SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarter Ended: September 30, 1999
Commission file number: 333-67287
AEI INCOME & GROWTH FUND 23 LLC
(Exact Name of Small Business Issuer as Specified in its Charter)
State of Delaware 41-1922579
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
(Address of Principal Executive Offices)
(651) 227-7333
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.
Yes [X] No
Transitional Small Business Disclosure Format:
Yes No [X]
AEI INCOME & GROWTH FUND 23 LLC
INDEX
PART I. Financial Information
Item 1. Balance Sheet as of September 30, 1999 and December 31, 1998
Statements for the Period ended September 30, 1999:
Operations
Cash Flows
Changes in Members' Equity
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
PART II.Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
BALANCE SHEET
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Unaudited)
ASSETS
1999 1998
CURRENT ASSETS:
Cash $ 1,590,267 $ 1,000
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Payable to AEI Fund Management, Inc. $ 31,080 $ 0
MEMBERS' EQUITY:
Managing Members' Equity 636 1,000
Limited Members' Equity, $1,000 Unit value;
24,000 Units authorized; 1,869 Units issued
and outstanding at September 30, 1999 1,558,551 0
----------- -----------
Total Members' Equity 1,559,187 1,000
----------- -----------
Total Liabilities and Members' Equity $ 1,590,267 $ 1,000
=========== ===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30
(Unaudited)
1999
INCOME $ 262
ADMINISTRATION EXPENSES 30,649
-----------
NET LOSS $ (30,387)
===========
NET LOSS ALLOCATED:
Managing Members $ (304)
Limited Members (30,083)
-----------
$ (30,387)
===========
NET LOSS PER LIMITED MEMBERSHIP UNIT
(1,869 weighted average Units outstanding) $ (16.10)
===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED SEPTEMBER 30
(Unaudited)
1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (30,387)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Increase in Payable to
AEI Fund Management, Inc. 31,080
-----------
Total Adjustments 31,080
-----------
Net Cash Provided By
Operating Activities 693
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital Contributions from Limited Members 1,868,616
Organization and Syndication Costs (280,042)
-----------
Net Cash Provided By
Financing Activities 1,588,574
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,589,267
CASH AND CASH EQUIVALENTS, beginning of period 1,000
-----------
CASH AND CASH EQUIVALENTS, end of period $ 1,590,267
===========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30
(Unaudited)
Managing Limited
Members Members Total
BALANCE, December 31, 1998 $ 1,000 $ 0 $ 1,000
Capital Contributions 0 1,868,616 1,868,616
Organization and Syndication Costs (60) (279,982) (280,042)
Net Loss (304) (30,083) (30,387)
---------- ---------- ----------
BALANCE, September 30, 1999 $ 636 $1,558,551 $1,559,187
========== ========== ==========
The accompanying Notes to Financial Statements are an integral
part of this statement.
</PAGE>
<PAGE>
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(Unaudited)
(1) The condensed statements included herein have been prepared
by the LLC, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of
operations for the interim period, on a basis consistent with
the annual audited statements. The adjustments made to these
condensed statements consist only of normal recurring
adjustments. Certain information, accounting policies, and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the LLC believes that
the disclosures are adequate to make the information
presented not misleading.
(2) Organization -
AEI Income & Growth Fund 23 LLC (the LLC), a Limited
Liability Company, was formed on October 14, 1998 to acquire
and lease commercial properties to operating tenants. The
LLC's operations are managed by AEI Fund Management XXI,
Inc. (AFM), the Managing Member of the LLC. Robert P.
Johnson, the President and sole shareholder of AFM, serves
as the Special Managing Member of the LLC. An affiliate of
AFM, AEI Fund Management, Inc., performs the administrative
and operating functions for the LLC.
The terms of the offering call for a subscription price of
$1,000 per LLC Unit, payable on acceptance of the offer.
Under the terms of the Operating Agreement, 24,000 LLC Units
are available for subscription which, if fully subscribed,
will result in contributed Limited Members' capital of
$24,000,000. The LLC commenced operations on September 30,
1999 when minimum subscriptions of 1,500 Limited Membership
Units ($1,500,000) were accepted. At September 30, 1999,
1,868.616 Units ($1,868,616) were subscribed and accepted by
the LLC. The Managing Members have contributed capital of
$1,000.
During the operation of the LLC, any Net Cash Flow, as
defined, which the Managing Members determine to distribute
will be distributed 97% to the Limited Members and 3% to the
Managing Members. Distributions to Limited Members will be
made pro rata by Units.
