Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - ATEL Growth Capital Fund 8, LLC | v499076_exh32x2.htm |
EX-32.1 - EXHIBIT 32.1 - ATEL Growth Capital Fund 8, LLC | v499076_exh32x1.htm |
EX-31.2 - EXHIBIT 31.2 - ATEL Growth Capital Fund 8, LLC | v499076_exh31x2.htm |
EX-31.1 - EXHIBIT 31.1 - ATEL Growth Capital Fund 8, LLC | v499076_exh31x1.htm |
Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the quarterly period ended June 30, 2018
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. |
For the transition period from to
Commission File number 000-55217
ATEL GROWTH CAPITAL FUND 8, LLC
(Exact name of registrant as specified in its charter)
California | 37-1656343 | |
(State or other jurisdiction of Incorporation or organization) |
(I. R. S. Employer Identification No.) |
The Transamerica Pyramid, 600 Montgomery Street, 9th Floor, San Francisco, California 94111
(Address of principal executive offices)
Registrants telephone number, including area code (415) 989-8800
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Limited Liability Company Units
Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x
The number of Limited Liability Company Units outstanding as of July 31, 2018 was 1,612,396.
DOCUMENTS INCORPORATED BY REFERENCE
None.
ATEL GROWTH CAPITAL FUND 8, LLC
Index
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
ATEL GROWTH CAPITAL FUND 8, LLC
BALANCE SHEETS
JUNE 30, 2018 AND DECEMBER 31, 2017
(in thousands)
June 30, 2018 |
December 31, 2017 |
|||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents | $ | 357 | $ | 1,255 | ||||
Due from affiliates | 78 | 150 | ||||||
Accounts receivable | | 13 | ||||||
Notes receivable, net | 3,125 | 3,021 | ||||||
Investment in securities | 341 | 243 | ||||||
Warrants, fair value | 542 | 489 | ||||||
Prepaid expenses and other assets | 10 | 4 | ||||||
Total assets | $ | 4,453 | $ | 5,175 | ||||
LIABILITIES AND MEMBERS CAPITAL |
||||||||
Accounts payable and accrued liabilities: |
||||||||
Managing Member | $ | 17 | $ | 56 | ||||
Accrued distributions to Other Members | 248 | 248 | ||||||
Other | 16 | 1 | ||||||
Total liabilities | 281 | 305 | ||||||
Commitments and contingencies |
||||||||
Members capital: |
||||||||
Managing Member | | | ||||||
Other Members | 4,172 | 4,870 | ||||||
Total Members capital | 4,172 | 4,870 | ||||||
Total liabilities and Members capital | $ | 4,453 | $ | 5,175 |
See accompanying notes.
3
ATEL GROWTH CAPITAL FUND 8, LLC
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 AND 2017
(in thousands except units and per unit data)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: |
||||||||||||||||
Notes receivable interest income, including accretion of net note origination costs and discounts | $ | 132 | $ | 123 | $ | 254 | $ | 267 | ||||||||
Gain on early termination of notes receivable | | | | 70 | ||||||||||||
Gain on sales or dispositions of investment in securities | | | | 1 | ||||||||||||
Unrealized gain (loss) on fair value adjustment for warrants | 9 | (2 | ) | 19 | 27 | |||||||||||
Unrealized (loss) gain on fair value adjustment for investment in securities | (43 | ) | | 98 | | |||||||||||
Other | 7 | 4 | 10 | 13 | ||||||||||||
Total revenues | 105 | 125 | 381 | 378 | ||||||||||||
Expenses: |
||||||||||||||||
Asset management fees to Managing Member | 12 | 14 | 25 | 32 | ||||||||||||
Acquisition expense | 6 | 41 | 33 | 105 | ||||||||||||
Cost reimbursements to affiliates | 32 | 63 | 76 | 135 | ||||||||||||
(Reversal of) provision for credit losses | (9 | ) | (24 | ) | (33 | ) | (24 | ) | ||||||||
Professional fees | 9 | 36 | 36 | 57 | ||||||||||||
Outside services | 14 | 19 | 43 | 39 | ||||||||||||
Taxes on income and franchise fees | 3 | | 3 | 2 | ||||||||||||
Bank charges | 5 | 5 | 10 | 10 | ||||||||||||
Other | 7 | 8 | 12 | 15 | ||||||||||||
Total expenses | 79 | 162 | 205 | 371 | ||||||||||||
Net income (loss) | $ | 26 | $ | (37 | ) | $ | 176 | $ | 7 | |||||||
Net income (loss): |
||||||||||||||||
Managing Member | $ | 38 | $ | 50 | $ | 87 | $ | 99 | ||||||||
Other Members | (12 | ) | (87 | ) | 89 | (92 | ) | |||||||||
$ | 26 | $ | (37 | ) | $ | 176 | $ | 7 | ||||||||
Net income (loss) per Limited Liability Company Unit (Other Members) | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.06 | $ | (0.06 | ) | |||||
Weighted average number of Units outstanding | 1,612,396 | 1,615,475 | 1,612,396 | 1,616,311 |
See accompanying notes.
