UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Period Ended March 31, 2006
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From ________________to
_______________.
Commission file number 000-22847
AMEN Properties, Inc.
---------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
---------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
303 W. Wall Street, Suite 2300
Midland, TX 79701
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(Address of Principal Executive Offices)
(432-684-3821)
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods 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 | |
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes | | No | X |
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes | | No | |
Applicable Only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: Common Stock, $ .01 Par Value:
2,206,215 shares outstanding as of May 3, 2006.
Transitional Small Business Disclosure Format (check one):
Yes | X | No | |
INDEX
Part I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet at March 31, 2006 (Unaudited) 1
Consolidated Statement of Operations--for the three months
ended March 31, 2006 and 2005 (Unaudited) 2
Consolidated Statement of Cash Flows-- for the three months
ended March 31, 2006 and 2005 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 20
Item 3. Controls and Procedures 26
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits 27
Signatures 32
Exhibits
11. Computation of Earnings Per Share
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC
ss. 1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss. 1350.
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
March 31, 2006
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (notes A3, and F) $ 2,005,370
Accounts receivable net of allowance of $46,668 (notes
A6 and A15) 858,891
Other current assets 199,680
-------------
Total current assets 3,063,941
RESTRICTED CASH EQUIVALENTS (note C) 4,303,104
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $1,346,882 (notes A7, A8 and D) 8,020,510
ROYALTY INTERESTS, at cost net of accumulated depletion
of $ 29,431 (notes A7 and E) 133,423
LONG-TERM INVESTMENTS (notes A4 and F) 62,350
OTHER ASSETS
Deferred costs (note A9) 25,276
Deposits and other assets 15,222
-------------
Total other assets 40,498
-------------
TOTAL ASSETS $ 15,623,826
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 943,220
Accrued liabilities (note G) 316,440
Current portion of long-term obligations (note I) 263,488
Accrued interest payable 99,838
Deferred revenue (note A12) 159,546
-------------
Total current liabilities 1,782,532
LONG-TERM OBLIGATIONS, less current portion (note I)
Financial institutions 6,267,152
Related parties 879,738
-------------
Total long-term obligations 7,146,890
MINORITY INTEREST (note A13) 365,868
COMMITMENTS AND CONTINGENCIES (note K) -
STOCKHOLDERS' EQUITY (note L and M)
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized; 80,000 Series "A" shares issued and
outstanding, convertible into a total of 616,447 shares
of common stock at the option of the holders (note A14) 80
80,000 Series "B" shares issued and outstanding,
convertible into a total of 233,317 shares of common
stock at the option of the holders (note A14) 80
125,000 Series "C" shares issued and outstanding,
convertible into a total of 500,000 shares of common
stock at the option of the holders (note A14) 125
Common stock, $.01 par value, 20,000,000 shares
authorized; 2,206,215 shares issued and outstanding 22,063
Additional paid-in capital 44,633,448
Accumulated deficit (38,327,260)
Accumulated other comprehensive income -
-------------
Total stockholders' equity 6,328,536
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,623,826
=============
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
1
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31,
(Unaudited)
2006 2005
------------ ------------
Operating revenue (note A15):
Rental revenue $ 751,605 670,182
Retail electricity revenue 3,168,707 310,789
------------ ------------
Total operating revenue 3,920,312 980,971
------------ ------------
Operating expenses:
Cost of goods and services 2,820,418 277,688
Rental property operations 478,386 407,622
General and administrative 236,692 206,986
Depreciation, amortization and depletion 102,276 91,835
------------ ------------
Total operating expenses 3,637,772 984,131
------------ ------------
Income (loss) from operations 282,540 (3,160)
------------ ------------
Other (expense) income
Interest income 49,701 11,844
Interest expense (140,662) (114,346)
Other income (expense) 22,945 (17,164)
------------ ------------
Total other (expense) income (68,016) (119,666)
------------ ------------
Income (loss) before income taxes and minority
interest 214,524 (122,826)
Income taxes (note A11) - -
Minority interest (21,870) (40,824)
------------ ------------
NET INCOME (LOSS) $ 192,654 (163,650)
============ ============
Net income (loss) per common share (basic) $ .09 (.07)
============ ============
Net income (loss) per common share (diluted) $ .05 (.07)
============ ============
Weighted average number of common shares
outstanding - basic 2,206,215 2,201,356
Weighted average number of common shares
outstanding - diluted 3,555,979 2,201,356
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
2
AMEN Properties, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31,
(Unaudited)
2006 2005
------------ ------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss) $ 192,654 (163,650)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation, amortization and depletion 102,276 91,835
Minority interest 21,870 40,824
Changes in operating assets and liabilities:
Accounts receivable 435,920 (223,874)
Increase in allowance for doubtful accounts 5,734 -
Other assets (1,441) -
Deposits and other assets (4,691) (156,000)
Deferred costs 5,416 (74,253)
Accounts payable (205,908) 143,416
Accrued and other liabilities (81,475) (312,931)
Deferred revenue 108,899 64,646
------------ ------------
Net cash provided by (used in) operating
activities 579,254 (589,987)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (15,932) (361,129)
Increase in restricted cash equivalents (647,840) -
Repayments of notes receivable 50,000 8,000
------------ ------------
Net cash used in investing activities (613,772) (353,129)
------------ ------------
Cash flows from financing activities:
Repayments of notes payable (64,540) (1,454,907)
Net proceeds from issuance of preferred stock - 2,000,000
------------ ------------
Net cash (used in) provided by financing
activities (64,540) 545,093
------------ ------------
Net decrease in cash and cash equivalents (99,058) (398,023)
Cash and cash equivalents at beginning of period 2,104,428 4,147,900
------------ ------------
Cash and cash equivalents at end of period $ 2,005,370 3,749,877
============ ============
The accompanying summary of accounting policies and footnotes are an integral
part of these consolidated financial statements.
3
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2006
Unaudited
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Effective October 2002, AMEN Properties, Inc. 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. Effective July 2004 AMEN
formed W Power and Light, LP ("W Power"), a Delaware limited partnership to
enter into the retail electricity market in Texas. AMEN Properties, Inc.
and Subsidiaries and affiliates (collectively referred to as the "Company")
is a self-administered and self-managed Delaware corporation.
As of March 31, 2006 and 2005, 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, Texas
comprising an aggregate of approximately 428,560 square feet of gross
leaseable area. The investment was obtained through Delaware's acquisitions
of a partnership interest in TCTB Partners, Ltd. ("TCTB") a Texas limited
partnership, totaling approximately 71.3%. Through its investment in
Minerals, AMEN has acquired an investment interest in an oil and gas
royalty trust and other oil and gas royalties. Through the Company's
investment in W Power, AMEN has entered the retail electricity market in
the state of Texas. The real estate operations of the Company are primarily
conducted through Delaware of which AMEN is the sole general partner and
the retail electricity operations are primarily conducted through W Power
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.
4
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
4. Investments
The Company invests in U.S. government bonds and treasury notes, municipal
bonds, certificates of deposit, corporate bonds and other securities.
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, accounts
receivable, notes receivable, and accounts payable approximate fair value
because of the relatively short maturity of these instruments. The fair
value of the fixed rate debt, based upon current interest rates for similar
debt instruments with similar payment terms and expected payoff dates,
would be approximately $6,930,000 as of March 31, 2006. Disclosure about
fair value of financial instruments is based on pertinent information
available to management as of March 31, 2006.
6. Accounts Receivable
Management regularly reviews accounts receivable and estimates the
necessary amounts to be recorded as an allowance for uncollectibility. For
TCTB 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.
W Power's unbilled revenue is accrued based on the estimated amount of
unbilled power delivered to customers using the average customer billing
rates. Unbilled revenue also includes accruals for estimated Transmission
and Distribution Service Provider ("TDSP") charges and monthly service
charges applicable to the estimated usage for the period.
The Company estimated the allowance for doubtful accounts related to W
Power's billed account receivables to be approximately .2% percent of W
Power's retail electricity billed revenue for the quarter ended March 31,
2006. Due to the limited historical data, the Company regularly reviews the
accounts receivable and accordingly makes adjustments in estimating the
allowance for doubtful accounts.
At March 31, 2006 accounts receivable consisted of the following:
Tenant receivables $ 53,354
Billed electricity receivables 449,289
Unbilled electricity receivables 402,916
Allowance for doubtful accounts (46,668)
-------------
Accounts receivable, net $ 858,891
=============
5
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
7. Depreciation, Amortization and Depletion
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. Costs for the repair and maintenance of
property and equipment are expensed as incurred. Royalty acquisitions are
stated at cost. Depletion is determined using the units-of-production
method based on the estimated oil and gas reserves.
