10-Q 1 fund910q2q2003.txt REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2003 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 June 30, 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.) 235 Pine Street, 6th Floor, San Francisco, California 94104 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 989-8800 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 June 30, 2003 was 12,065,016 DOCUMENTS INCORPORATED BY REFERENCE None 1 Part I. FINANCIAL INFORMATION Item 1. Financial Statements. 2 ATEL CAPITAL EQUIPMENT FUND IX, LLC BALANCE SHEETS JUNE 30, 2003 AND DECEMBER 31, 2002 (Unaudited) ASSETS 2003 2002 Cash and cash equivalents $38,627,508 $39,722,496 Accounts receivable 1,082,912 1,197,760 Notes receivable 773,783 1,131,793 Other assets 435,158 465,157 Investments in leases 52,435,262 46,902,018 ------------------ ------------------ Total assets $93,354,623 $89,419,224 ================== ================== LIABILITIES AND MEMBERS' CAPITAL Accounts payable: Managing Member $ 555,947 $ 434,516 Other 89,335 90,667 Unearned operating lease income 137,782 77,044 ------------------ ------------------ Total liabilities 783,064 602,227 Members' capital 92,571,559 88,816,997 ------------------ ------------------ Total liabilities and members' capital $93,354,623 $89,419,224 ================== ================== See accompanying notes. 3 ATEL CAPITAL EQUIPMENT FUND IX, LLC STATEMENTS OF OPERATIONS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, 2003 2002 2003 2002 Revenues: Leasing activities: Operating leases $ 4,530,250 $ 2,187,687 $ 2,380,006 $ 1,235,820 Direct financing leases 57,791 53,396 9,012 32,244 Gain on sales of assets 104,373 107,353 104,373 107,353 Interest 511,065 271,501 280,310 164,910 Other 46,179 319 35,131 183 ------------------ ------------------ ------------------ ------------------ 5,249,658 2,620,256 2,808,832 1,540,510 Expenses: Depreciation and amortization 3,800,559 1,806,647 2,031,946 1,022,111 Cost reimbursements to Managing Member 312,058 118,586 192,545 65,732 Asset management fees to Managing Member 256,771 93,693 136,806 35,437 Impairment losses 76,634 - - - Professional fees 56,646 32,857 23,812 8,832 Interest expense 166,803 19,263 82,291 19,263 Other 149,877 133,563 101,602 52,209 ------------------ ------------------ ------------------ ------------------ 4,819,348 2,204,609 2,569,002 1,203,584 ------------------ ------------------ ------------------ ------------------ Net income $ 430,310 $ 415,647 $ 239,830 $ 336,926 ================== ================== ================== ================== Net income: Managing member $ 421,953 $ 197,341 $ 219,169 $ 110,831 Other members 8,357 218,306 20,661 226,095 ------------------ ------------------ ------------------ ------------------ $ 430,310 $ 415,647 $ 239,830 $ 336,926 ================== ================== ================== ================== Net income per Limited Liability Company Unit $0.001 $0.038 $0.002 $0.035 Weighted average number of Units outstanding 11,994,974 5,728,798 12,074,561 6,394,522
See accompanying notes. 4 ATEL CAPITAL EQUIPMENT FUND IX, LLC STATEMENT OF CHANGES IN MEMBERS' CAPITAL SIX MONTH PERIOD ENDED JUNE 30, 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 Limited liability company units repurchased (250) (1,923) - (1,923) Less selling commissions to affiliates - (976,719) - (976,719) Other syndication costs to affiliates - (352,311) - (352,311) Distributions to members - (5,204,092) (421,953) (5,626,045) Net income - 8,357 421,953 430,310 ------------------ ------------------ ------------------ ------------------ Balance June 30, 2003 12,065,016 $92,571,559 $ - $92,571,559 ================== ================== ================== ==================
See accompanying notes. STATEMENTS OF CASH FLOWS SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, 2003 2002 2003 2002 Operating activities: Net income $ 430,310 $ 415,647 $ 239,830 $ 336,926 Adjustments to reconcile net income to cash provided by operating activities: Gain on sales of assets (104,373) (107,353) (104,373) (107,353) Impairment losses 76,634 - - - Depreciation and amortization 3,800,559 1,806,647 2,031,946 1,022,111 Changes in operating assets and liabilities: Accounts receivable 114,848 (161,956) (240,712) (606,352) Other assets 29,999 - 14,999 - Accounts payable, Managing Member 121,431 23,841 (14,549) (133,454) Accounts payable, other (1,332) 1,397 47,121 15,050 Unearned operating lease income 60,738 (24,307) 42,528 (159,105) ------------------ ------------------ ------------------ ------------------ Net cash provided by operations 4,528,814 1,953,916 2,016,790 367,823 ------------------ ------------------ ------------------ ------------------
5 ATEL CAPITAL EQUIPMENT FUND IX, LLC STATEMENTS OF CASH FLOWS (Continued SIX AND THREE MONTH PERIODS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
