10-Q/A

Form 10-Q/A

(Amendment No. 1)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

ý           Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2011

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 000-50210

ATEL Capital Equipment Fund IX, LLC

(Exact name of registrant as specified in its charter)

California	94-3375584
(State or other jurisdiction of Incorporation or organization)	(I. R. S. Employer Identification No.)

600 California Street, 6th Floor, San Francisco, California 94108-2733

(Address of principal executive offices)

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

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

Securities registered pursuant to section 12(g) of the Act: 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 ý  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 ý  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   Accelerated filer   Non-accelerated filer   Smaller reporting company ý

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

The number of Limited Liability Company Units outstanding as of July 31, 2011 was 12,055,016.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Explanatory Note

The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 10, 2011 (the “Form 10-Q”), is solely to replace, and supersede in its entirety, Exhibit 101 to the Form 10-Q, in order to correct technical errors made by a third party vendor in the production of interactive data initially filed as Exhibit 101 to the Form 10-Q. Exhibit 101 provides the financial statements and related notes taken from the Form 10-Q and formatted in XBRL (Extensible Business Reporting Language).

No changes have been made to the Form 10-Q or any Exhibit to the Form 10-Q other than Exhibit 101. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

ITEM 6.  Exhibits

31.1*	Certification of Chief Executive Officer Pursuant to Rule 13a-15(e) / Rule 15d-15(e)
31.2*	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) / Rule 15(e)/15d-15(e)
32.1*	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002
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 Definition Link Document
*	Filed as an Exhibit to our original report on form 10-Q filed August 10, 2011
**	Furnished herewith

2 

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, 2011

ATEL CAPITAL EQUIPMENT FUND IX, LLC

(Registrant)

	By:	ATEL Financial Services, LLC
		Managing Member of Registrant
/s/ Dean L. Cash
Dean L. Cash
Chairman of the Board, President and Chief Executive Officer of ATEL Financial Services, LLC (Managing Member)
/s/ Paritosh K. Choksi
Paritosh K. Choksi
Director, Executive Vice President and Chief Financial Officer and Chief Operating Officer of ATEL Financial Services, LLC (Managing Member)
/s/ Samuel Schussler
Samuel Schussler
Vice President and Chief Accounting Officer of ATEL Financial Services, LLC (Managing Member)

3

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BALANCE SHEETS (Parenthetical) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Accounts receivable, allowance for doubtful accounts	$ 87	$ 239
Notes receivable, unearned interest income	379	515
Investments in equipment and leases, accumulated depreciation	$ 41,019	$ 42,468

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STATEMENTS OF INCOME (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Leasing activities:
Operating leases	$ 2,323	$ 2,899	$ 4,610	$ 5,493
Direct financing leases	1,125	1,281	2,262	2,550
Interest on notes receivable	65	64	136	133
Gain on sales of lease assets	435	230	551	233
Gain on sale or disposition of securities	31		73
Other revenue	47	361	75	373
Total revenues	4,026	4,835	7,707	8,782
Expenses:
Depreciation of operating lease assets	1,283	1,573	2,569	3,268
Asset management fees to Managing Member	183	169	375	379
Acquisition expense		88	(2)	109
Cost reimbursements to Managing Member	224	156	451	327
(Reversal of provision) provision for credit losses	(54)	2	(152)	(36)
Impairment losses		218		276
Provision for losses on investment in securities			41
Amortization of initial direct costs	9	20	19	49
Interest expense	389	465	795	955
Professional fees	14	50	82	133
Outside services	9	16	19	37
Insurance	35	23	31	57
Marine vessel maintenance and other operating costs	135	166	338	343
Other	170	68	264	125
Total operating expenses	2,397	3,014	4,830	6,022
Other (expense) income, net	(6)	10		63
Net income	1,623	1,831	2,877	2,823
Net income:
Managing Member	146	122	293	244
Other Members	1,477	1,709	2,584	2,579
Net income	$ 1,623	$ 1,831	$ 2,877	$ 2,823
Net income per Limited Liability Company Unit (Other Members)	0.12	0.14	0.21	0.21
Weighted average number of Units outstanding	12,055,016	12,055,016	12,055,016	12,055,016

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 31, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	ZZHJC
Entity Registrant Name	ATEL CAPITAL EQUIPMENT FUND IX LLC
Entity Central Index Key	0001125264
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Units Outstanding		12,055,016

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Investment in equipment and leases, net:

6 Months Ended

Jun. 30, 2011

Investment in equipment and leases, net:

5. Investment in equipment and leases, net:

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

	Balance December 31, 2010		Reclassifications, Additions/ Dispositions and Impairment Losses			Depreciation/ Amortization Expense or Amortization of Leases			Balance June 30, 2011
Net investment in operating leases	$	21,426	$	(503	)	$	(2,567	)	$	18,356
Net investment in direct financing leases		17,232		(1,392	)		(1,423	)		14,417
Assets held for sale or lease, net		1,349		398			(2	)		1,745
Initial direct costs, net of accumulated amortization of $93 at June 30, 2011 and $86 at December 31, 2010		88		—			(17	)		71
Total	$	40,095	$	(1,497	)	$	(4,009	)	$	34,589

Impairment of investments in leases and assets held for sale or lease:

Management periodically reviews the carrying values of its assets on leases and assets held for lease or sale. Impairment losses are recorded as an adjustment to the net investment in operating leases. There were no impaired lease assets during the three and six months ended June 30, 2011. By comparison, during the three and six months ended June 30, 2010, the Company deemed certain property subject to operating leases and certain off-lease assets to be impaired. Accordingly, the Company recorded adjustments, totaling $218 thousand and $276 thousand for the respective three and six months ended June 30, 2010, to reduce the cost basis of such assets.

