SQN AIF IV, L.P. - FORM 10-Q - November 13, 2015

Attached files

file	filename
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - SQN AIF IV, L.P.	ex31-1.htm
EX-32.1 - CERTIFICATION OF CHIEF ACCOUNTING OFFICER - SQN AIF IV, L.P.	ex32-2.htm
EX-31.2 - CERTIFICATION OF CHIEF ACCOUNTING OFFICER - SQN AIF IV, L.P.	ex31-2.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - SQN AIF IV, L.P.	ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION FROM __________ TO __________

COMMISSION FILE NUMBER: 333-184550

SQN AIF IV, L.P.

(Exact name of registrant as specified in its charter)

Delaware	36-4740732
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer ID No.)

100 Wall Street, 28^th Floor
New York, NY	10005
(Address of principal executive offices)	(Zip code)

Issuer’s telephone number: (212) 422-2166

(Former name, former address and former fiscal year, if changed since last report.)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐	Smaller Reporting Company ☒

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

Yes ☐ No ☒

At November 12, 2015, there were 48,923.10 units of the Registrant’s limited partnership interests issued and outstanding.

SQN AIF IV, L.P. and Subsidiaries

INDEX

PART I – FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at September 30, 2015 (unaudited) and December 31, 2014	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2015 and 2014 (unaudited)	4

	Condensed Consolidated Statement of Changes in Partners’ Equity for the Nine Months Ended September 30, 2015 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	General Partner’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

PART II – OTHER INFORMATION		39

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	39

Signatures		40

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Condensed Consolidated Balance Sheets

	September 30,			December 31,
	2015			2014
	(Unaudited)
Assets

Cash and cash equivalents	$	4,436,047		$	4,035,214
Investments in finance leases, net		1,185,073			1,492,778
Investments in equipment subject to operating leases, net		1,090,589			14,265,326
Equipment notes receivable, including accrued interest of $66,365 and $22,488		5,308,857			4,341,220
Equipment loans receivable, including accrued interest of $0 and $30,448		—			11,429,927
Residual value investment in equipment on lease		2,938,065			2,192,362
Initial direct costs, net of accumulated amortization of $36,119 and $199,396		125,588			313,688
Collaterized loans receivable, including accrued interest of $59,380 and $0		10,874,372			—
Investment in Informage SQN Technologies LLC		701,786			1,231,792
Investment in SQN Helo LLC		1,075,403			—
Investment in H&P		6,743,645			—
Other assets		77,240			4,237,124
Total Assets	$	34,556,665		$	43,539,431

Liabilities and Partners' Equity
Liabilities:
Equipment notes payable, non-recourse	$	—		$	10,380,386
Loans payable		—			11,304,675
Accounts payable and accrued liabilities		142,922			178,713
Distributions payable to Limited Partners		—			429,140
Distributions payable to General Partner		33,716			13,005
Security deposits payable		32,684			12,324
Total Liabilities		209,322			22,318,243

Commitments and Contingencies		—			—

Partners' Equity (Deficit):
Limited Partners		32,616,940			20,083,196
General Partner		(58,347	)		(23,339	)
Total Partners' Equity attributable to the Partnership		32,558,593			20,059,857

Non-controlling interest in consolidated entities		1,788,750			1,161,331

Total Equity		34,347,343			21,221,188
Total Liabilities and Partners' Equity	$	34,556,665		$	43,539,431

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Condensed Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended					For the Nine Months Ended
	September 30					September 30
	2015			2014		2015			2014

Revenue:
Rental income	$	81,116		$	1,294,742	$	1,645,019		$	3,427,328
Finance income		41,089			61,870		138,466			140,057
Interest income		245,922			736,770		1,015,854			1,636,898
Investment loss from equity method investments		(192,799	)		—		(486,554	)		—
Gain (loss) on sale of assets		—			466,482		(57,440	)		469,595
Other income		56,550			—		313,223			—
Total Revenue		231,878			2,559,864		2,568,568			5,673,878

Expenses:
Management fees - Investment Manager		375,000			375,000		1,125,000			1,125,000
Depreciation and amortization		75,628			891,621		1,561,227			2,397,984
Professional fees		33,810			51,508		166,986			241,242
Acquisition costs		—			—		—			28,532
Administration expense		20,499			21,619		51,342			36,409
Interest expense		73,248			674,407		907,818			1,649,063
Other expenses		1,621			8,493		55,060			27,550
Total Expenses		579,806			2,022,648		3,867,433			5,505,780
Foreign currency transaction (gains) losses		38,418			40,324		18,843			25,223
Net (loss) income		(386,346	)		496,892		(1,317,708	)		142,875

Net income (loss) attributable to non-controlling interest in consolidated entities		735			120,757		(85,496	)		171,627
Net (loss) income attributable to the Partnership	$	(387,081	)	$	376,135	$	(1,232,212	)	$	(28,752	)

Net (loss) income attributable to the Partnership
Limited Partners	$	(383,210	)	$	372,374	$	(1,219,890	)	$	(28,464	)
General Partner		(3,871	)		3,761		(12,322	)		(288	)
Net (loss) income attributable to the Partnership	$	(387,081	)	$	376,135	$	(1,232,212	)	$	(28,752	)

Weighted average number of limited partnership interests outstanding		40,521.23			19,314.82		34,520.95			13,713.41

Net (loss) income attributable to Limited Partners per weighted average number of limited partnership interests outstanding	$	(9.46	)	$	19.28	$	(35.34	)	$	(2.08	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Condensed Consolidated Statement of Changes in Partners' Equity (Unaudited)

Nine Months Ended September 30, 2015

	Limited
	Partnership		Total			General			Limited			Non-controlling
	Interests		Equity			Partner			Partners			Interest

Balance, January 1, 2015		26,444.01	$	21,221,188		$	(23,339	)	$	20,083,196		$	1,161,331

Limited Partners' capital contributions		18,148.07		18,148,068			—			18,148,068			—
Non-controlling interest contribution to consolidated entities		—		1,788,750			—			—			1,788,750
Offering expenses		—		(325,653	)		—			(325,653	)		—
Underwriting fees		—		(1,802,204	)		—			(1,802,204	)		—
Net loss		—		(1,317,708	)		(12,322	)		(1,219,890	)		(85,496	)
Distributions to partners		—		(2,091,789	)		(20,711	)		(2,071,078	)		—
Redemption of non-controlling interest to consolidated entities		—		(1,075,835	)		—			—			(1,075,835	)
Distribution of income from consolidated entities		—		(197,474	)		(1,975	)		(195,499	)		—

Balance, September 30, 2015		44,592.08	$	34,347,343		$	(58,347	)	$	32,616,940		$	1,788,750

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2015			2014

Cash flows from operating activities:
Net (loss) income	$	(1,317,708	)	$	142,875
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Finance income		(138,466	)		(140,057	)
Accrued interest income		(815,177	)		(1,344,045	)
Investment loss from equity method investments		486,554			—
Depreciation and amortization		1,561,227			2,397,984
Loss (gain) on sale of assets		57,440			(469,595	)
Rental income adjustment for Echo and Echo II		186,048			—
Foreign currency transaction gains		12,588			(4,317	)
Change in operating assets and liabilities:
Minimum rents receivable		342,916			419,594
Accrued interest income		710,793			1,156,511
Other assets		4,526,745			(72,305	)
Accounts payable and accrued liabilities		(35,791	)		47,252
Unearned income		—			(82,024	)
Due to SQN Securities, LLC		—			(10,797	)
Security deposits payable		20,360			—
Accrued interest on note payable		(674,826	)		554,194
Net cash provided by operating activities		4,922,703			2,595,270

Cash flows from investing activities:
Cash paid for purchase of equipment subject to operating leases		—			(2,929,174	)
Purchase of finance leases		(1,023,427	)		(2,582,377	)
Purchase of residual value investments of equipment subject to lease		(745,703	)		(402,976	)
Cash paid for initial direct costs		(64,247	)		(142,283	)
Cash paid for collateralized loans receivable		(10,964,992	)		(2,686,056	)
Cash received from collateralized loans receivable		150,000			2,145,086
Cash paid for equipment loans receivable		—			(5,836,265	)
Cash received from equipment loans receivable		1,128,812			1,985,352
Proceeds from sale of leased assets		15,431,895			2,494,487
Investment in Informage SQN Technologies		(103,532	)		(192,500	)
Proceeds from Informage SQN Technologies		610,936			—
Investment in SQN Helo		(1,465,000	)		—
Investment in H&P		(6,818,000	)		—
Cash paid for equipment notes receivable		(1,216,377	)		(803,638	)
Repayment of equipment notes receivable		287,268			238,854
Net cash used in investing activities		(4,792,367	)		(8,711,490	)

Cash flows from financing activities:
Cash received from loan payable		—			9,500,000
Repayments of loan payable		(11,304,675	)		(3,714,172	)
Cash paid to financial institutions for equipment notes payable		(2,460,262	)		(4,970,568	)
Cash received from non-controlling interest contribution		1,788,750			470,000
Cash received from Limited Partner capital contributions		17,948,564			14,271,451
Cash paid for Limited Partner distributions		(2,500,218	)		(817,706	)
Cash paid for Initial Limited Partners contribution redemption		—			(97,183	)
Distribution of income from consolidated entities		(197,474	)		—
Cash paid for non-controlling interest distributions		(1,075,835	)		—
Cash paid for underwriting fees		(1,602,700	)		(1,408,690	)
Cash paid for organizational and offering costs		(325,653	)		(419,731	)
Net cash provided by financing activities		270,497			12,813,401

Net increase in cash and cash equivalents		400,833			6,697,181
Cash and cash equivalents, beginning of period		4,035,214			146,340
Cash and cash equivalents, end of period	$	4,436,047		$	6,843,521

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2015			2014
Supplemental disclosure of other cash flow information:
Cash paid for interest	$	351,678		$	856,168

Supplemental disclosure of non-cash investing and financing activities:
Debt assumed in lease purchase agreement	$	—		$	11,447,351
Units issued as underwriting fee discount	$	199,504		$	—
Distributions payable to General Partner	$	20,711		$	—
Debt forgiven on sale of assets	$	—		$	(1,219,553	)
Reclassification of equipment subject to operating leases to other assets	$	(181,778	)	$	(195,168	)
Increase in equipment loans receivable	$	(108,636	)	$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

SQN AIF IV, L.P. and Subsidiaries

(A Delaware Limited Partnership)

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2015 and 2014

(Unaudited)

1.	Organization and Nature of Operations

Organization – SQN AIF IV, L.P. (the “Partnership”) was formed on August 10, 2012, as a Delaware limited partnership and is engaged in a single business segment, the ownership and investment in leased equipment and related financings which includes: (i) purchasing equipment and leasing it to third-party end users; (ii) providing equipment and other asset financing; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. The Partnership will terminate no later than December 31, 2036.

Nature of Operations – The principal investment strategy of the Partnership is to invest in business-essential, revenue-producing (or cost-saving) equipment or other physical assets with high in-place value and long, relative to the investment term, economic life and project financings. The Partnership executes its investment strategy by making investments in equipment already subject to lease or originating equipment leases in such equipment, which will include: (i) purchasing equipment and leasing it to third-party end users; (ii) providing equipment and other asset and project financings; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. From time to time, the Partnership may also purchase equipment and sell it directly to its leasing customers. The Partnership may use other investment structures that SQN Capital Management, LLC (the “Investment Manager”) believes will provide the Partnership with an appropriate level of security, collateralization, and flexibility to optimize its return on its investment while protecting against downside risk. In many cases, the structure will include the Partnership holding title to or a priority or controlling position in the equipment or other asset.

The General Partner of the Partnership is SQN AIF IV GP, LLC (the “General Partner”), a wholly-owned subsidiary of the Partnership’s Investment Manager. Both the Partnership’s General Partner and its Investment Manager are Delaware limited liability companies. The General Partner manages and controls the day to day activities and operations of the Partnership, pursuant to the terms of the Limited Partnership Agreement. The General Partner paid an aggregate capital contribution of $100 for a 1% interest in the Partnership’s income, losses and distributions. The Investment Manager makes all investment decisions and manages the investment portfolio of the Partnership.

