Attached files

file	filename
EX-32.2 - EXHIBIT 32.2 - ATEL 16, LLC	v477477_exh32x2.htm
EX-32.1 - EXHIBIT 32.1 - ATEL 16, LLC	v477477_exh32x1.htm
EX-31.2 - EXHIBIT 31.2 - ATEL 16, LLC	v477477_exh31x2.htm
EX-31.1 - EXHIBIT 31.1 - ATEL 16, LLC	v477477_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 September 30, 2017


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 333-174418

ATEL 16, LLC

(Exact name of registrant as specified in its charter)


California		90-0920813
(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
Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

The number of Limited Liability Company Units outstanding as of October 31, 2017 was 4,287,586.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

ATEL 16, LLC

Index


Part I. Financial Information			3
Item 1. Financial Statements (Unaudited)			3
Balance Sheets, September 30, 2017 and December 31, 2016			3
Statements of Operations for the three and nine months ended September 30, 2017 and 2016			4
Statements of Changes in Members’ Capital for the year ended December 31, 2016 and for the nine months ended September 30, 2017			5
Statements of Cash Flows for the three and nine months ended September 30, 2017 and 2016			6
Notes to the Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 4. Controls and Procedures			29
Part II. Other Information			30
Item 1. Legal Proceedings			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			30
Item 3. Defaults Upon Senior Securities			30
Item 4. Mine Safety Disclosures			30
Item 5. Other Information			30
Item 6. Exhibits			30

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 16, LLC

BALANCE SHEETS

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016
(In Thousands)


	September 30, 2017		December 31, 2016
	(Unaudited)
ASSETS
Cash and cash equivalents	$	4,815	$	4,934
Due from Managing Member		1		—
Due from affiliate		124		—
Accounts receivable, net		215		685
Notes receivable, net		1,467		2,201
Investment in securities		100		100
Warrants, fair value		95		54
Investments in equipment and leases, net		25,990		28,397
Prepaid expenses and other assets		52		45
Total assets	$	32,859	$	36,416
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	—	$	1
Affiliates		—		74
Accrued distributions to Other Members		288		290
Other		124		224
Non-recourse debt		5,978		6,647
Unearned operating lease income		427		326
Total liabilities		6,817		7,562
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		26,042		28,854
Total Members’ capital		26,042		28,854
Total liabilities and Members’ capital	$	32,859	$	36,416

See accompanying notes.

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ATEL 16, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2017 AND 2016
(In Thousands Except for Units and Per Unit Data)
(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenues:
Leasing and lending activities:
Operating lease revenue	$	1,672		$	1,696		$	5,007		$	4,814
Notes receivable interest income		51			46			179			140
Gain (loss) on sales of lease assets and early termination of notes receivable		13			(2	)		146			(3	)
Unrealized (loss) gain on fair value adjustment for warrants		(7	)		19			41			20
Other		3			9			15			11
Total revenues		1,732			1,768			5,388			4,982
Expenses:
Depreciation of operating lease assets		1,242			1,348			3,824			3,865
Asset management fees to Managing Member		176			172			526			481
Acquisition expense		46			76			224			260
Cost reimbursements to Managing Member and/or affiliates		175			176			550			475
Provision for (reversal of) credit losses		26			(6	)		37			—
Amortization of initial direct costs		36			44			146			131
Interest expense		57			54			173			183
Professional fees		22			41			132			122
Outside services		18			38			65			71
Taxes on income and franchise fees		9			9			11			25
Other		53			47			172			128
Total expenses		1,860			1,999			5,860			5,741
Net loss	$	(128	)	$	(231	)	$	(472	)	$	(759	)
Net loss:
Managing Member	$	—		$	—		$	—		$	—
Other Members		(128	)		(231	)		(472	)		(759	)
	$	(128	)	$	(231	)	$	(472	)	$	(759	)
Net loss per Limited Liability Company Unit (Other Members)	$	(0.03	)	$	(0.05	)	$	(0.11	)	$	(0.18	)
Weighted average number of Units outstanding		4,293,491			4,305,636			4,296,912			4,306,475

See accompanying notes.

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ATEL 16, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2016
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2017
(In Thousands Except for Units and Per Unit Data)


				Amount
	Units			Other Members			Managing Member		Total
Balance December 31, 2015		4,307,636		$	32,955		$	—	$	32,955
Repurchases of Units		(7,300	)		(54	)		—		(54	)
Distributions to Other Members ($0.70 per Unit)		—			(3,011	)		—		(3,011	)
Net loss		—			(1,036	)		—		(1,036	)
Balance December 31, 2016		4,300,336			28,854			—		28,854
Repurchases of Units		(12,750	)		(88	)		—		(88	)
Distributions to Other Members ($0.52 per Unit)		—			(2,252	)		—		(2,252	)
Net loss		—			(472	)		—		(472	)
Balance September 30, 2017 (Unaudited)		4,287,586		$	26,042		$	—	$	26,042

See accompanying notes.

