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Atel 16, LLC – ‘10-Q’ for 6/30/22

On:  Friday, 8/12/22, at 1:27pm ET   ·   For:  6/30/22   ·   Accession #:  1558370-22-13452   ·   File #:  0-55417

Previous ‘10-Q’:  ‘10-Q’ on 5/13/22 for 3/31/22   ·   Next:  ‘10-Q’ on 11/14/22 for 9/30/22   ·   Latest:  ‘10-Q’ on 11/14/23 for 9/30/23

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/12/22  Atel 16, LLC                      10-Q        6/30/22   66:7.4M                                   Toppan Merrill Bridge/FA

Quarterly Report   —   Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   1.64M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     24K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     24K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     22K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     22K 
11: R1          Document and Entity Information                     HTML     74K 
12: R2          Balance Sheets                                      HTML     85K 
13: R3          Statements of Operations                            HTML    101K 
14: R4          Statements of Changes in Members' Capital           HTML     42K 
15: R5          Statements of Changes in Members' Capital           HTML     22K 
                (Parenthetical)                                                  
16: R6          Statements of Cash Flows                            HTML    106K 
17: R7          Organization and Limited Liability Company Matters  HTML     26K 
18: R8          Summary of Significant Accounting Policies          HTML    109K 
19: R9          Notes Receivable, Net                               HTML     22K 
20: R10         Investments in equipment and leases, net            HTML    111K 
21: R11         Allowance for Credit Losses                         HTML    116K 
22: R12         Related Party Transactions                          HTML     47K 
23: R13         Non-Recourse Debt                                   HTML     45K 
24: R14         Borrowing Facilities                                HTML     22K 
25: R15         Commitments and contingencies                       HTML     22K 
26: R16         Members' Capital                                    HTML     43K 
27: R17         Fair Value Measurements                             HTML    227K 
28: R18         Summary of Significant Accounting Policies          HTML    142K 
                (Policy)                                                         
29: R19         Summary of Significant Accounting Policies          HTML     78K 
                (Tables)                                                         
30: R20         Investments in equipment and leases, net (Tables)   HTML    114K 
31: R21         Allowance for Credit Losses (Tables)                HTML    118K 
32: R22         Related Party Transactions (Tables)                 HTML     42K 
33: R23         Non-Recourse Debt (Tables)                          HTML     42K 
34: R24         Members' Capital (Tables)                           HTML     40K 
35: R25         Fair Value Measurements (Tables)                    HTML    229K 
36: R26         Organization and Limited Liability Company Matters  HTML     55K 
                (Narrative) (Details)                                            
37: R27         Summary of Significant Accounting Policies          HTML     96K 
                (Narrative) (Details)                                            
38: R28         Summary of Significant Accounting Policies          HTML     53K 
                (Summary of Geographic Information Relating to                   
                Sources, by Nation, of Partnership's Total Revenue               
                and Long-Lived Assets) (Details)                                 
39: R29         Notes Receivable, Net (Narrative) (Details)         HTML     30K 
40: R30         Investments in equipment and leases, net            HTML     38K 
                (Narrative) (Details)                                            
41: R31         Investments in equipment and leases, net            HTML     34K 
                (Investment in Leases) (Details)                                 
42: R32         Investments in equipment and leases, net (Property  HTML     64K 
                on Operating Leases) (Details)                                   
43: R33         Investments in equipment and leases, net (Future    HTML     35K 
                Minimum Lease Payments Receivable) (Details)                     
44: R34         Investments in equipment and leases, net (Schedule  HTML     53K 
                of Useful Lives of Lease Assets) (Details)                       
45: R35         Allowance for Credit Losses (Narrative) (Details)   HTML     24K 
46: R36         Allowance for Credit Losses (Activity in Allowance  HTML     25K 
                for Credit Losses) (Details)                                     
47: R37         Allowance for Credit Losses (Financing Receivables  HTML     30K 
                by Credit Quality Indicator and by Class)                        
                (Details)                                                        
48: R38         Allowance for Credit Losses (Net Investment in      HTML     41K 
                Financing Receivables by Age) (Details)                          
49: R39         Related Party Transactions (Affiliates Earned       HTML     28K 
                Commissions and Billed for Reimbursements Pursuant               
                to Operating Agreement) (Details)                                
50: R40         Non-Recourse Debt (Narrative) (Details)             HTML     33K 
51: R41         Non-Recourse Debt (Future Minimum Payments of       HTML     69K 
                Non-Recourse Debt) (Details)                                     
52: R42         Borrowing Facilities (Narrative) (Details)          HTML     21K 
53: R43         Commitments and Contingencies (Narrative)           HTML     23K 
                (Details)                                                        
54: R44         Members' Capital (Narrative) (Details)              HTML     42K 
55: R45         Members' Capital (Distributions to Other Members)   HTML     30K 
                (Details)                                                        
56: R46         Fair Value Measurements (Narrative) (Details)       HTML     33K 
57: R47         Fair Value Measurements (Warrants Measured on       HTML     25K 
                Recurring Basis) (Details)                                       
58: R48         Fair Value Measurements (Investment Securities      HTML     27K 
                Measured on Recurring Basis) (Details)                           
59: R49         Fair Value Measurements (Fair Value Measurement of  HTML     34K 
                Assets and Liabilities Measured at Fair Value on a               
                Non-Recurring Basis) (Details)                                   
60: R50         Fair Value Measurements (Summary of Valuation       HTML     64K 
                Techniques and Significant Unobservable Inputs                   
                Used) (Details)                                                  
61: R51         Fair Value Measurements (Estimated Fair Values of   HTML     57K 
                Financial Instruments) (Details)                                 
64: XML         IDEA XML File -- Filing Summary                      XML    121K 
62: XML         XBRL Instance -- tmb-20220630x10q_htm                XML   2.19M 
63: EXCEL       IDEA Workbook of Financial Reports                  XLSX    122K 
 7: EX-101.CAL  XBRL Calculations -- tmb-20220630_cal                XML    177K 
 8: EX-101.DEF  XBRL Definitions -- tmb-20220630_def                 XML    483K 
 9: EX-101.LAB  XBRL Labels -- tmb-20220630_lab                      XML    887K 
10: EX-101.PRE  XBRL Presentations -- tmb-20220630_pre               XML    753K 
 6: EX-101.SCH  XBRL Schema -- tmb-20220630                          XSD    172K 
65: JSON        XBRL Instance as JSON Data -- MetaLinks              281±   439K 
66: ZIP         XBRL Zipped Folder -- 0001558370-22-013452-xbrl      Zip    266K 


‘10-Q’   —   Quarterly Report

Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I
"Financial Information
"Item 1
"Financial Statements (Unaudited)
"Balance Sheets, June 30, 2022 and December 31, 2021
"Statements of Operations for the three and six months ended June 30, 2022 and 2021
"Statements of Changes in Members' Capital for the three and six months ended June 30, 2022 and 2021
"Statements of Cash Flows for the six months ended June 30, 2022 and 2021
"Notes to the Financial Statements
"Item 2
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Item 4
"Controls and Procedures
"Part Ii
"Other Information
"Legal Proceedings
"Unregistered Sales of Equity Securities and Use of Proceeds
"Item 3
"Defaults Upon Senior Securities
"Mine Safety Disclosures
"Item 5
"Item 6
"Exhibits

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Table of Contents

Form  i 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended  i June 30, 2022

 i          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  i 000-55417

 i ATEL 16, LLC

(Exact name of registrant as specified in its charter)

 i California

 i 90-0920813

(State or other jurisdiction of

(I. R. S. Employer

incorporation or organization)

Identification No.)

 i The Transamerica Pyramid,  i 600 Montgomery Street, 9th Floor,  i San Francisco,  i California  i 94111

(Address of principal executive offices)

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

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

Securities registered pursuant to section 12(g) of the Act:  i Limited Liability Company Units

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

N/A

N/A

N/A

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.  i Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 files).  i Yes No

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

Large accelerated filer

Accelerated filer

 i Non-accelerated filer

Smaller reporting company  i 

Emerging growth company  i 

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. 

