<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 0-10201
TGX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 72-0890264
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Pennbright, Suite 200
Houston, Texas 77090
(Address of principal executive offices) (Zip Code)
(281) 872-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for 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 whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
_____ _____
As of January 5, 1995, there were 25,313,533 outstanding shares of TGX
Corporation Common Stock, $.01 par value.
<PAGE>
TGX CORPORATION
Report on Form 10-Q/A For The Quarter Ended June 30, 1994
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information 1
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 2
Consolidated Statements of Operations
Three and Six Month Periods Ended June 30, 1994 and 1993 3
Consolidated Statements of Cash Flows -
Six Month Periods Ended June 30, 1994 and 1993 4
Notes to Consolidated Financial Statements (Unaudited) 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information 18
Item 1. Legal Proceedings
Item 3. Defaults Upon Senior Securities
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
Forward-Looking Statements
Stockholders are cautioned that all forward-looking statements involve
risks and uncertainties, including without limitation, statements about the
costs of exploring and developing new oil and natural gas reserves, the price
for which such reserves can be sold, the Company's attempts to reduce overhead
and eliminate non-core assets, environmental concerns affecting the drilling of
oil and natural gas wells, pending litigation, and general market conditions,
competition and pricing. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and there can therefore be no assurance
that the forward-looking statements included in this Form 10-Q/A will prove
accurate. Because of the significant uncertainties inherent in the forward-
looking statements contained in this Form 10-Q/A, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
<PAGE>
TGX Corporation
Report on Form 10-Q/A For the Quarter Ended June 30, 1994
Part I. Financial Information.
Item 1. FINANCIAL STATEMENTS.
The accompanying unaudited consolidated financial statements of TGX
Corporation ("TGX") and its subsidiaries (collectively the "Company") have been
prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial
Statements", and accordingly do not include all information and notes required
under generally accepted accounting principles for complete financial
statements. The financial statements have been prepared in conformity with the
accounting principles and practices as disclosed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1993. These interim financial
statements reflect all adjustments (which were normal recurring adjustments)
which are, in the opinion of management, necessary for a fair presentation of
the Company's financial position as of June 30, 1994 and the results of its
operations and cash flows for the six month period ended June 30, 1994. Results
of operations for the six month period ended June 30, 1994 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1994. It is recommended that these unaudited consolidated financial statements
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
Prior Period Adjustments
- ------------------------
In July 1994, the Company restructured and converted its Bank of
Montreal ("BMO") debt of $4,652,000 to a nonrecourse note secured only by
proceeds, if any, which might be received from the National Fuel Gas
Distribution Corporation litigation ("NFG Litigation"). This restructuring and
conversion was accounted for as an exchange transaction presented as an
extinguishment of debt in accordance with Emerging Issues Task Force Consensus
No. 86-18 and resulted in the recognition of an extraordinary gain, net of
transaction costs of $492,000, of $4,160,000 in the third quarter of 1994. In
connection with responding to comments from the Securities and Exchange
Commission in connection with a 1996 filing, the Company accepted the Securities
and Exchange Commission's determination that generally accepted accounting
principles require the Company to account for the restructuring and conversion
of debt as a troubled debt restructuring in accordance with Statement of
Financial Accounting Standards No. 15. As a result of this change, the
financial statements for September 30, 1994 through the current reported period
have been restated to restore the liability for the nonrecourse BMO debt,
including accrued interest, and to reverse the extraordinary gain recognized in
1994. This restatement did not impact cash flow during the period September 30,
1994 through the current reported period. The Company did, however, upon
resolution of the NFG Litigation in April 1996, reflect a net gain from
litigation settlement of $7,100,000 and an extraordinary debt extinguishment
gain of $1,868,000, and made a final debt payment to BMO of $3,600,000. The
restatement did not impact the previously reported June 30, 1994 financial
statements. The only restatement impact was in regards to Note 6 - Subsequent
Event footnote disclosures, which has been changed to reflect the troubled debt
restructuring.
1
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TGX Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
Note 1
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
June 30, December 31,
(Thousands of dollars) 1994 1993
- -------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 692 $ 1,220
Accounts receivable, net of allowance for doubtful
accounts of $1,026 and $763 1,619 1,833
Accounts receivable from affiliates, net 558 1,019
Net oil and natural gas properties held for sale - Note 2 - 15,128
Other current assets 122 148
- -------------------------------------------------------------------------------------------------
Total current assets 2,991 19,348
- -------------------------------------------------------------------------------------------------
Property and equipment:
Oil and natural gas properties 10,443 11,434
Other property and equipment 312 442
Accumulated depletion, depreciation and amortization (3,032) (2,472)
- -------------------------------------------------------------------------------------------------
Property and equipment, net 7,723 9,404
- -------------------------------------------------------------------------------------------------
OTHER ASSETS:
Accounts receivable from affiliates, long-term portion - 100
Investment in Comite Field Plant Venture 1,122 1,015
Other assets 136 198
- -------------------------------------------------------------------------------------------------
Total other assets 1,258 1,313
- -------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 11,972 $ 30,065
=================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities $ 3,566 $ 7,657
Current maturities of long-term debt - Note 3 5,823 19,499
Notes payable 1,173 1,401
- -------------------------------------------------------------------------------------------------
Total current liabilities 10,562 28,557
- -------------------------------------------------------------------------------------------------
Commitments and contingencies - Note 4
Redeemable Senior Preferred Stock, $1.00 par value; 10,000,000
shares authorized 8,729,246 shares to be issued (including accrued
dividends of $23,018 and $17,809) 37,234 30,013
- -------------------------------------------------------------------------------------------------
Stockholders' deficit:
Junior preferred stock $1.00 par value; none issued
