U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File No. 0-25386
FX ENERGY, INC.
(Exact name of registrant as specified in its charter)
NEVADA 87-0504461
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
3006 Highland Drive, Suite 206
Salt Lake City, Utah 84106
(Address of principal executive offices)
(801) 486-5555
(Issuer's telephone number)
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 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 [ ]
The number of shares of $.001 par value common stock outstanding as of May 12,
2000 was 14,849,003.
<PAGE>
FX ENERGY, INC., AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
Item Description Page
------- ---------------------------------------------------- ---------
Part I. Financial Information
1. Consolidated Balance Sheets............................... 3
1. Consolidated Statements of Operations..................... 5
1. Consolidated Statements of Cash Flows..................... 6
1. Notes to Consolidated Financial Statements................ 7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
Part II. Other Information
6. Exhibits and Reports on Form 8-K.......................... 17
-- Signatures................................................ 18
2
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<TABLE>
<CAPTION>
PART I.
ITEM 1. FINANCIAL STATEMENTS
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March December
31, 2000 31, 1999
--------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents.............................................. $ 3,254,304 $ 1,619,237
Investment in marketable debt securities............................... 2,091,908 5,249,003
Accounts receivable:
Accrued oil sales.................................................... 293,499 243,183
Interest receivable.................................................. 29,788 171,242
Joint interest owners and others..................................... 62,152 86,723
Advances to oil and gas ventures....................................... 13,192 --
Inventory.............................................................. 70,844 66,361
Other current assets................................................... 106,894 126,006
--------------- ---------------
Total current assets............................................... 5,922,581 7,561,755
--------------- ---------------
Property and equipment, at cost:
Oil and gas properties (successful efforts method):
Proved............................................................... 2,175,442 1,687,089
Unproved............................................................. 1,398,546 1,382,880
Other property and equipment........................................... 2,793,510 2,652,102
--------------- ---------------
Gross property and equipment....................................... 6,367,498 5,722,071
Less accumulated depreciation, depletion and amortization.............. (3,216,824) (3,173,493)
--------------- ---------------
Net property and equipment......................................... 3,150,674 2,548,578
--------------- ---------------
Other assets:
Certificates of deposit................................................ 356,500 356,500
Other.................................................................. 2,789 2,789
--------------- ---------------
Total other assets................................................. 359,289 359,289
--------------- ---------------
Total assets............................................................. $ 9,432,544 $ 10,469,622
============= =============
</TABLE>
-- Continued --
The accompanying notes are an integral part of the
consolidated financial statements.
3
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<TABLE>
<CAPTION>
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
-- Continued --
March December
31, 2000 31, 1999
--------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable....................................................... $ 712,379 $ 623,911
Accrued liabilities.................................................... 1,118,675 1,478,862
--------------- ---------------
Total current liabilities.......................................... 1,831,054 2,102,773
--------------- ---------------
Total liabilities.................................................. 1,831,054 2,102,773
--------------- ---------------
Stockholders' equity:
Common stock, $.001 par value, 30,000,000 shares
authorized, 14,849,003 issued and outstanding as of
March 31, 2000 and December 31, 1999................................. 14,849 14,849
Notes receivable from officers......................................... (1,400,040) (1,370,873)
Additional paid-in capital............................................. 38,480,556 38,480,556
Accumulated deficit.................................................... (29,493,875) (28,757,683)
--------------- ---------------
Total stockholders' equity........................................... 7,601,490 8,366,849
--------------- ---------------
Total liabilities and stockholders' equity............................... $ 9,432,544 $ 10,469,622
=============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
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<TABLE>
<CAPTION>
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31,
----------------------------------------
2000 1999
----------------- -----------------
Revenues:
<S> <C> <C>
Oil sales............................................ $ 596,630 $ 233,708
Drilling revenue..................................... 73,738 87,543
----------------- -----------------
Total revenues................................... 670,368 321,251
----------------- -----------------
Operating costs and expenses:
Lease operating expenses............................. 284,992 236,069
Production taxes..................................... 6,946 14,368
Geological and geophysical costs..................... 484,409 179,832
Drilling costs....................................... 75,265 52,874
Depreciation, depletion and amortization............. 87,068 126,429
General and administrative........................... 596,967 536,389
----------------- -----------------
Total operating costs and expenses............... 1,535,647 1,145,961
----------------- -----------------
Operating loss......................................... (865,279) (824,710)
----------------- -----------------
Other income (expense):
Interest and other income............................ 134,254 102,191
Interest expense..................................... (308) --
Impairment of notes receivable from officers......... (4,859) --
----------------- -----------------
Total other income............................... 129,087 102,191
----------------- -----------------
Net loss............................................... $ (736,192) $ (722,519)
================= =================
Basic and diluted net loss per common share............ $ (.05) $ (.06)
================= =================
Basic and diluted weighted average number
of shares outstanding................................ 14,849,003 13,054,503
================= =================
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
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<TABLE>
<CAPTION>
FX ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For three months ended
March 31,
---------------------------------------
2000 1999
----------------- -----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss........................................................... $ (736,192) $ (722,519)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation, depletion and amortization....................... 87,068 126,429
Impairment of notes receivable from officers................... 4,859 --
Interest income on officer loans............................... (34,026) (28,340)
Increase (decrease) from changes in working capital items:
Accounts receivable.............................................. 115,709 10,700
Advances to oil and gas ventures................................. (13,192) --
Inventory........................................................ (4,483) 1,621
Other current assets............................................. 19,112 (4,214)
Accounts payable and accrued liabilities......................... (447,223) (103,484)
----------------- -----------------
Net cash used in operating activities.......................... (1,008,368) (719,807)
----------------- -----------------
Cash flows from investing activities:
Additions to oil and gas properties................................ (382,475) (65,036)
Additions to other property and equipment.......................... (131,185) (12,382)
Additions to other assets.......................................... -- (2,789)
Proceeds from sale of property interests........................... -- 3,000
Purchase of marketable debt securities............................. (1,384,905) (1,041,915))
Proceeds from maturing marketable debt securities.................. 4,542,000 1,065,000
----------------- -----------------
Net cash provided by (used in) investing activities.............. 2,643,435 (54,122)
----------------- -----------------
Cash flows from financing activities:
Advances to officers............................................... -- (97,810)
----------------- -----------------
Net cash used in financing activities............................ -- (97,810)
----------------- -----------------
Increase (decrease) in cash and cash equivalents..................... 1,635,067 (871,739)
Cash and cash equivalents at beginning of period..................... 1,619,237 1,811,780
----------------- -----------------
Cash and cash equivalents at end of period........................... $ 3,254,304 $ 940,041
================= =================
</TABLE>
Supplemental non-cash activity disclosure:
Non-cash investing activities
Additions to oil and gas properties included $121,544 and $269,047 of
additions financed with accounts payable and accrued liabilities for the periods
ended March 31, 2000 and 1999, respectively. Additions to other property and
equipment included $53,960 of additions financed with accounts payable for the
period ended March 31, 2000.
