Attached files
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
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March 31, 2010
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or
[ ] Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For
the transition period from
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|
to
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Commission_File_Number_
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000-53919
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ICON
Equipment and Corporate Infrastructure Fund Fourteen,
L.P.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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26-3215092
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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100 Fifth Avenue, 4th Floor, New York, New York
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10011
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(Address
of principal executive offices)
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(Zip
code)
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(212) 418-4700
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(Registrant's
telephone number, including area
code)
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Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
[x] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate 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 [x]
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 [x]
No
Number of
outstanding limited partnership interests of the registrant on May 10, 2010 is
114,399.
Table
of Contents
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Page
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1
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2
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3
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4
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5
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15
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21
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24
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(A
Delaware Limited Partnership)
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||||||||
Consolidated
Balance Sheets
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||||||||
Assets
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||||||||
March
31,
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||||||||
2010
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December
31,
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|||||||
(unaudited)
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2009
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|||||||
Cash
and cash equivalents
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$ | 36,423,766 | $ | 27,074,324 | ||||
Net
investment in finance lease
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4,304,684 | - | ||||||
Leased
equipment at cost (less accumulated depreciation of
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||||||||
$1,345,561
and $649,453, respectively)
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17,449,711 | 13,530,536 | ||||||
Note
receivable
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9,857,589 | - | ||||||
Investments
in joint ventures
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17,483,193 | 17,742,829 | ||||||
Deferred
charges, net
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1,154,085 | 1,186,369 | ||||||
Other
assets, net
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756,537 | 33,006 | ||||||
Total
Assets
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$ | 87,429,565 | $ | 59,567,064 | ||||
Liabilities
and Partners' Equity
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||||||||
Liabilities
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||||||||
Deferred
revenue
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$ | 731,382 | $ | 227,161 | ||||
Due
to General Partner and affiliates
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924,387 | 566,964 | ||||||
Accrued
expenses and other liabilities
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1,052,295 | 157,889 | ||||||
Total
Liabilities
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2,708,064 | 952,014 | ||||||
Commitments
and contingencies (Note 10)
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||||||||
Partners' (Deficit) Equity
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||||||||
Limited
Partners
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84,761,809 | 58,640,528 | ||||||
General
Partner
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(40,308 | ) | (25,478 | ) | ||||
Total
Partners' Equity
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84,721,501 | 58,615,050 | ||||||
Total
Liabilities and Partners' Equity
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$ | 87,429,565 | $ | 59,567,064 |
See
accompanying notes to consolidated financial statements.
(A
Delaware Limited Partnership)
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||||
Consolidated
Statement of Operations
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||||
(unaudited)
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||||
Three
Months Ended
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||||
March 31, 2010
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||||
Revenue:
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||||
Rental
income
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$ | 1,075,749 | ||
Finance
income
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64,381 | |||
Income
from investments in joint ventures
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667,496 | |||
Interest
and other income
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168,953 | |||
Total
revenue
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1,976,579 | |||
Expenses:
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||||
Management
fees
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78,611 | |||
Administrative
expense reimbursements
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940,577 | |||
General
and administrative
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241,007 | |||
Depreciation
and amortization
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705,843 | |||
Total
expenses
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1,966,038 | |||
Net
income
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$ | 10,541 | ||
Net
income allocable to:
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||||
Limited
Partners
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$ | 10,436 | ||
General
Partner
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105 | |||
$ | 10,541 | |||
Weighted
average number of limited
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||||
partnership
interests outstanding
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84,756 | |||
Net
income per weighted average
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||||
limited
partnership interest outstanding
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$ | 0.12 |
See
accompanying notes to consolidated financial statements.
(A
Delaware Limited Partnership)
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||||||||||||||||
Consolidated
Statement of Changes in Partners' Equity
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Limited
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Total
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Partnership
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Limited
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Partners'
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Interests
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Partners
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General Partner
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Equity
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Balance,
December 31, 2009
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68,411 | $ | 58,640,528 | $ | (25,478 | ) | $ | 58,615,050 | ||||||||
Net
income
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- | 10,436 | 105 | 10,541 | ||||||||||||
Proceeds
from sale of limited partnership interests
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30,916 | 30,798,446 | - | 30,798,446 | ||||||||||||
Sales
and offering expenses
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- | (3,209,025 | ) | - | (3,209,025 | ) | ||||||||||
Cash
distributions
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- | (1,478,576 | ) | (14,935 | ) | (1,493,511 | ) | |||||||||
Balance,
March 31, 2010 (unaudited)
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99,327 | $ | 84,761,809 | $ | (40,308 | ) | $ | 84,721,501 |
See
accompanying notes to consolidated financial statements.
(A
Delaware Limited Partnership)
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Consolidated
Statement of Cash Flows
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(unaudited)
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Three
Months Ended
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March 31, 2010
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Cash
flows from operating activities:
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Net
income
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$ | 10,541 | ||
Adjustments
to reconcile net income to net cash provided by
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||||
operating
activities:
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Finance
income
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(64,381 | ) | ||
Income
from investments in joint ventures
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(667,496 | ) | ||
Depreciation
and amortization
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705,843 | |||
Changes
in operating assets and liabilities:
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Collection
of finance leases
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140,920 | |||
Other
assets, net
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(348,745 | ) | ||
Accrued
expenses and other liabilities
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832,791 | |||
Deferred
revenue
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504,221 | |||
Due
to/from General Partner and affiliates, net
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234,076 | |||
Distributions
from joint ventures
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585,996 | |||
Net
cash provided by operating activities
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1,933,766 | |||
Cash
flows from investing activities:
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Purchase
of equipment
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(9,001,888 | ) | ||
Investment
in joint venture
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(111,987 | ) | ||
Distributions
from joint ventures in excess of profits
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453,123 | |||
Investment
in notes receivable
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(10,236,727 | ) | ||
Net
cash used in investing activities
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(18,897,479 | ) | ||
Cash
flows from financing activities:
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Sale
of limited partnership interests
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30,798,446 | |||
Sales
and offering expenses paid
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(2,911,714 | ) | ||
Deferred
charges
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(80,066 | ) | ||
Cash
distributions
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(1,493,511 | ) | ||
Net
cash provided by financing activities
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26,313,155 | |||
Net
increase in cash and cash equivalents
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9,349,442 | |||
Cash
and cash equivalents, beginning of the period
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27,074,324 | |||
Cash
and cash equivalents, end of the period
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$ | 36,423,766 | ||
Supplemental
disclosure of non-cash investing and financing activities:
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Organizational
and offering expenses due to Investment Manager
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$ | 123,347 | ||
Sales
commissions due to third parties
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$ | 61,615 | ||
Organizational
and offering expenses charged to equity
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$ | 235,696 |
See
accompanying notes to consolidated financial statements.
