Company Quick10K Filing
Quick10K
Icon Leasing Fund Twelve
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
PSN Parsons 3,392
NSM Nationstar 1,753
MMND Mastermind 45
MBCQ Madison Bank 33
KNWN Know Labs 30
DBS Invesco DB Silver Fund 16
PRKA Parks America 13
CVLB Conversion Labs 6
ENDV Endonovo Therapeutics 6
ZGL Zayo Group 0
ICOG 2018-12-31
Item 5. Market for Registrant's Securities, Related Security Holder Matters and Issuer Purchases of Equity Securities
Item 9A. Controls and Procedures
EX-31.1 exhibit31-1123118.htm
EX-31.2 exhibit31-2123118.htm
EX-31.3 exhibit31-3123118.htm

Icon Leasing Fund Twelve Earnings 2018-12-31

ICOG 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 iconfundtwelve-20181231x10k.htm 2018 YEAR END FINANCIALS Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
 
December 31, 2018
 
or
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
 
to
 
Commission file number:
 
000-53189
 
ICON Leasing Fund Twelve Liquidating Trust
(Exact name of registrant as specified in its charter)
Delaware
 
81-7012783
(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)
Securities registered pursuant to Section 12(b) of the Act: None 
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes  o
No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.*
 
Yes  o
No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.*    
 
Yes  o
No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).*
 
Yes  o
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
    
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer o 
Smaller reporting company þ
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
    
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  o 
No þ 
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter:  Not applicable. There is no established market for the beneficial interests of the registrant.

Number of outstanding beneficial interests of the registrant on March 20, 2019 is 348,335.

DOCUMENTS INCORPORATED BY REFERENCE
None.
*ICON Leasing Fund Twelve Liquidating Trust is the transferee of the assets and liabilities of ICON Leasing Fund Twelve, LLC and files reports under the Commission file number for ICON Leasing Fund Twelve, LLC, which filed a Form 15 on January 5, 2017 including its notice of termination of registration and filing requirements.



ICON Leasing Fund Twelve Liquidating Trust
Table of Contents




Item 5. Market for Registrant's Securities, Related Security Holder Matters and Issuer Purchases of Equity Securities
 
Overview

 
Number of Beneficial Owners as of
Title of Class
March 20, 2019
Managing Trustee (as a beneficial owner)
1
Additional beneficial owners
8,712
 
We, at our Managing Trustee's discretion, paid monthly distributions to each of our beneficial owners beginning the first month after each such beneficial owner was admitted to the LLC through the end of our operating period, which was on April 30, 2014. During our liquidation period, we have paid and will continue to pay distributions in accordance with the terms of our Trust Agreement. We expect that distributions paid during our liquidation period will vary, depending on the timing of the sale of our assets and/or the maturity of our investments, and our receipt of finance and other income from our investments. We paid distributions to our additional beneficial owners totaling $6,380,002 and $6,000,175 for the years ended December 31, 2018 and 2017, respectively. Additionally, we paid our Managing Trustee distributions of $64,444 and $60,608 for the years ended December 31, 2018 and 2017, respectively.
 
Our Interests are not publicly traded and there is no established public trading market for our Interests. Given that it is unlikely that any such market will develop, our Interests are generally considered illiquid. Even if an additional beneficial owner is able to sell our Interests, the price received may be less than our estimated value (“Estimated Value”) per Interest indicated below.

Our Estimated Value per Interest as of December 31, 2018 (the “Valuation Date”) has been determined to be $69.19 per Interest. The Estimated Value per Interest is based upon the estimated fair value of our assets less the estimated fair value of our liabilities as of the Valuation Date, divided by the total number of our Interests outstanding as of the Valuation Date. To the extent an investment is owned by a joint venture, we only include our share of assets and liabilities based on our ownership percentage in such joint venture. The information used to generate the Estimated Value per Interest, including, but not limited to, market information, investment and asset-level data and other information provided by third parties, was the most recent information practically available as of the Valuation Date. This Estimated Value per Interest is provided to assist (i) plan fiduciaries in fulfilling their annual valuation obligations as required by The Employee Retirement Income Security Act of 1974, as amended ("ERISA") and (ii) broker-dealers that participated in our offering of Interests in meeting their customer account statement reporting obligations as required by the Financial Industry Regulatory Authority, Inc. (“FINRA”).

The Estimated Value per Interest was calculated by our Managing Trustee primarily based on the fair values provided by Duff & Phelps, LLC (“Duff & Phelps”), a third-party independent valuation and consulting firm engaged by our Managing Trustee to provide material assistance related to the valuation of certain of our assets, as further described below. Duff & Phelps is a global valuation and corporate finance advisor with expertise in complex valuations.

Process and Methodology

Our Managing Trustee established the Estimated Value per Interest as of the Valuation Date primarily based on the fair values of our assets provided by Duff & Phelps. In arriving at its fair values, Duff & Phelps utilized valuation methodologies that both our Managing Trustee and Duff & Phelps believe are standard and acceptable in the equipment financing industry for the types of assets held by us. The valuation was performed in accordance with standard industry practice and the provisions of NASD Rule 2340 and FINRA Rule 2310. The basis of the fair values provided by Duff & Phelps is in accordance with the definition of fair value in Accounting Standards Codification 820. For an asset that was classified as held for sale and subsequently sold after the Valuation Date but before the filing of this report, the fair value was estimated by our Managing Trustee to approximate the net sale proceeds. To the extent an investment had non-recourse long-term debt obligations that exceeded the fair value of the related asset, the net asset value of such investment was deemed to be zero.

A summary of the methodology used by Duff & Phelps, as well as the assumptions and limitations of its work for us and of our determination of the Estimated Value, are presented below.
 

1


Discounted Cash Flow
 
The discounted cash flow (“DCF”) method was used to estimate value using the concept of the time value of money. All projected future cash flows accruing to an asset were estimated and discounted to give their present values. The sum of all projected future cash flows, both incoming and outgoing, comprises the net present value, which was recognized as the value or price of the cash flows.

Sales Comparison Method

The sales comparison method compares similar assets recently sold in the market and adjusts the value for differences in the subject asset and the comparable assets as well as for current market conditions.

Valuation of Note Receivable
 
The estimated fair value of our note receivable at the Valuation Date was derived by using the DCF method. Under the DCF method, the discount rate reflects the risks associated with the borrower and the time value of money, and was applied to the projected cash flows associated with the note receivable. The discounted projected cash flows included all unpaid principal, interest, and fee payments for the scheduled term period of the note receivable. An analysis of the borrower was conducted to determine viability of payment and total debt coverage, as well as to ascertain the borrower's risk level, with such considerations reflected in the implied discount rate used in discounting the cash flows.

The discount rates used ranged from 12.5% to 14.5%.

Valuation of Investment in Cost-Method Investees
 
The estimated fair value of our investment in cost-method investees was based on a combination of the DCF method and the sales comparison method. Under the DCF method, the discount rate reflects the risks associated with the investee and the time value of money, and was applied to the projected cash flows associated with the operations of the investee. The sum of all projected future cash flows included, but were not limited to, net operating cash flows of the investee discounted to give their present values. The estimated fair value of our investment in the other cost-method investee was based on the current fair value of the net assets of the investee from certain methodologies, which included the sales comparison method.

Valuation of Debt Obligations

The estimated fair value at the Valuation Date of our debt obligations that were subsequently settled after the Valuation Date was estimated by our Managing Trustee to approximate the amount paid to settle such debt obligations.

Cash, Other Assets and Other Liabilities
 
Cash, other assets and other liabilities (collectively, “Other Net Assets”) include our share of items of tangible or monetary value as of the Valuation Date. The fair values of Other Net Assets as of the Valuation Date were estimated by our Managing Trustee to approximate their carrying values because of their nature or short-term maturities. Excluded from Other Net Assets is our share of prepaid assets, which our Managing Trustee estimated as having a minimal fair value as of the Valuation Date.
 
Assumptions and Limitations
 
As with any valuation methodology, the methodologies used to determine our Estimated Value per Interest are based upon a number of estimates and assumptions that may prove later to be inaccurate or incomplete. Further, different market participants using different estimates and assumptions could derive different estimated values. Our Estimated Value per Interest may also not represent the price that our Interests would trade at on a national securities exchange, the amount realized in a sale, merger or liquidation, or the amount an additional beneficial owner would realize in a private sale of our Interests.

The Estimated Value per Interest calculated by our Managing Trustee is based on economic, market and other conditions and the information available to us and Duff & Phelps as of the Valuation Date. The Estimated Value per Interest is expected to fluctuate over time in response to future events, including, but not limited to, changes in market interest rates, changes in economic, market and regulatory conditions, the prospects of the asset sectors in general or in particular, or the special

2


purpose vehicles in which the assets may be held, rental and growth rates, returns on competing investments, changes in administrative expenses and other costs, and the amount of distributions paid on our Interests. The Estimated Value per Interest may also change as a result of changes in the circumstances of the risks associated with each investment.

There is no assurance that the methodologies used to calculate the Estimated Value per Interest would be acceptable to FINRA or in compliance with guidelines promulgated under ERISA with respect to their respective reporting requirements.

Our Managing Trustee is ultimately and solely responsible for the establishment of our Estimated Value per Interest. In arriving at its determination of the Estimated Value per Interest, our Managing Trustee considered all information provided in light of its own familiarity with our assets and liabilities and the estimated fair values recommended by Duff & Phelps.
 
We currently expect that our next Estimated Value per Interest will be based upon our assets and liabilities as of December 31, 2019 and such value will be included in our Annual Report on Form 10-K for the year ending December 31, 2019. We intend to publish an updated Estimated Value per Interest annually in our subsequent Annual Reports on Form 10-K.


3



Report of Independent Registered Public Accounting Firm
 
 
To the Beneficial Owners of ICON Leasing Fund Twelve Liquidating Trust
 
 
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of ICON Leasing Fund Twelve Liquidating Trust and subsidiaries (the “Liquidating Trust”) as of December 31, 2017, the related consolidated statements of operations, changes in equity and cash flows, for the year then ended, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Liquidating Trust as of December 31, 2017, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
These financial statements are the responsibility of the Liquidating Trust's management. Our responsibility is to express an opinion on the Liquidating Trust's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Liquidating Trust in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Liquidating Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Liquidating Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
 
/s/ RSM US LLP

We have served as the Liquidating Trust's auditor since 2017.
 
New York, New York
March 29, 2018


4



ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Consolidated Balance Sheets 
 
December 31,
 
2018
 
2017
 
(unaudited)
 
 
Assets
Current assets:
 
 
 
Cash and cash equivalents
$
6,696,984

 
$
12,974,467

Current portion of net investment in note receivable
3,750,000

 
8,791,579

Current portion of net investment in finance leases

 
2,677,965

Other current assets
278,667

 
72,325

Total current assets
10,725,651

 
24,516,336

Non-current assets:
 

 
 

Net investment in note receivable, less current portion
10,873,333

 
2,908,421

Net investment in finance leases, less current portion

 
30,232,353

Leased equipment at cost (less accumulated depreciation of $8,055,357)

 
13,000,000

Asset held for sale
2,078,000

 

Restricted cash
1,194,424

 
2,063,845

Investment in cost-method investees
3,301,189

 

Other non-current assets

 
202

Total non-current assets
17,446,946

 
48,204,821

Total assets
$
28,172,597

 
$
72,721,157

Liabilities and Equity
Current liabilities:
 
 
 
Current portion of non-recourse long-term debt
$
18,234,494

 
$
22,335,800

Due to Managing Trustee and affiliates, net
246,305

 
107,406

Accrued expenses and other current liabilities
139,412

 
604,805

Accrued interest
1,047,260

 
196,074

Total current liabilities
19,667,471

 
23,244,085

Non-current liabilities:
 
 
 
Non-recourse long-term debt, less current portion

 
11,146,564

Seller's credits, less current portion

 
8,738,715

Other non-current liabilities

 
150,000

Total non-current liabilities

 
20,035,279

Total liabilities
19,667,471

 
43,279,364

Commitments and contingencies (Note 15)

 

Equity:
Beneficial owners’ equity:
 

 
 

Additional beneficial owners
14,664,492

 
30,414,292

Managing Trustee
(2,963,179
)
 
(2,804,091
)
Total beneficial owners' equity
11,701,313

 
27,610,201

Noncontrolling interests
(3,196,187
)
 
1,831,592

Total equity
8,505,126

 
29,441,793

Total liabilities and equity
$
28,172,597

 
$
72,721,157


See accompanying notes to consolidated financial statements.


