SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For nine months ended September 30, 1997
Commission File No. 283574
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ISRAMCO, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3145265
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
575 Madison Avenue, Suite 1006, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-605-0417
------------
NOT APPLICABLE
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(Former name, former address and formal fiscal year if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
26,398,523 Common Shares were outstanding as of September 30, 1997.
<PAGE>
ISRAMCO, INC.
INDEX
PAGE NO.
--------
Part I. Financial Information
Item 1. Financial statements
Condensed Consolidated balance sheets:
- September 30, 1997 (unaudited)
- December 31, 1996 1
Condensed Consolidated statements of operations:
- Three months ended September 30, 1997
and 1996 (unaudited)
- Nine months ended September 30, 1997
and 1996 (unaudited) 2
Condensed Consolidated statements of cash flows:
- Nine months ended September 30, 1997 and 1996 (unaudited) 3
Notes to condensed consolidated financial statements 4-6
Item 2. Management's discussion and analysis of financial statements 7-11
Part II. Other information
Signatures 12
<PAGE>
ISRAMCO, INC. AND SUBIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
-----------------------------
(Unaudited)
ASSETS
------
Current assets:
Cash including cash equivalents $ 10,172,118 $ 15,999,022
Accounts receivable - oil and gas sales 207,699 --
Marketable securities, at market 9,034,462 6,477,954
Prepaid expenses and other 501,142 338,318
------------ ------------
Total current assets 19,915,421 22,815,294
Oil and gas properties, net 7,022,382 --
Equipment, net 124,582 65,172
Covenants not to compete, net 285,000 382,500
Other assets 82,667 --
------------ ------------
T O T A L $ 27,430,052 $ 23,262,966
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued expenses $ 484,734 $ 334,422
Current portion of long-term debt 781,200 --
------------ ------------
Total current liabilities 1,265,934 334,422
Long-term debt 2,891,534 --
------------ ------------
4,157,468 334,422
Minority interest 189,108 --
------------ ------------
4,346,576 334,422
Shareholders' equity:
Common stock, $.01 par value;
authorized 75,000,000 shares;
issued 26,691,198 266,912 266,912
Additional paid-in-capital 25,927,635 25,927,635
Accumulated deficit (2,947,173) (3,102,105)
Treasury stock; 292,675 shares (163,898) (163,898)
------------ ------------
23,083,476 22,928,544
------------ ------------
T O T A L $ 27,430,052 $ 23,262,966
============ ============
See notes to financial statements.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
ISRAMCO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- --------------------------------
1997 1996 1997 1996
------------------------------- --------------------------------
Revenues:
<S> <C> <C> <C> <C>
Operator fees from related party $ 108,000 $ 108,000 $ 324,000 $ 360,252
Oil and gas sales 536,565 -- 1,576,792 --
Interest income 263,499 300,056 803,745 870,465
Gain (loss) on marketable securities 168,439 (1,038,970) (67,805) 710,042
Office services to affiliates and other 145,364 106,571 401,095 359,041
------------ ------------ ------------ ------------
Total revenue 1,221,867 (524,343) 3,037,827 2,299,800
------------ ------------ ------------ ------------
Expenses:
Interest expense 94,048 552 254,206 2,545
Depreciation, depletion and amortization 91,261 9,751 396,980 29,813
Lease operating expenses 240,351 -- 619,407 --
Operator costs 77,979 237,008 407,834 590,436
General and administrative - in part
to related parties 522,422 242,313 1,189,664 939,763
Research and development -- -- -- (1,041)
------------ ------------ ------------ ------------
1,026,061 489,624 2,868,091 1,561,516
============ =========== ============ ============
Income (loss) before taxes and
minority interest 195,806 (1,013,967) 169,736 738,284
Provision (benefit) for income taxes -- -- -- --
------------ ------------ ------------ ------------
Income (loss) from operations before
minority interest 195,806 (1,013,967) 169,736 738,284
Minority interest 15,403 -- (14,804) --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 211,209 $ (1,013,967) $ 154,932 $ 738,284
============ ============ ============ ============
Earnings (loss) per share $ 0.01 $ (0.04) $ 0.01 $ 0.03
============ ============ ============ ============
Weighted average number of shares 26,398,523 26,398,523 26,398,523 26,527,171
============ ============ ============ ============
See notes to financial statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ISRAMCO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-------------------------------------
