SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
------------------
January 6, 2003
AMEN Properties, Inc.
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(Exact name of registrant as specified in its Charter)
Delaware
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(State or other jurisdiction of incorporation)
00-22847
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(Commission File Number)
54-1831588
---------------------------------
(IRS Employer Identification No.)
303 W. Wall Street, Suite 1700
Midland, Texas 79701
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(Address of principal executive offices) (Zip Code)
(915) 684-3821
----------------------------------------------------
(Registrant's telephone number, including area code)
NA
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(Former Name of Former Address, if Changed Since Last Report)
Current Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
FORM 8-K/A
Item 7. Financial Statements and Exhibits.
On November 7, 2002, the Company filed a Current Report on Form 8-K
disclosing the completion of the TCTB acquisition, whereby AMEN acquired
approximately 65% of the limited partnership shares of TCTB Partners, Ltd. The
purpose of this Current Report is provide certain financial information with
respect to this acquisition, which information was impracticable to provide at
the time AMEN filed the Current Report on Form 8-K on November 7, 2002. The
financial information also includes updated information related to the asset
sale to Salem Communications, which closed on October 4, 2002 and was disclosed
in a press release and in a Current Report on Form 8-K filed with the SEC by the
Company on October 15, 2002.
(a) Financial Statements - The following financial statements are included
I. Unaudited Financial Statements for the two buildings owned by
TCTB for the nine months ending September 30, 2002
II. Audited Financial Statements for the two buildings owned by TCTB
from inception to December 2000, and December 2001
I. Unaudited Financial Statements for the two buildings owned by TCTB for
nine months ending September 30, 2002
The following financial statements are provided for the interim period
ended September 30, 2002 for TCTB. Also included are operations financial
statements for 1500 Broadway, Ltd. through liquidation effective June 5, 2002
when TCTB acquired the Lubbock property from 1500 Broadway, Ltd. Therefore, the
financial statements of TCTB include the operations of the Midland and Lubbock
building from June to September 2002. The 1500 Broadway, Ltd. Partnership was
liquidated upon closing of the sale of the Lubbock property to TCTB. The
operations of the Lubbock building are reflected in the 1500 Broadway, Ltd.
unaudited financial statements through May 2002, and are compared to operations
of the Lubbock building in 2001 for the six months ended June 30, 2002.
TCTB PARTNERS, LTD.
(A TEXAS LIMITED PARTNERSHIP)
TABLE OF CONTENTS
FINANCIAL STATEMENTS (Unaudited) Page
BALANCE SHEETS as of September 30, 2002 2
STATEMENTS OF EARNINGS for the nine months ended September 30,
2002 and 2001 3
STATEMENTS OF CASH FLOWS for the nine months ended September 30,
2002 and 2001 4
NOTES TO FINANCIAL STATEMENTS 5
TCTB Partners, Ltd.
(A Texas Limited Partnership)
BALANCE SHEETS
(Unaudited)
September 30,
ASSETS
2002 2001
---------- ----------
CURRENT ASSETS
Cash $ 339,353 $ 98,318
Accounts receivable 37,458 16,443
---------- ----------
Total current assets 376,811 114,761
INVESTMENTS 359,371 362,500
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $493,795 and $279,728 8,568,966 4,085,371
OTHER ASSETS 145,945 35,373
---------- ----------
TOTAL ASSETS $9,451,093 $4,598,005
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 193,573 $ 16,961
Accrued liabilities 120,469 90,949
Deferred revenues 74,495 37,008
Current portion of long-term debt 150,252 562,322
---------- ----------
Total current liabilities 538,789 707,240
LONG-TERM DEBT, less current portion 6,349,748 2,355,482
PARTNERS' CAPITAL 2,562,556 1,535,283
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $9,451,093 $4,598,005
========== ==========
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
2
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF EARNINGS
(Unaudited)
Nine months ended September 30,
2002 2001
---------- ----------
Rental revenues $2,402,090 $1,664,610
---------- ----------
Expenses:
Operating expense 1,344,952 1,067,413
Depreciation and amortization expense 277,941 149,983
Interest expense 243,403 178,635
---------- ----------
Total expenses 1,866,296 1,396,031
Net earnings from operations 535,794 268,579
Other income, net 2,968 4,891
---------- ----------
NET EARNINGS $ 538,762 $ 273,470
========== ==========
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
3
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
2002 2001
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net earnings $ 538,762 $ 273,470
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 277,941 149,983
Changes in assets and liabilities:
Decrease in accounts receivable-trade (74,856) (64,440)
Increase in other assets 10,968 89,532
(Decrease) increase in accounts payable 45,337 (150,139)
Decrease in accrued liabilities 111,576 388
Increase (decrease) in deferred revenues 32,371 (19,091)
----------- -----------
Net cash provided by operating activities 942,099 279,703
----------- -----------
Cash flows from investing activities:
Property and equipment additions (4,448,395) (43,699)
Investments in partnerships (362,500)
----------- -----------
Net cash used in investing activities (4,448,395) (406,199)
----------- -----------
Cash flows from financing activities:
Additional borrowings of debt 6,800,000 465,524
Repayment of debt (3,082,003) (305,071)
Distributions (100,000) (285,524)
----------- -----------
Net cash (used in) provided by
financing activities 3,617,997 (125,071)
----------- -----------
Net increase (decrease) in
cash and cash equivalents 111,701 (251,567)
Cash and cash equivalents at beginning of period 227,652 349,885
----------- -----------
Cash and cash equivalents at end of period $ 339,353 $ 98,318
=========== ============
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
4
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization and Basis of Accounting
TCTB Partners, Ltd. (the Partnership), a Texas Limited Partnership was
organized effective March 1, 2000. The primary business activities of the
Partnership is to engage generally in the real estate business, including, but
not limited to, the purchase, improvement, development, leasing, sale, and
exchange of real estate, and the construction, alteration, or repair of
buildings or structures on real estate. The Partnership operates primarily in
Midland, Texas.
2. Cash Equivalents
The Partnership considers cash on hand, cash on deposit in banks, money
market mutual funds and highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
3. Long-Lived Assets
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 144 provides more guidance on estimating cash flows
when performing a recoverability test, requires that a long-lived asset to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset as "held for sale." The Partnership has adopted the SFAS No. 144
effective January 1, 2002. Management does not believe that impairment exists or
that the adoption of SFAS No. 144 will have a significant impact on results of
operations or financial position.
