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 June 30, 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.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
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(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:
2,290,589 shares outstanding as of August 1, 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 June 30, 2006 (Unaudited) 1
Consolidated Statement of Operations--for the three and six months
ended June 30, 2006 and 2005 (Unaudited) 2
Consolidated Statement of Cash Flows--for the six months ended
June 30, 2006 and 2005 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis or Plan of Operation 22
Item 3. Controls and Procedures 30
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 30
Item 3 Defaults Upon Senior Securities 30
Item 4 Submission of Matters to a Vote of Security Holders 30
Item 5 Other Information 31
Item 6 Exhibits 31
Signatures 36
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
June 30, 2006
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (notes A3, C and G) $ 2,711,857
Accounts receivable (notes A6 and A16) 1,434,967
Other current assets 347,398
-------------
Total current assets $ 4,494,222
RESTRICTED CASH EQUIVALENTS (note D) 4,256,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
depreciation of $1,501,321 (notes A7, A8 and E) 8,053,701
ROYALTY INTERESTS, at cost net of accumulated depletion
of $ 31,365 (notes A7, A8 and F) 131,489
LONG-TERM INVESTMENTS (notes A4 and G) 62,350
OTHER ASSETS
Goodwill (note A9 and B) 2,916,085
Deferred costs (note A10) 19,859
Deposits and other assets 37,967
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Total other assets 2,973,911
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TOTAL ASSETS $19,971,673
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,310,893
Accrued liabilities (note H) 351,650
Current portion of long-term obligations (note J) 599,216
Accrued interest payable 186,410
Deferred revenue 117,239
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Total current liabilities $ 2,565,408
LONG-TERM OBLIGATIONS, less current portion (note J)
Financial institutions 7,341,346
Related parties (note K) 2,636,560
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9,977,906
MINORITY INTEREST (note A14) 364,171
COMMITMENTS AND CONTINGENCIES (note L) -
STOCKHOLDERS' EQUITY (note 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 A15) 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 A15) 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 A15) 125
Common stock, $.01 par value, 20,000,000 shares authorized;
2,290,589 shares issued and outstanding 22,906
Additional paid-in capital 44,970,100
Accumulated deficit (37,929,103)
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Total stockholders' equity 7,064,188
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,971,673
============
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 and Six Months Ended June 30,
(Unaudited)
For the Three Months Ended June 30, For the Six Months Ended June 30,
2006 2005 2006 2005
----------------- ---------------- ---------------- ---------------
Operating Revenue
Rental revenue $ 832,969 $ 672,137 $ 1,584,574 $ 1,342,319
Energy management fees 676,806 - 676,806 -
Retail electricity revenue 3,391,948 1,125,596 6,560,655 1,436,385
----------------- ---------------- ---------------- ---------------
Total operating revenue 4,901,723 1,797,733 8,822,035 2,778,704
----------------- ---------------- ---------------- ---------------
Operating Expense
Cost of goods and services 3,063,743 1,143,727 5,884,161 1,423,375
Rental property operations 542,797 452,447 1,021,183 858,109
General and administrative 497,041 223,579 733,733 430,565
Depreciation, amortization and depletion 105,059 104,671 207,335 196,506
----------------- ---------------- ---------------- ---------------
Total operating expenses 4,208,640 1,924,424 7,846,412 2,908,555
----------------- ---------------- ---------------- ---------------
Income (loss) from operations 693,083 (126,691) 975,623 (129,851)
----------------- ---------------- ---------------- ---------------
Other (expense) income
Interest income 59,115 15,693 108,816 27,537
Interest expense (206,205) (148,149) (346,867) (262,495)
Other income (112,997) 43,578 (90,052) 26,414
----------------- ---------------- ---------------- ---------------
Total other (expense) income (260,087) (88,878) (328,103) (208,544)
----------------- ---------------- ---------------- ---------------
Income (loss) from continuing operations before income
taxes and minority interest 432,996 (215,569) 647,520 (338,395)
----------------- ---------------- ---------------- ---------------
Income taxes (note A12) - - - -
Minority interest (34,839) 4,231 (56,709) (36,593)
----------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) $ 398,157 $ (211,338) $ 590,811 $ (374,988)
================= ================ ================ ===============
Net income (loss) per common share (basic) $ .18 $ (.10) $ .27 $ (.17)
================= ================ ================ ===============
Net income (loss) per common share (diluted) $ .11 $ (.10) $ .17 $ (.17)
================= ================ ================ ===============
Weighted average number of common shares outstanding -
basic 2,246,084 2,201,356 2,226,260 2,201,356
================= ================ ================ ===============
Weighted average number of common shares outstanding -
diluted 3,595,848 2,201,356 3,576,024 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 Six Months Ended June 30,
(Unaudited)
2006 2005
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Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss) $ 590,811 $ (374,988)
Adjustments to reconcile net income (loss) to net cash
provided (used in) by operating activities:
Depreciation, amortization and depletion 207,335 196,506
Minority interest 56,709 36,593
Changes in operating assets and liabilities:
Accounts receivable 282,783 (777,547)
Increase in allowance for doubtful accounts 10,717 -
Deposits and other assets (144,317) -
Deferred costs 10,833 (76,198)
Accounts payable 101,568 567,053
Accrued and other liabilities (351,657) (211,375)
Deferred revenue (7,100) 46,389
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Net cash provided by (used in) operating activities 757,682 (593,567)
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Cash flows from investing activities:
Purchases of property and equipment (55,780) (424,348)
Increase in restricted cash equivalents (600,736) (634,512)
Acquisition of limited partnership interest (note B) 283,152 -
Repayments of notes receivable 50,000 8,000
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Net cash used in investing activities (323,364) (1,050,860)
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Cash flows from financing activities:
Repayments of notes payable (127,848) (1,513,877)