4
ATEL GROWTH CAPITAL FUND 8, LLC
STATEMENTS OF CHANGES IN MEMBERS CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2017
AND FOR THE SIX MONTHS ENDED
JUNE 30, 2018
(in thousands except units and per unit data)
Amount | ||||||||||||||||
Units | Other Members |
Managing Member |
Total | |||||||||||||
Balance December 31, 2016 | 1,618,296 | $ | 7,011 | $ | | $ | 7,011 | |||||||||
Repurchase of Units | (5,900 | ) | (30 | ) | | (30 | ) | |||||||||
Distributions to Other Members ($1.10 per Unit) | | (1,774 | ) | | (1,774 | ) | ||||||||||
Distributions to Managing Member | | | (198 | ) | (198 | ) | ||||||||||
Net (loss) income | | (337 | ) | 198 | (139 | ) | ||||||||||
Balance December 31, 2017 | 1,612,396 | 4,870 | | 4,870 | ||||||||||||
Distributions to Other Members ($0.49 per Unit) | | (787 | ) | | (787 | ) | ||||||||||
Distributions to Managing Member | | | (87 | ) | (87 | ) | ||||||||||
Net income | | 89 | 87 | 176 | ||||||||||||
Balance June 30, 2018 (unaudited) | 1,612,396 | $ | 4,172 | $ | | $ | 4,172 |
See accompanying notes.
5
ATEL GROWTH CAPITAL FUND 8, LLC
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 AND 2017
(in thousands)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Operating activities: |
||||||||||||||||
Net income (loss) | $ | 26 | $ | (37 | ) | $ | 176 | $ | 7 | |||||||
Adjustment to reconcile net income (loss) to cash provided by (used in) operating activities: |
||||||||||||||||
Accretion of note discount warrants | (13 | ) | (10 | ) | (24 | ) | (23 | ) | ||||||||
Amortization of net note origination costs | 8 | 3 | 17 | 8 | ||||||||||||
Gain on early termination of notes receivable | | | | (70 | ) | |||||||||||
Gain on sales or dispositions of investment in securities | | | | (1 | ) | |||||||||||
Reversal of provision for credit losses | (9 | ) | (24 | ) | (33 | ) | (24 | ) | ||||||||
Unrealized (gain) loss on fair value adjustment for warrants | (9 | ) | 2 | (19 | ) | (27 | ) | |||||||||
Unrealized loss (gain) on fair value adjustment for securities | 43 | | (98 | ) | | |||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable | | | 13 | 7 | ||||||||||||
Due from affiliates | (37 | ) | (24 | ) | 72 | 2 | ||||||||||
Prepaid expenses and other assets | (8 | ) | (2 | ) | (6 | ) | (2 | ) | ||||||||
Accounts payable, Managing Member | (11 | ) | | (39 | ) | | ||||||||||
Accounts payable, other | 17 | | 15 | (3 | ) | |||||||||||
Unearned fee income related to notes receivable | (4 | ) | (4 | ) | (4 | ) | (13 | ) | ||||||||
Net cash provided by (used in) operating activities | 3 | (96 | ) | 70 | (139 | ) | ||||||||||
Investing activities: |
||||||||||||||||
Advance payments | | | (64 | ) | (56 | ) | ||||||||||
Proceeds from early termination of notes receivable | | | | 130 | ||||||||||||
Proceeds from sales or dispositions of investment in securities | | | | 1 | ||||||||||||
Payments of note origination costs | | | (2 | ) | | |||||||||||
Note receivable advances | (416 | ) | | (1,016 | ) | | ||||||||||
Principal payments received on notes receivable | 451 | 554 | 988 | 1,334 | ||||||||||||
Net cash provided by (used in) investing activities | 35 | 554 | (94 | ) | 1,409 | |||||||||||
Financing activities: |
||||||||||||||||
Distributions to Other Members | (346 | ) | (444 | ) | (787 | ) | (888 | ) | ||||||||
Distributions to Managing Member | (38 | ) | (50 | ) | (87 | ) | (110 | ) | ||||||||
Repurchase of Units | | (2 | ) | | (18 | ) | ||||||||||
Net cash used in financing activities | (384 | ) | (496 | ) | (874 | ) | (1,016 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents | (346 | ) | (38 | ) | (898 | ) | 254 | |||||||||
Cash and cash equivalents at beginning of period | 703 | 2,152 | 1,255 | 1,860 | ||||||||||||
Cash and cash equivalents at end of period | $ | 357 | $ | 2,114 | $ | 357 | $ | 2,114 | ||||||||
Supplemental disclosures of cash flow information: |
||||||||||||||||
Cash paid during the period for taxes | $ | | $ | | $ | | $ | 3 | ||||||||
Schedule of non-cash investing and financing transactions: |
||||||||||||||||
Distributions payable to Other Members at period-end | $ | | $ | 250 | $ | 248 | $ | 250 | ||||||||
Distributions payable to Managing Member at period-end | $ | | $ | 28 | $ | 17 | $ | 28 |
See accompanying notes.
