<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 September 30, 1995
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 November 13, 1995 there were 24,956,033 outstanding shares of TGX
Corporation Common Stock, $.01 par value.
<PAGE>
TGX CORPORATION
Report on Form 10-Q/A For The Quarter Ended September 30, 1995
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information......................................... 1
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994...................... 2
Consolidated Statement of Operations -
Three and Nine Month Periods Ended September 30, 1995 and 1994 3
Consolidated Statement of Cash Flows -
Nine Month Periods Ended September 30, 1995 and 1994.......... 4
Notes to Consolidated Financial Statements (Unaudited)........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 13
Part II. Other Information............................................ 18
</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 10Q/A will prove
accurate. Because of the significant uncertainties inherent in the forward-
looking statements contained in this Form 10Q/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 September 30, 1995
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/A for the year ended December 31, 1994. These interim financial
statements contain all adjustments (which were normal recurring adjustments)
which are, in opinion of management, necessary for a fair presentation of the
Company's financial position as of September 30, 1995 and the results of its
operations and cash flows for the nine month period ended September 30, 1995.
Results of operations for the nine month period ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995. 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/A for the
year ended December 31, 1994.
PRIOR PERIOD ADJUSTMENT
- -----------------------
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. (See Note 7 of Notes to
Consolidated Financial Statements)
1
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TGX Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Unaudited) Note 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
(Restated - Note 7)
September 30, December 31,
(In thousands, except for share data) 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 260 $ 676
Accounts receivable, net 962 1,206
Accounts receivable from affiliates, net 100 504
Other current assets 76 60
- ------------------------------------------------------------------------------------------------------------------
Total current assets 1,398 2,446
- ------------------------------------------------------------------------------------------------------------------
Property and equipment:
Oil and natural gas properties 10,661 10,407
Other property and equipment 209 157
Accumulated depletion, depreciation and amortization (3,928) (3,307)
- ------------------------------------------------------------------------------------------------------------------
Property and equipment, net 6,942 7,257
- ------------------------------------------------------------------------------------------------------------------
Investment in Comite Field Plant Venture 783 878
Other assets 58 95
- ------------------------------------------------------------------------------------------------------------------
Total other assets 841 973
- ------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 9,181 $ 10,676
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities - Note 5 $ 2,800 $ 3,352
Accounts payable to affiliates 43 242
Notes payable - 171
- ------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,843 3,765
- ------------------------------------------------------------------------------------------------------------------
Long-term debt - Note 3 5,418 6,020
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Total liabilities 8,261 9,785
- ------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies - Note 4
Redeemable Senior Preferred Stock, 7,484,656 shares issued,
1,494,590 shares to be issued; redemption value $89,792 58,190 44,602
- ------------------------------------------------------------------------------------------------------------------
Stockholders' deficit:
9% Cumulative Convertible Preferred stock, 300,000 shares issued
plus 151,000 and 131,000, respectively, to be issued for dividends
shares to be issued for dividends 451 431
Common stock, 28,976,791 shares issued and 24,956,033 outstanding 290 290
Additional paid-in capital 1,361 1,179
Accumulated deficit (59,372) (45,611)
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' deficit (57,270) (43,711)
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 9,181 $ 10,676
==================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements
2
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TGX Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) Note 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Restated - Note 7)
Three Months Nine Months
Ended September 30 Ended September 30,
(In thousands, except per share data) 1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Oil and natural gas production $ 830 $ 1,296 $ 2,492 $ 3,285
Natural gas gathering 72 64 197 243
Share of earnings of natural gas treating plant 142 112 358 312
Other, net - Note 6 197 (9) 290 1,255
- -----------------------------------------------------------------------------------------------------------------------
1,241 1,463 3,337 5,095
- -----------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Operating expenses 503 827 1,492 1,771
Depletion, depreciation and amortization 249 790 620 1,754
General and administrative expenses 253 731 835 2,088
Exploration costs 19 - 57 -
Interest 130 144 419 732
- -----------------------------------------------------------------------------------------------------------------------
1,154 2,492 3,423 6,345
- -----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN 87 (1,029) (86) (1,250)
Extraordinary gain - Note 3 - 128 93 128
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 87 (901) 7 (1,122)
Accretion of Senior Preferred redemption value (1,259) (1,020) (3,585) (2,906)
