ATEL 12, LLC
 
Index

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 12, LLC
 
BALANCE SHEETS
 
JUNESEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(In Thousands)

		June 30, 2017				December 31, 2016				September 30, 2017				December 31, 2016
		(Unaudited)								(Unaudited)
ASSETS
Cash and cash equivalents		$	618			$	1,033			$	366			$	1,033
Accounts receivable, net			143				78				19				78
Investment in securities			248				272				246				272
Warrants, fair value			157				159				157				159
Investments in equipment and leases, net			2,550				2,885				2,179				2,885
Prepaid expenses and other assets			22				26				28				26
Total assets		$	3,738			$	4,453			$	2,995			$	4,453
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member		$	54			$	70			$	18			$	70
Accrued distributions to Other Members			374				230				—				230
Other			304				266				292				266
Non-recourse debt			336				566				220				566
Unearned operating lease income			54				22				58				22
Total liabilities			1,122				1,154				588				1,154
Commitments and contingencies
Members’ capital:
Managing Member			—				—				—				—
Other Members			2,616				3,299				2,407				3,299
Total Members’ capital			2,616				3,299				2,407				3,299
Total liabilities and Members’ capital		$	3,738			$	4,453			$	2,995			$	4,453

ATEL 12, LLC
 
STATEMENTS OF INCOMEOPERATIONS
 
FOR THE THREE AND SIXNINE MONTHS ENDED
JUNESEPTEMBER 30, 2017 AND 2016

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

		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended September 30,								Nine Months Ended September 30,
		2017				2016				2017				2016				2017				2016				2017				2016
Revenues:
Leasing and lending activities:
Operating leases		$	352			$	455			$	708			$	906			$	297			$	379			$	1,005			$	1,285
Direct financing leases			—				—				—				1				—				—				—				1
Interest on notes receivable			—				5				—				13				—				2				—				15
Gain (loss) on sales of lease assets and early termination of notes			8				(11	)			15				(78	)
(Loss) gain on sales of lease assets and early termination of notes receivable																			—				(4	)			15				(82	)
Gain on sales or dispositions of investment in securities			75				—				75				—				—				62				75				62
Unrealized (loss) gain on fair valuation of warrants			(2	)			—				(2	)			2
Unrealized (loss) gain on fair value adjustment for warrants																			—				—				(2	)			2
Other			1				50				10				106				1				15				11				121
Total revenues			434				499				806				950				298				454				1,104		��		1,404
Expenses:
Depreciation of operating lease assets			143				142				285				267				142				142				427				409
Asset management fees to Managing Member			17				9				27				21				9				7				36				28
Cost reimbursements to Managing Member and/or affiliates			43				35				91				84				39				39				130				123
Provision for credit losses			8				—				8				1				34				1				42				2
Impairment losses on equipment																			229				—				229				—
Amortization of initial direct costs			—				1				—				1				—				—				—				1
Interest expense			2				5				5				10				2				4				7				14
Professional fees			46				14				99				92				18				19				117				111
Outside services			20				9				43				21				13				3				56				24
Taxes on income and franchise fees			14				13				19				20				13				4				32				24
Other			12				10				28				23				8				14				36				37
Total expenses			305				238				605				540				507				233				1,112				773
Net income		$	129			$	261			$	201			$	410
Net income:
Net (loss) income																		$	(209	)		$	221			$	(8	)		$	631
Net income (loss) :
Managing Member		$	30			$	55			$	66			$	110			$	—			$	54			$	66			$	164
Other Members			99				206				135				300				(209	)			167				(74	)			467
		$	129			$	261			$	201			$	410			$	(209	)		$	221			$	(8	)		$	631
Net income per Limited Liability Company Unit (Other Members)		$	0.03			$	0.07			$	0.05			$	0.10
Net (loss) income per Limited Liability Company Unit (Other Members)																		$	(0.07	)		$	0.06			$	(0.02	)		$	0.16
Weighted average number of Units outstanding			2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482