6
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Limited Liability Company matters:
ATEL Growth Capital Fund 8, LLC (the Company or the Fund) was formed under the laws of the state of California on December 8, 2011 for the purpose of providing financing for the acquisition of equipment and other goods and services used by emerging growth companies and established privately held companies without publicly traded securities, and for providing other forms of financing for, and to acquire equity interests and warrants and rights to purchase equity interests in such companies. The Fund may continue until it is terminated in accordance with the ATEL Growth Capital Fund 8, LLC limited liability company operating agreement dated December 13, 2011 (the Operating Agreement). The Managing Member of the Company is AGC Managing Member, LLC (the Managing Member or Manager), the renamed AGC 8 Managing Member, LLC which was formed in December 2011 as a Nevada limited liability company. Such name change is the result of an amendment to the articles of incorporation filed with the State of Nevada effective March 18, 2014. Contributions in the amount of $500 were received as of December 31, 2011, which represented the initial Members capital investment. As a limited liability company, the liability of any individual member for the obligations of the Fund is limited to the extent of capital contributions to the Fund by the individual member.
The offering was terminated on August 20, 2014. Through June 30, 2018, cumulative contributions, net of rescissions and related distributions paid, totaling $16.2 million (inclusive of the $500 initial Members capital investment) have been received. As of June 30, 2018, a total of 1,612,396 Units were issued and outstanding.
Prior to the termination of its offering, the Fund, or Managing Member on behalf of the Fund, incurred costs in connection with the organization, registration and issuance of the Units. The amount of such costs borne by the Fund was limited by certain provisions of the Operating Agreement.
These unaudited interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission.
2. Summary of Significant Accounting Policies:
Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q as mandated by the Securities and Exchange Commission. The unaudited interim financial statements reflect all adjustments which are, in the opinion of the Managing Member, necessary for a fair statement of financial position and results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the full year.
Certain prior period amounts may have been reclassified to conform to the current period presentation. These reclassifications had no significant effect on the reported financial position or results of operations.
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, 2018, up until the issuance of the financial statements. No events were noted which would require additional disclosure in the footnotes to the financial statements or adjustments thereto.
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.
7
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of Significant Accounting Policies: - (continued)
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 credit losses on notes receivable and the fair valuation of equity securities and warrants.
Segment reporting:
The Company is organized into one operating segment for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment in the United States.
The primary geographic region in which the Company seeks financing opportunities is North America. Currently, 100% of the Companys operating revenues are from customers domiciled in the United States.
Allowance for Doubtful Accounts
Accounts receivable represent the amounts billed under notes receivable which are currently due to the Company.
Allowances for doubtful accounts are typically established based upon their aging and historical charge off and collection experience and the creditworthiness of specifically identified borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received.
Accounts receivable are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the creditworthiness of companies with note payments outstanding less than 90 days. Based upon managements judgment, such notes may be placed in non-accrual status. Notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. All payments received on amounts billed under notes receivable are applied only against outstanding principal balances.
Valuation Adjustments
In addition to the allowance established for delinquent accounts receivable, the total allowance also includes probable impairment charges on notes receivable.
Notes are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the note agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest when due. If it is determined that a loan is impaired with regard to scheduled payments, the Company will perform an analysis of the note to determine if an impairment valuation reserve is necessary. This analysis considers the estimated cash flows from the note, or the collateral value of the property underlying the note when note repayment is collateral dependent. Any required valuation reserve is charged to earnings when determined; and notes are charged off to the allowance as they are deemed uncollectible.
Investment in securities:
From time to time, the Company may purchase securities of its borrowers or receive warrants in connection with its lending arrangements.
8
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of Significant Accounting Policies: - (continued)
Purchased securities
The Companys purchased 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 Companys purchased securities not registered for public sale 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 issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital. As of June 30, 2018 and December 31, 2017, investments in equity securities totaled $341 thousand and $243 thousand, respectively. During the three and six months ended June 30, 2018, the Company recorded fair value adjustments of $43 thousand of unrealized losses and $98 thousand of unrealized gains, respectively. The Company recorded $0 and $1 thousand of gain on sales or disposition of investment in securities during the respective six months ended June 30, 2018 and 2017.
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. At June 30, 2018 and December 31, 2017, the Managing Member estimated the fair value of warrants to be $542 thousand and $489 thousand, respectively. During the three months ended June 30, 2018 and 2017, the Company recorded unrealized gains of $9 thousand and unrealized losses of $2 thousand, respectively, on the fair valuation of its warrants. During the six months ended June 30, 2018 and 2017, the Company recorded unrealized gains of $19 thousand and $27 thousand, respectively, on the fair valuation of its warrants. There were no exercises of warrants during the three and six months ended June 30, 2018 and 2017.
Credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, notes receivable and accounts receivable. The Company places the majority of its cash deposits in non-interest bearing accounts with financial institutions that have no less than $10 billion in assets. Such deposits are insured up to $250,000. The remainder of the Funds cash is temporarily invested in U.S. Treasury denominated instruments. The concentration of such deposits and temporary cash investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from various industries.
Per Unit data:
The Company issues only one class of Units, none of which are considered dilutive. Net income (loss) per Unit is based upon the weighted average number of Other Members Units outstanding during the period.