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is based on
the straight-line method over the estimated economic lives of 40 years for
building improvements and 3-15 years for machinery and equipment, or the lease
term, whichever is less. Maintenance and repairs are charged to operations as
incurred. Renewals and significant betterments and improvements are capitalized
and depreciation over their estimated useful lives.
5
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited
September 30, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Lease Revenue Recognition
Certain of the Partnership lease agreements contain provisions for
escalating rental payments over the life of the leases. In accordance with the
provisions of SFAS No. 13, Accounting for Leases, the Partnership recognizes
rental income from these leases on a straight-line basis over the life of the
respective leases.
6. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
7. Environmental
The Partnership is subject to extensive federal, state and local
environmental laws and regulations. These laws regulate asbestos in buildings
that require the Partnership to remove or mitigate the environmental effects of
the disposal of the asbestos at the buildings. Environmental costs that relate
to current operations are expensed or capitalized as appropriate. Costs are
expensed when they relate to an existing condition caused by past operations and
will not contribute to current or future revenue generation. Liabilities related
to environmental assessments and/or remedial efforts are accrued when property
or services are provided or can reasonably be estimated.
NOTE B - CONCENTRATIONS OF CREDIT RISK
The Partnership maintains cash balances at one financial institution, which
at times may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risks on such accounts.
The Partnership's revenues are derived principally from uncollateralized
rents from tenants. The concentration of credit risk in a single industry
affects its overall exposure to credit risk because tenants may be similarly
affected by changes in economic and other conditions.
6
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited
September 30, 2002
NOTE C - LONG-TERM DEBT
On April 4, 2000, the Partnership entered into a loan agreement with a
reputable financial institution for a term loan in the amount of $2,962,723 with
an interest rate equal to the financial institution's prime rate plus one
quarter of one percentage point (.25%), but in no event to exceed the highest
lawful rate. Commencing on May 15, 2000, the Partnership was required to make
monthly payments of outstanding principal, each in the amount of $27,135, plus
accrued interest. The final date of maturity is April 15, 2005, at which time
all of the outstanding principal and accrued interest shall be due and payable
in their entirety. The loan agreement is secured by substantially all of the
assets of the Partnership. The loan agreement restricts cash distributions to
the partners' owners other than for purposes of allowing those Partners to pay
any income taxes owed by them in connection with their ownership of interests in
the Partnership. The loan agreement also contains other customary conditions and
events of default, the failure to comply with, or occurrence of, would prevent
any further borrowings and would generally require the repayment of any
outstanding borrowings along with accrued interest under the loan agreement.
Such events of default include (a) non-payment of loan agreement debt and
interest thereon, (b) non-compliance with the terms of the credit agreement
covenants, (c) cross-default with other debt in certain circumstances and (d)
bankruptcy.
On April 26, 2001, the Partnership entered into an agreement to borrow an
additional $285,524 as an amendment to the previous loan agreement, for a total
term loan in the amount of $2,897,963. Commencing on May 15, 2001, the
Partnership was required to make monthly payments of outstanding principal, each
in the amount of $30,300, plus accrued interest. The final maturity date remains
at April 15, 2005, along with all other terms of the original term note. As of
December 31, 2001, the outstanding principal balance was $2,782,004. The term
note was subsequently paid in full in the second quarter of 2002.
On June 5, 2002, the Partnership entered into a loan agreement with a
reputable financial institution for a term note of $6,800,000 and a revolving
line of credit note of $200,000. The term note bears interest at a fixed rate
per annum of 7.23% and the line of credit bears interest at a variable rate per
annum equal to the Wells Fargo Bank Texas, N.A. Base Rate plus one-half of one
percentage point (0.5000%). Commencing on June 30, 2002, the Partnership was
required to start making monthly payments of principal and interest in the
amount of $53,663 for the term note until maturity of the note on May 31, 2009.
Commencing on June 30, 2002, the Partnership was required to start making
monthly interest payments computed on the unpaid principal balance of the
revolving line of credit note due to mature on May 31, 2003.
7
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited
September 30, 2002
NOTE C - LONG-TERM DEBT (CONTINUED)
The loan agreement is secured by substantially all of the assets of the
Partnership. The loan agreement restricts cash distributions to the partners'
owners. The Partnership shall not declare or pay any distributions in excess of
tax liability due annually (but in any event, no more than 40% of net income),
either in cash or any other property to any partner or partners' owners, nor
redeem, retire, repurchase or otherwise acquire any interest of any partner or
partners' owners. The loan agreement also contains other customary conditions
and events of default, the failure to comply with, or occurrence of, would
prevent any further borrowings and would generally require the repayment of any
outstanding borrowings along with accrued interest under the loan agreement.
Such events of default include (a) non-payment of loan agreement debt and
interest thereon, (b) non-compliance with the terms of the credit agreement
covenants, (c) cross-default with other debt in certain circumstances, (d)
bankruptcy and (e) a final judgment or order for the payment of money in excess
of $100,000.
Maturities of long-term debt at September 30, 2002 were as follows:
2002 $ 34,245
2003 168,225
2004 180,799
2005 194,313
2006 208,837
Thereafter 5,713,581
-------------
Total 6,500,000
Less: current portion 150,252
-------------
Long-term portion $ 6,349,748
=============
8
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited
September 30, 2002
NOTE D - ACQUISITION OF 1500 BROADWAY BUILDING AND RENTAL ARRANGEMENTS
Effective June 5, 2002, the Partnership purchased a building located at
1500 Broadway, Lubbock, TX, from a third party for $4,100,000. The Partnership
has acquired the building subject to their existing operating leases. Future
minimum lease payments under non-cancelable operating leases aggregate
approximately $10,300,791 as of September 30, 2002 and are due as follows:
2002 $ 436,359
2003 1,623,431
2004 1,548,693
2005 1,422,234
2006 1,257,094
Thereafter 4,012,980
-------------
Total $ 10,300,791
=============
The Partnership also has rented facilities under operating leases in
Midland, TX. Future minimum lease payments under non-cancelable operating leases
aggregate approximately $3,783,517 as of September 30, 2002 and due as follows:
2002 $ 503,593
2003 1,290,652
2004 1,084,455
2005 630,515
2006 139,075
Thereafter 135,227
-------------
Total $ 3,783,517
=============
9
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Unaudited
September 30, 2002
NOTE D - ACQUISITION OF 1500 BROADWAY BUILDING AND RENTAL ARRANGEMENTS
(CONTINUED)
The following represents the portion of TCTB's Statement of Earnings for
the nine-months ended September 30, 2002 related to the Lubbock building:
Revenue $ 612,933
Expenses:
Operating expenses 288,101
Depreciation and amortization 129,307
Interest expense 88,761
-------------
Total expenses $ 506,169
=============
Net earnings from operations $ 106,764
=============
NOTE E - RELATED PARTY TRANSACTIONS
For the nine-month periods ended September 30, 2002 and 2001 certain of the
Partnership's partners were tenants. The Partnership received rental income from
these partners of approximately $96,000 in each of these nine-month periods.
