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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from...............to...............
Commission file number 0-14252
ENEX OIL & GAS INCOME
PROGRAM II - 5, L.P.
(Name of small business issuer in its charter)
Texas 76-0098592
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Rockmead Drive
Three Kingwood Place
Kingwood, Texas 77339
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (713) 358-8401
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Limited Partnership Interest
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[x]
State issuer's revenues for its most recent fiscal year. $63,352
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified date within the past 60
days (See definition of affiliate in Rule 12b-2 of the Exchange Act):
Not Applicable
Documents Incorporated By Reference:
None
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<PAGE>
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1995
ENEX OIL & GAS INCOME PROGRAM II-5, L.P.
Item No. Part I Page
- -------- ------ ----
1 Description of Business I-1
2 Description of Property I-3
3 Legal Proceedings I-5
4 Submission of Matters to a Vote
of Security Holders I-5
Part II
-------
5 Market for Common Equity and
Related Security Holder Matters II-1
6 Management's Discussion and Analysis
or Plan of Operation II-2
7 Financial Statements and Supplementary
Data II-4
8 Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure II-14
Part III
--------
9 Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act III-1
10 Executive Compensation III-3
11 Security Ownership of Certain
Beneficial Owners and Management III-4
12 Certain Relationships and Related
Transactions III-4
13 Exhibits and Reports on Form 8-K III-4
Signatures S-1
<PAGE>
PART I
Item 1. Description of Business
General
Enex Oil & Gas Income Program II-5, L.P. (the "Company") was formed under
the Uniform Limited Partnership Act of the State of Texas on March 21, 1984 and
commenced operations on March 13, 1985 with aggregate subscriptions of
$6,114,437, $6,053,293 of which was received from 2,700 limited partners,
including investors whose distributions from earlier partnerships sponsored by
the Company's general partner were automatically invested in the Company.
The Company is engaged in the oil and gas business through the ownership of
various interests in producing oil and gas properties. If warranted, the Company
may further develop its oil and gas properties. However, the Company does not
intend to engage in significant drilling activities. Such activities may be
conducted, however, as an incidental part of the management of producing
properties or with a view toward enhancing the value of producing properties. In
no event will the Company engage in exploratory drilling, or use any of the
limited partners' net subscriptions to fund drilling activities. Any
developmental drilling will be financed primarily through third party borrowings
or with funds provided from operations. The expenses of drilling, completing and
equipping and operating development wells are allocated 90% to the limited
partners and 10% to the general partner. See Note 1 to the Financial Statements
for information relating to the allocation of costs and revenues between the
limited partners and the general partner. The Company's operations are
concentrated in a single industry segment.
The principal executive office of the Company is maintained at Suite 200,
Three Kingwood Place, Kingwood, Texas 77339. The telephone number at this office
is (713) 358-8401. The Company has no regional offices.
The Company has no employees. On March 1, 1996, Enex and its subsidiaries
employed 24 persons.
Marketing
The marketing of oil and gas produced by the Company is affected by a
number of factors which are beyond the Company's control, the exact nature of
which cannot be accurately predicted. These factors include the quantity and
price of crude oil imports, fluctuating supply and demand, pipeline and other
transportation facilities, the marketing of competitive fuels, state and federal
regulation of oil and gas production and distribution and other matters
affecting the availability of a ready market. All of these factors are extremely
volatile.
Hanson Minerals Company and Scurlock Permian Corporation accounted for 60%
and 26%, respectively, of the 1995 sales. Hanson Minerals Company and Scurlock
Permian Corporation accounted for 53% and 25%, respectively, of the 1994 sales.
No other purchaser individually accounted for more than 10% of such sales.
Although the Company marketed a significant portion of its sales to the above
noted companies, such a concentration does not pose a significant risk due to
the commodity nature of the Company's products.
I-1
<PAGE>
Environmental and Conservation Regulation
State regulatory authorities in the states in which the Company owns
producing properties are empowered to make and enforce regulations to prevent
waste of oil and gas and to protect correlative rights and opportunities to
produce oil and gas as between owners of a common reservoir. Each of such
regulatory authorities also regulates the amount of oil and gas produced by
assigning allowable rates of production, which may be increased or decreased in
accordance with supply and demand. Requirements regarding the prevention and
clean-up of pollution and similar environmental matters are also generally
applicable. The costs, if any, the Company may incur in this regard cannot be
predicted.
The existence of such regulations has had no material adverse effects on
the Company's operations to date, and the cost of compliance has not yet been
material. There are no material administrative or judicial proceedings arising
under such laws or regulations pending against the Company. The Company is
unable to assess or predict the impact that compliance with environmental and
pollution control laws and regulations may have on its future operations,
capital expenditures, earnings or competitive position.
Tax Laws
The operations of the Company are affected by the federal income tax laws
contained in the Internal Revenue Code of 1986, as amended (the "Code"). Under
the Code, generally, the Company will report income from the sale of oil and
gas, against which it may deduct its ordinary business expenses, depletion,
depreciation and intangible drilling and development costs.
It is anticipated that most of the Company's income, if any, will be from a
"passive activity" for purposes of the Code. A passive activity includes an
activity in which the taxpayer does not materially participate, including the
ownership of a limited partnership interest, such as an interest in the Company.
"Passive income," however, does not include portfolio income (i.e. dividends,
interest, royalties, etc.). Although taxpayers generally may not deduct losses
or use tax credits derived from passive activities in an amount greater than
their income derived from such activities, if and to the extent that the Company
generates passive income, it will be available to offset the limited partners'
passive losses from other sources.