On December 6, 2013, the Partnership formed a special purpose entity SQN Echo LLC (“Echo”), a limited liability company registered in the state of Delaware which was 80% owned by the Partnership and 20% by SQN Alternative Investment Fund III L.P. (“Fund III”), an entity also sponsored by the Partnership’s Investment Manager. The Partnership originally contributed $2,200,000 to purchase the 80% share of Echo. Fund III contributed $550,000 to purchase a 20% share of Echo which was presented as non-controlling interest on the condensed consolidated financial statements. On December 20, 2013, Echo entered into an agreement with a third party for the purchase of two portfolios of leases for $17,800,000. The first portfolio consisted of various types of equipment including material handling, semiconductor test and manufacturing equipment, computer, medical, and telecommunications equipment. The second portfolio consisted of lease financings, which were accounted for as loans receivable in the condensed consolidated financial statements. Echo paid approximately $9,300,000 in cash and assumed approximately $8,500,000 in non-recourse equipment notes payable. In February 2014, the Partnership funded an additional $480,000 into Echo (at the same time, an additional $120,000 was funded by Fund III) to decrease the principal of the debt originally obtained to finance the acquisition and reduce the interest rate. In June 2015, Echo sold all lease portfolios to a third party. The third party paid total cash proceeds of $6,001,324 and assumed related outstanding debt of $3,466,663. The net book value of lease portfolios at the time of sale was $9,978,526, which resulted in the Partnership recognizing a U.S. GAAP loss of $510,539, and a yield on investment of 11.603% which exceeded the originally projected yield of 10%. The Partnership received approximately $2,822,831 in cash from Echo.

On March 26, 2014, the Partnership formed a special purpose entity SQN Echo II, LLC (“Echo II”), a limited liability company registered in the state of Delaware which was 80% owned by the Partnership and 20% by Fund III. The Partnership originally contributed $800,000 to purchase the 80% share of Echo II. Fund III contributed $200,000 to purchase a 20% share of Echo II which was presented as non-controlling interest on the condensed consolidated financial statements. On March 28, 2014, Echo II entered into an agreement with a third party for the purchase of two portfolios of leases for approximately $21,863,000. The first portfolio consisted of (i) various types of equipment including material handling, semiconductor test and manufacturing equipment, computer, medical, and telecommunications equipment and (ii) direct finance leases in medical equipment. The second portfolio consisted of lease financings, which were accounted for as loans receivable in the condensed consolidated financial statements. Echo II paid approximately $10,416,000 in cash and assumed approximately $11,447,000 in non-recourse equipment notes payable. In June 2014, the Partnership funded an additional $600,000 into Echo II (at the same time, an additional $150,000 was funded by Fund III) to decrease the principal of the debt originally obtained to finance the acquisition and reduce the interest rate. In June 2015, Echo II sold all lease portfolios to a third party. The third party paid total cash proceeds of $7,825,000 and assumed related outstanding debt of $5,041,652. The net book value of lease portfolios at the time of sale was $12,902,075, which resulted in the Partnership recognizing a U.S. GAAP loss of $35,423, and a yield on investment of 14.083% which exceeded the originally projected yield of 10%. The Partnership received approximately $1,517,202 in cash from Echo II.

On June 3, 2015, SQN Alpha, LLC (“Alpha”), a special purpose entity which is 32.5% owned by the Partnership and 67.5% owned by SQN Portfolio Acquisition Company, LLC (“SQN PAC”), acquired a promissory note with a principal amount equal to $2,650,000. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on June 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the third party which include equipment leases, direct hard assets and infrastructure investments, and other securities. On June 3, 2015, a participation agreement was entered into between SQN PAC (“Participation A”), the Partnership (“Participation B”), Alpha and SQN Capital Management, LLC. Under the agreement, Alpha created two collateralized participation interests for the collateral (“Promissory Note”); Participation A’s principal contribution is $1,788,750 and accrues interest at 9% per annum and Participation B’s principal contribution is $861,250 and accrues interest at 15.05% per annum. SQN Capital Management, LLC was appointed as a servicer for the Promissory Note. Participation A’s interest is senior to Participation B’s interest. Alpha bears the risks and rewards of ownership of the Promissory Note and therefore the note is recorded on Alpha’s financial statements. Since the Partnership bears the primary risks and rewards of Alpha, the Partnership consolidates Alpha into the condensed consolidated financial statements. SQN PAC’s 67.5% investment in Alpha is presented as non-controlling interest on the condensed consolidated financial statements.

The Partnership’s income, losses and distributions are allocated 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have received total distributions equal to their capital contributions plus an 8% per year, compounded annually, cumulative return on their capital contributions. After such time, all income, losses and distributable cash will be allocated 80% to the Limited Partners and 20% to the General Partner. The Partnership is currently in the Offering and Operating Periods. The Offering Period expires the earlier of raising $200,000,000 in Limited Partner contributions (200,000 units at $1,000 per unit) or April 2, 2016, which is three years from the date the Partnership was declared effective by the Securities and Exchange Commission (“SEC”). During the Operating Period, the Partnership will invest most of the net proceeds from its offering in business-essential, revenue-producing (or cost-saving) equipment, other physical assets with substantial economic lives and, in many cases, associated revenue streams and project financings. The Operating Period began on the date of the Partnership’s initial closing, which occurred on May 29, 2013 and will last for three years unless extended at the sole discretion of the General Partner. The Liquidation Period, which begins three years after the start of the Operating Period, is the period in which the Partnership will sell its assets in the ordinary course of business and will last two years, unless it is extended, at the sole discretion of the General Partner.

SQN Securities, LLC (“Securities”), is a Delaware limited liability company and a majority-owned subsidiary of the Investment Manager. Securities, in its capacity as the Partnership’s selling agent, receives an underwriting fee of 3% of the gross proceeds from Limited Partners’ capital contributions (excluding proceeds, if any, the Partnership receives from the sale of its Units to the General Partner or its affiliates). While Securities is currently acting as the Partnership’s exclusive selling agent, the Partnership may engage additional selling agents in the future. In addition, the Partnership will pay a 7% sales commission to broker-dealers unaffiliated with the General Partner who will be selling the Partnership’s Units on a best efforts basis. When the 7% sales commission is not required to be paid, the Partnership applies the proceeds that would otherwise be payable as sales commission towards the purchase of additional fractional Units at $1,000 per Unit.

During the Operating Period, the Partnership plans to make quarterly distributions of cash to the Limited Partners, if, in the opinion of the Partnership’s Investment Manager, such distributions are in the Partnership’s best interests. Therefore, the amount and rate of cash distributions could vary and are not guaranteed. The targeted distribution rate is 6.5% annually, paid quarterly as 1.625%, of each Limited Partner’s capital contribution (pro-rated to the date of admission for each Limited Partner). During the nine months ended September 30, 2015, the Partnership made distributions to its Limited Partners totaling approximately $2,071,078. As of September 30, 2015, the Partnership has accrued $33,716 for distributions payable to General Partner.

From May 29, 2013 through September 30, 2015, the Partnership has admitted 872 Limited Partners with total capital contributions of $44,591,073 resulting in the sale of 44,591.08 Units. The Partnership received cash contributions of $42,907,509 and applied $1,683,564 which would have otherwise been paid as sales commission to the purchase of 1,683.56 additional Units.

2.	Summary of Significant Accounting Policies

Basis of Presentation – The condensed consolidated financial statements of SQN AIF IV, L.P. and Subsidiaries at September 30, 2015 and for the three and nine months ended September 30, 2015 and 2014 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results reported in these condensed consolidated financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Partnership for the year ended December 31, 2014 and notes thereto contained in the Partnership’s annual report on Form 10-K for the year ended December 31, 2014, as filed with the SEC on March 31, 2015.

Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Partnership and its subsidiaries, where the Partnership has the primary economic benefits of ownership. The Partnership’s consolidation policy requires the consolidation of entities where a controlling financial interest is held as well as the consolidation of variable interest entities in which the Partnership has the primary economic benefits. All material intercompany balances and transactions are eliminated in consolidation.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires the General Partner and Investment Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates primarily include the determination of allowances for doubtful lease, notes and loan accounts, depreciation and amortization, impairment losses, estimated useful lives, and residual values. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Partnership considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents consist of funds maintained in checking and money market accounts maintained at financial institutions.

The Partnership’s cash and cash equivalents are held principally at one financial institution and at times may exceed federally insured limits. The Partnership has placed these funds in an international financial institution in order to mitigate risk relating to exceeding insured limits. The Partnership, through Summit Asset Management Limited, maintains an unrestricted bank account at a major financial institution in the United Kingdom for purposes of receiving payments and funding transactions in Pound Sterling.

Credit Risk – In the normal course of business, the Partnership is exposed to credit risk. Credit risk is the risk that the Partnership’s counterparty to an agreement either has an inability or unwillingness to make contractually required payments. The Partnership expects concentrations of credit risk with respect to lessees to be dispersed across different industry segments and different regions of the world.

Asset Impairments – Assets in the Partnership’s investment portfolio, which are considered long-lived assets, are periodically reviewed, no less frequently than annually or when indicators of impairment exist, to determine whether events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. If there is an indication of impairment, the Partnership estimates the future cash flows (undiscounted and without interest charges) expected from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If an impairment is determined to exist, the impairment loss is measured as the amount by which the carrying value of a long-lived asset exceeds its fair value and is recorded in the statement of operations in the period the determination is made. The events or changes in circumstances that generally indicate that an asset may be impaired are, (i) the estimated fair value of the underlying equipment is less than its carrying value, (ii) the lessee is experiencing financial difficulties and (iii) it does not appear likely that the estimated proceeds from the disposition of the asset will be sufficient to recover the carrying value of the asset. The preparation of the undiscounted cash flows requires the use of assumptions and estimates, including the level of future rents or receipts from the sale of the investment, estimated downtime between re-leasing events, and the amount of re-leasing costs. The Investment Manager’s review for impairment includes a consideration of the existence of impairment indicators, including third party appraisals, published values for similar assets, recent transactions for similar assets, adverse changes in market conditions for specific asset types, and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of the asset.

Lease Classification and Revenue Recognition – The Partnership records revenue based upon the lease classification determined at the inception of the transaction and based upon the terms of the lease or when there are significant changes to the lease terms. The Partnership leases equipment to third parties and each such lease may be classified as either a finance lease or an operating lease. Initial direct costs are capitalized and amortized over the term of the related lease for a finance lease. For an operating lease, initial direct costs are included as a component of the cost of the equipment and depreciated.

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

For operating leases, rental income is recognized on the straight line basis over the lease term. Billed and uncollected operating lease receivables will be included in accounts receivable. Accounts receivable are stated at their estimated net realizable value. Rental income received in advance is the difference between the timing of the cash payments and the income recognized on the straight line basis.

The investment committee of the Investment Manager approves each new equipment lease, financing transaction, and lease acquisition. As part of this process it determines the unguaranteed residual value, if any, to be used once the acquisition has been approved. The factors considered in determining the unguaranteed residual value include, but are not limited to, the creditworthiness of the potential lessee, the type of equipment being considered, how the equipment is integrated into the potential lessee’s business, the length of the lease and the industry in which the potential lessee operates. Unguaranteed residual values are reviewed for impairment in accordance with the Partnership’s policy relating to impairment review.

Finance Lease Receivables and Allowance for Doubtful Lease, Notes and Loan Accounts – In the normal course of business, the Partnership provides credit or financing to its customers, performs credit evaluations of these customers, and maintains reserves for potential credit losses. These credit or financing transactions are normally collateralized by the equipment being financed. In determining the amount of allowance for doubtful lease, notes and loan accounts, the Investment Manager considers historical credit losses, the past due status of receivables, payment history, and other customer-specific information, including the value of the collateral. The past due status of a receivable is based on its contractual terms. Expected credit losses are recorded as an allowance for doubtful lease, notes and loan accounts. Receivables are written off when the Investment Manager determines they are uncollectible. At September 30, 2015, an allowance for doubtful lease, notes and loan accounts is not currently provided since, in the opinion of the Investment Manager, all accounts recorded are deemed collectible.

Equipment Notes and Loans Receivable – Equipment notes and loans receivable are reported in the condensed consolidated financial statements at the outstanding principal balance net of any unamortized deferred fees, premiums or discounts on purchased loans. Costs to originate loans, if any, are reported as other assets in the condensed consolidated financial statements. Income is recognized over the life of the note agreement. On certain equipment notes and loans receivable, specific payment terms were reached requiring prepayments which resulted in the recognition of unearned interest income. Unearned income, discounts and premiums, if any, are amortized to interest income in the statements of operations using the effective interest rate method. Equipment notes and loans receivable are generally placed in a non-accrual status when payments are more than 90 days past due. Additionally, the Investment Manager periodically reviews the creditworthiness of companies with payments outstanding less than 90 days. Based upon the Investment Manager’s judgment, accounts may be placed in a non-accrual status. Accounts on a non-accrual status are only returned to an accrual status when the account has been brought current and the Partnership believes recovery of the remaining unpaid receivable is probable. Revenue on non-accrual accounts is recognized only when cash has been received.

Initial Direct Costs –The Partnership capitalizes initial direct costs associated with the origination and funding of lease assets. These costs are amortized on a lease by lease basis based over the actual contract term of each lease using the effective interest rate method for finance leases and the straight-line method for operating leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as incurred as acquisition expense.

