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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
(COMMISSION FILE NUMBER: )
HERMES EUROPE RAILTEL B.V.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NETHERLANDS NONE
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
TERHULPSESTEENWEG 6A
1560 HOEILAART
BELGIUM
(Address of principal executive office)
(322) 658-5200
(Registrant's telephone number)
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
registrants were required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] [ ]
At July 31, 1998, there were outstanding 190,468 shares of common stock of
the registrant.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. Financial Information
Item 1 Financial Statements........................................ 3
Consolidated Balance Sheets as of June 30, 1997 and 1998.... 4
Consolidated Statements of Operations for the three and six
months ended June 30, 1997 and 1998....................... 5
Consolidated Statements of Cash Flows for the three and six
months ended June 30, 1997 and 1998....................... 6
Notes to Consolidated Financial Statements.................. 7
Item 2 Management's Discussion and Analysis of Financial Condition
and
Results of Operations....................................... 9
PART II. Other Information
Item 6 Exhibits and Reports on Form 8-K............................ 11
Signatures............................................................ 12
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of December 31, 1997 and June 30,
1998
Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 1997 and 1998
Condensed Consolidated Statements of Cash Flows for the three and six
months ended June 30, 1997 and 1998
Notes to Condensed Consolidated Financial Statements
3
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HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $204,327 $175,334
Restricted cash........................................... 29,539 29,863
Accounts receivable....................................... 2,129 20,672
Other assets.............................................. 13,330 15,583
-------- --------
Total current assets.............................. 249,325 241,452
Property and equipment, net................................. 204,944 269,431
Goodwill and intangible assets, net......................... 13,310 30,506
Restricted cash............................................. 28,271 14,332
Other noncurrent assets..................................... -- 12,798
-------- --------
TOTAL ASSETS...................................... $495,850 $568,519
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses..................... $ 37,457 $ 51,789
Due to affiliated companies............................... 1,311 778
Deferred income........................................... 1,436 16,829
Current portion of capital lease obligations.............. 21,540 17,417
-------- --------
Total current liabilities......................... 61,744 86,813
Long-term debt, less current portion........................ 265,383 265,367
Long-term portion of capital lease obligations.............. 117,645 158,700
Other noncurrent liabilities................................ 236 3,457
-------- --------
TOTAL LIABILITIES................................. 445,008 514,337
Minority interest........................................... -- 27,146
Commitments and contingencies
SHAREHOLDERS' EQUITY
Common stock, 1000 guilders par value (297,000 shares
authorized and 190,468 shares issued and outstanding at
December 31, 1997 and June 30, 1998)................... 96,757 96,757
Additional paid-in capital................................ 10,130 10,660
Accumulated other comprehensive loss...................... (3,665) (4,258)
Accumulated deficit....................................... (52,380) (76,123)
-------- --------
TOTAL SHAREHOLDERS' EQUITY........................ 50,842 27,036
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $495,850 $568,519
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
1997 1998 1997 1998
-------- --------- --------- ---------
(IN THOUSANDS, EXCEPT WEIGHTED AVERAGE SHARES
AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues......................................... $ 404 $ 11,230 $ 593 $ 15,936
------- -------- -------- --------
Operating costs and expenses:
Cost of revenues............................... 1,487 10,848 3,304 16,957
Selling, general and administrative............ 3,679 5,810 6,345 10,407
------- -------- -------- --------
5,166 16,658 9,649 27,364
------- -------- -------- --------
Loss from operations............................. (4,762) (5,428) (9,056) (11,428)
Other income/(expense):
Interest income................................ 49 2,620 80 5,912
Interest expense............................... (401) (8,093) (649) (15,521)
Foreign currency (losses) gains................ (667) (1,542) (405) (2,666)
------- -------- -------- --------
(1,019) (7,015) (974) (12,275)
------- -------- -------- --------
Net loss before income taxes and minority
interest....................................... (5,781) (12,443) (10,030) (23,703)
Income taxes..................................... -- -- -- --
Net loss before minority interest................ (5,781) (12,443) (10,030) (23,703)
Minority interest................................ -- (40) -- (40)
------- -------- -------- --------
Net loss......................................... $(5,781) $(12,483) $(10,030) $(23,743)
======= ======== ======== ========
Net loss per share............................... $(72.26) $ (0.07) $(125.38) $ (0.12)
======= ======== ======== ========
Weighted average common shares outstanding....... 80 190,468 80 190,468
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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HERMES EUROPE RAILTEL B.V.