Net proceeds from issuance of preferred stock - 2,000,000
Net proceeds from exercised warrants 337,495 -
Minority interest distributions (36,536) -
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Net cash provided by financing activities 173,111 486,123
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Net increase (decrease) in cash and cash equivalents 607,429 (1,158,304)
Cash and cash equivalents at beginning of period 2,104,428 4,147,900
------------ ------------
Cash and cash equivalents at end of period $ 2,711,857 $ 2,989,596
============ ============
Non-cash investing and financing activities:
Effective April 1, 2006 the Company acquired 100% of Priority
Power Management, Ltd and assumed a note payable to sellers (see Note B) $ 3,230,051 $ -
============ ============
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
June 30, 2006
(Unaudited)
NOTE A - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Organization
Effective October 2002, AMEN formed NEMA Properties, LLC ("NEMA"), a
Nevada limited liability company; AMEN Minerals, LP ("Minerals"), a
Delaware limited partnership; and AMEN Delaware, LP ("Delaware"), a
Delaware limited partnership, to pursue acquisitions as authorized by
stockholders on September 19, 2002. AMEN Properties, Inc. and
Subsidiaries is a self-administered and self-managed Delaware
corporation. Effective July 2004, AMEN Properties, Inc. and
Subsidiaries and affiliates (collectively referred to as the
"Company") formed W Power and Light, LP ("W Power"), a Delaware
limited partnership to enter into the retail electricity market in
Texas. Effective April 1, 2006, AMEN Properties acquired 100% of
Priority Power Management, Ltd. a Texas limited partnership, and
Priority Power Management, Dallas, Ltd. a Texas limited partnership,
(collectively referred to as "Priority Power"). Priority Power is
primarily involved in providing energy management services and the
Company believes that Priority Power's business is complimentary to
the retail electricity provider business conducted by the Company's
subsidiary W Power.
The Company's business purpose is to acquire investments in commercial
real estate, oil and gas royalties, retail electricity operations and
stabilized cash flowing businesses or assets. As of June 30, 2006, 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 leasable 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 entered the retail electricity market in
the state of Texas. On April 1, 2006, the Company, through it's
investment in Priority Power, began aggregating electric consumers and
negotiating power prices on their behalf with retail electric
providers. The real estate operations of the Company are primarily
conducted through Delaware of which AMEN is the sole general partner;
the retail electricity operations are primarily conducted through W
Power of which Amen is the sole general partner; the aggregation of
electric consumers is primarily conducted through Priority 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.
Inter-company 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.
4
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
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. 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 $10,960,270 as of June
30, 2006. Disclosure about fair value of financial instruments is
based on pertinent information available to management as of June 30,
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 three months and
six months ended June 30, 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.
Priority Power trade accounts receivable arise from aggregation fees
and other management services. An allowance for uncollectible accounts
receivable is provided, when considered necessary by management, for
estimated amounts not expected to be collectible. No allowance was
provided or deemed necessary at June 30, 2006.
5
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
At June 30, 2006 accounts receivable consisted of the following:
Tenant receivables $ 48,124
Billed electricity receivables 583,927
Unbilled electricity receivables 469,742
Aggregation fees 384,824
Allowance for doubtful accounts (51,650)
-----------
Accounts receivable, net $ 1,434,967
===========
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. Goodwill
The company follows the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". SFAS #142 requires that goodwill and other intangible assets
with investment lives no longer be amortized. The intangible assets is
tested for impairment annually. If there is an impairment, the amount
will be expenses and the intangible assets will be written down
accordingly.
10. Deferred Costs
6
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
Deferred costs primarily consist of deferred financing costs. Deferred
financing costs are amortized as interest expense over the life of the
related debt.
11. Stock-Based Compensation
On January 1, 2006 the Company adopted Statement of 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 SFAS 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.
12. Income Taxes
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.
13. Deferred Revenue
Deferred revenue consists of prepaid rent and prepaid aggregation
fees. Deferred revenue is amortized over the life of the lease for
prepaid and rent and over the life of the aggregation contract for
prepaid aggregation fees.
14. 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 June 30, 2006 and 2005.
15. 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
7
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
calculation of diluted earnings per share for any periods in which
their effect are antidilutive.
16. 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 June 30, 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.
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.
The Company's gross revenues for aggregation and other services to our
customers are recognized upon delivery and include estimated
aggregation fees and other services delivered but not billed by the
end of the period.
As of June 30, 2006, the Company recorded unbilled revenue of $209,871
for aggregation fees. Accrued unbilled revenues are based on our
estimates of customer usage since the date of the last meter reading
provided by the independent system operators or electric distribution
companies. Volume estimates are based on average daily volumes,
estimated customer usage and applicable customer aggregation rates.
Unbilled revenues are calculated by multiplying volume estimates by
8
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
our estimated rates by customer. Estimated amounts are adjusted when
actual usage and rates are known and billed.
17. 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.
18. 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.
19. New Accounting Pronouncements
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.
