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Atel 17

Filed: 16 May 21, 8:00pm

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

              Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended March 31, 2021

         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from        to

Commission File number 333-203841

ATEL 17, LLC

(Exact name of registrant as specified in its charter)

California

90-1108275

(State or other jurisdiction of
incorporation or organization)

(I. R. S. Employer
Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111

(Address of principal executive offices)

Registrant’s telephone number, including area code: (415) 989-8800

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: None

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

N/A

N/A

N/A

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

Indicate by check mark whether the registrant has submitted electronically 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 No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes No

The number of Limited Liability Company Units outstanding as of April 30, 2021 was 2,565,749.

DOCUMENTS INCORPORATED BY REFERENCE

None.



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 17, LLC

BALANCE SHEETS

MARCH 31, 2021 AND DECEMBER 31, 2020

(In Thousands)

March 31, 

December 31, 

    

2021

    

2020

(Unaudited)

ASSETS

 

  

 

  

Cash and cash equivalents

$

2,664

$

2,873

Due from affiliates

12

Accounts receivable, net

 

50

 

41

Notes receivable, net

 

272

 

390

Investment in securities

 

1,338

 

1,448

Warrants, fair value

 

159

 

187

Equipment under operating leases, net

 

10,625

 

11,011

Prepaid expenses and other assets

 

4

 

7

Total assets

$

15,112

$

15,969

LIABILITIES AND MEMBERS' CAPITAL

 

  

 

  

Accounts payable and accrued liabilities:

 

  

 

  

Affiliates

$

72

$

Accrued distributions to Other Members

228

228

Other

 

70

 

74

Non-recourse debt

2,089

2,339

Unearned operating lease income

 

96

 

115

Total liabilities

 

2,555

 

2,756

Members’ capital:

 

  

 

  

Managing Member

 

1

 

1

Other Members

 

12,556

 

13,212

Total Members’ capital

 

12,557

 

13,213

Total liabilities and Members’ capital

$

15,112

$

15,969

See accompanying notes.

3


ATEL 17, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED

MARCH 31, 2021 AND 2020

(In Thousands Except for Units and Per Unit Data)

(Unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

Operating revenues:

 

  

 

  

Leasing and lending activities:

 

  

 

  

Operating leases revenue, net

$

562

$

495

Notes receivable interest income

 

21

 

47

Total operating revenues

 

583

 

542

Operating expenses:

 

 

  

Depreciation of operating lease assets

 

377

 

369

Asset management fees to Managing Member

 

66

 

65

Cost reimbursements to Managing Member and/or affiliates

 

90

 

86

Amortization of initial direct costs

 

9

 

20

Interest expense

24

35

Professional fees

 

74

 

39

Outside services

 

8

 

8

Taxes on income and franchise fees

 

1

 

2

Bank charges

 

8

 

6

Other

 

10

 

8

Total operating expenses

 

667

 

638

Loss from operations

(84)

(96)

Other loss:

Gain on sale of securities

11

Unrealized loss on fair value adjustment for securities

(42)

Unrealized loss on fair value adjustment for warrants

 

(28)

 

(29)

Total other loss

(59)

(29)

Net loss

$

(143)

$

(125)

Net loss:

 

  

 

  

Managing Member

 

 

Other Members

$

(143)

$

(125)

$

(143)

$

(125)

Net loss per Limited Liability Company Unit (Other Members)

$

(0.06)

$

(0.05)

Weighted average number of Units outstanding

 

2,565,749

 

2,565,749

See accompanying notes.

4


ATEL 17, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE THREE MONTHS ENDED

MARCH 31, 2021 AND 2020

(In Thousands Except for Units and Per Unit Data)

(Unaudited)

Three Months Ended March 31, 2021

Amount

Other

Managing

Units

Members

Member

Total

Balance December 31, 2020

2,565,749

$

13,212

$

1

$

13,213

Distributions to Other Members ($0.20 per Unit)

 

 

(513)

 

 

(513)

Net loss

 

 

(143)

 

 

(143)

Balance March 31, 2021

 

2,565,749

$

12,556

$

1

$

12,557

Three Months Ended March 31, 2020

Amount

Other

Managing

Units

Members

Member

Total

Balance December 31, 2019

 

2,565,749

$

14,667

$

1

$

14,668

Distributions to Other Members ($0.20 per Unit)

 

 

(513)

 

 

(513)

Net loss

 

 

(125)

 

 

(125)

Balance March 31, 2020

 

2,565,749

$

14,029

$

1

$

14,030

See accompanying notes.

5


ATEL 17, LLC

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(In Thousands)

(Unaudited)

Three Months Ended

March 31, 

    

2021

    

2020

Operating activities:

 

  

 

  

Net loss

$

(143)

$

(125)

Adjustment to reconcile net loss to net cash provided by operating activities:

 

 

  

Accretion of note discount - warrants

(10)

(15)

Depreciation of operating lease assets

377

369

Amortization of initial direct costs

9

20

Provision for credit losses

10

Gain on sale of securities

(11)

Unrealized loss on fair value adjustment for securities

42

Unrealized loss on fair value adjustment for warrants

 

28

 

29

Changes in operating assets and liabilities:

Accounts receivable

 

(9)

 

27

Due from affiliates

 

12

 

Prepaid expenses and other assets

3

(5)

Accounts payable, other

(4)

7

Accrued liabilities, affiliates

 

72

 

13

Unearned operating lease income

 

(19)

 

(37)

Net cash provided by operating activities

 

