-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HgLjqc4Dq4ufMPTAH4YFbCPoQRppEpDlsPpqEYZwdedaFo2ZqBflOGL+1xTjKvr6 KXr4316aR1S2I5E01tx98A== 0000890566-96-001922.txt : 19961118 0000890566-96-001922.hdr.sgml : 19961118 ACCESSION NUMBER: 0000890566-96-001922 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOKINETICS INC CENTRAL INDEX KEY: 0000314606 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 941690082 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09268 FILM NUMBER: 96666080 BUSINESS ADDRESS: STREET 1: MARATHON OIL TOWER STREET 2: 5555 SAN FELIPE SUITE 780 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7138507600 MAIL ADDRESS: STREET 1: MARATHON OIL TOWER STREET 2: 5555 SAN FELIPE, ST 780 CITY: HOUSTON STATE: TX ZIP: 77056 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 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 Number 0-9268 GEOKINETICS INC. (Exact name of small business issuer as specified in its charter) DELAWARE 94-1690082 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5555 SAN FELIPE, SUITE 780 HOUSTON, TEXAS 77056 (Address of principal executive offices) (Zip Code) Small Business Issuer's telephone number, including area code (713) 850-7600 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 [ ] On September 30, 1996, there were 4,953,288 shares of Registrant's common stock ($.20 par value) outstanding. GEOKINETICS INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. -------- Item 1. Financial Statements ................................ 3 Condensed Statements of Financial Position September 30, 1996 and December 31, 1995 ...... 3 Condensed Statements of Operations Three Months and Nine Months Ended September 30, 1996 and 1995 .................. 5 Condensed Statements of Cash Flow Three Months Ended September 30, 1996 and 1995 .................. 6 Notes to Interim Financial Statements ............... 7 Item 2. Management's Discussion and Analysis or Plan of Operation ................. 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K .................... 10 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Financial Position ASSETS
September 30 December 31 1996 1995 Unaudited (*) ---------- ---------- Current Assets: Cash .............................................. $ 58,308 $ 16,905 Cash - restricted ................................. 420,968 0 Receivables ....................................... 233,342 259,370 Prepaid expenses .................................. 68,201 12,775 Oil and gas properties held for resale ........... 607,170 582,202 ---------- ---------- Total Current Assets ......................... 1,387,989 871,252 Property and Equipment: Proved oil and gas Properties (net of depletion) .. 796,936 876,747 (successful efforts method for oil and gas properties) Equipment (net of depreciation) ................... 3,837,395 21,093 Buildings (net of depreciation) ................... 128,106 0 Land .............................................. 23,450 0 ---------- ---------- Total Property and Equipment ................ 4,785,887 897,840 Other Assets: Deferred tax benefit ............................. 800,000 800,000 Deferred charges ................................. 74,445 0 Escrow-property investment ....................... 100,000 0 Restricted investments ........................... 21,700 101,339 ---------- ---------- Total Other Assets ........................... 996,145 901,339 ---------- ---------- Total Assets ............................. $7,170,021 $2,670,431 ========== ==========
3 LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 December 31 1996 1995 Unaudited (*) ----------- ----------- Current Liabilities: Accounts payable ................................. $ 637,241 $ 542,510 Accrued liabilities .............................. 423,114 198,890 Notes payable .................................... 816,226 25,000 Due to officer ................................... 106,722 101,722 Advances for lease bank .......................... 598,000 600,500 Site restoration costs ........................... 6,418 36,185 ----------- ----------- Total Current Liabilities .................... 2,587,721 1,504,807 Long -Term Liabilities: Long- term debt .................................. 4,942,558 420,246 ----------- ----------- Total Liabilities ........................... 7,530,319 1,925,053 Stockholders' Equity: Common stock, $.20 par value, 15,000,000 shares authorized; 4,953,288 shares issued and outstanding @ 9/30/96 and 4,869,955 shares issued and outstanding @ 12/31/95)................ 990,657 973,991 Additional paid in capital ....................... 3,924,345 3,815,179 Accumulated deficit .............................. (5,275,300) (4,043,792) ----------- ----------- Total Stockholders' Equity ................... (360,298) 745,378 ----------- ----------- Total Liabilities and Stockholders' Equity $ 7,170,021 $ 2,670,431 ============ ============
* CONDENSED FROM AUDITED FINANCIAL STATEMENTS 4 GEOKINETICS INC. Condensed Statement of Operations