20. Reclassifications
9
Certain reclassifications of prior period amounts have been made to
conform to the June 30, 2006 presentation.
NOTE B - BUSINESS COMBINATIONS
On May 25, 2006, the Company completed the acquisition of 100% of
Priority Power Management, effective April 1, 2006, for an aggregate
consideration of $3,730,051. Priority Power is primarily involved in
providing energy management services and the Company believes that
Priority Power's business is complimentary to the retail electricity
provider business conducted by the Company's subsidiary W Power. The
acquisition resulted in the Company allocating $2,916,085 of the
purchase price to goodwill. This allocation is principally the result
of the purchase price being based on a business valuation of Priority
Power for the period ended December 31, 2005. The acquisition
consisted of $500,000 of cash paid and promissory notes totaling
$3,230,051 payable to the selling partners of Priority Power. This
acquisition has been accounted for under the purchase method of
accounting and Priority Power's results of operations for the three
months ended June 30, 2006 have been included in the Company's
Consolidated Statement of Operations for the period then ended. The
purchase price has been allocated based on the estimated fair values
of 100% of the acquired partnership interests at the acquisition date
as follows:
Goodwill $ 2,916,085
Fair value of fixed assets acquired 96,467
Fair value of other current assets acquired 460,201
Fair value of liabilities assumed (525,854)
Note payable to sellers (3,230,051)
-----------
Net Cash acquired for the acquisition (283,152)
Less: total cash acquired 783,152
-----------
Net cash paid $ 500,000
===========
The total amount of goodwill expected to be deducted for tax purposes
for the tax year ending December 31, 2006 is $145,804.
The following summary compares the Company's operating results for the
six months ended June 30, 2006 as reported, to a pro forma of those
results prepared on the assumption that the purchase had taken place
on January 1, 2006.
As
Reported Proforma
------------- ----------
Revenues $ 8,822,035 9,471,039
============ ==========
Net income $ 590,811 881,537
============ ==========
Income per common share (basic) $ .27 .39
============ ==========
Income per common share (diluted) $ .17 .25
============ ==========
Weighted average number of common shares
Outstanding - basis 2,226,260 2,226,260
============ ==========
10
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
Weighted average number of common shares
Outstanding - diluted 3,576,024 3,576,024
============ ==========
NOTE C - CONCENTRATIONS OF CREDIT RISK
The Company maintains cash balances at four financial institutions,
which at times may exceed federally insured limits. At June 30, 2006
the Company had approximately $2,906,396 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 Priority Power's revenues are derived principally from
uncollateralized customer electricity billings and TCTB's revenues are
derived principally from uncollateralized rents from tenants. 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 D - 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 J) 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 June 30, 2006, the Company had
deposits with JPMC totaling $2,156,000 collateralizing outstanding
Letters of Credit.
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following at
June 30, 2006:
Buildings $ 8,501,365
Furniture, fixtures and equipment 290,037
Tenant improvements 604,622
Land 158,998
-----------
9,555,022
Less: accumulated depreciation (1,501,321)
-----------
$ 8,053,701
===========
Depreciation expense for the quarters ended June 30, 2006 and 2005 was
$202,206 and $189,219, respectively.
NOTE F - ROYALTY INTERESTS
11
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 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 June 30, 2006 and 2005.
Depletion expense for the quarters ended June 30, 2006 and 2005 was
$5,129 and $7,287, respectively.
NOTE G - CASH, CASH EQUIVALENTS AND INVESTMENTS
At June 30, 2006 and 2005, the Company's cash and cash equivalents
consist of cash in banks of $2,711,857.
Securities available-for-sale in the accompanying balance sheet at
June 30, 2006 and 2005 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 H - ACCRUED LIABILITIES
Accrued liabilities consisted of the following at June 30, 2006:
Accrued property taxes $ 92,735
Accrued TDSP charges 87,158
Other liabilities 171,757
-----------
$ 351,650
===========
NOTE I - OPERATING SEGMENTS
The Company's business activities are mainly comprised of three
reportable segments, real estate operations, a retail electricity
provider ("REP"), and retail electricity aggregation services.
The commercial real estate portfolio consists of a majority ownership
in two office properties located in Midland, Texas comprising an
aggregate of approximately 428,560 square feet of gross leasable area
through Delaware's investment in a limited partnership. 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%.
Amen entered the retail electricity market in the state of Texas in
July 2004. The retail electricity operations are primarily conducted
through W Power of which Amen is the sole general partner. The REP
segment will sell electricity and provide the related billing,
customer service, collection and remittance services to both
residential and commercial customers.
12
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
On April 1, 2006, the Company, through it's investment in Priority
Power, began aggregating electric consumers and negotiating power
prices on their behalf with retail electric providers. The aggregation
of electric consumers is primarily conducted through Priority Power of
which Amen is the sole general partner.
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 the three and six months ended June 30, 2006
and 2005, respectively.