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.
9
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of Significant Accounting Policies: - (continued)
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 Companys own estimates of assumptions that market participants would use in pricing the asset or liability.
The Companys 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 and third party appraisals of collateral and/or other valuation techniques. These techniques are significantly affected by certain of the Companys 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 Companys investments in 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.
Recent accounting pronouncements:
In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). ASU 2016-15 addresses specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-15 did not have a material impact on its financial statements and disclosures.
In June 2016, the FASB issued Accounting Standards Update 2016-13, Financial Instruments Credit Losses (Topic 326) (ASU 2016-13). The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. Management is currently evaluating the standard and expects the Update may potentially result in an increase in the allowance for credit losses given the change to estimated losses over the contractual life adjusted for expected prepayments.
In January 2016, the FASB issued Accounting Standards Update 2016-01, Financial Instruments Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The new standard provides guidance related to accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with
10
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Summary of Significant Accounting Policies: - (continued)
changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (v) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This guidance is effective for the Company beginning on January 1, 2018. The adoption of ASU 2016-01 did have an impact on its financial statements and disclosures.
The Companys investment 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 elected to record equity investments without readily determinable fair values at cost, less impairment, and adjusted for changes in observable prices. Any changes in the basis of these equity investments are reported in current earnings.
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. On July 9, 2015, the FASB approved the deferral of the effective date of ASU 2014-09 by one year and in August 2015, issued Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). ASU 2015-14 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. This guidance is effective for the Company beginning on January 1, 2018. Managements evaluation of the impact of such adoption on the financial statements of the Fund indicated that such impact was immaterial as the new revenue guideline does not affect revenues from leases and loans, which comprise the majority of the Companys revenues since leases and loans are not included within the scope of Topic 606.
3. Notes receivable, net:
The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. As of June 30, 2018, the original terms of the notes receivable are from 3 to 84 months and bear interest at implicit or stated rates ranging from 4.15% to 18.06% per annum. The notes are secured by the equipment financed and have maturity dates ranging from 2018 through 2021.
11
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Notes receivable, net: - (continued)
At June 30, 2018, the Company had no notes receivable on non-accrual status. As of December 31, 2017, four (Notes A and C) of the Companys notes receivable were on non-accrual status. Details are as follows, in thousands, except for the number of notes receivable and the annual interest rate:
Notes receivable A |
||||
December 31, 2017 |
||||
Number of notes | 3 | |||
Net investment value | $ | 33 | ||
Annual interest rate | 18.00 | % | ||
Fair value adjustments | $ | 33 | ||
Fair value amount | $ | | ||
Interest income not recorded relative to original terms | $ | 16 |
Note receivable C |
||||
Non-accrual | ||||
December 31, 2017 |
||||
Number of notes | 1 | |||
Net investment value | $ | 17 | ||
Annual interest rate | 15.88 | % | ||
Fair value adjustments | $ | | ||
Fair value amount | $ | 17 | ||
Interest income not recorded relative to original terms | $ | 7 |
As of June 30, 2018, the minimum future payments receivable are as follows (in thousands):
Six months ending December 31, 2018 | $ | 1,186 | ||
Year ending December 31, 2019 | 1,758 | |||
2020 | 673 | |||
2021 | 187 | |||
3,804 | ||||
Less: portion representing unearned interest income, net | (591 | ) | ||
3,213 | ||||
Unamortized discount on warrants received | (98 | ) | ||
Unamortized initial direct costs | 10 | |||
Notes receivable, net | $ | 3,125 |
12
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Allowance for credit losses:
The Companys allowance for credit losses are as follows (in thousands):
Valuation Adjustments Notes Receivable |
||||
Balance December 31, 2016 | $ | 717 | ||
Note receivable disposal | (611 | ) | ||
Reversal of provision for credit losses | (73 | ) | ||
Balance December 31, 2017 | 33 | |||
Reversal of provision for credit losses | (33 | ) | ||
Balance June 30, 2018 | $ | |
The Companys allowance for credit losses and its recorded investment in notes receivable as of December 31, 2017 were as follows (in thousands):
December 31, 2017 | Notes Receivable |
|||
Allowance for credit losses: |
||||
Ending balance | $ | 33 | ||
Ending balance: individually evaluated for impairment | $ | 33 | ||
Ending balance: collectively evaluated for impairment | $ | | ||
Financing receivables: |
||||
Ending balance | $ | 3,054 | ||
Ending balance: individually evaluated for impairment | $ | 3,054 | ||
Ending balance: collectively evaluated for impairment | $ | |
The Company evaluates the credit quality of its notes receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:
Pass Any account whose debtor, co-debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moodys or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.
Special Mention Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve managements close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Funds receivable at some future date.
Substandard Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Managers Credit Watch List.
13
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Allowance for credit losses: - (continued)
Doubtful Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Managers Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.