4
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(1)
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Organization
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ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P. (the “Partnership”)
was formed on August 20, 2008 as a Delaware limited partnership. The
Partnership is engaged in one business segment, the business of investing in
business-essential equipment and corporate infrastructure (collectively,
“Capital Assets”), including, but not limited to, Capital Assets that are
already subject to lease, Capital Assets that the Partnership purchases and
leases to domestic and global businesses, loans that are secured by Capital
Assets, and ownership rights to leased Capital Assets at lease
expiration. The Partnership will continue until December 31, 2020,
unless terminated sooner.
The
Partnership’s principal investment objective is to obtain the maximum economic
return from its investments for the benefit of its partners. To
achieve this objective, the Partnership: (i) acquires a diversified portfolio by
making investments in Capital Assets; (ii) makes monthly cash distributions, at
the Partnership’s general partner’s discretion, to its partners commencing the
month following each partner’s admission to the Partnership, continuing until
the end of the operating period; (iii) will reinvest substantially all
undistributed cash from operations and cash from sales of investments in Capital
Assets during the operating period; and (iv) will dispose of its investments and
distribute the excess cash from such dispositions to its partners beginning with
the commencement of the liquidation period.
The
general partner of the Partnership is ICON GP 14, LLC, a Delaware limited
liability company (the “General Partner”), which is a wholly-owned subsidiary of
ICON Capital Corp., a Delaware corporation (“ICON Capital”). The
General Partner manages and controls the business affairs of the Partnership,
including, but not limited to, the Capital Assets the Partnership invests in
pursuant to the terms of the Partnership’s limited partnership agreement (the
“Partnership Agreement”). Pursuant to the terms of an investment
management agreement, the General Partner has engaged ICON Capital as an
investment manager (the “Investment Manager”) to, among other things, facilitate
the acquisition and servicing of the Partnership’s
investments. Additionally, the General Partner has a 1% interest in
the profits, losses, cash distributions and liquidation proceeds of the
Partnership.
The
Partnership is currently in its offering period, which commenced on May 18, 2009
and is anticipated to end no later than May 2011. With the proceeds
from the sale of the limited partnership interests (“Interests”), the
Partnership intends to invest in a diverse pool of Capital Assets and establish
a cash reserve in the amount of 0.50% of the gross offering
proceeds. The initial capitalization of the Partnership was $1,001,
which consisted of $1 from the General Partner and $1,000 from ICON
Capital. The Partnership is offering Interests on a “best efforts”
basis with the intention of raising up to $418,000,000 of capital, consisting of
420,000 Interests, of which 20,000 have been reserved for the Partnership’s
distribution reinvestment plan (the “DRIP Plan”). The DRIP Plan
allows limited partners to purchase Interests with distributions received from
the Partnership and/or certain affiliates of the Partnership. At any
time prior to May 18, 2011, the Partnership may, at its sole discretion,
increase the offering to a maximum of up to $618,000,000 of capital, consisting
of 600,000 Interests, provided that the offering period is not extended in
connection with such change.
5
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(1)
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Organization
- continued
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The
Partnership’s initial closing date was June 19, 2009 (the “Commencement of
Operations”), the date at which the Partnership had raised $1,200,000 and
limited partners were admitted. Upon the Commencement of Operations,
the Partnership returned the initial capital contribution of $1,000 to ICON
Capital. During the period from May 18, 2009 to March 31, 2010, the
Partnership sold 99,327 Interests to 2,969
limited partners, representing $99,098,585 of capital
contributions. Investors from the Commonwealth of Pennsylvania and
the State of Tennessee were not admitted until the Partnership raised total
equity in the amount of $20,000,000, which the Partnership achieved on August
27, 2009. Beginning with the Commencement of Operations, the
Partnership has paid or accrued sales commissions to third
parties. The Partnership has also paid or accrued various fees to the
General Partner and its affiliates. For the period from the
Commencement of Operations through March 31, 2010, the Partnership paid or
accrued the following fees in connection with its offering of its
Interests: (i) sales commissions to third parties in the amount of
$6,788,331 and (ii) underwriting fees in the amount of $2,920,718 to ICON
Securities Corp., an affiliate of the General Partner and the dealer-manager of
the Partnership’s offering (“ICON Securities”). In addition, the
General Partner and its affiliates, on behalf of the Partnership, incurred
organizational and offering expenses in the amount of $1,780,983. For the period from the
Commencement of Operations through March 31, 2010, organizational and offering
expenses in the amount of $626,899 were recorded as a reduction of partners’
equity.
Partners’
capital accounts are increased for their initial capital contribution plus their
proportionate share of earnings and decreased by their proportionate share of
losses and distributions. Profits, losses, cash distributions and liquidation
proceeds are allocated 99% to the limited partners and 1% to the General Partner
until the aggregate amount of cash distributions paid to limited partners equals
the sum of the limited partners’ aggregate capital contributions plus an 8%
cumulative annual return on their aggregate unreturned capital contributions,
compounded daily. After such time, distributions will be allocated
90% to the limited partners and 10% to the General Partner.
(2)
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Basis
of Presentation and Consolidation
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The
accompanying consolidated financial statements of the Partnership have been
prepared in accordance with U.S. generally accepted accounting principles (“US
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 the General Partner, all adjustments
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 the
Partnership’s Annual Report on Form 10-K for the period from the Commencement of
Operations through December 31, 2009. As operations commenced on June
19, 2009, no statements of operations and cash flows are presented for the three
months ended March 31, 2009. The results for the interim period are
not necessarily indicative of the results for the full year.
The
consolidated financial statements include the accounts of the Partnership and
its majority-owned subsidiaries and other controlled entities. All
intercompany accounts and transactions have been eliminated in
consolidation. In joint ventures where the Partnership has majority
ownership, the financial condition and results of operations of the joint
venture are consolidated. Noncontrolling interest represents the
minority owner’s proportionate share of its equity in the joint
venture. The noncontrolling interest is adjusted for the minority
owner’s share of the earnings, losses, investments and distributions of the
joint venture.
6
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(2)
|
Basis
of Presentation and Consolidation -
continued
|
The
Partnership accounts for its noncontrolling interests in joint ventures where
the Partnership has influence over financial and operational matters, generally
50% or less ownership interest, under the equity method of
accounting. In such cases, the Partnership’s original investments are
recorded at cost and adjusted for its share of earnings, losses and
distributions. The Partnership accounts for investments in joint
ventures where the Partnership has virtually no influence over financial and
operational matters using the cost method of accounting. In such
cases, the Partnership’s original investments are recorded at cost and any
distributions received are recorded as revenue. All of the
Partnership’s investments in joint ventures are subject to its impairment review
policy.
Reclassifications
Certain
reclassifications have been made to the accompanying consolidated financial
statements in prior periods to conform to the current presentation.