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
1997 1998 1997 1998
------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss......................................... $(5,781) $(12,483) $(10,030) $(23,743)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 283 5,135 832 8,861
Fair value adjustment for the foreign currency
swap........................................ -- 3,224 -- 3,224
Non-cash compensation.......................... -- 262 -- 528
Changes in assets and liabilities:
Accounts receivable......................... (566) (9,872) (665) (11,830)
Deposits.................................... -- 234 -- (187)
Accounts payable and accrued expenses....... 3,055 15,912 1,178 1,998
Other changes in assets and liabilities..... (4,513) 4,106 (4,595) 8,140
------- -------- -------- --------
Net cash (used in) provided by
operating activities................. (7,522) 6,518 (13,280) (13,009)
INVESTING ACTIVITIES
Purchases of property and equipment............ (202) (18,381) (4,477) (30,844)
Acquisitions -- cash acquired.................. -- 13,352 -- 13,352
Restricted cash................................ 2,787 (543) 2,698 13,612
------- -------- -------- --------
Net cash provided by (used in)
investing activities................. 2,585 (5,572) (1,779) (3,880)
FINANCING ACTIVITIES
Repayments of debt............................. (81) (7,102) (89) (10,721)
Payment of debt issue costs.................... -- -- -- (825)
Proceeds from shareholders' loans.............. 3,683 -- 13,628 --
Due to affiliated companies, net............... 2,183 (380) 2,818 (499)
------- -------- -------- --------
Net cash provided by (used in)
financing activities................. 5,785 (7,482) 16,357 (12,045)
Effect of exchange rate changes on cash and cash
equivalents.................................... (1,970) (923) (2,261) (59)
------- -------- -------- --------
Net (decrease) increase in cash and cash
equivalents.................................... (1,122) (7,459) (963) (28,993)
Cash and cash equivalents at beginning of
period......................................... 2,172 182,793 2,013 204,327
------- -------- -------- --------
Cash and cash equivalents at end of period....... $ 1,050 $175,334 $ 1,050 $175,334
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL PRESENTATION
The financial statements of Hermes Europe Railtel B.V. (the "Company")
included herein are unaudited and have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and
Securities and Exchange Commission regulations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Material intercompany affiliate account
transactions have been eliminated; however, other adjustments may have been
required had an audit been performed. In the opinion of management, the
financial statements reflect all adjustments of a normal and recurring nature
necessary to present fairly the Company's financial position, results of
operations and cash flows for the interim periods. These financial statements
should be read in conjunction with the Company's 1997 audited consolidated
financial statements and the notes related thereto. The results of operations
for the three months and six months ended June 30, 1998 may not be indicative of
the operating results for the full year.
The Company is operating the initial segments of a pan-European high
capacity fiber optic network that is designed to interconnect a majority of the
largest Western and Central European cities and to transport international
voice, data and multimedia/image traffic for other carriers throughout Western
and Central Europe.
The Company's objective is to become the leading pan-European carriers'
carrier by providing centrally managed cross-border telecommunications
transmission capacity to telecommunications companies including traditional
public telecommunications operators and new entrants, such as alternative
carriers, global consortia of telecommunications operators, international
carriers, Internet backbone networks, resellers, value-added networks and other
service providers.
2. POLICIES AND PROCEDURES
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and display of comprehensive income and its components
in a full set of general purpose financial statements. Comprehensive income
(loss) is defined as the change in equity of a business enterprise during a
period from nonowner sources. Comprehensive loss was $7.2 million and $12.3
million for the three and six months ended June 30, 1997, respectively, and was
comprised of net losses of $5.8 million and $10.0 million and foreign currency
translation losses of $1.4 million and $2.3 million for the three and six months
ended June 30, 1997, respectively. Comprehensive loss was $11.6 million and
$24.3 million for the three and six months ended June 30, 1998, respectively,
and was comprised of net losses of $12.5 million and $23.7 million and foreign
currency translation income of $0.8 million for the three months ended June 30,
1998 and foreign currency translation loss of $0.6 million for the six months
ended June 30, 1998.
