-----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, BUgNdQ/gC80KzE0cAxBX2ftDTqK/wf/cVosFojbNm9vww/6WERlIvRp4tlh30BwC D/fP3pK4Gy34CGTb2vCkJQ== 0000890566-97-001221.txt : 19970520 0000890566-97-001221.hdr.sgml : 19970520 ACCESSION NUMBER: 0000890566-97-001221 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97609525 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 MARCH 31, 1997 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 Identification Number) incorporation or organization) 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 March 31, 1997, 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 March 31, 1997 and December 31, 1996. . . . 3 Condensed Statements of Operations Three Months Ended March 31, 1997 and 1996. . . . . . . . . . . 5 Condensed Statements of Cash Flow Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . 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 . . . . . . . . 11 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Financial Position ASSETS March 31 December 31 1997 1996 Unaudited Unaudited ----------- ---------- Current Assets: Cash ................................... $ (46,536) $ 99,879 Cash-Restricted ........................ 248,337 316,991 Receivables ............................... 173,864 226,306 Prepaid expenses ....................... 56,652 59,865 Oil and gas properties held for resale 612,467 596,452 ----------- ---------- Total Current Assets ............... 1,044,784 1,299,493 Property and Equipment: Proved oil and gas Properties (net of depletion) ........................... 756,246 776,043 (successful efforts method for oil and gas properties) Equipment (net of depreciation) ........ 3,838,989 3,839,658 Buildings (net of depreciation) ........ 128,106 128,106 Land ................................... 23,450 23,450 ----------- ---------- Total Property and Equipment ...... 4,746,791 4,767,257 Other Assets: Deferred tax benefit ................... 800,000 800,000 Deferred charges ....................... 75,028 76,317 Restricted investments ................. 21,700 21,700 ----------- ---------- Total Other Assets ................. 896,728 898,016 ----------- ---------- Total Assets ................... $ 6,688,303 $6,964,767 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY March 31 December 31 1997 1996 Unaudited Unaudited ----------- ----------- Current Liabilities: Accounts payable .......................... $ 775,842 $ 711,563 Accrued liabilities ....................... 406,248 387,319 Notes payable ............................. 1,384,698 1,384,698 Due to officer ............................ 106,722 106,722 Advances for lease bank ................... 406,000 406,000 Site restoration costs .................... 6,418 6,418 ----------- ----------- Total Current Liabilities ............. 3,085,928 3,002,720 Long -Term Liabilities: Long- term debt ........................... 4,778,447 4,860,124 ----------- ----------- Total Liabilities ..................... 7,864,375 7,862,844 Stockholders' Equity: Common stock (15,000,000 shares authorized; 4,953,288 shares issued and outstanding @ 3/31/97 and 4,953,288 shares issued and outstanding @ 12/31/96) ............. 990,657 990,657 Additional paid in capital .................. 3,924,345 3,924,345 Accumulated deficit ......................... (6,091,074) (5,813,079) ----------- ----------- Total Stockholders' Equity .............. (1,176,072) (898,077) ----------- ----------- Total Liabilities and Stockholders' Equity .............. $ 6,688,303 $ 6,964,767 =========== =========== GEOKINETICS INC. Condensed Statements of Operations Three Months Ended March 31 (unaudited) ---------------------------- 1997 1996 ----------- ----------- Revenues: Oil and gas sales ........................ $ 125,961 $ 108,349 Operating fees ........................... 57,650 64,327 ----------- ----------- Total Revenues ....................... 183,611 172,676 Expenses: General and administrative .. $ 197,958 $ 482,712 Lease operating expenses .... 59,112 117,099 Amortization expense ........ 4,983 4,983 Depletion expense ........... 14,814 16,075 Depreciation expense ........ 669 673 ----------- ----------- Total Expenses .......... 277,536 621,542 ----------- ----------- Loss from operations ........ (93,925) (448,866) Other Income (Expense): Interest income ............ 170 2,725 Interest expense ........... (184,240) (86,439) ----------- ----------- Total Other Income ...... (184,070) (83,714) Income (Loss) before provision for income tax ................ $ (277,995) $ (532,580) Provision for income tax ........ 0 0 ----------- ----------- Total income tax ............ 0 0 ----------- ----------- Net Income (Loss) .......... $ (277,995) $ (532,580) =========== =========== Earnings (Loss) per share ....... $ (0.06) $ (0.11) =========== =========== Weighted average common shares and equivalents outstanding ... 4,953,288 4,953,288 =========== =========== GEOKINETICS INC. Condensed Statements of Cash Flows Three Months Ended March 31 (unaudited) -------------------------- 1997 1996 --------- ----------- Cash flows from operating activities: Cash received from customers ............... $ 236,052 $ 157,037 Interest and dividends received ............ 170 2,337 Cash paid to suppliers and employees ....... (193,768) (568,150) Interest paid .............................. (176,251) (86,438) --------- ----------- Net cash used by operating activities .. (133,797) (495,214) --------- ----------- Cash flows from investing activities Cash payments for purchase of property and equipment ............................ 0 (3,785,963) Cash proceeds from restricted cash ......... 68,654 0 --------- ----------- Net cash provided (used) by investing activities ................. 68,654 (3,785,963) --------- ----------- Cash flows from financing activities: Principal payments on long-term debt ....... (81,273) 0 Proceeds from issuance of common stock ..... 0 125,833 Proceeds from long-term debt ............... 0 5,220,000 --------- ----------- Net cash provided (used) by financing activities ................. (81,273) 5,345,833 --------- ----------- Net increase (decrease) in cash ................ (146,415) 1,064,656 Cash, beginning of period ...................... 99,879 16,905 --------- ----------- Cash, end of period ............................ $ (46,536) $ 1,081,561 ========= =========== 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 Company is currently working to complete its audit for the fiscal year ended December 31, 1996, which financial statements will be provided by amendment to the Company's Form 10-KSB filed for the fiscal year ended December 31, 1996. It is contemplated that it may be necessary for the Company to file an amendment to this Form 10-QSB to properly reflect changes to the financial information provided herein by incorporating the results of the Company's audit for the fiscal year ended December 31, 1996. A summary of accounting policies and other significant information will be 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 March 31, 1997, 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 $1,384,698 reflect, in part, (i) the current (i.e., within one year) maturities, totaling $331,825 of the Quantum loan, (ii) a promissory note payable to Input/Output, Inc., dated January 8, 1996 (as amended), in the principal amount of $330,848 representing indebtedness incurred by the Company incident to its geophysical operations, and (iii) certain promissory notes dated October 23, 1996 and October 31, 1996 totaling an aggregate of $697,025 from a group of private sources including an outside director of the Company to provide short term working capital for the Company's operations. (See "Extension of Promissory Notes" under Liquidity and Capital Reserves in Item 2 below.) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL At March 31, 1997, the Company continues to incur various costs and expenses related to its efforts to develop and diversify its seismic contracting operations through a series of planned acquisitions. 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 3D seismic data acquisition services for the energy industry in the United States. Quantum has not yet commenced operations. On March 5, 1997, the Company entered into a Letter of Intent to acquire 100% of the issued and outstanding capital stock of Signature Geophysical Services, Inc., a Houston-based provider of 3D geophysical surveys for the oil and gas industry. The Company is currently negotiating a definitive agreement concerning this acquisition which is expected to close in the second quarter of fiscal 1997. 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 1997 from the sale of equity and/or debt securities in order to finance the Company's operations and proposed acquisitions strategy. LIQUIDITY AND CAPITAL RESOURCES CLOSING OF $5,000,000 QUANTUM LOAN The Company's financial position at March 31, 1997 substantially reflects the proceeds received by the Company from the $5,000,000 Quantum loan and the Company's use of such proceeds. Current assets at March 31, 1997, totaled $1,044,784 as compared with $1,299,493 at December 31, 1996. Cash at March 31, 1997 totaled negative $46,536 as compared to $99,879 at December 31, 1996. Restricted cash reflects the proceeds from the Quantum loan that are restricted for use in the Company's seismic operations and is, therefore not available to meet the Company's working capital needs. $500,000 BRIDGE FINANCING On April 25, 1997, the Company obtained $500,000 in short-term financing from private investment sources. The financing bears interest at 12% per annum. In addition, the Company issued warrants to these private investment sources to purchase an aggregate of 1,000,000 shares of its common stock at $.75 per share. The Company is currently negotiating with these private investment sources to obtain additional long-term financing. The Company believes that the acquisition of substantial long-term financing is critical to the Company's future operations. EXTENSION OF PROMISSORY NOTES The Company defaulted on interest payable January 31, 1997 under certain promissory notes with an aggregate value of $697,025. Two of such promissory notes are held by an outside director of the Company. On March, 1997, the Company signed an agreement with each noteholder whereby (i) all defaults have been cured and waived, (ii) the Company will pay interest to each noteholder on a monthly basis until maturity, and (iii) the maturity date of each note has been extended until the earlier of June 30, 1997 or such time as the Company has completed a private placement of debt and/or equity of not less than $4,000,000. Additionally, the Company extended until December 31, 1997 the expiration date of certain Common Stock Purchase Warrants that were previously issued to each noteholder in consideration of the loans evidenced by these promissory notes. The Company defaulted on the payment of a promissory note in favor of Input/Output, Inc. in the principal amount of $330,848 that was due on July 31, 1996. In April, 1997, the Company signed an agreement with Input/Ouput, Inc. whereby (i) all defaults have been cured and waived, (ii) the Company will pay interest to Input/Ouput, Inc. on a monthly basis until maturity, and (iii) the maturity date of the note has been extended until October 1, 1997. 