5


ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Consolidated Statements of Operations
 
Years Ended December 31,
 
2018
 
2017
 
(unaudited)
 
 
Revenue and other income:
 
 
 
Finance (loss) income
$
(417,815
)
 
$
4,607,583

Rental income
1,000,000

 
4,091,287

Loss from investment in joint ventures and equity-method investees
(298,811
)
 
(6,071
)
Gain on sale of assets, net

 
209,664

Gain on sale of vessels, net

 
59,730

Gain on extinguishment of seller's credit and interest payable
1,476,348

 
5,131,250

Other income
101,060

 

Total revenue and other income
1,860,782

 
14,093,443

Expenses:
 

 
 

Management fees

 
210,233

Administrative expense reimbursements
796,752

 
943,163

General and administrative
1,251,854

 
1,308,973

Interest 
1,450,724

 
2,825,023

Depreciation
310,164

 
2,926,149

Credit loss, net

 
15,690,944

Impairment loss
10,611,836

 
23,919,230

Vessel operating

 
627,401

Total expenses
14,421,330

 
48,451,116

Net loss
(12,560,548
)
 
(34,357,673
)
Less: net loss attributable to noncontrolling interests
(3,096,106
)
 
(3,993,217
)
Net loss attributable to Fund Twelve Liquidating Trust
$
(9,464,442
)
 
$
(30,364,456
)
 
 
 
 
Net loss attributable to Fund Twelve Liquidating Trust allocable to:
 
 
 

Additional beneficial owners
$
(9,369,798
)
 
$
(30,060,811
)
Managing Trustee
(94,644
)
 
(303,645
)
 
$
(9,464,442
)
 
$
(30,364,456
)
 
 
 
 
Weighted average number of additional beneficial interests outstanding
348,335

 
348,335

Net loss attributable to Fund Twelve Liquidating Trust per weighted average additional beneficial interest outstanding
$
(26.90
)
 
$
(86.30
)

See accompanying notes to consolidated financial statements.


6



ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Consolidated Statements of Changes in Equity
 
Beneficial Owners' Equity
 
 
 
Additional
Beneficial Interests
 
Additional
Beneficial Owners
 
Managing Trustee
 
Total Beneficial Owners' Equity
 
Noncontrolling
Interests
 
Total
Equity
Balance, December 31, 2016
348,335

 
$
66,475,278

 
$
(2,439,838
)
 
$
64,035,440

 
$
10,845,221

 
$
74,880,661

Net loss

 
(30,060,811
)
 
(303,645
)
 
(30,364,456
)
 
(3,993,217
)
 
(34,357,673
)
Distributions

 
(6,000,175
)
 
(60,608
)
 
(6,060,783
)
 
(5,020,412
)
 
(11,081,195
)
Balance, December 31, 2017
348,335

 
30,414,292

 
(2,804,091
)
 
27,610,201

 
1,831,592

 
29,441,793

Net loss (unaudited)

 
(9,369,798
)
 
(94,644
)
 
(9,464,442
)
 
(3,096,106
)
 
(12,560,548
)
Distributions (unaudited)

 
(6,380,002
)
 
(64,444
)
 
(6,444,446
)
 
(2,831,673
)
 
(9,276,119
)
Investment by noncontrolling interests (unaudited)

 

 

 

 
900,000

 
900,000

Balance, December 31, 2018 (unaudited)
348,335

 
$
14,664,492

 
$
(2,963,179
)
 
$
11,701,313

 
$
(3,196,187
)
 
$
8,505,126


See accompanying notes to consolidated financial statements.


7


ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Consolidated Statements of Cash Flows
 
Years Ended December 31,
 
2018
 
2017
 
(unaudited)
 
 
Cash flows from operating activities:
 
 
 
Net loss
$
(12,560,548
)
 
$
(34,357,673
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 

Finance loss (income)
2,221,881

 
(3,940,929
)
Loss from investment in joint ventures and equity-method investees
298,811

 
6,071

Depreciation
310,164

 
2,926,149

Interest expense from amortization of debt financing costs
247,130

 
129,223

Net accretion of seller's credits and other
92,816

 
509,789

Gain on extinguishment of seller's credit and interest payable
(1,476,348
)
 
(5,131,250
)
Impairment loss
10,611,836

 
23,919,230

Pain-in-kind interest
(790,000
)
 

Credit loss, net

 
15,690,944

Gain on sale of assets, net

 
(209,664
)
Gain on sale of vessels, net

 
(59,730
)
Changes in operating assets and liabilities:
 

 
 

Collection of finance leases
23,333,254

 
16,901,931

Other assets
(206,140
)
 
(535,484
)
Accrued expenses and other current liabilities
235,793

 
(110,328
)
Deferred revenue

 
(155,413
)
Due to Managing Trustee and affiliates, net
138,899

 
(160,358
)
Net cash provided by operating activities
22,457,548

 
15,422,508

Cash flows from investing activities:
 

 
 

Net proceeds from sale of vessels

 
3,035,730

Proceeds from sale of leased assets

 
1,949,581

Investment in joint venture

 
(6,071
)
Investment in note receivable, net
(3,300,000
)
 

Investment in equity-method investees
(3,600,000
)
 

Principal received on notes receivable
1,166,667

 

Net cash (used in) provided by investing activities
(5,733,333
)
 
4,979,240

Cash flows from financing activities:
 

 
 

Repayment of non-recourse long-term debt
(15,495,000
)
 
(8,008,441
)
Investment by noncontrolling interests
900,000

 

Distributions to noncontrolling interests
(2,831,673
)
 
(5,020,412
)
Distributions to beneficial owners
(6,444,446
)
 
(6,060,783
)
Net cash used in financing activities
(23,871,119
)
 
(19,089,636
)
Net (decrease) increase in cash, cash equivalents and restricted cash
(7,146,904
)
 
1,312,112

Cash, cash equivalents and restricted cash, beginning of year
15,038,312

 
13,726,200

Cash, cash equivalents and restricted cash, end of year (a)
$
7,891,408

 
$
15,038,312

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
229,798

 
$
2,156,901

 
 
 
 
Supplemental disclosure of non-cash financing activities:
 
 
 
Satisfaction of seller's credit netted at sale
$
7,355,183

 
$

 
 
 
 
(a) The following table presents a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheets:
 
 
 
 
Cash and cash equivalents
$
6,696,984

 
$
12,974,467

Restricted cash
1,194,424

 
2,063,845

Total cash, cash equivalents and restricted cash
$
7,891,408

 
$
15,038,312


See accompanying notes to consolidated financial statements.

8

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017


(1)      Organization
ICON Leasing Fund Twelve Liquidating Trust (the “Liquidating Trust”), a Delaware statutory trust, was transferred all of the assets and liabilities of ICON Leasing Fund Twelve, LLC (the “LLC” or “Fund Twelve”), a Delaware limited liability company, as of December 31, 2016. When used in these notes to consolidated financial statements, the terms “we,” “us,” “our” or similar terms refer to (i) the LLC and its consolidated subsidiaries for all periods prior to the transfer of the assets and liabilities of the LLC to the Liquidating Trust and (ii) the Liquidating Trust and its consolidated subsidiaries as of December 31, 2016 and thereafter. The terms “LLC” and “Liquidating Trust” are interchangeable, as the context so requires, when used in the consolidated financial statements.
 
Prior to the transfer of the assets and liabilities of the LLC to the Liquidating Trust, the manager of the LLC was ICON Capital, LLC, a Delaware limited liability company (the “Manager”). As of December 31, 2016 and thereafter, our Manager became the managing trustee of the Liquidating Trust (the “Managing Trustee”). The terms “Manager” and “Managing Trustee” are interchangeable, as the context so requires, when used in the consolidated financial statements.

The Liquidating Trust is governed by a Liquidating Trust Agreement (the “Trust Agreement”) that appointed our Manager as Managing Trustee of the Liquidating Trust. Prior to the transfer of the assets and liabilities of the LLC to the Liquidating Trust, the LLC's assets included investments in ICON Radiance, LLC, ICON Siva, LLC, ICON Victorious, LLC, ICON Mauritius MI, LLC, ICON Mauritius MI II, LLC, ICON Blackhawk, LLC, ICON Murray VII, LLC and a subordinated term loan to four affiliates of Técnicas Maritimas Avanzadas, S.A. de C.V. (collectively, “TMA”). These investments, as well as all other assets and liabilities of the LLC, were transferred to the Liquidating Trust from the LLC on December 31, 2016 in order to reduce expenses and to maximize potential distributions to beneficial owners of the Liquidating Trust.  On December 31, 2016, all Shares (as defined below) were exchanged for an equal number of beneficial interests (the “Interests”) in the Liquidating Trust.
 
We operated as an equipment leasing and finance program in which the capital our beneficial owners invested was pooled together to make investments, pay fees and establish a small reserve.  We primarily acquired equipment subject to lease, purchased equipment and leased it to third-party end users or financed equipment for third parties and, to a lesser degree, acquired ownership rights to items of leased equipment at lease expiration.
             
Our Managing Trustee manages and controls our business affairs, including, but not limited to, our equipment leases and other financing transactions. Additionally, our Managing Trustee has a 1% interest in our profits, losses, distributions and liquidation proceeds.
 
Our offering period commenced on May 7, 2007 and ended on April 30, 2009. We offered shares of limited liability company interests (the “Shares”) with the intention of raising up to $410,800,000 of capital. Our initial closing date was May 25, 2007, the date on which we raised $1,200,000, the minimum offering amount. Through April 30, 2009, we sold 348,826 Shares, representing $347,686,947 of capital contributions. Through December 31, 2016, 491 Shares were repurchased pursuant to our repurchase plan.

Our operating period commenced on May 1, 2009 and ended on April 30, 2014. Our liquidation period commenced on May 1, 2014, during which we have sold and will continue to sell our assets and/or let our investments mature in the ordinary course of business.

On May 30, 2017, our Managing Trustee retained ABN AMRO Securities (USA) LLC (“ABN AMRO Securities”) as its financial advisor to assist our Managing Trustee and us in identifying, evaluating and executing a potential sale of certain shipping and offshore energy assets included within our investment portfolio. During the first quarter of 2019, our Managing Trustee and ABN AMRO Securities recommenced seeking a sale of our secured term loan to TMA. We, however, cannot assure that the identification or evaluation to be performed will result in any specific sale transaction.

