**Form 10-QSB**

 

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

 

**ý****                                ****Quarterly Report Pursuant toSection 13 or 15(d)of the Securities Exchange Act of 1934.**

 

**For thequarterly period ended June 30, 2005**

 

**o****                                ****Transition Report Pursuant toSection 13 or 15(d)of the Securities Exchange Act of 1934.**

 

**For thetransition period from          to          **

 

**Commission File number 000-28368**

 

**ATELCash Distribution Fund VI, L.P.**(Exact name of registrant asspecified in its charter)

 
| **California**                                                  | ** ** | **94-3207229**                          |
|-----------------------------------------------------------------|------------|-----------------------------------------|
| (State or other jurisdiction of  Incorporation or organization) |       | (I. R. S. Employer  Identification No.) |

 

**600 California Street, 6th Floor, SanFrancisco, California 94108-2733**(Addressof principal executive offices)

 

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

 

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

 

Securities registered pursuant to section 12(g) of the Act: **Limited Partnership Units**

 

Indicate by a check markwhether the registrant (1) has filed all reports required to be filed bysection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ý No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theAct). Yes o No ý

 

State the issuer’s revenuesfor the most recent fiscal year: $5,019,693.

 

The number of LimitedPartnership Units outstanding as of June 30, 2005 was 12,490,076.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

**None**

 

 

----

 

**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**Index**

 
| **Part I.**  | **Financial Information**                                                                                                                |   |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|         |                                                                                                                                     |   |
| Item 1.      | Financial  Statements (Unaudited)                                                                                                        |   |
|         |                                                                                                                                     |   |
|         | Balance  Sheet, June 30, 2005.                                                                                                           |   |
|         |                                                                                                                                     |   |
|         | Statements of Operations for  the six and three month periods ended June 30, 2005 and 2004.                                              |   |
|         |                                                                                                                                     |   |
|         | Statements  of Changes in Partners’ Capital for the year ended December 31, 2004 and for  the six month period ended June 30, 2005. |   |
|         |                                                                                                                                     |   |
|         | Statements of Cash Flows for  the six and three month periods ended June 30, 2005 and 2004.                                              |   |
|         |                                                                                                                                     |   |
|         | Notes to the Financial  Statements                                                                                                       |   |
|         |                                                                                                                                     |   |
| Item  2.     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                              |   |
|         |                                                                                                                                     |   |
| Item 3.      | Controls and  Procedures                                                                                                                 |   |
|         |                                                                                                                                     |   |
| **Part II.** | **Other Information**                                                                                                                    |   |
|         |                                                                                                                                     |   |
| Item 1.      | Legal Proceedings                                                                                                                        |   |
|         |                                                                                                                                     |   |
| Item  2.     | Unregistered  Sales of Equity Securities and Use of Proceeds                                                                             |   |
|         |                                                                                                                                     |   |
| Item 3.      | Defaults Upon  Senior Securities                                                                                                         |   |
|         |                                                                                                                                     |   |
| Item  4.     | Submission  of Matters to a Vote of Security Holders                                                                                     |   |
|         |                                                                                                                                     |   |
| Item 5.      | Other Information                                                                                                                        |   |
|         |                                                                                                                                     |   |
| Item 6.      | Exhibits                                                                                                                                 |   |

 

2

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**Part I. FINANCIAL INFORMATION**

 

**Item 1. Financial Statements (unaudited).**

 

 

**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**BALANCESHEET**

 

**JUNE 30, 2005(Unaudited)**

 
| **ASSETS**                                                               |   |       |       |
|--------------------------------------------------------------------------|--------|------------|------------|
| Cash and cash equivalents                                                |   | $          | 1,791,631  |   |
|                                                                     |   |       |       |
| Accounts receivable, net of allowance for  doubtful accounts of $366,000 |   | 363,001    |       |
|                                                                     |   |       |       |
| Prepaid expenses                                                         |   | 169,769    |       |
|                                                                     |   |       |       |
| Investments in leases, net                                               |   | 12,960,241 |       |
|                                                                     |   |       |       |
| Total assets                                                             |   | $          | 15,284,642 |   |
|                                                                     |   |       |       |
| **LIABILITIES  AND PARTNERS’ CAPITAL**                              |   |       |       |
|                                                                     |   |       |       |
| Non-recourse debt                                                        |   | $          | 222,084    |   |
|                                                                     |   |       |       |
| Accounts payable and accruals:                                           |   |       |       |
| General Partner                                                          |   | 55,362     |       |
| Other                                                                    |   | 348,714    |       |
| Accrued interest payable                                                 |   | 1,549      |       |
| Unearned operating lease income                                          |   | 45,953     |       |
| Total liabilities                                                        |   | 673,662    |       |
|                                                                     |   |       |       |
| Partners’ capital:                                                  |   |       |       |
| General Partner                                                          |   | —     |       |
| Limited Partners                                                         |   | 14,610,980 |       |
| Total Partners’ capital                                             |   | 14,610,980 |       |
|                                                                     |   |       |       |
| Total liabilities and Partners’ capital                             |   | $          | 15,284,642 |   |

 

Seeaccompanying notes.

 

3

----

 

**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**STATEMENTSOF OPERATIONS**

 