1997 1996
--------------------------------------
Cash flow from operating activities:
<S> <C> <C>
Net income (loss) $ 154,932 $ 738,284
Adjustment to reconcile net income (loss) to net
cash (used in) operating activites
Depreciation, depletion and amortization 396,980 51,795
Minority interest 14,804 --
(Gain) loss on marketable securities 67,805 (710,042)
(Gain) loss on sale of property and equipment (2,984) 6,394
Changes in assets and liabilities:
Accounts receivable (86,617) --
Prepaid expenses and other current assets (53,219) (343,198)
Other assets 246,850 (415,000)
Accounts payble and accrued expenses 61,352 155,744
Purchase of marketable securities (5,261,030) (2,851,602)
Proceeds from sale of marketable securities 2,636,717 2,313,173
------------ ------------
Net cash (used in) operating activities (1,824,410) (1,054,452)
Cash flows from investing activities:
Purchase of oil and gas properties (5,476,878) (21,982)
Purchase of equipment (71,738) (2,542)
Proceeds from sale of equipment 5,616 4,653
Purchase of Jay Petroleum LLP from
affiliate, net of cash acquired (1,035,673) --
Other 27,360 --
------------ ------------
Net cash (used in) investing activities (6,551,313) (19,871)
------------ ------------
Cash flows from financing activities:
Purchase of treasury stock -- (163,898)
Proceeds of borrowings, net 2,590,234 --
Payment of loan cost (41,415) --
------------ ------------
Net cash provided by (used in)
financing activities 2,548,819 (163,898)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,826,904) (1,238,221)
Cash and cash equivalents, beginning of period 15,999,022 16,506,242
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,172,118 $ 15,268,021
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 254,206 $ 2,545
See notes to financial statements.
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</TABLE>
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(NOTE 1):
As used in these financial statements, the term "Company" refers to
Isramco, Inc. and subsidiaries.
(NOTE 2):
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of Management, all adjustments (consisting of
only normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the nine month
period ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto incorporated by reference in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.
(NOTE 3) - Consolidation:
The consolidated financial statements include the accounts of the Company,
its direct and indirect wholly owned subsidiaries, Isramco Oil & Gas Ltd.
("Oil & Gas") and Isramco Underwriters Ltd., both Israeli companies,
Isramco Resources Inc., a British Virgin Islands company, its majority
owned subsidiary, Jay Petroleum LLC ("Jay") and an immaterial foreign
wholly owned subsidiary. All intercompany balances and transactions have
been eliminated. Another wholly owned subsidiary of the Company, Isramco
Management (1988) Ltd., an Israeli company, is not included in the
consolidation because the Company has no voting rights. This entity serves
as the nominee for the unit holders of a limited partnership and has no
significant assets or operations.
(NOTE 4) - Acquisition of Oil and Gas Properties:
On February 5, 1997 the Company acquired an 82.9% membership interest in
Jay at an aggregate cost of $1.2 million; $677,500 for a 50% interest from
NIR Resources Inc. ("NIR"), $363,750 for a 25% interest from Stonewall
Resources LLC, and $132,650 as a capital contribution to Jay for a 7.9%
interest. The Company's share of profits after recovery of its investment
is 70.06%. NIR is a wholly owned subsidiary of Naphtha Israel Petroleum
Corporation Limited, holder of approximately 37% of the Company's
outstanding common stock.
(continued)
- 4 -
<PAGE>
On February 13, 1997 Jay acquired from Snyder Oil Corporation of Fort
Worth, Texas, various operated and non-operated interests in oil and gas
wells in Louisiana, Texas and Wyoming for a cost of $3.1 million. The
acquisition was financed primarily with bank financing obtained by Jay
through a $10 million Master Note Facility with Comerica Bank - Texas,
Houston, Texas. Isramco, Inc. is not a borrower or guarantor under this
Master Note Facility.
The acquisitions have been accounted for as purchases. Accordingly, the
consolidated financial statements include the operations of the acquired
entities from the dates of acquisition.
In September 1997 the Company acquired a 50% participation in a joint
venture that holds two permits offshore of the Congo for $2.7 million;
$150,000 for the Marine III Exploration permit which has a term of four
years with an extension right of three years, and $2,550,000 for the
Tilapia Exploration permit to develop the Tilapia Field, which has a term
of ten years with an extension right of five years.