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 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 Company expects its oil and gas operations to operate with a working capital deficiency during fiscal 1997. RESULTS OF OPERATIONS During the three months ended March 31, 1997, the Company incurred a loss from operations of $277,995 compared to a loss of $532,580 during the comparable period in 1996. This loss is primarily due to operating expenses the Company incurred in connection with (i) the development of the Company's geophysical data acquisition business, and (ii) expenses in oil and gas operations. General and administrative expenses during the three-months ended March 31, 1997, decreased to $197,957 compared with $482,712 during the comparable period in 1996. In addition, lease operating expenses from oil and gas operations during the three months ended March 31, 1997, totaled $57,650 an approximate 11% decrease of such expenses during the comparable period in 1996. DEFERRED TAX BENEFIT The Company has reported 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 as a result of Quantum's planned operations. As Quantum's operations commence and 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 a definitive agreement to acquire 100% of the capital stock of Signature Geophysical Services, Inc., a privately owned geophysical contractor based in Houston, Texas. In order to finance the Company's ongoing operations, including the acquisition of Signature Geophysical Services, Inc. and certain other possible acquisitions, the Company plans to issue and sell a minimum of $5,000,000 in equity and/or debt securities ("Placement"). There can be no assurance that the Signature Geophysical Services, Inc. acquisition or the Placement will be completed. If the Placement is not completed, the Company will be forced to seek other sources of financing to continue its operations. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NO. DESCRIPTION ----------- ----------- 10(a) Securities Purchase Agreement dated as of April 25, 1997 among the Company and each of William R. Ziegler and Steven A. Webster. Reference is made to Exhibit II to the Schedule 13D filed with the Securities & Exchange Commission by William R. Ziegler on May 5, 1997. 10(b) Form of 12% Senior Secured Promissory Note dated as of April 25, 1997 in the principal amount of $250,000 executed by the Company to each of William R. Ziegler and Steven A. Webster. Reference is made to Exhibit III to the Schedule 13D filed with the Securities & Exchange Commission by William R. Ziegler on May 5, 1997. 10(c) Form of Warrant to Purchase Common Stock dated as of April 25, 1997 issued by the Company to each of William R. Ziegler and Steven A. Webster. Reference is made to Exhibit IV to the Schedule 13D filed with the Securities & Exchange Commission by William R. Ziegler on May 5, 1997. 10(d) Registration Rights Agreement dated as of April 25, 1997 executed by the Company and each of William R. Ziegler and Steven A. Webster. Reference is made to Exhibit V to the Schedule 13D filed with the Securities & Exchange Commission by William R. Ziegler on May 5, 1997. 10(e) Consulting Agreement dated as of April 25, 1997 executed by the Company and William R. Ziegler. Reference is made to Exhibit VI to the Schedule 13D filed with the Securities & Exchange Commission by William R. Ziegler on May 5, 1997. 10(f) Letter Agreement dated as of March 25, 1997 executed by the Company and certain of the Company's lenders including William H. Murphy(copy attached). 10(g) Common Stock Purchase Warrant dated as of March 31, 1997 issued by the Company to William H. Murphy (copy attached). (b) Reports on form 8-K There were no form 8-K reports filed during the quarter ended March 31, 1997. 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: May 15, 1997 Jay D. Haber PRESIDENT Paul Miles CONTROLLER EX-10.F 2 VIA MESSENGER/OVERNIGHT DELIVERY March 26, 1997 Mr. Richard W. Harbin Mr. Michael A. Kimmel 306 Cinnamon Oak Lane 1101 Thornblade Blvd. Houston, Texas 77079 Greer, South Carolina 29650-4513 Mrs. Elinor T. Harbin Mr. William H. Murphy 5522 Woodway 2200 Post Oak Blvd., Suite 514 Houston, Texas 77056 Houston, Texas 77056 Elinor T. Harbin Trust c/o Mrs. Elinor T. Harbin 5522 Woodway Houston, Texas 77056 Re: WAIVER OF DEFAULTS UNDER OUTSTANDING PROMISSORY NOTES Gentlemen and Lady: After my meeting with Mr. Harbin and Mr. Murphy, I believe it is in our collective interest to resolve the pending defaults under the terms of the promissory notes which have been issued to each of you. Resolution of the defaults is critical to continuing the interest of William R. Ziegler in financing the ongoing operations of Geokinetics and its subsidiaries. The following proposal is intended to incorporate the initial proposal made by our counsel, Mr. Spring, to Mr. Houghton, by letter dated March 20, 1997; the suggestions made by Mr. Houghton in his letter to Mr. Spring dated March 20; and the discussions held yesterday. Geokinetics proposes to resolve the outstanding indebtedness due to you as follows: 1. Geokinetics is ready to pay all accrued interest on the outstanding notes (at the predefault rate) through March 14, 1997, immediately upon your execution of this letter agreement. 2. Geokinetics is ready to reimburse you for the reasonable attorney's fees incurred by you in connection with the defaults under the notes and preparation of the foreclosure notices. 3. Geokinetics will modify your outstanding warrants to continue their existence through December 31, 1997. Additionally, the warrants will be amended as follows immediately below. The remaining terms of the warrants will remain the same, including their exercise price. The warrants issued in conjunction with the promissory notes will be amended to provide that the following paragraph be inserted as Article 5.(a)(ii): "(ii) if the Company shall issue more than ten percent (10%) of its then outstanding shares of Common Stock, whether pursuant to a merger, consolidation or an acquisition of the stock or assets of another corporation or entity, or otherwise, then the number of shares purchasable under this Warrant immediately prior to the issue of such additional Common Stock shall immediately be increased so that the number of shares purchasable under this Warrant shall bear the same ratio to the number of shares of Common Stock outstanding immediately after the issuance of such additional Common Stock as the number of shares purchasable under this Warrant immediately prior to the issuance of such additional Common Stock bears to the number of shares of Common Stock outstanding immediately prior to the issuance of such additional Common Stock." 