Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 2003
|_| Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the transition period from _______ to _______
Commission File Number 333-47196
ATEL Capital Equipment Fund IX, LLC
(Exact name of registrant as specified in its charter)
California 94-3375584
---------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
600 California Street, 6th Floor, San Francisco, California 94108-2733
(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: None
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|
The number of Limited Partnership Units outstanding as of March 31, 2003 was
12,065,266
DOCUMENTS INCORPORATED BY REFERENCE
None
1
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
2
ATEL CAPITAL EQUIPMENT FUND IX, LLC
BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Unaudited)
ASSETS
2003 2002
---- ----
Cash and cash equivalents $43,999,801 $39,722,496
Accounts receivable 842,200 1,197,760
Notes receivable 925,281 1,131,793
Other assets 450,157 465,157
Investments in leases 49,787,621 46,902,018
------------------ ------------------
Total assets $96,005,060 $89,419,224
================== ==================
LIABILITIES AND MEMBERS' CAPITAL
Accounts payable:
Managing Member $ 570,496 $ 434,516
Other 42,214 90,667
Unearned operating lease income 95,254 77,044
------------------ ------------------
Total liabilities 707,964 602,227
Members' capital:
Managing member - -
Other members 95,297,096 88,816,997
------------------ ------------------
Total members' capital 95,297,096 88,816,997
------------------ ------------------
Total liabilities and members' capital $96,005,060 $89,419,224
================== ==================
See accompanying notes.
3
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
---- ----
Revenues:
Leasing activities:
Operating leases $ 2,150,244 $ 951,867
Direct financing leases 48,779 21,152
Interest 230,755 106,591
Other 11,048 136
----------------- ------------------
2,440,826 1,079,746
Expenses:
Depreciation and amortization 1,768,613 784,536
Asset management fees to Managing Member 119,965 58,256
Cost reimbursements to Managing Member 119,513 52,854
Interest expense 84,512 -
Impairment losses 76,634 -
Professional fees 32,834 24,025
Other 48,275 81,354
----------------- ------------------
2,250,346 1,001,025
----------------- ------------------
Net income $ 190,480 $ 78,721
================= ==================
Net income (loss):
Managing member $ 202,784 $ 86,510
Other members (12,304) (7,789)
----------------- ------------------
$ 190,480 $ 78,721
================= ==================
Net loss per Limited Liability Company Unit $ (0.0010) $ (0.0015)
Weighted average number of Units outstanding 11,914,503 5,055,796
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
THREE MONTH PERIOD ENDED
MARCH 31, 2003
(Unaudited)
Other Members Managing
-------------
Units Amount Member Total
Balance December 31, 2002 11,037,141 $88,816,997 $ - $88,816,997
Capital contributions 1,028,125 10,281,250 - 10,281,250
Less selling commissions to affiliates - (976,719) - (976,719)
Other syndication costs to affiliates - (311,122) - (311,122)
Distributions to members - (2,501,006) (202,784) (2,703,790)
Net income - (12,304) 202,784 190,480
------------------ ------------------ ------------------ ------------------
Balance March 31, 2003 12,065,266 $95,297,096 $ - $95,297,096
================== ================== ================== ==================
See accompanying notes.