Six Months Three Months Ended June 30, Ended June 30, 2003 2002 2003 2002 Investing activities: Purchases of equipment on operating leases (8,779,071) (18,013,963) (5,192,067) (11,154,367) Note receivable advances - (1,031,605) - 145,423 Purchases of equipment on direct financing leases (615,949) (980,570) 34,051 - Payments received on notes receivable 281,376 419,379 151,498 71,465 Proceeds from sales of lease assets 1,087,663 749,408 1,087,663 749,408 Investment in residuals - (66,995) - 24,814 Payments of initial direct costs to managing member (1,060,498) (352,809) (501,751) (226,082) Reduction of net investment in direct financing leases 138,425 94,646 (3,110) 60,514 ------------------ ------------------ ------------------ ------------------ Net cash used in investing activities (8,948,054) (19,182,509) (4,423,716) (10,328,825) ------------------ ------------------ ------------------ ------------------ Financing activities: Capital contributions received 10,281,250 26,563,080 - 12,096,000 Payment of syndication costs to managing member (1,329,030) (3,366,688) (41,189) (1,494,427) Repurchase of limited liability company units (1,923) - (1,923) - Distributions to members (5,626,045) (2,631,209) (2,922,255) (1,489,122) ------------------ ------------------ ------------------ ------------------ Net cash provided by financing activities 3,324,252 20,565,183 (2,965,367) 9,112,451 ------------------ ------------------ ------------------ ------------------ Net (decrease) increase in cash and cash (1,094,988) 3,336,590 (5,372,293) (848,551) equivalents Cash and cash equivalents at beginning of period 39,722,496 13,568,058 43,999,801 17,753,199 ------------------ ------------------ ------------------ ------------------ Cash and cash equivalents at end of period $38,627,508 $16,904,648 $38,627,508 $16,904,648 ================== ================== ================== ================== Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 166,803 $ 19,263 $ 82,291 $ 19,263 ================== ================== ================== ==================
See accompanying notes. 6 ATEL CAPITAL EQUIPMENT FUND IX, LLC NOTES TO FINANCIAL STATEMENTS JUNE 30, 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 prior period amounts have been reclassified to conform to current period 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 or Reclassi- Balance December 31, Amortization fications or June 30, 2002 Additions of Leases Dispositions 2003 Net investment in operating leases $44,149,781 $ 8,779,071 $ (3,597,453) $ (983,290) $48,348,109 Net investment in direct financing leases 1,525,473 615,949 (138,425) - 2,002,997 Initial direct costs 1,226,764 1,060,498 (203,106) - 2,084,156 ----------------- ------------------ ------------------ ------------------ ------------------ $46,902,018 $10,455,518 $ (3,938,984) $ (983,290) $52,435,262 ================= ================== ================== ================== ==================
7 ATEL CAPITAL EQUIPMENT FUND IX, LLC NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (Unaudited) 3. Investment in leases (continued): Operating leases: Property on operating leases consists of the following:
Balance Acquisitions, Dispositions & Balance December 31, Reclassifications June 30, 2002 1st Quarter 2nd Quarter 2003 Mining $ 20,903,212 $ - $ 4,312,710 $ 25,215,922 Manufacturing 15,051,966 656,092 (118,517) 15,589,541 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 - (74,943) 621,508 ------------------ ------------------ ------------------ ------------------ 51,102,432 3,587,004 4,119,250 58,808,686 Less accumulated depreciation (6,952,651) (1,678,545) (1,829,381) (10,460,577) ------------------ ------------------ ------------------ ------------------ $ 44,149,781 $ 1,908,459 $ 2,289,869 $ 48,348,109 ================== ================== ================== ==================
The average assumed residual values for assets on operating leases were 30% at December 31, 2002 and 29% at June 30, 2003. Direct financing leases: As of June 30, 2003, investment in direct financing leases consists office furniture. The following lists the components of the Company's investment in direct financing leases as of June 30, 2003: Total minimum lease payments receivable $ 2,173,873 Estimated residual values of leased equipment (unguaranteed) 211,527 -------------- Investment in direct financing leases 2,385,400 Less unearned income (382,403) -------------- Net investment in direct financing leases $ 2,002,997 ============== All of the property on leases was acquired in 2001, 2002 and 2003. At June 30, 2003, the aggregate amounts of future minimum lease payments are as follows:
Direct Year ending Operating Financing December 31, Leases Leases Total Six months ending December 31, 2003 $ 4,855,353 $ 313,314 $ 5,168,667 Year ending December 31, 2004 9,631,939 594,870 10,226,809 2005 9,502,962 576,549 10,079,511 2006 8,069,939 492,415 8,562,354 2007 3,587,888 135,491 3,723,379 Thereafter 2,873,060 61,234 2,934,294 ------------------ ------------------ ------------------ $38,521,141 $ 2,173,873 $40,695,014 ================== ================== ==================
8 ATEL CAPITAL EQUIPMENT FUND IX, LLC NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (Unaudited) 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. The Managing Member and/or affiliates earned fees, commissions and reimbursements, pursuant to the Limited Liability Company Agreement as follows:
