<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
COMMISSION FILE NO. 0-22892
TATHAM OFFSHORE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0269967
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600 TRAVIS
SUITE 7400
HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(713) 224-7400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
AS OF FEBRUARY 13, 1997, THERE WERE OUTSTANDING 26,784,117 SHARES OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE REGISTRANT.
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<PAGE> 2
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet as of December 31, 1996 (unaudited)
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statement of Operations for the Three and
Six Months Ended December 31, 1996 and 1995, respectively . . . . . . 4
Unaudited Consolidated Statement of Cash Flows for the Six Months
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity for the
Six Months Ended December 31, 1996 (unaudited) . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 16
Legal Proceedings
Changes in Securities
Defaults Upon Senior Securities
Submission of Matters to a Vote of Security Holders
Other Information
Exhibits and Reports on Form 8-K
</TABLE>
2
<PAGE> 3
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
(unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 11,138 $ 4,764
Stock subscriptions receivable 321 12,242
Accounts receivable from joint venture partners 252 719
Receivable from affiliates 2,472 968
Prepaid expenses 1,913 1,943
------------ ------------
Total current assets 16,096 20,636
------------ ------------
Oil and gas properties:
Oil and gas properties, at cost, using
successful efforts method 80,970 78,158
Less - accumulated depreciation, depletion,
amortization and impairment 15,378 13,258
------------ ------------
Oil and gas properties, net 65,592 64,900
------------ ------------
Prepaid expenses 10,634 11,594
------------ ------------
Total assets $ 92,322 $ 97,130
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 2,876 $ 4,654
Accounts payable to affiliates 620 3,101
Note payable to affiliate 1,734 1,734
------------ ------------
Total current liabilities 5,230 9,489
Long-term debt to affiliate 60,000 60,000
Other noncurrent liabilities 8,943 8,779
------------ ------------
74,173 78,268
------------ ------------
Stockholders' equity (Note 3):
Preferred stock, $0.01 par value, 110,000,000 shares
authorized as of December 31, 1996 and June 30, 1996,
19,585,907 and 18,724,530 shares issued and outstanding
at December 31, 1996 and June 30, 1996, respectively 196 187
Common stock, $0.01 par value, 250,000,000 shares
authorized as of December 31, 1996 and June 30, 1996,
26,784,117 and 25,500,320 shares issued and outstanding
at December 31, 1996 and June 30, 1996, respectively 268 255
Warrants outstanding to purchase shares of Convertible
Exchangeable Preferred Stock 2,247 2,883
Additional paid-in capital 82,031 80,004
Accumulated deficit (66,593) (64,467)
------------ ------------
18,149 18,862
------------ ------------
Total liabilities and stockholders' equity $ 92,322 $ 97,130
============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE> 4
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Six Months
Ended December 31, Ended December 31,
-------------------- --------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Oil and gas sales $ 5,803 $ 3,683 $ 10,302 $ 5,209
-------- -------- -------- --------
Costs and expenses:
Production and operating expenses 1,480 2,977 3,427 8,756
Exploration expenses 212 74 328 232
Depreciation, depletion and amortization 1,185 274 2,140 379
Management fee and general and administrative
expenses allocated from affiliate 825 990 1,551 2,560
General and administrative expenses 504 771 990 1,418
-------- -------- -------- --------
4,206 5,086 8,436 13,345
-------- -------- -------- --------
Operating income (loss) 1,597 (1,403) 1,866 (8,136)
Interest income 92 8 246 43
Gain on sale of oil and gas properties -- -- -- 11,319
Interest and other financing costs -- (57) -- (312)
Interest expense - affiliate (2,121) (1,917) (4,238) (3,737)
-------- -------- -------- --------
Net loss (432) (3,369) (2,126) (823)
Preferred stock dividends (977) -- (1,974) --
-------- -------- -------- --------
Net loss available to common shareholders $ (1,409) $ (3,369) $ (4,100) $ (823)
======== ======== ======== ========
Net loss per share $ (0.05) $ (0.13) $ (0.16) $ (0.03)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE> 5
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,126) $ (823)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation, depletion and amortization 2,140 379
Gain on sale of oil and gas properties -- (11,319)
Other 1,103 205
Changes in operating working capital:
Decrease in accounts receivable from joint
venture partners 467 3,155
Increase in receivable from affiliates (1,504) (984)
Decrease in prepaid expenses 30 150
Decrease in accounts payable,
accrued liabilities and other current liabilities (1,777) (5,898)
(Decrease) increase in accounts payable to affiliates (2,481) 4,266
-------- --------
Net cash used in operating activities (4,148) (10,869)
-------- --------
Cash flows from investing activities:
Additions to oil and gas properties (2,812) (3,972)
Proceeds from sale of oil and gas properties -- 15,000
-------- --------
Net cash (used in) provided by investing activities (2,812) 11,028
-------- --------
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock 12,242 --
Proceeds from issuance of Series B Preferred Stock 74 --
Proceeds from issuance of Series C Preferred Stock 1,018 --
Offering costs -- (786)
Proceeds from notes payable -- 8,000
Repayment of notes payable -- (10,467)
-------- --------
Net cash provided by (used in) financing activities 13,334 (3,253)
-------- --------
Net increase (decrease) in cash and cash equivalents 6,374 (3,094)
Cash and cash equivalents at beginning of year 4,764 3,864
-------- --------
Cash and cash equivalents at end of period $ 11,138 $ 770
======== ========
Cash paid for interest $ 4,238 $ 3,875
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE> 6
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Warrants
outstanding
to purchase shares
Preferred Stock Common Stock of Convertible
--------------------- -------------------- Exchangeable Additional
Number of Number of Preferred paid-in Accumulated
Shares Par Value Shares Par Value Stock capital deficit Total
--------- --------- --------- --------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 18,725 $ 187 25,500 $ 255 $ 2,883 $ 80,004 $(64,467) $ 18,862
Conversion of Series A
Preferred Stock into
common stock
(unaudited) (552) (5) 1,284 13 -- (8) -- --
Issuance of Series B
Preferred Stock
(unaudited) 74 1 -- -- (34) 107 -- 74
Issuance of Series C
Preferred Stock
(unaudited) 1,338 13 -- -- (602) 1,928 -- 1,339
Net loss for the six
months ended
December 31, 1996
(unaudited) -- -- -- -- -- -- (2,126) (2,126)
-------- -------- -------- -------- -------- -------- -------- --------
Balance, December 31,
1996 (unaudited) 19,585 $ 196 26,784 $ 268 $ 2,247 $ 82,031 $(66,593) $ 18,149
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE> 7
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
Tatham Offshore, Inc. ("Tatham Offshore" or the "Company") is an independent
energy company engaged in the development, exploration and production of oil
and gas reserves located primarily offshore the United States in the Gulf of
Mexico (the "Gulf") and offshore eastern Canada. The Company is an
approximately 37% - owned subsidiary of DeepTech International Inc.