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

The number of Limited Liability Company Units outstanding as of July 31, 2022 was  i 4,274,486.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

ATEL 16, LLC

Index

PART I

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Balance Sheets, June 30, 2022 and December 31, 2021

3

Statements of Operations for the three and six months ended June 30, 2022 and 2021

4

Statements of Changes in Members’ Capital for the three and six months ended June 30, 2022 and 2021

5

Statements of Cash Flows for the six months ended June 30, 2022 and 2021

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

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

29

2

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 16, LLC

BALANCE SHEETS

JUNE 30, 2022 AND DECEMBER 31, 2021
(In Thousands)

(Unaudited)

    

June 30, 

    

December 31, 

2022

2021

ASSETS

Cash and cash equivalents

$

 i 4,465

$

 i 4,804

Due from Managing Member and affiliates

 i 

 i 7

Accounts receivable, net

 

 i 31

 

 i 16

Notes receivable, net

 

 i 50

 

 i 101

Investment in equity securities

 

 i 99

 

 i 355

Warrants, fair value

 

 i 110

 

 i 108

Investment in equipment and leases, net

 

 i 8,297

 

 i 10,759

Prepaid expenses and other assets

 

 i 1

 

 i 9

Total assets

$

 i 13,053

$

 i 16,159

LIABILITIES AND MEMBERS’ CAPITAL

Accounts payable and accrued liabilities:

Due to Managing Member and affiliates

$

 i 38

$

 i 

Accrued distributions to Other Members

 

 i 289

 

 i 289

Options - short position

 i 

 i 1

Other

 

 i 74

 

 i 139

Non-recourse debt

 

 i 1,615

 

 i 2,145

Unearned operating lease income

 

 i 245

 

 i 250

Total liabilities

 i 2,261

 i 2,824

Commitments and contingencies

Members’ capital:

Managing Member

 

 i 

 

 i 

Other Members

 

 i 10,792

 

 i 13,335

Total Members’ capital

 

 i 10,792

 

 i 13,335

Total liabilities and Members’ capital

$

 i 13,053

$

 i 16,159

See accompanying notes.

3

Table of Contents

ATEL 16, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2022 AND 2021
(In Thousands Except for Units and Per Unit Data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Operating revenues:

Leasing and lending activities:

Operating lease revenue, net

$

 i 608

$

 i 647

$

 i 1,261

$

 i 1,373

Notes receivable interest income

 

 i 2

 

 i 20

 

 i 5

 

 i 47

(Loss) gain on sales of lease assets and/or early termination of notes receivable

( i 73)

 i 142

( i 132)

 i 286

Other revenue

 

 i 1

 

 i 1

 

 i 1

 

 i 831

Total operating revenues

 

 i 538

 

 i 810

 

 i 1,135

 

 i 2,537

Operating expenses:

Depreciation of operating lease assets

 

 i 546

 

 i 519

 

 i 1,100

 

 i 1,065

Asset management fees to Managing Member

 

 i 80

 

 i 84

 

 i 174

 

 i 187

Acquisition expense

 

 

( i 4)

 

 i 

 

 i 15

Cost reimbursements to Managing Member and/or affiliates

 

 i 103

 

 i 130

 

 i 211

 

 i 258

Amortization of initial direct costs

 

 i 4

 

 i 5

 

 i 8

 

 i 9

Interest expense

 

 i 18

 

 i 28

 

 i 38

 

 i 59

Professional fees

 

 i 101

 

 i 74

 

 i 133

 

 i 174

Outside services

 

 i 8

 

 i 10

 

 i 19

 

 i 20

Taxes on income and franchise fees

 

 i 12

 

 i 5

 

 i 181

 

 i 12

Other expense

 

 i 33

 

 i 56

 

 i 65

 

 i 116

Total operating expenses

 

 i 905

 

 i 907

 

 i 1,929

 

 i 1,915

Net (loss) income from operations

( i 367)

( i 97)

( i 794)

 i 622

Other (loss) income:

Gain on sale of investment in equity securities

 i 67

 i 

 i 78

Realized gain on sale of options

 i 1

 i 

Unrealized (loss) gain on fair value adjustment for equity securities

( i 72)

 i 111

( i 256)

 i 69

Unrealized gain (loss) on fair value adjustment for warrants

 i 1

 

( i 1)

 

 i 2

 

( i 11)

Total other (loss) income

( i 71)

 i 177

( i 253)

 i 136

Net (loss) income

$

( i 438)

$

 i 80

$

( i 1,047)

$

 i 758

Net (loss) income:

Managing Member

$

$

$

 i 

$

 i 

Other Members

 

( i 438)

 

 i 80

 

( i 1,047)

 

 i 758

$

( i 438)

$

 i 80

$

( i 1,047)

$

 i 758

Net (loss) income per Limited Liability Company Unit - Other Members

$

( i 0.10)

$

 i 0.02

$

( i 0.24)

$

 i 0.18

Weighted average number of Units outstanding

 

 i 4,274,486

 

 i 4,274,486

 

 i 4,274,486

 

 i 4,274,486

See accompanying notes.

4

Table of Contents

ATEL 16, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2022 AND 2021
(In Thousands Except for Units and Per Unit Data)

(Unaudited)

Three Months Ended June 30, 2022

Amount

Other

Managing

Units

    

Members

    

Member

    

Total

Balance March 31, 2022

 i 4,274,486

$

 i 11,978

$

$

 i 11,978

Distributions to Other Members ($ i 0.17 per Unit)

 

( i 748)

 

 

( i 748)

Net loss

 

( i 438)

 

 

( i 438)

Balance June 30, 2022

 i 4,274,486

 i 10,792

 i 10,792

Six Months Ended June 30, 2022

Amount

Other

Managing

Units

    

Members

    

Member

    

Total

Balance December 31, 2021

 i 4,274,486

$

 i 13,335

$

$

 i 13,335

Distributions to Other Members ($ i 0.35 per Unit)

 

( i 1,496)

 

 

( i 1,496)

Net loss

 

( i 1,047)

 

 

( i 1,047)

Balance June 30, 2022

 i 4,274,486

 i 10,792

 i 10,792

Three Months Ended June 30, 2021

Amount

Other

Managing

Units

    

Members

    

Member

    

Total

Balance March 31, 2021

 i 4,274,486

$

 i 17,114

$

$

 i 17,114

Distributions to Other Members ($ i 0.17 per Unit)

 

( i 748)

 

 

( i 748)

Net income

 

 i 80

 

 

 i 80

Balance June 30, 2021

 i 4,274,486

 i 16,446

 i 16,446

Six Months Ended June 30, 2021

Amount

Other

Managing

Units

    

Members

    

Member

    

Total

Balance December 31, 2020

 i 4,274,486

$

 i 17,184

$

$

 i 17,184

Distributions to Other Members ($ i 0.35 per Unit)

 

( i 1,496)

 

 

( i 1,496)

Net income

 

 i 758

 

 

 i 758

Balance June 30, 2021

 i 4,274,486

 i 16,446

 i 16,446

See accompanying notes.