ATEL 12, LLC
 
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 
FOR THE YEAR ENDED DECEMBER 31, 2016
AND FOR THE SIXNINE MONTHS ENDED
JUNESEPTEMBER 30, 2017

(In Thousands Except for Units and Per Unit Data)

						Amount																Amount
		Units				Other Members				Managing Member				Total				Units				Other Members				Managing Member				Total
Balance December 31, 2015			2,992,482			$	5,627			$	—			$	5,627				2,992,482			$	5,627			$	—			$	5,627
Distributions to Other Members ($0.90 per Unit)			—				(2,693	)			—				(2,693	)			—				(2,693	)			—				(2,693	)
Distributions to Managing Member			—				—				(218	)			(218	)			—				—				(218	)			(218	)
Net income			—				365				218				583				—				365				218				583
Balance December 31, 2016			2,992,482				3,299				—				3,299				2,992,482				3,299				—				3,299
Distributions to Other Members ($0.27 per Unit)			—				(818	)			—				(818	)			—				(818	)			—				(818	)
Distributions to Managing Member			—				—				(66	)			(66	)			—				—				(66	)			(66	)
Net income			—				135				66				201
Balance June 30, 2017 (Unaudited)			2,992,482			$	2,616			$	—			$	2,616
Net (loss) income																			—				(74	)			66				(8	)
Balance September 30, 2017 (Unaudited)																			2,992,482			$	2,407			$	—			$	2,407

ATEL 12, LLC
 
STATEMENTS OF CASH FLOWS
 
FOR THE THREE AND SIXNINE MONTHS ENDED
JUNESEPTEMBER 30, 2017 AND 2016

(In Thousands)
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended September 30,								Nine Months Ended September 30,
		2017				2016				2017				2016				2017				2016				2017				2016
Operating activities:
Net income		$	129			$	261			$	201			$	410
Adjustment to reconcile net income to cash provided by operating activities:
(Gain) loss on sales of lease assets and early termination of notes receivable			(8	)			11				(15	)			78
Net (loss) income																		$	(209	)		$	221			$	(8	)		$	631
Adjustment to reconcile net (loss) income to cash provided by operating activities:
Loss (gain) on sales of lease assets and early termination of notes receivable																			—				4				(15	)			82
Depreciation of operating lease assets			143				142				285				267				142				142				427				409
Amortization of initial direct costs			—				1				—				1				—				—				—				1
Provision for credit losses			8				—				8				1				34				1				42				2
Impairment losses on equipment																			229				—				229				—
Gain on sales or dispositions of investment in securities			(75	)			—				(75	)			—				—				(62	)			(75	)			(62	)
Unrealized loss (gain) on fair value adjustment for warrants			2				—				2				(2	)			—				—				2				(2	)
Changes in operating assets and liabilities:
Accounts receivable			(30	)			(1	)			26				(12	)			(9	)			12				17				—
Prepaid expenses and other assets			2				2				4				4				(6	)			(7	)			(2	)			(3	)
Accounts payable, Managing Member			(40	)			(82	)			(27	)			(31	)			(6	)			56				(33	)			25
Accounts payable, other			37				(11	)			38				68				(10	)			(4	)			28				64
Unearned operating lease income			(14	)			4				32				29				4				8				36				37
Net cash provided by operating activities			154				327				479				813				169				371				648				1,184
Investing activities:
Purchase of securities			—				—				—				(9	)			—				—				—				(9	)
Proceeds from sales of lease assets and early termination of notes			12				18				64				111				—				59				64				170
Proceeds from sales or dispositions of investment in securities																			99				98				99				98
Principal payments received on direct financing leases			—				1				1				14				—				1				1				15
Principal payments received on notes receivable			—				79				—				166				—				99				—				265
Net cash provided by investing activities			12				98				65				282				99				257				164				539
Financing activities:
Repayments under non-recourse debt			(115	)			(113	)			(230	)			(226	)			(116	)			(114	)			(346	)			(340	)
Distributions to Other Members			—				(673	)			(674	)			(1,346	)			(374	)			(673	)			(1,048	)			(2,019	)
Distributions to Managing Member			—				(55	)			(55	)			(110	)			(30	)			(54	)			(85	)			(164	)
Net cash used in financing activities			(115	)			(841	)			(959	)			(1,682	)			(520	)			(841	)			(1,479	)			(2,523	)
Net increase (decrease) in cash and cash equivalents			51				(416	)			(415	)			(587	)
Net decrease in cash and cash equivalents																			(252	)			(213	)			(667	)			(800	)
Cash and cash equivalents at beginning of period			567				2,169				1,033				2,340				618				1,753				1,033				2,340
Cash and cash equivalents at end of period		$	618			$	1,753			$	618			$	1,753			$	366			$	1,540			$	366			$	1,540
Supplemental disclosures of cash flow information:
Cash paid during the period for interest		$	2			$	5			$	5			$	10			$	2			$	4			$	7			$	14
Cash paid during the period for taxes		$	3			$	33			$	16			$	35			$	13			$	—			$	29			$	35
Schedule of non-cash transactions:
Distributions payable to Other Members at period-end		$	374			$	230			$	374			$	230			$	—			$	230			$	—			$	230
Distributions payable to Managing Member at period-end		$	30			$	19			$	30			$	19			$	—			$	19			$	—			$	19