Partnerships with interests that are "publicly traded" are taxed as
corporations unless at least 90% of their income is "qualifying income." Because
the Company's income will be qualifying income for this purpose, the Company
will not be taxed as a corporation under this rule. Passive income or losses
from publicly traded partnerships that are not taxed as corporations generally
cannot be used to offset passive income or losses from other sources. Enex
believes that the Company is not publicly traded. Consequently, limited partners
should continue to be able to utilize their income and loss from the Company to
offset losses and income from their other passive activities.
In order to prevent the adverse tax consequences that would affect the
limited partners if the Company's limited partnership interests were to become
"publicly traded" in the future, the general partner may, after final
regulations have been issued by the Internal Revenue Service, submit to a vote
of limited partners a proposal to amend the Company's agreement of limited
partnership to provide, among other things, (a) that Enex shall have the right
to refuse to recognize any transfer of limited partnership interests if it
believes that such transfer occurred on a secondary market or the substantial
I-2
<PAGE>
equivalent thereof; and (b) that all assignors and assignees of the limited
partnership interests shall be required to represent to Enex that any transfer
of limited partnership interests did not, to the best of their knowledge, occur
on a secondary market or the substantial equivalent thereof.
Item 2. Description of Property
Presented below is a summary of the Company's property acquisitions.
The RED FISH BAY acquisition in Nueces County, Texas was accomplished in
two stages. There are 5 wells located on State Lease 414 and 8 wells on State
Lease 416. This acquisition is also subject to an area of Mutual Interest
Agreement in which an additional 320 acres in State Lease 415 in Nueces County,
Texas have been acquired. The Company acquired its interest in this acquisition
in September 1985 for a purchase price of $550,684. During 1986 production
problems involving both surface equipment and downhole conditions caused
expenses to exceed revenues on a continuing basis. Without prospects that
profitability would be restored, the Company transferred its interests to United
Texas Petroleum Corporation. The Company has reserved the option to back in for
a proportionate 5% working interest of the interest assigned at such time that
the assignee has accrued $250,000 in net cash flow from the properties.
The NEWPORT acquisition consisted of five wells in Terry, Wheeler and
Hardeman Counties, Texas. The Company's interests were acquired in July 1985 for
$169,125. The Newport acquisition is operated by Phillips Petroleum Corporation
and Mineral Development Inc. The Company owns working interests ranging from
0.25% to 4.27% in the wells in the Newport acquisition at December 31, 1995.
In January 1986 the Company purchased the BLAIR acquisition, which
consisted of interests in 9 wells, and assumed operations in the WWW Field, Ward
County, Texas. The cost to the Company of its interest in this acquisition was
$65,759. The Blair acquisition is operated by Blair Operating Inc. The Company
owns working interests ranging from 11.91% to 12.5% in the wells in the Blair
acquisition at December 31, 1995.
The HANSON acquisition consisted of working interests in 34 wells in 10
counties in South Texas and Southeast Texas. The Company acquired its interests
effective February 1986 for $1,647,000. The Hanson acquisition is operated by
Hanson Minerals Co. The Company owns working interests ranging from 0.72% to
8.32% in the wells in the Hanson acquisition at December 31, 1995.
The Company's interest in the IBERIA acquisition, which consisted of 100%
of the working interest in the Edwin L. Bernard lease in Iberia Field, Iberia
Parish, Louisiana, was acquired effective in September 1986 for $1,945,263.
Effective May 1, 1992, the Company sold its interests in the Iberia acquisition
for $114,422 which resulted in a net gain of $88,084 to the Company.
The CONCORD acquisition consisted of working interests and royalty
interests in more than 10,600 wells in 137 counties in Texas, with very minor
interests in 12 other states. The Company acquired its interests effective
January 1987 for $880,927.
I-3
<PAGE>
Effective January 1, 1990, the Company sold its interest in the Concord
acquisition to three affiliated limited partnerships for $449,553. Also,
effective January 1, 1990, the Company purchased additional interests in the
Hanson, Iberia and Newport acquisition for $191,042, $42,324 and $6,921,
respectively, from an affiliated limited partnership. No gain or loss was
recognized on these transactions. All of the prices above were based on fair
market value as determined by an independent petroleum engineering firm.
Purchase price as used above is defined as the actual contract price plus
finders' fees, if applicable. Miscellaneous acquisition expenses, subsequent
capital items, etc. are not included.
Oil and Gas Reserves
For quantitative information regarding the Company's oil and gas reserves,
please see Supplementary Oil and Gas Information and related tables which follow
the Notes to Financial Statements in Item 7 of this report. The Company has not
filed any current oil and gas reserve estimates or included any such estimates
in reports to any federal or foreign governmental authority or agency, including
the Securities and Exchange Commission.
Proved oil and gas reserves reported herein are based on engineering
reports prepared by the petroleum engineering consulting firm of H. J. Gruy and
Associates, Inc. The reserves included in this report are estimates only and
should not be construed as exact quantities. Future conditions may affect
recovery of estimated reserves and revenue, and all reserves may be subject to
revision as more performance data become available. The proved reserves used in
this report conform to the applicable definitions promulgated by the Securities
and Exchange Commission. No major discovery or other favorable or adverse event
that could potentially cause a significant change in the estimated proved
reserves has occurred since December 31, 1995.
Net Oil and Gas Production
The following table shows for the years ended December 31, 1995 and 1994,
the approximate production attributable to the Company's oil and gas interests.
The figures in the table represent "net production"; i.e., production owned by
the Company and produced to its interest after deducting royalty and other
similar interests. All production occurred in the United States.
