ICON ECI Fund Sixteen 10-Q 2014 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended	June 30, 2014
or
[  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from		to
Commission File Number:	333-185144
ICON ECI Fund Sixteen
(Exact name of registrant as specified in its charter)
Delaware				80-0860084
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
3 Park Avenue, 36th Floor
New York, New York				10016
(Address of principal executive offices)				(Zip Code)
(212) 418-4700
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑    No o
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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o			Accelerated filer  o
Non-accelerated filer  o (Do not check if a smaller reporting company)			Smaller reporting company  ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ☑
Number of outstanding Class A and Class I shares of the registrant on August 8, 2014 is 14,317 and 369, respectively.

ICON ECI Fund Sixteen

Table of Contents

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	Page
Balance Sheets Statements of Operations Statements of Changes in Equity Statement of Cash Flows Notes to Financial Statements	1 2 3 4 5
Item 2. Managing Owner’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3. Quantitative and Qualitative Disclosures About Market Risk	15
Item 4. Controls and Procedures	15
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	16
Item 1A. Risk Factors	16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3. Defaults Upon Senior Securities	16
Item 4. Mine Safety Disclosures	16
Item 5. Other Information	16
Item 6. Exhibits	17
Signatures	18

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Balance Sheets

					June 30,		December 31,
					2014		2013
					(unaudited)
Assets
	Cash				$	7,446,362	$	1,027,327
	Investment in joint ventures					5,225,748		897,996
	Other assets					11,293		18,693
Total assets					$	12,683,403	$	1,944,016
Liabilities and Equity
Liabilities:
	Due to Investment Manager and affiliates				$	730,098	$	105,564
	Accrued expenses and other liabilities					415,680		92,513
		Total liabilities				1,145,778		198,077
Commitments and contingencies (Note 6)
Equity:
	Shareholders' capital:
			Class A			11,354,857		1,693,429
			Class I			182,768		52,510
				Total shareholders' capital		11,537,625		1,745,939
Total liabilities and equity					$	12,683,403	$	1,944,016
See accompanying notes to financial statements.

1

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statements of Operations

(unaudited)

			Three Months Ended		Six Months Ended
			June 30, 2014		June 30, 2014
Revenue:
	Income from investment in joint ventures		$	133,774	$	199,005
		Total revenue		133,774		199,005
Expenses:
	Management fees			22,087		34,373
	Administrative expense reimbursements			151,480		327,073
	General and administrative			99,680		154,502
	Interest			5,765		9,930
	Organization costs			2,401		5,575
		Total expenses		281,413		531,453
Net loss			$	(147,639)	$	(332,448)
Net loss attributable to Fund Sixteen allocable to:
	Additional Class A and Class I shareholders		$	(146,162)	$	(329,123)
	Managing Owner			(1,477)		(3,325)
			$	(147,639)	$	(332,448)
Additional Class A shares:
	Net loss attributable to Fund Sixteen allocable to additional Class A shareholders		$	(143,841)	$	(324,502)
	Weighted average number of additional Class A shares outstanding			10,645		7,864
	Net loss attributable to Fund Sixteen per weighted average additional Class A share		$	(13.51)	$	(41.26)
Additional Class I shares:
	Net loss attributable to Fund Sixteen allocable to additional Class I shareholders		$	(2,321)	$	(4,621)
	Weighted average number of additional Class I shares outstanding			174		120
	Net loss attributable to Fund Sixteen per weighted average additional Class I share		$	(13.32)	$	(38.62)
See accompanying notes to financial statements.