Recently
Adopted Accounting Pronouncements
In June
2009, the Financial Accounting Standards Board (“FASB”) issued an update to
Accounting Standard Codification 810 – Consolidation (“ASC 810”). The update
amends the consolidation guidance applicable to variable interest entities
(“VIEs”) and changes how a reporting entity evaluates whether an entity is
considered the primary beneficiary of a VIE and is therefore required to
consolidate such VIE. ASC 810 will also require assessments at each reporting
period of which party within the VIE is considered the primary beneficiary and
will require a number of new disclosures related to VIEs. ASC 810 is effective
for fiscal years beginning after November 15, 2009. The adoption of this
guidance, effective January 1, 2010, did not have a material impact on the
Partnership’s consolidated financial statements as of and for the three months
ended March 31, 2010.
In
January 2010, the FASB issued Accounting Standards Update 2010-06, Fair Value
Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value
Measurements (“ASU 2010-06”), amending Accounting
Standards Codification 820. ASU 2010-06 requires new disclosures and clarifies
existing disclosures on fair value measurements. It requires new
disclosures including (i) separate disclosure of the amounts of significant
transfers in and out of Level 1 and Level 2 fair value measurements and a
description of the reasons for the transfers and (ii) separate presentation of
information about purchases, sales, issuances and settlements in the
reconciliation of Level 3 fair value measurements. This update also clarifies
existing disclosures requiring the Partnership to (i) determine each class of
assets and liabilities based on the nature and risks of the investments rather
than by major security type and (ii) for each class of assets and liabilities,
disclose the valuation techniques and inputs used to measure fair value for both
Level 2 and Level 3 fair value measurements. The new disclosures and
clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the
disclosures about purchases, sales, issuances, and settlements in Level 3 fair
value measurements, which are effective for fiscal years beginning after
December 15, 2010. The adoption of ASU 2010-06 did not have a material
effect on the Partnership’s consolidated financial statements as of and for the
three months ended March 31, 2010.
7
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(3)
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Net
Investment in Finance Lease
|
Net
investment in finance lease consisted of the following at March 31,
2010:
March
31,
|
||||
2010
|
||||
Minimum
rents receivable
|
$ | 4,674,297 | ||
Estimated
residual value
|
641,942 | |||
Initial
direct costs, net
|
101,608 | |||
Unearned
income
|
(1,113,163 | ) | ||
Net
investment in finance lease
|
$ | 4,304,684 |
On
February 25, 2010, the Partnership, through its wholly-owned subsidiary, ICON
Global Crossing VI, LLC (“ICON Global Crossing VI”), purchased and
simultaneously leased back telecommunications equipment to Global Crossing
Telecommunications, Inc. (“Global Crossing”). The purchase price for
the equipment was approximately $4,300,000. The lease is for a period
of thirty-six months and expires in February of 2013. The Partnership
paid an acquisition fee to the Investment Manager of approximately $107,000
relating to this transaction.
Non-cancelable
minimum annual amounts due on investment in finance lease over the remaining
term of the lease were as follows at March 31, 2010:
For
the period April 1 to December 31, 2010
|
$ | 1,201,962 | ||
For
the year ending December 31, 2011
|
1,602,616 | |||
For
the year ending December 31, 2012
|
1,602,616 | |||
For
the year ending December 31, 2013
|
267,103 | |||
$ | 4,674,297 |
(4)
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Leased
Equipment at Cost
|
Leased
equipment at cost consisted of the following:
March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Packaging
equipment
|
$ | 6,535,061 | $ | 6,535,061 | ||||
Telecommunications
equipment
|
7,644,928 | 7,644,928 | ||||||
Motor
coaches
|
4,615,283 | - | ||||||
18,795,272 | 14,179,989 | |||||||
Less:
Accumulated depreciation
|
(1,345,561 | ) | (649,453 | ) | ||||
$ | 17,449,711 | $ | 13,530,536 |
Depreciation
expense was $696,108 for the three months ended March 31, 2010.
8
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(4)
|
Leased
Equipment at Cost -
continued
|
On March
9, 2010, the Partnership, through its wholly-owned subsidiary, ICON Coach II,
LLC (“ICON Coach II”), agreed to purchase and lease back twenty-six 2010 MCI
J4500 motor coach buses from Motor Coach Industries, Inc. (“MCI”) for the
aggregate purchase price of approximately $10,370,000. ICON Coach II
entered into a sixty-month lease with Dillon's Bus Service, Inc. (“DBS”) and
Lakefront Lines, Inc. (“Lakefront”) that will commence on June 1, 2010.
Simultaneously with the execution of the lease, ICON Coach II purchased eleven
2010 MCI J4500 motor coach buses from MCI for the purchase price of $4,502,715
and leased the buses to DBS. DBS paid interim rent for the period
from March 9, 2010 through March 31, 2010. Subsequent to March 31, 2010,
DBS paid interim rent for the period from April 1, 2010 through May 31,
2010. On May 13, 2010, ICON Coach II purchased fifteen 2010 MCI J4500
motor coach buses from MCI for the purchase price of $5,865,450 and
simultaneously leased the buses to Lakefront. Lakefront paid interim rent
for the period from May 13, 2010 through May 31, 2010. The obligations of
DBS and Lakefront are guaranteed by Coach America Holdings, Inc. and CUSA,
LLC. The Partnership paid an acquisition fee to its Investment Manager of
approximately $259,000 relating to this transaction.
Aggregate
annual minimum future rentals receivable from the Partnership’s non-cancelable
operating leases over the next five years consisted of the following at March
31, 2010:
For
the period April 1 to December 31, 2010
|
$ | 3,698,311 | ||
For
the year ending December 31, 2011
|
5,017,553 | |||
For
the year ending December 31, 2012
|
4,473,391 | |||
For
the year ending December 31, 2013
|
2,143,729 | |||
For
the year ending December 31, 2014
|
1,283,365 | |||
Thereafter
|
67,090 | |||
$ | 16,683,439 |
(5)
|
Note
Receivable
|
On March
3, 2010, the Partnership, through its wholly-owned subsidiary, ICON Northern
Leasing III, LLC (“ICON NL III”), provided a senior secured term loan in the
aggregate amount of $9,857,589 to Northern Capital Associates XVIII, L.P. (“NCA
XVIII”), Northern Capital Associates XV, L.P. (“NCA XV”) and Northern Capital
Associates XIV, L.P. (“NCA XIV”) (collectively “NL III”). The loan is
secured by (i) an underlying pool of leases for credit card machines of NCA
XVIII; (ii) an underlying pool of leases for credit card machines of NCA XV
(subject only to the first priority security interest of ICON Northern Leasing
II, LLC (“ICON NL II”)), and (iii) an underlying pool of leases for credit card
machines of NCA XIV (subject only to the first priority security interest of
ICON Northern Leasing, LLC and second priority security interest of ICON NL
II). Interest on the secured term loan accrues at a rate of 18% per
year. The loan is payable monthly in arrears for a period of 48
months. The obligations of NL III are guaranteed by Northern Leasing
Systems, Inc. The Partnership paid an acquisition fee to the
Investment Manager of approximately $379,000 relating to this
transaction.
