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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-QSB



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2007



| ̈ | 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 000-33103



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ATEL Capital Equipment Fund
VIII, LLC

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                       
|-------------------------------------------------------------- |  | --------------------------------------
|California                                                     |  | 20-1357935                            
|(State or other jurisdiction of Incorporation or organization) |  | (I. R. S. Employer Identification No.)

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

(Address of principal executive offices)

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



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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



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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 ̈No  x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes ̈No  x

State the issuers revenues for the most recent fiscal year: $14,581,271

The number of Limited Liability Company Units
outstanding as of July 31, 2007: 13,560,188

DOCUMENTS INCORPORATED BY REFERENCE

None



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##### Table of Contents

Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

Index



|         |  |                                                                                                                              |  |   
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | --
|Part I.  |  | Financial Information                                                                                                        |  | 3 
|         |  |                                                                                                                             
|Item 1.  |  | Financial Statements (Unaudited)                                                                                             |  | 3 
|         |  |                                                                                                                             
|         |  | Balance Sheet, March 31, 2007.                                                                                               |  | 3 
|         |  |                                                                                                                             
|         |  | Statements of Operations for the three months ended March 31, 2007 and 2006.                                                 |  | 4 
|         |  |                                                                                                                             
|         |  | Statement of Changes in Members Capital for the year ended December 31, 2006 and for the three months ended March 31, 2007. |  | 5 
|         |  |                                                                                                                             
|         |  | Statements of Cash Flows for the three months ended March 31, 2007 and 2006.                                                 |  | 6 
|         |  |                                                                                                                             
|         |  | Notes to the Financial Statements                                                                                            |  | 7 
|         |  |                                                                                                                             
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 18
|         |  |                                                                                                                             
|Item 3.  |  | Controls and Procedures                                                                                                      |  | 21
|         |  |                                                                                                                             
|Part II. |  | Other Information                                                                                                            |  | 22
|         |  |                                                                                                                             
|Item 1.  |  | Legal Proceedings                                                                                                            |  | 22
|         |  |                                                                                                                             
|Item 2.  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                  |  | 22
|         |  |                                                                                                                             
|Item 3.  |  | Defaults Upon Senior Securities                                                                                              |  | 22
|         |  |                                                                                                                             
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                          |  | 22
|         |  |                                                                                                                             
|Item 5.  |  | Other Information                                                                                                            |  | 22
|         |  |                                                                                                                             
|Item 6.  |  | Exhibits                                                                                                                     |  | 22



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##### Table of Contents

Part I. FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

BALANCE SHEET

MARCH 31, 2007

(in thousands)

(Unaudited)



|                                                                                                            |  |   |       
|----------------------------------------------------------------------------------------------------------- |  | - | ------
|ASSETS                                                                                                      |  |   |       
|Cash and cash equivalents                                                                                   |  | $ | 1,241 
|Accounts receivable, net of allowance for doubtful accounts of $127                                         |  |   | 906   
|Prepaid and other assets                                                                                    |  |   | 44    
|Investments in equipment and leases, net of accumulated depreciation and impairment loss reserve of $41,782 |  |   | 20,971
|                                                                                                            |  |   |       
|Total assets                                                                                                |  | $ | 23,162
|                                                                                                            |  |   |       
|                                                                                                            | 
|LIABILITIES AND MEMBERS CAPITAL                                                                            |  |   |       
|Accounts payable and accrued liabilities:                                                                   |  |   |       
|Managing Member                                                                                             |  | $ | 916   
|Other                                                                                                       |  |   | 592   
|Accrued interest payable                                                                                    |  |   | 15    
|Non-recourse debt                                                                                           |  |   | 2,932 
|Interest rate swap contracts                                                                                |  |   | 133   
|Unearned operating lease income                                                                             |  |   | 274   
|                                                                                                            |  |   |       
|Total liabilities                                                                                           |  |   | 4,862 
|                                                                                                            | 
|Commitments and contingencies                                                                               |  |   |       
|                                                                                                            | 
|Members capital:                                                                                           |  |   |       
|Managing Member                                                                                             |  |   |      
|Other Members                                                                                               |  |   | 18,300
|                                                                                                            |  |   |       
|Total Members capital                                                                                      |  |   | 18,300
|                                                                                                            |  |   |       
|Total liabilities and Members capital                                                                      |  | $ | 23,162
|                                                                                                            |  |   |       

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF OPERATIONS

THREE MONTHS ENDED

MARCH 31, 2007
AND 2006

(in thousands, except per unit data)

(Unaudited)



|                                                            |  |                              |            |   |      |   |            |  
|----------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                            |  | Three months ended March 31, |           
|                                                            |  | 2007                         |            |   | 2006 |  
|Revenues:                                                   |  |                              |            |   |      |   |            |  
|Leasing activities:                                         |  |                              |            |   |      |   |            |  
|Operating leases                                            |  | $                            | 2,252      |   |      | $ | 2,390      |  
|Direct financing leases                                     |  |                              | 9          |   |      |   | 31         |  
|Gain on sales of assets                                     |  |                              | 26         |   |      |   | 37         |  
|Interest                                                    |  |                              | 13         |   |      |   | 13         |  
|Other revenue                                               |  |                              | 3          |   |      |   | 6          |  
|                                                            |  |                              |            |   |      |   |            |  
|Total revenues                                              |  |                              | 2,303      |   |      |   | 2,477      |  
|                                                            |  |                             
|Expenses:                                                   |  |                              |            |   |      |   |            |  
|Depreciation of operating lease assets                      |  |                              | 1,017      |   |      |   | 1,393      |  
|Interest expense                                            |  |                              | 87         |   |      |   | 343        |  
|Asset management fees to Managing Member                    |  |                              | 140        |   |      |   | 113        |  
|Vessel maintenance                                          |  |                              | 197        |   |      |   | 30         |  
|Railcar maintenance                                         |  |                              | 127        |   |      |   | 71         |  
|Cost reimbursements to Managing Member                      |  |                              | 679        |   |      |   | 679        |  
|Amortization of initial direct costs                        |  |                              | 3          |   |      |   | 7          |  
|Professional fees                                           |  |                              | 253        |   |      |   | 122        |  
|Insurance                                                   |  |                              | 23         |   |      |   | 24         |  
|Provision for (recovery of) doubtful accounts               |  |                              | (4         | ) |      |   | 4          |  
|Taxes on income and franchise fees                          |  |                              |           |   |      |   | 25         |  
|Other                                                       |  |                              | 60         |   |      |   | 28         |  
|                                                            |  |                              |            |   |      |   |            |  
|                                                            |  |                              | 2,582      |   |      |   | 2,839      |  
|                                                            |  |                              |            |   |      |   |            |  
|Net loss from operations                                    |  |                              | (279       | ) |      |   | (362       | )
|Other income, net                                           |  |                              | 29         |   |      |   | 153        |  
|                                                            |  |                              |            |   |      |   |            |  
|Net loss                                                    |  | $                            | (250       | ) |      | $ | (209       | )
|                                                            |  |                              |            |   |      |   |            |  
|                                                            |  |                             
|Net income (loss):                                          |  |                              |            |   |      |   |            |  
|Managing Member                                             |  | $                            |           |   |      | $ | 197        |  
|Other Members                                               |  |                              | (250       | ) |      |   | (406       | )
|                                                            |  |                              |            |   |      |   |            |  
|                                                            |  | $                            | (250       | ) |      | $ | (209       | )
|                                                            |  |                              |            |   |      |   |            |  
|Net loss per Limited Liability Company Unit (Other Members) |  | $                            | (0.02      | ) |      | $ | (0.03      | )
|Weighted average number of Units outstanding                |  |                              | 13,560,188 |   |      |   | 13,570,188 |  

