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EX-32.2 - EXHIBIT 32.2 - ATEL 14, LLCv446232_exh32x2.htm
EX-32.1 - EXHIBIT 32.1 - ATEL 14, LLCv446232_exh32x1.htm
EX-31.2 - EXHIBIT 31.2 - ATEL 14, LLCv446232_exh31x2.htm
EX-31.1 - EXHIBIT 31.1 - ATEL 14, LLCv446232_exh31x1.htm

 

 

Form 10-Q

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

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

For the quarterly period ended June 30, 2016    

 
o   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 000-54356

ATEL 14, LLC

(Exact name of registrant as specified in its charter)

 
California   26-4695354
(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: Limited Liability Company Units

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act.

     
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o     Smaller reporting company x

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

The number of Limited Liability Company Units outstanding as of July 31, 2016 was 8,349,562

DOCUMENTS INCORPORATED BY REFERENCE

None.

 


 
 

TABLE OF CONTENTS

ATEL 14, LLC
 
Index

 

Part I.

Financial Information

    3  

Item 1.

Financial Statements (Unaudited)

    3  
Balance Sheets, June 30, 2016 and December 31, 2015     3  
Statements of Operations for the three and six months ended June 30, 2016 and 2015     4  
Statements of Changes in Members’ Capital for the year ended December 31, 2015 and for the six months ended June 30, 2016     5  
Statements of Cash Flows for the three and six months ended June 30, 2016 and 2015     6  
Notes to the Financial Statements     7  

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    26  

Item 4.

Controls and Procedures

    31  

Part II.

Other Information

    32  

Item 1.

Legal Proceedings

    32  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

    32  

Item 3.

Defaults Upon Senior Securities

    32  

Item 4.

Mine Safety Disclosures

    32  

Item 5.

Other Information

    32  

Item 6.

Exhibits

    32  

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 14, LLC
 
BALANCE SHEETS
 
JUNE 30, 2016 AND DECEMBER 31, 2015

(In Thousands)

   
  June 30,
2016
  December 31,
2015
     (Unaudited)
ASSETS
                 
Cash and cash equivalents   $     1,626     $     2,817  
Accounts receivable, net     89       154  
Notes receivable, net     173       398  
Investment in securities     368       368  
Fair value of warrants     572       569  
Investments in equipment and leases, net     34,995       39,120  
Due from Affiliates     47        
Prepaid expenses and other assets     90       98  
Total assets   $ 37,960     $ 43,524  
LIABILITIES AND MEMBERS’ CAPITAL
                 
Accounts payable and accrued liabilities:
                 
Managing Member   $ 67     $ 75  
Affiliates           1  
Accrued distributions to Other Members     813       813  
Other     331       305  
Non-recourse debt     10,195       12,297  
Long-term debt     2,068       2,068  
Unearned operating lease income     176       243  
Total liabilities     13,650       15,802  
Commitments and contingencies
                 
Members’ capital:
                 
Managing Member            
Other Members     24,310       27,722  
Total Members’ capital     24,310       27,722  
Total liabilities and Members’ capital   $ 37,960     $ 43,524  

See accompanying notes.

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TABLE OF CONTENTS

ATEL 14, LLC
 
STATEMENTS OF OPERATIONS
 
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2016 AND 2015

(In Thousands Except for Units and Per Unit Data)
(Unaudited)

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Revenues:
                                   
Leasing and lending activities:
                                   
Operating leases   $  2,293     $ 2,854     $ 4,788     $    5,858  
Direct financing leases     5       6       11       15  
Interest on notes receivable     5       24       13       54  
(Loss) gain on sales of lease assets and early termination of notes receivable     (126 )      311       246       448  
Gain on sales or dispositions of investment in securities           8             8  
Unrealized (loss) gain on fair valuation of warrants     (4 )      1       3       17  
Other     5       6       8       25  
Total revenues     2,178       3,210       5,069       6,425  
Expenses:
                                   
Depreciation of operating lease assets     1,484       2,126       2,971       4,418  
Asset management fees to Managing Member     121       169       251       321  
Cost reimbursements to Managing Member and/or affiliates     203       318       418       684  
(Reversal of) provision for credit losses     (11 )      7       10       37  
Impairment losses on equipment                 50        
Amortization of initial direct costs     6       19       13       41  
Interest expense     90       124       186       260  
Professional fees     22       17       113       91  
Outside services     21       15       46       34  
Taxes on income and franchise fees     6       23       14       45  
Bank charges     24       38       55       84  
Railcar maintenance     102       112       210       178  
Other     33       42       65       89  
Total expenses     2,101       3,010       4,402       6,282  
Net income   $ 77     $ 200     $ 667     $ 143  
Net income (loss):
                                   
Managing Member   $ 153     $ 153     $ 305     $ 306  
Other Members     (76 )      47       362       (163 ) 
     $ 77     $ 200     $ 667     $ 143  
Net (loss) income per Limited Liability Company Unit (Other Members)   $ (0.01 )    $ 0.01     $ 0.04     $ (0.02 ) 
Weighted average number of Units outstanding     8,364,003       8,385,839       8,364,664       8,385,927  

See accompanying notes.

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TABLE OF CONTENTS

ATEL 14, LLC
 
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 
FOR THE YEAR ENDED DECEMBER 31, 2015
AND FOR THE SIX MONTHS ENDED
JUNE 30, 2016

(In Thousands Except for Units and Per Unit Data)

       
  Other Members   Managing Member   Total
     Units   Amount
Balance December 31, 2014     8,386,015     $    35,500     $       —     $     35,500  
Repurchase of Units     (18,960 )      (74 )            (74 ) 
Distributions to Other Members ($0.90 per Unit)           (7,532 )            (7,532 ) 
Distributions to Managing Member                 (611 )      (611 ) 
Net (loss) income           (172 )      611       439  
Balance December 31, 2015     8,367,055       27,722             27,722  
Repurchase of Units     (4,593 )      (15 )            (15 ) 
Distributions to Other Members ($0.45 per Unit)           (3,759 )            (3,759 ) 
Distributions to Managing Member                 (305 )      (305 ) 
Net income           362       305       667  
Balance June 30, 2016 (Unaudited)     8,362,462     $ 24,310     $     $ 24,310  

See accompanying notes.

