UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2003
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission File No. 000-22847
AMEN Properties, Inc.
(Exact Name of Registrant in Its Charter)
Delaware 54-1831588
------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
303 West Wall St. Suite 1700
Midland, TX 79701
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(Address of Principal Executive Offices) (Zip Code)
432-684-3821
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Issuer's telephone number, including area code
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.01 par value
-----------------------------
Title of each class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 / /
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB / /
The issuer's revenues from continuing and discontinued operations for the twelve
months ended December 31, 2003 were $4,345,099.
The Company is not considered an investment company.
The aggregate market value of common stock held by non-affiliates, based on the
closing price at which the stock was sold at March 10, 2004 was approximately
$5.2 million. The total number of shares outstanding of the issuer's common
stock as of March 10, 2004 was 2,201,356.
Transitional Small Business Disclosure Format (Check One): Yes No X
Documents Incorporated by Reference
Exhibits to certain of the Company's filings are incorporated by reference as
Exhibits to this Report as set forth in Part III, Item 13.
Portions of the Company's definitive proxy statement for its 2004 annual
shareholders meeting to be filed on or before April 29, 2004, are incorporated
by reference in Part III. In addition, portions of the Company's definitive
Schedule 14-A dated August 27, 2002 are incorporated by reference in Part I and
Part II.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Forward-Looking Statements
Certain information in this annual report on Form 10-KSB may contain
"forward-looking statements" within the meaning of Section 21e of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including any projections of earnings, revenues, cash flow or other
financial items, any statements of the plans and objectives of management for
future operations, any statements concerning proposed new products or services,
any statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. In some cases,
"forward-looking statements" can be identified by the use of terminology such as
"may," "will," "expects," "believes," "plans," "anticipates," "estimates,"
"potential," or "continue," or the negative thereof or other comparable
terminology. Although we believe that the expectations reflected in the
"forward-looking statements" are reasonable, we can give no assurance that such
expectations or any of our "forward-looking statements" will prove to be
correct, and actual results could differ materially from those projected or
assumed in our "forward-looking statements." Our financial condition and
results, as well as any other "forward-looking statements," are subject to
inherent risks and uncertainties, including but not limited to those risk
factors disclosed in the Company's definitive Schedule 14A dated August 27,
2002, as well as those summarized in Item 6, "Management's Discussion and
Analysis or Plan of Operation."
Overview
Through the end of December 31, 2002 AMEN Properties, Inc. (hereinafter referred
to as "AMEN" or "the Company"), operated under the name Crosswalk.com, Inc. and
was primarily known as the creator of crosswalk.com(TM), an interactive website
that provides information and resources that the Company believed generally
appeals to the English speaking Christian and family-friendly community. The
Company was originally incorporated as DIDAX Inc. in January 1997. From our
inception through September 2002, our revenue was generated through the
development and aggregation of Internet content and services; online and offline
advertising sales, royalty sales, as well as the resale of products specifically
designed to meet the needs of Christian users of the Internet and the World Wide
Web.
On October 4, 2002 Amen sold the crosswalk.com website, with shareholder
approval to Salem Communications for approximately $4.1 million in cash. In
addition to the sale the shareholders were presented with a new business plan
(the "Business Plan"). The Business Plan recommended a new management team that
would attempt to acquire cash generating assets in order to exploit a net
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operating loss carryforward (NOL) of in excess of $29 million. This plan
initially focuses on value added plays in three distinct arenas that have
historically generated large amounts of ordinary income. These three areas are
1) acquiring office space in secondary stagnant markets, 2) acquiring office
space in out of favor growth markets and 3) acquiring investments in oil and gas
royalties. While this is our initial plan, management is also interested in the
acquisition of other properties and businesses that have a consistent and stable
cash flow history. On September 19, 2002, the shareholders approved all three
items up for vote, (i) the sale of crosswalk.com, (ii) the adoption of the new
Business Plan, as described in further detail in the Company's definitive
Schedule 14A dated August 27, 2002, and (iii) the change in the Company name to
AMEN Properties, Inc. The name change became effective October 9, 2002 and the
Company's trading symbol on the Nasdaq SmallCap Market remained AMEN. Effective
October 1, 2002, our executive offices were relocated to 303 W. Wall St. Suite
1700, Midland, TX 79701. Our phone number is 432-684-3821 and the facsimile
number is 432-685-3143.
In October 2002, the Company formed NEMA Properties LLC ("NEMA"), a Nevada
limited liability company 100% owned by AMEN; AMEN Delaware LP ("Delaware"), a
Delaware limited partnership owned 99% by NEMA as the sole limited partner and
1% by AMEN, as the sole general partner; and AMEN Minerals LP ("Minerals"), a
Delaware limited partnership, owned 99% by NEMA as the sole limited partner and
1% by AMEN, as the sole general partner. It is the Company's intent for Delaware
to own all our real estate assets and interest and for Minerals to own our oil
and gas royalty investments. As used herein, the terms "Company" and "AMEN" and
references to "we" and "our" refer to all of AMEN Properties, Inc., NEMA,
Delaware and Minerals, unless the context otherwise requires.
The Company makes available, free of charge, its Annual Report on Form 10-KSB,
Quarterly Reports on Form 10-QSB, Current Reports on Form 8-K and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(a) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after we
electronically file or furnish them to the Securities Exchange Commission. These
reports may also be obtained directly from the SEC via an Internet site
(http://www.sec.gov) and at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.
The Company will also provide to any person, free of charge, a copy of the
Company's Code of Business Conduct and Ethics upon request made to the Company
at 303 West Wall St., Suite 1700, Midland, Texas 79701, attn: Mr. John M. James.
Status of Business Plan
Shortly after the adoption of the Business Plan, the Company implemented the
initial phase by entering into an agreement with certain limited partners of
TCTB Partners, Ltd. ("TCTB") on October 31, 2002. Pursuant to the agreement, the
Company acquired a 64.9% limited partnership interest in TCTB effective October
1, 2002. Effective January 1, 2004 the Company entered into an agreement with
certain limited partners of TCTB in which the Company acquired an additional
6.485533% limited partnership interest in TCTB. This additional interest
purchased combined with the initial limited partnership interest purchased in
2002 gives the Company a total of 71.348013 % limited partnership interest in
TCTB. The assets of TCTB are two secondary office market properties in Midland
and Lubbock, Texas, collectively referred to as "the Properties". (See Item 2
below for further description of the Properties.)
TCTB is managed and operated by its general partner, TCTB Company, Inc. The
Company does not own any interest in TCTB Company, Inc., which is primarily
owned by the original limited partners of TCTB, but the Company has the
authority to change the general partner of TCTB due to its ownership of
approximately 71.348013% of the LP Interests of TCTB. Both Mr. Eric Oliver and
Mr. Jon Morgan, officers and directors of the Company, own interests in TCTB
Company, Inc., and Mr. Morgan is the president of TCTB Company, Inc.
This past year has not been a breakout year for the Company but has served to
establish a baseline operating history in which to benchmark the future
performance of our fully transitioned company. We pursued numerous acquisition
opportunities, none of which were consummated. If we had consummated a couple of
3
these acquisition opportunities, it could have provided the Company with more of
an exponential growth model. Ultimately, these potential acquisitions taxed both
time and some monies in due diligence efforts, but we abandoned or put on hold
when unacceptable risk elements could not be resolved. At the end of the year,
we sat with virtually the same asset mix in which we started. As a result we are
slightly behind our intended growth schedule.
In addition to our efforts in building shareholder value through real estate
acquisitions, the Company has evaluated several oil and gas royalty deals.
However, due primarily to the increase in commodity pricing, we have not bought
a direct royalty interest to date. Our philosophy is that you make money on
royalties by "buying right", so we have chosen to be prudent and patient in our
acquisitions. We have, as discussed further in this form, acquired a passive
interest in oil and gas royalties via our purchase of shares of a royalty trust.
This remains a core focus of the Company and we continue to actively pursue
acquiring direct royalty interests in the future.
Going forward, our initial objective is to actively monitor TCTB and build a
revenue-generating asset portfolio while not compromising our integrity and
founding Christian values. In addition, management intends to pursue other types
of property and business endeavors, including but not limited to, real estate
investment trusts and partnership interests for which there is a reasonable
degree of accuracy in ascertaining the risks associated with their future. In
particular, we are interested in existing businesses with management in place
that have a stable cash flow history. (For further discussion of our strategy
and investment policies see Item 2 "Properties" below.)
While we cannot guarantee results and the ability to find acquisition
candidates, we are committed to stay patient and not force any deals, while
maximizing our return on the TCTB acquisition, which is currently our primary
revenue source. TCTB's performance will depend on its ability to collect rent
from tenants and minimize the cost of ownership and maintenance. If TCTB's
tenants or prospective tenants experience a change in business conditions or a
downturn in their business, it may experience a delay in lease commencements, or
a decline in renewals and lease extensions. Any failure of tenants to operate
under the terms of their lease, make timely rental payments consistent with
lease terms, or remain solvent, could result in the termination of the tenant's
leases and the loss of rental income. We believe TCTB will work diligently to
attract and retain quality tenants in order to mitigate this risk to the
greatest extent possible.
We are also sensitive to the fact that we operate in a restrictive paradigm of
not being able to access traditional equity sources without compromising our NOL
balances. We hope we can continue to preserve our NOL, but certain issues
outside our control may occur which could jeopardize this position. If a larger
deal that would require an expansion of our equity base presents itself, we
would welcome sacrificing our NOL if the value added exceeded the present value
we have assigned it (see "Managements Discussion and Analysis" below for further
description of NOL value). If our capital does become limited, we intend to make
acquisitions through limited partnerships in a structure whereby AMEN would be
the general partner/manager, while property specific equity providers would be
the limited partners. However, we do not currently have any agreements or
arrangements relating to such financing, and no assurances can be made that such
financing will be available on terms acceptable to us.
Competitive Business Conditions
We compete with a number of other companies in providing leases to prospective
tenants and in re-letting space to current tenants upon expiration of their
respective leases. If our tenants decide not to renew or extend their leases
upon expiration, we may not be able to re-let the space. Even if the tenants do
renew or we can re-let the space, the terms of renewal or re-letting, including
the cost of required renovations, may be less favorable than current lease terms
or than expectations for the space. WE MAY BE UNABLE TO PROMPTLY RENEW THE
LEASES OR RE-LET THIS SPACE, OR THE RENTAL RATES UPON RENEWAL OR RE-LETTING MAY
BE SIGNIFICANTLY LOWER THAN EXPECTED RATES. See Item 2 below for further
discussion of the competitive conditions of the new Business Plan.
Management and Staff
4
Our management consists of Eric Oliver, Chairman of the Board and Chief
Executive Officer, Jon Morgan, President and Chief Operating Officer and John M.
James, Chief Financial Officer and Corporate Secretary. Currently John M. James
is the only full time employee at AMEN. TCTB has nine full time employees who
assist in the day-to-day operations of the Properties.
AMEN management believes operational and accounting controls are essential to
any successful business plan. During the implementation of the Business Plan the
Company maintained a high standard as TCTB has well established control policies
in managing the real estate operations of the Properties. Despite the minimal
corporate staff, we have in place adequate controls to ensure the security of
cash on hand, viability of cash disbursements and complete and accurate
recording and reporting of cash receipts.
Impact of Government Regulation and Environmental Laws
Under various environmental laws, a current or previous owner or operator of
real property may be liable for the costs of removal or remediation of hazardous
or toxic substances, including asbestos-containing materials that are located on
or under the property. Specific asbestos remediation has taken place in both of
the Properties. Environmental laws often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of those
substances. In connection with our ownership and operation of properties, we may
be liable for these costs, which could be substantial. Also, our ability to
arrange for financing secured by that real property might be adversely affected
because of the presence of hazardous or toxic substances or the failure to
properly remediate any contamination. In addition, we may be subject to claims
by third parties based on damages and costs resulting from environmental
contamination at or emanating from our properties.
In addition, under the Americans with Disabilities Act (ADA), all public
accommodations are required to meet certain federal requirements related to
physical access and use by disabled persons. While we believe that the
Properties comply in all material respects with these physical requirements or
would be eligible for applicable exemptions from material requirements because
of adaptive assistance provided, a determination that we are not in compliance
with the ADA could result in the imposition of fines or an award of damages to
private litigants. Any required modifications to comply with the ADA would most
likely result in unplanned cash expenditures that could impact our ability to
meet our financial objectives.
With regard to investments in oil and gas royalties, the production,
transportation and sale of natural gas from underlying properties are subject to
federal and state governmental regulation, including regulation and tariffs
charged by pipelines, taxes, the prevention of waste, the conservation of gas,
pollution controls and various other matters. The United States has governmental
power to impose measures that could increase the cost of oil and gas properties.
The Federal Energy Regulatory Commission (FERC) has jurisdiction with respect to
various aspects of gas operations including the marketing and production of gas.
The Natural Gas Act and the Natural Gas Policy Act (collectively, the "Acts")
mandate federal regulation of the interstate transportation of gas. Numerous
concerns regarding the interpretation and implementation of several provisions
of the Acts have led to lawsuits and administrative proceedings to challenge the
validity of the Acts. The FERC is also considering various policies and
proposals that may affect the marketing of gas under new and existing contracts.
Accordingly, we are unable to predict the impact of any such governmental
regulation.
In the past, Congress has been very active in the area of gas regulation. Due to
legislative action, previously applicable incremental pricing requirements and
gas use restraints have been repealed. However, it is not feasible to predict
with certainty, what proposals, if any, might actually be enacted by Congress or
other legislative bodies and what effect, if any, such proposals might have on
the oil and gas properties that may be considered for acquisition.