4. On a monthly basis, Geokinetics would furnish each of you a monthly, unaudited financial statement for Geokinetics and a statement of gross and net revenues from the wells pledged to you. 5. Geokinetics will agree to modify the terms of each of the outstanding promissory notes as follows: a) The maturity date of each such note will be extended to June 30, 1997, or such earlier date as Geokinetics funds a private placement of not less than $4,000,000; b) Interest would be paid on a current basis on each of April 30, May 31, and June 30 (or the date of funding the private placement referred to in subparagraph (a) above, if earlier); and c) The notes would be modified to eliminate the thirty-day notice required to be given by the holders in the event of a monetary default. 6. The modified or amended terms of the instruments referred to above would be reflected by appropriate documentation, satisfactory to you and your counsel. In consideration for the foregoing, each of you agrees to waive all existing defaults under the notes AB INITIO and agree to withdraw the pending foreclosure actions and remove the posted foreclosure notices. Mr. Ziegler has told us that he is not interested in a thirty-day solution, and we have made the foregoing proposal with his position in mind. The matter must be resolved immediately. If this proposal is acceptable to you, please indicate by each of you signing a copy of this letter in the space provided below and returning it to me by facsimile by noon tomorrow. Sincerely, GEOKINETICS INC. /s/ JAY D. HABER Jay D. Haber President /s/ RICHARD W. HARBIN Richard W. Harbin /s/ ELINOR T. HARBIN Elinor T. Harbin /s/ ELINOR T. HARBIN Elinor T. Harbin, Trustee /s/ MICHAEL A. KIMMEL Michael A. Kimmel /s/ WILLIAM H. MURPHY William H. Murphy cc: Mr. James J. Spring Mr. Thomas Houghton EX-10.G 3 Exhibit 10(g) Form of Common Stock Purchase Warrant THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON ADVICE TO THE CORPORATION BY ITS COUNSEL THAT REGISTRATION IS NOT REQUIRED FOR SUCH SALE, ASSIGNMENT OR TRANSFER. THE TRANSFER OF THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF IS SUBJECT TO COMPLIANCE WITH THE CONDITIONS SPECIFIED BELOW, AND NO TRANSFER OF THIS WARRANT OR SUCH SHARES SHALL BE VALID UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT No. 19-A THIS IS TO CERTIFY THAT, for value received, William H. Murphy (the "HOLDER"), upon due exercise of this Warrant, is entitled to purchase from Geokinetics Inc., a Delaware corporation (the "COMPANY") on or before the close of business on December 31, 1997 (the "EXPIRATION DATE"), all or any part of 136,385 shares of fully paid and non-assessable Common Stock, $.20 par value, of the Company (the "COMMON STOCK"), at a purchase price per share (the "PURCHASE PRICE") computed pursuant to Section 1 below. This Warrant is hereinafter called the "Warrant," and the shares of Common Stock issuable upon exercise hereof are hereinafter called the "Warrant Shares." The term "Warrant" shall also include other warrants granted by the Company on the date of grant of this Warrant, and the term "Warrant Shares" shall also include shares issuable upon exercise thereof. 1. PURCHASE PRICE. The Purchase Price per share of Common Stock under this Warrant is $1.25. 2. EXERCISE OF WARRANT. The Holder of this Warrant may, at any time on or before the Expiration Date, exercise this Warrant in whole or in part from time to time for the purchase of the shares of Common Stock which such Holder is then entitled to purchase hereunder at the Purchase Price (as hereinafter defined). In order to exercise this Warrant in whole or in part, the Holder hereof shall deliver to the Company (a) a written notice of such Holder's election to exercise this Warrant, GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 1 which notice shall specify the number of whole shares of Common Stock to be purchased, (b) payment of the aggregate purchase price of the shares of Common Stock being purchased in cash, certified or cashiers check, or by the delivery of the Note (as described below) in the manner provided in the second paragraph of this Section 1, and (c) this Warrant; PROVIDED, HOWEVER, that, in case the issuance of such shares shall not have been registered under the Securities Act of 1933, as amended (the "Securities Act"), the Company may require that such Holder furnish to the Company a written statement that such Holder is purchasing such shares for such Holder's own account for investment and not with a view to the distribution thereof and that none of such shares will be offered or sold in violation of the provisions of the Securities Act. Upon receipt of the notice of exercise, the payment and surrender of this Warrant, the Company shall, as promptly as practicable, execute or cause to be executed and deliver to such Holder a certificate or certificates representing the aggregate number of shares of Common Stock specified in such notice. The stock certificate or certificates so delivered shall be in the such denominations as may be specified in such notice and shall be registered in the name of such Holder or, subject to Section 4, such other name as shall be designated in such notice. This Warrant represents an amendment and modification of that certain Warrant No. 19 dated October 23, 1996, issued to Holder by the Company and is being issued pursuant to the terms of that certain letter agreement dated as of March 26, 1996, between the Company and the holders, including Holder, of certain common stock purchase warrants and promissory notes issued by the Company on October 23, 1996. The Purchase Price for the aggregate number of whole shares of Common Stock to be purchased must be paid in full to the Company in cash, or by cashiers or certified check payable to the order of the Company. In addition, the parties acknowledge that this Warrant is being issued to the Holder as partial consideration for a business loan and financial advisory services ("LOAN") made by Holder to the Company, evidenced in part by one or more promissory notes (the "NOTES") issued by the Company to Holder. Accordingly, in the event the Holder exercises this Warrant, in whole or in part, Holder may, at Holder's option, apply the face value of the Notes, in whole or in part, towards the aggregate purchase price of the shares of Common Stock to be purchased. In such event, prior to the issuance of any stock certificate or certificates in the manner provided in this Section, Holder shall deliver to the Company, the Notes and a duly executed release in a form acceptable to the Company, together with the balance of the purchase price, if any. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant. If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of such certificate or certificates, deliver to such Holder a new warrant evidencing the rights of such Holder to purchase the remaining shares of Common Stock called for by this Warrant, which new warrant shall in all other respects be identical with this Warrant, or, at the request of such Holder, appropriate notation may be made on this Warrant and the same returned to such Holder. If the Notes shall have been partially applied towards the aggregate purchase price of the shares of Common Stock under this Warrant, Holder shall tender the original Notes to the Company. Thereafter, the Company will issue new promissory notes to Holder containing substantially the same terms and conditions of the Notes with a principal amount equal to the unapplied outstanding principal balance on the Notes. Upon acceptance by Holder of such new promissory Notes, the Company will issue a new Warrant in the manner and on the terms specified herein. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 2 The Company shall pay all expenses, taxes and other charges payable in connection with the preparation, execution and delivery of stock certificates under this Section, except that, in case such stock certificates are to be registered in a name or names other than the name of the Holder of this Warrant, all stock transfer taxes payable upon the execution and delivery of such stock certificate or certificates shall be paid by the Holder hereof at the time of delivering the notice of exercise mentioned above. In such case, the Holder hereof shall deliver with such notice of exercise evidence, satisfactory to the Company, that such taxes have been paid. The Company represents, warrants and agrees that all shares of Common Stock issuable upon any exercise of this Warrant shall be validly authorized and issued, fully paid and nonassessable. This Warrant shall not entitle the Holder hereof to any of the rights of a stockholder of the Company. 3. TRANSFER, DIVISION AND COMBINATION. Subject to the provisions of Section 4, this Warrant is transferable in the same manner and with the same effect as in the case of a negotiable instrument payable to a specified person. The Company, however, may treat the registered Holder hereof as the owner hereof for all purposes until this Warrant shall have been surrendered for transfer as hereinafter provided. Upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant duly executed by the Holder hereof or his agent or attorney, the Company shall, subject to Section 4, execute and deliver a new warrant or warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant shall promptly be canceled. This Warrant may, subject to Section 4, be divided or combined with other warrants upon presentation hereof at the principal office of the Company, together with a written notice specifying the names and denominations in which new warrants are to be issued signed by the Holder or his agent or attorney. Subject to compliance with the preceding paragraph and with Section 4, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new warrant or warrants in exchange for the warrant or warrants to be divided or combined in accordance with such notice. The Holder shall pay all expenses, taxes and other charges payable in connection with the preparation execution and delivery of Warrants under this Section 3. 4. RESTRICTIONS ON TRANSFER; COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS. (a) This Warrant and the related Warrant Shares shall not be transferable except upon the conditions specified in this Section, which conditions are intended, among other things, to ensure compliance with the provisions of the Securities Act or any applicable state securities laws in respect of the transfer of such Warrant or such Warrant Shares. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 3 (b) By acceptance of this Warrant, the Holder of this Warrant agrees, prior to any transfer or attempted transfer of such Warrant or the related Warrant Shares, to give written notice to the Company of such Holder's intention to effect such transfer. The notice shall describe the manner and circumstances of the proposed transfer in detail and shall contain an undertaking by the Holder to furnish such other information as may be required to enable the Company's counsel to render the opinions referred to below, and shall give the identity and address of the Holder's counsel. The Holder shall submit a copy of the notice to the counsel designated in the notice and the Company shall submit a copy thereof to its counsel, and the following provisions shall apply: (i) If, in the opinion of both the Company's and the Holder's counsel, the proposed transfer of the Warrant or Warrant Shares may be effected without registration of the Warrant or Warrant Shares under the Securities Act, the Company shall, as promptly as practicable, so notify the Holder who will then be entitled to transfer the Warrant or Warrant Shares in accordance with the terms of the notice delivered by the Holder to the Company. (ii) If, in the opinion of either the Company's or the Holder's counsel, the proposed transfer of the Warrant or Warrant Shares may not be effected without registration of the Warrant or Warrant Shares under the Securities Act, the Company shall, as promptly as practicable, so notify the Holder, and the Company shall not be obligated to effect the proposed transfer, except pursuant to an offering registered under the Securities Act. (c) If the Company shall file a registration statement under the Securities Act (other than a registration statement on Form S-8), the Company shall give written notice thereof to the Holder of this Warrant. Upon written notice from the Holder, received by the Company within the time period (not fewer than ten (10) days) specified