Preferred stock, $1.00 par value; 10,000,000 shares
authorized; 300,000 shares issued plus 117,000 and 104,000
shares to be issued for dividends (liquidation preference of
$10.00 per share) 417 404
Common stock, $.01 par value: 100,000,000 shares authorized;
28,976,791 shares issued, 25,313,533 shares outstanding 290 290
Additional paid-in capital 1,057 936
Deficit (37,588) (30,135)
- -------------------------------------------------------------------------------------------------
Total stockholders' deficit (35,824) (28,505)
- -------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 11,972 $ 30,065
=================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
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TGX Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Note 1
<TABLE>
<CAPTION>
Three Months Ended June 30, Six months Ended June 30,
(In thousands, except per share data) 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ 900 $ 2,294 $ 1,989 $ 4,426
Natural gas gathering 112 112 179 217
Share of earnings of natural gas treating plant 71 133 200 282
Other, net - Note 5 1,062 364 1,264 382
- ------------------------------------------------------------------------------------------------------
2,145 2,903 3,632 5,307
- ------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Operating expenses 429 986 944 2,092
Depletion, depreciation and amortization 494 837 964 1,660
General and administrative expenses 692 887 1,357 1,615
Interest, net 276 543 588 1,150
- ------------------------------------------------------------------------------------------------------
1,891 3,253 3,853 6,517
- ------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 254 (350) (221) (1,210)
Accretion of Senior Preferred redemption value (968) (700) (1,886) (1,364)
Preferred stock dividends, net (2,688) (2,533) (5,346) (5,040)
- ------------------------------------------------------------------------------------------------------
NET LOSS APPLICABLE TO COMMON STOCK $(3,402) $(3,583) $(7,453) $(7,614)
======================================================================================================
NET LOSS PER SHARE OF COMMON STOCK $(.13) $(.14) $(.29) $(.30)
======================================================================================================
AVERAGE COMMON SHARES OUTSTANDING 25,314 25,314 25,314 25,314
======================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
TGX Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Note 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Six Months Ended June 30,
(Thousands in dollars) 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (221) $(1,210)
Adjustments to reconcile net loss to cash provided by
operating activities
Depletion, depreciation and amortization 964 1,660
Other amortization - 98
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 214 (157)
(Increase) decrease in accounts receivable from affiliates 461 (312)
Net oil and gas properties held for sale 15,128 -
Decrease (increase) in other current assets 26 (51)
Increase (decrease) in accounts payable and accrued expenses (1,024) 2,847
- --------------------------------------------------------------------------------------------
Net cash provided by operating activities 15,548 2,875
- --------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (403) (299)
Proceeds from asset sale, net 1,243 298
(Increase) decrease in other assets 55 (18)
- --------------------------------------------------------------------------------------------
Net cash provided by (used by) investing activities 895 (19)
- --------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (13,676) (1,409)
Principal payments on notes payable (228) -
Payment of accrued interest and fees in default (3,067) -
Advance pursuant to revolving credit facility - 90
- --------------------------------------------------------------------------------------------
Net cash used by financing activities (16,971) (1,319)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (528) 1,537
Cash and cash equivalents at beginning of period 1,220 1,297
- --------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 692 $ 2,834
============================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
TGX Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
TGX Corporation ("TGX") and subsidiaries (collectively, the
"Company"), is a domestic independent energy company engaged in the production
of oil and natural gas. The Company is also engaged in intrastate natural gas
gathering and treating.
On February 22, 1990, TGX filed a voluntary petition in the United
States Bankruptcy Court for the Western District of Louisiana, Shreveport
Division (the "Bankruptcy Court") for reorganization pursuant to Chapter 11,
Title 11 of the United States Code (the "Reorganization Proceeding"). On January
7, 1992, the Bankruptcy Court confirmed an Amended Plan of Reorganization
("Plan") for TGX, and the confirmation order became effective on January 21,
1992 (the "Effective Date"). On September 21, 1992, the Bankruptcy Court
determined that the Plan had been substantially consummated, and the Bankruptcy
Court's order of substantial consummation became final and nonappealable on
October 2, 1992.
The consolidated financial statements have been prepared on a going
concern basis which contemplates continuity of operations and realization of
assets and liquidation of liabilities in the ordinary course of business.
As a result of the substantial consummation of the Plan and due to (i)
the reallocation of the voting rights among the equity interests owners and (ii)
the Reorganization Value, as defined below, of TGX's assets being less than the
total of all post-petition liabilities and allowed claims, the effects of the
Reorganization Proceeding were accounted for in accordance with the fresh start
reporting standards promulgated under the American Institute of Certified Public
Accountants Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7").
In conjunction with implementing fresh start reporting, a
reorganization value ("RV") of the Company's assets and liabilities as of
October 2, 1992 was determined by management in the following manner:
The RV of proved oil and natural gas properties and other related assets was
determined based on future net revenues discounted to present value
utilizing a rate of twenty percent (20%). For proved undeveloped properties,
the RV was determined to be fifty percent (50%) of discounted future net
revenues. For the purpose of calculating future net revenues of oil and
natural gas properties, current oil and natural gas prices were escalated at
five percent (5%) per annum to certain maximum amounts and current operating
costs and expenses were escalated at four percent (4%) per annum for the
economic life of the properties. The initial price for natural gas dedicated
under the contract with National Fuel Gas Distribution Corporation ("NFG"),
which is currently a matter being litigated, was equal to ninety percent
(90%) of the rolling twelve month average price for No. 6 fuel oil in the
Buffalo, New York area (the "90% of No. 6 Fuel Oil Price"). The RV of oil
and natural gas properties also included $2,905,000 attributable to the
difference, plus interest, between the price that NFG has paid since
September 1984 and the 90% of No. 6 Fuel Oil Price.
Current assets and liabilities were recorded at book value which
approximates RV. Long-term liabilities were recorded at the present values
of amounts to be paid and the pre-consummation stockholders' deficit was
adjusted to reflect the par value of pre-consummation equity interests.