5

Table of Contents

ATEL 16, LLC

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2022 AND 2021
(In Thousands)

(Unaudited)

Six Months Ended

June 30, 

    

2022

2021

Operating activities:

Net (loss) income

$

( i 1,047)

$

 i 758

Adjustment to reconcile net (loss) income to cash provided by operating activities:

Accretion of note discount-warrants

 

 

( i 14)

Depreciation of operating lease assets

 

 i 1,100

 

 i 1,065

Loss (gain) on sales of lease asset and/or early termination of notes receivable

 

 i 132

 

( i 286)

Amortization of initial direct costs

 

 i 8

 

 i 9

Provision for doubtful accounts

 

 i 38

 

 i 1

Realized gain on sale of options

( i 1)

Gain on sale of equity securities

( i 78)

Unrealized loss (gain) on fair value adjustment for equity securities

 i 256

( i 69)

Unrealized (gain) loss on fair value adjustment for warrants

 

( i 2)

 

 i 11

Changes in operating assets and liabilities:

Accounts receivable

 

( i 53)

 

 i 18

Due to/from Managing Members and affiliates

( i 5)

 i 2

Prepaid expenses and other assets

 

 i 8

 

 i 9

Accounts payable, other

 

( i 65)

 

 i 12

Unearned operating lease income

 

( i 5)

 

( i 20)

Net cash provided by operating activities

 

 i 364

 

 i 1,418

Investing activities:

Purchases of equipment on operating leases

 

 

( i 405)

Proceeds from sales of equity securities

 i 79

Proceeds from sales of options

 i 50

Proceeds from sales of lease assets

 

 i 1,222

 

 i 1,186

Principal payments received on notes receivable

 

 i 51

 

 i 265

Net cash provided by investing activities

 

 i 1,323

 

 i 1,125

Financing activities:

Repayments under non-recourse debt

 

( i 530)

 

( i 653)

Distributions to Other Members

 

( i 1,496)

 

( i 1,496)

Net cash used in financing activities

 

( i 2,026)

 

( i 2,149)

Net (decrease) increase in cash and cash equivalents

 

( i 339)

 

 i 394

Cash and cash equivalents at beginning of period

 

 i 4,804

 

 i 3,603

Cash and cash equivalents at end of period

$

 i 4,465

$

 i 3,997

Supplemental disclosures of cash flow information:

Cash paid during period for interest

$

 i 38

$

 i 64

Cash paid during period for taxes

$

 i 215

$

 i 24

Schedule of non-cash investing and financing transactions:

Distributions payable to Other Members at period-end

$

 i 289

$

 i 289

See accompanying notes.

6

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

1. Organization and Limited Liability Company matters:

ATEL 16, LLC (the “Company” or the “Fund”) was formed under the laws of the state of  i California on  i December 27, 2012 (“Date of Inception”) for the purpose of  i equipment financing and acquiring equipment to engage in equipment leasing and sales activities. The Managing Member of the Company is ATEL Managing Member, LLC (the “Managing Member” or “Manager”), a Nevada limited liability company. The Managing Member is controlled by ATEL Financial Services, LLC (“AFS”), a wholly-owned subsidiary of ATEL Capital Group. The Fund may continue until terminated as provided in the ATEL 16, LLC Limited Liability Company Operating Agreement dated March 1, 2013 (the “Operating Agreement”). Contributions in the amount of $ i 500 were received as of December 31, 2012, which represented the initial member’s capital investment. As a limited liability company, the liability of any individual member for the obligations of the Fund is limited to the extent of capital contributions to the Fund by the individual member.

The Company conducted a public offering of  i 15,000,000 Limited Liability Company Units (“Units”), at a base price of $ i 10 per Unit. As of March 6, 2014, subscriptions for the minimum number of Units ( i 120,000, representing $ i 1.2 million), excluding subscriptions from Pennsylvania investors, had been received and the Fund requested subscription proceeds to be released from escrow. On that date, the Company commenced initial operations and continued in its development stage activities until transitioning to an operating enterprise during the second quarter of 2014. Pennsylvania subscriptions are subject to a separate escrow and are released to the Fund only when aggregate subscriptions for all investors equal to at least $ i 7.5 million. Total contributions to the Fund exceeded $ i 7.5 million on June 19, 2014, at which time a request was processed to release the Pennsylvania escrowed amounts. The offering was terminated on November 5, 2015.

As of June 30, 2022, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable), totaling $ i 42.9 million (inclusive of the $ i 500 initial Member’s capital investment) have been received. As of the same date,  i 4,274,486 Units were issued and outstanding.

The Company’s principal objectives are to invest in a diversified portfolio of investments that will (i) preserve, protect and return the Company’s invested capital; (ii) generate regular cash distributions to Unit holders during the Offering Stage and Operating Stage of the Fund, any balance remaining after required minimum distributions, equal to not less than  i 7% nor more than  i 9% per annum on investors’ Original Invested Capital, during the Operating Stage, to be used to purchase additional investments during the Reinvestment Period (the first  i six years after the year the offering terminates); and (iii) provide additional cash distributions during the Liquidating Stage, commencing with the end of the Operating Stage/Reinvestment Period and continuing until all investment portfolio assets have been sold or otherwise disposed. The Company is governed by the Operating Agreement. On January 1, 2022, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

Pursuant to the terms of the Operating Agreement, the Managing Member and/or its affiliates receives compensation for services rendered and reimbursements for costs incurred on behalf of the Company (See Note 6, Related party transactions). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of the Managing Member.

These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission.

 / 
 i 

7

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

2. Summary of significant accounting policies:

 i 

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, 2022 are not necessarily indicative of the results to be expected for the full year.

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

In preparing the accompanying financial statements, the Company has reviewed, as determined necessary by the Managing Member, events that have occurred after June 30, 2022, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements.

 i 

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  i ninety days or less.

 / 
 i 

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 for determination of the allowance for doubtful accounts on accounts receivable, and reserve for credit losses on notes receivable.

 i 

Segment reporting:

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

The Company’s principal decision makers are the Managing Member’s Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer. The Company believes that its equipment leasing business operates as  i one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the principal decision makers do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations; d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business

around geographic areas.

 / 

8

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

The table below summarize geographic information relating to the sources, by nation, of the Company’s total operating revenues for the three and six months ended June 30, 2022 and 2021 and long-lived assets as of June 30, 2022 and December 31, 2021 (dollars in thousands):

Three Months Ended June 30,

    

2022

    

% of Total

2021

    

% of Total 

Revenue

United States

$

 i 538

 

 i 100

%  

$

 i 810

 

 i 100

%

Total

$

 i 538

 

 i 100

%  

$

 i 810

 

 i 100

%

Six Months Ended June 30,

    

2022

    

% of Total

2021

    

% of Total 

Revenue

United States

$

 i 1,135

 

 i 100

%  

$

 i 2,525

 

 i 99

%

Costa Rica

 

 

%  

 

 i 12

 

 i 1

%

Total

$

 i 1,135

 

 i 100

%  

$

 i 2,537

 

 i 100

%

As of June 30, 

As of December 31, 

    

2022

    

% of Total

2021

    

% of Total

Long-lived assets

United States

$

 i 8,297

 

 i 100

%  

$

 i 10,394

 

 i 97

%

Costa Rica

 

 

%  

 

 i 365

 

 i 3

%

Total

$

 i 8,297

 

 i 100

%  

$

 i 10,759

 

 i 100

%

 / 
 i 

Accounts receivable:

Accounts receivable represent the amounts billed under operating lease contracts and notes receivable which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge off and collection experience and the collectability 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.

 i 

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. See discussion herein under the caption – Notes receivable, unearned interest income and related revenue recognition.