Christian Statement of Faith; the Company's Policy
Article XIII of our Bylaws provides that AMEN Properties, Inc. is a "religious
corporation." Our policy is generally to include among our officers and
5
directors unconditionally, and among our employees where a bona fide occupation
qualification exists, only persons who, upon request, subscribe to the Company's
Christian Statement of Faith as follows:
1. We believe that there is one God, eternally existing in three persons: the
Father, the Son, and the Holy Spirit.
2. We believe that the Bible is God's written revelation to man and that it is
verbally inspired, authoritative, and without error in the original
manuscripts.
3. We believe in the deity of Jesus Christ, His virgin birth, sinless life,
miracles, and death on the cross to provide for our redemption, bodily
resurrection and ascension into heaven, present ministry of intercession
for us, and His return to earth in power and glory.
4. We believe in the personality and deity of the Holy Spirit, that He
performs the miracle of the new birth in an unbeliever and indwells
believers, enabling them to live a godly life.
5. We believe that man was created in the image of God, but because of sin,
was alienated from God. That alienation can be removed only by accepting
through faith, God's gift of salvation which was made possible by Christ's
death.
In order to implement the Christian Statement of Faith, we intend generally to
act in accordance with the following policy, as stated in our Bylaws:
"The Corporation shall:
1. Actively seek to market the services of the [C]orporation to those persons,
entities, and agencies, which are actively involved in propagating a
pattern of beliefs and actions consistent with the tenets of the Statement
of Faith. Nothing herein shall be construed to prohibit marketing such
services to other persons, entities, or agencies except as specifically set
forth in the prohibitions or corporate action set forth below.
2. To the extent permitted by law, expend from the revenues of the
[C]orporation such sums as are deemed prudent by the Board of Directors to
support, encourage, or sustain persons or entities which in the judgment of
the Board of Directors are expected to make significant efforts to
propagate the Gospel of Jesus Christ in any manner not in conflict with the
Statement of Faith. Such expenditures may be made without regard to the tax
status or nonprofit status of the recipient. It is expected that the
expenditures paid out under the provisions of this paragraph shall
approximate ten percent (10%) of the amount that would otherwise be the net
profits of the [C]orporation for the accounting period.
The Corporation shall not:
1. Take any position publicly or privately that denies or conflicts with the
tenets of the Statement of Faith.
2. Elect, qualify or permit to serve in office as a [d]irector or officer to
the [C]orporation any person who has not without reservation subscribed to
the Statement of Faith as being true, accurate and correct or who having so
subscribed has either publicly or privately recanted from a particular of
the Statement of Faith or who has publicly made statements or taken actions
without repentance which the Board of Directors finds to be in clear
conflict with the Statement of Faith.
3. Hire or continue to employ any employee in any position in which, in the
sole discretion of the Corporation, subscription to the Statement of Faith
is a bona-fide occupational qualification reasonably necessary to the
normal operations of the Corporation's activities, where such employee
refuses, upon request, to subscribe to the Statement of Faith or having so
subscribed has either publicly or privately recanted from any particular of
the Statement of Faith or has publicly made statements or taken actions
without repentance which the Board of Directors finds to be in clear
conflict with the Statement of Faith. Because the Scriptures teach that bad
company corrupts good morals and that a little leaven affects the whole
lump, it is important to the Corporation's purposes that it be protected
from the influence of persons not in agreement with the Statement of Faith
at every level of employment.
4. Permit any party to utilize the name, goodwill, trade marks, or trade names
of the [C]orporation in any course of action or dealings which the
[C]orporation itself is herein prohibited from taking."
6
"In addition to any other appropriate legend, prior to its issuance each and
every share certificate to be issued by this Corporation shall be inscribed with
a legend that states:
`ThisCorporation is a religious corporation. All shares of this
[C]orporation are subject to the terms as set forth in the BYLAWS of the
corporation which restricts the amendment or deletion of that section of
the BYLAWS which prescribes a corporate Statement of Faith in the LORD
JESUS CHRIST and directs or prohibits certain corporate actions on the
basis of the Statement of Faith.'"
The Bylaws also state:
"No amendment to this Article XIII and no other superseding or conflicting
provision of these BYLAWS, the ARTICLES OF INCORPORATION, or any
shareholder agreement shall be adopted unless the result of the count of
votes approving the amendment is 90% affirmative without dissension and a
minimum of two-thirds of the shares outstanding are represented and voting.
Such vote must be made at an actual special meeting of the shareholders
called by written notice delivered to each shareholder not less than 10 nor
more than 60 days prior to the date of the meeting. Time is of the essence
as to this notice provision and no extension of the time of the meeting or
adjournment of the meeting to a date outside the notice period shall be
permitted except upon the affirmative vote of not less than 70 percent of
the shares then issued and outstanding."
ITEM 2. DESCRIPTION OF PROPERTIES
Investments or Interest in Real Estate or in Persons Primarily Engaged in Real
Estate Activities
As discussed above, we intend to grow our business through selective
acquisitions of cash-generating assets focusing on value added plays in three
distinct arenas that have historically generated large amounts of ordinary
income - commercial real estate in secondary stagnant markets, commercial real
estate in out of favor growth markets and in oil and gas royalties. While we
focus on these areas, we also consider and evaluate opportunities to acquire
other properties and businesses that have a consistent and stable cash flow
history. Our intent is to accumulate these assets to generate income and create
shareholder value.
Out of Favor Growth Market Acquisition - The market for acquiring multi-tenant
office complexes in primary growth markets is highly competitive and is
dominated by large capitalized real estate investment trusts along with local
and regional seasoned private investors. In these markets, our competitive
advantage will be through the value we can add by having a qualified on-sight
team to manage and lease the building while being proactive on operating
expenses by implementing audits of contracts for energy, janitorial, elevator,
and other systems. Though these acquisitions will become more competitive, they
contribute a significant equity appreciation component.
Secondary Stagnant Market Acquisition - The market for acquiring multi-tenant
office properties in secondary stagnant markets is controlled mainly by local or
regional investors who operate for sustained profitability versus a timelined
exit strategy. These markets tend to yield greater return on capital while not
delivering as impressively on appreciation potential. In addition to the
hands-on operational audits described above, our competitive advantage will be
our ability to add value by structuring anchor or major tenant leases to
possibly share in building ownership through equity participation. Our intent is
to only focus on the premier properties within these secondary stagnant markets.
Oil and Gas Royalty Acquisition - Oil and gas royalty properties are revenue
generating interests in oil and gas leases which do not bear any of the costs of
producing oil or gas, and do not bear all of the risks associated with the
ownership and operation of other oil and gas interests. The market for oil and
gas royalty is highly competitive and dominated by mainly wealthy individuals
and small focused royalty companies. Many middle to large sized oil and gas
independents are also markets for individual oil and gas royalty properties.
7
This market is becoming increasingly efficient with a variety of auction types
along with direct solicitation. Our competitive advantage hinges on our
knowledge of virtually the entire United States with respect to general
reservoir characteristics and risk factors. This knowledge could allow us to add
value through focusing on properties, which have under developed reserves or
other risk mitigating conditions.
Management intends to pursue opportunities in these areas based on favorable
market evaluations and availability. Our evaluations of these opportunities will
be based on a system whereby we formulate a cash flow series with at least 10
possible outcomes. We will then assign probability percentages to each of the
outcomes. Based on the assigned probabilities, we will arrive at weighted return
of total capital. These returns should meet the following four criteria to
warrant additional due diligence:
1. Return on Total Capital (ROTC) of not less than 15% for the project
2. ROTC of at least 12% at the end of Year 1
3. Less than 10% assigned probability for an outcome ROTC of less than 5%
4. At least a 20% cumulative probability for an outcome ROTC of more than
20%
The last two parameters serve to focus our attention on opportunities we can
model with limited risk but significant upside potential. By using leverage on
these minimum rates of return, we will attempt to choose opportunities that
attain our necessary return on equity targets. With the exception of the TCTB
acquisition, no significant acquisition has been made at this time, as deals
that meet our criteria in our primary focus area of royalties and commercial
office buildings have not been attractive in the short-term. While this
methodology was not utilized in the Company's purchase of the TCTB limited
partnership interest, this acquisition was deemed, and has proven to be, a solid
investment in which to launch the new Business Plan.
Description of Real Estate and Operating Data
The Properties are owned by TCTB and managed and operated by TCTB Company, Inc.,
as general partner of TCTB. AMEN initially acquired 64.9% of the limited
partnership interest of TCTB and an additional 6.485% effective January 1, 2004.
The Properties consist of commercial real estate in Midland and Lubbock, Texas.
The twenty-four-story Midland property, where the Company's headquarters are
located, was completed in 1977 and encompasses 329,178 rentable square feet and
is approximately 78% occupied. It also includes a 17-lane drive through bank and
a 900 space-parking garage. The average lease term is 4 years and the major
tenant is Bank of America. There are a total of two tenants in the Midland
building who account for ten percent or more of the rentable space, consisting
of the bank and Pioneer Natural Resources, Inc., a public oil and gas company.
The Lubbock property was built in 1966 and is a fifteen story high rise with
210,659 rentable square feet, a 214 space parking garage, and is approximately
79% occupied. TCTB has a non-cancelable operating lease for land on which a
portion of the Lubbock, TX rental property is built. The lease will expire in
2013 and the existing monthly lease payments are $3,930. Wells Fargo Bank is the
primary tenant in the Lubbock building and the average tenant lease term is 5
years. There are a total of two tenants occupying ten percent or more of the
rentable space, consisting of the bank and a law firm. A limited investment in
building improvements of $160,000 ($114,157 net to AMEN's interest) are planned
or anticipated in the Properties for 2004, and the Properties are held for
income generating capabilities. The 2003 average annual net rental per occupied
square foot for the Midland and Lubbock buildings was $8.42 and $11.03,
respectively.
The following table sets forth certain information concerning lease expirations,
excluding month to month leases and assuming no renewals for each Property:
8
Midland Building
Percentage
Number of of Total Percentage of
Lease Leases Square Feet Annualized Square Feet Total Annualized
Expiration Expiring Expiring Gross Base Rent Expiring Gross Bass Rent
--------------- -------------- -------------- ----------------- -------------- --------------------
2004 16 28,742 $ 273,008 13.0% 13.6%
2005 26 76,573 690,628 34.6% 34.5%
2006 5 58,845 332,827 26.6% 16.6%
2007 - - - - -
2008 6 52,291 654,978 23.7% 32.7%
2009 1 4,663 52,220 2.1% 2.6%
2010 - - - - -
2011 - - - - -
2012 - - - - -
2013 - - - - -
-------------- -------------- ----------------- -------------- --------------------
Total 54 221,114 $ 2,003,661 100.0% 100.0%
============== ============== ================= ============== ====================
Lubbock Building
Percentage
Number of of Total Percentage of
Lease Leases Square Feet Annualized Square Feet Total Annualized
Expiration Expiring Expiring Gross Base Rent Expiring Gross Bass Rent
--------------- -------------- -------------- ----------------- -------------- --------------------
2004 8 7,892 $ 111,307 5.5% 6.1%
2005 9 23,665 254,116 16.4% 14.0%
2006 5 7,808 116,214 5.4% 6.4%
2007 3 13,792 199,584 9.6% 11.0%
2008 3 4,822 50,910 3.4% 2.8%
2009 1 1,119 10,296 0.8% 0.6%
2010 1 52,841 621,425 36.7% 34.2%
2011 3 15,738 203,216 10.9% 11.2%
2012 2 16,209 248,501 11.3% 13.7%
2013 - - - - -
-------------- -------------- ----------------- -------------- --------------------
Total 35 143,886 $ 1,815,569 100.0% 100.0%
============== ============== ================= ============== ====================
The federal tax basis for the two properties is $8,890,770. Of this amount,
$6,868,504 is related to the buildings that will be depreciated, for tax
purposes, over 39 years using the straight-line method; $1,157,459 has been
allocated to the parking garages that will be depreciated, for tax purposes,
using the 150% declining balance method over 15 years; $104,138 has been
allocated to partitions and flooring which will be depreciated, for tax
purposes, using the 200% declining balance over 5 years; $293,887 has been
allocated to building improvements and will be depreciated, for tax purposes,
using the 200% declining balance over 7 years; and $466,782 has been allocated
to land that will not be depreciated. The Properties are financed by a loan from
Wells Fargo Bank (the "Wells Fargo Note"), originally a $6.8 million
non-recourse note bearing annual interest of 7.23% with a 20-year amortization
that balloons on May 31, 2009.
Over the next two to three years, financing acquisitions will hinge upon our
ability to access the necessary capital through conventional bank financings, as
well as unconventional structures due to NOL restrictions. If acceptable
conventional financing is not available, we intend to make acquisitions through
limited partnerships in a structure whereby AMEN would be the general
partner/manager, while property specific equity providers would be the limited
partners. After our NOL utilization period, or if an acquisition provides more
shareholder value than the NOL, we will consider financing acquisitions through
more conventional equity offerings if necessary. We do not have any financing
arranged, and it is anticipated that acquisition financing will most often be
project specific. To the extent financing is not available on terms acceptable
to the Company, the Company may delay or curtail its acquisitions.
9
As stated above, we recognize that we compete with many companies in providing
leases to prospective tenants and in re-letting space to current tenants upon
expiration of their respective leases. If our tenants decide not to renew or
extend their leases upon expiration, we may not be able to re-let the space.
Because of competitive offerings, even if the tenants do renew or we can re-let
the space, the terms of renewal or re-letting, including the cost of required
renovations, may be less favorable than current lease terms or than expectations
for the space.
In the opinion of management, the Properties are properly insured from loss
related to comprehensive liability, fire, extended coverage, and rental loss.
Though we believe to the best of our ability that policy specifications and
insured limits of these policies are adequate and appropriate, there may be
however, certain types of losses, including lease and other contract claims,
acts of war, acts of terror and acts of God that generally may not be insured.