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TABLE OF CONTENTS

ATEL 14, LLC
 
STATEMENTS OF CASH FLOWS
 
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2016 AND 2015

(In Thousands)
(Unaudited)

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Operating activities:
                                   
Net income   $      77     $      200     $     667     $      143  
Adjustment to reconcile net income to cash provided by operating activities:
                                   
Loss (gain) on sales of lease assets and early termination of notes receivable     126       (311 )      (246 )      (448 ) 
Depreciation of operating lease assets     1,484       2,126       2,971       4,418  
Amortization of initial direct costs     6       19       13       41  
(Reversal of) provision for credit losses     (11 )      7       10       37  
Impairment losses on equipment                 50        
Gain on sales or dispositions of investment in securities           (8 )            (8 ) 
Unrealized (loss) gain on fair valuation of warrants     4       (1 )      (3 )      (17 ) 
Changes in operating assets and liabilities:
                                   
Accounts receivable     98       7       61       3  
Prepaid expenses and other assets     11       16       8       4  
Accounts payable, Managing Member     1       48       (8 )      34  
Accrued distributions to Other Members     (1 )                   
Accounts payable, other     (40 )      (270 )      26       (42 ) 
Accrued liabilities, affiliates     (121 )      (45 )      (48 )      180  
Deposits due lessees           (4 )            (4 ) 
Unearned operating lease income     (87 )      (53 )      (67 )      (15 ) 
Net cash provided by operating activities     1,547       1,731       3,434       4,326  
Investing activities:
                                   
Improvements on operating leases                       (21 ) 
Purchase of securities                       (15 ) 
Proceeds from sales of lease assets and early termination of notes receivable     452       1,244       1,314       1,567  
Principal payments received on direct financing leases     12       69       23       160  
Proceeds from sales or dispositions of investment in securities           8             8  
Principal payments received on notes receivable     84       174       219       510  
Net cash provided by investing activities     548       1,495       1,556       2,209  
Financing activities:
                                   
Repayments under non-recourse debt     (1,049 )      (1,946 )      (2,102 )      (4,064 ) 
Distributions to Other Members     (1,879 )      (1,885 )      (3,759 )      (3,772 ) 
Distributions to Managing Member     (153 )      (153 )      (305 )      (306 ) 
Repurchase of Units     (6 )      (63 )      (15 )      (63 ) 
Net cash used in financing activities     (3,087 )      (4,047 )      (6,181 )      (8,205 ) 
Net decrease in cash and cash equivalents     (992 )      (821 )      (1,191 )      (1,670 ) 
Cash and cash equivalents at beginning of period     2,618       5,797       2,817       6,646  
Cash and cash equivalents at end of period   $ 1,626     $ 4,976     $ 1,626     $ 4,976  
Supplemental disclosures of cash flow information:
                                   
Cash paid during the period for interest   $ 71     $ 106     $ 148     $ 224  
Cash paid during the period for taxes   $ 42     $ 66     $ 44     $ 68  
Schedule of non-cash transactions:
                                   
Distributions payable to Other Members at period-end   $ 813     $ 814     $ 813     $ 814  
Distributions payable to Managing Member at period-end   $ 66     $ 66     $ 66     $ 66  

See accompanying notes.

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TABLE OF CONTENTS

ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL 14, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on April 1, 2009 (“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. Prior to May 9, 2011, the Manager was named ATEL Associates 14, LLC. The Managing Member is controlled by ATEL Financial Services, LLC (“AFS”), a wholly-owned subsidiary of ATEL Capital Group. The Fund may continue until December 31, 2030. Contributions in the amount of $500 were received as of May 8, 2009, 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.

As of June 30, 2016, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable), totaling $84.0 million (inclusive of the $500 initial Member’s capital investment) have been received. As of the same date, 8,362,462 Units were issued and outstanding.

The Company is governed by the ATEL 14, LLC amended and restated limited liability company operating agreement dated October 7, 2009 (the “Operating Agreement”). 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). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and 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, 2015, filed with the Securities and Exchange Commission.

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 and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant effect on the reported financial position or results of operations.

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

In preparing the accompanying unaudited financial statements, the Managing Member has reviewed, as determined necessary by the Managing Member, events that have occurred after June 30, 2016, up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements, and adjustments thereto.

Use of estimates:

The preparation of 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

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TABLE OF CONTENTS

ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

reporting period. Actual results could differ from those 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 primary geographic region in which the Company seeks leasing opportunities is North America and Europe. For the three and six months ended June 30, 2016 and 2015, and as of June 30, 2016 and December 31, 2015, all of the Company’s operating revenues and long-lived assets relate to customers domiciled in North America.

Accounts receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts, and notes receivable which are currently due to the Company.

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness 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.

Accounts receivable 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 periodically reviews the creditworthiness of companies with lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes 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 receivable is probable. Until such time, revenues on operating leases are recognized on a cash basis. All payments received on amounts billed under direct financing leases and notes receivable are applied only against outstanding principal balances.

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 and direct financing leases.

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.

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TABLE OF CONTENTS

ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. 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.

Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. 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 $368 thousand of purchased securities at both June 30, 2016 and December 31, 2015. Based upon the Company’s review of its portfolio, no fair value adjustment was deemed necessary for the three and six months ended June 30, 2016 and 2015. Likewise, there were no sales or dispositions of securities during the three and six months ended June 30, 2016 and 2015.

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. During the respective three and six months ended June 30, 2016, the Company recorded unrealized loss of $4 thousand and a gain of $3 thousand on fair valuation of its warrants. By comparison, during the respective three and six months ended June 30, 2015, the Company recorded unrealized gains of $1 thousand and $17 thousand on fair valuation of its warrants. The unrealized gains recorded during the current year period increased the estimated fair value of the Company’s portfolio of warrants to $572 thousand at June 30, 2016 from $569 thousand at December 31, 2015. There were no exercises of warrants, net or otherwise, during the three and six months ended June 30, 2016. The Company realized $8 thousand of gains from the net exercise of warrants during both the three and six months ended June 30, 2015.