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENT OF CHANGES IN MEMBERS CAPITAL

FOR THE YEAR ENDED DECEMBER 31, 2006

AND FOR THE

THREE MONTHS ENDED

MARCH 31, 2007

(in thousands, except per unit data)

(Unaudited)



|                                                                   |  |               |   |  |                |         |   |                                   |   |      |       |  |   |      |   |  |   |         |  
|------------------------------------------------------------------ |  | ------------- | - |  | -------------- | ------- | - | --------------------------------- | - | ---- | ----- |  | - | ---- | - |  | - | ------- | -
|                                                                   |  | Other Members |   |  | ManagingMember |         |   | AccumulatedOtherComprehensiveLoss |   |      | Total | 
|                                                                   |  | Units         |   |  | Amount         |         |   |                                   |  
|Balance December 31, 2005                                          |  | 13,570,188    |   |  | $              | 26,622  |   |                                   | $ |     |       |  | $ | (140 | ) |  | $ | 26,482  |  
|Distributions to Other Members ($0.91 per Unit)                    |  |              |   |  |                | (12,343 | ) |                                   |   |     |       |  |   |     |   |  |   | (12,343 | )
|Distributions to Managing Member                                   |  |              |   |  |                |        |   |                                   |   | (788 | )     |  |   |     |   |  |   | (788    | )
|Reclassification for portion of swap liability charged to net loss |  |              |   |  |                |        |   |                                   |   |     |       |  |   | 140  |   |  |   | 140     |  
|Rescissions of capital contributions                               |  | (10,000       | ) |  |                | (45     | ) |                                   |   |     |       |  |   |     |   |  |   | (45     | )
|Net income                                                         |  |              |   |  |                | 4,316   |   |                                   |   | 788  |       |  |   |     |   |  |   | 5,104   |  
|                                                                   |  |               |   |  |                |         |   |                                   |   |      |       |  |   |      |   |  |   |         |  
|Balance December 31, 2006                                          |  | 13,560,188    |   |  |                | 18,550  |   |                                   |   |     |       |  |   |     |   |  |   | 18,550  |  
|Net loss                                                           |  |              |   |  |                | (250    | ) |                                   |   |     |       |  |   |     |   |  |   | (250    | )
|                                                                   |  |               |   |  |                |         |   |                                   |   |      |       |  |   |      |   |  |   |         |  
|Balance March 31, 2007                                             |  | 13,560,188    |   |  | $              | 18,300  |   |                                   | $ |     |       |  | $ |     |   |  | $ | 18,300  |  
|                                                                   |  |               |   |  |                |         |   |                                   |   |      |       |  |   |      |   |  |   |         |  

See accompanying notes.



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

MARCH 31, 2007
AND 2006

(in thousands)

(Unaudited)



|                                                                           |  |                             |        |   |      |   |        |  
|-------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                           |  | Three months endedMarch 31, |       
|                                                                           |  | 2007                        |        |   | 2006 |  
|Operating activities:                                                      |  |                             |        |   |      |   |        |  
|Net loss                                                                   |  | $                           | (250   | ) |      | $ | (209   | )
|Adjustment to reconcile net loss to cash provided by operating activities: |  |                             |        |   |      |   |        |  
|Gain on sales of assets                                                    |  |                             | (26    | ) |      |   | (37    | )
|Depreciation of operating lease assets                                     |  |                             | 1,017  |   |      |   | 1,393  |  
|Amortization of initial direct costs                                       |  |                             | 3      |   |      |   | 7      |  
|Interest rate swap contracts                                               |  |                             |       |   |      |   | 140    |  
|Change in fair value of interest rate swap contracts                       |  |                             | (29    | ) |      |   | (153   | )
|Provision for (recovery of) doubtful accounts                              |  |                             | (4     | ) |      |   | 4      |  
|Changes in operating assets and liabilities:                               |  |                             |        |   |      |   |        |  
|Accounts receivable                                                        |  |                             | 119    |   |      |   | (103   | )
|Prepaid expenses and other assets                                          |  |                             | 32     |   |      |   | 25     |  
|Accounts payable, Managing Member                                          |  |                             | (157   | ) |      |   | (66    | )
|Accounts payable, other                                                    |  |                             | (109   | ) |      |   | (447   | )
|Accrued interest payable                                                   |  |                             | (14    | ) |      |   | (23    | )
|Unearned operating lease income                                            |  |                             | 182    |   |      |   | 73     |  
|                                                                           |  |                             |        |   |      |   |        |  
|Net cash (used in) provided by operating activities                        |  |                             | 764    |   |      |   | 604    |  
|                                                                           |  |                             |        |   |      |   |        |  
|                                                                           |  |                            
|Investing activities:                                                      |  |                             |        |   |      |   |        |  
|Proceeds from sales of lease assets                                        |  |                             | 409    |   |      |   | 249    |  
|Reduction of net investment in direct financing leases                     |  |                             | 78     |   |      |   | 243    |  
|Purchases and additions to equipment on operating leases                   |  |                             |       |   |      |   | (427   | )
|                                                                           |  |                             |        |   |      |   |        |  
|Net cash provided by investing activities                                  |  |                             | 487    |   |      |   | 65     |  
|                                                                           |  |                             |        |   |      |   |        |  
|                                                                           |  |                            
|Financing activities:                                                      |  |                             |        |   |      |   |        |  
|Borrowings under acquisition facility                                      |  |                             |       |   |      |   | 6,600  |  
|Repayments under acquisition facility                                      |  |                             |       |   |      |   | (1,000 | )
|Repayments under receivables funding program                               |  |                             |       |   |      |   | (4,524 | )
|Repayments of non-recourse debt                                            |  |                             | (564   | ) |      |   | (318   | )
|Distributions to Other Members                                             |  |                             | (1,304 | ) |      |   | (3,087 | )
|Distributions to Managing Member                                           |  |                             |       |   |      |   | (197   | )
|                                                                           |  |                             |        |   |      |   |        |  
|Net cash used in financing activities                                      |  |                             | (1,868 | ) |      |   | (2,526 | )
|                                                                           |  |                             |        |   |      |   |        |  
|                                                                           |  |                            
|Net decrease in cash and cash equivalents                                  |  |                             | (617   | ) |      |   | (1,857 | )
|Cash and cash equivalents at beginning of period                           |  |                             | 1,858  |   |      |   | 2,615  |  
|                                                                           |  |                             |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                 |  | $                           | 1,241  |   |      | $ | 758    |  
|                                                                           |  |                             |        |   |      |   |        |  
|                                                                           |  |                            
|Supplemental disclosures of cash flow information:                         |  |                             |        |   |      |   |        |  
|Cash paid during the period for taxes                                      |  | $                           |       |   |      | $ | 26     |  
|                                                                           |  |                             |        |   |      |   |        |  
|Cash paid during the period for interest                                   |  | $                           | 101    |   |      | $ | 365    |  
|                                                                           |  |                             |        |   |      |   |        |  
|                                                                           |  |                            
|Schedule of non-cash transactions:                                         |  |                             |        |   |      |   |        |  
|Distributions declared to Managing Member at period end                    |  | $                           |       |   |      | $ | 106    |  
|                                                                           |  |                             |        |   |      |   |        |  
|Distributions declared to Other Members at period end                      |  | $                           |       |   |      | $ | 1,306  |  
|                                                                           |  |                             |        |   |      |   |        |  