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ATEL 16, LLC

STATEMENTS OF CASH FLOWS

FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2017 AND 2016
(In Thousands)
(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating activities:
Net loss	$	(128	)	$	(231	)	$	(472	)	$	(759	)
Adjustment to reconcile net loss to cash provided by operating activities:
Accretion of note discount-warrants		(4	)		—			(13	)		—
Depreciation of operating lease assets		1,242			1,348			3,824			3,865
(Gain) loss on sales of lease assets and early termination of notes receivable		(13	)		2			(146	)		3
Amortization of initial direct costs		36			44			146			131
Provision for (reversal of) credit losses		26			(6	)		37			—
Unrealized loss (gain) on fair value adjustment for warrants		7			(19	)		(41	)		(20	)
Changes in operating assets and liabilities:
Accounts receivable		50			180			433			500
Prepaid expenses and other assets		3			153			(7	)		(47	)
Accounts payable, Managing Member		2			(4	)		(2	)		(3	)
Accounts payable, other		(19	)		(80	)		(100	)		6
Accrued liabilities, affiliates		(172	)		229			(198	)		270
Unearned operating lease income		(218	)		(132	)		101			215
Net cash provided by operating activities		812			1,484			3,562			4,161
Investing activities:
Purchases of equipment on operating leases		(1,723	)		(1,017	)		(2,175	)		(4,582	)
Purchase of securities		—			—			—			(67	)
Proceeds from sales of lease assets		154			11			786			61
Payments of initial direct costs		(10	)		(5	)		(32	)		(54	)
Note receivable advances		(60	)		(500	)		(60	)		(500	)
Principal payments received on notes receivable		252			173			811			501
Net cash used in investing activities		(1,387	)		(1,338	)		(670	)		(4,641	)
Financing activities:
Borrowings under non-recourse debt		—			—			1,998			—
Repayments under non-recourse debt		(484	)		(372	)		(2,667	)		(2,507	)
Distributions to Other Members		(750	)		(757	)		(2,254	)		(2,264	)
Repurchases of Units		(71	)		—			(88	)		(16	)
Net cash used in financing activities		(1,305	)		(1,129	)		(3,011	)		(4,787	)
Net decrease in cash and cash equivalents		(1,880	)		(983	)		(119	)		(5,267	)
Cash and cash equivalents at beginning of period		6,695			7,479			4,934			11,763
Cash and cash equivalents at end of period	$	4,815		$	6,496		$	4,815		$	6,496
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	76		$	67		$	229		$	147
Cash paid during the period for taxes	$	—		$	—		$	24		$	28
Schedule of non-cash investing and financing transactions:
Distributions payable to Other Members at period-end	$	288		$	289		$	288		$	289

See accompanying notes.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL 16, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on December 27, 2012 for the purpose of raising capital and originating equipment financing transactions 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 the “Manager”), a Nevada limited liability company. The Managing Member is controlled by ATEL Financial Services, LLC (“AFS”), a wholly-owned subsidiary of ATEL Capital Group (“ACG” or “ATEL”). The Fund may continue until terminated as provided in the ATEL 16, LLC limited liability company operating agreement dated November 1, 2013 (the “Operating Agreement”). Contributions in the amount of $500 were received as of December 31, 2012, 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.

Through September 30, 2017, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) totaling $42.9 million (inclusive of the $500 initial Member’s capital investment), have been received. As of September 30, 2017, a total of 4,287,586 Units were issued and outstanding.

The Company is governed by 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 AFS.

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, 2016, 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 nine months ended September 30, 2017 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 financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after September 30, 2017, up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements, or adjustments thereto.

Use of Estimates:

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

the reporting period. Actual results could differ from the estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and 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 table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for the nine months ended September 30, 2017 and 2016 and long-lived tangible assets as of September 30, 2017 and December 31, 2016 (dollars in thousands):


	For The Nine Months Ended September 30,
	2017		% of Total			2016		% of Total
Revenue
United States	$	4,692		87	%	$	4,286		86	%
Costa Rica		696		13	%		696		14	%
Total	$	5,388		100	%	$	4,982		100	%


	As of September 30,					As of December 31,
	2017		% of Total			2016		% of Total
Long-lived assets
United States	$	21,961		84	%	$	23,872		84	%
Costa Rica		4,029		16	%		4,525		16	%
Total	$	25,990		100	%	$	28,397		100	%

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.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

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.

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 market place 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:

From time to time, the Company may purchase securities of its borrowers or receive warrants to purchase securities in connection with its lending arrangements.

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 made its initial investment in purchased securities during the first quarter of 2016. As of both September 30, 2017 and December 31, 2016, purchased securities totaled $100 thousand.