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 an 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
impairments 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.
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
On January 1, 2006 the Company adopted Financial Accounting Standards
(SFAS) No. 123(R), Accounting for Stock-Based Compensation, to account for
its stock-based compensation. In December 2004, the Financial Accounting
Standards Board issued Statement 123(R) effective for small business
issuers after December 15, 2005. The new Statement requires mandatory
reporting of all stock-based compensation awards on a fair value basis of
accounting. Generally, companies are required to calculate the fair value
of all stock awards and amortize that fair value as compensation expense
over the vesting period of the awards.
11. Income Taxes
6
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". 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. Deferred Revenue
Deferred revenue mainly consists of prepaid rent and is being amortized
over the life of the lease.
13. 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 28.7% at March 31, 2006 and 2005.
14. Contingently Convertible Securities
The Company has outstanding Series A Preferred Stock ("Series A"), Series B
Preferred Stock ("Series B") and Series C Preferred Stock ("Series C")
whose terms enable the holder, under certain conditions, to convert such
securities into 1,349,764 shares of the Company's Common Stock as shown in
the following table.
Number Purchase Conversion Number of
Series of Shares Price Rate Common Shares
------ --------- ----- ---- -------------
A 80,000 $ 2,000,000 $ 3.2444 616,447
B 50,000 500,000 3.2444 154,111
B 10,000 100,000 3.424 29,206
B 20,000 200,000 4.000 50,000
C 125,000 2,000,000 4.000 500,000
Conversion of Series A, Series B and Series C is at the option of the
holder thereof, at any time and from time to time, into such number of
fully paid and nonassessable shares of Common Stock as is determined by
dividing the original Series A, Series B and Series C issue price by the
conversion price in effect at the time of conversion. The contingently
convertible securities have not been included in the calculation of diluted
earnings per share for the three months ended March 31, 2005 as their
effect is antidilutive.
15. 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 of March 31, 2006 and 2005, there were no deferred
tenant receivables.
The Company records electricity sales under the accrual method and these
revenues are recognized upon delivery of electricity to the customers'
meters. Electric services not billed by month-end are accrued based upon
estimated deliveries to customers as tracked and recorded by the Electric
Reliability Council of Texas ("ERCOT") multiplied by the Company's average
billing rate per kilowatt hour ("kwh") in effect at the time.
7
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The flow technique of revenue calculation relies upon ERCOT settlement
statements to determine the estimated revenue for a given month. Supply
delivered to our customers for the month, measured on a daily basis,
provides the basis for revenues. ERCOT provides net electricity delivered
data in three frames. Initial daily settlements become available
approximately 17 days after the day being settled. Approximately 45 days
after the day being settled, a resettlement is provided to adjust the
initial settlement to the actual supply delivered based on subsequent
comparison of prior forecasts to actual meter reads processed. A final
resettlement is provided approximately 180 days after power is delivered,
marking the last routine settlement adjustment to the power deliveries for
that day.
Sales represent the total proceeds from energy sales, including pass
through charges from the TDSPs billed to the customer at cost. Cost of
goods and services ("COGS") include electric power purchased, sales
commissions, and pass through charges from the TDSPs in the areas serviced
by the Company. TDSP charges are costs for metering services and
maintenance of the electric grid. TDSP charges are determined by regulated
tariffs established by the Public Utility Commission of Texas ("PUCT").
Bilateral wholesale costs are incurred through contractual arrangements
with wholesale power suppliers for firm delivery of power at a fixed volume
and fixed price. The Company is typically invoiced for these wholesale
volumes at the end of each calendar month for the volumes purchased for
delivery during the month, with payment due 10 to 20 days after the end of
the month.
Balancing/ancillary costs are based on the aggregate customer load and are
determined by ERCOT through a multiple step settlement process. Balancing
costs/revenues are related to the differential between supply provided by
the Company through its bilateral wholesale supply and the supply required
to serve the Company's customer load. The Company endeavors to minimize the
amount of balancing/ancillary costs through its load forecasting and
forward purchasing programs.
16. Income (Loss) Per Share
Income (loss) per share is computed based on the weighted average common
shares and common stock equivalents outstanding during each period. The
effects of Series A, Series B and Series C Convertible Preferred Stock are
not included in the computation of diluted earnings per share for any
periods in which their effect are antidilutive.
17. 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.
8
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
18. New Accounting Pronouncements
In December 2004, the FASB issued Statement No. 123 (revised), Accounting
for Stock-Based Compensation. This Statement eliminates the alternative to
use Accounting Principles Board (APB) Opinion No. 25's intrinsic value
method of accounting. This Statement establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which
an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or that may be
settled by the issuance of those instruments. An entity will measure the
cost of employee services received in exchange for an award of equity
instruments based on the grant date fair value of those instruments, except
in certain circumstances. The provisions of this Statement became effective
as of the beginning of the first annual reporting period that begins after
December 15, 2005.
In May 2004, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections. This Statement replaces APB Opinion 20 and FASB Statement No.3
and changes the requirements for the accounting for and reporting of a
change in accounting principle. This Statement applies to all voluntary
changes in accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement
does not include specific transition provisions. When a pronouncement
includes specific transition provisions, those provisions should be
followed. The provisions of this Statement shall be effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005.
In February 2006, the FASB issued SFAS No. 155, Accounting for Certain
Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and
140. This Statement amends FASB Statement No.133, Accounting for Derivative
Instruments and Hedging Activities, and No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities. This
Statement resolves issues addressed in Statement 133 Implementation Issue
No. D1, "Application of Statement 133 to Beneficial Interests in
Securitized Financial Assets." The provisions of this Statement shall be
effective for financial instruments acquired or issued after the beginning
of an entity's first fiscal year that begins after September 15, 2006.
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of
Financial Assets - an amendment of FASB Statement No. 140. This Statement
amends FASB Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, with respect to the
accounting for separately recognized servicing assets and servicing
liabilities. The provisions of this Statement shall be effective as of the
beginning of an entity's first fiscal year that begins after September 15,
2006.
Management does not believe the new pronouncements will have a material
impact on its financial statements.
19. Reclassifications
Certain reclassifications of prior period amounts have been made to conform
to the March 31, 2006 presentation.
NOTE B - CONCENTRATIONS OF CREDIT RISK
9
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The Company maintains cash balances at three financial institutions, which
at times may exceed federally insured limits. At March 31, 2006 the Company
had approximately $1,276,000 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.
W Power and TCTB's revenues are derived principally from uncollateralized
customer electricity billings and rents from tenants, respectively. The
concentration of credit risk in a limited number of industries affects its
overall exposure to credit risk because customers and tenants may be
similarly affected by changes in economic and other conditions.
NOTE C - RESTRICTED CASH EQUIVALENTS
The Company has pledged a $2,100,000 certificate of deposit with a
financial institution which bears interest at 4.00% and matures on December
28, 2006. The certificate of deposit collateralizes the term note with a
financial institution (see note I) and is restricted. The certificate of
deposit is recorded at cost, which approximates market value. The
certificate is non-negotiable and non-transferable, and may incur
substantial penalties for withdrawal prior to maturity.
On October 18, 2005 the Company entered into a continuing agreement for
commercial and standby letters of credit (the "Letters of Credit") with
JPMorgan Chase Bank, N.A., Houston, Texas, ("JPMC"). Under the agreement
JPMC may, but is not obligated to, issue one or more standby or commercial
letters of credit, on behalf of W Power. The Letters of Credit are
generally required in the normal course of business operations to support
the Company's obligations to collateralize certain obligations to electric
power providers, TDSPs, and ERCOT. Currently the Letters of Credit bear an
interest rate of seven-tenths of one percent (0.70%) payable quarterly in
advance. In order to support the Letters of Credit, the Company, JPMC and
JP Morgan Securities Inc. maintain a tri-party control agreement that
creates a security interest in favor of Chase in a certain Money Market
Fund the Company maintains with JPMC. At March 31, 2006, the Company had
deposits with JPMC totaling $2,203,104 collateralizing outstanding Letters
of Credit.
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following at March
31, 2006:
Buildings $ 8,467,365
Furniture, fixtures and equipment 142,706
Tenant improvements 598,323
Land 158,998
-----------------
9,367,392
Less: accumulated depreciation (1,346,882)
-----------------
$ 8,020,510
=================
Depreciation expense for the quarters ended March 31, 2006 and 2005 was
$99,080 and $82,645, respectively.
