Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended June 30, 2023

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

For the transition period from        to

Commission File number 000-55417

ATEL 16, LLC

(Exact name of registrant as specified in its charter)

California	90-0920813
(State or other jurisdiction of	(I. R. S. Employer
incorporation or organization)	Identification No.)

505 Montgomery Street, 7th Floor, San Francisco, California 94111

(Address of principal executive offices)

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

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

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

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. 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 such files). 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. (Check one):

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

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 ☐ No ☒

The number of Limited Liability Company Units outstanding as of July 31, 2023 was 4,273,986.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATEL 16, LLC

Index

PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Balance Sheets, June 30, 2023 and December 31, 2022	3
	Statements of Operations for the three and six months ended June 30, 2023 and 2022	4
	Statements of Changes in Members’ Capital for the three and six months ended June 30, 2023 and 2022	5
	Statements of Cash Flows for the six months ended June 30, 2023 and 2022	6
	Notes to the Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ATEL 16, LLC

BALANCE SHEETS

JUNE 30, 2023 AND DECEMBER 31, 2022
(In Thousands)

(Unaudited)

	June 30,		December 31,
	2023		2022
ASSETS
Cash and cash equivalents	$	4,233	$	5,340
Accounts receivable, net		80		128
Investment in equity securities		66		68
Warrants, fair value		106		108
Investment in equipment and leases, net		5,838		6,496
Prepaid expenses and other assets		1		7
Total assets	$	10,324	$	12,147
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities:
Due to Managing Member and affiliates	$	40	$	57
Accrued distributions to Other Members		289		289
Other		61		92
Non-recourse debt		943		1,113
Unearned operating lease income		152		165
Total liabilities		1,485		1,716
Commitments and contingencies
Members’ capital:
Managing Member		—		—
Other Members		8,839		10,431
Total Members’ capital		8,839		10,431
Total liabilities and Members’ capital	$	10,324	$	12,147

See accompanying notes.

3

ATEL 16, LLC

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2023 AND 2022
(In Thousands Except for Units and Per Unit Data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Operating revenues:
Leasing and lending activities:
Operating lease revenue, net	$	589	$	608	$	1,108	$	1,261
Notes receivable interest income		—		2		—		5
Loss on sales of operating lease assets		—		(73)		—		(132)
Other revenue		12		1		27		1
Total operating revenues		601		538		1,135		1,135
Operating expenses:
Depreciation of operating lease assets		303		546		652		1,100
Asset management fees to Managing Member		77		80		154		174
Cost reimbursements to Managing Member and/or affiliates		67		103		157		211
Amortization of initial direct costs		3		4		6		8
Interest expense		11		18		23		38
Professional fees		27		101		96		133
Outside services		15		8		37		19
Taxes on income and franchise fees		12		12		62		181
Other expense		16		33		38		65
Total operating expenses		531		905		1,225		1,929
Net income (loss) from operations		70		(367)		(90)		(794)
Other income (loss):
Unrealized loss on fair value adjustment for equity securities		(6)		(72)		(2)		(256)
Unrealized (loss) gain on fair value adjustment for warrants		(1)		1		(2)		2
Realized gain on sale of options		—		—		—		1
Total other loss		(7)		(71)		(4)		(253)
Net income (loss)	$	63	$	(438)	$	(94)	$	(1,047)
Net income (loss):
Managing Member	$	—	$	—	$	—	$	—
Other Members		63		(438)		(94)		(1,047)
	$	63	$	(438)	$	(94)	$	(1,047)
Net income (loss) per Limited Liability Company Unit - Other Members	$	0.01	$	(0.10)	$	(0.02)	$	(0.24)
Weighted average number of Units outstanding		4,274,470		4,274,486		4,274,478		4,274,486

See accompanying notes.

