ICON ECI Fund Sixteen

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Balance Sheets

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statement of Operations

(unaudited)

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statement of Changes in Equity

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statement of Cash Flows

(unaudited)

(1)   Organization

ICON ECI Fund Sixteen (the “Fund”) was formed as a Delaware statutory trust on October 11, 2012. When used in these notes to the financial statements, the terms “we,” “us,” “our” or similar terms refer to the Fund.  Our initial capitalization was $1,001.

We are a direct financing fund that primarily makes investments in or that are collateralized by equipment and other corporate infrastructure (collectively, “Capital Assets”). The investments are in companies that utilize Capital Assets to operate their businesses. These investments are primarily structured as debt and debt-like financings such as loans, leases and other structured financing transactions in or that are collateralized by Capital Assets that ICON MT 16, LLC, a Delaware limited liability company and our managing owner (the “Managing Owner”), believes will provide us with a satisfactory, risk-adjusted rate of return. Our Managing Owner makes investment decisions on our behalf and manages our business.

Our investment objectives are to preserve investors’ capital, provide distributions and provide a favorable total return. To meet our investment objectives, we will use the net proceeds from our offering to originate or acquire a diverse pool of investments described above, as well as other strategic investments collateralized by Capital Assets. ICON Capital, LLC, a Delaware limited liability company and our affiliate, is our investment manager (the “Investment Manager”). Our Investment Manager originates and services our investments. Wilmington Trust, National Association (the “Trustee”) serves as our sole trustee pursuant to our Third Amended and Restated Trust Agreement (the “Trust Agreement”). The Trustee delegated to the Managing Owner all of the power and authority to manage our business and affairs and has only nominal duties and liabilities to us.

Our offering period commenced on July 1, 2013. We are offering to sell to the public any combination of two classes of shares, Class A shares and Class I shares (collectively, the “Shares”), on a “best efforts” basis with the intention of raising up to $250,000,000 of capital, of which $9,000,000 has been reserved for issuance pursuant to our distribution reinvestment plan (the “DRIP”). Other than differing allocable fees and expenses, Class A shares and Class I shares have identical rights and privileges, such as identical voting and distribution rights. We reserve the right to reallocate the offering amount between the primary offering and the DRIP.

As of November 12, 2013 (the “Initial Closing Date”), we raised a minimum of $1,200,000 from the sale of our Shares, at which time shareholders were admitted and we commenced operations. As of March 31, 2014, we had not raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania. From the commencement of our offering period on July 1, 2013 through March 31, 2014, we sold 8,021 Class A shares to 156 Class A shareholders and 65 Class I shares to one Class I shareholder, representing an aggregate of $8,039,346 of capital contributions.  From July 1, 2013 through March 31, 2014, we incurred sales commissions to third parties of $561,458 and dealer-manager and distribution fees in the amount of $161,157 to ICON Securities, LLC, formerly known as ICON Securities Corp., the dealer-manager of our offering and an affiliate of our Investment Manager (“ICON Securities”). In addition, organization costs of $4,343 and offering expenses of $74,852 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets. Organization costs are expensed when incurred and offering expenses are recorded as a reduction of shareholders’ equity.

(2)   Summary of Significant Accounting Policies

Basis of Presentation

Our accompanying 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 Managing Owner, all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation have been included.  These financial statements should be read together with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.  The results for the interim period are not necessarily indicative of the results for the full year.

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

Our Investment Manager weighs all credit decisions based on a combination of external credit ratings as well as internal credit evaluations of all borrowers. A borrower’s credit is analyzed using those credit ratings as well as the borrower’s financial statements and other financial data deemed relevant.

