Atel 17 10-Q 2018 Q2 Quarterly report

Form 10-Q

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

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

For the quarterly period ended June 30, 2018

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 333-203841

ATEL 17, LLC

(Exact name of registrant as specified in its charter)

California	90-1108275
(State or other jurisdiction of Incorporation or organization)	(I. R. S. Employer Identification No.)

The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111
(Address of principal executive offices)

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

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

Securities registered pursuant to section 12(g) of the Act: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. Yesx Noo

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). Yesx Noo

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 filero     Accelerated filero     Non-accelerated filero     Smaller reporting companyx
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). Yeso Nox

The number of Limited Liability Company Units outstanding as of July 31, 2018 was 2,565,749.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL 17, LLC
 
Index

Part I. Financial Information		3
Item 1. Financial Statements (Unaudited)		3
Balance Sheets, June 30, 2018 and December 31, 2017		3
Statements of Operations for the three and six months ended June 30, 2018 and 2017		4
Statements of Changes in Members’ Capital for the year ended December 31, 2017 and for the six months ended June 30, 2018		5
Statements of Cash Flows for the three and six months ended June 30, 2018 and 2017		6
Notes to the Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of   Operations		24
Item 4. Controls and Procedures		28
Part II. Other Information		29
Item 1. Legal Proceedings		29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29
Item 3. Defaults Upon Senior Securities		30
Item 4. Mine Safety Disclosures		30
Item 5. Other Information		30
Item 6. Exhibits		30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 17, LLC
 
BALANCE SHEETS
 
JUNE 30, 2018 AND DECEMBER 31, 2017
(In Thousands)

	June 30, 2018		December 31, 2017
	(Unaudited)
ASSETS
Cash and cash equivalents	$	3,763	$	7,092
Due from affiliate		6		—
Accounts receivable, net		46		66
Notes receivable, net		4,063		1,794
Warrants, fair value		237		62
Investments in equipment and leases, net		9,988		10,200
Prepaid expenses and other assets		50		12
Total assets	$	18,153	$	19,226
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Managing Member	$	—	$	34
Affiliates		—		74
Accrued distributions to Other Members		228		217
Other		22		30
Non-recourse debt		100		—
Unearned operating lease income		121		164
Total liabilities		471		519
Commitments and contingencies
Members’ capital:
Managing Member		1		1
Other Members		17,681		18,706
Total Members’ capital		17,682		18,707
Total liabilities and Members’ capital	$	18,153	$	19,226

See accompanying notes.

3

ATEL 17, LLC
 
STATEMENTS OF OPERATIONS
 
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 AND 2017
(In Thousands Except for Units and Per Unit Data)
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Leasing and lending activities:
Operating lease revenue	$	423		$	298		$	826		$	576
Notes receivable interest income		152			42			303			87
Unrealized (loss) gain on fair value adjustment for warrants		(36	)		10			(37	)		(4	)
Other		5			2			7			4
Total revenues		544			352			1,099			663
Expenses:
Depreciation of operating lease assets		304			214			608			401
Asset management fees to Managing Member		67			23			132			58
Acquisition expense		9			58			84			156
Cost reimbursements to Managing Member and/or affiliates		112			72			216			121
Provision for (reversal of) credit losses		—			9			(18	)		9
Amortization of initial direct costs		19			13			37			26
Professional fees		17			49			55			62
Outside services		15			22			46			56
Taxes on income and franchise fees		(11	)		—			(9	)		—
Bank charges		30			—			58			—
Other		19			7			28			12
Total expenses		581			467			1,237			901
Net loss	$	(37	)	$	(115	)	$	(138	)	$	(238	)
Net loss:
Managing Member	$	—		$	—		$	—		$	—
Other Members		(37	)		(115	)		(138	)		(238	)
	$	(37	)	$	(115	)	$	(138	)	$	(238	)
Net loss per Limited Liability Company Unit (Other Members)	$	(0.01	)	$	(0.06	)	$	(0.05	)	$	(0.13	)
Weighted average number of Units outstanding		2,565,749			1,954,524			2,568,355			1,777,306

See accompanying notes.