4

ATEL 16, LLC

STATEMENTS OF CHANGES IN MEMBERS’ CAPITAL

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2023 AND 2022
(In Thousands Except for Units and Per Unit Data)

(Unaudited)

	Three Months Ended June 30, 2023
		Amount
		Other		Managing
	Units	Members		Member		Total
Balance March 31, 2023	4,274,486	$	9,526	$	—	$	9,526
Repurchase of Units	(500)		(2)		—		(2)
Distributions to Other Members ($0.18 per Unit)	—		(748)		—		(748)
Net income	—		63		—		63
Balance June 30, 2023	4,273,986		8,839		—		8,839
	Six Months Ended June 30, 2023
		Amount
		Other		Managing
	Units	Members		Member		Total
Balance December 31, 2022	4,274,486	$	10,431	$	—	$	10,431
Repurchase of Units	(500)		(2)		—		(2)
Distributions to Other Members ($0.35 per Unit)	—		(1,496)		—		(1,496)
Net loss	—		(94)		—		(94)
Balance June 30, 2023	4,273,986		8,839		—		8,839
	Three Months Ended June 30, 2022
		Amount
		Other		Managing
	Units	Members		Member		Total
Balance March 31, 2022	4,274,486	$	11,978	$	—	$	11,978
Distributions to Other Members ($0.17 per Unit)	—		(748)		—		(748)
Net loss	—		(438)		—		(438)
Balance June 30, 2022	4,274,486		10,792		—		10,792
	Six Months Ended June 30, 2022
		Amount
		Other		Managing
	Units	Members		Member		Total
Balance December 31, 2021	4,274,486	$	13,335	$	—	$	13,335
Distributions to Other Members ($0.35 per Unit)	—		(1,496)		—		(1,496)
Net loss	—		(1,047)		—		(1,047)
Balance June 30, 2022	4,274,486		10,792		—		10,792

See accompanying notes.

5

ATEL 16, LLC

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2023 AND 2022
(In Thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2023		2022
Operating activities:
Net loss	$	(94)	$	(1,047)
Adjustment to reconcile net loss to cash provided by operating activities:
Depreciation of operating lease assets		652		1,100
Loss on sales of operating lease assets		—		132
Amortization of initial direct costs		6		8
(Reversal of) provision for doubtful accounts		(8)		38
Realized gain on sale of options		—		(1)
Unrealized loss on fair value adjustment for equity securities		2		256
Unrealized loss (gain) on fair value adjustment for warrants		2		(2)
Changes in operating assets and liabilities:
Accounts receivable		56		(53)
Prepaid expenses and other assets		6		8
Due to/from Managing Members and affiliates		(17)		(5)
Accounts payable, other		(31)		(65)
Unearned operating lease income		(13)		(5)
Net cash provided by operating activities		561		364
Investing activities:
Proceeds from sales of options		—		50
Proceeds from sales of lease assets		—		1,222
Principal payments received on notes receivable		—		51
Net cash provided by investing activities		—		1,323
Financing activities:
Repayments under non-recourse debt		(170)		(530)
Distributions to Other Members		(1,496)		(1,496)
Repurchases of Units		(2)		—
Net cash used in financing activities		(1,668)		(2,026)
Net decrease in cash and cash equivalents		(1,107)		(339)
Cash and cash equivalents at beginning of period		5,340		4,804
Cash and cash equivalents at end of period	$	4,233	$	4,465
Supplemental disclosures of cash flow information:
Cash paid during period for interest	$	23	$	38
Cash paid during period for taxes	$	72	$	215
Schedule of non-cash investing and financing transactions:
Distributions payable to Other Members at period-end	$	289	$	289

See accompanying notes.

6

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Limited Liability Company matters:

ATEL 16, LLC (the “Company” or the “Fund”) was formed under the laws of the state of California on December 27, 2012 (“Date of Inception”) for the purpose of equipment financing and acquiring equipment to engage in equipment leasing and sales activities. The Managing Member of the Company is ATEL Managing Member, LLC (the “Managing Member” or “Manager”), a Nevada limited liability company. 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 $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 15,000,000 Limited Liability Company Units (“Units”), at a base price of $10 per Unit. As of March 6, 2014, subscriptions for the minimum number of Units (120,000, representing $1.2 million), excluding subscriptions from Pennsylvania investors, had been received and the Fund requested subscription proceeds to be released from escrow. On that date, the Company commenced initial operations 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 $7.5 million. Total contributions to the Fund exceeded $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, 2023, cumulative gross contributions, less rescissions and repurchases (net of distributions paid and allocated syndication costs, as applicable), totaling $42.9 million (inclusive of the $500 initial Member’s capital investment) have been received. As of the same date, 4,273,986 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 7% nor more than 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 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 5, 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, 2022, filed with the Securities and Exchange Commission.

7

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

2. Summary of significant accounting policies:

Basis of presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2023 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, 2023, up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements.