347

 

293

Investing activities:

 

  

 

  

Proceeds from sale of securities

79

Principal payments received on notes receivable and/or early termination of notes receivable

 

128

 

289

Net cash provided by investing activities

 

207

 

289

Financing activities:

 

  

 

  

Repayments under non-recourse debt

(250)

(328)

Distributions to Other Members

 

(513)

 

(513)

Net cash used in financing activities

 

(763)

 

(841)

Net decrease in cash and cash equivalents

 

(209)

 

(259)

Cash at beginning of period

 

2,873

 

6,410

Cash at end of period

$

2,664

$

6,151

Supplemental disclosures of cash flow information:

 

  

 

  

Cash paid during the period for interest

$

24

$

35

Cash paid during the period for taxes

$

$

1

Schedule of non-cash investing and financing transactions:

 

  

 

  

Distributions payable to Other Members at period-end

$

228

$

228

See accompanying notes.

6


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL 17, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on April 16, 2015 (“Date of Inception”) for the purpose of equipment financing and acquiring equipment to engage in equipment leasing and sales activities. The Managing Member of the Company is ATEL Managing Member, LLC (the “Managing Member” or “Manager”), a Nevada limited liability company. The Managing Member is controlled by ATEL Financial Services, LLC (“AFS”), a wholly-owned subsidiary of ATEL Capital Group. The Fund may continue as provided in the ATEL 17, LLC limited liability operating agreement dated April 24, 2015 (the “Operating Agreement”). Contributions in the amount of $500 were received as of April 28, 2015, which represented the initial member’s capital investment. As a limited liability company, the liability of any individual member for the obligations of the Fund is limited to the extent of capital contributions to the Fund by the individual member.

The offering of the Company was granted effectiveness by the Securities and Exchange Commission as of January 5, 2016. The offering will continue until the earlier of a period of two years from that date or until sales of the limited liability company units (Units) to the public reach $150 million. As of February 2, 2016, subscriptions for the minimum number of Units (120,000, representing $1.2 million), excluding subscriptions from Pennsylvania investors, had been received and the Fund requested subscription proceeds to be released from escrow. On that date, the Company commenced initial operations and continued in its development stage activities until transitioning to an operating enterprise during the first quarter of 2016. Pennsylvania subscriptions are subject to a separate escrow and are released to the Fund only when aggregate subscriptions for all investors equal to at least $7.5 million. Total contributions to the Fund exceeded $7.5 million on July 6, 2016, at which time a request was processed to release the Pennsylvania escrowed amounts. The offering terminated on January 5, 2018.

As of March 31, 2021, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable), totaling $25.7 million (inclusive of the $500 initial Member’s capital investment) have been received. As of the same date, 2,565,749 Units were issued and outstanding.

The Company’s principal objectives are to invest in a diversified portfolio of investments that will (i) preserve, protect and return the Company’s invested capital; (ii) generate regular cash distributions to members, with any balance remaining after required minimum distributions to be used to purchase additional investments during the Reinvestment Period (ending six calendar years after the completion of the Company’s public offering of Units) and (iii) provide additional cash distributions following the Reinvestment Period and until all investment portfolio assets have been sold or otherwise disposed.

Pursuant to the terms of the Operating Agreement, the Managing Member and/or its affiliates receives compensation for services rendered and reimbursements for costs incurred on behalf of the Company. (See Note 6, Related party transactions.) The Company is required to maintain reasonable cash reserves for working capital, for the repurchase of Units and for contingencies. The repurchase of Units is solely at the discretion of the Managing Member.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission.

7


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after March 31, 2021, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and cash equivalent investments such as U.S. Treasury instruments with original and/or purchased maturities of ninety days or less.

Use of Estimates:

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

Segment reporting:

The Company is organized into one operating segment for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.

The Company’s principal decision makers are the Managing Member’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.

The primary geographic region in which the Company seeks leasing opportunities is North America. All of the Company’s current operating revenues for the three months ended March 31, 2021 and 2020, and long-lived assets as of March 31, 2021 and December 31, 2020 relate to customers domiciled in the United States.

8


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Accounts receivable:

Accounts receivable represent the amounts billed under operating lease contracts, and notes receivable which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability of specifically identified lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.

Financing receivables:

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on notes receivable.

Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance as they are deemed uncollectible.

Investment in securities:

Purchased securities

The Company’s purchased securities registered for public sale with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The Company’s purchased securities that do not have readily determinable fair values are measured at cost minus impairment and adjusted for changes in observable prices. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. The Company had $1.3 million and $1.4 million of purchased securities at March 31, 2021 and December 31, 2020, respectively. During the three months ended March 31, 2021, the Company recorded $42 thousand of unrealized losses on investment securities with readily determinable fair values. Also during the current quarter, the Company sold investment securities with a value approximating $79 thousand and realized a gain of $11 thousand on the sale. The Company had no equity securities prior to the fourth quarter of 2020 and held no securities that do not have readily determinable fair values at March 31, 2021 and December 31, 2020.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are reflected at an estimated fair value on the balance sheet as determined by the Managing Member. The estimated fair value of the Company’s portfolio of warrants was $159 thousand and $187 thousand at March 31, 2021 and December 31, 2020, respectively. The Company recorded unrealized losses of $28 thousand and $29 thousand on fair valuation of its warrants for the three months ended March 31, 2021 and 2020, respectively.