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL 12, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on January 25, 2007 for the purpose of equipment financing and acquiring equipment to engage in equipment leasing and sales activities. From its inception into the third quarter of 2013, the Managing Member was ATEL Associates 12, LLC (“AA12”), a Nevada limited liability company. Effective September 30, 2013, AA12 was merged into ATEL Financial Services, LLC (“AFS” or “Managing Member” or “Manager”), a wholly-owned subsidiary of ATEL Capital Group. The Fund may continue until December 31, 2030. As a limited liability company, the liability of any individual member for the obligations of the Fund is limited to the extent of capital contributions to the Fund by the individual member.

As of JuneSeptember 30, 2017, cumulative contributions, net of rescissions and/or redemptions, totaling $29.9 million (inclusive of the $500 initial Member’s capital investment) have been received and 2,992,482 Units were issued and outstanding.

The Company is governed by its Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2016, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement. Prior thereto, the Company was in its acquisition phase and was making distributions on a monthly and quarterly basis. During the liquidation phase, periodic distributions are paid at the discretion of the Managing Member.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 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 sixnine months ended JuneSeptember 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 from operations.

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

In preparing the accompanying unaudited financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after JuneSeptember 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.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 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 allowances for doubtful accounts.

7

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

Segment reporting:

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

The primary geographic region in which the Company sought leasing opportunities was North America. For the sixnine months ended JuneSeptember 30, 2017 and 2016, and as of JuneSeptember 30, 2017 and December 31, 2016, 100% of the Company’s operating revenues and long-lived assets relate to customers domiciled in the United States.

Accounts receivable

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

Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.

Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, revenues on operating leases are recognized on a cash basis. All payments received on amounts billed under direct financing leases and notes receivable are applied only against outstanding principal balances.

Financing receivables

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

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

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,

8

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

if held in quantity, simultaneously or to dispose of the asset quickly. Impairment is measured as the difference between the fair value (as determined by a valuation method using discounted estimated future cash flows, third party appraisals or comparable sales of similar assets as applicable based on asset type) of the asset and its carrying value on the measurement date.

Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. Based upon the Company’s review of its portfolio, no fair value adjustment was deemed necessary for the three and sixnine months ended JuneSeptember 30, 2017 and 2016. Purchased securities totaled $248$246 thousand and $272 thousand at JuneSeptember 30, 2017 and December 31, 2016, respectively. The Company recognized gains of $0 and $62 thousand and $75 thousand and $0$62 thousand on sales of investment in securities during both the three and sixnine months ended JuneSeptember 30, 2017 and 2016, respectively.