The joint venture holds 100% of the rights under the production sharing
contract for the Tilapia permit and 50% of the rights with regard to the
production sharing contract in the Marine III permit. The other participant
in the joint venture is Naphtha Israel Petroleum Corp. Ltd., an approximate
37% owner of Isramco. Work programs for the two permits are being prepared
by the operator, Naphtha Congo Ltd., a wholly owned subsidiary of Naphtha
Israel Petroleum Corp. Ltd.
The joint venture's right in the production sharing contract on the Tilapia
permit is subject to a 12.5% carried interest after payout of the joint
venture's investment costs not including the purchase price. Levdan Ltd.
has a 50% participation interest in the Marine III permit.
The Company acquired its participation in the joint venture from Equital
Ltd., an affiliated company (formerly known as Pass-port Ltd.) subject to
an 8% carried interest after payout in its rights regarding the production
sharing contract on the Tilapia permit. The Company received a fair market
valuation of the two permits from Forrest A. Garb & Assoc. Inc., petroleum
consultants, Dallas, Texas.
(NOTE 5) - Income Taxes:
The provision (benefit) for income taxes (current or deferred) for the
three and nine month periods presented was fully offset by a decrease or
increase in the valuation allowance.
- 5 -
<PAGE>
(NOTE 6) - Long-term Debt:
At September 30, 1997, Jay has outstanding indebtedness of $3,673,000 under
a bank loan facility of $10 million. The loan bears interest at prime plus
1.5% with monthly payments of $65,000 plus interest and matures in February
2000. The loan is secured by oil and gas properties and cannot exceed the
"Borrowing Base", as defined, which is subject to annual redetermination.
- 6 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operation" and elsewhere in this document as well as statements
made in press releases and oral statements that may be made by the Company or by
officers, directors or employees of the Company acting on the Company's behalf
that are not statements of historical or current fact constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
factors that could cause the actual results of the Company to be materially
different from the historical results or from any future results expressed or
implied by such forward looking statements.
During the nine month period ended September 30, 1997, the Company invested in
certain oil and gas activities in the United States through Jay Petroleum LLC
("Jay"), in the Congo through a joint venture with Naphtha and continued to
participate in work programs in the Negev Med Venture, the Yam Ashdod Carveout
and the Shederot Venture in Israel as hereinafter discussed.
The consolidated financial statements for the nine month period ended September
30, 1997 include the operations of Jay from the date of acquisition.
Liquidity and Capital Resources
The decrease in the Company's consolidated cash and cash equivalents of
$5,826,904 from December 31, 1996 to $10,172,118 at September 30, 1997 is the
result of net cash outflows of $6,551,313 from investing activities, $1,824,410
from operating activities and $2,548,819 cash inflows from financing activities.
The investing activities consist principally of (i) approximately $1,000,000
used by the Company to purchase its membership interest in Jay, (ii)
approximately $2,770,000 used by Jay to acquire from Snyder Oil Corporation of
Fort Worth, Texas ("Snyder") various operated and non-operated interests in oil
and gas wells in Louisiana, Texas and Wyoming, and (iii) $2,700,000 used by the
Company to acquire its 50% participation in the Congo. The financing activities
relate to non-recourse bank financing of the Snyder acquisition. Isramco, Inc.
is not a borrower or guarantor under this bank financing.
In the nine month periods ended September 30, 1997 and 1996 the Company had net
cash outflow from the purchase and sale of marketable securities of $2,624,313
and $538,429, respectively. As of September 30, 1997, the Company owned 5.5% of
the issued shares of J.O.E.L. - Jerusalem Oil Exploration Ltd. ("JOEL"), the
controlling shareholder of Naphtha Israel Petroleum Company Ltd. ("Naphtha").
Naphtha through a wholly owned subsidiary holds approximately 37% of the
Company's outstanding common stock. Shares of JOEL and Naphtha are traded on the
Tel Aviv Stock Market.
Jay has outstanding indebtedness of $3,673,000 under a credit facility with
Comerica Bank - Texas, Houston, Texas. The credit facility provides for an
interest rate of prime plus 1.25% with payments of $65,000 plus interest
monthly. The loan is due on February 5, 2000. Additional draw downs under the
Comerica Bank Credit Facility require bank approval and the loan is subject to
an annual borrowing base redetermination review.
The Company believes that it has sufficient funds to fulfill its present capital
requirements.