("DeepTech"), a diversified energy company, which, through its affiliates, is
engaged in providing contract drilling services, oil and gas gathering and
transmission, technology and engineering services, geological and geophysical
technology services, gas processing and liquids marketing, oil and gas
marketing and, through the Company and other affiliates, oil and gas
exploration, development and production.
The accompanying consolidated financial statements have been prepared without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, the statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for a fair
statement of the results of operations for the period covered by such
statements. These interim consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1996.
NOTE 2 - RELATED PARTY TRANSACTIONS:
The management agreement between the Company and DeepTech provides for an
annual management fee which is intended to reimburse DeepTech for the estimated
costs of its operational, financial, accounting and administrative services
provided to the Company. Effective July 1, 1996, the management agreement was
amended to provide for an annual management fee of 24% of DeepTech's overhead
expenses. During the six months ended December 31, 1996, DeepTech charged
Tatham Offshore $1.6 million under this agreement.
As of December 31, 1996, the Company had $60.0 million aggregate principal
amount of Convertible Promissory Notes (the "Subordinated Notes") outstanding,
all of which were held by DeepTech. Interest expense related to this borrowing
totaled $3.5 million for the six months ended December 31, 1996.
During the six months ended December 31, 1996, the Company sold substantially
all of its oil and gas production to Offshore Gas Marketing, Inc. ("Offshore
Marketing"), an affiliate of the Company. The Company's proceeds from Offshore
Marketing are reduced by a nominal discount which is a marketing fee to
Offshore Marketing.
Effective December 10, 1996, Flextrend Development Company, L.L.C. ("Flextrend
Development"), an affiliate of the Company, exercised its option to permanently
retain 50% of the assigned working interest in the Viosca Knoll Block 817,
Garden Banks Block 72 and Garden Banks Block 117 properties (the "Assigned
Properties") in exchange for forgiving 50% of the then-existing Payout Amount
exclusive of the $7.5 million plus interest added to the Payout Amount in
connection with the restructuring of certain transportation agreements with the
Partnership. Accordingly, Tatham Offshore is entitled to receive a reassignment
of one-half interest in the Assigned Properties (37 1/2% working interest in
Viosca Knoll Block 817, 25% working interest in Garden Banks Block 72 and a 25%
working interest in Garden Banks Block 117), subject to conditions as discussed
below, after Flextrend Development has received net revenues equal to the
Payout Amount. Flextrend Development remains obligated to fund any further
development costs attributable to the Company's portion of the working
interests, such costs to be added to the Payout Amount. Flextrend Development's
election to retain 50% of the assigned working interest in all three of the
Assigned Properties reduced the Payout Amount from $94.0 million to $50.8
million. Subsequent to December 10, 1996, only 50% of the development and
operating costs attributable to the Assigned Properties are added to the Payout
Amount and 50% of the net revenue from the assigned working interests in the
Assigned Properties will reduce the Payout Amount. As of December 31, 1996,
the Payout Amount was $49.6 million comprised of (a) the sum of (i) initial
acquisition and transaction costs of $32.1 million, (ii) development and
operating costs of $84.6 million, (iii) prepaid demand charges of $7.5 million
and (iv) interest of $13.1 million reduced by (b) the sum of (i) net revenue of
$44.5 million and (ii) forgiveness of $43.2 million of the Payout Amount.