Preferred stock dividends, net (3,431) (2,717) (10,181) (8,063)
- -----------------------------------------------------------------------------------------------------------------------
NET LOSS APPLICABLE TO COMMON STOCK $(4,603) $ (4,638) $(13,759) $(12,091)
=======================================================================================================================
NET LOSS PER SHARE OF COMMON STOCK $(0.18) $(0.18) $(0.55) $(0.48)
=======================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING 24,956 25,314 24,956 25,314
=======================================================================================================================
</TABLE>
See accompanying notes to unaudited consolidated financial statements
3
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TGX Corporation and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Note 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
(Restated - Note 7)
Nine Months Ended
September 30,
(In thousands) 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7 $ (1,122)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depletion, depreciation and amortization 620 1,754
Amortization of debt transaction costs and stock compensation 64 102
Distribution in excess of equity earnings 95 76
Recovery of accounts receivable loss provision - 751
Interest to be paid through issuance of additional notes 348 101
Extraordinary gain (93) (128)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 244 (140)
Decrease in accounts receivable from affiliates, net 205 31
Decrease (increase) in other current assets (16) 15,145
Decrease in accounts payable and accrued expenses (552) (4,730)
- -----------------------------------------------------------------------------------------------
Net cash provided by operating activities 922 11,840
- -----------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (306) (418)
Proceeds from asset sale, net - 1,244
Increase in other assets (4) (243)
- -----------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (310) 583
- -----------------------------------------------------------------------------------------------
Cash flows from financing activities:
Advances pursuant to Revolving Credit Facility 350 1,725
Principal payments on long-term debt and notes payable (1,378) (14,719)
- -----------------------------------------------------------------------------------------------
Net cash used by financing activities (1,028) (12,994)
- -----------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (416) (571)
Cash and cash equivalents at beginning of period 676 1,220
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 260 $ 649
===============================================================================================
Supplemental Disclosure of Non-Cash Financing Activities:
Forgiveness of notes payable $ 93 $ 128
Interest to be paid through issuance of additional notes $ 348 $ 101
</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.
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 (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
approximated 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) 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 then 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 has been 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 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.
Certain amounts from the prior year have been reclassified to conform to
current year presentation.
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 September 30, 1995,
the redemption value and accrued dividends related to the Senior Preferred were
$89,792,000 and $35,798,000, 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 January 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, 1994. Substantially all of
the net proceeds from this transaction were applied toward the reduction of
TGX's obligation to the Bank of Montreal (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 September 30, 1995 and December 31, 1994, the components of long-term
debt were:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
September 30, December 31,
(Thousands of dollars) 1995 1994
- -----------------------------------------------------------
<S> <C> <C>
Bank borrowings:
Revolving credit (secured) $ 200 $1,150
Non-recourse 5,218 4,870
Less current maturities - -
- -----------------------------------------------------------
Long-term debt $5,418 $6,020
===========================================================
</TABLE>
On July 13, 1994, the Company entered into a series of agreements with Bank
One, Texas N.A. ("Bank One") whereby the Company's then outstanding secured debt
with the Bank of Montreal ("BMO") was restructured and all existing BMO events
of default were resolved. Pursuant to the restructuring, Bank One established a
borrowing-based facility of $2,350,000 under which the Company immediately
borrowed $1,600,000 of which $1,452,000 was paid to BMO. The Bank One facility
at September 30, 1995 had a borrowing base availability of $2,240,000 which is
reduced by $53,000 per month and is redetermined every six months or at Bank
One's discretion. The loan is repayable over 36 months and matures July 13,
1997. The Bank One facility requires the maintenance of certain financial ratios
including an adjusted working capital ratio, a tangible net worth ratio,
including Senior Preferred stock, and other financial ratios. The Company was in
compliance with all financial ratios and covenants at September 30, 1995, but
can give no assurance that it will be able to continually meet the Bank One
facility ratios and covenants.
In conjunction with the debt restructuring, BMO released all of its liens
on the Company's properties with the exception of its lien on the Company's
currently pending litigation with NFG pursuant to the NFG Litigation. As part of
the loan restructuring, BMO converted $4,652,000 (the "BMOF Principal") of its
outstanding indebtedness, including legal transaction costs incurred by BMO, 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 Company note to BMO's wholly owned subsidiary, BMO Financial, Inc. ("BMOF").
