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ATEL 15, LLC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

May 13, 2014

Statements contained in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") and elsewhere in this Form 10-Q, which are not historical facts, may be forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. In particular, economic recession and changes in general economic conditions, including fluctuations in demand for equipment, lease rates, and interest rates, may result in delays in investment and reinvestment, delays in leasing, re-leasing, and disposition of equipment, and reduced returns on invested capital. The Company's performance is subject to risks relating to lessee and borrower defaults and the creditworthiness of its lessees and borrowers. The Company's performance is also subject to risks relating to the value of its equipment at the end of its leases, which may be affected by the condition of the equipment, technological obsolescence and the markets for new and used equipment at the end of lease terms. Investors are cautioned not to attribute undue certainty to these forward-looking statements, which speak only as of the date of this Form 10-Q. We undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events, other than as required by law. Overview ATEL 15, LLC (the "Company" or the "Fund") was formed under the laws of the state of California on March 4, 2011 for the purpose of raising capital and originating equipment financing transactions and acquiring equipment to engage in equipment leasing and sales activities. The offering of the Fund was granted effectiveness by the Securities and Exchange Commission as of October 28, 2011. The Company conducted a public offering of 15,000,000 Limited Liability Company Units ("Units"), at a price of $10 per Unit. As of December 21, 2011, subscriptions for the minimum number of Units (120,000, representing $1.2 million), excluding subscriptions from Pennsylvania investors, had been received and the Fund requested subscription proceeds to be released from escrow. On that date, the Company commenced initial operations and continued in its development stage activities until transitioning to an operating enterprise during the first quarter of 2012. Pennsylvania subscriptions are subject to a separate escrow and are released to the Fund only when aggregate subscriptions for all investors equal to not less than $7.5 million. Total contributions to the Fund exceeded $7.5 million on April 4, 2012, at which time a request was processed to release the Pennsylvania escrowed amounts. The offering was terminated on October 28, 2013. As of March 31, 2014, cumulative contributions of $66.5 million (inclusive of the $500 initial Member's capital investment), representing 6,653,171 Units, have been received. Through the same date, a net total of $242 thousand of such contributions (representing 32,200 Units) have been rescinded or repurchased (net of distributions paid and allocated syndication costs) by the Company. As of March 31, 2014, 6,620,971 Units were issued and outstanding. Results of Operations The three months ended March 31, 2014 versus the three months ended March 31, 2013



The Company had net losses of $663 thousand and $310 thousand for the three months ended March 31, 2014 and 2013, respectively. Results for the first quarter of 2014 reflect increases in both total expenses and total revenues when compared to the prior year period.

Revenues

Total revenues for the first quarter of 2014 increased by $1.4 million, or 149%, as compared to the prior year period. The increase was largely due to the growth in operating lease revenues partially offset by an unrealized loss on the fair valuation of warrants. Operating lease revenues increased by $1.5 million primarily due to additional revenue from an approximate $34.6 million of operating lease assets acquired since March 31, 2013. The unrealized loss on fair valuation of warrants totaled $140 thousand and was primarily attributable to the revaluation of certain warrant positions in the Fund's portfolio. 20

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TABLE OF CONTENTS Expenses Total expenses for the first quarter of 2014 increased by $1.8 million, or 140%, as compared to the prior year period. Such increase is consistent with the growth in total revenues and was largely a result of increases in depreciation expense, costs reimbursed to the Manager, interest expense and asset management fees paid to the Manager. Depreciation expense increased by $1.3 million largely due to the addition of approximately $34.6 million of net equipment purchases for operating leases during the past twelve months. Costs reimbursed to the Manager increased by $168 thousand as a result of an increase in allocated costs consistent with the Fund's expanded operations. Moreover, interest expense increased by $134 thousand due to a $17.8 million increase in outstanding debt during the past twelve months; and, asset management fees to the manager increased by $93 thousand due to the increase in managed assets and related rents.