Equity Method – The Partnership records its 24.5% investment in Informage SQN Technologies, LLC, its 50% investment in SQN Helo, LLC and its 88% investment in H&P, using the equity method of accounting. According to U.S. GAAP, a company that holds 20% or greater investment in another company could potentially exercise significant influence over the investee company’s operating and financing activities and should therefore utilize the equity method of accounting. The Partnership’s portion of earnings or losses in the investee are recorded as an increase or decrease in its investment and recognized in the consolidated statements of operations, and any distributions received from the investee are recorded as a reduction in its investment.

Acquisition Expense – Acquisition expense represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to the selection and acquisition of leased equipment which are incurred by the Partnership under the terms of the Partnership Agreement, as amended. As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.

Income Taxes – As a partnership, no provision for income taxes is recorded since the liability for such taxes is the responsibility of each of the Partners rather than the Partnership. The Partnership’s income tax returns are subject to examination by the federal and state taxing authorities, and changes, if any, could adjust the individual income tax of the Partners.

Per Share Data – Net income or loss attributable to limited partners per weighted average number of limited partnership interests outstanding is calculated as follows; the net income or loss allocable to the limited partners divided by the weighted average number of limited partnership interests outstanding during the period.

Foreign Currency Transactions – The Partnership has designated the United States of America dollar as the functional currency for the Partnership’s investments denominated in foreign currencies. Accordingly, certain assets and liabilities are translated at either the reporting period exchange rates or the historical exchange rates, revenues and expenses are translated at the average rate of exchange for the period, and all transaction gains or losses are reflected in the period’s results of operations.

Depreciation – The Partnership records depreciation expense on equipment when the lease is classified as an operating lease. In order to calculate depreciation, the Partnership first determines the depreciable equipment cost, which is the cost less the estimated residual value. The estimated residual value is the Partnership’s estimate of the value of the equipment at lease termination. Depreciation expense is recorded by applying the straight-line method of depreciation to the depreciable equipment cost over the lease term.

Recent Accounting Pronouncements

In February 2015, the Financial Accounting Standards Board (“FASB”) issued new guidance to improve consolidation guidance for legal entities (Accounting Standards Update (“ASU”) 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis), effective for fiscal years beginning after December 15, 2015 and interim periods within those years and early adoption is permitted. The new standard is intended to improve targeted areas of the consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures. The amendments in the ASU affect the consolidation evaluation for reporting organizations. In addition, the amendments in this ASU simplify and improve current U.S. GAAP by reducing the number of consolidation models. The Partnership is currently evaluating the impact of this guidance on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.

3.	Related Party Transactions

The General Partner is responsible for the day-to-day operations of the Partnership and the Investment Manager makes all investment decisions and manages the investment portfolio of the Partnership. The Partnership pays the General Partner an allowance for organizational and offering costs not to exceed 2% of all capital contributions received by the Partnership. Because organizational and offering expenses will be paid as and to the extent they are incurred, organizational and offering expenses may be drawn disproportionately to the gross proceeds of each closing. The General Partner also has a promotional interest in the Partnership equal to 20% of all distributed distributable cash, after the Partnership has provided an 8% cumulative return, compounded annually, to the Limited Partners on their capital contributions. The General Partner has a 1% interest in the profits, losses and distributions of the Partnership. The General Partner will initially receive 1% of all distributed distributable cash, which was accrued for at September 30, 2015 and December 31, 2014.

The Partnership pays the Investment Manager during the Offering Period, Operating Period and the Liquidation Period a management fee equal to the greater of, (i) 2.5% per annum of the aggregate offering proceeds, or (ii) $125,000, payable monthly, until such time as an amount equal to at least 15% of the Partnership’s Limited Partners’ capital contributions have been returned to the Limited Partners, after which the monthly management fee will equal 100% of the management fee as initially calculated above, less 1% for each additional 1% of the Partnership’s Limited Partners’ capital contributions returned to them, such amounts are measured on the last day of each month. The management fee is paid regardless of the performance of the Partnership and will be adjusted in the future to reflect the equity raised. For the three months ended September 30, 2015 and 2014, the Partnership paid $375,000 in management fee expense, which is recorded in Management fee — Investment Manager in the condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, the Partnership paid $1,125,000 in management fee expense, which is recorded in Management fee — Investment Manager in the condensed consolidated statements of operations.

Securities, in its capacity as the Partnership’s selling agent, receives an underwriting fee of 3% of the gross proceeds from Limited Partners’ capital contributions (excluding proceeds, if any, the Partnership receives from the sale of the Partnership’s Units to the General Partner or its affiliates).

For the nine months ended September 30, 2015 and year ended December 31, 2014, the Partnership had the following transactions and balances with Securities:

	September 30, 2015			December 31, 2014
	(unaudited)
Balance - beginning of period	$	—		$	10,797
Underwriting fees earned by Securities		531,840			543,990
Payments by the Partnership to Securities		(531,840	)		(554,787	)
Balance - end of period	$	—		$	—

For the nine months ended September 30, 2015 and 2014, the Partnership recorded the following underwriting fee transactions:

	September 30, 2015		September 30, 2014

Underwriting discount incurred by the Partnership	$	420,060	$	615,140
Underwriting fees earned by Securities		531,840		409,689
Fees paid to outside brokers		850,304		383,861
Total underwriting fees	$	1,802,204	$	1,408,690

4.	Investments in Finance Leases

At September 30, 2015 and December 31, 2014, net investment in finance leases consisted of the following:

	September 30, 2015			December 31, 2014
Minimum rents receivable	$	1,415,943		$	1,389,721
Estimated unguaranteed residual value		71,468			360,000
Unearned income		(302,338	)		(256,943	)
Total	$	1,185,073		$	1,492,778

Computer Networking Equipment

On September 1, 2015, the Partnership entered into a new finance lease transaction for computer networking equipment for $446,677. The finance lease requires 36 monthly payments of $14,195.

Gamma Knife Suite - TRCL

On April 30, 2015, the Partnership acquired from a third party, 20 quarterly lease payments with respect to a gamma knife suite leased to a hospital in the United Kingdom. The Partnership paid £375,000 ($576,750 applying exchange rate of 1.538 at April 30, 2015) for the equipment lease receivables which are payable under the lease from July 2015 through April 2020. The finance lease requires 20 quarterly payments of £25,060. The equipment lease receivables are secured by the gamma knife suite.

Medical Equipment

On June 30, 2014, the Partnership entered into a finance lease transaction for medical equipment for $247,920. The finance lease requires 48 monthly payments of $7,415. At September 30, 2015, there were no significant changes to this lease.

Medical Equipment

On March 28, 2014, Echo II purchased three finance leases for medical equipment. One of the leases had a remaining term of 37 months and monthly payments of $4,846. The second lease also has a remaining term of 37 months and monthly payments of $32,416 for the first 13 payments and $22,606 for the last 24 payments. The third lease had a remaining term of 32 months and monthly payments of $14,456. In June 2015, Echo II sold these finance leases to a third party.

5.	Investments in Equipment Subject to Operating Leases

On October 31, 2014, the Partnership entered into an agreement for the purchase of two operating leases for aircraft rotable parts equipment with a total basis of $1,330,616. Each operating lease had a remaining term of 28 months and monthly payments of $26,493 and $1,800, respectively. On that same date, the Partnership entered into a participation agreement with the rotable parts servicer, whereby the servicer purchased a 5% interest in these operating leases.

In June 2015, Echo and Echo II sold all their remaining operating leases to a third party. See Note 1 for detailed information on these sales.

On March 28, 2014, Echo II entered into an agreement with an unrelated third party for the purchase of two portfolios of leases with a combined total of approximately $21,863,000 of assets. One of the portfolios consisted of approximately $7,800,000 of assets subject to operating leases.

On December 20, 2013, Echo entered into an agreement with an unrelated third party for the purchase of two portfolios of leases with a combined total of $17,800,000 of assets. One of the portfolios consisted of approximately $11,200,000 of assets subject to operating leases.

The composition of the equipment subject to operating leases of the Partnership as of September 30, 2015 and in the Echo and Echo II transactions as of December 31, 2014 is as follows:

September 30, 2015:

As of September 30, 2015, Echo and Echo II did not hold equipment subject to operating leases, as all portfolio assets were sold.

Description	Cost Basis		Accumulated Depreciation		Net Book Value

Aircraft equipment	$	1,330,616	$	240,027	$	1,090,589
	$	1,330,616	$	240,027	$	1,090,589

December 31, 2014:

The December 31, 2014, equipment subject to operating leases reflect the portfolio assets held within Echo and Echo II.

Description	Cost Basis		Accumulated Depreciation		Net Book Value
Agricultural equipment	$	807,239	$	125,677	$	681,562
Aircraft equipment		3,469,297		250,394		3,218,903
Computer equipment		671,809		233,776		438,033
Forklifts and fuels cells		7,188,160		1,166,572		6,021,588
Heavy equipment		3,047,443		435,563		2,611,880
Industrial		518,399		97,295		421,104
Machine tools		556,686		68,778		487,908
Medical		518,588		134,240		384,348
	$	16,777,621	$	2,512,295	$	14,265,326

The Partnership records depreciation expense on equipment when the lease is classified as an operating lease. In order to calculate depreciation, the Partnership first determines the depreciable equipment cost, which is the cost less the estimated residual value. The estimated residual value is the estimate of the value of the equipment at lease termination. Depreciation expense is recorded by applying the straight-line method of depreciation to the depreciable equipment cost over the lease term. Depreciation expense for the three and nine months ended September 30, 2015 was $65,462 and $1,308,880, respectively.

6.	Equipment Notes Receivable

Medical Equipment

On June 28, 2013, the Partnership entered into a $150,000 promissory note to finance the purchase of medical equipment located in Tennessee. The promissory note will be paid through 36 monthly installments of principal and interest of $5,100. The promissory note is secured by the medical equipment and other personal property located at the borrower’s principal place of business. The promissory note is guaranteed personally by the officer of the borrower who will make all required note payments if the borrower is unable to perform under the promissory note. For the three and nine months ended September 30, 2015, the medical equipment note earned $1,728 and $6,607 of interest income, respectively.

Mineral Processing Equipment

On September 27, 2013, the Partnership entered into a loan facility to provide financing up to a maximum borrowing of $3,000,000. The borrower is a Florida based company that builds, refurbishes and services mineral refining and mining equipment in the United States, Central and South America. The loan facility was secured by equipment that refines precious metals and other minerals. The Partnership advanced $2,500,000 to the borrower during September 2013. The loan facility required 48 monthly payments of principal and interest of $68,718 (revised from original payment of $69,577 upon second funding discussed below) and a balloon payment of $500,000 in September 2017. The loan facility was scheduled to mature in September 2017. On May 9, 2014, the Partnership made a second funding of $500,000 to the borrower under the above agreement. The loan facility required 41 monthly payments of principal and interest of $15,764 and matures in September 2017. The borrower’s obligations under the loan facility were also personally guaranteed by its majority shareholders.

On December 22, 2014, the outstanding principal of $2,537,822 and accrued interest of $204,721 of this note receivable was restructured into a new note receivable of $2,883,347. The new loan facility is secured by equipment that refines precious metals and other minerals and is guaranteed by the majority shareholders of the Florida based company referred to above. The new loan facility requires 48 monthly payments of principal and interest of $79,255 commencing on February 24, 2015 and a balloon payment of $500,000 in January 2019. The loan facility is scheduled to mature in December 2018. In connection with above restructured note, on December 22, 2014, the Partnership entered into a $200,000 promissory note with the same borrower. The promissory note requires five annual payments of $150,000 commencing on January 25, 2019 and matures in January 2023. As of December 31, 2014, the Partnership advanced $100,000. In January 2015, the Partnership advanced the remaining $100,000. In June 2015, the Partnership received a principal payment of $40,000. For the three and nine months ended September 30, 2015, the mineral processing equipment note earned $0 of interest income since this note is in non-accrual status. Based on a third party appraisal of the collateral value of the equipment, the Investment Manager believes that there is sufficient collateral value to cover the outstanding balance of the restructured note receivable and the promissory note.

Manufacturing Equipment

On October 15, 2013, the Partnership entered into a $300,000 loan facility with a New Jersey based manufacturer and assembler of various consumer products. The loan is secured by manufacturing equipment owned by the borrower. The loan facility is scheduled to be repaid in 29 equal monthly installments of $12,834. For the three and nine months ended September 30, 2015, the manufacturing equipment note earned interest income of $6,510. The borrower’s obligations under the loan facility are also personally guaranteed by its majority shareholder. On December 8, 2014, the borrower went into default and the balance of the loan was accelerated. Local counsel has been retained to exercise available legal remedies. On February 12, 2015, a civil action was filed in New Jersey against the borrower and guarantor to recover all amounts outstanding under the note receivable relating to manufacturing equipment. The Investment Manager did not record an asset impairment based on the collateral value of the equipment, the value of the plant as a going concern, and the personal guarantees behind the transaction. On April 23, 2015, Superior Court of New Jersey, Law Division, Union County entered a judgment for the full principal balance and accrued interest due, together with attorney’s fees, court costs and post-judgment interest against this borrower and the guarantor of the loan in favor of the Partnership. As of September 30, 2015, the outstanding balance of principal and interest is $242,183.