Pursuant to agreement, after repayment of the BMOF Principal, plus applicable
interest, from NFG Litigation proceeds, if any, BMOF will, in certain instances,
after the Company has received the same amount as was paid to BMOF, be entitled
to receive up to 50% interest in any additional litigation proceeds. If NFG
Litigation proceeds are insufficient to repay the BMOF Principal, plus
applicable interest, the Company will have no further obligation for such
repayment. The BMOF note 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 loan, no cash payment for such
interest is required; instead, the Company will pay interest in kind through the
issuance of additional notes to BMOF. As of September 30, 1995 total accrued
interest pursuant to the BMOF debt was $566,000 resulting in a total BMOF debt
balance of $5,218,000.
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
7
<PAGE>
negotiated settlement amounts and terms of payment with certain holders of
Administrative Claims. As a result, administrative claimants, other than the
Opposing Administrative Claimants, upon execution of certain releases in favor
of the Company and others, were entitled to receive promissory notes (the
"Administrative Notes") due December 31, 1994, in satisfaction of each of their
unpaid administrative claim. Substantially all administrative claimants entitled
to receive Administrative Notes perfected their claims by executing such
releases. The Administrative Notes bore interest at a rate not to exceed 8% and
were secured with certain collateral (the "Consummation Collateral"). If the
proceeds related to the Consummation Collateral were not sufficient to satisfy
the Company's obligations under the Administrative Notes the Company's excess
operating funds, if any, was to be applied toward the balances due. During the
third quarter of 1994, the Company negotiated discounted settlements with
certain persons holding Administrative Notes resulting in the recognition of a
1994 third quarter extraordinary gain of $128,000.
During 1995, the Company paid all remaining perfected Administrative Notes
at book value except for two claimants whose Administrative Notes totaling
$106,000 in principal and $20,000 in accrued interest were renegotiated with the
Company paying $51,000 in cash and issuing 10,000 shares of Senior Preferred
Stock. Other claimants holding Administrative Notes, including interest, of
$18,000, who had not timely executed the required releases and perfected their
claims, were deemed to have forfeited their claim rights pursuant to the Plan.
As a result of the discounted settlements and claim forfeitures, the Company
recorded an extraordinary net gain during 1995 of $93,000. As a result of the
Administrative Note settlements, all Consummation Collateral was released to the
Company.
4. COMMITMENTS AND CONTINGENCIES
NFG Litigation
- --------------
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. 84-1372-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) sold certain
natural gas production to NFG. The litigation addresses, among other things, the
continued validity of the Contract, the price for natural 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 the opinion of
the Court of Appeals.
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 Proceeding without
prejudice (ii) released NFG (subject to certain limitations) from any and all
liability and affirmative claims for relief alleged to arise from
8
<PAGE>
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 future amount due to TGX from NFG, if any.
In July 1992, the New York Federal Court denied a motion filed by NFG for
partial summary judgment 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 could not be resolved by
summary judgment. In December 1992, NFG filed a motion with the PSC requesting a
hearing to determine pricing issues related to the Contract. In 1993, the PSC
determined that it would hold the requested hearing, but in May 1995, the PSC
determined that NFG's requested hearing and the dealings after 1983 between NFG
and TGX did not constitute the type of filing appropriate for PSC review. The
PSC stated that it would not determine whether a price to be paid under the
Contract was appropriate until such time as such price was finally agreed to by
the parties or determined by the New York Federal Court, which would also be
needed to determine the continued viability of the Contract. NFG has brought a
special proceeding for the New York State Supreme Court, Albany County, seeking
to have that court request the PSC to determine the issue raised in NFG's
December 1992 motion. TGX has joined such proceeding as a party.
In January 1993, the New York Federal Court granted TGX's motion for
partial summary judgment 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, until at least, January 1, 1993, the date Federal 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. The Federal Court's decision might be interpreted
such that the December 1983 permitted contract price would be $4.41 per Mcf
during the winter months and $4.01 per Mcf during the summer months. 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 (assuming a
contract price of $4.41 for winter and $4.01 for summer per Mcf) is
approximately $25,033,000 as of September 30, 1995, including permitted
statutory interest. The New York Federal Court's order did not determine the
impact of the termination of the NGPA, the effect of any subsequent PSC order or
NFG's defense, including the alleged repudiation by TGX of the NFG Contract. As
part of its sale of substantially all of its oil and gas properties in Ohio and
New York to BBC, TGX assigned the Contract effective December 1, 1994. TGX's
assignment of the contract did not include TGX's rights in its existing claims
against NFG, any proceeds therefrom, and TGX's rights, claims or causes of
action, even if they had not yet been asserted, that arose prior to the
effective time of the assignment.