Six Months Three Months Ended June 30, Ended June 30, 2003 2002 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 $ 2,523,493 $ - $ 1,149,120 Reimbursement of other syndication costs to Managing Member 352,311 843,195 41,189 345,307 Costs reimbursed to Managing Member 312,058 118,586 192,545 65,732 Asset management fees to Managing Member 256,771 93,693 136,806 35,437 ------------------ ------------------ ------------------ ------------------ $ 1,897,859 $ 3,578,967 $ 370,540 $ 1,595,596 ================== ================== ================== ==================
5. Member's capital: As of June 30, 2003, 12,065,016 Units 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 as defined in the Limited Liability Company Operating Agreement are to be allocated 92.5% to the Members and 7.5% to the Managing Member. 9 ATEL CAPITAL EQUIPMENT FUND IX, LLC NOTES TO FINANCIAL STATEMENTS JUNE 30, 2003 (Unaudited) 6. Line of credit: The Company participates with the Managing Member and certain of its affiliates in a $56,736,746 revolving line of credit with a financial institution that includes certain financial covenants. The line of credit expires on June 28, 2004. As of June 30, 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 26,500,000 ---------------- Total borrowings under the acquisition facility 26,500,000 Amounts borrowed by the Managing Member and its sister corporation under the warehouse facility - ---------------- Total outstanding balance $ 26,500,000 ================ Total available under the line of credit $ 56,736,746 Total outstanding balance (26,500,000) ---------------- Remaining availability $ 30,236,746 ================ 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 General Partner. The credit agreement includes certain financial covenants applicable to each borrower. The Company was in compliance with its covenants as of June 30, 2003. 7. Commitments: As of June 30, 2003, the Company had outstanding commitments to purchase lease equipment totaling approximately $29,751,000. 10 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 second quarter of 2003, the Company's primary activity was engaging in equipment leasing activities. During the second quarter of 2002, the Company's primary activities were raising funds through its offering of Limited Liability Company Units (Units) and engaging in equipment leasing activities. Through January 15, 2003, the Company had received subscriptions for 12,065,266 Units ($120,652,660). The Company's offering was terminated as of that date. As of June 30, 2003, 12,065,016 Units ($120,650,160) 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 $56,736,746 revolving line of credit with a financial institution that includes certain financial covenants. The line of credit expires on June 28, 2004. As of June 30, 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 26,500,000 ---------------- Total borrowings under the acquisition facility 26,500,000 Amounts borrowed by the Managing Member and its sister corporation under the warehouse facility - ---------------- Total outstanding balance $ 26,500,000 ================ Total available under the line of credit $ 56,736,746 Total outstanding balance (26,500,000) ---------------- Remaining availability $ 30,236,746 ================ 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. No commitments of capital have been or are expected to be made other than for the acquisition of additional equipment. As of June 30, 2003, such commitments totaled approximately $29,742,000. 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. 11 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 June 30, 2003, the Company had not borrowed under the facility. Cash Flows During the first half of 2003 and 2002, the Company's primary source of liquidity was the proceeds of its offering of Units. In 2003 and 2002, the primary source of cash from operations was rents from operating leases. In 2003, the primary source of cash from investing activities was proceeds from the sales of lease assets. In 2002, rents from direct financing leases and payments received on notes receivable were the primary sources of cash from investing activities. 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 (2002 only). In 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. Financing uses of cash consisted of payments of syndication costs associated with the offering and distributions to the members. Results of operations In 2003, operations resulted in net income of $430,310 for the six month period ended June 30 and $239,830 for the three month period then ended. In 2002, operations resulted in net income of $415,647 for the six month period ended June 30 and $336,926 for the three month period then ended. The Company's primary source of revenues is from operating leases. Depreciation 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 are based on the gross lease rents of the Company plus proceeds from the sales of lease assets. Such fees 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 in 2003 relates to the cost of maintaining the availability of the long-term financing facility discussed above under the caption "Capital Resources and Liquidity". Interest expense for the first half of 2002 related to the borrowings under the line of credit incurred by an affiliate of the Managing Member. Interest expense for the first half of 2002 included all amounts related to those borrowings related transactions transferred to the Company. All of the revenues and related carrying costs for these transactions were attributed to the Company in the same periods. Results of operations in future periods are expected to vary considerably from those of the first half 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. 