4

ATEL 17, LLC
 
STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL
 
FOR THE YEAR ENDED DECEMBER 31, 2017 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2018
(In Thousands Except for Units and Per Unit Data)

				Amount
	Units			Other Members			Managing Member		Total
Balance December 31, 2016		1,475,864		$	11,695		$	1	$	11,696
Capital contributions		1,075,885			10,740			—		10,740
Syndication costs		—			(1,608	)		—		(1,608	)
Distributions to Other Members ($0.80 per Unit)		—			(1,640	)		—		(1,640	)
Net loss		—			(481	)		—		(481	)
Balance December 31, 2017		2,551,749		$	18,706			1	$	18,707
Capital contributions		34,000			340			—		340
Repurchase of units		(20,000	)		(151	)		—		(151	)
Syndication costs		—			(51	)		—		(51	)
Distributions to Other Members ($0.40 per Unit)		—			(1,025	)		—		(1,025	)
Net loss		—			(138	)		—		(138	)
Balance June 30, 2018 (unaudited)		2,565,749		$	17,681		$	1	$	17,682

See accompanying notes.

5

ATEL 17, LLC
 
STATEMENTS OF CASH FLOWS
 
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 AND 2017
(Unaudited)
(In Thousands)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Operating activities:
Net loss	$	(37	)	$	(115	)	$	(138	)	$	(238	)
Adjustment to reconcile net loss to net cash provided by operating activities:
Accretion of note discount – warrants		(18	)		(4	)		(26	)		(9	)
Depreciation of operating lease assets		304			214			608			401
Amortization of initial direct costs		19			13			37			26
Provision for (reversal of) credit losses		—			9			(18	)		9
Unrealized loss on fair value adjustment for warrants		36			(10	)		37			4
Changes in operating assets and liabilities:
Accounts receivable		11			(37	)		38			36
Prepaid expenses and other assets		(12	)		(21	)		(38	)		(21	)
Accounts payable, Managing Member		(1	)		(14	)		(34	)		(8	)
Accrued distributions to Other Members		—			38			—			63
Accounts payable, other		(5	)		(44	)		(8	)		(5	)
Accrued liabilities, affiliates		63			23			(80	)		82
Unearned operating lease income		(28	)		4			(43	)		(48	)
Net cash provided by operating activities		332			56			335			292
Investing activities:
Purchases of equipment on operating leases		—			(3,045	)		(407	)		(3,267	)
Payments of initial direct costs		(1	)		(52	)		(33	)		(81	)
Note receivable advances		(681	)		—			(3,252	)		—
Principal payments received on notes receivable		419			109			804			246
Net cash used in investing activities		(263	)		(2,988	)		(2,888	)		(3,102	)
Financing activities:
Borrowings under non-recourse debt		100			—			100			—
Syndication costs paid to Managing Member and affiliates		—			(436	)		(51	)		(919	)
Distributions to Other Members		(513	)		(391	)		(1,014	)		(710	)
Capital contributions		—			2,907			340			6,127
Repurchase/Rescissions of Units		—			—			(151	)		—
Net cash (used in) provided by financing activities		(413	)		2,080			(776	)		4,498
Net (decrease) increase in cash and cash equivalents		(344	)		(852	)		(3,329	)		1,688
Cash at beginning of period		4,107			5,970			7,092			3,430
Cash at end of period	$	3,763		$	5,118		$	3,763		$	5,118
Supplemental disclosures of cash flow information:
Cash paid during the period for taxes	$	—		$	—		$	1		$	1
Schedule of non-cash investing and financing transactions:
Distributions payable to Other Members at period-end	$	228		$	180		$	228		$	180

See accompanying notes.

6

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

1. Organization and Limited Liability Company matters:

ATEL 17, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on April 16, 2015 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 corporation. 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 17, LLC limited liability company operating agreement dated April 24, 2015 (the “Operating Agreement”). Contributions in the amount of $500 were received as of April 28, 2015, which represented the initial member’s capital investment. As a limited liability company, the liability of any individual member for the obligations of the Fund is limited to the extent of capital contributions to the Fund by the individual member.

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

As of June 30, 2018, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) totaling $25.7 million have been received, inclusive of the $500 initial member’s capital investment. Through the same date, a net total of $151 thousand of such contributions (representing 20,000 Units) have been rescinded or repurchased (net of distributions paid and allocated syndication costs) by the Company. As of June 30, 2018, a total of 2,565,749 Units were issued and outstanding.

The Fund, or Managing Member on behalf of the Fund, has and will continue to incur costs in connection with the organization, registration and issuance of the Units. The amount of such costs to be borne by the Fund is limited by certain provisions of the Operating Agreement.

The Company’s principal objectives are to invest in a diversified portfolio of investments that will generate a favorable overall return to investors and (i) preserve, protect and return the Fund's invested capital; (ii) generate regular cash distributions to Unit holders during the Offering Stage and Operating Stage of the Fund, with any balance remaining after required minimum distributions, equal to not less than 8% nor more than 10% per annum on investors' Original Invested Capital, to be used to purchase additional investments during the first six years after the year the offering terminates; and (iii) provide additional cash distributions during the Liquidating Stage, commencing with the end of the six year reinvestment period and continuing until all investment portfolio assets have been sold or otherwise disposed.