2

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statements of Changes in Equity

		Class A									Class I			Total
		Managing Owner			Additional Shareholders			Total Class A			Additional Shareholders
		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2013		0.001	$	(1,161)	2,016	$	1,694,590	2,016	$	1,693,429	65	$	52,510	2,081	$	1,745,939
	Net loss	-		(1,848)	-		(180,661)	-		(182,509)	-		(2,300)	-		(184,809)
	Proceeds from sale of shares	-		-	6,005		5,968,452	6,005		5,968,452	-		-	6,005		5,968,452
	Sales and offering expenses	-		-	-		(587,385)	-		(587,385)	-		(1,308)	-		(588,693)
	Distributions	-		(625)	-		(60,524)	-		(61,149)	-		(1,273)	-		(62,422)
Balance, March 31, 2014		0.001		(3,634)	8,021		6,834,472	8,021		6,830,838	65		47,629	8,086		6,878,467
	(unaudited)
	Net loss	-		(1,477)	-		(143,841)	-		(145,318)	-		(2,321)	-		(147,639)
	Proceeds from sale of shares	-		-	5,458		5,422,039	5,458		5,422,039	158		147,100	5,616		5,569,139
	Sales and offering expenses	-		-	-		(541,813)	-		(541,813)	-		(6,237)	-		(548,050)
	Distributions	-		(1,834)	-		(209,055)	-		(210,889)	-		(3,403)	-		(214,292)
Balance, June 30, 2014		0.001	$	(6,945)	13,479	$	11,361,802	13,479	$	11,354,857	223	$	182,768	13,702	$	11,537,625
	(unaudited)
See accompanying notes to financial statements.

3

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Statement of Cash Flows

(unaudited)

			Six Months Ended
			June 30, 2014
Cash flows from operating activities:
	Net loss		$	(332,448)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Income from investment in joint ventures		(199,005)
		Interest expense from amortization of debt financing costs		7,400
		Interest expense, other		2,529
	Changes in operating assets and liabilities:
		Due to Investment Manager and affiliates, net		409,662
		Accrued expenses and other liabilities		31,234
		Distributions from joint ventures		179,389
Net cash provided by operating activities				98,761
Cash flows from investing activities:
	Investment in joint ventures			(4,904,295)
	Distributions received from joint ventures in excess of profit			697,683
Net cash used in investing activities				(4,206,612)
Cash flows from financing activities:
	Sale of Class A and Class I shares			11,537,591
	Sales and offering expenses paid			(736,112)
	Distributions to shareholders			(274,593)
Net cash provided by financing activities				10,526,886
Net increase in cash				6,419,035
Cash, beginning of period				1,027,327
Cash, end of period			$	7,446,362

Supplemental disclosure of non-cash investing and financing activities:
	Offering expenses payable to Investment Manager charged to equity	$	105,921
	Distribution fees payable to dealer-manager	$	5,323
	Distribution payable to Managing Owner	$	2,121
	Sales commission trail payable to third parties	$	289,404
	Acquisition fee payable to Investment Manager	$	101,524
See accompanying notes to financial statements.

4

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Notes to Financial Statements

June 30, 2014

(unaudited)

(1)   Organization

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

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

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

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

As of November 12, 2013 (the “Initial Closing Date”), we raised a minimum of $1,200,000 from the sale of our Shares, at which time shareholders were admitted and we commenced operations. As of June 13, 2014, we raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania. From the commencement of our offering period on July 1, 2013 through June 30, 2014, we sold 13,479 Class A shares to 254 Class A shareholders and 223 Class I shares to three Class I shareholders, representing an aggregate of $13,608,485 of capital contributions.  From July 1, 2013 through June 30, 2014, we incurred sales commissions to third parties of $941,806 and dealer-manager and distribution fees in the amount of $272,613 to ICON Securities, LLC, formerly known as ICON Securities Corp., the dealer-manager of our offering and an affiliate of our Investment Manager (“ICON Securities”). In addition, organization costs of $6,744 and offering expenses of $124,854 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets. Organization costs are expensed when incurred and offering expenses are recorded as a reduction of shareholders’ equity.