Per Unit data:

The Company issues only one class of Units, none of which are considered dilutive. Net income (loss) and distributions per Unit are based upon the weighted average number of Other Members Units outstanding during the period.

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, generally on a national exchange.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

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.

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.

Recent Accounting Pronouncements:

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 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 net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in 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. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and its operational and related disclosure requirements.

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). The new standard will require lessees to recognize lease assets and lease liabilities arising from operating leases with lease terms greater than 12 months in the statement of financial position. Lessor accounting per ASU 2016-02 is mostly unchanged from the previous lease accounting GAAP. Certain changes were made to the lessor accounting guidance in order to align the lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. Similar to the previous guidance, lessors will classify leases as operating, direct financing, or sales-type. Lessors in operating leases will continue to recognize the underlying asset and recognize income on a straight-line basis. Lessors determine whether a lease is a sale of the underlying asset based on whether the lessee effectively obtains control of the underlying assets. ASU-2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its operational and related disclosure requirements.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

2. Summary of significant accounting policies: - (continued)

In January 2016, FASB issued Accounting Standards Update 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The new standard provides guidance related to accounting for equity investments and 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. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Management is currently evaluating the standard and its operational and related disclosure requirements.

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU-2014-15”). The new standard provides guidance relative to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Company’s financial statements or related disclosures.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts from Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company evaluated the impact of the new standard on its financial statements and has determined that such impact is virtually non-existent as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues.

3. Notes receivable, net:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. The notes are generally secured by the equipment financed. As of June 30, 2016, the original terms of the notes receivable are from 42 to 48 months and bear interest at rates ranging from 12.35% to 18.00% per annum. The notes had a net outstanding balance of $173 thousand and $398 thousand at June 30, 2016 and December 31, 2015, respectively. The notes all mature in 2016.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

3. Notes receivable, net: - (continued)

At both June 30, 2016 and December 31, 2015, two of the Company’s notes receivable were on non-accrual status, respectively. Details are as follows, in thousands, except for the number of notes receivable and the interest rate:

   
  Notes receivable
     Non-accrual
     June 30,
2016
  December 31,
2015
Number of notes            2              2  
Net investment value   $ 92     $ 81  
Annual interest rate     18.00 %      18.00 % 
Fair value adjustments   $ 69     $ 50  
Fair value amount   $ 23     $ 31  
Interest income not recorded relative to original terms   $ 8     $ 7  

 
Date   Note modification
December 1, 2014   Notes placed on non-accrual status.
January 1, 2015   Defer payment of principal, interest-only payments at their original rates through June 30, 2015. Payments will be adjusted so ultimate amounts paid will reflect interest earned at 18% per annum related to the entire term from the original funding date.
1st quarter 2015   Impairment totaling $33 thousand was recorded.
3rd quarter 2015   Impairment totaling $30 thousand was recorded.
4th quarter 2015   Extend interest only payments through June 30, 2016.
     Entire balance on the notes due on July 1, 2016.
1st quarter 2016   Impairment totaling $6 thousand was recorded.
Current status   Payment on note outstanding balance has not been received.

As of June 30, 2016, the net outstanding balance of $173 thousand was comprised of future minimum payments receivable through July 2016, totaling $306 thousand, less unearned interest income of $64 thousand and an allowance for credit losses totaling $69 thousand.

Initial direct costs (“IDC”) amortization expense related to notes receivable and the Company’s operating and direct finance leases for the three and six months ended June 30, 2016 and 2015 are as follows (in thousands):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
IDC amortization – notes receivable   $       —     $       1     $       —     $        2  
IDC amortization – lease assets     6       18       13       39  
Total   $ 6     $ 19     $ 13     $ 41  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses:

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

           
  Accounts Receivable Allowance
for Doubtful Accounts
  Valuation Adjustments on
Financing Receivables
  Total
Allowance for
Credit Losses
     Notes
Receivable
  Finance
Leases
  Operating
Leases
  Notes
Receivable
  Finance Leases
Balance December 31, 2014   $       —     $       —     $       5     $       —     $       —     $        5  
Provision for credit losses                 5       63             68  
Balance December 31, 2015                 10       63             73  
Provision for credit losses                 4       6             10  
Balance June 30, 2016   $     $     $ 14     $ 69     $     $ 83  

As of June 30, 2016 and December 31, 2015, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded investment in financing receivables were as follows (in thousands):

     
June 30, 2016   Notes
Receivable
  Finance
Leases
  Total
Allowance for credit losses:
                          
Ending balance   $       69     $       —     $       69  
Ending balance: individually evaluated for impairment   $ 69     $     $ 69  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  
Financing receivables:
                          
Ending balance   $ 242     $ 39     $ 281  
Ending balance: individually evaluated for impairment   $ 242     $ 39     $ 281  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  

     
December 31, 2015   Notes
Receivable
  Finance
Leases
  Total
Allowance for credit losses:
                          
Ending balance   $       63     $       —     $       63  
Ending balance: individually evaluated for impairment   $ 63     $     $ 63  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  
Financing receivables:
                          
Ending balance   $ 461     $ 62     $ 523  
Ending balance: individually evaluated for impairment   $ 461     $ 62     $ 523  
Ending balance: collectively evaluated for impairment   $     $     $  
Ending balance: loans acquired with deteriorated credit quality   $     $     $  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

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.