The accompanying notes are an integral part of the
consolidated financial statements.
6
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FX ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The interim financial data are unaudited; however, in the opinion of
the management of FX Energy, Inc. and Subsidiaries ("FX Energy" or the
"Company"), the interim data includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
interim periods. The interim financial statements should be read in conjunction
with FX Energy's annual report on Form 10-K as amended for the year ended
December 31, 1999, including the financial statements and notes thereto.
The consolidated financial statements include the accounts of FX Energy
and its wholly-owned subsidiaries and FX Energy's undivided interests in Poland.
All significant inter-company accounts and transactions have been eliminated in
consolidation. At March 31, 2000, FX Energy owned 100% of the voting stock of
all of its subsidiaries.
Certain balances in the 1999 financial statements have been
reclassified to conform to the current quarter presentation. These changes had
no effect on total assets, total liabilities, stockholders' equity or net loss.
Note 2: Income Taxes
FX Energy recognized no income tax benefit from the losses generated in
the first quarter of 2000 and the first quarter of 1999.
Note 3: Officer Loans
As of March 31, 2000, notes receivable and accrued interest from
officers, before an impairment allowance, totaled $2,070,411, with a due date of
on or before December 31, 2000. The notes receivable and accrued interest are
collateralized by 233,340 shares of FX Energy's common stock. In accordance with
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," FX Energy has
recorded a cumulative impairment allowance of $670,371 as of March 31, 2000,
including $4,859 for the quarter ended March 31, 2000 and $665,512 for the year
ended December 31, 1999, based on the value of the underlying collateral.
In consideration for extending the term from December 31, 1999 through
December 31, 2000, the officers agreed that if the average closing price of the
common stock for five consecutive trading days results in a value of the
collateral equal to or above the total principal and accrued interest balances,
the officers will repay the loans within 45 days thereafter either in cash or by
tendering to the Company such number of shares which at the average closing
price for the previous five consecutive trading days equals the principal and
accrued interest then due.
The impairment allowance will continue to be adjusted quarterly based
on the market value of the collateral shares.
7
<PAGE>
Note 4: Business Segment Information
FX Energy operates within two segments of the oil and gas industry: the
exploration and production segment ("E&P") and the contract drilling and well
servicing segment ("contract services").
Reportable business segment information as of March 31, 2000 and for
the three months ended March 31, 2000 follows:
<TABLE>
<CAPTION>
Non-
Contract Segmented
E&P Services Items (1) Total
-------------- -------------- ------------------------------
<S> <C> <C> <C> <C>
Revenues.................. $ 596,630 $ 73,738 $ -- $ 670,368
Net loss.................. (195,659) (52,713) (487,820) (736,192)
Identifiable net property
and equipment (2)....... 2,365,128 630,418 155,128 3,150,674
</TABLE>
- --------------------
(1) Net loss reconciling items include $596,967 of general and administrative
expenses, $19,940 of corporate DD&A and $129,087 of other income and
expense. Identifiable net property and equipment includes $155,128 of
corporate office equipment, hardware and software.
(2) Identifiable net property and equipment are reported by business segment
for management reporting and reportable business segment disclosure
purposes. Current assets, other assets and current liabilities are not
allocated to business segments for management reporting or business segment
disclosure purposes.
Reportable business segment information as of March 31, 1999 and for
the three months ended March 31, 1999 follows:
<TABLE>
<CAPTION>
Non-
Contract Segmented
E&P Services Items (1) Total
-------------- -------------- ------------------------------
<S> <C> <C> <C> <C>
Revenues.................. $ 233,708 $ 87,543 $ -- $ 321,251
Net loss.................. (211,004) (46,266) (465,249) (722,519)
Identifiable net property
and equipment (2)....... 1,957,953 655,963 222,374 2,836,290
- --------------------
</TABLE>
(1) Net loss reconciling items include $536,389 of general and administrative
expenses, $31,051 of corporate DD&A and $102,191 of other income and
expense. Identifiable net property and equipment includes $222,374 of
corporate office equipment, hardware and software.
(2) Identifiable net property and equipment are reported by business segment
for management reporting and reportable business segment disclosure
purposes. Current assets, other assets and current liabilities are not
allocated to business segments for management reporting or business segment
disclosure purposes.
Note 5: Subsequent Events
Fences Project Area
On April 11, 2000, FX Energy signed an agreement with the Polish Oil
and Gas Company ("POGC") under which FX Energy will earn a 49% working interest
in approximately 300,000 gross acres in west central Poland (the "Fences"
project area) by spending $16 million for agreed exploration drilling, seismic
acquisition and related activities.
8
<PAGE>
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information May Prove Inaccurate
This report contains statements about the future, sometimes referred to
as "forward-looking" statements. Forward-looking statements are typically
identified by the use of the words "believe," "may," "will," "should," "expect,"
"anticipate," "estimate," "project," "propose," "plan," "intend" and similar
words and expressions. Statements that describe FX Energy's future strategic
plans, goals or objectives are also forward-looking statements. FX Energy
intends the forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A of the
Securities Act and Section 21E of the Exchange Act.