4
ATEL CAPITAL EQUIPMENT FUND IX, LLC
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED
MARCH 31, 2003 AND 2002
(Unaudited)
2003 2002
---- ----
Operating activities:
Net income $ 190,480 $ 78,721
Adjustments to reconcile net income to cash provided by operating activities:
Impairment losses 76,634 -
Depreciation and amortization 1,768,613 784,536
Changes in operating assets and liabilities:
Accounts receivable 355,560 444,396
Other assets 15,000 -
Accounts payable, Managing Member 135,980 157,295
Accounts payable, other (48,453) (13,653)
Unearned operating lease income 18,210 134,798
------------------ ------------------
Net cash provided by operations 2,512,024 1,586,093
------------------ ------------------
Investing activities:
Purchases of equipment on operating leases (3,587,004) (6,859,596)
Purchases of equipment on direct financing leases (650,000) (980,570)
Payments of initial direct costs to managing member (558,747) (126,727)
Payments received on notes receivable 129,878 347,914
Reduction of net investment in direct financing leases 141,535 34,132
Note receivable advances - (1,268,837)
------------------ ------------------
Net cash used in investing activities (4,524,338) (8,853,684)
------------------ ------------------
Financing activities:
Capital contributions received 10,281,250 14,467,080
Payment of syndication costs to managing member (1,287,841) (1,872,261)
Distributions to members (2,703,790) (1,142,087)
------------------ ------------------
Net cash provided by financing activities 6,289,619 11,452,732
------------------ ------------------
Net increase in cash and cash equivalents 4,277,305 4,185,141
Cash and cash equivalents at beginning of period 39,722,496 13,568,058
------------------ ------------------
Cash and cash equivalents at end of period $43,999,801 $17,753,199
================== ==================
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 84,512 $ -
================== ==================
See accompanying notes.
5
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
1. Summary of significant accounting policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with instructions to Form 10-Q and Article 10 of Regulation S-X. The
unaudited interim financial statements reflect all adjustments which are, in the
opinion of the Managing Member, necessary to a fair statement of financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal recurring nature. 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,
2002, filed with the Securities and Exchange Commission.
Reclassifications:
Certain amounts have been reclassified to conform to current year presentation.
2. Organization and Company matters:
ATEL Capital Equipment Fund IX, LLC (the Company) was formed under the laws of
the state of California on September 27, 2000 for the purpose of acquiring
equipment to engage in equipment leasing and sales activities. The Company may
continue until December 31, 2019. The Company's offering was terminated as of
January 15, 2003.
Upon the sale of the minimum amount of Units of Limited Liability Company
interest (Units) of $1,200,000 and the receipt of the proceeds thereof on
February 21, 2001, the Company commenced operations.
The Company does not make a provision for income taxes since all income and
losses will be allocated to the Partners for inclusion in their individual tax
returns.
ATEL Financial Services, LLC, an affiliated entity, acts as the Managing Member
of the Company.
3. Investment in leases:
The Company's investment in leases consists of the following:
Depreciation
Balance Expense and Reclass- Balance
December 31, Amortization ifications and March 31,
2002 Additions of Leases Dispositions 2003
---- --------- --------- ------------ ----
Net investment in operating
leases $44,149,781 $ 3,587,004 $ (1,678,545) $ - $46,058,240
Net investment in direct financing
leases 1,525,473 650,000 (141,535) - 2,033,938
Initial direct costs, net of
accumulated amortization of
$273,930 in 2003 and
$183,862 in 2002 1,226,764 558,747 (90,068) - 1,695,443
------------------ ------------------ ------------------ ------------------ ------------------
$46,902,018 $ 4,795,751 $ (1,910,148) $ - $49,787,621
================== ================== ================== ================== ==================
6
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
3. Investment in leases (continued):
Operating leases:
Property on operating leases consists of the following:
Balance Reclass- Balance
December 31, Additions and ifications and March 31,
2002 Depreciation Dispositions 2003
---- ------------ ------------ ----
Mining $ 20,903,212 $ - $ - $ 20,903,212
Manufacturing 15,051,966 656,092 - 15,708,058
Marine vessels 11,200,000 - - 11,200,000
Communications 269,153 2,756,244 - 3,025,397
Materials handling 2,419,402 - - 2,419,402
Office furniture 562,248 174,668 - 736,916
Natural gas compressors 696,451 - - 696,451
------------------ ------------------ ------------------ ------------------
51,102,432 3,587,004 - 54,689,436
Less accumulated depreciation (6,952,651) (1,678,545) - (8,631,196)
------------------ ------------------ ------------------ ------------------
$ 44,149,781 $ 1,908,459 $ - $ 46,058,240
================== ================== ================== ==================
The average assumed residual values for assets on operating leases were 30% at
December 31, 2002 and 29% at March 31, 2003.