1995 1994
Crude oil and condensate (Bbls) . . . . 2,498 1,784
Natural gas (Mcf) . . . . . . . . . . . 15,097 15,755
I-4
<PAGE>
The following table sets forth the Company's average sales price per barrel
of oil, per Mcf of gas, and average production cost per unit produced for the
years ended December 31, 1995 and 1994.
1995 1994
Average sales price per barrel of oil....... $ 17.12 $ 16.18
Average sales price per Mcf of gas.......... 1.36 1.81
Average production cost per equivalent
barrel of production...................... 4.89 7.15
Current Activities
The Limited Partners of the Company have been asked to consider and vote
upon a proposal to sell its assets and, thereafter, dissolve and liquidate the
Company in accordance with the provisions of it Partnership Agreement (the
"Proposal"). Adoption of the Proposal requires the affirmative vote of a
majority in interest of the Limited Partners. If the proposal is adopted, the
assets will be sold and the proceeds allocated to the Partners' capital accounts
in accordance with the provisions of the Partnership Agreement. If the Company's
assets are not sold pursuant to the Proposal described herein, the Company will
continue to be managed by the General Partner on an ongoing basis. See further
discussion in Note 7 of the Notes to Financial Statements.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company is a
party.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
I-5
<PAGE>
PART II
Item 5. Market for Common Equity and Related Security Holder Matters
Market Information
There is no established public trading market for the Company's outstanding
limited partnership interests.
Number of Equity Security Holders
Number of Record Holders
Title of Class (as of March 1, 1996)
-------------- ------------------------
General Partner's Interests 1
Limited Partnership Interests 1,747
Dividends
The Company made a cash distribution to partners of $3 per $500
investment in 1994. No distribution was made in 1995. Based upon current
projected cash flow from the properties, it is anticipated that the Company will
make periodic distributions.
II-1
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
This discussion should be read in conjunction with the
financial statements of the Company and the notes thereto included in this Form
10-KSB.
Oil and gas sales in 1995 were $63,352 as compared with $57,494
in 1994. This represents an increase of $5,858 or 10%. Oil sales increased by
$13,895 or 48%. A 40% increase in oil production increased revenues by $11,547,
while a 6% increase in the average sales price increased revenues by an
additional $2,348. Gas sales decreased by $8,037 or 28%. A 4% decline in gas
production reduced gas sales by $1,092. A 25% decrease in the average gas sales
price reduced sales by an additional $6,945. The increase in oil production was
primarily the result of a partial shut-in of production in 1994 from the Hanson
acquisition for a recompletion of the Arco-Hampton wells. The decrease in gas
production was primarily the result of natural production declines. The changes
in average prices correspond with changes in the overall market for the sale of
oil and gas.
Lease operating expenses were $20,940 in 1995, as compared with
$27,979 in 1994. The decrease in lease operating expenses of $7,039 or 25% was
primarily due to costs incurred for a workover on the Hanson acquisition in
1994.
Depreciation and depletion expense was $22,414 in 1995 as
compared with $16,367 in 1994. This represents an increase of $6,047 or 37%. The
changes in production, noted above, increased depreciation and depletion expense
by $2,246. A 20% increase in the depletion rate increased depreciation and
depletion expense by an additional $3,801. The increase in the depletion rate
was primarily the result of relatively higher production from properties with a
higher depletion rate partially offset by upward revisions of the oil and gas
reserves during 1995.
General and administrative expenses were $26,220 in 1995 as
compared with $27,986 in 1994. The decrease of $1,766 or 6% from 1994 to 1995
was primarily due to less staff time being required to manage the Company's
operations in 1995.
Capital Resources and Liquidity
The Company's cash flow from operations is a direct result of
the amount of net proceeds realized from the sale of oil and gas production.
Accordingly, the changes in cash flow from 1994 to 1995 were primarily due to
the changes in oil and gas sales described above. It is the general partner's
intention to distribute substantially all of the Company's available net cash
flow to the Company's partners.
Distributions to the Company's partners of $33,061 were made in
1994. Future distributions are dependent upon, among other things, future prices
received for oil and gas. The Company will continue to recover its reserves and
distribute to the partners the net proceeds realized from the sale of oil and
gas productions. Distribution amounts are subject to change if net revenues are
greater or less than expected. Future periodic distributions will be made once
sufficient net revenues are accumulated.
Due to the magnitude of prices received from unaffiliated third
party purchasers for working interests owned by other partnerships managed by
the General Partner in the same properties in which the Company owns working
interests, the depletion of the Company's oil and gas reserves, the
II-2
<PAGE>
Company's inability to generate sufficient cash flow from operations to
consistently maintain regular cash distributions, and the ongoing costs of
operating the Company, the General Partner has determined that it is in the best
interests of the Limited Partners to sell the Company's assets and, thereafter,
dissolve and liquidate the Company.
In light of the above described circumstances, the Limited
Partners of the Company have been asked to consider and vote upon a proposal to
sell its assets and, thereafter, dissolve and liquidate the Company in
accordance with the provisions of it Partnership Agreement (the "Proposal").
Adoption of the Proposal requires the affirmative vote of a majority in interest
of the Limited Partners. If the proposal is adopted, the assets will be sold and
the proceeds allocated to the Partners' capital accounts in accordance with the
provisions of the Partnership Agreement. Neither the General Partner nor any
other affiliate of the Company or the General Partner will purchase any Company
properties. If the Company's assets are not sold pursuant to the Proposal
described herein, the Company will continue to be managed by the General Partner
on an ongoing basis.