9

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

Investment in securities:

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

Investment in equity securities

The Company’s equity securities registered for public sale with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The Company’s equity securities that do not have readily determinable fair values are measured at cost minus impairment and adjusted for changes in observable prices. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. The Company had $ i 99 thousand and $ i 355 thousand of purchased securities on June 30, 2022 and December 31, 2021, respectively. Such amounts included investment securities which do not have readily determinable market value totaling $ i  i 47 /  thousand at both June 30, 2022 and December 31, 2021. During the three months ended June 30, 2022 and 2021, the Company recorded unrealized losses of $ i 72 thousand and unrealized gains of $ i 111 thousand on investment securities with readily determinable fair values. During the six months ended June 30, 2022 and 2021, the Company recorded unrealized losses of $ i 256 thousand and unrealized gains of $ i 69 thousand on such investment securities. There were  i  i  i  i no /  /  /  fair value adjustments on securities that do not have readily determinable values during the three and six months ended June 30, 2022 and 2021, and on a cumulative basis. There were  i  i no /  sales or dispositions of securities during the three and six months ended June 30, 2022. During the three months and six months ended June 30, 2021, the Company sold investment securities with a value of approximately $ i 551 thousand and $ i 619 thousand, respectively, and realized gains of $ i 67 thousand and $ i 78 thousand, 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. The estimated fair value of the Company’s warrants were $ i 110 thousand and $ i 108 thousand as of June 30, 2022 and December 31, 2021, respectively. The Company recorded unrealized gains of $ i 1 thousand and unrealized losses of $ i 1 thousand on fair valuation of its warrants for the three months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022 and 2021, the Company recorded unrealized gains of $ i 2 thousand and unrealized losses $ i 11 thousand, respectively. There were  i  i  i  i no /  /  /  net exercises of warrants during the three and six months ended June 30, 2022 and 2021.

Options - short position

During the third quarter of 2021, the Company had sold options contracts on a publicly traded investment security. Such contracts were sold in two tranches as follows:  i 125 options at a premium of $ i 3.00 and  i 75 options at $ i 1.64 per share. Accordingly, the Company recorded a liability for the initial options value totaling $ i 38 thousand and $ i 12 thousand, respectively. During the year ended December 31, 2021, the Company recorded unrealized gains totaling $ i 49 thousand related to the options, which reflected changes in the fair value of the options and effectively reduced the liability related to the options. The options contracts both expired on  i January 21, 2022 with a strike price of $ i 15.00 and $ i 12.50, respectively. The Company realized gains totaling $ i 1 thousand related to the expiration of the options.

 / 

10

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, operating lease receivables, notes receivable and accounts receivable. The Company places the majority of its cash deposits in noninterest-bearing accounts with financial institutions that have no less than $ i 10 billion in assets. Such deposits are insured up to $ i 250 thousand. The 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 and notes receivable represent amounts due from lessees or borrowers in various industries related to equipment on operating lease contracts and notes receivable.

 / 
 i 

Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is 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 the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-10-35-3, 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  i 36 to  i 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  i 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  i 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.

 / 
 i 

Notes receivable, unearned interest income and related revenue recognition:

The Company records all future payments of principal and interest on notes as notes receivable, which are then offset by the amount of any related unearned interest income. For financial statement purposes, the Company reports only the net

11

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

amount of principal due on the balance sheet. The unearned interest is recognized over the term of the note and the income portion of each note payment is calculated so as to generate a constant rate of return on the net balance outstanding. Any fees or costs related to notes receivable are recorded as part of the net investment in notes receivable and amortized over the term of the loan.

Allowances for losses on notes receivable are typically established based on historical charge off and collection experience and the collectability of specifically identified borrowers and billed and unbilled receivables. 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 payments 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.

Notes receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than  i 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with note payments outstanding less than  i 90 days. Based upon management’s judgment, the related notes may be placed on non-accrual status. 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, all payments received are applied only against outstanding principal balances.

 i 

Initial direct costs:

Incremental costs of a lease that would not have been incurred if the lease had not been obtained are capitalized and amortized over the lease term. All other costs associated with the execution of the Company’s leases are expensed as incurred.

 i 

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 (“IDC”), such amounts are expensed as incurred.

 i 

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.

12

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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.

 i 

Asset valuation:

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 the 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. 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.

 i 

Per Unit data:

Net (loss) income and distributions per Unit are based upon the weighted average number of Other Members Units outstanding during the period.

 i 

Recent accounting pronouncements:

In March 2020, the FASB issued Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments (“ASU 2020-03”). ASU 2020-03 improves and clarifies various financial instruments topics, including the current expected credit losses (CECL) standard issued in 2016. ASU 2020-03 includes seven different issues that describe the areas of improvement and the related amendments to GAAP that are intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. Management is currently evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Fund’s 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 equipment under operating leases that are not accounted for at

13

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

fair value through net income. The amendments affect loans, debt securities, trade receivables, equipment under operating 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. Management is currently evaluating the standard and expects the update may potentially result in the increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.

In November 2018, the FASB issued Accounting Standards Update 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses (“ASU 2018-19”). The new standard clarifies certain aspects of the new CECL impairment model in ASU 2016-13. The amendment clarifies that receivables arising from operating leases are within the scope of ASC 842, rather than ASC 326. Management is currently evaluating the impact of the standard on the financial statements and related disclosure requirements.

On August 15, 2019, the FASB issued a proposed ASU that would grant certain companies additional time to implement FASB standards on CECL and hedging. The proposed ASU defers the effective date for CECL to fiscal periods beginning after December 15, 2022, including interim periods within those fiscal years; and defers the effective date for hedging to fiscal periods beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The ASU was approved on October 16, 2019. In February 2020, the FASB issued ASU 2020-02 and delayed the effective date of Topic 326 until fiscal year beginning after December 15, 2022.

 i 

3. Notes receivable, net:

The Company has a note receivable from a borrower who has financed the purchase of equipment through the Company. As of June 30, 2022, the original term of the remaining note is  i 42 months with an interest rate of  i 15.99% per annum. The note is secured by the equipment financed and  i matures in 2022. As of June 30, 2022 the minimum future payments receivable through the notes’ maturity date totals $ i 50 thousand.

 / 

 i 

4. Investments in equipment and leases, net:

 i 

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

    

    

    

Balance

Additions/

Depreciation/

Balance

December 31,

Dispositions and

Amortization

June 30,

2021

Reclassifications

Expense

2022

Equipment under operating leases, net

$

 i 9,354

$

( i 86)

$

( i 1,100)

$

 i 8,168

Assets held for sale or lease, net

 

 i 1,355

 

( i 1,268)

 

 

 i 87

Initial direct costs, net

 

 i 50

 

 i 

 

( i 8)

 

 i 42

Total

$

 i 10,759

$

( i 1,354)

$

( i 1,108)

$

 i 8,297

 / 

The Company utilizes a straight-line depreciation method over the term of the equipment lease for equipment on operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $ i  i 546 /  thousand and $ i 519 thousand for the respective three months ended June 30, 2022 and 2021, and was $ i  i 1.1 /  million for each of the six-month periods ended June 30, 2022 and 2021.

For the respective three months ended June 30, 2022 and 2021, total depreciation includes $ i 10 thousand and $ i 61 thousand of additional depreciation recorded to reflect quarter-to-date changes in estimated residual values of certain equipment generating revenue under month-to-month extensions. For the respective six months ended June 30, 2022 and 2021, such additional depreciation totaled $ i 44 thousand and $ i 118 thousand. The estimated residual values of equipment associated with leases on month-to-month extensions are evaluated at least semi-annually, and depreciation recorded for the change in estimated reduction in value. During the six months ended June 30, 2021, the Company purchased $ i 405 thousand of equipment, all of which were purchased during the first quarter. There was  i  i no /  equipment purchased during the three and six months ended June 30, 2022. In addition, there were  i  i  i  i no /  /  /  impairment losses for the three and six months ended June 30, 2022 and 2021.

 / 

14

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

IDC amortization expense related to the Company’s operating leases totaled $ i 4 thousand and $ i 5 thousand for the respective three months ended June 30, 2022 and 2021. For the respective six months ended June 30, 2022 and 2021, IDC amortization expenses totaled $ i 8 thousand and $ i 9 thousand

All of the Company’s lease asset purchases and capital improvements were made during the years from 2014 through 2021.