(2)   Summary of Significant Accounting Policies

Basis of Presentation

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

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

5

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Notes to Financial Statements

June 30, 2014

(unaudited)

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

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

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

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

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

Recent Accounting Pronouncements

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

(3)   Investment in Joint Ventures

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

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

6

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Notes to Financial Statements

June 30, 2014

(unaudited)

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

(4)   Revolving Line of Credit, Recourse

On December 26, 2013, we entered into an agreement with California Bank & Trust (“CB&T”) for a revolving line of credit through March 31, 2015 of up to $5,000,000 (the “Facility”), which is secured by all of our assets not subject to a first priority lien. The interest rate for general advances under the Facility is CB&T’s prime rate. We may elect to designate up to five advances on the outstanding principal balance of the Facility to bear interest at the London Interbank Offered Rate (“LIBOR”) plus 2.5% per year. In all instances, borrowings under the Facility are subject to an interest rate floor of 4.0% per year. In addition, we are obligated to pay an annualized 0.5% fee on unused commitments under the Facility. At June 30, 2014, there were no obligations outstanding under the Facility and we were in compliance with all covenants related to the Facility. Amounts available under the Facility are subject to a borrowing base that is determined, subject to certain limitations, by the present value of the future receivables under certain loans and lease agreements in which we have a beneficial interest. At June 30, 2014, we had $0 available under the Facility pursuant to the borrowing base.

(5)   Transactions with Related Parties

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

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

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

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

We paid or accrued distributions to our Managing Owner of $1,834 and $2,459 for the three and six months ended June 30, 2014, respectively.  Additionally, our Managing Owner’s interest in the net loss attributable to us was $1,477 and $3,325 for the three and six months ended June 30, 2014, respectively.

7

ICON ECI Fund Sixteen

(A Delaware Statutory Trust)

Notes to Financial Statements

June 30, 2014

(unaudited)

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

				Three Months Ended		Six Months Ended
Entity	Capacity	Description		June 30, 2014		June 30, 2014
ICON Capital, LLC	Investment Manager	Offering expense
			reimbursements (1)	$	50,002	$	105,921
ICON Capital, LLC	Investment Manager	Organization cost
			reimbursements (2)		2,401		5,575
ICON Capital, LLC	Investment Manager	General and administrative
			reimbursements (2)		7,251		41,644
ICON Capital, LLC	Investment Manager	Management fees (2)			22,087		34,373
ICON Securities, LLC	Dealer-manager	Dealer-manager fees (1)			106,134		224,901
ICON Capital, LLC	Investment Manager	Administrative expense
			reimbursements (2)		151,480		327,073
ICON Capital, LLC	Investment Manager	Acquisition fees (3)			-		101,524
				$	339,355	$	841,011
(1)  Amount charged directly to shareholders' equity.
(2)  Amount charged directly to operations.
(3)  Amount capitalized and amortized to operations.

At June 30, 2014, we had a net payable of approximately $730,000 due to our Investment Manager and its affiliates that primarily consisted of administrative expense reimbursements of approximately $407,000, offering expenses of approximately $125,000, acquisition fees of approximately $102,000 and general and administrative expense reimbursements of approximately $43,000. At December 31, 2013, we had a net payable of approximately $106,000 due to our Investment Manager and its affiliates that primarily consisted of administrative expense reimbursements of approximately $80,000 and offering expenses of approximately $19,000.

From July 1, 2014 through August 8, 2014, we raised an additional $969,436 in capital contributions and incurred dealer-manager and distribution fees in the amount of $20,512.

(6)   Commitments and Contingencies

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

As of June 30, 2014, our Investment Manager and its affiliates incurred organization and offering costs of $1,668,877 on our behalf in accordance with the terms of our Trust Agreement. Of this amount, the Investment Manager has sought reimbursement of $187,615, which is included in due to Investment Manager and affiliates on our balance sheet as of June 30, 2014. Should the Investment Manager seek reimbursement of the remaining $1,481,262, we expect $452,699 to be charged to earnings and $1,028,563 to be charged to shareholders’ equity. The decision to pay organization and offering costs on our behalf and the decision to seek reimbursement for such costs is solely at the discretion of our Investment Manager and its affiliates. Accordingly, we may or may not be required to reimburse any remaining organization and offering expenses that have been or will be incurred by our Investment Manager and its affiliates.