Three months ended June 30, 2006:
---------------------------------
Inter-
Energy Company
Real Estate Management Other and Transaction Consolidated
REP Operations Services Corporate Eliminations Total
------------- ------------- ------------- ------------- ------------- -------------
Revenues from external
customers $ 3,391,948 $ 832,969 $ 676,806 $ - $ - $ 4,901,723
============ ============ ============ ============ ============ ============
Revenues from other
operating segments $ 268,310 $ 10,399 $ - $ - $ (278,709) $ -
============ ============ ============ ============ ============ ============
Depreciation, amortization
and depletion $ 3,743 $ 96,154 $ 2,817 $ 2,345 $ - $ 105,059
============ ============ ============ ============ ============ ============
Interest expense $ 100,540 $ 139,247 $ 62,583 $ 136 $ (96,301) $ 206,205
============ ============ ============ ============ ============ ============
Segment net income (loss) $ 219,861 $ 121,596 $ 262,171 $ (152,292) $ (53,179) $ 398,157
============ ============ ============ ============ ============ ============
Segment assets $ 4,360,541 $ 7,473,986 $ 1,080,063 $ 7,505,419 $ (448,336) $ 19,971,673
============ ============ ============ ============ ============ ============
Goodwill $ - $ - $ - 2,916,085 $ - $ 2,916,085
============ ============ ============ ============ ============ ============
Expenditures for segment
assets $ 4,584 $ 40,300 $ 802 $ (5,838) $ - $ 39,848
============ ============ ============ ============ ============ ============
Three months ended June 30, 2005:
---------------------------------
Inter-
Energy Company
Real Estate Management Other and Transaction Consolidated
REP Operations Services Corporate Eliminations Total
------------- ------------- ------------- ------------- ------------- -------------
Revenues from external
customers $ 1,125,596 $ 672,137 $ - $ - $ - $ 1,797,733
============ ============ ============ ============ ============ ============
Revenues from other
operating segments $ 177,295 $ 4,987 $ - $ - $ (182,282) $ -
============ ============ ============ ============ ============ ============
Depreciation, amortization
and depletion $ 1,778 $ 75,777 $ - $ 27,116 $ - $ 104,671
============ ============ ============ ============ ============ ============
Interest expense $ 11,667 $ 168,477 $ - $ 8,918 $ (40,913) $ 148,149
============ ============ ============ ============ ============ ============
Segment net income (loss) $ (179,610) $ (14,766) $ - $ (45,302) $ 28,340 $ (211,338)
============ ============ ============ ============ ============ ============
Segment assets $ 1,664,153 $ 7,420,442 $ - $ 6,828,318 (391,853) $ 15,521,060
============ ============ ============ ============ ============ ============
Expenditures for segment
assets $ 8,369 $ 51,959 $ - $ 2,891 $ - $ 63,219
============ ============ ============ ============ ============ ============
13
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
Six months ended June 30, 2006:
-------------------------------
Inter-
Energy Company
Real Estate Management Other and Transaction Consolidated
REP Operations Services Corporate Eliminations Total
------------- ------------- ------------- ------------- ------------- -------------
Revenues from external
customers $ 6,560,655 $ 1,584,574 $ 676,806 $ - $ - $ 8,822,035
============ ============ ============ ============ ============ ============
Revenues from other
operating segments $ 489,111 $ 15,386 $ - $ - $ (504,497) $ -
============ ============ ============ ============ ============ ============
Depreciation, amortization
and depletion $ 7,109 $ 191,252 $ 2,817 $ 6,157 $ - $ 207,335
============ ============ ============ ============ ============ ============
Interest expense $ 103,451 $ 276,998 $ 62,583 $ 136 $ (96,301) $ 346,867
============ ============ ============ ============ ============ ============
Segment net income (loss) $ 426,140 $ 197,930 $ 262,171 $ (199,129) $ (96,301) $ 590,811
============ ============ ============ ============ ============ ============
Goodwill $ - $ - $ - $ 2,916,085 $ - $ 2,916,085
============ ============ ============ ============ ============ ============
Segment assets $ 4,360,541 $ 7,473,986 $ 1,080,063 $ 7,505,419 $ (448,336) $ 19,971,673
============ ============ ============ ============ ============ ============
Expenditures for segment
assets $ 4,584 $ 56,232 $ 802 $ (5,838) $ - 55,780
============ ============ ============ ============ ============ ============
Six months ended June 30, 2005:
-------------------------------
Inter-
Energy Company
Real Estate Management Other and Transaction Consolidated
REP Operations Services Corporate Eliminations Total
------------- ------------- ------------- ------------- ------------- -------------
Revenues from external
customers $ 1,436,385 $ 1,342,319 $ - $ - $ - $ 2,778,704
============ ============ ============ ============ ============ ============
Revenues from other
operating segments $ 272,826 $ 13,300 $ - $ - $ (286,126) $ -
============ ============ ============ ============ ============ ============
Depreciation, amortization
and depletion $ 3,300 $ 138,762 $ - $ 54,444 $ - $ 196,506
============ ============ ============ ============ ============ ============
Interest expense $ 22,895 $ 222,571 $ - $ 91,184 $ (74,155) $ 262,495
============ ============ ============ ============ ============ ============
Segment net income (loss) $ (264,627) $ 127,715 $ - $ (215,232) $ (22,844) $ (374,988)
============ ============ ============ ============ ============ ============
Segment assets $ 1,664,153 $ 7,420,442 $ - $ 6,828,318 $ (391,853) $ 15,521,060
============ ============ ============ ============ ============ ============
Expenditures for segment
assets $ 15,495 $ 403,371 $ - $ 5,482 $ - $ 424,348
============ ============ ============ ============ ============ ============
NOTE J - 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
14
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
loan agreement restricts cash distributions to TCTB's owners. TCTB
shall not declare or pay any distributions in excess of tax liability
due annually (but in any event, no more than 40% of net income),
either in cash or any property to any owners. The loan agreement also
contains other customary conditions and events of default, the failure
to comply with, or occurrence of, would prevent any further borrowings
and would generally require the repayment of any outstanding
borrowings along with accrued interest under the loan agreement. Such
events of default include (a) non-payment of loan agreement debt and
interest thereon, (b) non-compliance with the terms of the credit
agreement covenants, (c) cross-default with other debt in certain
circumstances, (d) bankruptcy and (e) a final judgment or order for
the payment of money in excess of $100,000. 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 D) 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 8.25% as of June 30, 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. The loan agreement is secured by substantially all of the
assets of 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 (8.25% at June 30, 2006). Interest is computed on the
unpaid principal balance of the Note and is due and payable 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
15
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
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.