(6)
|
Investments
in Joint Ventures
|
On June
26, 2009, the Partnership and ICON Leasing Fund Twelve, LLC, an entity managed
by the Investment Manager (“Fund Twelve”), entered into a joint venture, ICON
Atlas, LLC (“ICON Atlas”), for the purpose of investing in eight new Ariel
natural gas compressors (the “Gas Compressors”) from AG Equipment Co.
(“AG”). On June 26, 2009, ICON Atlas purchased four of the Gas
Compressors from AG for approximately $4,270,000. Simultaneously with the
purchase, ICON Atlas entered into a lease with Atlas Pipeline Mid-Continent, LLC
(“APMC”), an affiliate of Atlas Pipeline Partners, L.P. (“APP”).
9
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(6)
|
Investments
in Joint Ventures - continued
|
On August
17, 2009, ICON Atlas purchased the four additional Gas Compressors from AG for
approximately $7,028,000. Simultaneously with that purchase, ICON
Atlas entered into a second schedule to the lease with APMC. Each
schedule is for a period of 48 months and expires on August 31,
2013. The obligations of APMC are guaranteed by its parent company,
APP. The Partnership contributed approximately $5,084,000 to ICON
Atlas and the Partnership’s and Fund Twelve’s ownership interests in ICON Atlas
are 45% and 55%, respectively. The Partnership paid an acquisition
fee to the Investment Manager in the amount of approximately $127,000 in
connection with this transaction.
The
results of operations of ICON Atlas are summarized below:
Three
Months Ended
|
||||
March
31, 2010
|
||||
Revenue
|
$ | 613,955 | ||
Net
income
|
$ | 379,403 | ||
Partnership's
share of net income
|
$ | 170,732 |
On June 29, 2009, the Partnership and
Fund Twelve entered into a joint venture, ICON ION, LLC (“ICON ION”), for the
purpose of making secured term loans (the “ION Loans”) in the aggregate amount
of $20,000,000 to ARAM Rentals Corporation, a Canadian bankruptcy remote Nova
Scotia unlimited liability company (“ARC”) and ARAM Seismic Rentals Inc., a U.S.
bankruptcy remote Texas corporation (“ASR,” together with ARC, collectively
referred to as the “ARAM Borrowers”). On that date, ICON ION funded
the first tranche of the ION Loans in the amounts of $8,825,000 and $3,675,000
to ARC and ASR, respectively. On July 20, 2009, ICON ION funded the
second tranche of the ION Loans to ARC in the amount of $7,500,000.
The ARAM
Borrowers are wholly-owned subsidiaries of ION Geophysical Corporation, a
Delaware corporation (“ION”). The ION Loans are secured by (i) a
first priority security interest in all of the ARAM analog seismic system
equipment owned by the ARAM Borrowers and (ii) a pledge of all of the equity
interests in the ARAM Borrowers. In addition, ION guaranteed all
obligations of the ARAM Borrowers under the ION Loans. Interest
accrues at the rate of 15% per year and the ION Loans are payable monthly in
arrears for a period of 60 months beginning on August 1, 2009. The
Partnership contributed $9,000,000 to ICON ION and the Partnership’s and Fund
Twelve’s ownership interests in ICON ION are 45% and 55%,
respectively. The Partnership paid an acquisition fee to the
Investment Manager in the amount of $225,000 in connection with this
transaction.
The
results of operations of ICON ION are summarized below:
Three
Months Ended
|
||||
March
31, 2010
|
||||
Revenue
|
$ | 753,324 | ||
Net
income
|
$ | 647,756 | ||
Partnership's
share of net income
|
$ | 291,490 |
10
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(6)
|
Investments
in Joint Ventures - continued
|
On
December 23, 2009, ICON Quattro, LLC (“ICON Quattro”), a joint venture owned 45%
by the Partnership and 55% by Fund Twelve, participated in a £24,800,000 loan
facility by making a second priority secured term loan to Quattro Plant Limited
(“Quattro Plant”) in the amount of £5,800,000. Quattro Plant is a
wholly-owned subsidiary of Quattro Group Limited (“Quattro Group”). The
loan is secured by (i) all of Quattro Plant’s rail support construction
equipment, which consists of railcars, attachments to railcars, bulldozers,
excavators, tractors, lowboy trailers, street sweepers, service trucks,
forklifts (collectively, the “Construction Equipment”) and any other existing or
future asset owned by Quattro Plant, (ii) all of Quattro Plant’s accounts
receivable, and (iii) a mortgage over certain real estate in London, England
owned by the majority shareholder of Quattro Plant. In addition, ICON
Quattro will receive a key man insurance policy insuring the life of the
majority shareholder of ICON Quattro in an amount not less than £5,500,000 and
not more than £5,800,000. All of Quattro Plant’s obligations under the
loan are guaranteed by Quattro Group and its subsidiaries, Quattro Hire Limited
and Quattro Occupational Academy Limited (collectively, the "Quattro
Companies").
Interest
on the secured term loan accrues at a rate of 20% per year and the loan will be
amortized to a balloon payment of 15% of the principal at the end of the
term. The loan is payable monthly in arrears for a period of 33 months,
which began on January 1, 2010. Quattro Plant has the option to prepay the
entire outstanding amount of the loan beginning January 1, 2012 in consideration
for a fee of 5% of the amount being prepaid.
Simultaneously
with ICON Quattro's loan, KBC Bank N.V. (“KBC”), an entity not affiliated with
the Partnership, participated in the £24,800,000 loan facility by making a loan
of £19,000,000 to Quattro Plant (the “KBC Loan”). The KBC Loan is secured
by (i) a first priority security interest in all of Quattro Plant’s Construction
Equipment and any other existing or future asset owned by Quattro Plant and (ii)
a first priority security interest in all of Quattro Plant’s accounts
receivable.
Simultaneously
with the consummation of ICON Quattro’s loan and the KBC Loan, ICON Quattro,
KBC, Quattro Plant, Quattro Group and the Quattro Companies entered into an
intercreditor deed governing the relationship between ICON Quattro and
KBC. In the event either ICON Quattro or KBC seeks to enforce its security
interest under its respective loan, the proceeds from the enforcement of any
security interest shall be applied (i) first, to pay all costs and expenses
incurred by or on behalf of ICON Quattro or KBC, (ii) second, to KBC in an
amount that would allow KBC to receive its return on its investment, and (iii)
third, to ICON Quattro in an amount that would allow ICON Quattro to receive its
return on its investment. The Partnership paid an acquisition fee to
the Investment Manager of approximately $327,000 relating to this
transaction.