Should an uninsured loss or a loss in excess of insured limits occur, we could
lose all or a portion of the capital we have invested in the Properties, as well
as anticipated future revenue. If that happened, we might nevertheless remain
obligated for any mortgage debt or other financial obligations related to the
Properties. Though we believe that we maintain insurance policies with carriers
with sufficient assets and capital to cover all insured perils, there may be
however, failures or receiverships of carriers providing insurance on the
Properties. If this occurs, we could be essentially without coverage for perils
and losses.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of the fiscal year ended December 31, 2003.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
From January 1 to December 31, 2003, AMEN Properties, Inc.'s common stock traded
on the NASDAQ SmallCap Market(SM) ("Nasdaq SmallCap"). From January 1 to
February 3, 2003 Amen Properties, Inc was traded under the symbol "AMENC"; from
February 4 to March 3, 2003 Amen Properties, Inc was traded under the symbol
"AMECD"; from March 4, 2003 to April 6, 2003, Amen Properties, Inc was traded
under the symbol "AMENC"; and from April 7, 2003 to December 31, 2003, Amen
Properties, Inc was traded under the symbol "AMEN." The aforementioned changes
in Amen Properties, Inc. symbol were due to a process to satisfy listing
criteria as described below.
On October 9, 2002, we received Nasdaq Staff Determination of noncompliance with
the minimum $1.00 bid price per share requirement set forth in Nasdaq
Marketplace Rule 4310(c)(4). On November 20, 2002, we received further
notification of noncompliance with the Nasdaq SmallCap listing maintenance
requirement of $2.5 million in shareholders' equity. After an oral hearing
before a Nasdaq Listing Qualifications Panel on November 20, 2002, we were
granted a temporary exception from these standards subject to meeting certain
conditions. Pursuant to this ruling, effective December 20, 2002, and for the
duration of the exception, our Nasdaq symbol was changed to AMENC.
As of April 4, 2003 that the Company had received notification from Nasdaq that
the Company had evidenced compliance with the final requirement necessary for
continued listing on the Nasdaq SmallCap Market, as set forth in the Nasdaq
Listing Qualifications Panel decision dated December 17, 2002.
10
1. On December 31, 2002 we filed with the Securities and Exchange
Commission (SEC) and Nasdaq a Form 8-K, evidencing a minimum of $2.5
million in shareholders' equity.
2. At a special meeting held January 30, 2003, our shareholders approved
a 1-for-4 reverse stock split which resulted in the Company having a
closing bid price above $1 per share by February 14, 2003.
3. The third requirement was for our stock to trade above $1 for 10
consecutive trading days after the reverse split. This was
accomplished and we were so notified by Nasdaq.
4. The fourth and final condition was to file, by March 31, 2003, a Form
10-KSB for the year ending December 31, 2002, evidencing over $2.5
million in stockholders' equity.
The following table sets forth the ranges of high and low sales prices of our
common stock for each quarter within the last two fiscal years as reported on
the Nasdaq SmallCap Market, adjusted to give effect to the aforementioned
1-for-4 reverse stock split as if it occurred prior to the beginning of such
period.
High Low
---------- ----------
First Quarter 2002: $ 5.560 $ 2.600
Second Quarter 2002: $ 3.440 $ 1.596
Third Quarter 2002: $ 2.320 $ 1.000
Fourth Quarter 2002: $ 2.160 $ 1.360
First Quarter 2003: $ 1.820 $ 1.170
Second Quarter 2003: $3.450 $ 1.510
Third Quarter 2003: $ 2.860 $ 2.010
Fourth Quarter 2003: $ 2.250 $ 1.10
January 1, 2004 through March 10, 2004 $ 3.270 $ 1.50
At March 10, 2004 the closing price for our common stock, as reported by NASDAQ
SmallCap, was $2.37 per share. There are approximately 3,500 holders of record
of our common stock. A number of such holders of record are brokers and other
institutions holding shares of common stock in "street name" for more than one
beneficial owner. The Company's transfer agent and registrar is the American
Stock Transfer and Trust Company. We have not paid and do not currently intend
to pay cash dividends on our common stock in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table is provided in compliance with Item 201(d) of Regulation
S-B:
11
Number of Weighted-average Number of securities remaining
Securities to Exercise price of available for future issuance
be issued Outstanding under equity compensation
upon options, plans (excluding securities
exercise of warrants and reflected in column (a))
outstanding rights
options,
warrants and
rights
-----------------------------------------------------------------------------
(a) (b) (c)
-----------------------------------------------------------------------------
Equity
compensation
plans approved by
security holders 498,958 $15.78 252,947
-----------------------------------------------------------------------------
Equity
compensation None None None
plans not
approved
security holders
-----------------------------------------------------------------------------
Total 498,958 $15.78 252,947
-----------------------------------------------------------------------------
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
As discussed in Item 1 Amen Properties, Inc. initially consisted primarily of
the operations of crosswalk.com(TM), an interactive website, which provided
information and resources that the Company believed generally appealed to the
English speaking Christion and family-friendly community and also provided a
direct mail advertising service.
Both of these businesses were sold during 2002. We sold substantially all of the
assets used, required, useful, or otherwise relating to the ownership,
development and operations of the crosswalk.com website to Salem Communications
Corporation for approximately $4.1 million in cash (the "Asset Sale"). The Asset
Sale closed on October 4, 2002. In addition, on December 12, 2002, the Company
divested the direct mail service to Blue Hill Media, Inc. and received a
$275,000 Note Receivable bearing 6% interest and a 3.5% net profits interest in
the business's gross margin.
Pursuant to the Company's adoption and application of the provisions of
Statement of Financial Accounting Standards (SFAS) 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets", both the website and direct mail
revenue and direct and indirect costs associated with the businesses for the
year ended December 31, 2002 are classified as discontinued operations and
reported as such on the Company's financial statements.
The Asset Sale and Implementation of the Business Plan
Taking into consideration the Company's material remaining value of
approximately $4.1 million in cash from the Asset Sale, a public company
foundation, and a net operating tax loss carryforward (NOL) in excess of $29
million, the Company presented to shareholders a business plan (the "Business
Plan") to grow the Company and exploit the NOL through the judicious acquisition
of cash generating assets, consisting primarily of office buildings in secondary
stagnant markets, office buildings in out of favor growth markets and oil and
gas royalties. On September 19, 2002, the shareholders approved this Business
Plan, and immediately thereafter, the board of directors appointed current
directors Eric Oliver and Jon Morgan as Chairman and Chief Executive Officer,
and President and Chief Operating Officer, respectively. Effective October 9,
2002, the name of the Company was changed from Crosswalk.com, Inc. to AMEN
Properties, Inc., and the Company relocated its headquarters from Chantilly,
Virginia to Midland, Texas.
The first step in the new Business Plan was completed on October 31, 2002 when
the Company entered into an Agreement with certain limited partners ("the
Selling Partners") of TCTB Partners, Ltd. to purchase 64.86248% of the LP
Interest in TCTB effective October 1, 2002. Effective January 1, 2004, the
12
Company acquired an additional 6.485533% limited partnership interest in TCTB,
for a total current ownership of 71.348013%. The assets of TCTB are two
secondary office market properties in Midland and Lubbock, Texas, collectively
referred to as "the Properties". These properties are described further in Items
1 and 2 above. In addition, information on the Properties is included in audited
financial statements in the definitive proxy statement dated August 27, 2002,
and the Form 8-K filed with the SEC related to the sale of the website on
November 7, 2002 and an 8-KA filed on January 6, 2003.
Risk Factors
During 2003, AMEN marked its 6th anniversary as a public company. While we
believe that the Company has finally demonstrated improvement in its financial
condition, and management and the board are working diligently to continue and
build upon this momentum, there remains significant risk in the new Business
Plan. Many of these factors have been previously discussed in this form as well
as the "risk factors" set forth in the definitive Schedule 14A dated August 27,
2002, which are incorporated herein by reference. Related to our commercial real
estate investments, these risks include, but are not limited to, 1) adverse
market conditions and competition, such as changes in the national and regional
economic climate, 2) increased competition, 3) changes in operating costs 4)
ability of our tenants to pay rent and 5) changes in law - all of which may
impede our ability to generate sufficient income to pay expenses and maintain
properties. Related to our efforts to buy oil and gas royalty related assets,
these risks include, but are not limited to, 1) volatility of oil and gas
prices, 2) uncertainty of estimated oil and gas discovery that may affect future
cash flows, and 3) regulation of natural gas which could increase the carrying
cost associated with oil and gas properties.
Application of Critical Accounting Policies
We prepare our financial statements in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). A summary of our
significant accounting policies is disclosed in Note A to our consolidated
financial statements, which are included in this annual report under Item 7. The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
We consider critical accounting policies to be those policies that have the most
impact on the reporting of our financial condition and those requiring
significant judgments and estimates.
In June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years
beginning after December 15, 2001. Under the new rules, and the adoption
thereof, goodwill will no longer be amortized, effective January 1, 2002, but
will be subject to annual impairment tests in accordance with the Statements.
Other intangible assets will continue to be amortized over their useful lives.
During 2002, the Company recognized $1,200,000 in impairment losses. In June
2002, the Company performed the transitional goodwill impairment tests as
described herein. This resulted in a $750,000 impact to earnings in the second
quarter. In September 2002, the Company performed a quarterly impairment
analysis on the continuing operation of the direct mail business and determined
that an additional $450,000 impairment loss needed to be recognized.
In addition, in October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes both SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS 144 retains the fundamental provisions
in SFAS 121 for recognizing and measuring impairment losses on long-lived assets
13
held for use and long-lived assets to be disposed of by sale, while also
providing guidance on how a long-lived asset that is used as part of a group
should be evaluated for impairment. SFAS 144 also establishes criteria for when
a long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. SFAS 144 retains
the basic provisions of APB 30 on how to present discontinued operations in the
income statement but broadens that presentation to include a component of an
entity (rather than a segment of a business).
The Company adopted the provisions of SFAS 144 in 2002, specifically as it
relates to the treatment of long-lived assets held for sale pursuant to the
Company's sale of substantially all of its website business to Salem
Communications Corporation for approximately $4.1 million and the sale of the
direct mail business to Blue Hill Media, Inc., both in 2002. Accordingly, the
Company's statement of operations for the year ended December 31, 2002, as
presented, consist primarily of a loss from discontinued operations. The
exceptions are expenses related to ongoing corporate functions, titled Property
Operating and Sales and Marketing under the caption Operating Expenses. All
revenue, and all other expenses shown separately relate to the operation results
of the Company's investment in TCTB. Consistent with SFAS 144, depreciation on
the property, plant and equipment included in discontinued operations, ceased as
of June 1, 2002, understanding that the carrying amount of those assets would be
recovered through the asset sale and not through future operations.
The Company's acquisition of TCTB has been accounted for under the purchase
method of accounting, as required by SFAS No. 141, "Business Combinations". The
assets of TCTB are fully consolidated in the Company's financial statements in
accordance with Accounting Research Bulletin 51 "Consolidated Financial
Statements", as amended by SFAS 94 "Consolidation of all Majority Owned
Subsidiaries", as well as Statement of Position 78-9, "Accountings for
Investment in Real Estate Ventures", with a corresponding 35% minority interest
recorded at historical cost and AMEN's share of the assets recorded at market
values at the date of purchase, October 1, 2002 and January 1, 2004. The
Company's consolidated financial statements and the financial information set
forth in this report are presented on this basis, except for certain information
included under "2004 Outlook" which is presented on a basis of net amounts to
AMEN's ownership interest in TCTB.
In January 2003, the FASB issued FASB Interpretation No. 46 "Consolidation of
Variable Interest Entities" (FIN 46). The objective of this interpretation is to
provide guidance on how to identify a variable interest entity (VIE) and
determine when the assets, liabilities, non-controlling interests, and results
of operations of a VIE need to be included in a company's consolidated financial
statements. A company that holds variable interests in an entity will need to
consolidate the entity if the company's interest in the VIE is such that the
company will absorb a majority of the VIE's expected losses and/or receive a
majority of the entity's expected residual returns, if they occur. FIN 46 also
requires additional disclosures by primary beneficiaries and other significant
variable interest holders. Management does not believe the new pronouncement
will have a material impact on its financial statements.
The Company accounts for its options granted to employees in accordance with APB
25 and SFAS 148. Stock-based awards to non-employees are accounted for under the
provisions of SFAS 123 based on their fair value as determined by the
Black-Scholes option-pricing model. Had compensation expense been determined
based on the fair value of the options at the grant dates consistent with the
method of accounting under SFAS 123, the Company's net income and net income per
share for the years ended December 31, 2003 and 2002 would have been increased
by approximately $102,000 and approximately $331,000, respectively. See Footnote
P to the Company's Consolidated Financial Statements included herein.
Results of Operations
Full Year 2003 Compared to Full Year 2002
For the year ended December 31, 2003, the Company showed net income of $391,829,
or $.19 per share, as compared to a net loss of $2,148,951, or ($1.08) per share
for the same period ended December 31, 2002. The net loss in 2002 is primarily
attributable to the prior website business and direct mail business. While there
is no good comparison for 2003 due to sale of the website business and the
14
direct mail business during 2002, the Company did realize positive net income
from operations for the first time in its history during the fourth quarter of
2002. Continuing operating revenue of $1,060,413 for 2002 and $893,022 of
operating expenses for 2002 relate solely to the acquisition of interests in
TCTB, which was acquired in October 2002.
Fourth Quarter 2003 Compared to Fourth Quarter 2002
During the fourth quarter of 2003, the Company realized positive income from
continued operations of $218,324 as compared to $167,391 for the fourth quarter
2002. Operating expenses for the fourth quarter 2003 as compared to the fourth
quarter 2002 decreased by approximately $17,400 while revenue increased by
approximately $33,000. The Company experienced a decrease in interest expense of
approximately $42,000 as compared to the fourth quarter of 2002. This is due to
agreements signed between the Company and the holders of the Series A and Series
B Preferred Stock dated May 30, 2003 suspending the accrual of $42,000 in
dividends per quarter. The agreements also provided for the payment of already
accrued dividends through the issuance of 209,300 share of Common Stock in
accordance with the terms of the preferred stock. During the fourth quarter of
2003, other income/(expense) is $141,500 as compared to ($6,018) for the fourth
quarter of 2002. The difference of $147,518 is mainly comprised of a net gain
realized of approximately $120,000 on the sale of a royalty investment during
the fourth quarter of 2003.