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

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

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

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

(3)   Investment in Joint Ventures

On September 12, 2013, a joint venture owned by us, ICON Leasing Fund Eleven, LLC (“Fund Eleven”) and ICON Leasing Fund Twelve, LLC (“Fund Twelve”), each an entity also managed by our Investment Manager, purchased mining equipment for approximately $15,107,000. The equipment is subject to a 24-month lease with Murray Energy Corporation and certain of its affiliates (collectively, “Murray”), which expires on September 30, 2015. On December 1, 2013 and February 1, 2014, we contributed capital of approximately $934,000 and $1,726,000, respectively, to the joint venture, inclusive of acquisition fees. Subsequent to our second capital contribution, the joint venture is owned 19.8% by us, 67.0% by Fund Eleven and 13.2% by Fund Twelve.

On March 4, 2014, a joint venture owned 10% by us, 60% by Fund Twelve, 15% by ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P. (“Fund Fourteen”) and 15% by ICON ECI Fund Fifteen, L.P. (“Fund Fifteen”), each an entity also managed by our Investment Manager, purchased mining equipment from an affiliate of Blackhawk Mining, LLC (“Blackhawk”). Simultaneously, the mining equipment was leased to Blackhawk and its affiliates for four years. The aggregate purchase price for the mining equipment of approximately $25,359,000 was funded by approximately $17,859,000 in cash and $7,500,000 of non-recourse long-term debt. Our contribution to the joint venture was approximately $1,796,000.

On March 28, 2014, a joint venture owned 12.5% by us, 60% by Fund Twelve and 27.5% by Fund Fifteen purchased trucks, trailers and other equipment from subsidiaries of D&T Holdings, LLC (“D&T”) for $12,200,000. Simultaneously, the trucks, trailers and other equipment were leased to D&T and its subsidiaries for 57 months. Our contribution to the joint venture was approximately $1,485,000.

Information as to the results of operations of ICON Murray VI, LLC is summarized as follows:  

Information as to the results of operations of ICON Blackhawk, LLC is summarized as follows:

(4)   Revolving Line of Credit, Recourse

On December 26, 2013, we entered into an agreement with California Bank & Trust (“CB&T”) for a revolving line of credit of up to $5,000,000 (the “Facility”), which is secured by all of our assets not subject to a first priority lien. The interest rate for general advances under the Facility is CB&T’s prime rate. We may elect to designate up to five advances on the outstanding principal balance of the Facility to bear interest at the London Interbank Offered Rate (“LIBOR”) plus 2.5% per year. In all instances, borrowings under the Facility are subject to an interest rate floor of 4.0% per year. In addition, we are obligated to pay an annualized 0.5% fee on unused commitments under the Facility. At March 31, 2014, there were no obligations outstanding and we were in compliance with all covenants related to the Facility.  Amounts available under the Facility are subject to a borrowing base that is determined, subject to certain limitations, based on the present value of the future receivables under certain loans and lease agreements in which we have a beneficial interest.  At March 31, 2014, we had $0 available under the Facility pursuant to the borrowing base.

(5)   Transactions with Related Parties

We have entered into certain agreements with our Investment Manager and ICON Securities whereby we pay certain fees and reimbursements to these parties. We will pay ICON Securities (i) a dealer-manager fee for the Class A shares sold in the offering equal to 2% of gross offering proceeds from sales of such Class A shares for managing the offering and to reimburse the dealer-manager for wholesaling fees and expenses and (ii) a distribution fee equal to 0.55% of gross offering proceeds from Class I shares sold in the offering for managing the distribution of the Class I shares. We will continue to pay the distribution fee with respect to the Class I shares sold in the offering until the earlier to occur of: (i) total distribution fees paid with respect to the Class I shares following the completion of the offering equaling 10% of the gross proceeds received with respect to the issuance of such shares from the primary portion of the offering or (ii) our entry into our wind down period. The distribution fee will be paid monthly in arrears. No dealer-manager or distribution fees will be paid on any Shares sold pursuant to the DRIP.