Brake Manufacturing Equipment

On May 2, 2014, the Partnership purchased a promissory note secured by brake manufacturing equipment with an aggregate principal amount of $432,000. The promissory note requires quarterly payments of $34,786, accrues interest at 12.5% per annum and matures in January 2018. For the three and nine months ended September 30, 2015, the equipment note earned interest income of $10,086 and $32,158, respectively.

Medical Equipment

On December 19, 2014, the Partnership entered into a $667,629 promissory note to finance the purchase of medical equipment located in Texas. The promissory note will be paid through 60 monthly installments of principal and interest of $15,300. The promissory note is secured by a first priority security interest in the medical equipment and other personal property located at the borrower’s principal place of business. For the three and nine months ended September 30, 2015, the medical equipment note earned interest income of $21,064 and $65,316, respectively.

Anaerobic Digestion Plant

On April 1, 2015, the Partnership entered into a loan facility with a borrower. Under the terms of the loan facility, the Partnership agreed to provide the borrower with financing in an amount up to £310,000 (approximately $475,000 applying various exchange rates) in connection with the construction financing of a waste water processing anaerobic digestion plant (the “Plant”) located in the United Kingdom. The loan facility accrues interest at a rate of 12% per annum and has a final repayment date of July 31, 2015. The loan facility was extended until completion of the Plant, which is expected to be completed in February 2016. The loan facility is secured by the Plant. As of September 30, 2015, the Partnership advanced the full amount under this facility. For the three and nine months ended September 30, 2015, the equipment note earned interest income of $14,576 and $26,268, respectively.

Computer Networking Equipment

On June 10, 2015, the Partnership entered into a loan facility to provide financing up to a maximum borrowing of $3,000,000. The loan facility was secured by computer networking equipment. Under this loan facility, in June 2015, the Partnership advanced $319,147 to the borrower (“Loan Schedule 01”). In September 2015, the Partnership advanced another $319,147 to the borrower (“Loan Schedule 02”). Each loan schedule requires 36 monthly payments of approximately $10,200, accrues interest at a rate of 16.85% per annum and has a final balloon payment of approximately $48,000. Loan Schedule 01 and Loan Schedule 02 have final repayment dates of April 1, 2018 and August 1, 2018, respectively. For the three and nine months ended September 30, 2015, the equipment notes earned interest income of $15,449 and $17,242, respectively.

The future maturities of the Partnership’s equipment notes receivable at September 30, 2015 are as follows:

Years ending September 30,

2016	$	2,018,198
2017		1,079,827
2018		1,051,384
2019		863,004
2020		230,079
	$	5,242,492

7.	Equipment Loans Receivable

In June 2015, Echo and Echo II sold all their operating leases to a third party. See Note 1 for detailed information on these sales. As a result, as of September 30, 2015, the Partnership did not hold any equipment loans receivable.

On December 20, 2013, Echo entered into an agreement for the purchase of two portfolios of leases for a combined total purchase price of $17,800,000. One of the portfolios consisted of approximately $6,600,000 of equipment loans receivable. The loans accrued interest at a rate of 10%. For the three and nine months ended September 30, 2015, the Partnership earned $0 and $192,642 of interest income, respectively.

On March 28, 2014, Echo II entered into an agreement with the same party as the Echo transaction for the purchase of two portfolios of leases for a combined total purchase price of $21,863,000. One of the portfolios consisted of approximately $12,400,000 of equipment loans receivable. The loans accrued interest at a rate of 10%. For the three and nine months ended September 30, 2015, the Partnership earned $0 and $270,455 of interest income, respectively.

8.	Residual Value Investment in Equipment on Lease

On September 15, 2014, the Partnership entered into a Residual Interest Purchase Agreement with a leasing company to acquire cash handling machines known as Smart Safes having an Original Equipment Cost (“OEC”) of $20,000,000. This leasing company has entered into a Master Lease Agreement with another third party to lease the Smart Safes under one or more lease schedules each having a term of five years from initiation of each lease schedule. In connection with the Master Lease Agreement, the leasing company has entered into a finance arrangement with another third party to finance 85% of the OEC up to an aggregate facility of $17,000,000 (85% of $20,000,000) and the Partnership has agreed to finance the remaining 15% of the OEC up to an aggregate facility of $3,000,000 (15% of $20,000,000). As of September 30, 2015, the Partnership had advanced a net total of $2,938,065.

9.	Collateralized Loan Receivable

On February 4, 2015, the Partnership entered into a loan facility with a borrower to provide financing up to a maximum borrowing of $5,000,000. The borrower entered into an Export Prepayment Facility Agreement dated as of January 21, 2015 and in connection with the Export Prepayment Facility Agreement, the borrower entered into the loan facility with the Partnership and a third party to provide financing up to a maximum borrowing of $50,000,000, whereby the third party funded a total of $13,500,000 and is the senior lender and the Partnership funded a total of $1,500,000 and is the subordinate lender. The loan facility is secured by the borrower’s rights under the Export Prepayment Facility Agreement. In connection with the loan facility, the Partnership entered into a $1,500,000 promissory note with the borrower. For the three and nine months ended September 30, 2015, the promissory note earned $27,616 and $69,792 of interest income, respectively.

On June 3, 2015, Alpha, a special purpose entity which is 32.5% owned by the Partnership and 67.5% owned by SQN PAC, acquired a promissory note issued by a third party with a principal amount equal to $2,650,000. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on June 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the third party which include equipment leases, direct hard asset and infrastructure investments, and other securities. On June 3, 2015, a participation agreement was entered into between SQN PAC (“Participation A”), the Partnership (“Participation B”), Alpha and SQN Capital Management, LLC. Under the agreement, Alpha created two collateralized participation interests for the collateral; Participation A’s principal contribution is $1,788,750 and accruing interest at 9% per annum and Participation B’s principal contribution is $861,250 accruing interest at 15.05% per annum. SQN Capital Management, LLC was appointed as a servicer for the promissory note. Participation A’s interest is senior to Participation B’s interest.

On August 13, 2015, the Partnership entered into a Loan Note Instrument to provide €1,640,000 ($1,824,992 applying exchange rate of 1.1128 at August 13, 2015) (the “Facility”) of financing to a borrower to acquire shares of a special purpose entity (the “SPE”). The SPE previously acquired, by assignment, the rights to lease a parcel of land in Ireland on which planning permissions have been granted to construct an aerobic digestion plant (“AD Plant”). The Facility accrues interest at the rate of 18% per annum, compounding monthly on the last business day of each month, and matures on May 16, 2016. The Facility is secured by the shares of the SPE and also secured by a personal guaranty from the principal owner of the borrower.

On September 30, 2015, the Partnership entered into a loan agreement with a borrower to fund $5,000,000 for the capitalization of the borrower’s wholly owned insurance subsidiary. In connection with the loan agreement, the Partnership entered into a $5,000,000 promissory note with the borrower. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on September 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the borrower which include equipment leases, direct hard asset and infrastructure investments, and other securities. On November 3, 2015, the Partnership received cash of $5,082,192 as payment in full of this collateralized loan receivable.

10.

Investment in Informage SQN Technologies, LLC

On August 1, 2014, the Partnership, SQN PAC, an entity managed by the Partnership’s Investment Manager, and a third party formed a special purpose entity, Informage SQN Technologies, LLC (“Informage SQN”), a Limited Liability Company registered in the state of Texas. Informage SQN was formed to finance cellular communications field measurement and testing and other related services to telecom clients on a contractual basis. The Partnership and SQN PAC each own 24.5% of Informage SQN, while the third party owns 51%. The Partnership accounts for its investment in Informage SQN using the equity method. The Partnership will make additional contributions up to $3,850,000 of total aggregate outstanding capital contributions. On February 9, 2015, the primary customer of Informage SQN filed for bankruptcy protection under Chapter 11 in order to reorganize the company. Informage SQN is not in default under any of the agreements with the Partnership. As of September 30, 2015, the Partnership has advanced a total of $1,322,622. During the nine months ended September 30, 2015, the Partnership received a return of capital of $610,936. For the three months and nine months ended September 30, 2015, the Partnership recorded investment loss of $7,534 and $22,602 respectively, for its proportionate share of Informage SQN’s net loss under the equity method pursuant to U.S. GAAP.

11.

Investment in SQN Helo LLC

On January 7, 2015, the Partnership acquired a junior participation interest in a portfolio of eight helicopters for $1,500,000. The Partnership, SQN PAC, SQN Asset Finance Income Fund Limited (“SQN AFIF”), a Guernsey incorporated closed ended investment company, a fund managed by the Partnership’s Investment Manager and a third party formed a special purpose entity SQN Helo, LLC (“SQN Helo”) whose sole purpose is to acquire the helicopter portfolio. SQN Helo is the sole owner of eight special purpose entities each of which own a helicopter. The purchase price of the helicopter portfolio was approximately $23,201,000 comprised of approximately $11,925,000 of cash payments and the assumption of approximately $11,276,000 of nonrecourse indebtedness. SQN PAC also acquired a junior participation interest in SQN Helo for $1,500,000. The senior participation interests in SQN Helo were acquired by SQN AFIF and the third party. The Partnership and SQN PAC each own 50% of SQN Helo. The Partnership accounts for its investment in SQN Helo using the equity method. As of September 30, 2015, the Partnership has advanced a total of $1,465,000. For the three months and nine months ended September 30, 2015, the Partnership recorded investment loss of $110,910 and $389,597 respectively, for its proportionate share of SQN Helo’s net loss under the equity method pursuant to U.S. GAAP.

12.

Investment in H&P

On July 23, 2015, the Partnership entered into a collateralized purchase agreement with a third party. Under the terms of the agreement, the Partnership acquired an 88.20% (90% of 98%) economic interest in container feeder vessels, for an aggregate investment of $6,818,000. The Partnership acquired their economic interest in the vessels through a limited partnership interest in a Germany based limited partnership (“H&P”), which acquired and operates the container feeder vessels. The Partnership accounts for its investment in H&P using the equity method. For the three months and nine months ended September 30, 2015, the Partnership recorded investment loss of $74,355, for its proportionate share of H&P’s net loss under the equity method pursuant to U.S. GAAP.

13.

Other Assets

Other assets primarily include a receivable of approximately $77,000 related to income from the participation returns on the Partnership’s investments in Informage SQN and SQN Helo.

14.

Equipment Notes Payable

In connection with the Echo and Echo II transactions, Echo and Echo II assumed approximately $8,500,000 and $11,447,000, respectively, in non-recourse debt in connection with the acquisition of portfolios of assets subject to lease. The debt was held by multiple lenders with interest rates which ranged from 2.75% to 9.25%. The notes were secured by the underlying assets of each lease.

15.

Loans Payable

In June 2015, Echo and Echo II sold all their operating leases to a third party. See Note 1 for detailed information on these sales. As of September 30, 2015, the Partnership did not hold any loans payable since Echo and Echo II paid off these loans in full.

In connection with the Echo transaction, the Partnership borrowed $6,800,000 in the form of a senior participation with interest accruing at 10% per annum through February 28, 2014, then at 8.9% per annum when the Partnership made a one-time $600,000 payment which was applied to principal. The senior participant, as collateral, had a first priority security interest in all of the leased assets acquired by Echo as well as a senior participation interest in the proceeds from the leased assets, while the Partnership had a junior participation interest until the loan is repaid in full. Beginning January 1, 2014, and monthly thereafter, all of the cash received from these leased assets was applied first against accrued and unpaid interest of the senior participant, second, against any cumulative interest shortfall of the senior participant, third, against accrued and unpaid interest of the junior participants, and fourth, against the outstanding principal balance of the senior participation with any excess distributed to the junior participants. There was no stated repayment term for the principal. In June 2015, Echo paid back approximately $2,564,675 in cash as payment in full of this loan payable.

In connection with the Echo II transaction, the Partnership borrowed $9,500,000 in the form of a senior participation with interest accruing at 10% per annum through July 1, 2014, then at 9% per annum when the Partnership made a one-time $817,525 payment which was applied to principal. The senior participant, as collateral, had a first priority security interest in all of the leased assets acquired by Echo II as well as a senior participation interest in the proceeds from the leased assets, while the Partnership had a junior participation interest until the loan is repaid in full. Beginning May 1, 2014, and monthly thereafter, all of the cash received from these leased assets was applied first against accrued and unpaid interest of the senior participant, second, against any cumulative interest shortfall of the senior participant, third, against accrued and unpaid interest of the junior participants, and fourth, against the outstanding principal balance of the senior participation with any excess distributed to the junior participants. There was no stated repayment term for the principal. On September 29, 2014, all rights, title and interest in this senior participation was assigned from the unrelated third party to SQN AFIF. In June 2015, Echo II paid back approximately $5,989,864 in cash as payment in full of this loan payable.