Operating leases:

 i 

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

    

Balance

    

    

    

Balance

December 31, 

Reclassifications/

June 30, 

2021

Additions

Dispositions

2022

Aviation

$

 i 5,027

$

 i 

$

( i 332)

$

 i 4,695

Coal terminal

 

 i 5,000

 

 i 

 

 i 

 

 i 5,000

Railroad

 

 i 3,334

 

 i 

 

 i 

 

 i 3,334

Marine vessels

 

 i 2,291

 

 i 

 

 i 

 

 i 2,291

Construction

 i 1,902

 i 

 i 

 i 1,902

Manufacturing

 

 i 1,243

 

 i 

 

 i 

 

 i 1,243

Materials handling

 

 i 825

 

 i 

 

 i 

 

 i 825

Trucks and trailers

 

 i 86

 

 i 

 

 i 

 

 i 86

Other

 

 i 204

 

 i 

 

 i 

 

 i 204

 

 i 19,912

 

 i 

 

( i 332)

 

 i 19,580

Less accumulated depreciation

 

( i 10,558)

 

( i 1,100)

 

 i 246

 

( i 11,412)

Total

$

 i 9,354

$

( i 1,100)

$

( i 86)

$

 i 8,168

 / 

The average estimated residual value for assets on operating leases was both  i  i 24 / % of the assets’ original cost at both June 30, 2022 and December 31, 2021. There were  i  i no /  operating leases in non-accrual status at June 30, 2022 and December 31, 2021.

 i 

At June 30, 2022, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

    

Operating 

Leases

Six months ending December 31, 2022

$

 i 1,002

Year ending December 31, 2023

 i 1,267

2024

 

 i 980

2025

 

 i 452

2026

 

 i 366

Thereafter

 i 392

$

 i 4,459

 / 

15

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

The useful lives for each category of leases are reviewed at a minimum of once per quarter. As of June 30, 2022, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category

    

Useful Life

Coal terminal

 

 i 50 -  i 60

Railroad

 

 i 35 -  i 50

Marine vessel

 

 i 20 -  i 30

Aviation

 

 i 20 -  i 30

Containers

 

 i 15 -  i 20

Manufacturing

 

 i 10 -  i 15

Mining

 

 i 10 -  i 15

Construction

 

 i 7 -  i 10

Materials handling

 

 i 7 -  i 10

Trucks and trailers

 

 i 7 -  i 10

 / 

 i 

5. Allowance for credit losses:

 i 

The Company’s allowance for credit losses, which reflects the allowance for doubtful accounts related to certain lease receivables, are as follows (in thousands):

Allowance for

Doubtful

Accounts

Operating 

    

Leases

Balance December 31, 2020

$

 i 1

Provision for doubtful accounts

 i 1

Balance June 30, 2021

$

 i 2

Balance December 31, 2021

$

 i 2

Provision for doubtful accounts

 

 i 38

Balance June 30, 2022

$

 i 40

 / 

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 of 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.

 / 

16

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ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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.

 i 

At June 30, 2022 and December 31, 2021, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes warrants – notes receivable discount and unamortized IDC) (in thousands):

Notes Receivable

June 30, 

December 31, 

    

2022

    

2021

Pass

$

 i 50

$

 i 101

Special mention

 

 i 

 

 i 

Substandard

 

 i 

 

 i 

Doubtful

 

 i 

 

 i 

Total

$

 i 50

$

 i 101

 / 

There were  i  i no /  impaired investments in financing receivables at June 30, 2022 and December 31, 2021.

 i 

At June 30, 2022 and December 31, 2021, the investment in financing receivables (excludes warrants – notes receivable discount and unamortized IDC) is aged as follows (in thousands):

    

    

    

    

    

    

    

Recorded

Greater

Total

Investment>90

3160 Days

6190 Days

 Than

Total

Notes

Days and

June 30, 2022

    

Past Due

    

Past Due

    

90 Days

    

Past Due

    

Current

    

Receivable

    

Accruing

Notes receivable

$

 i 

$

 i 

$

 i 

$

 i 

$

 i 50

$

 i 50

$

 i 

    

    

    

    

    

    

    

Recorded

Greater

Total

Investment>90

3160 Days

6190 Days

 Than

Total

Notes

Days and

December 31, 2021

    

Past Due

    

Past Due

    

90 Days

    

Past Due

    

Current

    

Receivable

    

Accruing

Notes receivable

$

 i 

$

 i 

$

 i 

$

 i 

$

 i 101

$

 i 101

$

 i 

 / 

As of June 30, 2022 and December 31, 2021, the Company had  i  i no /  notes receivable on non-accrual status.

 i 

6. Related party transactions:

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

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

Each of AFS and ATEL Leasing Corporation (“ALC”) is a wholly-owned subsidiary of ATEL Capital Group and performs services for the Company on behalf of the Managing Member. Acquisition services, equipment management, lease administration and asset disposition services are performed by ALC; investor relations, communications and general administrative services are performed by AFS.

17

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Cost reimbursements to the Managing Member or its affiliates are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as total assets, number of investors or contributed capital based upon the type of cost incurred. The Managing Member believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Company or (ii) the amount the Company would be required to pay independent parties for comparable administrative services in the same geographic location.

 i 

The Managing Member and/or affiliates earned fees and billed for reimbursements, pursuant to the Operating Agreement, during the three and six months ended June 30, 2022 and 2021 as follows (in thousands):

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Administrative costs reimbursed to Managing Member and/or affiliates

$

 i 103

$

 i 130

$

 i 211

$

 i 258

Asset management fees to Managing Member

 

 i 80

 

 i 84

 

 i 174

 

 i 187

Acquisition and initial direct costs paid to Managing Member

 

 

( i 4)

 

 

 i 15

$

 i 183

$

 i 210

$

 i 385

$

 i 460

 / 

The Fund’s Operating Agreement places an annual and cumulative limit for cost reimbursements to AFS and/or its affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be reimbursable in future years to the extent such amounts may be payable if within the annual and cumulative limits in such future years. The Fund is a finite life and self-liquidating entity, and AFS and its affiliates have no recourse against the Fund for the amount of any unpaid excess reimbursable administrative expenses. The Fund will continue to require administrative services from AFS and its affiliates through the end of its term, and will therefore continue to incur reimbursable administrative expenses in each year. The Fund has determined that payment of any amounts in excess of the annual and cumulative limits is not probable, and the date any portion of such amount may be paid, if ever, is uncertain. When the Fund completes its liquidation stage and terminates, any unpaid amount will expire unpaid, with no claim by AFS or its affiliates against any liquidation proceeds or any party for the unpaid balance. As of June 30, 2022 and 2021, the Company has not exceeded the annual and/or cumulative limitations discussed above.

 i 

7. Non-recourse debt:

At June 30, 2022, 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  i 3.62% to  i 4.71% per annum. The notes are secured by assignments of lease payments and pledges of assets. At June 30, 2022, gross operating lease rentals totaled approximately $ i 1.8 million over the remaining lease terms; and the carrying value of the pledged assets is $ i 3.2 million.  i The notes mature at various dates from 2022 to 2028.