Beneficial owners’ capital accounts are increased for their initial capital contribution plus their proportionate share of earnings and decreased by their proportionate share of losses and distributions. Profits, losses, distributions and liquidation proceeds are allocated 99% to the additional beneficial owners and 1% to our Managing Trustee until each additional

9

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

beneficial owner has (a) received distributions and liquidation proceeds sufficient to reduce its adjusted capital account to zero and (b) received, in addition, other distributions and allocations that would provide an 8% per year cumulative return, compounded daily, on its outstanding adjusted capital account. After such time, distributions will be allocated 90% to the additional beneficial owners and 10% to our Managing Trustee.
 
 (2)    Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
Our accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In the opinion of our Managing Trustee, all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation have been included.

The consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries and other controlled entities. All intercompany accounts and transactions have been eliminated in consolidation. In joint ventures where we have a controlling financial interest, the financial condition and results of operations of the joint venture are consolidated.  Noncontrolling interest represents the minority owner’s proportionate share of its equity in the joint venture. The noncontrolling interest is adjusted for the minority owner’s share of the earnings, losses, investments and distributions of the joint venture.
 
We account for our noncontrolling interests in joint ventures where we have influence over financial and operational matters, generally 50% or less ownership interest, under the equity method of accounting. In such cases, our original investments are recorded at cost and adjusted for our share of earnings, losses, and distributions. We account for investments in joint ventures where we have virtually no influence over financial and operational matters using the cost method of accounting.  In such cases, our original investments are recorded at cost and any distributions received are recorded as revenue.  All of our investments in joint ventures are subject to our impairment review policy.
 
We report noncontrolling interests as a separate component of consolidated equity and net loss attributable to noncontrolling interests is included in consolidated net loss. The attribution of net loss between controlling and noncontrolling interests is disclosed on our accompanying consolidated statements of operations.
 
Net loss attributable to us per weighted average additional Interest outstanding is based upon the weighted average number of additional Interests outstanding during the year.

Certain reclassifications have been made to the accompanying consolidated financial statements in the prior year to conform to the current presentation.

Cash and Cash Equivalents
Cash and cash equivalents include cash in banks and highly liquid investments with original maturity dates of three months or less.
 
Our cash and cash equivalents are held principally at two financial institutions and at times may exceed insured limits.  We have placed these funds in high quality institutions in order to minimize risk relating to exceeding insured limits.

Restricted Cash
Cash that is restricted from use in operations is generally classified as restricted cash.
 
Debt Financing Costs
Debt financing costs associated with a recognized debt liability are netted against the carrying amount of the related debt liability and debt financing costs associated with a line of credit arrangement were capitalized and included as other assets. Such costs are amortized to interest expense over the term of the debt instrument using the effective interest rate method.
 

10

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

Leased Equipment at Cost
Investments in leased equipment were stated at cost less accumulated depreciation.  Leased equipment was depreciated on a straight-line basis over the lease term, which typically ranged from 3 to 10 years, to the asset’s residual value. 
 
Our Managing Trustee has an investment committee that approved each new equipment lease and other financing transaction.  As part of its process, the investment committee determined the estimated residual value, if any, to be used once the investment had been approved. The factors considered in determining the estimated residual value included, but were not limited to, the creditworthiness of the potential lessee, the type of equipment considered, how the equipment was integrated into the potential lessee’s business, the length of the lease and the industry in which the potential lessee operated.  Residual values were reviewed for impairment in accordance with our impairment review policy.
 
The residual value assumed, among other things, that the asset was utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the marketplace were disregarded and it was assumed that there was no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. The residual value was calculated using information from various external sources, such as trade publications, auction data, equipment dealers, wholesalers and industry experts, as well as inspection of the physical asset and other economic indicators.
 
Depreciation
We recorded depreciation expense on equipment or vessel when the asset was idle or when the lease was classified as an operating lease. In order to calculate depreciation, we first determined the depreciable base, which was the equipment cost less the estimated residual value at lease termination. Depreciation expense was recorded on a straight-line basis over the lease term or over the useful life of the asset, as applicable.
 
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 market 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 our consolidated statements 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 asset is less than its carrying value or (ii) the lessee is experiencing financial difficulties and 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 and, if applicable, the remaining obligation to the non-recourse lender. Generally, in the latter situation, the residual position relates to equipment subject to third-party non-recourse debt where the lessee remits its rental payments directly to the lender and we do not recover our residual position until the non-recourse debt is repaid in full. 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 re-leasing costs. Our Managing Trustee’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
Each equipment lease we entered into was classified as either a finance lease or an operating lease, based upon the terms of each lease. The estimated residual value was a critical component of and directly influenced the determination as to whether a lease was classified as a finance lease or an operating lease.
 

11

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

For finance leases, we capitalized, at lease inception, the total minimum lease payments receivable from the lessee, the estimated unguaranteed residual value of the equipment at lease termination and the initial direct costs related to the lease, less unearned income.  Unearned income represented 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 was recognized as finance income over the term of the lease using the effective interest rate method.
 
For operating leases, rental income was recognized on a straight-line basis over the lease term.  Billed operating lease receivables were included in accounts receivable until collected or written off. We recorded a reserve if we deemed any receivable not collectible. The difference between the timing of the cash received and the income recognized on a straight-line basis was recognized as either deferred revenue or other assets, as appropriate. Initial direct costs were capitalized as a component of the cost of the equipment and depreciated over the lease term.
 
Accounting for Vessel Revenue and Expenses

Revenue generated from time charters is recognized over the term of the respective time charter agreements as service is provided. Under time charters, voyage expenses such as bunkers, port dues, cargo handling operations and brokerage commissions are paid by our customers. Vessel operating costs, including, without limitation, crewing, vessel maintenance, technical management costs and vessel insurance, are expensed by us as incurred on an accrual basis. Commercial management and technical management fees are expensed as incurred. Dry-docking costs are generally expensed as incurred as such costs primarily represent normal maintenance and repairs. To the extent dry-docking costs represent expenditures that add economic life to the vessel or improve the vessel’s efficiency, such costs can be capitalized and depreciated over the life of the vessel.
  
Notes Receivable and Revenue Recognition
Notes receivable are reported in our consolidated balance sheets at the outstanding principal balance, plus costs incurred to originate the loans, net of any unamortized premiums or discounts on purchased loans. We use the effective interest rate method to recognize finance income, which produces a constant periodic rate of return on the investment. Unearned income, discounts and premiums are amortized to finance income in our consolidated statements of operations using the effective interest rate method. Interest receivable related to the unpaid principal is recorded separately from the outstanding balance in our consolidated balance sheets. Upon the prepayment of a note receivable, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as part of finance income in our consolidated statements of operations. Our notes receivable may contain a paid-in-kind (“PIK”) interest provision. Any PIK interest, if deemed collectible, will be added to the principal balance of the note receivable and is recorded as finance income.
 
Credit Quality of Notes Receivable and Finance Leases and Credit Loss Reserve
Our Managing Trustee monitors the ongoing credit quality of our financing receivables by (i) reviewing and analyzing a borrower’s financial performance on a regular basis, including review of financial statements received on a monthly, quarterly or annual basis as prescribed in the loan or lease agreement, (ii) tracking the relevant credit metrics of each financing receivable and a borrower’s compliance with financial and non-financial covenants, (iii) monitoring a borrower’s payment history and public credit rating, if available, and (iv) assessing our exposure based on the current investment mix. As part of the monitoring process, our Managing Trustee may physically inspect the collateral or a borrower’s facility and meet with a borrower’s management to better understand such borrower’s financial performance and its future plans on an as-needed basis. 

As our financing receivables, generally notes receivable and finance leases, are limited in number, our Managing Trustee is able to estimate the credit loss reserve based on a detailed analysis of each financing receivable as opposed to using portfolio-based metrics. Our Managing Trustee does not use a system of assigning internal risk ratings to each of our financing receivables. Rather, each financing receivable is analyzed quarterly and categorized as either performing or non-performing based on certain factors including, but not limited to, financial results, satisfying scheduled payments and compliance with financial covenants. A financing receivable is usually categorized as non-performing only when a borrower experiences financial difficulties and has failed to make scheduled payments. Our Managing Trustee then analyzes whether the financing receivable should be placed on a non-accrual status, a credit loss reserve should be established or the financing receivable should be restructured. As part of the assessment, updated collateral value is usually considered and such collateral

12

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

value can be based on a third party industry expert appraisal or, depending on the type of collateral and accessibility to relevant published guides or market sales data, internally derived fair value. Material events would be specifically disclosed in the discussion of each financing receivable held. 
 
Financing receivables are generally placed on a non-accrual status when payments are more than 90 days past due. Additionally, our Managing Trustee periodically reviews the creditworthiness of companies with payments outstanding less than 90 days and based upon our Managing Trustee’s judgment, these accounts may be placed on 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 on 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 Managing Trustee deems it is probable that we will not be able to collect all contractual principal and interest on a non-performing financing receivable, we perform an analysis to determine if a credit loss reserve is necessary. This analysis considers the estimated cash flows from the financing receivable, and/or the collateral value of the asset underlying the financing receivable when financing receivable repayment is collateral dependent. If it is determined that the impaired value of the non-performing financing receivable is less than the net carrying value, we will recognize a credit loss reserve or adjust the existing credit loss reserve with a corresponding charge to earnings.  We then charge off a financing receivable in the period that it is deemed uncollectible by reducing the credit loss reserve and the balance of the financing receivable.
 
Initial Direct Costs
We capitalized initial direct costs, including acquisition fees, associated with the origination and funding of leased assets and other financing transactions. We paid acquisition fees through the end of our operating period to our Managing Trustee of 3% of the purchase price of the investment made by or on our behalf, including, but not limited to, the cash paid, indebtedness incurred or assumed, and the excess of the collateral value of the long-lived asset over the amount of the investment, if any.  The costs of each transaction were amortized over the transaction term using the straight-line method for operating leases and the effective interest rate method for finance leases and notes receivable in our consolidated statements of operations. Costs related to leases or other financing transactions that were not consummated were expensed.

Investments - Equity Method and Cost Method

We account for our interests in entities in which we are able to exercise significant influence over operating and financial policies, generally 50% or less ownership interest, under the equity method of accounting. In such cases, our original investments are recorded at cost and adjusted for our share of earnings, losses and distributions. We account for our interests in entities where we have virtually no influence over operating and financial policies under the cost method of accounting. In such cases, our original investments are recorded at cost and any distributions received are recorded as revenue. All investments are subject to our impairment review policy.  

We have one investment that is accounted for under the cost method that does not have readily determinable fair values. We measure this investment at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. At each reporting period, our Managing Trustee reassesses the appropriateness of this methodology for this investment and performs a qualitative assessment by considering any impairment indicators. If the qualitative assessment indicates that the investment is impaired and its fair value is less than its net carrying value, we will write down the investment to such fair value.
 
Income Taxes
Prior to the transfer of all the assets and liabilities of the LLC to the Liquidating Trust, we were taxed as a partnership for federal and state income tax purposes. Therefore, no provision for federal and state income taxes was recorded since the liability for such taxes was the responsibility of each of the individual members rather than our business as a whole. Upon the transfer of all assets and liabilities of the LLC to the Liquidating Trust, we were subject to taxation as a liquidating trust. During 2018, the Trust Agreement was amended to clarify that we will be taxed as a partnership for federal and state

13

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

income tax purposes in 2018 and thereafter. We are potentially subject to New York City unincorporated business tax (“UBT”), which is imposed on unincorporated trade or business operating in New York City. The UBT is imposed for each taxable year at a rate of 4% of taxable income allocated to New York City. We use the asset and liability method of accounting for the UBT. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax assets will not be realized.