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 both the three and sixrespective nine months ended JuneSeptember 30, 2017 and 2016, the Company recorded an unrealized lossesloss of $2 thousand and $2 thousand of unrealized gain on the fair valuationvalue adjustment of its warrants. By Comparison, during the prior year three and six month periods, the Company recorded unrealized gains of $0 and $2 thousand, respectively. As of JuneSeptember 30, 2017 and December 31, 2016, the estimated fair value of the Company’s portfolio of warrants amounted to $157 thousand and $159 thousand, respectively. There were no exercises of warrants, net or otherwise, during the three and sixnine months ended JuneSeptember 30, 2017 and 2016.

Per Unit data:

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

Fair Value Measurement:

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

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

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.

9

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

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, and equity securities of venture companies. The analysis may include a periodic review of price fluctuations and validation of numbers obtained from a specific third party by reference to multiple representative sources.

Recent accounting pronouncements:

In 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 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-2016-02ASU 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.

10

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

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 (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 virtually non-existentnon-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.

11

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

3. Allowance for credit losses:

The Company’s allowance for credit losses totaled $46 thousand and $4 thousand at September 30, 2017 and December 31, 2016, respectively. All of such allowance were related to delinquent operating lease receivables.

4. Investments in equipment and leases, net:

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

		Balance December 31, 2016				Reclassifications, Additions/ Dispositions and Impairment Losses				Depreciation/ Amortization Expense or Amortization of Leases				Balance June 30, 2017				Balance December 31, 2016				Reclassifications, Additions/ Dispositions and Impairment Losses				Depreciation/ Amortization Expense or Amortization of Leases				Balance September 30, 2017
Net investment in operating leases		$	2,583			$	(11	)		$	(285	)		$	2,287			$	2,583			$	(303	)		$	(427	)		$	1,853
Net investment in direct financing leases			1				—				(1	)			—				1				—				(1	)			—
Assets held for sale or lease, net			300				(38	)			—				262				300				25				—				325
Initial direct costs, net of accumulated amortization of $4 at June 30, 2017 and $4 at December 31, 2016			1				—				—				1
Initial direct costs, net of accumulated amortization of $4 at September 30, 2017 and $4 at December 31, 2016																			1				—				—				1
Total		$	2,885			$	(49	)		$	(286	)		$	2,550			$	2,885			$	(278	)		$	(428	)		$	2,179

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

Operating leases:

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

		Balance December 31, 2016				Additions				Reclassifications or Dispositions				Balance June 30, 2017				Balance December 31, 2016				Additions				Reclassifications or Dispositions				Balance September 30, 2017
Transportation		$	3,963			$	—			$	—			$	3,963			$	3,963			$	—			$	—			$	3,963
Construction			2,740				—				1				2,741				2,740				—				1				2,741
Aviation			2,167				—				—				2,167				2,167				—				—				2,167
Manufacturing			664				—				—				664
Materials handling			254				—				(25	)			229				254				—				(25	)			229
Computer			87				—				(41	)			46				87				—				(41	)			46
Manufacturing																			664				—				(664	)			—
Other			1				—				(1	)			—				1				—				(1	)			—
			9,876				—				(66	)			9,810				9,876				—				(730	)			9,146
Less accumulated depreciation			(7,293	)			(285	)			55				(7,523	)			(7,293	)			(427	)			427				(7,293	)
Total		$	2,583			$	(285	)		$	(11	)		$	2,287			$	2,583			$	(427	)		$	(303	)		$	1,853

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

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

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

Equipment Categorycategory		Useful Life
Aviation			15 – 20
Manufacturing			10 – 15
Construction			7 – 10
Materials handling			7 – 10
Transportation			7 – 10
Computer			3 – 5

4.5. Related party transactions:

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

The Operating Agreement allows for the reimbursement of costs incurred by Managing Member and/or affiliates for providing administrative services to the Company. Administrative services provided include Company accounting, investor relations, legal counsel and lease and equipment documentation. The Managing Member is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of investments. The Company would be liable for certain future costs to be incurred by the Managing Member to manage the administrative services provided to the Company.