The
results of operations of ICON Quattro are summarized below:
Three
Months Ended
|
||||
March
31, 2010
|
||||
Revenue
|
$ | 584,537 | ||
Net
income
|
$ | 456,164 | ||
Partnership's
share of net income
|
$ | 205,274 |
11
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(7)
|
Revolving
Line of Credit, Recourse
|
The Partnership and certain entities
managed by the Investment Manager, ICON Income Fund Eight B L.P. (“Fund Eight
B”), ICON Income Fund Nine, LLC (“Fund Nine”), ICON Income Fund Ten, LLC (“Fund
Ten”), ICON Leasing Fund Eleven, LLC (“Fund Eleven”) and Fund Twelve
(together with the Partnership, Fund Eight B, Fund Nine, Fund Ten, and
Fund Eleven, the “ICON
Borrowers”), are parties to a Commercial Loan Agreement, as amended (the “Loan
Agreement”), with California Bank & Trust
(“CB&T”). The Loan Agreement provides for a revolving line
of credit of up to $30,000,000 pursuant to a senior secured revolving loan
facility (the “Facility”), which is secured by all assets of the ICON Borrowers
not subject to a first priority lien, as defined in the Loan Agreement. Each of
the ICON Borrowers is jointly and severally liable for all amounts borrowed
under the Facility. At March 31, 2010, no amounts were accrued related to the
Partnership’s joint and several obligations under the Facility. Amounts
available under the Facility are subject to a borrowing base that is determined,
subject to certain limitations, on the present value of the future receivables
under certain lease agreements and loans in which the ICON Borrowers have a
beneficial interest.
The
Facility expires on June 30, 2011 and the ICON Borrowers may request a one year
extension to the revolving line of credit within 390 days of the then-current
expiration date, but CB&T has no obligation to extend. The interest rate for
general advances under the Facility is CB&T’s prime rate and the interest
rate on up to five separate non-prime rate advances that are permitted to be
made under the Facility is the rate at which U.S. dollar deposits can be
acquired by CB&T in the London Interbank Eurocurrency Market plus 2.5% per
year, provided that neither interest rate is permitted to be less than 4.0% per
year. The interest rate at March 31, 2010 was 4.0%. In addition, the
ICON Borrowers are obligated to pay a quarterly commitment fee of 0.50% on
unused commitments under the Facility.
Aggregate
borrowings by all ICON Borrowers under the Facility amounted to $700,000 at
March 31, 2010, all of which was borrowed by Fund Ten. Subsequent to
March 31, 2010, Fund Ten borrowed an additional $650,000 under the Facility,
which increased Fund Ten’s outstanding loan balance to $1,350,000.
Pursuant
to the Loan Agreement, the ICON Borrowers are required to comply with certain
covenants. At March 31, 2010, the ICON Borrowers were in compliance
with all covenants.
(8)
|
Transactions
with Related Parties
|
The
Partnership has entered into certain agreements with the General Partner, the
Investment Manager and ICON Securities, whereby the Partnership pays certain
fees and reimbursements to these parties. ICON Securities is entitled
to receive a 3% underwriting fee out of the gross proceeds from sales of the
Partnership’s Interests.
The
Partnership pays the Investment Manager (i) an annual management fee, payable
monthly, equal to 3.50% of the gross periodic payments due and paid from the
Partnership’s investments and (ii) acquisition fees, through the end of the
operating period, equal to 2.50% of the Purchase Price of each investment the
Partnership makes in Capital Assets.
12
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(8)
|
Transactions
with Related Parties - continued
|
In addition, the Partnership reimburses
the General Partner and its affiliates for organizational and offering expenses
incurred in connection with the Partnership’s organization and
offering. The reimbursement of these expenses will be capped at the
lesser of 1.44% of the gross offering proceeds (assuming all of the Interests
are sold in the offering) and the actual costs and expenses incurred by the
General Partner and its affiliates. Accordingly, the General Partner
and its affiliates may ultimately be reimbursed for less than the actual costs
and expenses incurred. These costs may include, but are not limited
to, legal, accounting, printing, advertising, administrative, investor relations
and promotional expenses for registering, offering and distributing the
Partnership’s Interests to the public. The General Partner also has a
1% interest in the Partnership’s profits, losses, cash distributions and
liquidation proceeds.
In addition, the General Partner and
its affiliates are reimbursed for administrative expenses incurred in connection
with the Partnership’s operations. Administrative expense
reimbursements are costs incurred by the General Partner or its affiliates that
are necessary to the Partnership’s operations. These costs include the
General Partner’s and its affiliates’ legal, accounting, investor relations and
operations personnel costs, as well as professional fees and other costs that
are charged to the Partnership based upon the percentage of time such personnel
dedicate to the Partnership. Excluded are salaries and related costs,
office rent, travel expenses and other administrative costs incurred by
individuals with a controlling interest in the General Partner.
Fees and
other expenses paid or accrued by the Partnership to the General Partner or its
affiliates were as follows:
Three
Months Ended
|
||||||||
Entity
|
Capacity
|
Description
|
March 31, 2010
|
|||||
ICON
Capital Corp.
|
Investment
Manager
|
Organizational
and offering
|
||||||
expense
reimbursements (1)
|
$ | 203,413 | ||||||
ICON
Securities Corp.
|
Dealer-Manager
|
Underwriting
fees (2)
|
894,330 | |||||
ICON
Capital Corp.
|
Investment
Manager
|
Acquisition
fees (3)
|
745,332 | |||||
ICON
Capital Corp.
|
Investment
Manager
|
Management
fees (4)
|
78,611 | |||||
ICON
Capital Corp.
|
Investment
Manager
|
Administrative
expense
|
||||||
reimbursements
(4)
|
940,577 | |||||||
$ | 2,862,263 | |||||||
(1)
Amount capitalized and charged to partners' equity.
|
||||||||
(2)
Amount charged directly to partners' equity.
|
||||||||
(3)
Amount capitalized and amortized to operations over the estimated service
period in accordance with the Partnership's accounting
policies.
|
||||||||
(4) Amount charged directly to
operations.
|
At March 31, 2010, the Partnership had
a net payable of $924,387 due to the General
Partner and its affiliates that primarily consisted of administrative expense
reimbursements in the amount of approximately $690,577.
From
April 1, 2010 to May 10, 2010, the Partnership raised an additional $14,979,360
in capital contributions and has paid or accrued underwriting fees to ICON
Securities in the amount of $425,013.
13
ICON
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(A
Delaware Limited Partnership)
Notes to
Consolidated Financial Statements
March 31,
2010
(unaudited)
(9)
|
Fair
Value Measurements
|
Fair value information with respect to
the Partnership’s leased assets and liabilities is not separately provided since
(i) the current accounting pronouncements do not require fair value disclosures
of lease arrangements and (ii) the carrying value of financial assets, other
than lease-related investments, and the recorded value of recourse debt
approximate fair value due to their short-term maturities and variable interest
rates. The estimated fair value of the Partnership’s note receivable was based
on
the discounted value of future cash flows expected to be received from the loan
based on recent transactions of this type.