Our federal, state and local income tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the applicable taxing authorities. All penalties and interest, if any, associated with income taxes are included in general and administrative expense on our consolidated statements of operations.
 
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires our Managing Trustee 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates primarily include the determination of credit loss reserves, impairment losses, estimated useful lives and residual values.  Actual results could differ from those estimates.  

Recently Adopted Accounting Pronouncements 
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), requiring revenue to be recognized in an amount that reflects the consideration expected to be received in exchange for goods and services. We adopted ASU 2014-09 on January 1, 2018. Since substantially all of our revenue is recognized from our leasing and lending contracts, which are not subject to ASU 2014-09, the adoption of ASU 2014-09 did not have an effect on our consolidated financial statements.

In January 2016, FASB issued ASU No. 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which provides guidance related to accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. We adopted ASU 2016-01 on January 1, 2018. As a result of the adoption of ASU 2016-01, we are no longer required to make certain disclosures related to the methods and significant assumptions used to estimate fair value for financial instruments measured at amortized cost.

In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows. We adopted ASU 2016-15 on January 1, 2018, which did not have an effect on our consolidated financial statements. We utilize the cumulative earnings approach under ASU 2016-15 to present distributions received from equity-method investees, which is consistent with our previous policy.

In November 2016, FASB issued ASU No. 2016-18, Statement of Cash Flows (“ASU 2016-18”), which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. As a result of the adoption of ASU 2016-18 on January 1, 2018, we commenced presenting restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on our consolidated statements of cash flows. We adopted ASU 2016-18 using the retrospective method. As a result, the effects of adopting ASU 2016-18 on our consolidated statements of cash flows for the year ended December 31, 2017 were as follows:


14

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

 
Year Ended December 31, 2017
 
As Reported
 
Adoption of
ASU 2016-18
 
As Adjusted
Net cash provided by (used in) operating activities
$
16,829,810

 
$
(1,407,302
)
 
$
15,422,508

 
 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of year
10,255,053

 
3,471,147

 
13,726,200

Net increase (decrease) in cash, cash equivalents and restricted cash
2,719,414

 
(1,407,302
)
 
1,312,112

Cash, cash equivalents and restricted cash, end of year
$
12,974,467

 
$
2,063,845

 
$
15,038,312


In January 2017, FASB issued ASU No. 2017-01, Business Combinations (“ASU 2017-01”), which clarifies the definition of a business. ASU 2017-01 sets forth requirements to be met for a set to be deemed a business and establishes a practical way to determine when a set is not a business. To be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create an output, and removes the evaluation of whether a market participant could replace missing elements. In addition, ASU 2017-01 narrows the definition of outputs and aligns such definition with how outputs are described within the revenue guidance. We adopted ASU 2017-01 on January 1, 2018, which did not have an effect on our consolidated financial statements.

Other Recent Accounting Pronouncements 
In February 2016, FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize assets and liabilities for leases with lease terms greater than twelve months on the balance sheet and disclose key information about leasing arrangements. ASU 2016-02 implements changes to lessor accounting focused on conforming with certain changes made to lessee accounting and the recently released revenue recognition guidance. In July 2018, FASB issued ASU No. 2018-11, Leases (“ASU 2018-11”), which provides an additional transition method by allowing companies to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, ASU 2018-11 provides lessors a practical expedient to not separate non-lease components from the associated lease component under certain circumstances. In December 2018, FASB issued ASU No. 2018-20, Leases (“ASU 2018-20”), which provides guidance and clarification with respect to lessor accounting associated with (i) certain taxes collected from lessees, (ii) certain lessor costs, and (iii) the recognition of variable payments for contracts with lease and non-lease components. The adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 becomes effective for us on January 1, 2019. As we no longer have any lease arrangements and since we are in our liquidation period and not expecting to enter into any new leases in the future, the adoption of ASU 2016-02, ASU 2018-11 and ASU 2018-20 will not have an effect on our consolidated financial statements.

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-13”), which modifies the measurement of credit losses by eliminating the probable initial recognition threshold set forth in current guidance, and instead reflects an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity will apply the amendments within ASU 2016-13 through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The adoption of ASU 2016-13 becomes effective for us on January 1, 2020, including interim periods within that reporting period. Early adoption is permitted. The adoption of ASU 2016-13 is not expected to have a material effect on our consolidated financial statements.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements for fair value measurements. The adoption of ASU 2018-13 becomes effective for us on January 1, 2020, including interim periods within that reporting period. Early adoption is permitted. We are currently in the process of evaluating the impact of the adoption of ASU 2018-13 on our consolidated financial statements.

(3)      Net Investment in Note Receivable

As of December 31, 2018, we had no net investment in note receivable on non-accrual status and no net investment in note receivable that was past due 90 days or more and still accruing.  As of December 31, 2017, we had net investment in

15

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

note receivable on non-accrual status of $11,700,000 and no net investment in note receivable that was past due 90 days or more and still accruing. See below for further details regarding our note receivable related to TMA.
  
Net investment in note receivable consisted of the following:  
 
December 31,
 
2018
 
2017
 
(unaudited)
 
 
Principal outstanding (1)
$
14,623,333

 
$
21,002,939

Credit loss reserve (2)

 
(9,302,939
)
Net investment in note receivable (3)
14,623,333

 
11,700,000

Less: current portion of net investment in note receivable
3,750,000

 
8,791,579

Net investment in note receivable, less current portion
$
10,873,333

 
$
2,908,421

(1) As of December 31, 2018 and 2017, total principal outstanding related to our impaired loan was $14,623,333 and $21,002,939, respectively.
(2) As of December 31, 2017, we had a credit loss reserve of $15,690,944 related to TMA, of which $6,388,005 was reserved against the accrued interest receivable included in other current assets and $9,302,939 was reserved against the current portion of net investment in note receivable.
(3) As of December 31, 2018 and 2017, net investment in note receivable related to our impaired loan was $14,623,333 and $11,700,000, respectively.
 
On July 14, 2014, we, ICON Equipment and Corporate Infrastructure Fund Fourteen Liquidating Trust (formerly, ICON Equipment and Corporate Infrastructure Fund Fourteen, L.P.) (“Fund Fourteen”) and ICON ECI Fund Fifteen Liquidating Trust (formerly, ICON ECI Fund Fifteen, L.P.) (“Fund Fifteen”), each an entity also managed by our Managing Trustee (collectively, “ICON”), entered into a secured term loan credit facility agreement with TMA to provide a credit facility of up to $29,000,000 (the “ICON Loan”), of which our commitment of $21,750,000 was funded on August 27, 2014 (the “TMA Initial Closing Date”). The facility was used by TMA to acquire and refinance two platform supply vessels. At inception, the loan bore interest at the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus a margin of 17%.  Upon the acceptance of both vessels by TMA’s sub-charterer on September 19, 2014, the margin was reduced to 13%. On November 24, 2014, ICON entered into an amended and restated senior secured term loan credit facility agreement with TMA pursuant to which an unaffiliated third party (the “Senior Lender”) agreed to provide a senior secured term loan in the amount of up to $89,000,000 (the “Senior Loan,” and collectively with the ICON Loan, the “TMA Facility”) to acquire two additional vessels. The TMA Facility had a term of five years from the TMA Initial Closing Date. As a result of the amendment, the margin for the ICON Loan increased to 15% and repayment of the ICON Loan became subordinated to the repayment of the Senior Loan. The TMA Facility is secured by, among other things, a first priority security interest in the four vessels and TMA’s right to the collection of hire with respect to earnings from the sub-charterer related to the four vessels. As a condition to the amendment and increased size of the TMA Facility, TMA was required to cause all four platform supply vessels to be under contract by March 31, 2015. Due to TMA’s failure to meet such condition, TMA was in technical default and in payment default while available cash was swept by the Senior Lender and applied to the Senior Loan in accordance with the loan agreement. As a result, the principal balance of the Senior Loan amortized at a faster rate. In January 2016, the remaining two previously unchartered vessels had commenced employment. Our Managing Trustee continued to assess the collectability of the note receivable at each reporting date as TMA's credit quality slowly deteriorated and the fair market value of the collateral continued to decrease. During the three months ended June 30, 2017, our Managing Trustee believed it was prudent to place the note receivable on non-accrual status. In September 2017, our Managing Trustee met with certain restructuring advisors engaged by TMA to discuss a potential restructuring of the company. In light of these developments and a decrease in the fair market value of the collateral, in which we had a second priority security interest, our Managing Trustee determined to record a credit loss of $10,500,000 during the three months ended September 30, 2017.

On December 26, 2017, ICON, the Senior Lender and TMA entered into a restructuring support and lock-up agreement to commit to a restructuring of TMA’s outstanding debt obligations and to provide additional funding to TMA, subject to execution of definitive agreements. As a result of this restructuring (as further described below), our Managing Trustee assessed the collectability of the note receivable as of December 31, 2017 and recorded an additional credit loss of $5,190,944 for the three months ended December 31, 2017. 

On January 5, 2018, ICON, the Senior Lender and TMA executed all definitive agreements including, without limitation, the second amended and restated term loan credit facility agreement in connection with the restructuring of the TMA Facility

16

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

(the “Second Amendment”). Under the Second Amendment, ICON funded a total of $8,000,000 in exchange for (i) all amounts payable under the Senior Loan would amortize at a faster rate, at which time ICON would become the senior lender and have a first priority security interest in the four vessels and TMA’s right to the earnings generated by the vessels; and (ii) a 12.5% equity interest in two affiliates of TMA. Also as part of the Second Amendment, ICON agreed to reduce its aggregate notes and interest receivables to $20,000,000 in connection with the overall restructuring plan. As a result of the Second Amendment, on January 5, 2018, we funded our additional commitment of $6,000,000, which represented our share of the total additional commitment to TMA, and our note and interest receivables due from TMA were reduced to $15,000,000. As of January 5, 2018, of our $6,000,000 additional commitment to TMA, (a) $2,700,000 represented our 75% share of the fair value of the 12.5% equity interest in two affiliates of TMA (see Note 8), which was based on an independent third-party valuation and (b) the remaining $3,300,000 represented an additional loan to TMA. As a result of this restructuring, during the three months ended March 31, 2018, we wrote off the allowance for credit loss of $15,690,944 related to TMA, of which $6,388,005 was previously reserved against the accrued interest receivable and $9,302,939 was previously reserved against the current portion of our net investment in note receivable. In addition, we also wrote off the corresponding $6,388,005 accrued interest receivable. In accordance with the Second Amendment, our restructured loan of $15,000,000 bears interest at a rate of 12% per year and is scheduled to mature on January 5, 2021. The amended TMA Facility is secured by substantially the same collateral that secured the TMA Facility prior to the restructuring.
On June 12, 2018, all of TMA’s obligations to the Senior Lender and all amounts payable under the Senior Loan were satisfied in full. As a result, ICON became the agent and senior lender and has a first priority security interest in the four vessels and TMA’s right to the earnings generated by the vessels. Interest was accrued as PIK interest until the Senior Loan was satisfied in full. Upon satisfaction of the Senior Loan, (i) $790,000 of PIK interest was reclassified to principal; and (ii) the ICON Loan is being amortized at 25% per year and together with interest, is payable quarterly in arrears. On July 5, 2018, we extended the due date of certain payments from TMA for an additional 15 days for a fee of $22,500. Such payments were thereafter timely received from TMA. On October 4, 2018, we extended the due date of the quarterly interest and principal payments from TMA for an additional 20 days for a fee of $30,000. The fee was timely received, but the quarterly interest and principal payments were not received from TMA until November 9, 2018.
As of December 31, 2018 and 2017, our net investment in note receivable related to TMA was $14,623,333 and $11,700,000, respectively. In addition, as of December 31, 2017, we had an accrued interest receivable related to TMA of $6,388,005, which had been fully reserved, resulting in a net carrying value of $0. For the years ended December 31, 2018 and 2017, we recognized finance income of $1,907,625 and $667,672, respectively, of which no amount was recognized on a cash basis.