Any Net Proceeds of Sale, as defined, from the sale or
financing of the LLC's properties which the Managing Members
determine to distribute will, after provisions for debts and
reserves, be paid in the following manner: (i) first, 99% to
the Limited Members and 1% to the Managing Members until the
Limited Members receive an amount equal to: (a) their
Adjusted Capital Contribution plus (b) an amount equal to 7%
of their Adjusted Capital Contribution per annum, cumulative
but not compounded, to the extent not previously distributed
from Net Cash Flow; (ii) any remaining balance will be
distributed 90% to the Limited Members and 10% to the
Managing Members. Distributions to the Limited Members will
be made pro rata by Units.
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(2) Organization - (Continued)
For tax purposes, profits from operations, other than
profits attributable to the sale, exchange, financing,
refinancing or other disposition of the LLC's property, will
be allocated first in the same ratio in which, and to the
extent, Net Cash Flow is distributed to the Members for such
year. Any additional profits will be allocated in the same
ratio as the last dollar of Net Cash Flow is distributed.
Net losses from operations will be allocated 99% to the
Limited Members and 1% to the Managing Members.
For tax purposes, profits arising from the sale, financing,
or other disposition of the LLC's property will be allocated
in accordance with the Operating Agreement as follows: (i)
first, to those Members with deficit balances in their
capital accounts in an amount equal to the sum of such
deficit balances; (ii) second, 99% to the Limited Members
and 1% to the Managing Members until the aggregate balance
in the Limited Members' capital accounts equals the sum of
the Limited Members' Adjusted Capital Contributions plus an
amount equal to 7% of their Adjusted Capital Contributions
per annum, cumulative but not compounded, to the extent not
previously allocated; (iii) third, the balance of any
remaining gain will then be allocated 90% to the Limited
Members and 10% to the Managing Members. Losses will be
allocated 98% to the Limited Members and 2% to the Managing
Members.
The Managing Members are not required to currently fund a
deficit capital balance. Upon liquidation of the LLC or
withdrawal by a Managing Member, the Managing Members will
contribute to the LLC an amount equal to the lesser of the
deficit balances in their capital accounts or 1.01% of the
total capital contributions of the Limited Members over the
amount previously contributed by the Managing Members.
(3) Summary of Significant Accounting Policies -
Financial Statement Presentation
The accounts of the LLC are maintained on the accrual
basis of accounting for both federal income tax purposes
and financial reporting purposes.
Accounting Estimates
Management uses estimates and assumptions in preparing
these financial statements in accordance with generally
accepted accounting principles. Those estimates and
assumptions may affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could differ from those estimates.
Cash Concentrations of Credit Risk
At times throughout the year, the Partnership's cash
deposited in financial institutions may exceed FDIC
insurance limits.
AEI INCOME & GROWTH FUND 23 LLC
NOTES TO FINANCIAL STATEMENTS
(Continued)
(3) Summary of Significant Accounting Policies - (Continued)
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash
equivalents may include cash in checking, cash invested in
money market accounts, certificates of deposit, federal
agency notes and commercial paper with a term of three
months or less.
Income Taxes
The income or loss of the LLC for federal income tax
reporting purposes is includable in the income tax returns
of the Members. Accordingly, no recognition has been
given to income taxes in the accompanying financial
statements.
The tax return, the qualification of the LLC as such for
tax purposes, and the amount of distributable LLC income
or loss are subject to examination by federal and state
taxing authorities. If such an examination results in
changes with respect to the LLC qualification or in
changes to distributable LLC income or loss, the taxable
income of the members would be adjusted accordingly.
Real Estate
All of the properties to be purchased by the LLC will be
leased under long-term triple net leases.
The building and equipment of the LLC will be depreciated
using the straight-line method for financial reporting
purposes based on estimated useful lives of 25 years and 5
years, respectively.
(4) Payable to AEI Fund Management, Inc. -
AEI Fund Management, Inc. performs the administrative and
operating functions for the LLC. The payable to AEI Fund
Management represents the balance due for those services.
This balance is non-interest bearing and unsecured and is to
be paid in the normal course of business.
(5) Fair Value of Financial Instruments -
The carrying value of certain assets and liabilities
approximates fair value.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
For the period ended September 30, 1999, the LLC earned
$262 in investment income from subscription proceeds which were
invested in a short-term money market account. This investment
income constituted 100% of total income for the period. The
percentage of total income represented by investment income
declines as subscription proceeds are invested in properties.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
During the period ended September 30, 1999, the LLC paid
administration expenses to affiliated parties of $29,749. These
administration expenses include initial start-up costs and
administrative expenses associated with processing distributions,
reporting requirements and correspondence to the Limited Members.