10
1500 Broadway, Ltd.
(A TEXAS LIMITED PARTNERSHIP)
TABLE OF CONTENTS
FINANCIAL STATEMENTS (Unaudited) Page
BALANCE SHEETS as of May 31, 2002 2
STATEMENTS OF EARNINGS for the five months ended May 31,
2002 and six months ended June 30, 2001 3
STATEMENTS OF CASH FLOWS for the five months ended May 31,
2002 and six months ended June 30, 2001 4
NOTES TO FINANCIAL STATEMENTS 5
1500 Broadway, Ltd.
(A Texas Limited Partnership)
BALANCE SHEETS
(Unaudited)
ASSETS
May 31, June 30,
2002 2001
---------- ----------
CURRENT ASSETS
Cash $ 116,364 $ 27,792
Total current assets 116,364 27,792
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $190,958 and $63,498 2,912,824 1,800,704
OTHER ASSETS 5,392 10,530
---------- ----------
TOTAL ASSETS $3,034,580 $1,839,026
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 43,958 $ 40,058
---------- ----------
Total current liabilities 43,958 40,058
PARTNERS' CAPITAL 2,990,622 1,798,968
---------- ----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $3,034,580 $1,839,026
========== ==========
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
2
1500 Broadway, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF EARNINGS
(Unaudited)
Five Months Six Months
Ended May 31, Ended June 30,
2002 2001
-------- --------
Rental revenues $803,374 $822,091
Expenses:
Operating expense 467,998 593,796
Depreciation and amortization expense 69,807 49,646
-------- --------
Total expenses 537,805 643,442
-------- --------
NET EARNINGS $265,569 $178,649
======== ========
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
3
1500 Broadway, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Five Months Six Months
Ended May 31, Ended June 30,
2002 2001
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net earnings $ 265,569 $ 178,649
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 69,807 49,646
Changes in assets and liabilities:
Decrease in accounts receivable 72,866 4,494
(Increase) in other assets (4,742) (10,530)
(Decrease) in accounts payable (35,008) (206,627)
(Decrease) in deferred revenues (83,678) (983)
--------- ---------
Net cash provided by operating
activities 284,814 14,649
Cash flows from investing activities:
Property and equipment additions (731,009) (399,045)
--------- ---------
Net cash used in investing
activities (731,009) (399,045)
Cash flows from financing activities:
Contributions 518,785 375,000
Distributions (493,867) --
--------- ---------
Net cash provided by financing
activities 24,918 375,000
Net increase in cash and cash equivalents (421,277) (9,396)
Cash and cash equivalents at beginning
of period 537,641 37,188
Cash and cash equivalents at end of period $116,364 $27,792
========= =========
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
4
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 5, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization and Basis of Accounting
1500 Broadway, Ltd. (the Partnership), a Texas Limited Partnership was
organized effective June 13, 2000. The primary business activities of the
Partnership is to engage generally in the real estate business, including, but
not limited to, the purchase, improvement, development, leasing, sale, and
exchange of real estate, and the construction, alteration, or repair of
buildings or structures on real estate. The Partnership operates primarily in
Lubbock, Texas.
2. Cash Equivalents
The Partnership considers cash on hand, cash on deposit in banks, money
market mutual funds and highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalent.
3. Long-Lived Assets
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 144 provides more guidance on estimating cash flows
when performing a recoverability test, requires that a long-lived asset to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset as "held for sale." The Partnership has adopted the SFAS No. 144
effective January 1, 2002. Management does not believe that impairment exists or
that the adoption of SFAS No. 144 will have a significant impact on results of
operations or financial position.
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is based on
the straight-line method over the estimated economic lives of 40 years for
building improvements and 3-15 years for machinery and equipment, or the lease
term, whichever is less. Maintenance and repairs are charged to operations as
incurred. Renewals and significant betterments and improvements are capitalized
and depreciation over their estimated useful lives.
5
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 5, 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Lease Revenue Recognition
Certain of the Partnership lease agreements contain provisions for
escalating rental payments over the life of the leases. In accordance with the
provisions of SFAS No. 13, Accounting for Leases, the Partnership recognizes
rental income from these leases on a straight-line basis over the life of the
respective leases.
6. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
7. Environmental
The Partnership is subject to extensive federal, state and local
environmental laws and regulations. These laws regulate asbestos in buildings
that require the Partnership to remove or mitigate the environmental effects of
the disposal of the asbestos at the buildings.
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Costs are expensed when they relate to an existing
condition caused by past operations and will not contribute to current or future
revenue generation. Liabilities related to environmental assessments and/or
remedial efforts are accrued when property or services are provided or can
reasonably be estimated.
NOTE B - CONCENTRATIONS OF CREDIT RISK
The Partnership maintains cash balances at one financial institution, which
at times may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risks on such accounts.
The Partnership's revenues are derived principally from uncollateralized
rents from tenants. The concentration of credit risk in a single industry
affects its overall exposure to credit risk because tenants may be similarly
affected by changes in economic and other conditions.
6
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 5, 2002
NOTE C - SALE OF PARTNERSHIP ASSETS
Effective June 5, 2002, the Partnership sold its primary asset, the
building located at 1500 Broadway to a third party for $4,100,000 and liquidated
the Partnership.
7
II. Audited Financial Statements for the two buildings owned by TCTB, for
the period inception to December 2000, and December 2001
On August 15, 2002 the CPA firm of Johnson Miller & Co. of Midland, TX,
completed an audit of the income statements for TCTB and 1500 Broadway, Ltd., a
Texas limited partnership. The primary assets of TCTB and 1500 Broadway, Ltd.
are the Midland and Lubbock properties, respectively, which are the subject of
potential acquisition by the Company as indicated in Proposal Two. The audited
income statements for TCTB related to the Midland building are for the year
ended December 31, 2001 and for the period from March 1, 2000 (date of
inception) through December 31, 2000. The audited income statements for 1500
Broadway, Ltd., related to the Lubbock building are for the year ended December
31, 2001 and for the period from June 13, 2000 (date of inception) through
December 31, 2000. Prior to these periods, these buildings were not revenue
producing assets, and therefore a schedule of operating revenues and expenses is
not available.