Direct financing leases:
As of March 31, 2003, investment in direct financing leases consists office
furniture and materials handling equipment. The following lists the components
of the Company's investment in direct financing leases as of March 31, 2003:
Total minimum lease payments receivable $ 2,191,326
Estimated residual values of leased equipment (unguaranteed) 211,527
---------------
Investment in direct financing leases 2,402,853
Less unearned income (368,915)
---------------
Net investment in direct financing leases $ 2,033,938
===============
All of the property on leases was acquired in 2001, 2002 and 2003.
7
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
3. Investment in leases (continued):
At March 31, 2003, the aggregate amounts of future minimum lease payments are as
follows:
Direct
Operating Financing
Leases Leases Total
Nine months ending December 31, 2003 $ 6,176,325 $ 498,208 $ 6,674,533
Year ending December 31, 2004 8,723,186 664,278 9,387,464
2005 8,594,209 527,062 9,121,271
2006 8,058,128 363,473 8,421,601
2007 3,572,570 135,491 3,708,061
Thereafter 2,963,127 2,814 2,965,941
------------------ ------------------ ------------------
$38,087,545 $ 2,191,326 $40,278,871
================== ================== ==================
4. Related party transactions:
The terms of the Limited Company Operating Agreement provide that the Managing
Member and/or Affiliates are entitled to receive certain fees for equipment
acquisition, management and resale and for management of the Company.
The Limited Liability Company Operating Agreement allows for the reimbursement
of costs incurred by the Managing Member in providing services to the Company.
Services provided include Company accounting, investor relations, legal counsel
and lease and equipment documentation. The Managing Member is not reimbursed for
services where it is entitled to receive a separate fee as compensation for such
services, such as acquisition and management of equipment. Reimbursable costs
incurred by the Managing Member are allocated to the Company based upon actual
time incurred by employees working on Company business and an allocation of rent
and other costs based on utilization studies.
Substantially all employees of the Managing Member record time incurred in
performing services on behalf of all of the companies serviced by the Managing
Member. 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 and are reimbursable in
accordance with the Limited Liability Company Operating Agreement.
During the three month periods ended March 31, 2003 and 2002, the Managing
Member and/or Affiliates earned fees, commissions and reimbursements, pursuant
to the Limited Liability Company Agreement as follows:
2003 2002
---- ----
Selling commissions, equal to 9.5% of the selling price of the Limited Liability
Company units, deducted from Other Members' capital $ 976,719 $ 1,374,373
Reimbursement of other syndication costs to Managing Member, deducted from
Other Members' capital 311,122 497,888
Asset management fees to Managing Member 119,965 58,256
Costs reimbursed to Managing Member 119,513 52,854
------------------ ------------------
$ 1,527,319 $ 1,983,371
================== ==================
8
ATEL CAPITAL EQUIPMENT FUND IX, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2003
(Unaudited)
5. Member's capital:
As of March 31, 2003, 12,065,266 Units ($120,652,660) were issued and
outstanding. The Company is authorized to issue up to 15,000,050 Units,
including the 50 Units issued to the initial members.
The Company's Net Income, Net Losses, and Distributions are to be allocated
92.5% to the Other Members and 7.5% to the Managing Member.
6. Line of credit:
The Company participates with the Managing Member and certain of its affiliates
in a $56,191,292 revolving line of credit (comprised of an acquisition facility
and a warehouse facility) with a financial institution that includes certain
financial covenants. The line of credit expires on June 28, 2004. As of March
31, 2003, borrowings under the facility were as follows:
Amount borrowed by the Company under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 17,200,000
------------------
Total borrowings under the acquisition facility 17,200,000
Amounts borrowed by the Managing Member and its sister
corporation under the warehouse facility -
------------------
Total outstanding balance $ 17,200,000
==================
Total available under the line of credit $ 56,191,292
Total outstanding balance (17,200,000)
------------------
Remaining availability $ 38,991,292
==================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Company and the Managing
Member.
The credit agreement includes certain financial covenants applicable to each
borrower. The Company was in compliance with its covenants as of March 31, 2003.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements contained in this Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form 10-Q,
which are not historical facts, may be forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. 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.
