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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2004
Commission File No. 0-31235
CONX CAPITAL CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 62-1736894
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
502 N. DIVISION STREET, CARSON CITY, NV 89703
---------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(702) 886-0713
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. X
---
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). YES NO X
--- ---
There is no established market for the registrant's voting and
non-voting common equity. The aggregate book value of the voting
common equity held by non-affiliates on December 31, 2004 was
$0. For purposes of the foregoing calculation only, all
directors, executive officers, and their respective family
members, have been deemed affiliates. The registrant's revenues
for the fiscal year-end December 31, 2004, were $1,868,222.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Class Outstanding Shares
----------------------------- ------------
COMMON STOCK - PAR VALUE $.01 6,605,200
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
NONE
----
PART I
This annual report on Form 10-K contains forward-looking
statements as defined by the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements should be read in
conjunction with the cautionary statements and other important
factors included in this Form 10-K as well as in other filings
made by the Company with the Securities and Exchange Commission
("SEC") . These forward-looking statements are subject to a
number of risks and uncertainties, which could cause the
Company's actual results to differ materially from those
anticipated in such statements and include statements concerning
plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements which
are other than statements of historical facts. Factors which
could cause such results to differ include, but are not limited
to, the Company's limited operating history, the Company's
dependence on the operations of an affiliated party, reliance
upon third party financing, the need for additional financing
and other factors discussed in the Company's filings with the SEC,
including the Risk Factors set forth in the Company's Form
10 dated January 16, 2001. Such forward-looking statements
may be identified, without limitation, by the use of the
words "anticipates," "estimates," "expects," "should," "intends,"
"plans," "predicts," "projects," and similar expressions.
The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a
reasonable basis, including without limitation, management's
examination of the historical operating trends, data contained in
the Company's records and other data available from third
parties. There can be no assurance, however, that the Company's
expectations, beliefs or projections will be achieved or
accomplished in whole or in part.
ITEM 1. Description of Business.
-----------------------
CONX Capital Corporation, a Delaware corporation (the
"Company" or "CONX"), is a specialty commercial finance company
engaged in the business of originating and servicing
equipment leases to regional trucking companies. To date, the
Company's leasing activities have been limited to the leasing
of tractors and semi-trailers to one affiliated company,
Continental Express SD, Inc. As of December 31, 2004, the
Company had total assets of $7,116,804, primarily including
equipment that consisted of leased tractors and semi trailers
carried at $2,197,962, net of accumulated depreciation. For the
year ended December 31, 2004, net income was $77,820.
The Company was organized in April 1998 with its corporate
headquarters located in Carson City, Nevada. The Company
currently originates long-term fixed and variable rate lease
products with Continental Express SD, Inc., an affiliate under
common control with the Company's controlling shareholder.
The Company also may periodically make equity investments in
certain of the companies that enter into loan and lease
arrangements with the Company as part of its core lending and
leasing business.
The Company currently originates leases through its offices
located in Carson City, Nevada and Little Rock, Arkansas. The
Little Rock, Arkansas office was opened in April, 1998 at the
time of formation of the Company. The Carson City, Nevada office
has been the registered office of the Company since its
incorporation.
To date, the Company has no employees. Personnel performing
management and administrative functions on behalf of the Company
are provided to the Company under an employee leasing arrangement
with an affiliate of the Company controlled by the Company's
controlling stockholder. The activities of the Company require
on average approximately 10 hours per month for each of the four
leased employees. The Company will hire permanent employees at
such time as the activities of the Company can support full time
employees. At this time, the Company does not anticipate the
need for full time employees during the next twenty-four month
period.
-1-
To date, the Company's lease income has been derived solely
from one affiliated company, Continental Express SD, Inc. No
significant expansion of the scope of the Company's lending
activities is expected before the end of calendar year 2005.
The Company faces intense competition in the business of
originating and selling loans and leases. Traditional
competitors in the financial services business include commercial
banks, thrift institutions, diversified finance companies, asset-
based lenders, and specialty finance companies. Many of these
competitors are substantially larger and have considerably
greater financial, technical and marketing resources than the
Company. Competition can take many forms, including convenience
in obtaining a loan or a lease, customer service, marketing and
distribution channels, amount and term of the loan, interest
rates charged to borrowers, and credit ratings. In addition, the
current level of gains realized by the Company's competitors on
the sale of their loans and leases could attract additional
competitors into these markets, with the possible effect of
lowering gains that may be realized on the Company's future loan
and lease sales. The Company believes that its industry
expertise, combined with its responsiveness to borrowers,
flexibility in structuring transactions and broad product
offerings give it a competitive advantage over more traditional,
highly regulated small business lenders serving the trucking
industry.
ITEM 2. Properties.
----------
The Company leases its executive and administrative
offices which are located at 502 North Division Street, Carson,
City, Nevada, and 1406 Cantrell Road, Little Rock, Arkansas.
These offices consist of an aggregate of approximately 3,500
square feet. Both leases have been extended through December 31,
2005. The Company owns no fee interest in any real property.
ITEM 3. Legal Proceedings.
-----------------
There are no pending legal proceedings involving the Company as a
party or involving any of the Company's assets or leased
properties.