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 June 30, 2016 and December 31, 2015, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

       
  Notes Receivable   Finance Leases
     June 30,
2016
  December 31,
2015
  June 30,
2016
  December 31,
2015
Pass   $      150     $      362     $       39     $        62  
Special mention                        
Substandard     92       99              
Doubtful                        
Total   $ 242     $ 461     $ 39     $ 62  

As of June 30, 2016 and December 31, 2015, the Company’s impaired loans were as follows (in thousands):

         
  Impaired Loans
June 30, 2016   Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
With no related allowance recorded Notes receivable   $       —     $       —     $       —     $       —     $       —  
With an allowance recorded
Notes receivable
    92       92       69       94        
Total   $ 92     $ 92     $ 69     $ 94     $  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

         
  Impaired Loans
December 31, 2015   Recorded
Investment
  Unpaid
Principal
Balance
  Related
Allowance
  Average
Recorded
Investment
  Interest
Income
Recognized
With no related allowance recorded Notes receivable   $       —     $       —     $       —     $       —     $       —  
With an allowance recorded
Notes receivable
    99       99       63       104        
Total   $ 99     $ 99     $ 63     $ 104     $  

At June 30, 2016 and December 31, 2015, the investment in financing receivables is aged as follows (in thousands):

             
June 30, 2016   31 – 60 Days
Past Due
  61 – 90 Days
Past Due
  Greater Than
90 Days
  Total Past
Due
  Current   Total Financing
Receivables
  Recorded
Investment
> 90 Days and
Accruing
Notes receivable   $      —     $      —     $      —     $      —     $     242     $     242     $      —  
Finance leases           37             37       2       39        
Total   $     $ 37     $     $ 37     $ 244     $ 281     $  

             
December 31, 2015   31 – 60 Days
Past Due
  61 – 90 Days
Past Due
  Greater Than
90 Days
  Total Past
Due
  Current   Total
Financing
Receivables
  Recorded
Investment
> 90 Days and
Accruing
Notes receivable   $      —     $      —     $      —     $      —     $     461     $     461     $      —  
Finance leases                             62       62        
Total   $     $     $     $     $ 523     $ 523     $  

At both June 30, 2016 and December 31, 2015, the Company had two notes receivable which were on non-accrual status (See Note 3).

5. Investments in equipment and leases, net:

The Company’s investment in leases consists of the following (in thousands):

       
  Balance December 31,
2015
  Reclassifications,
Improvements/
Dispositions and
Impairment
Losses
  Depreciation/
Amortization
Expense or
Amortization of
Leases
  Balance
June 30,
2016
Net investment in operating leases   $     38,403     $       (588 )    $     (2,971 )    $    34,844  
Net investment in direct financing leases     62             (23 )      39  
Assets held for sale or lease, net     608       (530 )            78  
Initial direct costs, net of accumulated amortization of $106 at June 30, 2016 and $96 at December 31, 2015     47             (13 )      34  
Total   $ 39,120     $ (1,118 )    $ (3,007 )    $ 34,995  

Impairment of investments in leases:

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

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Investments in equipment and leases, net: - (continued)

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, if any. 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.

As a result of these reviews, the Company determined that no impairment losses existed during the first six months of 2016. There were no fair value adjustments recorded during the first six months of 2015 as well.

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 $1.5 million and $2.1 million for the respective three months ended June 30, 2016 and 2015, and $3.0 million and $4.4 million for the respective six months ended June 30, 2016 and 2015.

IDC amortization expense related to operating leases and direct financing leases totaled $6 thousand and $18 thousand for the respective three months ended June 30, 2016 and 2015, and $13 thousand and $39 thousand for the respective six months ended June 30, 2016 and 2015. (See Note 3).

Operating leases:

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

       
  Balance
December 31,
2015
  Improvements   Reclassifications
or Dispositions
  Balance
June 30,
2016
Marine vessel   $     19,410     $       —     $       —     $     19,410  
Transportation, rail     18,837             (31 )      18,806  
Manufacturing     7,832                   7,832  
Transportation     7,516                   7,516  
Materials handling     5,653             (2,446 )      3,207  
Construction     3,005                   3,005  
Research     2,250                   2,250  
Agriculture     851                   851  
Air support equipment     120                   120  
Other     119             (31 )      88  
       65,593             (2,508 )      63,085  
Less accumulated depreciation     (27,190 )      (2,971 )      1,920       (28,241 ) 
Total   $ 38,403     $ (2,971 )    $ (588 )    $ 34,844  

The average estimated residual value for assets on operating leases was 37% of the assets’ original cost at both June 30, 2016 and December 31, 2015. There were no operating leases in non-accrual status at both June 30, 2016 and December 31, 2015.

All of the Company’s lease asset purchases and capital improvements were made during the years from 2009 through 2015.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

5. Investments in equipment and leases, net: - (continued)

Direct financing leases:

As of June 30, 2016 and December 31, 2015, investment in direct financing leases consists of various types of materials handling and computer-related equipment and cleaning and maintenance equipment. The components of the Company’s investment in direct financing leases as of June 30, 2016 and December 31, 2015 are as follows (in thousands):

   
  June 30,
2016
  December 31,
2015
Total minimum lease payments receivable   $       60     $       94  
Estimated residual values of leased equipment (unguaranteed)     3       4  
Investment in direct financing leases     63       98  
Less unearned income     (24 )      (36 ) 
Net investment in direct financing leases   $ 39     $ 62  

As of June 30, 2016 and December 31, 2015, there were no investments in direct financing leases in non-accrual status.

At June 30, 2016, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

     
  Operating
Leases
  Direct
Financing
Leases
  Total
Six months ending December 31, 2016   $     3,305     $         12     $     3,317  
Year ending December 31, 2017     5,939       26       5,965  
2018     4,460       22       4,482  
2019     1,230             1,230  
2020     217             217  
2021     54             54  
     $ 15,205     $ 60     $ 15,265  

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of June 30, 2016, 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 – 40  
Marine vessel     20 – 30  
Air support equipment     15 – 20  
Manufacturing     10 – 15  
Agriculture     7 – 10  
Construction     7 – 10  
Materials handling     7 – 10  
Transportation     7 – 10  
Research     5 – 7  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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, 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 ATEL Financial Services, LLC (“AFS”) and ATEL Leasing Corporation (“ALC”) is a wholly-owned subsidiary of ATEL Capital Group 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 of costs and expenses, pursuant to the Operating Agreement, during the three and six months ended June 30, 2016 and 2015 as follows (in thousands):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Administrative costs reimbursed to Managing Member and/or affiliates   $     203     $     318     $     418     $     684  
Asset management fees to Managing Member     121       169       251       321  
     $ 324     $ 487     $ 669     $ 1,005  

7. Non-recourse debt:

At June 30, 2016, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 1.61% to 3.00% per annum. The notes are secured by assignments of lease payments and pledges of assets. At June 30, 2016, gross operating lease rentals totaled $11 million over the remaining lease terms, and the carrying value of the pledged assets is $22 million. The notes mature at various dates from 2016 through 2019.