8

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

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

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

Forward-Looking Statements

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

Overview

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

As of the Initial Closing Date, we raised a minimum of $1,200,000 from the sale of our Shares, at which time shareholders were admitted and we commenced operations. As of June 13, 2014, we raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania. Subsequent to the Initial Closing Date, we returned the initial capital contribution of $1,000 to ICON Investment Group, LLC (the “Initial Shareholder”). From the commencement of our offering on July 1, 2013 through June 30, 2014, we sold 13,479 Class A shares to 254 Class A shareholders and 223 Class I shares to three Class I shareholders, representing an aggregate of $13,608,485 of capital contributions. From July 1, 2013 through June 30, 2014, we incurred sales commissions to third parties of $941,806 and dealer-manager and distribution fees to ICON Securities of $272,613. In addition, organization costs of $6,744 and offering expenses of $124,854 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets. During the period from July 1, 2013 through August 8, 2014, we raised $14,577,921 in total equity and will continue to raise equity until no later than July 1, 2015.

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

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

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

9

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

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

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

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

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

In addition, we have established a cash reserve of approximately 0.5% of the gross offering proceeds. As of June 30, 2014, the cash reserve was $68,042.

Recent Significant Transactions

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

Mining Equipment

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

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

Trucks and Trailers

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

The following table includes additional information on the significant transactions that we engaged in from the Initial Closing Date through June 30, 2014:

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Portfolio Company	Structure	Equity Invested	Interest Rate	Expiration Date	Collateral/ Priority	Net Carrying Value  (2)	Credit Loss Reserve	Current Status
Murray Energy Corporation (1)	Lease	$2,659,195	N/A	9/30/2015	Ownership of mining equipment	$2,058,841	None	Performing
Blackhawk Mining, LLC (1)	Lease	$1,795,597	N/A	2/28/2018	Ownership of mining equipment	$1,764,578	None	Performing
D&T Holdings, LLC (1)	Lease	$1,484,705	N/A	12/31/2018	Ownership of trucks, trailers and equipment	$1,402,329	None	Performing
(1) Our investment in this portfolio company is through a joint venture.
(2) Net carrying value of our investment in joint ventures is calculated as follows: investment at cost plus/less our share of the cumulative net income/loss of the joint venture and less distributions received since the date of our initial investment.

Acquisition Fees

We incurred acquisition fees to our Investment Manager of $0 and $101,524 during the three and six months ended June 30, 2014, respectively. Acquisition fees of $101,524 is included in due to our Investment Manager and affiliates on our balance sheet as of June 30, 2014.

Recent Accounting Pronouncements

In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will become effective for us on January 1, 2017. We are currently in the process of evaluating the impact of the adoption of ASU 2014-09 on our financial statements. We do not believe any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements.

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

Total revenue for the 2014 Quarter was $133,774, which was attributable to income generated from our investment in three joint ventures with Fund Eleven, Fund Twelve, Fund Fourteen and Fund Fifteen.

Total expenses for the 2014 Quarter were $281,413, which were primarily comprised of administrative expense reimbursements due to our Investment Manager and other general and administrative expenses. Administrative expense reimbursements are costs incurred by our Investment Manager or its affiliates that are necessary for our operations.

Net Loss Attributable to Fund Sixteen

As a result of the foregoing factors, net loss attributable to us for the 2014 Quarter was $147,639. Net loss attributable to us per weighted average additional Class A share and Class I share outstanding for the 2014 Quarter was $13.51 and $13.32, respectively.

Results of Operations for the Six Months Ended June 30, 2014 (the “2014 Period”)

Total revenue for the 2014 Period was $199,005, which was attributable to income generated from our investment in three joint ventures with Fund Eleven, Fund Twelve, Fund Fourteen and Fund Fifteen.

Total expenses for the 2014 Period were $531,453, which were primarily comprised of administrative expense reimbursements due to our Investment Manager and other general and administrative expenses. Administrative expense reimbursements are costs incurred by our Investment Manager or its affiliates that are necessary for our operations.

Net Loss Attributable to Fund Sixteen

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As a result of the foregoing factors, net loss attributable to us for the 2014 Period was $332,448. Net loss attributable to us per weighted average additional Class A share and Class I share outstanding for the 2014 Period was $41.26 and $38.62, respectively.