At December 31, 1995, the Company had no material commitments
for capital expenditures. The Company does not intend to engage in significant
developmental drilling activity.
II-3
<PAGE>
Item 7. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
The Partners
Enex Oil & Gas Income
Program II-5, L.P.:
We have audited the accompanying balance sheet of Enex Oil & Gas Income Program
II-5, L.P. (a Texas limited partnership) as of December 31, 1995 and the related
statements of operations, changes in partners' capital, and cash flows for each
of the two years in the period ended December 31, 1995. These financial
statements are the responsibility of the general partner of Enex Oil & Gas
Income Program II-5, L.P. Our responsibility is to express an opinion on the
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Enex Oil & Gas Income Program II-5, L.P. at
December 31, 1995 and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
March 18, 1996
II-4
<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 5, L.P.
BALANCE SHEET, DECEMBER 31, 1995
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<TABLE>
<CAPTION>
ASSETS
1995
----------------
CURRENT ASSETS:
<S> <C>
Cash $ 6,051
Accounts receivable - oil & gas sales 18,499
Other current assets 490
----------------
Total current assets 25,040
----------------
OIL & GAS PROPERTIES
(Successful efforts accounting method) - Proved
mineral interests and related equipment & facilities 4,209,687
Less accumulated depreciation and depletion 4,134,078
----------------
Property, net 75,609
----------------
TOTAL $ 100,649
================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable $ 13,378
Payable to general partner 949
----------------
Total current liabilities 14,327
----------------
PARTNERS' CAPITAL:
Limited partners 83,504
General partner 2,818
----------------
Total partners' capital 86,322
----------------
TOTAL $ 100,649
================
</TABLE>
See accompanying notes to financial statements.
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II-5
<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 5, L.P.
STATEMENTS OF OPERATIONS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
1995 1994
---------- ----------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 63,352 $ 57,494
---------- ----------
EXPENSES:
Depreciation and depletion 22,414 16,367
Lease operating expenses 20,940 27,979
Production taxes 3,598 3,526
General and administrative:
Allocated from general partner 18,468 20,470
Direct expense 7,752 7,516
---------- ----------
Total expenses 73,172 75,858
---------- ----------
NET LOSS $ (9,820) $ (18,364)
========== ==========
</TABLE>
See accompanying notes to financial statements.
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II-6
<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 5, L.P.
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STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
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<TABLE>
<CAPTION>
PER $500
LIMITED
PARTNER
GENERAL LIMITED UNIT OUT-
TOTAL PARTNER PARTNERS STANDING
------------ --------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1994 147,567 2,818 $ 144,749 $ 12
CASH DISTRIBUTIONS (33,061) - (33,061) (3)
NET LOSS (18,364) - (18,364) (1)
------------ --------- ---------- ----------
BALANCE, DECEMBER 31, 1994 96,142 2,818 93,324 8
NET LOSS (9,820) - (9,820) (1)
------------ --------- ---------- ----------
BALANCE, DECEMBER 31, 1995 86,322 2,818 $ 83,504 (1) $ 7
============ ========= ========== ==========
</TABLE>
(1) Includes 2,774 units purchased by the general partner as a limited partner.
See accompanying notes to financial statements.
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II-7
<PAGE>
<TABLE>
<CAPTION>
ENEX OIL AND GAS INCOME PROGRAM II - 5, L.P.
STATEMENTS OF CASH FLOWS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
1995 1994
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (9,820) $(18,364)
---------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and depletion 22,414 16,367
(Increase) decrease in:
Accounts receivable - oil & gas sales (5,424) 15,706
Other current assets 18 (125)
(Decrease) in:
Accounts payable - (8,577)
Payable to general partner (1,588) (1,946)
---------- ---------
Total adjustments 15,420 21,425
---------- ---------
Net cash provided by operating activities 5,600 3,061
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property (additions) credits - development costs (236) 2,438
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions - (33,061)
---------- ---------
NET INCREASE (DECREASE) IN CASH 5,364 (27,562)
CASH AT BEGINNING OF YEAR 687 28,249
---------- ---------
CASH AT END OF YEAR $ 6,051 $ 687
========== =========
</TABLE>
See accompanying notes to financial statements.
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II-8
<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 5, L.P.
NOTES TO FINANCIAL STATEMENTS
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
- ------------------------------------------------------------------------------
1. PARTNERSHIP ORGANIZATION
Enex Oil & Gas Income Program II-5, L.P. (the "Company"), a
Texas limited partnership, commenced operations on March 13,
1985 for the purpose of acquiring proved oil and gas
properties. Total limited partner contributions were
$6,114,437, of which $61,144 was contributed by Enex Resources
Corporation ("Enex"), the general partner.
Enex has been the general partner of the Company since its
inception, except for the period from April 18, 1990 until
August 17, 1991 when Energy Development Company, an unrelated
company in Denver, Colorado was the general partner.
In accordance with the partnership agreement, the Company paid
commissions of $533,798 for solicited subscriptions to Enex
Securities Corporation, a subsidiary of Enex, and reimbursed
Enex for organization expenses of approximately $185,000.
Information relating to the allocation of costs and revenues
between Enex, as general partner, and the limited partners is
as follows:
Limited
Enex Partners
Commissions and selling expenses 1% 99%
Company reimbursement of organization
expense 1% 99%
Company property acquisition 1% 99%
General and administrative costs 10% 90%
Costs of drilling and completing
development wells 10% 90%
Revenues from temporary investment of
partnership capital 1% 99%
Revenues from producing properties 10% 90%
Operating costs (including general and
administrative costs associated with
operating producing properties) 10% 90%
At the point in time when the cash distributions to the limited
partners equal their subscriptions ("payout"), the costs of
drilling and completing development wells, revenues from
producing properties, general and administrative costs and
operating costs will be allocated 15% to the general partner
and 85% to the limited partners.