16.

Fair Value of Financial Instruments

The Partnership’s carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and other liabilities, approximate fair value due to their short term until maturities.

The Partnership’s carrying values and approximate fair values of its financial instruments were as follows:

	September 30, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Equipment notes receivable	$	5,242,492	$	5,242,492	$	4,318,732	$	4,396,712
Equipment loans receivable	$	—	$	—	$	11,399,479	$	11,399,479
Collateralized loan receivable	$	10,814,992	$	10,814,992	$	—	$	—

Liabilities:
Equipment notes payable	$	—	$	—	$	10,380,386	$	10,380,386
Loans payable	$	—	$	—	$	11,304,675	$	10,984,066

As of September 30, 2015, the Partnership evaluated the carrying values of its financial instruments and they approximate fair values.

17.

Business Concentrations

For the nine months ended September 30, 2015, the Partnership had three lessees which accounted for approximately 21%, 15% and 15% of the Partnership’s rental income derived from operating leases. For the nine months ended September 30, 2014, the Partnership had two lessees which accounted for approximately 25% and 11% of the Partnership’s rental income derived from operating leases. For the nine months ended September 30, 2015, the Partnership did not have a lessee which accounted for 10% or more of the Partnership’s interest income. For the nine months ended September 30, 2014, the Partnership had three lessees which accounted for approximately 17%, 16% and 11% of the Partnership’s interest income.

At September 30, 2015, the Partnership had three lessees which accounted for approximately 47%, 35% and 18% of the Partnership’s investment in finance leases. At September 30, 2014, the Partnership had three lessees which accounted for approximately 47%, 25%, and 19% of the Partnership’s investment in finance leases. At September 30, 2015, the Partnership had one lessee which accounted for approximately 100% of the Partnership’s investment in operating leases. At September 30, 2014, the Partnership had two lessees which accounted for 21% and 16% of the Partnership’s investment in operating leases. At September 30, 2015, the Partnership had three lessees which accounted for approximately 57%, 12% and 11% of the Partnership’s investment in equipment notes receivable. At September 30, 2014, the Partnership had two lessees which accounted for approximately 78% and 12% of the Partnership’s investment in equipment notes receivable. At September 30, 2015, the Partnership had one lessee which accounted for approximately 100% of the Partnership’s investment in residual value leases.

18.

Geographic Information

Geographic information for revenue for the three months ended September 30, 2015 and 2014 was as follows:

	Three Months Ended September 30, 2015
Revenue:		United States			Europe		Mexico		Total
Rental income	$	81,116		$	—	$	—	$	81,116
Finance income	$	24,100		$	16,989	$	—	$	41,089
Interest income	$	231,343		$	14,579	$	—	$	245,922
Investment loss from equity method investments	$	(192,799	)	$	—	$	—	$	(192,799	)
Gain (loss) on sale of assets	$	—		$	—	$	—	$	—

	Three Months Ended September 30, 2014
Revenue:		United States		Europe		Mexico		Total
Rental income	$	1,294,742	$	—	$	—	$	1,294,742
Finance income	$	38,343	$	23,527	$	—	$	61,870
Interest income	$	607,924	$	—	$	128,846	$	736,770
Gain on sale of assets	$	466,482	$	—	$	—	$	466,482

Geographic information for revenue for the nine months ended September 30, 2015 and 2014 was as follows:

	Nine Months Ended September 30, 2015
Revenue:		United States			Europe		Mexico		Total
Rental income	$	1,645,019		$	—	$	—	$	1,645,019
Finance income	$	105,305		$	33,161	$	—	$	138,466
Interest income	$	989,451		$	26,403	$	—	$	1,015,854
Investment loss from equity method investments	$	(486,554	)	$	—	$	—	$	(486,554	)
Gain (loss) on sale of assets	$	(57,440	)	$	—	$	—	$	(57,440	)

	Nine Months Ended September 30, 2014
Revenue:		United States		Europe		Mexico		Total
Rental income	$	3,427,328	$	—	$	—	$	3,427,328
Finance income	$	79,175	$	60,882	$	—	$	140,057
Interest income	$	1,371,661	$	—	$	265,237	$	1,636,898
Gain on sale of assets	$	469,595	$	—	$	—	$	469,595

Geographic information for long-lived assets at September 30, 2015 and December 31, 2014 was as follows:

	September 30, 2015
Long-lived assets:		United States		Europe		Mexico		Total
Investment in finance leases, net	$	625,455	$	559,618	$	—	$	1,185,073
Investments in equipment subject to operating leases, net	$	1,090,589	$	—	$	—	$	1,090,589
Equipment notes receivable, including accrued interest	$	2,265,510	$	—	$	3,043,347	$	5,308,857
Collateralized loans receivable, including accrued interest	$	9,006,180	$	1,868,192	$	—	$	10,874,372

	December 31, 2014
Long-lived assets:		United States		Europe		Mexico		Total
Investment in finance leases, net	$	1,268,085	$	224,693	$	—	$	1,492,778
Investments in equipment subject to operating leases, net	$	14,265,326	$	—	$	—	$	14,265,326
Equipment notes receivable, including accrued interest	$	1,357,873	$	—	$	2,983,347	$	4,341,220
Equipment loans receivable, including accrued interest	$	11,429,927	$	—	$	—	$	11,429,927

19.

Subsequent Events

Subsequent to September 30, 2015, the Partnership acquired a loan note from a third party leasing company for approximately $96,000. The loan is secured by a heavy duty tow truck which is owned by a Connecticut-based towing and repair company. Under the terms of the loan agreement, the borrower is required to make 60 monthly payments of principal and interest of $2,041. The loan is scheduled to mature on October 31, 2020.

On October 7, 2015, the Partnership acquired manufacturing equipment for $58,000. The equipment is subject to a 60 month lease with a Connecticut-based engraving, decal and die manufacturing company. The family owned and operated company was originally formed in 1897. The company is composed of five divisions that provide a variety of services to major automotive and consumer appliance manufacturers.

On August 5, 2015, the Partnership entered into a Master Equipment Lease agreement to lease approximately $2,700,000 of servers, fixtures and furniture to a third party lessee, an innovative provider of professional office environments. The lessee is required to make monthly payments until all equipment has been delivered and accepted by the lessee. After lease commencement, the equipment will be leased for a 3 year term. At lease maturity the lessee has the option to purchase the equipment for a fixed purchase price. All of the lessee’s obligations under the lease are guaranteed by the lessee’s parent company. On October 9, 2015 and October 15, 2015, the Partnership funded approximately $225,000 and $538,000, respectively, under the first two draws under the Master Equipment Lease agreement.

On October 13, 2015, the Partnership funded $1,250,000 in connection with its investment in H&P.

On October 15, 2015, the Partnership made an additional advance of approximately £150,000 (approximately $232,485 applying exchange rate of 1.550 at October 15, 2015) in connection with the construction financing of the waste water processing anaerobic digestion plant (the “Plant”) located in the United Kingdom. After construction of the Plant is completed, the Plant operator has agreed to lease the Plant from the lender for a five year term. The Partnership has agreed in advance to purchase the lease receivables from the lender. The lease receivables will be secured by the lender’s ownership of the Plant.

On November 3, 2015, the Partnership received cash of $5,082,192 as payment in full of a collateralized loan receivable.

From October 1, 2015 through November 12, 2015, the Partnership admitted an additional 96 Limited Partners with total cash contributions of $4,205,344, total capital contributions of $4,332,018 and 4,332.02 Units. The Partnership paid or accrued an underwriting fee to Securities and outside brokers totaling $126,160 and $176,568, respectively.

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

As used in this Quarterly Report on Form 10-Q, references to “we,” “us,” “our” or similar terms include SQN AIF IV, L.P. and its subsidiaries.

The following is a discussion of our current financial position and results of operations. This discussion should be read together with the financial statements and notes in our Form 10-K, filed on March 31, 2015. 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.

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,” “intend,” “predict,” “continue,” “further,” “seek,” “plan,” 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 were organized as a Delaware limited partnership on August 10, 2012 and are engaged in a single business segment, the ownership and investment in leased equipment and related financings which includes: (i) purchasing equipment and leasing it to third-party end users; (ii) providing equipment and other asset financing; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. We will terminate no later than December 31, 2036.

The General Partner of the Partnership is SQN AIF IV GP, LLC (the “General Partner”), a wholly-owned subsidiary of the Partnership’s Investment Manager, SQN Capital Management, LLC (the “Investment Manager”). Both the Partnership’s General Partner and its Investment Manager are Delaware limited liability companies. The General Partner manages and controls the day to day activities and operations of the Partnership, pursuant to the terms of the Partnership Agreement. The General Partner paid an aggregate capital contribution of $100 for a 1% interest in the Partnership’s income, losses and distributions. The Investment Manager makes all investment decisions and manages the investment portfolio of the Partnership.

Our Investment Manager made a cash payment to us of $1,000 for an initial limited partnership interest. We refunded the initial Limited Partner’s interest of $1,000 during early July 2013.

Our Offering period commenced on April 2, 2013 and will last until the earlier of (i) April 2, 2016, which is three years from the commencement of our Offering Period, or (ii) the date that we have raised $200,000,000. We are currently in negotiations with additional Selling Dealers to offer our Units for sale. We have been approved for sale under Blue Sky regulations in 49 states and the District of Columbia. The Partnership is not for sale in Arkansas and residents of Arkansas are not eligible to invest. During the Offering Period it is anticipated that the majority of our cash inflows will be derived from financing activities and be the direct result of capital contributions from investors.

Our income, losses and distributions are allocated 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have received total distributions equal to their capital contributions plus an 8% per year, compounded annually, cumulative return on their capital contributions. After such time, all distributable cash will be allocated 80% to the Limited Partners and 20% to the General Partner. We are currently in the Offering and Operating Period. The Offering Period expires the earlier of raising $200,000,000 in Limited Partner contributions (200,000 units at $1,000 per unit) or April 2, 2016, which is three years from the date we were declared effective by the SEC. During the Operating Period, we will invest most of the net proceeds from our offering in business-essential, revenue-producing (or cost-saving) equipment, other physical assets with substantial economic lives and, in many cases, associated revenue streams and project financings. The Operating Period began on the date of our initial closing, which occurred on May 29, 2013 and will last for three years unless extended at the sole discretion of the General Partner. The Liquidation Period, which begins three years after the start of the Operating Period, is the period in which we will sell our assets in the ordinary course of business and will last two years, unless it is extended, at the sole discretion of the General Partner.

SQN Securities, LLC (“Securities”), a majority-owned subsidiary of the Investment Manager, is currently acting as our exclusive selling agent. We may engage additional selling agents in the future. We pay 3% of the gross proceeds of the offering (excluding proceeds, if any, we receive from the sale of its Units to the General Partner or its affiliates) to its selling agent or selling agents as an underwriting fee. In addition, we will pay a 7% sales commission to broker-dealers unaffiliated with our General Partner who will be selling our Units, on a best efforts basis. When Units are not sold by unaffiliated broker-dealers, the 7% sales commission is not required to be paid. We apply the proceeds that would otherwise be payable as sales commission toward the purchase of additional fractional Units at $1,000 per Unit.

During our Operating Period, which began on May 29, 2013, the date of our initial closing, we will use the majority of our net offering proceeds from Limited Partner capital contributions to acquire our initial investments. As our investments mature, we anticipate reinvesting the cash proceeds in additional investments in leased equipment and project financing transactions, to the extent that the cash will not be needed for expenses, reserves and distributions to our Limited Partners. During this timeframe we expect both rental income and finance income to increase substantially as well as related expenses such as depreciation and amortization. During the Operating Period, we believe the majority of our cash outflows will be from investing activities as we acquire additional investments and to a lesser extend from financing activities from our paying quarterly distributions to our Limited Partners. Our cash flow from operations is expected to increase, primarily from the collection of rental payments.

During the nine months ended September 30, 2015, we made distributions to our Limited Partners totaling $2,071,078.

Our principal investment strategy is to invest in business-essential, revenue-producing (or cost-savings) equipment with high in-place value and long, relative to the investment term, economic life and project financings. We expect to achieve our investment strategy by making investments in equipment already subject to lease or originating equipment leases in such equipment, which will include: (i) purchasing equipment and leasing it to third-party end users; (ii) providing equipment and other asset financing; (iii) acquiring equipment subject to lease and (iv) acquiring ownership rights (residual value interests) in leased equipment at lease expiration. From time to time, we may also purchase equipment and sell it directly to our leasing customers.

Many of our investments will be structured as full payout or operating leases. Full payout leases generally are leases under which the rent over the initial term of the lease will return our invested capital plus an appropriate return without consideration of the residual value, and where the lessee may acquire the equipment or other assets at the expiration of the lease term. Operating leases generally are leases under which the aggregate non-cancelable rental payments during the original term of the lease, on a net present value basis, are not sufficient to recover the purchase price of the equipment or other assets leased under the lease.