Our Managing Owner also has a 1% interest in our profits, losses, distributions and liquidation proceeds, subject to increase based on our investors achieving a preferred return. In addition, our Investment Manager and its affiliates will be reimbursed for organization and offering expenses incurred in connection with our organization and offering of Shares and administrative expenses incurred in connection with our operations. The reimbursement of organization and offering expenses will be capped at the lesser of 1.44% of the maximum primary offering amount of $241,000,000 and the actual costs and expenses incurred by our Investment Manager and its affiliates.

We pay our Investment Manager (i) a management fee of 3.50% of the gross periodic payments due and paid from our investments and (ii) acquisition fees of 2.50% of the total purchase price (including indebtedness incurred or assumed therewith) of, or the value of the Capital Assets secured by or subject to, each of our investments.

Administrative expense reimbursements are costs incurred by our Investment Manager or its affiliates that are necessary to our operations. These costs include our Investment Manager’s and its affiliates’ legal, accounting, investor relations and operations personnel, as well as professional fees and other costs that are charged to us. Excluded are salaries and related costs, office rent, travel expenses and other administrative costs incurred by individuals with a controlling interest in our Investment Manager.

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

At March 31, 2014, we had a net payable of $489,720 due to our Investment Manager and its affiliates that primarily consisted of administrative expense reimbursements of approximately $256,000, offering expenses of approximately $75,000, acquisition fees of approximately $102,000 and general and administrative expense reimbursements of approximately $36,000.  On December 31, 2013, we had a net payable of $105,564 due to our Investment Manager and its affiliates that primarily consisted of administrative expense reimbursements of approximately $80,000 and offering expenses of approximately $19,000.

From April 1, 2014 through May 8, 2014, we raised an additional $1,351,133 in capital contributions and incurred dealer-manager and distribution fees in the amount of $28,147.

(6)   Commitments and Contingencies

At the time we acquire or divest of our interest in Capital Assets, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities.  Our Managing Owner 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 financial condition or results of operations taken as a whole.

We reimburse our Investment Manager and its affiliates for the organization and offering expenses they incur in connection with our organization and offering pursuant to our Trust Agreement. As of March 31, 2014, $1,491,655 was advanced by our Investment Manager and its affiliates for organization and offering expenses incurred on our behalf of which only $115,266 has been charged to us by our Investment Manager and is included in due to Investment Manager and affiliates on our balance sheets. Of the remaining $1,376,389 that we expect to reimburse to our Investment Manager and its affiliates in the future as we continue to raise offering proceeds, $475,045 is expected to be charged to earnings and $901,344 is expected to be charged to shareholders’ equity.

Item 2. Managing Owner's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our current financial position and results of operations. This discussion should be read together with our unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2013.  This discussion should also be read in conjunction with the disclosures below regarding “Forward-Looking Statements”.

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include ICON ECI Fund Sixteen.

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 our control that may cause actual results to differ materially from those projected.  We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

We are a direct financing fund that primarily makes investments in domestic and international businesses, which investments are primarily structured as debt and debt-like financings (such as loans, leases and other structured financing transactions) in, or that are collateralized by, Capital Assets utilized by such companies to operate their businesses, as well as other strategic investments in or collateralized by Capital Assets that our Managing Owner believes will provide us with a satisfactory, risk-adjusted rate of return. We were formed as a Delaware statutory trust and will be treated as a partnership for federal income tax purposes.

As of the Initial Closing Date, we raised a minimum of $1,200,000 from the sale of our Shares, at which time shareholders were admitted and we commenced operations. As of March 31, 2014, we had not raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania.  Subsequent to the Initial Closing Date, we returned the initial capital contribution of $1,000 to ICON Investment Group, LLC (the “Initial Shareholder”). From the commencement of our offering on July 1, 2013 through March 31, 2014, we sold 8,021 Class A shares to 156 Class A shareholders and 65 Class I shares to one Class I shareholder, representing an aggregate of $8,039,346 of capital contributions.  From July 1, 2013 through March 31, 2014, we incurred sales commissions to third parties of $561,458 and dealer-manager and distribution fees to ICON Securities of $161,157.  In addition, organization costs of $4,343 and offering expenses of $74,852 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets.

