10QSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-QSB

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

o 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)
One Riverway, Suite 2100  Houston, Texas	77056
(Address of principal executive offices)	(Zip Code)
(713) 850-7600
Small Business Issuer’s telephone number, including area code

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  ý                                                                                                    No  o

On June 30, 2002, there were 18,992,156 shares of Registrant’s common stock ($.01 par value) outstanding.

GEOKINETICS INC.

INDEX

PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Statements of Financial Position
			June 30, 2002 and December 31, 2001
		Condensed Statements of Operations
			Three Months and Six Months Ended
			June 30, 2002 and 2001
		Condensed Statements of Cash Flows
			Six Months Ended
			June 30, 2002 and 2001
		Notes to Interim Financial Statements
	Item 2.	Management’s Discussion and
			Analysis or Plan of Operation
PART II.	OTHER INFORMATION
	Item 5.	Other Information
	Item 6.	Exhibits and Reports on Form 8-K

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PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

GEOKINETICS INC.

Condensed Statements of Financial Position

ASSETS

	June 30		December 31
	2002		2001
	(Unaudited)		(Audited)
Current Assets:
Cash	$	1,221,251	$	1,172,280
Receivables	1,673,884		2,992,420
Prepaid expenses	153,845		336,578
Total Current Assets	3,048,980		4,501,278
Property and Equipment:
Equipment, net of depreciation	3,297,675		4,486,464
Buildings, net of depreciation	223,338		226,577
Land	23,450		23,450
Total  Property and Equipment	3,544,463		4,736,491
Other Assets:
Deferred charges	57,029		94,544
Restricted investments	231,700		231,700
Other assets	67,349		77,349
Total Other Assets	356,078		403,593
Total Assets	$	6,949,521	$	9,641,362

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LIABILITIES AND STOCKHOLDERS’ EQUITY

	June 30			December 31
	2002			2001
	(Unaudited)			(Audited)
Current Liabilities:
Current maturities of long term debt	$	588,212		$	576,168
Current portion of capital lease	244,143			230,361
Accounts payable	1,246,626			4,010,170
Accrued liabilities	1,860,649			2,026,442
Deferred revenue	515,151			626,742
Notes payable	1,683,989			282,520
Advances for lease bank	105,000			115,000
Accrued GeoLease liability	6,587,782			4,792,425
Total Current Liabilities	12,831,552			12,659,828
Short term obligations expected to be refinanced	11,433,798			6,790,660
Long term debt, (net of current maturities), net of OID	62,557,619			62,376,458
Other Liabilities:
Non-current portion of capital lease	22,233			147,500
Accrued long-term lease liability	844,440			422,220
Total Other Liabilities	866,673			569,720
Total Liabilities	87,689,642			82,396,666
Stockholders’ Equity:
Common stock, $.01 par value, 100,000,000  shares authorized, 18,992,156 shares outstanding	193,672			193,672
Additional paid in capital	33,019,248			33,019,248
Retained deficit	(113,810,541		)	(105,825,724		)
	(80,597,621		)	(72,612,804		)
Less common stock in treasury at cost - 375,000 shares	(142,500		)	(142,500		)
Total Stockholders’ Equity	(80,740,121		)	(72,755,304		)
Total Liabilities and Stockholders’ Equity	$	6,949,521		$	9,641,362

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GEOKINETICS INC.