5
<PAGE>
The recorded value of the Series A Senior Preferred Stock ("Senior
Preferred") to be issued pursuant to the Plan was determined based on the
difference between the RV of the Company's assets less the sum of (i) the
present value of liabilities plus (ii) the par value of pre-consummation
equity interests. The accretion of the difference between the recorded value
and the $10 per share redemption amount of the Senior Preferred will be
recorded as a reduction of income applicable to common stockholders over a
period of approximately ten (10) years.
The RV was determined by management on the basis of its best judgment of what
it considered to be the fair market value ("FMV") of the Company's assets and
liabilities at the time of the valuation after reviewing relevant facts
concerning the price at which similar assets were being sold between willing
buyers and sellers. However, there can be no assurances that the RV and the FMV
are comparable and the difference between the Company's calculated RV and the
FMV may, in fact, be material.
The Senior Preferred has a $10 per share redemption value and has a provision
for a 10% annual compounded cash dividend, payable quarterly, provided however,
that the payment of such dividend does not violate Delaware law or certain loan
covenants. The Company has not paid any dividends since the Effective Date of
the Plan and based on the current financial position of the Company and bank
covenants restricting dividend payments, it does not expect to make any such
dividend payments in the near future. Subject to Delaware law, the Senior
Preferred must be redeemed no later than January 21, 2002. Holders of Senior
Preferred have 95% of the voting rights of TGX. As of June 30, 1994, the
redemption value and accrued dividends related to the Senior Preferred were
$87,292,000 and $23,018,000 respectively. The Senior Preferred dividends must be
paid in full prior to paying any other dividends.
2. SALE OF OIL AND NATURAL GAS PROPERTIES AND RELATED ASSETS
In the first half of 1994, TGX consummated the sale of substantially all of
its New York and Ohio oil and natural gas properties and related assets to
Belden & Blake Corporation ("BBC") for $16.2 million, subject to certain
adjustments. The effective date of this transaction was December 1, 1993.
Substantially all of the net proceeds from this transaction were applied toward
the reduction of TGX's obligation to Bank of Montreal as described in Note 3. In
conjunction with the BBC transaction, TGX assigned to BBC its contract with NFG
pursuant to which a substantial portion of TGX's New York natural gas production
was marketed. The assignment of TGX's contract with NFG was made with certain
reservations relating to the litigation and administrative proceedings between
TGX and NFG.
6
<PAGE>
3. LONG-TERM DEBT AND NOTES PAYABLE
As of June 30, 1994 and December 31, 1993, the components of long-term debt
were:
<TABLE>
<CAPTION>
- -------------------------------------------------------
June 30, December 31,
(Thousands of dollars) 1994 1993
- -------------------------------------------------------
<S> <C> <C>
Bank borrowings:
Term loans (secured) $ 5,823 $ 19,209
Revolving credit (secured) - 290
- -------------------------------------------------------
5,823 19,499
Less current maturities (5,823) (19,499)
- -------------------------------------------------------
Long-term debt in default $ - $ -
=======================================================
</TABLE>
Pursuant to the terms of the Plan, effective February 1, 1992, TGX executed
an Amended and Restated Credit Agreement (the "Amended Credit Agreement") with
Bank of Montreal ("BMO") which essentially continued and preserved a prior
revolving credit agreement. In March 1992, the Amended Credit Agreement was
further amended to provide for the issuance of letters of credit and in October
1992 it was again amended to increase the revolving credit facility from a
maximum amount of $500,000 to $1,000,000 and to provide for the issuance of a
term loan promissory note in settlement of certain disputed claims of BMO. The
general terms of the term loans under the Amended Credit Agreement are:
<TABLE>
<CAPTION>
Original
Principal
Description Amount Interest Rate Maturity Date
- -------------- ----------- ------------------- -----------------
<S> <C> <C> <C>
Term Loan A $15,600,000 BMO Prime plus 1.5% December 31, 1994
Term Loan B 10,000,000 13% December 31, 1993
Term Loan C 1,250,000 BMO Prime plus 1.5% December 31, 1993
Term Loan D 194,750 None December 31, 1994
</TABLE>
Loans made pursuant to the Amended Credit Agreement are secured by
substantially all of the assets of the Company, and the Amended Credit Agreement
includes covenants regarding financial reporting and ratios and generally
prohibits capital expenditures in excess of specified amounts and the payment of
dividends unless certain requirements are satisfied.
Pursuant to the provisions of the Term Loans, on December 31, 1992, TGX was
required to make certain interest payments of approximately $1,274,000. TGX was
unable to pay this obligation and on January 7, 1993, BMO notified TGX ,that an
Event of Default had occurred under the Amended Credit Agreement. In addition,
TGX did not satisfy in full the subsequent required debt service payments to
BMO, which also constitute Events of Default. During 1993, TGX did not cure the
Events of Default and, as a result, BMO had the right to take certain actions
under the Amended Credit Agreement, including, but not limited to, the
acceleration of all of the New BMO Loans.
In January 1994, in conjunction with TGX's sale of certain oil and natural
gas properties and related assets to BBC, TGX made a debt service payment of
approximately $14.3 million to BMO. In addition, TGX and BMO entered into a
limited forbearance agreement (the "Forbearance Agreement"), which was
7
<PAGE>
subsequently amended, pursuant to which BMO agreed not to assert any rights
resulting from the Events of Default until March 31, 1994. Pursuant to the
Forbearance Agreement, TGX was required to make a payment (the "Required
Payment") of $18 million plus accrued interest and fees less (i) the $14.3
million previously paid to BMO and (ii) any amounts paid to BMO subsequent to
January 1, 1994 that were applied toward the Required Payment. In conjunction
with obtaining all or substantially all of the funds for the remainder of the
Required Payment, on April 28, 1994, TGX received a commitment regarding a new
secured credit facility which it believed would be effected prior to June 30,
1994 but was not. Since the Required Payment was not made before March 31, 1994,
the Forbearance Agreement terminated and BMO's rights under the Amended Credit
Agreement were reinstated including the existence of the Events of Default.