Readers of this report are cautioned that any forward-looking
statements, including those regarding FX Energy or its management's current
beliefs, expectations, anticipations, estimations, projections, proposals, plans
or intentions, are not guarantees of future performance or results of events and
involve risks and uncertainties, such as:
o The future results of drilling individual wells and other
exploration and development activities;
o Uncertainties regarding drilling potential and expected results;
o The inability to estimate precisely the hydrocarbon potential of
any exploration prospect or the related risks;
o Future variations in well performance as compared to initial test
data;
o Future events that may result in the need for additional capital;
o Fluctuations in prices for oil and gas;
o Uncertainties of certain terms to be determined in the future
relating to FX Energy's oil and gas interests, including
exploitation fees, royalty rates and other matters;
o Future drilling and other exploration schedules and sequences for
various wells and other activities;
o Uncertainties regarding estimates of hydrocarbon reserves,
production rates, accumulations and recoveries;
o Uncertainties regarding future political, economic, regulatory,
fiscal, taxation and other policies in Poland;
o The future ability of FX Energy to attract strategic partners to
share the costs of exploration, exploitation, development and
acquisition activities; and
o Future plans and the financial and technical resources of strategic
partners.
The forward-looking information is based on present circumstances and
on FX Energy's predictions respecting events that have not occurred, which may
not occur or which may occur with different consequences from those now assumed
or anticipated. Actual events or results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including the risk factors detailed in this report. The forward-looking
statements included in this report are made only as of the date of this report.
FX Energy is not obligated to update such forward-looking statements to reflect
subsequent events or circumstances.
9
<PAGE>
Introduction
We are an independent energy company engaged in the exploration,
development and production of oil and gas from properties located primarily in
the Republic of Poland. However, to date, all of our revenue from oil and gas
production has been from our United States producing properties. In the western
United States, we produce oil from fields in Montana and Nevada and have a
drilling and well servicing company in northern Montana and oil and gas
exploration prospects in several western states.
We conduct substantially all of our exploration and development
activities jointly with others and, accordingly, recorded amounts for our
activities in Poland reflect only our proportionate interest in these
activities.
Our results of operations may vary significantly from period to period
based on the factors discussed above and on other factors such as our
exploratory and development drilling success. Therefore, the results of any one
period may not be indicative of future results.
We follow the successful efforts method of accounting for our oil and
gas properties. Under this method of accounting, all property acquisition costs
and costs of exploratory and development wells are capitalized when incurred,
pending determination of whether the well has found proved reserves. If an
exploratory well has not found proved reserves, these costs plus the costs of
drilling the well are expensed. The costs of development wells are capitalized,
whether productive or nonproductive. Geological and geophysical costs on
exploratory prospects and the costs of carrying and retaining unproved
properties are expensed as incurred. An impairment allowance is provided to the
extent that capitalized costs of unproved properties, on a property-by-property
basis, are considered not to be realizable. An impairment loss is recorded if
the net capitalized costs of proved oil and gas properties exceed the aggregate
undiscounted future net revenues determined on a property-by-property basis. The
impairment loss recognized equals the excess of net capitalized costs over the
related fair value, determined on a property-by-property basis. As a result of
the foregoing, our results of operations for any particular period may not be
indicative of the results that could be expected over longer periods.
We have reviewed all recently issued, but not yet adopted, accounting
standards in order to determine their effects, if any, on our results of
operations or financial position. Based on that review, we believe that none of
these pronouncements will have a significant effect on current or future
earnings or operations.
Results of Operations by Business Segment
We operate within two segments of the oil and gas industry: exploration
and production and contract servicing. Depreciation, depletion and amortization
costs directly associated with the exploration and production and contract
servicing segments are detailed within the following discussion. General and
administrative costs, interest income, other income, interest expense and
officer loan impairments are not allocated to individual operating segments for
management or segment reporting purposes and are discussed in their entirety
following the segment discussion.
Three months ended March 31, 2000 compared to the same period of 1999
Exploration and Production Segment
10
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Oil Revenues. Oil revenues were $597,000 during the first quarter of
2000, an increase of $363,000 as compared to $234,000 during the same period of
1999. During the first quarter of 2000, our oil revenues were positively
affected by higher oil prices and negatively affected by lower production rates
attributable to the natural production declines of our producing properties.
During the first quarter of 1999, our oil revenues were adversely affected by
depressed oil prices and lower production rates attributable to the natural
production declines of our producing properties. A summary of the percentage
change in oil revenues, average oil price and oil production for first quarter
of 2000 and 1999 as compared to their respective prior year's period are set
forth on the following table:
Quarter ended March 31,
-----------------------------
2000 1999
------------ ------------
Oil revenues.................................. $ 597,000 $ 234,000
Percent change versus prior year's quarter +155% -30%
Average oil price............................. $ 24.94 $ 8.80
Percent change versus prior year's quarter +184% -22%
Production volumes (bbls)..................... 23,924 26,572
Percent change versus prior year's quarter -10% -10%
Lease Operating Costs. Our lease operating costs are composed of normal
recurring lease operating expenses and production taxes. Lease operating costs
were $292,000 during the first quarter of 2000, an increase of $42,000 as
compared to $250,000 during the same period of 1999.
Lease operating expense was $285,000 during the first quarter of 2000,
an increase of $49,000 as compared to $236,000 during the same period of 1999.
During the first quarter of 2000, we increased our lease operating expense to
cover various repair and maintenance items that were previously deferred due to
low oil prices. As a result, lifting costs were $11.91 per barrel during the
first quarter of 2000, an increase of $3.03 as compared to $8.88 during the
first quarter of 1999. During the first quarter of 1999, we reduced our lease
operating expense by re-designing the pattern of injecting fluids into the Cut
Bank Sand Unit, our principal producing property, and deferred major repairs and
maintenance items due to depressed oil prices.