We also intend to invest by way of participation agreements and residual sharing agreements where we would acquire an interest in a pool of equipment or other assets, or rights to the equipment or other assets, at a future date. We may invest in operating companies that use or own equipment and other assets. We also may structure investments as project financings that are secured by, among other things, essential use equipment and/or assets. Finally, we may use other investment structures that our Investment Manager believes will provide us with the appropriate level of security, collateralization, and flexibility to optimize our return on our investment while protecting against downside risk, such as vendor and rental programs. In many cases, the structure will include us holding title to or a priority or controlling position in the equipment or other asset.

Although the final composition of our portfolio cannot be determined at this stage, we expect to invest in equipment and other assets that are considered essential use or core to a business or operation in the agricultural, energy, environmental, medical, manufacturing, technology, and transportation industries. Our Investment Manager may identify other assets or industries that meet our investment objectives. We expect to invest in equipment, other assets and project financings located primarily within the United States of America and the European Union but may also make investments in other parts of the world.

Recent Significant Transactions

Loan Note

On September 30, 2015, we entered into a loan agreement with a borrower to fund $5,000,000 for the capitalization of the borrower’s wholly owned insurance subsidiary. In connection with the loan agreement, we entered into a $5,000,000 promissory note with the borrower. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on September 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the borrower which include equipment leases, direct hard asset and infrastructure investments, and other securities. On November 3, 2015, we received cash of $5,082,192 as payment in full of this collateralized loan receivable.

Computer Networking Equipment

On September 1, 2015, we entered into a new finance lease transaction for computer networking equipment for $446,677. The finance lease requires 36 monthly payments of $14,195.

Loan Note Instrument

On August 13, 2015, we entered into a Loan Note Instrument to provide €1,640,000 ($1,824,992 applying exchange rate of 1.1128 at August 13, 2015) (the “Facility”) of financing to a borrower to acquire shares of a special purpose entity (the “SPE”). The SPE previously acquired, by assignment, the rights to lease a parcel of land in Ireland on which planning permissions have been granted to construct an aerobic digestion plant (“AD Plant”). The Facility accrues interest at the rate of 18% per annum, compounding monthly on the last business day of each month, and matures on May 16, 2016. The Facility is secured by the shares of the SPE and also secured by a personal guaranty from the principal owner of the borrower.

Investment in H&P

On July 23, 2015, we entered into a collateralized purchase agreement with a third party. Under the terms of the agreement, we acquired an 88.20% (90% of 98%) economic interest in container feeder vessels, for an aggregate investment of $6,818,000. We acquired our economic interest in the vessels through a limited partnership interest in a Germany based limited partnership (“H&P”), which acquired and operates the container feeder vessels.

Alpha Promissory Note

On June 3, 2015, SQN Alpha, LLC (“Alpha”), a special purpose entity which is 32.5% owned by us and 67.5% owned by SQN Portfolio Acquisition Company, LLC (“SQN PAC”), acquired a promissory note issued by a third party with a principal amount equal to $2,650,000. The promissory note accrues interest at the rate of 11% per annum, payable quarterly in arrears, and matures on June 30, 2020. The promissory note is secured by a pledge of shares in an investment portfolio of insurance companies under common control of the third party which include equipment leases, direct hard asset and infrastructure investments, and other securities. On June 3, 2015, a participation agreement was entered into between SQN PAC (“Participation A”), the Partnership (“Participation B”), Alpha and SQN Capital Management, LLC. Under the agreement, Alpha created two collateralized participation interests for the collateral; Participation A’s principal contribution is $1,788,750 and accruing interest at 9% per annum and Participation B’s principal contribution is $861,250 accruing interest at 15.05% per annum. SQN Capital Management, LLC was appointed as a servicer for the promissory note. Participation A’s interest is senior to Participation B’s interest.

Computer Networking Equipment

On June 10, 2015, we entered into a loan facility to provide financing up to a maximum borrowing of $3,000,000. The loan facility was secured by computer networking equipment. Under this loan facility, in June 2015, we advanced $319,147 to the borrower (“Loan Schedule 01”). In September 2015, we advanced another $319,147 to the borrower (“Loan Schedule 02”). Each loan schedule requires 36 monthly payments of approximately $10,200, accrues interest at a rate of 16.85% per annum and has a final balloon payment of approximately $48,000. Loan Schedule 01 and Loan Schedule 02 have final repayment dates of April 1, 2018 and August 1, 2018, respectively.

Gamma Knife Suite

On April 30, 2015, we acquired from a third party, 20 quarterly lease payments with respect to a gamma knife suite leased to a hospital in the United Kingdom. We paid £375,000 ($576,750 applying exchange rate of 1.538 at April 30, 2015) for the equipment lease receivables which are payable under the lease from July 2015 through April 2020. The finance lease requires 20 quarterly payments of £25,060. The equipment lease receivables are secured by the gamma knife suite.

Collateralized Loan Facility

On February 4, 2015, we entered into a loan facility with a borrower to provide financing up to a maximum borrowing of $5,000,000. The borrower entered into an Export Prepayment Facility Agreement dated as of January 21, 2015 and in connection with the Export Prepayment Facility Agreement, the borrower entered into the loan facility with the Partnership and a third party to provide financing up to a maximum borrowing of $50,000,000, whereby the third party funded a total of $13,500,000 and is the senior lender and the Partnership funded a total of $1,500,000 and is the subordinate lender. The loan facility is secured by the borrower’s rights under the Export Prepayment Facility Agreement. In connection with the loan facility, the Partnership entered into a $1,500,000 promissory note with the borrower.

Investment in SQN Helo, LLC

On January 7, 2015, we acquired a junior participation interest in a portfolio of eight helicopters for $1,500,000. The Partnership, SQN PAC, SQN Asset Finance Income Fund Limited (“SQN AFIF”) and a third party formed a special purpose entity SQN Helo, LLC (“SQN Helo”) whose sole purpose is to acquire the helicopter portfolio. SQN Helo is the sole owner of eight special purpose entities each of which own a helicopter. The purchase price of the helicopter portfolio was approximately $23,201,000 comprised of approximately $11,925,000 in cash and the assumption of approximately $11,276,000 of nonrecourse indebtedness. SQN PAC also acquired a junior participation interest in SQN Helo for $1,500,000. The senior participation interests in SQN Helo were acquired by SQN AFIF and the third party.

Aircraft Rotable Parts

On October 31, 2014, we entered into an agreement for the purchase of two operating leases for aircraft rotable parts equipment located in the United States of America with a total basis of $1,330,616. Each operating lease had a remaining term of 28 months and monthly payments of $26,493 and $1,800, respectively. On that same date, we entered into a participation agreement with the rotable parts servicer, whereby the servicer purchased a 5% interest in these operating leases.

Investment in Informage SQN Technologies, LLC

On August 1, 2014, the Partnership, SQN PAC and a third party formed Informage SQN Technologies, LLC (“Informage SQN”). Informage SQN was formed to finance cellular communications field measurement and testing and other related services to telecom clients on a contractual basis. The Partnership and SQN PAC each own 24.5% of Informage SQN, while the third party owns 51%. The Partnership accounts for its investment in Informage SQN using the equity method. The Partnership may make additional contributions up to $3,850,000.

Echo II Leases

On March 26, 2014, we formed a special purpose entity SQN Echo II, LLC (“Echo II”), a limited liability company registered in the state of Delaware which was 80% owned by us and 20% by SQN Alternative Investment Fund III L.P. (“Fund III”), an entity also sponsored by our Investment Manager. We contributed $800,000 and Fund III contributed $200,000 to purchase a 20% share of Echo II which was presented as non-controlling interest on the accompanying condensed consolidated financial statements. On March 28, 2014, Echo II entered into an agreement with a third party for the purchase of two portfolios of leases for approximately $21,863,000. The first portfolio consisted of (i) various types of equipment including material handling, semiconductor test and manufacturing equipment, computer, medical, and telecommunications equipment and (ii) direct finance leases in medical equipment. The second portfolio consisted of lease financings, which were accounted for as loans receivable in the accompanying condensed consolidated financial statements. Echo II paid approximately $10,416,000 in cash and assumed approximately $11,447,000 in non-recourse equipment notes payable. In June 2014, we funded an additional $600,000 into Echo II (at the same time, an additional $150,000 was funded by Fund III) to decrease the principal of the debt originally obtained to finance the acquisition and reduce the interest rate. In June 2015, Echo II sold all lease portfolios to a third party. The third party paid total cash proceeds of $7,825,000 and assumed related outstanding debt of $5,041,652. The net book value of lease portfolios at the time of sale was $12,902,075 which resulted in the Partnership recognizing a U.S. GAAP loss of $35,423, and a yield on investment of 14.083% which exceeded the originally projected yield of 10%. The Partnership received approximately $1,517,202 in cash from Echo II.

Echo Leases

On December 6, 2013, we formed a special purpose entity SQN Echo LLC (“Echo”), a limited liability company registered in the state of Delaware which was 80% owned by us and 20% by Fund III. We originally contributed $2,200,000 to purchase the 80% share of Echo. Fund III contributed $550,000 to purchase a 20% share of Echo which was presented as non-controlling interest on the accompanying condensed consolidated financial statements. On December 20, 2013, Echo entered into an agreement with a third party for the purchase of two portfolios of leases for $17,800,000. The first portfolio consisted of various types of equipment including material handling, semiconductor test and manufacturing equipment, computer, medical, and telecommunications equipment. The second portfolio consisted of lease financings, which were accounted for as loans receivable in the accompanying condensed consolidated financial statements. Echo paid approximately $9,300,000 in cash and assumed approximately $8,500,000 in non-recourse equipment notes payable. In February 2014, we funded an additional $480,000 into Echo (at the same time, an additional $120,000 was funded by Fund III) to decrease the principal of the debt originally obtained to finance the acquisition and reduce the interest rate. In June 2015, Echo sold all lease portfolios to a third party. The third party paid total cash proceeds of $6,001,324 and assumed related outstanding debt of $3,466,663. The net book value of lease portfolios at the time of sale was $9,978,526 which resulted in the Partnership recognizing a U.S. GAAP loss of $510,539, and a yield on investment of 11.603% which exceeded the originally projected yield of 10%. The Partnership received approximately $2,822,831 in cash from Echo.

Mineral Processing Equipment Financing

On September 27, 2013, we entered into a loan facility to provide financing up to a maximum borrowing of $3,000,000. The borrower is a Florida based company that builds, refurbishes and services mineral refining and mining equipment in the United States, Central and South America. The loan facility was secured by equipment that refines precious metals and other minerals. We advanced $2,500,000 to the borrower during September 2013. The loan facility required 48 monthly payments of principal and interest of $68,718 (revised from original payment of $69,577 upon second funding discussed below) and a balloon payment of $500,000 in September 2017. The loan facility was scheduled to mature in September 2017. On May 9, 2014, we made a second funding of $500,000 to the borrower under the above agreement. The loan facility required 41 monthly payments of principal and interest of $15,764 and matures in September 2017. The borrower’s obligations under the loan facility were also personally guaranteed by its majority shareholders.

Manufacturing Equipment Financing

On October 15, 2013, we entered into a $300,000 loan facility with a New Jersey based manufacturer and assembler of various consumer products. The loan is secured by manufacturing equipment owned by the borrower. The loan facility is scheduled to be repaid in 29 equal monthly installments of $12,834. The borrower’s obligations under the loan facility are also personally guaranteed by its majority shareholder. On December 8, 2014, the borrower went into default and the balance of the loan was accelerated. Local counsel has been retained to exercise all available legal remedies. On February 12, 2015, a civil action was filed in New Jersey against the borrower and guarantor to recover all amounts outstanding under the note receivable relating to manufacturing equipment. Our Investment Manager does not believe an asset impairment is warranted based on the collateral value of the equipment, the value of the plant as a going concern, and the personal guarantee behind the transaction. On April 23, 2015, Superior Court of New Jersey, Law Division, Union County entered a judgment for the full principal balance and accrued interest due, together with attorney’s fees, court costs and post-judgment interest against the borrower and the guarantor of the loan in favor of the Partnership. We are actively pursuing efforts to collect on the judgment.

Brake Manufacturing Equipment Financing

On May 2, 2014, we purchased a promissory note secured by brake manufacturing equipment with an aggregate principal amount of $432,000. The promissory note requires quarterly payments of $34,786, accrues interest at 12.5% per annum and matures in January 2018.

Medical Equipment Financing

On December 19, 2014, we entered into a $667,629 promissory note to finance the purchase of medical equipment located in Texas. The promissory note will be paid through 60 monthly installments of principal and interest of $15,300. The promissory note is secured by a first priority security interest in the medical equipment and other personal property located at the borrowers principal place of business.