See accompanying notes.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS

1. Organization and Limited Liability Company matters:

ATEL Capital
Equipment Fund VIII, LLC (the Company) was formed under the laws of the State of California on July 31, 1998. The Company was formed for the purpose of acquiring equipment to engage in equipment leasing, lending and sales
activities. The Managing Member of the Company is ATEL Financial Services, LLC (AFS), a California limited liability company. The Company may continue until December 31, 2019. Each Members personal liability for obligations of
the Company generally will be limited to the amount of their respective contributions and rights to undistributed profits and asset of the Company.

The
Company conducted a public offering of 15,000,000 Limited Liability Company Units (Units), at a price of $10 per Unit. On January 13, 1999, 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 (leasing and lending activities). Total gross
contributions in the amount of $135.7 million (13,570,188 Units) were received as of November 30, 2000, $500 of which represented the Initial Members capital investment, $100 of which represented AFS capital investment and $135.7
million of which represented continuing interest of Other Members. The offering was terminated on November 30, 2000.

As of March 31, 2007,
13,560,188 Units were issued and outstanding.

The Companys principal objectives are to invest in a diversified portfolio of equipment that will
(i) preserve, protect and return the Companys invested capital; (ii) generate 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, which ended December 31, 2006 and (iii) provide additional distributions following the Reinvestment Period and until all equipment has been sold. The
Company is governed by its Limited Liability Company Operating Agreement (Operating Agreement), as amended.

The Company, or AFS on behalf of
the Company, has incurred costs in connection with the organization, registration and issuance of the Limited Liability Company Units (Note 4). The amount of such costs to be borne by the Company is limited by certain provisions of the
Companys Operating Agreement. The Company will pay AFS and affiliates of AFS substantial fees which may result in a conflict of interest. The Company will pay substantial fees to AFS and its affiliates before distributions are paid to
investors even if the Company does not produce profits. Therefore, the financial position of the Company could change significantly.

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 instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. 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. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that effect reported amounts in the financial statements
and accompanying notes. Therefore, actual results could differ from those estimates. Operating results for the three months ended March 31, 2007 are not necessarily indicative of the results for the year ending December 31, 2007.

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, 2006, filed with the Securities and Exchange Commission.

Certain prior period amounts have been reclassified to
conform to the current period presentation. Footnote and tabular amounts are presented in thousands, except as to Units and per Unit data.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 relate primarily
to the determination of residual values at the end of the lease term and expected future cash flows used for impairment analysis purposes and determination of the allowance for doubtful accounts.

Cash and cash equivalents:

Cash and cash equivalents include cash in
banks and cash equivalent investments with original maturities of ninety days or less.

Credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk include cash and cash equivalents, direct finance lease receivables, notes
receivable and accounts receivable. The Company places its cash deposits and temporary cash investments with creditworthy, high quality financial institutions and, therefore, believes that such a concentration of such deposits and temporary cash
investments is not deemed to create a significant risk to the Company. Accounts receivable represent amounts due from lessees in various industries, related to equipment on operating and direct financing leases.

Accounts receivable:

Accounts receivable represent the amounts
billed under operating and direct financing lease contracts which are currently due to the Company. Allowances for doubtful accounts are typically established based on historical charge offs and collection experience and are usually determined by
specifically identified lessees and invoiced amounts. Accounts receivable are charged off to the allowance on specific identification basis. Amounts recovered that were previously written-off are recorded as other income in the period received.

Direct financing leases and related revenue recognition:

Income from direct financing lease transactions is reported using the financing method of accounting, in which the Companys investment in the leased property is reported as a receivable from the lessee to be recovered through future
rentals. The interest income portion of each rental payment is calculated so as to generate a constant rate of return on the net receivable outstanding.

Allowances for losses on direct financing leases are typically established based on historical charge offs and collections experience and are usually determined by specifically identified lessees and billed and unbilled receivables. Direct
financing leases are charged off to the allowance as they are deemed uncollectible.

Direct financing leases 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 credit worthiness of all direct finance lessees with payments outstanding less than 90 days. Based upon
managements judgment, direct finance lessees with balances less than 90 days delinquent may be placed in a non-accrual status. Leases 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 lease payments is probable.



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



Equipment on operating leases and related revenue recognition:

Equipment subject to operating leases is stated at cost. Depreciation is being recognized on a straight-line method over the terms of the related leases to the
equipments estimated residual values at the end of the leases.

Operating lease revenue is recognized on a straight-line basis over the term of the
underlying leases. The initial lease terms will vary as to the type of equipment subject to the leases, the needs of the lessees and the terms to be negotiated, but initial leases are generally from 24 to 120 months. The difference between rent
received and rental revenue recognized is recorded as unearned operating lease income on the balance sheet.