On April 30, 2009, a major lessee, Chrysler Corporation filed for bankruptcy protection under Chapter 11. Under a pre-package agreement, a new company was formed to purchase the assets of old Chrysler — its plants, brands, land, equipment, as well as its contracts with the union, dealers and suppliers — from the bankruptcy court. Under this agreement, the Company had its leases with the old, bankrupt Chrysler assumed by the new Chrysler, Chrysler Group, LLC, which is 46% owned by Fiat. The new Chrysler has remitted payments relative to the affirmed leases. At April 1, 2011, Chrysler accounts were returned to accrual status.

As of June 30, 2011, there were no lease contracts placed in non-accrual status. At December 31, 2010, net investment in equipment underlying all lease contracts placed on a cash basis approximated $306 thousand, all of which were related to Chrysler. The related accounts receivable from such contracts approximated $40 thousand at December 31, 2010. As of the same dates, the Company has certain other leases that have related accounts receivables aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, such receivables are fully reserved. Management continues to closely monitor these leases for any actual change in collectability status and indication of necessary valuation adjustments.

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its portfolio of operating lease transactions. Depreciation expense on the Company’s equipment was approximately $1.3 million and $1.6 million for the respective three months ended June 30, 2011 and 2010, and was $2.6 million and $3.3 million for the respective six months ended June 30, 2011 and 2010.

All of the leased property was acquired in years beginning with 2002 through 2010.

Operating leases:

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

	Balance December 31, 2010			Additions			Reclassifications, Dispositions & Impairment Losses			Balance June 30, 2011
Transportation, other	$	18,001		$	—		$	(1,797	)	$	16,204
Transportation, rail		13,288			—			(1,376	)		11,912
Materials handling		10,204			—			(479	)		9,725
Marine vessels		6,816			442			—			7,258
Manufacturing		5,014			—			(1,520	)		3,494
Natural gas compressors		1,671			—			—			1,671
Construction		1,594			—			—			1,594
Agriculture		1,151			—			—			1,151
Office furniture		159			—			—			159
Other		84			—			—			84
		57,982			442			(5,172	)		53,252
Less accumulated depreciation		(36,556	)		(2,567	)		4,227			(34,896	)
Total	$	21,426		$	(2,125	)	$	(945	)	$	18,356

The average estimated residual value for assets on operating leases was 17% and 19% of the assets’ original cost at June 30, 2011 and December 31, 2010, respectively. There were no operating leases placed in non-accrual status as of June 30, 2011. By comparison, operating leases in non-accruals status totaled $306 thousand at December 31, 2010.

The Company may earn revenues from its containers, marine vessel and certain other assets based on utilization of such assets or a fixed-term lease. Contingent rentals (i.e., short-term, operating charter hire payments) and the associated expenses are recorded when earned and/or incurred. The revenues associated with these rentals are included as a component of Operating Lease Revenues. Such revenues totaled $54 thousand and $102 thousand for the three and six months ended June 30, 2011, respectively. There were no revenues from contingent rentals during the three and six months ended June 30, 2010.

Direct financing leases:

As of June 30, 2011 and December 31, 2010, investment in direct financing leases primarily consists of mining, materials handling equipment and office furniture. The following lists the components of the Company’s investment in direct financing leases as of June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011			December 31, 2010
Total minimum lease payments receivable	$	24,030		$	29,415
Estimated residual values of leased equipment (unguaranteed)		3,644			3,666
Investment in direct financing leases		27,674			33,081
Less unearned income		(13,257	)		(15,849	)
Net investment in direct financing leases	$	14,417		$	17,232
Net investment in direct financing leases placed in non-accrual status	$	—		$	54

There was no investment in direct financing lease assets in non-accrual status at June 30, 2011. However, the Company has certain direct financing leases that have related accounts receivables aged 90 days or more that have not been placed on non-accrual status. In accordance with Company policy, such receivables are fully reserved. Management continues to closely monitor these leases for any actual change in collectability status and indication of necessary valuation adjustments.

At June 30, 2011, the aggregate amounts of future minimum lease payments receivable are as follows (in thousands):

	Operating Leases		Direct Financing Leases		Total
Six months ending December 31, 2011	$	3,318	$	2,356	$	5,674
Year ending December 31, 2012		4,671		4,624		9,295
2013		3,094		4,466		7,560
2014		1,831		4,450		6,281
2015		1,033		4,450		5,483
2016		196		3,684		3,880
Thereafter		167		—		167
	$	14,310	$	24,030	$	38,340

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Guarantees:

6 Months Ended

Jun. 30, 2011

Guarantees:

10. Guarantees:

The Company enters into contracts that contain a variety of indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

The Managing Member knows of no facts or circumstances that would make the Company’s contractual commitments outside standard mutual covenants applicable to commercial transactions between businesses. Accordingly, the Company believes that these indemnification obligations are made in the ordinary course of business as part of standard commercial and industry practice, and that any potential liability under the Company’s similar commitments is remote. Should any such indemnification obligation become payable, the Company would separately record and/or disclose such liability in accordance with GAAP.

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Organization and Limited Liability Company matters:

6 Months Ended

Jun. 30, 2011

Organization and Limited Liability Company matters:

1. Organization and Limited Liability 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 engaging in the sale of limited liability company investment units and acquiring equipment to engage in equipment leasing, lending and sales activities, primarily in the United States. The Managing Member or Manager of the Company is ATEL Financial Services, LLC (“AFS”), a California limited liability company. The Company may continue until December 31, 2020. Contributions in the amount of $600 were received as of December 31, 2000, $100 of which represented AFS’s continuing interest, and $500 of which represented the Initial Member’s capital investment.