During 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which
requires the Company to present basic and fully diluted earnings per share for
all periods presented. The Company's net loss per share calculation (basic and
fully diluted) is based upon the weighted average common shares issued. There
are no reconciling items in the numerator or denominator of the Company's net
loss per share calculation. Employee stock options have been excluded from the
net loss per share calculation because their effect would be anti-dilutive.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which will be
required to be adopted by January 1, 2000. This statement establishes accounting
and reporting standards requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at its fair value.
The statement also requires that changes in the derivatives fair value be
recognized in earnings unless specific hedge accounting
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HERMES EUROPE RAILTEL B.V.
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
criteria are met. The Company is currently assessing the impact of this new
statement on its consolidated financial position and results of operations.
Certain reclassifications have been made to the December and June 1997
condensed, consolidated financial statements in order to conform to the 1998
presentation.
3. CAPITAL LEASE OBLIGATIONS
During the three months ended June 30, 1998, HER entered into contractual
commitments to lease fiber pairs, including facilities and maintenance and
utilizing the partial routes for laying fiber optic cable. Based on the contract
provisions, these commitments are currently estimated to aggregate approximately
$26.5 million. The commitments have expected lease terms of eight and one-half
to eighteen years with options for renewal rights of one to eight additional
years. Subsequent to June 30, 1998, HER entered into additional contractual
commitments to lease fiber pairs that are currently estimated to aggregate
approximately $4.1 million. These commitments have expected lease terms of
fifteen years with certain of the leases having options for renewal rights of
eighteen months to two additional years.
4. ACQUISITION
On June 24, 1998, the Company completed the acquisition for ECU 90 million
(approximately $99.5 million) from Ebone Holding Association (the "Association")
of a 75% interest in Ebone A/S ("Ebone"). The Company funded the acquisition
with proceeds of a short-term bank loan, which has been repaid. Ebone is a Tier
1 Internet backbone provider, principally serving as a carriers' carrier for
European Internet service providers. As part of the transaction, Ebone will
purchase, under a transmission capacity agreement, long-term capacity rights on
the Company's network valued at ECU 90 million. In addition to the majority
interest held by the Company, Ebone's new ownership structure will continue to
include many of Ebone's existing customers, which own the balance of Ebone's
shares through the Association. The members of the Association will have the
right to buy shares of Ebone in a future issuance to occur by the end of 1998,
which could reduce the Company's stake in Ebone from 75% to not less than 54%.
The acquisition has been accounted for using the purchase method of
accounting. The excess purchase price over the fair value of assets acquired of
$17.2 million was allocated to goodwill and is being amortized over 5 years. The
results of Ebone have been included in the accompanying consolidated financial
statements from the date of acquisition.
5. FOREIGN CURRENCY TRANSACTIONS
On April 19, 1998, the Company entered into a foreign currency swap
transaction agreement (the "Swap") with Rabobank International ("Rabo") in order
to minimize the foreign currency exposure resulting from the issuance in August
1997 of $265 million aggregate principal amount 11.5% Senior Notes due 2007 (the
"Notes"). The Company has marked the Swap to its fair value as of June 30, 1998
and the resulting adverse change in the fair value of $3.2 million has been
recorded as a Noncurrent Liability on the balance sheet and recognized as a
foreign currency loss in the statement of operations. Foreign currency losses
were $1.5 million and $2.7 million for the three and six months ended June 30,
1998, respectively, as compared to $0.7 million and $0.4 million for the
comparable periods in 1997. The losses in 1998 were primarily the result of
foreign currency exposure from the issuance of the Notes, that is expected to be
minimized in the future as a result of the Swap.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company as of June 30, 1998 and 1997 and for the three and six
months ended June 30, 1998 and 1997 and of certain factors that management
believes are likely to affect the Company's prospective financial condition. The
following discussion should be read in conjunction with the Company's unaudited
Condensed, Consolidated Financial Statements and the notes related thereto,
included in this report.