in such notice, that the Holder desires that the Company include the Warrant Shares in such registration statement (which request shall specify the number of Warrant Shares which such Holder desires to include in such registration statement), the Company shall use its best efforts to include all or a portion of the Warrant Shares in such registration statement, subject to such conditions as may be determined by the Company. The Holder shall be permitted to withdraw all or any part of the Warrant Shares from such registration statement prior to the effective date of such registration. If such registration statement is filed in connection with an underwritten offering on behalf of the Company (a "PRIMARY REGISTRATION"), Holder may sell, at the sole discretion of the Company, all or part of the Warrant Shares included in the registration statement on the same terms and conditions that apply to the other securities being issued and sold by the Company. If such registration statement is filed in connection with an underwritten secondary registration on behalf of other holders of the Company's securities (a "SECONDARY REGISTRATION"), Holder may sell, at the sole discretion of the Company, all or part of the Warrant Shares included in the registration statement on the same terms and conditions that apply to the securities being sold by the person or persons who initiated the Secondary Registration. If, however, the Company concludes before the effectiveness of such registration statement that to include all or part of the Warrant Shares requested by the Holder in any registration would be detrimental to any offering of securities by the Company, the number of Warrant Shares to be included in the registration may be reduced (or eliminated) to the extent deemed appropriate in the sole discretion of the Company, in good faith, GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 4 after using its best efforts to include all or as many as possible of the Warrant Shares requested by the Holder. With respect to any registration of Warrant Shares under the Securities Act pursuant to Subsection (c) of this Section, the Company shall pay all expenses incurred by it in effecting such registration (including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel for the Company and expenses of special audits incident to or required by any such registration); PROVIDED, HOWEVER, that the Company shall not be required to pay (i) the fees and expenses of counsel or other advisors for the Holder, (ii) underwriting discounts and commissions relating to any of the Warrant Shares to be registered or (iii) premiums on insurance required by any underwriter insofar as such premiums relate to the offering of Warrant Shares. (d) It shall be a condition precedent to the obligation of the Company to take any action pursuant to Subsection (c) of this Section that the Holder of the Warrant Shares to be registered under each such registration shall furnish to the Company such information regarding the securities held by such Holder and the intended method of disposition thereof as the Company shall reasonably request in connection with the action to be taken by the Company. In no event shall the Company be required (i) to amend any registration statement filed pursuant to Subsection (c) of this Section after it has become effective, or to amend or supplement any prospectus to permit the continued disposition of the securities registered under any registration statement, or (ii) to execute a general consent to service in process or to qualify to do business in any state in connection with the qualification of the Warrant Shares for sale under state securities laws. (e) In the event of any registration of any of its securities under the Securities Act pursuant to this Section, the Company shall indemnify and hold harmless the seller of such securities and each other person, if any, who controls such seller within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which such seller or controlling person may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading. In addition, the Company shall reimburse such seller and each such controlling person for any legal or any other expenses reasonably incurred by such seller or such controlling person in connection with investigating or defending any such loss, claim, damage, liability or action. The Company shall not, however, be obligated under this Subsection (e) to indemnify or reimburse any person to the extent that such loss, claim, damage or liability arises out of or is based upon an untrue statement, alleged untrue statement, omission or alleged omission made in a registration statement, preliminary or final prospectus, or any amendment thereof or supplement GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 5 thereto in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by the seller or the controlling person specifically for use in the preparation thereof. If the offering pursuant to any such registration statement is made through underwriters, the Company agrees to enter into an underwriting agreement in customary form with such underwriters and to indemnify such underwriters and each person who controls such underwriters within the meaning of the Securities Act. In the event of any registration by the Company of any of its securities under the Securities Act pursuant to this Section, each seller of the securities so registered will indemnify and hold harmless the Company, each other person, if any, who controls the Company within the meaning of the Securities Act and each officer and director of the Company to the same extent that the Company agrees to indemnify it, but only with respect to the written information relating to such seller furnished to the Company by such seller as aforesaid. (f) Each certificate for Warrant Shares issued upon exercise of this Warrant shall bear a legend to the effect that the Warrant Shares may not be transferred except upon compliance with the provisions of this Section 4, and each certificate for Warrant Shares transferred pursuant to Subsection (b)(i) of this Section shall also