9


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating lease receivable, notes receivable and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250 thousand. The remainder of the Funds’ cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts and notes receivable represent amounts due from lessees or borrowers in various industries, related to equipment on operating leases or notes receivable.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with Accounting Standards Condification (“ASC”) 360-10-35-3, over the periods of the lease terms contained in each asset’s respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).

The Company does not use the equipment held in its portfolio, but holds it solely for lease and ultimate sale. In the course of marketing equipment that has come off-lease, management may determine at some point that re-leasing the assets may provide a superior return for investors and would then execute another lease. Upon entering into a new lease contract, management will estimate the residual value once again and resume depreciation. If, and when, the Company, at any time, determines that depreciation in value may have occurred with respect to an asset held-for-sale, the Company would review the value to determine whether a material reduction in value had occurred and recognize any appropriate impairment. All lease assets, including off-lease assets, are subject to the Company’s quarterly impairment analysis, as described below. Maintenance costs associated with the Fund’s portfolio of leased assets are expensed as incurred. Major additions and betterments are capitalized.

Operating lease revenue is recognized on a straight-line basis over the term of the underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally on terms from 36 to 120 months. The difference between rent received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.

Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis. Provisions for credit losses relating to operating leases are included in lease income in the Company’s financial statements.

10


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Initial direct costs:

Incremental costs of a lease that would not have been incurred if the lease had not been obtained are capitalized and amortized over the lease term. All other costs associated with the execution of the Company’s leases are expensed as incurred.

Asset valuation:

Recorded values of the Company’s leased asset portfolio are reviewed each quarter to confirm the reasonableness of established residual values and to determine whether there is indication that an asset impairment might have taken place. The Company uses a variety of sources and considers many factors in evaluating whether the respective book values of its assets are appropriate. In addition, the company may direct a residual value review at any time if it becomes aware of issues regarding the ability of a lessee to continue to make payments on its lease contract. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their net book value. The estimated undiscounted future cash flows are the sum of the residual value of the asset at the end of the asset’s lease contract and undiscounted future rents from the existing lease contract. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the marketplace are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date. Upward adjustments for impairments recognized in prior periods are not made in any circumstances.

Acquisition expense:

Acquisition expense represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses and miscellaneous expenses related to the selection and acquisition of equipment which are reimbursable to the Managing Member under the terms of the Operating Agreement and are expensed as incurred.

Fair Value:

Fair value measurements and disclosures are based on a fair value hierarchy as determined by significant inputs used to measure fair value. The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market.

Level 3 – Valuation is modeled using significant inputs that are unobservable in the market. These unobservable inputs reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability.

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Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The Company’s valuation policy is determined by members of the Asset Management, Credit and Accounting departments. Whenever possible, the policy is to obtain quoted market prices in active markets to estimate fair values for recognition and disclosure purposes. Where quoted market prices in active markets are not available, fair values are estimated using discounted cash flow analyses, broker quotes, information from third party remarketing agents, third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Company’s assumptions, including discount rates and estimates of future cash flows. Potential taxes and other transaction costs are not considered in estimating fair values. As the Company is responsible for determining fair value, an analysis is performed on prices obtained from third parties. Such analysis is performed by asset management and credit department personnel who are familiar with the Company’s investments in equipment, notes receivable and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

Per Unit data:

Net loss and distributions per Unit are based upon the weighted average number of members Units outstanding during the period.

Recent accounting pronouncements:

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”). ASU 2020-03 improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. ASU 2020-03 includes seven different issues that describe the areas of improvement and the related amendments to GAAP that are intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. Management is currently evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Fund’s financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326) (“ASU 2016-13”). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and equipment under operating leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, equipment under operating leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. Management is currently evaluating the standard and expects the update may potentially result in the increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses (“ASU 2018-19”). The new standard clarifies certain aspects of the new CECL impairment model in ASU 2016-13. The amendment clarifies that receivables arising from operating leases are within the scope of ASC 842, rather than ASC 326. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements.

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Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

On August 15, 2019, the FASB issued a proposed ASU that would grant certain companies additional time to implement FASB standards on CECL, and hedging. The proposed ASU defers the effective date for CECL to fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years; and defers the effective dates for hedging to fiscal periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The ASU was approved on October 16, 2019. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of Topic 326 until fiscal year beginning after December 15, 2022.

3. Notes receivable, net:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. As of March 31, 2021, the original terms of the notes are 42 months with interest rates ranging from 11.55% to 14.84% per annum. The notes are secured by the equipment financed and have maturity dates ranging from 2021 to 2022.

As of March 31, 2021, the minimum future payments receivable are as follows (in thousands):

Nine months ending December 31, 2021

$

298

Year ending December 31, 2022

 

9

 

307

Less: portion representing unearned interest income

 

(10)

 

297

Less: warrants - notes receivable discount

 

(25)

Notes receivable, net

$

272

Initial direct costs (“IDC”) amortization expense related to notes receivable and the Company’s operating leases for the three months ended March 31, 2021 and 2020 are as follows (in thousands):

Three Months Ended

March 31, 

2021

    

2020

IDC amortization - notes receivable

$

$

1

IDC amortization - lease assets

 

9

 

19

Total

$

9

$

20

4. Equipment under operating leases, net:

The Company’s equipment under operating leases, net consists of the following (in thousands):

Balance

Depreciation/

Balance

December 31, 

Amortization

March 31, 

2020

    

Additions

    

Expense

    

2021

Equipment under operating leases, net

$

10,907

$

$

(377)

$

10,530

Initial direct costs, net

 

104

 

 

(9)

 

95

Total

$

11,011

$

$

(386)

$

10,625

The Company utilizes a straight line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $377 thousand and $369 thousand for the respective three months ended March 31, 2021 and 2020.