**SIX AND THREE MONTH PERIODS ENDEDJUNE 30, 2005 AND 2004(Unaudited)**

 
| ** **                                                  | ** ** | **Six Months**     | ** ** | **Three Months**   | ** ** |
|-------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                  | ** ** | **Ended June 30,** | ** ** | **Ended June 30,** | ** ** |
| ** **                                                  | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues:                                                   |       |               |       |               |       |   |   |   |   |
| Leasing activities:                                         |       |               |       |               |       |   |   |   |   |
| Operating leases                                            |       | $                  | 1,627,998  |               | $          | 2,373,360 |   | $ | 789,258 |   | $ | 1,139,644 |   |
| Direct financing leases                                     |       | 99,894             |       | 626,687            |       | 26,582 |   | 305,607 |   |
| Loss on sales of assets                                     |       | (101,356           | )          | (284,704           | )          | (85,286 | ) | (392,480 | ) |
| Interest income                                             |       | 31,306             |       | 6,197              |       | 12,337 |   | 4,048 |   |
| Other                                                       |       | 38,526             |       | 100,160            |       | 18,465 |   | (3,097 | ) |
|                                                        |       | 1,696,368          |       | 2,821,700          |       | 761,356 |   | 1,053,722 |   |
|                                                        |       |               |       |               |       |   |   |   |   |
| Expenses:                                                   |       |               |       |               |       |   |   |   |   |
| Impairment losses                                           |       | —             |       | 1,238,137          |       | — |   | — |   |
| Depreciation of operating lease assets                      |       | 780,996            |       | 1,488,399          |       | 383,937 |   | 828,678 |   |
| Cost reimbursements to General Partner                      |       | 246,363            |       | 282,169            |       | 129,443 |   | 127,886 |   |
| Other management fees                                       |       | 72,388             |       | 100,592            |       | 34,188 |   | 42,639 |   |
| Railcar maintenance                                         |       | 164,181            |       | 204,974            |       | 100,219 |   | 136,370 |   |
| Equipment and incentive management fees to General  Partner |       | 56,810             |       | 80,733             |       | 25,229 |   | 34,442 |   |
| Professional fees                                           |       | 32,012             |       | 56,844             |       | 4,557 |   | 31,502 |   |
| Interest expense                                            |       | 9,982              |       | 35,125             |       | 4,786 |   | 7,860 |   |
| Franchise fees and state taxes                              |       | 225,207            |       | 22,390             |       | 225,207 |   | 22,390 |   |
| Provision for doubtful accounts                             |       | 69,000             |       | 2,076              |       | 56,000 |   | 16,076 |   |
| Outside Services                                            |       | 24,442             |       | 15,345             |       | 10,984 |   | 7,170 |   |
| Amortization of initial direct costs                        |       | 14,993             |       | 14,993             |       | 7,497 |   | 7,497 |   |
| Other                                                       |       | 72,843             |       | 84,298             |       | 41,825 |   | 46,180 |   |
|                                                        |       | 1,769,217          |       | 3,626,075          |       | 1,023,872 |   | 1,308,690 |   |
| Net loss                                                    |       | $                  | (72,849    | )                  | $          | (804,375 | ) | $ | (262,516 | ) | $ | (254,968 | ) |
|                                                        |       |               |       |               |       |   |   |   |   |
| Net income (loss):                                          |       |               |       |               |       |   |   |   |   |
| General Partner                                             |       | $                  | 52,435     |               | 5,855      |   | $ | — |   | — |   |
| Limited Partners                                            |       | (125,284           | )          | (810,230           | )          | (262,516 | ) | (254,968 | ) |
|                                                        |       | $                  | (72,849    | )                  | $          | (804,375 | ) | $ | (262,516 | ) | $ | (254,968 | ) |
|                                                        |       |               |       |               |       |   |   |   |   |
| Net loss per Limited Partnership unit                       |       | $                  | (0.01      | )                  | $          | (0.06 | ) | $ | (0.02 | ) | $ | (0.02 | ) |
| Weighted average number of units outstanding                |       | 12,490,076         |       | 12,490,076         |       | 12,490,076 |   | 12,490,076 |   |

 

 

Seeaccompanying notes.

 

4

----

 

**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL**

 

**FOR THE YEAR ENDED DECEMBER 31, 2004AND FOR THE SIX MONTH PERIODENDED JUNE 30, 2005(Unaudited)**

 
| ** **                                           | ** ** | **Limited Partners** | ** ** | **General** | ** ** | ** **  | ** ** |
|------------------------------------------------------|------------|----------------------|------------|-------------|------------|-------------|------------|
| ** **                                           | ** ** | **Units**            | ** ** | **Amount**  | ** ** | **Partner** | ** ** | **Total** | ** ** |
|                                                 |       |                 |       |        |       |        |       |   |   |
| Balance December 31, 2003                            |       | 12,490,076           |       | $           | 23,783,263 |        | $          | — |   | $ | 23,783,263 |   |
| Distributions to Limited Partners ($0.275  per Unit) |       | —               |       | (3,435,269  | )          | —      |       | (3,435,269 | ) |
| Distributions to General Partner                     |       | —               |       | —      |       | (33,993     | )          | (33,993 | ) |
| Net income (loss)                                    |       | —               |       | (615,698    | )          | 33,993      |       | (581,705 | ) |
| Balance December 31, 2004                            |       | 12,490,076           |       | 19,732,296  |       | —      |       | 19,732,296 |   |
| Distributions to Limited Partners ($0.40)  per Unit  |       | —               |       | (4,996,032  | )          | —      |       | (4,996,032 | ) |
| Distributions to General Partner                     |       | —               |       | —      |       | (52,435     | )          | (52,435 | ) |
| Net income (loss)                                    |       | —               |       | (125,284    | )          | 52,435      |       | (72,849 | ) |
| Balance June 30, 2005                                |       | 12,490,076           |       | $           | 14,610,980 |        | $          | — |   | $ | 14,610,980 |   |

 

Seeaccompanying notes.

 

5

----

 

**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**STATEMENTSOF CASH FLOWS**

 

**SIX AND THREE MONTH PERIODS ENDEDJUNE 30, 2005 AND 2004(Unaudited)**

 
| ** **                                                                  | ** ** | **Six Months**     | ** ** | **Three Months**   | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                                                  | ** ** | **Ended June 30,** | ** ** | **Ended June 30,** | ** ** |
| ** **                                                                  | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| **Operating activities:**                                                   |       |               |       |               |       |   |   |   |   |
| Net loss:                                                                   |       | $                  | (72,849    | )                  | $          | (804,375 | ) | $ | (262,516 | ) | $ | (254,968 | ) |
| Adjustment to reconcile net loss to cash provided  by operating activities: |       |               |       |               |       |   |   |   |   |
| Impairment losses                                                           |       | —             |       | 1,238,137          |       | — |   | — |   |
| Depreciation of operating lease assets                                      |       | 780,996            |       | 1,488,399          |       | 383,937 |   | 828,678 |   |
| Amortization of initial direct costs                                        |       | 14,993             |       | 14,993             |       | 7,497 |   | 7,497 |   |
| Provision for doubtful accounts                                             |       | 69,000             |       | 2,076              |       | 56,000 |   | 16,076 |   |
| Loss on sales of lease assets                                               |       | 101,356            |       | 284,704            |       | 85,286 |   | 392,480 |   |
| Changes in operating assets and  liabilities:                               |       |               |       |               |       |   |   |   |   |
| Accounts receivable                                                         |       | 149,093            |       | 166,600            |       | 27,553 |   | (17,751 | ) |
| Prepaid expenses                                                            |       | (169,769           | )          | —             |       | (169,769 | ) | — |   |
| Accounts payable, General Partner                                           |       | (138,342           | )          | (67,438            | )          | (24,349 | ) | (89,488 | ) |
| Accounts payable, other                                                     |       | 2,653              |       | (256,858           | )          | (2,442 | ) | 122,621 |   |
| Accrued interest payable                                                    |       | (273               | )          | (901               | )          | (138 | ) | (355 | ) |
| Unearned operating lease income                                             |       | (36,450            | )          | (13,106            | )          | (45,690 | ) | (14,990 | ) |
| **Net cash provided by operating activities**                               |       | 700,408            |       | 2,052,231          |       | 55,369 |   | 989,800 |   |
|                                                                        |       |               |       |               |       |   |   |   |   |
| **Investing activities:**                                                   |       |               |       |               |       |   |   |   |   |
| Reduction of net investment in direct  financing leases                     |       | 237,486            |       | 185,761            |       | 142,108 |   | (136,818 | ) |
| Proceeds from sales of lease assets                                         |       | 176,778            |       | 803,329            |       | 126,841 |   | 321,190 |   |
| **Net cash provided by investing activities**                               |       | 414,264            |       | 989,090            |       | 268,949 |   | 184,372 |   |
|                                                                        |       |               |       |               |       |   |   |   |   |
| **Financing activities:**                                                   |       |               |       |               |       |   |   |   |   |
| Distributions to Limited Partners                                           |       | (4,996,032         | )          | (625,000           | )          | — |   | — |   |
| Distributions to General Partner                                            |       | (52,435            | )          | (5,855             | )          | — |   | — |   |
| Repayments of non-recourse debt                                             |       | (39,125            | )          | (495,265           | )          | (19,766 | ) | (202,578 | ) |
| **Net cash used in financing activities**                                   |       | (5,087,592         | )          | (1,126,120         | )          | (19,766 | ) | (202,578 | ) |
|                                                                        |       |               |       |               |       |   |   |   |   |
| **Net increase (decrease) in cash and cash  equivalents**                   |       | (3,972,920         | )          | 1,915,201          |       | 304,552 |   | 971,594 |   |
| **Cash and cash equivalents at beginning of  period**                       |       | 5,764,551          |       | 1,664,963          |       | 1,487,079 |   | 2,608,570 |   |
| **Cash and cash equivalents at end of period**                              |       | $                  | 1,791,631  |               | $          | 3,580,164 |   | $ | 1,791,631 |   | $ | 3,580,164 |   |
|                                                                        |       |               |       |               |       |   |   |   |   |
| **Supplemental disclosures of cash flow  information:**                     |       |               |       |               |       |   |   |   |   |
| Cash paid during the period for interest                                    |       | $                  | 10,255     |               | $          | 36,026 |   | $ | 4,924 |   | $ | 8,215 |   |

