U.S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
Annual Report Under Section 13 or 15(d)
of the
Securities Exchange Act of 1934
for the quarterly period ended
June 30, 1997
Commission File Number: 1-10425
WICHITA RIVER OIL CORPORATION, Debtor-in-Possession
(Name of Small Business Issuer in its Charter)
Delaware 13-3544163
(State of Incorporation) (IRS Employer Identification Number)
3500 N. Causeway Blvd., Suite 410
Metairie, Louisiana 70002
(Address of Principle Executive Office) (Zip Code)
(504)-831-0381
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of The Exchange Act:
Title of Each Class Name of Exchange on which Registered
Common Stock $0.01 par value None
Securities registered under Section 12(g) of The Exchange Act: None
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 Transitional Small Business Format: Yes No x .
Applicable Only To Corporate Issuers
State the number of shares outstanding of each of the issuer's
classes of equity.
As of July 25, 1997, approximately 7,974,000 shares of Common Stock, $0.01
par value per share, were issued and outstanding.
<PAGE>
<TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 16,000 $ 77,000
Accounts receivable 621,000 473,000
__________ _________
Total Current Assets 637,000 550,000
Property and Equipment:
Oil and gas properties
(full cost method) 57,568,000 55,503,000
Less - Accumulated depletion and
writedown of oil and gas
properties (39,606,000) (39,035,000)
Net Property and Equipment 17,962,000 16,468,000
____________ ____________
Total Assets $ 18,599,000 $ 17,018,000
___________ ___________
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $1,085,000 $1,076,000
Undistributed production
receipts 2,180,000 2,180,000
Accrued liabilities 2,217,000 984,000
Accrued interest 4,818,000 3,620,000
Current maturities of
long-term debt 21,350,000 21,350,000
__________ __________
Total Current Liabilities 31,650,000 29,210,000
Stockholders' Equity (Deficit):
Common stock, voting, $.01
par value, shares authorized
10,000,000, shares outstanding
7,974,000 and 7,974,000,
respectively 81,000 81,000
Additional paid-in capital 12,987,000 12,987,000
Subscriptions receivable (216,000) (319,000)
Retained earnings (deficit) (25,903,000) (24,941,000)
__________ __________
Total Stockholders' Equity
(Deficit) (13,051,000) (12,192,000)
___________ __________
Total Liabilities &
Stockholders' Equity (Deficit) $18,599,000 $17,018,000
___________ __________
</TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
Unaudited
<CAPTION>
Additional Stock
Common Stock Paid-in Subscriptions Retained Stockholders'
Shares Amount Capital Receivable Earnings (Deficit) Equity (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Balance Dec. 31, 1996 7,974,000 $81,000 $12,987,000 $(319,000) $(24,941,000) $(12,192,000)
Collection of
Subscription Receivable - - - - - - 103,000 - - 103,000
Net Loss - - - - - - - - ( 962,000) ( 962,000)
_________ _______ ___________ _________ ____________ ____________
Balance March 31, 1997 7,974,000 $81,000 $12,987,000 $(216,000) $(25,903,000) $(13,051,000)
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
2
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
First Half Second Quarter
Periods Ended June 30, 1997 1996 1997 1996
<S> <C> <C> <C> <C)
Revenues:
Oil and gas sales $2,105,000 $2,062,000 $1,084,000 $1,104,000
Expenses:
Production expenses 874,000 607,000 483,000 402,000
General and administrative 423,000 751,000 228,000 263,000
Interest expense 1,200,000 1,145,000 600,000 562,000
Depreciation, depletion
and amortization 570,000 546,000 317,000 296,000
__________ _________ _________ _________
Total expenses 3,067,000 3,049,000 1,628,000 1,523,000
Income(loss)before income taxes ( 962,000) ( 987,000) (544,000) (419,000)
Income tax benefit - - - - - - - -
___________ ____________ __________ __________
Net Income (Loss) $( 962,000) $( 987,000) $( 544,000) $(419,000)
Earnings (Loss) Per Share $(0.12) $(0.12) $(0.07) $(0.05)
Number of shares outstanding 7,974,000 7,974,000 7,974,000 7,974,000
</TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $(962,000) $(987,000)
Adjustment to reconcile net income (loss)
to net cash from operating activities:
Depreciation, depletion and amortization 570,000 546,000
_________ _________
Operating cash flow (Loss) before (392,000) (441,000)
non-cash charges
Changes in assets and liabilities
Decrease (increase) in accounts receivable
and other assets (148,000) 408,000
Increase (decrease) in accounts payable
and other liabilities 2,440,000 1,357,000
__________ __________
Net cash provided by operating activities $1,900,000 $1,324,000
Cash Flows from Investing Activities:
Capital expenditures $(2,064,000) $(1,320,000)
___________ ___________
Net cash (used in) investing activities $(2,064,000) $(1,320,000)
Cash Flows from Financing Activities: $ 103,000 $ - -
Cash and Cash Equivalents:
At beginning of period $ 77,000 $ 28,000
Net increase (decrease) during period (61,000) 4,000
___________ _________
At end of period $ 16,000 $ 32,000
Supplemental Cash Flow Information:
Cash paid during period for interest $ - - $ - -
Cash paid during period for income taxes $ - - $ - -
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
3
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Notes to Condensed Consolidated Financial Statements for June 30, 1997
Summary of Significant Accounting Policies
Principles of Consolidation: The condensed consolidated financial statements
include the accounts of Wichita River Oil Corporation, Debtor-in-Possession and
its wholly owned subsidiaries (collectively referred to as the "Company").