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 nine months ended September 30, 2017, the Company recorded an unrealized loss of $7 thousand and unrealized gains of $41 thousand on fair valuation of its warrants. By comparison, unrealized gains of $19 thousand and $20 thousand were recorded for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017 and December 31, 2016, the estimated fair value of the Fund’s portfolio of warrants amounted to $95 thousand and $54 thousand, respectively. There have been no exercises of warrants, net or otherwise, during the three and nine months ended September 30, 2017 and 2016.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

Fair Value:

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

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

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

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

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

Per Unit data:

The Company issues only one class of Units, none of which are considered dilutive. Net loss and distributions per Unit for the three and nine months ended September 30, 2017 and 2016 is based upon the weighted average number of Other Members Units outstanding during the respective periods.

Emerging growth company:

Section 107 of the Jumpstart Our Business Startups Act (the “JOBS Act”) provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Recent accounting pronouncements:

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2016-15 — Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the standard and its impact on operations and financial reporting. The adoption of ASU 2016-15 by the Company is not expected to have a material effect on its financial statements.

In June 2016, the 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 expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.

In February 2016, the 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. While early adoption is permitted, the Company does not expect to elect that option. The Company expects to adopt the guidance in the first quarter 2019 using the modified retrospective method. Management is currently evaluating the impact of this standard on the financial statements and its operational and related disclosure requirements, including the impact on the Company’s current lease portfolio from a lessor perspective. Given the limited changes to lessor accounting, management does not expect material changes to recognition or measurement, but the Company is early in the implementation process and will continue to evaluate the impact. This adoption will primarily result in an increase in the assets and liabilities on the Company’s balance sheet.

In January 2016, the 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. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

(v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. 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. The Company’s implementation efforts include the identification of equity securities within the scope of the guidance, the evaluation of the measurement alternative available for equity securities without a readily determinable fair value, and the related impact to accounting policies, presentation and disclosures.

In May 2014, the FASB issued Accounting Standards Update 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 with 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 expects to adopt the Standards Update. A preliminary evaluation of the impact of such adoption on the financial statements of the Fund indicates that such impact is non-material as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Company’s revenues. Management expects that accounting policies will not materially change since the principles of revenue recognition from the standard are largely consistent with existing guidance and current practices applied by the Company.

3. Notes receivable, net:

The Company has various notes receivables from borrowers who have financed the purchase of equipment through the Company. The terms of the notes receivable are from 12 to 36 months and bear interest at rates ranging from 4.29% to 16.00% per annum. The notes are secured by the equipment financed. The notes mature from 2018 through 2020. There were neither impaired notes nor notes placed in non-accrual status as of September 30, 2017 and December 31, 2016.

As of September 30, 2017, the minimum future payments receivable are as follows (in thousands):


Three Months Ending December 31, 2017	$	299
Year Ending December 31, 2018		831
2019		474
2020		45
		1,649
Less: portion representing unearned interest income		(156	)
		1,493
Unamortized initial direct costs		11
Warrants – notes receivable discount		(37	)
Notes receivable, net	$	1,467

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

3. Notes receivable, net: - (continued)

IDC (Initial Direct Cost) amortization expense related to notes receivable and the Company’s operating leases for the three and nine months ended September 30, 2017 and 2016 are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
IDC amortization – notes receivable	$	2	$	2	$	5	$	5
IDC amortization – lease assets		34		42		141		126
Total	$	36	$	44	$	146	$	131

4. Allowance for credit losses:

The Company’s allowance for credit losses totaled $40 thousand and $3 thousand at September 30, 2017 and December 31, 2016, respectively. All of such allowance were related to delinquent operating lease receivables.

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 September 30, 2017 and December 31, 2016, 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
	September 30, 2017		December 31, 2016
Pass	$	1,493	$	2,193
Special mention		—		—
Substandard		—		—
Doubtful		—		—
Total	$	1,493	$	2,193

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

4. Allowance for credit losses: - (continued)

At September 30, 2017 and December 31, 2016, investment in note receivables is aged as follows (in thousands):


September 30, 2017	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	$	—	$	—	$	—	$	—	$	1,493	$	1,493	$	—
Total	$	—	$	—	$	—	$	—	$	1,493	$	1,493	$	—


December 31, 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	$	—	$	—	$	—	$	—	$	2,193	$	2,193	$	—
Total	$	—	$	—	$	—	$	—	$	2,193	$	2,193	$	—

The Company had no financing receivables on non-accrual or impaired status at both September 30, 2017 and December 31, 2016.