After the net offering proceeds have been invested, it is anticipated that additional investments will be made with the cash generated from our initial investments to the extent that cash is not used for our expenses, reserves and distributions to our shareholders.  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 our offering.  This time frame is called the “operating period” and may be extended, at our Managing Owner’s discretion, for up to an additional three years.  After the operating period, we will then sell our assets or let our investments mature in the ordinary course of business, during a time frame called the “wind down period”.

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

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

·         generate deferred cash flow by realizing the value of certain Capital Assets that we lease at the maturity of the investment; and

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

In the case of secured loans and other financing transactions, the principal and interest payments due under the loan are expected to provide a return of and a return on the amount we lend. 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 our investment.

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

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

In addition, we have established a cash reserve of approximately 0.5% of the gross offering proceeds.  As of March 31, 2014, the cash reserve was $40,197.

Recent Significant Transactions

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

Mining Equipment

On September 12, 2013, a joint venture owned by us, Fund Eleven and Fund Twelve purchased mining equipment for approximately $15,107,000. The equipment is subject to a 24-month lease with Murray, which expires on September 30, 2015. On December 1, 2013 and February 1, 2014, we contributed capital of approximately $934,000 and $1,726,000, respectively, to the joint venture, inclusive of acquisition fees. Subsequent to our second capital contribution, the joint venture is owned 19.8% by us, 67.0% by Fund Eleven and 13.2% by Fund Twelve.

On March 4, 2014, a joint venture owned 10% by us, 60% by Fund Twelve, 15% by Fund Fourteen and 15% by Fund Fifteen purchased mining equipment from an affiliate of Blackhawk. Simultaneously, the mining equipment was leased to Blackhawk and its affiliates for four years. The aggregate purchase price for the mining equipment of approximately $25,359,000 was funded by approximately $17,859,000 in cash and $7,500,000 of non-recourse long-term debt. Our contribution to the joint venture was approximately $1,796,000.

Trucks and Trailers

On March 28, 2014, a joint venture owned 12.5% by us, 60% by Fund Twelve and 27.5% by Fund Fifteen purchased trucks, trailers and other equipment from subsidiaries of D&T for $12,200,000. Simultaneously, the trucks, trailers and other equipment were leased to D&T and its subsidiaries for 57 months. Our contribution to the joint venture was approximately $1,485,000.

The following table includes additional information on the significant transactions that we engaged in from the Initial Closing Date through March 31, 2014:

Acquisition Fees

We incurred acquisition fees to our Investment Manager of $101,524 during the three months ended March 31, 2014.

Recent Accounting Pronouncements

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

Results of Operations for the Three Months Ended March 31, 2014 (the “2014 Quarter”)

Total revenue for the 2014 Quarter was $65,231, which was attributable to income generated from our investment in three joint ventures with Fund Eleven, Fund Twelve, Fund Fourteen and Fund Fifteen.

Total expenses for the 2014 Quarter were $250,040, which were primarily comprised of administrative expense reimbursements due to our Investment Manager and other general and administrative expenses. Administrative expense reimbursements are costs incurred by our Investment Manager or its affiliates that are necessary for our operations.

Net Loss Attributable to Fund Sixteen

As a result of the foregoing factors, net loss attributable to us for the 2014 Quarter was $184,809. Net loss attributable to us per weighted average additional Class A share and Class I share outstanding for the 2014 Quarter was $35.76 and $35.65, respectively.

Financial Condition

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

Total Assets 

Total assets increased $5,674,034, from $1,944,016 at December 31, 2013 to $7,618,050 at March 31, 2014.  The increase was due to proceeds from the sale of our Shares, the majority of which were used to make investments during the 2014 Quarter.