Cash and cash equivalents:

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

Use of Estimates:

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

Segment reporting:

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

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 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

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The primary geographic region in which the Company seeks leasing opportunities is North America. For the three and six months ended June 30, 2023 and 2022, and as of June 30, 2023 and December 31, 2022, all of the Company’s current operating revenues and long-lived assets relate to customers domiciled in the United States.

Accounts receivable:

Accounts receivable represent the amounts billed under operating lease contracts 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.

Investment in securities:

From time to time, the Company may receive the right to purchase equity 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 $66 thousand and $68 thousand of investment securities as of June 30, 2023 and December 31, 2022, respectively. Such amounts included investment securities which do not have readily available fair values totaling $47 thousand at both June 30, 2023 and December 31, 2022. During the three months ended June 30, 2023 and 2022, the Company recorded unrealized losses of $6 thousand and $72 thousand on investment securities with readily determinable fair values. During the six months ended June 30, 2023 and 2022, the Company recorded unrealized losses of $2 thousand and $256 thousand on such securities. There were no fair value adjustments on securities that do not have readily determinable values during the three and six months ended June 30, 2023 and 2022, and on a cumulative basis. There were neither impairment losses nor sale of securities during the three and six months ended June 30, 2023 and 2022.

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. As of June 30, 2023 and December 31, 2022, the estimated fair value of the Company’s portfolio of warrants were $106 thousand and $108 thousand, respectively. The Company recorded unrealized losses of $1 thousand and unrealized gains of $1 thousand on fair valuation of its warrants for the three months ended June 30, 2023 and 2022, respectively. During the six months ended June 30, 2023 and 2022, the Company recorded unrealized losses of $2 thousand and unrealized gains of $2 thousand, respectively. There were no net exercises of warrants during the three and six months ended June 30, 2023 and 2022.

9

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Options - short position

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

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 $10 billion in assets. Such deposits are insured up to $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 receivable represent amounts due from lessees or borrowers in various industries related to equipment on operating lease contracts.

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.

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

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

Operating leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management considers the equipment underlying the lease contracts for impairment

10

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

and periodically reviews the credit worthiness of all operating lessees with payments outstanding less than 90 days. Based upon management’s judgment, the related operating leases may be placed on non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable. Until such time, revenues are recognized on a cash basis. Provisions for credit losses relating to operating leases are included in lease income in the Company’s financial statements.

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.

Acquisition expense:

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

Fair Value:

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

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

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

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

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

11

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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.

Per Unit data:

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

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. The Company adopted this new accounting guidance on January 1, 2023. Such adoption had no material impact on the Company’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 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. The Company adopted this new accounting guidance on January 1, 2023. Such adoption had no material impact on the Company’s financial statements and disclosures.

12

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

3. Investment in equipment and leases, net:

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

	Balance		Additions/		Depreciation/		Balance
	December 31,		Dispositions/		Amortization		June 30,
	2022		Reclassifications		Expense		2023
Equipment under operating leases, net	$	6,461	$	—	$	(652)	$	5,809
Initial direct costs, net		35		—		(6)		29
Total	$	6,496	$	—	$	(658)	$	5,838

The Company utilizes a straight-line depreciation method over the term of the equipment lease for equipment under operating leases currently in its portfolio. Depreciation expense on the Company’s equipment totaled $303 thousand and $546 thousand for the respective three months ended June 30, 2023 and 2022, and totaled $652 thousand and $1.1 million for the respective six months ended June 30, 2023 and 2022.

For the respective three months ended June 30, 2023 and 2022, total depreciation includes $7 thousand and $10 thousand of additional depreciation recorded to reflect year-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, 2023 and 2022, such additional depreciation totaled $5 thousand and $44 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. In addition, there were no purchases of equipment and no impairment losses during the three and six months ended June 30, 2023 and 2022.

IDC amortization expense related to the Company’s operating leases totaled $3 thousand and $4 thousand for the respective three months ended June 30, 2023 and 2022, and $6 thousand and $8 thousand for the respective six months ended June 30, 2023 and 2022.

