Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Statements contained in this Item 2, Managements 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, the 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 Companys performance is subject to risks relating to lessee and borrower defaults and the creditworthiness of its lessees and borrowers. The Companys 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.
The offering of ATEL 15, LLC (the Company or the Fund) was granted effectiveness by the Securities and Exchange Commission as of October 28, 2011. The offering will continue until the earlier of a period of two years from that date or until sales of Units to the public reach $150 million.
As of December 21, 2011, 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 2012. Pennsylvania subscriptions are subject to a separate escrow and are released to the Fund only when aggregate subscriptions for all investors equal to not less than $7.5 million. Total
contributions to the Fund exceeded $7.5 million on April 4, 2012, at which time a request was processed to release the Pennsylvania escrowed amounts. The Fund is actively raising capital and, as of October 31, 2012, has received cumulative contributions in the amount of $27.6 million, inclusive of the $500 initial members capital investment.
Results of Operations
The Company had net losses of $221 thousand and $436 thousand for the three and nine months ended September 30, 2012, respectively.
The Company commenced operations on December 21, 2011. In January 2012, the Fund made its first investment in a long-term operating lease. Through September 30, 2012, the Company purchased equipment for long term operating leases totaling $10.8 million and financed equipment under a direct financing lease totaling $125 thousand. The Company also funded investments in notes receivable during the period from December 21, 2011 through September 30, 2012 and had an aggregate net investment of $3.0 million in notes receivable outstanding at September 30, 2012.
Equipment under operating and direct financing leases generated revenues of $363 thousand and $691 thousand for the respective three and nine months ended September 30, 2012; while investment in notes receivable generated interest income of $93 thousand and $170 thousand for the three- and nine-month periods ended September 30, 2012, respectively.
Consistent with the growth of revenues resulting from the purchase of lease assets and funding of investments in notes, was an increase in expenses related to the acquisition and depreciation of such assets. Combined, acquisition and depreciation expenses comprised approximately 78% and 77% of total expenses for the three and nine months ended September 30, 2012. The remainder of the Companys expenses for each period, which totaled $151 thousand and $298 thousand, respectively, were largely related to startup costs, costs reimbursed to the Manager and affiliates, professional fees, interest expense, outside services,
management fees, taxes on income and franchise fees, and other operational expenses.
As defined by the ATEL 15, LLC Limited Liability Company Operating Agreement (Operating Agreement), acquisition expense shall mean expenses including, but not limited to, legal fees and expenses, travel and