-----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, N56tF7z0qEl1MLlFCPSvjxlisHaEKRBAT9G54cVs/CwjvIaNQbZQydf/pEQHgawC vdgxxdzww5ivbs6DlbSvMg== 0000890566-97-001922.txt : 19970815 0000890566-97-001922.hdr.sgml : 19970815 ACCESSION NUMBER: 0000890566-97-001922 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09268 FILM NUMBER: 97664046 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 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 JUNE 30, 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 incorporation or organization) 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 June 30, 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 June 30, 1997 and December 31, 1996. . . . . 3 Condensed Statements of Operations Three Months and Six Months Ended June 30, 1997 and 1996 . . . . . . . . . . 5 Condensed Statements of Cash Flow Three Months Ended June 30, 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 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Financial Position ASSETS
June 30 December 31 1997 1996 Unaudited Unaudited ---------- ---------- Current Assets: Cash .................................................. $ 1,906 $ 99,879 Cash-Restricted ....................................... 248,135 316,991 Receivables ........................................... 163,939 226,306 Prepaid expenses ...................................... 67,740 59,865 Oil and gas properties held for resale ................ 414,026 596,452 ---------- ---------- Total Current Assets ................................ 895,746 1,299,493 Property and Equipment: Proved oil and gas Properties (net of depletion) ..... 736,881 776,043 (successful efforts method for oil and gas properties) Equipment (net of depreciation) ...................... 3,838,319 3,839,658 Buildings (net of depreciation) ...................... 128,106 128,106 Land ................................................. 23,450 23,450 ---------- ---------- Total Property and Equipment ....................... 4,726,756 4,767,257 Other Assets: Deferred tax benefit ................................. 800,000 800,000 Deferred charges ..................................... 72,475 76,317 Restricted investments ............................... 21,700 21,700 ---------- ---------- Total Other Assets .................................. 894,175 898,017 ---------- ---------- Total Assets ........................................ $6,516,677 $6,964,767 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY June 30 December 31 1997 1996 Unaudited Unaudited ----------- ----------- Current Liabilities: Accounts payable ........................... $ 728,865 $ 711,563 Accrued liabilities ........................ 328,584 387,319 Notes payable .............................. 1,361,585 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 .............. 2,938,174 3,002,720 Long -Term Liabilities: Long- term debt ............................ 5,198,074 4,860,124 ----------- ----------- Total Liabilities ..................... 8,136,248 7,862,844 Stockholders' Equity: Common stock (15,000,000 shares authorized; 4,953,288 shares issued and outstanding @ 6/30/97 ................................. 990,657 990,657 and 4,953,288 shares issued and outstanding @ 12/31/96) Additional paid in capital ................. 3,924,345 3,924,345 Accumulated deficit ........................ (6,534,573) (5,813,079) ----------- ----------- Total Stockholders' Equity ............. (1,619,571) (898,077) ----------- ----------- Total Liabilities and Stockholders' Equity ............... $ 6,516,677 $ 6,964,767 =========== =========== * CONDENSED FROM AUDITED FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statement of Operations
Three Months Ended Six Months Ended June 30 June 30 (unaudited) (unaudited) ------------------------- ------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Revenues: Oil and gas sales ........ $ 98,386 $ 148,236 $ 224,347 $ 256,585 Operating fees ........... 60,025 67,490 117,675 131,817 Gain (Loss) on sale of assets ................... (73,441) 0 (73,441) 0 ----------- ----------- ----------- ----------- Total Revenues ....... 84,970 215,726 268,581 388,402 Expenses: General and administrative $ 280,956 $ 330,323 $ 478,914 $ 813,036 Lease operating expenses . 54,925 43,274 114,037 160,373 Amortization expense ..... 4,983 4,983 9,965 9,966 Depletion expense ........ 14,382 17,297 29,196 33,372 Depreciation expense ..... 670 673 1,339 1,346 ----------- ----------- ----------- ----------- Total Expenses ....... 355,916 396,550 633,451 1,018,092 ----------- ----------- ----------- ----------- Loss from operations ......... $ (270,946) $ (180,824) $ (364,870) $ (629,690) Other Income: Interest income ......... 