March
31, 2010
|
||||||||
Carrying Amount
|
Fair Value
|
|||||||
Fixed
rate note receivable
|
$ | 9,857,589 | $ | 10,357,363 |
(10)
|
Commitments
and Contingencies
|
At the
time the Partnership acquires or divests of its interest in a Capital Asset, the
Partnership may, under very limited circumstances, agree to indemnify the seller
or buyer for specific contingent liabilities. The General Partner
believes that any liability that may arise as a result of any such
indemnification obligations will not have a material adverse effect on the
consolidated financial condition of the Partnership taken as a
whole.
(11)
|
Subsequent
Events
|
On April
1, 2010, the Partnership sold to an unaffiliated third party, Hardwood
Partners, LLC: (i) 4.805% of its interest in ICON Quattro for the purchase
price of $450,000, (ii) 4.467% of its interest in ICON Atlas for the
purchase price of $450,000, (iii) 2.384% of its interest in ICON ION for
the purchase price of $450,000 and (iv) 9.084% of its interest in ICON
Global Crossing VI for the purchase price of $1,000,000.
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, 2009. 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 Equipment and Corporate Infrastructure Fund Fourteen,
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,” “will,” “could,” “anticipate,”
“believe,” “estimate,” “expect,” “continue,” “further,” “plan,” “seek,”
“intend,” “predict” or “project” and variations of these words or comparable
words or phrases of similar meaning. These forward-looking statements
reflect our current beliefs and expectations with respect to future events and
are based on assumptions and are subject to risks and uncertainties and other
factors outside our control that may cause actual results to differ materially
from those projected. We undertake no obligation to update publicly
or review any forward-looking statement, whether as a result of new information,
future developments or otherwise.
Overview
We
operate as an equipment leasing and finance fund in which the capital our
partners invest is pooled together to make investments in Capital Assets, pay
fees and establish a small reserve. We commenced operations on June
19, 2009. We will use a substantial portion of the proceeds from the
sale of our Interests to invest in Capital Assets, including, but not limited
to, Capital Assets that are already subject to lease, Capital Assets that we
purchase and lease to domestic and global businesses, loans that are secured by
Capital Assets, and ownership rights to leased Capital Assets at lease
expiration. After these 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 limited 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 the date we complete the
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 in
the ordinary course of business, during a time frame called the “liquidation
period.”
We seek
to make investments in Capital Assets that we believe will provide our investors
with a satisfactory rate of return on their investment from (a) current cash
flow generated by the payment of rent in the case of leases and principal and/or
interest in the case of secured loans, (b) deferred cash flow from the
realization of the value of the Capital Assets or interests therein at the
maturity of the investment or the exercise of an option to purchase Capital
Assets or (c) a combination of both.
With
respect to (a) above, we seek to make investments in Capital Assets subject to
lease and in secured loans with lessees and borrowers, respectively, that we
believe to be creditworthy based on such lessees’ and borrowers’ financial
position, business, industry, and the underlying value of the Capital
Assets. In our opinion, this increases the probability that all of
the scheduled rental or loan payments, as applicable, will be paid when
due. 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 price of the leased Capital Assets. In the case of
secured loans, 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.
With
respect to (b) above, we seek to make investments in Capital Assets subject to
operating leases and leveraged leases, interests or options to purchase
interests in the residual value of Capital Assets, and other investments in
Capital Assets that we expect will generate enough net proceeds from either the
sale or re-lease of such Capital Assets, as applicable, to provide a
satisfactory rate of return. In the case of these types of
investments, we seek to make investments in Capital Assets that decline in value
at a slow rate due to the long economic life of such assets. In the
case of operating leases (leases where there is limited cash flow during the
primary term of the lease and the value of the Capital Assets at the end of the
term was the primary reason for making the investment), most, if not all, of the
return of and return on that investment will generally be realized upon the sale
or re-lease of the Capital Assets. In the case of leveraged leases
(leases where a substantial portion of the cash flow and potentially a portion
of the residual value has been pledged to a lender on a non-recourse basis and
the value will be realized upon the sale or re-lease of the Capital Assets), the
rental income received in cash will 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 our Investment Manager’s
experience, the residual value may provide a return of and a return on the
purchase price of the equipment even if all rental payments received during the
initial term were paid to a lender.
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, which may increase our expected return on our investment.
Our
General Partner manages and controls our business affairs, including, but not
limited to, our investments in Capital Assets, under the terms of our
Partnership Agreement. Our Investment Manager, an affiliate of our
General Partner, will originate and service our investments. Our
Investment Manager also sponsored and manages seven other equipment leasing and
finance funds.
Recent
Significant Transactions
We
engaged in the following significant transactions since December 31,
2009:
·
|
On
February 25, 2010, we, through our wholly-owned subsidiary, ICON Global
Crossing VI, purchased and simultaneously leased back
telecommunications equipment to Global Crossing. The purchase
price for the equipment was approximately $4,300,000. The lease
is for a period of thirty-six months and expires in February of
2013. We paid an acquisition fee to the Investment Manager of
approximately $107,000 relating to this
transaction.
|
·
|
On
March 3, 2010, we, through our wholly-owned subsidiary, ICON NL III,
provided a senior secured term loan in the aggregate amount of $9,857,589
to NCA XVIII, NCA XV and NCA XIV. The loan is secured by (i) an
underlying pool of leases for credit card machines of NCA XVIII; (ii) an
underlying pool of leases for credit card machines of NCA XV (subject only
to the first priority security interest of ICON NL II), and (iii) an
underlying pool of leases for credit card machines of NCA XIV (subject
only to the first priority security interest of ICON Northern Leasing, LLC
and second priority security interest of ICON NL II). Interest
on the secured term loan accrues at a rate of 18% per year. The
loan is payable monthly in arrears for a period of 48
months. The obligations of NCA XVIII, NCA XV and NCA XIV are
guaranteed by Northern Leasing Systems, Inc. We paid an
acquisition fee to the Investment Manager of approximately $379,000
relating to this transaction.
|
·
|
On
March 9, 2010, we, through our wholly-owned subsidiary, ICON Coach II,
agreed to purchase and lease back twenty-six 2010 MCI J4500 motor coach
buses from MCI for the aggregate purchase price of approximately
$10,370,000. ICON Coach II entered into a sixty-month lease with DBS
and Lakefront that will commence on June 1, 2010. Simultaneously
with the execution of the lease, ICON Coach II purchased eleven 2010 MCI
J4500 motor coach buses from MCI for the purchase price of $4,502,715 and
leased the buses to DBS. DBS paid interim rent for the period
from March 9, 2010 through March 31, 2010. Subsequent to March 31,
2010, DBS paid interim rent for the period from April 1, 2010
through May 31, 2010. On May 13, 2010, ICON Coach II purchased
fifteen 2010 MCI J4500 motor coach buses from MCI for the purchase price
of $5,865,450 and simultaneously leased the buses to Lakefront.