Initial direct costs:

The Company capitalizes initial direct costs (IDC) associated with the origination and funding of lease assets as defined in Statement of Financial Accounting
Standards (SFAS) No. 91 (SFAS No. 91) Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases. IDC includes both internal costs
(e.g., labor and overhead) and external broker fees incurred with the origination. The costs are amortized on a lease by lease basis based on actual lease term using a straight-line method for operating leases and the effective interest rate method
for direct finance leases and notes receivable. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that are not consummated are not eligible
for capitalization as initial direct costs and are expensed as acquisition expense.

Acquisition expense:

In prior years, the Company capitalized initial direct costs (IDC) associated with the acquisition of lease assets (as defined in Statement of Financial
Accounting Standards SFAS No. 91 Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases). Capitalized IDC included both internal costs (e.g., labor
and overhead) and external broker fees incurred with the acquisition. Remaining IDC is being amortized on a lease by lease basis based on actual lease term using a straight-line method for operating leases and the effective interest rate method for
direct finance leases. Upon disposal of the underlying lease assets, both the initial direct costs and the associated accumulated amortization are relieved. Costs related to leases that were not consummated were not eligible for capitalization as
initial direct costs. Such amounts were expensed as acquisition expense.

Asset valuation:

Recorded values of the Companys asset portfolio are periodically reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. An impairment loss is measured and recognized only if the estimated undiscounted future cash flows of the asset are less than their 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. Impairment is measured as the difference between the fair value (as determined by a valuation method using the discounted estimated future cash flows) of the asset and its carrying value on the measurement date.

Segment reporting:

The Company reports segment information in
accordance with SFAS No. 131 Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes annual and interim standards for operating segments of a company. It also requires entity-wide
disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenue, and its major customers. 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.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



The Companys chief operating decision makers are the Managing Members Chief Operating Officer and its
Chief Executive Officer. The Company believes that its equipment leasing business operates as one reportable segment because: a) the Company measures profit and loss at the equipment portfolio level as a whole; b) the chief operating decision makers
do not review information based on any operating segment other than the equipment leasing transaction portfolio; c) the Company does not maintain discrete financial information on any specific segment other than its equipment financing operations;
d) the Company has not chosen to organize its business around different products and services other than equipment lease financing; and e) the Company has not chosen to organize its business around geographic areas.

Certain of the Companys lessee customers have international operations. In these instances, the Company is aware that certain equipment, primarily rail and
transportation, may periodically exit the country. However, these lessee customers are US-based, and it is impractical for the Company to track, on an asset-by-asset day-by-day basis, where these assets are deployed.

Derivative financial instruments:

In June 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which established new accounting and reporting standards for derivative instruments. SFAS No. 133
has been amended by SFAS No. 137, issued in June 1999, by SFAS No. 138, issued in June 2000 and by SFAS No. 149, issued in June 2003.

The
Company records all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. It further provides criteria for derivative instruments to be designated as fair value, cash flow, or foreign currency
hedges, and establishes accounting standards for reporting changes in the fair value of the derivative instruments. Upon adoption on January 1, 2001, the Company recorded its interest rate swap hedging instruments at fair value in the balance
sheet, designated the interest rate swaps as cash flow hedges, and recognized the offsetting gains or losses as adjustments to be reported in net income or other comprehensive income, as appropriate. For derivative instruments not designated as
hedging instruments, the gain or loss is recognized in current earnings during the period of change. Such interest rate swaps are linked to and adjust effectively the interest rate sensitivity of specific long-term debt.

The effective portion of the change in fair value of the interest rate swaps is recorded in Accumulated Other Comprehensive Income (AOCI) and the ineffective
portion (if any) directly in earnings. Amounts in AOCI are reclassified into earnings in a manner consistent with the earnings pattern of the underlying hedged item (generally reflected in interest expense). If a hedged item is de-designated prior
to maturity, previous adjustments to AOCI are recognized in earnings to match the earnings recognition pattern of the hedged item (e.g., level yield amortization if hedging an interest bearing instruments). Interest income or expense on most hedging
derivatives used to manage interest rate exposure is recorded on an accrual basis as an adjustment to the yield of the link exposures over the periods covered by the contracts. This matches the income recognition treatment of the exposure (i.e., the
liabilities, which are carried at historical cost, with interest recorded on an accrual basis).

Credit exposure from derivative financial instruments,
which are assets, arises from the risk of a counterparty default on the derivative contract. The amount of the loss created by the default is the replacement cost or current positive fair value of the defaulted contract.

Unearned operating lease income:

The Company records prepayments on
operating leases as a liability, unearned operating lease income. The liability is recorded when the prepayments are received and recognized as operating lease revenue ratably over the period to which the prepayments relate.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



2. Summary of significant accounting policies (continued):



Income taxes:

The Company is treated as a partnership for federal income tax purposes. Pursuant to the provisions of Section 701 of the Internal Revenue Code, a partnership is not subject to federal income taxes. Accordingly, the Company has
provided current income taxes for only those states which levy income taxes on partnerships.

Other income (loss), net:

Other income (loss) consists of gains and losses on interest rate swap contracts.

Per unit data:

Net income and loss and distributions per unit are based upon the weighted average number of Other Members units
outstanding during the period.

Recent accounting pronouncements:

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement No.159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement
No. 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent
with the Boards long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007 (January 1, 2008). The standard
is not applicable to direct financing and operating leases. The Company does not presently anticipate any significant impact on its consolidated financial position, results of operations or cash flows.

During September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108. This Bulletin provides
the Staffs views on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The guidance in SAB No. 108 is effective for financial statements of
fiscal years ending after November 15, 2006. Adoption of this guidance did not materially impact the Partnerships financial statements.

In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards No. 157, Fair Value Measurements (FAS 157). This standard clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. As of March 31, 2007, the Fund does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the
inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes (FIN 48), to create a single model to address accounting
for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance
on deregulation, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of FIN 48
on January 1, 2007. The adoption of FIN 48 did not have a significant effect on the Companys financial position and results of operations for the quarter ended March 31, 2007.