Liquidity and Capital Resources
During the years ended December 31, 2003 and 2002, net cash provided by (used
in) operating activities was $1,185,321 and $(833,764), respectively. The
increase in the net cash provided by operating activities in 2003 is a result of
the Company's implementation of the shareholder approved Business Plan. The net
cash used in operating activities in 2002 was, for the most part, a result of
the impact of writing off virtually all of the website business receivables and
other assets, partially offset by the gain on sale.
Net cash provided by investing activities were $214,741 and $1,482,438 for the
years ended December 31, 2003 and 2002, respectively. The net cash provided by
in investing activities in 2003 is mainly investments in marketable securities
and bonds. The net cash provided by investing activities in 2002 is primarily a
result of the proceeds received from the sale of the website business, the
effects of which are partially offset by additional costs incurred in the sale
and the acquisition of the TCTB limited partnership interests.
Net cash used in financing activities was $199,718 and $8,686 for the years
ended December 31, 2003 and 2002, respectively. The net cash used in financing
activities consists primarily of repayments of notes payable of approximately
$175,500 in 2003. The net cash used in financing activities for 2002 consists of
$300,000 received from the net proceeds of the purchase of Series "B" preferred
stock that closed on January 9, 2002, in the total amount of $800,000. The
difference of $500,000 of the net proceeds was received by the Company at the
end of 2001. In 2002, this was offset by principal repayment of the Wells Fargo
Note of approximately $272,000.
At December 31, 2003, the Company had working capital and investments of
$2,178,092 comprised of cash of $2,741,527, accounts receivable of $51,859,
short-term investments of $50,225, other current assets of $78,507, and
long-term investments of $62,350, less current liabilities if $806,376. The
long-term investments of $62,350 primarily relates to the Company's ownership of
10,000 shares of a publicly traded royalty trust. The Company believes this
level of working capital plus cash flow from operations will be sufficient to
meet the Company's anticipated needs over the next twelve months. See the
discussion below in 2004 Outlook for further detail of expected cash flow.
The Company's ability to raise funds is somewhat hindered as we are limited in
our ability to issue new equity due to IRC Section 382 restrictions on
utilization of the NOL. However, if an opportunity presents itself that would be
more valuable to the shareholders than the approximate $2.5 to $5 million
present value we have assigned the NOL, we will strongly consider pursuing the
deal and would consider issuing equity to do so. Absent this, we intend on
using, as discussed above, certain limited partnership structures and
traditional bank borrowings to implement the Business Plan and meet our growth
targets. In assigning a present value range to the NOL, we assumed equity growth
of 10% and 30% annualized, and used a 10% discount factor and a 34% tax rate.
15
The TCTB acquisition was funded with $1,945,874 in cash and the creation of
$2,789,087 in Promissory Notes between AMEN and the selling partners ("the TCTB
Notes"). The TCTB Notes totaling $2,789,087 stipulate a floating interest rate
of 15 basis points above the prime lending rate, beginning at 4.9% and never to
exceed 6%. The interest rate is adjusted every October 1st. The TCTB Notes are
payable in consecutive annual installments, the first of which is due and
payable on or before April 1, 2005, and one of which becomes due and payable on
or before the same day of each succeeding year until the entire unpaid principal
balance and all accrued and unpaid interest is fully paid. The amount of each
annual payment is based upon the Net Operating Loss Benefit we realize, defined
as the dollar value of the federal income tax benefit to the Company in
utilizing the NOL as defined in the Internal Revenue Service Code. Therefore, we
will make the first payment on April 1, 2005. It will be related to the 2004
fiscal year Net Operating Loss Benefit. If the TCTB Notes are not paid prior to
the expiration of the Wells Fargo Note, they become due and payable in
conjunction with the Wells Fargo Note on May 31, 2009. The Wells Fargo Note of
$6,800,000 is non-recourse, bears interest of 7.23% and has a 20-year
amortization that balloons on May 31, 2009.
There can be no assurance that current working capital will be sufficient to
meet the Company's needs or that additional financing will be available to the
Company or that such financing will be available on acceptable terms.
2004 OUTLOOK
The following information is presented based upon the Company's knowledge of our
current operations and historical performance. This information is not presented
in accordance with general accounting principles, which require us to fully
consolidate TCTB, showing 100% of its revenues and expenses and subtracting the
minority interest in TCTB. Instead, the foregoing reflects information net to
AMEN's interest. The net effect to AMEN, however, should be approximately the
same.
Current Operations - Based primarily upon historical performance, the Company
anticipates TCTB operating results in 2004 to produce approximately $1,045,157
in positive cash flow from operations, net to AMEN's 71.348% ownership. Based
upon historical performance of the underlying assets, the Company estimates
receiving $60,000 in 2003 from Blue Hill Media on payments of the Note
Receivable and the Net Profits Interest obtained in the sale of the direct mail
business. The Company believes that such capital resources will be sufficient to
fund its anticipated operations and expenditures, excluding any acquisitions
pursuant to the Business Plan.
Regarding anticipated cash outflows in 2004, we are estimating total cost to
maintain our public company status to be approximately $230,000 annually, which
includes Nasdaq fees, audit fees, legal expenses, public filing fees, directors
and officers insurance and costs related to the annual shareholders meeting.
Because the majority of our officers have agreed not to take a salary, our
general and administrative cash outlays are expected to be $100,000. This amount
is mainly cash outlays for salary and benefits for our Chief Financial Officer.
TCTB's general and administrative costs are expected to be $100,000 for 2004,
net to AMEN's share of TCTB. Current annual interest expense related to the
Wells Fargo Note is $334,000, net to AMEN's interest in TCTB. Additionally, the
Company is expecting to incur $138,000 of interest expense related to the TCTB
Notes, but will not have a cash outlay for this expense in 2004 as the first
payment on the notes will not occur until April of 2005 in accordance with the
terms of the notes. TCTB estimates spending approximately $114,157 in capital
improvements on the Midland and Lubbock buildings in 2004, net to AMEN's
interest. Property taxes are anticipated to be $170,843, net to AMEN's interest
in TCTB. We have no long-term leases associated with the current operations.
AMEN's expected cash inflows / outflows are shown in the following table at the
consolidated gross amounts and the net amounts, which represents AMEN's
ownership interest:
16
Expected
2004
Consolidated
Expected Cash Inflows in 2004: Amounts Net to Amen
------------- -----------
TCTB Revenue $ 4,345,000 $ 3,100,000
Other Investments, distributions and note
receivable 60,000 60,000
------------- -----------
Total Expected Cash Inflows 4,405,000 3,160,000
------------- -----------
Expected Cash Outflows in 2004:
TCTB Operating Costs 2,032,292 1,450,000
TCTB General and Administrative 140,158 100,000
Corporate General and Administrative 100,000 100,000
Public Costs 230,000 230,000
TCTB Est. Taxes 239,450 170,843
------------- -----------
Total Operating Expense (excluding depreciation) 2,741,900 2,050,843
TCTB Interest Expense - Wells Fargo Note 468,128 334,000
------------- -----------
Expected Cash Outflows from Operations 3,210,028 2,384,843
TCTB Capital Reserve 160,000 114,157
------------- -----------
Total Expected Cash Outflows 3,370,028 2,499,000
Expected Net Cash Flow 1,034,972 661,000
Beginning Working Capital + Investments 2,325,907 1,093,133
------------- -----------
Expected Ending Net Working Capital + Investments $ 3,360,879 $ 1,754,133
============= ===========
The Wells Fargo Note prohibits distributions, without the consent of the bank,
from TCTB to limited partners, except for the limited partners' tax liability.
Taking this into consideration, AMEN's beginning working capital plus
investments at the corporate level at December 31, 2003 was $1,093,133. Adding
$60,000 in expected investment distributions and $240,000 in estimated tax
distribution from TCTB, and subtracting $100,000 for Corporate General and
Administrative and $230,000 for public costs, the Company, at the corporate
level, estimates it will have a $1,063,133 working capital plus investment
balance at the end of 2004. The remaining amount of expected ending working
capital plus investments reflected in the table above consists of net TCTB
revenue retained by TCTB due to the limitation on distributions to the limited
partners of TCTB under the terms of the Wells Fargo Note.
The expected 2004 results discussed above contemplate only our current
operations and are dependent upon our current operations performing consistent
with their historical performance. While management of the Company believes that
its current views and expectations are based upon reasonable assumptions, there
are significant risks and uncertainties that could significantly effect expected
results. Important factors that could cause actual results to differ materially
from those in the projections and estimates include, without limitation, the
Risk Factors referenced above under "Risk Factors", and many of those factors
are beyond the Company's control. The foregoing information is expressly
qualified in its entirety by such factors. You should expect the assumptions and
related estimates to change as additional information becomes available.
However, the Company does not intend to update or otherwise revise the
projections and estimates provided to reflect events or circumstances after the
date of this report. Actual results may differ materially from the projections
and estimates provided.
Management is actively seeking acquisition opportunities that meet our criteria
stated above in Item 2. Should an acquisition be made, expenditures and required
resources could change significantly. Since implementing the Business Plan in
October 2002, management has reviewed numerous deals, and anticipates this pace
of evaluation to continue in 2004. The Company's ability to raise funds required
to complete acquisitions is somewhat hindered, as mention above, due to NOL
utilization rules contained in Section 382 of the Internal Revenue Code.
However, if an opportunity presents itself that would be more valuable to the
shareholders than the NOL, we would recommend pursuing the deal and would
17
consider issuing equity to do so. Absent this, we intend on using certain
limited partnership structures and traditional bank borrowings to implement the
Business Plan. The Company does not currently have any agreements or
arrangements for any such financing, and no assurances can be made that such
financing will be available on terms considered acceptable to the Company.
Forward Looking Statements
Certain information in this section may contain "forward-looking statements"
within the meaning of Section 21e of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including, but
not limited to, any projections of earnings, revenues or other financial items,
any statements of the plans and objectives of management for future operations,
any statements concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. In some cases, "forward-looking
statements" can be identified by the use of terminology such as "may," "will,"
"expects," "believes," "plans," "anticipates," "estimates," "potential," or
"continue," or the negative thereof or other comparable terminology. Although
the Company believes that the expectations reflected in its forward-looking
statements are reasonable, it can give no assurance that such expectations or
any of its "forward-looking statements" will prove to be correct, and actual
results could differ materially from those projected or assumed in the Company's
"forward-looking statements." Our financial condition and results, as well as
any other "forward-looking statements," are subject to inherent risks and
uncertainties, including but not limited to those risk factors disclosed in the
Company's definitive Schedule 14A dated August 27, 2002, which are incorporated
herein by reference, as well as those summarized in Item 6, "Management's
Discussion and Analysis or Plan of Operation."
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements prepared in accordance with Regulation S-B are included
in this report commencing on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 8a. CONTROLS AND PROCEDURES
The Company's management, under the supervision and with the participation of
the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
performed an evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures as of December 31, 2003. Based on
that evaluation, the CEO and CFO concluded that the Company's disclosure
controls and procedures were effective. There are no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to this evaluation.
PART III
Information Incorporated by Reference
The information required by Item 9 - Directors and Executive Officers of the
Registrant, Item 10 - Executive Compensation, Item 11 - Security Ownership of
Certain Beneficial Owners and Management and Related Stockholders Matters (other
than information concerning securities authorized for issuance under equity
compensation plans), and Item 12 - Certain Relationships and Related
Transactions and Item 14 - Principal Accountant Fees and Services is
incorporated by reference from our definitive proxy statement, which will be
18
filed with the SEC no later than April 29, 2004. For information concerning
securities authorized for issuance under equity compensation plans, see "Market
for Common Equity and Related Stockholder Matters - Securities Authorized for
Issuance under Equity Compensation Plans" in Part II of this Form 10-KSB
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
------ --------------------
2.3// Asset Purchase Agreement between the Company and Blue Hill Media,
Inc. dated December 13, 2002
3.1+ Certificate of Incorporation and Certificates of Amendments thereto
of DIDAX INC.
3.1(a)+ Certificate of Correction regarding Certificate of Incorporation
3.1(b)** Certificate of Amendment thereto of DIDAX INC.
3.2+++ Certificate of Amendment thereto of Crosswalk.com, Inc.