7
<PAGE> 8
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 3 - STOCKHOLDERS' EQUITY:
The following table summarizes the Company's outstanding equity:
<TABLE>
<CAPTION>
Outstanding at Conversion/
--------------------------------- Liquidation Dividend Dividends Exchange
Equity June 30, 1996 December 31, 1996 Preference Rate In Arrears Features
<S> <C> <C> <C> <C> <C> <C>
Senior Preferred Stock (a) 7,500 7,500 $1,000 per share 9% $ 619,000 (e)
Series A Preferred Stock (b) 18,717,030 18,165,866 $ 1.50 per share 12% 1,635,000 (f)(g)
Series B Preferred Stock -- 74,379 $ 1.00 per share 8% 1,000 (f)(g)
Series C Preferred Stock (c) -- 1,338,162 $ 0.50 per share 4% -- (f)(g)
Mandatory Redeemable
Preferred Stock -- -- $ 0.50 per share -- -- (g)(h)
Warrants (d) 6,403,918 4,991,377 N/A -- -- (i)
Common Stock 25,500,320 26,784,117 N/A -- -- --
</TABLE>
- ---------------
(a) Leviathan Gas Pipeline Partners, L.P. (the "Partnership"), an
affiliate of the Company, holds all outstanding shares.
(b) DeepFlex Production Services, Inc. ("DeepFlex Services"), an
affiliate of the Company, holds 4,670,957 shares of the
outstanding Series A Preferred Stock.
(c) DeepFlex Services holds 1,016,957 shares of the outstanding
Series C Preferred Stock.
(d) DeepFlex Services holds 4,312,086 of the outstanding Warrants.
(e) The Partnership has made an irrevocable offer to the Company to
sell all or any portion of the Senior Preferred Stock at a price
equal to $1,000 per share, plus interest thereon at 9% per annum
less the sum of any dividends paid thereon. In the event the
Company does not purchase the Senior Preferred Stock on or before
September 30, 1998, then for a period of 90 days thereafter it
shall be convertible into Series A Preferred Stock. The
conversion ratio shall be equal to (i) the liquidation preference
amount plus accumulated unpaid dividends divided by (ii) the
arithmetic average of closing prices for the 20 trading days
following October 1, 1998 of the Series A Preferred Stock.
(f) At any time until December 31, 1998, each share may be exchanged
for four Exchange Warrants each of which entitles the holder
thereof to purchase one share of common stock at $0.653 per
share. At any time, the holder may convert the liquidation value
and unpaid dividends into shares of common stock at $0.653 per
share.
(g) On or after July 1, 1997, redeemable at the option of the
Company.
(h) The Company is required to redeem at a redemption price of $0.50
per share if the Company redeems any shares of Series A, B or C
Preferred Stock. The Company is also required to redeem at a
redemption price of $0.50 per share from net proceeds from the
sale of common stock pursuant to the exercise of Exchange
Warrants, subject to certain conditions.
(i) Holders were entitled to purchase, for $1.00 per share, one share
of Series C Preferred Stock on or before January 1, 1997. All
remaining unexercised Warrants were automatically converted into
Mandatory Redeemable Preferred Stock on January 1,1997.
Primary earnings (loss) per share is computed by dividing common equity in net
income (loss) by the weighted average number of shares and common stock
equivalents outstanding during the period. The weighted average number of
shares outstanding for purposes of computing primary earnings (loss) per share
were 26,521,797 shares and 25,063,103 shares for the three months ended
December 31, 1996 and 1995, respectively. The weighted average number of
shares for the six months ended December 31, 1996 and 1995 were 26,224,716
shares and 25,031,552 shares, respectively.
8
<PAGE> 9
TATHAM OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
In the ordinary course of business, the Company is subject to various laws and
regulations. In the opinion of management, compliance with existing laws and
regulations will not materially affect the financial position of the Company.
The Company is involved in certain legal proceedings which have arisen in the
ordinary course of business. Management believes that the outcome of such
proceedings will not have a material adverse effect on the Company's financial
position.
The Company anticipates substantial future capital expenditures associated with
the full development of its oil and gas properties. Realization of the full
potential of the Company's properties is dependent upon the ability to obtain
sufficient additional capital or project financing.
In September 1996, the Company entered into a drilling arrangement (the
"Drilling Arrangement") with Sedco Forex Division of Schlumberger Technology
Corporation ("Sedco Forex"). The Drilling Arrangement includes the use of
either the semisubmersible drilling rig, the FPS Bill Shoemaker, owned by an
affiliate of DeepTech, or a substitute rig capable of drilling in up to 1,500
feet of water. The Drilling Arrangement will become effective upon the
mobilization of a rig to the Company's initial location. The initial contract
term of the Drilling Arrangement is for 90 days or, if sooner, the completion
of the Company's initial drilling operation and the mobilization of the rig to
another location. The Company may, at its option, extend the initial contract
term through (i) three successive one well options or (ii) two successive one
year terms. Under the terms of the Drilling Arrangement, the Company has
committed to pay Sedco Forex a drilling rate of $70,000 per day with a standby
rate of $66,700 per day. As security for its obligations under the Drilling
Arrangement, the Company is required to post an irrevocable letter of credit or
cash collateral of $6.3 million, which amount is equal to the aggregate
operating day rate for the contract term. In the event that the Company
exercises its option to extend the Drilling Arrangement, the Company and Sedco
Forex must agree upon additional security for the extension period. During the
term of the Drilling Arrangement, the Company has the right to sub-contract the
rig to other operators. If the rig is sub-contracted to another operator, the
Company will receive the difference between the sub-contract rate and the above
agreed upon rates, if any. The FPS Bill Shoemaker is owned by an affiliate of
DeepTech and operated by Sedco Forex under a charter agreement. Sedco Forex
has the right to substitute a similar drilling rig for the FPS Bill Shoemaker
in the event the FPS Bill Shoemaker is unavailable due to a prior contract
commitment for work offshore Canada. In the event Sedco Forex mobilizes the
rig to Canada, the Company has (i) an option to use the FPS Bill Shoemaker in
the Newfoundland Grand Banks Area rather than the substitute rig to complete
the initial contract term prior to the use by the third party, subject to
availability, and subject to higher contract rates to account for the
additional costs incurred by Sedco Forex as a result of operations offshore
Canada, and (ii) an additional option, upon completion of the third party work
and subject to the use of the rig for one other project, to contract to use the
rig for the drilling of one well at the then prevailing contract price.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in Part I of this
quarterly report.