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, 2017, filed with the Securities and Exchange Commission.

7

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year.

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after June 30, 2018, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, or adjustments thereto.

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

Cash and cash equivalents:

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

Use of Estimates:

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

Segment reporting:

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

The primary geographic region in which the Company seeks financing opportunities is North America. Currently, 100% of the Company’s operating revenues are from 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

8

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

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, 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 in connection with its lending arrangements.

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 three and six months ended June 30, 2018, the Company recorded unrealized losses of $36 thousand and $37 thousand, respectively, on fair valuation of its warrants. By comparison, the Company recorded unrealized gain of $10 thousand and unrealized loss of $4 thousand, on fair valuations of its warrants during the respective three and six months ended June 30, 2017. As of June 30, 2018 and December 31, 2017, the estimated fair value of the Fund’s portfolio of warrants amounted to $237 thousand and $62 thousand, respectively. There have been no exercises of warrants, net or otherwise, during the three and six months ended June 30, 2018 and 2017.

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating and direct financing lease receivables, notes receivable and accounts receivable. The Company places the majority of its cash deposits in non-interest bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250,000. The

9

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

remainder of the Fund’s cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from various industries related to equipment on operating leases.

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the equipment’s estimated residual values. Off-lease equipment is generally not subject to depreciation. The Company depreciates all lease assets, in accordance with guidelines consistent with ASC 840-20-35-3, over the periods of the lease terms contained in each asset’s respective lease contract to the estimated residual value at the end of the lease contract. All lease assets are purchased only concurrent with the execution of a lease commitment by the lessee. Thus, the original depreciation period corresponds with the term of the original lease. Once the term of an original lease contract is completed, the subject property is typically sold to the existing user, re-leased to the existing user, or, when off-lease, is held for sale. Assets which are re-leased continue to be depreciated using the terms of the new lease agreements and the estimated residual values at the end of the new lease terms, adjusted downward as necessary. Assets classified as held-for-sale are carried at the lower of carrying amount, or the fair value less cost to sell (ASC 360-10-35-43).

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

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

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

Initial direct costs:

The Company capitalizes initial direct costs (“IDC”) associated with the origination of lease assets. IDC includes both internal costs (e.g., the costs of employees’ activities in connection with successful lease originations) and external broker fees incurred with such originations. The costs are amortized on a lease by

10

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

lease basis based on actual contract term using a straight-line method for operating leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that are not consummated are not eligible for capitalization as initial direct costs and are expensed as acquisition expense.

Acquisition expense:

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

Fair Value:

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

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

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

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

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 are based upon the weighted average number of Other Members Units outstanding since commencement of its operations.

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

11

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

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 December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures.

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 under 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. As part of the adoption of the standard, the Company has selected and is in the process of implementing new lease accounting software. The Company is in the process of identifying and designing appropriate changes to its business processes, systems and controls to support the new standard. Given the limited changes to lessor accounting, Management does not expect material changes to recognition or measurement.

12

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

In July 2018, the FASB issued Accounting Standards Update 2018-11, Leases (Topic 842) Targeted Improvements (“ASU 2018-11”). The new standard provides a new transition method and practical expedient to simplify the application of the new leasing standard. Under the new transition method, comparative periods presented in the financial statements in the period of adoption will not need to be restated. Instead, a Company would initially apply the new lease requirements at the effective date, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company would continue to report comparative periods presented in the financial statements in the period of adoption under current GAAP and provide the applicable required disclosures for such periods. The new practical expedient allows lessors to avoid separating lease and associated nonlease components within a contract if certain criteria are met. If elected, lessors will be able to aggregate nonlease components that otherwise would be accounted for under the new revenue standard with the associated lease component if the following conditions are met (1) the timing and pattern of transfer of the nonlease component and the associated lease component are the same and (2) the stand-alone lease component would be classified as an operating lease if accounted for separately. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update related to separating components of a contract are the same as the effective date and transition requirements in Update 2016-02. The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. The practical expedient may be applied either retrospectively or prospectively. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements.

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. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did not have a material impact on its financial statements 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. This guidance is effective for the Company beginning on January 1, 2018. Management’s

13

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

evaluation of the impact of such adoption on the financial statements of the Fund indicated that such impact was immaterial as the new revenue guideline does not affect revenues from leases and loans, which comprise substantially all of the Company’s revenues since leases are not included within the scope of Topic 606.