- 7 -
<PAGE>
Results of Operations
United States
During the second quarter Jay completed the installation of the water flood
project in Jack County, Texas. Jay is monitoring the response of the producing
wells to the water injection. Drilling of the gas well in Garfield County,
Oklahoma, which was originally scheduled for the fourth quarter was delayed to
the second quarter of 1998. A work over will take place in the first quarter of
1998 in the Kirkendall well in Harden County, Texas. This work over is being
done to enhance the gas production for this well.
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
---------------------------------------
Oil Volume Sold (Barrels)
Farmers 3,741 12,662
Synder 7,367 16,778
Total 11,108 29,440
Gas Volume sold (MC)
Farmers 73,748 196,575
Snyder 139,185 328,508
Total 212,933 525,083
Oil Sales ($)
Farmers 91,227 278,078
Snyder 114,137 300,835
Total 205,364 578,913
Gas Sales ($)
Farmers 134,062 400,298
Snyder 197,139 597,381
Total 331,201 997,879
Average Unit Price
Oil ($/Bbl)* $18.49 $19.66
Gas ($/MCF)** $ 1.56 $ 1.90
* Bbl - Stock Market Barrel equivalent to 42 U.S. Gallons
** MCF - 1,000 Cubic Feet
- 8 -
<PAGE>
Israel
Negev Med Venture
- -----------------
During the nine month period ended September 30, 1997 the Negev Med Venture
expended $262,711 previously on administration costs. The Company's share is
1.0043% or $2,638. The expenditures were primarily for administrative expenses.
Yam Ashdod Venture (within the Med Ashdod License)
During the nine month period ended September 30, 1997 the Yam Ashdod Carveout
Venture expended $164,849. The Company's share is 1.0043% or $1,656.
Conditions of the Offshore Licenses
- -----------------------------------
In November 1997 the Oil Commissioner at the Ministry of National
Infrastructures amended the conditions of the licenses held by the offshore
venture participants as follows:
1. A seismic survey of at least 186 miles to be conducted no later than
February 1, 1998, which will assist in the upgrading of the prospects in
the Med Ashdod license.
2. Three wells at least 3,000 meters (approximately 9,800 feet) deep shall be
drilled on the licenses held by Isramco and the participants. The first
well shall be drilled no later than January 1, 1999. The drilling of the
second well shall begin before June 1, 1999 and the third shall begin no
later than December 1, 1999. Deepening of any of the old wells shall be
considered as a new well. In this regard, the Company, as the operator,
issued a request to the participants in the Yam Ashdod Carveout Venture to
approve an AFE (authorization for expenditure) in the amount of $980,000
for the above mentioned seismic survey.
Shederot Venture
- ----------------
During the nine month period ended September 30, 1997 the Shederot Venture
expended $126,320. The Company's share is 1.0043% or $1,269. These funds were
primarily expended for the preparation for the Gevim-1 well and for
administrative expenses.
The onshore well, the Gevim-1 is planned to be spud in the beginning of January
1998. The drilling contractor requested an extension from the original spudding
target during November 1997 because it is engaged in the drilling of other
wells. The Gevim-1 is planned for a depth of approximately 14,700 feet at an
estimated cost of approximately $6.6 million. Drilling is expected to take
approximately three to four months. The Company's share is 1.0043% or $66,000.
The Company expects to receive a revenue of approximately $373,000 as operator's
fees from the Gevim-1 well.
Operator's Fees
- ---------------
In the nine month periods ended September 30, 1997 and 1996, the Company earned
$324,000 and $360,252, respectively, which were based on the minimum monthly
compensation for each period.
- 9 -
<PAGE>
Oil and Gas Revenues
- --------------------
In the nine month and three month periods ended September 30, 1997, the Company
had oil and gas revenues of $1,576,792 and $536,565, respectively. There were no
oil and gas revenues for the comparable period.
Lease Operating Expenses
- ------------------------
In the nine month period ended September 30, 1997, the oil and gas expenses were
mainly in connection with oil and gas fields in the United States, and the
purchase of the Marine III Exploration permit in the Congo, as compared to the
same period in 1996 in which all these expenses were mainly in the various
ventures in Israel and are included in depreciation, depletion and amortization
expenses. Oil and gas lease operating expenses in the United States in the nine
and three month periods ended September 30, 1997 were approximately $620,000 and
$240,000, respectively.
Interest Income
- ---------------
Interest income decreased in the nine and three month periods ended September
30, 1997 compared to interest income in the nine and three month periods ended
September 30, 1996 mainly due to lower average investment balances.