 

Seeaccompanying notes.

 

6

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**ATEL CASH DISTRIBUTION FUND VI, L.P.**

 

**NOTES TOFINANCIAL STATEMENTS**

 

**JUNE 30, 2005(Unaudited)**

 

**1. Organizationand partnership matters:**

 

ATEL Cash Distribution FundVI, L.P. (the Partnership), was formed under the laws of the State of Californiaon June 29, 1994, for the purpose of acquiring equipment to engage in equipmentleasing and sales activities. The Partnership may continue until December 31,2015.

 

Upon the sale of the minimumamount of Units of Limited Partnership interest (Units) of $1,200,000 and thereceipt of the proceeds thereof on January 3, 1995, the Partnership commencedoperations.

 

The Partnership does notmake a provision for income taxes since all income and losses will be allocatedto the Partners for inclusion in their individual tax returns.

 

ATEL Financial Services, LLC(AFS), an affiliated entity, acts as the General Partner of the Partnership.

 

The Partnership is in itsliquidation phase and is making distributions on an annual basis.

 

**2. Summaryof significant accounting policies:**

 

Basis of presentation:

 

The accompanying unaudited financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States (GAAP) for interim financialinformation and with instructions to Form 10-QSB and Article 10 of RegulationS-X. The unaudited interim financial statements reflect all adjustments whichare, in the opinion of the General Partner, necessary for a fair statement offinancial position and results of operations for the interim periods presented.All such adjustments are of a normal recurring nature. The preparation offinancial statements in accordance with GAAP requires management to makeestimates and assumptions that effect reported amounts in the financialstatements and accompanying notes. Therefore, actual results could differ fromthose estimates. Operating results for the six and three months ended June 30,2005 are not necessarily indicative of the results for the year ending December31, 2005.

 

Certain prior year balanceshave been reclassified to conform to the current period presentation.

 

These unaudited interim financialstatements should be read in conjunction with the financial statements and notesthereto contained in the report on Form 10-KSB for the year ended December 31, 2004,filed with the Securities and Exchange Commission.

 

Equipment on operatingleases:

 

Equipment on operatingleases is stated at cost. Depreciation is being provided by use of thestraight-line method over the terms of the related leases to the equipment’sestimated residual values at the end of the leases.

 

7

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Asset Valuation:

 

Recorded values of thePartnership’s asset portfolio are periodically reviewed for impairment inaccordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accountingfor the Impairment or Disposal of Long-Lived Assets. An impairment loss ismeasured and recognized only if the estimated undiscounted future cash flows ofthe asset are less than their net book value. The estimated undiscounted futurecash flows are the sum of the estimated residual value of the asset at the endof the asset’s expected holding period and estimates of undiscounted futurerents. The residual value assumes, among other things, that the asset isutilized normally in an open, unrestricted and stable market. Short-termfluctuations in the market place are disregarded and it is assumed that thereis no necessity either to dispose of a significant number of the assets, ifheld in quantity, simultaneously or to dispose of the asset quickly. Impairmentis measured as the difference between the fair value (as determined by the discountedestimated future cash flows) of the assets and its carrying value on themeasurement date.

 

Revenue recognition:

 

Operating leases

Operating lease revenue isrecognized on a straight-line basis over the term of the underlying leases. Theinitial lease terms will vary as to the type of equipment subject to theleases, the needs of the lessees and the terms to be negotiated, but initialleases are generally expected to be for 36 to 84 months. Income from step rentprovisions, escalation clauses, capital improvement funding provisions or otherlease concessions in lease contracts, and lease rates subject to variationbased on changes in market indexes or interest rates are recognized on a straightline basis.

 

Direct finance leases

Income from direct financinglease transactions is reported using the financing method of accounting, in whichthe Partnership’s investment in the leased property is reported as a receivablefrom the lessee to be recovered through future rentals. The income portion ofeach rental payment is calculated so as to generate a constant rate of returnon the net receivable outstanding.

 

Notes receivable

Income from notes receivableis reported using the financing method of accounting. The Partnership’sinvestment in notes receivable is reported as the present value of the futurenote payments. The income portion of each note payment is calculated so as togenerate a constant rate of return on the net balance outstanding.

 

Initial direct costs:

 

Initial direct cost ofleases are deferred and amortized over the lease term, either as an adjustmentto the yield for direct finance leases, or on a straight-line basis foroperating leases.

 

8

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Segment Reporting:

 

The Partnership adopted theprovisions of SFAS No. 131 Disclosures about Segments of an Enterprise andRelated Information. SFAS No. 131 establishes annual and interim standards foroperating segments of a company. It also requires entity-wide disclosures aboutthe products and services an entity provides, the material countries in whichit holds assts and reports revenue, and its major customers. The Partnership isnot organized by multiple operating segments for the purpose of makingoperating decisions or assessing performance. Accordingly the Partnershipoperates in one reportable operating segment in the United States.