NOTE E - ROYALTY INTERESTS
10
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The Company, through its wholly-owned subsidiary Amen Minerals, LP,
currently owns two separate royalty interests, one in the state of Texas
and one in the state of Oklahoma. The total consideration paid by the
Company for the royalty interests was $162,854. Under accounting principles
generally accepted in the United States of America, revenues and expenses
are recognized on an accrual basis. Royalty income is generally received
one to two months following the month of production and the Company uses
estimates to accrue royalty income for the quarters ended March 31, 2006
and 2005.
NOTE F - CASH, CASH EQUIVALENTS AND INVESTMENTS
At March 31, 2006 the Company's cash and cash equivalents consist of cash
in banks of $2,005,370.
Securities available-for-sale in the accompanying balance sheet at March
31, 2006 totaled $62,350. The aggregate market value, cost basis, and
unrealized gains and losses of securities available-for-sale, by major
security type are as follows:
Gross
Market Cost Unrealized
Value Basis Losses
------------ ------------ ------------
Other securities $ 62,350 62,350 -
============ ============ ============
NOTE G - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at March 31, 2006:
Accrued property taxes $ 46,367
Accrued TDSP charges 82,804
Other liabilities 187,269
------------------
$ 316,440
==================
NOTE H - OPERATING SEGMENTS
On July 30, 2004, the Company formed and initiated the development of W
Power. W Power was established to enter into the retail electricity market
in Texas. The formation of W Power resulted in the diversification of the
Company's business activities into two reportable segments: real estate
operations and a retail electricity provider (REP). The real estate
operations consist of two office properties located in Midland, Texas and
comprise an aggregate of approximately 428,560 square feet of gross
leaseable area. The REP segment sells electricity and provides the related
billing, customer service, collection and remittance services to both
residential and commercial customers.
Each segment's accounting policies are the same as those described in the
summary of significant accounting policies and the following tables reflect
totals for period ended March 31, 2006 and 2005, respectively.
11
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
March 31, 2006:
---------------
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
---------------- ---------------- ---------------- ---------------- ----------------
Revenues from
external customers $ 3,168,707 $ 751,605 $ - $ - $ 3,920,312
================ ================ ================ ================ ================
Revenues from other
operating segments $ 220,801 $ 4,987 $ - $ (225,788) $ -
================ ================ ================ ================ ================
Depreciation,
amortization and
depletion $ 3,366 $ 95,098 $ 3,812 $ - $ 102,276
================ ================ ================ ================ ================
Interest expense $ 2,911 $ 137,751 $ - $ - $ 140,662
================ ================ ================ ================ ================
Segment net income
(loss) $ 206,279 $ 76,334 $ (46,837) $ (43,122) $ 192,654
================ ================ ================ ================ ================
Segment assets $ 3,790,410 $ 7,443,406 $ 4,780,116 $ (390,106) $ 15,623,826
================ ================ ================ ================ ================
Expenditures for
segment assets $ - $ 15,932 $ - $ - $ 15,932
================ ================ ================ ================ ================
March 31, 2005:
---------------
Inter-Company
Real Estate Other and Transaction Consolidated
REP Operations Corporate Eliminations Total
---------------- ---------------- ---------------- ---------------- ----------------
Revenues from
external customers $ 310,789 $ 670,182 $ - $ - $ 980,971
================ ================ ================ ================ ================
Revenues from other
operating segments $ 95,484 $ 8,313 $ - $ (103,797) $ -
================ ================ ================ ================ ================
Depreciation,
amortization and
depletion $ 1,522 $ 62,985 $ 27,328 $ - $ 91,835
================ ================ ================ ================ ================
Interest expense $ 11,228 $ 94,061 $ 82,267 $ (73,210) $ 114,346
================ ================ ================ ================ ================
Segment net income
(loss) $ (85,018) $ 142,481 $ (150,642) $ (70,471) $ (163,650)
================ ================ ================ ================ ================
Segment assets $ 972,650 $ 7,371,158 $ 7,068,636 $ (123,782) $ 15,288,662
================ ================ ================ ================ ================
Expenditures for
segment assets $ 7,125 $ 351,412 $ 2,592 $ - $ 361,129
================ ================ ================ ================ ================
NOTE I - LONG-TERM OBLIGATIONS
On June 5, 2002, TCTB entered into a loan agreement (the "TCTB Note") with
a financial institution for a term note of $6,800,000. The term note bears
interest at a fixed rate per annum of 7.23%. TCTB is 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 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
12
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
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 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. Effective December 31, 2004, TCTB
partners agreed to distribute its Lubbock, Texas office building to the
TCTB partners and simultaneously sell their interest in the asset to an
entity partially owned by certain TCTB minority owners. The Lubbock
building was subject to a lien securing TCTB's note payable to Wells Fargo
Bank Texas, N.A. The Bank agreed to release its lien on the Lubbock
building in exchange for a $2,100,000 restricted certificate of deposit
(see note C) pledged by TCTB to the Bank as additional collateral.
On March 3, 2006 TCTB entered into a loan agreement with a financial
institution for a revolving line of credit note (the"Line of Credit") of
$300,000. The line of credit bears interest at a variable rate per annum
equal to the Prime Rate, currently 7.75% as of March 31, 2006. The proceeds
from the Note are intended to be used to fund potential tenant lease
improvements provided for in new tenant lease agreements at TCTB.
Delaware entered into nine promissory notes (the "Delaware Notes"), certain
of which are with related parties, in an aggregate amount of $2,789,087, to
purchase the 64.9% ownership interest in TCTB on October 1, 2002. 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 currently
6.9% and is adjusted each October 1 to equal the Wall Street Journal Prime
Lending Rate (6.75% at October 31, 2005) plus .15%. 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. Due to the distribution and sale of the Lubbock building on
December 31, 2004, the Company elected to forgo the payment as described
above and paid one half of the principal balance along with the entire
accrued interest balance during January 2005.
Delaware entered into a promissory note (the "Hexagon Note") on February
18, 2004, effective January 1, 2004 in the amount of $250,778 to purchase
an additional 6.485% ownership interest in TCTB. The note is due in
quarterly installments of principal and interest beginning on March 1, 2004
with a final maturity of January 1, 2010. The term note bears interest at a
fixed rate per annum of 5%.
On February 28, 2005 the Company entered into a loan agreement (the "WNB
Note") with Western National Bank, Midland, Texas. The Note is a certain
Revolving Line of Credit in an amount of $5,000,000. Under the Note, the
Bank may, but is not obligated to advance more than $2,500,000. Borrowings
under the Note are subject to a borrowing base equal to the lesser amount
of: (a) $5,000,000 or (b) seventy-five percent (75%) of the eligible
customer receivables of the Company and its subsidiary W Power. The Note
bears a variable interest rate equal to the Prime Rate, defined as the
prime rate in the money rate table of The Wall Street Journal, a Dow Jones
publication, as of each business day (7.75% at March 31, 2006). Interest is
computed on the unpaid principal balance of the Note and is due and payable
13
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
as it accrues monthly, commencing March 31, 2005, and thereafter on the
last day of each and every succeeding month until maturity, March 31, 2008,
when the entire amount of the Note, principal and accrued, unpaid interest,
shall be due and payable. The Note is secured by a security agreement to
all of the accounts receivable of W Power. In addition, the Note is
guaranteed by certain accredited investors which guarantees are partially
secured by letters of credit. The loan agreement also contains other
customary conditions and events of default, the failure to comply with, or
occurrence of, would prevent any further borrowings and would generally
require the repayment of any outstanding borrowings along with accrued
interest under the loan agreement. The proceeds from the Note are intended
to be used to fund potential capital requirements in order to facilitate
the growth of the Company's retail electric provider subsidiary, W Power,
and for general corporate purposes.
Long-term debt as of March 31, 2006:
Long-term Current
Portion Portion Total
-------------- -------------- --------------
TCTB Note $ 5,628,105 $ 222,356 $ 5,850,461
Delaware Notes 1,394,543 - 1,394,543
Hexagon Note 124,242 41,132 165,374
Line of Credit - - -
WNB Note - - -
-------------- -------------- --------------
Total $ 7,146,890 $ 263,488 $ 7,410,378
============== ============== ==============
Maturities of long-term debt at March 31, 2006 are as follows:
2006 $ 263,488
2007 281,344
2008 302,697
2009 5,168,306
2010 1,394,543
--------------
Total 7,410,378
Less current portion 263,488
--------------
Long-term portion $ 7,146,890
==============
NOTE J - RELATED PARTY TRANSACTIONS
At March 31, 2006 and 2005, related parties leased from TCTB, office space
of approximately 32,000 square feet. TCTB received rental income from these
related parties of approximately $88,895 and $75,279 during the quarters
then ended, respectively.