Smart Safes

On September 15, 2014, we entered into a Residual Interest Purchase Agreement with a leasing company to acquire cash handling machines known as Smart Safes having an Original Equipment Cost (“OEC”) of $20,000,000. This leasing company has entered into a Master Lease Agreement with another third party to lease the Smart Safes under one or more lease schedules each having a term of five years from initiation of each lease schedule. In connection with the Master Lease Agreement, the leasing company has entered into a finance arrangement with another third party to finance 85% of the OEC up to an aggregate facility of $17,000,000 (85% of $20,000,000) and we agreed to finance the remaining 15% of the OEC up to an aggregate facility of $3,000,000 (15% of $20,000,000). As of September 30, 2015, we had advanced a net total of $2,938,065.

Critical Accounting Policies

An understanding of our critical accounting policies is necessary to understand our financial results. The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires our General Partner and our Investment Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates will primarily include the determination of allowance for doubtful lease, notes and loan accounts, depreciation and amortization, impairment losses and the estimated useful lives and residual values of the leased equipment we acquire. Actual results could differ from those estimates.

Lease Classification and Revenue Recognition

Each equipment lease we enter into is classified as either a finance lease or an operating lease, which is determined at lease inception, based upon the terms of each lease, or when there are significant changes to the lease terms. We capitalize initial direct costs associated with the origination and funding of lease assets. Initial direct costs include both internal costs (e.g., labor and overhead), if any, and external broker fees incurred with the lease origination. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as incurred as acquisition expense. For a finance lease, initial direct costs are capitalized and amortized over the lease term using the effective interest rate method. For an operating lease, the initial direct costs are included as a component of the cost of the equipment and depreciated over the lease term.

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

For operating leases, rental income is recognized on the straight-line basis over the lease term. Billed operating lease receivables are included in accounts receivable until collected. Accounts receivable is stated at its estimated net realizable value. Deferred revenue is the difference between the timing of the receivables billed and the income recognized on the straight-line basis.

Our Investment Manager has an investment committee that approves each new equipment lease and other project financing transaction. As part of its process, the investment committee determines the residual value, if any, to be used once the investment has been approved. The factors considered in determining the residual value include, but are not limited to, the creditworthiness of the potential lessee, the type of equipment considered, how the equipment is integrated into the potential lessee’s business, the length of the lease and the industry in which the potential lessee operates. Residual values are reviewed for impairment in accordance with our impairment review policy.

Asset Impairments

The significant assets in our portfolio are periodically reviewed, no less frequently than annually or when indicators of impairment exist, to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss will be recognized only if the carrying value of a long-lived asset is not recoverable and exceeds its fair value. If there is an indication of impairment, we will estimate the future cash flows (undiscounted and without interest charges) expected from the use of the asset and its eventual disposition. Future cash flows are the future cash inflows expected to be generated by an asset less the future outflows expected to be necessary to obtain those inflows. If an impairment is determined to exist, the impairment loss will be measured as the amount by which the carrying value of a long-lived asset exceeds its fair value and recorded in the statement of operations in the period the determination is made.

The events or changes in circumstances that generally indicate that an asset may be impaired are, (i) the estimated fair value of the underlying equipment is less than its carrying value, (ii) the lessee is experiencing financial difficulties and (iii) it does not appear likely that the estimated proceeds from the disposition of the asset will be sufficient to satisfy the residual position in the asset. The preparation of the undiscounted cash flows requires the use of assumptions and estimates, including the level of future rents, the residual value expected to be realized upon disposition of the asset, estimated downtime between re-leasing events and the amount of releasing costs. Our Investment Manager’s review for impairment includes a consideration of the existence of impairment indicators including third-party appraisals, published values for similar assets, recent transactions for similar assets, adverse changes in market conditions for specific asset types and the occurrence of significant adverse changes in general industry and market conditions that could affect the fair value of the asset.

Equipment Notes and Loans Receivable

Equipment notes and loans receivable are reported in our condensed consolidated balance sheets at the outstanding principal balance net of any unamortized deferred fees, premiums or discounts on purchased notes and loans. Costs to originated notes, if any, are reported as other assets in our condensed consolidated balance sheets. Unearned income, discounts and premiums, if any, are amortized to interest income in the condensed consolidated statements of operations using the effective interest rate method. Equipment notes and loans receivable are generally placed in a non-accrual status when payments are more than 90 days past due. Additionally, we periodically review the creditworthiness of companies with payments outstanding less than 90 days. Based upon the Investment Manager’s judgment, accounts may be placed in a non-accrual status. Accounts on a non-accrual status are only returned to an accrual status when the account has been brought current and we believe that the recovery of the remaining unpaid receivable is probable. Revenue on non-accrual accounts is recognized only when cash has been received.

Results of Operations

We are currently in both our Offering Period and our Operating Period. The Offering Period is designated as the period in which we raise capital from investors. During this period we expect to generate the majority of our cash inflow from financing activities though the sale of our Units to investors. Through September 30, 2015, we admitted 872 limited partners with total capital contributions of $44,591,073 resulting in the sale of 44,591.08 Units. We received cash contributions of $42,907,509 and applied $1,683,564 which would have otherwise been paid as sales commission to the purchase of additional Units. For the nine months ended September 30, 2015, we paid or accrued an underwriting fee to Securities totaling $1,802,204.

We have also entered our Operating Period, which is defined as the period in which we invest the net proceeds from the Offering Period and reinvest cash from operations into business-essential, revenue-producing (or cost-saving) equipment and other physical assets with substantial economic lives and, in many cases, associated revenue streams. During this period we anticipate substantial cash outflows from investing activities as we acquire leased equipment. We also expect our operating activities to generate cash in-flows during this time as we collect rental payments from the leased assets we acquire.

Results of Operations for the Three Months Ended September 30, 2015

Our revenue for the three months ended September 30, 2015 (“2015 Quarter”) as compared to three months ended September 30, 2014 (“2014 Quarter”) is summarized as follows:

	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014
Revenue:
Rental income	$	81,116		$	1,294,742
Finance income		41,089			61,870
Interest income		245,922			736,770
Investment loss from equity method investments		(192,799	)		—
(Loss) gain on sale of assets		—			466,482
Other income		56,550			—
Total Revenue	$	231,878		$	2,559,864

For the three months ended September 30, 2015 we earned $81,116 in rental income. This is rental income from our two operating leases of aircraft rotable parts equipment. We also recognized $245,922 in interest income, the majority of which was generated by the equipment notes and collateralized loans receivable. We recognized $41,089 in finance income from our finance leases. We also recognized a loss of $192,799 from our equity method investments. We also recognized $56,550 in other income related to income from the participation returns on our investments in Informage SQN and SQN Helo. For the three months ended September 30, 2014 we earned $1,294,742 in rental income. The majority of this revenue is a result of the portfolios of leases obtained by us through the Echo and Echo II transactions. We also recognized $736,770 in interest income, the majority of which was generated by the equipment notes and loans receivable. We recognized $61,870 in finance income from four finance leases. We also recognized a gain on sale of assets of $466,482 from the sale of operating leases and a finance lease. The decrease in our total revenue in 2015 Quarter as compared to the 2014 Quarter is a result of the sale by Echo and Echo II of all their portfolios of leases and equipment loan receivables to a third party in June 2015.

Our expenses for the three months ended September 30, 2015 (“2015 Quarter”) as compared to three months ended September 30, 2014 (“2014 Quarter”) are summarized as follows:

	Three Months Ended September 30, 2015		Three Months Ended September 30, 2014
Expenses:
Management fees - Investment Manager	$	375,000	$	375,000
Depreciation and amortization		75,628		891,621
Professional fees		33,810		51,508
Administration expense		20,499		21,619
Interest expense		73,248		674,407
Other expenses		1,621		8,493

Total Expenses	$	579,806	$	2,022,648

Foreign currency transaction losses	$	38,418	$	40,324

For the three months ended September 30, 2015 and 2014 we incurred $579,806 and $2,022,648 in total expenses, respectively. There was no increase in management fees paid to our Investment Manager in the 2015 Quarter as compared to the 2014 Quarter. We pay our Investment Manager a management fee during the Operating Period and the Liquidation Period equal to the greater of, (i) 2.5% per annum of the aggregate offering proceeds, or (ii) $125,000, payable monthly, until such time as an amount equal to at least 15% of our Limited Partners’ capital contributions have been returned to them, after which the monthly management fee will equal 100% of the management fee as initially calculated above, less 1% for each additional 1% of the Partnership’s Limited Partners’ capital contributions returned to them, such amounts to be measured on the last day of each month. We recognized $75,628 in depreciation and amortization expense for the 2015 Quarter as compared to $891,621 in the 2014 Quarter. We also incurred $33,810 in professional fees in the 2015 Quarter as compared to $51,508 in the 2014 Quarter. We incurred $73,248 in interest expense for the 2015 Quarter as a result of Alpha’s collateralized participation interests with SQN PAC and with us, as compared to $674,407 in interest expense for the 2014 Quarter as a result of our assumption of approximately $20,000,000 in non-recourse notes payable with various financial institutions for the equipment held for lease in conjunction with the Echo and Echo II transactions. The decrease in our total expenses in 2015 Quarter as compared to the 2014 Quarter is a result of the sale by Echo and Echo II of all their portfolios of leases and equipment notes and loans payables to a third party in June 2015.

Net Income (Loss)

As a result of the factors discussed above, we reported a net loss for the three months ended September 30, 2015 of $386,346, prior to the allocation for non-controlling interest, as compared to net income of $496,892 for the 2014 Quarter. The non-controlling interest represents the 67.5% investment by SQN PAC in the Alpha transaction. For the three months ended September 30, 2015, the non-controlling interest recognized net income of $735 due to its interest in Alpha.

Results of Operations for the Nine Months Ended September 30, 2015

Our revenue for the nine months ended September 30, 2015 (“2015 Period”) as compared to nine months ended September 30, 2014 (“2014 Period”) is summarized as follows:

	Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
Revenue:
Rental income	$	1,645,019		$	3,427,328
Finance income		138,466			140,057
Interest income		1,015,854			1,636,898
Investment loss from equity method investments		(486,554	)		—
(Loss) gain on sale of assets		(57,440	)		469,595
Other income		313,223			—
Total Revenue	$	2,576,102		$	5,673,878

For the nine months ended September 30, 2015 we earned $1,645,019 in rental income. The majority of which is a result of the portfolios of leases obtained by us through the Echo and Echo II transactions. We also recognized $1,015,854 in interest income, the majority of which was generated by the equipment notes and loans receivable. We recognized $138,466 in finance income from our finance leases. We also recognized a loss of $486,554 from our equity method investments. We also recognized a loss on sale of assets of $57,440 from the sale of operating leases and finance leases. For the nine months ended September 30, 2014 we earned $3,427,328 in rental income. The majority of this revenue is a result of the portfolios of leases obtained by us through the Echo and Echo II transactions. We also recognized $1,636,898 in interest income, the majority of which was generated by the equipment notes and loans receivable. We recognized $140,057 in finance income from five finance leases. We also recognized a gain on sale of assets of $469,595 from the sale of operating leases and finance leases. The decrease in our total revenue in 2015 Period as compared to the 2014 Period is a result of the sale by Echo and Echo II of all of their portfolios of leases and equipment loan receivables to a third party during the 2015 Period.

Our expenses for the nine months ended September 30, 2015 (“2015 Period”) as compared to nine months ended September 30, 2014 (“2014 Period”) are summarized as follows:

	Nine Months Ended September 30, 2015		Nine Months Ended September 30, 2014
Expenses:
Management fees - Investment Manager	$	1,125,000	$	1,125,000
Depreciation and amortization		1,561,227		2,397,984
Professional fees		166,986		241,242
Acquisition costs		—		28,532
Administration expense		51,342		36,409
Interest expense		907,818		1,649,063
Other expenses		55,060		27,550

Total Expenses	$	3,867,433	$	5,505,780

Foreign currency transaction losses	$	18,843	$	25,223

For the nine months ended September 30, 2015 and 2014 we incurred $3,867,433 and $5,505,780 in total expenses, respectively. There was no increase in management fees paid to our Investment Manager in the 2015 Period as compared to the 2014 Period. We pay our Investment Manager a management fee during the Operating Period and the Liquidation Period equal to the greater of, (i) 2.5% per annum of the aggregate offering proceeds, or (ii) $125,000, payable monthly, until such time as an amount equal to at least 15% of our Limited Partners’ capital contributions have been returned to them, after which the monthly management fee will equal 100% of the management fee as initially calculated above, less 1% for each additional 1% of the Partnership’s Limited Partners’ capital contributions returned to them, such amounts to be measured on the last day of each month. We recognized $1,561,227 in depreciation and amortization expense for the 2015 Period as compared to $2,397,984 in the 2014 Period. We also incurred $166,986 in professional fees in the 2015 Period as compared to $241,242 in the 2014 Period. In conjunction with the Echo and Echo II transactions, we assumed approximately $20,000,000 in non-recourse notes payable with various financial institutions for the equipment held for lease which resulted in $907,818 in interest expense for the 2015 Period as compared to $1,649,063 in the 2014 Period. The decrease in our total expenses in 2015 Period as compared to the 2014 Period is a result of the sale by Echo and Echo II of all of their portfolios of leases and equipment notes and loans payables to a third party during the 2015 Period.

