-----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, Bwe8aMYTDuIzcUU92RA4Xj+Dc27/1bhDjT718LesXWF5uvYmaCU+EUClJ3wWdyTl rXR524A9cmxUCATHSiWvPw== 0000890566-98-001003.txt : 19980518 0000890566-98-001003.hdr.sgml : 19980518 ACCESSION NUMBER: 0000890566-98-001003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-09268 FILM NUMBER: 98624913 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 MARCH 31, 1998 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 incorporation or organization) (I.R.S. Employer Identification Number) 5555 SAN FELIPE, SUITE 780 HOUSTON, TEXAS 77056 (Address of principal executive offices) (Zip Code) Small Business Issuer's telephone number, including area code (713) 850-7600 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] On March 31, 1998, there were 18,326,816 shares of Registrant's common stock ($.01 par value) outstanding. GEOKINETICS INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Financial Statements . . . . . . . . . . . . . . . . . .. .3 Condensed Statements of Financial Position March 31, 1998 and December 31, 1997 . . . . .. .3 Condensed Statements of Operations Three Months Ended March 31, 1998 and 1997. . . . . . 5 Condensed Statements of Cash Flows Three Months Ended March 31, 1998 and 1997 . . . . . . . . . . . . 6 Notes to Interim Financial Statements . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Plan of Operation . . . . . . . . . 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .. 10 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Financial Position ASSETS
March 31 December 31 1998 1997 Unaudited (*) ----------- ----------- Current Assets: Cash ................................................. $ 1,004,202 $ 2,055,564 Cash-restricted ...................................... 107,129 157,117 Earnest money deposits ................................ 1,000,000 0 Receivables ........................................... 4,523,231 4,218,234 Prepaid expenses ..................................... 270,084 367,687 Accrued interest ..................................... 395 11,221 ----------- ----------- Total Current Assets ............................. 6,905,041 6,809,823 Property and Equipment: Proved oil and gas Properties (net of depletion) ..... 704,510 708,353 (successful efforts method for oil and gas properties) Equipment (net of depreciation) ...................... 16,079,095 16,454,416 Buildings (net of depreciation) ...................... 128,106 128,106 Land ................................................. 23,450 23,450 ----------- ----------- Total Property and Equipment .................... 16,935,161 17,314,325 Other Assets: Deferred tax benefit ................................. 2,292,430 2,292,430 Deferred charges ..................................... 58,535 60,316 Restricted investments ............................... 106,700 71,700 Deposits on software and equipment ................... 74,820 4,776 Patronage stock, Organization fees, Non-compete Fees . 25,731 0 Goodwill ............................................. 4,965,483 1,949,626 ----------- ----------- Total Other Assets ............................... 7,523,699 4,378,848 ----------- ----------- Total Assets ................................. $31,363,901 $28,502,996 =========== ===========
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS LIABILITIES AND STOCKHOLDERS' EQUITY
March 31 December 31 1998 1997 Unaudited (*) ------------ ------------ Current Liabilities: Current maturities of long-term debt ................................................... $ 3,394,984 $ 3,463,660 Accounts payable ....................................................................... 2,420,453 2,282,037 Accrued liabilities .................................................................... 1,251,398 1,049,119 Customer deposit ....................................................................... 35,000 0 Notes payable .......................................................................... 2,172,281 896,686 Due to officer ......................................................................... 180,213 164,206 Advances for lease bank ................................................................ 260,500 260,500 Site restoration costs ................................................................. 6,418 6,418 ------------ ------------ Total Current Liabilities .......................................................... 9,721,247 8,122,626 Long-Term Liabilities: Long-term debt, net of current maturities .............................................. 11,679,530 12,129,420 Deferred income tax .................................................................... 290,946 0 ------------ ------------ Total Liabilities ................................................................. 21,691,723 20,252,046 Stockholders' Equity: Preferred stock, Series B, $10 par value, 100,000 shares authorized, issued and outstanding at 12/31/97, converted into 1,333,333 shares of common stock on 1/01/98 .......................................................................... 0 1,000,000 Common stock , $.01 par value, 100,000,000 shares authorized, 18,326,816 shares outstanding at 3/31/98, and 16,598,483 shares outstanding at 12/31/97 ............................................................................ 183,268 165,985 Additional paid in capital ............................................................. 16,039,486 14,017,394 Accumulated deficit .................................................................... (6,550,576) (6,932,429) ------------ ------------ Total Stockholders' Equity ......................................................... 9,672,178 8,250,950 ------------ ------------ Total Liabilities and Stockholders' Equity ..................................... $ 31,363,901 $ 28,502,996 ============ ============
