Business Acquisition

6 Months Ended

Jun. 30, 2013

Business Acquisition

Business Acquisition

4.   Business Acquisition

On June 19, 2013, the Partnership acquired the primary economic risks and rewards in a newly formed variable interest entity, Bravo. The Partnership’s Investment Manager determined that this acquisition was in the best interests of the Partnership due to the following factors: (i) the Partnership was able to leverage its investments through debt at rates less than the corresponding leased equipment are earning and (ii) the Partnership’s credit risk is spread over a larger pool and more diversified selection of leased investments.

Bravo is an entity owned by a third party which acquired assets from SQN Alternative Investment Fund II (“SQN Fund II”) and the Partnership. The Partnership has a junior participation interest in Bravo, and as such, bears the positive and negative economic consequence of the entity and thus is required to be consolidated under US GAAP.

On June 19, 2013, Bravo obtained its financing as follows; (i) a non-recourse loan payable from an unrelated insurance company for $5,860,085 (See Note 10) and (ii) an equity investment from the Partnership of $3,906,724. Bravo purchased a seasoned portfolio of leased equipment from SQN Fund II, another entity managed by the Partnership’s Investment Manager. Bravo purchased the following general types of leased assets: (i) $632,284 in finance leases (See Note 5), (ii) $1,937,636 in equipment subject to operating leases (See Note 6) and (iii) $2,500,000 in residual value investments in equipment on lease (See Note 7). In addition, the Partnership transferred various leased assets with a net book value of $4,137,073 to Bravo.

At June 30, 2013, Bravo is owed $43,183 from SQN Fund II, which is included in other receivables in the accompanying condensed consolidated balance sheets and related to the rental payments received by SQN Fund II during June 2013 for leased assets sold to the Partnership on June 19, 2013. All amounts due were received by the Partnership during July 2013.