In November 1994, the New York Federal Court appointed a Magistrate to
review and hear various aspects of the Federal Court litigation, including
certain motions, scheduling, and certain pre-trial discovery. In July 1995 the
Magistrate issued a scheduling order regarding all pre-trial discovery.
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 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
9
<PAGE>
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 pre-petition claim
amount was $600,000 which has been satisfied with the issuance of Senior
Preferred. Previously, the Company had estimated this claim amount and therefore
it had been included in the financial statements for prior years. Pursuant to
the Bankruptcy Court's order, certain post-petition but prior to October 2, 1992
claims are to be treated as administrative claims. The administrative claim
amount will be calculated by the claimant, subject to review and approval by the
Company, and pursuant to the terms of the Plan. Any claims subsequent to October
2, 1992 are subject to the Bankruptcy Court's review, including ownership of the
overriding royalty interest. TGX has appealed the Bankruptcy Court decision.
On May 31, 1995, the Company entered into a Settlement Agreement among
itself, Paragon Resources, Inc., J. C. Templeton, W. M. Templeton and a number
of other former directors of the Company, trusts on behalf of members of the
Templeton family and other entities pursuant to which all lawsuits between and
among the parties were dismissed with prejudice. In consideration therefore, the
Company received $325,000, an assignment of certain oil and gas leases, and
receipt of past due joint operating expenses payable by certain of the
defendants. The Company released lis pendens against certain of the defendants'
properties and conveyed to the defendants an interest in certain properties to
which they were entitled. The parties to the litigation also conveyed to the
Company any Common Stock or Preferred Stock which they held.
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.
10
<PAGE>
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 1995 and December 31, 1994, the primary components of
accounts payable and accrued liabilities were (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accounts payable $ 248 $ 489
Undistributed net oil and natural gas revenue 1,184 1,069
Accrued interest and fees - 32
Accrued pre-petition liabilities 572 934
Accrued operating and tax expenses 193 252
Miscellaneous accruals 603 576
------ ------
$2,800 $3,352
====== ======
</TABLE>
6. OTHER REVENUE
The primary components of other revenue are
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Nine Months Ended September 30,
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Proceeds from asset sales, net $ 56 $1,244
Interest 148 -
Other 86 11
- ----------------------------------------------------------------------------
$290 $1,255
============================================================================
</TABLE>
7. PRIOR PERIOD ADJUSTMENTS
In July 1994, the Company restructured and converted its BMO debt of
$4,652,000 to a nonrecourse note secured only by proceeds, if any, which might
be received from the 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
11
<PAGE>
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. A summary of the impact for the periods presented is shown below (in
thousands, except per share data).
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
---------------------- ----------------------
Reported Restated Reported Restated
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
BALANCE SHEET
Total current liabilities $ 2,856 $ 2,843 $ 3,928 $ 3,765
Long-term debt 200 5,418 1,150 6,020
Accumulated deficit (54,167) (59,372) (40,904) (45,611)
Total stockholders' deficit (52,065) (57,270) (39,004) (43,711)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
Reported Restated Reported Restated Reported Restated Reported Restated
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS (Unaudited)
General and administrative expense $ 253 $ 253 $ 239 $ 731 $ 835 $ 835 $ 1,596 $ 2,088
Interest expense 13 130 43 144 71 419 631 732
Income tax benefit 150 - - - 150 - - -
Extraordinary gain net of taxes - - 4,288 128 93 93 4,288 128
Net income (loss) applicable to
common stock (4,336) (4,603) 115 (4,638) (13,261) (13,759) (7,338) (12,091)
Net income (loss) per share of
common stock (0.18) (0.18) 0.00 (0.18) (0.53) (0.55) (0.29) (0.48)
</TABLE>
12
<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.