The Company conducted a public offering of 15,000,000 Limited Liability Company Units (“Units”), at a price of $10 per Unit. On February 21, 2001, subscriptions for the minimum number of Units (120,000, representing $1.2 million) had been received (excluding subscriptions from Pennsylvania investors) and AFS requested that the subscriptions be released to the Company. On that date, the Company commenced operations in its primary business. As of April 3, 2001, the Company had received subscriptions for 753,050 Units ($7.5 million), thus exceeding the $7.5 million minimum requirement for Pennsylvania, and AFS requested that the remaining funds in escrow (from Pennsylvania investors) be released to the Company.

As of January 15, 2003, the offering was terminated. As of that date, the Company had received subscriptions for 12,065,266 Units ($120.7 million). Subsequent to January 15, 2003, Units totaling 10,250 were rescinded or repurchased and funds returned to investors (net of distributions paid and allocated syndication costs, as applicable). As of June 30, 2011, 12,055,016 Units remain issued and outstanding.

The Company’s principal objectives are to invest in a diversified portfolio of equipment that (i) preserves, protects and returns the Company’s invested capital; (ii) generates regular distributions to the members of cash from operations and cash from sales or refinancing, with any balance remaining after certain minimum distributions to be used to purchase additional equipment during the reinvestment period (“Reinvestment Period”) (defined as six full years following the year the offering was terminated), which ended on December 31, 2009 and (iii) provides additional distributions following the Reinvestment Period and until all equipment has been sold. The Company is governed by the Limited Liability Company Operating Agreement (“Operating Agreement”), as amended. On January 1, 2010, the Company commenced liquidation phase activities pursuant to the guidelines of the Operating Agreement.

Pursuant to the terms of the Operating Agreement, AFS receives compensation for services rendered and reimbursements for costs incurred on behalf of the Company (Note 6). The Company is required to maintain reasonable cash reserves for working capital, the repurchase of Units and contingencies. The repurchase of Units is solely at the discretion of AFS.

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, 2010, filed with the Securities and Exchange Commission.

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Non-recourse debt:

6 Months Ended

Jun. 30, 2011

Non-recourse debt:

7. Non-recourse debt:

At June 30, 2011, non-recourse debt consists of notes payable to financial institutions. The notes are due in monthly installments. Interest on the notes is at fixed rates ranging from 6.16% to 6.66%. The notes are secured by assignments of lease payments and pledges of assets. At June 30, 2011, gross operating lease rentals and future payments on direct financing leases totaled approximately $27.3 million over the remaining lease terms; and the carrying value of the pledged assets is $18.0 million. The notes mature from 2015 through 2017.

The non-recourse debt does not contain any material financial covenants. The debt is secured by liens granted by the Company to the non-recourse lenders on (and only on) the discounted lease transactions. The lenders have recourse only to the following collateral: the specific leased equipment; the related lease chattel paper; the lease receivables; and proceeds of the foregoing items. The non-recourse obligation is payable solely out of the respective specific security and the Company does not guarantee (nor is the Company otherwise contractually responsible for) the payment of the non-recourse debt as a general obligation or liability of the Company. Although the Company does not have any direct or general liability in connection with the non-recourse debt apart from the security granted, the Company is directly and generally liable and responsible for certain representations, warranties, and covenants made to the lenders, such as warranties as to genuineness of the transaction parties’ signatures, as to the genuineness of the respective lease chattel paper or the transaction as a whole, or as to the Company’s good title to or perfected interest in the secured collateral, as well as similar representations, warranties and covenants typically provided by non-recourse borrowers and customary in the equipment finance industry, and are viewed by such industry as being consistent with non-recourse discount financing obligations. Accordingly, as there are no financial covenants or ratios imposed on the Company in connection with the non-recourse debt, the Company has determined that there are no material covenants with respect to the non-recourse debt that warrant footnote disclosure.

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

	Principal		Interest		Total
Six months ending December 31, 2011	$	1,909	$	738	$	2,647
Year ending December 31, 2012		4,009		1,285		5,294
2013		4,279		1,015		5,294
2014		4,568		726		5,294
2015		4,616		420		5,036
2016		3,743		133		3,876
Thereafter		178		1		179
	$	23,302	$	4,318	$	27,620

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Fair value measurements:

6 Months Ended

Jun. 30, 2011

Fair value measurements:

12. Fair value measurements:

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, generally on a national exchange.

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

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

At June 30, 2011 and December 31, 2010, only the fair value of the Company’s interest rate swap contracts was measured on a recurring basis. However, at December 31, 2010, the Company measured the fair value of impaired operating lease and off-lease equipment on a non-recurring basis. Such estimate of measurement methodology is as follows:

Interest rate swaps

The fair value of interest rate swaps is estimated using a valuation method (discounted cash flow) with inputs that are defined or that can be corroborated by observable market data. The discounted cash flow approach utilizes each swap’s notional amount, payment and termination dates, swap coupon, and the prevailing market rate and pricing data to determine the present value of the future swap payments. Accordingly, such swap contracts are classified within Level 2 of the valuation hierarchy.