The Company closed the sale and issuance of 125,000 shares of Series C
Preferred Stock and 250,000 Warrants (see note L) pursuant to a Purchase
Agreement, as amended by the Second Amendment on March 1, 2005 between the
Company and certain accredited investors, including the Company's President
and Chief Operating Officer, Jon M. Morgan, the Company's Chief Executive
Officer, Eric Oliver and Bruce Edgington, one of the Company's Directors.
14
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The following table reflects the Series C issuance to the Company's
officers and directors.
Number of Common Preferred C
Preferred C Stock Voting Purchase
Shares Equivalent Equivalent Price
------------ ------------ ------------ ------------
Eric Oliver 14,063 56,252 52,877 $ 225,008
Jon M. Morgan 14,062 56,248 52,873 224,992
Bruce Edgington 3,125 12,500 11,750 50,000
------------ ------------ ------------ ------------
Total 31,250 125,000 117,500 $ 500,000
============ ============ ============ ============
The following table reflects the issuance of Warrants to the Company's
Officers and Directors.
Common
Number of Stock
Warrants Equivalent
------------ ------------
Eric Oliver 28,126 28,126
Jon M. Morgan 28,124 28,124
Bruce Edgington 6,250 6,250
------------ ------------
Total 62,500 62,500
============ ============
NOTE K - COMMITMENTS AND CONTINGENCIES
Legal Proceedings
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.
Power Purchase Contracts
Certain contracts to purchase electricity provide for capacity payments to
ensure availability and provide for adjustments based on the actual power
taken under the contracts. Expected annual future capacity payments under
existing agreements are estimated as follows as of March 31, 2006:
2006 $ 2,212,955
2007 684,604
2008 148,960
2009 -
--------------
Total $ 3,046,519
==============
15
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
NOTE L - STOCKHOLDERS' EQUITY
On February 3, 2005, the Company finalized an agreement involving a private
placement under Regulation D for the new Series C Preferred Stock and
common stock purchase warrants (the "Warrants") to accredited investors
(the "Purchase Agreement"). The Company closed the sale and issuance of
125,000 Series C Preferred Stock and 250,000 Warrants pursuant to the
Purchase Agreement, as amended by the Second Amendment (the "Amended
Purchase Agreement"), on March 1, 2005. The purchase price consisted of a
total of $2 million in cash and limited guaranties from the investors in
favor of Western National Bank covering the credit facility described in
Note I. No underwriting discounts or commissions were paid in connection
with this issuance. Certain facts related to the exemption from
registration of the issuance of the securities under securities law are set
forth in the Amended Purchase Agreement as representations of the
investors, including without limitation their investment intent, their
status as accredited investors, the information provided to them, the
restricted nature of the securities, and similar matters.
The Series C ranks equally to the Company's outstanding Series A and the
outstanding Series B and prior to the Common Stock, par value $.01 per
share, of the Company (the "Common Stock") upon liquidation of the Company.
The Series A, Series B, Series C and the Common Stock are equal as to the
payment of dividends. Each share of Series C is convertible into four
shares of Common Stock, for a total of 500,000 shares, subject to
adjustment pursuant to anti-dilution provisions. The Warrants are
exercisable into a total of 250,000 shares of Common Stock at an initial
exercise price of $4.00 (also subject to adjustment pursuant to
anti-dilution provisions), and expire three years from the date of
issuance.
On July 29, 2005, the Company issued 4,859 shares of common stock for
$24,455 upon the exercise of certain stock options covering 341 and 4,518
shares with a strike price of $3.88 and $5.12, respectively.
NOTE M - 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. 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 March 31, 2006, all options available
under the 1997 Plan have been granted: 62,579 options have been exercised,
and 304,055 options are outstanding which are fully vested and range in
price from $3.50 to $61.36 and have a weighted average contractual maturity
of 1.98 years.
The 1998 Stock Option Plan ("1998 Plan") was approved by the Board of
Directors in April 1998, with an 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, if management elects,
16
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
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 March 31, 2006, 4,859 options have
been exercised and 113,381 options are outstanding and are fully vested and
range in price from $1.98 to $45.50 and have a weighted average contractual
maturity of 6.98 years.
Effective January 1, 2006, the Company adopted SFAS No. 123(R) utilizing
the modified prospective approach. The modified prospective approach
applies to new awards and to awards that were outstanding on January 1,
2006 that are subsequently modified, repurchased or cancelled. Under the
modified prospective approach, compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006 and all
share-based payments granted subsequent to January 1, 2006 should be
recognized as compensation expense in accordance with the provisions of
SFAS 123 (R). Under the modified prospective approach prior periods are not
restated to reflect the impact of adopting the new standard. The
share-based payments fair value is estimated on the date of grant using the
Black-Scholes option-pricing model. As of January 1, 2006 the Company's
outstanding options for the 1997 Plan and 1998 Plan were fully vested and
for the quarters ended March 31, 2006 the Company did not issue any stock
based compensation under the 1997 Plan or the 1998 Plan. As such the
Company did not have any stock based compensation expense to recognize
during the quarter ended March 31, 2006.
The table below summarizes the stock option activity for the quarter ending
March 31, 2006:
Weighted
Options Average
Options Outstanding Outstanding Price
------------------- ----------- -----
Outstanding December 31, 2005 433,603 $ 14.06
Options exercised - -
Options forfeited (16,167) 12.48
Options issued - -
-----------
Outstanding March 31, 2006 417,436 $ 14.12
===========
At March 31, 2006 the 417,436 outstanding options are fully vested and
exercisable. They range in price from $1.98 to $61.36 and have a weighted
average contractual maturity of 3.27 years.
17
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
The table below summarizes the stock option activity for the quarter ending
March 31, 2005:
Weighted
Options Average
Options Outstanding Outstanding Price
------------------- ----------- -----
Outstanding December 31, 2004 454,993 $ 13.05
Options exercised - -
Options forfeited (13,620) 14.07
Options issued - -
-----------
Outstanding March 31, 2005 441,373 $ 14.06
===========
At March 31, 2005 the 441,373 outstanding options are fully vested and
exercisable. They range in price from $1.98 to $61.36 and had a weighted
average contractual maturity of 3.27 years.
Prior to the issuance of SFAS No. 123(R), the Company accounted for stock
based compensation granted using Accounting Principles Board APB Opinion 25
"Accounting for Stock Issued to Employees." Accordingly, no compensation
cost has been recognized for the Company's stock-based compensation plans.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant date for awards consistent
with SFAS No. 123 "Accounting for Stock-Based Compensation," the net loss
and net loss per common share would have changed to the pro forma amounts
indicated below:
2005
------------
Net loss: as reported $ (163,650)
Add: Total share-based
employee compensation
expense included in
reported net loss -
Deduct: Total share-based
employee compensation
expense determined
under fair value based
method for all awards (7,848,411)
------------
Net (loss), pro forma $ (8,012,061)
============
18
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
March 31, 2006
(Unaudited)
Earnings Per Share:
As reported: Net (loss) per common share (basic): $ (.07)
============
As reported: Net (loss) per common share (diluted): $ (.07)
============
Pro forma: Net (loss) per common share (basic): $ (3.64)
============
Pro forma: Net (loss) per common share (diluted): $ (3.64)
============
Weighted average common shares outstanding - Basis 2,201,356
Weighted average common shares outstanding - Diluted 2,201,356
19
ITEM 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements and related footnotes
presented in Item 1 and the Company's December 31, 2005 Form 10-KSB.
Overview
AMEN Properties, Inc., (the "Company") is a real estate and energy company
engaged in owning and managing real estate, oil and gas royalties, and energy
related business properties. The Company is a holding company and conducts its
operations through AMEN Delaware, LP ("Delaware"); AMEN Minerals, LP
("Minerals") and W Power and Light, LP ("W Power"), each being a wholly owned
subsidiary of the Company. The Company owns its present real estate holdings
through Delaware. Delaware owns an approximate 71.35% limited interest in TCTB
Partners, Ltd., which currently owns two commercial office buildings in Midland,
TX. The Company's present oil and gas royalty holdings are through Minerals,
which owns two oil and gas royalty properties, one in Nowata County, Oklahoma
and the other in Hemphill County, Texas. The Company is engaged in the retail
electricity market as a retail electric provider serving both retail and
wholesale customers within the state of Texas through W Power.