On July 13, 1994 TGX entered into a series of agreements with BMO and Bank
One, Texas NA ("Bank One") whereby the Company's outstanding bank debt was
restructured and all Events of Default resolved. This restructuring resulted in
establishment of a borrowing base facility of $2,350,000 under which TGX
immediately borrowed $1,600,000 of which $1,452,000 was paid to BMO. In
conjunction with the debt restructuring, $4,652,000 of BMO debt was converted to
a non-recourse note secured only by the NFG Litigation. See Note 6 Subsequent
Event for additional information regarding the debt restructuring.
During the Reorganization Proceeding, the Company incurred and claimants
filed applications for approximately $7,131,000 in administrative fees and
expenses relating to the reorganization ("Administrative Claims"). The Company
objected to certain of the Administrative Claims and negotiated settlement
amounts and terms of payment with certain holders of Administrative Claims. As a
result, each of these administrative claimants, other than certain opposing
administrative claimants, received a promissory note (the "Administrative
Notes") due December 31, 1994, in satisfaction of its unpaid administrative
claim. The Administrative Notes bear interest at a rate not to exceed 8% and are
secured with certain collateral (the "Consummation Collateral") that had been
released from the BMO lien. If the proceeds related to the Consummation
Collateral are not sufficient to satisfy the Company's obligations under the
Administrative Notes the Company's excess operating funds, if any, may be
applied toward the balances due.
4. COMMITMENTS AND CONTINGENCIES
NFG Dispute
- -----------
Since November 30, 1984, TGX has been involved in litigation in the United
States District Court for the Western District of New York ("New York Federal
Court") (Civ. No. 841372-E) with NFG concerning the validity of a contract (the
"Contract") pursuant to which TGX (as successor-in-interest to Paragon
Resources, Inc. ("Paragon"), the original contracting party) sells certain
natural gas production to NFG. The litigation addresses, among other things, the
continued validity of the Contract, the price for gas sold and certain take-or-
pay claims.
In December 1983, certain pricing provisions of the Contract were
disapproved by the New York Public Service Commission ("PSC") and as a result,
in January 1991, the New York Federal Court determined that the Contract was
invalidated. However, on December 3, 1991, the Court of Appeals for the Second
Circuit ("Court of Appeals") (Case No. 91-7127) reversed the New York Federal
Court and held that the Contract remains in effect subject to the pricing
provisions set forth therein. The Court of Appeals remanded the case to the New
York Federal Court for further proceedings not inconsistent with their opinion.
During the Reorganization Proceeding, TGX filed an adversary proceeding (the
"Turnover Proceeding-) in the Bankruptcy Court to compel NFG to pay the amount
due to TGX pursuant to the provisions of the Contract. Effective June 19, 1992,
TGX and NFG entered into a partial settlement agreement, regarding the
settlement of some, but not all, of their disputes. Pursuant to the provisions
of the partial settlement agreement, in consideration of a payment of $2,940,000
(the "Payment") from NFG, TGX (i) dismissed the Turnover
8
<PAGE>
Proceeding without prejudice (ii) released NFG (subject to certain limitations)
from any and all liability and affirmative claims for relief alleged to arise
from or based upon certain evidence presented by TGX in the Turnover Proceeding,
and (iii) reserved its rights regarding the assumption or rejection of certain
other relatively minor gas purchase agreements with NFG. The Payment will be
credited against any additional amount due to TGX from NFG.
In July 1992, the New York Federal Court denied a motion filed by NFG for
partial summary judgement wherein NFG sought a finding that it had properly
suspended performance under, and eventually terminated, the Contract. A
subsequent rehearing upheld this conclusion, but determined that certain matters
relating to this issue were questions of fact that cannot be resolved by summary
judgement.
In December 1992, NFG filed a motion with the PSC requesting a hearing to
determine pricing issues related to the Contract. The PSC determined that it
would hold the requested hearing and the parties have submitted prepared
testimony, legal briefs, and other documentary material to an administrative law
judge appointed by the PSC. As of June 30, 1994, the administrative law judge
had not made a finding of fact or law. In November 1994, the administrative law
judge issued a preliminary finding that the just and reasonable price pursuant
to the NFG contract was $3.714 per mcf of gas. TGX, NFG, and the Staff of the
Public Service Commission have filed exceptions to the administrative law
judge's rulings, but, to date, the administrative law judge has not ruled on the
filed exceptions.
In January 1993, the New York Federal Court granted TGX's motion for partial
summary judgement regarding the price to be paid under the Contract. Based on
the New York Federal Court's order, TGX has concluded that from December 1983,
through, at least, January 1, 1993, the date price controls were terminated, the
Contract price is equal to the lower of (i) the applicable maximum lawful price
for December 1983 and for each month thereafter as established by the Natural
Gas Policy Act ("NGPA") subject to the escalations provided by the NGPA or (ii)
the December 1983 permitted Contract price of approximately $4.41 per MCF. Based
on TGX's calculations, the gross difference between the price actually paid by
NFG and the price required by the New York Federal Court's order is
approximately $23,157,000 as of June 30, 1994, including permitted statutory
interest. The New York Federal Court's order did not determine the price
subsequent to the termination of the NGPA nor the effect of any subsequent PSC
order. A motion by NFG to reconsider this order was determined in 1993, and
pursuant thereto, the order for partial summary judgement was upheld. However,
the New York Federal Court determined that there were factual issues relating to
the alleged repudiation by TGX of the NFG Contract which could not be determined
pursuant to a motion for summary judgement. In November 1994, the New York
Federal Court appointed a Magistrate to review and hear certain motions relating
to various aspects of the Federal Court litigation, including motions and
scheduling in pre-trial discovery.