0 5,924 170 8,649 Interest expense ........ (174,821) (163,075) (359,061) (249,513) ----------- ----------- ----------- ----------- Total Other Income (Expense) .......... (174,821) (157,151) (358,891) (240,864) Income (Loss) before provision for income tax ............. $ (445,767) $ (337,975) $ (723,761) $ (870,555)) Provision for income tax ..... 0 0 0 0 ----------- ----------- ----------- ----------- Total income tax ......... 0 0 0 0 ----------- ----------- ----------- ----------- Net Income (Loss) ............ $ (445,767) $ (337,975) $ (723,761) $(870,555)) =========== =========== =========== =========== Earnings (Loss) per share .... $ (0.09) $ (0.07) $ (0.15) $ (0.18) =========== =========== =========== =========== Weighted average common shares and equivalents outstanding 4,953,288 4,953,288 4,953,288 4,953,288 =========== =========== =========== ===========
GEOKINETICS INC. Condensed Statements of Cash Flows
Three Months Ended June 30 (unaudited) ----------------------- 1997 1996 --------- ----------- Cash flows from operating activities: Cash received from customers ............. $ 230,837 $232199 Interest and dividends received .......... 0 6,312 Cash paid to suppliers and employees ..... (386,311) (328,771) Interest paid ............................ (216,536) (160,297) --------- ----------- Net cash provided (used) by operating activities ........................... (372,010) (250,557) --------- ----------- Cash flows from investing activities: Cash payments for purchase of property and equipment ................................ 0 (128,436) Cash payment for certificate of deposit .. 0 (100,000) Cash payment for escrow deposit-property investment................................ 202 (100,000) --------- ----------- Net cash provided (used) by investing activities ........................... 202 (328,436) --------- ----------- Cash flows from financing activities: Proceeds from short-term debt ............ 500,000 100,000 Principal payments on long-term debt ..... (79,750) (75,504) --------- ----------- Net cash provided (used) by financing activities ........................... 420,250 24,496 --------- ----------- Net increase (decrease) in cash .............. 48,442 (554,497) Cash, beginning of period .................... (46,536) 1,081,561 --------- ----------- Cash, end of period .......................... $ 1,906 $ 527,064 ========= ===========
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 Company is working to complete its audit for the fiscal year ended December 31, 1996. When completed, audited financial statements will be included in an amendment to the Company's Form 10-KSB filed for the fiscal year ended December 31, 1996. The Company expects to file an amendment to the Form 10-QSB for the period ended March 31, 1997 and 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 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 June 30, 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 $1,361,585 reflect, in part, (i) the current (i.e., one year) maturities, totaling $331,825, 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 $330,848 representing indebtedness incurred by the Company incident to its geophysical operations, (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.) 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION GENERAL At June 30, 1997, 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. Seismic survey operations are not expected to commence before September 1997. On March 5, 1997, the Company entered into a Letter of Intent to acquire 100% of the issue and outstanding capital stock of Signature Geophysical Services, Inc., a Houston based provider of 3D geophysical surveys for the oil and gas industry. LIQUIDITY AND CAPITAL RESOURCES CLOSING OF $5,000,000 QUANTUM LOAN The Company's financial position at June 30, 1997 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 June 30, 1997, totaled $895,746 as compared with $1,299,493 at December 31, 1996. Cash and short-term investments at June 30, 1997 totaled $1,906 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. 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. In 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 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 $330,884 that was due on July 31, 1997. In April 1997, the Company signed an agreement with Input/Output, Inc. whereby (i) all defaults have been cured and waived, (ii) the Company will pay interest to Input/Output, Inc. on a monthly basis until maturity, and (iii) the maturity of the note has been extended until October 31, 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 operating 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 requires additional capital to fund the following expenses: (i) purchases of leases and other interests in oil and gas properties; and ,(ii) capital expenditures under agreements for geological, geophysical and seismic costs as well as drilling and completion costs of wells. 