Lakefront paid interim rent for the period from May 13, 2010 through May
31, 2010. The obligations of DBS and Lakefront are guaranteed by
Coach America Holdings, Inc. and CUSA, LLC. We paid an acquisition
fee to the Investment Manager of approximately $259,000 relating to this
transaction.
|
Subsequent
Events
On April
1, 2010, we sold to an unaffiliated third party, Hardwood Partners, LLC:
(i) 4.805% of our interest in ICON Quattro for the purchase price of
$450,000, (ii) 4.467% of our interest in ICON Atlas for the purchase price
of $450,000, (iii) 2.384% of our interest in ICON ION for the purchase
price of $450,000 and (iv) 9.084% of our interest in ICON Global Crossing
VI for the purchase price of $1,000,000.
Recently
Adopted Accounting Pronouncements
There are
no recent accounting pronouncements that are expected to have a significant
impact on our consolidated financial statements as of March 31,
2010. See Note 2 to our consolidated financial statements for a
discussion of accounting pronouncements that we have recently
adopted.
Results
of Operations for the Three Months Ended March 31, 2010 (the “2010
Quarter”)
We are
currently in our offering period. The minimum offering of $1,200,000
was achieved on June 19, 2009, the Commencement of Operations, and from the
Commencement of Operations through March 31, 2010, we raised total equity of
$99,098,585. 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 August 27, 2009. With the net
proceeds from our offering, we will invest in Capital Assets. As our
investments mature, we may sell the Capital Assets and reinvest the proceeds in
additional Capital Assets.
Revenue
for the 2010 Quarter is summarized as follows:
Three
Months Ended
|
||||
March 31, 2010
|
||||
Rental
income
|
$ | 1,075,749 | ||
Finance
income
|
64,381 | |||
Income
from investments in joint ventures
|
667,496 | |||
Interest
and other income
|
168,953 | |||
Total
revenue
|
$ | 1,976,579 |
Total
revenue for the 2010 Quarter was $1,976,579, which was primarily generated by
rental income from our leases with Exopack, Global Crossing and DBS and income
from our investments in the ICON Atlas, ICON ION and ICON Quattro joint
ventures.
Expenses
for the 2010 Quarter are summarized as follows:
Three
Months Ended
|
||||
March 31, 2010
|
||||
Management
fees
|
$ | 78,611 | ||
Administrative
expense reimbursements
|
940,577 | |||
General
and administrative
|
241,007 | |||
Depreciation
and amortization
|
705,843 | |||
Total
expenses
|
$ | 1,966,038 |
Total
expenses for the 2010 Quarter were $1,966,038, which were comprised primarily of
administrative expense reimbursements to our Investment Manager in the amount of
approximately $941,000. During the 2010 Quarter, we recorded
depreciation expense of approximately $696,000 related to equipment on lease to
Exopack, Global Crossing and DBS. General and administrative expense was
composed primarily of professional fees of approximately $220,000.
Net
Income
As a
result of the foregoing factors, the net income for the 2010 Quarter was
$10,541. The net income per weighted average limited partnership
interest outstanding for the 2010 Quarter was $0.12.
Financial
Condition
This
section discusses the major balance sheet variances at March 31, 2010 compared
to December 31, 2009.
Total Assets
Total
assets increased $27,862,501 from $59,567,064 at December 31, 2009 to
$87,429,565 at March 31, 2010. The increase in total assets was
primarily the result of cash proceeds received from the sale of our Interests,
which were then used to make investments in the NL III senior secured term loan,
telecommunications equipment on lease to Global Crossing and motor coach buses
on lease to DBS.
Total
Liabilities
Total
liabilities increased $1,756,050 from $952,014 at December 31, 2009 to
$2,708,064 at March 31, 2010. The increase related primarily to the accrual of
the administrative expense reimbursement due to our General Partner as well as
additional deferred revenue generated by our leases with Global Crossing and DBS
and our note receivable with NL III.
Partners’ Equity
Partners’
equity increased $26,106,451 from $58,615,050 at December 31, 2009 to
$84,721,501 at March 31, 2010. The increase related to the proceeds
from the sale of our Interests and our net income from the 2010 Quarter, which
was offset by the distributions paid to our partners, the amortization of
organizational and offering expenses, sales commissions to third parties and
underwriting fees paid to ICON Securities.
Liquidity
and Capital Resources
Summary
At March
31, 2010 and December 31, 2009, we had cash and cash equivalents of $36,423,766
and $27,074,324, respectively. In addition, 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. During our offering
period, our main source of cash has been from financing activities and our main
use of cash has been in investing activities.
We are
offering our Interests on a “best efforts” basis with the current intention of
raising up to $418,000,000. As additional Interests are sold, we will
experience a relative increase in liquidity as cash is received and then a
relative decrease in liquidity as cash is expended to make
investments. We are using the net proceeds of the offering to invest
in Capital Assets located in North America, Europe and other developed markets,
including those in Asia, South America and elsewhere. We seek to
acquire a portfolio of Capital Assets that is comprised of both (a) transactions
that provide current cash flow in the form of rental payments (in the case of
leases) and payments of principal and/or interest (in the case of secured loans)
and (b) transactions that generate deferred cash flow from realizing the value
of the Capital Assets or interests therein at the maturity of the investment or
exercise of an option to purchase Capital Assets, or (c) a combination of
both.
For the
period from the Commencement of Operations through March 31, 2010, we sold
99,327 Interests, representing $99,098,585 of capital
contributions. We admitted 2,969 limited partners. For the
period from the Commencement of Operations through March 31, 2010, we have paid
or accrued sales commissions to third parties of $6,788,331 and underwriting
commissions to ICON Securities of $2,920,718. In addition,
organization and offering expenses of $1,780,983 were paid or incurred by us,
our General Partner or its affiliates during this period.
Cash
Flows
The
following table sets forth summary cash flow data:
Three
Months Ended
|
||||
March 31, 2010
|
||||
Net
cash provided by (used in)
|
||||
Operating
activities
|
$ | 1,933,766 | ||
Investing
activities
|
(18,897,479 | ) | ||
Financing
activities
|
26,313,155 | |||
Net
increase in cash and cash equivalents
|
$ | 9,349,442 |
Note:
See the Consolidated Statement of Cash Flows included in “Item 1. Consolidated
Financial Statements” of this Quarterly Report on Form 10-Q for additional
information.