Condensed Statements of Operations

	Three Months Ended June 30						Six Months Ended June 30
	2002			2001			2002			2001
	(Unaudited)						(Unaudited)
Revenues:
Seismic revenue	$	2,221,215		$	2,795,462		$	5,039,537		$	6,452,275
Data processing revenue	1,113,751			1,561,234			2,676,135			3,125,709
Total Revenues	3,334,966			4,356,696			7,715,672			9,577,984
Expenses:
General and administrative	387,220			426,628			879,443			876,639
Seismic operating expense	2,789,767			3,431,796			5,902,275			7,284,379
Data processing expense	883,939			1,233,627			1,835,343			2,510,473
Amortization expense	290,313			1,002,430			580,626			2,004,861
Depreciation expense	564,087			777,486			1,126,230			1,554,972
Total Expenses	4,915,326			6,871,967			10,323,917			14,231,324
Loss from Operations	(1,580,360		)	(2,515,271		)	(2,608,245		)	(4,653,340		)
Other Income (Expense):
Interest income	4,243			33,918			8,550			62,383
Other income	151			279			4,213			279
Interest expense	(2,785,520		)	(2,290,735		)	(5,389,335		)	(4,439,970		)
Total Other Income (Expense)	(2,781,126		)	(2,256,538		)	(5,376,572		)	(4,377,308		)
Loss before provision for income tax	(4,361,486		)	(4,771,809		)	(7,984,817		)	(9,030,648		)
Provision for income tax	—			—			—			—
Net Loss	$	(4,361,486	)	$	(4,771,809	)	$	(7,984,817	)	$	(9,030,648	)
Earnings (Loss) per common share-Basic	$	(0.23	)	$	(0.25	)	$	(0.42	)	$	(0.48	)
Weighted average common shares and equivalents outstanding	18,992,156			18,992,156			18,992,156			18,992,156

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GEOKINETICS INC.
Condensed Statements of Cash Flows

	Six Months Ended June 30
	2002			2001
	(Unaudited)
OPERATING ACTIVITIES
Net Loss	$	(7,984,817	)	$	(9,030,648	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	1,706,856			3,559,833
Changes in operating assets and liabilities
Accounts receivable and work in progress	1,318,537			(990,253		)
Prepaid expenses and other assets	230,248			147,700
Accounts payable	646,246			(497,702		)
Accrued liabilities and deferred revenue	(277,382		)	3,046,748
Short term obligations expected to be refinanced	4,643,138			4,074,514
Long term lease liability	2,217,577			1,459,075
Net cash provided by operating activities	2,500,403			1,769,267
INVESTING ACTIVITIES
Purchases of capital assets	(34,977		)	(70,522		)
Net cash (used in) investing activities	(34,977		)	(70,522		)
FINANCING ACTIVITIES
Proceeds from short term debt	8,206			9,940
Principal paid on lease bank advances	(10,000		)	(41,251		)
Payments on software financing	(111,486		)	(122,108		)
Principal paid on long term debt	(286,646		)	(276,495		)
Principal paid on short term debt	(2,016,529		)	(171,736		)
Net cash (used in) financing activities	(2,416,455		)	(601,650		)
Net increase in cash	48,971			1,097,095
Cash at beginning of period	1,172,280			1,241,282
Cash at end of period	$	1,221,251		$	2,338,377

Significant non-cash transactions:

     Notes were issued during the first quarter of 2002 in payment of vendor accounts

     payable invoices in the amount of $3,409,791

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Notes to Interim Financial Statements

1.             Method and Basis of Presentation

                The unaudited 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.  All such adjustments are of a normal recurring nature. 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, 2001.  A summary of accounting policies and other significant information is included therein.

                As a result of continuing negative industry conditions, the Company incurred a loss of approximately $39.9 million during 2001 and a loss of approximately $8.0 million in the first six months of 2002.  These results have left the Company with an equity deficit of approximately $80.7 million at June 30, 2002.  Additionally, the Company’s current liabilities exceed its current assets by approximately $9.8 million.  However, approximately $6.6 million of this deficit working capital position is a result of the liability associated with the Company’s equipment lease with GeoLease Partners, L.P.  As presently structured, the GeoLease Partners, L.P. equipment lease obligation of approximately $7.6 million, including accrued unpaid interest, comes due on October 1, 2002.  Under current conditions, continued operations by the Company through this payment will be dependent upon a continuing forbearance of payments by GeoLease Partners L.P. beyond October 1, 2002 or a restructuring of the underlying equipment lease.