NEMA entered into twenty-two promissory notes (the "NEMA Notes") on
May 18, 2006, effective April 1, 2006 totaling $3,230,051 to purchase
100% ownership interest in Priority Power Management, Ltd, a Texas
limited partnership, and Priority Power Management Dallas, Ltd, a
Texas limited partnership. The notes are due in quarterly installments
of principal and interest beginning on September 30, 2006 with a final
maturity of December 31, 2013. The term notes bear interest at a fixed
rate per annum of 7.75%.
Long-term debt as of June 30, 2006:
Long-term Current
Portion Portion Total
------------- ------------ ------------
TCTB note $ 5,570,755 $ 226,491 $ 5,797,246
Delaware notes 1,394,543 - 1,394,543
Hexagon note 113,636 41,646 155,282
Line of credit - - -
WNB note - - -
NEMA notes 2,898,972 331,079 3,230,051
------------ ----------- -----------
Total $ 9,977,906 $ 599,216 $10,577,122
============ =========== ===========
Maturities of long-term debt at June 30, 2006 areas follows:
2006 $ 599,216
2007 643,806
2008 5,760,162
2009 440,682
2010 3,133,256
-----------
Total 10,577,122
Less current portion 599,216
-----------
Long-term portion $ 9,977,906
===========
NOTE K - RELATED PARTY TRANSACTIONS
At June 30, 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 $89,215 and $88,895 during
the quarters then ended, respectively.
16
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
The Company closed the sale and issuance of 125,000 shares of Series C
Preferred Stock and 250,000 Warrants (see note M) 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.
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
============= ================
On May 18, 2006, Jon M. Morgan and Bruce Edgington exercised their
outstanding warrants (described above) for a total exercise price of
$112,496 and $25,000, respectively. Mr. Morgan received 28,124 shares
of common stock and Mr. Edgington received 6,250 shares of common
stock upon the exercise of their stock warrants.
On May 25, 2006, the Company completed its acquisition of all of the
outstanding partnership interests in Priority Power pursuant to a
Securities Purchase Agreement by and between the Company and its
subsidiary, NEMA and the partners of Priority Power dated May 18,
2006. The total purchase price was $3,730,051.14, comprised of (i)
$500,000 in cash, and (ii) promissory notes with the aggregate
principal amount of $3,230,051.14 (see note J) from the Company and
NEMA and payable to the sellers. There are several business
relationships among Priority Power, its partners, the Company and its
subsidiaries, and their respective affiliates. The Company's retail
electricity provider subsidiary, W Power, has contractual
relationships with Priority Power with respect to providing
electricity to less than 0.2% of Priority Power's clients and the
Company believes W Power will not provide energy to any Priority Power
clients in the future. Additionally certain of the selling partners of
Priority Power are customers of W Power none of which are considered
significant customers. In addition, certain of the selling partners of
Priority Power are also five percent or more stockholders of the
Company or affiliates of stockholders of the Company, including an
affiliate of Jon M. Morgan, the President and Chief Operating Officer
of the Company, and Eric L. Oliver, the Chairman of the Board of
Directors and the Chief Executive Officer of the Company. Jon M.
Morgan is a fifty percent owner of Anthem Oil and Gas, Inc which was a
selling limited partner of Priority Power. Mr. Morgan also owned a one
third interest in the selling general partner of Priority Power
Management, Ltd. Eric L. Oliver owned a thirty-seven and a half
percent interest in a selling limited partner of Priority Power,
Oakdale Ventures, Ltd.
17
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
The following table reflects the portion of the Company's long-term
debt payable to related parties:
NEMA notes Delaware notes Total
--------------- ----------------- ----------------
Eric Oliver, CEO $ 24,887 240,853 $ 265,740
Jon M. Morgan , COO 588,693 370,142 958,835
5% Shareholders 1,143,241 268,744 1,411,985
--------------- ----------------- ----------------
Total $ 1,756,821 879,739 $ 2,636,560
=============== ================= ================
NOTE L - 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 June 30, 2006:
2006 $ 1,217,986
2007 714,984
2008 118,580
2009 -
-----------
Total $ 2,051,550
===========
NOTE M - 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 J. 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
18
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
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.
On May 18, 2006, the Company issued 84,374 shares of common stock for
$337,496 upon the exercise of certain stock warrants (described above)
covering 84,374 shares with a strike price of $4.00.