Operating
Activities
Cash
provided by operating activities of $1,933,766 primarily relates to rental
income of approximately $1,075,000, finance income of approximately $64,000,
deferred revenue of approximately $504,000 and income from investments in joint
ventures of approximately $667,000, partially offset by payment of
administrative expenses of $250,000.
Investing
Activities
Cash used
in investing activities of $18,897,479 primarily relates to the purchase or
financing of equipment in the amount of approximately $9,000,000, our investment
in a note receivable in the amount of approximately $10,237,000 and our
additional investment in ICON Quattro in the amount of approximately $112,000.
These uses of cash were partially offset by distributions from joint ventures in
excess of profits in the amount of approximately $453,000.
Financing
Activities
Cash
provided by financing activities of $26,313,155 primarily relates to the sale of
our Interests in the amount of approximately $30,798,000, which was partially
offset by sales and offering expenses paid in the amount of approximately
$2,912,000, deferred charges in the amount of approximately $80,000 and
distributions to partners in the amount of approximately
$1,494,000.
Sources
of Liquidity
Cash
generated from the sale of Interests pursuant to our offering will be our most
significant source of liquidity during our offering period. We
believe that cash generated from the sale of Interests pursuant to our offering
and other financing activities, as well as the expected results of our
operations, will be sufficient to finance our liquidity requirements for the
foreseeable future, including distributions to our partners, general and
administrative expenses, new investment opportunities, management fees and
administrative expense reimbursements. In addition, our revolving
line of credit had $29,300,000 available as of March 31, 2010 (see Note 7 to our
consolidated financial statements) for additional working capital needs or new
investment opportunities.
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.
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 to our
General Partner and limited partners in the amount of $14,935 and $1,478,576,
respectively, during the 2010 Quarter.
Commitments
and Contingencies and Off-Balance Sheet Transactions
Commitments
and Contingencies
At the
time we acquire or divest of an 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 that may arise as a result of any such indemnification obligations
will not have a material adverse effect on our consolidated financial condition
taken as a whole.
Off-Balance
Sheet Transactions
None.
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,
2009.
In
connection with the preparation of this Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, as well as the financial statements for our
General Partner, 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 Chief Financial 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 Chief Financial 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 March 31, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
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, cash flows 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.
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,
2009.
Our
Registration Statement on Form S-1, as amended, was declared effective by the
Securities and Exchange Commission on May 18, 2009 (SEC File No.
333-153849). Our offering period commenced on May 18, 2009 and is
anticipated to end no later than May 2011. From May 18, 2009 through
March 31, 2010, we received capital contributions in the amount of
$99,098,585. For the period from the Commencement of Operations
through March 31, 2010, we have paid or accrued sales commissions to unrelated
third parties of $6,788,331 and underwriting commissions to ICON Securities of
$2,920,718. In addition, organizational and offering expenses in the
amount of $1,780,983 were paid or incurred by us, our General Partner or its
affiliates during this period. Net offering proceeds to us after
deducting the expenses described were $87,608,553.
From
April 1, 2010 through May 10, 2010, we received additional capital contributions
in the amount of $14,979,360. For the period from April 1, 2010
through May 10, 2010, we have paid or accrued sales commissions to unrelated
third parties of $989,808 and underwriting commissions to ICON Securities of
$425,013. In addition, organizational and offering expenses in the
amount of $67,806 were paid or incurred by us, our General Partner or its
affiliates during this period. Net offering proceeds to us after
deducting the expenses described were $13,496,733.
See the
disclosure under “Recent Significant Transactions” in Item 2 of Part I for a
discussion of the investments that we have made with our net offering
proceeds.
Not
applicable.
Not
applicable.
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 3, 2008 (File No.
333-153849)).
|
4.1
|
Limited
Partnership Agreement of Registrant (Incorporated by reference to Exhibit
A to Registrant’s Prospectus filed with the SEC on May 18, 2009 (File No.
333- 153849)).
|
10.1
|
Investment
Management Agreement, by and between ICON Equipment and Corporate
Infrastructure Fund Fourteen, L.P. and ICON Capital Corp., dated as of May
18, 2009 (Incorporated by reference to Exhibit 10.1 to Registrant’s
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2009, filed August 13,
2009).
|
10.2
|
Commercial
Loan Agreement, dated as of August 31, 2005, by and among California Bank
& Trust and ICON Income Fund Eight B L.P., ICON Income Fund Nine,
LLC, ICON Income Fund Ten, LLC and ICON Leasing Fund Eleven, LLC
(Incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2009, filed
August 13,
2009).
|
10.3
|
Loan
Modification Agreement, dated as of December 26, 2006, between California
Bank & Trust and ICON Income Fund Eight B L.P., ICON Income Fund
Nine, LLC, ICON Income Fund Ten, LLC and ICON Leasing Fund Eleven, LLC
(Incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2009, filed
August 13,
2009).
|
10.4
|
Loan
Modification Agreement, dated as of June 20, 2007, between California Bank
& Trust, ICON Income Fund Eight B L.P., ICON Income Fund Nine,
LLC, ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC and ICON
Leasing Fund Twelve, LLC (Incorporated by reference to Exhibit 10.4 to
Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2009, filed August 13,
2009).
|
10.5
|
Third
Loan Modification Agreement, dated as of May 1, 2008, between California
Bank & Trust, ICON Income Fund Eight B L.P., ICON Income Fund
Nine, LLC, ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC and
ICON Leasing Fund Twelve, LLC (Incorporated by reference to Exhibit 10.5
to Registrant’s Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2009, filed August 13,
2009).
|
10.6 |
Fourth
Loan Modification Agreement, dated as of August 12, 2009, between
California Bank & Trust, ICON Income Fund Eight B L.P., ICON Income
Fund Nine, LLC, ICON Income Fund Ten, LLC, ICON Leasing Fund Eleven, LLC,
ICON Leasing Fund Twelve, LLC and ICON Equipment and Corporate
Infrastructure Fund Fourteen, L.P. (Incorporated by reference to Exhibit
10.6 to Registrant’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2009, filed August 13,
2009).
|
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 Chief Financial
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 Chief Financial Officer pursuant to 18 U.S.C. §1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
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
Equipment and Corporate Infrastructure Fund Fourteen, L.P.
(Registrant)
By: ICON
GP 14, LLC
(General
Partner of the Registrant)
May 14,
2010
By:
/s/ Michael A.
Reisner
|
Michael
A. Reisner
|
Co-Chief
Executive Officer and Co-President
(Co-Principal
Executive Officer)
|
May 14,
2010
By:
/s/ Mark
Gatto
|
Mark
Gatto
|
Co-Chief
Executive Officer and Co-President
(Co-Principal
Executive Officer)
|
May 14,
2010
By:
/s/
Anthony J. Branca
|
Anthony
J. Branca
|
Chief
Financial Officer
(Principal
Accounting and Financial
Officer)
|
24
|