Capital Resources and Liquidity

The Company's cash and cash equivalents totaled $10.8 million and $12.7 million at March 31, 2014 and December 31, 2013, respectively. The liquidity of the Company will vary in the future, increasing to the extent cash flows from leases and proceeds of asset sales 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 and proceeds from asset sales. If inflation in the general economy becomes significant, it may affect the Company in as much 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 and notes would not increase as such rates are generally fixed for the terms of the leases and notes without adjustment for inflation. In addition, if interest rates increase significantly under such circumstances, the rates that the Company can obtain on future lease or financing transactions will be expected to increase as the cost of capital is a significant factor in the pricing of leases and investments in notes receivable. Leases and notes already in place, for the most part, would not be affected by changes in interest rates. The Company currently believes it has available adequate reserves to meet its immediate cash requirements and those of the next twelve months, but in the event those reserves were found to be inadequate, the Company would likely be in a position to borrow against its current portfolio to meet such requirements. The Managing Member envisions no such requirements for operating purposes.



Cash Flows

The following table sets forth summary cash flow data (in thousands):

[[Image Removed]] [[Image Removed]] [[Image Removed]] Three Months Ended March 31, 2014 2013 Net cash provided by (used in): Operating activities $ 827 $ 358 Investing activities (214 ) (2,427 ) Financing activities (2,515 ) 5,979



Net (decrease) increase in cash and cash $ (1,902 ) $

3,910

equivalents

The three months ended March 31, 2014 versus the three months ended March 31, 2013

During the three months ended March 31, 2014, the Company's primary source of liquidity was cash flow from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. In addition, the Company realized $590 thousand of proceeds from the sale of lease assets and early termination of certain notes receivable. 21 --------------------------------------------------------------------------------



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By comparison, during the three months ended March 31, 2013, the Company's primary source of liquidity was subscription proceeds from the public offering of Units, which totaled $7.7 million during the first quarter of 2013. During the same period, the Company began to realize cash flow from its portfolio of operating and direct financing lease contracts, and its investments in notes receivable. During both three month-periods ended March 31, 2014 and 2013, cash was primarily used to acquire lease assets totaling $1.4 million and $2.7 million, respectively. Cash was also used to pay distributions to both Other Members and the Managing Member - totaling $1.6 million and $807 thousand during the respective three months ended March 31, 2014 and 2013; and, to pay down debt totaling $908 thousand and $206 thousand. In addition, during the prior year period, cash totaling $681 thousand was used to pay commissions associated with the offering. Revolving credit facility Effective May 25, 2012, the Company participated with AFS and certain of its affiliates in a revolving credit facility (the "Credit Facility") with a syndicate of financial institutions. The Credit Facility is comprised of a working capital facility to AFS, an acquisition facility (the "Acquisition Facility") and a warehouse facility (the "Warehouse Facility") to AFS, the Company and affiliates, and a venture facility available to an affiliate. Such Credit Facility was for an amount up to $60 million and set to expire in June 2014. During January 2014, the line was increased to $75 million, an affiliated participant added, and expiration extended to June 2015.



Compliance with covenants

The Credit Facility includes certain financial and non-financial covenants applicable to each borrower, including the Company. Such covenants include covenants typically found in credit facilities of the size and nature of the Credit Facility, such as accuracy of representations, good standing, absence of liens and material litigation, etc. The Company was in compliance with all applicable covenants under the Credit Facility as of March 31, 2014. The Company considers certain financial covenants to be material to its ongoing use of the Credit Facility and these covenants are described below.



Material financial covenants

Under the Credit Facility, the Company is required to maintain a specific tangible net worth, to comply with a leverage ratio and an interest coverage ratio, and to comply with other terms expressed in the Credit Facility, including limitation on the incurrence of additional debt and guaranties, defaults, and delinquencies.

As of March 31, 2014, the material financial covenants are summarized as follows:

Minimum Tangible Net Worth: $10.0 million Leverage Ratio (leverage to Tangible Net Worth): Not to exceed 1.25 to 1 Collateral Value: Collateral value under the Warehouse Facility must be no less than the outstanding borrowings under that facility EBITDA to Interest Ratio: Not to be less than 2 to 1 for the four fiscal quarters just ended "EBITDA" is defined under the Credit Facility as, for the relevant period of time (1) gross revenues (all payments from leases and notes receivable) for such period minus (2) expenses deducted in determining net income for such period plus (3) to the extent deducted in determining net income for such period (a) provision for income taxes and (b) interest expense, and (c) depreciation, amortization and other non-cash charges. Extraordinary items and gains or losses on (and proceeds from) sales or dispositions of assets outside of the ordinary course of business are excluded in the calculation of EBITDA. "Tangible Net Worth" is defined as, as of the date of determination, (i) the net worth of the Company, after deducting therefrom (without duplication of deductions) the net book amount of all assets of the Company, after deducting any reserves and other amounts for assets which would be treated as intangibles under accounting principles generally accepted in the United States of America ("GAAP"), and after certain other adjustments permitted under the agreements.