Impaired operating lease and off-lease equipment

No equipment was deemed impaired at June 30, 2011. During 2010, the Company deemed certain operating lease and off-lease equipment (assets) to be impaired. Accordingly, the Company recorded fair value adjustments of approximately $353 thousand which reduced the cost basis of the assets. The fair value adjustments are non-recurring. Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the fair value of impaired leased and off-lease equipment are classified within Level 3 of the valuation hierarchy as the data sources utilized for the valuation of such assets reflect significant inputs that are unobservable in the market. Such valuation utilizes a market approach technique and uses inputs that reflect the sales price of similar assets sold by affiliates and/or information from third party remarketing agents not readily available in the market.

The following table presents the fair value measurement of assets and liabilities measured at fair value on a recurring and non-recurring basis and the level within the hierarchy in which the fair value measurements fall at June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011		Level 1 Estimated Fair Value		Level 2 Estimated Fair Value		Level 3 Estimated Fair Value
Liabilities measured at fair value on a recurring basis:
Interest rate swaps	$	1	$	—	$	1	$	—

	December 31, 2010		Level 1 Estimated Fair Value		Level 2 Estimated Fair Value		Level 3 Estimated Fair Value
Assets measured at fair value on a non-recurring basis:
Impaired operating lease and off-lease assets	$	297	$	—	$	—	$	297
Liabilities measured at fair value on a recurring basis:
Interest rate swaps	$	5	$	—	$	5	$	—

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

The Company 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. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize or has realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

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

Notes receivable

The fair value of the Company’s notes receivable is estimated using discounted cash flow analyses, based upon current market rates for similar types of lending arrangements, with adjustments for non-accrual loans as deemed necessary.

Investment in securities

The Company’s investment securities are not registered for public sale and are carried at cost which management believes approximates fair value, as appropriately adjusted for impairment.

Non-recourse debt

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

Receivables funding program

The carrying amount of these variable rate obligations approximate fair value based on current borrowing rates for similar types of borrowings.

Commitments and Contingencies

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

Limitations

The fair value estimates presented herein were based on pertinent information available to the Company as of June 30, 2011 and December 31, 2010. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since those dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

The following table presents estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at June 30, 2011 and December 31, 2010 (in thousands):

	June 30, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	5,258	$	5,258	$	2,782	$	2,782
Notes receivable		2,315		2,315		2,712		2,712
Investment in securities		34		34		70		70
Financial liabilities:
Non-recourse debt		23,302		24,170		25,150		26,076
Receivables funding program		95		95		415		415
Interest rate swap contracts		1		1		5		5

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Receivable funding program:

6 Months Ended

Jun. 30, 2011

Receivable funding program:

8. Receivable funding program:

As of June 30, 2011, the Company had amounts outstanding under a $60 million receivables funding program (the “RF Program”) with a receivables financing company that issued commercial paper rated A1 from Standard and Poor’s and P1 from Moody’s Investors Service. Under the RF Program, the lender holds liens against the Company’s assets. The lender is in a first position against certain specified assets and is in either a subordinated or shared position against the remaining assets. The RF Program does not contain any credit risk related default contingencies and is scheduled to mature in August 2011 at which time advances under the RF Program are to be repaid in full.

The RF Program provides for borrowing at a variable interest rate and 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 RF Program allows the Company to have a more cost effective means of obtaining debt financing than available for individual non-recourse debt transactions.

The Company had approximately $95 thousand and $415 thousand outstanding under the RF Program at June 30, 2011 and December 31, 2010, respectively. During the six months ended June 30, 2011, the Company paid nominal program fees, as defined in the receivables funding agreement. Such program fees paid during the prior year period totaled $3 thousand. The RF Program fees are included in interest expense in the Company’s statements of income.

As of June 30, 2011, the Company has entered into interest rate swap agreements to receive or pay interest on a notional principal of $95 thousand based on the difference between nominal rates ranging from 3.75% to 4.80% and the variable rates that ranged from 0.19% to 0.26%. As of December 31, 2010, the Company entered into interest rate swap agreements to receive or pay interest on a notional principal of $415 thousand based on the difference between nominal rates ranging from 3.75% to 4.81% and the variable rates that ranged from 0.23% to 0.35%. No actual borrowing or lending is involved. The termination of the swaps coincides with the maturity of the debt. Through the swap agreements, the interest rates have been effectively fixed. The differential to be paid or received is accrued as interest rates change and is recognized currently as an adjustment to interest expense related to the debt. The interest rate swaps are not designated as hedging instruments and are carried at fair value on the balance sheet with unrealized gain/loss included in the statements of income in other (expense) income, net.

At June 30, 2011 and December 31, 2010, borrowings and interest rate swap agreements under the RF Program are as follows (in thousands):

Date Borrowed	Original Amount Borrowed		Balance June 30, 2011		Notional Balance June 30, 2011		Swap Value June 30, 2011			Payment Rate On Interest Swap Agreement
February 14, 2005	$	20,000	$	16	$	16	$	—			3.75	%
March 22, 2005		9,892		71		71		(1	)		4.31	%
December 15, 2005		13,047		8		8		—			4.80	%
	$	45,439	$	95	$	95	$	(1	)

Date Borrowed	Original Amount Borrowed		Balance December 31, 2010		Notional Balance December 31, 2010		Swap Value December 31, 2010			Payment Rate On Interest Swap Agreement
February 14, 2005	$	20,000	$	80	$	80	$	(1	)		3.75	%
March 22, 2005		9,892		277		277		(4	)		4.31	%
December 15, 2005		13,047		30		30		—			4.80	%
January 9, 2006		2,500		28		28		—			4.81	%
	$	45,439	$	415	$	415	$	(5	)

At June 30, 2011, the minimum repayment schedule under the RF Program totals $95 thousand, which will be paid in full by August 2011. As of the same date, there are specific leases that are identified as collateral under the Program with expected future lease receivables of approximately $657 thousand at their discounted present value. Such related future lease receivables approximates $106 thousand at their discounted present value through August 2011.