NOTE N - 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 June 30, 2006, all options available under
the 1997 Plan have been granted: 62,579 options have been exercised,
and 301,363 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 1.66 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, 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 June 30, 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 6.73 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
thee and six months ended June 30, 2006 the Company did not issue any
stock based compensation under the 1997 Plan or the 1998 Plan. As such
19
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
the Company did not have any stock based compensation expense to
recognize during the three and six months ended June 30, 2006.
The table below summarizes the stock option activity for the three and
six months ended June 30, 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
============
Options exercised - -
Options forfeited (2,692) 16.00
Options issued - -
------------
Outstanding June 30, 2006 414,744 $ 14.11
============
At June 30, 2006 the 414,744 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 3.04 years
The table below summarizes the stock option activity for the three and
six months ended June 30, 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
============
Options exercised - -
20
AMEN Properties, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
June 30, 2006
(Unaudited)
Options forfeited (13,620) 14.07
Options issued - -
------------
Outstanding June 30, 2005 427,753 $ 14.00
============
At June 30, 2005 the 427,753 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 3.87 years.
21
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 for the three and six
month periods ended June 30, 2006 and 2005, 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. Effective April
1, 2006, AMEN Properties acquired 100% of Priority Power Management, Ltd. a
Texas limited partnership, and Priority Power Management, Dallas, Ltd. a Texas
limited partnership, (collectively referred to as "Priority Power"). Priority
Power is primarily involved in providing energy management services and the
Company believes that Priority Power's business is complimentary to the retail
electricity provider business conducted by the Company's subsidiary 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 of
estimates and fassumptions as to future uncertainties and, therefore, may result
in actual amounts that differ from estimates are the following:
- Impairments,
- Business combinations,
- Revenue recognition,
- Consolidation of variable interest entities,
- Allowance for doubtful accounts and
- Stock options
22
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
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.
Business Combinations
We allocate the purchase price of acquired businesses 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 business, and other market data. Management also
considers information obtained about each business as a result of its
pre-acquisition due diligence 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
23
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.
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.
24
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.
The Company's gross revenues for energy management services provided to our
customers are recognized upon delivery and include estimated aggregation fees
and other services delivered but not billed by the end of the period.
Accrued unbilled aggregation revenues are based on our estimates of customer
electricity usage since the date of the last meter reading provided by the
independent system operators or electric distribution companies. Volume
estimates are based on average daily volumes, estimated customer usage and
applicable customer aggregation rates. Unbilled aggregation revenues are
calculated by multiplying volume estimates by our estimated rates by customer.
Estimated amounts are adjusted when actual usage and rates are known and billed.
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.
25
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; billed and unbilled
customer retail electricity usage flowed for a given period and billed and
unbilled customer management fees based on 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 June 30, 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. Priority Power's trade accounts receivable arise from aggregation fees
and other management services. An allowance for uncollectible accounts
receivable is provided for amounts not expected to be collectible. At June 30,
2006, no allowance was provided for Priority Power's accounts receivable due to
the limited captured historical data related to the estimated aggregation fees
and other services delivered but not billed by the end of the period. As of June
30, 2006 the Company considers Priority Power's accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is required.
Stock Options
The Company accounts for its stock-based compensation in accordance with SFAS
No. 123R, Accounting for Stock-Based Compensation. In December 2004, the
Financial Accounting Standards Board issued SFAS 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
Overview
--------
For the six months ended June 30, 2006, the Company generated net income of
$590,811 or $.27 per share as compared to a net loss of $374,988, or $.17 per
share for the same period ended June 30, 2005, for a net increase of $965,799.
This increase is mainly due to the Company's wholly owned subsidiary W Power
generating net income for the six months ended June 30, 2006 of approximately
$426,000 compared to a net loss of approximately $265,000 for the same period
ended June 30, 2005. W Power was in its startup period during this time last
year, and was able to grow its customer base sufficiently to achieve
profitability for the same period this year. Additionally, retail margins have
expanded because of increased contract prices and a decrease in certain
wholesale ancillary energy services prices. The Company also completed the
acquisition of Priority Power effective April 1, 2006. For the three months
ended June 30, 2006 Priority Power generated net income of approximately $
262,000.
Revenues
--------
For the three and six months ended June 30, 2006
For the three and six months ended June 30, 2006, the Company experienced an
increase in rental revenue of approximately $161,000 and $242,000, respectively,
as compared to the same period ended June 30, 2005. The increase is mainly due
26
to the Company billing tenants for the incremental increase in building
operations. The Company did not pass through the incremental increase in
building operations during the same period ended June 30, 2005. W Power
experienced a net increase in retail electricity revenue of approximately
$2,266,000 and $5,124,000 during the three months and six months ended June 30,
2006, respectively. This increase is mainly due to W Power moving from a start
up phase to acquiring a customer base of approximately 1,400 meters.
Operating expenses
------------------
For the three months ended June 30, 2006
Total operating expenses for the three months ended June 30, 2006 and 2005 were
$4,208,640 and $1,924,424, respectively. The increase of approximately
$2,284,000 in operating expense is mainly related to W Power's increase of
wholesale electricity purchases of approximately $1,920,000, consistent with its
increased customer base. The remaining increase of $364,000 in operating
expenses is related to the increase in general and administrative and rental
property operations, approximately $273,000 and 90,000, respectively.
W Power's cost of goods and services were $3,063,743 or approximately 90.3% of
retail sales for the three months ended June 30, 2006. This increase in gross
profits is mainly due to an increase in customer contract prices and a decrease
in certain wholesale ERCOT ancillary energy services.