During the same period, the LLC incurred administration expenses
from unrelated parties of $900. These expenses represent direct
payments to third parties for legal and filing fees, direct
administrative costs, outside audit and accounting costs, and
other costs. The administrative expenses decrease after
completion of the offering and acquisition phases of the LLC's
operations.
The Year 2000 issue is the result of computer systems that
use two digits rather than four to define the applicable year,
which may prevent such systems from accurately processing dates
ending in the Year 2000 and beyond. This could result in
computer system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or receive electronic data, or to engage in routine business
activities.
AEI Fund Management, Inc. (AEI) performs all management
services for the LLC. In 1998, AEI completed an assessment of
its computer hardware and software systems and has replaced or
upgraded certain computer hardware and software using the
assistance of outside vendors. AEI has received written
assurance from the equipment and software manufacturers as to
Year 2000 compliance. The costs associated with Year 2000
compliance have not been, and are not expected to be, material.
The LLC intends to monitor and communicate with tenants
regarding Year 2000 compliance, although there can be no
assurance that the systems of the various tenants will be Year
2000 compliant.
Liquidity and Capital Resources
The LLC's primary sources of cash will be proceeds from
the sale of Units, investment income, rental income and proceeds
from the sale of property. Its primary uses of cash will be
investment in real properties, payment of expenses involved in
the sale of Units, the organization of the LLC, the management of
properties, the administration of the LLC, and the payment of
distributions.
The Operating Agreement requires that no more than 15% of
the proceeds from the sale of Units be applied to expenses
involved in the sale of Units (including Commissions) and that
such expenses, together with acquisition expenses, not exceed 20%
of the proceeds from the sale of Units. As set forth under the
caption "Estimated Use of Proceeds" of the Prospectus, the
Managing Members anticipate that 15% of such proceeds will be
applied to cover organization and offering expenses if only the
minimum proceeds are obtained and that 14% of such proceeds will
be applied to such expenses if the maximum proceeds are obtained.
To the extent organization and offering expenses actually
incurred exceed 15% of proceeds, they are borne by the Managing
Members.
The Operating Agreement requires that all proceeds from
the sale of Units be invested or committed to investment in
properties by the later of two years after the date of the
Prospectus or six months after termination of the offer and sale
of Units. While the LLC is purchasing properties, cash flow from
investing activities (investment in real property) will remain
negative and will constitute the principal use of the LLC's
available cash flow. Until capital is invested in properties,
the LLC will remain extremely liquid.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Before the acquisition of all such properties, cash flow
from operating activities is not significant. Net income, after
adjustment for depreciation, is lower during the first few years
of operations as administrative expenses remain high and a large
amount of the LLC's assets remain invested on a short-term basis
in lower-yielding cash equivalents. Net income will become the
largest component of cash flow from operating activities and the
largest component of cash flow after the completion of the
acquisition phase.
During the offering of Units, the LLC's primary source of
cash flow will be from the sale of LLC Units. The LLC commenced
its offering of LLC Units to the public through a registration
statement which became effective March 23, 1999 and will continue
until March 22, 2000, subject to extension to March 22, 2001 if
all 24,000 LLC Units are not sold before then. From March 23,
1999 to September 30, 1999, the minimum number of LLC Units
(1,500) needed to form the LLC were sold. On September 30, 1999,
a total of 1,868.616 Units ($1,868,616) were transferred into the
LLC. From subscription proceeds, the LLC paid organization and
syndication costs (which constitute a reduction of capital) of
$280,042.
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings to which
the LLC is a party or of which the LLC's property is subject.
ITEM 2.CHANGES IN SECURITIES
None.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits -
Description
27 Financial Data Schedule for period
ended September 30, 1999.
b. Reports filed on Form 8-K - None.
SIGNATURES
In accordance with the requirements of the Exchange Act,
the Registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated: November 8, 1999 AEI Income & Growth Fund 23 LLC
By: AEI Fund Management XXI, Inc.
Its: Managing Member
By: /s/ Robert P. Johnson
Robert P. Johnson
President
(Principal Executive Officer)
By: /s/ Mark E. Larson
Mark E. Larson
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001073363
<NAME> AEI INCOME & GROWTH FUND 23 LLC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,590,267
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,590,267
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,590,267
<CURRENT-LIABILITIES> 31,080
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,559,187
<TOTAL-LIABILITY-AND-EQUITY> 1,590,267
<SALES> 0
<TOTAL-REVENUES> 262
<CGS> 0
<TOTAL-COSTS> 30,649
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (30,387)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30,387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,387)
<EPS-BASIC> (16.10)
<EPS-DILUTED> (16.10)
</TABLE>