13


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The three-month period ended March 31, 2021 includes $31 thousand of additional depreciation recorded to reflect year-to-date changes in estimated residual values of certain equipment generating revenue under month-to-month extensions. Such estimated residual values of equipment associated with leases on month-to-month extensions are evaluated at least semi-annually, and depreciation recorded for the change in estimated reduction in value. There were no such additional adjustments to depreciation recorded during the three months ended March 31, 2020.

IDC amortization expense related to the Company’s operating leases totaled $9 thousand and $20 thousand for the three months ended March 31, 2021 and 2020, respectively.

All of the Company’s lease asset purchases and capital improvements were made during the years from 2016 through 2020.

Impairment of equipment under operating leases:

As a result of impairment reviews, management determined that no impairment losses existed for the three months ended March 31, 2021 and 2020.

Operating leases:

Property on operating leases consists of the following (in thousands):

Balance

Balance

December 31, 

Reclassifications

March 31, 

    

2020

    

Additions

    

or Dispositions

    

2021

Transportation, rail

$

3,657

$

$

$

3,657

Mining

 

2,749

 

 

 

2,749

Construction

 

2,892

 

 

 

2,892

Aviation

 

2,118

 

 

 

2,118

Paper processing

 

1,058

 

 

 

1,058

Marine vessel

 

1,041

 

 

 

1,041

Containers

 

860

 

 

 

860

Agriculture

 

742

 

 

 

742

Materials handling

 

960

 

 

 

960

Transportation, other

 

97

 

 

 

97

 

16,174

 

 

 

16,174

Less accumulated depreciation

 

(5,267)

 

(377)

 

 

(5,644)

Total

$

10,907

$

(377)

$

$

10,530

The average estimated residual value for assets on operating leases was 35% of the assets’ original cost for March 31, 2021 and December 31, 2020. There were no operating leases in non-accrual status at both March 31, 2021 and December 31, 2020.

14


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

At March 31, 2021, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

    

Operating

Leases

Nine months ending December 31, 2021

$

1,172

Year ending December 31, 2022

 

1,449

2023

 

1,395

2024

 

1,028

2025

528

Thereafter

608

$

6,180

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of March 31, 2021, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category

    

Useful Life

Transportation, rail

 

35 - 50

Marine vessel

 

20 - 30

Containers

 

15 - 20

Aviation

 

15 - 20

Mining

 

10 - 15

Paper processing

 

10 - 15

Agriculture

 

7 - 10

Construction

 

7 - 10

Materials handling

 

7 - 10

Transportation, other

 

7 - 10

5. Allowance for credit losses:

The Company’s allowance for credit losses are as follows (in thousands):

Accounts Receivable

Valuation

Allowance for Doubtful 

Adjustments on

Accounts

Financing Receivables

Operating

Notes

    

Leases

    

Receivables

    

Total

Balance December 31, 2020

    

$

20

    

$

    

$

20

Provision of credit losses

 

 

 

Balance March 31, 2021

$

20

$

$

20

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass — Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.

15


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Special Mention — Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard — Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful — Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.

At March 31, 2021 and December 31, 2020, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes warrants – notes receivable discount) (in thousands):

Notes Receivable

    

March 31, 2021

    

December 31, 2020

Pass

$

307

$

424

Special mention

 

 

Substandard

 

 

Doubtful

 

 

Total

$

307

$

424

At March 31, 2021 and December 31, 2020, investment in financing receivables is aged as follows (in thousands):

    

    

    

    

    

    

    

Recorded

Greater

Total

Investment>90

31-60 Days

61-90 Days

Than

Total

Financing

Days and

March 31, 2021

    

Past Due

    

Past Due

    

90 Days

    

Past Due

    

Current

    

Receivables

    

Accruing

Notes receivable

 

$

$

$

$

$

307

$

307

$

Recorded

Greater

Total

Investment>90

31-60 Days

61-90 Days

Than

Total

Financing

Days and

December 31, 2020

    

Past Due

    

Past Due

    

90 Days

    

Past Due

    

Current

    

Receivables

    

Accruing

Notes receivable

$

$

$

$

$

424

$

424

$

The Company had no financing receivables on non-accrual or impaired status at March 31, 2021 and December 31, 2020.

6. Related party transactions:

The terms of the Operating Agreement provide that the Managing Member and/or affiliates are entitled to receive certain fees for equipment management and resale and for management of the Company.

The Operating Agreement allows for the reimbursement of costs incurred by the Managing Member and/or affiliates for providing administrative services to the Company. Administrative services provided include Company accounting,

16


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

investor relations, legal counsel and lease and equipment documentation. The Managing Member is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of investments.

Each of AFS and ATEL Leasing Corporation (“ALC”) is a wholly-owned subsidiary of ATEL Capital Group, Inc. and performs services for the Company on behalf of the Managing Member. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.

Cost reimbursements to the Managing Member or its affiliates are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred. The Managing Member believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Company or (ii) the amount the Company would be required to pay independent parties for comparable administrative services in the same geographic location.