Production taxes were $7,000 during the first quarter of 2000, a
decrease of $7,000 as compared to $14,000 during the same period of 1999.
Production taxes averaged approximately 1.2% and 6.1% of oil revenues during the
first quarter of 2000 and 1999, respectively. During late 1999, the state of
Montana substantially reduced the production tax rate for stripper wells, which
in turn resulted in substantially less production taxes for the first quarter of
2000 as compared to the same period of 1999.
Depreciation, Depletion and Amortization Expense - Exploration and
Production. Depreciation, depletion and amortization expense for producing
properties was $16,000 for the first quarter of 2000, an increase of $2,000 as
compared to $14,000 during the same period of 1999. The depreciation, depletion
and amortization expense rate per barrel for the first quarter of 2000 was
$0.67, an increase of $0.14 as compared to $0.53 during the same period of 1999.
We utilize the units-of-production method to calculate our depreciation,
depletion and amortization expense for producing properties. As such, the
depreciation, depletion and amortization expense rate may vary year to year
based on net capitalized costs and the volumes of reserves reported in the
current year's reserve report as compared to the prior year. The reserve report
as of
11
<PAGE>
December 31, 1999 reflected proved reserves of 1.1 million barrels of oil, 0.4
million barrels less than the 1.5 million barrels of oil reported as of December
31, 1998.
Exploration Costs. Our exploration costs consist of geological and
geophysical costs, exploratory dry holes and non-producing leasehold
impairments. Exploration costs were $484,000 during the first quarter of 2000,
an increase of $304,000 as compared to $180,000 during the same period of 1999.
Geological and geophysical costs were $484,000 during the first quarter
of 2000, an increase of $304,000 as compared to $180,000 during the same period
of 1999. During the first quarter of 2000, we spent $162,000 reprocessing
seismic data on the Pomeranian area, $108,000 reprocessing seismic data on the
Warsaw West area, $74,000 for travel and related expenses and $140,000 on other
geological and geophysical activities. During the first quarter of 1999,
geological and geophysical costs were comprised primarily of $75,000 for the
Polish Lowlands Study, $65,000 for travel and related expenses and $40,000 for
other geological and geophysical activities. Geological and geophysical costs
will continue to fluctuate from period to period, based on our level of
exploratory activity in Poland and the respective cost participation percentage
of our industry partners.
We had no exploratory dry hole costs during the first quarter of 2000
and 1999. During late 1998, we participated in drilling two exploratory wells,
the Czernic 277-2 and the Poniatowa 317-1, on the Lublin Basin area in Poland,
both of which were subsequently determined to be exploratory dry holes during
February 1999. The Czernic 277-2 and the Poniatowa 317-1 were each counted as
exploratory wells under the Apache Exploration Program. As such, Apache
Corporation ("Apache") covered all of our pro-rata share of costs for each well.
There were no non-producing leasehold impairments during the first
quarter of 2000 and 1999. As of March 31, 2000, we had capitalized unproved
property costs of $1.399 million, including $692,000 domestically and $707,000
in Poland. In accordance with generally accepted accounting principles, an
impairment charge will be recognized, determined on a property-by-property
basis, in the event we determine any capitalized unproved property costs are not
recoverable following unsuccessful exploratory drilling or other factors.
Non-producing leasehold impairments will continue to vary from period to period
based on our determination that capitalized costs of unproved properties, on a
property-by-property basis, are not realizable.
Contract Servicing Segment
Contract Servicing Revenues. We had contract servicing revenues of
$74,000 during the first quarter of 2000, a decrease of $14,000 as compared to
$88,000 for the first quarter of 1999. During the first quarter of 2000 and
1999, our drilling rig was idle, and all revenues were generated by our well
servicing equipment. Contract servicing revenue will continue to fluctuate from
period to period based on whether our drilling rig is active, the degree of
emphasis on utilizing equipment on our own properties, the number of wells
drilled, the amount of retained working interest, if any, and other factors.
Contract Servicing Costs. Contract servicing costs were $75,000 during
the first quarter of 2000, an increase of $22,000 as compared to $53,000 for the
same period of 1999. During the first quarter of 2000, our well and servicing
equipment generated a gross profit of 25% on direct costs of $55,000 and
incurred downtime maintenance costs of $20,000 associated with our drilling rig.
During the first quarter of 1999, our well and servicing equipment generated a
gross
12
<PAGE>
profit of 39% on direct costs of $53,000, and the drilling rig was idle.
Contract servicing costs will continue to fluctuate from period to period based
on whether our drilling rig is active, the degree of emphasis on utilizing
equipment on our own properties, the number of wells drilled, the amount of
retained working interest, if any, and other factors.
Depreciation, Depletion and Amortization Expense - Contract Servicing.
Depreciation, depletion and amortization expense for contract servicing was
$51,000 during the first quarter of 2000, a decrease of $30,000 as compared to
$81,000 during the same period of 1999. Depreciation, depletion and amortization
expense for contract servicing was lower during the first quarter of 2000 as
compared to the same quarter of 1999 due to capital items being depreciated in
the first quarter of 1999 subsequently becoming fully depreciated prior to the
first quarter of 2000.
Non-segmented Information
Depreciation, Depletion and Amortization Expense - Corporate.
Depreciation, depletion and amortization expense for corporate activities was
$20,000 during the first quarter of 2000, a decrease of $11,000 as compared to
$31,000 during the same period of 1999. Depreciation, depletion and amortization
expense for corporate activities was lower during the first quarter of 2000 as
compared to the same quarter of 1999 due to capital items being depreciated in
the first quarter of 1999 subsequently becoming fully depreciated prior to the
first quarter of 2000.