While TGX is continuing the litigation with NFG regarding the Contract,
TGX's management has determined that it will also continue to seek a negotiated
settlement with NFG. However, there can be no assurances that any such
settlement negotiations will be held or, if held, will be productive. Absent
settlement, TGX will vigorously pursue the litigation with NFG. In either event,
the ultimate result of the litigation or any settlement with NFG could have a
material effect on TGX's financial condition. Also, as result of the debt
restructuring completed on July 13, 1994 (See Note 6), BMO through its wholly
owned subsidiary is entitled to receive the initial $4,652,000, plus interest,
of any settlement and will in certain instances, after TGX has received the same
initial amount paid to BMO, be entitled to receive up to fifty percent of
certain additional proceeds. TGX can make no prediction as to the effect of or
when the NFG litigation will finally be resolved.
Other
- -----
In August 1992, certain unleased mineral interest owners commenced a legal
action against TGX, as operator of certain wells, in the 19th Judicial District
Court for East Baton Rouge Parish, Louisiana (Case
9
<PAGE>
Number 383844, Division "A"). The complaint alleges that revenues in excess of
the reasonable costs of drilling, completing, and operating certain wells have
not been credited to the interests of the unleased mineral interest owners. This
case is in the discovery stage and if settlement negotiations are not
successful, TGX will vigorously defend itself in the litigation.
In March 1994, a hearing was conducted in the Bankruptcy Court regarding the
final allowance of pre-petition and administrative claims related to an
overriding royalty interest previously conveyed by TGX. As a result of this
hearing, the Bankruptcy Court established the method for computing these claim
amounts. The parties stipulated that the finally allowed prepetition claim
amount was $600,000 to be satisfied with the issuance of Senior Preferred.
Previously, TGX had estimated this claim amount and therefor it had been
included in prior years financial statements. The administrative claim amount
will be satisfied with the issuance of an Administrative Note. The Bankruptcy
Court has issued an initial decision relating to the amount of the
Administrative Claim. Each of the parties has filed exceptions to the Bankruptcy
Court's Opinion, but, to date, no final decision has been issued.
From time to time, in the normal course of business, the Company is a party
to various other litigation matters the outcome of which, to the extent not
otherwise provided for, should not have a material adverse effect on the
Company.
5. OTHER REVENUE
The primary components of other revenue are (amounts in thousands):
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1994 1993
------------- ----------
<S> <C> <C>
Proceeds from asset sales, net $ 877 $ 137
Decrease in allowance for doubtful
accounts 242 240
Other 145 5
------ -----
$1,264 $ 382
====== =====
</TABLE>
6. SUBSEQUENT EVENT (Restated)
On July 13, 1994 TGX entered into a series of agreements with BMO and
Bank One whereby the Company's outstanding secured bank debt was restructured.
Pursuant to the restructuring, Bank One established a borrowing base facility of
$2,350,000 under which TGX immediately borrowed $1,600,000 of which $1,452,000
was paid to BMO. The Bank One facility bears interest at Bank One's stated rate
plus 2% and is secured by substantially all of TGX's oil and gas properties.
This loan is repayable over 36 months and matures July 13, 1997. The borrowing
base is to be redetermined at a minimum of every six months or at Bank One's
discretion. The Bank One facility requires the maintenance of certain financial
ratios including a working capital ratio of 1.2 to 1 and a tangible net worth,
including Senior Preferred Stock, of a minimum of $5,000,000 and other ratios.
The Company can give no assurance that it will be able to continually meet the
Bank One facility ratios and covenants.
Simultaneously with the securance of the Bank One facility, BMO
released all of it liens on TGX's properties with the exception of its lien on
TGX's currently pending litigation with National Fuel Gas Distribution
Corporation ("NFG Litigation")(See Note 4). As part of the loan restructuring,
BMO converted $4,652,000 (the "BMOF Principal") of its outstanding indebtedness,
including certain BMO transaction costs, to a non-recourse note secured only by
the NFG Litigation and any proceeds that might be received therefrom. BMO has
assigned its rights to the loan, security and TGX note, to BMO's wholly-owned
subsidiary, BMO
10
<PAGE>
Financial, Inc. ("BMOF"). Pursuant to the agreement, after repayment of the
outstanding BMOF Principal, plus applicable interest, from NFG Litigation
proceeds, if any, BMOF will, in certain instances, after TGX has received the
same initial amount paid to BMOF, be entitled to receive up to fifty percent
interest in certain additional litigation proceeds. If NFG Litigation proceeds
are insufficient to repay the BMOF note, plus interest, TGX will have no further
obligation for such repayment. The BMOF Principal matures on December 31, 1997,
subject to each party having the right to extend the maturity date and bears
interest at the rate of 10% per annum. However, until December 31, 1997 and for
such further time as BMOF elects to extend the maturity date of such note, no
cash payment for such interest is required; instead TGX will pay interest in
kind through the issuance of additional notes to BMOF.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF UNAUDITED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion provides information which management
believes is relevant to an understanding and assessment of the Company's results
of operations, financial condition, and those presently known events, trends or
uncertainties that are reasonably likely to have a material impact on the
Company's future results of operations or financial condition or that are
reasonably likely to cause the historical financial statements not to be
necessarily indicative of future operating results or financial condition. It
should be read in conjunction with the unaudited consolidated financial
statements and related notes appearing elsewhere herein.
RESULTS OF OPERATIONS
Comparison of The First Six Months of 1994 to the First Six Months of 1993
- --------------------------------------------------------------------------
Following is a comparison of operating income and other financial activity
(amounts in thousands):
<TABLE>
<CAPTION>
1994 1993 Decrease
-------- -------- ---------
<S> <C> <C> <C>
Oil and natural gas sales $ 1,989 $ 4,426 $(2,437)
Natural gas gathering and treating 379 499 (120)
Other, net 1,264 382 882
Operating expenses (944) (2,092) (1,148)
Depletion , depreciation and amortization (964) (1,660) (696)
General and administrative expenses (1,357) (1,615) 258
------- ------- -------
Operating income (loss) $ 367 $ (60) $ 427
======= ======= =======
</TABLE>
Revenues
- --------
Consolidated revenues for 1994 decreased 32% to $3,632,000 compared to
$5,307,000 for 1993.
