-----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, DAoG6iaeb+4Z+xe1NkPnyTLrtmcPrgzTQsFljFuFrACGawFBz/Zms4X/TR+b3Dck 2kR/tERJIftg7ksp75xxHA== 0000890566-96-000433.txt : 19960702 0000890566-96-000433.hdr.sgml : 19960702 ACCESSION NUMBER: 0000890566-96-000433 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOKINETICS INC CENTRAL INDEX KEY: 0000314606 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 941690082 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09268 FILM NUMBER: 96565839 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 10QSB 1 QUARTERLY REPORT FOR THE PERIOD ENDED 03/31/96 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, 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 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, 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 March 31, 1996 and December 31, 1995 ..... 3 Condensed Statements of Operations Three Months Ended March 31, 1996 and 1995 ................... 5 Condensed Statements of Cash Flow Three Months Ended March 31, 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
March 31 December 31 1996 1995 Unaudited (*) --------------------- --------------------- Current Assets: Cash and short term investments $ 1,081,561 $ 16,905 Receivables 275,650 259,370 Prepaid expenses 34,015 12,775 Oil and gas properties held for resale 654,903 582,202 --------------------- --------------------- Total Current Assets 2,046,129 871,252 Property and Equipment: Proved oil and gas Properties (net of depletion) 836,604 876,747 (successful efforts method for oil and gas properties) Equipment (net of depreciation) 3,673,912 21,093 Buildings (net of depreciation) 128,106 0 Land 23,450 0 --------------------- --------------------- Total Property and Equipment 4,662,072 897,840 Other Assets: Deferred tax benefit 800,000 800,000 Deferred charges 80,000 0 Restricted investments 101,339 101,339 --------------------- --------------------- Total Other Assets 981,339 901,339 --------------------- --------------------- Total Assets $ 7,689,540 $ 2,670,431 ===================== =====================
3 LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31 1996 1995 Unaudited (*) --------------------- --------------------- Current Liabilities: Accounts payable $ 554,995 $ 542,510 Accrued liabilities 321,840 198,890 Notes payable 314,000 25,000 Due to officer 101,722 101,722 Advances for lease bank 600,500 600,500 Site restoration costs 26,607 36,185 --------------------- --------------------- Total Current Liabilities 1,919,664 1,504,807 Long -Term Liabilities: Long- term debt 5,431,246 420,246 --------------------- --------------------- Total Liabilities 7,350,910 1,925,053 Stockholders' Equity: Common stock (15,000,000 shares authorized; 4,953,288 shares issued and outstanding @ 3/31/96 990,657 973,991 and 4,869,955 shares issued and outstanding @ 12/31/95) Additional paid in capital 3,924,345 3,815,179 Accumulated deficit (4,576,372) (4,043,792) --------------------- --------------------- Total Stockholders' Equity 338,630 745,378 --------------------- --------------------- Total Liabilities and Stockholders' Equity $ 7,689,540 $ 2,670,431 ===================== ===================== * CONDENSED FROM AUDITED FINANCIAL STATEMENTS
4 GEOKINETICS INC. Condensed Statements of Operations
Three Months Ended March 31 (unaudited) --------------------------------------------- 1996 1995 -------------------- -------------------- Revenues: Oil and gas sales $108,349 $117,017 Operating fees 64,327 67,241 Gain on sale of assets 0 182,364 -------------------- -------------------- Total Revenues 172,676 366,622 Expenses: General and administrative $569,151 $ 457,157 Lease operating expenses 117,099 73,572 Amortization expense 4,983 0 Depletion expense 16,075 25,394 Depreciation expense 673 1,343 -------------------- -------------------- Total Expenses 707,981 557,466 -------------------- -------------------- Loss from operations (535,305) (190,844) Other Income: Interest income 2,725 155 -------------------- -------------------- Total Other Income 2,725 155 Income (Loss) before provision for income tax $(532,580) $(190,689) Provision for income tax 0 0 -------------------- -------------------- Total income tax 0 0 -------------------- -------------------- Net Income (Loss) $(532,580) $(190,689) ==================== ==================== Earnings (Loss) per share $ (0.11) $ (0.04) ==================== ==================== Weighted average common shares and equivalents outstanding 4,953,288 4,434,920 ==================== ====================
5 GEOKINETICS INC. Condensed Statements of Cash Flows