                At June 30, 2002, the Company had cash balances of $1,221,251.  The Company believes this cash, anticipated cash flow from its seismic acquisition and seismic data processing operations, and implementation of a plan to restructure and recapitalize the Company, as outlined below, will provide sufficient liquidity to continue operations beyond 2002.  Management successfully converted approximately $3.4 million of accounts payable to one year unsecured promissory notes during the first quarter of 2002, and the remaining balance due on the notes at June 30, 2002 is approximately $1.6 million.  In addition, management has initiated negotiations with (x) the holders of the Company’s Senior Secured Notes to convert the principal and unpaid interest into Common Stock of the Company or to accept an agreed cash payment in exchange for extinguishment of the Senior Secured Notes, (y) GeoLease Partners, L.P. to restructure the equipment lease, and (z) an investment group that has indicated a willingness to invest approximately $3.5 million for new equity.  Any proposed transactions with the holders of the Senior Secured Notes and new investors would be subject to approval by a majority of the existing holders of the Company’s Common Stock.  There can be no assurance that any of these transactions will be completed.  The Company’s financial results will continue to be negatively impacted until a recovery in the seismic service industry occurs.  The Company is presently unable to predict when such a recovery will occur.

                These financial statements are prepared assuming that the Company will continue as a going concern.  They do not include any adjustments relating to the recoverability and classification

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of recorded assets or the amounts and classification of liabilities that would be necessary in the event the Company cannot continue in existence.  Should the Company be unsuccessful in restructuring the GeoLease Partners, L.P. equipment lease or should continuing Company operations fail to meet projections while the Company finalizes its financial restructuring and recapitalization, the Company would experience difficulty in meeting its financial obligations in a timely manner and such circumstances would raise substantial doubt about the Company’s ability to continue as a going concern.

2.             Long Term Debt

                At June 30, 2002, the Company’s long term debt was $63,145,831, including $588,212 in current maturities.  Long term debt is presented net of unamortized Original Issue Discount, totaling $1,259,038.  Long term debt consists primarily of (i) 13.5% Senior Secured Notes, due 2005, in the amount of $54,886,187, (ii) 13.5% Senior Secured Notes, due 2003, in the amount of $7,110,393 and (iii) a note to a financial institution, bearing interest at prime plus 1.5%, in the amount of $2,408,289.

                Accrued interest on the Company’s Senior Secured Notes totaled $11,433,798 at June 30, 2002 and $2,441,115 at June 30, 2001, and is classified as “Short term obligations expected to be refinanced” on the Company’s balance sheet.

3.Segment Information

The following table sets forth the Company’s significant information from reportable segments:

	For the Quarter Ended June 30, 2002
	Seismic Acquisition			Data Processing			Totals
Revenues from external customers	$	2,221,215		$	1,113,751		$	3,334,966
Segment Profit (Loss)	(2,497,522		)	(1,786,416		)	(4,283,938		)
Segment Assets	4,065,880			8,132,772			12,198,652
	For the Quarter Ended June 30, 2001
	Seismic Acquisition			Data Processing			Totals
Revenues from external customers	$	2,795,462		$	1,561,234		$	4,356,696
Segment Profit (Loss)	(2,471,226		)	(2,211,394		)	(4,682,620		)
Segment Assets	8,865,785			35,657,410			44,523,195
	For the Six Months Ended June 30, 2002
	Seismic Acquisition			Data Processing			Totals
Revenues from external customers	$	5,039,537		$	2,676,135		$	7,715,672
Segment Profit (Loss)	(4,627,492		)	(3,111,823		)	(7,739,315		)
Segment Assets	4,065,880			8,132,772			12,198,652
	For the Six Months Ended June 30, 2001
	Seismic Acquisition			Data Processing			Totals
Revenues from external customers	$	6,452,275		$	3,125,709		$	9,577,984
Segment Profit (Loss)	(4,440,935		)	(4,393,026		)	(8,833,961		)
Segment Assets	8,865,785			35,657,410			44,523,195