General and Administrative Costs. General and administrative costs were
$597,000 during the first quarter of 2000, an increase of $61,000 as compared to
$536,000 for the same period of 1999. During the first quarter of 2000, we
incurred substantially more travel and other associated costs as compared to the
same period of 1999. General and administrative costs are expected to be higher
in future periods as we begin to pay for part of our pro-rata share of Apache's
general and administrative costs in Poland beginning in July 2000.
Interest and Other Income. Interest and other income was $134,000
during the first quarter of 2000, an increase of $32,000 as compared to $102,000
during the same period of 1999. Our cash and marketable debt securities balance
was $5.346 million as of March 31, 2000, $1.499 million more than the balance of
$3.847 million as of March 31, 1999. As a result of higher average cash and
marketable debt securities balances during the first quarter of 2000 as compared
to the same period of 1999, we earned $126,000 of interest income during the
first quarter of 2000, an increase of $34,000 as compared to $92,000 for the
same period of 1999.
Officer Loan Impairment. Officer loan impairment was $5,000 for the
quarter ended March 31, 2000, as compared to no officer loan impairment for the
same period of 1999. In accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan," we
recorded an additional impairment allowance of $5,000 for the quarter ended
March 31, 2000. The notes receivable from officers totaled $1.4 million as of
March 31, 2000, including principal and interest of $2.070 million reduced by an
impairment allowance of $670,000. The notes receivable from officers are
collateralized by 233,340 shares of our common stock. The impairment allowance
will continue to be adjusted quarterly based on the market value of the
collateral shares.
13
<PAGE>
Liquidity and Capital Resources
Historically, we have relied primarily on proceeds from the sale of
equity securities to fund our operating and investing activities. During 1999,
1998 and 1997, we received net proceeds from the sale of securities of $7.067
million, $166,000 and $253,000, respectively. We also benefit from funds
provided by industry partners. We intend to obtain funds for our planned
activities from the sale of additional securities, project financing, sale of
partial property interests, strategic alliances with other energy or financial
partners or other arrangements, all of which may dilute the interest of our
existing stockholders or our interest in the specific project financed. There
can be no assurance we will be able to obtain funds that will enable us to carry
out our planned activities.
Working Capital
Our working capital was $4.092 million as of March 31, 2000, a decrease
of $1.367 million as compared to $5.459 million at December 31, 1999. The
decrease was due principally to a net loss before depreciation, depletion and
amortization costs of $649,000 and net additions to property and equipment of
$645,000 during the first quarter of 2000.
Operating Activities
Net cash used in operating activities was $1.008 million during the
first quarter of 2000, an increase of $288,000 as compared to $720,000 for the
same period of 1999. We used net cash in operating activities before changes in
working capital items of $678,000 and $624,000 during the first quarter of 2000
and 1999, respectively. Cash used to fund changes in working capital items was
$330,000 and $96,000 during the first quarter of 2000 and 1999, respectively.
Investing Activities
Our investing activities provided net cash of $2.643 million during the
first quarter of 2000, as compared to using net cash of $54,000 during the same
period of 1999. During the first quarter of 2000, we spent $322,000 on drilling
the Wilga 3 development well in Poland, spent $44,000 to upgrade our domestic
properties, spent $16,000 on annual concession fees for the Baltic project area
in Poland, spent $16,000 on office equipment, spent a net amount of $116,000 to
upgrade our drilling and well servicing equipment and realized a net amount of
$3.157 million from investing in marketable debt securities. During the first
quarter of 1999, we spent $31,000 on upgrading our producing properties, spent
$33,000 on annual concession fees relating to the Baltic Project area, received
$3,000 from the sale of a partial property interest in the Williston Basin of
North Dakota, spent $8,000 to upgrade our drilling well servicing equipment,
spent $5,000 to upgrade our corporate office equipment, spent $3,000 on other
assets and realized a net amount of $23,000 from investing in marketable debt
securities.
Financing Activities
No cash was used in financing activities during the first quarter of
2000, as compared to $98,000 used in the same period of 1999. During the first
quarter of 1999, we advanced two of our officers a total of $98,000. As of April
8, 1999, we had no further commitment to advance additional funds to the
officers.
14
<PAGE>
In the past our strategic partners have provided a substantial amount
of the capital required under our exploratory agreements with them and we expect
they may continue to do so in the future. For instance, in 1997, Apache
committed to cover our fifty-percent share of an exploration program in Poland
estimated to cost $60 million gross ($30 million net). Apache has covered
approximately $40 million of those costs through the end of 1999 and is now
committed to covering our share of costs to drill four additional wells, shoot
350 kilometers of 2-D seismic and a portion of our share of Apache's overhead in
Poland during 2000. Other industry partners have previously covered
approximately $2.9 million of our share of costs in other projects during the
last five years.
Capital Requirements
We had $5.3 million of cash and marketable securities with no long-term
debt as of March 31, 2000. As a result of our recent Wilga exploration success
and our new Fences project, we now need additional capital to fund our share of
ongoing planned, exploration, appraisal, development, production and property
acquisition activities in Poland during the remainder of 2000 and 2001. We
intend to obtain funds for these purposes from the sale of additional
securities, project financing, sale of partial property interests, strategic
alliances with other energy or financial partners or other arrangements, all of
which may dilute the interest of our existing stockholders or our interest in
the specific project financed. There can be no assurance we will be able to
obtain funds that will enable us to carry out our planned activities as
discussed below:
Fences Project Area. We have agreed to spend $16 million of exploration
costs in the Fences project area to earn a 49% interest. We expect the $16
million will cover the costs to drill the Kleka 11, well now underway and
approximately five additional exploratory wells and to acquire approximately 200
square kilometers of 3-D seismic to supplement the 3-D seismic already acquired
by POGC. After the first $16 million, all costs and net revenues will be shared
49% by us and 51% by POGC. The first well, the Kleka 11, which was started by
POGC, is expected to reach target depth in May 2000. We and POGC are currently
discussing the schedule for operations to be conducted during the balance of
2000 and 2001.