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ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



3. Investment in equipment and leases, net:

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



|                                                                                                              |  |                         |        |                                            |   |      |                                                          |  |   |                      |   |  |   |       
|------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ------------------------------------------ | - | ---- | -------------------------------------------------------- |  | - | -------------------- | - |  | - | ------
|                                                                                                              |  | BalanceDecember 31,2006 |        | Reclassifications& Additions /Dispositions |   |      | Depreciation/AmortizationExpense orAmortizationof Leases |  |   | BalanceMarch 31,2007
|Net investment in operating leases                                                                            |  | $                       | 21,184 |                                            | $ | (139 | )                                                        |  | $ | (1,017               | ) |  | $ | 20,028
|Net investment in direct financing leases                                                                     |  |                         | 633    |                                            |   |     |                                                          |  |   | (78                  | ) |  |   | 555   
|Assets held for sale or lease, net                                                                            |  |                         | 620    |                                            |   | (244 | )                                                        |  |   |                     |   |  |   | 376   
|Initial direct costs, net of accumulated amortization of $233 at March 31, 2007 and $259 at December 31, 2006 |  |                         | 15     |                                            |   |     |                                                          |  |   | (3                   | ) |  |   | 12    
|                                                                                                              |  |                         |        |                                            |   |      |                                                          |  |   |                      |   |  |   |       
|Total                                                                                                         |  | $                       | 22,452 |                                            | $ | (383 | )                                                        |  | $ | (1,098               | ) |  | $ | 20,971
|                                                                                                              |  |                         |        |                                            |   |      |                                                          |  |   |                      |   |  |   |       

IDC amortization expense related to leases was approximately $3 thousand and $7 thousand for the three months
ended March 31, 2007 and 2006, respectively.

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

Impairment losses are recorded as an addition to accumulated depreciation of the impaired assets. Depreciation expense on property subject to operating leases and
property held for lease or sale was approximately $1.0 million and $1.4 million for the three months ended March 31, 2007 and 2006, respectively. There were no impairment losses recorded for the three months ended March 31, 2007 and 2006.

All of the leased property was acquired during the period from 1999 through 2002.

Operating leases:

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



|                              |  |                         |         |   |           |   |        |                                  |  |   |                      |   |  |   |         |  
|----------------------------- |  | ----------------------- | ------- | - | --------- | - | ------ | -------------------------------- |  | - | -------------------- | - |  | - | ------- | -
|                              |  | BalanceDecember 31,2006 |         |   | Additions |   |        | Reclassificationsor Dispositions |  |   | BalanceMarch 31,2007 |  
|Transportation, rail          |  | $                       | 23,854  |   |           | $ |       |                                  |  | $ |                     |   |  | $ | 23,854  |  
|Containers                    |  |                         | 20,995  |   |           |   |       |                                  |  |   | (21                  | ) |  |   | 20,974  |  
|Natural gas compressors       |  |                         | 2,522   |   |           |   |       |                                  |  |   | (84                  | ) |  |   | 2,438   |  
|Manufacturing                 |  |                         | 1,141   |   |           |   |       |                                  |  |   |                     |   |  |   | 1,141   |  
|Transportation, other         |  |                         | 7,721   |   |           |   |       |                                  |  |   |                     |   |  |   | 7,721   |  
|Material handling             |  |                         | 1,041   |   |           |   |       |                                  |  |   |                     |   |  |   | 1,041   |  
|Other                         |  |                         | 3,050   |   |           |   |       |                                  |  |   | (366                 | ) |  |   | 2,684   |  
|                              |  |                         |         |   |           |   |        |                                  |  |   |                      |   |  |   |         |  
|                              |  |                         | 60,324  |   |           |   |       |                                  |  |   | (471                 | ) |  |   | 59,853  |  
|Less accumulated depreciation |  |                         | (39,140 | ) |           |   | (1,017 | )                                |  |   | 332                  |   |  |   | (39,825 | )
|                              |  |                         |         |   |           |   |        |                                  |  |   |                      |   |  |   |         |  
|Total                         |  | $                       | 21,184  |   |           | $ | (1,017 | )                                |  | $ | (139                 | ) |  | $ | 20,028  |  
|                              |  |                         |         |   |           |   |        |                                  |  |   |                      |   |  |   |         |  



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



3. Investment in equipment and leases, net (continued):



Direct financing leases:

As of March 31, 2007, investment in direct financing leases consists of rail cars, anhydrous ammonia storage tanks, office automation equipment, point of sale equipment, refrigerated trailers and laundry equipment. The following lists
the components of the Companys investment in direct financing leases as of March 31, 2007 (in thousands):



|                                                             |  |               |     |  
|------------------------------------------------------------ |  | ------------- | --- | -
|                                                             |  | March 31,2007 |    
|Total minimum lease payments receivable                      |  | $             | 242 |  
|Estimated residual values of leased equipment (unguaranteed) |  |               | 334 |  
|                                                             |  |               |     |  
|Investment in direct financing leases                        |  |               | 576 |  
|Less unearned income                                         |  |               | (21 | )
|                                                             |  |               |     |  
|Net investment in direct financing leases                    |  | $             | 555 |  
|                                                             |  |               |     |  

At March 31, 2007, the aggregate amount of future lease payments is as follows (in thousands):



|                                     |  |                 |        |                       |   |       |  |   |       
|------------------------------------ |  | --------------- | ------ | --------------------- | - | ----- |  | - | ------
|                                     |  | OperatingLeases |        | DirectFinancingLeases |   | Total
|Nine months ending December 31, 2007 |  | $               | 4,608  |                       | $ | 193   |  | $ | 4,801 
|Year ending December 31, 2008        |  |                 | 5,139  |                       |   | 49    |  |   | 5,188 
|2009                                 |  |                 | 2,635  |                       |   |      |  |   | 2,635 
|2010                                 |  |                 | 1,274  |                       |   |      |  |   | 1,274 
|2011                                 |  |                 | 757    |                       |   |      |  |   | 757   
|2012                                 |  |                 | 356    |                       |   |      |  |   | 356   
|Thereafter                           |  |                 | 192    |                       |   |      |  |   | 192   
|                                     |  |                 |        |                       |   |       |  |   |       
|                                     |  | $               | 14,961 |                       | $ | 242   |  | $ | 15,203
|                                     |  |                 |        |                       |   |       |  |   |       

The Company utilizes a straight line depreciation method for equipment in all of the categories currently in its
portfolio of lease transactions. The useful lives for investment in leases by category are as follows (in years):



|                        |  |            
|----------------------- |  | -----------
|Equipment category      |  | Useful Life
|Transportation, rail    |  | 30 - 35    
|Manufacturing           |  | 10 - 20    
|Construction            |  | 7 - 10     
|Material handling       |  | 7 - 10     
|Natural gas compressors |  | 7 - 10     
|Transportation, other   |  | 7 - 10     

4. 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, 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. Reimbursable costs incurred by AFS are allocated to the Company based upon estimated time incurred by employees working on Company business and an allocation of rent and other costs based on utilization studies.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



4. Related party transactions (continued):



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

Cost reimbursements to the Managing Member are based on costs incurred by AFS in performing administrative services for the Company that are allocated to each fund that AFS manages based on certain criteria such as
existing or new leases, number of investors or equity depending on the type of cost incurred. AFS believes that the costs reimbursed are the lower of (i) actual costs incurred on behalf of the Company or (ii) the amount the Company would
be required to pay independent parties for comparable administrative services in the same geographic location.