At June 30, 2018 and December 31, 2017, the Companys notes receivables by credit quality indicator and by class of financing receivables are as follows (in thousands):
Notes Receivable | ||||||||
June 30, 2018 |
December 31, 2017 |
|||||||
Pass | $ | 3,015 | $ | 2,547 | ||||
Special mention | 8 | 392 | ||||||
Substandard | 102 | 115 | ||||||
Doubtful | | | ||||||
Total | $ | 3,125 | $ | 3,054 |
As of December 31, 2017, the Companys impaired investment in financing receivables were as follows (in thousands):
Impaired Investment in Financing Receivables | ||||||||||||||||||||
December 31, 2017 | Recorded Investment |
Unpaid Principal Balance |
Related Allowance |
Average Recorded Investment |
Interest Income Recognized |
|||||||||||||||
With no related allowance recorded Notes receivable | $ | | $ | | $ | | $ | | $ | | ||||||||||
With an allowance recorded Notes receivable |
33 | 33 | 33 | 70 | | |||||||||||||||
Total | $ | 33 | $ | 33 | $ | 33 | $ | 70 | $ | |
At June 30, 2018 and December 31, 2017, investment in financing receivables is aged as follows (in thousands):
June 30, 2018 | 31 60 Days Past Due |
61 90 Days Past Due |
Greater Than 90 Days |
Total Past Due |
Current | Total Financing Receivables |
Recorded Investment > 90 Days and Accruing |
|||||||||||||||||||||
Notes receivable | $ | | $ | | $ | | $ | | $ | 3,125 | $ | 3,125 | $ | | ||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | 3,125 | $ | 3,125 | $ | |
December 31, 2017 | 31 60 Days Past Due |
61 90 Days Past Due |
Greater Than 90 Days |
Total Past Due |
Current | Total Financing Receivables |
Recorded Investment > 90 Days and Accruing |
|||||||||||||||||||||
Notes receivable | $ | | $ | | $ | | $ | | $ | 3,054 | $ | 3,054 | $ | | ||||||||||||||
Total | $ | | $ | | $ | | $ | | $ | 3,054 | $ | 3,054 | $ | |
As of June 30, 2018, the Company had no notes receivable on non-accrual status. As of December 31, 2017, the Company had four notes receivable on non-accrual status (See Note 3 for details).
14
ATEL GROWTH CAPITAL FUND 8, 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 equipment financing documentation. The Managing Member is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of investments.
Cost reimbursements to the Managing Member or its affiliates are based on its costs incurred in performing administrative services for the Company. These costs are allocated to each managed entity based on certain criteria such as 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. During the three and six months ended June 30, 2018 and 2017, the Managing Member and/or affiliates earned commissions and fees, and billed for reimbursements of costs and expenses pursuant to the Operating Agreement as follows (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Administrative costs reimbursed to Managing Member and/or affiliates | $ | 32 | $ | 63 | $ | 76 | $ | 135 | ||||||||
Asset management fees to Managing Member | 12 | 14 | 25 | 32 | ||||||||||||
Acquisition costs and note origination fees paid to Managing Member | 6 | 41 | 33 | 105 | ||||||||||||
$ | 50 | $ | 118 | $ | 134 | $ | 272 |
6. Commitments:
At June 30, 2018, there were commitments to fund investments in notes receivable totaling $1.2 million. These amounts represent contract awards which may be canceled by the prospective borrower/investee or may not be accepted by the Company.
7. Members Capital:
A total of 1,612,396 Units were issued and outstanding as of June 30, 2018 and December 31, 2017. The Fund is authorized to issue up to 7,500,000 Units in addition to the Units issued to the initial Member (50 Units).
Distributions to the Other Members for the three and six months ended June 30, 2018 and 2017 are as follows (in thousands, except as to Units and per Unit data):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Distributions declared | $ | 346 | $ | 444 | $ | 787 | $ | 888 | ||||||||
Weighted average number of Units outstanding | 1,612,396 | 1,615,475 | 1,612,396 | 1,616,311 | ||||||||||||
Weighted average distributions per Unit | $ | 0.21 | $ | 0.27 | $ | 0.49 | $ | 0.55 |
15
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. 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, 2018 and December 31, 2017, the Companys warrants and investment securities were measured on a recurring basis. At December 31, 2017, only the Companys warrants were measured on a recurring basis.
The measurement methodology is as follows:
Warrants (recurring)
Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants was determined using a Black-Scholes formulation of value based upon the volatility of respective similar publicly traded companies, a risk free interest rate, time to maturity, stock prices, exercise prices and number of warrants.
As of June 30, 2018 and December 31, 2017, the calculated fair value of the Funds warrant portfolio totaled $542 thousand and $489 thousand, respectively. Such valuation is classified within Level 3 of the valuation hierarchy.