Wilga Project Area. We are currently drilling the Wilga 3, a
development well next to the Wilga 2. One additional well is scheduled and two
additional wells are anticipated to be drilled in the Wilga area during 2000.
Additional wells may be drilled thereafter. We estimate each well in the Wilga
area will cost an average of approximately $3.0 million gross ($1.4 million
net). We anticipate completing production facilities and pipelines during the
fourth quarter of 2000 at a cost of approximately $11.0 million gross ($5.0
million net). Initial production from the Wilga area is anticipated to commence
during the first half of 2001.
Based on our exploration success in the Wilga project area and our
planned completion of production facilities, we anticipate receiving production
revenue from the Wilga field in early 2001. We expect these revenues will
supplement our capital from other sources for further development of the Wilga
field.
We have initiated discussions with a commercial lender for a possible
project loan secured by proved reserves that may be developed through the Wilga
drilling effort. We expect the amount that may be available from this commercial
lender would equal about half of the discounted net present value of proved
reserves that we may be able to establish. There can be
15
<PAGE>
no assurance we can establish such a credit facility. In any event, borrowed
funds are not likely to be available until significant proved reserves are
established through additional drilling.
Apache Exploration Program. During the remainder of 2000, we expect to
have almost all of our share of exploration activities relating to the Apache
Exploration Program paid for by Apache. We and Apache have scheduled one well in
each of the Warsaw West, Pomeranian and Carpathian project areas plus an
additional 350 square kilometers of 2-D seismic in the Carpathian area. The
three exploratory wells are scheduled to be drilled prior to the end of 2000.
Apache is obligated to cover our pro-rata share of costs for an additional
exploratory well, which is expected to be drilled during 2001 in an area to be
selected.
During the first quarter of 2000, in an effort to conserve our capital,
we signed an agreement with Apache, whereby Apache would cover our share of
costs to shoot 300 kilometers of 2-D seismic data in the Pomeranian area and 422
kilometers of 2-D seismic data in the Warsaw West area in exchange for their
commitment to cover our share of costs in one exploratory well. Under terms of
the Apache Exploration Program, Apache has covered our share of costs to drill
five exploratory wells to date and is now committed to covering our share of
costs to drill four additional exploratory wells in Poland.
Property Acquisition. We will need additional capital if we are able to
reach an agreement with POGC to purchase appraisal, development or exploration
projects on existing POGC discoveries, shut-in fields and under-developed
properties in Poland. Capital may be required to pay costs of acquisition, the
installation of production infrastructure and the implementation of a long-term
exploitation program. We may undertake such projects alone or under our
arrangement with Apache. We intend to seek additional capital that may be
required for such purposes through a variety of means, including the issuance of
debt and equity securities, project financing, bank financing or other financing
alternatives. There can be no assurance we will be able to obtain funds that
will enable us to participate in any such acquisitions.
Other. We expect to incur minimal exploration expenditures on our
Baltic Project area in Poland during the remainder of 2000 and 2001. Similarly,
we expect to incur minimal appraisal and development expenditures on our
domestic operations during the remainder of 2000 and 2001.
We may change the allocation of capital among the categories of
anticipated expenditures, depending upon future events that we cannot predict.
For example, we may change the allocation of our expenditures based on the
actual results and costs of future exploration, appraisal, development,
production, property acquisition and other activities. In addition, we may have
to change our anticipated expenditures if costs of placing the Wilga field into
production are higher, if the field is smaller than expected or if the
commencement of production takes longer than expected.
16
<PAGE>
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document
- ------------- -------------- -------------------------------------------------
Item 10 Material Contracts
- ------------- -------------- -------------------------------------------------
10.1 10 Agreement effective January 1, 2000, between FX
Energy. Inc, and Apache Overseas, Inc.
Item 27 Financial Data Schedule
- ------------- -------------- -------------------------------------------------
27.01 27 Financial Data Schedule
(b) Reports on form 8-K
During the quarter ended March 31, 2000, FX Energy filed the
following reports on Form 8-K:
Date of Event Reported Item(s) Reported
- ------------------------------------- -----------------------------------
January 25, 2000 Item 5. Other Events
March 6, 2000 Item 5. Other Events
March 30, 2000 Item 5. Other Events
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FX ENERGY, INC.
---------------
(Registrant)
Date: May 15, 2000 By /s/ David N. Pierce
-------------------
President, Director,
Chief Executive Officer
Date: May 15, 2000 By /s/ Dennis L. Tatum
-------------------
Vice-President, Treasurer and
Chief Accounting Officer
18
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into effective as of
January 1, 2000, by and between FX Energy, Inc., a Nevada corporation, and its
subsidiaries and affiliates through which it owns interests and carries out
activities in Poland (collectively, "FX Energy"), and Apache Overseas, Inc.. a
Delaware corporation, and its subsidiaries and affiliates through which it owns
interests and carries out activities in Poland (collectively, "Apache").
Recitals
A. Apache and FX Energy hold certain rights to explore for and exploit
natural gas and oil in certain lands in the Republic of Poland and have been
conducting exploration operations in Poland pursuant to various agreements.
Apache and FX Energy jointly hold exploration rights covering approximately 11.5
million acres and options covering approximately 3.4 million acres controlled by
Polski Gornictwo Naftowe i Gazownictwo S.A. ("POGC").
B. The strategic alliance of Apache and FX Energy has historically
focused on an extensive exploration program. To date, Apache and FX Energy have
jointly participated in the drilling of six wells, and Apache has covered all of
FX Energy's drilling and completion costs for five of the six wells. Apache and
FX Energy also entered into a Farmin Agreement with POGC with respect to POGC's
Lachowice area. The Farmin Agreement was the first agreement of its kind
executed by POGC with foreign entities.
C. The close relationship that Apache and FX Energy have developed
together. and with POGC will hopefully lead to an expanded program in the
Republic of Poland that will include the acquisition of producing properties and
the development and enhancement of proven properties within the Republic of
Poland. Apache and FX Energy have been evaluating several opportunities, and, as
a result of their analyses, executed a Letter of Intent with POGC that, among
other things, establishes an exclusive negotiation period for a proposed
transaction involving the acquisition of interests in the Koscian, Rensko,
Obrzycko, Paproc East and Stezyca project areas (the "Zielona Gora
transaction").