During the three months ended
March 31, 2007 and 2006, AFS and/or affiliates earned fees, commissions and reimbursements, pursuant to the Operating Agreement as follows (in thousands):



|                                         |  |                             |     |      |   |    
|---------------------------------------- |  | --------------------------- | --- | ---- | - | ---
|                                         |  | Three Months EndedMarch 31,
|                                         |  | 2007                        |     | 2006
|Asset management fees to Managing Member |  | $                           | 140 |      | $ | 113
|Cost reimbursements to Managing Member   |  |                             | 679 |      |   | 679
|                                         |  |                             |     |      |   |    
|                                         |  | $                           | 819 |      | $ | 792
|                                         |  |                             |     |      |   |    

5. Non-recourse debt:

At March 31, 2007, non-recourse debt consists of notes payable to a financial institution. The notes are due in monthly or semi-annual installments. Interest on the notes is fixed at rates between 4.96% and 6.90%. The notes are secured
by assignments of lease payments and pledges of assets. At March 31, 2007, the carrying value of the pledged assets is $3.2 million. The notes mature from 2008 through 2010. On July 2, 2007, the Company repaid the balance of one of the notes
totaling $343 thousand.

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



|                                     |  |           |       |          |   |       |  |   |      
|------------------------------------ |  | --------- | ----- | -------- | - | ----- |  | - | -----
|                                     |  | Principal |       | Interest |   | Total
|Nine months ending December 31, 2007 |  | $         | 999   |          | $ | 119   |  | $ | 1,118
|Year ending December 31, 2008        |  |           | 779   |          |   | 107   |  |   | 886  
|2009                                 |  |           | 756   |          |   | 56    |  |   | 812  
|2010                                 |  |           | 398   |          |   | 8     |  |   | 406  
|                                     |  |           |       |          |   |       |  |   |      
|                                     |  | $         | 2,932 |          | $ | 290   |  | $ | 3,222
|                                     |  |           |       |          |   |       |  |   |      

6. Borrowing facilities:

The Company participated with AFS and certain of its affiliates in a financing arrangement (comprised of a term loan to AFS and a line of credit) with a group of financial institutions that includes certain financial
covenants. The financial arrangement was $75 million and was renewed for two years in June 2007. The Company was removed as a party to the agreement on January 31, 2007.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



7. Receivables funding program:

In 1999, the Company established a $40 million receivables funding program (which was subsequently increased to a maximum of $125 million in July 2000) with a receivables financing company that issues commercial paper
rated A1 from Standard and Poors and P1 from Moodys Investor Services. In this receivables funding program, the lenders received a general lien against all of the otherwise unencumbered assets of the Company. The program provided for
borrowing at a variable interest rate and required the Company to enter into interest rate swap agreements with certain counterparties (also rated A1/P1) to mitigate the interest rate risk associated with a variable rate note. AFS believes that this
program allowed the Company to avail itself of lower cost debt than that available for individual non-recourse debt transactions. The program expired as to new borrowings in January 2002. The receivables funding program terminated in January 2007.

As of March 31, 2007, the Company receives or pays interest on a notional principal of approximately $7.0 million on the difference between nominal
rates ranging from 4.35% to 7.50% and the variable rate under the Program of 5.76% at March 31, 2007. No actual borrowing or lending is involved. The termination of swaps was to coincide with the maturity of the debt. 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. Through the swap agreements, the interest rates on the borrowings 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 carried at fair value on the balance sheet with unrealized
gain/loss included in the statement of operations in other income or loss.

The interest rate swaps were originally designated as cash flow hedges of the
interest payment on the long term debt. As a result of repayments, the swaps were deemed to be ineffective and the Company de-designated the original hedge relationships effective September 30, 2004. Prior to this de-designation, changes in the
fair value of the swaps were recognized in accumulated other comprehensive loss (AOCL). Subsequent to this de-designation, changes in fair value of the swaps were reflected in the statement of operations in other income/loss, net. In
addition, amounts remaining in AOCL subsequent to the de-designation of the swaps were reclassified into earning in a manner consistent with the earnings pattern of the underlying hedged item. During the three months ended March 31, 2006, the
remaining AOCL balance of $140 thousand was charged to earnings (included in interest expense).

Prior to the programs termination in January 2007,
the Company was required to make payments of standby fees in order to maintain the availability of the program. These fees were included in interest expense in the Companys statement of operations. The Company made standby fee payments of $7
thousand during the first three months of 2006. There were no standby fee payments in 2007.



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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



7. Receivables funding program (continued):



Borrowings under the Program are as follows (in thousands):



|              |  |                        |         |                      |   |                              |  |                        |       |  |                                      |      |   |  |      |  
|------------- |  | ---------------------- | ------- | -------------------- | - | ---------------------------- |  | ---------------------- | ----- |  | ------------------------------------ | ---- | - |  | ---- | -
|Date Borrowed |  | OriginalAmountBorrowed |         | BalanceMarch 31,2007 |   | NotionalBalanceMarch 31,2007 |  | SwapValueMarch 31,2007 |       |  | Payment RateOn InterestSwapAgreement |     
|11/11/1999    |  | $                      | 20,000  |                      | $ |                             |  | $                      |      |  | $                                    |     |   |  |      |  
|12/21/1999    |  |                        | 20,000  |                      |   |                             |  |                        | 5,409 |  |                                      | (123 | ) |  | 7.41 | %
|12/24/1999    |  |                        | 25,000  |                      |   |                             |  |                        | 37    |  |                                      |     |   |  | 7.44 | %
|4/17/2000     |  |                        | 6,500   |                      |   |                             |  |                        | 26    |  |                                      |     |   |  | 7.45 | %
|4/28/2000     |  |                        | 1,900   |                      |   |                             |  |                        |      |  |                                      |     |   |  |      |  
|8/3/2000      |  |                        | 19,000  |                      |   |                             |  |                        | 1,200 |  |                                      | (12  | ) |  | 7.50 | %
|10/31/2000    |  |                        | 7,500   |                      |   |                             |  |                        |      |  |                                      |     |   |  |      |  
|1/29/2001     |  |                        | 8,000   |                      |   |                             |  |                        |      |  |                                      |     |   |  |      |  
|6/1/2001      |  |                        | 2,000   |                      |   |                             |  |                        |      |  |                                      |     |   |  |      |  
|9/1/2001      |  |                        | 9,000   |                      |   |                             |  |                        | 315   |  |                                      | 3    |   |  | 4.35 | %
|1/31/2002     |  |                        | 3,900   |                      |   |                             |  |                        |      |  |                                      |     |   |  |      |  
|              |  |                        |         |                      |   |                              |  |                        |       |  |                                      |      |   |  |      |  
|              |  | $                      | 122,800 |                      | $ |                             |  | $                      | 6,987 |  | $                                    | (132 | ) |  |      |  
|              |  |                        |         |                      |   |                              |  |                        |       |  |                                      |      |   |  |      |  

8. Commitments:

As of March 31, 2007, the Company had no commitments to purchase lease assets.