The fair value of warrants that were accounted for on a recurring basis as of the three and six months ended June 30, 2018 and 2017 and classified as level 3 are as follows (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Fair value of warrants at beginning of period | $ | 521 | $ | 510 | $ | 489 | $ | 481 | ||||||||
Fair value of new warrants, recorded during the year (included as a discount on notes receivable) | 12 | | 34 | | ||||||||||||
Unrealized gain (loss) on fair value adjustment for warrants | 9 | (2 | ) | 19 | 27 | |||||||||||
Fair value of warrants at end of period | $ | 542 | $ | 508 | $ | 542 | $ | 508 |
The following table presents the fair value measurement of impaired assets measured at fair value on a non-recurring basis and the level within the hierarchy in which the fair value measurements fall at December 31, 2017 (in thousands):
December 31, 2017 |
Level 1 Estimated Fair Value |
Level 2 Estimated Fair Value |
Level 3 Estimated Fair Value |
|||||||||||||
Impaired investment securities | $ | 278 | $ | | $ | | $ | 278 |
16
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. Fair value measurements: - (continued)
The following tables summarize the valuation techniques and significant unobservable inputs used for the Companys recurring and non-recurring fair value calculation categorized as Level 3 in the fair value hierarchy at June 30, 2018 and December 31, 2017:
June 30, 2018 |
||||||||||||||||
Name | Valuation Frequency |
Valuation Technique | Unobservable Inputs | Range of Input Values | ||||||||||||
Warrants |
Recurring | Black-Scholes formulation | Stock price | $ | 0.00 $14.75 | |||||||||||
Exercise price | $ | 0.01 $25.76 | ||||||||||||||
Time to maturity (in years) | 2.49 14.38 | |||||||||||||||
Risk-free interest rate | 2.58% 2.88% | |||||||||||||||
Annualized volatility | 25.13% 292.22% |
December 31, 2017 |
||||||||||||||||
Name | Valuation Frequency | Valuation Technique | Unobservable Inputs | Range of Input Values | ||||||||||||
Warrants |
Recurring | Black-Scholes formulation | Stock price | $ | 0.00 $14.75 | |||||||||||
Exercise price | $ | 0.01 $25.76 | ||||||||||||||
Time to maturity (in years) | 2.99 14.88 | |||||||||||||||
Risk-free interest rate | 1.98% 2.49% | |||||||||||||||
Annualized volatility | 27.78% 83.30% | |||||||||||||||
Impaired Investment Securities |
Non-recurring | Market Approach | Qualitative and quantitative information (Investee Management) | Not Applicable |
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 Companys financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Companys financial statements and related notes.
The Company has determined the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Cash and cash equivalents
The recorded amounts of the Companys cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.
Notes receivable
The fair value of the Companys notes receivable is generally estimated based upon various methodologies deployed by financial and credit management including, but not limited to, credit analysis, third party appraisal and/or discounted cash flow analysis based upon current market valuation techniques and market rates for similar types of lending arrangements, which may consider adjustments for impaired loans as deemed necessary.
17
ATEL GROWTH CAPITAL FUND 8, LLC
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. Fair value measurements: - (continued)
Investment in securities
Investment securities (recurring)
The Companys investment 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 Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuers ability to meet its current obligations and indications of the issuers subsequent ability to raise capital.
The fair value of investment securities that were accounted for on a recurring basis as of the three and six months ended June 30, 2018 and classified as Level 1 are as follows (in thousands):
Three Months Ended June 30, 2018 |
Six Months Ended June 30, 2018 |
|||||||
Fair value of securities at beginning of period | $ | 218 | $ | 92 | ||||
Unrealized (loss) gain on fair value of securities | (42 | ) | 84 | |||||
Fair value of investment securities at end of period | $ | 176 | $ | 176 |
The following tables present estimated fair values of the Companys financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at June 30, 2018 and December 31, 2017 (in thousands):
June 30, 2018 | ||||||||||||||||||||
Carrying Amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents | $ | 357 | $ | 357 | $ | | $ | | $ | 357 | ||||||||||
Notes receivable, net | 3,125 | | | 3,253 | 3,253 | |||||||||||||||
Investment in securities | 176 | 176 | | | 176 | |||||||||||||||
Warrants | 542 | | | 542 | 542 |
December 31, 2017 | ||||||||||||||||||||
Carrying Amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets: |
||||||||||||||||||||
Cash and cash equivalents | $ | 1,255 | $ | 1,255 | $ | | $ | | $ | 1,255 | ||||||||||
Notes receivable, net | 3,021 | | | 3,009 | 3,009 | |||||||||||||||
Warrants | 489 | | | 489 | 489 |
18
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Statements contained in this Item 2, Managements 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, changes in general economic conditions, including significant rates of inflation and fluctuations in interest rates may result in reduced returns on invested capital. The Companys performance is subject to risks relating to borrower defaults and the creditworthiness of its borrowers. 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 Growth Capital Fund 8, LLC (the Company or the Fund) was formed under the laws of the state of California on December 8, 2011 for the purpose of providing financing for the acquisition of equipment and other goods and services used by emerging growth companies and established privately held companies without publicly traded securities, and for providing other forms of financing for, and to acquire equity interests and warrants and rights to purchase equity interests in such companies.
Through June 30, 2018, cumulative contributions, net of rescissions and related distributions paid, totaling $16.2 million (inclusive of the $500 initial Members capital investment) have been received. As of June 30, 2018, a total of 1,612,396 Units were issued and outstanding.