3. Notes receivable, net:

The Company has various notes receivables from borrowers who have financed the purchase of equipment through the Company. The original terms of the notes receivable are from 24 to 42 months and bear interest at rates ranging from 11.8% to 16.49% per annum. The notes are secured by the equipment financed. The notes mature from 2020 through 2021. There were neither impaired notes nor notes placed in non-accrual status as of June 30, 2018 and December 31, 2017.

As of June 30, 2018, the future minimum payments receivable are as follows (in thousands):

Six months ending December 31, 2018	$	1,166
Year ending December 31, 2019		2,273
2020		1,138
2021		390
		4,967
Less: portion representing unearned interest income		(705	)
		4,262
Less: warrants – notes receivable discount		(211	)
Unamortized initial direct costs		12
Notes receivable, net	$	4,063

IDC (Initial Direct Cost) amortization expense related to notes receivable and the Company’s notes receivable operating leases for the three and six months ended June 30, 2018 and 2017 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
IDC amortization – notes receivable	$	3	$	1	$	5	$	1
IDC amortization – lease assets		16		12		32		25
Total	$	19	$	13	$	37	$	26

4. Allowance for credit losses:

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

	Accounts Receivable Allowance for Doubtful Accounts
	Operating Leases
Balance December 31, 2017		18
Reversal of provision of credit loss		(18	)
Balance June 30, 2018	$	—

14

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

4. Allowance for credit losses: - (continued)

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

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

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

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

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

At June 30, 2018 and 2017, the Company’s investment in financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

	Notes Receivable
	June 30, 2018		December 31, 2017
Pass	$	4,262	$	1,813
Special mention		—		—
Substandard		—		—
Doubtful		—		—
Total	$	4,262	$	1,813

15

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

4. Allowance for credit losses: - (continued)

At June 30, 2018 and December 31, 2017, investment in financing receivables is aged as follows (in thousands):

June 30, 2018	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	$	—	$	—	$	—	$	—	$	4,262	$	4,262	$	—
Total	$	—	$	—	$	—	$	—	$	4,262	$	4,262	$	—

December 31, 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	$	—	$	—	$	—	$	—	$	1,813	$	1,813	$	—
Total	$	—	$	—	$	—	$	—	$	1,813	$	1,813	$	—

The Company had no financing receivables on non-accrual or impaired status at June 30, 2018 and December 31, 2017.

5. Investment in equipment and leases, net:

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

	Balance December 31, 2017		Additions		Depreciation/ Amortization Expense			Balance June 30, 2018
Net investment in operating leases	$	9,970	$	407	$	(608	)	$	9,769
Initial direct costs, net of accumulated amortization of $115 at June 30, 2018 and $82 at December 31, 2017		230		21		(32	)		219
Total	$	10,200	$	428	$	(640	)	$	9,988

Additions to net investment in operating lease assets are stated at cost. All of the Company’s leased property was acquired beginning in March 2016 through January 2018.

Impairment of investments in lease assets:

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 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 six months ended June 30, 2018 and the year ended December 31, 2017.

16

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

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

The Company utilizes a straight-line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment totaled $304 thousand and $214 thousand for the respective three months ended June 30, 2018 and 2017, and $608 thousand and $401 thousand for the respective six months ended June 30, 2018 and 2017.

IDC amortization expense related to the Company’s operating leases totaled $16 thousand and $12 thousand for the respective three months ended June 30, 2018 and 2017, and $32 thousand and $25 thousand for the respective six months ended June 30, 2018 and 2017.

Operating leases:

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

	Balance December 31, 2017			Additions			Reclassifications or Dispositions		Balance June 30, 2018
Transportation, rail	$	3,679		$	—		$	—	$	3,679
Mining		1,320			407			—		1,727
Construction		1,242			—			—		1,242
Paper processing		1,058			—			—		1,058
Marine vessels		1,041			—			—		1,041
Containers		860			—			—		860
Agriculture		742			—			—		742
Materials handling		711			—			—		711
Aviation		462			—			—		462
Transportation, other		97			—			—		97
		11,212			407			—		11,619
Less accumulated depreciation		(1,242	)		(608	)		—		(1,850	)
Total	$	9,970		$	(201	)	$	—	$	9,769

The average estimated residual value for assets on operating leases was 38% and 39% of the assets’ original cost at June 30, 2018 and December 31, 2017, respectively.

At June 30, 2018, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating Leases
Six months ending December 31, 2018	$	856
Year ending December 31, 2019		1,691
2020		1,509
2021		1,025
2022		811
2023		756
Thereafter		462
	$	7,110

17

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

5. Investment 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 June 30, 2018, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category	Useful Life
Transportation, rail		35 – 40
Marine vessel		20 – 30
Containers		15 – 20
Aviation		15 – 20
Mining		10 – 15
Paper processing		10 – 15
Agriculture		7 – 10
Construction		7 – 10
Materials handling		7 – 10
Transportation		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.