II-9
<PAGE>
In May 1993, as the aggregate purchase price of the interests
in the Company plus the cumulative distributions to the limited
partners did not equal limited partner subscriptions (the
"Deficiency"), the general partner forfeited its 10% share of
the Company's net revenues. The foregone net revenues will be
allocated to the limited partners until such time as no
Deficiency exists.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Oil and Gas Properties - The Company uses the successful
efforts method of accounting for its oil and gas operations.
Under this method, the costs of all development wells are
capitalized. Capitalized costs are amortized on the
units-of-production method based on estimated total proved
reserves. The acquisition costs of improved oil and gas
properties are capitalized and periodically assessed for
impairment.
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standards No. 121, "Accounting for the
impairment of Long Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement requires that long-lived assets
and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset
may not be recoverable.
The Company has not determined the effect, if any, on its
financial position or results of operations which may result
from the adoption of this statement in the first quarter of
1996.
Cash Flows - The Company has presented its cash flows using the
indirect method and considers all highly liquid investments
with an original maturity of three months or less to be cash
equivalents.
General and Administrative Expenses - The Company reimburses
the General Partner for direct costs and administrative costs
incurred on its behalf. Administrative costs allocated to the
Company are computed on a cost basis in accordance with
standard industry practices by allocating the time spent by the
General Partner's personnel among all projects and by
allocating rent and other overhead on the basis of the relative
direct time charges.
Uses of Estimates - The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contigent assets and liabilities at the date of
the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could
differ from these estimates.
3. FEDERAL INCOME TAXES
General - The Company is not a taxable entity for federal
income tax purposes. Such taxes are liabilities of the
individual partners and the amounts thereof will vary depending
on the individual situation of each partner. Accordingly, there
is no provision for income taxes in the accompanying financial
statements.
II-10
<PAGE>
Set forth below is a reconciliation of net loss as reflected in the accompanying
financial statements and net loss for federal income tax purposes for the year
ended December 31, 1995:
<TABLE>
<CAPTION>
Allocable to
---------------------- Per $500 Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
------------ ---------- ----------- ------------
Net loss as reflected in the
<S> <C> <C> <C> <C>
accompanying financial statements $ (9,820) $ - $ (9,820) $ (1)
Reconciling item:
Difference in depreciation and
depletion computed for federal
income tax purposes and
the amount computed for
financial reporting purposes (10,681) - (10,681) (1)
------------ ---------- ----------- ------------
Net loss for federal
income tax purposes $ (20,501) $ - $(20,501) $ (2)
============ ========== =========== ============
</TABLE>
Net loss for federal income tax purposes is a summation of ordinary income
(loss), portfolio income (loss), cost depletion and intangible drilling costs as
presented in the Company's federal income tax return.
Set forth below is a reconciliation between partners' capital as reflected in
the accompanying financial statements and partners' capital for federal income
tax purposes as of December 31, 1995:
<TABLE>
<CAPTION>
Allocable to
------------------------ Per $500 Limited
General Limited Partner Unit
TOTAL Partner Partners Outstanding
------------ ----------- ----------- --------------
Partners' capital as reflected in the
<S> <C> <C> <C> <C>
accompanying financial statements $ 86,322 $ 2,818 $ 83,504 $ 7
Reconciling items:
Intangible drilling costs
capitalized for financial
reporting purposes which
were charged-off for federal
income tax purposes (119,373) (11,328) (108,045) (9)
Difference in accumulated
depreciation, depletion and
amortization for financial
reporting and federal income
tax purposes 257,585 5,817 251,768 20
Commissions and syndication
fees capitalized for federal
income tax purposes 553,798 5,538 548,260 45
------------ ----------- ----------- --------------
Partners' capital for federal
income tax purposes $ 778,332 $ 2,845 $ 775,487 $ 63
============ =========== =========== ==============
</TABLE>
II-11
<PAGE>
4. REPURCHASE OF LIMITED PARTNER INTERESTS
In accordance with the partnership agreement, the general partner is
required to purchase limited partner interests (at the option of the
limited partners) at annual intervals beginning after the second
year following the formation of the Company. The purchase price, as
specified in the partnership agreement, is based primarily on
reserve reports prepared by independent petroleum engineers as
reduced by a specified risk factor.
5. SIGNIFICANT PURCHASERS
Hanson Minerals Company and Scurlock Permian Corporation accounted
for 60% and 26%, respectively, of the 1995 sales. Hanson Minerals
Company and Scurlock Permian Corporation accounted for 53% and 25%,
respectively, of the 1994 sales. No other purchaser individually
accounted for more than 10% of such sales.
6. PAYABLE TO GENERAL PARTNER
Unpaid general and administrative expenses allocated to the Company
by Enex during 1995 will be reimbursed to Enex in 1996.
7. PROPOSAL TO SELL THE COMPANY'S ASSETS
Due to the magnitude of prices received from unaffiliated third
party purchasers for working interests owned by other partnerships
managed by the General Partner in the same properties in which the
Company owns working interests, the depletion of the Company's oil
and gas reserves, the Company's inability to generate sufficient
cash flow from operations to consistently maintain regular cash
distributions, and the ongoing costs of operating the Company, the
General Partner has determined that it is in the best interests of
the Limited Partners to sell the Company's assets and, thereafter,
dissolve and liquidate the Company.