Results of Operations
The three months ended June 30, 2018 versus the three months ended June 30, 2017
The Company had net income of $26 thousand and net loss $37 thousand for the respective three months ended June 30, 2018 and 2017. The results for the second quarter of 2018 reflect decreases in total revenues and total operating expenses when compared to the prior year period.
Revenues
Total revenues for the second quarter of 2018 decreased by $20 thousand, or 16%, as compared to the prior year period. Such decrease was largely due to a $43 thousand unfavorable change in the fair value adjustment for investment in securities; offset, in part, by an $11 thousand favorable change in the fair value adjustments for warrants; and a $9 thousand, or 7%, increase in interest income on new investments in notes receivable.
Expenses
Total expenses for the second quarter ended June 30, 2018 decreased by $83 thousand, or 51%, as compared to the prior year period. The net decrease in total expenses was largely due to a $35 thousand, or 85%, decrease in acquisition expense related to the financing of equipment which was not consummated; a $31 thousand, or 49%, decrease in cost reimbursement to affiliates, due to a refinement in cost methodology; and a $27 thousand or 75% decrease in professional fees, related to year over year differences in timing and related billings for professional audit and tax services; offset, in part, by a $15 thousand, or 63%, unfavorable change in the provision for credit losses, due to delinquent accounts.
The six months ended June 30, 2018 versus the six months ended June 30, 2017
The Company had net income of $176 thousand and $7 thousand for the respective six month periods ended June 30, 2018 and 2017. The results for the six months ended June 30, 2018 reflect an increase in total revenues and a decrease in total operating expenses when compared to the prior year period.
19
Revenues
Total revenues for the first half of 2018 increased by $3 thousand, or 1% as compared to the prior year period. Such increase was largely due to a $98 thousand favorable change in unrealized gains on fair value adjustment for investment in securities; offset, in part, by a $70 thousand, or 100%, decrease in gain on early termination of notes receivable, as there was no note termination during the current period; and a $13 thousand, or 5%, decrease in interest income on investments in notes receivable.
Expenses
Total expenses for the six months ended June 30, 2018 decreased by $166 thousand, or 45%, as compared to the prior year period. The net decrease is mostly due to a $72 thousand, or 69%, decrease in acquisition expense related to the financing of equipment which was not consummated; a $59 thousand, or 44%, decrease in cost reimbursements to affiliates, due to a refinement in cost methodology; and a $21 thousand, or 37%, decrease in professional fees, related to year over year differences in timing and related billings for professional audit and tax services.
Capital Resources and Liquidity
The Companys cash and cash equivalents totaled $0.4 million and $1.3 million at June 30, 2018 and December 31, 2017, respectively. The liquidity of the Company varies, increasing to the extent cash flows from its portfolio investments exceed expenses and decreasing as portfolio investments are acquired, as distributions are made to the Members and to the extent expenses exceed cash flows from its portfolio investments.
The Fund will acquire its investments with cash. The Fund will not borrow to acquire its portfolio assets and does not intend or expect to incur any indebtedness. The Fund anticipates that it would incur indebtedness only in the event that it is required to borrow for temporary working capital purposes.
Cash Flows
The following table sets forth summary cash flow data (in thousands):
Three Months Ended March 31, |
Six Months Ended June 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net cash provided by (used in): |
||||||||||||||||
Operating activities | $ | 3 | $ | (96 | ) | $ | 70 | $ | (139 | ) | ||||||
Investing activities | 35 | 554 | (94 | ) | 1,409 | |||||||||||
Financing activities | (384 | ) | (496 | ) | (874 | ) | (1,016 | ) | ||||||||
Net (decrease) increase in cash and cash equivalents | $ | (346 | ) | $ | (38 | ) | $ | (898 | ) | $ | 254 |
The three months ended June 30, 2018 versus the three months ended June 30, 2017
During the three months ended June 30, 2018 and 2017, the Companys primary source of liquidity was cash flow from its investments in notes receivable.
During the same respective periods, cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling $384 thousand and $494 thousand for the three months ended June 30, 2018 and 2017, respectively. In addition, cash was used to pay invoices related to management fees and expenses, and other payables.
The six months ended June 30, 2018 versus the six months ended June 30, 2017
During the respective six months ended June 30, 2018 and 2017, the Companys primary source of liquidity was cash flow from its investments in notes receivable. In addition, the Company realized $0 and $130 thousand of proceeds from the early termination of notes.
20
Cash was primarily used to pay distributions to both the Other Members and the Managing Member, totaling $874 thousand and $998 thousand for the six months ended June 30, 2018 and 2017, respectively. In addition, cash was used to pay invoices related to management fees and expenses, and other payables.
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 November 2012. Additional distributions have been made through June 30, 2018.
Cash distributions were paid by the Fund to Unitholders of record as of February 28, 2018, and paid through June 30, 2018. The distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets. See the discussion in the ATEL Growth Capital Fund 8, LLC Prospectus dated August 20, 2012 (Prospectus) under Income, Losses and Distributions Reinvestment. Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets.