 

**3. Investmentin equipment leases:**

 

The Partnership’s investmentin leases consists of the following:

 
| ** **                                                                                           | ** ** | ** **       | ** ** | **Depreciation/** | ** ** | ** **                  | ** ** | ** **   | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------------|------------|-------------------|------------|-----------------------------|------------|--------------|------------|
| ** **                                                                                           | ** ** | ** **       | ** ** | **Amortization**  | ** ** | ** **                  | ** ** | ** **   | ** ** |
| ** **                                                                                           | ** ** | ** **       | ** ** | **Expense or**    | ** ** | ** **                  | ** ** | ** **   | ** ** |
| ** **                                                                                           | ** ** | ** **       | ** ** | **Amortization**  | ** ** | ** **                  | ** ** | ** **   | ** ** |
| ** **                                                                                           | ** ** | **Balance**      | ** ** | **of Direct**     | ** ** | ** **                  | ** ** | **Balance**  | ** ** |
| ** **                                                                                           | ** ** | **December 31,** | ** ** | **Financing**     | ** ** | **Reclassifications &** | ** ** | **June 30,** | ** ** |
| ** **                                                                                           | ** ** | **2004**         | ** ** | **Leases**        | ** ** | **Dispositions**            | ** ** | **2005**     | ** ** |
|                                                                                                 |       |             |       |              |       |                        |       |         |       |
| Net investment in operating leases                                                                   |       | $                | 13,516,446 |              | $          | (772,147                    | )          | $            | (616,620   | ) | $ | 12,127,679 |   |
| Net investment in direct financing leases                                                            |       | 588,214          |       | (237,486          | )          | —                      |       | 350,728      |       |
| Assets held for sale or lease, net of accumulated  depreciation of $2,289,858 and $2,879,419 in 2004 |       | 137,204          |       | (8,849            | )          | 338,486                     |       | 466,841      |       |
| Initial direct costs, net of accumulated amortization  of $407,093 in 2005 and $398,095 in 2004      |       | 29,986           |       | (14,993           | )          | —                      |       | 14,993       |       |
|                                                                                                 |       | $                | 14,271,850 |              | $          | (1,033,475                  | )          | $            | (278,134   | ) | $ | 12,960,241 |   |

 

Management periodicallyreviews the carrying values of its assets on leases and assets held for leaseor sale. As a result of that review, management determined during 2004 that thevalue of a fleet of certain refuse and other vehicles and computer equipmenthad declined in value to the extent that the carrying values had becomeimpaired. This decline is the result of decreased long-term demand for thesetypes of assets and a corresponding reduction in the amounts of rental paymentsthat these assets currently command. Management recorded a provision for thedecline in value of those assets in the amount of $1,238,137 in 2004. Therehave been no such impairments recognized to date in 2005.

 

9

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Impairment losses are recordedas an addition to accumulated depreciation of the impaired assets. Depreciationexpense and impairment losses on property subject to operating leases andproperty held for lease or sale consist of the following for the six and three monthperiods ended June 30:

 
| ** **           | ** ** | **Six Months**     | ** ** | **Three Months**   | ** ** |
|----------------------|------------|--------------------|------------|--------------------|------------|
| ** **           | ** ** | **Ended June 30,** | ** ** | **Ended June 30,** | ** ** |
| ** **           | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Depreciation expense |       | $                  | 780,996    |               | $          | 1,488,399 |   | $ | 383,937 |   | $ | 828,678 |   |
| Impairment losses    |       | —             |       | 1,238,137          |       | — |   | — |   |
|                 |       | $                  | 780,996    |               | $          | 2,726,536 |   | $ | 383,937 |   | $ | 828,678 |   |

 

*Netinvestment in operating leases:*

 

Property on operating leasesconsists of the following:

 
| ** **                    | ** ** | **Balance**      | ** ** | ** **       | ** ** | ** **                  | ** ** | **Balance**  | ** ** |
|-------------------------------|------------|------------------|------------|------------------|------------|-----------------------------|------------|--------------|------------|
| ** **                    | ** ** | **December 31,** | ** ** | **Depreciation** | ** ** | **Reclassifications &** | ** ** | **June 30,** | ** ** |
| ** **                    | ** ** | **2004**         | ** ** | **Expense**      | ** ** | **Dispositions**            | ** ** | **2005**     | ** ** |
| Transportation                |       | $                | 34,466,300 |             | $          | —                      |       | $            | (2,669,352 | ) | $ | 31,796,948 |   |
| Construction                  |       | 88,647           |       | —           |       | —                      |       | 88,647       |       |
| Materials handling            |       | 4,610,321        |       | —           |       | (125,318                    | )          | 4,485,003    |       |
| Office automation             |       | 156,860          |       | —           |       | (156,860                    | )          | —       |       |
| Other                         |       | 366,203          |       | —           |       | (10,366                     | )          | 355,837      |       |
|                          |       | 39,688,331       |       | —           |       | (2,961,896                  | )          | 36,726,435   |       |
| Less accumulated depreciation |       | (26,171,885      | )          | (772,147         | )          | 2,345,276                   |       | (24,598,756  | )          |
|                          |       | $                | 13,516,446 |             | $          | (772,147                    | )          | $            | (616,620   | ) | $ | 12,127,679 |   |

 

10

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The Partnership utilizes astraight line depreciation method for equipment in all of the categoriescurrently in its portfolio of lease transactions. The useful lives forinvestment in leases by category are as follows:

 

| **Equipment category** | ** ** | **Useful Life** | ** ** |
|------------------------|------------|-----------------|------------|
| Materials Handling     |       | 7 - 10          |       |
| Transportation         |       | 7 - 10          |       |
| Construction           |       | 7 - 10          |       |
| Office automation      |       | 3 - 5           |       |

 

*Netinvestment in direct financing leases:*

 

As of June 30, 2005, investmentin direct financing leases consists of loaders/haul trucks and ground supportequipment. The following lists the components of the Partnership’s investmentin direct financing leases as of June 30, 2005:

 
| Total minimum lease payments receivable                       |   | $       | 246,901 |   |
|---------------------------------------------------------------|--------|---------|---------|--------|
| Estimated residual values of leased equipment  (unguaranteed) |   | 151,632 |    |
| Investment in direct financing leases                         |   | 398,533 |    |
| Less unearned income                                          |   | (47,805 | )       |
| Net investment in direct financing leases                     |   | $       | 350,728 |   |

 

At June 30, 2005, theaggregate amounts of future minimum lease payments under operating and directfinancing leases are as follows:

 
| ** **                           | ** ** | ** **    | ** ** | **Direct**    | ** ** | ** ** | ** ** |
|--------------------------------------|------------|---------------|------------|---------------|------------|------------|------------|
| ** **                           | ** ** | **Operating** | ** ** | **Financing** | ** ** | ** ** | ** ** |
| ** **                           | ** ** | **Leases**    | ** ** | **Leases**    | ** ** | **Total**  | ** ** |
| Six months  ending December 31, 2005 |       | $             | 734,179    |          | $          | 49,381     |       | $ | 783,560 |   |
| Year ending  December 31, 2006       |       | 1,192,070     |       | 98,760        |       | 1,290,830  |       |
| 2007                                 |       | 464,330       |       | 98,760        |       | 563,090    |       |
|                                 |       | $             | 2,390,579  |          | $          | 246,901    |       | $ | 2,637,480 |   |

 

Substantially all of the equipmenton leases were acquired in 1995, 1996 and 1997.