The Managing Member and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement, during the three months ended March 31, 2021 and 2020 as follows (in thousands):

Three Months Ended

March 31, 

2021

    

2020

Administrative costs reimbursed to Managing Member and/or affiliates

$

90

$

86

Asset management fees to Managing Member

 

66

 

65

$

156

$

151

7. Non-recourse debt:

At March 31, 2021, non-recourse debt consists of notes payable to financial institutions. The note payments are due in monthly installments. Interest on the notes range from 3.74% to 4.66% per annum. The notes are secured by assignments of lease payments and pledges of assets. At March 31, 2021, gross operating lease rentals totaled approximately $2.3 million over the remaining lease terms and the carrying value of the pledged assets was $5.3 million. The notes mature from 2021 through 2028.

The non-recourse debt does not contain any material financial covenants. The debt is secured by a lien granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lenders, such as warranties as to genuineness of the transaction parties’ signatures, as to the genuineness of the respective lease chattel paper or the transaction as a whole, or as to the Company’s good title to or perfected interest in the secured collateral, as well as similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

17


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

Future minimum payments of non-recourse debt are as follows (in thousands):

    

Principal

    

Interest

    

Total

Nine months ending December 31, 2021

$

456

$

61

$

517

Year ending December 31, 2022

518

61

579

2023

522

39

561

2024

288

20

308

2025

73

13

86

Thereafter

232

17

249

 

$

2,089

 

$

211

 

$

2,300

8. Borrowing facilities:

Effective October 31, 2019, the Company entered into an amended and restated revolving credit facility agreement (the “Credit Facility”) which replaced a previous agreement extended beyond its original expiration date of June 2019. The Company participated with ATEL Capital Group and certain subsidiaries and affiliated entities as borrowers, with a syndicate of financial institutions as lenders. The Credit Facility is comprised of a working capital sub-facility, an acquisition sub-facility, institutional leasing sub-facility, and a venture line sub-facility. The Company participates in the acquisition sub-facility and the institutional leasing sub-facility, on  a several, but not joint, basis (i.e., the Company is liable only for the amount of the advances extended to the Company under those sub-facilities, and not as to amounts extended to any co-borrower).

The aggregate amount of the Credit Facility is $55 million, with sub-limits for each sub-facility, and currently expires September 30, 2021 (unless extended). The lending syndicate providing the Credit Facility has a blanket lien on all of the Company’s assets as collateral for any and all borrowings extended to the Company under the acquisition sub-facility or the institutional leasing sub-facility, on a several, but not joint, basis. The Credit Facility includes certain financial covenants made by the Company, as is customarily found in credit facilities of similar size and nature.

As of March 31, 2021 and December 31, 2020, borrowings under the Credit Facility were as follows (in thousands):

    

March 31, 

    

December 31, 

2021

2020

Total available under the financing arrangement

$

55,000

$

55,000

Amount borrowed by affiliated partnerships and limited liability companies under the venture, acquisition, and warehouse facilities.

 

(775)

 

(5,879)

Total remaining available under the working capital, acquisition and warehouse facilities

$

54,225

$

49,121

The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of March 31, 2021, the aggregate amount of the Credit Facility is potentially available to the Company, subject to certain sub-facility and borrowing-base limitations. However, as amounts are drawn on the Credit Facility by each of the Company and the affiliates who are borrowers under the Credit Facility, the amount remaining available to all borrowers to draw under Credit Facility is reduced. As the Warehousing Facility is a short term bridge facility, any amounts borrowed under the Warehousing Facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the Warehouse Facility for further short term borrowing.

18


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2021, the Company’s Tangible Net Worth requirement under the Credit Facility was $10.0 million, the permitted maximum leverage ratial was not to exceed 1.25 to 1, and the required minimum interest coverage ratio was not to be less than 2 to 1. The Company was in compliance with these financial covenants under the Credit Facility with a minimum Tangible Net Worth, leverage ratio and interest coverage ratio, as calculated per the Credit Facility agreement of $12.6 million, 0.17 to 1, and 6.7 to 1, respectively, as of March 31, 2021. As such, as of March 31, 2021, the Company was in compliance with all material financial covenants, and with all other material conditions of the Credit Facility. The Company does not anticipate any covenant violations nor does it anticipate that any of these covenants will restrict its operations or its ability to procure additional financing.

Fee and interest terms

The interest rate on the Credit Facility is based on either the LIBOR plus 2.25% or the bank’s Prime rate, which re-prices daily. Principal amounts of loans made under the Credit Facility that are prepaid may be re-borrowed on the terms and subject to the conditions set forth under the Credit Facility. There were no borrowings outstanding at March 31, 2021 and December 31, 2020.

Warehouse facility

To hold the assets under the Warehousing Facility prior to allocation to specific investor programs, a Warehousing Trust has been entered into by the Company, AFS, ALC, and certain of the affiliated partnerships and limited liability companies. The Warehousing Trust is used by the Warehouse Facility borrowers to acquire and hold, on a short-term basis, certain lease transactions that meet the investment objectives of each of such entities. Each of the leasing programs sponsored by AFS and ALC is a pro rata participant in the Warehousing Trust, as described below. When a program no longer has a need for short-term financing provided by the Warehousing Facility, it is removed from participation, and as new leasing investment entities are formed by AFS and ALC and commence their acquisition stages, these new entities

are added.