Each of ATEL Leasing Corporation (“ALC”) and AFS is a wholly-owned subsidiary of ATEL Capital Group and perform 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 its offering period, the Fund will pay selling commissions of up to 9% of the selling price of the Units to ATEL Securities Corporation (“ASC”), an affiliate of the Managing Member acting as Dealer Manager for the group of selling broker-dealers. ASC will in turn pay to participating broker-dealers selling commissions of up to 7% of the price of the Units sold by them, retaining the balance of 2%.

18

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

6. Related Party Transactions: - (continued)

During the three and six months ended June 30, 2018 and 2017, the Managing Member and/or affiliates earned commissions and fees, and billed for reimbursements pursuant to the Operating Agreement as follows (in thousands):

	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
Selling commissions, equal to 9% of the selling price of the Limited Liability Company Units, deducted from Other Members capital	$	—	$	261	$	31	$	551
Reimbursement of other syndication costs to Managing Member and/or affiliates, deducted from Other Members capital		—		175		20		368
Special discounts		—		—		—		13
Administrative costs reimbursed to Managing Member and/or affiliates		112		72		216		121
Asset management fees to Managing Member		67		23		132		58
Acquisition and initial direct costs paid to Managing Member		11		110		117		237
	$	190	$	641	$	516	$	1,348

7. Non-recourse debt:

At June 30, 2018, non-recourse debt consists of a note payable to a financial institution. The note payments are due in monthly installments. The note is secured by assignments of lease payments and pledges of assets. At June 30, 2018, gross operating lease rental totaled approximately $104 thousand over the remaining lease term and the carrying value of the pledged assets is $151 thousand. Interest on the note is 4.45% per annum and the note matures in 2021.

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

19

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

7. Non-recourse debt: - (continued)

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

	Principal		Interest		Total
Six months ending December 31, 2018	$	28	$	2	$	30
Year ending December 31, 2019		57		2		59
2020		15		0		15
	$	100	$	4	$	104

8. Syndication Costs:

Syndication costs are reflected as a reduction to Members’ capital as such costs are netted against the capital raised. The amount shown is primarily comprised of selling commissions as well as fees pertaining to the organization of the Fund, document preparation, regulatory filing fees, and accounting and legal costs. Such costs relating to the comparative three and six month periods ended June 30, 2018 and 2017, are listed below:

	Three months ended June 30,				Six months ended June 30,
	2018		2017		2018		2017
Administration and Other	$	—	$	175	$	20	$	368
Selling Commissions		—		261		31		551
Total Syndication Cost	$	—	$	436	$	51	$	919

The Operating Agreement places a limit for cost reimbursements to the Managing Member and/or affiliates. When added to selling commissions, such cost reimbursements may not exceed a total equal to 15% of all offering proceeds. As of June 30, 2018, the Company had not recorded any syndication costs in excess of the limitation. The limitation on the amount of syndication costs pursuant to the Operating Agreement is determined on the date of termination of the offering. At such time, the Manager guarantees repayment of any excess syndication costs (above the limitation) which it may have collected from the Company, which guarantee is without recourse or reimbursement by the Fund.

9. Special Discounts:

The Fund sold Units subject to volume discounts to investors who purchased more than $500 thousand of Units through the same broker dealer in this offering. In these instances the Fund applied the reduced per unit price and appropriate scheduled sales commission, as detailed in the offering prospectus, to the entire purchase, not just the portion of the purchase price which exceeds the $500 thousand threshold. During the three and six months ended June 30, 2018, there were no such sales or discounts and for the three and six months ended June 30, 2017, volume discounts totaled $13 thousand. These special discounts are reflected in the financial statements as a reduction of Members’ Capital.

10. Borrowing facilities:

Effective June 30, 2017, 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 June 30, 2018, the Credit Facility is for an amount of $75 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. 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

20

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

10. Borrowing facilities: - (continued)

lender designated spread, or the bank’s Prime rate, which re-prices daily. At June 30, 2018 and December 31, 2017, approximately $72.1 million and $69.2 million, respectively, were available under the facility, and the Company had no outstanding borrowings under the facility.

11. Commitments:

At June 30, 2018, there was a commitment to fund investments in notes receivable totaling $2.8 million. The contract awards may be canceled by the prospective borrower/investee or may not be accepted by the Company prior to funding.

12. Members’ Capital:

Totals of 2,565,749 and 2,551,749 Units were issued and outstanding as of June 30, 2018 and December 31, 2017, respectively, including the 50 Units issued to the initial Member (Managing Member). The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Member.