 

11

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**4. Non-recoursedebt:**

 

Non-recourse debt consistsof a note payable to a financial institution. The note is due in monthlypayments. Interest on the note is at a fixed rate of 8.37%. The note is securedby assignments of lease payments and pledges of assets. At June 30, 2005, thecarrying value of the pledged assets is $445,284. The note matures in 2007.

 

As of June 30, 2005, futureminimum principal payments of non-recourse debt are as follows:

 
| ** **                           | ** ** | **Principal** | ** ** | **Interest** | ** ** | **Total** | ** ** |
|--------------------------------------|------------|---------------|------------|--------------|------------|-----------|------------|
| Six months  ending December 31, 2005 |       | $             | 40,791     |         | $          | 8,589     |       | $ | 49,380 |   |
| Year ending  December 31, 2006       |       | 86,868        |       | 11,892       |       | 98,760    |       |
| 2007                                 |       | 94,425        |       | 4,336        |       | 98,761    |       |
|                                 |       | $             | 222,084    |         | $          | 24,817    |       | $ | 246,901 |   |

 

**5. Relatedparty transactions:**

 

The terms of the Limited PartnershipAgreement provide that AFS and/or affiliates are entitled to receive certain feesfor equipment acquisition, management and resale and for management of thePartnership.

 

The Limited Partnership Agreementallows for the reimbursement of costs incurred by AFS in providing administrativeservices to the Partnership. Administrative services provided includePartnership accounting, investor relations, legal counsel and lease andequipment documentation. AFS is not reimbursed for services whereby it isentitled to receive a separate fee as compensation for such services, such asacquisition and disposition of equipment. Reimbursable costs incurred by AFSare allocated to the Partnership based upon actual time incurred by employeesworking on Partnership business and an allocation of rent and other costs basedon utilization studies.

 

Each of ATEL LeasingCorporation (“ALC”), ATEL Equipment Corporation (“AEC”), ATEL Investor Services(“AIS”) and ATEL Financial Services LLC is a wholly-owned subsidiary of ATELCapital Group and performs services for the Partnership. Acquisition services areperformed for the Partnership by ALC, equipment management, lease administrationand asset disposition services are performed by AEC, investor relations andcommunications services are performed by AIS and general administrative servicesfor the Partnership are performed by AFS.

 

Cost reimbursements to the GeneralPartner are based on costs incurred by AFS in performing administrative servicesfor the Partnership that are allocated to each Partnership that AFS managesbased on certain criteria such as existing or new leases, number of investorsor equity depending on the type of cost incurred. AFS believes that the costsreimbursed are the lower of (i) actual costs incurred on behalf of thePartnership or (ii) the amount the Partnership would be required to payindependent parties for comparable administrative services in the samegeographic location.

 

Incentive management fees arecomputed as 3.25% of distributions of cash from operations, as defined in the LimitedPartnership Agreement. Equipment management fees are computed as 3.5% of gross revenuesfrom operating leases, as defined in the Limited Partnership Agreement plus 2%of gross revenues from full payout leases, as defined in the LimitedPartnership Agreement.

 

12

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During the six and three monthperiods ended June 30, 2005 and 2004, AFS and/or affiliates earned fees,commissions and reimbursements, pursuant to the Limited Partnership Agreementas follows:

 
| ** **                                      | ** ** | **Six Months**     | ** ** | **Three Months**   | ** ** |
|-------------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                      | ** ** | **Ended June 30,** | ** ** | **Ended June 30,** | ** ** |
| ** **                                      | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Costs reimbursed to AFS                         |       | $                  | 246,363    |               | $          | 282,169 |   | $ | 129,443 |   | $ | 127,886 |   |
| Incentive and equipment management fees to  AFS |       | 56,810             |       | 80,733             |       | 25,229 |   | 34,442 |   |
|                                            |       | $                  | 303,173    |               | $          | 362,902 |   | $ | 154,672 |   | $ | 162,328 |   |

 

The General Partner makescertain payments to third parties on behalf of the Partnership for conveniencepurposes. During the six month periods ended June 30, 2005 and 2004, theGeneral Partner made such payments of $102,040, $113,466, respectively. Duringthe three month periods ended June 30, 2005 and 2004, the General Partner madesuch payments of $44,976 and $78,417, respectively.

 

**6. Financingarrangement:**

 

The Partnership participateswith AFS and certain of its affiliates in a financing arrangement (comprised ofa term loan to AFS and a line of credit) with a group of financial institutionsthat includes certain financial covenants. The financial arrangement is$75,000,000 and expires in June 2006. The availability of borrowings to thePartnership under this financing arrangement is reduced by the amount AFS hasoutstanding as a term loan. As of June 30, 2005 borrowings under the facilitywere as follows:

 
| Total amount available under the financing  arrangement                                                     |   | $           | 75,000,000 |   |
|-------------------------------------------------------------------------------------------------------------|--------|-------------|------------|--------|
| Term loan to AFS as of June 30, 2005                                                                        |   | (936,727    | )          |
| Total available under the acquisition and  warehouse facilities                                             |   | 74,063,273  |       |
|                                                                                                        |   |        |       |
| Amount borrowed by the Partnership under  the acquisition facility                                          |   | —      |       |
| Amounts borrowed by affiliated partnerships  and limited liability companies under the acquisition facility |   | (10,500,000 | )          |
| Total remaining available under the  acquisition and warehouse facilities                                   |   | $           | 63,563,273 |   |

 

Draws on the acquisition facilityby any individual borrower are secured only by that borrower’s assets, includingequipment and related leases. Borrowings on the warehouse facility are recoursejointly to certain of the affiliated partnerships and limited liabilitycompanies, the Partnership and AFS.

 

13

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The credit agreement includescertain financial covenants applicable to each borrower. The Partnership was incompliance with its covenants as of June 30, 2005.

 

**7. Partners’Capital:**

 

As of June 30, 2005,12,490,076 Units were issued and outstanding, including the 50 Units issued tothe Initial Limited Partners. The Partnership’s registration statement with theSecurities and Exchange Commission became effective November 23, 1994. The Partnershipis authorized to issue up to 12,500,000 Units, in addition to those issued to theInitial Limited Partners.

 

As defined in the LimitedPartnership Agreement, the Partnership’s Net Profits, Net Losses, and TaxCredits are to be allocated 99% to the Limited Partners and 1% to AFS. TheLimited Partnership Agreement allows the Partnership to make an allocation ofincome to AFS in order to maintain the capital account of AFS at zero. Inaccordance with the terms of the Limited Partnership Agreement, additionalallocations of income were made to AFS in 2005 and 2004. The amounts allocatedwere determined to bring AFS’s ending capital account balance to zero.