As of March 31, 2021, the investment program participants were the Company and ATEL 16, LLC. Pursuant to the Warehousing Trust, the benefit of the lease transaction assets, and the corresponding liabilities under the Warehouse Facility, inure to each of such entities based upon each entity’s pro-rata share in the Warehousing Trust estate. The “pro-rata share” is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the Warehousing Trust estate, excepting that the trustees, AFS and ALC, are both jointly and severally liable for the pro-rata portion of the obligations of each of the affiliated limited liability companies participating under the Warehouse Facility. Transactions are financed through this Warehouse Facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of proceeds of a draw under the Acquisition Facility, and the asset is removed from the Warehouse Facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

9. Commitments:

At March 31, 2021, there was a commitment to purchase lease assets totaling $355 thousand. This amount represents contract awards which may be canceled by the prospective investee or may not be accepted by the Company.

10. Members’ capital:

A total of 2,565,749 Units were issued and outstanding at both March 31, 2021 and December 31, 2020, including the 50 Units issued to the initial Member (Managing Member). The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Member.

19


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The Company has the right, exercisable at the Managing Member’s discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to 100% of the holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund Units is made in accordance with Section 13 of the Operating Agreement. The repurchase would be at the discretion of the Managing Member on terms it determines to be appropriate under given circumstances, in the event that the Managing Member deems such repurchase to be in the best interest of the Company; provided, the Company is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.

The Fund’s net income or net losses are to be allocated 100% to the members. From the commencement of the Fund until the initial closing date, net income and net loss were allocated 99% to the Managing Member and 1% to the initial members. Commencing with the initial closing date, net income and net loss are to be allocated 99.99% to the Other Members and 0.01% to the Managing Member.

Fund distributions are to be allocated 0.01% to the Managing Member and 99.99% to the Other Members. The Company commenced periodic distributions in February 2016.

Distributions to the Other Members for the three months ended March 31, 2021 and 2020 were as follows (in thousands except Units and per Unit data):

Three Months Ended

March 31, 

2021

    

2020

Distributions

$

513

$

513

Weighted average number of Units outstanding

 

2,565,749

 

2,565,749

Weighted average distributions per Unit

$

0.20

$

0.20

11. Fair value measurements:

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

At March 31, 2021 and December 31, 2020, only the Company’s warrants were measured on a recurring basis.

Such fair value adjustments utilized the following methodology:

Warrants (recurring)

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants are determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, the time to maturity, and a risk free interest rate for the term(s) of the warrant exercise(s). As of March 31, 2021 and December 31, 2020, the calculated fair value of the Fund’s warrant portfolio approximated $159 thousand and $187 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy.

20


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The following table reconciles the beginning and ending balances of the Company’s Level 3 recurring assets (in thousands):

Three Months Ended

March 31, 

2021

    

2020

Fair value of warrants at beginning of period

$

187

$

731

Unrealized loss on fair valuation of warrants

 

(28)

 

(29)

Fair value of warrants at end of period

$

159

$

702

Investment securities (recurring)

The Company’s investment securities registered for public sale with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The fair value of such securities totaled $1.3 million and $1.4 million at March 31, 2021 and December 31, 2020, respectively. There were no investment securities with readily determinable values held at March 31, 2020.

The fair value of investment securities that were accounted for on a recurring basis for the three months ended March 31, 2021 and 2020 and classified as Level 1 are as follows (in thousands):

Three Months Ended

March 31, 

2021

2020

Fair value of securities at the beginning of period

$

1,448

$

Securities sold

(68)

Unrealized loss on fair value adjustment for securities

(42)

Fair value of investment securities at the end of period

$

1,338

$

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s recurring and non-recurring fair value calculation/adjustments categorized as Level 3 in the fair value hierarchy at March 31, 2021 and December 31, 2020:

March 31, 2021

    

Valuation 

    

Valuation

    

Unobservable

    

Range of Input Values

Name

Frequency

Technique

Inputs

(Weighted Average)

Warrants

 

Recurring

 

Black-Scholes formulation

 

Stock price

$0.01 - $11.71 ($0.08)

 

  

 

  

 

Exercise price

$0.02 - $9.00 ($0.07)

 

  

 

  

 

Time to maturity (in years)

 

6.66 - 10.70 (6.81)

 

  

 

  

 

Risk-free interest rate

 

1.40% - 1.80% (1.42%)

 

  

 

  

 

Annualized volatility

 

40.69% - 115.04% (56.26%)

December 31, 2020

    

Valuation 

    

Valuation

    

Unobservable

    

Range of Input Values

Name

Frequency

Technique

Inputs

(Weighted Average)

Warrants

 

Recurring

 

Black-Scholes formulation

 

Stock price

$0.01 - $16.95 ($0.09)

 

  

 

  

 

Exercise price

$0.02 - $9.00 ($0.07)

 

  

 

  

 

Time to maturity (in years)

6.91 - 10.94 (7.06)

 

  

 

  

 

Risk-free interest rate

0.65% - 1.58% (0.67%)

 

  

 

  

 

Annualized volatility

40.36% - 115.04% (55.70%)

21


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

The Company determines the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Notes receivable

The fair value of the Company’s notes receivable is generally estimated based upon various methodologies deployed by financial and credit management including, but not limited to, credit analysis, third party appraisal and/or discounted cash flow analysis based upon current market valuation techniques and market rates for similar types of lending arrangements, which may consider adjustments for impaired loans as deemed necessary.

Non-recourse debt

The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon current market borrowing rates for similar types of borrowing arrangements.

Commitments and Contingencies

Management has determined that no recognition for the fair value of the Company’s loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Company’s credit requirements at the time of funding.

The fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

22


Table of Contents

ATEL 17, LLC
 
NOTES TO THE FINANCIAL STATEMENTS

(Unaudited)

The following tables present estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at March 31, 2021 and December 31, 2020 (in thousands):

Fair Value Measurements at March 31, 2021

    

Carrying

    

    

    

    

Amount

Level 1

Level 2

Level 3

Total

Financial assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

2,664

$

2,664

$

$

$

2,664

Notes receivable, net

 

272

 

 

 

275

 

275

Investment in securities

1,338

1,338

 

 

1,338

Warrants, fair value

 

159

 

 

 

159

 

159

Financial liabilities:

Non-recourse debt

2,089

2,155

2,155

Fair Value Measurements at December 31, 2020

    

Carrying

    

    

    

    

Amount

Level 1

Level 2

Level 3

Total

Financial assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

2,873

$

2,873

$

$

$

2,873

Notes receivable, net

 

390

 

 

 

396

 

396

Investment in securities

 

1,448

1,448

 

 

1,448

Warrants, fair value

187

 

 

 

187

 

187

Financial liabilities:

Non-recourse debt

2,339

2,438

2,438

12.  Global health emergency:

On January 30, 2020, the World Health Organization declared the novel coronavirus outbreak a public health emergency. The Fund’s operations is located in California, which has restricted gatherings of people due to the coronavirus outbreak. At present, the Fund’s operations have not been adversely affected and continues to function effectively. Due to the dynamic nature of these unprecedented circumstances and possible business disruption, the Fund will continue to monitor the situation closely, but given the uncertainty about the situation, an estimate of the future impact, if any, cannot be made at this time.

23


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

Statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company’s performance is subject to risks relating to lessee and borrower defaults and the creditworthiness of its lessees and borrowers. The Company’s performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law.

Overview

ATEL 17, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on April 16, 2015 for the purpose of raising capital and originating equipment financing transactions and acquiring equipment to engage in equipment leasing and sales activities. The offering of the Company was granted effectiveness by the Securities and Exchange Commission as of January 5, 2016.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. The offering will continue until the earlier of a period of two years from that date or until sales of the limited liability company Units to the public reach $150 million. As of February 2, 2016, subscriptions for the minimum number of Units (120,000, representing $1.2 million), excluding subscriptions from Pennsylvania investors, had been received and the Fund requested subscription proceeds to be released from escrow. On that date, the Company commenced initial operations. Pennsylvania subscriptions are subject to a separate escrow and will be released to the Fund only at such time as total subscription proceeds received by the Fund from all subscribers, including the escrowed Pennsylvania subscriptions, equal not less than $7.5 million in gross proceeds. Total contributions to the Fund exceeded $7.5 million on July 6, 2016. The offering was terminated on January 5, 2018.

Results of Operations

The three months ended March 31, 2021 versus the three months ended March 31, 2020

The Company had net losses of $143 thousand and $125 thousand for the three months ended March 31, 2021 and 2020, respectively. The results for the first quarter of 2021 reflect increases in both operating revenues and operating expenses when compared to the prior year period.

Total operating revenues were $583 thousand and $542 thousand for the three months ended March 31, 2021 and 2020, respectively. The $41 thousand, or 8%, increase in revenues was primarily due to an increase in operating lease revenues offset by a decline in notes receivable interest income.

The $67 thousand increase in operating lease revenues was primarily due to incremental revenues from lease assets acquired since March 31, 2020. Notes receivable interest income decreased by $26 thousand primarily due to the scheduled run-off of the portfolio.

Total operating expenses were $667 thousand and $638 thousand for the three months ended March 31, 2021 and 2020, respectively. The $29 thousand, or 5%, increase in expenses was primarily due to increases in professional fees and depreciation offset, in part, by decreases in amortization of IDC and interest expense.

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Professional fees increased by $35 thousand primarily due to the timing of audit and tax related billings. Depreciation increased by $8 thousand due to incremental depreciation on equipment acquired since March 31, 2020, and on leases on month-to-month extensions partially offset by an increase in assets which have been fully depreciated. Amortization of IDC decreased by $11 thousand largely due to current year run-off and dispositions of lease assets; and interest expense decreased by $11 thousand due to the maturities of certain notes.

The Company also recorded other losses totaling $59 thousand and $29 thousand for the quarters ended March 31, 2021 and 2020, respectively. Such other losses reflects unrealized gains/losses on the Company’s investment securities and warrants portfolio. The Company recorded unrealized losses on fair valuation of its warrants of $28 thousand and $29 thousand for the respective quarters ended March 31, 2021 and 2020. In addition, during the current quarter, the Company realized an $11 thousand gain on the sale of securities and a $42 thousand unrealized loss on fair valuation of securities. There was no fair valuation adjustment on the Company’s securities during the prior year quarter. Likewise, there were no sales or valuation of securities during the quarter ending March 31, 2020.

Capital Resources and Liquidity

At March 31, 2021 and December 31, 2020, the Company’s cash and cash equivalents totaled $2.7 million and $2.9 million, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The Company currently believes it has adequate reserves available to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements.

Cash Flows

The following table sets forth summary cash flow data (in thousands):

Three Months Ended

March 31, 

2021

2020

Net cash provided by (used in):

Operating activities

$

347

$

293

Investing activities

 

207

 

289

Financing activities

 

(763)

 

(841)

Net decrease in cash and cash equivalents

$

(209)

$

(259)

During the respective three months ended March 31, 2021 and 2020, the Company’s main sources of liquidity were cash flows from its portfolio of operating lease contracts, principal payments on its investments in notes receivable and proceeds from sales of lease assets and/or early termination of certain notes receivable. Principal payments received on the notes receivable totaled $128 thousand for the three months ended March 31, 2021; and, proceeds from sales of assets and/or early termination of notes receivable totaled $289 thousand during the first three months of 2020. There were no early termination of notes during the first three months of 2021. The Company received $79 thousand of proceeds from the sale of securities during the three months ended March 31, 2021. There were no such sales during the prior year period.