The weighted average interest rates on the RF Program, including interest on the swap contracts, were 5.07% and 5.25% during the three months ended June 30, 2011 and 2010, respectively. The weighted average interest rates on the RF Program were 5.01% and 5.29% during the six months ended June 30, 2011 and 2010, respectively. The RF Program discussed above includes certain financial and non-financial covenants applicable to the Company as borrower. The Company was in compliance with all covenants as of June 30, 2011.

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Related party transactions:

6 Months Ended

Jun. 30, 2011

Related party transactions:

6. Related party transactions:

The terms of the Operating Agreement provide that AFS 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 AFS for providing administrative services to the Company. Administrative services provided include Company accounting, finance/treasury, investor relations, legal counsel and lease and equipment documentation. AFS is not reimbursed for services whereby it is entitled to receive a separate fee as compensation for such services, such as management of equipment. The Company would be liable for certain future costs to be incurred by AFS to manage the administrative services provided to the Company.

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

Cost reimbursements to the Managing Member 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 managed assets, number of investors or contributed capital based upon the type of cost incurred. The Operating Agreement places an annual limit and a cumulative limit for cost reimbursements to AFS and/or affiliates. Any reimbursable costs incurred by AFS and/or affiliates during the year exceeding the annual and/or cumulative limits cannot be reimbursed in the current year, though such costs may be recovered in future years to the extent of the cumulative limit. As of June 30, 2011, the Company has not exceeded the annual and/or cumulative limitations discussed above.

During the three and six months ended June 30, 2011 and 2010, AFS and/or affiliates earned fees and commissions, and billed for reimbursements, pursuant to the Operating Agreement as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Costs reimbursed to Managing Member and/or affiliates	$	224	$	156	$	451	$	327
Asset management fees to Managing Member and/or affiliates		183		169		375		379
Acquisition and initial direct costs paid to Managing Member		—		102		—		128
	$	407	$	427	$	826	$	834

During December 2009, operating lease assets with an original cost of $2.7 million and investments in notes receivable totaling $1.0 million were transferred to the Company by certain affiliates, resulting in an amount due to affiliates equivalent to the original cost of the assets. Such amounts were paid in January 2010.

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STATEMENTS OF CHANGES IN MEMBERS' CAPITAL (Parenthetical) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
Distributions to Other Members, per Unit	$ 0.30	$ 0.50

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Summary of significant accounting policies:

6 Months Ended

Jun. 30, 2011

Summary of significant accounting policies:

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, 2011 are not necessarily indicative of the results to be expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation.

During the first quarter 2011, the Company identified a misclassification in the presentation of amortization of unearned income on both direct financing leases and notes receivable on the 2010 statements of cash flows. An adjustment made to reflect proper classification results in a $1.3 million increase in net cash from operating activities and a corresponding decrease in net cash from investing activities for the quarter ended March 31, 2010. The Company incorrectly reported these interest income activities as an increase in the payments received on both direct financing leases and notes receivable. The appropriate classification of the receipt of interest income on direct financing leases and notes receivable is to record the $1.3 million as an inflow in the operating activities section of the statement of cash flows. Such adjustment totaled $1.4 million and $2.7 million for the three and six months ended June 30, 2010, respectively. The classification adjustment does not change the Company’s financial position, net income or the net reported change in cash for the three and six months ended June 30, 2010, nor does it affect the cash balance previously reported on the balance sheet.

The Company does not believe that this classification adjustment is material to cash flows for its previously filed Annual Report on Form 10-K or Quarterly Reports on Form 10-Q for the year ended December 31, 2010. Accordingly, the Company will revise its 2010 statements of cash flows prospectively in the 2011 Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.

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

In preparing the accompanying unaudited financial statements, the Managing Member has reviewed events that have occurred after June 30, 2011, up until the issuance of the financial statements. No events were noted which would require disclosure in the footnotes to the financial statements, or adjustments thereto.

Use of estimates:

The preparation of 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 those estimates. Such estimates primarily relate to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and for determination of the allowance for doubtful accounts and reserve for credit losses on notes receivable.

Segment reporting:

The Company is not organized by multiple operating segments 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 regions in which the Company seeks leasing opportunities are North America and Europe. The table below summarizes geographic information relating to the sources, by nation, of the Company’s total revenues for six months ended June 30, 2011 and 2010 and long-lived tangible assets as of June 30, 2011 and December 31, 2010 (dollars in thousands):

	Six Months Ended June 30,
	2011		% of Total			2010		% of Total
Revenue
United States	$	7,254		94	%	$	8,127		93	%
United Kingdom		248		3	%		436		5	%
Canada		205		3	%		219		2	%
Total International		453		6	%		655		7	%
Total	$	7,707		100	%	$	8,782		100	%

	As of June 30,					As of December 31,
	2011		% of Total			2010		% of Total
Long-lived assets
United States	$	33,478		97	%	$	38,238		96	%
United Kingdom		354		1	%		907		2	%
Canada		757		2	%		950		2	%
Total International		1,111		3	%		1,857		4	%
Total	$	34,589		100	%	$	40,095		100	%

Investment in securities:

Purchased securities

Purchased securities are generally not registered for public sale and are carried at cost. Such securities are adjusted to fair value if the fair value is less than the carrying value and such impairment is deemed by the Managing Member to be other than temporary. Factors considered by the Managing Member in determining fair value include, but are not limited to, available financial information, the issuer’s ability to meet its current obligations and indications of the issuer’s subsequent ability to raise capital. At March 31, 2011, the Company deemed an investment security to be impaired and recorded a fair value adjustment of approximately $41 thousand which reduced the cost basis of the investment. No additional impairment was recorded at June 30, 2011. Likewise, there was no impairment recorded at December 31, 2010.