 

As defined in the LimitedPartnership Agreement, available Cash from Operations and Cash from Sales andRefinancing are to be distributed as follows:

 

First, 95.75% ofDistributions of Cash from Operations to the Limited Partners, 1% ofDistributions of Cash from Operations to AFS and 3.25% to an affiliate of AFS asan Incentive Management Fee, 99% of Distributions of Cash from Sales orRefinancing to the Limited Partners and 1% of Cash from Sales or Refinancing toAFS.

 

Second, the balance to theLimited Partners until the Limited Partners have received AggregateDistributions in an amount equal to their Original Invested Capital, as defined,plus a 10% per annum cumulative (compounded daily) return on their AdjustedInvested Capital.

 

Third, an affiliate of AFSwill receive as an Incentive Management Fee, 4% of remaining Cash from Sales orRefinancing.

 

Fourth, the balance to theLimited Partners.

 

Distributions to the LimitedPartners were as follows:

 
| ** **                                    | ** ** | **Six Months**     | ** ** | **Three Months**   | ** ** |
|-----------------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                                    | ** ** | **Ended June 30,** | ** ** | **Ended June 30,** | ** ** |
| ** **                                    | ** ** | **2005**           | ** ** | **2004**           | ** ** | **2005** | ** ** | **2004** | ** ** |
| Distributions                                 |       | $                  | 4,996,032  |               | $          | 625,000 |   | $ | — |   | $ | — |   |
| Weighted average number of Units  outstanding |       | 12,490,076         |       | 12,490,076         |       | 12,490,076 |   | 12,490,076 |   |
| Weighted average distributions per Unit       |       | $                  | 0.40       |               | $          | 0.05 |   | $ | — |   | $ | — |   |

 

14

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**8. Guarantees:**

 

The Partnership enters intocontracts that contain a variety of indemnifications. The Partnership’s maximumexposure under these arrangements is unknown. However, the Partnership has nothad prior claims or losses pursuant to these contracts and expects the risk ofloss to be remote.

 

In the normal course ofbusiness, the Partnership enters into contracts of various types, includinglease contracts, contracts for the sale or purchase of lease assets, managementcontracts, loan agreements, credit lines and other debt facilities. It isprevalent industry practice for most contracts of any significant value toinclude provisions that each of the contracting parties - in addition toassuming liability for breaches of the representations, warranties, andcovenants that are part of the underlying contractual obligations - also assumean obligation to indemnify and hold the other contracting party harmless forsuch breaches, for harm caused by such party’s gross negligence and willfulmisconduct, including, in certain instances, certain costs and expenses arisingfrom the contract. The General Partner has substantial experience in managingsimilar leasing programs subject to similar contractual commitments in similartransactions, and the losses and claims arising from these commitments havebeen insignificant, if any. Generally, to the extent these contracts areperformed in the ordinary course of business under the reasonable businessjudgment of the General Partner, no liability will arise as a result of theseprovisions. The General Partner has no reason to believe that the facts andcircumstances relating to the Partnership’s contractual commitments differ fromthose it has entered into on behalf of the prior programs it has managed. TheGeneral Partner knows of no facts or circumstances that would make thePartnership’s contractual commitments outside standard mutual covenantsapplicable to commercial transactions between businesses. Accordingly, thePartnership believes that these indemnification obligations are made in theordinary course of business as part of standard commercial and industry practice,and that any potential liability under the Partnership’s similar commitments isremote. Should any such indemnification obligation become payable, thePartnership would separately record and/or disclose such liability inaccordance with GAAP.

 

**Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

Statements contained in thisItem 2, “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations,” and elsewhere in this Form 10-QSB, which are not historicalfacts, may be forward-looking statements. Such statements are subject to risksand uncertainties that could cause actual results to differ materially formthose projected. In particular, economic recession and changes in generaleconomic conditions, including, fluctuations in demand for equipment, lease rates,and interest rates, may result in delays in investment and reinvestment, delaysin leasing, re-leasing, and disposition of equipment, and reduced returns oninvested capital. The Partnership’s performance is subject to risks relating tolessee defaults and the creditworthiness of its lessees. The Fund’s performanceis also subject to risks relating to the value of its equipment at the end ofits leases, which may be affected by the condition of the equipment,technological obsolescence and the markets for new and used equipment at the endof lease terms. Investors are cautioned not to attribute undue certainty tothese forward-looking statements, which speak only as of the date of this Form10-QSB. We undertake no obligation to publicly release any revisions to theseforward-looking statements to reflect events or circumstances after the date ofthis Form 10-QSB or to reflect the occurrence of unanticipated events, otherthan as required by law.

 

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**Capital Resources and Liquidity**

 

During the first half of 2005and 2004, the Partnership’s primary activity was engaging in equipment leasingactivities. During this same period in 2005 and 2004, the Partnership’s primarysource of liquidity was rents from operating leases.

 

The liquidity of thePartnership will vary in the future, increasing to the extent cash flows fromleases exceed expenses, and decreasing as lease assets are acquired, as distributionsare made to the limited partners and to the extent expenses exceed cash flowsfrom leases.

 

As another source of liquidity,the Partnership has contractual obligations with a diversified group of lesseesfor fixed lease terms at fixed rental amounts. As the initial lease termsexpire, the Partnership will re-lease or sell the equipment. The futureliquidity beyond the contractual minimum rentals will depend on the GeneralPartner’s success in re-leasing or selling the equipment as it comes off lease.

 

The Partnership participateswith AFS and certain of its affiliates in a financing arrangement (comprised ofa term loan to AFS and a line of credit) with a group of financial institutionsthat includes certain financial covenants. The financial arrangement is$75,000,000 and expires in June 2006. The availability of borrowings to thePartnership under this financing arrangement is reduced by the amount AFS hasoutstanding as a term loan. As of June 30, 2005 borrowings under the facilitywere as follows:

 
| Total amount available under the financing  arrangement                                                     |   | $           | 75,000,000 |   |
|-------------------------------------------------------------------------------------------------------------|--------|-------------|------------|--------|
| Term loan to AFS as of June 30, 2005                                                                        |   | (936,727    | )          |
| Total available under the acquisition and  warehouse facilities                                             |   | 74,063,273  |       |
|                                                                                                        |   |        |       |
| Amount borrowed by the Partnership under the  acquisition facility                                          |   | —      |       |
| Amounts borrowed by affiliated partnerships  and limited liability companies under the acquisition facility |   | (10,500,000 | )          |
| Total remaining available under the  acquisition and warehouse facilities                                   |   | $           | 63,563,273 |   |

 

Draws on the acquisition facilityby any individual borrower are secured only by that borrower’s assets, includingequipment and related leases. Borrowings on the warehouse facility are recoursejointly to certain of the affiliated partnerships and limited liability companies,the Partnership and AFS.