* CONDENSED FROM AUDITED FINANCIAL STATEMENTS GEOKINETICS INC. Condensed Statements of Operations Three Months Ended March 31 (unaudited) ---------------------------- 1998 1997 ------------ ----------- Revenues: Seismic revenues .......................... 5,691,339 0 Oil and gas sales ......................... $ 49,745 $ 125,961 Operating fees ............................ 57,424 57,493 ------------ ----------- Total Revenues ..... 5,798,508 183,454 Expenses: General and administrative ................ $ 1,124,093 $ 197,958 Seismic operating expenses ................ 2,876,523 0 Lease operating expenses .................. 80,432 58,955 Amortization expense ...................... 47,769 4,983 Depletion expense ......................... 3,843 14,814 Depreciation expense ...................... 846,100 669 ------------ ----------- Total Expenses ........................ 4,978,760 277,379 ------------ ----------- Income (Loss) from operations ............. 819,748 (93,925) Other Income (Expense): Interest income .......................... 17,002 170 Other income ............................. 4,900 0 Interest expense ......................... (459,797) (188,685) ------------ ----------- Total Other Income .................... (437,895) (188,515) Income (Loss) before provision for income tax .............................. $ 381,853 $ (282,440) Provision for income tax ...................... 0 87,000 ------------ ----------- Total income tax .......................... 0 87,000 ------------ ----------- Net Income (Loss) ............................ $ 381,853 $ (195,440) ============ =========== Earnings (Loss) per share ..................... $ 0.02 $ (0.04) ============ =========== Weighted average common shares and equivalents outstanding ................. 18,326,816 4,953,288 ============ =========== GEOKINETICS INC. Condensed Statements of Cash Flows
Three Months Ended March 31 (unaudited) ------------------------ 1998 1997 ----------- --------- Cash flows from operating activities: Cash received from customers ....................... $ 6,854,232 $ 288,396 Interest and dividends received .................... 27,828 170 Cash paid to suppliers and employees ............... (4,366,208) (242,158) Interest paid ...................................... (501,166) (179,800) ----------- --------- Net cash used by operating activities .......... 2,014,686 (133,392) ----------- --------- Cash flows from investing activities: Net deposits paid out .............................. (4,700) 0 Payments for purchase of property and equipment .... (164,305) 0 Acquisition of Reliable Exploration, Incorporated .. (1,190,430) 0 Earnest Money for acquisition of GDC ............... (1,000,000) 0 ----------- --------- Net cash provided (used) by investing activities (2,359,435) 0 ----------- --------- Cash flows from financing activities: Proceeds from short-term debt ...................... 1,500,000 0 Principal payments on long-term debt ............... (2,018,621) (81,677) Principal payments on short-term debt .............. (224,404) 0 Principal payments on loans from officers .......... (13,577) 0 ----------- --------- Net cash (used) by financing activities ........ (756,602) (81,677) ----------- --------- Net (decrease) in cash ................................ (1,101,351) (215,069) Cash, beginning of period .............................. 2,212,681 413,935 ----------- --------- Cash, end of period .................................... $ 1,111,330 $ 198,866 =========== =========
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, 1997. A summary of accounting policies and other significant information is included therein. 