The financial covenants referred to above are applicable to the Company only to the extent that the Company has borrowings outstanding under the Credit Facility. The Company was in compliance with

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these financial covenants under the Credit Facility with a minimum Tangible Net Worth, leverage ratio and interest coverage ratio, as calculated per the Credit Facility agreement of $45.4 million, 0.41 to 1, and 20.63 to 1, respectively, as of March 31, 2014. As such, as of March 31, 2014, the Company was in compliance with all such material financial covenants.



Reconciliation to GAAP of EBITDA

For purposes of compliance with the Credit Facility covenants, the Company uses a financial calculation of EBITDA, as defined therein, which is a non-GAAP financial performance measure. The EBITDA is utilized by the Company to calculate its debt covenant ratios.

As previously discussed, the Fund became a party to the Credit Facility effective May 25, 2012. The following is a reconciliation of net loss to EBITDA, as defined in the loan agreement, for the twelve months ended March 31, 2014 (in thousands): [[Image Removed]] [[Image Removed]] Net loss - GAAP basis $ (1,578 ) Interest expense 261 Depreciation and amortization



5,622

Amortization of initial direct costs



37

Unrealized gain on fair valuation of warrants (644 ) Principal payments received on direct financing leases



38

Principal payments received on notes receivable



1,648

EBITDA (for Credit Facility financial covenant calculation $ 5,384 only)

Events of default, cross-defaults, recourse and security

The terms of the Credit Facility include standard events of default by the Company which, if not cured within applicable grace periods, could give lenders remedies against the Company, including the acceleration of all outstanding borrowings and a demand for repayment in advance of their stated maturity. If a breach of any material term of the Credit Facility should occur, the lenders may, at their option, increase borrowing rates, accelerate the obligations in advance of their stated maturities, terminate the facility, and exercise rights of collection available to them under the express terms of the facility, or by operation of law. The lenders also retain the discretion to waive a violation of any covenant at the Company's request. The Company is currently in compliance with its obligations under the Credit Facility. In the event of a technical default (e.g., the failure to timely file a required report, or a one-time breach of a financial covenant), the Company believes it has ample time to request and be granted a waiver by the lenders, or, alternatively, cure the default under the existing provisions of its debt agreements, including, if necessary, arranging for additional capital from alternate sources to satisfy outstanding obligations.



The lending syndicate providing the Credit Facility has a blanket lien on all of the Company's assets as collateral for any and all borrowings under the Acquisition Facility, and on a pro-rata basis under the Warehouse Facility.

The Acquisition Facility is generally recourse solely to the Company, and is not cross-defaulted to any other obligations of affiliated companies under the Credit Facility, except as described in this paragraph. The Credit Facility is cross-defaulted to a default in the payment of any debt (other than non-recourse debt) or any other agreement or condition beyond the period of grace (not exceeding 30 days), the effect of which would entitle the lender under such agreement to accelerate the obligations prior to their stated maturity in an individual or aggregate principal amount in excess of 15% of the Company's consolidated Tangible Net Worth. Also, a bankruptcy of AFS will trigger a default for the Company under the Credit Facility.



Non-Recourse Long-Term Debt

As of March 31, 2014 and December 31, 2013, the Company had non-recourse long-term debt totaling $16.7 million and $17.6 million, respectively. Such non-recourse notes payable do not contain any material financial covenants. The notes are secured by a specific lien granted by the Company to the non-recourse

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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. For detailed information on the Company's debt obligations, see Notes 8 and 9 to the financial statements as set forth in Part I, Item 1, Financial Statements (Unaudited).



Long-Term Debt

As of March 31, 2014, the Company had long-term debt totaling $2.1 million. The debt was utilized during the fourth quarter of 2013 to partially fund the marine vessel and related bareboat charter purchased by the Fund and its affiliate, ATEL 14, LLC. The full pro rata principal amount of $2.1 million plus all outstanding accrued and unpaid interest of approximately $400 thousand shall be paid in one payment of $2.5 million due on May 25, 2019. The note is recourse to the residual value of the vessel which is expected to be well in excess of the note amount. In addition, the lender has recourse to the Fund's general assets up to $2.5 million. The note does not contain any material financial covenants and is guaranteed as a senior obligation of the Fund.