In light of the above described circumstances, the Limited Partners
of the Company have been asked to consider and vote upon a proposal
to sell its assets and, thereafter, dissolve and liquidate the
Company in accordance with the provisions of it Partnership
Agreement (the "Proposal"). Adoption of the Proposal requires the
affirmative vote of a majority in interest of the Limited Partners.
If the proposal is adopted, the assets will be sold and the proceeds
allocated to the Partners' capital accounts in accordance with the
provisions of the Partnership Agreement. Neither the General Partner
nor any other affiliate of the Company or the General Partner will
purchase any Company properties. If the Company's assets are not
sold pursuant to the Proposal described herein, the Company will
continue to be managed by the General Partner on an ongoing basis.
II-12
<PAGE>
ENEX OIL & GAS INCOME PROGRAM II - 5, L.P.
SUPPLEMENTARY OIL AND GAS INFORMATION
FOR THE TWO YEARS ENDED DECEMBER 31, 1995
- ----------------------------------------------------------------------------
Proved Oil and Gas Reserve Quantities (Unaudited)
The following presents an estimate of the Company's proved oil and gas reserve
quantities and changes therein for each of the two years in the period ended
December 31, 1995. Oil reserves are stated in barrels ("BBLS") and natural gas
in thousand cubic feet ("MCF"). The amounts per $500 limited partner unit do not
include a potential 5% reduction after payout. All of the Company's reserves are
located within the United States.
<TABLE>
<CAPTION>
Per $500 Per $500
Limited Natural Limited
Oil Partner Unit Gas Partner Unit
(BBLS) Outstanding (MCF) Outstanding
--------- ------------ ----------- -------------
PROVED DEVELOPED AND
UNDEVELOPED RESERVES:
<S> <C> <C> <C> <C>
January 1, 1994 8,146 1 156,953 12
Revisions of previous estimates 3,442 - (36,367) (3)
Production (1,784) - (15,755) (1)
--------- ------------ ----------- -------------
December 31, 1994 9,804 1 104,831 8
Revisions of previous estimates 1,221 - 20,987 2
Production (2,498) - (15,097) (1)
--------- ------------ ----------- -------------
December 31, 1995 8,527 1 110,721 9
========= ============ =========== =============
PROVED DEVELOPED RESERVES:
January 1, 1994 8,146 1 156,953 12
========= ============ =========== =============
December 31, 1994 9,804 1 104,831 8
========= ============ =========== =============
December 31, 1995 8,527 1 110,721 9
========= ============ =========== =============
</TABLE>
II-13
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not Applicable
II-14
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------------------
The Company's sole General Partner is Enex Resources Corporation, a
Delaware corporation. The Company has no Directors or executive officers. The
Directors and executive officers of Enex are:
Gerald B. Eckley. Mr. Eckley, age 69, has served as a Director, President
and Chief Executive Officer of the General Partner since its formation in 1979.
He was employed by Shell Oil Company from 1951 to 1967 and served in managerial
capacities from 1959 to 1967. From 1967 to 1969, he was Director of Fund Raising
at the University of Oklahoma and from 1969 to 1971, was Vice President of Land
and Operations for Imperial American Management Company. In 1971, Mr. Eckley was
a petroleum consultant and in 1972-1973 was General Counsel and Executive
Director of the Oil Investment Institute. From 1973 to 1974, he was Manager of
Oil Properties, Inc. and from 1974 to 1976, was Vice President, Land and Joint
Ventures for Petro-Lewis Corporation. From 1977 to August 1979, Mr. Eckley was
President of Eckley Energy, Inc., a company engaged in purchasing and selling
oil and gas properties. Mr. Eckley received an L.L.B. degree from the University
of Oklahoma in 1951 and a Juris Doctor degree from the University of Oklahoma in
1970.
William C. Hooper, Jr. Mr. Hooper, age 58, has been a Director of the
General Partner since its formation in 1979 and is a member of the General
Partner's Audit and Compensation and Options Committees. In 1960 he was a staff
engineer in the Natural Gas Department of the Railroad Commission of Texas, with
principal duties involving reservoir units and gas proration. In 1961 he was
employed by the California Company as a Drilling Engineer and Supervisor. In
1963 he was employed as a Staff Engineer by California Research Corporation and
in 1964 rejoined the California Company as a project manager having various
duties involving drilling and reservoir evaluations. In 1966 he was Executive
Vice President for Moran Bros. Inc., coordinating and managing all company
activities, drilling operations, bidding and engineering. From 1970 until the
present, he has been self-employed as a consulting petroleum engineer providing
services to industry and government and engaged in business as an independent
oil and gas operator and investor. From 1975 to 1987 he was also a Director and
President of Verna Corporation, a drilling contractor and service organization.
He received a B.S. degree in Petroleum Engineering in 1960 from the University
of Texas and an M.S. degree in Petroleum Engineering from that same University
in 1961.
Stuart Strasner. Mr. Strasner, age 66, was a Director of the General
Partner from its formation until October of 1986. He was reappointed to the
Board on April 19, 1990 to fill a vacancy. He is a member of the Audit
Committee. He is a professor of business law at Oklahoma City University and was
Dean of the law school at Oklahoma City University from July 1984 until June
1991. Prior to July 1984, Mr. Strasner was an attorney in private practice with
McCollister, McCleary, Fazio and Holliday in Oklahoma City, Oklahoma. From 1959
to 1974, he was employed by various banks, bank holding companies and an
insurance company in executive capacities. From 1974 to 1978, he was a
consultant to various corporations such as insurance companies, bank holding
companies and small business investment companies. From 1978 until late 1981, he
was Executive Director of the Oklahoma Bar Association, and from 1981 to 1983
was a Director and President of PRST Enterprises, Inc., a real estate
development company. Mr. Strasner holds an A.B. degree from Panhandle A&M
College, Oklahoma, and a J.D. degree from the University of Oklahoma. He is a
member of the Fellows of the American Bar Association and a member of the
Oklahoma Bar Association. Mr. Strasner is also a director of Health Images,
Inc., a public company which provides fixed site magnetic resonance imaging
("MRI") services.