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 June 30, 2003, there was no outstanding balance on the floating interest rate line of credit. 12 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 borrowings under this facility as of June 30, 2003. 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 June 30, 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 June 30, 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 June 30, 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. Silicon Access Networks, Inc.: Silicon Access Networks, Inc. ("Debtor") advised the Company 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 cease operations, which occurred in July 2002. As Debtor was current on the Note payments, the Company declared a technical default in early July 2002 on the basis of the termination of operations. As of September 30, 2002, the Debtor's account was current except for late charges. The Company filed suit, on the basis of the default, and moved for a Writ of Attachment, which was denied despite repeated attempts by the Company. The Company's motions were denied, due in large part to the fact that the Debtor's account was, and still is, current. On advice of new counsel the Company has withdrawn the initial suit, as it is apparent that the court will continue to deny any Writ of Attachment until and unless the lessee actually defaults in payments. As of July 17, 2003, the account is current. The Company is monitoring the debtor's cash position, monthly, as it will run out of cash sometime in the late summer of 2003, unless it raises new equity or debt or is acquired. The Company's likelihood of success in recovering the full amount of its claims remains highly uncertain. 13 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 June 30, 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. Follow on rounds, which have allowed Photuris to continue operations for a few more months at a time, have closed in February and May 2003, with another to close in late July or early August 2003. Continued receipt of these staged equity investments will allow Photuris to operate into the fourth quarter 2003. 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" (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
14 (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 4,793,765 4,793,765 ------------------ ------------------ ------------------ Total expenses $ 1,809,790 $14,445,978 $16,255,768 ================== ================== ================== (9) Net offering proceeds to the issuer after the total expenses in item 8: $104,396,892
(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 $ - $103,793,629 $103,793,629 Working capital 603,263 603,263 ------------------ ------------------ ------------------ $ - $104,396,892 $104,396,892 ================== ================== ==================
(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, June 30, 2003 and December 31, 2002. Statements of operations for the six and three month periods ended June 30, 2003 and 2002. Statement of changes in partners' capital for the six month period ended June 30, 2003. Statements of cash flows for the six and three month periods ended June 30, 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 15 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 10Q of ATEL Capital Equipment Fund IX, LLC, (the "Company") for the period ended June 30, 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. /s/ Dean L. Cash -------------------------------------------- Dean L. Cash President and Chief Executive Officer of Managing Member August 12, 2003 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 10Q of ATEL Capital Equipment Fund IX, LLC, (the "Company") for the period ended June 30, 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. /s/ Paritosh K. Choksi -------------------------------------------- Paritosh K. Choksi Executive Vice President of Managing Member, Principal financial officer of registrant August 12, 2003 16 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: August 12, 2003 /s/ Paritosh K. Choksi ------------------------------- Paritosh K. Choksi Principal Financial Officer of Registrant, Executive Vice President of Managing Member 17 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: August 12, 2003 /s/ Dean L. Cash ------------------------------- Dean L. Cash President and Chief Executive Officer of Managing Member 18 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 12, 2003 ATEL CAPITAL EQUIPMENT FUND IX, LLC (Registrant) By: ATEL Financial Services, LLC 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 Executive Vice President of Managing Member, Principal financial officer of registrant By: /s/ Donald E. Carpenter ------------------------------------- Donald E. Carpenter Principal accounting officer of registrant 19