3.3+ Bylaws and amendments thereto of the Registrant
3.4 ~ Certificate of Designations for Series "A" Preferred Stock
3.4(a) ~~ Amended Certificate of Designations for Series "A" Preferred Stock
3.5 ~~ Certification of Designations for Series "B" Preferred Stock
4.5+ Form of Stock Option Agreement
4.6+ 1997 Stock Option Plan
4.6A* 1997 Stock Option Plan, as amended April 6, 1998
4.7* 1998 Stock Option Plan
4.7A** 1998 Stock Option Plan, as amended February 26, 1999
4.8## 1998 Stock Option Plan, as amended March 3, 2000
10.3** Office Building Lease by and between Enterprise Center Limited
Partnership Number Two and the registrant dated August 23, 1999
10.4+ Warrant Certificate between the Company and Robert Varney dated
July 10, 1996
10.5+ Warrant Certificate between the Company and Robert Varney dated
September 26, 1996
10.8+ Warrant Certificate between the Company and Bruce Edgington dated
July 30, 1996
10.9+ Warrant Certificate between the Company and Bruce Edgington dated
October 30, 1996
19
10.50++ Stock Purchase Agreement between the Company and A. Scott Dufford for
Series A Preferred Stock dated September 29, 2000
10.51++ Stock Purchase Agreement between the Company and John R. Norwwod for
Series A Preferred Stock dated September 29, 2000
10.52++ Stock Purchase Agreement between the Company and J.M. Mineral and
Land Co. for Series A Preferred Stock dated September 29, 2000
10.53++ Stock Purchase Agreement between the Company and Jon M. Morgan
Pension Plan for Series A Preferred Stock dated September 29, 2000
10.54++ Stock Purchase Agreement between the Company and Stallings
Properties, Ltd. for Series A Preferred Stock dated September 29,
2000
10.55++ Stock Purchase Agreement between the Company and John D. Bergman for
Series A Preferred Stock dated September 29, 2000
10.56++ Stock Purchase Agreement between the Company and Julia Jones Family
Trust for Series A Preferred Stock dated September 29, 2000
10.57++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series A Preferred Stock dated September 29, 2000
10.58++ Stock Purchase Agreement between the Company and Soft Op, L.P. for
Series A Preferred Stock dated September 29, 2000
10.59++ Stock Purchase Agreement between the Company and Lighthouse
Partners, L.P. for Series A Preferred Stock dated September 29, 2000
10.60++ Stock Purchase Agreement between the Company and Ray McGlothlin, Jr.
for Series A Preferred Stock dated September 29, 2000
10.61++ Stock Purchase Agreement between the Company and Gary J. Lamb for
Series A Preferred Stock dated September 29, 2000
10.62++ Stock Purchase Agreement between the Company and Frosty Gilliam, Jr.
for Series A Preferred Stock dated September 29, 2000
10.63++ Stock Purchase Agreement between the Company and Bruce Edgington for
Series B Preferred Stock dated December 31, 2001
10.64++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series B Preferred Stock dated December 31, 2001
10.65++ Stock Purchase Agreement between the Company and Earl E. Gjelde for
Series B Preferred Stock dated December 31, 2001
10.66++ Stock Purchase Agreement between the Company and Jon M. Morgan for
Series B Preferred Stock dated December 31, 2001
10.67++ Stock Purchase Agreement between the Company and Soft Op, L.P. for
Series B Preferred Stock dated December 31, 2001
10.68++ Annex to the Stock Purchase Agreement for Series A Preferred Stock
dated September 29, 2000
20
10.69++ Annex to the Stock Purchase Agreement for Series B Preferred Stock
dated December 31, 2001
10.72// Agreement and Transfer of Limited Partnership Interest between the
Company and the Selling Partners of TCTB Partners, Ltd. dated
October 31, 2002
10.73// Amended Promissory Note between the Company and A. Scott Dufford
dated October 31, 2002, with schedule describing all outstanding
Amended Promissory Notes between the Company and the Selling Partners
of TCTB Partners, Ltd, which are identical other than differences
stated in the schedule.
10.74// Credit Agreement between TCTB Partners, Ltd. and Wells Fargo Bank
Texas, N.A. dated June 5, 2002, the exhibits of which are not
included due to their size.
10.75// Lease Agreement between TCTB Partners, Ltd. and Bank of America, N.A.
dated September 30, 2003.
10.76// Lease Agreement between TCTB Partners, Ltd. and Pioneer Natural
Resources USA, Inc. dated April 4, 2000.
10.77// Lease Agreement between TCTB Partners, Ltd. and Wells Fargo Bank
Texas, N.A. dated June 27, 2000
10.78// Lease Termination between the Company and Matan Properties dated
July 30, 2002.
10.79# Agreement to Suspend Dividends and Consent of the Holders of Series A
Preferred Stock of Amen Properties, Inc. dated May 30, 2003.
10.80# Agreement to Suspend Dividends and Consent of Holders of Series B
Convertible Preferred Stock of Amen Properties, Inc. dated May 30,
2003.
11 Statement of computation of earnings per share
21.1 Subsidiaries of the Company
23.1 Consent of Johnson, Miller & Co.
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USCss.1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USCss.1350.
+ Incorporated by reference to the Company's Registration Statement on Form SB-2
declared effective by the Securities and Exchange Commission on September 24,
1997, SEC File No. 333-25937
* Incorporated by reference to the Company's Registration Statement Post
Effective Amendment No. 1 to Form SB-2 declared effective by the Securities and
Exchange Commission on July 2, 1998, SEC File No. 333-25937
## Filed as an Appendix to the Company's Proxy Statement on Schedule 14-A filed
with the Securities and Exchange Commission on March 30, 2000.
21
** Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 30, 2000.
~ Incorporated by reference to the Company's Registration Statement on Form S-3
declared effective by the Securities and Exchange Commission on December 1,
2000, SEC File No. 333-49126
++ Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 29, 2002, amended July 25,
2002 and August 14, 2002.
~~ Incorporated by reference to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on April 5, 2002, SEC file No.
333-85636
*** Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
filed with the Securities and Exchange Commission on November 14, 2002.
+++ Filed as an Appendix to the Company's Proxy Statement on Schedule 14-A filed
with the Securities and Exchange Commission on January 13, 2003.
// Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 24, 2003.
# Incorporated by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on June 4, 2003.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the last fiscal quarter
covered by this report.
22
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMEN Properties, Inc.
March 29, 2004 By: /s/ Eric L. Oliver
---------------------------------------
Eric L. Oliver,
Chairman of the Board of Directors and
Chief Executive Officer
March 29, 2004 By: /s/ John M James
----------------------------------------
John M. James, Chief Financial Officer
and Secretary
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
March 29, 2004 By: /s/ Jon Morgan
---------------------------------------
Director and Chief Operating Officer
March 29, 2004 By: /s/ Bruce Edgington
---------------------------------------
Director
March 29, 2004 By: /s/ Randy G. Nicholson
---------------------------------------
Director
23
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Board of Directors and Stockholders
AMEN Properties, Inc. and Subsidiaries
Midland, Texas
We have audited the consolidated balance sheets of AMEN Properties, Inc.,
(formerly Crosswalk.com, Inc.), and Subsidiaries as of December 31, 2003 and
2002, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits 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 of 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AMEN Properties,
Inc. and Subsidiaries at December 31, 2003 and 2002, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
JOHNSON, MILLER & CO.
Midland, Texas
February 6, 2003
F-1
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
2003 2002
----------- -----------
CURRENT ASSETS
Cash and cash equivalents (notes A3, D and E) $ 2,741,527 1,541,183
Accounts receivable (notes A6 and A13), net of allowance of $91,066
and $61,826 in 2003 and 2002, respectively 51,859 161,783
Short-term investments (notes A4 and E) 50,225 -
Other current assets 78,507 31,363
----------- -----------
Total current assets 2,922,118 1,734,329
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $822,301 and $458,155 in 2003 and 2002,
respectively (notes A7, A8, and G) 11,662,960 11,908,066
LONG-TERM INVESTMENTS (notes A4 and E) 62,350 341,649
OTHER ASSETS
Note receivable (note F) 250,763 275,000
Deferred costs (note A9) 79,064 94,328
Rents receivable (notes A6 and A13) 75,288 71,240
Deposits and other assets 4,348 60,840
----------- -----------
Total other assets 409,463 501,408
----------- -----------
TOTAL ASSETS $ 15,056,891 14,485,452
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term obligations (note J) $ 186,156 197,961
Accounts payable 151,818 214,855
Accrued liabilities (note H) 258,237 798,473
Deferred revenue 34,463 108,928
Other liabilities 175,702 67,535
----------- -----------
Total current liabilities 806,376 1,387,752
LONG-TERM OBLIGATIONS, less current portion (note J) 8,898,364 9,072,310
DEFERRED REVENUE 180,542 -
MINORITY INTEREST (note A12) 1,157,170 755,323
COMMITMENTS AND CONTINGENCIES (notes A16 and L) - -
STOCKHOLDERS' EQUITY (notes O and P)
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;
2,201,356 and 1,991,056 shares issued and outstanding 22,014 19,920
Common stock warrants 127,660 127,660
Additional paid-in capital 42,481,507 42,123,601
Accumulated deficit (38,616,607) (39,008,436)
Accumulated other comprehensive (loss) income (295) 7,162
----------- -----------
Total stockholders' equity 4,014,439 3,270,067
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,056,891 14,485,452
============ ===========
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
F-2
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
2003 2002
---------- ---------
Rental revenue $ 4,345,099 1,060,413
Operating expenses:
Property operating 359,319 158,916
Sales and marketing 7,351 6,260
General and administrative 128,788 55,523
Depreciation and amortization 408,335 98,718
Insurance 68,439 21,755
Travel and entertainment 827 600
Utilities 854,140 172,624
Building maintenance 621,905 224,947
Office expense 479,486 109,088
Taxes, except income 238,873 44,591
---------- ---------
Total operating expenses 3,167,463 893,022
---------- ---------
Net income from operations 1,177,636 167,391
Other income (expense):
Interest income 31,020 1,131
Interest expense (note A15) (654,319) (322,363)
Other expense 253,306 (6,018)
---------- ---------
Total other income (expense) (369,993) (327,250)
---------- ---------
Net income (loss) before income taxes, minority interest
and discontinued operations 807,643 (159,859)
Income taxes (notes A11 and I) - -
Minority interest (415,814) (81,984)
---------- ---------
Income (loss) from continuing operations 391,829 (241,843)
---------- ---------
Discontinued operations-net operations of sold assets - (2,284,070)
Discontinued operations-gain on sale of assets - 376,962
---------- ---------
Loss from discontinued operations - (1,907,108)
---------- ---------
NET INCOME (LOSS) $ 391,829 (2,148,951)
========== =========
Net income (loss) per common share (basic)
Income (loss) from continuing operations $ .19 (.12)
Discontinued operations - (1.15)
Gain on sale of discontinued operations - .19
---------- ---------
Net income (loss) $ .19 (1.08)
========== =========
Net income (loss) per common share (diluted)
Income (loss) from continuing operations $ .13 (.12)
Discontinued operations - (1.15)
Gain on sale of discontinued operations - .19
---------- ---------
Net income (loss) $ .13 (1.08)
========== =========
Weighted average number of common shares outstanding - basic 2,111,328 1,991,962
Weighted average number of common shares outstanding - diluted 2,961,051 1,991,962
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
F-3
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2003 and 2002
Accumulated
Other
Preferred Stock Common Stock Additional Common Comprehensive
------------------ ---------------------- Paid-in Stock Accumulated Income Total
Shares Amount Shares Amount Capital Warrants Deficit (Loss) Equity
--------- ------- ----------- --------- ------------ --------- ------------ -------- -----------
Balance, December 31, 2001 160,000 $ 160 1,989,931 $ 19,835 42,116,248 127,660 (36,859,485) 4,045 5,408,463
Common stock issued pursuant to
exercise of stock options - - 2,125 85 7,353 - - - 7,438
Other comprehensive income - - - - - - - 3,117 3,117
Net loss - - - - - - (2,148,951) - (2,148,951)
TOTAL COMPREHENSIVE LOSS - - - - - - - - (2,145,834)
--------- ------- ----------- --------- ------------ --------- ------------ -------- -----------
Balance, December 31, 2002 160,000 160 1,992,056 19,920 42,123,601 127,660 (39,008,436) 7,162 3,270,067
Common stock issued pursuant to a
deferral of preferred stock
dividend - - 209,300 2,094 357,906 - - - 360,000
Other comprehensive income - - - - - - - (7,457) (7,457)
Net income - - - - - - 391,829 - 391,829
TOTAL COMPREHENSIVE INCOME - - - - - - - - 384,372
--------- ------- ----------- --------- ------------ --------- ------------ -------- -----------
Balance, December 31, 2003 160,000 $ 160 2,201,356 $ 22,014 42,481,507 127,660 (38,616,607) (295) 4,014,439
========= ======= =========== ========= ============ ========= ============ ======== ===========
The accompanying summary of accounting policies and footnotes are an integral part of these consolidated financial statements.
F-4
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2003 2002
------------ --------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss) $ 391,829 (2,148,951)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 408,335 98,718
Depreciation and amortization - discontinued operations - 320,167
Goodwill impairment - discontinued operations - 1,200,000
Gain on sale of discontinued operations - (376,962)
(Gain) loss on sale of investments (120,405) 10,457
Minority interest 415,814 81,984
Changes in operating assets and liabilities:
Accounts receivable 109,924 660,440
Notes receivable from former officers - 17,856
Deposits and other assets 14,425 (40,865)
Deferred costs (5,572) 119,646
Accounts payable (63,037) (506,428)
Accrued and other liabilities (72,069) (55,568)
Deferred revenue 106,077 (214,258)
------------ --------------
Net cash provided by (used in) operating activities 1,185,321 (833,764)
------------ --------------
Cash flows from investing activities:
Purchases of property and equipment (151,518) (81,381)
Proceeds from sale of property, equipment and intangible assets - 4,381,290
Closing costs on sale of discontinued operations - (1,293,314)
Sales and maturity of investments 1,839,223 971,946
Purchase of investments (1,497,201) (1,094,105)
Acquisition of limited partnership interest (note C) - (1,401,998)
Repayments of notes receivable 24,237 -
------------ --------------
Net cash provided by investing activities 214,741 1,482,438
------------ --------------
Cash flows from financing activities:
Net proceeds from issuance of preferred stock - 300,000
Net proceeds from issuance of common stock - 7,438
Repayments of notes payable (175,467) (272,238)
Repayments of capitalized leases (10,284) (43,886)
Partner distributions (13,967) -
------------ --------------
Net cash used in financing activities $ (199,718) (8,686)
------------ --------------
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
F-5
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended December 31,
2003 2002
--------- --------
Net increase in cash and cash equivalents $ 1,200,344 639,988
Cash and cash equivalents at beginning of year 1,541,183 901,195
--------- --------
Cash and cash equivalents at end of year $ 2,741,527 1,541,183
--------- --------
Cash paid during the year for:
Interest $ 470,783 120,197
Non-cash investing and financing activities:
In December 2002, the Company sold its "Offline Business"
for a note receivable. (note B) $ - 275,000
In March 2003, the Company issued 209,300 shares of
stock pursuant to a deferral of preferred stock dividend $ 360,000 -
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
F-6
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
1. Organization
Pursuant to actions of the stockholders on September 19, 2002,
Crosswalk.com, Inc. changed its name to AMEN Properties, Inc. ("AMEN").