Capital Resources and Liquidity
During the first quarters of 2003 and 2002, the Company's primary activities
were raising funds through its offering of Limited Liability Company Units
(Units) and engaging in equipment leasing activities. The Company's public
offering of Limited Liability Company interests (Units) was completed as of
January 15, 2003. As of that date, subscriptions for 12,065,266 Units
($120,652,660) had been received and accepted, including the initial member's 50
Units ($500). As of March 31, 2003, all of the Units were issued and
outstanding.
During the funding period, the Company's primary source of liquidity is
subscription proceeds from the public offering of Units. The liquidity of the
Company will vary in the future, increasing to the extent cash flows from leases
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.
As another source of liquidity, the Company has contractual obligations with a
diversified group of lessees for fixed lease terms at fixed rental amounts. As
the initial lease terms expire, the Company will re-lease or sell the equipment.
The future liquidity beyond the contractual minimum rentals will depend on the
Managing Member's success in re-leasing or selling the equipment as it comes off
lease.
The Company participates with the Managing Member and certain of its affiliates
in a $56,191,292 revolving line of credit (comprised of an acquisition facility
and a warehouse facility) with a financial institution that includes certain
financial covenants. The line of credit expires on June 28, 2004. As of March
31, 2003, borrowings under the facility were as follows:
Amount borrowed by the Company under the acquisition facility $ -
Amounts borrowed by affiliated partnerships and limited
liability companies under the acquisition facility 17,200,000
------------------
Total borrowings under the acquisition facility 17,200,000
Amounts borrowed by the Managing Member and its sister
corporation under the warehouse facility -
------------------
Total outstanding balance $ 17,200,000
==================
Total available under the line of credit $ 56,191,292
Total outstanding balance (17,200,000)
------------------
Remaining availability $ 38,991,292
==================
Draws on the acquisition facility by any individual borrower are secured only by
that borrower's assets, including equipment and related leases. Borrowings on
the warehouse facility are recourse jointly to certain of the affiliated
partnerships and limited liability companies, the Company and the Managing
Member.
The Company anticipates reinvesting a portion of lease payments from assets
owned in new leasing transactions. Such reinvestment will occur only after the
payment of all obligations, including debt service (both principal and
interest), the payment of management and acquisition fees to the Managing Member
and providing for cash distributions to the members.
The Company currently has available adequate reserves to meet contingencies, 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.
The credit agreement includes certain financial covenants applicable to each
borrower. The Company was in compliance with its covenants as of March 31, 2003.
No commitments of capital have been or are expected to be made other than for
the acquisition of additional equipment. There were a total of approximately
$20,622,000 of such commitments as of March 31, 2003.
10
If inflation in the general economy becomes significant, it may affect the
Company inasmuch as the residual (resale) values and rates on re-leases of the
Company's leased assets may increase as the costs of similar assets increase.
However, the Company's revenues from existing leases would not increase, as such
rates are generally fixed for the terms of the leases without adjustment for
inflation.
If interest rates increase significantly, the lease rates that the Company can
obtain on future leases will be expected to increase as the cost of capital is a
significant factor in the pricing of lease financing. Leases already in place,
for the most part, would not be affected by changes in interest rates.
In August 2002, the Company established a $100 million receivables funding
program with a receivables financing company that issues commercial paper rated
A1 from Standard and Poors and P1 from Moody's Investor Services. In this
receivables funding program, the lenders would receive liens against the
Company's assets. The lender will be in a first position against certain
specified assets and will be in either a subordinated or shared position against
the remaining assets. The program provides for borrowing at a variable interest
rate and requires the Managing Member, on behalf of the Company, to enter into
interest rate swap agreements with certain hedge counterparties (also rated
A1/P1) to mitigate the interest rate risk associated with a variable interest
rate note. The Managing Member anticipates that this program will allow the
Company to have a more cost effective means of obtaining debt financing than
available for individual non-recourse debt transactions. As of March 31, 2003,
the Company had not borrowed under the facility.
Cash Flows
During the first quarters of 2003 and 2002, the Company's primary source of
liquidity was the proceeds of its offering of Units.
In the first quarters of 2003 and 2002, the primary source of cash from
operations was rents from operating leases.