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The following table reconciles reportable segment losses to consolidated losses:

	For the Quarter Ended June 30
	2002			2001
PROFIT OR LOSS
Total profit or loss for reportable segments	$	(4,283,938	)	$	(4,682,620	)
Unallocated amounts:
Corporate expenses net of interest earnings	(74,004		)	(83,418		)
Corporate interest expense	(2,968		)	(5,390		)
Depreciation	(576		)	(381		)
Total Consolidated Loss	$	(4,361,486	)	$	(4,771,809	)
	For the Six Months Ended June 30
	2002			2001
PROFIT OR LOSS
Total profit or loss for reportable segments	$	(7,739,315	)	$	(8,833,961	)
Unallocated amounts:
Corporate expenses net of interest earnings	(237,916		)	(183,585		)
Corporate interest expense	(6,434		)	(12,340		)
Depreciation	(1,152		)	(762		)
Total Consolidated Loss	$	(7,984,817	)	$	(9,030,648	)

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Item 2.      Management’s Discussion and Analysis or Plan of Operation

General

                At June 30, 2002, the Company’s financial position reflects (i) the seismic acquisition services being conducted by Quantum Geophysical, Inc., and (ii) the seismic data processing, software and consultation services being provided by Geophysical Development Corporation.

The Company continues to experience significant competition in its marketplace which in turn negatively impacts the prices the Company can charge for its services.  The Company’s financial results will continue to be negatively affected until a more favorable pricing environment presents itself.  The Company is presently unable to predict when such an event will occur.

                During the first six months of 2002, the Company operated two seismic acquisition crews on a non-continuous basis.  The Company expects demand for its seismic acquisition services to continue to improve in the second half of 2002.  The Company’s current backlog is sufficient to keep two crews operating on a continuous basis into the first quarter of 2003.  During the current quarter, the Company’s data processing segment continued to have a portion of its computing capability unutilized.  However, the Company’s seismic data processing group has seen a recent increase in demand for its services and expects this trend to continue in the second half of 2002.  This increased activity is primarily the result of the Company offering a wave equation migration for pre-stacked time and pre-stacked depth imaging.  This product offering is a result of a recent joint venture the Company entered into with Screen Imaging Technology Inc.

Results of Operations

                Revenues for the six months ended June 30, 2002 were $7,715,672 as compared to $9,577,984 for the same period of fiscal 2001, a decrease of 19%.  This decrease is primarily attributable to the Company’s seismic acquisition activities.  Seismic acquisition revenue totaled $5,039,537 during this period as compared to $6,452,275 for the same period of a year ago, a decrease of 22%.   Seismic data processing revenue at June 30, 2002 totaled $2,676,135 as compared to $3,125,709 for the same period of 2001, a decrease of 14%.  For the three months ended June 30, 2002 revenues totaled $3,334,966 as compared to $4,356,696 for the same period of fiscal year 2001, a decrease of 23%.  The Company believes it is seeing a small improvement in the industry’s pricing environment, however the Company continues to experience significant competition in both its operating segments.  The Company anticipates that revenues will increase from current levels during the second half of 2002 due to the backlogs that have been accumulated by its operating units during the first half of 2002.  The Company’s results will continue to suffer until a more significant improvement in industry pricing occurs.

                Operating expenses for the six months ended June 30, 2002 totaled $7,737,618 as compared to $9,794,852 for the same period of fiscal 2001, a decrease of 21%.  This decrease is the result of decreased activity at the Company’s seismic acquisition segment, a significant reduction in equipment lease costs at the Company’s seismic data processing segment as well as continuing cost

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reductions realized at the Company’s seismic data processing segment.  There was a decrease of 19% in seismic acquisition operating expenses during the first six months of 2002 when compared to the same period of 2001.  Seismic data processing operating expenses decreased by 27% in the six months ended June 30, 2002 when compared to the same period of a year ago.  For the three month period ended June 30,  operating expenses decreased from $4,665,423 in 2001 to $3,673,706 during 2002, a decrease of 21%.