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.Company. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.

Cost reimbursements to the Managing Member or its affiliates are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as 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.

The Managing Member and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement, during the three and sixnine months ended JuneSeptember 30, 2017 and 2016 as follows (in thousands):

		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended September 30,								Nine Months Ended September 30,
		2017				2016				2017				2016				2017				2016				2017				2016
Administrative costs reimbursed to Managing Member and/or affiliates		$	43			$	35			$	91			$	84			$	39			$	39			$	130			$	123
Asset management fees to Managing Member			17				9				27				21				9				7				36				28
		$	60			$	44			$	118			$	105			$	48			$	46			$	166			$	151

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

5.6. Non-recourse debt:

At JuneSeptember 30, 2017, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 1.97% to 2.39% per annum. The notes are secured by assignments of lease payments and pledges of assets. At JuneSeptember 30, 2017, gross lease rentals totaled $345$227 thousand over the remaining lease terms, and the carrying value of the pledged assets is $1.2$1.1 million. The notes mature at various dates from 2017 through 2018.

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

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

		Principal				Interest				Total				Principal				Interest				Total
Six months ending December 31, 2017		$	233			$	2			$	235
Three months ending December 31, 2017														$	117			$	1			$	118
Year ending December 31, 2018			103				1				104				103				1				104
		$	336			$	3			$	339			$	220			$	2			$	222

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

7.8. Members’ capital:

A total of 2,992,482 Units were issued and outstanding at both JuneSeptember 30, 2017 and December 31, 2016. The Fund was authorized to issue up to 20,000,000 total Units.

Fund distributions are to be allocated 7.5% to the Managing Member and 92.5% to the Other Members.

Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):

		Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended September 30,								Nine Months Ended September 30,
		2017				2016				2017				2016				2017				2016				2017				2016
Distributions		$	374			$	673			$	818			$	1,346			$	—			$	673			$	818			$	2,019
Weighted average number of Units outstanding			2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482				2,992,482
Weighted average distributions per Unit		$	0.12				0.23			$	0.27			$	0.45			$	—			$	0.22			$	0.27			$	0.67

ATEL 12, LLC
 
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

8.9. 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 JuneSeptember 30, 2017 and December 31, 2016:

JuneSeptember 30, 2017

Name

Valuation Frequency

Valuation Technique

Unobservable Inputs

Range of Input Values

Warrants

Recurring

Black-Scholes formulation

Stock price

$

$0.02 – $14.75

Exercise price

$

$0.36 – $25.76

Time to maturity (in years)

1.251.00 – 6.346.09

Risk-free interest rate

1.28%1.31% – 2.06%2.05%

Annualized volatility

49.46%47.62% – 102.16%99.85%

Impaired off-lease equipment

Non-recurring

Market Approach

Third Party Agents' pricing Quotes – Per Equipment

$

125,000 – $200,000

Equipment Condition

Poor to Average

December 31, 2016

Name

Valuation Frequency

Valuation Technique

Unobservable Inputs

Range of Input Values

Warrants

Recurring

Black-Scholes formulation

Stock price

$

$0.01 – $14.75

Exercise price

$

$0.14 – $25.76

Time to maturity (in years)

0.13 – 6.84

Risk-free interest rate

0.48% – 2.22%

Annualized volatility

49.69% – 103.87%

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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a current market exchange. 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.

Investment in securities

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

Non-recourse debt

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.

17

ATEL 12, LLC

NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)

9. Fair value measurements: - (continued)

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.