GENERAL
Tatham Offshore is an independent energy company engaged in the development and
production of, and the exploration for, offshore oil and gas reserves, with
activities currently concentrated primarily in the Flextrend (water depths of
600 to 1,500 feet) and Deepwater (water depths greater than 1,500 feet) areas
of the Gulf and offshore eastern Canada. The Company's current portfolio of
mineral leaseholds consists of 15 offshore oil and gas leases in the Gulf which
include producing properties and undeveloped acreage.
The following discussion is intended to assist in the understanding of the
Company's financial condition and results of operations for the three and six
months ended December 31, 1996.
RESULTS OF OPERATIONS
Three Months Ended December 31, 1996 Compared with Three Months Ended December
31, 1995
Revenue from oil and gas sales totaled $5.8 million for the three months ended
December 31, 1996 as compared with $3.7 million for the three months ended
December 31, 1995. During the three months ended December 31, 1996, the
Company sold 1,803 MMcf of gas and 47,000 barrels of oil at average prices of
$2.57 per thousand cubic feet ("Mcf") and $24.57 per barrel, respectively.
During the same period in 1995, the Company sold 479 MMcf of gas and 149,000
barrels of oil at average prices of $2.18 per Mcf and $17.73 per barrel,
respectively. The increase in oil and gas revenue is due primarily to
production initiated from the Company's Viosca Knoll Block 817 (Phar Lap)
project and higher oil and gas prices partially offset by lower oil production
from the Company's Ewing Bank 914 #2 well.
Production and operating expenses for the three months ended December 31, 1996
totaled $1.5 million as compared with $3.0 million for the same period in 1995.
The decrease in production and operating expenses is comprised of a decrease of
$1.7 million in the cost of transportation services primarily related to the
restructuring of certain transportation agreements with the Partnership offset
by an increase of $0.2 million in operating costs related primarily to the
Viosca Knoll property.
Exploration expenses for the three months ended December 31, 1996 totaled $0.2
million as compared with $0.1 million for the three months ended December 31,
1995. Exploration costs during the three months ended December 31, 1996 and
1995 included expenses incurred under the amended technology services agreement
with an affiliate of the Company.
Depreciation, depletion and amortization totaled $1.2 million for the three
months ended December 31, 1996 as compared with $0.3 million for the three
months ended December 31, 1995. Depreciation, depletion and amortization for
the three months ended December 31, 1996 reflected costs applicable to the
Company's investment in the Viosca Knoll Block 817 project, the West Delta 35
project and the Ewing Bank 914 #2 well. Depreciation, depletion and
amortization for the three months ended December 31, 1995 reflected costs
primarily applicable to the Company's investment in the West Delta 35 project
and the Ewing Bank 914 #2 well. The increase in depreciation, depletion and
amortization expense is primarily attributable to the initiation of production
from the first well at Viosca Knoll Block 817 in late December 1995 and from an
additional seven wells during 1996.
General and administrative expenses, including the management fee allocated
from DeepTech, for the three months ended December 31, 1996 were $1.3 million
as compared with $1.8 million for the same period in 1995. The decrease in
general and administrative expenses for the three months ended December 31,
1996 reflected a decrease in direct general and administrative expenses of $0.3
million and a decrease in staff and overhead expenses allocated to the Company
under its management agreement with DeepTech of $0.2 million. As a result of
DeepTech's reduction of services provided to the Company, the Company and
DeepTech amended the management agreement effective July 1, 1996 to provide for
a 24% overhead allocation as compared to an effective 31.6% overhead allocation
during the three months ended December 31, 1995.
10
<PAGE> 11
Operating income for the three months ended December 31, 1996 was $1.6 million
as compared with an operating loss of $1.4 million for the three months ended
December 31, 1995. The change in operating income (loss) was due to the items
discussed above.
Interest expense, net of interest income, for the three months ended December
31, 1996 and 1995 totaled $2.0 million. For the three months ended December
31, 1996 and 1995, $1.8 million of the interest expense was attributable to
interest payable to DeepTech on the Company's $60.0 million aggregate principal
amount of Convertible Promissory Notes (the "Subordinated Notes").
After taking into account $1.0 million of preferred stock dividends in arrears,
the Company's net loss available to common shareholders for the three months
ended December 31, 1996 was $1.4 million as compared with a net loss available
to common shareholders for the three months ended December 31, 1995 of $3.4
million.