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
TCTB PARTNERS, LTD.
(A TEXAS LIMITED PARTNERSHIP)
December 31, 2001 and 2000
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
BALANCE SHEETS 2
STATEMENTS OF EARNINGS 3
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 7
Report of Independent Certified Public Accountants
To the Members of
TCTB Partners, Ltd.
A Texas Limited Partnership
We have audited the balance sheets of TCTB Partners, Ltd. a Texas Limited
Partnership, (the Partnership) as of December 31, 2001 and 2000, and the related
statements of earnings, partners' capital and cash flows for the year ended
December 31, 2001 and for the period from March 1, 2000 (date of inception)
through December 31, 2000. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TCTB Partners, Ltd., a Texas
Limited Partnership, as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the year ended December 31, 2001 and the
period from March 1, 2000 (date of inception) through December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
Midland, Texas
August 15, 2002
/s/: Johnson, Miller & Co.
---------------------
TCTB Partners, Ltd.
(A Texas Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS
2001 2000
--------------- ----------------
CURRENT ASSETS
Cash (note A2) $ 227,652 349,885
Accounts receivable 91,426 155,344
Accounts receivable - related party - 2,103
--------------- ----------------
Total current assets 319,078 507,332
INVESTMENTS 364,580 -
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $202,507 and $77,361 (notes A4, A5 and E) 4,390,596 4,044,741
OTHER ASSETS 18,924 20,615
--------------- ----------------
$ 5,093,178 4,572,688
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable $ 74,795 84,770
Accrued liabilities 165,532 169,408
Deferred revenues 72,139 68,652
Current portion of long-term debt (note C) 457,790 111,371
--------------- ----------------
Total current liabilities 770,256 434,201
LONG-TERM DEBT, less current portion (note C) 2,324,214 2,645,980
PARTNERS' CAPITAL 1,998,708 1,492,507
--------------- ----------------
$ 5,093,178 4,572,688
=============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
2
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF EARNINGS
Year ended December 31, 2001 and from
March 1, 2000 (Date of Inception) to December 31, 2000
2001 2000
--------------- ----------------
Rental revenues $ 2,166,374 1,380,432
Expenses:
Operating expense 1,440,558 971,066
Depreciation and amortization expense 128,408 79,808
Interest expense 224,439 192,491
Other expense 21,874 25,126
--------------- ----------------
Total expenses 1,815,279 1,268,491
--------------- ----------------
Net earnings from operations 351,095 111,941
Other income, net 7,569 11,187
--------------- ----------------
NET EARNINGS $ 358,664 123,128
=============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
3
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
Year ended December 31, 2001 and from
March 1, 2000 (Date of Inception) to December 31, 2000
General Limited
Partner Partners Total
--------------- --------------- ----------------
Beginning Partners' Capital, March 1, 2000 $ - - -
Contributions 13,694 1,355,685 1,369,379
Net earnings 1,231 121,897 123,128
--------------- --------------- ----------------
Ending Partners' Capital, December 31, 2000 14,925 1,477,582 1,492,507
Contributions 1,475 146,062 147,537
Net earnings 3,586 355,078 358,664
--------------- --------------- ----------------
Ending Partners' Capital, December 31, 2001 $ 19,986 1,978,722 1,998,708
=============== =============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
4
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
Year ended December 31, 2001 and from
March 1, 2000 (Date of Inception) to December 31, 2000
2001 2000
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net earnings $ 358,664 123,128
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 128,408 77,361
Equity in income from investment in partnerships (2,080) -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable-trade 63,918 (155,344)
Decrease (increase) in accounts receivable-related party 21,875 (2,103)
Decrease (increase) in other assets 1,691 (20,615)
(Decrease) increase in accounts payable (9,975) 84,770
(Decrease) increase in accrued liabilities (3,876) 169,408
Increase in deferred revenues 3,487 68,652
--------------- ----------------
Net cash provided by operating activities 562,112 345,257
----------------- ----------------
Cash flows from investing activities:
Property and equipment additions (60,974) (4,122,102)
Investments in partnerships (362,500) -
--------------- ----------------
Net cash used in investing activities (423,474) (4,122,102)
--------------- ----------------
Cash flows from financing activities:
Additional borrowings of debt - 2,962,723
Repayment of debt (260,871) (205,372)
Partner contributions - 1,369,379
--------------- ----------------
Net cash (used in) provided by financing activities (260,871) 4,126,730
--------------- ----------------
Net increase in cash and cash equivalents (122,233) 349,885
Cash and cash equivalents at beginning of period 349,885 -
--------------- ----------------
Cash and cash equivalents at end of period $ 227,652 349,885
=============== ================
Cash paid during the year for:
Interest $ 224,439 192,491
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
5
TCTB Partners, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
Year ended December 31, 2001 and from
March 1, 2000 (Date of Inception) to December 31, 2000
2001 2000
--------------- ----------------
Noncash investing and financing activities:
-------------------------------------------
Acquisition of property and equipment in exchange for a
partnership interest $ 413,289 -
Acquisition of debt in exchange for a partnership interest 285,524 -
Exchange of related party liability for a partnership interest 19,772 -
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
6
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization and Basis of Accounting
TCTB Partners, Ltd. (the Partnership), a Texas Limited Partnership was
organized effective March 1, 2000. The primary business activities of the
Partnership is to engage generally in the real estate business, including, but
not limited to, the purchase, improvement, development, leasing, sale, and
exchange of real estate, and the construction, alteration, or repair of
buildings or structures on real estate. The Partnership operates primarily in
Midland, Texas.
2. Cash Equivalents
The Partnership considers cash on hand, cash on deposit in banks, money
market mutual funds and highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
3. Fair Value of Financial Instruments
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of
Financial Instruments, which requires entities to disclose the SFAS No. 107
value of certain on-and off-balance sheet financial instruments for which it is
practicable to estimate. Value is defined in SFAS No. 107 as the amount at which
the instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
the carrying amounts of its financial instruments classified as current assets
and liabilities in its balance sheet approximate SFAS No. 107 value due to the
relatively short maturity of these instruments. The Partnership considers the
disclosure of the SFAS 107 value of the loans to be impracticable.