Total Liabilities 

Total liabilities increased $541,506, from $198,077 at December 31, 2013 to $739,583 at March 31, 2014.  The increase was primarily due to the sales commission trail we accrued on the sale of our Class A shares and offering expenses payable to our Investment Manager and its affiliates during the 2014 Quarter.

Equity 

Equity increased $5,132,528, from $1,745,939 at December 31, 2013 to $6,878,467 at March 31, 2014.  The increase was primarily due to the sale of our Shares during the 2014 Quarter.

Liquidity and Capital Resources

Summary

At March 31, 2014 and December 31, 2013, we had cash of $1,927,369 and $1,027,327, respectively. Pursuant to the terms of our offering, we have established a cash reserve in the amount of 0.50% of the gross offering proceeds from the sale of our Shares. As of March 31, 2014, the cash reserve was $40,197. During our offering period, our main source of cash will be from financing activities and our main use of cash will be in investing activities.

We are offering our Shares on a “best efforts” basis with the current intention of raising up to $250,000,000.  As additional Shares 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 will use the net proceeds of our 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 transactions that generate (a) current cash flow from payments of principal and/or interest (in the case of secured loans and other financing transactions) and rental payments (in the case of leases), (b) deferred cash flow by realizing the value of certain Capital Assets that we lease at the maturity of the investment, or (c) a combination of both current and deferred cash flow from other structured investments.

Unanticipated or greater than anticipated operating costs or losses (including a borrower’s inability to make timely loan payments or a lessee’s inability to make timely lease payments) would adversely affect our liquidity. To the extent that working capital may be insufficient to satisfy our cash requirements, we anticipate that we would fund our operations from cash flow generated by operating and financing activities. Our Managing Owner does not intend to fund any cash flow deficit of ours or provide other financial assistance to us.

From the commencement of our offering on July 1, 2013 through March 31, 2014, we sold 8,021 Class A shares to 156 Class A shareholders and 65 Class I shares to one Class I shareholder, representing an aggregate of $8,039,346 of capital contributions.  From July 1, 2013 through March 31, 2014, we incurred sales commissions to third parties of $561,458 and dealer-manager and distribution fees to ICON Securities of $161,157.  In addition, organization costs of $4,343 and offering expenses of $74,852 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets. Organization costs are expensed when incurred and offering expenses are recorded as a reduction of shareholders’ equity.

Cash Flows

Operating Activities 

Cash provided by operating activities in the 2014 Quarter of $34,127, was primarily due to distributions received from one of our joint ventures, partially offset by general and administrative expenses paid during the 2014 Quarter.

Investing Activities    

Cash used in investing activities in the 2014 Quarter of $4,656,501 was related to our investment in three joint ventures.

Financing Activities   

Cash provided by financing activities in the 2014 Quarter of $5,522,416 was primarily related to proceeds from the sale of our Shares, partially offset by sales commissions and dealer-manager fees paid.

Sources of Liquidity

We believe that cash generated from the sale of our Shares pursuant to our offering and other financing activities, as well as our expected results of operations, will be sufficient to finance our liquidity requirements for the foreseeable future, including distributions to our shareholders, general and administrative expenses, new investment opportunities, management fees and administrative expense reimbursements.

Our ability to generate cash in the future is subject to general economic, financial, competitive, regulatory and other factors that affect us and our lessees’ and borrowers’ businesses that are beyond our control.

Financings and Borrowings

Revolving Line of Credit, Recourse

On December 26, 2013, we entered into the Facility, which is secured by all of our assets not subject to a first priority lien.  The interest rate for general advances under the Facility is CB&T’s prime rate. We may elect to designate up to five advances on the outstanding principal balance of the Facility to bear interest at LIBOR plus 2.5% per year. In all instances, borrowings under the Facility are subject to an interest rate floor of 4.0% per year. In addition, we are obligated to pay an annualized 0.5% fee on unused commitments under the Facility. At March 31, 2014, there were no obligations outstanding and we were in compliance with all covenants related to the Facility.  Amounts available under the Facility are subject to a borrowing base that is determined, subject to certain limitations, based on the present value of the future receivables under certain loans and lease agreements in which we have a beneficial interest.  At March 31, 2014, we had $0 available under the Facility pursuant to the borrowing base.