The non-recourse debt does not contain any material financial covenants. The debt is secured by a specific lien granted by the Company to the non-recourse lender on (and only on) the discounted lease transactions. The lender has recourse only to the following collateral: the leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lender, 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

 / 

18

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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.

 i 

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

    

Principal

    

Interest

    

Total

Six months ending December 31, 2022

$

 i 502

$

 i 32

$

 i 534

Year ending December 31, 2023

 

 i 343

 

 i 43

 

 i 386

2024

 

 i 290

 

 i 28

 

 i 318

2025

 i 159

 i 19

 i 178

2026

 i 138

 i 12

 i 150

Thereafter

 i 183

 i 8

 i 191

$

 i 1,615

$

 i 142

$

 i 1,757

 / 

 i 

8. Borrowing facilities:

Effective June 30, 2021, the Company entered into an amended and restated revolving credit facility agreement (the “Credit Facility”) which replaced a previous agreement which had an expiration date of June 2021. The Company participated with ATEL Capital Group and certain subsidiaries and affiliated entities as borrowers, with a syndicate of financial institutions as lenders. The Credit Facility had an aggregate amount of $ i 55 million and is comprised of a working capital sub-facility, institutional leasing sub-facility, and a venture line sub-facility. The Company participates in the acquisition sub-facility and the institutional leasing sub-facility, on a several, but not joint, basis (i.e., the Company is liable only for the amount of the advances extended to the Company under those sub facilities, and not as to amounts extended to any co-borrower). The Company’s reinvestment period ended as of December 31, 2021. As such, the Company will no longer purchase lease assets and does not have a need to use the Credit Facility. Accordingly, as of December 31, the Fund ceased to be a participant in the Credit Facility.

 / 
 i 

9. Commitments and contingencies:

At June 30, 2022, there were  i no commitments to purchase lease assets or to fund investments in notes receivable.

 / 
 i 

10. Members’ capital:

A total of  i  i 4,274,486 /  Units were issued and outstanding at both June 30, 2022 and December 31, 2021, including the  i  i 50 /  Units issued to the initial Member (Managing Member). The Fund was authorized to issue up to  i 15,000,000 Units in addition to the Units issued to the initial Member.

The Company has the right, exercisable at the Managing Member’s discretion, but not the obligation, to repurchase Units of a Unitholder who ceases to be a U.S. Citizen, for a price equal to  i 100% of the holder’s capital account. The Company is otherwise permitted, but not required, to repurchase Units upon a holder’s request. The repurchase of Fund units is made in accordance with Section 13 of the Amended and Restated Limited Liability Company Operating Agreement. The repurchase would be at the discretion of the Managing Member on terms it determines to be appropriate under given circumstances, in the event that the Managing Member deems such repurchase to be in the best interest of the Company; provided, the Company is never required to repurchase any Units. Upon the repurchase of any Units by the Fund, the tendered Units are cancelled. Units repurchased in prior periods were repurchased at amounts representing the original investment less cumulative distributions made to the Unitholder with respect to the Units. All Units repurchased during a quarter are deemed to be repurchased effective the last day of the preceding quarter, and are not deemed to be outstanding during, or entitled to allocations of net income, net loss or distributions for the quarter in which such repurchase occurs.

 / 

19

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The Fund’s net income or net losses are to be allocated  i 100% to the members. From the commencement of the Fund until the initial closing date, net income and net loss were allocated  i 99% to the Managing Member and  i 1% to the initial members. Commencing with the initial closing date, net income and net loss are to be allocated  i 99.9% to the Other Members and  i 0.01% to the Managing Member.

Fund distributions are to be allocated  i 0.01% to the Managing Member and  i 99.99% to the Other Members. The Company commenced periodic distributions in the second quarter of 2014.

 i 

Distributions to the Other Members for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands except Units and per Unit data):

    

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Distributions

$

 i 748

$

 i 748

$

 i 1,496

$

 i 1,496

Weighted average number of Units outstanding

 

 i 4,274,486

 

 i 4,274,486

 

 i 4,274,486

 

 i 4,274,486

Weighted average distributions per Unit

$

 i 0.17

$

 i 0.17

$

 i 0.35

$

 i 0.35

 / 

 i 

11. Fair value measurements:

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

At June 30, 2022 and December 31, 2021, the fair value of Company’s warrants and investment in equity securities were measured on a recurring basis. At December 31, 2021, the Company’s options – short position were also measured on a recurring basis. In addition, certain equipment deemed impaired were measured at fair value on a non-recurring basis as of June 30, 2022 and December 31, 2021.

Such fair value adjustments utilized the following methodology:

Warrants (recurring)

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants was determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, time to maturity, and a risk free interest rate for the term(s) of the warrant exercise(s). As of June 30, 2022 and December 31, 2021, the calculated fair value of the Fund’s warrant portfolio approximated $ i 110 thousand and $ i 108 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy.

 i 

The fair value of the warrants that were accounted for on a recurring basis for the three and six months ended June 30,  2022 and 2021, and classified as Level 3 are as follows (in thousands):

    

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Fair value of warrants at beginning of period

$

 i 109

$

 i 120

$

 i 108

$

 i 130

Unrealized gain (loss) on fair value adjustment for warrants

 

 i 1

 

( i 1)

 

 i 2

 

( i 11)

Fair value of warrants at end of period

$

 i 110

$

 i 119

$

 i 110

$

 i 119

 / 

 / 

20

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Investment securities (recurring)

The Company’s investment securities registered for public sale with readily determinable values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. The fair value of such securities totaled $ i 52 thousand and $ i 308 thousand at June 30, 2022 and December 31, 2021, respectively.

 i 

The fair value of the investment securities that were accounted for on a recurring basis for the three and six months ended June 30, 2022 and 2021, and classified as Level 1 are as follows (in thousands):

    

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Fair value of securities at beginning of period

$

 i 124

$

 i 1,338

$

 i 308

$

 i 1,448

Securities sold

( i 551)

( i 619)

Unrealized (loss) gain on fair value adjustment for securities

 

( i 72)

 

 i 111

 

( i 256)

 

 i 69

Fair value of securities at end of period

$

 i 52

$

 i 898

$

 i 52

$

 i 898

 / 

Options – short position (recurring)

The liability associated with the Company’s options – short position contracts were measured at fair value based on the price of the publicly traded options contracts, with any changes in fair value recognized in the Company’s results of operations. During the year ended December 31, 2021, the Company recorded $ i 49 thousand of unrealized gains on the options, which reduced the $ i 50 thousand initial value of the options to $ i 1 thousand at December 31, 2021. The options both expired on January 22, 2022, upon which the Company realized $ i 1 thousand of gains on the transactions.

Impaired equipment (non-recurring)

 i 

During the year ended December 31, 2021, the Company recorded fair value adjustments totaling $ i 548 thousand to reduce the cost basis of certain containers deemed impaired. The impaired equipment were sold during the first six months of 2022. There was no additional impaired equipment as of June 30, 2022.

Level 1

Level 2

Level 3

December 31,

Estimated

Estimated

Estimated

2021

  

Fair Value

  

Fair Value

  

Fair Value

Assets measured at fair value on a non-recurring basis (in thousands):

Impaired equipment

$

 i 365

$

 i 

$

 i 

$

 i 365

$

 i 365

$

 i 

$

 i 

$

 i 365

 / 

21

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 i 

The following tables summarize the valuation techniques and significant unobservable inputs used for the Company’s recurring and non-recurring fair value calculation/adjustments categorized as Level 3 in the fair value hierarchy at June 30, 2022 and December 31, 2021:

June 30, 2022

Valuation

Valuation

Unobservable

Range of Input Values

Name

    

Frequency

    

Technique

    

Inputs

    

(Weighted Average)

Warrants

 

Recurring

 

Black-Scholes formulation

 

Stock price

$ i 0.01 - $ i 11.71 ($ i 0.09)

 

Exercise price

$ i 0.02 - $ i 9.00 ($ i 0.09)

 

Time to maturity (in years)

 i 1.85 -  i 9.45 ( i 5.54)

 

Risk-free interest rate

 i 1.58% -  i 3.03% ( i 3.00%)

 

Annualized volatility

 i 39.50% -  i 115.04% ( i 55.81%)

December 31, 2021

Valuation

Valuation

Unobservable

Range of Input Values

Name

    

Frequency

    

Technique

    

Inputs

    

(Weighted Average)

Warrants

 

Recurring

 

Black-Scholes formulation

 