The Company's wholly owned subsidiaries are Equitable Petroleum Corporation
and WRO Operating Company. The Company is an oil and gas exploration,
development and production company. All material intercompany accounts and
transactions are eliminated in consolidation.
Cash Equivalents: The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
Property and Equipment: Property and equipment are stated at cost. The Company
uses the "full cost" method of accounting for oil and gas properties.
Accordingly, costs incurred in the acquisition, exploration and development of
oil and gas properties are capitalized. Under the full cost method, intangible
drilling costs, dry hole costs, geologic costs and certain internal costs
related to exploration and development efforts are included as part of oil
and gas properties. Proceeds from the sale of oil and gas properties reduce
property and equipment and no gains or losses are normally recognized under
the full cost method. As the Company becomes aware of costs to be incurred for
site restoration, dismantlement and/or abandonment, it records the liability.
To date, no such liability has been recorded.
Depreciation, depletion and amortization of proved oil and gas properties is
computed using the units of production method based on total proved oil and
gas reserves. Depreciation of other fixed assets, primarily office equipment,
is determined using the straight-line method over their estimated useful lives.
Upon abandonment or disposal of depreciable assets, the cost and accumulated
allowance for depreciation are eliminated from the accounts and any gain or
loss is reflected in results of operations.
Income Taxes: Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"), which requires the Company to use an asset and liability
approach to accounting for income taxes. Deferred tax assets or liabilities are
measured by applying the provisions of enacted tax laws to differences between
the tax bases of assets and liabilities and amounts reported on the Company's
balance sheet. A valuation allowance must be established for any portion of a
deferred income tax asset, if it is more likely than not that a tax benefit
will not be realized.
Reclassifications: Certain prior years' amounts have been reclassified to
conform with the 1997 presentation.
Earnings (Loss) Per Share: The weighted average number of shares of common
stock outstanding during the periods is used to compute earnings (loss) per
share. Stock options and warrants are considered common stock equivalents to
the extent they have a dilutive effect on earnings per share.
Use of Estimates: The preparation of 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 contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Notes to Condensed Consolidated Financial Statements for June 30, 1997
Current Maturities of Long-Term Debt
On February 1, 1992, the Company entered into a long-term credit agreement
("1992 Credit Agreement") with a bank providing a borrowing capacity of
$20,000,000, which was immediately drawn. The proceeds were used primarily
to retire the $15,000,000 loan under an existing credit agreement and the
remainder of a production payable incurred in a 1991 merger.
Outstanding borrowings, which were increased and then subsequently reduced to
$21.5 million in August of 1993, under the loan are secured by a first security
interest in the oil and gas properties of the Company. On October 1, 1995, a
$2.7 million payment ($2.0 million of principal and $0.7 million of accured
interest) was due on the Company's $21.3 million senior-secured debt. The
Company was unable to pay to $2.7 million, and the note holder's remedies for
nonpayment include acceleration of the loan and initation of foreclosure
proceedings. Immediately prior to October 1, 1995, the Company's original
lender transferred the debt to a new note holder. Subsequently, the note
holder and the Company discussed various debt amendment ideas as well as various
recapitalization and/or refinancing alternatives. On April 11, 1996, the note
holder delivered to the Company a notice of default and declared the debt due
and payable. On April 17, 1996, alleged unsecured creditors of the Company
filed an involuntary petition with the United States Bankruptcy Court in the
Eastern District of Louisiana seeking a Chapter 11 reorganization of the
Company. On July 15, 1996, an Order for Relief was entered and Wichita River
Oil Corporation became Debtor-in-Possession.