Application of Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, and
contingencies as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. We evaluate our
assumptions and estimates on an ongoing basis. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. These estimates form the basis for making
judgments about the carrying values of assets and liabilities where that
information is available from other sources. Certain estimates are particularly
sensitive due to their significance to the financial statements. Actual results
may differ significantly from management's estimates.
We believe that the most significant accounting policies that involve the use
estimates and assumptions as to future uncertainties and, therefore, may result
in actual amounts that differ from estimates are the following:
- Impairments,
- Acquisition of operating properties,
- Revenue recognition,
- Consolidation of variable interest entities,
- Allowance for doubtful accounts and
- Stock options
Impairments
Real estate and leasehold improvements are classified as long-lived assets held
for sale or long-lived assets to be held and used. In accordance with SFAS No.
144, we record assets held for sale at the lower of carrying value or sales
price less costs to sell. For assets classified as held and used, these assets
are tested for recoverability when events or changes in circumstances indicate
that the estimated carrying amount may not be recoverable. An impairment loss is
20
recognized when expected undiscounted future cash flows from a Property is less
than the carrying value of the Property. Our estimates of cash flows of the
Properties requires us to make assumptions related to future rental rates,
occupancies, operating expenses, the ability of our tenants to perform pursuant
to their lease obligations and proceeds to be generated from the eventual sale
of our Properties. Any changes in estimated future cash flows due to changes in
our plans or views of market and economic conditions could result in recognition
of additional impairment losses.
If events or circumstances indicate that the fair value of an investment
accounted for using the equity method has declined below its carrying value and
we consider the decline to be "other than temporary," the investment is written
down to fair value and an impairment loss is recognized. The evaluation of
impairment for an investment would be based on a number of factors, including
financial condition and operating results for the investment, inability to
remain in compliance with provisions of any related debt agreements, and
recognition of impairments by other investors. Impairment recognition would
negatively impact the recorded value of our investment and reduce net income.
Acquisition of Operating Properties
We allocate the purchase price of acquired properties to tangible and identified
intangible assets acquired based on their fair values in accordance with SFAS
No. 141, "Business Combinations." We initially record the allocation based on a
preliminary purchase price allocation with adjustments recorded within one year
of the acquisition.
In making estimates of fair value for purposes of allocating purchase price,
management utilizes sources, including, but not limited to, independent value
consulting services, independent appraisals that may be obtained in connection
with financing the respective property, and other market data. Management also
considers information obtained about each property as a result of its
pre-acquisition due diligence, marketing and leasing activities in estimating
the fair value of the tangible and intangible assets acquired.
The aggregate value of the tangible assets acquired is measured based on the sum
of (i) the value of the property and (ii) the present value of the amortized
in-place tenant improvement allowances over the remaining term of each lease.
Management's estimates of the value of the property are made using models
similar to those used by independent appraisers. Factors considered by
management in its analysis include an estimate of carrying costs such as real
estate taxes, insurance, and other operating expenses and estimates of lost
rentals during the expected lease-up period assuming current market conditions.
The value of the property is then allocated among building, land, site
improvements, and equipment. The value of tenant improvements is separately
estimated due to the different depreciable lives.
The aggregate value of intangible assets acquired is measured based on the
difference between (i) the purchase price and (ii) the value of the tangible
assets acquired as defined above. This value is then allocated among
above-market and below-market in-place lease values, costs to execute similar
leases (including leasing commissions, legal expenses and other related
expenses), in-place lease values and customer relationship values.
Above-market and below-market in-place lease values for acquired properties are
calculated based on the present value (using a market interest rate which
reflects the risks associated with the leases acquired) of the difference
between (i) the contractual amounts to be paid pursuant to the in-place leases
and (ii) management's estimate of fair market lease rates for the corresponding
in-place leases, measured over a period equal to the remaining non-cancelable
term of the lease for above-market leases and the initial term plus the term of
the below-market fixed rate renewal option, if any, for below-market leases. We
perform this analysis on a lease by lease basis. The capitalized above-market
lease values are amortized as a reduction to rental income over the remaining
non-cancelable terms of the respective leases. The capitalized below-market
lease values are amortized as an increase to rental income over the initial term
plus the term of the below-market fixed rate renewal option, if any, of the
respective leases.
21
Management estimates costs to execute leases similar to those acquired at the
property at acquisition based on current market conditions. These costs are
recorded based on the present value of the amortized in-place leasing costs on a
lease by lease basis over the remaining term of each lease.
The in-place lease values and customer relationship values are based on
management's evaluation of the specific characteristics of each customer's lease
and our overall relationship with that respective customer. Characteristics
considered by management in allocating these values include the nature and
extent of our existing business relationships with the customer, growth
prospects for developing new business with the customer, the customer's credit
quality, and the expectation of lease renewals, among other factors. The
in-place lease value and customer relationship value are both amortized to
expense over the initial term of the respective leases and projected renewal
periods, but in no event does the amortization period for the intangible assets
exceed the remaining depreciable life of the building.
Should a tenant terminate its lease, the unamortized portion of the in-place
lease value and the customer relationship value and above-market and
below-market lease values would be charged to expense.
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.
The Company records electricity sales under the accrual method and these
revenues are recognized upon delivery of electricity to the customers' meters.
Electric services not billed by month-end are accrued based upon estimated
deliveries to customers as tracked and recorded by the Electric Reliability
Council of Texas ("ERCOT") multiplied by the Company's average billing rate per
kilowatt hour ("kwh") in effect at the time.
The flow technique of revenue calculation relies upon ERCOT settlement
statements to determine the estimated revenue for a given month. Supply
delivered to our customers for the month, measured on a daily basis, provides
the basis for revenues. ERCOT provides net electricity delivered data in three
frames. Initial daily settlements become available approximately 17 days after
the day being settled. Approximately 45 days after the day being settled, a
resettlement is provided to adjust the initial settlement to the actual supply
delivered based on subsequent comparison of prior forecasts to actual meter
reads processed. A final resettlement is provided approximately 180 days after
power is delivered, marking the last routine settlement adjustment to the power
deliveries for that day.
Sales represent the total proceeds from energy sales, including pass through
charges from the TDSPs billed to the customer at cost. Cost of goods and
services ("COGS") include electric power purchased, sales commissions, and pass
through charges from the TDSPs in the areas serviced by the Company. TDSP
charges are costs for metering services and maintenance of the electric grid.
TDSP charges are determined by regulated tariffs established by the Public
Utility Commission of Texas ("PUCT").
Bilateral wholesale costs are incurred through contractual arrangements with
wholesale power suppliers for firm delivery of power at a fixed volume and fixed
price. The Company is typically invoiced for these wholesale volumes at the end
of each calendar month for the volumes purchased for delivery during the month,
with payment due 10 to 20 days after the end of the month.
Balancing/ancillary costs are based on the aggregate customer load and are
determined by ERCOT through a multiple step settlement process. Balancing
costs/revenues are related to the differential between supply provided by the
Company through its bilateral wholesale supply and the supply required to serve
the Company's customer load. The Company endeavors to minimize the amount of
balancing/ancillary costs through its load forecasting and forward purchasing
programs.
22
Consolidation of Variable Interest Entities
We perform evaluations of each of our investment partnerships, real estate
partnerships and joint ventures to determine if the associated entities
constitute a Variable Interest Entity, or VIE, as defined under Interpretations
46 and 46R, "Consolidation of Variable Interest Entities," or FIN 46 and 46R,
respectively. In general, a VIE is an entity that has (i) an insufficient amount
of equity for the entity to carry on its principal operations, without
additional subordinated financial support from other parties, (ii) a group of
equity owners that are unable to make decisions about the entity's activities,
or (iii) equity that does not absorb the entity's losses or receive the benefits
of the entity. If any one of these characteristics is present, the entity is
subject to FIN 46R's variable interests consolidation model.
Quantifying the variability of VIEs is complex and subjective, requiring
consideration and estimates of a significant number of possible future outcomes
as well as the probability of each outcome occurring. The results of each
possible outcome are allocated to the parties holding interests in the VIE and,
based on the allocation, a calculation is performed to determine which party, if
any, has a majority of the potential negative outcomes (expected losses) or a
majority of the potential positive outcomes (expected residual returns). That
party, if any, is the VIE's primary beneficiary and is required to consolidate
the VIE. Calculating expected losses and expected residual returns requires
modeling potential future results of the entity, assigning probabilities to each
potential outcome, and allocating those potential outcomes to the VIE's interest
holders. If our estimates of possible outcomes and probabilities are incorrect,
it could result in the inappropriate consolidation or deconsolidation of the
VIE.