4. Long-Lived Assets
In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operation when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. SFAS
No. 121 also addresses the accounting for long-lived assets that are expected to
be disposed of. Management does not believe that impairment exists.
7
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is based on
the straight-line method over the estimated economic lives of 40 years for
building improvements and 3-15 years for machinery and equipment, or the lease
term, whichever is less. Maintenance and repairs are charged to operations as
incurred. Renewals and significant betterments and improvements are capitalized
and depreciation over their estimated useful lives.
6. Lease Revenue Recognition
Certain of the Partnership lease agreements contain provisions for
escalating rental payments over the life of the leases. In accordance with the
provisions of SFAS No. 13, Accounting for Leases, the Partnership recognizes
rental income from these leases on a straight-line basis over the life of the
respective leases.
7. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
8. Impact of Recently Issued Accounting Standards
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 144 provides more guidance on estimating cash flows
when performing a recoverability test, requires that a long-lived asset to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset as "held for sale." The Partnership expects to adopt the SFAS No. 144
effective January 1, 2002 and does not anticipate adoption will have a
significant effect on results of operations or financial position.
9. Environmental
The Partnership is subject to extensive federal, state and local
environmental laws and regulations. These laws regulate asbestos in buildings
that require the Partnership to remove or mitigate the environmental effects of
the disposal of the asbestos at the buildings.
8
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
9. Environmental (Continued)
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Costs are expensed when they relate to an existing
condition caused by past operations and will not contribute to current or future
revenue generation. Liabilities related to environmental assessments and/or
remedial efforts are accrued when property or services are provided or can
reasonably be estimated.
NOTE B - CONCENTRATIONS OF CREDIT RISK
The Partnership maintains cash balances at one financial institution, which
at times may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risks on such accounts.
The Partnership's revenues are derived principally from uncollateralized
rents from tenants. The concentration of credit risk in a single industry
affects its overall exposure to credit risk because tenants may be similarly
affected by changes in economic and other conditions.
NOTE C - LONG-TERM DEBT
On April 4, 2000, the Partnership entered into a loan agreement with a
reputable financial institution for a term loan in the amount of $2,962,723 with
an interest rate equal to the financial institution's prime rate plus one
quarter of one percentage point (.25%), but in no event to exceed the highest
lawful rate. Commencing on May 15, 2000, the Partnership was required to make
monthly payments of outstanding principal, each in the amount of $27,135, plus
accrued interest. The final date of maturity is April 15, 2005, at which time
all of the outstanding principal and accrued interest shall be due and payable
in their entirety. The loan agreement is secured by substantially all of the
assets of the Partnership. The loan agreement restricts cash distributions to
the partners' owners other than for purposes of allowing those Partners to pay
any income taxes owed by them in connection with their ownership of interests in
the Partnership. The loan agreement also contains other customary conditions and
events of default, the failure to comply with, or occurrence of, would prevent
any further borrowings and would generally require the repayment of any
outstanding borrowings along with accrued interest under the loan agreement.
Such events of default include (a) non-payment of loan agreement debt and
interest thereon, (b) non-compliance with the terms of the credit agreement
covenants, (c) cross-default with other debt in certain circumstances and (d)
bankruptcy. As of December 31, 2000, the outstanding principal balance was
$2,757,351.
9
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE C - LONG-TERM DEBT (CONTINUED)
On April 26, 2001, the Partnership entered into an agreement to borrow an
additional $285,524 as an amendment to the previous loan agreement, for a total
term loan in the amount of $2,897,963. Commencing on May 15, 2001, the
Partnership was required to make monthly payments of outstanding principal, each
in the amount of $30,300, plus accrued interest. The final maturity date remains
at April 15, 2005, along with all other terms of the original term note. As of
December 31, 2001, the outstanding principal balance was $2,782,004. The term
note was subsequently paid in full in fiscal year 2002.
On June 5, 2002, the Partnership entered into a loan agreement with a
reputable financial institution for a term note of $6,800,000 and a revolving
line of credit note of $200,000. The term note bears interest at a fixed rate
per annum of 7.23% and the line of credit bears interest at a variable rate per
annum equal to the Wells Fargo Bank Texas, N.A. Base Rate plus one-half of one
percentage point (0.5000%). Commencing on June 30, 2002, the Partnership was
required to start making monthly payments of principal and interest in the
amount of $53,663 for the term note until maturity of the note on May 31, 2009.
Commencing on June 30, 2002, the Partnership was required to start making
monthly interest payments computed on the unpaid principal balance of the
revolving line of credit note due to mature on May 31, 2003. The loan agreement
is secured by substantially all of the assets of the Partnership. The loan
agreement restricts cash distributions to the partners' owners. The Partnership
shall not declare or pay any distributions in excess of tax liability due
annually (but in any event, no more than 40% of net income), either in cash or
any other property to any partner or partners' owners, nor redeem, retire,
repurchase or otherwise acquire any interest of any partner or partners' owners.
The loan agreement also contains other customary conditions and events of
default, the failure to comply with, or occurrence of, would prevent any further
borrowings and would generally require the repayment of any outstanding
borrowings along with accrued interest under the loan agreement. Such events of
default include (a) non-payment of loan agreement debt and interest thereon, (b)
non-compliance with the terms of the credit agreement covenants, (c)
cross-default with other debt in certain circumstances, (d) bankruptcy and (e) a
final judgment or order for the payment of money in excess of $100,000.
10
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE C - LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt at December 31, 2001 were as follows:
2002 $ 457,790
2003 492,007
2004 528,782
2005 568,305
2006 610,783
Thereafter 124,337
---------------
Total 2,782,004
Less: current portion 457,790
---------------
Long-term portion $ 2,324,214
===============
NOTE D - RENTAL ARRANGEMENTS
The Partnership has rented facilities under operating leases. Future
minimum lease payments under non-cancelable operating leases
aggregate approximately $5,294,000 and $7,255,000 as of December 31,
2001 and 2000, respectively and are due as follows:
December 31, 2001:
2002 $ 2,014,361
2003 1,290,652
2004 1,084,455
2005 630,515
2006 139,075
Thereafter 135,227
---------------
Total $ 5,294,285
===============
11
TCTB Partners, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE E - PROPERTY AND EQUIPMENT INFORMATION
The following is a summary of property and equipment and the related
accumulated depreciation as of December 31, 2001 and 2000:
2001 2000
--------------- ----------------
Buildings $ 4,465,789 4,042,117
Furniture and fixtures 9,684 1,688
Vehicle 3,000 3,000
Tenant improvements 46,914 13,567
Land 67,716 61,730
--------------- ----------------
4,593,103 4,122,102
Accumulated depreciation (202,507) (77,361)
--------------- ----------------
Property and equipment, net $ 4,390,596 4,044,741
====================================
NOTE F - SIGNIFICANT TENANTS
For the year ended December 31, 2001, rent income that accounted for more
than ten-percent of the partnership's revenue was as follows:
Bank of America, N.A. 32%
Pioneer Natural Resources USA, Inc. 15%
Faskin Oil and Ranch, Inc. 13%
NOTE G - RELATED PARTY TRANSACTIONS
During 2001 and 2000 certain of the Partnership's partners were tenants.