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" including, without limitation,
those concerning (i) projected traffic volume, (ii) future revenues and costs,
(iii) changes in the Company's competitive environment and (iv) the performance
of future equity-method investments, contain forward-looking statements
concerning the Company's operations, economic performance and financial
condition. Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements.
OVERVIEW
The Company is continuing to develop and operate segments of a pan-European
high capacity fiber optic network. The Company began delivering services to
customers in November 1996 when the Brussels-Amsterdam route came into
operation. The cities of London and Paris came into commercial operation during
the last quarter of 1997 and in the first and second quarters of 1998,
Frankfurt, Zurich, Geneva, Stuttgart, Dusseldorf and Munich were added to the
network.
RESULTS OF OPERATIONS
Revenue. The Company's consolidated revenues for the three and six months
ended June 30, 1998 were $11.2 million and $15.9 million, respectively, compared
to $0.4 million and $0.6 million for the comparable periods in 1997. The growth
in revenue is attributable to the continued deployment of the Company's network.
The Company commenced commercial service over the Brussels-Amsterdam route in
late 1996, the London-Paris portion in November 1997 and Frankfurt, Zurich,
Geneva, Stuttgart, Dusseldorf and Munich were added in the second quarter of
1998.
Cost of Revenue. The Company's cost of revenue for the three and six months
ended June 30, 1998 was $10.8 million and $17.0 million, respectively, compared
to $1.5 million and $3.3 million for the comparable periods in 1997. The
increase in cost of revenue for the three and six months ended June 30, 1998 as
compared to the comparable periods in 1997 was associated with the costs related
to operating and maintaining the network, local access costs and the
depreciation of the network.
Gross Margin. The Company had a favorable gross margin of $0.4 million for
the three months ended June 30, 1998 and an unfavorable gross margin of $(1.0)
million for the six months ended June 30, 1998. The Company had unfavorable
gross margins of $(1.1) and $(2.7) million for the three and six months ended
June 30, 1997. The improvement in gross margins in 1998 as compared to 1997 is
reflective of the increased utilization of the network.
Operating Expenses. Operating expenses for the three and six months ended
June 30, 1998 were $5.8 million and $10.4 million, respectively, as compared to
$3.7 million and $6.3 million for the comparable periods in 1997. The increase
in operating expenses is reflective of the growth of the Company's business
operations and support personnel.
Interest. Interest expense for the three and six months ended June 30, 1998
was $8.1 million and $15.5 million, respectively, as compared to $0.4 million
and $0.6 million for the same periods in 1997. The increase was primarily
attributable to the interest and related costs associated with the issuance by
the Company in August 1997 of $265 million aggregate principal amount of 11.5%
Senior Notes due 2007 (The "Senior Notes").
Interest income for the three and six months ended June 30, 1998 was $2.6
million and $5.9 million, respectively. Interest income was minimal for the
comparable periods in 1997. The increase in interest income
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was the result of investing the excess cash generated from the issuance of the
Senior Notes in various highly liquid investments.
Foreign Currency Losses. Foreign currency losses were $1.5 million and $2.7
million for the three and six months ended June 30, 1998, respectively, as
compared to $0.7 million and $0.4 million for the comparable periods in 1997.
The losses in 1998 were primarily the result of foreign currency exposure from
the issuance of the Senior Notes in US dollars. In April 1998, the Company
entered into a foreign currency swap agreement that is expected to minimize this
exposure in the future.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of Company funding through June 30, 1998 have been net
proceeds of $251.3 million from the issuance of the Senior Notes and cash equity
contributions of $103.2 million in 1997.
Development of the Company's fiber optic network is capital intensive. The
build-out of the network is expected to require approximately $290.0 million of
capital expenditures. Through June 30, 1998 approximately, $81.9 million has
been spent on network capital expenditures. An additional $194.6 million has
been capitalized in connection with long-term fiber lease arrangements. In
August 1997, the Company completed the issuance of the Senior Notes. The Senior
Notes are general unsecured obligations of the Company. The Company believes
that the net proceeds from the Senior Notes, combined with projected internally
generated funds, should be sufficient to fund expected capital expenditures.