Credit loss allowance activities for the years ended December 31, 2018 and 2017 were as follows:

Credit Loss Allowance
Allowance for credit loss as of December 31, 2016
$

Provisions
15,690,944

Write-offs, net of recoveries


Allowance for credit loss as of December 31, 2017
$
15,690,944

Provisions (unaudited)

Write-offs, net of recoveries (unaudited)
(15,690,944
)
Allowance for credit loss as of December 31, 2018 (unaudited)
$

 



(4)      Net Investment in Finance Leases
As of December 31, 2018 and 2017, we had no net investment in finance leases on non-accrual status and no net investment in finance leases that was past due 90 days or more and still accruing.
 

17

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

Net investment in finance leases consisted of the following:

 
December 31,
 
2018
 
2017
 
(unaudited)
 
 
Minimum rents receivable
$

 
$
45,640,500

Initial direct costs

 
636,338

Unearned income

 
(13,366,520
)
Net investment in finance leases

 
32,910,318

Less: current portion of net investment in finance leases

 
2,677,965

Net investment in finance leases, less current portion
$

 
$
30,232,353


Marine Vessels 
 
On March 21, 2014, a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen, through two indirect subsidiaries, entered into memoranda of agreement to purchase two LPG tanker vessels, the EPIC Bali and the EPIC Borneo (f/k/a the SIVA Coral and the SIVA Pearl, respectively) (collectively, the “EPIC Vessels”), from Foreguard Shipping I Global Ships Ltd. (f/k/a Siva Global Ships Limited) (“Foreguard Shipping”) for an aggregate purchase price of $41,600,000. The EPIC Bali and the EPIC Borneo were delivered on March 28, 2014 and April 8, 2014, respectively. The EPIC Vessels were bareboat chartered to an affiliate of Foreguard Shipping for a period of eight years upon the delivery of each respective vessel. The EPIC Vessels were each acquired for approximately $3,550,000 in cash, $12,400,000 of financing through a senior secured loan from DVB Group Merchant Bank (Asia) Ltd. (“DVB Asia”) and $4,750,000 of financing through a subordinated, non-interest-bearing seller’s credit. On December 26, 2017, the indirect subsidiaries amended the bareboat charters with Foreguard Shipping to, among other things, waive the continuing event of default and increase the monthly charter hire payable by Foreguard Shipping for each vessel. In addition, Foreguard Shipping paid an aggregate amendment fee of $1,087,512. On December 26, 2017, the indirect subsidiaries also amended the loan agreement with DVB Asia to, among other things, waive the continuing event of default and provide for an aggregate partial prepayment on the senior secured loan of $1,240,000. On February 14, 2018, Foreguard Shipping purchased the EPIC Vessels from the indirect subsidiaries for an aggregate purchase price of $32,412,488. As a result, the bareboat charters were terminated. A portion of the proceeds from the sale of the EPIC Vessels was used to satisfy in full the seller's credit to Foreguard Shipping and the related outstanding non-recourse long-term debt obligations to DVB Asia. As a result, we recorded a loss of $3,018,839, which is included in finance (loss) income on our consolidated statements of operations. The loss was primarily due to (i) the seller’s credit, which was satisfied in full at its maturity amount of $9,500,000 rather than its then-present value of $7,355,183 recorded on our books prior to the sale, and (ii) the write-off of the remaining unamortized indirect costs.

Mining Equipment

On March 4, 2014, a joint venture owned 60% by us, 15% by Fund Fourteen, 15% by Fund Fifteen and 10% by ICON ECI Fund Sixteen Liquidating Trust (formerly, ICON ECI Fund Sixteen) (“Fund Sixteen”), an entity also managed by our Managing Trustee, 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 $25,359,446 was funded by $17,859,446 in cash and $7,500,000 of non-recourse long-term debt. On July 21, 2017, Blackhawk satisfied its remaining lease obligations by making a prepayment of $7,753,666. As a result, we recognized finance income of $353,373.


18

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

(5)      Leased Equipment at Cost
Leased equipment at cost consisted of the following:
 
December 31,
 
2018
 
2017
 
(unaudited)
 
 
Offshore oil field services equipment
$

 
$
21,055,357

Leased equipment at cost

 
21,055,357

Less: accumulated depreciation

 
8,055,357

Leased equipment at cost, less accumulated depreciation
$

 
$
13,000,000


Depreciation expense was $310,164 and $2,926,149 for the years ended December 31, 2018 and 2017, respectively.

Offshore Supply Vessel
On June 12, 2014, ICON Radiance Pte. Ltd. (“ICON Radiance”), which is wholly-owned by a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen, purchased an offshore supply vessel from Pacific Crest Pte. Ltd. (“Pacific Crest”) for $40,000,000. Simultaneously, the vessel was bareboat chartered to Pacific Crest for ten years. The vessel was acquired for approximately $12,000,000 in cash, $26,000,000 of financing through a senior secured loan from DVB Asia and $2,000,000 of financing through a subordinated, non-interest-bearing seller’s credit. Since July 2017, Pacific Crest failed to make its monthly charter payments and our Managing Trustee was advised in July 2017 that Pacific Crest was engaged in discussions with its lenders regarding a potential restructuring of its outstanding debt obligations. As a result, we performed an impairment test on the vessel. Based on such test, we recorded an impairment loss of $14,661,525 during the three months ended June 30, 2017. In addition, our Managing Trustee determined to reduce the estimated residual value from $15,300,000 to $13,000,000. As a result of the impairment loss and the change in residual value, our monthly depreciation decreased by $148,279, effective July 1, 2017. In addition, commencing July 1, 2017, we ceased recognizing rental income on the lease.

As part of our annual assessment of asset impairment, our Managing Trustee obtained third-party valuations related to the offshore supply vessel. Based on such valuations, our Managing Trustee concluded that an impairment existed and as a result, we recorded an additional impairment loss of $4,633,705 during the three months ended December 31, 2017. The fair market value of the vessel was based on third-party valuations using a combination of the market approach and the income approach. As a result of the impairment loss and the change in residual value, our monthly depreciation decreased by an additional $18,531, effective January 1, 2018.

On April 20, 2018, we and DVB Asia entered into an agreement (the “DVB Asia Agreement”) under which the parties agreed (i) to cooperate to market and sell the offshore supply vessel, (ii) on the application of any future payments that may be received by us from Pacific Crest and/or Pacific Radiance Ltd. (“Pacific Radiance”), the guarantor of Pacific Crest’s obligations under the bareboat charter related to the vessel, in settlement of all obligations and liabilities of Pacific Crest and Pacific Radiance under the bareboat charter and the guaranty, respectively, and (iii) on the application of the sale proceeds from any future sale of the vessel. On December 18, 2018, we and DVB Asia entered into an addendum to the DVB Asia Agreement (the “DVB Asia Addendum”) under which we agreed to continue providing certain administrative and operational services related to the vessel until the earlier of the sale of the vessel and March 14, 2019. DVB Asia agreed to reimburse us (a) for such administrative services in an amount not to exceed $16,500, and (b) for all operational and technical management costs related to the vessel.
On May 14, 2018, we entered into a settlement agreement with Pacific Crest, Pacific Radiance and DVB Asia under which, among other things, (i) the parties agreed to terminate the bareboat charter and we released Pacific Crest and Pacific Radiance from all obligations and liabilities under the bareboat charter and the guaranty, respectively, in each case upon our receipt of a $1,000,000 payment from Pacific Crest, a portion of which was used to make a partial repayment on the outstanding debt to DVB Asia; (ii) the parties agreed to cooperate to market and sell the offshore supply vessel; and (iii) Pacific Crest released us from our obligation to repay the seller's credit and Pacific Crest continued to maintain the vessel in its then current condition until December 15, 2018. Effective December 16, 2018, we engaged the existing ship

19

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

management company for the vessel, with costs to be reimbursed by DVB Asia under the DVB Asia Addendum. On May 18, 2018, we received the $1,000,000 payment from Pacific Crest, of which (a) we were allocated $566,667, and (b) the remaining $433,333, net of any reimbursement from DVB Asia pursuant to the DVB Asia Agreement and the DVB Asia Addendum, was applied toward the repayment of the outstanding non-recourse debt to DVB Asia. As a result, we recognized $1,000,000 of rental income as part of this arrangement.
On May 16, 2018, Pacific Radiance and its subsidiaries (including Pacific Crest) made applications to the Singapore High Court seeking interim protection against legal proceedings and other claims as they seek to restructure their outstanding debt obligations with stakeholders. On June 11, 2018, the Court granted such protection to Pacific Radiance and its subsidiaries (including Pacific Crest) until December 2018, which was further extended to April 18, 2019.
On June 4, 2018, we entered into an exclusivity agreement with a potential purchaser of the offshore supply vessel under which we agreed to exclusively negotiate with such potential purchaser for the sale of the vessel to permit the potential purchaser to bid on a bareboat charter that if accepted, would have employed the offshore supply vessel. In exchange for exclusivity, the potential purchaser paid a $25,000 nonrefundable fee. The exclusivity agreement expired and we were informed by the potential purchaser that it would not proceed with the purchase of the vessel.

As a result of the termination of the bareboat charter, we reclassified the offshore supply vessel from leased equipment at cost to vessel on our consolidated balance sheet as of June 30, 2018 at the then net carrying value of $5,400,000. During the remainder of 2018, we continued to work with DVB Asia, Pacific Crest and Pacific Radiance to identify sale opportunities and on December 11, 2018, we signed a memorandum of agreement to sell the vessel to a third-party purchaser, subject to satisfaction of closing conditions (see Note 6). Based on offers received from potential purchasers through prior negotiations, and the agreed upon purchase price pursuant to the memorandum of agreement, our Managing Trustee performed impairment tests and concluded that we should record an aggregate impairment loss of $10,611,836 during 2018.
 
As of December 31, 2018, the vessel met the criteria to be classified as asset held for sale on our consolidated balance sheet (see Note 6).

Mining Equipment
 
On September 18, 2014, a joint venture owned 55.817% by us and 44.183% by Hardwood Partners, LLC purchased mining equipment for $6,789,928. The equipment was subject to a 36-month lease with Murray Energy Corporation and certain of its affiliates (collectively, "Murray"), which was scheduled to expire on September 30, 2017. On October 3, 2017, Murray purchased the equipment pursuant to the terms of the lease for $1,949,583. As a result, we recognized a gain on sale of assets of $201,680. Pursuant to a remarketing agreement with a third party, we paid a remarketing fee of $100,841 as part of the transaction.