Effective October 2002, AMEN formed NEMA Properties, LLC ("NEMA"), a Nevada
limited liability company; AMEN Minerals, LP ("Minerals"), a Delaware
limited partnership; and AMEN Delaware, LP ("Delaware"), a Delaware limited
partnership, to pursue acquisitions as authorized by stockholders on
September 19, 2002. AMEN Properties, Inc. and Subsidiaries and affiliates
(collectively referred to as the "Company") is a self-administered and
self-managed Delaware corporation.
The Company's business purpose is to acquire investments in commercial real
estate, oil and gas royalties and stabilized cash flowing businesses or
assets. As of December 31, 2003, the Company, through Delaware's investment
in a limited partnership, has a commercial real estate portfolio consisting
of majority ownership in two office properties located in Midland and
Lubbock, Texas comprising an aggregate of approximately 539,837 square feet
of gross leasable area ("GLA"). The investment was obtained through
Delaware's acquisition of an approximate 64.9% partnership interest in TCTB
Partners, Ltd. ("TCTB"), a Texas limited partnership. Through its
investment in Minerals, AMEN has acquired an investment interest in an oil
and gas royalty trust. The operations of the Company are primarily
conducted through Delaware of which AMEN is the sole general partner.
2. Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its majority-owned/controlled subsidiaries and affiliates. Intercompany
balances and transactions have been eliminated.
Management uses estimates and assumptions in preparing the consolidated
financial statements in accordance with accounting principles generally
accepted in the United States of America. Those estimates and assumptions
affect the reported amounts of assets, liabilities, revenues and expenses
in the consolidated financial statements, and the disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.
3. Cash Equivalents
The Company 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 a cash equivalent.
F-7
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
4. Short and Long-Term Investments
The Company invests in U.S. government bonds and treasury notes, municipal
bonds, and corporate bonds. Investments with original maturities greater
than three months but less than twelve months from the balance sheet date
are short-term investments. Those investments with original maturities
greater than twelve months from the balance sheet date are long-term
investments.
The Company's marketable securities are classified as available-for-sale as
of the balance sheet date, and are reported at fair value with unrealized
gains and losses, net of tax, recorded in stockholders' equity. Realized
gains or losses and permanent declines in value, if any, on
available-for-sale investments are reported in other income or expense as
incurred.
5. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, investments and accounts
receivable approximate fair value because of the relatively short maturity
of these instruments.
6. Tenant Accounts Receivable
Management regularly reviews accounts receivable and estimates the
necessary amounts to be recorded as an allowance for uncollectibility.
These reserves are established on a tenant-specific basis and are based
upon, among other factors, the period of time an amount is past due and the
financial condition of the obligor.
7. Depreciation and Amortization
Property, plant and equipment are stated at cost. Depreciation is
determined using the straight-line method over the estimated useful lives
ranging from three to forty years. Leasehold improvements are amortized
over the shorter of the life of the asset or the remaining lease term.
Intangible assets are amortized over the useful lives of five to ten years
using the straight-line method. Amortization expense includes two capital
leases amortized over a 36 month period which were repaid in 2003. Costs
for the repair and maintenance of property and equipment are expensed as
incurred.
F-8
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
8. Impairment of Long-Lived Assets
The Company periodically evaluates the recoverability of the carrying value
of its long-lived assets and identifiable intangibles by monitoring and
evaluating changes in circumstances that may indicate that the carrying
amount of the asset may not be recoverable. Examples of events or changes
in circumstances that indicate that the recoverability of the carrying
amount of an asset should be assessed include but are not limited to the
following: a significant decrease in the market value of an asset, a
significant change in the extent or matter in which as asset is used or a
significant physical change in an asset, a significant adverse change in
legal factors or in the business climate that could affect the value of an
asset or an adverse action or assessment by a regulator, an accumulation of
costs significantly in excess of the amount originally expected to acquire
or construct an asset, and/or a current period operating or cash flow loss
combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with an asset used
for the purpose of producing revenue.
The Company considers historical performance and anticipated future results
in its evaluation of potential impairment. Accordingly, when indicators or
impairment are present, the Company evaluates the carrying value of these
assets in reaction to the operating performance of the business and future
discounted and nondiscounted cash flows expected to result from the use of
these assets. Impairment losses are recognized when the sum of expected
future cash flows are less than the assets' carrying value. The Company
recorded an impairment loss of $1,200,000 for the year ended December 31,
2002, which related to discontinued operations.
9. Deferred Costs
Deferred costs primarily consist of deferred financing costs. Deferred
financing costs are amortized as interest expense over the life of the
related debt.
10. Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with
Accounting Principles Board Opinion (APB) 25, Accounting for Stock Issued
to Employees, which uses the intrinsic value method. As required by
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, the Company has disclosed the pro forma impact on
the consolidated financial statements assuming the measurement provisions
of SFAS No. 123 and additional disclosure requirements of SFAS No. 148 had
been adopted.
F-9
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
11. Income Taxes
The Company accounts for income taxes using the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to
the amount expected to be realized.
12. Minority Interest
Minority interest represents the interest of unit holders of TCTB, other
than the Company in the net earnings and net equity of TCTB. The unit
holder minority interest is adjusted at the end of each period to reflect
the ownership at that time. The unit holder minority interest in TCTB was
approximately 35.1% at December 31, 2003 and 2002.
13. Revenue recognition
Leases with tenants are accounted for as operating leases. Minimum annual
rentals are recognized on a straight-line basis over the terms of the
respective leases. As a result of recording rental revenue on a
straight-line basis, accounts receivable include $47,478 and $100,105 of
tenant receivables at December 31, 2003 and 2002, respectively, which is
expected to be collected over the remaining lives of the leases.
14. Advertising Expense
All advertising costs are expensed when incurred. Advertising expenses were
approximately $7,000 and $91,000 for the years ended December 31, 2003 and
2002, respectively.
15. Earnings Per Share
Income from continuing operations has been decreased by preferred stock
dividends of approximately $42,000 and $168,000 for the years ended
December 31, 2003 and 2002, respectively.
The effects of Series "A" and "B" convertible Preferred Stock are not
included in the computation of diluted earnings per share for any periods
in which their effect is antidilutive.
F-10
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
15. Earnings Per Share (Continued)
Disclosures regarding shares and share price have been adjusted to reflect
the 1-for-4 reverse stock split dated January 30, 2003 in accordance with
accounting principles generally accepted in the United States of America.
See note O.
16. Environmental
The Company is subject to extensive federal, state and local environmental
laws and regulations. These laws regulate asbestos in buildings that
require the Company 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 be reasonably estimated.
17. New Accounting Pronouncements
In September 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring. This Statement
improves financial reporting by requiring that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value only when the liability is incurred. The accounting
for similar events and circumstances will be the same, thereby improving
the comparability and representation faithfulness of reported financial
information. The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure, an amendment of SFAS No. 123,
Accounting for Stock-Based Compensation. This Statement amends SFAS No.
123, to provide alternative methods of transition for a voluntary change to
the fair value method of accounting for stock-based employee compensation.
In addition, this Statement amends the disclosure requirements of SFAS No.
123 to require
F-11
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
17. New Accounting Pronouncements (Continued)
prominent disclosures in both annual and interim financial statements about
the method of accounting for stock-based compensation and the effect of the
method used on reported results. Certain of the disclosure modifications
are required for fiscal years ending after December 15, 2002 and are
included in the notes to these consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities. The objective of this interpretation is to
provide guidance on how to identify a variable interest entity (VIE) and
determine when the assets, liabilities, noncontrolling interests, and
results of operations of a VIE need to be included in a company's
consolidated financial statements. A company that holds variable interests
in an entity will need to consolidate the entity if the company's interest
in the VIE is such that the company will absorb a majority of the VIE's
expected losses and/or receive a majority of the entity's expected residual
returns, if they occur. FIN 46 also requires additional disclosures by
primary beneficiaries and other significant variable interest holders. The
provisions of this interpretation become effective upon issuance.
In December 2003, the FASB issued a revised Interpretation No. 46,
Consolidation of Variable Interest Entities, replacing the original
Interpretation issued in January 2003. The revised Interpretation provides
guidance on when certain entities should be consolidated or the interests
in those entities should be disclosed by enterprises that do not control
them through majority voting interest. Under the revised Interpretation,
entities are required to be consolidated by enterprises that lack majority
voting interest when equity investors of those entities have insignificant
capital at risk or they lack voting rights, the obligation to absorb
expected losses, or the right to receive expected returns. Entities
identified with these characteristics are called variable interest entities
and the interests that enterprises have in these entities are called
variable interests. These interests can derive from certain guarantees,
leases, loans or other arrangements that result in risks and rewards that
are disproportionate to the voting interests in the entities. The
provisions of the revised Interpretation must be immediately applied for
variable interest entities created after January 31, 2003 and for variable
interests in entities commonly referred to as "special purpose entities."
For all other variable interest entities, implementation is required by
March 31, 2004.
In July 2003, the FASB issued SFAS No. 149, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 149 amends and clarifies SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS
No. 149 improves financial reporting of derivatives by requiring contracts
with comparable characteristics be accounted for similarly. This Statement
also incorporates
F-12
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
17. New Accounting Pronouncements (Continued)
clarifications of the definition of a derivative. SFAS No. 149 is effective
for contracts entered into or modified after June 30, 2003. Management will
consider the impact of this Statement on its financial statements for
future periods.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No.
150 requires that an issuer classify a financial instrument that is within
its scope as a liability. Many of those instruments were previously
classified as equity such as common or preferred shares that are
mandatorily redeemable-that embody an unconditional obligation requiring
the issuer to redeem the shares by transferring its assets at a specified
date or upon an event that is certain to occur. The provisions of this
Statement shall be effective for the first fiscal period beginning after
December 15, 2004.
Management does not believe the new pronouncements will have a material
impact on its financial statements.
18. Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the 2003 presentation.
NOTE B - DISCONTINUED OPERATIONS AND ASSET SALES
In the years ended December 31, 2001 and prior, the business of the Company
consisted of the development and aggregation of Internet content and
services; advertising and royalty sales; and through the third quarter of
2000, the resale of products specifically designed to meet the needs of
Christian users of the Internet and the World Wide Web. This was
accomplished through the platform of the website Crosswalk.com, which was
created and developed by the Company (the "Online Business"). In addition,
the Company generated advertising revenue through the issuance of mailers
called "card decks." Six times annually, the Company distributed these card
decks bringing awareness of over fifty ad clients' products to 225,000
churches in each mailing (the "Offline Business"). The Offline Business,
which employed a staff of three, included a proprietary database of about
140,000 churches. Additional lists were rented to meet the remaining
distribution commitment.
In September 2002, the Company's stockholders approved the sale of the
Crosswalk.com Web site to Salem Communications, Inc. for approximately $4.1
million in cash. The sale closed October 4, 2002. The operation of the
Online Business also terminated at that time. The Company incurred legal
and consulting
F-13
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE B - DISCONTINUED OPERATIONS AND ASSET SALES (CONTINUED)
fees, contract termination costs and severance costs approximating
$1,043,000. These costs were incurred as part of the Company's exit of the
Online Business activities and moving corporate headquarters to Midland,
Texas.
On December 12, 2002, the assets related to the Offline Business were sold
to Blue Hill Media, Inc. for a note receivable in the amount of $275,000
and a 3.5% net profits interest in the Offline Business' future gross
margin. The operation of the Offline Business ceased upon the date of the
sale. Therefore, the Online Business and Offline Business comprise that
which is categorized as "Discontinued Operations."
The table below summarizes the net operations and sales of discontinued
operations for the year ended December 31, 2002:
Revenues $ 2,245,430
Operating expenses (4,529,500)
---------
Loss from discounted operations $ (2,284,070)
=========
Proceeds received on sales of assets of
discontinued operations $ 4,381,290
Property, plant and equipment, net (598,592)
Intangibles, net (2,361,319)
Other assets and liabilities, net (1,012,597)
Other costs incurred (31,820)
---------
Net gain on sale of discontinued operations $ 376,962
=========
NOTE C - BUSINESS COMBINATIONS
Effective October 1, 2002, Delaware completed the acquisition of
approximately 64.9% of a limited partnership interest in TCTB for an
aggregate consideration of approximately $4,375,000, including
approximately $1,946,000 of cash paid.
This acquisition has been accounted for under the purchase method of
accounting. The purchase price has been allocated based on the estimated
fair values of the approximate 64.9% acquired interest at the acquisition
date as follows:
Fair value of assets acquired $ 12,262,452
----------
Liabilities assumed (7,398,028)
Notes payable to sellers (2,789,087)
Minority interest (673,339)
----------
Cash used for the acquisition 1,401,998
Plus: cash acquired 543,876
----------
Net cash paid $ 1,945,874
===========
F-14
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE C - BUSINESS COMBINATIONS (CONTINUED)
For purposes of financial reporting, the Company has accounted for the
acquisition as if it occurred on October 1, 2002, the effective date of the
transaction. The Company has included the results of TCTB's fourth quarter
operations in its statement of operations for 2002.
The following summary compares the Company's 2002 operating results as
reported, to a pro forma of those results (twelve months) prepared on
the assumption that the purchase had taken place January 1, 2001.