The non-recourse debt does not contain any material financial covenants. The debt is secured by a specific 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 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

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

7. Non-recourse debt: - (continued)

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.

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

     
  Principal   Interest   Total
Six months ending December 31, 2016    $     2,034     $      122     $     2,156  
Year ending December 31, 2017      3,932       166       4,098  
2018      3,233       71       3,304  
2019      996       8       1,004  
     $ 10,195     $ 367     $ 10,562  

8. Long-term debt:

As of June 30, 2016, the $2.1 million of long-term debt consists of a note payable to a lender. Such debt was utilized during the fourth quarter of 2013 to partially fund the marine vessel and related bareboat charter purchased by the Fund and its affiliate, ATEL 15, LLC. The note bears interest at a fixed-rate of 3.5% per annum, to accrue in arrears on a monthly basis. The full pro rata principal amount of $2.1 million plus all outstanding accrued and unpaid interest of approximately $400 thousand shall be paid in one payment of $2.5 million due on May 25, 2019. The note is recourse to the residual value of the vessel which is expected to be well in excess of the note amount. In addition, the lender has recourse to the Fund’s general assets up to $2.5 million. The note does not contain any material financial covenants and is guaranteed as a senior obligation of the Fund.

9. Borrowing facilities:

The Company participates with AFS and certain of its affiliates in a revolving credit facility (the “Credit Facility”) with a syndicate of financial institutions as lenders. The Credit Facility is comprised of a working capital facility to AFS, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”) to AFS, the Company and affiliates, and a venture facility available to an affiliate. As of June 30, 2016, the Credit Facility is for an amount up to $75.0 million and is set to expire in June 2017. 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 under the Acquisition Facility, and on a pro-rata basis under the Warehouse Facility. Such Credit Facility includes certain financial covenants.

As of June 30, 2016 and December 31, 2015, borrowings under the Credit Facility were as follows (in thousands):

   
  June 30,
2016
  December 31,
2015
Total available under the financing arrangement   $     75,000     $     75,000  
Amount borrowed by the Company under the acquisition facility            
Amounts borrowed by affiliated partnerships and limited liability companies under the venture, acquisition and warehouse facilities     (13,867 )      (1,090 ) 
Total remaining available under the venture, acquisition and warehouse facilities   $ 61,133     $ 73,910  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

9. Borrowing facilities: - (continued)

The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of June 30, 2016, 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 the 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.

As of June 30, 2016, the Company’s Tangible Net Worth requirement under the Credit Facility was $10.0 million, the permitted maximum leverage ratio 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 $24.3 million, 0.50 to 1, and 21.96 to 1, respectively, as of June 30, 2016. As such, as of June 30, 2016, 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/Eurocurrency rate of 1-, 2-, 3- or 6-month maturity plus a lender designated spread, 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. The Company had no borrowings outstanding at June 30, 2016 and December 31, 2015.

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 June 30, 2016, the investment program participants were the Company, ATEL 15, LLC 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.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

9. Borrowing facilities: - (continued)

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.

There were no borrowings under the Warehouse Facility as of June 30, 2016 and December 31, 2015.

10. Commitments:

At June 30, 2016, there were no commitments to fund investments in notes receivable and to purchase lease assets.

11. Members’ capital:

A total of 8,362,462 Units and 8,367,055 Units were issued and outstanding as of June 30, 2016 and December 31, 2015, respectively, 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.

Distributions to the Other Members for the three and six months ended June 30, 2016 and 2015 were as follows (in thousands except Units and per Unit data):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Distributions declared   $   1,879     $   1,883     $   3,759     $   3,770  
Weighted average number of Units outstanding     8,364,003       8,385,839       8,364,664       8,385,927  
Weighted average distributions per Unit   $ 0.22     $ 0.22     $ 0.45     $ 0.45  

12. Fair value measurements:

At June 30, 2016 and December 31, 2015, only the Company’s warrants were measured on a recurring basis. In addition, certain notes receivable and off-lease equipment deemed impaired were measured at fair value on a non-recurring basis as of June 30, 2016 and December 31, 2015.

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 was determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, and a risk free interest rate for the term(s) of the warrant exercise(s). As of June 30, 2016 and December 31, 2015, the calculated fair value of the Fund’s warrant portfolio approximated $572 thousand and $569 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

The fair value of warrants that were accounted for on a recurring basis as of the three and six months ended June 30, 2016 and 2015 and classified as level 3 are as follows (in thousands):

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Fair value of warrants at beginning of period   $     576     $     611     $     569     $     595  
Unrealized (loss) gain on fair valuation of warrants     (4 )      1       3       17  
Fair value of warrants at end of period   $ 572     $ 612     $ 572     $ 612  

Impaired notes receivable (non-recurring)

The fair value of the Company’s notes receivable, when impairment adjustments are required, is estimated using either third party appraisals or estimations of the value of collateral (for collateral dependent loans) or discounted cash flow analyses (by discounting estimated future cash flows) using the effective interest rate contained in the terms of the original loan. During the six months ended June 30, 2016, fair value adjustments totaling $6 thousand were recorded to further reduce the cost basis of two impaired notes that were originally written-down in 2015. During 2015, the fair value adjustments recorded on these notes totaled $63 thousand.