The Partnership received rental income from these partners of approximately
$128,000 and $57,300 during 2001 and 2000, respectively.
At December 31, 2000, the General Partner owed the Partnership
approximately $1,000.
NOTE H - SUBSEQUENT EVENTS
Effective June 5, 2002, the Partnership purchased a building from a third
party for $4,100,000.
12
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
1500 BROADWAY, LTD.
(A TEXAS LIMITED PARTNERSHIP)
December 31, 2001 and 2000
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
BALANCE SHEETS 2
STATEMENTS OF EARNINGS 3
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6
Report of Independent Certified Public Accountants
To the Members of
1500 Broadway, Ltd.
A Texas Limited Partnership
We have audited the balance sheets of 1500 Broadway, Ltd., a Texas Limited
Partnership, (the Partnership) as of December 31, 2001 and 2000, and the related
statements of earnings, partners' capital and cash flows for the year ended
December 31, 2001 and for the period from June 13, 2000 (date of inception)
through December 31, 2000. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 1500 Broadway, Ltd., a Texas
Limited Partnership, as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the year ended December 31, 2001 and the
period from June 13, 2000 (date of inception) through December 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
Midland, Texas
August 15, 2002
/s/: Johnson, Miller & Co.
---------------------
1500 Broadway, Ltd.
(A Texas Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS
2001 2000
--------------- ----------------
CURRENT ASSETS
Cash (note A2) $ 537,641 37,188
Accounts receivable 72,866 4,494
--------------- ----------------
Total current assets 610,507 41,682
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $121,151 and $13,852 (notes A3, A4 and D) 2,251,622 1,451,305
OTHER ASSETS 650 -
--------------- ----------------
$ 2,862,779 1,492,987
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable $ 78,966 246,685
Deferred revenues 83,678 983
--------------- ----------------
Total current liabilities 162,644 247,668
72,804
PARTNERS' CAPITAL 2,700,135 1,245,319
--------------- ----------------
$ 2,862,779 1,492,987
=============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
2
1500 Broadway, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF EARNINGS
Year ended December 31, 2001 and from
June 13, 2000 (Date of Inception) to December 31, 2000
2001 2000
--------------- ----------------
Rental revenues $ 1,776,604 765,344
Expenses:
Operating expense 1,305,690 664,748
Depreciation and amortization expense 107,299 13,852
--------------- ----------------
Total expenses 1,412,989 678,600
--------------- ----------------
NET EARNINGS $ 363,615 86,744
=============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
3
1500 Broadway, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
Year ended December 31, 2001 and from
June 13, 2000 (Date of Inception) to December 31, 2000
Beginning Partners' Capital, June 13, 2000 $ -
Contributions 1,200,000
Distributions (41,425)
Net earnings 86,744
----------------
Ending Partners' Capital, December 31, 2000 1,245,319
Contributions 1,300,000
Distributions (208,799)
Net earnings 363,615
----------------
Ending Partners' Capital, December 31, 2001 $ 2,700,135
================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
4
1500 Broadway, Ltd.
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
Year ended December 31, 2001 and from
June 13, 2000 (Date of Inception) to December 31, 2000
2001 2000
--------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net earnings $ 363,615 86,744
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 107,299 13,852
Changes in assets and liabilities:
Increase in accounts receivable (68,372) (4,494)
Increase in other assets (650) -
(Decrease) increase in accounts payable (167,719) 246,685
Increase in deferred revenues 82,695 983
--------------- ----------------
Net cash provided by operating activities 316,868 343,770
--------------- ----------------
Cash flows from investing activities:
Property and equipment additions (907,616) (1,465,157)
--------------- ----------------
Net cash used in investing activities (907,616) (1,465,157)
--------------- ----------------
Cash flows from financing activities:
Contributions 1,300,000 1,200,000
Distributions (208,799) (41,425)
--------------- ----------------
Net cash provided by financing activities 1,091,201 1,158,575
--------------- ----------------
Net increase in cash and cash equivalents 500,453 37,188
Cash and cash equivalents at beginning of period 37,188 -
--------------- ----------------
Cash and cash equivalents at end of period $ 537,641 37,188
=============== ================
The accompanying summary of accounting policies and footnotes are an
integral part of these financial statements.
5
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization and Basis of Accounting
1500 Broadway, Ltd. (the Partnership), a Texas Limited Partnership was
organized effective June 13, 2000. The primary business activities of the
Partnership is to engage generally in the real estate business, including, but
not limited to, the purchase, improvement, development, leasing, sale, and
exchange of real estate, and the construction, alteration, or repair of
buildings or structures on real estate. The Partnership operates primarily in
Lubbock, Texas.
2. Cash Equivalents
The Partnership considers cash on hand, cash on deposit in banks, money
market mutual funds and highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalent.
3. Long-Lived Assets
In March 1995, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operation when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. Management does not believe that
impairment exists.
4. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is based on
the straight-line method over the estimated economic lives of 40 years for
building improvements and 3-15 years for machinery and equipment, or the lease
term, whichever is less. Maintenance and repairs are charged to operations as
incurred. Renewals and significant betterments and improvements are capitalized
and depreciation over their estimated useful lives.
6
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
5. Lease Revenue Recognition
Certain of the Partnership lease agreements contain provisions for
escalating rental payments over the life of the leases. In accordance with the
provisions of SFAS No. 13, Accounting for Leases, the Partnership recognizes
rental income from these leases on a straight-line basis over the life of the
respective leases.
6. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
7. Impact of Recently Issued Accounting Standards
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 144 provides more guidance on estimating cash flows
when performing a recoverability test, requires that a long-lived asset to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset as "held for sale." The Partnership expects to adopt SFAS No. 144
effective January 1, 2002 and does not anticipate adoption will have a
significant effect on results of operations or financial position.