Distributions

We, at our Managing Owner’s discretion, make monthly distributions to our shareholders beginning with the first month after each such shareholder’s admission and expect to continue to make such distributions until the termination of our operating period.  During the 2014 Quarter, we made distributions to our Managing Owner, Class A additional shareholders and Class I shareholder of $625, $60,524, and $1,273, respectively.

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 Managing Owner 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 financial condition or results of operations taken as a whole. We are a party to the Facility, as discussed in “Financings and Borrowings – Revolving Line of Credit, Recourse” above. We had no borrowings under the Facility at March 31, 2014.

Off-Balance Sheet Transactions

We reimburse our Investment Manager and its affiliates for the organization and offering expenses they incurred in connection with our organization and offering pursuant to our Trust Agreement. As of  March 31, 2014, $1,491,655 was advanced by our Investment Manager and its affiliates for organization and offering expenses incurred on our behalf of which only $115,266 has been charged to us by our Investment Manager and is included in due to Investment Manager and affiliates on our balance sheets.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

In connection with the preparation of this Quarterly Report on Form 10-Q for the three months ended March 31, 2014, our Managing Owner carried out an evaluation, under the supervision and with the participation of the management of our Managing Owner, including its Co-Chief Executive Officers and the Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our Managing Owner’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 Managing Owner’s disclosure controls and procedures were effective.

In designing and evaluating our Managing Owner’s disclosure controls and procedures, our Managing Owner 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 Managing Owner’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, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings  

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

Item 1A. Risk Factors

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

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

On November 9, 2012, we were capitalized with (i) our Investment Manager’s capital contribution of $1.00 in exchange for an interest in our cash flow and 0.001 Class A share and (ii) the issuance to the Initial Shareholder of one Class A share for a purchase price of $1,000. The Class A shares were purchased for investment and for the purpose of organizing us. We issued the Class A shares in reliance on an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

On January 25, 2013, our Investment Manager transferred its interest in us to our Managing Owner in exchange for $1.00.

Our Registration Statement on Form S-1, as amended, was declared effective by the SEC on July 1, 2013 (SEC File No. 333-185144).  Our offering period commenced on July 1, 2013 and will end no later than July 1, 2015, unless extended by our Managing Owner.

Our Initial Closing Date was November 12, 2013, at which time shareholders were admitted and we commenced operations. Subsequent to the Initial Closing Date, we returned the initial capital contribution of $1,000 to the Initial Shareholder.  As of March 31, 2014, we had not raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania.  From the commencement of our offering on July 1, 2013 through March 31, 2014, we received additional capital contributions of $8,039,346.  From July 1, 2013 through March 31, 2014, we incurred sales commissions to third parties of $561,458 and dealer-manager and distribution fees to ICON Securities of $161,157.  In addition, organization costs of $4,343 and offering expenses of $74,852 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets.  Net amount to us after deducting the expenses described were $7,237,536 during this period.

From April 1, 2014 through May 8, 2014, we received additional capital contributions in the amount of $1,351,133.  For the period from April 1, 2014 through May 8, 2014, we incurred sales commissions to third parties of $90,092 and dealer-manager and distribution fees to ICON Securities of $28,147.

See the disclosure under “Recent Significant Transactions” in Item 2 of Part I for a discussion of the investments we have made with our net offering proceeds.

Item 3.  Defaults Upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

Item 6. Exhibits

SIGNATURES

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

ICON ECI Fund Sixteen

(Registrant)

By: ICON MT 16, LLC

      (Managing Owner of the Registrant)

May 13, 2014