Stock price

$ i 0.01 - $ i 11.71 ($ i 0.09)

 

Exercise price

$ i 0.02 - $ i 9.00 ($ i 0.09)

 

Time to maturity (in years)

 i 2.35 -  i 9.94 ( i 6.03)

 

Risk-free interest rate

 i 0.85% -  i 1.58% ( i 1.36%)

 

Annualized volatility

 i 37.90% -  i 115.04% ( i 54.71%)

Equipment

 

Non-recurring

 

Market Approach

 

Third Party Agents' Pricing

$ i 0 - $ i 6,500

Quotes - per equipment

(total of $ i 365,000)

Equipment Condition

Poor to Average

 / 

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

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

Cash and cash equivalents

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

22

Table of Contents

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Notes receivable

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

Non-recourse debt

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

Commitments and Contingencies

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

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

 i 

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, 2022 and December 31, 2021 (in thousands):

Fair Value Measurements at June 30, 2022

    

Carrying

    

    

    

    

Amount

Level 1

Level 2

Level 3

Total

Financial assets:

Cash and cash equivalents

$

 i 4,465

$

 i 4,465

$

 i 

$

 i 

$

 i 4,465

Notes receivable, net

 

 i 50

 

 

 i 

 

 i 50

 

 i 50

Investment in equity securities

 i 52

 i 52

 i 

 i 

 i 52

Warrants, fair value

 

 i 110

 

 

 i 

 

 i 110

 

 i 110

Financial liabilities:

Non-recourse debt

 i 1,615

 i 

 i 1,603

 i 1,603

Fair Value Measurements at December 31, 2021

    

Carrying

    

    

    

    

Amount

Level 1

Level 2

Level 3

Total

Financial assets:

Cash and cash equivalents

$

 i 4,804

$

 i 4,804

$

 i 

$

 i 

$

 i 4,804

Notes receivable, net

 

 i 101

 

 i 

 

 i 

 

 i 102

 

 i 102

Investment in equity securities

 

 i 308

 

 i 308

 

 i 

 

 i 

 

 i 308

Warrants, fair value

 

 i 108

 

 i 

 

 i 

 

 i 108

 

 i 108

Financial liabilities:

Investment in options - short

 i 1

 i 1

 i 

 i 

 i 1

Non-recourse debt

 i 2,145

 i 

 i 

 i 2,197

 i 2,197

 / 

23

Table of Contents

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 16, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on December 27, 2012 for the purpose of raising capital and originating equipment financing transactions and acquiring equipment to engage in equipment leasing and sales activities. The offering of the Company was granted effectiveness by the Securities and Exchange Commission as of November 5, 2013.

Through June 30, 2022, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable) totaling $42.9 million (inclusive of the $500 initial Member’s capital investment), had been received. As of June 30, 2022, a total of 4,274,486 Units were issued and outstanding.

Results of Operations

Three months ended June 30, 2022 versus three months ended June 30, 2021

The Company had net losses of $438 thousand and net income of $80 thousand for the respective three months ended June 30, 2022 and 2021. The current quarter results primarily reflect a decrease in total operating revenues and an unfavorable change in other (loss) income related to the Company’s investment securities and warrants.

Revenues

Total operating revenues declined by $272 thousand due to an unfavorable change in gains and losses from asset sales and decreases in operating lease revenue and interest income on notes receivable.

The unfavorable change in gains/losses on asset sales totaled $215 thousand and was attributable to changes in the mix of assets sold. Operating lease revenues decreased by $39 thousand primarily due to lease run-off and sales of lease assets. In addition, interest income on notes receivable decreased by $18 thousand largely due to the scheduled amortization of the notes.

Expenses

Total operating expenses for the three months ended June 30, 2022 totaled $905 thousand and was virtually unchanged as compared to the prior year period’s total of $907 thousand. At a detailed level, the $2 thousand net decrease in total operating expenses was primarily attributable to decreases in cost reimbursements to the Manager, other expense, and interest expense partially offset by increases in depreciation and professional fees.

Cost reimbursements to the Manager decreased by $27 thousand due to lower allocated costs reflective of the Fund’s year over year decline in assets. Other expense was reduced by $23 thousand largely due to lower storage fees, and interest expense declined by $10 thousand due to the scheduled amortization of the notes receivable. Partially offsetting

24

Table of Contents

such decreases were increases in depreciation expense and in professional fees totaling $27 thousand each. The increase in depreciation expense was attributable to incremental depreciation on new equipment purchased since June 30, 2021, while the increase in professional fees was a result of timing differences in receipt of services and billings.

Other loss

During the three-month periods ended June 30, 2022 and 2021, the Company recorded other loss totaling $71 thousand and other income totaling $177 thousand, respectively, to reflect both unrealized and realized gains and losses on the Fund’s portfolio of equity securities and warrants. Adverse changes to prices of the Company’s publicly traded equity securities during the quarter resulted in $72 thousand of unrealized losses, which was partially offset by realized gains of $1 thousand on fair valuation of the Company’s warrants. By comparison, during the prior year period, the Company recorded unrealized gains of $110 thousand, net on the fair valuation of its equity securities and warrants. Such unrealized gains were complemented by $67 thousand of gains realized from sales of equity securities during the three months ended June 30, 2021. There were no such sales during the current quarter.

Six months ended June 30, 2022 versus six months ended June 30, 2021

The Company had net losses of $1.0 million and net income of $758 thousand for the respective six months ended June 30, 2022 and 2021. The current period results primarily reflect a decrease in total operating revenues and an unfavorable change in other (loss) income related to the Company’s investment securities and warrants.

Revenues

Total operating revenues declined by $1.4 million due to a reduction in other revenue, an unfavorable change in gains/losses recorded on asset sales and decreases in operating lease revenue and interest income on notes receivable.

Other revenue declined by $830 thousand due to a significant drop in deferred maintenance fees related to excess wear and tear on certain returned equipment. The unfavorable change in gains/losses on asset sales totaled $418 thousand and was attributable to changes in the mix of assets sold. Further reducing total revenues were decreases in operating lease revenues and interest income on notes receivable totaling $112 thousand and $42 thousand, respectively. The decrease in operating lease revenue was mainly a result of lease run-off and sales of lease assets, while the decrease in interest income was due to the scheduled amortization of the notes.

Expenses

Total operating expenses increased by $14 thousand, primarily due to an increase in taxes on income and franchise fees and depreciation of operating lease assets partially offset by decreases in other expense, cost reimbursements to the Manager, professional fees, and interest expense.

Taxes on income and franchise fees increased by $169 thousand largely due to a settlement of excise taxes related to revenues generated by certain equipment, while depreciation expense increased by $35 thousand primarily due to incremental depreciation on new equipment purchased since June 30, 2021. Partially offsetting such increases was a $51 thousand decrease in other expense due to lower storage fees incurred as most of the Company’s off-lease assets were either sold or re-leased. In addition, cost reimbursements to the Manager decreased by $47 thousand due to lower allocated costs reflective of the Fund’s year over year decline in assets. Finally, professional fees declined by $41 thousand due to timing differences in receipt of services and billings, and interest expense decreased by $21 thousand due to the scheduled amortization of the notes receivable.

Other loss

During the six-month periods ended June 30, 2022 and 2021, the Company recorded other losses totaling $253 thousand and other income totaling $136 thousand, respectively, to reflect both unrealized and realized losses and gains on the Fund’s investment securities and warrants portfolio. Adverse changes to prices of the Company’s publicly traded equity securities during the first half of 2022 resulted in $256 thousand of unrealized losses. Such losses were partially offset by realized gains of $2 thousand on fair valuation of the Company’s warrants and realized gains of $1 thousand on the

25

Table of Contents

expiration of options sold. By comparison, during the prior year period, the Company recorded unrealized gains of $58 thousand, net on the fair valuation of its equity securities and warrants, and $78 thousand of gains realized on sales of equity securities. There were no such sales during the current quarter.