5. Investment in equipment and leases, net:

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


	Balance December 31, 2016		Additions/ Dispositions		Depreciation/ Amortization Expense			Balance September 30, 2017
Net investment in operating leases	$	27,986	$	1,476	$	(3,818	)	$	25,644
Assets held for sale or lease, net		—		59		(6	)		53
Initial direct costs, net of accumulated amortization of $270 at September 30, 2017 and $302 at December 31, 2016		411		23		(141	)		293
Total	$	28,397	$	1,558	$	(3,965	)	$	25,990

Additions to net investment in operating lease assets are stated at cost.

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 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

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

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, management determined that no impairment losses existed during the respective three and nine months ended September 30, 2017 and 2016.

The Company utilizes a straight-line depreciation method for equipment in all of the categories currently in its portfolio of lease transactions. Depreciation expense on the Company’s equipment totaled $1.2 million and $1.3 million for the respective three months ended September 30, 2017 and 2016, and $3.8 million and $3.9 million for the respective nine months ended September 30, 2017 and 2016.

IDC amortization expense related to the Company’s operating leases totaled $34 thousand and $42 thousand for the respective three months ended September 30, 2017 and 2016, and $141 thousand and $126 thousand for the respective nine months ended September 30, 2017 and 2016.

All of the Company’s leased property was acquired in the years 2014 through 2017.

Operating leases:

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


	Balance December 31, 2016			Additions			Dispositions			Balance September 30, 2017
Aviation	$	8,013		$	452		$	—		$	8,465
Containers		6,707			—			(16	)		6,691
Coal terminal		5,000			—			—			5,000
Railroad		2,294			1,723			—			4,017
Mining		2,766			—			—			2,766
Materials handling		4,065			—			(1,338	)		2,727
Marine vessels		2,291			—			—			2,291
Motor vehicles		1,551			—			—			1,551
Trucks and trailers		1,295			—			—			1,295
Manufacturing		1,243			—			—			1,243
Other		1,624			—			(531	)		1,093
		36,849			2,175			(1,885	)		37,139
Less accumulated depreciation		(8,863	)		(3,818	)		1,186			(11,495	)
Total	$	27,986		$	(1,643	)	$	(699	)	$	25,644

The average estimated residual value for assets on operating leases was 33% of the assets’ original cost at September 30, 2017 and 32% at December 31, 2016. There were no operating leases in non-accrual status at September 30, 2017 and December 31, 2016.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

At September 30, 2017, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):


	Operating Leases
Three months ending December 31, 2017	$	1,076
Year Ending December 31, 2018		6,265
2019		3,647
2020		2,449
2021		1,534
2022		1,154
Thereafter		765
	$	16,890

The useful lives for each category of leases is reviewed at a minimum of once per quarter. As of September 30, 2017, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):


Equipment category	Useful Life
Coal terminal		50 – 60
Transportation, rail		35 – 40
Marine vessel		20 – 30
Aviation		20 – 30
Containers		15 – 20
Manufacturing		10 – 15
Mining		10 – 15
Materials handling		7 – 10
Motor vehicles		7 – 10
Trucks and trailers		7 – 10

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 acquisition and asset management services and to receive reimbursements for payments made on behalf of the Fund for certain operating expenses, which are more fully described in Section 8 of the Operating Agreement.

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 equipment financing 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.

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 managed 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.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

6. Related Party Transactions: - (continued)

Each of 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; and investor relations, communications services and general administrative services are performed by AFS.

During the three and nine months ended September 30, 2017 and 2016, the Managing Member and/or affiliates earned commissions and fees, and billed for reimbursements pursuant to the Operating Agreement as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Administrative costs reimbursed to Managing Member and/or affiliates		175		176		550		475
Asset management fees to Managing Member		176		172		526		481
Acquisition and initial direct costs paid to Managing Member		54		81		255		315
	$	405	$	429	$	1,331	$	1,271

7. Non-recourse debt:

At September 30, 2017, non-recourse debt consists of notes payable to financial institutions. The note payments are due in monthly installments. Interest on the notes range from 2.25% to 5.00% per annum. The notes are secured by assignments of lease payments and pledges of assets. At September 30, 2017, gross operating lease rentals totaled approximately $6.4 million over the remaining lease terms and the carrying value of the pledged assets is $10.3 million. The notes mature from 2017 through 2022.