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

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

Overview

ATEL 12, LLC (the “Company” or the “Fund”) is a California limited liability company that was formed in January 2007 for the purpose of equipment financing and acquiring equipment to engage in equipment leasing and sales activities, as well as in real estate, growth capital investment activities and green technologies (the “principal operations”), primarily in the United States.

The Company may continue until December 31, 2030. However, pursuant to the guidelines of the Operating Agreement, the Company commenced liquidation phase activities on January 1, 2016. Periodic distributions are paid at the discretion of the Managing Member.

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

The Company had a net incomeloss of $129$209 thousand and $261a $221 thousand net income for the three months ended JuneSeptember 30, 2017 and 2016, respectively. Results for the secondthird quarter of 2017 reflect decreasesa decrease in total revenues and increasesan increase in total operating expenses when compared to the prior year period.

Revenues

Total revenues for the secondthird quarter of 2017 decreased by $65$156 thousand, or 13%35%, as compared to the prior year period. Such decrease was largely due to a $103an $82 thousand, or 23%22%, reduction in lease revenues, mainly the result of dispositions of lease assets; an unfavorable $62 thousand decrease in gain on sales of investment in securities and a $49$14 thousand, or 98%93%, decrease in other revenue as the prior period included deferred maintenance fees previously collected for additional wear and tear on certain returned equipment; offset, in part, by a favorable $75 thousand increase in gain on sales of investment in securities and a $19 thousand, or 173%, increase in gain on sales of lease assets and early termination of notes, due to a change in the mix of assets sold.equipment.

Expenses

Total expenses for the secondthird quarter of 2017 increased by $67$274 thousand, or 28%118%, as compared to the prior year period. The netSuch increase in expenses was primarily due to a $229 thousand increase in impairment losses on equipment due to an impairment recognized on equipment during the result of $32current year period; a $33 thousand, increase in provision for credit losses, due to increased delinquent accounts; and a $10 thousand, or 229%, increase in professional fees, due to the year over year difference in timing and related billings for professional audit and tax services; an $11 thousand, or 122%,3 times, increase in outside services, indicative of additional efforts required to comply with certain regulatory requirements; an $8 thousand, or 23%, increase in cost reimbursements to Managing Member and or/affiliates, related to indirect cost allocations and an $8 thousand increase in the adjustment for the provision for credit losses, due to delinquent accounts.requirements.

The six monthsnine month ended JuneSeptember 30, 2017 versus the sixnine months ended JuneSeptember 30, 2016

The Company had a net loss of $8 thousand and a $631 thousand net income of $201 thousand and $410 thousand for the sixnine months ended JuneSeptember 30, 2017 and 2016, respectively. Results for the first halfthird quarter of 2017 reflect decreasesa decrease in total revenuesrevenue and increasesan increase in total operating expenses when compared to the prior year period.

19

Revenues

Total revenues for the first halfthird quarter of 2017 declined by $144$300 thousand, or 15%21%, as compared to the prior year period. Such decrease was largely due to a $198$280 thousand, or 22% reduction in operating lease revenues, mainly the result of dispositions of lease assets; a $96$110 thousand, or 91%, decrease in other revenue related to deferred maintenance fees previously collected for additional wear and tear on certain returned equipment in the prior period; and a $13$15 thousand decrease in interest on notes receivable, offset, in part, by a $93$97 thousand, or 119%118%, favorable gain on sales of lease assets and early termination of notes, and a $75$13 thousand, or 21%, gain on sales of investment in securities.