Financial Condition

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

Total Assets

Total assets increased $10,739,387, from $1,944,016 at December 31, 2013 to $12,683,403 at June 30, 2014.  The increase was due to proceeds from the sale of our Shares, some of which were used to make investments during the 2014 Period.

Total Liabilities

Total liabilities increased $947,701, from $198,077 at December 31, 2013 to $1,145,778 at June 30, 2014.  The increase was primarily due to administrative expense reimbursements, offering expenses and acquisition fees payable to our Investment Manager and its affiliates and the sales commission trail we accrued on the sale of our Class A shares during the 2014 Period.

Equity

Equity increased $9,791,686, from $1,745,939 at December 31, 2013 to $11,537,625 at June 30, 2014.  The increase was primarily due to the sale of our Shares during the 2014 Period.

Liquidity and Capital Resources

Summary

At June 30, 2014 and December 31, 2013, we had cash of $7,446,362 and $1,027,327, respectively. Pursuant to the terms of our offering, we have established a cash reserve in the amount of 0.50% of the gross offering proceeds from the sale of our Shares. As of June 30, 2014, the cash reserve was $68,042. During our offering period, our main source of cash is from financing activities and our main use of cash is in investing activities.

We are offering our Shares on a “best efforts” basis with the current intention of raising up to $250,000,000.  As additional Shares are sold, we will experience a relative increase in liquidity as cash is received, and then a relative decrease in liquidity as cash is expended to make investments.

We will use the net proceeds of our offering to invest in Capital Assets located in North America, Europe and other developed markets, including those in Asia, South America and elsewhere.  We seek to acquire a portfolio of Capital Assets that is comprised of both transactions that generate (a) current cash flow from payments of principal and/or interest (in the case of secured loans and other financing transactions) and rental payments (in the case of leases), (b) deferred cash flow by realizing the value of certain Capital Assets that we lease at the maturity of the investment, or (c) a combination of both current and deferred cash flow from other structured investments.

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

From the commencement of our offering on July 1, 2013 through June 30, 2014, we sold 13,479 Class A shares to 254 Class A shareholders and 223 Class I shares to three Class I shareholders, representing an aggregate of $13,608,485 of capital contributions.  From July 1, 2013 through June 30, 2014, we incurred sales commissions to third parties of $941,806 and dealer-manager and distribution fees to ICON Securities of $272,613.  In addition, organization costs of $6,744 and offering expenses of $124,854 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets. Organization costs are expensed when incurred and offering expenses are recorded as a reduction of shareholders’ equity.

Cash Flows

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Operating Activities 

Cash provided by operating activities in the 2014 Period of $98,761 was primarily due to distributions received from our joint ventures, partially offset by general and administrative expenses paid during the 2014 Period.

Investing Activities

Cash used in investing activities in the 2014 Period of $4,206,612 was related to our investment in three joint ventures, partially offset by distributions received from our joint ventures in excess of profits.

Financing Activities

Cash provided by financing activities in the 2014 Period of $10,526,886 was primarily related to net proceeds from the sale of our Shares, partially offset by distributions to shareholders.

Sources of Liquidity

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

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

Financings and Borrowings

Revolving Line of Credit, Recourse

On December 26, 2013, we entered into the Facility, which is secured by all of our assets not subject to a first priority lien.  The interest rate for general advances under the Facility is CB&T’s prime rate. We may elect to designate up to five advances on the outstanding principal balance of the Facility to bear interest at LIBOR plus 2.5% per year. In all instances, borrowings under the Facility are subject to an interest rate floor of 4.0% per year. In addition, we are obligated to pay an annualized 0.5% fee on unused commitments under the Facility. At June 30, 2014, there were no obligations outstanding under the Facility and we were in compliance with all covenants related to the Facility.  Amounts available under the Facility are subject to a borrowing base that is determined, subject to certain limitations, by the present value of the future receivables under certain loans and lease agreements in which we have a beneficial interest.  At June 30, 2014, we had $0 available under the Facility pursuant to the borrowing base.