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

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

7. Non-recourse debt: - (continued)

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


	Principal		Interest		Total
Three months ending December 31, 2017	$	260	$	22	$	282
Year ending December 31, 2018		3,071		180		3,251
2019		1,078		82		1,160
2020		530		53		583
2021		510		34		544
2022		529		15		544
	$	5,978	$	386	$	6,364

8. Borrowing facilities:

Effective January 7, 2014, the Company participated with ATEL Capital Group and certain subsidiaries and affiliated funds in a $75 million revolving credit facility (the “Credit Facility”) with a syndicate of financial institutions as lenders. The Credit Facility is comprised of a working capital facility, an acquisition facility (the “Acquisition Facility”) and a warehouse facility (the “Warehouse Facility”), the Company and affiliates, and a venture facility. As of September 30, 2017, the Credit Facility is for an amount of $75.0 million and has been extended to June 30, 2019. 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 September 30, 2017 and December 31, 2016, borrowings under the Credit Facility were as follows (in thousands):


	September 30, 2017			December 31, 2016
Total available under the financing arrangement	$	75,000		$	75,000
Amounts borrowed by affiliated partnerships and limited liability companies under the venture, acquisition and warehouse facilities		(1,485	)		(1,030	)
Amounts borrowed by institutional leasing trust under institutional line		(1,800	)		(8,488	)
Total remaining available under the working capital, acquisition and warehouse facilities	$	71,715		$	65,482

The Company and its affiliates pay an annual commitment fee to have access to this line of credit. As of September 30, 2017, the aggregate amount of the Credit Facility is potentially available to the Company, subject to certain sub-facility and borrowing-base limitations. However, as amounts are drawn on the Credit Facility by each of the Company and the affiliates who are borrowers under the Credit Facility, the amount remaining available to all borrowers to draw under Credit Facility is reduced. As the Warehousing Facility is a short term bridge facility, any amounts borrowed under the Warehousing Facility, and then repaid by the affiliated borrowers (including the Company) upon allocation of an acquisition to a specific purchaser, become available under the Warehouse Facility for further short term borrowing.

As of September 30, 2017, 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 $26.0 million, 0.23 to 1, and 26.08 to 1, respectively,

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

8. Borrowing facilities: - (continued)

as of September 30, 2017. As such, as of September 30, 2017, 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 as of September 30, 2017 and December 31, 2016.

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 September 30, 2017, the investment program participants were ATEL 14, LLC, ATEL 15, LLC, ATEL 17, LLC and the Company. Pursuant to the Warehousing Trust, the benefit of the lease transaction assets, and the corresponding liabilities under the Warehouse Facility, inure to each of such entities based upon each entity’s pro-rata share in the Warehousing Trust estate. The “pro-rata share” is calculated as a ratio of the net worth of each entity over the aggregate net worth of all entities benefiting from the Warehousing Trust estate, excepting that the trustees, AFS and ALC, are both jointly and severally liable for the pro-rata portion of the obligations of each of the affiliated limited liability companies participating under the Warehouse Facility. Transactions are financed through this Warehouse Facility only until the transactions are allocated to a specific program for purchase or are otherwise disposed by AFS and ALC. When a determination is made to allocate the transaction to a specific program for purchase by the program, the purchaser repays the debt associated with the asset, either with cash or by means of proceeds of a draw under the Acquisition Facility, and the asset is removed from the Warehouse Facility collateral, and ownership of the asset and any debt obligation associated with the asset are assumed solely by the purchasing entity.

There were no borrowings under the Warehouse Facility as of September 30, 2017 and December 31, 2016.

9. Commitments:

At September 30, 2017, there was one commitment to fund investments in notes receivable totaling approximately $4.4 million. This amount represents contract awards which may be canceled by the prospective borrower/lessee or may not be accepted by the Company.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

10. Members’ Capital:

Units issued and outstanding totaled 4,287,586 and 4,300,336 Units at September 30, 2017 and December 31, 2016, 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 nine months ended September 30, 2017 and 2016 were as follows (in thousands except Units and per Unit data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Distributions	$	749	$	750	$	2,252	$	2,258
Weighted average number of Units outstanding		4,293,491		4,305,636		4,296,912		4,306,475
Weighted average distributions per Unit	$	0.17	$	0.17	$	0.52	$	0.52

11. Fair value measurements:

At September 30, 2017 and December 31, 2016, only the Company’s warrants were measured on a recurring basis. As of the same dates, the Company had certain other assets or liabilities that required measurement at fair value on a non-recurring basis.

The measurement methodology is as follows:

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, time to maturity and a risk free interest rate for the term(s) of the warrant exercise(s). The calculated fair value of the Fund’s warrant portfolio was $95 thousand and $54 thousand at September 30, 2017 and December 31, 2016, respectively. Such valuation is classified within Level 3 of the valuation hierarchy.