-2-
ITEM 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matters were submitted for a vote of the security holders
during the fourth quarter of fiscal year 2004.
PART II
ITEM 5. Market for Common Equity and Related Stockholder
------------------------------------------------------
Matters.
-------
There is no established public trading market for the Company's
common stock. There are also no outstanding options or warrants
to purchase the common stock of the Company, or securities
convertible into the common stock of the Company. All issued
and outstanding common stock of the Company are held by persons
who would be deemed to be affiliates for purposes of the
Securities Act of 1933, as amended (the Securities Act ),
and for purposes of Rule 144 as promulgated thereunder. As of
April 14, 2005, there were approximately 7 holders of record of
the Company's common stock.
The Company has not declared or paid any cash dividends on
its common stock and does not intend to declare any dividends in
the foreseeable future. Payment of dividends, if any, is within
the discretion of the board of directors and would depend upon
the Company's earnings, if any, its capital requirements and
financial condition, and such other factors as the board of
directors may consider from time to time.
The Company did not sell or otherwise issue any equity
securities during the fiscal year ended December 31, 2004.
Equity Compensation Plan Information
(a) (b) (c)
------------- ------------- -------------
Number of
Securities
Remaining
available
Number of for issuance
Securities under equity
to be issued compensation
upon exercise Weighted Average plans (excluding
of Outstanding Exercise Price of securities reflected
Options Outsanding Options in column (a))
------------ ---------------- ------------------
Plan Category
-------------
Equity Compensation
plans approved by
Shareholders . . . . . . None $ 0 None
Equity Compensation
plans not approved by
Shareholders . . . . . . None $ 0 None
ITEM 6. Selected Financial Data.
-----------------------
The following sets forth the selected financial data for the
fiscal years ended December 31, 2004, December 31, 2003, December
31, 2002, December 31, 2001, and December 31, 2000, respectively:
12/31/04 12/31/03 12/31/02 12/31/01 12/31/00
---------- ---------- ---------- ---------- ----------
Revenues $ 1,868,222 $ 3,267,090 $ 3,800,220 $ 4,650,930 $ 4,326,287
Net Income $ 77,820 $ 485,191 $ 1,226,589 $ 890,329 $ 541,293
Earnings per
Share $ 0.0117 $ 0.0729 $ 0.1845 $ 0.1338 $ 0.0814
Cash Dividend
per Share $ 0.0 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Total Assets $ 7,116,804 $ 8,848,218 $10,346,455 $ 8,168,003 $10,603,031
Stockholders
Equity $ 3,587,567 $ 3,569,537 $ 3,084,346 $ 1,857,757 $ 967,428
ITEM 7. Management's Discussion and Analysis of Financial
------------------------------------------------------
Condition and Results of Operation.
----------------------------------
The following discussion and analysis below should be read
in conjunction with the financial statements, including the notes
thereto, appearing elsewhere in this Annual Report on Form 10-K.
To date, the Company's only activities and sources of operating
revenue have been leases of tractor and trailer truck equipment
to one affiliated company, Continental Express SD, Inc.
-3-
Results of Operation
Fiscal year ended December 31, 2004
Lease income was $912,164 for the fiscal year ended
December 31, 2004. As of that date the Company had 59 tractors
leased to its customer. Operating expenses (consisting
primarily of interest expense and depreciation) for the
fiscal year ended December 31, 2004 were $1,896,348.
Operating Loss for the fiscal year ended December 31, 2004
was $28,126. This operating loss results primarily from a
decrease in lease income. Other income for fiscal year 2004
was $141,255. Income before income taxes for fiscal year 2004
totaled $113,129, with a provision for income taxes of $35,309,
resulting in net income for fiscal year 2004 equal to $77,820.
This amount represents a decrease of 83.96% when compared to
the net income amount in fiscal year 2003, as a result of the
differences noted above.
Fiscal year ended December 31, 2003
Lease income was $3,024,901 for the fiscal year ended
December 31, 2003. As of that date the Company had 135 tractors
and 141 semi-trailers leased to its customer. Operating
expenses (consisting primarily of interest expense and
depreciation) for the fiscal year ended December 31, 2003 were
$2,597,009 and operating expenses as a percentage of lease income
was 85.9%. The increase in this percentage in 2003 from the
prior year resulted primarily from a reduction in lease income
income of 17.4% in 2003 from fiscal year 2002 levels.
Operating Income for the fiscal year ended December 31, 2003
was $670,081, a decrease of 52.5% from fiscal year 2002. This
decrease in operating income results primarily from a
decrease in lease income compounded with increases in both
depreciation expense and interest expense. Other income for
fiscal year 2003 was $119,828. Income before income taxes for
fiscal year 2003 totaled $789,909, with a provision for income
taxes of $304,718, resulting in net income for fiscal year 2003
equal to $485,191. This amount represents a decrease of 60.4%
when compared to the net income amount in fiscal year 2002,
as a result of the differences noted above.
Fiscal year ended December 31, 2002
Lease income was $3,663,770 for the fiscal year ended
December 31, 2002. As of December 31, 2002, the Company had 126
tractors and 142 semi-trailers leased to its customer. Operating
expenses (consisting primarily of interest and depreciation) for
the fiscal year ended December 31, 2002 were $2,390,844, and
operating expenses as a percentage of lease income was 65.3%.