Loss on Marketable Securities
- -----------------------------
In the nine month period ended September 30, 1997 the Company had net realized
and unrealized loss of $67,805 compared to gain of $710,042 in the same period
in 1996. In the three month period ended September 30, 1997 the Company had net
realized and unrealized gain of $168,439 compared to loss of $1,038,970 in the
three month period ended September 30, 1996. The loss for 1997 includes an
unrealized loss of $195,164 from the Company's investment in JOEL (in the nine
month period ended September 30, 1996 - unrealized gain of $916,835). As of
November 12, 1997 that loss increased by approximately $17,000 as a result of
the change in the dollar rate exchange to the Israeli shekel.
Increase or decrease in the gains and losses from marketable securities are
dependent on the market prices in general and the composition of the portfolio
of the Company.
Operator Costs
- --------------
Operator's costs decreased in the nine and three month periods ended September
30, 1997 as compared to the nine and three month periods ended September 30,
1996, primarily as a result of lower manpower costs and reduced rent payments
for the Company offices in Israel.
- 10 -
<PAGE>
General and Administrative Expenses
- -----------------------------------
General and administrative expenses increased during the nine and three month
periods ended September 30, 1997 as compared to the same periods of 1996.
General and administrative expenses in the nine month period ended September 30,
1997 includes approximately $181,000 added from the operations of Jay and
approximately $42,000 of charges resulting from non-compete agreements.
Directors' fees and officers' salaries decreased during the nine month period
ended September 30, 1997 as compared to the same period of 1996. Tax payments
during the nine month period ended September 30, 1997 were higher than in the
same period ended September 30, 1996.
Minority Interest
- -----------------
Minority interest for the nine month and three month period ended September 30,
1997 represents the minority share (17.1%) of Jay's net income.
- 11 -
<PAGE>
ISRAMCO, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Effective October 27, 1997, Reuven Hollo was removed by the
Company as Manager of Jay Petroleum and Jay Management. The Company
has appointed J. Monroe Cutler, an experienced Petroleum Engineer, as
the new Manager of Jay Petroleum and N.I.R. Resources (subsidiary of
Naphtha) as Manager of Jay Management.
In parallel to the removal of Reuven Hollo, as Manger of Jay
Petroleum and Jay Management, the Company commenced a law suit against
Reuven Hollo which proceeding has been stayed pending the resolution
of an arbitration proceeding commenced by Reuven Hollo. According to
Jay Petroleum's regulation, disputes between members are to be decided
by arbitration. Reuven Hollo has entered a counterclaim and asserted
causes of action for wrongful termination, usurpation of opportunity,
breach of contract, and defamation. Because no discovery has been
conducted at this time, counsel for the Company has indicated that it
is impossible to state the merits of these counterclaims.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Annual Meeting of Shareholders held October 24, 1997,
the following matters were voted on and approved (i) the election of
Daniel Avner, Avihu Ginzburg, Tina Maimon Arckens and Haim Tsuff as
directors of the Company; and (ii) the appointment of Richard A. Eisner
& Company, LLP as independent auditors of the Company for 1997.
Item 5. Other Information
-----------------
None.
Item 6. Reports on Form 8-K
-------------------
Form 8-K for the month of July, 1997 dated July 23, 1997; Form
8-K for the month of September, 1997 dated September 9, 1997.
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 hereunto duly authorized.
ISRAMCO, INC.
(Registrant)
Date: November 13, 1997
By: /sS HAIM TSUFF
----------------------------
(Signature)
Haim Tsuff
Chairman of the Board
and Chief Executive Officer
By: /S/ DANIEL AVNER
----------------------------
(Signature)
Daniel Avner
President, Secretary
and Principal Accounting Officer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,172,118
<SECURITIES> 9,034,462
<RECEIVABLES> 207,699
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,915,421
<PP&E> 7,146,964
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,430,052
<CURRENT-LIABILITIES> 1,265,934
<BONDS> 2,891,534
0
0
<COMMON> 266,912
<OTHER-SE> 22,816,564
<TOTAL-LIABILITY-AND-EQUITY> 27,430,052
<SALES> 1,576,792
<TOTAL-REVENUES> 3,037,827
<CGS> 619,407
<TOTAL-COSTS> 2,868,091
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254,206
<INCOME-PRETAX> 169,735
<INCOME-TAX> 0
<INCOME-CONTINUING> 154,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 154,932
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