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 June 30, 1997, the Company incurred a loss from operations of $445,767 compared to a loss of $337,975 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 June 30, 1997, decreased to $280,956 compared with $330,323 during the comparable period in 1996. In addition, lease operating expenses from oil and gas operations during the three-months ended June 30, 1997, totaled $98,386, an approximate 33% decrease of such expenses during the comparable period in 1996. 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. PRIVATE PLACEMENT On July 18, 1997, the Registrant entered into a Securities Purchase and Exchange Agreement ( the "Purchase Agreement") with Blackhawk Investors, L.L.C. (the "Blackhawk"), William R. Ziegler, an individual resident of the state of New York ("Ziegler"), and Steven A. Webster, an individual resident of the state of Texas ("Webster") (Blackhawk, Ziegler and Webster being sometimes referred to collectively as the "Blackhawk Group"). Pursuant to the Purchase Agreement, the Blackhawk Group acquired from Registrant (i) 5,500,000 newly-issued shares of Registrant's Common Stock, par value $.20 per share ("Common Stock"), (ii) 187,500 newly-issued shares of Registrant's Series A Preferred Stock, par value $10.00 per share (convertible into an aggregate of 2,500,000 shares of Common Stock, and (iii) Shadow Warrants to purchase up to an additional 7,104,103 shares of Common Stock at a price of $.20 per share, in exchange for (x) an aggregate of $5,500,000 in cash paid to the Registrant and (y) the exchange of certain indebtedness in the principal amount of $500,000 owed by Registrant to Ziegler and Webster. The shares of Common Stock acquired by the Blackhawk Group, pursuant to the Purchase Agreement, represent 62.2% of the Registrant's outstanding Common Stock. The Shadow Warrants issued to the Blackhawk Group are only exercisable in the event that certain warrants previously issued by the Registrant are exercised in the future. On July 24, 1997, Registrant entered into a Letter Agreement re Additional Investment (the "Letter Agreement") pursuant to which the Blackhawk Group invested an additional $1,000,000 in cash in Registrant and the Registrant will issue 100,000 shares of Registrant's Series B Preferred Stock, par value $10.00 per share (convertible into an aggregate of 1,333,333 shares of Common Stock). The term of the Series B Preferred Stock are identical to the terms of the Series A Preferred Stock except that the Series B Preferred Stock will automatically be converted into shares of Common Stock on January 1, 1998. The Letter Agreement also provides that the Registrant will issue to the Blackhawk Group additional Shadow Warrants to purchase up to an aggregate of 1,172,051 shares of Common Stock. All of the Shadow Warrants issued to the Blackhawk Group are exercisable only in the event that certain warrants previously issued by the Registrant are exercised in the future. Upon conversion of the Series A Preferred Stock and Series B Preferred Stock, the Registrant will have an aggregate of 14,686,621 shares of Common Stock outstanding. In addition, the Registrant has outstanding (i) an aggregate of 7,049,973 warrants to purchase shares of Common Stock (at a weighted average exercise price of $.80 per share), (ii) stock options held by executive officers and employees to purchase an aggregate of 2,237,500 shares of Common Stock (at a weighted average exercise price of $.81 per share), and (iii) Shadow Warrants to purchase an aggregate of 8,204,356 shares of Common Stock at a price of $.20 per share. In the event that all of the Registrant's outstanding Warrants, Stock Options and Shadow Warrants were exercised, the Registrant would have an aggregate of 32,178,450 shares of Common Stock outstanding. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K None 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: August 14, 1997 /S/ JAY D. HABER Jay D. Haber Chairman and Chief Executive Officer /S/THOMAS J. CONCANNON Thomas J. Concannon Vice President and Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 250,041 21,700 163,939 0 414,026 895,746 4,726,756 0 6,516,677 2,938,174 0 0 0 990,657 0 6,516,677 0 98,386 0 530,737 0 0 0 (445,767) 0 0 0 0 0 (445,767) (.09) 0
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