Six Months Ended December 31, 1996 Compared with Six Months Ended December 31,
1995
Revenue from oil and gas sales totaled $10.3 million for the six months ended
December 31, 1996 as compared with $5.2 million for the six months ended
December 31, 1995. During the six months ended December 31, 1996, the Company
sold 3,279 MMcf of gas and 108,000 barrels of oil at average prices of $2.38
per Mcf and $23.05 per barrel, respectively. During the same period in 1995,
the Company sold 715 MMcf of gas and 221,000 barrels of oil at average prices
of $1.97 per Mcf and $17.17 per barrel, respectively. The increase in oil and
gas revenue is due primarily to production initiated from the Company's Viosca
Knoll Block 817 (Phar Lap) project and higher oil and gas prices partially
offset by lower oil production from the Company's Ewing Bank 914 #2 well.
Production and operating expenses for the six months ended December 31, 1996
totaled $3.4 million as compared with $8.8 million for the same period in 1995.
The decrease in production and operating expenses is primarily comprised of (i)
a decrease of $3.1 million in the cost of transportation services primarily
related to the restructuring of certain transportation agreements with the
Partnership, (ii) a decrease in workover and repair expenses of $2.0 million
and (iii) a net decrease in operating costs related to Viosca Knoll, Ewing
Bank, West Delta, West Cameron and Ship Shoal properties of $0.3 million.
During the six months ended December 31, 1995, the Company incurred $2.3
million of workover and repair expenses related to the Ewing Bank 914 #2 well.
Exploration expenses for the six months ended December 31, 1996 totaled $0.3
million as compared with $0.2 million for the six months ended December 31,
1995. Exploration costs during the six months ended December 31, 1996 and 1995
included expenses incurred under the amended technology services agreement with
an affiliate of the Company.
Depreciation, depletion and amortization totaled $2.1 million for the six
months ended December 31, 1996 as compared with $0.4 million for the six months
ended December 31, 1995. Depreciation, depletion and amortization for the six
months ended December 31, 1996 reflected costs applicable to the Company's
investment in the Viosca Knoll Block 817 project, the West Delta 35 project and
the Ewing Bank 914 #2 well. Depreciation, depletion and amortization for the
six months ended December 31, 1995 reflected costs primarily applicable to the
Company's investment in the West Delta 35 project and the Ewing Bank 914 #2
well. The increase in depreciation, depletion and amortization expense is
primarily attributable to the initiation of production from the first well at
Viosca Knoll Block 817 in late December 1995 and from an additional seven wells
during 1996.
General and administrative expenses, including the management fee allocated
from DeepTech, for the six months ended December 31, 1996 were $2.5 million as
compared with $4.0 million for the same period in 1995. The decrease in
general and administrative expenses for the six months ended December 31, 1996
reflected a decrease in direct general and administrative expenses of $ 0.5
million and a decrease in staff and overhead expenses allocated to the Company
under its management agreement with DeepTech of $1.0 million. As a result of
DeepTech's reduction of services provided to the Company, the Company and
DeepTech amended the management agreement effective July 1, 1996 to provide for
a 24% overhead allocation as compared to an effective 35.8% overhead allocation
during the six months ended December 31, 1995.
Operating income for the six months ended December 31, 1996 was $1.9 million as
compared with an operating loss of $8.1 million for the six months ended
December 31, 1995. The change in operating income (loss) was due to the items
discussed above.
11
<PAGE> 12
During the six months ended December 31, 1995, the Company recognized an $11.3
million gain related to the sale of its working interests in the Assigned
Properties to Flextrend Development, as a result of the Company waiving a
portion of its options to prepay the existing Payout Amount (as discussed
below) and receive a reassignment of its working interests.
Interest expense, net of interest income, for the six months ended December 31,
1996 and 1995 totaled $4.0 million. For the six months ended December 31, 1996
and 1995, $3.5 million of the interest expense was attributable to interest
payable to DeepTech on the Subordinated Notes.
After taking into account $2.0 million of preferred stock dividends in arrears,
the Company's net loss available to common shareholders for the six months
ended December 31, 1996 was $4.1 million as compared with a net loss available
to common shareholders for the six months ended December 31, 1995 of $0.8
million.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash. The Company intends to satisfy its immediate capital
requirements and other working capital needs primarily from cash on hand, cash
generated from continuing operations and the collection of stock subscriptions
receivable from the exercise of outstanding Warrants as of December 31, 1996.
At December 31, 1996, the Company had $11.1 million of cash and cash
equivalents and $0.3 million of stock subscriptions receivable.
Cash from continuing operations is derived primarily from production from the
Company's Viosca Knoll Block 817 project which is currently producing a total
of approximately 115 MMcf of gas and 300 barrels of oil per day. Tatham
Offshore currently owns a 25% working interest in the Viosca Knoll Block 817
project which interest is subject to a production payment equal to 25% of the
net operating cash flow from such working interest.
Tatham Offshore also has producing wells at Ewing Bank 914 and at its Silent
Beauty project at West Delta Block 35 which contribute to cash from continuing
operations. The Company owns a 100% working interest in the Ewing Bank 914 #2
well and a 38% working interest in the Silent Beauty project. The Ewing Bank
914 #2 well is currently producing at a rate of approximately 600 barrels of
oil, 1.2 MMcf of gas and 2,000 barrels of water per day. The Silent Beauty
project is currently producing at a rate of approximately 6.3 MMcf of gas and
100 barrels of oil per day.
As a result of a rights offering in February 1996, the Company received $12.6
million in gross proceeds ($11.3 million in net proceeds) pursuant to the
exercise of Rights to purchase 25,120,948 Warrants at $0.50 per warrant. As of
January 1, 1997, a total of 20,129,571 Warrants had been exercised to purchase
18,717,030 shares, 74,379 shares and 1,338,162 shares of Series A, B and C
Preferred Stock, respectively, at $1.00 per share which generated an additional
$20.1 million in proceeds to the Company.