III-1
<PAGE>
Martin J. Freedman. Mr. Freedman, age 71, was one of the General Partner's
founders and a member of its Board of Directors as well as a board member of
Enex Securities Corporation until June of 1986. He was reappointed to the Board
on April 19, 1990 to fill a vacancy. He is a member of the Compensation and
Options Committee. He is currently President of Freedman Oil & Gas Company,
engaged primarily in the management of its exploration and producing properties,
and the managing partner Martin J. Freedman & Company which has an interest in
approximately one hundred producing oil and/or gas wells. Mr. Freedman is a
lifetime member of the Denver Petroleum Club as well as being a lifetime member
of the Denver Association of Petroleum Landmen. He was an officer and Director
and/or founder of several former private and public companies. Mr. Freedman
entered the oil and gas business in 1954 when he joined Mr. Marvin Davis of the
Davis Oil Company. In 1956, he became President of Central Oil Corporation, a
company engaged in oil and gas exploration. From 1958 on, Mr. Freedman operated
as Martin J. Freedman Oil Properties and was President of Oil Properties, Inc.,
a private corporation. Mr. Freedman attended Long Island University and New York
University. He received a bachelor's degree in Psychology and also attended New
York University's graduate school.
James Thomas Shorney. Mr. Shorney, age 70, has been a Director of the
General Partner since April of 1990 and is a member of the Compensation and
Options Committee. He has been a petroleum consultant and Secretary/Treasurer of
the Shorney Company, a privately held oil and gas exploration company, from 1970
to date. From 1970 to 1976, he also served as a petroleum consultant in Land and
Lease Research Analysis Studies for the GHK Company. He was an oil and gas lease
broker from 1962 to 1970 and employed by Shell Oil Company in the Land
Department from 1954 to 1962. Before joining Shell Oil Company, he served as
Public Information Officer in the U.S. Army Air Force from 1950 to 1953
including attending Georgetown University Graduate School in 1952. Mr. Shorney
graduated from the University of Oklahoma with a B.A. degree in Journalism in
1950. From 1943 to 1945, he served in the U.S. Army Air Force as an air crew
member on a B-24 Bomber. Mr. Shorney is a member of the Oklahoma City
Association of Petroleum Landmen on which he has served as Director and
Secretary/Treasurer. He is an active member of the American Association of
Petroleum Landmen. In 1975, Mr. Shorney was first listed in the London Financial
Times' Who's Who in World Oil and Gas.
Robert D. Carl, III. Mr. Carl, age 42, was appointed a Director of the
General Partner on July 30, 1991 and is a member of the Audit Committee. He is
President, Chief Executive Officer and Chairman of the Board of Health Images,
Inc., a public company whose securities are traded on NYSE, which provides fixed
site magnetic resonance imaging ("MRI") services. From 1978 to 1981, Mr. Carl
also served as President of Carl Investment Associates, Inc. a registered
investment advisor. In 1981, Mr. Carl joined Cardio-Tech, Inc., as general
counsel and as an officer and Director. Upon the sale and reorganization of
Cardio-Tech, Inc. into Cardiopul Technologies in 1982, he served as its
Executive Vice President and as a Director. In March, 1985 he was elected
President, Chief Executive Officer and Chairman of Cardiopul Technologies which
spun off its non-imaging medical services business and changed its name to
Health Images, Inc. Mr. Carl received a B.A. in History from Franklin and
Marshall College, Lancaster, Pennsylvania in 1975 and a J.D. from Emory
University School of Law, Atlanta, Georgia in 1978. Mr. Carl is a trustee of
Franklin & Marshall College and is a member of the State Bar of Georgia.
On January 4, 1996, the SEC filed a complaint in the United States District
Court for the District of Columbia against Mr. Carl alleging that Mr. Carl
violated Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act"),
and Rule 16a-2 and 16a-3 (and former Rule 16a-1) thereunder, by failing to
timely file reports concerning thirty-eight securities transactions in his
mother's brokerage accounts involving shares of Health Images, Inc. stock.
Although Mr. Carl's mother apparently did not
III-2
<PAGE>
live in his household, the SEC took the position that because Mr. Carl (1)
provided substantial financial support to his mother, (2) commingled his
mother's assets with his own, (3) provided a substantial portion of the funds
used to purchase the shares in question, and (4) received from his mother a
substantial portion of the sales proceeds, he, therefore, had a pecuniary
interest in, and was a beneficial owner of, the shares in question.
In response to the SEC's action, Mr. Carl disgorged to Health Images, Inc.
approximately $92,400 in short-swing profits from the trading in his mother's
account, plus interest thereon of approximately $52,600. The SEC further
requested the court to impose a $10,000 civil penalty against Mr. Carl pursuant
to Section 21(d)(3) of the Exchange Act. Without admitting or denying the
allegations in the complaint, Mr. Carl consented to the entry of a final
judgement imposing the $10,000 penalty. On January 12, 1996, a federal judge
entered the final judgement in this matter, and Mr. Carl has since filed amended
reports on Forms 4 and 5 reflecting these transactions in his mother's accounts.