Expenses

Total expenses for the first halfthird quarter of 2017 increased by $65$339 thousand, or 12%44%, as compared to the prior year period. The netSuch increase in expenses was primarily the result of $22$229 thousand increase in impairment losses due to an impairment recognized on equipment during the current year period; a $40 thousand increase in an adjustment for provision for credit losses, due to increased delinquent accounts; a $32 thousand, or 105%133% increase in outside services, indicative of additional efforts required to comply with certain regulatory requirements; an $18 thousand, or 7%4%, increase in depreciation expense, mainly the result of a lease contract renewal and a reduction in residual value on certain equipment; and a $7 thousand, or 8%6% increase in cost reimbursements to Managing Member and/or affiliates, related to higher indirect costs allocations;allocations, a $7 thousand increase in the adjustment for provision to credit losses, due to delinquent accounts, and a $7 thousand, or 8%, increase in professional fees due to the year over year difference in timing and related billings for professional audit and tax services.result of refinement of cost allocation methodology.

Capital Resources and Liquidity

At JuneSeptember 30, 2017 and December 31, 2016, the Company’s cash and cash equivalents totaled $618$366 thousand and $1 million, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as distributions are made to the Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The primary source of liquidity for the Company has been its cash flow from fixed-term leasing activities. As the lease terms expire, the Company will re-lease or sell the equipment. The future liquidity beyond the contractual minimum rentals will depend on the Company’s success in remarketing or selling the equipment as it comes off rental.

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 June 30,								Six Months Ended June 30,								Three Months Ended September 30,								Nine Months Ended September 30,
		2017				2016				2017				2016				2017				2016				2017				2016
Net cash provided by (used in):
Operating activities		$	154			$	327			$	479			$	813			$	169			$	371			$	648			$	1,184
Investing activities			12				98				65				282				99				257				164				539
Financing activities			(115	)			(841	)			(959	)			(1,682	)			(520	)			(841	)			(1,479	)			(2,523	)
Net increase (decrease) in cash and cash equivalents		$	51			$	(416	)		$	(415	)		$	(587	)
Net decrease in cash and cash equivalents																		$	(252	)		$	(213	)		$	(667	)		$	(800	)

During the same comparative periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, and to pay down non-recourse debt. DuringTotal distributions paid to Members amounted to $404 thousand and $727 thousand for the second quarter ofrespective three months ended September 30, 2017 no distributions were made as a semi-annual basis was adopted during this later stage of the fund’s life cycle; cashand 2016. Cash payments of $115$116 thousand and $113$114 thousand were made to reduce non-recourse debt during the same respective periods.

The sixnine months ended JuneSeptember 30, 2017 versus the sixnine months ended JuneSeptember 30, 2016

During the sixnine months ended JuneSeptember 30, 2017 and 2016, the Company’sCompany's primary sources of liquidity were cash flows from its portfolio of operating lease contracts, and its investments in notes receivable.receivable and securities. The Company also realized $64 thousand and $111$170 thousand of proceeds from the sales of lease assets and/or the early termination of notes receivable during the respective sixnine months ended JuneSeptember 30, 2017 and 2016. The Company also realized $99 thousand and $98 thousand of proceeds from the sales of investment in securities during the respective nine months ended September 30, 2017 and 2016.

During the same comparative periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, and to pay down debt. Total distributions paid to Members amounted to $729 thousand$1.1 million and $1.5$2.2 million for the respective sixnine months ended JuneSeptember 30, 2017 and 2016; cash2016. Cash payments of $230$346 thousand and $226$340 thousand were made to reduce non-recourse debt during the same respective periods.

Distributions

Beginning with the month of February 2008, the Company commenced periodic distributions, based on cash flows from operations. Such distributions have been consistently made through JuneSeptember 30, 2017.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At JuneSeptember 30, 2017, the Company had no commitments to purchase lease assets or fund investments in notes receivable.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see note 2 Summary of significant accounting policies.

Significant Accounting Policies and Estimates

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

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

21

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

The Company’s Managing Member’s President and Chief Executive Officer, and Executive Vice President and Chief Financial Officer and Chief Operating Officer (“Management”), evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15-15(e)) as of

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.

Documents filed as a part of this report:

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 not applicable, and therefore have been omitted.

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

23

SIGNATURES

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

Date: August 10,November 9, 2017

ATEL 12, LLC
(Registrant)