The following table reconciles the beginning and ending balances of the Company’s Level 3 recurring assets as of the three and nine months ended September 30, 2017 and 2016 as follows (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Fair value of warrants at beginning of period	$	102		$	54	$	54	$	53
Unrealized (loss) gain on fair value adjustment for warrants		(7	)		19		41		20
Fair value of warrants at end of period	$	95		$	73	$	95	$	73

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

11. Fair value measurements: - (continued)

The following tables summarize the valuation techniques and significant unobservable inputs used for the Company’s recurring fair value calculation categorized as Level 3 in the fair value hierarchy at September 30, 2017 and December 31, 2016:


September 30, 2017
Name	Valuation Frequency	Valuation Technique	Unobservable Inputs	Range of Input Values
Warrants	Recurring	Black-Scholes formulation	Stock price	$1.67 – $3.88
			Exercise price	$1.00 – $3.98
			Time to maturity (in years)	6.60 – 14.20
			Risk-free interest rate	2.11% – 2.46%
			Annualized volatility	36.19% – 46.41%


December 31, 2016
Name	Valuation Frequency	Valuation Technique	Unobservable Inputs	Range of Input Values
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.10 – $3.68
			Exercise price	$1.00 – $3.98
			Time to maturity (in years)	7.31 – 14.95
			Risk-free interest rate	2.27% – 2.62%
			Annualized volatility	43.96% – 108.99%

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

Cash and cash equivalents

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

Notes receivable

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

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.

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

11. Fair value measurements: - (continued)

Non-recourse debt

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

Commitments and Contingencies

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

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

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 September 30, 2017 and December 31, 2016 (in thousands):


	September 30, 2017
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	4,815	$	4,815	$	—	$	—	$	4,815
Notes receivable, net		1,467		—		—		1,467		1,467
Investment in securities		100		—		—		100		100
Warrants, fair value		95		—		—		95		95
Financial liabilities:
Non-recourse debt		5,978		—		—		5,774		5,774


	December 31, 2016
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	4,934	$	4,934	$	—	$	—	$	4,934
Notes receivable, net		2,201		—		—		2,201		2,201
Investment in securities		100		—		—		100		100
Warrants, fair value		54		—		—		54		54
Financial liabilities:
Non-recourse debt		6,647		—		—		6,732		6,732

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

Overview

Through September 30, 2017, cumulative gross contributions, less recissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) totaling $42.9 million (inclusive of the $500 initial Member’s capital investment), have been received. As of September 30, 2017, a total of 4,287,586 Units were issued and outstanding.

Results of Operations

The three months ended September 30, 2017 versus the three months ended September 30, 2016:

The Company had net losses of $128 thousand and $231 thousand for the three months ended September 30, 2017 and 2016, respectively. Results for the third quarter of 2017 reflect decreases in both total revenues and total expenses when compared to the prior year period.

Revenues

Total revenues for the three months ended September 30, 2017 decreased by $36 thousand, or 2%, as compared to the prior year period. Such decrease was largely due to a $26 thousand, or 137%, unfavorable change in the fair value adjustment for warrants relative to warrant holdings; and a $24 thousand, or 1%, decrease in operating lease revenues, mainly the result of operating lease equipment sale; offset, in part, by a $15 thousand, or eight times, increase in gain on sales of lease assets and early termination of notes receivable, due to a change in the volume and mix of assets sold.

Expenses

Total expenses for the three months ended September 30, 2017 decreased by $139 thousand, or 7%, as compared to the prior year period. Such net decrease was mainly due to a $106 thousand, or 8%, decrease in depreciation expense, due to run-off and sales of lease assets; a $30 thousand, or 39%, decrease in acquisition expenses related to lower period over period acquisitions of operating lease assets; a $20 thousand, or 53% decrease in outside services, indicative of reduced utilization of contract professional; and a $19 thousand, or 46%, decrease in professional fees, due to year over year difference in timing and related billings for professional audit and tax services; offset, in part, by a $32 thousand, or more than 5 times, increase in the provision for credit losses, a direct result of receivable writeoffs.

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The nine months ended September 30, 2017 versus the nine months ended September 30, 2016

The Company had net losses of $472 thousand and $759 thousand for the nine months ended September 30, 2017 and 2016, respectively. Results for the first nine months of 2017 reflect increases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the nine months ended September 30, 2017 increased by $406 thousand, or 8%, as compared to the prior year period. Such increase was largely due to a $193 thousand, or 4%, increase in operating lease revenues, mainly the result of the Fund’s acquisition of new equipment for long term operating leases; a $149 thousand gain on sales of lease assets and early termination of notes receivable, primarily due to a change in the volume and mix of assets sold; a $39 thousand, or 28% increase in interest income on notes receivable related to funding of new notes receivable investments; and a $21 thousand, or 105%, increase in unrealized gains on fair value adjustment for warrants relative to warrant holdings.

Expenses

Total operating expenses for the nine months ended September 30, 2017 increased by $119 thousand, or 2%, as compared to the prior year period. The net increase was due to a $75 thousand, or 16%, increase in cost reimbursements to Managing Member, due to increased indirect cost allocations, a result of refinement of cost allocation methodology; a $45 thousand, or 9%, increase in asset management fees paid to the Manager, primarily due to an increase in assets under management; a $44 thousand, or 34%, increase in other expenses that are primarily related to bank charges, miscellaneous expenses and printing and photocopying; and a $37 thousand, increase in the provision for credit losses, a direct result of receivable writeoffs; offset, in part, by a $41 thousand, or 1%, decrease in depreciation expense, due to lease assets run-off and sales of lease assets; and a $36 thousand, or 14%, decrease in acquisition expenses related to lower period over period acquisitions of operating lease assets.