In relation to the same matter, the SEC has issued an administrative Order
pursuant to Section 21C of the Exchange Act against Mr. Carl, finding that he
violated Section 16(a) and the rules thereunder and requiring him to cease and
desist from committing or causing any violation or future violation of those
provisions. Without admitting or denying allegations in the SEC's Order, Mr.
Carl consented to the entry of the Order.
Robert E. Densford. Mr. Densford, age 38, was appointed a Director of the
General Partner on September 11, 1991. He joined the General Partner as
Controller on May 1, 1985 and became Vice President-Finance, Secretary and
Treasurer on March 1, 1989. From January 1983 to April 1985, he was Senior
Accountant for Deloitte Haskins & Sells in Houston, Texas, auditing both closely
held and publicly owned oil and gas companies. From September 1981 to December
1982, he was a staff accountant for Coopers & Lybrand in Houston. Mr. Densford
is a C.P.A. and holds a B.B.A. degree in Accounting and an M.S. degree in Oil
and Gas Accounting from Texas Tech University and is a member of the American
Institute of Certified Public Accountants and the Texas Society of Certified
Public Accountants.
James A. Klein. Mr. Klein, age 32, joined the General Partner as Controller
in February 1991. In June 1993, he was appointed President and Principal of Enex
Securities Corporation. From June 1988 to February 1991, he was employed by
Positron Corporation in Houston. From July 1987 to May 1988, he was employed by
Transworld Oil Company in Houston and from September 1985 until July 1987, he
was an accountant with Deloitte Haskins & Sells in Houston, Texas, auditing oil
and gas and oil service companies. Mr. Klein is a Certified Public Accountant
and holds a B.A. in Accounting (1985) from the University of Iowa. He is a
member of the American Institute of Certified Public Accountants and the Iowa
Society of Certified Public Accountants.
Item 10. Executive Compensation
The Company has no Directors or executive officers.
The Company does not pay a proportional or fixed share of the compensation
paid to the officers of the General Partner.
The Company reimburses the General Partner for direct costs and
administrative costs incurred on its behalf. Administrative costs allocated to
the Company are computed on a cost basis in accordance with standard industry
practices by allocating the time spent by the General Partner's personnel among
all projects and by allocating rent and other overhead on the basis of the
relative direct time charges.
III-3
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
$500 Limited
Name of Partner Units Percent
Title of Class Beneficial Owner Owned Directly of Class
Limited Partner Enex Resources 2,774 22.6824%
Item 12. Certain Relationships and Related Transactions
See the Statements of Operations included in the Financial
Statements in Item 7 of this report for information concerning general and
administrative costs incurred by Enex and allocated to the Company, and Note 1
to such Financial Statements for information concerning payments to Enex
Securities Corporation, a wholly owned subsidiary of Enex and to Enex for
certain offering and organization expenses incurred by the Company.
Item 13. Exhibits and Reports on Form 8-K
Sequential
Page No.
-----------
(a) Exhibits
(3) a. Amended Certificate and Agreement of Limited
Partnership. Incorporated by reference to
Exhibit A to the Prospectus of Enex Oil & Gas
Income Program II dated May 4, 1984, filed
with the Securities and Exchange Commission
pursuant to Rule 424(b) on or about May 15,
1984.
(4) Not Applicable
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(18) Not Applicable
(19) Not Applicable
(22) Not Applicable
(23) Not Applicable
III-4
<PAGE>
(24) Not Applicable
(25) Not Applicable
(28) Not Applicable
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
III-5
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENEX OIL AND GAS INCOME
PROGRAM II - 5, L.P.
By: ENEX RESOURCES CORPORATION
the General Partner
March 18, 1996 By: /s/ G. B. Eckley
-------------------
G. B. Eckley, President
In accordance with the Exchange Act, this report has been
signed below on March 18, 1996, by the following persons in the capacities
indicated.
ENEX RESOURCES CORPORATION General Partner
By: /s/ G. B. Eckley
------------------------
G. B. Eckley, President
/s/ G. B. Eckley
President, Chief Executive
------------------ Officer and Director
G. B. Eckley
/s/ R. E. Densford Vice President, Secretary, Treasurer,
Chief Financial Officer and Director
-------------------
R. E. Densford
/s/ James A. Klein Controller and Chief Accounting Officer
-----------------
James A. Klein
S-1
<PAGE>
/s/ Robert D. Carl, III
--------------------------
Robert D. Carl, III Director
/s/ Martin J. Freedman
--------------------------
Martin J. Freedman Director
/s/ William C. Hooper, Jr.
--------------------------
William C. Hooper, Jr. Director
/s/ Tom Shorney
--------------------------
Tom Shorney Director
/s/ Stuart Strasner
--------------------------
Stuart Strasner Director
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000769501
<NAME> Enex Oil & Gas Income Program II - 5 L.P.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> dec-31-1995
<PERIOD-START> jan-01-1995
<PERIOD-END> dec-31-1995
<CASH> 6051
<SECURITIES> 0
<RECEIVABLES> 18499
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25040
<PP&E> 4209687
<DEPRECIATION> 4134078
<TOTAL-ASSETS> 100649
<CURRENT-LIABILITIES> 14327
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 86322
<TOTAL-LIABILITY-AND-EQUITY> 100649
<SALES> 63352
<TOTAL-REVENUES> 63352
<CGS> 24538
<TOTAL-COSTS> 46952
<OTHER-EXPENSES> 26220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9820)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