Oil and natural gas sales revenue for 1994 decreased by $2,437,000 to
$1,989,000. This decrease was primarily attributable to the sale of
substantially all of TGX's New York and Ohio oil and natural gas properties
effective December 1,1993 and one of TGX's most significant properties being
shut-in for a workover operation for all of 1994.
12
<PAGE>
A summary of oil and natural gas sales and revenues for the respective periods
is:
<TABLE>
<CAPTION>
Summary of Oil Volumes and Revenue
- -------------------------------------------------------------------
1994 1993 Change
- -------------------------------------------------------------------
<S> <C> <C> <C>
Oil revenues (in thousands) $ 465 $ 702 (34%)
Oil sales volume (barrels) 32,344 36,000 (10%)
Oil average price per barrel $ 14.38 $ 19.50 (26%)
- -------------------------------------------------------------------
Summary of Natural Gas Volumes and Revenue
- -------------------------------------------------------------------
1994 1993 Change
- -------------------------------------------------------------------
Natural gas revenues (in thousands) $ 1,524 $ 3,724 (59%)
Natural gas sales volume (Bcf) .731 1.675 (56%)
Natural gas average sales price per Mcf $ 2.08 $ 2.22 ( 6%)
- -------------------------------------------------------------------
</TABLE>
On January 14, 1994, TGX sold substantially all of its New York and
Ohio oil and natural gas properties and related assets to Belden & Blake
Corporation ("BBC") for $16.2 million, subject to certain adjustments. The
effective date of this transaction was December 1, 1993 and accordingly the
Company's 1994 results of operations do not include any transactions related to
these properties. For 1993, a summary of the oil and natural gas production
volumes and net revenue related to these properties that were included in the
Company's results of operations for that period is:
<TABLE>
<CAPTION>
<S> <C>
Oil production (Mbbls) 3.2
Gas production (Bcf) 1.009
Oil and natural gas revenue $ 2,318
Operating expenses (1,157)
-------
Net revenue $ 1,161
=======
Natural gas average price per equivalent Mcf $ 2.26
=======
</TABLE>
TGX, as operator, in early 1994 commenced capitalizable workover
operations on the Starkey No. 1 well located in the Comite Field, East Baton
Rouge Parish, Louisiana. This well is one of TGX's most significant properties
and TGX's combined direct and beneficial working interest for the well is
approximately 42.6%. Net TGX capitalized expenditures incurred through June 30,
1994 total approximately $400,000. In August, 1994, TGX and its partners elected
to suspend further workover operations pending further review. TGX and its
partners are currently attempting to secure a third party to assume the
remaining financial risk to be incurred to return this well to production. If a
third party investor is not secured TGX and its partners have no current plans
to recommence operations and the well will be abandoned. If the well is
abandoned, TGX will at that time expense its share of capitalized costs incurred
under this operation. TGX can give no assurances as to whether or not an
investor will be secured and if secured, if these operation will be successful.
If the operation is not successful, TGX's future results of operations will be
adversely affected.
On an equivalent unit basis (one barrel of oil equals six MCF of
natural gas on a heating value basis), natural gas represents 79% of TGX's 1994
oil and natural gas production volumes and 77% of oil and natural gas revenues.
Due to the Company's production being heavily weighted toward gas, its revenues
and cash flow
13
<PAGE>
is significantly influenced by changes in gas prices. During the second half of
1994, average gas prices have declined by approximately 22% from the June 30,
1994 average realized price of $2.08. Continued low gas prices will
significantly diminish operating results for the reminder of 1994.
Natural gas gathering and treating revenues decreased by 24% to
$379,000 in 1994 compared to $499,000 in 1993. This decrease in primarily
attributable to decreased throughput as a result of the shut-in of the Starkey
No. 1 well.
Costs and Expenses
- ------------------
Consolidated costs and expenses for 1994 decreased 41% to $3,853,000
compared to $6,517,000 for 1993.
For 1994, operating expenses decreased 55% to $944,000 compared to
$2,092,000 for 1993 while for both periods the expense represented 47% of oil
and natural gas revenues. The decrease in operating expenses is primarily
attributable to (I) the sale of the New York and Ohio oil and natural gas
properties and related assets, and (ii) the Starkey No. 1 well being shut-in for
the workover operation. Both of these items were offset by the recognition of
additional beneficial interests in certain affiliated partnerships in 1994.
Certain operating expenses are fixed and accordingly will not vary with
increases or decreases in oil and natural gas production.
Effective October 2, 1992, the Company adopted the successful efforts
accounting method for oil and natural gas operating activities. Depletion,
depreciation, and amortization decreased 55% to $964,000 in 1994 from $1,660,000
in 1993 primarily due to the sale of the New York and Ohio oil and natural gas
properties. The reclassification to a probable category of reserves attributable
to the Starkey No. 1 well resulted in a higher per unit depreciation and
depletion rate for production from the Comite Field in 1994. The depletion and
depreciation rate for oil and natural gas properties could be materially
affected by various events including but not limited to (I) the ability of the
Company to conduct additional oil and natural gas operations and (ii) consistent
rates of production from each field throughout the year.
General and administrative expenses in 1994 decreased by 16% to
$1,357,000 from $1,615,000 in 1993. This net decrease is primarily attributable
to higher 1993 costs related to the consolidation of the Company's operations
and administrative offices and decreases in 1994 overhead reimbursements due to
(I) the liquidation of certain affiliated partnerships and (ii) the sale of
operated oil and gas properties. The Company's management has implemented plans
to reduce its general and administrative expenses primarily through staff
reductions and the outsourcing of certain functions. The cost savings from staff
reductions to date have been reduced by related severance termination costs.