Rental property operations and general and administrative expense increased
approximately $90,000 and $273,000, respectively, for the three months ended
June 30, 2006 as compared to three months ended June 30, 2005. The increase for
property operations is attributable to an increase in energy costs. The increase
in general and administrative expense is also attributable to the newly acquired
operating segment Priority Power.
For the six months ended June 30, 2006
Total operating expense for the six months ended June 30, 2006 as compared to
same period ended June 30, F2005 increased approximately $4,938,000. This
increase is mainly related to W Power's increase in purchased wholesale
electricity of approximately $4,460,000. The remaining increase of approximately
$478,000 in operating expenses is mainly related to the increase of general and
administrative costs, approximately $273,000, associated with the newly acquired
business segment Priority Power and an increase in rental property operations,
approximately $163,000, associated with the increase in energy costs.
W Power's cost of goods and services were $5,884,161 or approximately 89.7% of
retail electricity sales for the six months ended June 30, 2006, for a gross
profit of approximately $676,000 or approximately 11.1% of retail electricity
sales for the six months ending June 30, 2006. For the six months ended June 30,
2005 W Power's cost of goods and services were $1,423,375 or approximately 99.1%
of retail electricity sales for the six months ended June 30, 2005, for a gross
profit of approximately $13,000 or approximately 0.1% of retail electricity
sales for the six months ending June 30, 2005. The net increase of approximately
10% in gross profit earnings is mainly due to W Power successfully increasing
its customer contract prices while also experiencing a decrease in the costs of
wholesale power and certain wholesale ERCOT ancillary services.
Rental property operations expense increased approximately $163,000 for the six
months ended June 30, 2006 as compared to six months ended June 30, 2005. The
increase for property operations is attributable to the increase in utility
expense due to the rising costs of energy.
27
For the six months ended June 30, 2006 as compared to the same period ending
June 30, 2005, general and administrative costs increased approximately
$303,000. This increase is mainly attributable to the newly acquired operating
segment Priority Power.
Other (expense) income
----------------------
For the three months ended June 30, 2006
For the three months ended June 30, 2006, the Company experienced an increase of
approximately $43,000 in interest income as compared to the three months ended
June 30, 2005. This increase is mainly due to a rate increase on the Company's
$2,100,000 certificated of deposit with the Wells Fargo, Bank, N.A. coupled with
the interest the Company received on the restricted deposits with JPMorgan Chase
Bank, N.A. totaling $2,156,000 collateralizing outstanding Letters of Credit
(see Note D to the financial statements for further explanation). For the three
months ended June 30, 2006 and 2005, the Company incurred a net change in other
expense of approximately $157,000. This change is mainly related to a
non-recurring expense the Company paid to key employees of Priority Power
Management upon their signing of employment agreements. This non-recurring
expense approximated $125,000.
For the six months ended June 30, 2006
For the six months ended June 30, 2006, as compared to the same period ended
June 30, 2005, the Company experienced an increase of approximately $81,000 in
interest income. This increase is mainly due to a rate increase on the Company's
$2,100,000 certificated of deposit with the Wells Fargo, Bank, N.A. coupled with
the interest the Company received on the restricted deposits with JPMorgan Chase
Bank, N.A. totaling $2,156,000 collateralizing outstanding Letters of Credit
(see Note D for further explanation). For the six months ended June 30, 2006 and
2005, the Company experienced a net decrease in other income of approximately
$116,000. This change is mainly related to a non-recurring expense the Company
paid to key employees of Priority Power Management upon their signing of
employment agreements. . The employee's retention of the payment is not
contingent on the employees rendering of future services. This non-recurring
expense approximated $125,000.
Minority interest
-----------------
For the three and six months ended June 30, 2006
Minority interest expense for the three months and six months ended June 30,
2006 increased approximately $39,070 and $20,116, respectively, as compared to
the same period ended June 30, 2005. This increase reflects the minority
interest owner's share of net income of TCTB.
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. Additionally, we believe the recent acquisition of Priority Power
Management, LP (PPM) will also provide stable cash flow in the future, and is
consistent with our interest in the deregulated electricity market in Texas.
With PPM as a wholly owned subsidiary, Management believes we can continue
participating in opportunities within Texas and elsewhere, and diversify our
energy activities.
28
As discussed last quarter, 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 in the first two quarters of 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 and to manage the risks associated with volatile
energy prices. The main challenges W Power will face will be volatile 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 obligations. Even with continued
deliberate limiting of W Power's growth the Company's business model leads
management to expect positive earnings for 2006.
The PPM acquisition was made with a combination of cash and promissory notes.
PPM was profitable in the period. Management is optimistic that PPM will
continue its profitability throughout 2006 and beyond, and will continue to grow
its client base and become an important component in providing stable cash flow
in the future. Management believes the continued high volatility of energy
prices will provide a reason for additional end-use energy consumers to solicit
energy management services from PPM.
Though we have not abandoned the 2002 business model, our focus is to continue
supporting W Power for the immediate future, integrate the PPM acquisition into
the Company and support is growth efforts, actively monitor TCTB, and assess
opportunities as they present themselves.
During the six months ended June 30, 2006 and 2005, net cash provided by (used
in) operating activities was $757,682 and $(593,367), respectively for a net
increase of approximately $1,351,000 provided by operating activities. This
increase is mainly attributable to the net income of approximately $590,000 for
the six months ended June 30, 2006. Additionally, during the six months ended
June 30, 2005 the Company experienced an increase in operating expenses
associated with W Power, as W Power was beginning operations.