Management believes that anticipated cash flows from operations will be
adequate to meet the Company's foreseeable financial obligations provided
the Company's properties can be fully developed. The Company's ability to
continue the development of its properties during the near future is subject
to the determination of certain issues in bankruptcy proceedings.
Common Stock
During 1994, the Company issued 1,258,000 shares of common stock and
stockholders' equity was increased by $1,023,000. Included were 237,729
shares with a market value $259,000 for settlement of litigation, 250,000
shares to a consultant to the company for a subscription receivable of
$190,000, and the balance of 770,000 shares for reducing the Company's
current liabilities by $764,000. The Company had incurred the current
liabilities primarily as a result of capital expenditures associated with
production enhancement operations.
The following table identifies the changes during the past two years for the
Company's stock purchase warrants and stock options as well as the issued and
outstanding warrants and options as of June 30, 1997.
<TABLE>
<CAPTION>
Number Price Number Price
of Warrants Per Share of Options Per Share
<S> <C> <C> <C> <C>
Outstanding Dec. 31, 1993 567,500 $0.01 - 1.25 40,000 $1.56 - 6.25
Forfeited during 1994-net (8,000) - - - - - -
Exercised during 1994 (41,000) 1.25 - - - -
_______ ___________ ______ ___________
Outstanding Dec. 31, 1994: 518,500 0.01 - 1.25 40,000 1.56 - 6.25
Forfeited during 1995-net (12,000) - - (16,000) 6.25
Exercised during 1995 - - - - - - - -
_______ ____________ ______ ____________
Outstanding Dec. 31, 1995: 506,500 $0.01 - 1.25 24,000 $1.56 - 6.25
Forfeited during 1996 & 1997 (506,500) $0.01 - 1.25 - - - -
Exercised during 1996 & 1997 - - - - - - - -
_______ ____________ ______ ____________
Outstanding June 30, 1997: - - - - 24,000 $1.56 - 6.25
Consisting of: 20,800 $1.56
3,200 $6.25
</TABLE>
As of June 30, 1997, a total of 24,000 shares of Company common stock were
reserved for issuance under stock option plans.
5
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
On October 1, 1995, a $2.7 million payment ($2.0 million of principal and $0.7
million of accrued interest) was due on the Company's $21.3 million senior-
secured debt. The Company was unable to pay the $2.7 million, and the note
holder's remedies for nonpayment include acceleration of the loan and
initiation of foreclosure proceedings. Immediately prior to October 1,
1995, the Company's original lender transferred the debt to a new note
holder. Subsequently, the note holder and the Company discussed various
debt amendments ideas as well as various recapitalization and/or refinancing
alternatives. On April 11, 1996, the note holder delivered to the Company a
notice of default and declared the debt due and payable. On April 17, 1996,
alleged unsecured creditors of the Company filed an involuntary petition with
the United States Bankruptcy Court in the Eastern District of Louisiana seeking
a Chapter 11 reorganization of the Company. On July 15, 1996, an Order of
Relief was entered and Wichita River Oil Corporation became Debtor-in-
Possession.
The Company's balance sheet as of December 31, 1996, includes the entire amount
of senior-secured debt in current liabilities, resulting in deficit working
capital of $28.7 million, including $21.3 million of principal and an additional
$3.6 million of accured interest.
The Company's independent auditors, Arthur Andersen LLP, did not express an
opinion on the Company's financial statements as of December 31, 1995. The
auditors requested the note holder to return an ordinary audit debt
confirmation. The note holder refused to confirm the debt terms and
maturities. The auditors further stated that there is "substantial doubt
about the Company's ability to continue as a going concern." Consequently,
the auditors stated "we do not express an opinion on the financial
statememts..."
Management believes that anticipated cash flows from operations will be
adequate to meet the Company's foreseeable financial obligations provided the
Company's properties can be fully developed. The Company's ability to continue
the development of its properties during the near future is subject to the
determination of certain issues in bankruptcy proceedings.
As of December 31, 1995, the capitalized cost of the Company's oil and gas
properties was less than the cost ceiling established by the Company's proved
reserves. However, uncertainty regarding the Company's ability to fund
development of its proved undeveloped reserves in the near future may limit
the cost ceiling to the value of the Company's proved developed reserves.
By limiting its property value to the cost ceiling established by proved
developed reserves, a writedown of $9.2 million for impairment of the Company's
stated property value was recorded during the fourth quarter of 1995.