The improvement in this percentage in 2002 from the prior year
resulted primarily from a reduction in operating expenses of 26.5%
in 2002 from fiscal year 2001 levels. This improvement was
slightly offset by a reduction in lease revenues in 2002 from
fiscal year 2001 levels.
Operating Income for the fiscal year ended December 31, 2002
was $1,409,376. Other income for the fiscal year ended December
31, 2002 was $94,230. Income before income taxes for the fiscal
year ended December 31, 2002 was $1,503,606, with provision for
income taxes of $277,017, resulting in net income for the
fiscal year ended December 31, 2002 of $1,226,589. The increases
in the operating and net income for 2002 over 2001 amounts
result primarily from a decrease in operating expenses as
discussed above.
-4-
Liquidity and Capital Resources
The Company's current assets and working capital are
sufficient to meet its needs for the next twelve months of
operation as the Company is currently operating. However, the
Company has an ongoing need to finance its lending activities.
The Company's primary cash requirements include the funding of (i)
loans and leases pending their sale, (ii) fees and expenses
incurred in connection with its securitization program, (iii)
over collateralization or reserve account requirements in
connection with loans pooled and sold, (iv) interest, fees, and
expenses associated with the Company's warehouse credit and
repurchase facilities with certain financial institutions, (v)
federal and state income tax payments, and (vi) ongoing
administrative and other operating expenses. To date, the Company
currently has funded these cash requirements by credit facilities
granted by Navistar Financial Corporation, GE Capital Corporation
and Fleet Capital Leasing and guaranteed by the Company's
affiliate, Continental Express SD, Inc. The Company anticipates
that in the future it may rely more heavily on securitizations,
whole loan and lease sales, and borrowings as its cash
requirements increase.
The Company has also offered and sold its common stock to
fund its operations. In April 1998, the Company issued 7,000,000
shares of common stock for net proceeds of $70,000.
Inflation
The impact of inflation is reflected in the increased cost
of the Company's operating expenses, excluding depreciation and
interest expense. Changes in interest rates have a greater
impact on the Company's performance than do the effects of
general levels of inflation. Inflation affects the Company
primarily through its effect on interest rates, since interest
rates normally increase during periods of high inflation and
decrease during periods of low inflation. The Company intends to
manage its exposure to inflationary interest rate risks by
closely monitoring the difference or spread between the
effective rate of interest received by the Company and the rates
payable by the Company.
Disclosure of Contractual Obligations
The funding requirements of the Company's most significant
financial obligations are set forth in the table below:
Payments Due by Period
-------------------------------------------------------
Less than 1-3 3-5 Greater than
1 Year Years Years 5 Years Total
-------------------------------------------------------
Contractual
Obligations:
Long-term
Debt $ 1,249,341 $ 949,886 -0- -0- $ 2,199,227
ITEM 8. Financial Statements and Supplementary Data.
-------------------------------------------
The financial statements, including notes thereto, are
attached in the Financial Statement Schedules in Item 15 to this
Annual Report on Form 10-K.
ITEM 9. Changes In and Disagreements with Accountants on
------------------------------------------------------
Accounting and Financial Disclosure.
-----------------------------------
None.
ITEM 9A. Controls and Procedures.
------------------------
The Company maintains disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in the Company's reports pursuant to the Securities
Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief
Executive Officer and its Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurances of achieving the desired
control objectives, and management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Within 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures, as
that term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures
are effective in timely alerting the Company's Chief Executive
Officer and Chief Financial Officer to material information
required to be disclosed in the periodic reports filed with the
SEC.
The Company also adheres to certain processes to provide
reasonable assurance regarding the reliability of financial
information reported in documents filed with the SEC or
otherwise made public. The Company's management is responsible
for establishing and maintaining such processes to ensure that
adequate internal controls exist with respect to the Company's
financial reporting. The Company's Chief Executive Officer and
Chief Financial Officer have reviewed the Company's internal
controls and there have been no significant changes in such
controls or other factors that could significantly affect those
controls subsequent to the last date of the most recent
evaluation.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
The names of the directors and executive officers of the
Company, as well as their respective ages and positions with the
Company, are as follows:
Name Age Position
---- --- --------
Edward M. Harvey 73 Chairman of the Board of Directors
Michael Kelly Woodridge 46 President and Director
Todd W. Tiefel 39 Chief Financial Officer and
Director
John P. Flahavin 68 Director
Theodore C. Skokos 57 Director
Edward M. Harvey has been the President and the Chairman of
the Company's Board of Directors since the Company's inception
and currently remains as chairman of the Board of Directors.
Prior to founding the Company, Mr. Harvey founded and continues
to own and serve as the Chairman of the Board of Harvey
Incorporated and several affiliated companies, including Harvey
Industries, Inc., Harvey Manufacturing Corporation and Advanced
Sawmill Machinery, Inc. (Manufacturing), Continental Express SD,
Inc. (Trucking), Preston National Bank (Banking) and Continental
Lumber Company and Travis Lumber Company, Inc. (Timber).