Distributions

We, at our Managing Owner’s discretion, pay monthly distributions to our shareholders beginning with the first month after each such shareholder’s admission and expect to continue to pay such distributions until the termination of our operating period.  During the 2014 Period, we paid or accrued distributions to our Managing Owner, Class A additional shareholders and Class I shareholders of $2,459, $269,579 and $4,676, respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At the time we acquire or divest of an interest in Capital Assets, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities.  Our Managing Owner believes that any liability of ours that may arise as a result of any such indemnification obligations will not have a material adverse effect on our financial condition or results of operations taken as a whole. We are a party to the Facility, as discussed in “Financings and Borrowings – Revolving Line of Credit, Recourse” above. We had no borrowings under the Facility at June 30, 2014.

Off-Balance Sheet Transactions

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As of June 30, 2014, our Investment Manager and its affiliates incurred organization and offering costs of $1,668,877 on our behalf in accordance with the terms of our Trust Agreement. Of this amount, the Investment Manager has sought reimbursement of $187,615, which is included in due to Investment Manager and affiliates on our balance sheet as of June 30, 2014. The decision to pay organization and offering costs on our behalf and the decision to seek reimbursement for such costs is solely at the discretion of our Investment Manager and its affiliates. Accordingly, we may or may not be required to reimburse any remaining organization and offering expenses that have been or will be incurred by our Investment Manager and its affiliates.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

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

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

Evaluation of internal control over financial reporting

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

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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

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

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

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

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

Our Initial Closing Date was November 12, 2013, at which time shareholders were admitted and we commenced operations. Subsequent to the Initial Closing Date, we returned the initial capital contribution of $1,000 to the Initial Shareholder. As of June 13, 2014, we raised the $12,500,000 minimum offering amount for the Commonwealth of Pennsylvania. From the commencement of our offering on July 1, 2013 through June 30, 2014, we received additional capital contributions of $13,608,485.  From July 1, 2013 through June 30, 2014, we incurred sales commissions to third parties of $941,806 and dealer-manager and distribution fees to ICON Securities of $272,613.  In addition, organization costs of $6,744 and offering expenses of $124,854 were incurred by us during such period and are included in due to Investment Manager and affiliates on our balance sheets.  Net offering proceeds to us after deducting the expenses described were $12,262,468 during this period.

From July 1, 2014 through August 8, 2014, we received additional capital contributions in the amount of $969,436.  For the period from July 1, 2014 through August 8, 2014, we incurred sales commissions to third parties of $57,906 and dealer-manager and distribution fees to ICON Securities of $20,512.

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

Item 3.  Defaults Upon Senior Securities

Not applicable.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

Not applicable.

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Item 6. Exhibits

3.1	Certificate of Trust of Registrant (Incorporated by reference to Exhibit 3.1 to Registrant’s Registration Statement on Form S-1 filed with the SEC on November 26, 2012 (File No. 333-185144)).
4.1	Form of Third Amended and Restated Trust Agreement of Registrant (Incorporated by reference to Exhibit A to Registrant’s Prospectus Supplement No. 4 filed with the SEC on April 2, 2014 (File No. 333-185144)).
10.1	Form of Investment Management Agreement, by and between ICON ECI Fund Sixteen and ICON Capital, LLC (Incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on February 1, 2013 (File No. 333-185144)).
10.2	Commercial Loan Agreement, by and between California Bank & Trust and ICON ECI Fund Sixteen, dated as of December 26, 2013 (Incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013, filed March 28, 2014).
31.1	Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer.
31.3	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial and Accounting Officer.
32.1	Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3	Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
*	XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

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

ICON ECI Fund Sixteen

(Registrant)

By: ICON MT 16, LLC

      (Managing Owner of the Registrant)

August 13, 2014

By: /s/ Michael A. Reisner

Michael A. Reisner

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

By: /s/ Mark Gatto

Mark Gatto

Co-Chief Executive Officer and Co-President

(Co-Principal Executive Officer)

By: /s/ Nicholas A. Sinigaglia

Nicholas A. Sinigaglia

Managing Director

(Principal Financial and Accounting Officer)

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