bear such a legend unless, in the opinion of counsel for the Company, such a legend is not required. (g) The Holder hereby covenants and agrees with the Company as follows: (i) The Holder acknowledges being informed that this Warrant or the Warrant Shares must held by the Holder indefinitely unless the Warrants or Warrant Shares are registered for sale by the Holder under the Securities Act or an exemption from such registration is available. The Holder understands that any routine sale of the Warrant Shares made in reliance upon Rule 144 promulgated under the Securities Act can be made only in limited amounts after the expiration of a period of two years from the date of receipt of the Warrant and otherwise in accordance with the terms and conditions of Rule 144, and further understands that in the event that the exemption from registration provided by Rule 144 is not available, compliance with some other exemption under the Securities Act will be required in the absence of registration. (ii) The Company may instruct its transfer agents not to transfer any of the Warrant Shares unless the transfer agents have been advised by the Company or otherwise have been satisfied that the Holder has complied with the provisions above-described. (iii) The Holder understands that the Company has not covenanted and is not obligated to furnish a registration statement under the Securities Act covering the Warrants or the Warrant Shares, to file a notification under any regulations promulgated pursuant to the Securities Act with respect to the Warrants or the Warrant Shares, or to take any other action that would make available an exemption from registration, except as set forth in Section 4(b). The Company covenants and agrees that it will use its best efforts to make publicly available, from time to time, such information as will permit the Holder to comply with the requirements of Rule 144 relating to current public information, that it will upon request furnish the Holder a written certificate relating to its compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, and GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 6 the regulations and rules thereunder and that it will otherwise cooperate in good faith with the Holder in connection with any sale under Rule 144. 5. ADJUSTMENTS TO NUMBER OF SHARES PURCHASABLE UPON EXERCISE OF WARRANTS. (a) As used herein, "Common Stock" shall mean stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the distribution of either earnings or assets of the Company without limit as to the amount or percentage; PROVIDED, HOWEVER, that the term "Warrant Shares" shall mean only the Common Stock, $.20 par value, of the Company and stock of any other class into which such presently authorized Common Stock may hereinafter have been changed. In case by reason of the operation of this Section 5 this Warrant shall be exercisable for any other shares of stock or other securities or property of the Company or of any other corporation, any reference herein to the exercise of this Warrant shall be deemed to refer to and include the exercise of this Warrant for such other shares of stock or other securities or property. (b) The number of shares of Common Stock or the class of securities purchasable upon any exercise of this Warrant, as appropriate, are subject to adjustment as set forth in this Section 5, without any adjustment in the Purchase Price: (i) If the Company shall issue more than ten percent (10%) of its then outstanding shares of Common Stock, whether pursuant to a merger, consolidation or an acquisition of the stock or assets of another corporation or entity, or otherwise, then the number of shares purchasable under this Warrant immediately prior to the issue of such additional Common Stock shall immediately be increased so that the number of shares purchasable under this Warrant shall bear the same ratio to the number of shares of Common Stock outstanding immediately after the issuance of such additional Common Stock as the number of shares purchasable under this Warrant immediately prior to the issuance of such additional Common Stock bears to the number of shares of Common Stock outstanding immediately prior to the issuance of such additional Common Stock. (ii) If the number of issued and outstanding shares of Common Stock shall increase by more than ten percent (10%) as a result of a subdivision, combination, consolidation or reclassification of the Common Stock, or the payment of a stock dividend, the number of shares purchasable under this Warrant shall be proportionately increased. Conversely, if the number of issued and outstanding shares of Common Stock of the Company are in any manner combined into a smaller number of shares by more than ten percent (10%), the number of shares purchasable under this Warrant shall be proportionately reduced. (c) Except as otherwise provided herein, the effective date of any adjustment pursuant to this Section 5 shall be the effective date of the event that causes such adjustment. The adjustments provided for in this Section 5 shall apply to each successive event specified herein that causes an adjustment. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 7 (d) In case of any consolidation of the Company with or the merger of the Company into another corporation or in the case of any conveyance or transfer of all or substantially all of the properties of the Company to another corporation entitled to acquire and operate the same, the Company or such successor or acquiring corporation, as the case may be, shall take all steps necessary to amend the terms and conditions of this Warrant so that the Holder shall have the right to exercise the Warrant into the kind and amount of shares of stock and other securities and property receivable upon such reclassification, change, consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock of the Company for which such Warrant might have been converted immediately prior to such reclassification, change, consolidation, merger, conveyance or transfer. Such amendment shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 5 hereof. The above provisions of this Subsection (d) shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, conveyances or transfers. Notice of the execution of an amendment hereto pursuant to this Section 5(d) shall be given pursuant to Section 7 below. 