Michael Kelly Wooldridge has served as a Director of the
Company since its inception and has served as the Company's
President since 2002. Mr. Wooldridge has served as the
President of Gibraltar National Insurance Company since 1988.
Todd W. Tiefel has served as the Secretary, Treasurer and a
Director of the Company since its inception, has served as the
Company's CFO since 2002, and has been the Chief Financial
Officer of Harvey Incorporated since 1996. Prior thereto and
since before 1996, Mr. Tiefel served in different capacities
with Baird, Kurtz & Dobson, Certified Public Accountants,
most recently as Audit/Tax Supervisor. Mr. Tiefel is a Certified
Public Accountant.
John P. Flahavin has served as a Director of the Company
since its inception. Since 1973, Mr. Flahavin has served as the
President of John Flahavin & Associates, an apparel manufacturer
and representative of designer manufacturers. In addition, during
the 1992 to 1995 period, Mr. Flahavin also served as the
President of Teri Jon N.Y., a dress and suit manufacturer
generating sales volume of approximately $21,000,000.
Theodore C. Skokos has served as a Director of the Company
since its inception. Mr. Skokos is involved with several other
businesses, principally in the telecommunications field, and has
served since 1991 as the President of Skokos Cellular
Communications of Arkansas, Inc., as President of New Hampshire
One Cellular Telephone Company, Inc., and as President of Cardiac
Concepts, Inc., a medical device company. In addition, Mr.
Skokos has been a member of the law firm of Skokos, Bequette &
Billingsley, P.A., since before 1996, and served as that firm's
President during 1993-1994.
The Company adopted a Code of Ethics applicable to its
directors, chairman, president, chief financial officer and other
executive officers that constitues a "code of ethics" as
defined by applicable rules of the Securities and Exchange
Commission. The Company will provide its Code of Ethics to any
person, without charge, upon request submitted to the Board of
Directors of the Company at its principal office located at
502 N. Division Street, Carson City, Nevada 89703. Any
amendments to the Company's Code of Ethics, other than technical,
administrative, or other non-substantive amendments, will be
promptly disclosed by the Company in a report on Form 8-K filed
with the Securities and Exchange Commission.
-6-
ITEM 11. Executive Compensation.
----------------------
None of the Company's executive officers were compensated
for their services in such capacities for the year ended December
31, 2004.
ITEM 12. Security Ownership of Certain Beneficial Owners and
------------------------------------------------------
Management.
----------
The following table sets forth information regarding
the beneficial ownership of the Company's Common Stock as of the
date hereof by (i) each person known by the Company to be the
beneficial owner of more than five percent of its Common Stock;
(ii) each director; (iii) each executive officer of the Company;
and (iv) all directors and executive officers as a group. Unless
otherwise indicted, each of the following stockholders has sole
voting and investment power with respect to the shares
beneficially owned, except to the extent that such authority is
shared by spouses under applicable law.
-7-
Amount and
Name and Address of Nature of Percentage of
Beneficial Owner Beneficial Outstanding
Ownership Shares
------------------- ---------- -------------
Edward M. Harvey(1)(2) 4,855,200 73.50%
Bonnie P. Harvey(1)(3) 350,000 5.30%
Charles Harvey(1)(4) 350,000 5.30%
Deborah Harvey(1)(5) 350,000 5.30%
Jill Pryor(1)(6) 350,000 5.30%
Darby Boyd(1)(7) 350,000 5.30%
Mark Guffin(1)(8) 350,000 5.30%
All executive officers 4,855,200 73.50%
and directors as a
group (5 persons)
(1) CONX Capital Corporation and each of such persons may be
reached at 502 North Division Street, Carson City, Nevada,
89703, or 1406 Cantrell Road, Little Rock, Arkansas, 72201.
(2) Includes 350,000 shares held in the name of his spouse,
Bonnie P. Harvey. Edward M. Harvey is the spouse of Bonnie
P. Harvey and the father of Charles Harvey and Deborah
Harvey, and the stepfather of Jill Pryor, Darby Boyd and
Mark Guffin. Mr. Harvey disclaims beneficial ownership over
any of the shares held by all such persons.
(3) Includes 4,505,200 shares held in the name of her spouse,
Edward M. Harvey. Bonnie P. Harvey is the spouse of Edward
M. Harvey and the stepmother of Charles Harvey and Deborah
Harvey, and the mother of Jill Pryor, Darby Boyd and Mark
Guffin. Mrs. Harvey disclaims beneficial ownership over any
of the shares held by all such persons.
(4) Charles Harvey is the son of Edward M. Harvey.
(5) Deborah Harvey is the daughter of Edward M. Harvey.
(6) Jill Pryor is the daughter of Bonnie Harvey.
(7) Darby Boyd is the daughter of Bonnie Harvey.
(8) Mark Guffin is the son of Bonnie Harvey.
ITEM 13. Certain Relationships and Related Transactions.
----------------------------------------------
The officers and directors are required to devote only such
time to the Company's affairs as is necessary for the effective
conduct of the Company's business. Each of the directors and
officers have, and may continue to have, occupations and sources
of income other than as a director or officer of the Company.