Warrants

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried at an estimated fair value on the balance sheet at the end of the period, as determined by the Managing Member. At June 30, 2011 and December 31, 2010, the Managing Member estimated the fair value of the warrants to be nominal in amount. During the second quarter of 2011, the Company recognized a gain of $34 thousand relative to the net exercise of warrants associated with shares of a venture company. The total net quarter-to-date and year-to-date gain on warrants approximated $31 thousand and $80 thousand, respectively. By comparison, there was no warrant activity to generate a gain or loss during the three and six months ended June 30, 2010.

Other (expense) income, net:

Other (expense) income, net consists of gains and losses on interest rate swap contracts, and gains and losses on foreign exchange transactions. The table below details the Company’s other (expense) income, net for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Foreign currency (loss) gain	$	(7	)	$	(4	)	$	(4	)	$	29
Change in fair value of interest rate swap contracts		1			14			4			34
	$	(6	)	$	10		$	—		$	63

Per Unit data:

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

Recent accounting pronouncements:

In May 2011, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) (collectively the “Boards”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 created a uniform framework for applying fair value measurement principles for companies around the world and clarified existing guidance in US GAAP. ASU 2011-04 is effective for the first reporting annual period beginning after December 15, 2011 and shall be applied prospectively. The Company anticipates that adoption of this update will not have a material impact on its financial position or results of operations.

In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” ASU 2011-02 clarifies guidance on a creditor’s evaluation of whether it has granted a concession to a borrower and a creditor’s evaluation of whether a borrower is experiencing financial difficulties. The amendments in this update are effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. As a result of applying these amendments, an entity may identify receivables that are newly considered impaired. For purposes of measuring impairment of those receivables, an entity should apply the amendments prospectively for the first interim or annual period beginning on or after June 15, 2011. In addition, an entity should disclose the information required by Accounting Standards Codification paragraphs 310-10-50-33 through 50-34, which was deferred by ASU 2011-01, for interim and annual periods beginning on or after June 15, 2011. The Company anticipates that adoption of this update will not have a material impact on its financial position or results of operations.

In January 2011, the FASB issued ASU No. 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20.” ASU 2011-01 temporarily delays the effective date of the disclosures about troubled debt restructurings in Update 2010-20 for public entities. The delay is intended to allow the Board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. The guidance will be effective for the first interim or annual period beginning on or after June 15, 2011, and should be applied retrospectively to the beginning of the annual period of adoption. The Company anticipates that adoption of these additional disclosures will not have a material effect on its financial position or results of operations.

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Notes receivable, net:

6 Months Ended

Jun. 30, 2011

Notes receivable, net:

3. Notes receivable, net:

The Company has various notes receivable from borrowers who have financed the purchase of equipment through the Company. At June 30, 2011, the original terms of the notes receivable are 36 to 120 months and bear interest rates ranging from 8.42% to 16.22%. The notes are secured by the equipment financed. The notes mature from 2013 through 2016. There were neither impaired notes nor notes placed in non-accrual status as of June 30, 2011 and December 31, 2010.

As of June 30, 2011, the minimum future payments receivable are as follows (in thousands):

Six months ending December 31, 2011	$	527
Year ending December 31, 2012		1,021
2013		558
2014		229
2015		165
2016		188
		2,688
Less: portion representing unearned interest income		(379	)
		2,309
Unamortized initial direct costs		6
Notes receivable, net	$	2,315

Initial direct costs (“IDC”) amortization expense related to the notes receivable and the Company’s operating and direct financing leases for the three and six months ended June 30, 2011 and 2010 are as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
IDC amortization – notes receivable	$	1	$	1	$	2	$	2
IDC amortization – lease assets		8		19		17		47
Total	$	9	$	20	$	19	$	49

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Members' capital:

6 Months Ended

Jun. 30, 2011

Members' capital:

11. Members’ capital:

As of June 30, 2011 and December 31, 2010, 12,055,016 Units were issued and outstanding. The Company was authorized to issue up to 15,000,000 Units in addition to the Units issued to the initial members (50 Units).

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

As defined in the Operating Agreement, the Company’s Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Members and 7.5% to AFS. In accordance with the terms of the Operating Agreement, additional allocations of income were made to AFS during three and six months ended June 30, 2011 and 2010. The amounts allocated were determined to bring AFS’s ending capital account balance to zero at the end of each period.

Distributions to the Other Members were as follows (in thousands, except as to Units and per Unit data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Distributions declared	$	1,808	$	1,507	$	3,616	$	3,014
Weighted average number of Units outstanding		12,055,016		12,055,016		12,055,016		12,055,016
Weighted average distributions per Unit	$	0.15	$	0.12	$	0.30	$	0.25

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Provision for credit losses:

6 Months Ended

Jun. 30, 2011

Provision for credit losses:

4. Provision for credit losses:

The Company’s provision for credit losses are as follows (in thousands):

	Accounts Receivable Allowance for Doubtful Accounts									Valuation Adjustments on Financing Receivables				Total Allowance for Credit Losses
	Notes Receivable			Finance Leases			Operating Leases			Notes Receivable		Finance Leases
Balance December 31, 2009	$	19		$	150		$	106		$	—	$	—	$	275
Provision		—			3			125			—		—		128
Charge-offs and/or recoveries		—			(107	)		(57	)		—		—		(164	)
Balance December 31, 2010		19			46			174			—		—		239
Reversal of provision		(19	)		(32	)		(101	)		—		—		(152	)
Balance June 30, 2011	$	—		$	14		$	73		$	—	$	—	$	87