9. 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.

In the normal course of business, the
Company enters into contracts of various types, including lease contracts, contracts for the sale or purchase of lease assets, management contracts, loan agreements, credit lines and other debt facilities. It is prevalent industry practice for most
contracts of any significant value to include provisions that each of the contracting partiesin addition to assuming liability for breaches of the representations, warranties, and covenants that are part of the underlying contractual
obligationsalso assume an obligation to indemnify and hold the other contracting party harmless for such breaches, for harm caused by such partys gross negligence and willful misconduct, including, in certain instances, certain costs and
expenses arising from the contract. The Managing Member has substantial experience in managing similar leasing programs subject to similar contractual commitments in similar transactions, and the losses and claims arising from these commitments have
been insignificant, if any. Generally, to the extent these contracts are performed in the ordinary course of business under the reasonable business judgment of the Managing Member, no liability will arise as a result of these provisions. The
Managing Member has no reason to believe that the facts and circumstances relating to the Companys contractual commitments differ from those it has entered into on behalf of the prior programs it has managed. 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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##### Table of Contents

ATEL CAPITAL EQUIPMENT FUND VIII, LLC

NOTES TO FINANCIAL STATEMENTS



10. Members capital:

As of March 31, 2007 13,560,188 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).

As defined in the Operating Agreement, the Companys Net Income, Net Losses, and Distributions are to be allocated 92.5% to the Other Members and 7.5% to AFS.

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



|                                             |  |                              |            |      |   |           
|-------------------------------------------- |  | ---------------------------- | ---------- | ---- | - | ----------
|                                             |  | Three Months Ended March 31,
|                                             |  | 2007                         |            | 2006
|Distributions declared                       |  | $                            |           |      | $ | 3,087     
|Weighted average number of Units outstanding |  |                              | 13,560,188 |      |   | 13,570,188
|                                             |  |                              |            |      |   |           
|Weighted average distributions per Unit      |  | $                            |           |      | $ | 0.23      
|                                             |  |                              |            |      |   |           



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|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-QSB, 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 form 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 defaults and the creditworthiness of its lessees. The Fund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-QSB. 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-QSB or to reflect the occurrence of unanticipated events,
other than as required by law.

Capital Resources and Liquidity

The Company commenced its offering of Units on December 7, 1998. On January 13, 1999, the Company commenced operations in its primary business (leasing activities). As of November 30, 2000, the offering
was concluded. Total proceeds of the offering were $135.7 million. The Companys public offering provided for a total maximum capitalization of $150 million.

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 Other Members
and to the extent expenses exceed cash flows from leases and proceeds from asset sales.

As another source of liquidity, the Company has and is expected to
continue having contractual obligations with a diversified group of lessees for fixed lease terms at fixed rental amounts. As initial lease terms expire, the Company re-leases or sells the equipment. The future liquidity beyond the contractual
minimum rentals will depend on the Companys success in re-leasing or selling the equipment as it comes off lease.

Throughout the Reinvestment
Period, the Company reinvested a portion of lease payments from assets owned in new leasing transactions. Such reinvestment occurred only after the payment of all current obligations, including debt service (both principal and interest), the payment
of management fees to AFS and providing for cash distributions to the Other Members.

The Company participated with AFS and certain of its affiliates in a
financing arrangement (the Master Terms Agreement). The Master Terms Agreement is comprised of: (1) a working capital term loan facility to AFS, (2) an acquisition facility, (3) a warehouse facility to AFS, and (4) a
venture facility available to an affiliate. The Master Terms Agreement is with a group of financial institutions and includes certain financial and non-financial covenants. The Master Terms Agreement totals $75 million and expired in June 2007. The
availability of borrowings to the Company under the Master Terms Agreement was to be reduced by the amount outstanding on any of the above mentioned facilities. The Company was removed as a party to the agreement on January 31, 2007.

Borrowings under the facility as of March 31, 2007 were as follows:



|                                                                                                                           |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | -
|Total available under the financing facility                                                                               |  | $ | 75,000  |  
|Amount borrowed by the Company under the acquisition facility                                                              |  |   |        |  
|Amounts borrowed by affiliated partnerships and limited liability companies under the acquisition and warehouse facilities |  |   | (12,000 | )
|                                                                                                                           |  |   |         |  
|Total remaining available under the acquisition and warehouse facilities                                                   |  | $ | 63,000  |  
|                                                                                                                           |  |   |         |  

The Company currently 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. AFS envisions no such requirements for operating purposes.



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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 would not increase; as such rates are generally fixed for the terms of
the leases without adjustment for inflation.

If interest rates increase significantly, the lease rates that the Company can obtain on future leases will
be expected to increase as the cost of capital is a significant factor in the pricing of lease financing. Leases already in place, for the most part, would not be affected by changes in interest rates.

In 1999, the Company established a $40 million receivables funding program (which was subsequently increased to a maximum of $125 million) with a receivables financing
company that issues commercial paper rated A1 from Standard and Poors and P1 from Moodys Investor Services. In this receivables funding program, the lenders receive liens against the Companys assets. The lender is 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 AFS, 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 receivables funding program allowed the Company to have a more cost effective
means of obtaining debt financing than available for individual, non-recourse debt transactions. The receivables funding program expired as to new borrowings in January 2002 and fully terminated in January 2007.

In order to maintain the availability of the receivables funding program, the Company was required to make standby payments. These fees totaled $0 and $7 thousand for
the three months ended March 31, 2007 and 2006, respectively, and are included in interest expense in the Companys statement of operations.

Finally, the Company has access to certain sources of non-recourse debt financing, which the Company uses on a transaction basis as a means of mitigating credit risk. The non-recourse debt financing consists of notes payable to a financial
institution. The notes are due in monthly or semi-annual payments. Interest on the notes is fixed at rates between 4.96% and 6.90%. The note is secured by assignments of lease payments and pledges of assets.

The Operating Agreement limits such borrowings to 50% of the total cost of equipment, in aggregate.

The Company commenced regular distributions, based on cash flows from operations, beginning with the month of January 1999.

At March 31, 2007, the Company had no commitments to purchase leased assets.