To date, the Company's lease income has been derived from
one affiliated company, Continental Express SD, Inc., and
Continental Express SD, Inc. has guaranteed each of the Company's
existing credit facilities granted by Navistar Financial
Corporation, Banc One Leasing Corporation, Fleet Capital Leasing
and GE Capital Corporation. Edward M. Harvey, chairman of the
Board of Directors of the Company, owns 68.20% of the issued and
outstanding shares of common stock of the Company, and is the
president and the controlling and majority shareholder of
Continental Express SD, Inc.
-8-
Except as set forth above, there have not been any
transactions and currently there are no proposed transactions in
which the amount involved exceeds $60,000 in which any director,
officer, or 5% shareholder is involved during the fiscal year
ended December 31, 2004.
ITEM 14. Principal Accounting Fees and Services
--------------------------------------
2004 2003
----------------------------
(a) Audit Fees: $ 27,175 $ 22,250
(b) Audit Related Fees: $ 0 $ 0
(c) Tax Fees: $ 0 $ 0
(d) All Other Fees: $ 0 $ 0
PART IV
ITEM 15. Exhibits, Financial Statements and Reports on Form 8-K:
-------------------------------------------------------
(a)(1) Financial Statements - See Index to Financial
Statements on Page F-1 of this Annual Report on
Form 10-K.
(a)(2) Financial Statement Schedules included in Part IV
of this Annual Report on Form 10-K. All schedules
under the accounting regulations of the SEC are
not required under the related instructions or are
inapplicable and thus, have been omitted.
(a)(3) See Exhibits below.
(b) No reports on Form 8-K were filed during the year ended
December 31, 2004.
(c) Exhibits.
3.1* Certificate of Incorporation of CONX Capital
Corporation.
3.2* Bylaws of CONX Capital Corporation.
10.1* CONX Capital Corporation 1998 Stock Compensation
Plan.
99.1 Certification of Chief Executive Officer of CONX
Capital Corporation Pursuant to 18 U.S.C. Section
1350.
99.2 Certification of Chief Financial Officer of CONX
Capital Corporation Pursuant to 18 U.S.C. Section
1350.
------------
* Previously filed as an Exhibit to the CONX
Capital Corporation Form 10 filed August 3,
2000 (File No. 0-31235).
-9-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CONX Capital Corporation
By: /s/ Edward M. Harvey
--------------------------------
Edward M. Harvey, Chairman of
the Board of Directors
Dated: April 14, 2005
-10-
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and all
the dates indicated.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below appoints, Todd W. Tiefel, his attorney-
in-fact, with the power of substitution, for him in any and all
capacities, to sign any and all amendments to this Annual Report
on Form 10-K and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof.
/s/ Edward M. Harvey
------------------------------------
Name: Edward M. Harvey
Capacity: Chairman and Director
(Principal Executive Officer)
Dated: April 14, 2005
/s/ Michael Kelly Wooldridge
----------------------------------------
Name: Michael Kelly Wooldridge
Capacity: President and Director
Dated: April 14, 2005
/s/ Todd W. Tiefel
--------------------------------------
Name: Todd W. Tiefel
Capacity: Chief Financial Officer and
Director
(Principal Financial and
Accounting Officer)
Dated: April 14, 2005
/s/ John P. Flahavin
---------------------------------------
Name: John P. Flahavin
Capacity: Director
Dated: April 14, 2005
/s/ Theodore C. Skokos
----------------------------------------
Name: Theodore C. Skokos
Capacity: Director
Dated: April 14, 2005
-11-
Certifications
--------------
I, Edward M. Harvey, certify that:
1. I have reviewed this annual report on Form 10-K of CONX
Capital Corporation;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 14, 2005
/s/ Edward M. Harvey
---------------------------
Principal Executive Officer
-12-
I, Todd W. Tiefel, certify that:
1. I have reviewed this annual report on Form 10-K of CONX
Capital Corporation;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this annual report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 14, 2005
/s/ Todd W. Tiefel
-----------------------
Chief Financial Officer
CONX Capital Corporation
Accountants' Report and Financial Statements
December 31, 2004, 2003 and 2002
CONX Capital Corporation
December 31, 2004, 2003 and 2002
Contents
Independent Accountants' Report 13
Financial Statements
Balance Sheets 14
Statements of Income 15
Statements of Stockholders' Equity 16
Statements of Cash Flows 17
Notes to Financial Statements 18
Independent Accountants' Report
Audit Committee, Board of Directors and Stockholders
CONX Capital Corporation
Little Rock, Arkansas
We have audited the accompanying consolidated balance sheets of
CONX Capital Corporation ("Company") as of December 31, 2004 and
2003, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years
in the period ended December 31, 2004. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of CONX Capital Corporation as of December 31, 2004 and
2003, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the
United States of America.