8. Environmental
The Partnership is subject to extensive federal, state and local
environmental laws and regulations. These laws regulate asbestos in buildings
that require the Partnership to remove or mitigate the environmental effects of
the disposal of the asbestos at the buildings.
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Costs are expensed when they relate to an existing
condition caused by past operations and will not contribute to current or future
revenue generation. Liabilities related to environmental assessments and/or
remedial efforts are accrued when property or services are provided or can
reasonably be estimated.
7
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE B - CONCENTRATIONS OF CREDIT RISK
The Partnership maintains cash balances at one financial institution, which
at times may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risks on such accounts.
The Partnership's revenues are derived principally from uncollateralized
rents from tenants. The concentration of credit risk in a single industry
affects its overall exposure to credit risk because tenants may be similarly
affected by changes in economic and other conditions.
NOTE C - RENTAL ARRANGEMENTS
The Partnership has rented facilities under operating leases. Future
minimum lease payments under non-cancelable operating leases aggregate
approximately $11,610,000 and $13,129,000 as of December 31, 2001 and 2000,
respectively and are due as follows:
December 31, 2001:
2002 $ 1,745,434
2003 1,623,431
2004 1,548,693
2005 1,422,234
2006 1,257,094
Thereafter 4,012,980
---------------
Total $ 11,609,866
===============
December 31, 2000:
2001 $ 1,518,671
2002 1,745,434
2003 1,623,431
2004 1,548,693
2005 1,422,234
Thereafter 5,270,074
---------------
Total $ 13,128,537
===============
There can be no assurance that any of the Partnership's leases will be
renewed.
8
1500 Broadway, Ltd.
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2001 and 2000
NOTE D - PROPERTY AND EQUIPMENT INFORMATION
The following is a summary of property and equipment and the related
accumulated depreciation as of December 31, 2001 and 2000:
2001 2000
--------------- -----------------
Buildings $ 1,651,098 1,101,566
Furniture and fixtures 13,873 6,921
Equipment 22,774 9,484
Tenant improvements 455,028 117,186
Land 230,000 230,000
--------------- -----------------
2,372,773 1,465,157
Accumulated depreciation (121,151) (13,852)
--------------- -----------------
Property and equipment, net $ 2,251,622 1,451,305
=============== =================
The Partnership has a non-cancelable operating lease agreement for
land on which approximately twenty-five per cent of the Partnership's
rental office is built. The terms of the present lease agreement will
expire on September 30, 2013. The existing lease requires monthly
lease payments of $3,495 per month. These payments are adjusted every
five years for the change in the consumer price index. The next
adjustment will occur on October 1, 2003. Future minimum lease
payments under the agreement aggregate approximately $ 493,000 as of
December 31, 2001 and are as follows:
2002 $ 41,940
2003 41,940
2004 41,940
2005 41,940
2006 41,940
Thereafter 283,095
---------------
Total $ 492,795
===============
NOTE E - SIGNIFICANT TENANTS
For the year then ended December 31, 2001, rent income that accounted
for more than ten-percent of the Partnership's revenue was as follows:
Wells Fargo Bank, Texas N.A. 37%
Lubbock Club 11%
9
(b) Pro forma financial information.
The following unaudited pro forma condensed consolidated financial
statements are filed with this report:
-- Pro Forma Consolidated Balance Sheet at September 30, 2002
-- Pro Forma Consolidated Statements of Operations for Year Ended December 31,
2001
-- Pro Forma Consolidated Statements of Operations for Nine Months Ended
September 30, 2002
The Pro Forma Consolidated Balance Sheet of the Company as of September 30,
2002 reflects the financial position of the Company assuming the asset sale and
the asset acquisition had occurred on September 30, 2002. All material
adjustments required to reflect the asset sale are set forth in the column
labeled "Asset Sale Pro Forma Adjustments." All material adjustments required to
reflect the asset acquisition are set forth in the column labeled "Asset
Acquisition Pro Forma Adjustments." The data contained in the column labeled
"September 2002 Actual" is derived from the Company's unaudited consolidated
balance sheet as of September 30, 2002. The pro forma data is for informational
purposes only and may not necessarily reflect the Company's financial position
or what the financial position would have been had the asset sale and the asset
acquisition occurred on September 30, 2002.
The unaudited Pro Forma Consolidated Statements of Operations were prepared
to illustrate the estimated effects of the discontinuance of the business
associated with the asset sale as of January 1, 2001. Pursuant to SFAS No. 144,
the Company has removed the business attributable to the asset being sold from
continuing operations in the periodic statement of operations for the nine
months ended September 30, 2002. The net loss attributable to the business of
the asset being sold is reflected in discontinued operations in the income
statement for the nine months ended September 30, 2002. The unaudited Pro Forma
Consolidated Statements of Operations exclude the effects of transactions that
are not reasonably expected to reoccur subsequent to the asset sale. The
unaudited pro forma consolidated statements of operations and related notes are
provided for informational purposes only and do not purport to be indicative of
the results of operations that would have been reported had the events assumed,
occurred on the dates indicated, or purport to be indicative of results of
operations that may be achieved in the future.
The unaudited Pro Forma Consolidated Balance Sheet and the unaudited Pro
Forma Consolidated Statements of Operations should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company, including
the notes thereto, appearing in the Company's Annual Form 10-K for the year
ended December 31, 2001 and "Management's Discussion and Analysis or Plan of
Operation" and the consolidated financial statements of the Company, including
the notes thereto, appearing on interim report Form 10-QSB for the quarter ended
September 30, 2002.
AMEN Properties, Inc.