Accounts Receivable

Accounts receivable represent the amounts billed under operating and direct financing lease contracts, and 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 lessees and borrowers, and invoiced amounts. Accounts receivable deemed uncollectible are generally charged off against the allowance on a specific identification basis. Recoveries of amounts that were previously written-off are recorded as other income in the period received. 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 lease or note payments outstanding less than 90 days. Based upon management’s judgment, such leases or notes may be placed in non-accrual status. Leases or notes placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid receivable is probable. Until such time, all payments received are applied only against outstanding principal balances.

Financing Receivables

In addition to the allowance established for delinquent accounts receivable, the total allowance related solely to financing receivables also includes anticipated impairment charges on notes receivable and direct financing leases.

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.

The asset underlying a direct financing lease contract is considered impaired if the estimated undiscounted future cash flows of the asset are less than its net book value. The estimated undiscounted future cash flows are the sum of the estimated residual value of the asset at the end of the asset’s expected holding period and estimates of undiscounted future rents. The residual value assumes, among other things, that the asset is utilized normally in an open, unrestricted and stable market. Short-term fluctuations in the market place are disregarded and it is assumed that there is no necessity either to dispose of a significant number of the assets, if held in quantity, simultaneously or to dispose of the asset quickly.

As of June 30, 2011 and December 31, 2010, the Company’s allowance for credit losses (related solely to financing receivables) and its recorded net investment in financing receivables were as follows (in thousands):

June 30, 2011	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables, net:
Ending balance	$	2,3151	$	14,4642	$	16,779
Ending balance: individually evaluated for impairment	$	2,315	$	14,464	$	16,779
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

¹ Includes $6 of unamortized initial direct costs.

² Includes $47 of unamortized initial direct costs.

December 31, 2010	Notes Receivable		Finance Leases		Total
Allowance for credit losses:
Ending balance	$	—	$	—	$	—
Ending balance: individually evaluated for impairment	$	—	$	—	$	—
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—
Financing receivables, net:
Ending balance	$	2,7123	$	17,2884	$	20,000
Ending balance: individually evaluated for impairment	$	2,712	$	17,288	$	20,000
Ending balance: collectively evaluated for impairment	$	—	$	—	$	—
Ending balance: loans acquired with deteriorated credit quality	$	—	$	—	$	—

³ Includes $6 of unamortized initial direct costs.

⁴ Includes $56 of unamortized initial direct costs.

The Company evaluates the credit quality of its financing receivables on a scale equivalent to the following quality indicators related to corporate risk profiles:

Pass – Any account whose lessee/debtor, co-lessee/debtor or any guarantor has a credit rating on publicly traded or privately placed debt issues as rated by Moody’s or S&P for either Senior Unsecured debt, Long Term Issuer rating or Issuer rating that are in the tiers of ratings generally recognized by the investment community as constituting an Investment Grade credit rating; or, has been determined by the Manager to be an Investment Grade Equivalent or High Quality Corporate Credit per its Credit Policy or has a Not Rated internal rating by the Manager and the account is not considered by the Chief Credit Officer of the Manager to fall into one of the three risk profiles below.

Special Mention – Any traditional corporate type account with potential weaknesses (e.g. large net losses or major industry downturns) or, any growth capital account that has less than three months of cash as of the end of the calendar quarter to fund their continuing operations. These accounts deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the Fund’s receivable at some future date.

Substandard – Any account that is inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Accounts that are so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Fund will sustain some loss as the likelihood of fully collecting all receivables may be questionable if the deficiencies are not corrected. Such accounts are on the Manager’s Credit Watch List.

Doubtful – Any account where the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Accordingly, an account that is so classified is on the Manager’s Credit Watch List, and has been declared in default and the Manager has repossessed, or is attempting to repossess, the equipment it financed. This category includes impaired notes and leases as applicable.

At June 30, 2011 and December 31, 2010, the Company’s financing receivables by credit quality indicator and by class of financing receivables are as follows (excludes initial direct costs) (in thousands):

	Notes Receivable				Finance Leases
	June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010
Pass	$	1,085	$	1,339	$	14,283	$	16,982
Special mention		1,224		1,367		134		250
Substandard		—		—		—		—
Doubtful		—		—		—		—
Total	$	2,309	$	2,706	$	14,417	$	17,232

At June 30, 2011 and December 31, 2010, the net investment in financing receivables is aged as follows (in thousands):

June 30, 2011	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	2,309	$	2,309	$	—
Finance leases		5		1		5		11		14,406		14,417		5
Total	$	5	$	1	$	5	$	11	$	16,715	$	16,726	$	5

December 31, 2010	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables		Recorded Investment>90 Days and Accruing
Notes receivable	$	—	$	—	$	—	$	—	$	2,706	$	2,706	$	—
Finance leases		3		2		54		59		17,173		17,232		—
Total	$	3	$	2	$	54	$	59	$	19,879	$	19,938	$	—

The Company did not carry an impairment reserve on its financing receivables at both June 30, 2011 and December 31, 2010. At June 30, 2011, certain net investments in financing receivables with related accounts receivable past due more than 90 days are still on an accrual basis based on management’s assessment of the collectability of such receivables. However, these accounts receivable are fully reserved and included in the allowance for doubtful accounts presented above. There were no accounts receivable related to financing receivables placed in non-accrual status as of December 31, 2010.