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

Operating leases:

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

	Balance				Balance
	December 31,				June 30,
	2022		Additions		2023
Coal terminal	$	5,000	$	—	$	5,000
Aviation		3,929		—		3,929
Railroad		3,334		—		3,334
Marine vessel		2,291		—		2,291
Construction		1,902		—		1,902
Materials handling		825		—		825
Trucks and trailers		86		—		86
Other		204		—		204
		17,571		—		17,571
Less accumulated depreciation		(11,110)		(652)		(11,762)
Total	$	6,461	$	(652)	$	5,809

13

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

The average estimated residual value for assets on operating leases was 20% of the assets’ original cost at both June 30, 2023 and December 31, 2022. There were no operating leases in non-accrual status at June 30, 2023 and December 31, 2022.

At June 30, 2023, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating
	Leases
Six months ending December 31, 2023	$	1,026
Year ending December 31, 2024		1,737
2025		452
2026		366
2027		295
Thereafter		97
	$	3,973

The useful lives for each category of leases are reviewed at a minimum of once per quarter. As of June 30, 2023, the respective useful lives of each category of lease assets in the Company’s portfolio are as follows (in years):

Equipment category	Useful Life
Coal terminal	50 - 60
Railroad	35 - 50
Marine vessel	20 - 30
Aviation	20 - 30
Construction	7 - 10
Materials handling	7 - 10
Trucks and trailers	7 - 10
Other	7 - 10

4. Allowance for doubtful accounts:

The Company’s allowance for doubtful accounts are as follows (in thousands):

	Allowance for
	Doubtful
	Accounts
	Operating
	Leases
Balance December 31, 2021	$	2
Provision for doubtful accounts		38
Balance June 30, 2022	$	40
Balance December 31, 2022	$	8
Reversal of provision for doubtful accounts		(8)
Balance June 30, 2023	$	—

14

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

5. Related party transactions:

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

The Operating Agreement allows for the reimbursement of costs incurred by 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.

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.

Pursuant to the Operating Agreement, the Managing Member and/or affiliates earned fees and billed for reimbursements during the three and six months ended June 30, 2023 and 2022 as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Administrative costs reimbursed to Managing Member and/or affiliates	$	67	$	103	$	157	$	211
Asset management fees to Managing Member		77		80		154		174
	$	144	$	183	$	311	$	385

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, 2023 and 2022, the Company has not exceeded the annual and/or cumulative limitations discussed above.

15

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

6. Non-recourse debt:

At June 30, 2023, 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 3.97% to 4.71% per annum. The notes are secured by assignments of lease payments and pledges of assets. At June 30, 2023, gross operating lease rentals totaled approximately $1.0 million over the remaining lease terms; and the carrying value of the pledged assets is $1.8 million. The notes mature at various dates from 2024 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 the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

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

	Principal		Interest		Total
Six months ending December 31, 2023	$	173	$	20	$	193
Year ending December 31, 2024		290		28		318
2025		159		19		178
2026		138		12		150
2027		96		6		102
Thereafter		87		2		89
	$	943	$	87	$	1,030

7. Commitments and contingencies:

At June 30, 2023, there were no commitments to purchase lease assets.

16

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

8. Members’ capital:

A total of 4,273,986 Units and 4,274,486 were issued and outstanding at June 30, 2023 and December 31, 2022, inclusive of the 50 Units issued to the initial Member (Managing Member). The Fund was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial Member.

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 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.

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

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

Distributions to the Other Members for the three and six months ended June 30, 2023 and 2022 were as follows (in thousands except Units and per Unit data):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Distributions	$	748	$	748	$	1,496	$	1,496
Weighted average number of Units outstanding		4,274,470		4,274,486		4,274,478		4,274,486
Weighted average distributions per Unit	$	0.18	$	0.17	$	0.35	$	0.35

17

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

9. 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, 2023 and December 31, 2022, the Company’s warrants and investment in equity securities were measured at fair value on a recurring basis. There were no assets measured at fair value on a non-recurring basis at June 30, 2023 and December 31, 2022.

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). At June 30, 2023 and December 31, 2022, the calculated fair value of the Fund’s warrant portfolio approximated $106 thousand and $108 thousand. Such valuations are classified within Level 3 of the valuation hierarchy.

The fair value of the warrants that were accounted for on a recurring basis for the three and six months ended June 30, 2023 and 2022 and classified as Level 3 are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Fair value of warrants at beginning of period	$	107	$	109	$	108	$	108
Unrealized (loss) gain on fair value adjustment for warrants		(1)		1		(2)		2
Fair value of warrants at end of period	$	106	$	110	$	106	$	110

Investment in equity 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 $19 thousand and $21 thousand at June 30, 2023 and December 31, 2022, respectively. Unrealized losses of $6 thousand and $72 thousand were recorded during the respective three months ended June 30, 2023 and 2022. Unrealized losses of $2 thousand and $256 thousand were recorded during the respective six months ended June 30, 2023 and 2022.