Distributions to the Other Members for the three and six months ended June 30, 2018 and June 30, 2017 were as follows (in thousands except Units and per Unit data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Distributions	$	513	$	391	$	1,025	$	710
Weighted average number of Units outstanding		2,565,749		1,954,524		2,568,355		1,777,306
Weighted average distributions per Unit	$	0.20	$	0.20	$	0.40	$	0.40

13. Fair value measurements:

At June 30, 2018 and December 31, 2017, only the Company’s warrants were measured on a 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 $237 thousand and $62 thousand at June 30, 2018 and December 31, 2017, respectively. Such valuation is classified within Level 3 of the valuation hierarchy.

21

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

13. Fair value measurements: - (continued)

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Fair value of warrants at beginning of period	$	190		$	37	$	62		$	51
Fair value of new warrants, recorded during the period (included as a discount on notes receivable)	$	83			—		212			—
Unrealized (loss) gain on fair valuation of warrants		(36	)		10		(37	)		(4	)
Fair value of warrants at end of period	$	237		$	47	$	237		$	47

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 June 30, 2018 and December 31, 2017:

June 30, 2018
Name	Valuation Frequency		Valuation Technique		Unobservable Inputs		Range of Input Values
Warrants		Recurring		Black-Scholes formulation		Stock price	$	1.95 – $14.50
						Exercise price	$	1.64 – $9.00
						Time to maturity (in years)		8.13 – 13.45
						Risk-free interest rate		2.83% – 2.87%
						Annualized volatility		38.15% – 292.22%

December 31, 2017
Name	Valuation Frequency		Valuation Technique		Unobservable Inputs		Range of Input Values
Warrants		Recurring		Black-Scholes formulation		Stock price	$	3.88 – $4.59
						Exercise price	$	2.54 – $3.98
						Time to maturity (in years)		8.63 – 13.95
						Risk-free interest rate		2.37% – 2.47%
						Annualized volatility		37.63% – 42.49%

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.

22

ATEL 17, LLC
 
NOTES TO FINANCIAL STATEMENTS

13. Fair value measurements: - (continued)

Notes receivable

The fair value of the Company’s notes receivable is generally estimated based upon various methodologies deployed by financial and credit management based on assumptions market participants would consider 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.

The following tables present estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at June 30, 2018 and December 31, 2017 (in thousands):

	June 30, 2018
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	3,763	$	3,763	$	—	$	—	$	3,763
Notes receivable, net		4,063		—		—		3,966		3,966
Warrants, fair value		237		—		—		237		237
Financial liabilities:
Non-recourse debt		100		—		—		100		100

	December 31, 2017
	Carrying Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	7,092	$	7,092	$	—	$	—	$	7,092
Notes receivable, net		1,794		—		—		1,794		1,794
Warrants, fair value		62		—		—		62		62

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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

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

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

Results of Operations

The three months ended June 30, 2018 versus the three months ended June 30, 2017

The Company had net losses of $37 thousand and $115 thousand for the respective three months ended June 30, 2018 and 2017. Results for the second quarter of 2018 reflect increases in both total revenues and total expenses when compared to the prior year period.

Revenues

Total revenues for the three months ended June 30, 2018 increased by $192 thousand, or 55%, as compared to the prior year period. Such increase was largely due to a $125 thousand, or 42%, increase in operating lease revenue, mainly the result of new operating lease equipment acquisitions; and a $110 thousand, or more than 2 times, increase in interest income on notes receivable related to new investments in notes receivable; offset, in part, by a $46 thousand, or almost 5 times, unfavorable change in unrealized gains/losses on fair value adjustment for the warrant holdings.

Expenses

Total expenses for the three months ended June 30, 2018 increased by $114 thousand, or 24%, as compared to the prior year period. The increase in total expenses was due to a $90 thousand, or 42%, increase in depreciation expense, the result of approximately $1.7 million of lease assets purchased in the past twelve months; a $44 thousand, or 191%, increase in asset management fees paid to the Manager, due to an increase in managed assets; a $40 thousand, or 56%, increase in cost reimbursements to Manager Member, a result of

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increased levels of portfolio assets and the refinement of cost allocation methodology; and a $30 thousand, increase in bank charges for fees related to the line of credit; offset, in part, by a $49 thousand, or 84%, decrease in acquisition expenses related to lower period over period acquisitions of operating lease assets; a $32 thousand, or 65%, decrease in professional fees, due to year over year difference in timing and related billings for professional audit and tax services; and a $9 thousand decrease in the provision for credit losses, due to payments received from customers.