Rents from direct financing leases accounted for as reductions in the Company's
net investment in direct financing leases and payments received on notes
receivable were the primary sources of cash from investing activities in both
the first quarters of 2003 and 2002. Uses of cash for investing activities
consisted of cash used to purchase operating and direct financing lease assets,
payments of initial direct costs associated with the lease asset purchases and
advances on notes receivable.
In the first quarters of 2003 and 2002, the primary source of cash from
financing activities was the proceeds of the Company's public offering of Units
of Limited Liability Company interest of $10,281,250 and $14,467,080,
respectively. Financing uses of cash consisted of payments of syndication costs
associated with the offering and making distributions to the members.
Results of Operations
On February 21, 2001, the Company commenced operations. Operations resulted in
net income of $190,480 in the quarter ended March 31, 2003 compared to $78,721
in in the quarter ended March 31, 2002. The Company's primary source of revenues
is from operating leases. Depreciation and amortization was $119,965 and $58,256
during the quarters ended March 31, 2003 and 2002, respectively, and is related
to operating lease assets and thus, to operating lease revenues. They are
expected to increase in future periods as acquisitions continue.
Asset management fees were $119,513 and $52,584 for the quarters ended March 31,
2003 and 2002, respectively, and are based on the gross lease rents of the
Company plus proceeds from the sales of lease assets. They are limited to
certain percentages of lease rents, distributions to members and certain other
items. As assets are acquired, lease rents are collected and distributions are
made to the members, these fees are expected to increase.
Interest expense of $84,512 for the first quarter of 2003 related to maintaining
the availability of the receivables funding facility established in August 2002.
There was no interest expense or debt in the first quarter of 2002.
Results of operations in future periods are expected to vary considerably from
those of the first quarter of 2003 and 2002 as the Company continues to acquire
significant amounts of lease assets.
Item 3. Quantitative and Qualitative Disclosures of Market Risk.
The Company, like most other companies, is exposed to certain market risks,
including primarily changes in interest rates. The Company believes its exposure
to other market risks, including foreign currency exchange rate risk, commodity
risk and equity price risk, are insignificant to both its financial position and
results of operations.
11
In general, the Company expects to manage its exposure to interest rate risk by
obtaining fixed rate debt. The fixed rate debt is structured so as to match the
cash flows required to service the debt to the payment streams under fixed rate
lease receivables. The payments under the leases are assigned to the lenders in
satisfaction of the debt. Furthermore, the Managing Member has historically been
able to maintain a stable spread between its cost of funds and lease yields in
both periods of rising and falling interest rates. Nevertheless, the Company
expects to frequently fund leases with its floating interest rate line of credit
and will, therefore, be exposed to interest rate risk until fixed rate financing
is arranged, or the floating interest rate line of credit is repaid. As of March
31, 2003, there was no outstanding balance on the floating interest rate line of
credit.
Also, as described in the caption "Capital Resources and Liquidity," the Company
entered into a receivables funding facility in 2002. Since interest on the
outstanding balances under the facility will vary, the Company will be exposed
to market risks associated with changing interest rates. To hedge its interest
rate risk, the Company expects to enter into interest rate swaps, which will
effectively convert the underlying interest characteristic on the facility from
floating to fixed. Under the swap agreements, the Company expects to make or
receive variable interest payments to or from the counterparty based on a
notional principal amount. The net differential paid or received by the Company
is recognized as an adjustment to interest expense related to the facility
balances. The amount paid or received will represent the difference between the
payments required under the variable interest rate facility and the amounts due
under the facility at the fixed (hedged) interest rate. There were no borrowing
In general, it is anticipated that these swap agreements will eliminate the
Company's interest rate risk associated with variable rate borrowings. However,
the Company would be exposed to and would manage credit risk associated with the
counterparty by dealing only with institutions it considers financially sound.
Item 4. Controls and procedures.
Internal Controls
As of March 31, 2003, an evaluation was performed under the supervision and with
the participation of the Company's management, including the CEO and CFO of the
Managing Member, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and CFO of the Managing Member,
concluded that the Company's disclosure controls and procedures were effective
as of March 31, 2003. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to March 31, 2003.