6. SPECIAL AGREEMENTS OF THE COMPANY. (a) The Company covenants and agrees that it will reserve and set apart and have at all times, a number of shares of authorized but unissued Common Stock deliverable upon the exercise of the Warrants or any other rights or privileges provided for therein sufficient to enable it at any time to fulfill all of its obligations thereunder; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the exercise of the Warrants at the Purchase Price then in effect, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. As a condition precedent to the taking of any action which would cause an adjustment reducing the Purchase Price below the then par value, if any, per share of the Common Stock issuable upon exercise of this Warrant, the Company will take such corporate action as may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue its Common Stock at the Purchase Price upon conversion of this Warrant in accordance with the provisions of this Section 6. If any shares of the Company reserved or to be reserved for the purpose of exercise of this Warrant require registration or qualification with or approval of any governmental authority under any Federal or State law before such shares may be validly issued upon exercise, then the Company covenants that it will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be; PROVIDED, HOWEVER, that this provision shall not require the Company to endeavor to secure such registration, qualification or approval in order to enable any person to sell or distribute this Warrant or any Common Stock received upon exercise of this Warrant. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 8 The Company covenants that all shares of Common Stock which may be issued upon exercise of this Warrant will be, upon issuance, fully paid and nonassessable and, except as set forth herein, the Company will pay all taxes, liens and charges with respect to the issuance thereof. (b) Whenever the number of shares purchasable under this Warrant or the Purchase Price shall be adjusted as required by the provisions of Section 5 hereof, the Company shall forthwith mail a notice setting forth the adjusted Purchase Price and the adjusted number of Warrant Shares for which this Warrant is exercisable to the registered Holder of this Warrant at his last address as it shall appear on the registration books, but failure to give or receive such notice, or any defects therein, or in the mailing thereof, shall not affect such adjustment in Purchase Price or number of Warrant Shares. (c) In case the Company proposes: (i) to pay any stock dividend upon the Common Stock, make any distribution (other than ordinary cash dividends payable out of earnings) or offer any subscription or other rights to the Holders of Common Stock; (ii) to effect any capital reorganization or reclassification of capital stock of the Company; or (iii) to effect the consolidation, merger, sale of all or substantially all of the assets, liquidation, dissolution or winding up of the Company; then the Company shall cause notice of any such intended action to be given to the Holder of this Warrant not less than twenty (20) nor more than forty (40) days prior to the date on which such capital reorganization, reclassification, consolidation, merger, sale, liquidation, dissolution or winding up shall be effected, as the case may be. 7. NOTICES. Any notice or other document required or permitted to be given or delivered to the Holder of this Warrant and the Warrant Shares shall be sent by certified or registered mail to the address shown on this Warrant or such other address as shall have been furnished to the Company in writing by such Holder. Any notice or other document required or permitted to be given or delivered to the Company shall be sent by certified or registered mail to the principal office of the Company at 5555 San Felipe, Suite 780, Houston, Texas 77056, attention of the President, or such other address as shall have been furnished to the Holder of Warrants and Holders of Warrant Shares by the Company. 8. LIMITATION OF LIABILITY. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder for the Purchase Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 9 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by its President and its Secretary. GEOKINETICS INC., a Delaware corporation /s/JAY D. HABER By: Jay D. Haber, President ATTEST: /s/MICHAEL HALE Michael Hale, Secretary DATE: March 31,1997 GEOKINETICS INC. COMMON STOCK PURCHASE WARRANT - PAGE 10 ASSIGNMENT TO BE EXECUTED BY THE REGISTERED HOLDER IF HE DESIRES TO TRANSFER THE WARRANT FOR VALUE RECEIVED, ________________________________________ hereby sells, assigns and transfers unto ________________________ the right to purchase __________________ shares evidenced by the within Warrant, and does hereby irrevocably constitute and appoint __________________________________________ Attorney to transfer the said Warrant on the books of the Company, with full power of substitution. Signature Print Name Address Dated: _______________, ______ In the presence of: - ------------------------------- NOTICE The signature of the foregoing Assignment must correspond to the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. SUBSCRIPTION FORM TO BE EXECUTED BY THE REGISTERED HOLDER IF HE DESIRES TO EXERCISE THE WARRANT The undersigned hereby exercises the right to purchase _______ ____________________ shares covered by this Warrant according to the conditions thereof and herewith makes payment of the Purchase Price for such in full. Signature Print Name Address Date: ___________________, _____ EX-27 4
5 3-MOS DEC-31-1997 MAR-31-1997 201,801 21,700 173,864 0 612,467 1,044,784 4,746,791 0 6,688,303 3,085,928 0 0 0 990,657 0 6,688,303 0 183,611 0 461,606 0 0 0 (277,995) 0 0 0 0 0 (277,995) (.06) 0
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