Cash Flows

The three months ended March 31, 2007 versus the three months ended March 31, 2006

Operating Activities

During the three months ended March 31, 2007 and 2006, the Companys primary source of
cash from operations was rents from operating leases. In addition, the Companys cash flows are impacted by changes in certain assets and liabilities. Cash provided by operating activities totaled $764 thousand and $604 thousand for the three
months ended March 31, 2007 and 2006, respectively. The increase in cash balances was primarily due to a reduction in payments made against accounts payable and accrued liabilities. Cash inflow related to the reduced payments totaled $247 thousand
during the first quarter of 2007 when compared to the same period in 2006. The reduction in payments was primarily due to the timing of inestimable third party vendor invoices.

Investing Activities

During the three months ended March 31, 2007 and 2006, the main sources of cash flow from
investing activities were proceeds from sales of lease assets and payments received on the Companys investment in direct financing leases. Cash provided by investing activities totaled $487 thousand and $65 thousand for the first quarter of
2007 and 2006, respectively. The increase was primarily due to the following: (1) $427 thousand of cash used in 2006 related to capitalized costs of refurbishing rail cars and vessels under operating leases, and (2) a $160 thousand year
over year increase in proceeds on sale of lease assets offset by (3) a 2007 decrease of $165 thousand in principal payments of the Companys investment in direct financing leases.



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Financing Activities

During the three months ended March 31, 2007, the Companys sole financing activity was the repayment of its non-recourse debt. During the three months ended March 31, 2006, the main source of cash from financing activities
has been borrowings on the Companys various credit facilities. The main uses of cash in financing activities during the same timeframe have been the repayment of debt and distributions to both Managing Member and Other Members.

Cash used in financing activities totaled $1.9 million and $2.5 million for the three months ended March 31, 2007 and 2006, respectively. The higher amount of cash
used during the first quarter of 2006 included $5.5 million of debt repayments and $3.2 million of distributions paid to the Managing Member and Other Members offset by $6.6 million in gross borrowings during the period.

Results of Operations

Cost reimbursements to the Managing
Member are based on costs incurred by AFS in performing administrative services for the Company that are allocated to each managed entity based on certain criteria such as existing or new leases, number of investors or equity depending on the type
of cost incurred.

The three months ended March 31, 2007 versus the three months ended March 31, 2006

The Company incurred net losses of $250 thousand and $209 thousand for the three months ended March 31, 2007 and 2006, respectively. Results for the three months
ended March 31, 2007 reflects decreases in both total revenues and operating expenses when compared to the three months ended March 31, 2006.

Revenues

Total revenues were $2.3 million and $2.5 million for the three months ended March 31, 2007 and 2006, respectively. The net
decline in total revenues was primarily a result of decreases in both operating and direct financing lease revenues due to continued run-off of the Companys lease portfolios. Revenues from operating and direct financing leases declined by $138
thousand and $22 thousand, respectively, during the three months ended March 31, 2007 when compared to the same period in 2006.

The Company recorded
net gains totaling $26 thousand and $37 thousand on sales of lease assets during the respective first quarters of 2007 and 2006. The majority of the gain in 2007 involved the sale of equipment under operating leases that terminated during the first
quarter of 2007.



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Expenses

Total
expenses were $2.6 million and $2.8 million for the three months ended March 31, 2007 and 2006, respectively. The decrease in total expenses was primarily due to declines in depreciation and interest expense, partially offset by an increase in
vessel maintenance expense and professional fees.

Depreciation expense totaled $1 million and $1.4 million for the first quarter of 2007 and 2006,
respectively. The $376 thousand decrease in depreciation expense was primarily due to the run-off of the Companys lease portfolio, and is consistent with lower operating lease revenue. Similarly, interest expense decreased by $256 thousand
during the first quarter of 2007 when compared to the same period in 2006 as the Company paid down approximately $5.7 million of debt since March 31, 2006.

The decreases in depreciation and interest expense were partially offset by the year over year increases in vessel maintenance expense and professional fees totaling $167 thousand and $131 thousand, respectively. The increase in vessel
maintenance expense reflects maintenance costs associated with a leased asset placed in service in March 2006, while the increase in professional fees reflects consulting costs associated with the restatement and audit of the Companys prior
year financial statements.

Other

Other income for the
first quarter of 2007 and 2006 was solely comprised of gains on interest rate swap contracts and totaled $29 thousand and $153 thousand for the first quarter of 2007 and 2006, respectively.



|Item 3. | Controls and procedures.
|------- | ------------------------

Evaluation of disclosure
controls and procedures

The Companys Managing Members Chief Executive Officer, and Executive Vice President and Chief Financial and
Operating Officer, evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) during and as of the end of the period covered by this report. Based on this evaluation, the Chief
Executive Officer and Executive Vice President and Chief Financial and Operating Officer concluded that at March 31, 2007, certain material weaknesses existed in the Companys internal control over financial reporting.

The Company does not control the financial reporting process, and is dependent on the Managing Member, who is responsible for providing the Company with financial
statements in accordance with generally accepted accounting principles. The Managing Members disclosure controls and procedures over the: a) process of identifying and estimating liabilities in the correct period; and b) timeliness of the
financial statement close process were determined to be ineffective and constitute material weaknesses in internal control over financial reporting.

Changes in internal control

The Managing Member has reviewed the material weaknesses and believes that the following corrective
actions taken as a whole will address the material weaknesses in its disclosure controls and procedures described above. These corrective actions are as follows:

With regard to identifying and estimating liabilities in the correct periods, the Managing Member has performed a detailed review to identify and record the liabilities, in the correct period. A standardized quarterly review process has
been implemented to ensure the identification and estimation of the liabilities.

The Managing Member has taken the following steps to mitigate the
weakness regarding its financial statement close process: a Chief Accounting Officer and an SEC reporting manager have been hired, and the controller position has been split into two separate roles to ensure proper management of the Managing Member
and the managed Funds accounting operations. Controls and job functions are being redesigned to increase the documentation of processes and transparency of procedures going forward.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

Inapplicable.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Inapplicable.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

Inapplicable.



|Item 4. | Submission Of Matters To A Vote Of Security Holders.
|------- | ----------------------------------------------------

Inapplicable.



|Item 5. | Other Information.
|------- | ------------------

Inapplicable.



|Item 6. | Exhibits.
|------- | ---------

(a) Documents filed as a part of this report

1. Financial Statement Schedules

All other
schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

2. Other Exhibits



|31.1 | Certification of Dean L. Cash
|---- | -----------------------------



|31.2 | Certification of Paritosh K. Choksi
|---- | -----------------------------------



|32.1 | Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash
|---- | ----------------------------------------------------------------



|32.2 | Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi
|---- | ----------------------------------------------------------------------



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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 14, 2007

ATEL CAPITAL EQUIPMENT FUND
VIII, 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                                       |  |                                 |  | 
|                              |  | Principal Financial Officer of Registrant                |  |                                 |  | 



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