Changes in internal controls
There have been no significant changes in our internal controls or in other
factors that could significantly affect our disclosure controls and procedures
subsequent to the evaluation date, nor were there any significant deficiencies
or material weaknesses in our internal controls.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including
the CEO and CFO, an evaluation of the effectiveness of the design and operation
of the Company's disclosure controls and procedures, as defined in Rules
240.13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 was
performed as of a date within ninety days before the filing date of this
quarterly report. Based upon this evaluation, the CEO and CFO of the Managing
Member concluded that, as of the evaluation date, our disclosure controls and
procedures were effective for the purposes of recording, processing, summarizing
and timely reporting information required to be disclosed by us in the reports
that we file under the Securities Exchange Act of 1934 and that such information
is accumulated and communicated to our management in order to allow timely
decisions regarding required disclosure.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No material legal proceedings are currently pending against the Company or
against any of its assets. The following is a discussion of legal matters
involving the Company, but which do not represent claims against the Company or
its assets.
Silicon Access Networks, Inc.:
Silicon Access Networks, Inc. (the "Debtor") advised the Managing Member on July
8, 2002, that due to a further decline in expectations of future demand for the
Debtor's products by potential customers in its target markets, the Debtor's
Board of Directors had directed management to close a branch office located in
North Carolina, which occurred in July 2002. As the Debtor was current on its
Notes Payable payment obligation to the Company, the Managing Member of the
Company declared a technical default in early July on the basis of the
termination of operations. As of December 31, 2002, the Debtor's account was
current, except for late charges.
12
The Company is monitoring the Debtor's cash position quarterly as the Debtor
will run out of cash sometime in the summer of 2003, unless the Debtor raises
new equity or debt. If there is no sign the Debtor will receive a cash infusion
in the latter half of the second quarter of 2003, and the Debtor's cash position
falls below a certain amount, the Company will likely move for a Writ of
Attachment and continue to pursue its claim against the Debtor. The Company's
likelihood of success in recovering the full amount of its claims remains
uncertain.
Photuris, Inc.:
Photuris, a Debtor of the Company, was on the verge of ceasing operations as it
was unable to secure new equity under favorable terms when the Company commenced
negotiations with the Debtor. As of March 31, 2003, no legal action has been
initiated against the debtor; however, the account has been restructured. In
concert with several other lessors and lenders, the Company concluded
negotiations and executed a Settlement Agreement with the Debtor. Under the
terms of the Settlement Agreement, the Company received an initial $200,000 in
cash in July 2002. The Company is carrying a promissory note from the Debtor for
$300,000 that is payable interest only at prime plus 1.25% from August 1, 2002
to October 2003, at which time payments will convert to an equal principal plus
interest basis, spread over 36 months.
The Company has been granted $200,000 worth of new equity shares in Photuris as
the final part of the settlement. The Company still retains its perfected first
priority lien on the equipment financed by the Company. As of early October
2002, the Company became aware that Photuris had not yet closed on receiving
additional equity and was in danger of running out of operating capital in early
November 2002. The Company has confirmed with the lead investor in Photuris'
latest equity round that the investors have agreed to provide additional equity
to allow Photuris to continue to operate; however, this commitment, for up to
$15 million, is being provided in stages on a quarterly basis if certain
milestones are met. The Company has confirmed that Photuris received the first
stage of this new equity in November 2002. Another round, which would allow
Photuris to continue operations for at least two to four months, closed in
February 2003. Continued receipt of such funds would allow Photuris to operate
an ad
Item 2. Changes In Securities.
Inapplicable.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission Of Matters To A Vote Of Security Holders.
Inapplicable.
Item 5. Other Information.
Information provided pursuant to ss. 228.701 (Item 701(f))(formerly
included in Form SR):
(1) Effective date of the offering: January 16, 2001; File Number:
333-47196
(2) Offering commenced: January 16, 2001
(3) The offering did not terminate before any securities were sold.
(4) The offering was terminated prior to the sale of all of the securities
on January 15, 2003.
(5) The managing underwriter is ATEL Securities Corporation.