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $4.5 million and $4.8 million as of June 30, 2022 and December 31, 2021, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and proceeds of asset sales exceed expenses and decreasing as lease assets are acquired, as distributions are made to the Members and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

The Company currently believes it has available adequate reserves to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements. The Managing Member envisions no such requirements for operating purposes.

Cash Flows

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

Six Months Ended

  

June 30, 

    

2022

    

2021

Net cash provided by (used in):

Operating activities

$

364

$

1,418

Investing activities

 

1,323

 

1,125

Financing activities

 

(2,026)

 

(2,149)

Net (decrease) increase in cash and cash equivalents

$

(339)

$

394

During the six months ended June 30, 2022 and 2021, the Company’s main sources of liquidity were cash flows from its portfolio of operating lease contracts, principal payments on its investments in notes receivable, and proceeds from sales of lease assets and/or early termination of notes receivable. Principal payments received on the notes receivable totaled $51 thousand and $265 thousand for the six months ended June 30, 2022 and 2021, respectively; and, proceeds from sales of assets were recorded $1.2 million for both of the six months ended June 30, 2022 and 2021. In addition, the Company recorded $50 thousand of proceeds from sales of options during the current six-month period. There were no options sold during the prior year period. Also, during the six months ended June 30, 2021, the Company recorded $79 thousand of proceeds from the sale of securities. There were no such sales during the current period.

During the six months ended June 30, 2022 and 2021, cash was primarily used to pay distributions and repay borrowings under non-recourse debt. Cash used to pay distributions totaled $1.5 million for each of the six-month periods ended June 30, 2022 and 2021; and repayments of non-recourse debt totaled $530 thousand and $653 thousand for the six months ended June 30, 2022 and 2021, respectively. In addition, during the six months ended June 30, 2021, cash used to acquire lease assets totaling $405 thousand. There were no lease asset acquisitions during the current period. Cash was also used to pay invoices related to management fees and expenses, and other payables in both six-month periods.

Distributions

The Unitholders of record are entitled to certain distributions as provided under the Operating Agreement. The Company commenced periodic distributions beginning with the month of April 2014. Additional distributions have been made through June 30, 2022.

26

Table of Contents

Cash distributions were paid by the Fund to Unitholders of record as of May 31, 2022, and paid through June 30, 2022. The distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets. See the discussion in the ATEL 16, LLC Prospectus dated November 5, 2013 (“Prospectus”) under “Income, Losses and Distributions.” Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.

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

The following table summarizes distribution activity for the Fund from inception through June 30, 2022 (in thousands, except for Units and Per Unit Data):

Total

Weighted

Return of

Distribution

Total

Distribution

Average Units

Distribution Period(1)

    

Paid

    

Capital

    

    

of Income

    

    

Distribution

    

    

per Unit (2)

    

Outstanding(3)

Monthly and quarterly distributions

  

  

Nov 2013 – Mar 2014 (Distribution of all escrow interest)

Jun 2014

$

$

$

n/a

n/a

Mar 2014 – Nov 2014

Apr 2014 – Dec 2014

 

453

 

 

453

0.51

896,524

Dec 2014 – Nov 2015

Jan 2015 – Dec 2015

2,096

2,096

0.69

3,044,217

Dec 2015 – Nov 2016

Jan 2016 – Dec 2016

3,016

3,016

0.70

4,306,106

Dec 2016 – Nov 2017

Jan 2017 – Dec 2017

3,001

3,001

0.70

4,295,644

Dec 2017 – Nov 2018

Jan 2018 – Dec 2018

2,997

2,997

0.70

4,276,421

Dec 2018 – Nov 2019

Jan 2019 – Dec 2019

2,992

2,992

0.70

4,274,486

Dec 2019 – Nov 2020

Jan 2020 – Dec 2020

2,992

2,992

0.70

4,274,486

Dec 2020 – Nov 2021

Jan 2021 – Dec 2021

2,992

2,992

0.70

4,274,486

Dec 2021 – May 2022

Jan 2022 – Jun 2022

1,496

1,496

0.35

4,274,486

$

22,035

$

$

22,035

$

5.75

Source of distributions

 

 

  

 

 

 

Lease and loan payments and sales proceeds received

$

22,035

100.00

%  

$

0.00

%  

$

22,035

100.00

%  

 

 

Interest Income

 

0.00

%  

 

0.00

%  

 

0.00

%  

 

 

Debt against non-cancellable firm term payments on leases and loans

 

0.00

%  

 

0.00

%  

 

0.00

%  

 

 

$

22,035

100.00

%  

$

0.00

%  

$

22,035

100.00

%  

 

 

(1)Investors may elect to receive their distributions either monthly or quarterly. See “Timing and Method of Distributions” on Page 67 of the Prospectus.
(2)Total distributions per Unit represents the per Unit distributions rate for those units which were outstanding for all of the applicable period.
(3)Balances shown represent weighted average units for the period from March 6 – November 30, 2014, December 1, 2014 – November 30, 2015, December 1, 2015November 30, 2016, December 1, 2016 – November 30, 2017, December 1, 2017 – November 30, 2018, December 1, 2018 – November 30, 2019, December 1, 2019 – November 30, 2020, December 1, 2020November 30, 2021, and December 1, 2021May 31, 2022, respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2022, there were no commitments to purchase lease assets or to fund investments in notes receivable.

Off-Balance Sheet Transactions

None.

27

Table of Contents

Recent Accounting Pronouncements

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

Critical Accounting Policies and Estimates

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

The Company’s significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the Company’s significant accounting policies since December 31, 2021.

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 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 15d-15(e)) as of the end of the period covered by this report. Based on the evaluation of the Company’s disclosure controls and procedures, Management concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.

The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Member’s disclosure controls and procedures, as they are applicable to the Company, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control

There were no changes in the Managing Member’s internal control over financial reporting, as it is applicable to the Company, during the quarter ended June 30, 2022, 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.

28

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of conducting business, there may be certain claims, suits, and complaints filed against the Managing Member. In the opinion of management, the outcome of such matters, if any, will not have a material impact on the Managing Member’s financial position or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a)Documents filed as a part of this report

1.

Financial Statement Schedules

All 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 pursuant to Rules 13a-14(a)/15d-14(a)

(31.2)

Certification of Paritosh K. Choksi pursuant to Rules 13a-14(a)/15d-14(a)

(32.1)

Certification of Dean L. Cash pursuant to 18 U.S.C. section 1350

(32.2)

Certification of Paritosh K. Choksi pursuant to 18 U.S.C. section 1350

(101.INS)

Inline XBRL Instance Document

(101.SCH)

Inline XBRL Taxonomy Extension Schema Document

(101.CAL)

Inline XBRL Taxonomy Extension Calculation Linkbase Document

(101.DEF)

Inline XBRL Taxonomy Extension Definition Linkbase Document

(101.LAB)

Inline XBRL Taxonomy Extension Label Linkbase Document

(101.PRE)

Inline XBRL Taxonomy Extension Presentation Linkbase Document

(104)

The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended

June 30, 2022 has been formatted in Inline XBRL

29

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August 12, 2022

ATEL 16, LLC

(Registrant)

By:

ATEL Managing Member, LLC

Managing Member of Registrant

By:

/s/ Dean L. Cash

Dean L. Cash

Chairman of the Board, President and Chief Executive Officer of ATEL Managing Member, LLC (Managing Member)

By:

/s/ Paritosh K. Choksi

Paritosh K. Choksi

Director, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Managing Member, LLC (Managing Member)

By:

/s/ Raymond A. Rigo

Raymond A. Rigo

Vice President, Fund Controller of ATEL Managing Member, LLC (Managing Member)

30


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