For entities that do not constitute VIEs, we consider other GAAP, as required,
determining (i) consolidation of the entity if our ownership interests comprise
a majority of its outstanding voting stock or otherwise control the entity, or
(ii) application of the equity method of accounting if we do not have direct or
indirect control of the entity, with the initial investment carried at costs and
subsequently adjusted for our share of net income or less and cash contributions
and distributions to and from these entities.
Allowance for Doubtful Accounts
Our accounts receivable balance is reduced by an allowance for amounts that may
become uncollectible in the future. Our receivable balance is composed primarily
of rents and operating cost recoveries due from its tenants and billed and
unbilled customer retail electricity usage flowed for a given period. The
allowance for doubtful accounts is reviewed at least quarterly for adequacy by
reviewing such factors as the credit quality of our tenants and customers, any
delinquency in payment, historical trends and current economic conditions. If
the assumptions regarding our ability to collect accounts receivable prove
incorrect, we could experience write-offs in excess of the allowance for
doubtful accounts, which would result in a decrease in net income. The Company
estimated the allowance for doubtful accounts related to W Power's billed
account receivables to be approximately 0.2% percent of W Power's retail
electricity billed revenue for the quarter ended March 31, 2006. Due to the
limited historical data, the Company regularly reviews the accounts receivable
and accordingly makes adjustments in estimating the allowance for doubtful
accounts.
Stock Options
The Company accounts for its stock-based compensation in accordance with
Financial Accounting Standards (SFAS) No. 123R, Accounting for Stock-Based
Compensation. In December 2004, the Financial Accounting Standards Board issued
Statement 123(R) effective for small business issuers after December 15, 2005.
The new Statement requires mandatory reporting of all stock-based compensation
awards on a fair value basis of accounting. Generally, companies are required to
calculate the fair value of all stock awards and amortize that fair value as
compensation expense over the vesting period of the awards.
Results of Operations
23
Overview
--------
For the quarter ended March 31, 2006, the Company showed net income of $192,654
or $.09 per share as compared to a net loss of $163,650 or $.07 per share for
the same period ended March 31, 2005 for a net change of approximately $356,000.
The increase is mainly attributable to W Power. During the quarter ended March
31, 2006, W Power had net income of approximately $206,000 as compared to a net
loss of approximately $85,000 during the same period last year. Although energy
costs have dramatically increased as compared to this time last year, W Power
has been able to meet its credit requirements and achieve strong operating cash
flow. W Power continues to maintain deliberate and controlled growth to ensure
it does not outgrow its current credit capacity. As of the period ended March
31, 2006, W Power provided approximately 18,700 total MWH as compared to
approximately 4,800 MWH during its first full quarter of retail operations
ending March 31, 2005. Additionally, the Company provided approximately 16,800
MWH to its wholesale customers during the quarter ended March 31, 2006. During W
Power's first quarter of operations ended March 31, 2005, W Power did not
provide any electricity to wholesale customers.
The Company's investment in its commercial real estate property through TCTB
continues to show steady operating income. TCTB showed net income of
approximately $76,000 during the quarter ended March 31, 2006 as compared to net
income of approximately $142,000 for the period ended March 31, 2005. The
decrease in income through the Company's investment in TCTB is mainly
attributable to the increase in utilities expense for the commercial real estate
property. However, the increase in operating expenses has been partially offset
with the Company passing the increased expenses through to the tenants during
the quarter ended March 31, 2006. During the same period ended March 31, 2005
the Company did not pass these additional expenses through to the tenants in an
effort to build stronger business relationships with the buildings tenants.
Revenues
--------
Total operating revenue for the quarter ended March 31, 2006 increased
approximately 300% over the same period ended March 31, 2005. This increase of
approximately $2,900,000 is predominantly related to W Power's growth. For the
period ended March 31, 2006 W Power had revenues of approximately $3,170,000 as
compared to approximately $311,000 for the quarter ended March 31, 2005, or an
increase of 920%. Additionally, TCTB's revenue increased approximately 12% for
the quarter ended March 31, 2006 as compared to the same period last year. This
is due mostly to the increase in the commercial real estate buildings increase
in operating expenses being passed through to the tenants.
Operating expenses
------------------
Operating expenses for the quarter ended March 31, 2006 increased approximately
270% over the same period last year. The increase is primarily related to the
cost of wholesale electricity for W Power. Wholesale electricity purchases grew
due to customer load growth and higher wholesale energy prices. Rising energy
costs over the last year are also the primary cause of an increase in TCTB real
estate operations expenses for the quarter ended March 31, 2006 as compared to
March 31, 2005. For the period ended March 31, 2006, TCTB experienced
approximately a 17% increase in rental property operations compared to the same
quarter last year. Additionally, depreciation expense increased approximately
11% for the quarter ended March 31, 2006 as compared to same period last year.
This increase is related to the capitalized tenant lease improvement costs
incurred by TCTB. The Company did not realize a full period of depreciation
expense during the quarter ended March 31, 2005 as the tenant improvements were
not completed until the latter part of the quarter ended March 31, 2005.
Other (expense) income
----------------------
24
For the quarter ended March 31, 2006, the Company experienced a decrease in
other expenses of approximately $52,000. This decrease is mainly associated with
an increase in interest income of approximately $38,000 for the quarter compared
to the same period last year. The interest income is mostly related to the
Company's increase in short-term investments with J.P. Morgan Chase to cover
standby letters of credit with certain wholesale electricity providers and an
increase in the interest rate the Company is earning on the restricted
certificate of deposit upon the Certificate of Deposit's renewal on December 28,
2005. The remaining difference is attributable to the non-recurring legal
expenses the Company incurred during the quarter ended March 31, 2005 associated
with the issuance of the Company's Series C Preferred Stock on March 1, 2005.
Minority interest
-----------------
Minority interest expense for the three months ended March 31, 2006 and 2005,
was 21,870 and 40,824, respectively, and reflects the minority interest owners
of TCTB. The decrease in minority interest is related to the decrease in TCTB
quarterly income due to the increased operational expenses of the commercial
real estate buildings.
Liquidity and capital resources
-------------------------------
Management's initial focus of the 2002 Business Plan was to focus on value added
plays in three distinct arenas, 1) acquiring office space in secondary stagnant
markets, 2) acquiring office space in out of favor growth markets 3) acquiring
investments in oil and gas royalties and to assess opportunities in acquiring
other properties and businesses that have a consistent and stable cash flow
history. Management believes that through its wholly owned subsidiary W Power,
we have been able to enter a market that will provide a stable cash flow in the
future.
W Power faced several challenges during its first year of operations, including:
1) rapidly escalating and volatile energy prices; 2) an extended period of
above-average summer and fall temperatures resulting in record breaking
electricity demand and consumption across Texas; and 3) a shortage of electric
generating capacity. While W Power reported positive net income for the first
time during the quarter ended March 31, 2006, management believes W Power will
be faced with similar challenges throughout 2006 and perhaps beyond. If so, W
Power will need to continue a deliberately controlled growth plan in order not
to exceed its credit capacity requirements. The main challenges W Power will
face will be higher commodity energy prices and the amount of credit required to
hedge forward its electricity requirements. Management continues to monitor and
limit the growth of W Power's customer acquisition to ensure that W Power will
be able to meet its credit requirements to hedge forward its electricity
requirements. Even with continued deliberate limiting of W Power's growth the
Company's business model leads management to expect positive earnings for 2006.
Operating activities
--------------------
During the three months ended March 31, 2006 and 2005, the net cash provided by
(used in) operating activities was $579,254 and $(589,987), respectively, for a
net increase of approximately $1,170,000. The increase in operating activities
is due to several items. W Power, while still a very young company, has moved
past its startup phase and is experiencing both positive net income and cash
flow. Additionally, W Power has realized an accelerated payment schedule from
both its wholesale and retail customers, thereby reducing working capital
requirements by approximately $660,000 which would otherwise have been a use of
cash to fund receivables. During the three months ended March 31, 2005, the
Company was able to decrease its accrued and other liabilities by paying the
accrued interest of approximately $287,000 related to nine promissory notes,
certain of which are with related parties, entered into by Delaware in October
2002 to purchase the original 64.9% ownership interest in TCTB.