D. In light of these developments, Apache and FX Energy wish to modify
certain provisions of their existing agreements and acknowledge certain
additional agreements.
Agreement
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated herein by this reference, and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Interim Funding Agreement (Zielona Gora). Apache and FX Energy are parties to
an Interim Funding Agreement dated as of September 30, 1999. The Interim Funding
Agreement, among other things, sets forth a timetable for FX Energy's obtaining
of third party financing for the Zielona Gora transaction. Any capitalized term
used in this Section 1 but not defined shall have the meaning given such term in
the Interim Funding Agreement.
The Interim Funding Agreement is hereby amended as follows:
<PAGE>
(i) Extension. According to Paragraph 1 of the Interim Funding
Agreement, "[i]f a Definitive Agreement has not been signed by December
31, 1999, this Agreement shall have no further force or effect unless
extended by mutual agreement of the parties." In addition, the Interim
Funding Agreement states that only Definitive Agreements signed on or
before December 31, 1999 will be subject to the Interim Funding
Agreement. The term of the Interim Funding Agreement is hereby extended
until July 1, 2000, and the deadline for execution of Definitive
Agreements subject to the Interim Funding .Agreement is hereby extended
until July 1, 2000.
(ii) Option Period. The Interim Funding Agreement currently
provides for a 180-day option period commencing on the date of
execution of a Definitive Agreement among POGC, Apache and FX Energy.
The option period described in Paragraph 4 of the Interim Funding
Agreement is hereby modified and will commence on the Closing (defined
below) of the Zielona Gora transaction and terminate 90 days
thereafter.
(iii) Determination Date. The Determination Date set forth in
Paragraph 5 of the Interim Funding Agreement is hereby modified and
will occur on the 90th day following the Closing (defined below) of the
Zielona Gora transaction, or earlier at the election of FX Poland.
(iv) Transaction Expenses. All third party legal and
accounting expenses of Apache and FX Energy relating to the negotiation
and execution of the Definitive Agreement for the Zielona Gora
transaction will be shared by Apache and FX Energy regardless of
whether a Definitive Agreement is executed. Each party's share of
expenses will be based upon each party's participation interest in the
Zielona Gora transaction following FX Energy's exercise of its option.
Apache will provide FX Energy with copies of the invoices from third
parties upon receipt, and promptly pay the invoices. FX Energy will
reimburse Apache for the third party legal and accounting expenses
within thirty days after the first to occur of: (i) FX Energy's
exercise of its option to own an interest in the Zielona Gora
transaction, or (ii) the termination of the Interim Funding Agreement.
In the event the Interim Funding Agreement is terminated, Apache and FX
Energy will share the third party legal and accounting expenses
equally.
(v) Partnership Agreement. The Partnership Agreement to be
filed of record for the Apache/FX Energy spolka jawna (the "Apache/FX
Partnership") in the Zielona Gora transaction will provide that: (a)
the Apache/FX Partnership can be bound only with the signatures of two
members of management, one from Apache and one from FX Energy; (b) it
will have at least two representatives at meetings of the
POGC/Apache/FX Energy spolka komandvtowa (the "Zielona Gora
Partnership"), at least one from FX Energy and at least one from
Apache; and (c) each representative will vote in the Zielona Gora
Partnership in accordance with the consensus mechanism at the Apache/FX
Partnership level.
The term "Closing ' means the consummation of the Zielona Gora
transaction, which will take place following the satisfaction or waiver of the
conditions precedent set forth in the definitive documentation for the Zielona
Gora transaction.
2. Future Well Carries. FX Energy hereby acknowledges and agrees that
Apache has satisfied all of its seismic and drilling obligations to FX Energy in
Poland other than as set forth in this paragraph. Apache will carry FX Energy
in: (i) five wells located within the parties' Area of Mutual Interest and in
which both Apache and FX Energy participate (the "Carried Wells"), and (ii) 350
kilometers of seismic in Blocks 410, 411, 412, 413, 414, 415, 430, 431, 432,
433, 452, and 453 (the
2
<PAGE>
"Carpathian Blocks"). Each of the Carried Wells will be drilled at a mutually
agreeable location and to a depth sufficient to test Carboniferous or Devonian
or deeper formations, estimated at a depth of 2,000 to 3,000 meters. If a
proposed Carried Well is a well required to satisfy a minimum work obligation of
either the Lublin Blocks (defined below) or Carpathian Blocks, then FX Energy
will be required to elect to be carried in that well. In the event a well is
proposed outside of the Lublin or Carpathian Blocks, FX Energy will have the
right to elect to be carried in such well, provided that Apache and FX Energy
agree that such well is substantially equivalent to the wells previously drilled
in Poland in terms of cost and depth.
The commitments set forth in the previous paragraph are intended to
supersede Apache's obligations to drill ten exploratory wells within certain
specified time periods, as more fully described in the following Agreements:
(i) Lublin Participation Agreement. Participation Agreement
dated as of April 16, 1997 between Apache Overseas, Inc. and FX Energy,
Inc. pertaining to the Lublin Area Concessions;
(ii) Carpathian Participation Agreement. Participation
Agreement dated as of February 27, 1998 between Apache Overseas, Inc.
and FX Energy, Inc. pertaining to the Western Carpathian Concessions;
and
(iii) Global Agreement. Agreement dated as of January 1, 1999'
between Apache Overseas, Inc. and FX Energy, Inc. pertaining to Oil and
Gas Operations in Poland.
FX Energy will pay its share of geological and geophysical costs in the
Carpathian Blocks commencing on the later of (i) January 1, 2001, or (ii) the
completion of the 350 kilometer seismic acquisition program in the Carpathian
Blocks.