 

To manage the warehousingline of credit for the holding of assets prior to allocation to specificinvestor programs, a Warehousing Trust Agreement has been entered into by thePartnership, ATEL Financial Services LLC (“AFS”), ATEL Leasing Corporation (“ALC”),and certain of the affiliated partnerships and limited liability companies. Thewarehousing line is used to acquire and hold, on a short-term basis, certainlease transactions that meet the investment objectives of each of suchentities. Each of the leasing programs sponsored by AFS and ALC currently inits acquisition stage is a pro rata participant in the Warehousing TrustAgreement, as described below. When a program no longer has a need for shortterm financing provided by the warehousing facility, it is removed fromparticipation, and as new leasing investment entities are formed by AFS and ALCand commence their acquisition stages, these new entities will be added. As of June30, 2005, the investment program participants were ATEL Cash Distribution FundVI, L.P., ATEL Capital Equipment Fund VII, L.P., ATEL Capital Equipment FundVIII, LLC, ATEL Capital Equipment Fund IX, LLC, and ATEL Capital Equipment FundX, LLC. Pursuant to the Warehousing Trust Agreement, the benefit of the leasetransaction assets, and the corresponding liabilities under the warehouseborrowing facility, inure to each of such entities based upon each entity’spro-rata share in the warehousing trust estate. The “pro-rata share” iscalculated as a ratio of the net worth of each entity over the aggregate networth of all entities benefiting from the warehouse trust estate, exceptingthat the trustees, AFS and ALC, are both liable for their pro-rata shares ofthe obligations based on their respective net worths, and jointly liable forthe pro rata portion of the obligations of each of the affiliated partnershipsand limited liability companies participating under the borrowing facility. Transactionsare financed through this warehousing line only until the transactions areallocated to a specific program for purchase or are otherwise disposed by AFSand ALC. When a determination is made to allocate the transaction to a specificprogram for purchase by the program, the purchaser repays the debt associatedwith the asset, either with cash or by means of the acquisition facilityfinancing, the asset is removed from the warehouse line collateral, andownership of the asset and 

 

16

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any debt obligation associatedwith the asset are assumed solely by the purchasing entity.

 

The credit agreement includescertain financial covenants applicable to each borrower. The Partnership was incompliance with its covenants as of June 30, 2005.

 

The Partnership anticipates reinvestinga portion of lease payments from assets owned in new leasing transactions. Suchreinvestment will occur only after the payment of all obligations, includingdebt service (both principal and interest), the payment of management andacquisition fees to AFS and providing for cash distributions to the LimitedPartners.

 

The Partnership currentlyhas available adequate reserves to meet contingencies, but in the event thosereserves were found to be inadequate, the Partnership would likely be in a positionto borrow against its current portfolio to meet such requirements. AFSenvisions no such requirements for operating purposes.

 

Through June 30, 2005, thePartnership had cumulatively borrowed $101,227,460 on a non-recourse basis. Asof that date, $222,084 remained outstanding.

 

The Partnership’s long-termborrowings are generally non-recourse to the Partnership, that is, the onlyrecourse of the lender is to the equipment or corresponding lease acquired withthe loan proceeds. The Partnership may borrow up to 50% of aggregate equipmentcost, AFS expects that for a liquidation phase Partnership, such borrowings willbe minimal. In any event, the Agreement of Limited Partnership limits suchborrowings to 50% of the total cost of equipment, in aggregate. The Partnershipmay only incur additional debt to the extent that the then outstanding balanceof all such debt, including the additional debt, does not exceed 50% of theoriginal cost of the lease assets then owned by the Partnership, including anysuch assets purchased with the proceeds of such additional debt.

 

If inflation in the generaleconomy becomes significant, it may affect the Partnership inasmuch as theresidual (resale) values and rates on re-leases of the Partnership’s leasedassets may increase as the costs of similar assets increase. However, thePartnership’s revenues from existing leases would not increase, as such ratesare generally fixed for the terms of the leases without adjustment forinflation.

 

If interest rates increasesignificantly, the lease rates that the Partnership can obtain on future leaseswill be expected to increase as the cost of capital is a significant factor inthe pricing of lease financing. Leases already in place, for the most part,would not be affected by changes in interest rates. For detailed information onthe Partnership’s debt obligations, see Notes 4 and 6 in the notes to thefinancial statements in Item 1.

 

**Cash Flows**

 

During the six and threemonth periods ending June 30 of 2005 and 2004, the Partnership’s primary sourceof cash from operating activities was rents from operating leases. Cash fromoperating activities was almost entirely from operating lease rents in bothperiods in both years.

 

Proceeds from the sales ofassets and direct financing lease rents accounted for as reductions of thePartnership’s net investment in direct financing leases were the only investingsources of cash during the three and six month periods ended June 30, 2005 and2004. Proceeds from sales of lease assets decreased from $321,190 for the threemonths ended June 30, 2004 to $126,841 during the three months ended June 30,2005, and from $803,329 for the six months ending June 30, 2004 to $176,778 forthe comparable period ending June 30, 2005. Proceeds from sales of lease assetsare not expected to be consistent from one period to another. Asset sales aremade as leases expire, as purchasers can be found and as the sales can benegotiated and completed. Assets sold in 2005 consisted primarily ofconstruction and materials handling equipment and various types of vehicles. Cashflows from direct finance leases increased from $185,761 for the six monthperiod ended June 30, 2004 to $237,486 for the comparable period in 2005.

 

During the three and sixmonth periods ended June 30, 2005 and 2004, the single largest financing use ofcash was distributions to partners. The amount of such distributions increased from$630,855 during the six months ended June 30, 2004 to $5,048,467 during the sixmonths ended June 30, 2005. Distribution rates are now being adjusted annually 

 

17

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based on the amounts of cashavailable for distribution after taking into consideration the amounts thatwill be required for operations.

 

**Results of operations**

 

Operations resulted in a netloss of $262,516 during the three months ended June 30, 2005 compared to a net lossof $254,968 during the three months ended June 30, 2004. Net loss for the six monthsended June 30, 2005 was $72,849 compared with a net loss of $804,375 for thecomparable period in 2004. The Partnership’s primary source of revenues wasfrom operating leases in both years. Depreciation of operating lease assetsdecreased for the six month period from $1,488,399 in 2004 to $780,996 in 2005 andfor the three month period from $828,678 in 2004 to $383,937 in 2005. The fundis in its liquidation stage, as such, lease assets have been sold upon maturityof the underlying leases. These assets sales have led to decreases in operatinglease revenues and depreciation expense.