Distributions

The Unitholders of record are entitled to certain distributions as provided under the Operating Agreement. The Company commenced periodic distributions beginning with the month of January 2012. Additional distributions have been made consistently through March 2014.

Cash distributions were made by the Fund to Unitholders of record as of February 28, 2014 and paid through March 2014. Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital (including escrow interest) or a portion of each. Generally, the portion of each cash distribution by a company which exceeds its net income for the fiscal period would constitute a return of capital. The Fund is required by the terms of its Operating Agreement to distribute the net cash flow generated by its investments in certain minimum amounts during the Reinvestment Period before it can reinvest its operating cash flow in additional portfolio assets. See the discussion in the Prospectus under "Income, Losses and Distributions - Reinvestment." Accordingly, the amount of cash flow from Fund investments distributed to Unitholders will not be available for reinvestment in additional portfolio assets. The cash distributions were based on current and anticipated gross revenues from the leases and loans acquired. During the Fund's acquisition and operating stages, the Fund may incur short term borrowing to fund regular distributions of such gross revenues to be generated by newly acquired transactions during their respective initial fixed terms. As such, all Fund periodic cash distributions made during these stages have been, and are expected in the future to be, based on the Fund's actual and anticipated gross revenues to be generated from the binding initial terms of the leases and loans acquired. 24 --------------------------------------------------------------------------------



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The following table summarizes distribution activity for the Fund from inception through March 31, 2014 (in thousands, except as to Units and per Unit data):

[[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] Distribution Paid Return of Capital Distribution of Income Total

Distribution Total Distribution per Weighted Average Units Period(1) Unit(2) Outstanding(3) Monthly and quarterly distributions Oct 2011 - Dec 2011Feb 2012 - $ - $ - $ - n/a n/a (Distribution of Jun 2012 escrow interest) Jan 2012 - Nov Feb 2012 - 1,173 - 1,173 0.79 1,476,249 2012 Dec 2012 Dec 2012 - Nov Jan 2013 - 4,191 - 4,191 0.88 4,758,784 2013 Dec 2013 Dec 2013 - Feb Jan 2014 - 1,486 - 1,486 0.22 6,620,971 2014 Mar 2014 $ 6,850 $ - $ 6,850 $ 1.89 Source of distributions Lease and loan payments and $ 6,850 100.00 % $ - 0.00 % $ 6,850 100.00 % sales proceeds received Interest Income - 0.00 % - 0.00 % - 0.00 % Debt against non-cancellable firm term - 0.00 % - 0.00 % - 0.00 % payments on leases and loans $ 6,850 100.00 % $ - 0.00 % $ 6,850 100.00 % [[Image Removed]]

(1) Investors may elect to receive their distributions either monthly or quarterly (See "Timing and Method of Distributions" on Page 67 of the Prospectus).



(2) Total distributions per Unit represents the per Unit distribution rate for

those units which were outstanding for all of the applicable period.

(3) Balances shown represent weighted average units for the period from January

1, 2012 to November 30, 2012, December 1, 2012 to November 30, 2013, and December 1, 2013 to February 28, 2014, respectively.



Commitments and Contingencies and Off-Balance Sheet Transactions Commitments and Contingencies

At March 31, 2014, there were commitments to fund investments in notes receivable and purchase lease assets totaling approximately $6.2 million and $1.2 million, respectively. These amounts represent contract awards which may be canceled by the prospective borrower/investee or may not be accepted by the Company.



Off-Balance Sheet Transactions

None.

Recent Accounting Pronouncements

Recent accounting standards updates as issued by the Financial Accounting Standards Board (FASB) were evaluated and determined to be not applicable to the Company.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going 25 --------------------------------------------------------------------------------



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basis, the Company evaluates its estimates, which are based upon historical experiences, market trends and financial forecasts, and upon various other assumptions that management believes to be reasonable under the circumstances and at that certain point in time. Actual results may differ, significantly at times, from these estimates under different assumptions or conditions.



The Company's critical accounting policies are described in its Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to the Company's critical accounting policies since December 31, 2013.


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