As Proforma
Reported 2002
------------ ----------
Revenues $ 1,060,413 4,132,131
============ ==========
(Loss) income before discontinued
operations $ (241,843) (90,337)
Loss from discontinued operations (1,907,108) (1,907,108)
------------ ----------
Net loss $ (2,148,951) (1,997,445)
============ ==========
(Loss) income per common share (basic
and diluted)
Loss (income) from continuing
operations $ (.12) (.04)
Loss from discontinued operations (.96) (.96)
------------ ----------
Net loss $ (1.08) (1.00)
============ ==========
NOTE D - CONCENTRATIONS OF CREDIT RISK
The Company maintains cash balances at three financial institutions, which
at times may exceed federally insured limits. At December 31, 2003 and
2002, the Company had approximately $2,201,200 and $679,700, respectively,
of uninsured cash and cash equivalents. The Company has not experienced any
losses in such accounts and believes that it is not exposed to any
significant credit risks on such accounts.
The Company'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.
F-15
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE E - CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM INVESTMENTS (CONTINUED)
The Company invests in cash in banks, U.S. government bonds, oil and gas
royalty trust funds and various other investments. All highly liquid
instruments with original maturities of three months or less are considered
cash equivalents; those with original maturities greater than three months
but less than twelve months from the balance sheet date are considered
short-term investments; and those with original maturities greater than
twelve months from the balance sheet date are considered long-term
investments. The Company's marketable securities are classified as
available-for-sale as of the balance sheet date and are reported at fair
value, with unrealized gains and losses, net of tax, recorded shareholders'
equity. Realized gains and losses and permanent declines in value, if any,
on available-for-sale securities are reported in other income or expense as
incurred. The cost of securities sold is determined by the specific
identification method.
At December 31, 2003 and 2002, the Company's cash and cash equivalents
consist of the following:
2003 2002
---------- -----------
Cash in banks $ 2,741,527 1,464,436
Short-term investments - 76,747
---------- -----------
$ 2,741,527 1,541,183
========== ===========
Securities available-for-sale in the accompanying balance sheet at December
31, 2003 and 2002 total $112,575 and $418,396, respectively. The aggregate
market value, cost basis, and unrealized gains and losses of securities
available-for-sale, by major security type as of December 31, 2003 and 2002
are as follows:
Gross
Market Cost Unrealized
Value Basis Losses
---------- ----------- ----------
As of December 31, 2003:
U.S. Government Debt Securities $ 50,225 50,520 (295)
Other 62,350 62,350 -
---------- ----------- ----------
Total $ 112,575 112,870 (295)
========== =========== ==========
F-16
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE E - CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM
INVESTMENTS (CONTINUED)
Gross
Market Cost Unrealized
Value Basis Gains
--------- ---------- -----------
As of December 31, 2002:
U.S. Government Debt Securities $ 127,386 125,599 1,787
Oil and Gas Royalty Trust Fund 288,625 283,250 5,375
Other 2,385 2,385 -
--------- ---------- -----------
Total $ 418,396 411,234 7,162
========= ========== ===========
The current and long-term portions at December 31, 2003 are as follows:
Gross
Market Cost Unrealized
Value Basis Losses
--------- ---------- -----------
Short-term investments $ 50,225 50,520 (295)
Long-term investments 62,350 62,350 -
--------- ---------- -----------
$ 112,575 112,870 (295)
========= ========== ===========
The Company recorded net realized gains of $120,405 for the year ended
December 31, 2003. The Company recorded net realized losses of $11,271 and
net realized gains of $814 for the year ended December 31, 2002.
NOTE F - NOTE RECEIVABLE
On December 13, 2002, the Company received a note receivable in the amount
of $275,000, with an annual interest rate of 6.00%, from a third-party for
the sale of substantially all assets associated with the Offline Business
line (see note B). The note receivable is due in quarterly installments,
beginning April 10, 2003, equal to 20% of the gross margin of the Offline
Business operations for the prior calendar quarter period, with all
remaining unpaid principal and interest due on January 10, 2010. As of
December 31, 2003 and 2002, the outstanding principal balance on the note
receivable was $250,763 and $275,000, respectively. Because the current
maturities are not reasonably estimable at December 31, 2003, the entire
principal balance is reported as non-current.
F-17
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE G - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following at
December 31, 2003 and 2002:
2003 2002
---------- -----------
Buildings $ 11,742,431 11,667,457
Furniture, fixtures and equipment 44,147 11,310
Tenant improvements 165,245 121,539
Capitalized leases - 32,477
Land 533,438 533,438
---------- -----------
12,485,261 12,366,221
Less: accumulated depreciation (822,301) (458,155)
---------- -----------
$ 11,662,960 11,908,066
========== ===========
Depreciation and amortization expense for 2003 and 2002 was $408,335 and
$418,885, respectively.
NOTE H - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at December 31:
2003 2002
---------- -----------
Accrued dividends payable (see note O) $ - 318,000
Accrued property taxes 248,712 219,949
Accrued severance wages - 103,665
Other liabilities 9,525 156,859
---------- -----------
$ 258,237 798,473
========== ===========
NOTE I - INCOME TAXES
There was no income tax expense or benefit to report for the years ended
December 31, 2003 and 2002. A reconciliation of income taxes at the
statutory rate to the Company's effective rate is as follows for the years
ended December 31:
2003 2002
---------- -----------
Computed at the expected statutory rate $ 133,000 (731,000)
---------- -----------
State income tax-net of Federal tax benefit - -
Other - 9,000
Less valuation allowance (133,000) 722,000
---------- -----------
Income taxes $ - -
========== ===========
F-18
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE I - INCOME TAXES (CONTINUED)
Noncurrent deferred tax assets and liabilities at December 31, 2003 and
2002 were as follows:
2003 2002
------------- ------------
Deferred tax assets
Net operating loss carry-forward $ 10,850,666 10,953,786
Other 30,963 23,545
------------- ------------
Gross deferred tax assets 10,881,629 10,977,331
Deferred tax liabilities
Rents receivable (16,603) (15,710)
Depreciation (54,641) (19,443)
Other (1,436) -
------------- ------------
Gross deferred tax liabilities (72,680) (35,153)
Valuation allowance (10,808,949) (10,942,178)
------------ ------------
Net noncurrent deferred tax assets $ - -
============ ============
As of December 31, 2003, the Company has net operating loss carry-forwards
totaling approximately $31,914,000 for federal and state income tax
purposes expiring in 2013 through 2023.
NOTE J - LONG-TERM OBLIGATIONS
On June 5, 2002, TCTB entered into a loan agreement with a 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 (0.50%), 4.75% at December 31, 2002. Commencing on June
30, 2002, TCTB 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. The terms of the TCTB revolving line of credit
note, due to mature on May 31, 2003, required monthly interest payments
computed on the unpaid principal balance commencing June 30, 2002. The line
of credit matured on May 31, 2003 and was not renewed by the Company. The
loan agreement is secured by substantially all of the assets of TCTB. The
loan agreement restricts cash distributions to TCTB's owners. TCTB 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 property to any 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
F-19
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE J - LONG-TERM OBLIGATIONS (CONTINUED)
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 (c) a final
judgment or order for the payment of money in excess of $100,000.
Delaware entered into nine promissory notes, in an aggregate amount of
$2,789,087, to purchase the 64.9% ownership interest in TCTB (see note C).
The notes are due in annual payments of principal and interest beginning
April 1, 2005 with a final maturity of May 31, 2009. The interest rate is
equal to the Wall Street Journal Prime Lending Rate plus 1.5%. The annual
payments are equal to a set percentage, ranging from 1% to 16% of the
future net operating loss benefit of the Company. The net operating loss
benefits are calculated as the dollar value of the federal income tax
benefit to the Company of the net operating loss calculated in accordance
with the Internal Revenue Code, for the calendar year preceding the date of
each annual payment.
Maturities of long-term debt at December 31, 2003 are as follows:
2004 $ 186,156
2005 202,951
2006 218,338
2007 233,682
2008 251,460
Thereafter 7,991,933
---------
Total 9,084,520
Less current portion 186,156
---------
Long-term portion $ 8,898,364
=========
The Company entered into two capital lease agreements for computer
equipment in prior years. During 2003, these capital lease agreements were
repaid and the associated assets retired. The assets under capital leases
recorded in Property, Plant and Equipment, net of accumulated depreciation,
totaled $9,116 at December 31, 2002.
NOTE K - RELATED PARTY TRANSACTIONS
At December 31, 2003 and 2002, related parties leased approximately 29,000
and 37,000 square feet, respectively. TCTB received rental income from
these related parties of approximately $260,000 and $273,000 during the
years ended December 31, 2003 and 2002. At December 31, 2003, related
parties owed TCTB approximately $11,000, which is included in accounts
receivable. At December 31, 2002, a preferred stockholder owed TCTB
approximately $1,000, which is included in accounts receivable.
F-20
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE L - COMMITMENTS AND CONTINGENCIES
The Company is subject to claims and lawsuits which arise primarily in the
ordinary course of business. It is the opinion of management that the
disposition or ultimate resolution of such claims and lawsuits will not
have a material adverse effect on the consolidated financial position of
the Company.
The Company has a non-cancelable operating lease agreement for land on
which a portion of the Lubbock, Texas rental property is built. The terms
of the present lease agreement will expire September 30, 2013. The existing
lease requires monthly lease payments of $3,930 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, 2008. Future minimum lease
payments under the agreement aggregate approximately $459,810 as of
December 31, 2003 and are as follows:
2004 $ 47,160
2005 47,160
2006 47,160
2007 47,160
2008 47,160
Thereafter 224,010
-------
Total $ 459,810
=======
NOTE M - RENTAL ARRANGEMENTS
The Company has rented facilities under operating leases. Future minimum
lease payments under non-cancelable operating leases aggregate $15,689,635
as of December 31, 2003 and are due as follows:
Percentage of
Future Total Space
Minimum Under Lease
Rent Expiring
----------- ------------
2004 $ 3,819,230 24%
2005 3,130,982 20%
2006 2,427,182 16%
2007 2,139,245 14%
2008 1,301,001 8%
Thereafter 2,871,995 18%
----------- ------------
Total $ 15,689,635 100%
=========== ============
F-21
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE M - RENTAL ARRANGEMENTS (CONTINUED)
Of the above leases, future minimum lease payments under non-cancelable
operating leases to related parties aggregate $319,349 as of December 31,
2003 and are due as follows:
2004 $ 257,879
2005 61,470
-------
$ 319,349
=======
NOTE N - SIGNIFICANT TENANTS
For the year ended December 31, 2003, rent income that accounted for more
than ten-percent of the Company's revenue was derived from two entities
which had 15% and 14%, respectively.
NOTE O - STOCKHOLDERS' EQUITY
At a special meeting held January 30, 2003, the Company stockholders
approved a 1-for-4 stock split. On February 3, 2003, shares of AMEN began
trading under the new symbol "AMECD." This action brought the closing bid
price of AMEN's common stock over the $1.00 per share criteria required
before February 14, 2003. After 20 trading days, on March 4, 2003, the
symbol reverted back to AMENC, and the Company continued trading under this
symbol for the duration of the exception period granted by the Nasdaq
Listing Panel. The "C" was removed from the symbol when the Nasdaq Listing
Panel confirmed compliance with the terms of the exception and all other
criteria necessary for continued listing on April 4, 2003.
On October 9, 2002, the Company received Nasdaq Staff Determination of
noncompliance with the minimum $1.00 bid price per share requirement set
forth in Nasdaq Marketplace rules. On November 20, 2002, the Company
received further notification of noncompliance with the Nasdaq SmallCap
listing maintenance requirement of $2.5 million in shareholders' equity.
After an oral hearing before a Nasdaq Listing Qualifications Panel, the
Company was granted a temporary exception from these standards subject to
meeting certain conditions. Pursuant to this ruling, effective December 20,
2002, and for the duration of the exception, AMEN's symbol was changed to
"AMENC."
F-22
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE O - STOCKHOLDERS' EQUITY (CONTINUED)
On September 29, 2000, the Company closed a $2.0 million strategic private
placement. The financing consisted of 80,000 shares of three-year Series
"A" preferred stock, convertible into 215,517 shares of common stock, and
redeemable at the option of the Company. This is the equivalent to $9.28
per common share. The Series "A" preferred stock also accrues a 6% dividend
per annum which was suspended by agreement in 2003 with the outstanding
accrued dividends paid in shares of common stock. Each preferred share
carries the number of votes equal to the number of shares of common stock
into which each share of preferred stock is convertible.
On January 9, 2002, the Company closed the sale of 80,000 shares of Series
"B" preferred stock for an aggregate of $800,000. Of this amount, four
directors of the Company purchased $550,000. A total of $500,000 was
received in December 2001, with the remaining $300,000 included as a
subscription receivable at December 31, 2001. The subscription receivable
was realized on January 9, 2002. The Series "B" preferred stock is
convertible into an aggregate of 233,317 shares of AMEN Properties, Inc.
common stock over the next three years, and will accrue 6% interest per
annum payable in cash or the Company's common stock, at the discretion of
the Company. The dividend accrual was suspended during 2003 by agreement,
with the outstanding accrued dividend paid in common stock. At the end of
the three-year period, the Series "B" preferred stock may be redeemed,
extended or converted, at the discretion of the Company. Consistent with
the offering memorandum, conversion prices of the three traunches received
are $3.244, $3.424 and $4.00, chronologically, for an average conversion
price of $3.428 per share. The Purchaser of the Series "B" and the holders
of common stock shall vote together on all matters as to which the approval
of the stockholders may be required. The purchasers of the Series "B"
preferred stock shall have one vote for each share of common stock into
which such Series "B" preferred stock may be converted.