As of January 1, 1997, there were 4,991,377 Warrants outstanding. Each Warrant
remaining unexercised at 5:00 p.m. New York time on January 1, 1997 was
automatically converted, without any action on the part of the holder thereof,
into one share of Mandatory Redeemable Preferred Stock, which has a liquidation
preference of $0.50 per share and shall be mandatorily redeemable by the
Company under certain circumstances, including from the net proceeds from the
sale of Common Stock pursuant to the exercise of Exchange Warrants, subject to
certain conditions. At any time until December 31, 1998, each share of Series
A, B or C Preferred Stock may be exchanged for four Exchange Warrants each of
which shall entitle the holder thereof to purchase one share of Common Stock at
$0.653 per share. The Exchange Warrants will expire July 1, 1999.
Alternatively, at any time, the holder of any shares of Series A, B or C
Preferred Stock will have the right, at the holder's option, to convert the
liquidation value of such stock and accrued and unpaid dividends into shares of
Common Stock at $0.653 per share. On and after July 1, 1997, the Convertible
Exchangeable Preferred Stock will be redeemable at the option of the Company.
Through January 31, 1997, a total of 551,164 shares of Series A Preferred Stock
had been converted into 1,283,797 shares of Common Stock.
12
<PAGE> 13
Uses of Cash. The Company's primary uses of cash consist of (i) amounts due
under the Subordinated Notes, (ii) expenses associated with operating its
producing properties, including its production payment and leasehold
abandonment liabilities, (iii) capital expenditures necessary to fund its
portion of the development costs attributable to its working interests,
including its obligations under the Drilling Arrangement, (iv) platform access
fees and processing and commodity charges payable to the Partnership, (v)
payments due under the management agreement with DeepTech and (vi) amounts due
under the Affiliate Note, as defined below.
As of December 31, 1996, Tatham Offshore had $60.0 million aggregate principal
amount of Subordinated Notes outstanding, the maximum principal amount of
Subordinated Notes issuable, all of which were held by DeepTech. The
Subordinated Notes bear interest at a rate of 11 3/4% per annum, payable in
arrears (approximately $1.8 million per quarter); provided, however, that
effective July 1, 1997, interest shall accrue at a rate of 13% per annum. The
principal amount of the Subordinated Notes is payable in seven equal annual
installments of approximately $8.6 million each commencing August 1, 1999. For
the six months ended December 31, 1996, Tatham Offshore paid DeepTech $3.5
million in interest on the Subordinated Notes.
During the six months ended December 31, 1996, the Company completed its
abandonment of its West Cameron 436 property, in which it owned a 47% working
interest, at a cost of approximately $1.0 million which the Company anticipates
it will pay in 1997.
Tatham Offshore is obligated to pay to the Partnership commodity charges, based
on the volume of oil and gas transported or processed, under certain
transportation agreements. Also, the Company is obligated to pay to the
Partnership $1.6 million in platform access fees annually relative to its 25%
working interest in its Phar Lap property.
The management fee agreement between the Company and DeepTech provides for an
annual management fee which is intended to reimburse DeepTech for the estimated
costs of its operational, financial, accounting and administrative services
provided to Tatham Offshore. Effective July 1, 1996, the management agreement
was amended to provide for an annual management fee of 24% of DeepTech's
overhead expenses. For the six months ended December 31, 1996, the Company was
charged $1.6 million in management fees pursuant to this agreement.
On November 1, 1995, the Company converted $1.7 million of its accounts payable
to an affiliate into an unsecured promissory note payable to DeepTech (the
"Affiliate Note") which bears interest at 14.5% per annum, payable quarterly.
The principal is due and payable in six monthly installments, beginning on a
date which is the earlier of (i) November 1, 1997 or (ii) the last day of the
calendar month in which the Company receives proceeds from the issuance of
preferred stock pursuant to the exercise of Warrants in an amount equal to or
greater than $20.0 million. In January 1997, as a result of the exercise of
Warrants to purchase shares of Series C Preferred Stock, the Company's total
proceeds from the issuance of preferred stock exceeded $20.0 million and, as a
result, Tatham Offshore made a $0.3 million principal payment to DeepTech on
January 31, 1997.
Liquidity Outlook. During 1994 and 1995, Tatham Offshore experienced liquidity
problems resulting primarily from substantial negative cash flow from
operations. In order to improve liquidity and partially address its capital
requirements, Tatham Offshore (i) sold, subject to certain reversionary
rights, all of its then-existing working interests in the Assigned Properties
to Flextrend Development for $30 million, (ii) raised additional equity through
the sale of Warrants and Series A, B and C Preferred Stock, (iii) prepaid
certain of its demand charge obligations through the assignment of certain
assets pursuant to an agreement with the Partnership and (iv) reduced its
overhead by lowering the level of services required under its management
agreement with DeepTech.
Flextrend Development has initiated production from each of the Assigned
Properties. As discussed above, the Viosca Knoll Block 817 (Phar Lap) is
currently producing approximately 115 MMcf of gas and 300 barrels of oil per
day. In addition, five producing wells on Garden Banks Block 72 (Spectacular
Bid) are currently producing approximately 3,850 barrels of oil and 15 MMcf of
gas per day. The Garden Banks Block 117 (Spend A Buck) is currently producing
approximately 1,750 barrels of oil, 3.5 MMcf of gas and 3,750 barrels of water
per day from one well. Flextrend Development has drilled a second successful
well at Garden Banks Block 117 which should be placed on production during the
third quarter of this fiscal year.