Net cash used in investing activities was $323,364 and $1,050,860 for the six
months ended June 30, 2006 and 2005, respectively, for a net decrease of
approximately $727,000. During the six months ended June 30, 2006 the Company
used approximately $56,000 in miscellaneous asset acquisition and remodeling of
lease space as compared to approximately $424,000 for the six months ended June
30, 2005 for a decrease of approximately $368,000. Additionally, during the
second quarter the Company completed the acquisition of 100% of Priority Power
Management, Ltd. This acquisition resulted in the Company receiving a net
increase in cash of approximately $283,000 and incurring a non-cash related note
payable in the amount of $3,230,051.
Net cash provided by financing activities was $173,111 and $486,123 for the six
months ended June 30, 2006 and 2005, respectively, for a net change of
approximately $313,000. During the six months ended June 30, 2006, the Company
received approximately $337,000 in net proceeds from the exercise of stock
warrants issued On February 3, 2005, to the accredited investors in the private
placement under Regulation D for the new Series C Preferred Stock. Additionally,
during the six months ended June 30, 2006 minority interest distributions were
approximately $36,500 and were related to the minority interest owners in TCTB.
For the six months ended June 30, 2005 minority interest owners in TCTB did not
receive a distribution.
Currently, the Company has a net operating tax loss ("NOL") carry forward in
excess of $29 million. This NOL is 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 $2.5 and $5 million and has
been diligent in its efforts to ensure its preservation and utilization.
29
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 interim 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 interim 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. 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
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.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Information related to this Item has been previously included in Current Reports
on Form 8-K filed during the period covered by this Report.
ITEM 3. Defaults Upon Senior Securities
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders
On May 17, 2006, the Company held its annual meeting of shareholders. At the
meeting, the following proposals were voted upon by the Company's shareholders.
At the record date, March 15, 2006, there were 2,206,215 shares of common stock
isuued; 616,447 common equivalent of Preferred A with a voting equivalent of
333,333 common shares; 233,317 common equivalent of Preferred B with a voting
equivalent of 233,317; and 470,000 common equivalent of Preferred C with a
30
voting equivalent of 470,000. A total of 3,242,865 voting shares and 2,761,156
of the shares, which represents the necessary quorum, voted on the proposals.
Proposal I: To elect the following nominees as directors:
It was proposed that six members be elected at the meeting to the Board of
Directors.
Percentage Percentage
of Votes of Votes
Proposal I For Cast Against Cast Abstain
----------------------------------------------------------------------------
Eric Oliver 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
Jon M. Morgan 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
Bruce E. Edgington 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
Earl E. Gjelde 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
Donald M. Blake Jr. 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
G. Randy Nicholson 2,647,854 95.90% 48,410 1.75% 64,892
----------------------------------------------------------------------------
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
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
31
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
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
32
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.
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
33
10.42@ Loan Agreement between Amen Properties, Inc. and Western National
Bank
10.43@ Western National Bank Revolving Line of Credit Note
10.44 Employment Agreement between Priority Power Management, Ltd and
John Bick (Incorporated by reference to the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on
June 1, 2006).
10.45 Employment Agreement between Priority Power Management, Ltd and
Padraig Ennis (Incorporated by reference to the Company's Report
on Form 8-K filed with the Securities and Exchange Commission on
June 1, 2006).
10.46 Securities Purchas Agreement among Amen Properties, Inc. and NEMA
Properties, LLC, Priority Power Management, Ltd. and Priority
Power Management Dallas, Ltd. and their respective partners dated
as of May 18, 2006, including the forms of promissory note and
assignment delivered at closing (incorporated by reference to the
Company's Form 8-K Current Report filed on May 24, 2006).
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 June 30, 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.
34
### 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.
35
SIGNATURES
In accordance with the requirements of Securities Act of 1934, AMEN Properties,
Inc., the registrant, has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AMEN Properties, Inc.
August 15, 2006 By: /s/ Eric Oliver
---------------
Eric Oliver
Chairman and Chief Executive Officer
August 15, 2006 By: /s/ John M. James
-----------------
John M. James
Interim Chief Financial Officer and Secretary
36
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
37
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)
10.31++ Annex to the Stock Purchase Agreement for Series B Preferred
Stock dated December 31, 2001
38
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
10.44 Employment Agreement between Priority Power Management, Ltd and
John Bick (Incorporated by reference to the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on
June 1, 2006).
10.45 Employment Agreement between Priority Power Management, Ltd and
Padraig Ennis (Incorporated by reference to the Company's Report
on Form 8-K filed with the Securities and Exchange Commission on
June 1, 2006).
10.46 Securities Purchase Agreement among Amen Properties, Inc. and
NEMA Properties, LLC, Priority Power Management, Ltd. and
Priority Power Management Dallas, Ltd. and their respective
partners dated as of May 18, 2006, including the forms of
promissory note and assignment delivered at closing (incorporated
by reference to the Company's Form 8-K Current Report filed on
May 24, 2006 as amended on August 8, 2006).
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.
39
32.2 Certification of Chief Financial Officer Pursuant to 18 USC
ss.1350.
99.1 Press release regarding June 30, 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
~ 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.
40