25
Investing activities
--------------------
For the three months ended March 31, 2006 and 2005, the net cash used in
investing activities was $613,772 and $353,129, respectively. The net increase
in of approximately $260,000 is mainly related to the Company entering into a
continuing agreement for commercial and standby letters of credit (the "Letters
of Credit") with JPMorgan Chase Bank, N.A., Houston, Texas, ("JPMC"). Under the
agreement JPMC may, but is not obligated to, issue one or more standby or
commercial letters of credit, on behalf of W Power. The Letters of Credit are
generally required in the normal course of business operations to support the
Company's obligations to collateralize certain obligations to electric power
providers, TDSPs, and ERCOT. In order to support the Letters of Credit, the
Company, JPMC and JP Morgan Securities Inc. maintain a tri-party control
agreement that creates a security interest in favor of Chase in a certain Money
Market Fund the Company maintains with JPMC. Management expects that with the
growth of W Power in the future, coupled with higher commodity energy costs, the
Company's investment with JPMC to issue standby or commercial letters of credit
on behalf of W Power will continue.
Financing activities
--------------------
Net cash (used in) provided by financing activities was $(64,540) and $545,093
for the three months ended March 31, 2006 and 2005, respectively, for a net
change of approximately $610,000. During the three months ended March 31, 2006
the Company used $64,540 in the repayment of notes, mainly the repayment of the
TCTB Note (further described in Note I of the Financial Statements). During the
three months ended March 31, 2005, the Company paid approximately $1,455,000 in
the repayments of notes and received $2,000,000 from the issuance of the
Company's Series C Preferred Stock on March 1, 2005. The repayment of notes of
approximately $1,455,000 during the three months ended March 31, 2005 mainly
represents the payment of one half of the outstanding principal balance on the
nine promissory notes entered into by Delaware in October, 2002 (further
described in Note I of the Financials Statements).
Currently, the Company has a net operating tax loss ("NOL") carry forward in
excess of $30 million. This NOL is mainly related to the Company's operations
prior to the Company presenting the 2002 business plan to shareholders.
Management believes the present value of this NOL is between at $2.5 to $5
million and has been diligent in its efforts to ensure its preservation and
utilization. The Company believes that the utilization, without limitation, of
the Company's NOL will be determined by the ability of management to limit the
issue of new equity due to IRC Section 382 restrictions. 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 an would consider issuing equity to do
so.
ITEM 3. Controls and Procedures
The Company has carried out an evaluation under the supervision of management,
including the Chairman and Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Company's
Chairman and Chief Executive Officer and Chief Financial Officer have concluded
that, and have reported to the Audit Committee of the Company's Board of
Directors that, management has identified certain deficiencies in the disclosure
controls and procedures. The deficiencies noted were (a) a lack of documented
control procedures (b) the lack of segregation of duties and (c) insufficient
supervision of the Company's accounting personnel. The Company believes such
deficiencies are primarily attributable to the Company currently having only one
full time employee at the corporate level and the continuing development of the
Company's new start up subsidiary W Power and Light, L.P. Management believes
that the deficiencies noted above do not materially interfere with the Company's
timely disclosure of information required to be disclosed by the Company in
reports filed or submitted under the Securities Exchange Act 1934, as amended,
because accounting personnel and a member of management have first-hand
knowledge of the daily transactions of the Company and that first-hand knowledge
26
enables such personnel to accumulate and communicate such information to the
Company's management, including its principal executive and principal financial
officer as appropriate to allow timely decisions regarding disclosure.
Therefore, the Company believes that its disclosure controls and procedures are
sufficient to provide reasonable assurance that the information required to be
disclosed by the Company in reports filed or submitted by it under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time period specified in the rules and forms of the SEC,
notwithstanding the deficiencies noted above.
There have not been any changes in the Company's disclosure controls and
procedures during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's
disclosure controls and procedures over financial reporting.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
None to report.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None to report.
ITEM 3. Defaults Upon Senior Securities
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders
None to report.
ITEM 5. Other Information
None to report.
ITEM 6. Exhibits
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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 Company
3.4 ~ Certificate of Designation for Series A Preferred Stock
3.4(a) ~~ Amended Certificate of Designation for Series A Preferred Stock
27
3.5 ~~ Certification of Designation for Series B Preferred Stock
3.6*** Certificate of Amendment of Certificate of Incorporation dated
May 26, 2004
3.7@ Certificate of Designation for Series C Preferred Stock
4.1+ Warrant Certificate between the Company and Robert Varney dated
July 10, 1996
4.2+ Warrant Certificate between the Company and Robert Varney dated
September 26, 1996
4.3+ Warrant Certificate between the Company and Bruce Edgington dated
July 30, 1996
4.4+ Warrant Certificate between the Company and Bruce Edgington dated
October 30, 1996
4.5@ Form of Warrant Certificate dated March 1, 2005
10.1// Asset Purchase Agreement between the Company and Blue Hill Media,
Inc. dated December 13, 2002
10.2+ Form of Stock Option Agreement
10.3+ 1997 Stock Option Plan
10.4* 1997 Stock Option Plan, as amended April 6, 1998
10.5* 1998 Stock Option Plan
10.6** 1998 Stock Option Plan, as amended February 26, 1999
10.7## 1998 Stock Option Plan, as amended March 3, 2000
10.8++ Stock Purchase Agreement between the Company and A. Scott Dufford
for Series A Preferred Stock dated September 29, 2000
10.9++ Stock Purchase Agreement between the Company and John R. Norw0od
Norwood for Series A Preferred Stock dated September 29, 2000
10.10++ Stock Purchase Agreement between the Company and J.M. Mineral and
Land Co. for Series A Preferred Stock dated September 29, 2000
10.11++ Stock Purchase Agreement between the Company and Jon M. Morgan
Pension Plan for Series A Preferred Stock dated September 29,
2000
10.12++ Stock Purchase Agreement between the Company and Stallings
Properties, Ltd. for Series A Preferred Stock dated September 29,
2000
10.13++ Stock Purchase Agreement between the Company and John D. Bergman
for Series A Preferred Stock dated September 29, 2000
10.14++ Stock Purchase Agreement between the Company and Julia Jones
Family Trust for Series A Preferred Stock dated September 29,
2000
10.15++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series A Preferred Stock dated September 29, 2000
10.16++ Stock Purchase Agreement between the Company and Soft Op, L.P.
for Series A Preferred Stock dated September 29, 2000
28
10.17++ Stock Purchase Agreement between the Company and Lighthouse
Partners, L.P. for Series A Preferred Stock dated September 29,
2000
10.18++ Stock Purchase Agreement between the Company and Ray McGlothlin,
Jr. for Series A Preferred Stock dated September 29, 2000
10.19++ Stock Purchase Agreement between the Company and Gary J. Lamb for
Series A Preferred Stock dated September 29, 2000
10.20++ Stock Purchase Agreement between the Company and Frosty Gilliam,
Jr. for Series A Preferred Stock dated September 29, 2000
10.21++ Stock Purchase Agreement between the Company and Bruce Edgington
for Series B Preferred Stock dated December 31, 2001
10.22++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series B Preferred Stock dated December 31, 2001
10.23++ Stock Purchase Agreement between the Company and Earl E. Gjelde
for Series B Preferred Stock dated December 31, 2001
10.24++ Stock Purchase Agreement between the Company and Jon M. Morgan
for Series B Preferred Stock dated December 31, 2001
10.25++ Stock Purchase Agreement between the Company and Soft Op, L.P.
for Series B Preferred Stock dated December 31, 2001
10.26++ Annex to the Stock Purchase Agreement for Series A Preferred
Stock dated September 29, 2000
10.27# Agreement to Suspend Dividends and Consent of the Holders of
Series A Preferred Stock of Amen Properties, Inc. dated May 30,
2003.
10.28# Agreement to Suspend Dividends and Consent of Holders of Series B
Convertible Preferred Stock of Amen Properties, Inc. dated May
30, 2003.
10.29^ Consent, Waiver and Amendment of the holders of Series A
Preferred Stock dated January 2005 (identical copy executed by
each holder)
10.30^ Consent, Waiver and Amendment of the holders of Series B
Preferred Stock dated January 2005 (identical copy executed by
each holder)
10.31++ Annex to the Stock Purchase Agreement for Series B Preferred
Stock dated December 31, 2001
10.32// Agreement and Transfer of Limited Partnership Interest between
the Company and the Selling Partners of TCTB Partners, Ltd. dated
October 31, 2002
10.33// 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.