2. LONG TERM DEBT At March 31, 1998, the Company's long-term debt was $15,074,514 including $3,394,984 which represents current maturities. Long-term debt consists primarily of (i) a note to a financial institution, bearing interest at prime plus 1-1/2%, in the amount of $4,350,045, (ii) a note to Input/Output, Inc., bearing interest at 12%, in the amount of $7,389,917, representing indebtedness incurred by Signature Geophysical Services, Inc. to acquire geophysical acquisition equipment and (iii) a note to Input/Output, Inc., bearing interest at 10%, in the amount of $2,809,664 representing indebtedness incurred by Quantum Geophysical, Inc. to acquire geophysical acquisition equipment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION (Three Months Ended March 31, 1998) GENERAL At March 31, 1998, the Company's financial position reflects (i) the Company's ongoing oil and gas operations, and (ii) the seismic services being conducted by Quantum Geophysical, Inc., Signature Geophysical Services, Inc. and Reliable Exploration, Inc. On January 26, 1998, the Company completed the acquisition of the issued and outstanding capital stock of Reliable Exploration, Inc., a Billings, Montana-based provider of 3-D seismic acquisition services. The Company is presently operating four seismic acquisition crews, consisting of two Input/Output, Inc. System Two's and two Texas Instruments DFSV crews, with a total seismic recording capacity of approximately 7,000 channels. All of the Company's crews are operating in the United States, with two performing seismic acquisition services in the Gulf Coast region and two performing such services in the Rocky Mountain region. It is the Company's intention to field a fifth seismic crew, with recording capacity of 3,000 channels, during the second quarter of 1998. This will be accomplished by purchasing additional equipment from Input/Output, Inc. RESULTS OF OPERATIONS The Company's revenues increased significantly from $183.5 thousand to $5.8 million during the three months ended March 31, 1998. The increase was attributable to seismic acquisition services which totaled $5.7 million during the three months ended March 31, 1998, compared to $0 in 1997. Revenues attributable to oil and gas sales were down marginally. Operating expenses during the three month period increased from $60 thousand in 1997 to $3.0 million in 1998. The increase came about from seismic acquisition operating expenses of $2.9 million in the current quarter, as compared to $0 in the same quarter a year ago. Depreciation and amortization increased from $20 thousand to $898 thousand due primarily to acquisitions of operating companies and increases in capital expenditures over the last nine months associated with the Company's seismic acquisition activities. General and administrative expenses increased from $198 thousand in the first quarter of 1997 to $1.1 million in the first quarter of 1998 due to significant personnel increases and costs associated with the repositioning of the Company as a provider of seismic acquisition services to the oil and gas industry. Interest expense increased from $187 thousand to $460 thousand. The increased interest cost is a result primarily from additional equipment financing required for the growth of the Company's seismic acquisition activities. LIQUIDITY AND CAPITAL RESOURCES The seismic acquisition industry is capital intensive and the Company will need to raise additional capital to implement its business strategy. The cost of sophisticated seismic acquisition equipment has increased significantly over the last several years. The Company's ability to expand its business operations is dependent upon the availability of internally generated cash flow and external financing alternatives. Such financing may consist of bank or commercial debt, forward sales of production, equity or debt securities or any combination thereof. There can be no assurance that the Company will be successful in obtaining additional financing when required. Any substantial alteration or increase in the Company's capitalization through the issuance of debt or equity securities or otherwise may significantly decrease the financial flexibility of the Company. Due to the uncertainties respecting the changing market for seismic services, technological changes, and other matters associated with the Company's operations, the Company is unable to estimate the amount of any financing that it may need to acquire, upgrade and maintain seismic equipment and continue its diversification as a full-scale geotechnology enterprise. If the Company is unable to obtain such financing when needed, it will be forced to curtail its business objectives, and to finance its business activities with only such internally generated funds as may then be available. At March 31, 1998, the Company had cash balances of $1.0 million. The Company feels this cash and the anticipated cash flow from its seismic acquisition operations are sufficient to meet the working capital requirements of its seismic acquisition operations for the foreseeable future. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: None. (b) Reports on Form 8-K: On February 10, 1998, the Registrant filed a Current Report on Form 8-K to report the acquisition of Reliable Exploration, Incorporated (Item 2). No financial statements were included in such Form 8-K. 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 14, 1998 /s/ JAY D. HABER Jay D. Haber Chief Executive Officer /s/THOMAS J. CONCANNON Thomas J. Concannon Vice President and CFO EX-27 2
5 3-MOS DEC-31-1998 MAR-31-1998 1,111,331 1,000,000 4,523,231 0 0 6,905,041 16,935,161 0 31,363,901 9,721,247 0 0 0 183,268 0 31,363,901 0 5,798,508 0 4,978,760 437,895 0 0 381,853 0 0 0 0 0 381,853 0.02 0
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