During the respective three months ended March 31, 2021 and 2020, cash was primarily used to pay distributions to both the Other Members and the Managing Member, and to repay borrowings under non-recourse debt. Distributions paid totaled $513 thousand for each three-month periods ended March 31, 2021 and 2020; and, repayments of borrowings under non-recourse debt totaled $250 thousand and $328 thousand for the respective three months ended March 31, 2021 and 2020.

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Distributions

The Unitholders of record are entitled to certain distributions as provided under the Operating Agreement. The Company commenced periodic distributions beginning with the month of February 2016.

Cash distributions were paid by the Fund to Unitholders of record as of August 31, 2020, and paid through March 31, 2021. The distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets; see the discussion in the Prospectus under “Income, Losses and Distributions.” Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.

The cash distributions were based on current and anticipated gross revenues from the loans funded and equity investments acquired. During the Fund’s acquisition and operating stages, the Fund may incur short term borrowing to fund regular distributions of such gross revenues to be generated by newly acquired transactions during their respective initial fixed terms. As such, all Fund periodic cash distributions made during these stages have been, and are expected in the future to be, based on the Fund’s actual and anticipated gross revenues to be generated from the binding initial terms of the loans and investments funded.

The following table summarizes distribution activity for the Fund from inception through March 31, 2021 (in thousands except for Units and Per Unit Data):

Total

Weighted

Return of

Distribution

Total

Distribution

Average Units

Distribution Period (1)

  

Paid

  

Capital

  

  

of Income

  

  

Distribution

  

  

per Unit (2)

  

Outstanding (3)

Monthly and quarterly distributions

  

  

Feb 2016 - Nov 2016

Apr 2016 - Dec 2016

$

492

$

$

492

$

0.64

770,832

Dec 2016 - Nov 2017

Jan 2017 - Dec 2017

 

1,540

 

 

1,540

0.78

1,967,313

Dec 2017 - Nov 2018

Jan 2018 - Dec 2018

2,043

2,043

0.80

2,562,088

Dec 2018 - Nov 2019

Jan 2019 - Dec 2019

2,052

2,052

0.80

2,565,749

Dec 2019 - Nov 2020

Jan 2020 - Dec 2020

2,052

2,052

0.80

2,565,749

Dec 2020 - Feb 2021

Jan 2021 - Mar 2021

513

513

0.20

2,565,749

$

8,692

$

$

8,692

$

4.02

Source of distributions

 

 

  

 

 

 

Lease and loan payments and sales proceeds received

$

8,692

100.00%

$

0.00%

$

8,692

100.00%

 

 


(1)Investors may elect to receive their distributions either monthly or quarterly. See “Timing and Method of Distributions” on Page 67 of the Prospectus.
(2)Total distributions per Unit represents the per Unit distributions rate for those units which were outstanding for all of the applicable period.
(3)Balances shown represent weighted average units for the period from February 2 - November 30, 2016, December 1, 2016 - November 30, 2017, December 1, 2017 - November 30, 2018, December 1, 2018 - November 30, 2019, December 1, 2019 - November 30, 2020, December 1, 2020 - November 30, 2020, and December 1, 2020 - February 28, 2021, respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At March 31, 2021, there was a commitment to purchase lease assets totaling $355 thousand. This amount represents contract awards which may be canceled by the prospective investee or may not be accepted by the Company.

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Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2 summary of significant accounting policies.

Significant Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.

The Company’s significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to the Company’s significant accounting policies since December 31, 2020.

Item 3.  Controls and procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.

The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended March 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Managing Member. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Managing Member’s financial position or results of operations.

Item 2. Defaults Upon Senior Securities.

None.

Item 3. Mine Safety Disclosures.

Not Applicable.

Item 4. Other Information.

None.

Item 5. Exhibits.

(a)Documents filed as a part of this report

1.

Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have been omitted.

2.

Other Exhibits

(31.1)

Certification of Dean L. Cash pursuant to Rules 13a-14(a)/15d-14(a)

(31.2)

Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a)

(32.1)

Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350

(32.2)

Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350

(101.INS)

XBRL Instance Document

(101.SCH)

XBRL Taxonomy Extension Schema Document

(101.CAL)

XBRL Taxonomy Extension Calculation Linkbase Document

(101.DEF)

XBRL Taxonomy Extension Definition Linkbase Document

(101.LAB)

XBRL Taxonomy Extension Label Linkbase Document

(101.PRE)

XBRL Taxonomy Extension Presentation Linkbase Document

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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.

Date: May 14, 2021

ATEL 17, LLC

(Registrant)

By:

ATEL Managing Member, LLC

Managing Member of Registrant

By:

/s/ Dean L. Cash

Dean L. Cash

Chairman of the Board, President and Chief Executive Officer of ATEL Managing Member, LLC (Managing Member)

By:

/s/ Paritosh K. Choksi

Paritosh K. Choksi

Director, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Managing Member, LLC (Managing Member)

By:

/s/ Samuel Schussler

Samuel Schussler

Senior Vice President and Chief Accounting Officer of ATEL Managing Member, LLC (Managing Member)

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