The fair value adjustments were non-recurring and were based upon an estimated valuation of underlying collateral. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of the impaired notes receivable is classified within Level 3 of the valuation hierarchy. The valuation utilizes a market approach technique and uses inputs from third party appraisers that utilize current market transactions as adjusted for certain factors specific to the underlying collateral.

Impaired off-lease equipment (non-recurring)

During the first six months of 2016, the Company recorded fair value adjustments totaling $50 thousand to reduce the cost basis of certain off-lease construction equipment. Subsequently, the equipment was sold. During 2015, the Company recorded $49 thousand of fair value adjustments relative to impaired off-lease research equipment, none of which was recorded during the first quarter of 2015.

Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of impaired lease assets were classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of such assets reflect significant inputs that are unobservable in the market. Such valuation utilizes a market approach technique and uses inputs that reflect the sales price of similar assets sold by affiliates and/or information from third party remarketing agents not readily available in the market.

The following table presents the fair value measurement of impaired assets measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at June 30, 2016 and December 31, 2015 (in thousands):

       
  June 30,
2016
  Level 1
Estimated
Fair Value
  Level 2
Estimated
Fair Value
  Level 3
Estimated
Fair Value
Assets measured at fair value on a non-recurring basis:
                                   
Impaired notes receivable, net   $     23     $     —     $     —     $     23  

       
  December 31,
2015
  Level 1
Estimated
Fair Value
  Level 2
Estimated
Fair Value
  Level 3
Estimated
Fair Value
Assets measured at fair value on a non-recurring basis:
                                   
Impaired notes receivable, net   $     36     $     —     $     —     $     36  
Impaired off-lease equipment     200                   200  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

The following tables summarize 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 June 30, 2016 and December 31, 2015:

       
June 30, 2016
Name   Valuation
Frequency
  Valuation
Technique
  Unobservable Inputs   Range of
Input Values
Warrants     Recurring       Black-Scholes formulation       Stock price     $ 0.35 – $1,000.00  
                         Exercise price     $ 0.36 – $1,000.00  
                         Time to maturity (in years)       0.12 – 9.58  
                         Risk-free interest rate       0.20% – 1.46%  
                         Annualized volatility       14.89% – 100.00%  
Notes Receivable     Non-recurring       Market Approach       Third Party Agents’ estimate of   the value of collateral     $ 6,530 – $17,051  
                         Condition of collateral
(equipment)
      Poor to Average  

       
December 31, 2015
Name   Valuation
Frequency
  Valuation
Technique
  Unobservable Inputs   Range of
Input Values
Warrants     Recurring       Black-Scholes formulation       Stock price     $ 0.35 – $1,000.00  
                         Exercise price     $ 0.36 – $1,000.00  
                         Time to maturity (in years)       0.62 – 7.01  
                         Risk-free interest rate       0.52% – 2.09%  
                         Annualized volatility       13.96% – 100.00%  
Notes Receivable     Non-recurring       Market Approach       Third Party Agents’ estimate of   the value of collateral     $ 6,530 – $17,051  
                         Condition of collateral
  (equipment)
      Poor to Average  
Lease Equipment     Non-recurring       Market Approach       Third Party Agents’ Pricing
  Quotes – per equipment
    $ 200,000
(total of $200,000)
 
                         Equipment condition       Poor to Average  

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.

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

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.

Investment in securities

The Company’s investment securities are not registered for public sale and are carried at cost which management believes approximates fair value, as appropriately adjusted for impairment.

Non-recourse debt and Long-term debt

The fair value of the Company’s non-recourse and long-term 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.

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 June 30, 2016 and December 31, 2015 (in thousands):

         
  Fair Value Measurements at June 30, 2016
     Carrying
Value
  Level 1   Level 2   Level 3   Total
Financial assets:
                                            
Cash and cash equivalents   $     1,626     $     1,626     $      —     $      —     $     1,626  
Notes receivable, net     173                   173       173  
Investment in securities     368                   368       368  
Fair value of warrants     572                   572       572  
Financial liabilities:
                                            
Non-recourse debt     10,195                   10,303       10,303  
Long-term debt     2,068                   2,331       2,331  

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ATEL 14, LLC
 
NOTES TO FINANCIAL STATEMENTS
(Unaudited)

12. Fair value measurements: - (continued)

         
  Fair Value Measurements at December 31, 2015
     Carrying
Value
  Level 1   Level 2   Level 3   Total
Financial assets:
                                            
Cash and cash equivalents   $     2,817     $     2,817     $      —     $      —     $     2,817  
Notes receivable, net     398                   398       398  
Investment in securities     368                   368       368  
Fair value of warrants     569                   569       569  
Financial liabilities:
                                            
Non-recourse debt     12,297                   12,315       12,315  
Long-term debt     2,068                   2,248       2,248  

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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,” 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 defaults and the creditworthiness of its lessees. 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 market 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 14, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on April 1, 2009 (“Date of Inception”) for the purpose of equipment financing and acquiring equipment to engage in equipment leasing and sales activities.

The Company may continue until December 31, 2030. Periodic distributions are paid at the discretion of the Managing Member.

Results of Operations

The three months ended June 30, 2016 versus the three months ended June 30, 2015

The Company had net income of $77 thousand and a net income of $200 thousand for the three months ended June 30, 2016 and 2015, respectively. Results for the second quarter of 2016 reflect decreases in both total revenues and total expenses when compared to the prior year period.

Revenues

Total revenues for the second quarter of 2016 decreased by $1 million, or 32%, as compared to the prior year period. Such decrease was primarily a result of a reduction in operating lease revenues offset, in part, by an unfavorable change in gain or loss recognized on sales of lease assets and termination of notes receivable.

The decrease in operating lease revenues totaled $561 thousand and was primarily attributable to run-off and dispositions of lease assets.

The unfavorable change in gain or loss recognized on sales of lease assets and early termination of notes receivable totaled $437 thousand. Such unfavorable change was mainly due to a change in the mix of assets sold.