The six months ended June 30, 2018 versus the six months ended June 30, 2017

The Company had net losses of $138 thousand and $238 thousand for the six months ended June 30, 2018 and 2017, respectively. Results for the first half of 2018 reflect increases in both total revenues and total operating expenses when compared to the prior year period.

Revenues

Total revenues for the six months ended June 30, 2018 increased by $436 thousand, or 66%, as compared to the prior year period. Such increase was largely due to a $250 thousand, or 43%, increase in operating lease revenues, mainly the result of new operating lease equipment acquisitions; and a $216 thousand, or more than 2 times, increase in interest income on notes receivable related to new investments in notes receivable; offset, in part by, a $33 thousand, or 8 times, unfavorable change in unrealized losses on fair value adjustment for the warrant holdings.

Expenses

Total operating expenses for the six months ended June 30, 2018 increased by $336 thousand, or 37%, as compared to the prior year period. The net increase was due to a $207 thousand, or 52%, increase in depreciation expense, largely due to the addition of $1.7 million in equipment purchased for operating leases since June 30, 2017; a $95 thousand, or 79%, increase in cost reimbursements to Managing Member, a result of increased levels of portfolio assets and the refinement of cost allocation methodology; a $74 thousand, or 128%, increase in asset management fees paid to the Manager, due to an increase in managed assets; a $58 thousand increase in bank charges for fees related to the line of credit; and an $11 thousand, or 42%, increase in amortization of initial direct costs due to an increase in acquisitions of equipment purchased for operating leases and notes receivable; offset in part by, a $72 thousand, or 46%, decrease in acquisition expenses related to lower period over period acquisitions of operating lease assets; and a $27 thousand, or 3 times, favorable change in the provision for credit losses, due to payments received from customers.

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $3.8 million and $7.1 million at June 30, 2018 and December 31, 2017, respectively. The liquidity of the Company will vary in the future, increasing to the extent cash flows from cash flows from subscriptions, leases and notes receivable 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.

Cash Flows

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

	Three months ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Net cash provided by (used in):
Operating activities	$	332		$	56		$	335		$	292
Investing activities		(263	)		(2,988	)		(2,888	)		(3,102	)
Financing activities		(413	)		2,080			(776	)		4,498
Net (decrease) increase in cash and cash equivalents	$	(344	)	$	(852	)	$	(3,329	)	$	1,688

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The three months ended June 30, 2018 versus the three months ended June 30, 2017

During the three months ended June 30, 2018, the Company’s primary source of liquidity was from its portfolio of operating lease contracts and investments in notes receivable. The Company received $419 thousand and $109 thousand from principal payments on notes receivable, for the respective three months ended June 30, 2018 and 2017. During the three months ended June 30, 2017, the Company’s primary source of liquidity was subscription proceeds from the sale of Units totaling $2.9 million. Cash received from borrowings under non-recourse debt totaled $100 thousand and $0 for the three months ended June 30, 2018 and 2017.

During the three months ended June 30, 2018, cash was primarily used to acquire lease assets, invest in notes receivable, and to pay distributions. Cash used to acquire lease assets totaled $0 and $3 million for the respective three months ended June 30, 2018 and 2017. Cash used to invest in notes receivable totaled $681 thousand and $0 for the respective three months ended June 30, 2018 and 2017. Distributions paid to Other Members totaled $513 thousand and $391 thousand for the respective three months ended June 30, 2018 and 2017. The payment of syndication costs associated with the Company’s offering totaled $0 and $436 thousand for the respective three months ended June 30, 2018 and 2017.

The six months ended June 30, 2018 versus the six months ended June 30, 2017

During the six months ended June 30, 2018, the Company’s primary source of liquidity were from its portfolio of operating lease contracts and investments in notes receivable. Cash received from Members for the offering of Units totaled $340 thousand and $6.1 million for the respective six months ended June 30, 2018 and 2017. Cash received from borrowings under non-recourse debt totaled $100 thousand and $0 for the respective six months ended June 30, 2018 and 2017. The Company received $804 thousand and $246 thousand from principal payments on notes receivable for the respective six months ended June 30, 2018 and 2017.

During the same comparative periods, cash was primarily used to acquire lease assets, invest in notes receivable and pay distributions. Cash used to acquire lease assets totaled $407 thousand and $3.3 million for the respective six months ended June 30, 2018 and 2017. Cash used to invest in notes receivable totaled $3.2 million and $0 for the respective six months ended June 30, 2018 and 2017. Distributions paid to Other Members totaled $1.0 million and $710 thousand for the respective six months ended June 30, 2018 and 2017. Cash used for the repurchase of Units totaled $151 thousand and $0 for the six months ended June 30, 2018 and 2017. The payment of selling commissions and syndication costs associated with the Company’s offering totaled $51 thousand and $919 thousand for the respective six months ended June 30, 2018 and 2017.