Amounts in this discussion and analysis have been restated as disclosed in
Note 7 of the Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Comparison of The First Nine Months of 1995 to the First Nine Months of 1994
- ----------------------------------------------------------------------------
Following is a comparison of operating activity (amounts in thousands):
<TABLE>
<CAPTION>
Change
------
1995 1994 $ %
---- ---- ----- -----
<S> <C> <C> <C> <C>
Oil and natural gas revenues $ 2,492 $ 3,285 $ (793) (24)%
Natural gas gathering and treating 555 555 - -
Other revenues net 290 1,255 (965) (77)%
Depletion, depreciation and amortization (620) (1,754) (1,134) (65)%
Operating and exploration expenses (1,549) (1,771) (222) (13)%
General and administrative expenses (835) (2,088) (1,253) (60)%
------------------------------------
Operating income (loss) $ 333 $ (518) $ 851 164 %
====================================
</TABLE>
13
<PAGE>
Revenues
- --------
Oil and natural gas revenues for 1995 decreased $793,000 due to
significantly lower gas volumes sold and average prices received. The impact of
lower gas revenues was partially offset by higher oil prices and a slight
increase in oil volumes sold. A summary of oil and natural gas production and
revenues for the respective nine month period follows:
Summary of Oil Production and Revenue
- -------------------------------------------------------------------------------
1995 1994 Change
- -------------------------------------------------------------------------------
Oil revenues (in thousands) $ 838 $ 729 15%
Oil production (barrels) 48,830 47,700 2%
Oil average price per barrel $ 17.16 $ 15.28 12%
- -------------------------------------------------------------------------------
Summary of Natural Gas Production and Revenue
- -------------------------------------------------------------------------------
1995 1994 Change
- -------------------------------------------------------------------------------
Natural gas revenues (in thousands) $ 1,654 $ 2,556 (35)%
Natural gas production (BCF) 1.180 1.392 (15)%
Natural gas average sales price per Mcf $ 1.40 $ 1.84 (24)%
- -------------------------------------------------------------------------------
On an equivalent unit basis (one barrel of oil equals six Mcf of natural
gas on a heating value basis), natural gas represents 80% of TGX's 1995 oil and
natural gas production volumes and 66% of oil and natural gas revenues. Due to
the Company's production being heavily weighted toward gas, its revenues and
cash flow is significantly influenced by changes in gas prices. During the first
nine months of 1995, average gas prices declined by approximately $0.44 per Mcf
from the September 30, 1994 average price of $1.84. The 24% decrease in average
1995 gas prices resulted in $517,000 of lower gas revenues while a decline in
production volumes of 15% lowered 1995 gas revenues by $390,000.
Included in 1995 gas revenues is approximately $143,000 of gas balancing
revenues. The Company records gas revenues on the net sales method and thus
revenues are recorded when received or operations merit accrual.
Natural gas gathering and treating revenues in total were unchanged from
1994. The decline in gathering revenues resulting from lower production rates
was offset by a reduction in plant treating expense accruals.
The decline in other revenues is primarily due to lower property sale
proceeds in 1995. (See Note 6). During 1994, the Company was actively
liquidating certain managed partnership assets
14
<PAGE>
and other non-strategic holdings and such activity yielded significant financial
benefit. The Company is currently liquidating eight remaining managed
partnerships, but any future benefit from such sales will be minimal due to the
Company's small ownership.
Costs and Expenses
- ------------------
Consolidated costs and expenses for 1995 decreased by $2,922,000 or 46% to
$3,423,000 compared to $6,345,000 for 1994. The significant decrease in expenses
was due primarily to lower general and administrative and interest costs and a
decline in depletion, depreciation and amortization costs, a non-cash expense.
For 1995, operating expenses decreased $279,000 or 16% to $1,492,000
compared to $1,771,000 for 1994. Included in 1995 and 1994 operating expenses
are workover costs totaling $222,000 and $108,000 respectively. Workover
expenses represent non-recurring operation costs implemented to enhance or
increase production. Also, in 1995 the Company incurred exploration costs of
approximately $57,000. Pursuant to successful efforts reporting, unsuccessful
exploration costs are expensed as opposed to capitalized. Excluding workover and
exploration costs, 1995 and 1994 operating expenses totaled $1,213,000 and
$1,663,000, respectively, and represented 49% and 51%, respectively, of oil and
natural gas revenues for 1995 and 1994.