Expenses

Total expenses for the second quarter of 2016 decreased by $909 thousand, or 31%, as compared to the prior year period. Such decrease was primarily a result of decreases in depreciation expense, asset management fees to Managing Member, costs reimbursed to the Managing Member and interest expense.

The decrease in depreciation expense totaled $642 thousand and was largely a result of run-off and sales of lease assets. Asset management fee to Managing Member decreased by $48 thousand due to a decrease in managed assets and related rents. Costs reimbursed to the Managing Member were reduced by $115 thousand as a result of lower allocated costs based, in part, on the Fund’s declining asset base. Interest expense decreased by $34 thousand due to a $5.0 million decline in outstanding debt since June 30, 2015.

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The six months ended June 30, 2016 versus the six months ended June 30, 2015

The Company had net income of $667 thousand and a net income of $143 thousand for the six months ended June 30, 2016 and 2015, respectively. Results for the first half of 2016 reflect decreases in both total expenses and total revenues when compared to the prior year period.

Revenues

Total revenues for the first half of 2016 decreased by $1.4 million, or 21%, as compared to the prior year period. Such decrease was largely due to reductions in operating lease revenues, gain on sales of lease assets and early termination of notes receivable and interest on notes receivable.

The decrease in operating lease revenues totaled $1.1 million and was mainly due to run-off and dispositions of lease assets. Gain on sales of lease assets and early termination of notes receivable decreased by $202 thousand largely due to a change in the mix of assets sold.

Interest on notes receivables was reduced by $41 thousand largely due to the early termination of certain notes.

Expenses

Total operating expenses for the first half of 2016 decreased by $1.9 million, or 30%, as compared to the prior year period. The decrease in total expenses was largely a result of reductions in depreciation expense, railcar maintenance costs, interest expense, costs reimbursements and asset management fees paid to the Manager.

The decrease in depreciation expense totaled $1.4 million and was largely a result of run-off and sales of lease assets. Railcar maintenance costs were increased by $32 thousand mainly due to an increase in required maintenance and repairs on the Fund’s remaining railcars.

Interest expense decreased by $74 thousand due to a $5.0 million reduction in outstanding debt since June 30, 2015. Cost reimbursements paid to the Manager declined by $266 thousand as a result of lower allocated costs based, in part, on the Fund’s declining asset base. Asset management fees paid to the Manager was reduced by $70 thousand largely due to a decrease in managed assets and related rents.

Capital Resources and Liquidity

At June 30, 2016 and December 31, 2015, the Company’s cash and cash equivalents totaled $1.6 million and $2.8 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 lease assets are acquired, 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. The Managing Member envisions no such requirements for operating purposes.

Cash Flows

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

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
     2016   2015   2016   2015
Net cash provided by (used in):
                                   
Operating activities   $     1,547     $     1,731     $     3,434     $     4,326  
Investing activities     548       1,495       1,556       2,209  
Financing activities     (3,087 )      (4,047 )      (6,181 )      (8,205 ) 
Net decrease in cash and cash equivalents   $ (992 )    $ (821 )    $ (1,191 )    $ (1,670 ) 

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The three months ended June 30, 2016 versus the three months ended June 30, 2015

During the three months ended June 30, 2016 and 2015, the Company’s primary sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $452 thousand and $1,244 thousand of proceeds from sales of lease assets and/or the early termination of notes receivable during the respective three months ended June 30, 2016 and 2015.

During the same comparative periods, cash was primarily used to pay distributions to both Other Members and the Managing Member, and to repay debt. Distributions paid to both Other Members and the Managing Member totaled $2.0 million for each of the three months ended June 30, 2016 and 2015. Cash used to repay debt totaled $1.0 million and $1.9 million for the three months ended June 30, 2016 and 2015, respectively.

The six months ended June 30, 2016 versus the six months ended June 30, 2015

During the six months ended June 30, 2016 and 2015, the Company’s primary sources of liquidity were cash flows from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $1.3 million and $1.6 million of proceeds from sales of lease assets and the early termination of notes receivable during the respective six months ended June 30, 2016 and 2015.

During the same comparative periods, cash was primarily used to repay debt and to pay distributions to both Other Members and the Managing Member. Cash used to repay debt totaled $2.1 million and $4.1 million for the respective six months ended June 30, 2016 and 2015. Distributions paid to both Other Members and Managing Member totaled $4.1 million for each of the aforementioned six month-periods.

Revolving credit facility

Effective June 15, 2010, the Company participated with AFS and certain of its affiliates in a revolving credit facility (the “Credit Facility”) with a syndicate of financial institutions as lenders. The Credit Facility is comprised of a working capital facility to AFS, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”) to AFS, the Company and affiliates, and a venture facility available to an affiliate. As of June 30, 2016, such Credit Facility is for an amount up to $75.0 million and is set to expire on June 30, 2017. 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 under the Acquisition Facility, and on a pro-rata basis under the Warehouse Facility. Such Credit Facility includes certain financial covenants.

Compliance with covenants

The Credit Facility includes certain financial and non-financial covenants applicable to each borrower, including the Company. Such covenants include covenants typically found in credit facilities of the size and nature of the Credit Facility, such as accuracy of representations, good standing, absence of liens and material litigation, etc. The Company was in compliance with all applicable covenants under the Credit Facility as of June 30, 2016. The Company considers certain financial covenants to be material to its ongoing use of the Credit Facility and these covenants are described below.

Material financial covenants

Under the Credit Facility, the Company is required to maintain a specific tangible net worth, to comply with a leverage ratio and an interest coverage ratio, and to comply with other terms expressed in the Credit Facility, including limitation on the incurrence of additional debt and guaranties, defaults, and delinquencies.