The term "Lublin Blocks", as used in this Section 2, means the Komarow,
Lublin, Ciecierzyn (which is Block 298), and Vistula Blocks.
3. Wilga Appraisal Well(s). FX Energy will have the option either (i)
to be carried in the Wilga appraisal well(s), or (ii) pay its participation
interest share of the Wilga appraisal well(s). Such option will be exercised no
later than 60 days following the initial cash call for each well. If FX Energy
elects to be carried on the appraisal well(s), such well(s) will be used to
satisfy the well carry(ies) defined in Section 2 above.
4. Lublin Project Area. FX Energy hereby acknowledges and agrees that
Apache has satisfied its obligations to date under the usufructs concerning the
acquisition and reprocessing of seismic and the drilling of wells within the
Komarow, Lublin, Ciecierzyn (which is Block 298), and Vistula Blocks (the
"Lublin Project Area"), and the parties will relinquish the entire Lublin
Project Area with the exception of Blocks 255, 275 and 297.
5. Lachowice Project Area. Apache and FX Energy will formally notify
POGC that Apache and FX Energy do not wish to proceed with further operations in
the Lachowice area.
6. Poland Overhead. Beginning July 1, 2000, FX Energy will pay its
share of overhead incurred, which shall be prorated based on the number of
carried wells completed as a percentage of the total carry commitment of ten
wells, excluding Zielona Gora. The term "overhead" means the direct
3
<PAGE>
charges authorized by Article II of the Accounting Procedure [Exhibit A to the
Joint Operating Agreement Covering Oil and Gas Operations in Poland (the "Joint
Operating Agreement")], which are identified in the Work Program and Budget as
"G&A." The amounts of G&A are based upon the amount of capital spent on
individual projects in relation to total capital spent. G&A shall be reduced by
any payments received by Apache as Operator from POGC and others in the nature
of direct or indirect charges.
7. Award of Contract to Geofizyka Torun. Apache and FX Energy hereby
approve the award of a modified seismic acquisition program (the "Modified
Seismic Program") for Blocks 85, 86, 87, 88, 89, 105, 108, 109, 129, and 149
(the "Pomeranian Blocks") and Blocks 211, 212, 213, 214, 231, 232, 233, 234,
251, 252, 253, 254, and 274 (the "Warsaw West Blocks") to Geofizyka Torun Sp. z
o.o. ("Geofizyka Torun"). Apache and FX Energy will each further evidence their
approval by executing an Authorization for Expenditure ("AFE") for the Modified
Seismic Program in the form of Appendix "A" attached hereto, as required by
Article 6.6 of the Joint Operating Agreement. FX Energy will use one of its five
remaining Carried Wells to offset its participation interest share of the cost
of the Modified Seismic Program.
The Modified Seismic Program consists of the acquisition of 2D seismic
data covering: (i) 300 kilometers of seismic lines within the Pomeranian Blocks;
and (ii) 422 kilometers of seismic lines within the Warsaw West Blocks. For
purposes of determining the allocation of G&A, the Carried Well that FX Energy
has elected to use will be deemed completed upon the conclusion of the Modified
Seismic Program. If Apache and FX Energy elect to acquire additional seismic in
excess of the amounts described above for the Modified Seismic Program, Apache
and FX Energy will share the cost of the additional seismic equally.
8. 2000 Work Program and Budget. In accordance with Article 6.1(B) of
the Joint Operating Agreement, Apache and FX Energy hereby approve the Work
Program and Budget for the calendar year commencing on January 1, 2000, in the
form attached hereto as Appendix "B."
9. Outstanding Amounts for Seismic Acquisition. FX Energy hereby agrees
to pay Apache the sum of U.S. $37,000 to settle the dispute arising from charges
incurred during the acquisition of seismic data by Geofizyka Krakow. FX Energy's
payment of this settlement amount shall not be construed as an admission of
liability on its part in any respect. Payment shall be made within five business
days of the execution of this Agreement.
10. Miscellaneous.
(i) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Texas without regard to any conflict of law rules that would direct
application of the laws of another jurisdiction.
(ii) Severability. This Agreement is severable, such that if
any provision of this Agreement is prohibited or unenforceable in any
jurisdiction such provision shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining portions hereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
4
<PAGE>
(iii) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(iv) Amendments and Prior Agreements. This Agreement shall be
effective when signed by the parties and may not be amended, modified
or assigned except by an instrument executed by all of the parties. To
the extent of any conflicts or inconsistencies, and only to such
extent, this Agreement supersedes all prior agreements between Apache
and FX Energy.
(v) Assignments. This Agreement is binding upon the parties
and their respective successors and assigns; provided that no party may
assign or transfer any of its rights or delegate any of its duties or
obligations under this Agreement without the prior consent of the other
parties.
IN WITNESS whereof this Agreement has been signed by the duly
authorized representatives of the parties as of the day and year first above
written.
APACHE OVERSEAS, INC.
By: /s/ W. Steven Farris
-------------------------------
W. Steven Farris
Vice Chairman of the Board
FX ENERGY, INC.
By: /s/ David N. Pierce
-----------------------
David N. Pierce
President and Chief Executive Officer
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet as of March 31, 2000, and Statements of Operations for the Quarter Ended
March 31, 2000, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,254,304
<SECURITIES> 2,091,908
<RECEIVABLES> 385,439
<ALLOWANCES> 0
<INVENTORY> 70,844
<CURRENT-ASSETS> 5,922,581
<PP&E> 3,150,674
<DEPRECIATION> 3,216,824
<TOTAL-ASSETS> 9,432,544
<CURRENT-LIABILITIES> 1,831,054
<BONDS> 0
14,849
0
<COMMON> 0
<OTHER-SE> 7,601,490
<TOTAL-LIABILITY-AND-EQUITY> 9,432,544
<SALES> 670,368
<TOTAL-REVENUES> 670,368
<CGS> 0
<TOTAL-COSTS> 1,535,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (736,192)
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