13
<PAGE> 14
Effective December 10, 1996, Flextrend Development exercised its option to
permanently retain 50% of the assigned working interest in all three of the
Assigned Properties in exchange for forgiving 50% of the then-existing Payout
Amount exclusive of the $7.5 million plus interest added to the Payout Amount
in connection with the restructuring of certain transportation agreements with
the Partnership. Accordingly, Tatham Offshore is entitled to receive a
reassignment of one-half interest in the Assigned Properties (37 1/2% working
interest in Viosca Knoll Block 817, 25% working interest in Garden Banks Block
72 and a 25% working interest in Garden Banks Block 117), subject to conditions
as discussed below, after Flextrend Development has received net revenues equal
to the Payout Amount. Flextrend Development remains obligated to fund any
further development costs attributable to the Company's portion of the working
interests, such costs to be added to the Payout Amount. Flextrend Development's
election to retain 50% of the assigned working interest in all three of the
Assigned Properties reduced the Payout Amount from $94.0 million to $50.8
million. Subsequent to December 10, 1996, only 50% of the development and
operating costs attributable to the Assigned Properties are added to the Payout
Amount and 50% of the net revenue from the assigned working interests in the
Assigned Properties will reduce the Payout Amount. As of December 31, 1996,
the Payout Amount was $49.6 million comprised of (a) the sum of (i) initial
acquisition and transaction costs of $32.1 million, (ii) development and
operating costs of $84.6 million, (iii) prepaid demand charges of $7.5 million
and (iv) interest of $13.1 million reduced by (b) the sum of (i) net revenue of
$44.5 million and (ii) forgiveness of $43.2 million of the Payout Amount.
Tatham Offshore and the Partnership have agreed that in the event the Company
furnishes the Partnership with a financing commitment from a lender with a
credit rating of BBB- or better covering 100% of the then outstanding Payout
Amount, the interest rate utilized to compute the Payout Amount shall be
adjusted from and after the date of such commitment to the interest rate
specified in such commitment, whether utilized or not.
In September 1996, the Company entered into the Drilling Arrangement with Sedco
Forex. The Drilling Arrangement includes the use of either the semisubmersible
drilling rig, the FPS Bill Shoemaker, or a substitute rig capable of drilling
in up to 1,500 feet of water. The Drilling Arrangement will become effective
upon the mobilization of a rig to the Company's initial location. The initial
contract term of the Drilling Arrangement is for 90 days or, if sooner, the
completion of the Company's initial drilling operation and the mobilization of
the rig to another location. The Company may, at its option, extend the
initial contract term through (i) three successive one well options or (ii) two
successive one year terms. Under the terms of the Drilling Arrangement, the
Company has committed to pay Sedco Forex a drilling rate of $70,000 per day
with a standby rate of $66,700 per day. As security for its obligations under
the Drilling Arrangement, the Company is required to post an irrevocable letter
of credit or cash collateral of $6.3 million, which amount is equal to the
aggregate operating day rate for the contract term. In the event that the
Company exercises its option to extend the Drilling Arrangement, the Company
and Sedco Forex must agree upon additional security for the extension period.
During the term of the Drilling Arrangement, the Company has the right to sub-
contract the rig to other operators. If the rig is sub-contracted to another
operator, the Company will receive the difference between the sub-contract rate
and the above agreed upon rates, if any. The FPS Bill Shoemaker is owned by an
affiliate of DeepTech and operated by Sedco Forex under a charter agreement.
Sedco Forex has the right to substitute a similar drilling rig for the FPS Bill
Shoemaker in the event the FPS Bill Shoemaker is unavailable due to a prior
contract commitment for work offshore Canada. In the event Sedco Forex
mobilizes the rig to Canada, the Company has (i) an option to use the FPS Bill
Shoemaker in the Newfoundland Grand Banks Area rather than the substitute rig
to complete the initial contract term prior to the use by the third party,
subject to availability, and subject to higher contract rates to account for
the additional costs incurred by Sedco Forex as a result of operations offshore
Canada, and (ii) an additional option, upon completion of the third party work
and subject to the use of the rig for one other project, to contract to use the
rig for the drilling of one well at the then prevailing contract price.
The Company has recently begun evaluating opportunities to acquire certain
license interests offshore eastern Canada. Emphasis is being placed on license
interests that could be acquired in exchange for (i) new securities to be
issued by the Company, (ii) convertible notes to be issued by the Company,
(iii) a portion of the Company's existing Gulf of Mexico leasehold interests,
particularly its Sunday Silence field, or (iv) in connection with the Company's
rights to utilize the FPS Bill Shoemaker.