Revolving Credit facility

Effective June 30, 2017, 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 June 30, 2018, the Credit Facility is for an amount of $75 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. 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. At June 30, 2018 and December 31, 2017, approximately $72.1 million and $69.2 million, respectively, were available under the facility, and the Company had no outstanding borrowings under the 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 February 2016. Additional distributions have been made through June 30, 2018.

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Cash distributions were paid by the Fund to Unitholders of record as of February 28, 2018, and paid through June 30, 2018. The distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets. See the discussion in the Prospectus under “Income, Losses and Distributions.” Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.

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

The following table summarizes distribution activity for the Fund from inception through June 30, 2018 (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
Feb 2016 – Nov 2016		Apr 2016 –  Dec 2016		492					—					492					0.64		770,832
Dec 2016 – November 2017		Jan 2017 –  Dec 2017		1,540					—					1,540					0.78		1,967,313
Dec 2017 – May 2018		Jan 2018 –  June 2018		1,014					—					1,014					0.40		2,558,407
			$	3,046				$	—				$	3,046					1.82
Source of distributions
Lease and loan payments and sales proceeds received			$	3,046		100.00	%	$	—		0.00	%	$	3,046		100.00	%
			$	3,046		100.00	%	$	—		0.00	%	$	3,046		100.00	%

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

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

(3) Balances shown represent weighted average units for the period from February 2 – November 30, 2016, from December 1, 2016 – November 30, 2017, and from December 1, 2017 – May 28, 2018, respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2018, there was a commitment to fund investments in notes receivable totaling $2.8 million. The amount represents contract awards which may be canceled by the prospective borrower/investee or may not be accepted by the Company.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

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

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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, 2017. There have been no material changes to the Company’s significant accounting policies since December 31, 2017.

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)) 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. 78aet seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended June 30, 2018 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.

Information provided pursuant to § 229.701 (Item 701(f)) (formerly included in Form SR):

(1) Effective date of the offering: January 5, 2016; File Number: 333-203841

(2) Offering commenced: January 5, 2016

(3) The offering did not terminate before any securities were sold.

(4) The managing underwriter is ATEL Securities Corporation.

(5) The title of the registered class of securities is “Units of Limited Liability Company Interest.”

(6) Aggregate amount and offering price of securities registered and sold as of June 30, 2018:

Title of Security	Amount Registered		Aggregate price of offering amount registered		Units sold		Aggregate price of offering amount sold
Units of Limited Company Interest		15,000,000	$	150,000		2,565,749	$	25,850

(7) Costs incurred for the issuers’ account in connection with the issuance and distribution of the securities registered for each category listed below:

	Direct or indirect payments to directors, officers, Managing Members of the issuer or their associates, to persons owning ten percent or more of any class of equity securities of the issuer; and to affiliates of the issuer		Direct or indirect payments to others		Total
Underwriting discounts and commissions	$	516	$	1,807	$	2,323
Other syndication costs		—		1,548		1,548
Total expenses	$	516	$	3,355	$	3,871

(8) Net offering proceeds to the issuer after the total expenses in item 7:			$   21,979
(9) The amount of the net offering proceeds to the issuer used for each of the purposes listed below:

	Direct or indirect payments to directors, officers, Managing Members of the issuer or their associates, to persons owning ten percent or more of any class of equity securities of the issuer; and to affiliates of the issuer		Direct or indirect payments to others		Total
Purchase and installation of machinery and equipment	$	332	$	11,620	$	11,952
Investment in notes receivable		20		5,877		5,897
Distributions paid and accrued		—		3,274		3,274
Other expenses		—		2,325		2,325
	$	352	$	23,096	$	23,448
(10) Net offering proceeds to the issuer after the total investments and distributions in item 9:					$	(1,469	)

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Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Documents filed as a part of this report

1. Financial Statement Schedules

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

2. Other Exhibits

31.1	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: August 9, 2018

ATEL 17, LLC
(Registrant)

By: ATEL Managing Member, LLC
Managing Member of Registrant

	By: /s/ Dean L. Cash Dean L. Cash Chairman of the Board, President and Chief Executive Officer of ATEL Managing Member, LLC (Managing Member)
	By: /s/ Paritosh K. Choksi Paritosh K. Choksi Director, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Managing Member, LLC (Managing Member)
	By: /s/ Samuel Schussler Samuel Schussler Senior Vice President and Chief Accounting Officer of ATEL Managing Member, LLC (Managing Member)

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