6
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Net cash provided by operating activities during the first half of 1997 was
$1,900,000, including an operating cash loss of $392,000. Comparable figures
for 1996 were cash provided by operating activities of $1,324,000, including an
operating cash loss of $441,000. Net cash used in investing activities in 1997
was $2,064,000 for capital expenditures compared to net cash used in investing
activities in 1996 of $1,320,000. Cash flows from financing activities were
$103,000 in 1997 from collection of stock subscriptions receivable. There were
no financing activities in 1996.
Wichita River Oil Corporation and the Company's subsidiary Equitable Petroleum
Corp. are defendants in various lawsuits arising in the ordinary course of
business. The Company believes it has meritorious defenses to the lawsuits
and will defend against them. Based on its evaluation of such claims, as
discussed with its outside legal counsel, Company management is of the
opinion that the ultimate resolution of such matters will not have a material
adverse effect on the Company's financial position or results of operations and
that such matters are not material for an investment decision regarding the
Company's securities.
Results of Operations
First Quarter of 1997 Compared to First Quarter of 1996. When compared to a
year earlier, oil and gas sales were 6% higher due primarily to a 8% increase
in average daily production (638 BOE v. 588) and despite 2% lower average prices
($17.79 per BOE v. $18.09). Average oil prices per barrel were higher ($19.15 v.
$17.61) while average natural gas prices were lower ($2.70 per mcf v. $3.08).
Production expenses, exclusive of taxes, were 2.1 times greater in 1997 than in
1996 due to compliance with new environmental regulations associated with water
disposal. Lease operating costs per BOE averaged $4.83 in 1997 compared to
$2.52 in 1996. Production taxes were 46% higher in 1997 when compared to 1996
($1.98 per BOE v. $1.36) reflecting the higher oil prices (depicted above) while
oil production was 28% higher (345 barrels per day v. 270). Natural gas
production volumes were 6% lower in 1997 (1,755 mcf per day v. 1,874 mcf).
General and administrative expenses in 1997 were 60% lower than in 1996,
reflecting the Company's continued austerity program. Interest expense in 1997
was 3% higher due to a higher amount of interest-bearing debt outstanding.
Depreciation, depletion and amortization costs were essentially unchanged
because increased volumes were offset by a lower depletion rate ($4.40 per BOE
v. $4.72).
Second Quarter of 1997 Compared to Second Quarter of 1996. When compared to a
year earlier, oil and gas sales were 2% lower due primarily to 10% lower average
prices ($15.03 per BOE v. $16.78) and despite a 10% increase in average daily
production (792 BOE per day v. 723). Higher average production volumes were
achieved despite a fire at the Company's principal property, the Little Lake
Field. The fire, which was an act of arson, occurred on April 29, 1997 and
resulted in loss of approximately $458,000 of oil and gas sales during the
second quarter of 1997. Average oil prices per barrel were 11% lower ($16.16
v. $18.15) and average natural gas prices were 22% lower ($1.99 per mcf v.
$2.54). Production expenses, exclusive of taxes, were 20% greater in 1997 than
in 1996 due to compliance with new environmental regulations associated with
water disposal. Lease operating costs per BOE averaged $4.82 in 1997 compared
to $4.70 in 1996. Production taxes were 33% higher in 1997 when compared to
1996 ($1.88 per BOE v. $1.41) reflecting the lower oil prices (depicted above)
while oil production was 53% higher (580 barrels per day v. 379). Natural gas
production volumes were 38% lower than in 1996 (1,275 mcf per day v. 2,063 mcf)
due primarily to the fire described above.
General and administrative expenses in 1997 were 13% lower than in 1996,
reflecting the Company's continued austerity program. Interest expense in 1997
was 7% higher due to a higher prime rate and an increased amount of interest-
bearing debt outstanding. Depreciation, depletion and amortization costs were
7% higher than in 1996 due to increased volumes, which were offset partially
by a lower depletion rate ($4.40 per BOE v. $4.50).
7
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
First Half of 1997 Compared to First Half of 1996. When compared to a year
earlier, oil and gas sales were 2% higher due primarily to an 11% increase in
average daily production (715 BOE per day v. 644) and despite 6% lower average
prices ($16.25 per BOE v. $17.29). Higher average production volumes were
achieved despite a fire at the Company's principal property, the Little Lake
Field. Average oil prices per barrel were 2% lower ($17.26 v. $17.69) and
average natural gas prices were 15% lower ($2.40 per mcf v. $2.82 mcf).