(6) The title of the registered class of securities is "Units of Limited
Liability Company interest."
13
(7) Aggregate amount and offering price of securities registered and sold
as of January 15, 2003:
Aggregate Aggregate
price of price of
offering offering
Amount amount Amount amount
Title of Security Registered registered sold sold
----------------- ---------- ---------- ---- ----
Limited Company units 15,000,000 $150,000,000 12,065,266 $120,652,660
(8) Costs incurred for the issuers account in connection with the issuance
and distribution of the securities registered for each category listed
below:
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Underwriting discounts and
commissions $ 1,809,790 $ 9,652,213 $11,462,003
Other expenses - 4,752,576 4,752,576
------------------ ------------------ ------------------
Total expenses $ 1,809,790 $14,404,788 $16,214,578
================== ================== ==================
(9) Net offering proceeds to the issuer after the total expenses in item 8: $104,438,082
(10) The amount of net offering proceeds to the issuer used for each of the
purposes listed below:
Direct or indirect payments to
directors, officers, general
partners of the issuer or their
associates; to persons owning
ten percent or more of any Direct or
class of equity securities of indirect
the issuer; and to affiliates of payments to
the issuer others Total
---------- ------ -----
Purchase and installation of
machinery and equipment $ 1,969,373 $101,865,445 $103,834,818
Working capital - 603,263 603,263
------------------ ------------------ ------------------
$ 1,969,373 $102,468,709 $104,438,082
================== ================== ==================
(11) The use of the proceeds in Item 10 does not represent a material
change in the uses of proceeds described in the prospectus.
Item 6. Exhibits And Reports On Form 8-K.
(a) Documents filed as a part of this report
1. Financial Statements
Included in Part I of this report:
Balance Sheets, March 31, 2003 and December 31, 2002.
Statements of Operations for the three month periods ended March 31,
2003 and 2002.
Statement of Changes in Partners' Capital for the three month period
ended March 31, 2003.
Statements of Cash Flows for the three month periods ended March 31,
2003 and 2002.
Notes to the Financial Statements.
2. Financial Statement Schedules
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(b) Report on Form 8-K
None
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 13, 2003
ATEL CAPITAL EQUIPMENT FUND IX, LLC
(Registrant)
By: ATEL Financial Corporation
Managing Member of Registrant
By: /s/ Dean L. Cash
---------------------------------
Dean L. Cash
President and Chief Executive Officer
of Managing Member
By: /s/ Paritosh K. Choksi
---------------------------------
Paritosh K. Choksi
Principal Financial Officer
of Registrant
By: /s/ Donald E. Carpenter
---------------------------------
Donald E. Carpenter
Principal Accounting
Officer of Registrant
15
CERTIFICATIONS
I, Paritosh K. Choksi, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment
Fund IX, LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Paritosh K. Choksi
- --------------------------
Paritosh K. Choksi
Principal Financial Officer of Registrant,
Executive Vice President of Managing Member
16
CERTIFICATIONS
I, Dean L. Cash, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ATEL Capital Equipment
Fund IX, LLC;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Dean L. Cash
- --------------------------
Dean L. Cash
President and Chief Executive Officer of
Managing Member
17
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10-Q of ATEL Capital Equipment
Fund IX, LLC, (the "Company") for the period ended March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), and
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Dean L. Cash, Chief Executive Officer of ATEL
Financial Services, LLC, managing member of the Company, hereby certify that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: May 13, 2003
/s/ Dean L. Cash
- --------------------------
Dean L. Cash
President and Chief Executive
Officer of Managing Member
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report on Form 10-Q of ATEL Capital Equipment
Fund IX, LLC, (the "Company") for the period ended March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), and
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the
Sarbanes-Oxley Act of 2002, I, Paritosh K. Choksi, Chief Financial Officer of
ATEL Financial Services, LLC, managing member of the Company, hereby certify
that:
1. The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: May 13, 2003
/s/ Paritosh K. Choksi
- --------------------------
Paritosh K. Choksi
Executive Vice President of Managing
Member, Principal Financial Officer of Registrant
18