Pursuant to the anti-dilution provisions of the Series "A" preferred stock,
the conversion price of the Series "A" preferred stock is reduced from
$9.28 per share to $3.244 per share in the event that the Company issues
additional shares of common stock from conversion of the first traunch
Series "B" preferred stock purchasers. In addition, to assure that the
Company is in full compliance with Nasdaq marketplace rules, the Company
also received unanimous approval from the purchasers of the Series "A"
preferred stock to change the terms of the Series "A" preferred stock as it
relates to voting rights and shareholder approval of issuance of certain
common stock upon conversion and/or dividend payment. Consistent with this
amendment, the Series "A" conversion would be subject to shareholder
approval if the number of shares exceeds 396,250 shares or 20% of the
number of shares outstanding at the time of the issuance of the Series "A"
preferred stock. With regard to voting rights, the original Series "A"
preferred stock voting rights provided the purchaser one vote for each
share of common stock into which the Series "A" preferred stock may be
F-23
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE O - STOCKHOLDERS' EQUITY (CONTINUED)
converted. This has been changed to provide the purchaser one vote for each
share of common stock into which the Series "A" preferred stock may be
converted, or the number of common stock equivalent shares determined by
dividing the face value of the preferred stock by $6.00, $1.50 prior to the
January 2003 reverse stock split impact, the closing price on the date of
the binding agreement, whichever is lower.
NOTE P - STOCK OPTION PLAN
Since the inception of the Company, various options have been granted by
the Board of Directors to founders, directors, employees, consultants and
ministry partners. The 1998 Stock Option Plan ("1998 Plan") was approved by
the Board of Directors in April 1998, with approved amendment in May 2000.
The 1998 Plan gives the Company the authority to issue 300,000 options to
purchase AMEN common stock. If any stock options granted under the 1998
Plan terminate, expire or are canceled, new stock options may thereafter be
granted covering such shares. In addition, any shares purchased under the
1998 Plan subsequently repurchased by the Company pursuant to the terms
hereof may again be granted under the 1998 Plan. The shares issued upon
exercise of stock options under the 1998 Plan may, in whole or in part, be
either authorized but unissued shares, or issued shares reacquired by the
Company. As of December 31, 2003, 81,714 options from the 1998 Plan have
been granted and are outstanding.
In February 1997, the Company authorized 67,100 additional shares of common
stock to underlie additional options reserved for key employees and for
future compensation to members of the Board of Directors. The Board of
Directors also adopted and the Stockholders approved, the 1997 Stock Option
Plan ("1997 Plan"), which provides for the granting of either qualified or
non-qualified options to purchase an aggregate of up to 514,484 shares of
common stock, inclusive of the 67,100 shares mentioned above, and any and
all options or warrants granted in prior years by the Company. As of
December 31, 2003, all options available under the 1997 Plan have been
granted: 374,084 options are outstanding, 43,160 warrants are outstanding
to directors included in the plan, and 62,579 options have been exercised.
At December 31, 2003 and 2002, the Company had outstanding options to sell
130,671 and 122,151 shares of common stock, respectively, to various
current officers and directors of the Company at exercise prices ranging
from $35.24 to $3.8752 per share. As of December 31, 2003 and 2002, options
for 85,748 and 78,323 shares are vested, respectively. The options expire
ten years from the date granted, except 46,250 options granted to directors
in 1997, which expire five years from the date exercisable.
F-24
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE P - STOCK OPTION PLAN (CONTINUED)
At December 31, 2003 and 2002, the Company had outstanding options to sell
10,992 and 19,239 shares of common stock, respectively, to various outside
consultants at exercise prices ranging from $61.36 to $6.67 per share. As
of December 31, 2003 and 2002, options for 10,992 and 15,489 were vested,
respectively. As of December 31, 2003, of the options outstanding, 3,219
options expire five years from the date granted. All other options expire
ten years from the date granted.
At December 31 2003 and 2002, the Company had outstanding options granted
to employees, ex-employees and previous directors for 357,295 and 297,982
shares of common stock, respectively, at exercise prices ranging from
$61.00 to $3.50 per share. As of December 31, 2003 and 2002, options for
345,967 and 286,654 are vested, respectively. The options expire through
2012.
The table below summarizes the stock option activity for the years ending
2003 and 2002, followed by summary table. The figures herein, as above,
reflect the impact of a 1-for-4 stock split approved by stockholders on
January 30, 2003. See note O.
Number of Per Unit
Options Outstanding Shares Exercise Price
------------------- --------- ------------------
Outstanding, December 31, 2001 523,728 $ 3.52 - $61.36
--------- ------------------
Options granted 108,560 $ 3.52 - $ 7.00
Options forfeited (137,943) $ 3.52 - $61.00
Options exercised (2,125) $ 3.52
--------- ------------------
Outstanding, December 31, 2002 492,220 $ 3.52 - $61.36
--------- ------------------
Options granted 14,450 $ 1.98
Options forfeited (50,872) $ 3.50 - $45.00
--------- ------------------
Outstanding, December 31, 2003 455,798 $ 1.98 - $61.36
========= ==================
F-25
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE P - STOCK OPTION PLAN (CONTINUED)
The Company accounts for its options granted to employees in accordance
with APB 25. Stock-based awards to non-employees are accounted for under
the provisions of SFAS No. 123 based on their fair value as determined by
the Black-Scholes option-pricing model. Had compensation expense been
determined based on the fair value of the options at the grant dates
consistent with the method of accounting under SFAS No. 123, the Company's
net income (loss) and net income (loss) per share for the years ended
December 31, 2003 and 2002 would have been increased to the proforma
amounts indicated below:
2003 2002
------------- -----------
Net income (loss), as reported $ 391,829 (2,148,951)
Deduct: Total stock-based
employee compensation
expense determined
under fair value based
method (102,124) (331,028)
------------- -----------
Net income (loss), pro forma $ 289,705 (2,479,979)
============= ===========
Net income (loss) per common share
Basic
As reported .19 (1.08)
Pro forma .14 (1.24)
Diluted
As reported .13 (1.08)
Pro forma .10 (1.24)
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model.
For the year ended December 31, 2003, the following assumptions were used:
dividend yield of 0%; risk-free interest rates based on the Treasury bond
yield at the date of grant for three- to five-year bonds, depending on the
expected term; volatility range approximating 64.9% depending on the grant
date; and an expected term of ten years. For the year ended December 31,
2002, the following assumptions were used: dividend yield of 0%; risk-free
interest rates based on the Treasury bond yield at the date of grant for
three- to five-year bonds, depending on the expected term; volatility range
approximating 104.3%, depending on the grant date; and an expected term of
five to seven years. All options granted to employees have been granted at
an exercise price of $3.50 to $61.00 per share.
F-26
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002
NOTE Q - EMPLOYEE BENEFIT PLAN
In January 1998, the Company adopted a defined contribution 401(k) plan
which covers substantially all of its eligible employees. The maximum
employee contribution allowed is 15% of compensation or $12,000, whichever
is lower. The Company is not required to contribute to the 401(k) plan and
has made no contributions since inception.
NOTE R - SUBSEQUENT EVENTS
On February 18, 2004, the Company and certain other limited partners of
TCTB entered into an agreement to acquire an additional approximate 6.49%
of TCTB, subject to a back-in interest to a related party. The effective
date of the acquisition is January 1, 2004. The Company funded the
acquisition with approximately $208,000 of cash and a note payable to the
selling limited partner of approximately $251,000. The note is payable in
quarterly installments of principal and interest. The note matures January
1, 2010 and bears an interest rate of 5%. The first quarterly payment is
due April 1, 2004.
F-27
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- --------------------
2.3// Asset Purchase Agreement between the Company and Blue Hill Media,
Inc. dated December 13, 2002
3.1+ Certificate of Incorporation and Certificates of Amendments thereto
of DIDAX INC.
3.1(a)+ Certificate of Correction regarding Certificate of Incorporation
3.1(b)** Certificate of Amendment thereto of DIDAX INC.
3.2+++ Certificate of Amendment thereto of Crosswalk.com, Inc.
3.3+ Bylaws and amendments thereto of the Registrant
3.4 ~ Certificate of Designations for Series "A" Preferred Stock
3.4(a) ~~ Amended Certificate of Designations for Series "A" Preferred Stock
3.5 ~~ Certification of Designations for Series "B" Preferred Stock
4.5+ Form of Stock Option Agreement
4.6+ 1997 Stock Option Plan
4.6A* 1997 Stock Option Plan, as amended April 6, 1998
4.7* 1998 Stock Option Plan
4.7A** 1998 Stock Option Plan, as amended February 26, 1999
4.8## 1998 Stock Option Plan, as amended March 3, 2000
10.3** Office Building Lease by and between Enterprise Center Limited
Partnership Number Two and the registrant dated August 23, 1999
10.4+ Warrant Certificate between the Company and Robert Varney dated
July 10, 1996
10.5+ Warrant Certificate between the Company and Robert Varney dated
September 26, 1996
10.8+ Warrant Certificate between the Company and Bruce Edgington dated
July 30, 1996
10.9+ Warrant Certificate between the Company and Bruce Edgington dated
October 30, 1996
10.50++ Stock Purchase Agreement between the Company and A. Scott Dufford for
Series A Preferred Stock dated September 29, 2000
10.51++ Stock Purchase Agreement between the Company and John R. Norwwod for
Series A Preferred Stock dated September 29, 2000
25
10.52++ Stock Purchase Agreement between the Company and J.M. Mineral and
Land Co. for Series A Preferred Stock dated September 29, 2000
10.53++ Stock Purchase Agreement between the Company and Jon M. Morgan
Pension Plan for Series A Preferred Stock dated September 29, 2000
10.54++ Stock Purchase Agreement between the Company and Stallings
Properties, Ltd. for Series A Preferred Stock dated September 29,
2000
10.55++ Stock Purchase Agreement between the Company and John D. Bergman for
Series A Preferred Stock dated September 29, 2000
10.56++ Stock Purchase Agreement between the Company and Julia Jones Family
Trust for Series A Preferred Stock dated September 29, 2000
10.57++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series A Preferred Stock dated September 29, 2000
10.58++ Stock Purchase Agreement between the Company and Soft Op, L.P. for
Series A Preferred Stock dated September 29, 2000
10.59++ Stock Purchase Agreement between the Company and Lighthouse Partners,
L.P. for Series A Preferred Stock dated September 29, 2000
10.60++ Stock Purchase Agreement between the Company and Ray McGlothlin, Jr.
for Series A Preferred Stock dated September 29, 2000
10.61++ Stock Purchase Agreement between the Company and Gary J. Lamb for
Series A Preferred Stock dated September 29, 2000
10.62++ Stock Purchase Agreement between the Company and Frosty Gilliam, Jr.
for Series A Preferred Stock dated September 29, 2000
10.63++ Stock Purchase Agreement between the Company and Bruce Edgington for
Series B Preferred Stock dated December 31, 2001
10.64++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series B Preferred Stock dated December 31, 2001
10.65++ Stock Purchase Agreement between the Company and Earl E. Gjelde for
Series B Preferred Stock dated December 31, 2001
10.66++ Stock Purchase Agreement between the Company and Jon M. Morgan for
Series B Preferred Stock dated December 31, 2001
10.67++ Stock Purchase Agreement between the Company and Soft Op, L.P. for
Series B Preferred Stock dated December 31, 2001
10.68++ Annex to the Stock Purchase Agreement for Series A Preferred Stock
dated September 29, 2000
10.69++ Annex to the Stock Purchase Agreement for Series B Preferred Stock
dated December 31, 2001
10.72// Agreement and Transfer of Limited Partnership Interest between the
Company and the Selling Partners of TCTB Partners, Ltd. dated
October 31, 2002
26
10.73// Amended Promissory Note between the Company and A. Scott Dufford
dated October 31, 2002, with schedule describing all outstanding
Amended Promissory Notes between the Company and the Selling Partners
of TCTB Partners, Ltd, which are identical other than differences
stated in the schedule.
10.74// Credit Agreement between TCTB Partners, Ltd. and Wells Fargo Bank
Texas, N.A. dated June 5, 2002, the exhibits of which are not
included due to their size.
10.75// Lease Agreement between TCTB Partners, Ltd. and Bank of America, N.A.
dated September 30, 2003.
10.76// Lease Agreement between TCTB Partners, Ltd. and Pioneer Natural
Resources USA, Inc. dated April 4, 2000.
10.77// Lease Agreement between TCTB Partners, Ltd. and Wells Fargo Bank
Texas, N.A. dated June 27, 2000
10.78// Lease Termination between the Company and Matan Properties dated
July 30, 2002.
10.79# Agreement to Suspend Dividends and Consent of the Holders of Series A
Preferred Stock of Amen Properties, Inc. dated May 30, 2003.
10.80# Agreement to Suspend Dividends and Consent of Holders of Series B
Convertible Preferred Stock of Amen Properties, Inc. dated May 30,
2003.
11 Statement of computation of earnings per share
21.1 Subsidiaries of the Company
23.1 Consent of Johnson, Miller & Co.
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USCss.1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USCss.1350.
+ Incorporated by reference to the Company's Registration Statement on Form SB-2
declared effective by the Securities and Exchange Commission on September 24,
1997, SEC File No. 333-25937
* Incorporated by reference to the Company's Registration Statement Post
Effective Amendment No. 1 to Form SB-2 declared effective by the Securities and
Exchange Commission on July 2, 1998, SEC File No. 333-25937
## Filed as an Appendix to the Company's Proxy Statement on Schedule 14-A
filed with the Securities and Exchange Commission on March 30, 2000.
** Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 30, 2000.
~ Incorporated by reference to the Company's Registration Statement on Form S-3
declared effective by the Securities and Exchange Commission on December 1,
2000, SEC File No. 333-49126
27
++ Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 29, 2002, amended July 25,
2002 and August 14, 2002.
~~ Incorporated by reference to the Company's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on April 5, 2002, SEC file No.
333-85636
*** Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
filed with the Securities and Exchange Commission on November 14, 2002.
+++ Filed as an Appendix to the Company's Proxy Statement on Schedule 14-A filed
with the Securities and Exchange Commission on January 13, 2003.
// Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 24, 2003.
# Incorporated by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on June 4, 2003.
28