Production expenses, exclusive of taxes, were 44% greater in 1997 than in 1996
due to compliance with new environmental regulations associated with water
disposal. Lease operating costs per BOE averaged $4.83 in 1997 compared to
$3.80 in 1996. Production taxes were 38% higher in 1997 when compared to 1996
($1.92 per BOE v $1.41) reflecting the lower oil prices (depicted above) while
oil production was 48% higher (463 barrels per day v. 312). Natural gas
production volumes were 24% lower than in 1996 (1,514 mcf per day v. 1,994 mcf)
due primarily to the fire described above.
General and administrative expenses in 1997 were 44% lower than in 1996,
reflecting the Company's continued austerity program. Interest expense in 1997
was 5% higher due to a higher prime rate and an increased amount of interest-
bearing debt outstanding. Depreciation, depletion and amortization costs were
4% higher than in 1996 due to increased volumes, which were offset partially by
a lower depletion rate ($4.40 per BOE v $4.68).
Legal Proceedings
On April 17, 1996, unsecured creditors of the Company filed an involuntary
petition with the United States Bankruptcy Court in the Eastern District of
Louisiana seeking a Chapter 11 reorganization of the Company. On July 15, 1996,
an Order of Relief was entered, permitting the Company to continue operations
under Chapter 11 as debtor-in-possession. Subsequently, the Company filed suit
on March 20, 1997 against Swiss Bank Corporation, Odyssey Partners, L.P. and
Nomura Holding America, Inc. in U.S. District Court in the Eastern District of
Louisiana seeking $100 million of damages from the defendants for fraud,
detrimental reliance, breach of contract and lender liability. The Company also
filed suit against other parties in the U.S. Bankruptcy Court during March 1997
seeking approximately $2 million for breach of certain agreements.
Two bankruptcy reorganization plans and related disclosure statements have been
filed and printed for mailing by the Company and by the "identified creditors"
group. A hearing has been scheduled to commence on September 8, 1997, for
ruling on which of the two plans will be confirmed for the bankruptcy
reorganization of the Company. Ballots are scheduled to be mailed to all
parties-in-interest on July 29, 1997, and the deadline for voting has been set
for August 28, 1997.
Wichita River Oil Corporation and the Company's subsidiary Equitable Petroleum
Corp. are defendants in various lawsuits arising in the ordinary course of
business. The Company believes it has meritorious defenses to the lawsuits and
will defend against them. Based on its evaluation of such claims, as discussed
with its outside legal counsel, Company management is of the opinion that the
ultimate resolution of such matters will not have a material adverse effect on
the Company's financial position or results of operations and that such matters
are not material for an investment decision regarding the Company's securities.
The Company is a defendant in an action styled John H. Hauberg, et al v.
Wichita River Oil Corporation, et al, No. 54,837, 23rd JDC, Ascension Parish,
La. in which the royalty owners of a lease that is operated by the Company are
seeking approximately $300,000 in unpaid royalties plus penalties and interest
and attorney's fees. The Company has acknowledged and accrued the $300,000
liability for unpaid royalties but has denied the claim for penalties, which
exceeds $1.2 million. The Company believes it has meritorious defeses against
the claim for penalties.
The Company owns approximately 75% working interest in the lease in question.
Other working interest owners and royalty owners who had not been involved
directly in the case mentioned above have filed recently claims and cross-claims
and counterclaims both with and against the Company for reimbursement for any
penalties which may result from this litigation.
Submission of Matters to a Vote of Security Holders
None.
Exhibits and Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized in New Orleans, State of
Louisiana on July 25, 1997.
Wichita River Oil Corporation
By: /s/ Michael L. McDonald By:/s/ James P. McGinnis
Michael L. McDonald James P. McGinnis
Chairman and President Controller
July 25, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of
Operations and is qualified in its entirety by reference to such on Form 10-QSB
for the six months period ended June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,000
<SECURITIES> 0
<RECEIVABLES> 621,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 637,000
<PP&E> 57,568,000
<DEPRECIATION> 39,606,000
<TOTAL-ASSETS> 18,599,000
<CURRENT-LIABILITIES> 31,650,000
<BONDS> 0
0
0
<COMMON> (13,051,000)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,599,000
<SALES> 0
<TOTAL-REVENUES> 2,105,000
<CGS> 874,000
<TOTAL-COSTS> 3,067,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 600,000
<INCOME-PRETAX> (962,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (962,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (962,000)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