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STATEMENTS OF CHANGES IN MEMBERS' CAPITAL (USD $) In Thousands, except Share data	3 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Beginning Balance		$ 19,645	$ 20,948	$ 20,948
Distributions to Other Members($0.30 per Unit in 2011 and $0.50 in 2010)		(3,616)		(6,027)
Distributions to Managing Member		(293)		(489)
Net income	1,623	2,877	2,823	5,213
Ending Balance	18,613	18,613		19,645
Other Members Capital
Beginning Balance (in units)		12,055,016	12,055,016	12,055,016
Beginning Balance		19,645	20,948	20,948
Distributions to Other Members($0.30 per Unit in 2011 and $0.50 in 2010)		(3,616)		(6,027)
Net income		2,584		4,724
Ending Balance (in units)	12,055,016	12,055,016		12,055,016
Ending Balance	18,613	18,613		19,645
Managing Members Capital
Distributions to Managing Member		(293)		(489)
Net income		$ 293		$ 489

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STATEMENTS OF CASH FLOWS (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Operating activities:
Net income	$ 1,623	$ 1,831	$ 2,877	$ 2,823
Adjustment to reconcile net income to cash provided by operating activities:
Gain on sales of lease assets	(435)	(230)	(551)	(233)
Gain on sales or disposition of securities	(31)		(73)
Depreciation of operating lease assets	1,283	1,573	2,569	3,268
Amortization of initial direct costs	9	20	19	49
(Reversal of provision) provision for credit losses	(54)	2	(152)	(36)
Impairment losses		218		276
Provision for losses on investment in securities			41
Gain on interest rate swap contracts	(1)	(14)	(4)	(34)
Changes in operating assets and liabilities:
Due to affiliates				79
Accounts receivable	138	(2)	171	(463)
Prepaid expenses and other assets	(6)	32	9	39
Accounts payable, Managing Member	(1)	83	(40)	(64)
Accounts payable, other	(539)	(162)	(296)	(200)
Deposits due lessees			(41)
Unearned operating lease income	(88)	(76)	54	82
Net cash provided by operating activities	1,898	3,275	4,583	5,586
Investing activities:
Purchases and improvements to operating leases		(55)	(442)	(929)
Proceeds from sales of lease assets	2,116	429	2,526	889
Proceeds from sales or dispositions of securities	18		68
Payments of initial direct costs		(14)	(2)	(5)
Principal payments received on direct financing leases	703	11	1,423	623
Principal payments received on notes receivable	199	133	397	288
Net cash provided by investing activities	3,036	504	3,970	866
Financing activities:
Repayments under receivables funding program	(142)	(824)	(320)	(1,371)
Repayments of non-recourse debt	(931)	(899)	(1,848)	(1,671)
Repayments of amount due to affiliates				(3,674)
Net cash used in financing activities	(3,027)	(3,352)	(6,077)	(11,280)
Net increase (decrease) in cash and cash equivalents	1,907	427	2,476	(4,828)
Cash and cash equivalents at beginning of period	3,351	4,934	2,782	10,189
Cash and cash equivalents at end of period	5,258	5,361	5,258	5,361
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	395	471	806	905
Cash paid during the period for taxes	132	87	132	87
Schedule of non-cash transactions:
Securities acquired through net exercise of warrants	34		34
Other Members
Financing activities:
Distributions to Members	(1,808)	(1,507)	(3,616)	(4,222)
Managing Member
Financing activities:
Distributions to Members	$ (146)	$ (122)	$ (293)	$ (342)

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Commitments and Contingencies:

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies:

9. Commitments and Contingencies:

At June 30, 2011, the Company had no commitments to purchase lease assets.

Gain Contingency

ATEL has chosen to litigate a claim on behalf of certain of its Funds for the under-reporting of revenue by a previous fleet manager of its marine vessels. Litigation continues relative to ATEL’s plaintiff position, seeking to recover an estimated total of $2.8 million, of which the Company’s portion approximates $350 thousand, of under-remitted revenues from marine vessel leasing covering years 2005 – 2007. Such amounts are not considered material to any of the Funds in any given year. While the Funds’ recovery with respect to this matter may be substantial, there is no assurance that judgment will be rendered in favor of the Funds. Originally scheduled to begin in March 2011, court proceedings have been re-scheduled to commence in September 2011. However, the outcome, either via negotiation or court mandate, is currently indeterminable.

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BALANCE SHEETS (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Cash and cash equivalents	$ 5,258	$ 2,782
Accounts receivable, net of allowance for doubtful accounts of $87 at June 30, 2011 and $239 at December 31, 2010	982	1,001
Notes receivable, net of unearned interest income of $379 at June 30, 2011 and $515 at December 31, 2010	2,315	2,712
Prepaid expenses and other assets	30	39
Investment in securities	34	70
Investments in equipment and leases, net of accumulated depreciation of $41,019 at June 30, 2011 and $42,468 at December 31, 2010	34,589	40,095
Total assets	43,208	46,699
Accounts payable and accrued liabilities:
Managing Member	42	82
Other	597	893
Deposits due lessees	49	90
Non-recourse debt	23,302	25,150
Interest rate swap contracts	1	5
Receivables funding program obligation	95	415
Unearned operating lease income	509	419
Total liabilities	24,595	27,054
Commitments and contingencies
Members' capital:
Managing Member
Other Members	18,613	19,645
Total Members' capital	18,613	19,645
Total liabilities and Members' capital	$ 43,208	$ 46,699