Three Months Ended March 31 (unaudited) -------------------------------------- 1996 1995 --------------- --------------- Cash flows from operating activities: Cash received from customers 157,037 $160,076 Interest and dividends received 2,337 155 Cash paid to suppliers and employees (568,150) (381,782) Interest paid (86,438) (21,489) --------------- --------------- Net cash provided (used) by operating activities (495,214) (243,040) --------------- --------------- Cash flows from investing activities: Cash proceeds from sale of property 0 323,453 Cash payments for purchase of property and equipment (3,785,963) (174,943) Cash payment for certificate of deposit 0 (100,000) --------------- --------------- Net cash provided (used) by investing activities (3,785,963) 48,510 --------------- --------------- Cash flows from financing activities: Advances from lease bank 0 183,000 Proceeds from issuance of common stock 125,833 0 Proceeds from long-term debt 5,220,000 0 --------------- --------------- Net cash provided (used) by financing activities 5,345,833 183,000 --------------- --------------- Net increase (decrease) in cash 1,064,656 (11,530) Cash, beginning of period 16,905 108,204 --------------- --------------- $ Cash, end of period $1,081,561 96,674 =============== ===============
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 12.5% per annum for the quarter ended March 31, 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. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (Three Months Ended March 31, 1996) GENERAL At March 31, 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 Company and the energy industry in the United States. Seismic survey acquisition operations are not expected to commence before July, 1996. In addition, the Company has continued its efforts towards developing geoscience technology and software development capabilities. On April 17, 1996, the Company entered into a Stock Purchase Agreement to acquire 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. LIQUIDITY AND CAPITAL RESOURCES CLOSING OF $5,000,000 QUANTUM LOAN TRANSACTION The Company's financial position at March 31, 1996, reflects the proceeds received by the Company in connection with the $5,000,000 Quantum loan transaction. Current assets at March 31, 1996, totalled $2,046,129 as compared with $871,252 at December 31, 1995. Cash and short-term investments at March 31, 1996 totalled $1,081,561 as compared to $16,905 at December 31, 1995. In addition, the Company's property and equipment at March 31, 1996, totalled $4,662,072, up from $897,840 at December 31, 1995. A substantial portion of the Quantum loan proceeds were used to purchase seismic equipment and other operating assets of Quantum's seismic operations. As a result of the Quantum loan, the Company's long-term debt increased by approximately $5,000,000 to $5,431,246 at March 31, 1996. 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 8 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. RESULTS OF OPERATIONS During the three months ended March 31, 1996, the Company incurred a loss from operations of $532,580 compared to a loss of $190,689 during the comparable period in 1995. This loss is primarily due to increased operating expenses the Company incurred in connection with (i) the start-up of Quantum's seismic operations, (ii) the development of the Company's geoscience and software development capabilities, and (iii) increased expenses in oil and gas operations. General and administrative expenses during the three-months ended March 31, 1996, increased to $569,151 compared with $457,157 during the comparable period in 1995. In addition, lease operating expenses from oil and gas operations during the three-months ended March 31, 1996, totalled $117,099, an approximate 59% increase of such expenses during the comparable period in 1995. This increase was primarily due to unscheduled well recompletions and workovers. Finally, the Company did not realize any revenues during the first quarter of 1996 from the sales of oil and gas prospects; corresponding revenues from the sale of oil and gas prospects during the first quarter of 1995 were $182,364. 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 the amortization of the Company's 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. GEOSCIENCE OPERATIONS AND PRIVATE PLACEMENT On April 17, 1996, the Company entered into a definitive agreement with respect to the acquisition of Green Mountain Geophysics, Inc. In order to finance this acquisition, the Company intends to conduct a private placement of approximately $4,000,000 - $5,000,000 in equity and debt securities (the "Green Mountain Private Placement"). Closing of the Green Mountain acquisition is expected to occur in June 1996, but is subject to a number of conditions, including the completion of the Green Mountain Private Placement. Completion of the Green Mountain Private Placement will have a substantial effect on the Company's financial position during fiscal 1996 and beyond. 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 March 31, 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: March 14, 1996 By: /s/ JAY D. HABER Jay D. Haber PRESIDENT By: /s/ PAUL MILES Paul Miles CONTROLLER 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FIRST QUARTER REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 MAR-31-1996 1,081,561 101,339 275,650 0 654,903 2,046,129 4,662,072 0 7,689,540 1,919,664 0 0 0 990,657 (652,027) 7,689,540 0 175,401 0 707,981 0 0 0 (532,580) 0 0 0 0 0 (532,580) (.11) (.08)
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