Depletion, depreciation, and amortization ("DD&A") expense decreased
$1,134,000 or 65% to $620,000 in 1995 from $1,754,000 in 1994 due primarily to a
lower weighted average DD&A rate per equivalent Mcf. In the fourth quarter of
1994, management determined that, as a result of the Company's improving
financial condition, including expected cash flow for 1995 and beyond, it could
fund development of its oil and gas reserves which had previously not been
classified as proved undeveloped. Accordingly, the Company treated these
reserves as proved undeveloped for purposes of accounting estimates and
financial statement disclosure. As a result of utilizing total proved reserves
in calculating 1995 DD&A, the weighted average DD&A rate for 1995 on an
equivalent Mcf basis was $0.41 as compared to 1994's rate of $1.39. Had total
proved reserves been used in calculating DD&A in the first nine months of 1994,
DD&A expense for that period would have decreased by $746,000.
General and administrative expenses in 1995 decreased by $1,253,000 or 60%
to $835,000 from $2,088,000 in 1994 primarily due to recoupment of previously
allowed for receivables, state tax settlement, lower staff costs and inclusion
in 1994 of $492,000 of non-deferrable debt restructuring costs. As discussed in
Note 4, the Company received as settlement of litigation a combination of cash
and properties totaling approximately $425,000. The $325,000 of cash and
$100,000 of estimated fair market value properties received were deemed as a
recoupment of previously allowed for receivables totaling approximately
$2,027,000 and thus was credited against general and administrative expenses.
During the third quarter of 1995, the Company settled certain pre-petition state
franchise taxes for an ultimate payment, including interest, of $139,000 in a
reduction of previously accrued general and administrative costs of $166,000.
The Company also realized 1995 general and administrative savings in the
area of staff costs due to outsourcing of certain accounting functions. Staff
costs net savings (after outsourcing expenses) to date for 1995 has been
approximately $274,000. Total expense reduction savings for 1995 were partially
offset by a decrease in reimbursements from managed partnerships of
approximately $196,000, resulting in a current year reimbursement total of
$362,000. The net decrease in partnership reimbursements was due to the
liquidation of approximately 17 partnerships in late 1994. The remaining eight
managed partnerships are anticipated to be liquidated by the
15
<PAGE>
fourth quarter of 1995, which will negate current partnership reimbursements of
approximately $40,000 per month.
Interest expense decreased $313,000 or 43% in 1995 to $419,000 from
$732,000 in 1994. This decrease is primarily attributable to lower bank
borrowings and interest rates. During 1995, maximum bank borrowings outstanding
were $1,150,000 resulting in a current quarter end balance of $200,000. For the
same period in 1994, borrowings outstanding peaked at $19,499,000. As a result
of the debt restructuring on July 13, 1994, the Company's per annum interest
rate was reduced from a high of 13% in 1994 to a floating rate of prime plus two
percent or approximately 11% for 1995. The interest rate on the remaining non-
recourse BMO debt was lowered to 10%. BMO interest, which is payable through the
issuance of additional notes, for 1995 and 1994 was $348,000 and $101,000,
respectively. Also, included in 1995 interest expense is $27,000 of amortization
of initial credit facility establishment costs. These credit facility
establishment fees are being amortized over the initial term of the facility.
As discussed in Note 3, the Company recognized in 1995 and 1994,
extraordinary gains related to notes payable forgiveness of $93,000 and
$128,000, respectively.
The accretion of the Senior Preferred redemption value, a non-cash item, is
calculated based on the interest method. Accordingly, the amount of accretion
increased by 23% to $3,585,000 for 1995 compared to $2,906,000 in 1994.
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 1995 totaled $9,979,000 as compared to $7,861,000
for 1994. Dividends on the Old Preferred stock totaled $202,000 for 1995 and
1994. 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.
FINANCIAL CONDITION
For 1995, the Company's capitalized expenditures totaled approximately
$306,000, of which $100,000 related to properties received as a result of
litigation settlement. The Company also incurred workover and exploration costs
of $222,000 and $57,000, respectively.