(6)       Assets Held for Sale      
Accommodation and Work Barge

On March 24, 2009, we and Swiber Engineering Ltd. (“Swiber”) entered into a joint venture owned 51% by us and 49% by Swiber for the purpose of purchasing a 300-man accommodation and work barge, the Swiber Chateau (f/k/a the Swiber Victorious). Simultaneously with the purchase, the barge was chartered to Swiber Offshore Marine Pte. Ltd., an affiliate of Swiber (“Swiber Offshore”), for 96 months, which expired on March 23, 2017. The Swiber Chateau was purchased for $42,500,000, which was funded by (i) a $19,125,000 equity investment from us, (ii) a $18,375,000 contribution-in-kind by Swiber and (iii) a $5,000,000 subordinated, non-recourse and unsecured payable from Swiber. The payable bore interest at 3.5% per year and was recorded within seller's credits on our consolidated balance sheet as of December 31, 2016. Due to various defaults by Swiber Offshore under the charter, the joint venture was not required to pay to Swiber principal and interest outstanding under the payable as further described below.  Swiber Holdings Ltd. (“Swiber Holdings”), the parent company of Swiber and Swiber Offshore (together with Swiber and Swiber Offshore, the “Swiber Group”), guaranteed the payment and performance obligations of Swiber Offshore and its affiliates under all transaction documents. 

Swiber Offshore failed to make its monthly charter payments to the joint venture from July 2016 through the expiration of the charter in March 2017. Pursuant to the joint venture’s operating agreement, in the event that, among other things, (i)

20

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

there was a default by Swiber Offshore under the charter, or (ii) the fair market value of the barge was less than $21,000,000, all of Swiber’s interests in the distributions, net cash flow, net profits and net proceeds resulting from the joint venture would be subordinated to our rights in such distributions, net cash flow, net profits and net proceeds until such time that we received in distribution the return of the full amount of our contribution to the joint venture and a return at a monthly compounded rate equal to 15.51% per year (the “Preferred Equity Interest”).  As the then current fair market value of the barge was less than $21,000,000, our Managing Trustee concluded that, commencing June 27, 2016, Swiber’s rights to the distributions, net cash flow, net profits and net proceeds were subordinated and Swiber should incur first loss resulting from the joint venture.

On July 27, 2016, Swiber Holdings filed a petition in Singapore to wind up and liquidate the company. On July 29, 2016, Swiber Holdings withdrew its petition for winding up and liquidation and submitted an application for court-supervised judicial management. On November 28, 2016, Swiber Offshore filed an application for voluntary winding up and liquidation in Singapore. Our Managing Trustee engaged in discussions with the court-appointed judicial manager of Swiber Holdings to, among other things, communicate our intention to sell the barge. During the three months ended December 31, 2016, our Managing Trustee commenced the process of marketing the barge for sale and the barge met the criteria to be classified as asset held for sale on our consolidated balance sheet as of December 31, 2016. As a result of (i) Swiber Offshore’s and Swiber Holdings’ default on their respective obligations under the charter and the guaranty, respectively, (ii) Swiber Offshore and Swiber Holdings being subject to voluntary winding up and judicial management proceedings, respectively, (iii) a decrease in the fair market value of the Swiber Chateau and (iv) the barge being classified as asset held for sale as of December 31, 2016, we recorded an aggregate impairment loss of $15,493,643 during the year ended December 31, 2016, of which $8,706,972 was allocated to Swiber to reduce the balance of the noncontrolling interest in the joint venture to zero after taking into account the Preferred Equity Interest.

During 2017, we repossessed the Swiber Chateau. As a result of advanced negotiations for the sale of the Swiber Chateau to a potential third-party purchaser, we further wrote down the barge by $900,000 during the three months ended March 31, 2017 to its estimated fair value less cost to sell based on the negotiated purchase price. Subsequently, this proposed sale transaction fell through. During the three months ended June 30, 2017, we resumed marketing the Swiber Chateau for sale and were in negotiations with another potential purchaser. Based on such negotiations, our Managing Trustee determined to record an additional impairment loss of $1,700,000 during the three months ended June 30, 2017. Subsequently, this proposed sale transaction also fell through. During the three months ended September 30, 2017, our Managing Trustee resumed marketing the Swiber Chateau for sale and entered into a memorandum of agreement to sell the barge. As a result, we recorded an additional impairment loss of $2,024,000 during the three months ended September 30, 2017 based on the estimated fair value less cost to sell. On December 29, 2017, we sold the Swiber Chateau to a third-party purchaser for $3,175,000. As a result, we recognized a gain on sale of $59,730.

Pursuant to the purchase and charter agreement, upon expiration of the charter on March 23, 2017, the joint venture’s obligation to pay to Swiber principal and interest outstanding under the payable of $5,131,250 was extinguished as a result of the continuing defaults under the transaction documents by the Swiber Group. The gain on extinguishment of the seller's credit and the related interest payable of $5,131,250 was allocated entirely to us during the year ended December 31, 2017 due to our Preferred Equity Interest. 

For the year ended December 31, 2017, pre-tax loss associated with the Swiber Chateau was $522,716, of which pre-tax loss attributable to us was $522,716.

Offshore Supply Vessel

On December 11, 2018, we signed a memorandum of agreement to sell the offshore supply vessel previously leased to Pacific Crest to a third-party purchaser (see Note 5). The vessel met the criteria to be classified as asset held for sale resulting in (i) a reclassification from vessel to asset held for sale on our consolidated balance sheet as of December 31, 2018 and (ii) no further deprecation would be recorded on the vessel. As of December 31, 2018, the net carrying value of the vessel was $2,078,000, and the principal balance of our non-recourse debt and related interest payable associated with the vessel was $18,315,800 and $1,047,260, respectively.


21

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

Upon the satisfaction of all closing conditions, on March 11, 2019, we sold the vessel to the third-party purchaser for $2,300,000 in accordance with the memorandum of agreement. No significant gain or loss was recognized as a result of the sale. However, we recognized a gain on extinguishment of debt of approximately $16,500,000 in March 2019 by using the net sale proceeds to settle our non-recourse debt obligations with DVB Asia related to the vessel.

For the years ended December 31, 2018 and 2017, pre-tax loss of ICON Radiance was $9,534,077 and $19,611,454, respectively, of which pre-tax loss attributable to us was $7,150,558 and $14,710,465, respectively.

(7)      Investment in Joint Ventures  
On December 22, 2011, a joint venture owned 25% by us and 75% by Fund Fourteen made a $20,124,000 subordinated term loan to Jurong Aromatics Corporation Pte. Ltd. (“JAC”) as part of a $171,050,000 term loan facility. Our initial contribution to this joint venture was $6,313,875. On May 15, 2013, a joint venture owned 21% by us, 39% by ICON Leasing Fund Eleven Liquidating Trust (formerly, ICON Leasing Fund Eleven, LLC) (“Fund Eleven”), an entity also managed by our Managing Trustee, and 40% by Fund Fifteen purchased a portion of a $208,038,290 subordinated credit facility for JAC from Standard Chartered Bank for $28,462,500. Our initial contribution to this joint venture was $6,456,034. The loan and the facility initially bore interest at rates ranging between 12.5% and 15% per year and were scheduled to mature in January 2021. As a result of JAC’s failure to make an expected payment that was due to the joint ventures during the three months ended March 31, 2015, the interest rate payable by JAC under the loan and the facility increased from 12.5% to 15.5%. The loan and the facility were secured by a second priority security interest in all of JAC’s assets, which included, among other things, all equipment, plant and machinery associated with a condensate splitter and aromatics complex.
 
During 2015, JAC experienced liquidity constraints as a result of a general economic slow-down in China and India, which led to lower demand from such countries, as well as the price decline of energy and other commodities. As a result, JAC’s manufacturing facility ceased operations and JAC was not able to service interest payments under the loan and the facility. After failed efforts (i) by JAC to timely commence a tolling arrangement with its suppliers and (ii) by JAC’s stakeholders to agree on a restructuring plan, JAC entered receivership on September 28, 2015. Commencing with the three months ended June 30, 2015 and on a quarterly basis thereafter, our Managing Trustee reassessed the collectability of the loan and facility and the joint ventures recorded an aggregate credit loss of $70,396,746 related to JAC during 2015 and 2016 based on our Managing Trustee’s quarterly collectability analyses, of which our share was $16,330,716. During the fourth quarter of 2016, the Receiver formally commenced the process of marketing JAC’s manufacturing facility for sale. As of December 31, 2016, the outstanding balance of the loan and facility due from JAC was fully reserved, resulting in a net investment in notes receivable held by the joint ventures of $0 and our total investment in the joint ventures of $0.
 
On September 12, 2017, our Managing Trustee received a formal notice from the Receiver notifying us that on August 28, 2017, the Receiver concluded a sale of substantially all of the assets of JAC (including the manufacturing facility) to a third party and confirmed that no sales proceeds would be distributed to the subordinated lenders, including the joint ventures. As a result, the joint ventures wrote off an aggregate credit loss reserve and corresponding balances related to the loan and the facility of $70,396,746 during 2017. The joint ventures did not recognize any finance income related to JAC for the year ended December 31, 2017.      

(8)    Investment in Cost-Method Investees
    
As part of the restructuring of our note receivable with TMA, two joint ventures owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen acquired a 12.5% equity interest in two affiliates of TMA. In proportion to our share of the ICON Loan, our share of such equity interest in these two entities is 9.375%. Due to our ownership interest and that we were able to exercise significant influence over the operating and financial policies of these two affiliates of TMA, the joint ventures accounted for the investment in such equity interest under the equity method of accounting.
On June 29, 2018, ICON’s appointee to the board of directors of the two affiliates of TMA resigned as a board member and as a result, no longer participated in voting on any matter associated with the business operations of these two entities. As a result, we are no longer deemed to be able to exercise significant influence over the operating and financial policies of these two entities. The joint ventures recorded their share of losses of $298,811 from these two equity-method investees

22

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

through June 29, 2018 and reclassified the amount related to these two affiliates of TMA from investment in equity-method investees to investment in cost-method investees as of June 30, 2018.

(9)      Non-Recourse Long-Term Debt
As of December 31, 2018 and 2017, we had the following non-recourse long-term debt:
 
 
 
December 31,
 
 
 
 
Counterparty
 
2018
 
2017
 
Maturity
 
Rate
 
 
(unaudited)
 
 
 
 
 
 
DVB Group Merchant Bank (Asia) Ltd.
 
$
18,315,800

 
$
33,810,800

 
2021-2022
 
5.04%-6.1225%
Total principal outstanding on non-recourse long-term debt
 
18,315,800

 
33,810,800

 
 
 
 
Less: debt issuance costs
 
81,306

 
328,436

 
 
 
 
Total non-recourse long-term debt
 
18,234,494

 
33,482,364

 
 
 
 
Less: current portion of non-recourse long-term debt
 
18,234,494

 
22,335,800

 
 
 
 
Total non-recourse long-term debt, less current portion
 
$

 
$
11,146,564

 
 
 
 

All of our non-recourse long-term debt obligations consisted of notes payable in which the lender had a security interest in the underlying assets. If the lessee defaulted on the underlying lease, resulting in our default on the non-recourse long-term debt, the assets could have been foreclosed upon and the proceeds would have been remitted to the lender in extinguishment of that debt. As of December 31, 2018 and 2017, the total carrying value of assets subject to non-recourse long-term debt was $2,078,000 and $45,910,318, respectively. 

On March 4, 2014, a joint venture owned 60% by us, 15% by Fund Fourteen, 15% by Fund Fifteen and 10% by Fund Sixteen financed the acquisition of certain mining equipment that was on lease to Blackhawk and its affiliates by entering into a non-recourse loan agreement with People’s Capital and Leasing Corp. (“People’s Capital”) in the amount of $7,500,000.  People’s Capital received a first priority security interest in such mining equipment. The loan bore interest at a rate of 6.5% per year and was scheduled to mature on February 1, 2018. On July 21, 2017, a portion of the proceeds from the prepayment made by Blackhawk was used to satisfy our remaining non-recourse long-term debt obligations to People’s Capital of $1,204,661.