Three Months Ended Nine Months Ended September 30 September 30 (unaudited) (unaudited) ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------- ------------ Revenues: Oil and gas sales ............. $ 156,903 $ 103,986 $ 413,488 $ 304,424 Operating fees ................ 59,893 66,122 191,710 207,434 Sale of oil and gas leases .... 4,011 0 4,011 0 Gain on sale of assets ........ 0 13,290 0 199,709 ----------- ----------- ----------- ----------- Total Revenues ............ 220,807 183,398 609,209 711,567 Expenses: General and administrative .... $ 262,590 $ 271,551 $ 1,075,626 $ 1,017,699 Lease operating expenses ...... 72,928 95,931 233,301 310,479 Cost of oil and gas leases sold 61,924 0 61,924 0 Amortization expense .......... 3,321 4,983 13,287 19,931 Depletion expense ............. 17,798 25,768 51,170 72,278 Depreciation expense .......... 671 673 2,017 3,358 ----------- ----------- ----------- ----------- Total Expenses ............ 419,232 399,906 1,437,325 1,423,745 ----------- ----------- ----------- ----------- Loss from operations .............. $ (198,425) $ (216,508) $ (828,116) $ (712,178) Other Income (Expense) Interest income .............. 1,716 5,453 10,365 1,553 Interest expense ............. 164,243 36,155 413,756 73,522 ----------- ----------- ----------- ----------- Total Other Expense ..... (162,527) (30,702) (403,391) (71,969) Loss before provision for income tax .................. $ (360,952) $ (247,210) $(1,231,507) $ (784,147) Provision for income tax .......... 0 0 0 0 ----------- ----------- ----------- ----------- Total income tax .............. 0 0 0 0 ----------- ----------- ----------- ----------- Net Loss .......................... $ (360,952) $ (247,210) $(1,231,507) $ (784,147) =========== =========== =========== =========== Loss per share .................... $ (0.07) $ (0.05) $ (0.25) $ (0.17) =========== =========== =========== =========== Weighted average common shares and equivalents outstanding ..... 4,953,288 4,620,320 4,953,288 4,620,320 =========== =========== =========== ===========
5 GEOKINETICS INC. Condensed Statements of Cash Flows Three Months Ended September 30 (unaudited) ----------------------- 1996 1995 --------- --------- Cash flows from operating activities: Cash received from customers ....................... $ 246,001 $ 154,139 Interest and dividends received .................... 1,969 1,398 Cash paid to suppliers and employees ............... (265,390) (398,954) Interest paid ...................................... (161,467) (30,980) --------- --------- Net cash (used) by operating activities ....... (178,887) (274,397) --------- --------- Cash flows from investing activities: Cash payments for purchase of property and equipment (40,122) (77,500) Cash proceeds from redemption of certificate of deposit ............................................ 79,639 0 Cash proceeds from sale of property ................ 0 17,344 Cash payment for escrow deposit equipment investment (320,968) 0 --------- --------- Net cash (used) by investing activities ....... (281,451) (60,156) --------- --------- Cash flows from financing activities: Advances for lease bank ............................ 2,500 321,333 Proceeds from short term debt ...................... 65,000 0 Principal payments on long-term debt ............... (75,918) 0 --------- --------- Net cash (used) by financing activities ....... (8,418) 321,333 --------- --------- Net (decrease) in cash ................................ (468,756) (13,220) Cash, beginning of period .............................. 527,064 15,713 --------- --------- Cash, end of period .................................... $ 58,308 $ 2,493 ========= ========= 6 NOTES TO INTERIM FINANCIAL STATEMENTS 1. METHOD OF PRESENTATION. The interim financial statements contained herein have been prepared in accordance with the instructions to Form 10-QSB and include all adjustments which are, in the opinion of management, necessary to provide a fair statement of the financial position and results of operations for the interim period reported. The financial statements are condensed and should be read in conjunction with the financial statements and related notes included in the Registrant's Form 10-KSB filed with the Securities and Exchange Commission for the fiscal year ended December 31, 1995, as well as the three-month transition period ended December 31, 1995. A summary of accounting policies and other significant information is included therein. 2. LIABILITY RELATING TO COMPANY LEASE BANK The Company's wholly-owned subsidiary, Geokinetics Production Co., Inc. ("Production") has established a revolving credit facility (the "Lease Bank") that receives cash deposits from private individuals and entities in order to acquire oil and gas prospects. In exchange for such deposits, Production issues promissory notes in principal amounts equal to the deposited cash amounts. These notes bear a floating interest rate, currently at 12.25% per annum for the quarter ended September 30, 1996, and are guaranteed by the Company. The Company's liabilities indicated on the interim financial statements reflect the aggregate principal amounts of the promissory notes payable to the private individuals and entities that have made cash deposits with the Lease Bank. 3. NOTES PAYABLE The Company's notes payable currently valued at $816,226 reflect, in part, (i) the current (i.e., one year) maturities, totaling $326,226, in connection with the Quantum loan, (ii) that certain promissory note payable to Input/Output, Inc., dated January 8, 1996, in the principal amount of $300,000 representing indebtedness incurred by the Company incident to its geophysical operations, (iii) a certain $100,000 loan from an unaffiliated lender to finance an escrow deposit made by the company incident to the proposed acquisition of Green Mountain Geophysics, Inc. (iiii) a $65,000 loan from an outside director of the Company. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Nine Months Ended September 30, 1996) GENERAL At September 30, 1996, the Company continues to incur various costs and expenses related to its efforts to diversify the Company's business activities. On March 6, 1996, the Company obtained a $5,000,000 loan from an unaffiliated lender to finance the initial operations of Quantum Geophysical, Inc. ("Quantum"). Quantum was formed as a wholly-owned subsidiary to perform 3-D seismic data acquisition services for the energy industry in the United States. Quantum has not yet commenced operations. The Company is currently negotiating with a third party to provide management and marketing services to Quantum. If negotiations with such third party are successful, the Company believes that Quantum may commence operations by January, 1997. In addition, the Company has continued its efforts towards developing geoscience technology and software development capabilities. The Company is currently negotiating the acquisition of 80% of the outstanding capital stock of Green Mountain Geophysics, Inc., a Boulder, Colorado-based manufacturer of specialized software for the petroleum industry. The financial requirements of the oil and gas business as well as the start-up costs incurred in diversifying the Company's business activities continues to require the Company to utilize a substantial portion of its current assets and incur additional indebtedness in order to acquire additional operating assets. As a result, the Company expects that it will be required to raise substantial additional funds during the remainder of fiscal 1996 from the sale of equity and/or debt securities in order to finance the Company's operations. LIQUIDITY AND CAPITAL RESOURCES CLOSING OF $5,000,000 QUANTUM LOAN The Company's financial position at September 30, 1996 substantially reflects the proceeds received by the Company in connection with the $5,000,000 Quantum loan and the Company's use of such proceeds. Current assets at September 30, 1996, totaled $1,387,989 as compared with $871,252 at December 31, 1995. Cash at September 30, 1996 totaled $58,308 as compared to $16,905 at December 31, 1995. Restricted cash reflects the proceeds from the Quantum loan that is restricted for use in the Company's seismic operations and is, therefore not available to meet the Company's working capital needs. In addition, the Company's property and equipment at September 30, 1996, totaled $4,785,887 up from $897,840 at December 31, 1995. OIL AND GAS OPERATIONS The Company (through its subsidiaries, HOC Operating Co., Inc. and Geokinetics Production Co., Inc.) continues to conduct its oil and gas operations consisting of acquiring, exploring, exploiting and developing oil and gas properties. However, the oil and gas industry is a highly capital-intensive business, especially in the initial stages of development of any venture. The Company, therefore, requires capital principally to fund the following expenses: (i) purchases of 8 leases and other interests in oil and gas properties; (ii) capital expenditures under agreements for geological, geophysical and seismic costs as well as drilling and completion costs of wells; and (iii) general and administrative expenses. The capital expenditures required by the Company to establish oil and gas production are generally incurred prior to the commencement of production revenues. As a result, the Company expects its oil and gas operations to operate with a working capital deficiency during fiscal 1996. The Company is not currently acquiring any additional oil and gas leases or drilling additional wells. RESULTS OF OPERATIONS During the three months ended September 30, 1996, the Company incurred a loss from operations of $360,952 compared to a loss of $247,210 during the comparable period in 1995. This loss is primarily due to operating expenses the Company incurred in connection with (i) the development of the Company's geoscience and software development capabilities, and (ii) expenses in oil and gas operations. General and administrative expenses during the three-months ended September 30, 1996, decreased to $262,590 compared with $271,551 during the comparable period in 1995. In addition, lease operating expenses from oil and gas operations during the three-months ended September 30, 1996, totaled $72,928 an approximate 24% decrease of such expenses during the comparable period in 1995. DEFERRED TAX BENEFIT The Company is reporting an $800,000 asset relating to deferred tax benefits as a result of the closing of the Quantum loan and the expected commencement of Quantum's operations. This asset consists primarily of differences in reporting Quantum's pre-operating costs and amortization and of net operating losses. The value of such deferred tax benefits reflects the amount that the Company believes to be realizable at this time. As Quantum's operations commence and additional revenues are generated, the company will review its valuation of deferred tax benefits and make adjustments when necessary. PLANNED PLACEMENT The Company is continuing to negotiate the acquisition of 80% of the capital stock of Green Mountain Geophysics, Inc. In order to finance this acquisition, the Company plans to sell approximately $4,000,000 - $5,000,000 in equity and debt securities (the "Green Mountain Placement"). There can be no assurance that the Green Mountain acquisition or the Green Mountain Placement will be completed. If the Green Mountain Placement is not completed, the Company will be forced to seek other sources of financing to continue its operations. 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits No Exhibits Required (b) Reports on Form 8-K There were no Form 8-K Reports filed during the quarter ended September 30, 1996. 10 SIGNATURE Pursuant to the requirement 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. GEOKINETICS INC. (Registrant) Date: November 14, 1996 ___________________________ Jay D. Haber PRESIDENT --------------------------- Paul Miles CONTROLLER 11 EX-27 2
5 9-MOS DEC-31-1996 SEP-30-1996 58,308 442,668 233,342 0 607,170 1,387,989 4,785,887 0 7,170,021 2,587,721 0 0 0 990,657 (1,350,955) 7,170,021 0 222,523 0 419,232 0 0 164,243 (360,952) 0 0 0 0 0 (360,952) (.07) (.05)
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