10.34// 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.
10.35// Lease Agreement between TCTB Partners, Ltd. and Bank of America,
N.A. dated September 30, 2003.
10.36// Lease Agreement between TCTB Partners, Ltd. and Pioneer Natural
Resources USA, Inc. dated April 4, 2000.
29
10.38### Employment and Noncompetition Agreement between the Company and
Kevin Yung dated as of July 1, 2004
10.39@@ Agreement to Distribute Assets among TCTB Partners, Ltd. and its
partners dated as of December 31, 2004
10.40@@ Purchase Agreement between certain partners of TCTB Partners,
Ltd. and 1500 Broadway Partners, Ltd. dated as of December 31,
2004
10.41@ Securities Purchase Agreement between the Company and certain
investors dated January 18, 2005, as amended by a First Amendment
dated January 28, 2005 and a Second Amendment dated February 28,
2005
10.42@ Loan Agreement between Amen Properties, Inc. and Western National
Bank
10.43@ Western National Bank Revolving Line of Credit Note
11 Statement of computation of earnings per share
21.1 Subsidiaries of the Company
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC
ss.1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss.1350.
99.1 Press release regarding March 31, 2006 Quarterly Report on Form
10-QSB
+ 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 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.
+++ 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 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
** 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 Report on Form 8-K filed with the
Securities and Exchange Commission on June 10, 2004.
# Incorporated by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on June 4, 2003.
## 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 Report on Form 8-K filed with the
Securities and Exchange Commission on August 13, 2004
30
~ 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 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 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 24, 2003.
@ Incorporated by reference to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on March 4, 2005.
@@ Incorporated by reference to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on January 4, 2005.
^ Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2005.
31
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.
May 12, 2006 By: /s/ Eric L. Oliver
-------------------------------------------
Eric L. Oliver,
Chairman of the Board of Directors and
Chief Executive Officer
May 12, 2006 By: /s/ John M. James
-------------------------------------------
John M. James,
Chief Financial Officer and Secretary
32
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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 Company
3.4 ~ Certificate of Designation for Series A Preferred Stock
3.4(a) ~~ Amended Certificate of Designation for Series A Preferred Stock
3.5 ~~ Certification of Designation for Series B Preferred Stock
3.6*** Certificate of Amendment of Certificate of Incorporation dated
May 26, 2004
3.7@ Certificate of Designation for Series C Preferred Stock
4.1+ Warrant Certificate between the Company and Robert Varney dated
July 10, 1996
4.2+ Warrant Certificate between the Company and Robert Varney dated
September 26, 1996
4.3+ Warrant Certificate between the Company and Bruce Edgington dated
July 30, 1996
4.4+ Warrant Certificate between the Company and Bruce Edgington dated
October 30, 1996
4.5@ Form of Warrant Certificate dated March 1, 2005
10.1// Asset Purchase Agreement between the Company and Blue Hill Media,
Inc. dated December 13, 2002
10.2+ Form of Stock Option Agreement
10.3+ 1997 Stock Option Plan
10.4* 1997 Stock Option Plan, as amended April 6, 1998
10.5* 1998 Stock Option Plan
10.6** 1998 Stock Option Plan, as amended February 26, 1999
10.7## 1998 Stock Option Plan, as amended March 3, 2000
10.8++ Stock Purchase Agreement between the Company and A. Scott Dufford
for Series A Preferred Stock dated September 29, 2000
10.9++ Stock Purchase Agreement between the Company and John R. Norw0od
Norwood for Series A Preferred Stock dated September 29, 2000
10.10++ Stock Purchase Agreement between the Company and J.M. Mineral and
Land Co. for Series A Preferred Stock dated September 29, 2000
33
10.11++ Stock Purchase Agreement between the Company and Jon M. Morgan
Pension Plan for Series A Preferred Stock dated September 29,
2000
10.12++ Stock Purchase Agreement between the Company and Stallings
Properties, Ltd. for Series A Preferred Stock dated September 29,
2000
10.13++ Stock Purchase Agreement between the Company and John D. Bergman
for Series A Preferred Stock dated September 29, 2000
10.14++ Stock Purchase Agreement between the Company and Julia Jones
Family Trust for Series A Preferred Stock dated September 29,
2000
10.15++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series A Preferred Stock dated September 29, 2000
10.16++ Stock Purchase Agreement between the Company and Soft Op, L.P.
for Series A Preferred Stock dated September 29, 2000
10.17++ Stock Purchase Agreement between the Company and Lighthouse
Partners, L.P. for Series A Preferred Stock dated September 29,
2000
10.18++ Stock Purchase Agreement between the Company and Ray McGlothlin,
Jr. for Series A Preferred Stock dated September 29, 2000
10.19++ Stock Purchase Agreement between the Company and Gary J. Lamb for
Series A Preferred Stock dated September 29, 2000
10.20++ Stock Purchase Agreement between the Company and Frosty Gilliam,
Jr. for Series A Preferred Stock dated September 29, 2000
10.21++ Stock Purchase Agreement between the Company and Bruce Edgington
for Series B Preferred Stock dated December 31, 2001
10.22++ Stock Purchase Agreement between the Company and Dodge Jones
Foundation for Series B Preferred Stock dated December 31, 2001
10.23++ Stock Purchase Agreement between the Company and Earl E. Gjelde
for Series B Preferred Stock dated December 31, 2001
10.24++ Stock Purchase Agreement between the Company and Jon M. Morgan
for Series B Preferred Stock dated December 31, 2001
10.25++ Stock Purchase Agreement between the Company and Soft Op, L.P.
for Series B Preferred Stock dated December 31, 2001
10.26++ Annex to the Stock Purchase Agreement for Series A Preferred
Stock dated September 29, 2000
10.27# Agreement to Suspend Dividends and Consent of the Holders of
Series A Preferred Stock of Amen Properties, Inc. dated May 30,
2003.
10.28# Agreement to Suspend Dividends and Consent of Holders of Series B
Convertible Preferred Stock of Amen Properties, Inc. dated May
30, 2003.
10.29^ Consent, Waiver and Amendment of the holders of Series A
Preferred Stock dated January 2005 (identical copy executed by
each holder)
10.30^ Consent, Waiver and Amendment of the holders of Series B
Preferred Stock dated January 2005 (identical copy executed by
each holder)
34
10.31++ Annex to the Stock Purchase Agreement for Series B Preferred
Stock dated December 31, 2001
10.32// Agreement and Transfer of Limited Partnership Interest between
the Company and the Selling Partners of TCTB Partners, Ltd. dated
October 31, 2002
10.33// 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.
10.34// 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.
10.35// Lease Agreement between TCTB Partners, Ltd. and Bank of America,
N.A. dated September 30, 2003.
10.36// Lease Agreement between TCTB Partners, Ltd. and Pioneer Natural
Resources USA, Inc. dated April 4, 2000.
10.38### Employment and Noncompetition Agreement between the Company and
Kevin Yung dated as of July 1, 2004
10.39@@ Agreement to Distribute Assets among TCTB Partners, Ltd. and its
partners dated as of December 31, 2004
10.40@@ Purchase Agreement between certain partners of TCTB Partners,
Ltd. and 1500 Broadway Partners, Ltd. dated as of December 31,
2004
10.41@ Securities Purchase Agreement between the Company and certain
investors dated January 18, 2005, as amended by a First Amendment
dated January 28, 2005 and a Second Amendment dated February 28,
2005
10.42@ Loan Agreement between Amen Properties, Inc. and Western National
Bank
10.43@ Western National Bank Revolving Line of Credit Note
11 Statement of computation of earnings per share
21.1 Subsidiaries of the Company
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Certification of Chief Executive Officer Pursuant to 18 USC
ss.1350.
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss.1350.
99.1 Press release regarding March 31, 2006 Quarterly Report on Form
10-QSB
+ 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 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.
+++ 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.
35
* 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
** 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 Report on Form 8-K filed with the
Securities and Exchange Commission on June 10, 2004.
# Incorporated by reference to the Company's Form 8-K filed with the Securities
and Exchange Commission on June 4, 2003.
## 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 Report on Form 8-K filed with the
Securities and Exchange Commission on August 13, 2004
~ 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 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 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 24, 2003.
@ Incorporated by reference to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on March 4, 2005.
@@ Incorporated by reference to the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on January 4, 2005.
^ Incorporated by reference to the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 2005.
36