On March 21, 2014, a joint venture owned 75% by us, 12.5% by Fund Fourteen and 12.5% by Fund Fifteen financed the acquisition of the EPIC Vessels by entering into a non-recourse loan agreement with DVB Asia in the amount of $24,800,000. The loan bore interest at a rate of 6.1225% per year and was scheduled to mature on March 25, 2022. On December 26, 2017, we amended the loan agreement with DVB Asia to, among other things, waive the continuing event of default as a result of a change in control of the related bareboat charter guarantor and provide for an aggregate partial prepayment of $1,240,000. On February 14, 2018, a portion of the proceeds from the sale of the EPIC Vessels was used to satisfy in full the related outstanding non-recourse long-term debt obligations to DVB Asia of $14,553,215.
  
On June 9, 2014, ICON Radiance financed the acquisition of an offshore supply vessel from Pacific Crest by entering into a non-recourse loan agreement with DVB Asia in the amount of $26,000,000. The senior secured loan bore interest at a rate of 5.04% per year and was scheduled to mature on June 24, 2021. On December 21, 2017, we were notified of an event of default as a result of payment defaults and non-compliance with certain financial covenants. The lender had reserved, but did not exercise, its rights under the loan agreement. As a result of such default, we classified the entire outstanding net balance of the debt of $18,234,494 under current liabilities as of December 31, 2018. On March 11, 2019, we sold the vessel to a third-party purchaser and the net sale proceeds was used to settle our non-recourse debt obligations associated with the vessel. As a result, we recognized a gain on extinguishment of debt of approximately $16,500,000 in March 2019.

At December 31, 2018, our non-recourse debt was related to the loan from DVB Asia, in which we were not in compliance, as disclosed above.


23

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

As of December 31, 2018 and 2017, we had capitalized net debt financing costs of $81,306 and $328,436, respectively. For the years ended December 31, 2018 and 2017, we recognized interest expense of $247,130 and $129,223, respectively, related to the amortization of debt financing costs.

The aggregate maturities of non-recourse long-term debt over the next five years and thereafter were as follows at December 31, 2018:

Years Ending December 31,
 
 

2019
 
$
18,315,800

2020
 

2021
 

2022
 

2023
 

Thereafter
 

 
 
$
18,315,800

 

(10)      Transactions with Related Parties
We paid our Managing Trustee (i) management fees ranging from 1% to 7% based on a percentage of the rentals and other contractual payments recognized either directly by us or through our joint ventures and (ii) acquisition fees, through the end of our operating period, of 3% of the purchase price (including indebtedness incurred or assumed therewith) of, or the value of the long-lived assets secured by or subject to, each of our investments. Our Managing Trustee was not paid acquisition fees or management fees for additional investments initiated during the liquidation period, although management fees continued to be paid for investments that were part of our portfolio prior to the commencement of the liquidation period through November 30, 2017. Effective December 1, 2017, our Managing Trustee waived all future management fees. Our Managing Trustee has a 1% interest in our profits, losses, distributions and liquidation proceeds.
 
Our Managing Trustee performs, or performed in its capacity as Manager of the LLC, certain services relating to the management of our equipment leasing and other financing activities. Such services include, but are not limited to, the collection of lease payments from the lessees of the equipment or loan payments from borrowers, re-leasing services in connection with equipment that is off-lease, inspections of the equipment, liaising with and general supervision of lessees and borrowers to ensure that the equipment is being properly operated and maintained, monitoring performance by the lessees of their obligations under the leases and the payment of operating expenses.
 
In addition, our Managing Trustee is reimbursed for administrative expenses incurred in connection with our operations. Administrative expense reimbursements are costs incurred by our Managing Trustee or its affiliates on our behalf that are necessary to our operations. These costs include our Managing Trustee’s and its affiliates’ legal, accounting, investor relations and operations personnel costs, as well as professional fees and other costs that are charged to us based upon the percentage of time such personnel dedicate 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 Managing Trustee.
 
We paid distributions to our Managing Trustee of $64,444 and $60,608 for the years ended December 31, 2018 and 2017, respectively. Our Managing Trustee’s interest in our net loss for the years ended December 31, 2018 and 2017 was $94,644 and $303,645, respectively.
  

24

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

Fees and other expenses incurred by us to our Managing Trustee or its affiliates were as follows:
 
 
Years Ended December 31,
Entity
 
Capacity
 
Description
 
2018
 
2017
 
 
 
 
 
 
(unaudited)
 
 
ICON Capital, LLC
 
Managing Trustee
 
Management fees (1)
 
$

 
$
210,233

ICON Capital, LLC
 
Managing Trustee
 
Administrative expense reimbursements (1)
 
796,752

 
943,163

 
 
$
796,752

 
$
1,153,396

(1) Amount charged directly to operations.

At December 31, 2018 and 2017, we had a net payable due to our Managing Trustee and affiliates of $246,305 and $107,406, respectively, related to administrative expense reimbursements.

(11)    Fair Value Measurements
Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
 
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable and are supported by little or no market data.
  
Assets Measured at Fair Value on a Nonrecurring Basis
We are required, on a nonrecurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements. Our non-financial assets, such as leased equipment at cost or vessel, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. Assets classified as held for sale are required to be recorded at the lower of carrying value or fair value less any costs to sell such assets. To determine the fair value when impairment indicators exist, we utilize different valuation approaches based on transaction-specific facts and circumstances to determine fair value, including, but not limited to, discounted cash flow models and the use of comparable transactions. The valuation of our financial assets, such as notes receivable, is included below only when fair value has been measured and recorded based on the fair value of the underlying collateral.
 
The following tables summarize the valuation of our material non-financial assets measured at fair value on a nonrecurring basis, which is presented as of the date the impairment loss was recorded, while the carrying value of the assets is presented as of December 31, 2018 or 2017, as applicable:
 
 
Carrying Value at
 
Fair Value at Impairment Date
 
Impairment Loss
for the Year Ended
December 31, 2018
 
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Asset held for sale (unaudited)
 
$
2,078,000

 
$

 
$

 
$
2,300,000

(1)
$
10,611,836

 
 
 
 
 
 
 
 
 
 
 
(1) There were non-recurring fair value measurements in relation to the impairment loss recorded as of June 30, 2018, September 30, 2018 and December 31, 2018 related to the offshore supply vessel. As of June 30, 2018, September 30, 2018 and December 31, 2018, the fair value was $5,400,000, $2,900,000 and $2,300,000, respectively.

 
 
Carrying Value at
 
Fair Value at Impairment Date
 
Impairment Loss
for the Year Ended
December 31, 2017
 
 
December 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Leased equipment at cost
 
$
13,000,000

 
$

 
$

 
$
13,000,000

(1)
$
19,295,230

 
 
 
 
 
 
 
 
 
 
 
(1) There were non-recurring fair value measurements in relation to the impairment loss recorded as of June 30, 2017 and December 31, 2017 related to the offshore supply vessel on charter to Pacific Crest at the time. As of June 30, 2017 and December 31, 2017, the fair value was $18,000,000 and $13,000,000, respectively.


25

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

Since July 2017, Pacific Crest failed to make its monthly charter payments and our Managing Trustee was advised in July 2017 that Pacific Crest was engaged in discussions with its lenders regarding a potential restructuring of its outstanding debt obligations. As a result, we performed an impairment test on the vessel. Based on such test, we recorded an impairment loss of $14,661,525 during the three months ended June 30, 2017. As of June 30, 2017, the estimated fair market value of the offshore supply vessel was based on a third-party valuation using a market approach. The estimated fair market value was based on inputs that are generally unobservable and are supported by little or no market data and were classified within Level 3. As part of our annual assessment of asset impairment, our Managing Trustee obtained third-party valuations related to the offshore supply vessel. Based on such valuations, our Managing Trustee concluded that an impairment existed and as a result, recorded an additional impairment loss of $4,633,705 during the three months ended December 31, 2017. The fair market value of the vessel was based on third-party valuations using a combination of the market approach and the income approach. During the three months ended June 30, 2018, we entered into an exclusivity agreement with a potential purchaser of the offshore supply vessel under which we agreed to exclusively negotiate with such potential purchaser for the sale of the vessel to permit the potential purchaser to bid on a bareboat charter that if accepted, would have employed the offshore supply vessel. The exclusivity agreement expired without proceeding with a sale of the vessel. During the three months ended June 30, 2018, we continued to work with DVB Asia, Pacific Crest and Pacific Radiance to market the vessel for sale and were in negotiations with another potential purchaser. Based on the purchase offers received, our Managing Trustee concluded that there was an indication that the then net carrying value of the vessel may not be recoverable. As a result, our Managing Trustee performed an impairment test on the vessel and concluded that we should record an additional impairment loss of $7,345,225 during the three months ended June 30, 2018. We continued to work with DVB Asia, Pacific Crest and Pacific Radiance to identify sale opportunities and based on negotiations with potential purchasers and the most recent purchase offer received at the time, our Managing Trustee concluded that there was an indication that the net carrying value of the vessel may not be recoverable. As a result, our Managing Trustee performed an impairment test and concluded that we should record an additional impairment loss of $2,458,845 for the three months ended September 30, 2018. On December 11, 2018, we signed a memorandum of agreement to sell the vessel to a third-party purchaser. Our Managing Trustee determined that the vessel met the criteria to be classified as asset held for sale resulting in a reclassification from vessel to asset held for sale on our consolidated balance sheet as of December 31, 2018. As a result, we recorded an additional impairment loss of $807,766 during the three months ended December 31, 2018 to write down the offshore supply vessel to its estimated fair value less cost to sell in accordance with U.S. GAAP. The carrying value of such asset held for sale of $2,078,000 represented the estimated fair market value of the offshore supply vessel of $2,300,000 less cost to sell. As of June 30, 2018, September 30, 2018 and December 31, 2018, the estimated fair market value of the offshore supply vessel was derived from the income approach, the market approach and/or the agreed upon sale price using the most recent relevant information that was available at the time of assessment. The estimated fair market value was based on inputs that are generally unobservable and are supported by little or no market data and were classified within Level 3.

 
 
Carrying Value at
December 31, 2017
 
Fair Value at Impairment Date
 
 
 
Impairment Loss
for the Year Ended
December 31, 2017
 
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
Asset held for sale
 
$

 
$

 
$

 
$
3,100,000

 
(1)
 
$
4,624,000

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) There were nonrecurring fair value measurements in relation to the impairment loss recorded as of March 31, 2017, June 30, 2017 and September 30, 2017 related to the Swiber Chateau. As of March 31, 2017, June 30, 2017 and September 30, 2017, the fair value was $7,000,000, $5,350,000 and $3,100,000, respectively.

During the three months ended March 31, 2017, as a result of advanced negotiations for the sale of the Swiber Chateau to a potential third-party purchaser, we further wrote down the barge by $900,000 to its estimated fair value less cost to sell based on the negotiated purchase price. Subsequently, this proposed sale transaction fell through. During the three months ended June 30, 2017, we resumed marketing the Swiber Chateau for sale and were in negotiations with another potential purchaser. Based on such negotiations, our Managing Trustee determined to record an additional impairment loss of $1,700,000 during the three months ended June 30, 2017. Subsequently, this proposed sale transaction also fell through. During the three months ended September 30, 2017, our Managing Trustee resumed marketing the Swiber Chateau for sale and entered into a memorandum of agreement to sell the barge. As a result, we recorded an additional impairment loss of $2,024,000 during the three months ended September 30, 2017. The net carrying value of such asset held for sale of $2,976,000 as of September 30, 2017 represents the estimated fair value of the Swiber Chateau of $3,100,000 less cost to sell. The

26

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

estimated fair value of the Swiber Chateau and cost to sell for each quarter were based on inputs that are generally unobservable and are supported by little or no market data and were classified within Level 3.