/s/ BKD, LLP
Little Rock, Arkansas
February 10, 2005
-13-
CONX Capital Corporation
Balance Sheets
December 31, 2004 and 2003
Assets
2004 2003
---------------------------
Cash $ 31,415 $ 90,465
Accounts receivable - other 445 93,404
Accounts receivable - affiliated
companies 206,235 236,735
Note receivable - affiliated
companies 4,680,747 3,233,815
Equipment, at cost, net of
accumulated depreciation 2,197,962 5,193,799
--------- ---------
$ 7,116,804 $ 8,848,218
========= =========
Liabilities and Stockholders' Equity
Liabilities
Accrued expenses $ 11,021 $ 37,719
Income taxes payable 780,503 296,563
Long-term debt 2,199,227 3,690,649
Deferred income taxes 538,486 1,253,750
--------- ---------
Total liabilities 3,529,237 5,278,681
--------- ---------
Stockholders' Equity
Common stock, $.01 par value,
7,000,000 shares authorized
and issued 70,000 70,000
Retained earnings 3,595,357 3,517,537
Treasury stock, at cost
Common - 2004 - 394,800
shares, 2003 - 350,000
shares (77,790) (18,000)
--------- ---------
Total stockholders' equity 3,587,567 3,569,537
--------- ---------
$ 7,116,804 $ 8,848,218
========= =========
See Notes to Financial Statements
-14-
CONX Capital Corporation
Statements of Income
Years Ended December 31, 2004, 2003 and 2002
2004 2003 2002
--------------------------------------
Lease Income $ 912,164 $ 3,024,901 $ 3,663,770
Gain on Sale of Equipment 956,058 242,189 136,450
--------- --------- ---------
1,868,222 3,267,090 3,800,220
--------- --------- ---------
Operating Expenses
Management fees 122,000 60,000 60,000
Depreciation 1,518,795 2,159,102 2,008,663
Professional fees 28,800 28,800 33,381
Director's fees 20,000 20,000 20,000
Rent 6,000 6,000 6,000
Taxes and licenses 11,987 10,889 1,425
Interest 184,537 312,022 260,372
Other 4,229 196 1,003
--------- -------- ---------
1,896,348 2,597,009 2,390,844
--------- --------- ---------
Operating (Loss) Income (28,126) 670,081 1,409,376
Other Income
Interest income 141,255 119,828 94,230
-------- --------- ---------
Income Before Income Taxes 113,129 789,909 1,503,606
Provision for Income Taxes 35,309 304,718 277,017
-------- --------- ---------
Net Income $ 77,820 $ 485,191 $ 1,226,589
======== ======== =========
Earnings Per Share
Net income $ 77,820 $ 485,191 $ 1,226,589
Weighted average shares
of common stock 6,627,539 6,650,000 6,650,000
--------- --------- ---------
Basic earnings per share $ .0117 $ .0729 $ 0.1845
========= ========= =========
See Notes to Financial Statements
-15-
CONX Capital Corporation
Statements of Stockholders' Equity
Years Ended December 31, 2004, 2003 and 2002
Common Retained Treasury
Stock Earnings Stock Total
-------------------------------------------------
Balance, January 1,
2002 $ 70,000 $ 1,805,757 $ (18,000) $ 1,857,757
Net income -- 1,226,589 -- 1,226,589
------- --------- -------- ---------
Balance, December 31,
2002 70,000 3,032,346 (18,000) 3,084,346
Net income -- 485,191 -- 485,191
-------- --------- -------- ---------
Balance, December 31,
2003 70,000 3,517,537 (18,000) 3,569,537
Treasury Stock; 44,800
shares -- -- (59,790) (59,790)
Net income -- 77,820 -- 77,820
-------- --------- --------- ---------
Balance, December 31,
2004 $ 70,000 $ 3,595,357 $ (77,790) $ 3,587,567
========= ========= ========= =========
See Notes to Financial Statements
-16-
CONX Capital Corporation
Statements of Cash Flows
Years Ended December 31, 2004, 2003 and 2002
2004 2003 2002
--------------------------------------
Operating Activities
Net income $ 77,820 $ 485,191 $ 1,226,589
Items not requiring
(providing) cash
Depreciation 1,518,795 2,159,102 2,008,663
Deferred income taxes (715,264) (67,255) 194,517
Gain on sale of equipment (956,058) (242,189) (136,450)
Changes in
Accounts receivable 123,459 1,548 (243,713)
Accrued expenses (26,698) (10,708) 18,427
Income taxes payable 483,940 296,563 --
--------- --------- --------
Net cash provided by
operating activites 505,994 2,622,252 3,068,033
--------- --------- ---------
Investing Activities
Proceeds from sale of
equipment 2,433,100 502,899 973,720
Purchase of equipment -- -- (4,007,368)
Issuance of notes
receivable (1,446,932) (888,645) (1,576,143)
Collection of note
receivable principal -- -- --
--------- --------- -----------
Net cash provided by
(used in) investing
activities 986,168 (385,746) (4,609,791)
--------- --------- ---------
Financing Activities
Purchases of treasury stock (59,790) -- 4,007,368
Principal payments on
long-term debt (1,491,422) (2,202,528) (3,297,949)
--------- --------- ---------
Net cash provided by
(used in) financing
activities (1,551,212) (2,202,528) 709,419
--------- --------- ---------
Increase (Decrease) in Cash (59,050) 33,978 (832,339)
Cash, Beginning of Year 90,465 56,487 888,826
--------- --------- ---------
Cash, End of Year $ 31,415 $ 90,465 $ 56,487
========= ========= ========
Supplemental Cash Flows
Information
Interest paid $ 184,537 $ 312,022 $ 260,372
Income taxes paid $ 278,363 $ 61,316 $ 82,500
See Notes to Financial Statements
-17-
CONX Capital Corporation
Notes to Financial Statements
December 31, 2004, 2003, and 2002
Note 1: Nature of Operations and Summary of Significant
Accounting Policies
Nature of Operations
CONX Capital Corporation, a Delaware Corporation, ("Company")
is a specialty commercial finance company engaged in the
business of originating and securing loans and equipment
leases to smaller businesses, with a primary focus on
regional trucking companies. The Company was organized in
April 1998 with its headquarters located in Carson City,
Nevada. The Company originates loans and leases through
marketing offices located in Carson City, Nevada and Little
Rock, Arkansas. For the years ended December 31, 2004, 2003
and 2002, all lease income was derived from one affiliated
company.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Accounts Receivable
Accounts receivable are stated at the amount billed to
customers. The Company provides an allowance for doubtful
accounts, which is based upon a review of outstanding
receivables, historical collection information and existing
economic conditions. Accounts receivable are generally
billed monthly and become delinquent 30 days thereafter.