Net Income (Loss)

As a result of the factors discussed above, we reported a net loss for the nine months ended September 30, 2015 of $1,317,708, prior to the allocation for non-controlling interest, as compared to net income of $142,875 for the 2014 Period. The non-controlling interest represents the 20% investment by Fund III in the Echo and Echo II transactions and the 67.5% investment by SQN PAC in the Alpha transaction. For the nine months ended September 30, 2015, the non-controlling interest recognized a net loss of $86,276 due to its interest in Echo and a net loss of $0 due to its interest in Echo II and net income of $780 due to its interest in Alpha.

Liquidity and Capital Resources

Sources and Uses of Cash

	Nine Months Ended September 30,
	2015			2014
Cash provided by (used in):
Operating activities	$	4,922,703		$	2,595,270
Investing activities	$	(4,792,367	)	$	(8,711,490	)
Financing activities	$	270,497		$	12,813,401

Sources of Liquidity

We are currently in both our Offering Period and our Operating Period. The Offering Period is the time frame in which we raise capital contributions from investors through the sale of our Units. As such, we expect that during our Offering Period a portion of our cash inflows will be from financing activities. The Operating Period is the time frame in which we acquire equipment under lease or enter into other equipment financing transactions. During this time period we anticipate that a portion of our cash outflows will be for investing activities. We believe that the cash inflows will be sufficient to finance our liquidity requirements for the foreseeable future, including quarterly distributions to our Limited Partners, general and administrative expenses, fees paid to our Investment Manager and new investment opportunities.

Operating Activities

Cash provided by operating activities for the nine months ended September 30, 2015 was $4,922,703 and was primarily driven by the following factors; (i) a decrease in other assets of approximately $4,527,000 due to a reclass to operating leases, (ii) an increase in accrued interest receivable, (iii) depreciation and amortization expense of approximately $1,561,000, (iv) investment loss from equity method investments of approximately $487,000, (v) a net loss on sale of assets of approximately $57,000 and (vi) an increase in minimum rents receivable for finance leases acquired during the period. Offsetting these fluctuations was a net loss of approximately $1,317,000, a decrease in accrued interest on loans payable from an unrelated insurance company as loans payable were paid in full due to the Echo and Echo II sales, as well as increases in finance accrued interest. We expect our accounts payable and accrued expenses will fluctuate from period to period primarily due to the timing of payments related to lease and financings transactions we will enter into. We anticipate that as we enter into additional equipment leasing and financing transactions we will generate greater net cash inflows from operations principally from rental payments received from lessees.

Cash provided by operating activities for the nine months ended September 30, 2014 was $2,595,270 and was primarily driven by the following factors; (i) net income for the nine months ended September 30, 2014 of approximately $143,000, (ii) an increase in accrued interest receivable, (iii) an increase in accrued interest on loans payable from an unrelated insurance company as part of the Echo and Echo II transactions, (iv) depreciation and amortization expense of $2,397,984 and (v) an increase in minimum rents receivable for finance leases acquired during the period. Offsetting these fluctuations was a net gain on sale of assets of approximately $470,000 as well as increases in finance accrued interest. We expect our accounts payable and accrued expenses will fluctuate from period to period primarily due to the timing of payments related to lease and financings transactions we will enter into. We anticipate that as we enter into additional equipment leasing and financing transactions we will generate greater net cash in-flows from operations principally from rental payments received from lessees.

Investing Activities

Cash used in investing activities for the nine months ended September 30, 2015 was $4,792,367. We received payments from borrowers related to our equipment loans receivable of approximately $1,129,000. We received proceeds from the sale of assets of approximately $15,432,000 primarily due to the Echo and Echo II sales. We paid approximately $1,465,000 for an investment in SQN Helo and also paid approximately $6,818,000 for an investment in H&P. We paid approximately $103,000 for our investment in Informage SQN Technologies and received proceeds of approximately $610,000 from our investment in Informage SQN Technologies. We also paid approximately $745,000 for the purchase of a residual value interest in equipment subject to operating leases. We made advances on collateralized loan receivables of approximately $10,965,000 and the borrowers repaid approximately $150,000 during the period. We also paid approximately $1,023,000 for the purchase of finance leases. We also paid approximately $1,217,000 for the acquisition of equipment notes receivable. The borrowers repaid approximately $288,000 during the period.

Cash used in investing activities was $8,711,490 for the nine months ended September 30, 2014. This was related to our entering into the equipment loans receivable transaction for approximately $5,840,000. The borrowers made payments of approximately $2,000,000 during the period. We received proceeds from the sale of assets of approximately $2,500,000. In addition, we paid approximately $2,900,000 and $2,600,000 for the purchase of equipment subject to operating leases and finance leases, respectively. We also paid approximately $403,000 for the purchase of a residual value interest in equipment subject to operating leases and approximately $193,000 for an investment in Informage SQN Technologies. We made additional advances on the collateralized loan receivable of approximately $2,690,000 and received repayments of approximately $2,150,000 from the borrower during the period. We also paid approximately $800,000 for the acquisition of equipment notes receivable. The borrowers repaid approximately $240,000 during the period.

Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2015 was $270,497 and was primarily due to cash proceeds received of approximately $17,950,000 for the sale of our Units to investors and cash proceeds received of approximately $1,789,000 from non-controlling interest contribution. Offsetting this increase were payments of approximately $11,305,000 for payment in full of loans payable due to the Echo and Echo II sales, $2,460,000 for equipment loans with various financial institutions in relation to the Echo and Echo II portfolios, underwriting fees, organizational and offering costs of approximately $1,928,000, payments for distributions to our limited partners totaling approximately $2,500,000 and payments for distributions to the non-controlling interest totaling approximately $1,075,000.

Cash provided by financing activities for the nine months ended September 30, 2014 was $12,813,401 and was primarily due to cash proceeds received of $9,500,000 from a loan payable in relation to the Echo II transaction as well as approximately $14,272,000 received for the sale of our Units to investors. Offsetting this increase were payments of approximately $4,971,000 for equipment loans with various financial institutions in relation to the Echo and Echo II portfolios, principal payments of approximately $3,715,000 on loans with unrelated lenders, underwriting fees, organizational and offering costs of approximately $1,830,000 and payments for distributions totaling approximately $915,000. During the period we also received $470,000 from Fund III for its portion of the Echo I and Echo II transactions.

Distributions

During our Operating Period, we intend to pay cash distributions on a quarterly basis to our Limited Partners at 1.625% per quarter, the equivalent rate of 6.5% per annum, of each Limited Partners’ capital contribution (pro-rated to the date of admission for each Limited Partner). The amount and rate of cash distributions could vary and are not guaranteed. During the nine months ended September 30, 2015, we made three quarterly distributions to our Limited Partners; one at a rate of 1.775% per quarter, another at a rate of 2% per quarter and another at a rate of 2% per quarter, the equivalent per annum rates of 7.1%, 8.0% and 8.0%, respectively, totaling $2,071,078. We did not make a cash distribution to the General Partner during the nine months ended September 30, 2015; however, we accrued $20,711 for distributions due to the General Partner which resulted in a Distributions payable to General Partner of $33,716 at September 30, 2015.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitment and Contingencies

Our income, losses and distributions are allocated 99% to our Limited Partners and 1% to our General Partner until the Limited Partners have received total distributions equal to each Limited Partners’ capital contribution plus an 8%, compounded annually, cumulative return on each Limited Partners’ capital contribution. After such time, income, losses and distributions will be allocated 80% to our Limited Partners and 20% to our General Partner.

We enter into contracts that contain a variety of indemnifications. Our maximum exposure under these arrangements is not known.

In the normal course of business, we enter into contracts of various types, including lease contracts, contracts for the sale or purchase of lease assets, and management contracts. It is prevalent industry practice for most contracts of any significant value to include provisions that each of the contracting parties, in addition to assuming liability for breaches of the representations, warranties, and covenants that are part of the underlying contractual obligations, to also assume an obligation to indemnify and hold the other contractual party harmless for such breaches, and for harm caused by such party’s gross negligence and willful misconduct, including, in certain instances, certain costs and expenses arising from the contract. Generally, to the extent these contracts are performed in the ordinary course of business under the reasonable business judgment of our General Partner and our Investment Manager, no liability will arise as a result of these provisions. Should any such indemnification obligation become payable, we would separately record and/or disclose such liability in accordance with accounting principles generally accepted in the United States of America.

Off-Balance Sheet Transactions

None.

Contractual Obligations

During our Operating Period, we pay cash distributions on a quarterly basis to our Limited Partners at 1.625% per quarter, of each Limited Partners’ capital contribution (pro-rated to the date of admission for each Limited Partner). The amount and rate of cash distributions could vary and are not guaranteed.

Subsequent Events

On October 2, 2015, the Partnership entered in a syndicated loan agreement. Under the terms of the agreement, the Partnership agreed to contribute $5,000,000 of the $40,000,000 facility which will be secured by all equipment that will be located a newly constructed lumber mill in Texas. Repayment of the facility is also secured by the lumber mill as well as the real property on which the lumber mill is to be situated. The Partnership together with the other equipment lenders (collectively, the “Equipment Lenders”) entered into an agreement amongst lenders with the lenders that financed the real property and construction of the lumber mill (collectively, the “Real Property Lenders”) whereby the Equipment Lenders agreed to be subordinated to the Real Property Lenders with respect to the real property collateral and the Real Property Lenders agreed to be subordinated to the Equipment Lenders with respect to the equipment collateral. The borrower’s parent company also pledged assets located at the parent’s company’s headquarters in Germany as additional collateral for the loan.

On August 5, 2015, the Partnership entered into a Master Equipment Lease agreement to lease approximately 2,700,000 of servers, fixtures and furniture to a third party lessee, an innovative provider of professional office environments. The lessee is required to make monthly payments until all equipment has been delivered and accepted by the lessee. After lease commencement, the equipment will be leased for a 3 year term. At lease maturity the lessee has the option to purchase the equipment for a fixed purchase price. All of the lessee’s obligations under the lease are guaranteed by the lessee’s parent company. On October 9, 2015 and October 15, 2015, the Partnership funded approximately $225,000 and $538,000, respectively, under the first two draws under the Master Equipment Lease agreement.

On October 13, 2015, the Partnership funded $1,250,000 in connection with its investment in H&P.

On November 3, 2015, the Partnership received cash of $5,082,192 as payment in full of a collateralized loan receivable.

Limited Partner Contributions

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable for Smaller Reporting Companies.

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 quarter ended September 30, 2015, our General Partner and Investment Manager carried out an evaluation, under the supervision and with the participation of the management of our General Partner and Investment Manager, including its Chief Executive Officer, of the effectiveness of the design and operation of our General Partner’s and Investment Manager’s disclosure controls and procedures as of the end of the period covered by this Report pursuant to the Securities Exchange Act of 1934. Based on the foregoing evaluation, the Chief Executive Officer concluded that our General Partner’s and Investment Manager’s disclosure controls and procedures were effective.

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

Evaluation of internal control over financial reporting

Our General Partner is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our General Partner and our Investment Manager have assessed the effectiveness of their internal control over financial reporting as of September 30, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control—Integrated Framework.”

Based on their assessment, our General Partner and our Investment Manager believe that, as of September 30, 2015, its internal control over financial reporting is effective.

Changes in internal control over financial reporting

There were no additional material changes in our General Partner’s or our Investment Manager’s internal control over financial reporting during the quarter ended September 30, 2015, that materially affected, or are reasonably likely to materially affect, their internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Not applicable.

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

Our Registration Statement on Form S-1, as amended, was declared effective by the SEC on April 2, 2013. Our Offering Period commenced on April 2, 2013 and is anticipated to end no later than April 2, 2016. We had our initial closing for the admission of limited partners in the partnership on May 29, 2013. From May 29, 2013 through September 30, 2015, we admitted 872 limited partners with total capital contributions of $44,591,073 resulting in the sale of 44,591.08 Units. We received cash contributions of $42,907,509 and applied $1,683,564 which would have otherwise been paid as sales commission to the purchase of additional Units. For the nine months ended September 30, 2015, we paid or accrued an underwriting fee to Securities totaling $1,802,204.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Certification of President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Accounting Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of President and 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 Chief Accounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Interactive Data Files

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.

File No. 333-184550

SQN AIF IV GP, LLC

General Partner of the Registrant

November 13, 2015

	By:	/s/ Jeremiah Silkowski
		Jeremiah Silkowski President and CEO

SQN AIF IV, L.P. - FORM 10-Q - November 13, 2015

Attached files

SQN AIF IV, L.P. Reports