On December 29, 2017, the Swiber Chateau was sold to an unaffiliated third party and a gain on sale of $59,730 was recognized.

Assets and Liabilities for which Fair Value is Disclosed
 
Certain of our financial assets and liabilities, which include a fixed-rate note receivable and fixed-rate non-recourse long-term debt, for which fair value is required to be disclosed, were valued using inputs that are generally unobservable and supported by little or no market data and are therefore classified within Level 3. Under U.S. GAAP, we use projected cash flows for fair value measurements of these financial assets and liabilities. Fair value information with respect to certain of our other assets and liabilities is not separately provided since (i) U.S. GAAP does not require fair value disclosures of lease arrangements and (ii) the carrying value of financial assets and liabilities, other than lease-related investments, approximates fair value due to their short-term maturities. 

The estimated fair value of our fixed-rate note receivable was based on the discounted value of future cash flows related to the loan at inception, adjusted for changes in certain variables, including, but not limited to, credit quality, industry, financial markets and other recent comparables. The estimated fair value of our fixed-rate non-recourse debt approximated the amount paid to the lender to settle the debt obligations subsequent to December 31, 2018.
 
December 31, 2018
 
(unaudited)
 
Carrying
Value
 
Fair Value
(Level 3)
Principal outstanding on fixed-rate note receivable
$
14,623,333

 
$
14,952,358

 
 
 
 
Principal outstanding on fixed-rate non-recourse debt
$
18,315,800

 
$
3,200,000

 
(12)    Concentrations of Risk 
In the normal course of business, we are exposed to two significant types of economic risk: credit and market. Credit risk is the risk of a lessee, borrower or other counterparty’s inability or unwillingness to make contractually required payments.  Concentrations of credit risk with respect to lessees, borrowers or other counterparties are dispersed across different industry segments within the United States and throughout the world.
 
Market risk reflects the change in the value of debt instruments, derivatives and credit facilities due to changes in interest rate spreads or other market factors. We believe that the carrying value of our investments is reasonable, taking into consideration these risks, along with estimated collateral values, payment history and other relevant information.
 
At times, our cash and cash equivalents may exceed insured limits. We have placed these funds in high-quality institutions in order to minimize the risk of loss relating to exceeding insured limits.
 
For the year ended December 31, 2018, we had two lessees and one borrower that accounted for 100% of our rental and finance (loss) income. For the year ended December 31, 2017, we had four lessees that accounted for 92.3% of our rental and finance (loss) income. No other lessees or borrowers accounted for more than 10% of our rental and finance (loss) income. 
 
As of December 31, 2018, we had one borrower that accounted for 51.9% of total assets.

As of December 31, 2017, we had two lessees and one borrower that accounted for 79.2% of total assets.
 
As of December 31, 2018 and 2017, we had one lender that accounted for 93.1% and 77.4% of total liabilities, respectively.

27

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017


(13) Income Taxes

Upon the transfer of all assets and liabilities of the LLC to the Liquidating Trust, we were subject to taxation as a liquidating trust. During 2018, the Trust Agreement was amended to clarify that we will be taxed as a partnership for federal and state income tax purposes in 2018 and thereafter. Therefore, no provision for federal and state income taxes has been recorded since the liability for such taxes is the responsibility of each of the individual beneficial owners rather than our business as a whole. We are potentially subject to UBT, which is imposed on unincorporated trade or business operating in New York City. The UBT is imposed for each taxable year at a rate of 4% of taxable income allocated to New York City. We use the asset and liability method of accounting for the UBT. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when it is determined that it is more likely than not that the deferred tax assets will not be realized.

Deferred tax assets are comprised of the following:
 
 
Years Ended December 31,
 
 
2018
 
2017
 
 
(unaudited)
 
 
Deferred tax assets:
 
 
 
 
Net operating loss carryforwards
 
$
707,203

 
$

Valuation allowance
 
(707,203
)
 

Total net deferred tax assets
 
$

 
$

As of December 31, 2018, the net operating losses generated during 2018 from UBT are available to offset only 80% of taxable income each year with indefinite carryforward periods.

During 2018, we reached a settlement with the City of New York Department of Finance related to its UBT audit for the 2011 tax year. We are currently under examination for the 2012 to 2016 tax years. The tax years after 2016 remain open for examination. We have provided for such UBT taxes related to the years open for examination, including amounts covering interest and penalties, where applicable. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

(14)    Geographic Information
Geographic information for revenue, long-lived assets and other assets deemed relatively illiquid, based on the country of origin, was as follows:  

 
Year Ended December 31, 2018
 
(unaudited)
 
North
America
 
Asia
 
Vessels(a)
 
Total
Revenue:
 
 
 
 
 
 
 
Finance loss
$

 
$

 
$
(417,815
)
 
$
(417,815
)
Rental income
$

 
$

 
$
1,000,000

 
$
1,000,000

Loss from investment in joint ventures and equity-method investees
$

 
$

 
$
(298,811
)
 
$
(298,811
)


28

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

 
At December 31, 2018
 
(unaudited)
 
North
America
 
Asia
 
Vessels(a)
 
Total
Long-lived assets:
 
 
 
 
 
 
 
Net investment in notes receivable
$

 
$

 
$
14,623,333

 
$
14,623,333

Asset held for sale
$

 
$

 
$
2,078,000

 
$
2,078,000

Investment in cost-method investees
$

 
$

 
$
3,301,189

 
$
3,301,189


 
Year Ended December 31, 2017
 
North
America
 
Asia
 
Vessels(a)
 
Total
Revenue:
 
 
 
 
 
 
 
Finance income
$
1,085,700

 
$

 
$
3,521,883

 
$
4,607,583

Rental income
$
1,624,541

 
$

 
$
2,466,746

 
$
4,091,287

Income (loss) from investment in joint ventures
$
888

 
$
(6,959
)
 
$

 
$
(6,071
)
 
At December 31, 2017

 
North
America
 
Asia
 
Vessels(a)
 
Total
Long-lived assets:
 
 
 
 
 
 
 
Net investment in notes receivable
$

 
$

 
$
11,700,000

 
$
11,700,000

Net investment in finance leases
$

 
$

 
$
32,910,318

 
$
32,910,318

Leased equipment at cost, net
$

 
$

 
$
13,000,000

 
$
13,000,000


(a) Vessels are generally free to trade worldwide.

(15)    Commitments and Contingencies
At the time we acquire or divest of our interest in an equipment lease or other financing transaction, we may, under very limited circumstances, agree to indemnify the seller or buyer for specific contingent liabilities. Our Managing Trustee believes that any liability of ours that may arise as a result of any such indemnification obligations may or may not have a material adverse effect on our consolidated financial condition or results of operations as a whole. In addition, we may be potentially subject to claims from a previous lessee, which would not result in a material adverse effect on our consolidated financial condition or results of operations taken as a whole. At times we may seek to enforce our rights under a personal guaranty in order to collect amounts from the guarantor that are owed to us by a defaulting borrower or lessee. Gain contingencies may arise from enforcement of such guaranty, but are not recognized until realizable. We are currently seeking to recover a judgment issued in our favor against a guarantor covering amounts owed to us related to a lease with MWU Universal, Inc. and certain of its subsidiaries.
  
In connection with certain debt obligations, we are required to maintain restricted cash accounts with certain banks. At December 31, 2018, we had restricted cash of $1,194,424.

(16)    Income Tax Reconciliation (unaudited)
At December 31, 2018 and 2017, the beneficial owners’ equity included in the consolidated financial statements totaled $11,701,313 and $27,610,201, respectively. The beneficial owners’ equity for federal income tax purposes at December 31, 2018 and 2017 totaled $19,033,044 and $61,341,114, respectively. The difference arises primarily from sales and offering expenses reported as a reduction in the additional beneficial owner equity accounts for financial reporting purposes, but not for federal income tax reporting purposes, and differences in credit loss, state income tax, and taxable income or loss attributable to noncontrolling interests and from joint ventures, between financial reporting purposes and federal income tax purposes.

29

ICON Leasing Fund Twelve Liquidating Trust
(A Delaware Statutory Trust)
Notes to Consolidated Financial Statements
December 31, 2018 (unaudited)
and December 31, 2017

 
The following table reconciles net loss attributable to us for financial statement reporting purposes to net loss attributable to us for federal income tax purposes:
 
Years Ended December 31,
 
2018
 
2017
Net loss attributable to Fund Twelve Liquidating Trust per consolidated financial statements
$
(9,464,442
)
 
$
(30,364,456
)
Taxable income (loss) from joint ventures
10,256,797

 
(5,257,755
)
Taxable loss attributable to noncontrolling interests
(2,819,460
)
 
(4,004,616
)
Credit loss
(15,690,944
)
 
15,690,944

State income tax
(190,979
)
 
347,732

Other
(138,148
)
 
(7,891
)
Net loss attributable to Fund Twelve Liquidating Trust for federal income tax purposes
$
(18,047,176
)
 
$
(23,596,042
)


30


Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures  
In connection with the preparation of this Annual Report on Form 10-K for the year ended December 31, 2018, our Managing Trustee carried out an evaluation, under the supervision and with the participation of the management of our Managing Trustee, including its Co-Chief Executive Officers and the Principal Financial and Accounting Officer, of the effectiveness of the design and operation of our Managing Trustee’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 Trustee’s disclosure controls and procedures were effective.
 
In designing and evaluating our Managing Trustee’s disclosure controls and procedures, our Managing Trustee 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 Trustee’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.  
 
Our Managing Trustee’s Co-Chief Executive Officers and Principal Financial and Accounting Officer have determined that no weakness in disclosure controls and procedures had any material effect on the accuracy and completeness of our financial reporting and disclosure included in this Annual Report on Form 10-K.
 
Evaluation of internal control over financial reporting
Our Managing Trustee 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 Managing Trustee assessed the effectiveness of its internal control over financial reporting as of December 31, 2018. 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” as issued in 2013.
 
Based on its assessment, our Managing Trustee believes that, as of December 31, 2018, its internal control over financial reporting is effective.

Changes in internal control over financial reporting
There were no changes in our Managing Trustee’s internal control over financial reporting during the quarter ended December 31, 2018 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.



31


SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  
ICON Leasing Fund Twelve Liquidating Trust
(Registrant)
 
By: ICON Capital, LLC
(Managing Trustee of the Registrant)
 
March 22, 2019
 
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)
 
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 capacities and on the dates indicated.
 
ICON Leasing Fund Twelve Liquidating Trust
(Registrant) 
 
By: ICON Capital, LLC
(Managing Trustee of the Registrant)
 
March 22, 2019
 
By: /s/ Michael A. Reisner
  Michael A. Reisner
      Co-Chief Executive Officer, Co-President and Director
      (Co-Principal Executive Officer)
 
By: /s/ Mark Gatto
  Mark Gatto
      Co-Chief Executive Officer, Co-President and Director
      (Co-Principal Executive Officer)
 
By: /s/ Christine H. Yap
  Christine H. Yap
      Managing Director
      (Principal Financial and Accounting Officer)
 

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants which Have Not Registered Securities Pursuant to Section 12 of the Act.

No annual report or proxy material has been sent to beneficial owners.


32