As of June 30, 2016, the material financial covenants are summarized as follows:

Minimum Tangible Net Worth: $10.0 million
Leverage Ratio (leverage to Tangible Net Worth): Not to exceed 1.25 to 1
Collateral Value: Collateral value under the Warehouse Facility must be no less than the outstanding
borrowings under that facility
EBITDA to Interest Ratio: Not to be less than 2 to 1 for the four fiscal quarters just ended

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“EBITDA” is defined under the Credit Facility as, for the relevant period of time (1) gross revenues (all payments from leases and notes receivable) for such period minus (2) expenses deducted in determining net income for such period plus (3) to the extent deducted in determining net income for such period (a) provision for income taxes and (b) interest expense, and (c) depreciation, amortization and other non-cash charges. Extraordinary items and gains or losses on (and proceeds from) sales or dispositions of assets outside of the ordinary course of business are excluded in the calculation of EBITDA. “Tangible Net Worth” is defined as, as of the date of determination, (i) the net worth of the Company, after deducting there from (without duplication of deductions) the net book amount of all assets of the Company, after deducting any reserves and other amounts for assets which would be treated as intangibles under accounting principles generally accepted in the United States of America (“GAAP”), and after certain other adjustments permitted under the agreements.

The financial covenants referred to above are applicable to the Company only to the extent that the Company has borrowings outstanding under the Credit Facility. The Company was in compliance with these financial covenants under the Credit Facility with a minimum Tangible Net Worth, leverage ratio and (EBITDA) interest coverage ratio, as calculated per the Credit Facility agreement of $24.3 million, 0.51 to 1, and 21.96 to 1, respectively, as of June 30, 2016. As such, as of June 30, 2016, the Company was in compliance with all such material financial covenants.

Reconciliation to GAAP of EBITDA

For purposes of compliance with the Credit Facility covenants, the Company uses a financial calculation of EBITDA, as defined therein, which is a non-GAAP financial performance measure. The EBITDA is utilized by the Company to calculate its debt covenant ratios.

The following is a reconciliation of net income to EBITDA, as defined in the loan agreement, for the twelve months ended June 30, 2016 (in thousands):

 
Net income – GAAP basis   $    963  
Interest expense     402  
Depreciation and amortization     6,587  
Amortization of initial direct costs     39  
Impairment losses     99  
Provision for credit losses     40  
Unrealized loss on fair valuation of warrants     41  
Principal payments received on direct financing leases     130  
Principal payments received on notes receivable     528  
EBITDA (for Credit Facility financial covenant calculation only)   $ 8,829  

For detailed information on the Company’s debt obligations, see Notes 7 through 9 to the financial statements as set forth in Part I, Item 1, Financial Statements (Unaudited).

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 December 2009. Additional distributions have been consistently made through June 30, 2016.

Cash distributions were paid by the Fund to Unitholders of record as of February 29, 2016, and paid through June 30, 2016. 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

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operating cash flow in additional portfolio assets. See the discussion in the ATEL 14, LLC Prospectus dated October 7, 2009 (“Prospectus”) under “Income, Losses and Distributions — Reinvestment.” Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.

Cash distributions were based on current and anticipated gross revenues from the leases and loans 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 leases and loans acquired.

The following table summarizes distribution activity for the Fund from inception through June 30, 2016 (in thousands except for Units and Per Unit Data):

                 
                 
Distribution Period(1)   Paid   Return of
Capital
    Distribution
of Income
    Total
Distribution
    Total Distribution
per Unit(2)
  Weighted
Average Units
Outstanding(3)
Monthly and quarterly distributions
                                                                                
Oct 2009 – Feb 2010
                                                                                
(Distribution of escrow interest)     Jan – Mar 2010     $              $              $              $       n/a  
Dec 2009 – Dec 2010     Jan 2010 – 
Jan 2011
      2,003                               2,003                0.90       2,214,171  
Jan 2011 – Nov 2011     Feb 2011 – 
Dec 2011
      4,855                               4,855                0.87       5,597,722  
Dec 2011 – Nov 2012     Jan – Dec 2012       7,562                               7,562                0.90       8,400,238  
Dec 2012 – Nov 2013     Jan – Dec 2013       7,550                               7,550                0.90       8,389,923  
Dec 2013 – Nov 2014     Jan – Dec 2014       7,548                               7,548                0.90       8,386,015  
Dec 2014 – Nov 2015     Jan – Dec 2015       7,535                               7,535                0.90       8,378,495  
Dec 2015 – May 2016     Jan – Jun
2016
      3,759                         3,759             0.45       8,365,361  
           $ 40,812           $           $ 40,812           $    5.82        
Source of distributions
                                                                                
Lease and loan payments received            $ 40,812       100.00 %    $              $ 40,812       100.00 %                   
Interest income                    0.00 %                           0.00 %                   
Debt against non-cancellable firm term payments on leases and loans                 0.00 %                        0.00 %             
           $   40,812       100.00 %    $     —           $   40,812       100.00 %             

(1) Investors may elect to receive their distributions either monthly or quarterly (See “Timing and Method of Distributions” on Page 73 of the Prospectus).
(2) Total distributions per Unit represents the per Unit distribution rate for those units which were outstanding for all of the applicable period.
(3) Balances shown represent weighted average units for the year ended December 31, 2010, and the periods from January 1 — November 30, 2011, December 1, 2011 — November 30, 2012, December 1, 2012 — November 30, 2013, December 1, 2013 — November 30, 2014, December 1, 2014 — November 30, 2015 and December 31, 2015 to February 29, 2016, respectively.

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Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2016, there were no commitments to fund investments in notes receivable and to purchase lease assets.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2 Summary of Significant Accounting Policies.

Critical 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 critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2015. There have been no material changes to the Company’s critical accounting policies since December 31, 2015.

Item 4. 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 and Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-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, the Chief Executive Officer and Executive Vice President and Chief Financial and Operating Officer 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 June 30, 2016 that have materially affected, or are 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. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Documents filed as a part of this report
1. Financial Statement Schedules

All other 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   Rule 13a-14(a)/15d-14(a) Certification of Dean L. Cash
31.2   Rule 13a-14(a)/15d-14(a) Certification of Paritosh K. Choksi
32.1   Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
32.2   Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document

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SIGNATURES

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

Date: August 12, 2016

ATEL 14, 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)