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

18

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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, 2023 and December 31, 2022:

June 30, 2023
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.01 - $11.71 ($0.09)
			Exercise price	$0.02 - $9.00 ($0.09)
			Time to maturity (in years)	0.85 - 8.45 (4.55)
			Annualized volatility	41.87% - 83.00% (52.30%)

December 31, 2022
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.01 - $11.71 ($0.09)
			Exercise price	$0.02 - $9.00 ($0.09)
			Time to maturity (in years)	1.35 - 8.94 (5.04)
			Annualized volatility	41.18% - 83.00% (51.36%)

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.

Investment in securities

The Company's purchased securities registered for public sale with readily determinable fair value are carried at fair value. These investment securities are valued based on their quoted market price.

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.

19

ATEL 16, LLC

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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 guaranteed liability has been incurred or will likely be incurred.

The following tables present estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at June 30, 2023 and December 31, 2022 (in thousands):

	Fair Value Measurements at June 30, 2023
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	4,233	$	4,233	$	—	$	—	$	4,233
Investment in equity securities		19		19		—		—		19
Warrants, fair value		106		—		—		106		106
Financial liabilities:
Non-recourse debt		943		—		—		912		912

	Fair Value Measurements at December 31, 2022
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	5,340	$	5,340	$	—	$	—	$	5,340
Investment in equity securities		21		21		—		—		21
Warrants, fair value		108		—		—		108		108
Financial liabilities:
Non-recourse debt		1,113		—		—		1,077		1,077

20

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, 2023, 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, 2023, a total of 4,273,986 Units were issued and outstanding.

Results of Operations

Three months ended June 30, 2023 versus three months ended June 30, 2022

The Company had net gains of $63 thousand and net losses of $438 thousand for the respective three months ended June 30, 2023 and 2022. The current quarter results reflect an increase in total operating revenues and decreases in both total operating expenses and other loss related to the Company’s investment securities and warrants, as compared to the prior year period.

Revenues

Total operating revenues increased by $63 thousand, or 12%, was comprised of a decrease in realized losses on lease asset sales and an increase in other revenue partially offset by a decline in operating lease revenue.  

The absence of lease asset sales during the current quarter resulted in a $73 thousand favorable variance as the prior year quarter included losses totaling $73 thousand from such sales activity. Other income increased by $11 thousand primarily due to interest income from a certificate of deposit opened during the first quarter of 2023. As a partial offset, operating lease revenue decreased by $19 thousand primarily due to lease run-off and the impact of lease asset sales since June 30, 2022.

Expenses

Total operating expenses decreased by $374 thousand, or 41%, primarily due to decreases in depreciation expense, professional fees and costs reimbursed to the Manager.

Depreciation expense decreased by $243 thousand primarily due to portfolio run-off and disposition of lease assets since June 30, 2022; while professional fees decreased by $74 thousand mainly due to timing differences in receipt of audit

21

and tax related services and billings. In addition, costs reimbursed to the Manager decreased by $36 thousand due to lower allocated costs reflective of the Fund’s declining assets.

Other loss

During the three-month periods ended June 30, 2023 and 2022, the Company recorded other losses of $7 thousand and $71 thousand, respectively, to reflect both unrealized and realized gains and losses on the Fund’s investment securities and warrants portfolio. The favorable change in such other loss was mostly attributable to the significant decline in the price of the Company's publicly traded securities during the prior year period, which resulted in losses of $72 thousand. The price of such securities has since steadied and has declined at a substantially lower rate during the current period. 

Six months ended June 30, 2023 versus six months ended June 30, 2022

The Company had net losses of $94 thousand and $1.0 million for the respective six months ended June 30, 2023 and 2022. The results for the first half of 2023 reflect decreases in both total operating expenses and other loss related to the Company’s investment securities and warrants.

Revenues

Total operating revenues were virtually unchanged at $1.1 million for each of the six months ended June 30, 2023 and 2022. When compared to the prior year period at a detailed level, the most notable changes were a $132 thousand decrease in realized losses on lease asset sales coupled with a $26 thousand increase in other revenue, partially offset by a $153 thousand decline in operating lease revenue.