BALANCE SHEET
(a) (b)
Actual Asset Sale Asset Pro Forma
Acquisition
September Pro Forma Pro Forma September
2002 2002
(unaudited) Adjustments Adjustments (unaudited)
------------------------------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $199,018 $4,100,000 $(1,606,521) $2,692,496
Short-term investments 76,234 76,234
Accounts receivable 210,680 37,458 248,139
Deferred costs 33,668 33,668
Assets held for sale 2,624,436 (2,624,436)
----------------------------------------------------
Total current assets 3,144,036 1,475,564 (1,569,063) 3,050,537
LONG TERM INVESTMENTS 52,326 52,326
PROPERTY AND EQUIPMENT, net 18,562 11,874,886 11,893,448
OTHER ASSETS:
Deposits 62,165 (60,000) 7,485 9,650
Deferred costs 138,460 138,460
Goodwill, net 300,399 300,399
----------------------------------------------------
Total other assets 362,564 (60,000) 145,945 448,509
TOTAL ASSETS $3,577,488 $1,415,564 $10,451,768 $15,444,820
====================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $244,692 $193,573 $438,265
Accrued liabilities 1,474,946 925 1,475,871
Deferred revenue 38,042 38,042
----------------------------------------------------
Total current liabilities 1,719,638 232,540 1,952,178
OTHER LIABILITIES:
Accounts payable 131,328 111,600 242,928
Other liabilities 597 44,397 44,994
LONGTERM DEBT
Note Payable-Wells Fargo 6,500,000 6,500,000
Promissory Note - TCTB 2,789,087 2,789,087
----------------------------------------------------
Total Long Term Debt 9,289,087 9,289,087
MINORITY INTEREST 774,144 774,144
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
5,000,000 shares authorized,
80,000 Series "A" shares
issued and outstanding 80 80
80,000 Series "B" shares
issued and outstanding 80 80
Common stock, $.01 par value,
20,000,000 shares authorized,
7,968,221 shares issued and
outstanding 79,682 79,682
Common stock warrants 127,660 127,660
Additional paid-in capital 42,052,931 42,052,931
Retained Earnings (Accumulated
deficit) (40,538,640) 1,415,564 (39,123,076)
Accumulated other comprehensive
loss:
Net unrealized gain on
available-for-sale
securities 4,132 4,132
----------------------------------------------------
Total stockholders' equity 1,725,925 1,415,564 3,141,489
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,577,488 $1,415,564 $10,451,769 $15,444,821
====================================================
0 0 0
See accompanying notes.
AMEN Properties, Inc.
Proforma Statement of Operations
(b) Undaudited (b) Pro Forma
Historical (a) Asset Pro Forma Nine Months (a) Asset Nine Months
Year Ended Asset Sale Acquistion Year Ended Ended Asset Sale Acquistion Ended
December 31, Pro Forma Pro Forma December 31, September Pro Forma Pro Forma September
2001 Adjustment Adjustment 2001 30, 2002 Adjustment Adjustment 30, 2002
-------------------------------------------------------------------------------------------
Total Revenues $4,506,291 $(3,302,484)$3,942,978 $5,146,785 $664,722 $ - $2,402,090 $3,066,812
Operating Expenses:
Building Operations, Cost of
goods and services 1,737,095 (783,078) 2,746,248 3,700,265 507,592 0 1,341,984 1,849,576
Crosswalk operations 2,774,780 (2,774,780) 0 0 0 0 0 0
Sales and marketing 1,525,243 (1,331,013) 0 194,230 102,855 0 0 102,855
Depreciation, Amortization of
Goodwill and Intangibles 1,682,235 (1,485,557) 235,707 432,385 0 0 277,941 277,941
Impairment Loss 0 0 0 0 450,000 0 0 450,000
General and administrative 1,654,513 (1,185,471) 21,874 490,916 431,959 (90,300) 0 341,659
-------------------------------------------------------------------------------------------
Total operating expenses $9,373,866 $(7,559,899)$3,003,829 $4,817,796 $1,492,406 $(90,300)$1,619,925 $3,022,031
Operating Income (Loss) from
Continued Operations $(4,867,575) $4,257,415 $939,149 $328,989 $(827,685) $90,300 $782,165 $44,781
Other Income (Expense) Net 83,061 - (216,870) (133,809) 21,126 0 (243,403) (222,277)
-------------------------------------------------------------------------------------------
Income (Loss) from Continued
Operations $(4,784,514) $4,257,415 $722,279 $195,180 $(806,559) $90,300 $538,762 $(177,497)
Loss from discontinued operations 0 0 0 0 (2,122,597)2,122,597 0 0
Income attributed to Minority
Interest 0 0 (253,791) (253,791) 0 0 (189,308) (189,308)
Gain (loss) before cumulative
effect of a change in accounting
policy $(4,784,514) $4,257,415 $468,488 $(58,611)$(2,929,156)$2,212,897 $349,454 $(366,804)
Recognition of impairment loss as a
result of transitional goodwill
impairment test 0 0 0 0 (750,000) 0 0 (750,000)
-------------------------------------------------------------------------------------------
Net Income (Loss) $(4,784,514) $4,257,415 $468,488 $(58,611)$(3,679,156)$2,212,897 $349,454 $(1,116,804)
===========================================================================================
See accompanying notes.
Notes to Pro Forma Financial Statements:
(A) To record the asset sale of the crosswalk.com website to Salem for
$4.1 million and the related gain on sale. On May 24, 2002, following
the approval of our board of directors, we entered into a letter of
intent agreement with OnePlace, LLC, a wholly owned subsidiary of
Salem Communications ("Salem"). The asset purchase agreement dated as
of August 19, 2002, contemplates that, subject to the satisfaction of
the conditions contained therein (including obtaining the approval of
the stockholders of AMEN, formally Crosswalk.com), Oneplace, LLC would
acquire substantially all of the Company's Internet related
intellectual property and other technology assets, email lists and
newsletters, customer base and trademarks for a purchase price of $4.1
million, to be paid in cash
(B) To record the asset acquisition of approximately 65% of the limited
partnership shares of TCTB Partners, Ltd. The adjustments assume full
consolidation of the partnership with minority interest. The value of
the two real estate buildings represents a "stepped-up" basis to
current fair market value for AMEN's 65% interest. The remaining 35%
is stated at carryover basis. The long term debt, which was refinanced
in 2002, and the other assets and liabilities are deemed to be stated
at current fair market value. On November 7, 2002, AMEN announced that
on October 31, 2002, it entered into an Agreement and Transfer of
Limited Partnership Interest ("the Agreement') with certain limited
partners ("the Selling Partners") of TCTB Partners, Ltd. ("TCTB").
Pursuant to the Agreement, the Selling Partners agreed to sell their
limited partnership interest ("the LP Interest") in TCTB to the
Company effective October 1, 2002, resulting in the Company acquiring
64.86248% of TCTB. The assets of TCTB are two secondary office market
properties in Midland and Lubbock, Texas.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
__________________________________________
AMEN Properties, Inc.
---------------------
(Registrant)
Date: January 6, 2003 __________________________________________
By /s/ Eric Oliver
------------------
Chairman of the Board of Directors and Chief
Executive Officer
(Signature)*