Interest expense decreased 49% in 1994 to $588,000 from $1,150,000
during 1993. This decrease is primarily attributable to current year principal
balance reductions of $13,676,000. The 1994 principal reductions were primarily
the result of proceeds derived from property sales. As a result of the debt
restructuring on July 13, 1994 (Note 6), the Company's per annum interest rate
shall be reduced from 13% to a floating rate of prime plus two percent. The
prime rate as of July 13, 1994 was 7.25%. The Company's future monthly interest
expense shall be significantly reduced due to lower borrowings outstanding and a
lower interest rate. The BMOF non-recourse note, dated July 13, 1994, interest
rate is 10% and payable in kind through the issuance of additional BMOF notes.
The accretion of the Senior Preferred redemption, value, a non-cash
item, is calculated based on the interest method. Accordingly, the amount of
this accretion increased by 38% to $1,886,000 during 1994 compared to $1,364,000
in 1993.
14
<PAGE>
Pursuant to the terms of the Plan, dividends for the Senior Preferred
are calculated at 10%, compounded annually. Due to the annual compounding
factor, Preferred Stock dividends for 1994 increased to $5,346,000 compared to
$5,040,000 for 1993.
As of December 31, 1993, the Company had substantial federal tax net
operating loss carryovers and investment tax credit and depletion carry
forwards, which expire at varying times from 1995 to 2006. Due to an expected
current federal tax loss, the Company currently pays no federal income taxes.
Pursuant to the provisions of the Internal Revenue Code (the "Code"), a
corporation which undergoes a "change of ownership" is generally subject to an
annual limitation on the utilization of its loss carryovers. As a result, the
Company is limited in its utilization of the pre-"change of ownership" loss
carryovers. Based on the value of the Company as of the Effective Date, the
annual amount of the pre-"change of ownership" loss carryovers to be utilized is
limited to $1,230,000. However, loss carryovers not fully utilized in the year
that they are available may be carried over and utilized in subsequent years,
subject to their expiration provisions. In addition, the amount of loss
carryovers utilized will be increased by any built-in gain exclusion recognized
during the five year period after the "change of ownership". Based on the
Company's current operations, the limitation on utilization of the loss
carryovers should not have a material effect on the Company's requirements to
pay income taxes.
Other
- -----
For 1994, substantially all of the Company's capital expenditures were
related to the workover operation for the Starkey No. 1 well. Since the
reserves attributable to this well were classified as probable as of December
31, 1993, and accordingly, were not included in the Company's estimate of proved
reserves, most cost associated with this operation have been capitalized. For
1993, the Company's capital expenditures of $299,000 were primarily related to
computer equipment.
FINANCIAL CONDITION
As set forth in Note 3 of the Notes to Consolidated Financial
Statements, the Company has applied approximately $16.7 million towards the
Required Payment and subsequent to quarter end completed its debt restructuring
(Note 6). The debt restructuring will reduce future interest expense and negate
temporarily the need for principal payments based on outstanding borrowings of
$1,600,000 on a borrowing base of $2,350,000 at July 13, 1994. The borrowing
base is reduced by $56,000 per month commencing August 1, 1994 and is subject to
redetermination every six months or at Bank One's election. The first
redetermination date is December 1, 1994.
At June 30, 1994, the Company's working capital deficit was $7,571,000
which included $5,823,000 for current maturities of long-term debt and
$1,173,000 for Administrative Notes. Subsequent to current quarter end,
$4,652,000, including certain transaction costs, of the current long term debt
was restructured, whereby, until December 31, 1997, repayment is limited to
proceeds, if any, received from the NFG Litigation.
As set forth in Note 1 of the Notes to Consolidated Financial
Statements, the Company has certain dividend and redemption obligations related
to the Senior Preferred. For financial reporting purposes, the Senior Preferred
has both debt and equity characteristics. Accordingly, it is not classified as
a component of stockholders' equity. At June 30, 1994, the Senior Preferred
redemption value and accrued dividends totaled $87,292,000 and $23,018,000
respectively. These amounts, plus any additional accrued dividends, must be
satisfied before any value can be attributed to the holders of Old Preferred and
Common Stock.
15
<PAGE>
As June 30, 1994, the stockholders' deficit was $35,824,000. Due to
the dividend requirements for the Senior, Junior, and Old Preferred Stock and
accretion of the redemption value of Senior Preferred, it is probable that the
Company's Stockholders' equity will remain a deficit for the foreseeable future
under the current capital structure.
LIQUIDITY AND CAPITAL RESOURCES
For 1994, the Company's cash provided by operating activities was
$420,000. As a result of TGX's obligation to BMO under the Amended Credit
Agreement, substantially all of the Company's operations cash flow was dedicated
to debt retirement.
The July 13, 1994 debt restructuring with BMO and Bank One (Note 6)
shall significantly improve the Company's liquidity while curing the BMO Events
of Default. The new credit facility has a borrowing base of $2.35 million of
which $1.6 million was immediately drawn. The borrowing base is reduced monthly
by $56,000 and is to be redetermined on a semi-annual basis commencing December
1, 1994 or at Bank One's election. Interest is payable monthly at the lender's
stated rate plus 2%. This new credit facility is secured by substantially all of
the Company's assets. The facility is repayable over 36 months and matures on
July 13, 1997. The Bank One facility includes financial and default covenants
standard in the industry. Though the Company has complied with all covenant
requirements to date, there can be no assurance that it will be able to continue
such compliance or that its borrowing base may not be significantly reduced
during a future semi-annual redetermination.
In conjunction with applying the net proceeds related to the sale of
assets to BBC, BMO reserved $300,000 for a TGX contingent liability under a
letter of credit. In May 1994, the letter of credit amount was reduced by
$150,000 and this amount was applied toward the Required Payment. The remaining
$150,000 letter of credit liability continues to be outstanding but release is
anticipated during the fourth quarter of 1994.