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $4.8 million and $4.9 million as of September 30, 2017 and December 31, 2016, 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 available adequate reserves 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 September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net cash provided by (used in):
Operating activities	$	812		$	1,484		$	3,562		$	4,161
Investing activities		(1,387	)		(1,338	)		(670	)		(4,641	)
Financing activities		(1,305	)		(1,129	)		(3,011	)		(4,787	)
Net decrease in cash and cash equivalents	$	(1,880	)	$	(983	)	$	(119	)	$	(5,267	)

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The three months ended September 30, 2017 versus the three months ended September 30, 2016

During the three months ended September 30, 2017 and 2016, the Company’s primary source of liquidity was from its portfolio of operating lease contracts and its investments in notes receivable. In addition, the Company realized $154 thousand and $11 thousand of proceeds from the sale of lease assets and early termination of certain notes receivable for the three months ended September 30, 2017 and 2016, respectively.

During the same comparative periods, cash was primarily used to pay distributions and to pay down debt. Cash used to pay down non-recourse debt totaled $484 thousand and $372 thousand for the respective three months ended September 30, 2017 and 2016. Distributions paid to Other Members totaled $750 thousand and $757 thousand for the respective three months ended September 30, 2017 and 2016. Cash used to invest in notes receivable totaled $60 thousand and $500 thousand for the respective three months ended September 30, 2017 and 2016. In addition, cash was used to acquire $1.7 million and $1.0 million of lease assets for the respective three months ended September 30, 2017 and 2016.

The nine months ended September 30, 2017 versus the nine months ended September 30, 2016

During the nine months ended September 30, 2017 and 2016, the Company’s primary source of liquidity was from $2.0 million of non-recourse debt as well as cash flow from its portfolio of operating lease contracts, and its investments in notes receivable. Cash used to invest in notes receivable totaled $60 thousand and $500 thousand for the respective nine months ended September 30, 2017 and 2016. In addition, the Company realized $786 thousand and $61 thousand of proceeds from the sale of lease assets and early termination of certain notes receivable for the nine months ended September 30, 2017 and 2016, respectively.

During the same comparative periods, cash was primarily used to pay distributions and to pay down debt. Cash used to pay down debt totaled $2.7 million and $2.5 million for the respective nine months ended September 30, 2017 and 2016. Distributions paid to Other Members totaled $2.3 million for each of the nine months ended September 30, 2017 and 2016. In addition, cash was used to acquire $2.2 million and $4.6 million of operating lease assets for the respective nine months ended September 30, 2017 and 2016.

Revolving credit facility

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 September 30, 2017. 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.

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As of September 30, 2017, the material financial covenants are summarized as follows:

Minimum Tangible Net Worth: $10 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

“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 therefrom (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 interest coverage ratio, as calculated per the Credit Facility agreement of $26.0 million, 0.23 to 1, and 26.08 to 1, respectively, as of September 30, 2017. As such, as of September 30, 2017, 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 loss to EBITDA, as defined in the loan agreement, for the twelve months ended September 30, 2017 (in thousands):


Tangible Net Worth	$	26,042
Total Debt		5,978
Net loss – GAAP basis	$	(749	)
Interest expense		225
Depreciation and amortization		5,160
Amortization of initial direct costs		189
Provision for doubtful accounts		40
Unrealized gain on fair valuation of warrants		29
Principal payments received on notes receivable		980
EBITDA (for Credit Facility financial covenant calculation only)	$	5,874

Events of default, cross-defaults, recourse and security

The terms of the Credit Facility include standard events of default by the Company which, if not cured within applicable grace periods, could give lenders remedies against the Company, including the acceleration of all outstanding borrowings and a demand for repayment in advance of their stated maturity. If a breach of any material term of the Credit Facility should occur, the lenders may, at their option, increase borrowing rates, accelerate the obligations in advance of their stated maturities, terminate the facility, and exercise rights of collection available to them under the express terms of the facility, or by operation of law. The lenders also retain the discretion to waive a violation of any covenant at the Company’s request.

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The Company is currently in compliance with its obligations under the Credit Facility. In the event of a technical default (e.g., the failure to timely file a required report, or a one-time breach of a financial covenant), the Company believes it has ample time to request and be granted a waiver by the lenders, or, alternatively, cure the default under the existing provisions of its debt agreements, including, if necessary, arranging for additional capital from alternate sources to satisfy outstanding obligations.

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.