The Company currently intends to fund its operations with cash on hand and cash
from continuing operations. The restructuring of the Company's existing demand
charge obligations with the Partnership, the reduction of its overhead, the
initiation of full production from the Viosca Knoll Block 817 (Phar Lap)
project and improved
14
<PAGE> 15
commodity prices enabled the Company to generate approximately $0.3 million in
positive cash flow for the three months ended December 31, 1996. The Company
does not currently anticipate generating significant positive cash flow prior
to the first to occur of (i) obtaining a refinancing commitment which could
allow the Company to reacquire all or a portion of the Assigned Properties from
Flextrend Development, (ii) actual payout of the Payout Amount and the
resulting reversion of one-half of the Assigned Properties or (iii) the initial
production from the Company's Sunday Silence field. In order to initiate
production from the Sunday Silence field, the Company will require substantial
additional capital to install a production facility and drill additional
development wells. There can be no assurance, however, that the Company will
be able to obtain additional financing on terms that are acceptable to the
Company.
To meet additional capital needs, the Company will continue to pursue the
implementation of its business strategy which will focus primarily on (i)
attempting to develop and initiate production from the Company's Sunday Silence
field under a farmout or financing arrangement with an industry partner or
financial institution, (ii) monitoring production from the Assigned Properties
in an effort to maximize the value of its reversionary interest and attempting
to obtain a financing commitment to reacquire the properties or, at a minimum,
to cause a reduction in the interest rate utilized in the calculation of the
Payout Amount, (iii) attempting to sell or farmout interests in its other
properties, including Genuine Risk (Ship Shoal Block 331) and (iv) maximizing
the value of its rights under the Drilling Arrangement with Sedco Forex
regarding the FPS Bill Shoemaker.
The ability of the Company to satisfy its capital needs beyond those funded
with the proceeds from the sale of the equity securities offered pursuant to
the rights offering will depend upon its success in implementing its business
strategy, particularly its ability to develop and initiate production from the
Sunday Silence field. Although the Company has pursued farmout and outside
financing arrangements for its Sunday Silence project, as of this date, the
Company has not been able to obtain an acceptable farmout arrangement with an
industry partner or develop a financing arrangement under the current economic
conditions. On November 28, 1995, a federal law was enacted that offers
deepwater royalty relief for certain federal leases located in 200 meters or
greater of water depth in the Gulf. For federal leases acquired prior to
November 20, 1995, an applicant must demonstrate that the proposed new
production for which the royalty relief is sought would not be economic to
develop absent the royalty relief. Under the new legislation, a minimum of the
first 52.5 million equivalent barrels of oil production from the Sunday Silence
project would be exempt from federal royalties if such relief is granted. The
Company submitted an application relative to its Sunday Silence field which was
deemed complete by the Minerals Management Service ("MMS") effective November
13, 1996. Under federal law, the MMS has up to 180 days to evaluate the
application once the application is deemed complete. If the MMS requests
additional information or clarification of the submitted data during the 180-
day period, the MMS may toll the review period until such information is
supplied by the Company. Through February 13, 1997, the Company has not
received a request for additional information. The Company believes that if
the requested royalty abatement is granted, the resulting improved economics
for the project will be sufficient to obtain development financing or an
industry farmout arrangement. However, there can be no assurance that the
Company will be able to obtain the requested royalty abatement, enter into a
farmout or financing arrangement on favorable terms, successfully develop the
Sunday Silence field or initiate production therefrom on a timely basis, if at
all.
The Company has never declared or paid dividends on its common or preferred
stock. The Company expects to retain all available earnings generated by its
operations for the growth and development of its business.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on October 21, 1996.
At the Annual Meeting, the stockholders (i) elected eleven directors to
hold office until the next annual meeting of stockholders and until
their respective successors are duly elected and qualified and (ii)
ratified the Board of Directors' appointment of Price Waterhouse LLP as
the Company's independent accountants for the fiscal year ending June
30, 1997. The votes were cast as follows:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
Thomas P. Tatham 22,459,496 85,224
Kenneth E. Benney 22,461,396 83,324
Phillip G. Clarke 22,462,296 82,424
Antoine Gautreaux, Jr. 22,460,296 84,424
Clyde E. Nath 22,462,296 82,424
James G. Niven 22,462,396 82,324
Jonathan D. Pollock 22,460,396 84,324
Humbert B. Powell, III 22,463,396 81,324
Donald S. Taylor 22,461,396 83,324
Roger B. Vincent, Sr. 22,458,396 86,324
Diana J. Walters 21,676,496 868,224
</TABLE>
Ratify Selection of Independent Accountants
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
22,483,096 59,224 2,400
</TABLE>
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission on December 27, 1996,
regarding its Garden Banks Block 117 #2 program under Item 5.
-- Other Events.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TATHAM OFFSHORE, INC.
Date: February 13, 1997 By: /s/ DENNIS A. KUNETKA
-------------------------------------------
Dennis A. Kunetka
Senior Vice President - Corporate Finance
(Signing on behalf of the Registrant and as
Principal Accounting Officer)
17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TATHAM
OFFSHORE INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31,
1996 INCLUDED IN ITS FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,138
<SECURITIES> 0
<RECEIVABLES> 2,724
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,096
<PP&E> 80,970
<DEPRECIATION> 15,378
<TOTAL-ASSETS> 92,322
<CURRENT-LIABILITIES> 5,230
<BONDS> 0
<COMMON> 268
0
196
<OTHER-SE> 17,685
<TOTAL-LIABILITY-AND-EQUITY> 92,322
<SALES> 10,302
<TOTAL-REVENUES> 10,302
<CGS> 3,427
<TOTAL-COSTS> 3,755
<OTHER-EXPENSES> 2,140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,238
<INCOME-PRETAX> (2,126)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,100)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 0
</TABLE>