The absence of lease asset sales during the current period resulted in a $132 thousand favorable variance as the prior year period included losses of the same amount from such sales activity. Other income increased by $26 thousand primarily due to interest income from a certificate of deposit opened during the first quarter of 2023. As a partial offset, operating lease revenue decreased by $153 thousand primarily due to lease run-off and the impact of lease asset sales since June 30, 2022.

Expenses

Total operating expenses decreased by $704 thousand, or 36%, primarily due to decreases in depreciation expense, taxes on income and franchise fees, costs reimbursed to the Manager, professional fees, and other expense.

Depreciation expense decreased by $448 thousand primarily due to portfolio run-off and disposition of lease assets since June 30, 2022; while taxes on income and franchise fees decreased by $119 thousand as the prior year period included a $161 thousand settlement of excise taxes related to prior year revenue generated by certain equipment. Costs reimbursed to the Manager decreased by $54 primarily mainly due to lower allocated costs reflective of Fund’s declining assets. In addition, professional fees decreased by $37 thousand as a result of timing differences in receipt of services and billings, and other expenses decreased $27 thousand primarily due to lower bank charges, printing and postage costs.

Other loss

During the six-month periods ended June 30, 2023 and 2022, the Company recorded other loss of $4 thousand and $253 thousand, respectively, to reflect both unrealized and realized gains and losses on the Fund’s investment securities and warrants portfolio. The favorable change in such other loss was mostly attributable to the significant decline in the price of the Company's publicly traded securities during the prior year period, which resulted in losses of $256 thousand. The price of such securities has since steadied and has declined at a substantially lower rate during the current period.

22

Capital Resources and Liquidity

The Company’s cash and cash equivalents totaled $4.2 million and $5.3 million as of June 30, 2023 and December 31, 2022, respectively. The liquidity of the Company varies, increasing to the extent cash flows from leases and decreasing as lease assets are acquired, as distributions are made to the Members and to the extent expenses exceed cash flows from leases.

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,
	2023		2022
Net cash provided by (used in):
Operating activities	$	561	$	364
Investing activities		—		1,323
Financing activities		(1,668)		(2,026)
Net decrease in cash and cash equivalents	$	(1,107)	$	(339)

During the six months ended June 30, 2023 and 2022, the Company’s main source of liquidity was cash flows from its portfolio of operating lease contracts. During the prior year period, the Company also received $1.2 million of proceeds from sales of lease assets, $51 thousand of principal payments on its investments in notes receivable, and $50 thousand of proceeds from sales of options. The Company’s notes receivable matured in 2022.

During the six months ended June 30, 2023 and 2022, 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, 2023 and 2022; and repayments of non-recourse debt totaled $170 thousand and $530 thousand for the same respective periods. Cash was also used to pay invoices related to management fees and expenses, and other payables for 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, 2023.

Cash distributions were paid by the Fund to Unitholders of record as of May 31, 2023, and paid through June 30, 2023. 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

23

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, 2023 (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 – Nov 2022	Jan 2022 – Dec 2022		2,992				—				2,992				0.70	4,274,486
Dec 2022 – May 2023	Jan 2023 – Jun 2023		1,496								1,496				0.35	4,274,478
		$	25,027			$	—			$	25,027			$	6.45
Source of distributions
Lease and loan payments and sales proceeds received		$	25,027	100.00	%	$	—	0.00	%	$	25,027	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	%
		$	25,027	100.00	%	$	—	0.00	%	$	25,027	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, 2015 – November 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, 2020 – November 30, 2021, December 1, 2021 – November 30, 2022, and December 1, 2022 – May 31, 2023, respectively.

Commitments and Contingencies and Off-Balance Sheet Transactions

Commitments and Contingencies

At June 30, 2023, there were no commitments to purchase lease assets.

Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

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

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

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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, 2022. There have been no material changes to the Company’s significant accounting policies since December 31, 2022.

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, 2023, that have materially affected, or are reasonably likely to materially affect, the Managing Member’s internal control over financial reporting, as it is applicable to the Company.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

(a) Documents filed as a part of this report

1.	Financial Statement Schedules
	All 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, 2023 has been formatted in Inline XBRL

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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 14, 2023

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)

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