 

Sales of assets during thesix month periods ended June 30, 2005 and 2004 resulted in a loss of $101,356and $284,704, respectively. Sales of assets during the three month periodsended June 30, 2005 and 2004 resulted in a loss of $85,286 and $392,480,respectively. On the termination of leases, assets may be re-leased or sold. Salesof assets are not scheduled and are created by opportunities within themarketplace. Some assets may have little or no value upon termination of theinitial leases, and the anticipated residual values are a key factor in pricingand terms structured for each lease.

 

Management fees paid to theGeneral Partner for the six month period ended June 30, 2005 decreased to$56,810 from $80,733 for the comparable period in 2004. Management fees for thethree month period ended June 30, 2005 decreased to $25,229 from $34,442 forthe comparable period in 2004. Management fees are based on the gross rentalsof the Partnership. As noted above, the Partnership is in its liquidation stageand assets are sold as opportunities arise. The sale of assets is the majorfactor in the decrease of management fee expense.

 

The Company owns and leasesa significant number of railcars to various lessees. From time to time, costsare incurred in order to be able to place the railcars on a new lease. Thesecosts do not increase the useful life of the assets or increase their value inthe marketplace. In the six month periods ended June 30, 2005 and 2004, theCompany incurred $164,181 and $204,974 of such cost. In the three month periodsended June 30, 2005 and 2004, the Company incurred $110,219 and $136,370 ofsuch cost.

 

For the six and three monthperiods ended June 30, 2005, taxes and franchise fees increased to $225,207from $22,390 for the comparable period in 2004. Taxes and franchise fees arenot consistent from period to period as the amount of taxes and fees areusually based on a number of factors such as property location, usage andrevenue apportionment. The fund leased a large number of assets to a singlelessee whose business location and tax and fee calculation was the main driverfor the increase in taxes and fees.

 

Management periodicallyreviews the carrying values of its assets on leases and assets held for leaseor sale. During its review of the carrying values as of June 30, 2005,management determined that no impairment exist against the carrying value ofits assets. For the six months period ended June 30, 2004, managementdetermined that the value of certain refuse and other vehicles and computerequipment had declined in value. Management recorded a provision for thedecline in the amount of $1,238,137. This decline is the result of decreased long-termdemand for these types of assets and a corresponding reduction in the amountsof rental payments that these assets currently command.

 

**Item 3. Controls and procedures.**

 

**Evaluation of disclosure controlsand procedures**

 

Under the supervision andwith the participation of our management (ATEL Financial Services, LLC as GeneralPartner of the registrant, including the chief executive officer and chieffinancial officer), an evaluation of the effectiveness of the design andoperation of the Partnership’s disclosure controls and procedures [as definedin Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934] wasperformed as of June 30, 2005. Based upon this evaluation, the chief executiveofficer and the chief financial officer concluded that, as of the evaluationdate, our disclosure controls and procedures were effective for the purposes ofrecording, processing, summarizing, and timely reporting information 

 

18

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required to be disclosed byus in the reports that we file under the Securities Exchange Act of 1934; andthat such information is accumulated and communicated to our management inorder to allow timely decisions regarding required disclosure.

 

As disclosed in thePartnership’s annual report on Form 10-K for the year ended December 31, 2003, thechief executive and chief financial officer of the General Partner hadidentified certain enhanced controls needed to facilitate a more effectiveclosing of the Partnership’s financial statements. Specifically, thePartnership’s auditors advised management of a material weakness surroundingthe financial statement closing process that they believe arose because ATEL’saccounting resources were not adequate to complete the closing of the books andpreparation of financial statements in a timely manner. However, it should benoted that the financial statements for that period were nevertheless issuedwith an unqualified opinion. Since the beginning of 2004, ATEL hired a new corporatecontroller, added two assistant controllers and additional accounting staff personnel,and has instituted new procedures or revised existing procedures to ensure thatthe Partnership’s ability to execute internal controls in accounting and reconciliationin the closing process is adequate in all respects. In connection withmanagement’s review of the effectiveness of internal disclosure controls andprocedures of the Partnership as of December 31, 2004, including communicationwith its auditors regarding the audit process, ATEL management has determinedthat it has successfully taken all steps necessary to resolve any outstandingissues with respect to its annual financial statement closing process and thatits accounting resources are adequate to perform this process in a timely andaccurate manner. In connection with their audit of the Partnership and related programsfor the year ended December 31, 2004, the independent accountants issued a nomaterial weakness letter which indicates that no matters were noted involvinginternal control and its operation that the auditor considered to be materialweaknesses as defined by the Public Company Accounting Oversight Board (UnitedStates). Furthermore, all financial statements for the Partnership and relatedprograms for 2004 were issued with unqualified opinions of the independentaccountants. The General Partner will continue to review its accounting proceduresand practices to determine their effectiveness and adequacy and will take anysteps deemed necessary in the opinion of the General Partner’s chief executiveand chief financial officers to ensure the adequacy of the Partnership’sdisclosure and accounting controls and procedures.

 

The General Partner’s chiefexecutive officer and chief financial officer have determined that no weaknessin financial and accounting controls and procedures had any material effect onthe accuracy and completeness of the Partnership’s financial reporting anddisclosure included in this report.

 

**Changes in internal controls**

 

There have been no significantchanges in our internal controls or in other factors that could significantly affectour disclosure controls and procedures subsequent to the evaluation date nor werethere any significant deficiencies or material weaknesses in our internalcontrols, except as described in the prior paragraphs.

 

19

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**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings.**

 

In the ordinary course ofconducting business, there may be certain claims, suits, and complaints filedagainst the Partnership. In the opinion of management, the outcome of such matters,if any, will not have a material impact on the Partnership’s consolidated financialposition or results of operations. No material legal proceedings are currentlypending against the Partnership or against any of its assets.

 

**Item 2. Unregistered Sales of EquitySecurities 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**

 

Documents filed as a part ofthis report

 

1.     Financial Statement Schedules

 

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

 

2.     Other Exhibits

 

31.1 Certification ofParitosh K. Choksi31.2 Certification of Dean L. Cash32.1 Certification Pursuant to 18 U.S.C. section 1350 of Dean L. Cash32.2 Certification Pursuant to 18 U.S.C. section 1350 of Paritosh K. Choksi

 

20

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**SIGNATURES**

 

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date:August 22, 2005

 

 
| ** ** | **ATEL CASH  DISTRIBUTION FUND VI, L.P.**    |
|------------|----------------------------------------------|
|       | **(Registrant)**                             |
|       |                                         |
|       |                                         |
|       |   By: ATEL  Financial Services LLC |
|       |  General  Partner of Registrant         |
|            |                                              |  |

 

 
| By:    | /s/ Dean L. Cash                       |   |
|--------|----------------------------------------|--------|
|   | Dean L. Cash                           |
|   | President and Chief  Executive Officer |
|   | of General Partner                     |
|   |                                   |
|   |                                   |
| By:    | /s/ Paritosh K. Choksi                 |   |
|   | Paritosh K. Choksi                     |
|   | Principal Financial  Officer           |
|   | of Registrant                          |

 

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