However, the actual amount and timing of the Company's future requirements may
differ materially from management's estimates. Any failure to obtain necessary
financing may require the Company to delay or abandon its plans for deploying
the remainder of the network and would jeopardize the viability of the Company.
The Company had a positive working capital of $154.6 million at June 30,
1998 compared to a negative working capital of $6.7 million at June 30, 1997.
The Company had cash and cash equivalents of $175.3 million and $1.1 million at
June 30, 1998 and 1997 respectively. The Company had $44.2 million and $1.1
million of restricted cash at June 30, 1998 and 1997, respectively. The
restricted cash at June 30, 1998 primarily represents the Company's obligation
to place into escrow the first four scheduled semi-annual interest payments on
the Senior Notes.
During the three and six months ended June 30, 1998, the Company provided
$6.5 million and used $13.0 million, respectively, of cash for operating
activities compared with using $7.5 million and $13.3 million for the comparable
periods in 1997. Investing activities used cash of $5.6 million and $3.9 million
for the three and six months ended June 30, 1998, respectively, as compared to
providing cash of $2.6 million during the three months ended June 30, 1997 and
using cash of $1.8 million during the six months ended June 30, 1997.
The Company has developed risk management policies that establish
guidelines for managing foreign exchange risk. The Company is currently
evaluating the materiality of foreign exchange exposures in different countries
and the financial instruments available to mitigate this exposure. The Company
is designing reporting processes to monitor the potential exposure on an ongoing
basis and expects to implement this process by the end of 1998. In April 1998,
the Company consummated a transaction to hedge the economic foreign exchange
exposure resulting from the issuance of the Senior Notes.
YEAR 2000 COMPLIANCE
The Company is currently in the process of assessing its year 2000
compliance costs and of converting, where necessary, its internal hardware and
software as well as customer facing telecommunications infrastructure to year
2000 compliance. This process includes obtaining confirmations from the
Company's primary vendors that plans are being developed or are already in place
to address processing of transactions in the year 2000. The Company does not
expect that the cost of converting such systems will be material to its
financial condition or results of operations. The Company currently believes it
will be able to achieve year 2000 compliance by the end of 1999, and currently
does not anticipate any material disruption in its operations as
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the result of any failure by the Company to be in compliance or that year 2000
compliance costs will have a material effect on the Company's earnings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
<TABLE>
<CAPTION>
DESIGNATION DESCRIPTION
----------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
B. Reports on Form 8-K
<TABLE>
<CAPTION>
DATE OF REPORT SUBJECT OF REPORT
-------------- -----------------
<C> <S>
June 24, 1998 Acquisition of EBONE
</TABLE>
The Company filed a report on Form 8-K on July 7, 1998, which reported that
it had completed its acquisition from Ebone Holding Association of a 75%
interest in Ebone A/S. A copy of the purchase agreement was included as Exhibit
10.1 to the Form.
The Company intends to furnish the required financial statements and pro
forma information with the Securities and Exchange Commission by September 8,
1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
HERMES EUROPE RAILTEL B.V.
(Registrant)
By: /s/ FRANCOIS NOTE
----------------------------------
Name: Francois Note
Title: Corporate Financial
Director --
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 14, 1998
12
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INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 175,334
<SECURITIES> 0
<RECEIVABLES> 20,672
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 241,452
<PP&E> 281,919
<DEPRECIATION> 12,488
<TOTAL-ASSETS> 568,519
<CURRENT-LIABILITIES> 86,813
<BONDS> 441,484
0
0
<COMMON> 96,757
<OTHER-SE> (69,721)
<TOTAL-LIABILITY-AND-EQUITY> 568,519
<SALES> 0
<TOTAL-REVENUES> 15,936
<CGS> 0
<TOTAL-COSTS> 16,957
<OTHER-EXPENSES> 13,073
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,521
<INCOME-PRETAX> (23,703)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,703)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,743)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