Pursuant to the terms of the purchase and sale agreement with BBC,
$500,000 of the consideration was placed in escrow pending the reconciliation of
purchase price adjustments. These funds, net of an estimated purchase price
adjustment of $45,000, and other adjustments were released to TGX in October
1994.
In 1994, a majority of the limited partner interests in two
partnerships voted to appoint TGX as the liquidating trustee for the
partnerships. As a result, TGX solicited offers to sell the oil and natural gas
properties of the partnerships and subsequently accepted an offer to sell
certain of the partnerships' oil and natural gas properties for $2.61 million.
TGX's share of the liquidating cash distributions from the partnerships ($1.367
million) was applied toward the Required Payment. During 1994, the Company will
continue a program of reviewing the status of affiliated partnerships to
determine whether or not the partnerships should be liquidated. Due to the
limited remaining asset value for most of these partnerships and their on-going
administrative costs, the Company expects that substantially all of the
partnerships will be liquidated. The Company is attempting to liquidate all
private partnerships before the end of 1994 and have all public partnerships
liquidated by mid-1995. As a result of the private partnership liquidations, the
Company may obtain additional direct interests in the related oil and natural
gas properties in consideration of debt forgiveness by the Company. Liquidation
of the partnerships will eliminate general and administrative reimbursements
derived from such partnerships by the Company, but such reimbursements should
equal cost reductions.
Subject to the availability of cash flow for 1994, the Company's
capital expenditure budget will be substantially related to the development of
proved developed non-producing reserves including workover operations on the
Starkey No. 1 well, one of its most significant properties. The Company
subsequent to quarter end suspended its workover operations on the Starkey. The
Company is attempting to secure a third party to assume the financial risk to be
incurred to return this well to production. If unsuccessful in securing
16
<PAGE>
a third party, the Company and its partners have no plans to recommence
operations and the well will be abandoned.
Pursuant to the terms of various agreements, the Company, as a
working interest owner, is responsible for marketing its share of natural gas
production from certain properties. If the Company is unable or unwilling to
market its share of natural gas production from a property, its under-produced
status is subject to balancing with other working interest owners who have sold
more than their pro-rate share of natural gas production. On an aggregate net
basis for certain natural gas properties, it appears that the Company is
substantially under-produced and the Company is conducting negotiations to
recoup or otherwise settle its net under-produced status. The Company
anticipates recouping under-produced payments in 1994 and 1995 but can give no
assurance as to its ability to recoup or otherwise settle any net under-produced
status in the immediate future.
In 1994, the Company will review investment opportunities, consistent
with its available capital, to determine if asset enhancement can be obtained
either through drilling or acquisition. However, considering the Company's's
current financial position and the inability to predict (I) the outcome of the
NFG Litigation and (ii) the success of any cost reductions, the Company cannot
currently determine if it will be able to successfully implement its business
plan and strategy.
In addition to the on-going oil and gas production operations, a key
factor in the Company's future will be the final resolution of the litigation
with NFG. While the Company has attempted to commence settlement negotiations
with NFG, to date no meaningful discussions have taken place. If a settlement
cannot be reached, the Company is committed to prosecuting this litigation with
every reasonable resource available to it. The outcome of the NFG Litigation,
which may be many years away if a settlement cannot be reached, could materially
affect the Company's future. Under the restructured credit agreement with BMO
(Note 6), BMO's subsidiary will be entitled to receive the initial $4,652,000 of
any settlement proceeds, plus interest, and in certain instances, after TGX has
received the same initial amount paid to BMO, be entitled to receive up to 50%
of any additional settlement proceeds.
17
<PAGE>
Part II. Other Information
Item 1. LEGAL PROCEEDINGS
Except as set forth in Note 4 of the Notes to Consolidated Financial
Statements included in Part I hereof, since the filing date of the Annual Report
on Form 10-K/A, there have been no substantial developments related to the legal
proceedings described therein.
Item 3. DEFAULTS UPON SENIOR SECURITIES
(a) Dividends for the Senior Preferred Stock began accruing on the
Effective Date, however, as of June 30, 1994, no dividends had been declared.
The Senior Preferred Stock will receive a 10% annual compounded cash dividend,
payable quarterly, provided however, that the payment of such dividends does not
violate (I) Delaware Law which prohibits the payment of dividends when such
payment would impair the capital of the Company or (ii) certain covenants in the
Company's Credit Agreement with Bank One, Texas N.A.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a). Exhibits: - Exhibit 27 - Financial Data Schedule
(b). Reports on Form 8-K
On July 13, 1994, the Company filed a report on form 8-K regarding the
securance of a new secured loan facility with Bank One, Texas, N.A. and the
simultaneous restructuring, amending and restating of its existing loan with the
Bank of Montreal.
18
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
TGX CORPORATION
(Registrant)
Date: February 25, 1997 By: /s/ MICHAEL A. GERLICH
-------------------------
Michael A. Gerlich
Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> JUN-30-1994
<CASH> 692
<SECURITIES> 0
<RECEIVABLES> 2,645
<ALLOWANCES> 1,026
<INVENTORY> 0
<CURRENT-ASSETS> 2,991
<PP&E> 10,755
<DEPRECIATION> (3,032)
<TOTAL-ASSETS> 11,972
<CURRENT-LIABILITIES> 10,562
<BONDS> 0
37,234
417
<COMMON> 290
<OTHER-SE> (36,531)
<TOTAL-LIABILITY-AND-EQUITY> 11,972
<SALES> 1,989
<TOTAL-REVENUES> 3,632
<CGS> 944
<TOTAL-COSTS> 944
<OTHER-EXPENSES> 2,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588
<INCOME-PRETAX> (221)
<INCOME-TAX> 0
<INCOME-CONTINUING> (221)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,453)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