Equipment
Equipment is depreciated over the estimated useful life of
each asset. Annual depreciation is primarily computed using
accelerated methods.
Income Taxes
Deferred tax liabilities and assets are recognized for tax
effects of differences between the financial statement and
tax bases of assets and liabilities. A valuation allowance
is established to reduce deferred tax assets if it is more
likely than not that a deferred tax asset will not be
realized.
Revenue Recognition
The Company recognizes operating lease income on the straight-
line basis over the life of the operating leases. These
operating leases contain provisions for service charges on
late payments equal to 2% of the lease payment or, if less,
the highest rate allowed by Nevada law. The leases also
contain excess mileage charges in the amount of five cents
per mile for miles in excess of 150,000 miles determined on
an annual basis. Initial direct costs are expensed over the
life of the corresponding lease in proportion to the
recognition of lease income.
-18-
CONX Capital Corporation
Notes to Financial Statements
December 31, 2004, 2003, and 2002
At December 31, 2004, the approximate future minimum lease
income under these operating leases is as follows:
2005 $ 1,185,600
2006 1,026,000
----------
$ 2,211,600
==========
Earnings Per Share
Earnings per share have been computed based upon the weighted-
average common shares outstanding during each year. There
are no dilutive or potentially dilutive shares.
Operating Leases
The Company leases equipment under noncancellable operating
leases. These leases expire through 2006 and convert to a
month-to-month basis if the Company does not receive notice
of termination. These leases require the lessee to pay all
executory costs (property taxes, maintenance and insurance).
Rental income under these operating leases was $912,164,
$3,024,901 and $3,663,770 for the years ended December 31,
2004, 2003 and 2002, respectively.
Equipment under operating leases consists of the following at
December 31, 2004 and 2003:
2004 2003
-------------------------
Tractors $ 4,439,733 $ 8,461,527
Trailers -- 2,412,661
--------- ----------
4,439,733 10,874,188
Less accumulated depreciation 2,241,771 5,680,389
--------- ----------
$ 2,197,962 $ 5,193,799
========= ==========
Note 2: Long-term Debt
2004 2003
--------------------------
Notes payable - Navistar
Financial Corporation (A) $ 1,988,197 $ 3,261,922
Note payable - GE Capital (B) 211,030 428,727
--------- ---------
$ 2,199,227 $ 3,690,649
========= =========
-19-
CONX Capital Corporation
Notes to Financial Statements
December 31, 2004, 2003, and 2002
(A) Due in monthly installments through 2006 with total monthly
payments of approximately $94,000; including interest at 6.0 %;
secured by trucks. Notes are guaranteed by Continental Express
SD, Inc. (see Note 5)
(B) Due December 1, 2005; payable $20,894 monthly, including
interest at the rate listed for "1-year" Treasury, constant
maturity under the column indicating an average rate as stated in
the Federal Reserve Statistical Release plus 3.19%, per annum;
secured by tractors. Note is guaranteed by Continental Express
SD, Inc. (see Note 5)
Aggregate annual maturities of long-term debt at
December 31, 2004:
2005 $ 1,249,341
2006 949,886
----------
$ 2,199,227
==========
NOTE 3: Income Taxes
The provision for income taxes includes these components:
2004 2003 2002
------------------------------------
Taxes currently payable $ 750,573 $ 371,973 $ 82,500
Deferred income taxes (715,264) (67,255) 194,517
--------- --------- --------
$ 35,309 $ 304,718 $ 277,017
========= ======== ========
A reconciliation of income tax expense at the statutory rate
to the Company's actual income tax expense is shown below:
2004 2003 2002
-------------------------------------
Computed at the statutory
rate (34%) $ 38,464 $ 268,569 $ 511,226
Increase (decrease) resulting
from State income taxes -- -- (206,000)
Other (3,155) 36,149 (28,209)
-------- -------- --------
Actual tax provision $ 35,309 $ 304,718 $ 277,017
======== ======== ========
-20-
CONX Capital Corporation
Notes to Financial Statements
December 31, 2004, 2003, and 2002
The tax effects of temporary differences related to deferred
taxes shown on the balance sheets were:
2004 2003
----------------------------
Deferred tax liabilities
Accumulated depreciation $ (538,486) $ (1,253,750)
---------- ------------
Net deferred tax liability $ (538,486) $ (1,253,750)
========== ============
Note 4: Equipment
Equipment consists of the following at December 31, 2004 and
2003:
2004 2003
-----------------------------
Tractors $ 4,439,733 $ 8,461,527
Trailers -- 2,412,661
--------- ---------
4,439,733 10,874,188
Less accumulated depreciation 2,241,771 5,680,389
--------- ---------
$ 2,197,962 $ 5,193,799
========= =========
Note 5: Related Party Transactions
The Company leases all of its equipment to Continental
Express SD, Inc., an affiliated company, which has common
ownership with the Company. The lessor is required to pay
all executory costs (property taxes, maintenance and
insurance). The Company uses the management and office
supplies of Harvey Manufacturing Corporation, an affiliated
Company, owned by a stockholder of the Company. The Company
paid Harvey Manufacturing Corporation $122,000 during 2004
and $60,000 during 2003 and 2002 for management fees.