The Acquisition Facility is generally recourse solely to the Company, and is not cross-defaulted to any other obligations of affiliated companies under the Credit Facility, except as described in this paragraph. The Credit Facility is cross-defaulted to a default in the payment of any debt (other than non-recourse debt) or any other agreement or condition beyond the period of grace (not exceeding 30 days), the effect of which would entitle the lender under such agreement to accelerate the obligations prior to their stated maturity in an individual or aggregate principal amount in excess of 15% of the Company’s consolidated Tangible Net Worth. Also, a bankruptcy of AFS will trigger a default for the Company under the Credit Facility.

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 April 2014. Additional distributions have been made through September 30, 2017.

Cash distributions were paid by the Fund to Unitholders of record as of August 31, 2017, and paid through September 30, 2017. The distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets. See the discussion in the ATEL 16, LLC Prospectus dated November 5, 2013 (“Prospectus”) under “Income, Losses and Distributions.” Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.

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

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The following table summarizes distribution activity for the Fund from inception through September 30, 2017 (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
Nov 2013 – Mar 2014 (Distribution of all escrow interest)		Jun 2014	$	—			$	—			$	—				n/a		n/a
Mar 2014 – Nov 2014		Apr 2014 – Dec 2014		453				—				453				0.51		896,524
Dec 2014 – Nov 2015		Jan 2015 – Dec 2015		2,096				—				2,096				0.69		3,044,217
Dec 2015 – Nov 2016		Jan 2016 – Dec 2016		3,016				—				3,016				0.70		4,306,106
Dec 2016 – August 2017		Jan 2017 – Sept 2017		2,254				—				2,254				0.52		4,298,320
			$	7,819			$	—			$	7,819			$	2.42
Source of distributions
Lease and loan payments and sales proceeds received			$	7,819	100.00	%	$	—	0.00	%	$	7,819	100.00	%
Interest Income				—	0.00	%		—	0.00	%		—	0.00	%
Debt against non-cancellable firm term payments on leases and loans				—	0.00	%		—	0.00	%		—	0.00	%
			$	7,819	100.00	%	$	—	0.00	%	$	7,819	100.00	%

(1)

Investors may elect to receive their distributions either monthly or quarterly. See “Timing and Method of Distributions” on Page 67 of the Prospectus.

(2)

Total distributions per Unit represents the per Unit distributions rate for those units which were outstanding for all of the applicable period.

(3)

Balances shown represent weighted average units for the period from March 6 – November 30, 2014, December 1, 2014 – November 30, 2015, December 31, 2015 – November 30, 2016, and December 1, 2016 – August 31, 2017 respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see Note 2 to the financial statements as set forth in Part I, Item 1, Financial Statements (Unaudited).

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Significant Accounting Policies and Estimates

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

The Company’s significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2016. There have been no material changes to the Company’s significant accounting policies since December 31, 2016.

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 September 30, 2017 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

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.

Other Exhibits


31.1		Certification of Dean L. Cash
31.2		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: November 9, 2017

ATEL 16, 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)

ATEL 16, LLC - FORM 10-Q - November 9, 2017

Attached files

Form 10-Q

For the quarterly period ended September 30, 2017

For the transition period from to

Commission File number 333-174418

ATEL 16, LLC

DOCUMENTS INCORPORATED BY REFERENCE

ATEL 16, LLC Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

1. Organization and Limited Liability Company matters:

2. Summary of significant accounting policies:

Basis of presentation:

Use of Estimates:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

Segment reporting:

Accounts receivable

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

Financing receivables

Investment in securities:

Purchased securities

Warrants

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

Fair Value:

Per Unit data:

Emerging growth company:

Recent accounting pronouncements:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

3. Notes receivable, net:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

3. Notes receivable, net: - (continued)

4. Allowance for credit losses:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

4. Allowance for credit losses: - (continued)

5. Investment in equipment and leases, net:

Impairment of investments in leases:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

Operating leases:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

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

6. Related Party Transactions:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

6. Related Party Transactions: - (continued)

7. Non-recourse debt:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

7. Non-recourse debt: - (continued)

8. Borrowing facilities:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

8. Borrowing facilities: - (continued)

Fee and interest terms

Warehouse facility

9. Commitments:

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

10. Members’ Capital:

11. Fair value measurements:

Warrants (recurring)

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

11. Fair value measurements: - (continued)

Cash and cash equivalents

Notes receivable

Investment in securities

ATEL 16, LLC NOTES TO FINANCIAL STATEMENTS (Unaudited)

11. Fair value measurements: - (continued)

Non-recourse debt

Commitments and Contingencies

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

Overview

Results of Operations

The three months ended September 30, 2017 versus the three months ended September 30, 2016:

Revenues

Expenses

ATEL 16, LLC

Index

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

ATEL 16, LLC
(Registrant)