At September 30, 1995, the Company had a working capital deficit of
$1,445,000 which included $572,000 of pre-petition obligations. Pursuant to the
new secured borrowing base facility, the Company must maintain certain financial
ratios including a current ratio of 1 to 1, after excluding certain liabilities
and making other adjustments as allowed under the facility. After making such
current ratio adjustments, the Company has to date been in compliance with the
current ratio test and other financial ratios. The Company can give no assurance
that it will be able, in the future, to comply with the current ratio test or
any other ratio tests as required under the new credit facility. The Company
also had $5,218,000, including interest of $566,000 to be paid through the
issuance of additional notes, of BMOF non-recourse debt which is secured only by
NFG Litigation proceeds, if any, received therefrom, outstanding at September
30, 1995.
The Company has certain dividend and redemption obligations related to the
Senior Preferred shares. For financial reporting purposes, the Senior Preferred
shares have both debt and equity characteristics. Accordingly, it is not
classified as a component of stockholders' equity. At September 30, 1995, the
Senior Preferred redemption value and accrued dividends totaled $89,792,000 and
$35,798,000, respectively. These amounts plus any additional accrued dividends,
16
<PAGE>
must be satisfied before any value can be attributed to the holders of Old
Preferred and Common Stock.
At September 30, 1995, the stockholders' deficit was $57,270,000. Due to
the dividend requirements for the Senior, 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 1995, the Company's cash provided by operating activities was $829,000.
During 1995, current operating activities cash flow was benefited by a one-time
litigation settlement of $425,000 and a state franchise tax settlement of
$166,000 plus related interest accrual benefit of $158,000. The Company had a
working capital deficit of $1,445,000 at current quarter end.
The July 13, 1994 debt restructuring with BMO and the establishment of a
new line of credit with Bank One (See Note 3) significantly improved the
Company's liquidity. The new credit facility has a current borrowing base of
approximately $2.2 million of which $200,000 was outstanding at September 30,
1995. Though the borrowing base is reduced monthly by approximately $53,000,
availability under the facility is deemed sufficient for current operating
activities.
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-rata 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. During the first nine months of 1995, the
Company recognized $143,000 of gas balancing revenues. The Company can give no
assurance as to its ability to recoup or otherwise settle any net under-produced
status and thus no additional accruals are reflected in the financial
statements.
The Company's capital expenditure budget for the remainder of 1996 and the
foreseeable future will continue to focus on the development of proved developed
non-producing and behind pipe reserves and the drilling of existing proved
undeveloped locations. The Company shall also continue to review investment
opportunities to determine if asset enhancement may be better obtained through
acquisition.
The Company anticipates that continued development drilling and workovers
will maintain or increase current production volumes. In addition, the Company
is continually evaluating opportunities for acquisition of producing properties
and currently intends to pursue future production volume and reserve base growth
through acquisitions. The current cash balance, projected cash flows from
existing properties and borrowings available under the Company's current line of
credit and expected future credit facility increases are considered adequate to
fund future capital growth plans. Effective implementation of the Company's
development and acquisition plans is expected to meet the Company's long-term
operation and liquidity requirements.
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 (see Note 4).
17
<PAGE>
Under the restructured credit agreement with BMO (see Note 3), 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. (See Note 7)
Part II. Other Information
Item 1. LEGAL PROCEEDINGS
Except as set forth in Note 4 of the Notes to Consolidated Financial
Statements Unaudited included in Part I hereof, since the filing date of
the Annual Report on Form 10-Q/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 September 30, 1995, 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 - None
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 under-
signed thereunto duly authorized.
TGX CORPORATION
(Registrant)
Date: February 25, 1997 By: /S/ Michael A. Gerlich
---------------------------------
Vice President and
Chief Financial Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 260
<SECURITIES> 0
<RECEIVABLES> 1,415
<ALLOWANCES> 353
<INVENTORY> 0
<CURRENT-ASSETS> 1,398
<PP&E> 10,870
<DEPRECIATION> 3,928
<TOTAL-ASSETS> 9,181
<CURRENT-LIABILITIES> 2,843
<BONDS> 0
58,190
451
<COMMON> 290
<OTHER-SE> (58,011)
<TOTAL-LIABILITY-AND-EQUITY> 9,181
<SALES> 2,492
<TOTAL-REVENUES> 3,337
<CGS> 1,492
<TOTAL-COSTS> 1,492
<OTHER-EXPENSES> 1,512
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 419
<INCOME-PRETAX> (86)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86)
<DISCONTINUED> 0
<EXTRAORDINARY> 93
<CHANGES> 0
<NET-INCOME> (13,759)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