At December 31, 2004 and 2003, the Company had a note
receivable including interest due from Harvey Manufacturing,
LLC, an affiliated company, owned by a stockholder of the
company in the amount of $911,940 and $854,197, respectively.
At December 31, 2003, the Company had a note receivable
including interest due from Great Western, LLC, an affiliated
company, owned by a stockholder of the company, in the amount
of $60,559. The Company also had accounts receivable from
Great Western, LLC, of $30,000 at December 31, 2003.
At December 31, 2004 and 2003, the Company had a note
receivable including interest due from Continental Express
SD, Inc. in the amount of $3,768,807 and $2,319,059,
respectively. The Company also had accounts receivable from
Continental Express SD, Inc. of $206,235 and $206,735 at
December 31, 2004 and 2003, respectively.
-21-
CONX Capital Corporation
Notes to Financial Statements
December 31, 2004, 2003, and 2002
Continental Express SD, Inc., Harvey Manufacturing, LLC and
Great Western, LLC have received a commitment from the
individual who is the principal stockholder or member of each
of these entities and the Company. The commitment indicates
that, should any of these entities not have sufficient
resources to repay the amounts due to the Company or the rest
of these entities, the principal stockholder/member will
provide that entity with resources to enable it to satisfy
these obligations in full. Notes receivable from these
entities are generally due on demand and bear interest at
rates of 3.35% to 8.25%. Interest is computed monthly on the
average balance outstanding and added to the note principal.
Note 6: Disclosures About Fair Value of Financial Instruments
The following methods were used to estimate the fair value of
financial instruments.
The fair values of certain of these instruments were
calculated by discounting expected cash flows, which method
involves significant judgments by management and
uncertainties. Fair value is the estimated amount at which
financial assets or liabilities could be exchanged in a
current transaction between willing parties, other than in a
forced or liquidation sale. Because no market exists for
certain of these financial instruments and because management
does not intend to sell these financial instruments, the
Company does not know whether the fair values shown below
represent values at which the respective financial
instruments could be sold individually or in the aggregate.
Long-term Receivables and Payables with Related Parties
It was not practical to estimate the fair value of long-term
receivables and payables with related parties. The terms of
the amounts reflected in the balance sheets at December 31,
2004 and 2003 are more fully discussed in Note 5.
Long-term Debt
Fair value is estimated based on the borrowing rates
currently available to the Company for loans with similar
terms and maturities. The estimated fair value and carrying
amount of long-term debt were $2,157,887 and $2,199,227 and
$3,870,967 and $3,690,649 at December 31, 2004 and 2003,
respectively.
Note 7: Significant Fourth Quarter Adjustments
During the fourth quarter of 2004, CONX Capital Corporation
and Continental Express, Inc. entered into an agreement to
retroactively reduce lease payments on fleet assets. This
resulted from the increase in repairs and maintenance
Continental Express, Inc. was experiencing as a result of
CONX Capital Corporation's aging fleet. This resulted in a
pre-tax charge to income of $750,000.
During December of 2004, CONX Capital Corporation sold its
trailers to an unrelated party, resulting in a gain of
$956,058.
-22-
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
OF CONX CAPITAL CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying report on Form 10-K for
the year ended December 31, 2004 and filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Edward
M. Harvey, Chief Executive Officer of CONX Capital Corporation,
hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that:
1. The report fully complies with the requirements
of Section 13 (a) or 15 (d) of the Secutities
Exchange act of 1934; and
2. The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the company.
/s/ Edward M. Harvey
---------------------------
Edward M. Harvey
Chief Executive Officer
-23-
Exhibit 99.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
OF CONX CAPITAL CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying report on Form 10-K for
the year ended December 31, 2004 and filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Todd W.
Tiefel, Chief Financial Officer of CONX Capital Corporation, hereby
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes - Oxley Act of 2002, that:
1. The report fully complies with the requirements
of Section 13 (a) or 15 (d) of the Secutities
Exchange act of 1934; and
2. The information contained in the Report fairly
presents, in all material respects, the financial
condition and results of operations of the company.
/s/ Todd W. Tiefel
----------------------------
Todd W. Tiefel
Chief Financial Officer
-24-