The cash distributions were based on current and anticipated gross revenues from the loans funded and equity investments acquired. During the Funds acquisition and operating stages, the Fund may incur short term borrowing to fund regular distributions of such gross revenues to be generated by newly acquired transactions during their respective initial fixed terms. As such, all Fund periodic cash distributions made during these stages have been, and are expected in the future to be, based on the Funds actual and anticipated gross revenues to be generated from the binding initial terms of the loans and investments funded.
The following table summarizes distribution activity for the Fund from inception through June 30, 2018 (in thousands)
Distribution Period(1) | Paid | Return of Capital |
Distribution of Income |
Total Distribution |
Total Distribution per Unit(2) |
Weighted Average Units Outstanding(3) |
||||||||||||||||||||||||||||||
Monthly and quarterly distributions |
||||||||||||||||||||||||||||||||||||
Oct 2012 Mar 2013 (Distribution of all escrow interest) | July 2013 | $ | | $ | | $ | | n/a | n/a | |||||||||||||||||||||||||||
Nov 14, 2012 Nov 30, 2012 | Dec 2012 | 3 | | 3 | $ | 0.43 | 6,306 | |||||||||||||||||||||||||||||
Dec 2012 Nov 2013 | Jan Dec 2013 | 866 | | 866 | 1.57 | 551,608 | ||||||||||||||||||||||||||||||
Dec 2013 Nov 2014 | Jan Dec 2014 | 1,452 | | 1,452 | 1.08 | 1,349,575 | ||||||||||||||||||||||||||||||
Dec 2014 Nov 2015 | Jan Dec 2015 | 1,779 | | 1,779 | 1.10 | 1,618,296 | ||||||||||||||||||||||||||||||
Dec 2015 Nov 2016 | Jan Dec 2016 | 1,780 | | 1,780 | 1.10 | 1,618,296 | ||||||||||||||||||||||||||||||
Dec 2016 Nov 2017 | Jan Dec 2017 | 1,776 | | 1,776 | 1.10 | 1,615,808 | ||||||||||||||||||||||||||||||
Dec 2017 June 2018 | Jan Jun 2018 | 787 | | 787 | 0.49 | 1,612,396 | ||||||||||||||||||||||||||||||
$ | 8,443 | $ | | $ | 8,443 | $ | 6.87 | |||||||||||||||||||||||||||||
Source of distributions |
||||||||||||||||||||||||||||||||||||
Lease and loan payments/payoffs | $ | 8,443 | 100.00 | % | $ | | 0.00 | % | $ | 8,443 | 100.00 | % | ||||||||||||||||||||||||
Interest income | | 0.00 | % | | 0.00 | % | | 0.00 | % | |||||||||||||||||||||||||||
$ | 8,443 | 100.00 | % | $ | | 0.00 | % | $ | 8,443 | 100.00 | % |
(1) | Investors may elect to receive their distributions either monthly or quarterly. See Timing and Method of Distributions on Page 46 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) | Balance shown represent weighted average units for the period from November 14 (date escrow requirement was met) November 30, 2012, December 1, 2012 November 30, 2013, December 1, 2013 November 30, 2014, December 1, 2014 November 30, 2015, December 1, 2015 November 30, 2016, December 1, 2016 November 30, 2017, and December 1, 2017 February 28, 2018, respectively. |
21
Commitments and Contingencies and Off-Balance Sheet Transactions
Commitments and Contingencies
At June 30, 2018, there were commitments to fund investments in notes receivable totaling $1.2 million. These amounts represent contract awards which may be canceled by the prospective borrower/investee or may not be accepted by the Company.
Off-Balance Sheet Transactions
None.
Recent Accounting Pronouncements
For detailed information on recent accounting pronouncements, see Note 2, Summary of significant accounting policies.
Significant Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.
The Companys significant accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to the Companys significant accounting policies since December 31, 2017.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The Companys Managing Members Chief Executive Officer, and Executive Vice President and Chief Financial and Operating Officer (Management), evaluated the effectiveness of the Companys 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 Companys disclosure controls and procedures, the Chief Executive Officer and Executive Vice President and Chief Financial and Operating Officer concluded that as of the end of the period covered by this report, the design and operation of these disclosure controls and procedures were effective.
The Company does not control the financial reporting process, and is solely dependent on the Management of the Managing Member, who is responsible for providing the Company with financial statements in accordance with generally accepted accounting principles in the United States. The Managing Members 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 Commissions 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 issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
22
Changes in internal control
There were no changes in the Managing Members internal control over financial reporting, as it is applicable to the Company, during the quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, the Managing Members internal control over financial reporting, as it is applicable to the Company.
23
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 Members 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 other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
2. | Other Exhibits |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Dean L. Cash | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Paritosh K. Choksi | |
32.1 | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash | |
32.2 | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 9, 2018
ATEL GROWTH CAPITAL FUND 8, LLC
(Registrant)
By: AGC Managing Member, LLC |
By: | /s/ Dean L. Cash Dean L. Cash Chairman of the Board, President and Chief Executive Officer of AGC 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 AGC Managing Member, LLC (Managing Member) |
By: | /s/ Samuel Schussler Samuel Schussler Senior Vice President and Chief Accounting Officer of AGC Managing Member, LLC (Managing Member) |
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