                General and administrative expense for the six months ended June 30, 2002 was $879,443 as compared to $876,639 for the same period of fiscal 2001.  For the three month period ended June 30 general and administrative expenses decreased to $387,220 from $426,628 in 2001, a decrease of 9%.  Fluctuations in quarterly general and administrative expenses result primarily from the timing of costs of professional fees related to the Company’s annual audit and ongoing legal expenditures, however costs through the first six months of 2002 varied less than 1% from the prior year.

                Depreciation and amortization expense for the six months ended June 30, 2002 totaled $1,706,856 as compared to $3,559,833 for the same period of fiscal 2001, a decrease of 52%.  For the quarter ended June 30 depreciation and amortization expense decreased to $854,400 from $1,779,916 in 2001, a decrease of 52%.  These decreases are primarily the result of the Company’s full impairment of its remaining unamortized goodwill during the fourth quarter of 2001.  This impairment resulted in a charge to operations in 2001 in the amount of $19.3 million.

                Interest expense (net of interest income) for the six months ended June 30, 2002 was $5,376,572 as compared to $4,377,308 for the same period of 2001, an increase of 23%. Interest expense increased for the quarter ended June 30 to $2,781,126 from $2,256,538 during the same period in 2001, an increase of 23%.  The balance on the Company’s 13.5% Senior Secured 2003 and 2005 Notes increased approximately $4.5 million as of March 15, 2002.  This increased note balance was primarily responsible for the increase in interest expense during the six months and quarter ended June 30, 2002.

The Company had a net loss of $7,984,817, or $(0.42) per share, for the six months ended June 30, 2002 as compared to a net loss of $9,030,648, or $(0.48) per share for the same period of 2001.  For the three months ended June 30, 2002 the Company had a net loss of $4,361,486, or $(0.23) per share, as compared to a net loss of $4,771,809, or $(0.25) per share, for the three months ended June 30, 2001.  The reduction of 12% in the net loss for the first six months of 2002 is primarily the result of reduced amortization expense due to the impairment of the Company’s goodwill which occurred in 2001 and an improvement in the Company’s operating results which is attributable to continuing cost reductions and a small improvement in the Company’s pricing.

Liquidity and Capital Resources

                The Company continues to experience significant competition in its marketplace, due primarily to surplus capacity for both acquiring and processing seismic data, which in turn negatively impacted the prices the Company can charge for its services.  The Company’s financial

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position was further weakened during the later portion of 2001 when its seismic acquisition operation suffered a substantial operating loss on an acquisition project that ran significantly longer than projected due to client permit issues and severe weather which occurred during the months of June and November.  This project’s contract was on a turnkey basis, meaning that the Company was paid a fixed fee per square mile of data acquired.  Turnkey contracts cause the Company to bear substantially all the risks of business interruption caused by weather delays and other hazards.  Due to industry conditions, most seismic acquisition contracts are currently on a turnkey basis.

                As a result of the conditions outlined above, the Company incurred a loss of approximately $39.9 million during 2001, which included a charge of approximately $19.3 million due to a full impairment of the Company’s remaining goodwill, and a loss of approximately $8.0 million in the first six months of 2002.  These results have left the Company with an equity deficit of approximately $80.7 million at June 30, 2002.  Additionally, the Company’s current liabilities exceed its current assets by approximately $9.8 million.  However, approximately $6.6 million of this deficit working capital position is a result of the liability associated with the Company’s equipment lease with GeoLease Partners, L.P.  As presently structured, the GeoLease Partners, L.P. equipment lease obligation of approximately $7.6 million, including accrued unpaid interest, comes due on October 1, 2002.  Under current conditions, continued operations by the Company through this payment will be dependent upon a continued forbearance by GeoLease Partners, L.P. or a restructuring of the underlying equipment lease.

                In order to meet its financial obligations in a timely manner, management has undertaken the implementation of a plan to restructure and recapitalize the Company.  During January and February of this year, the Company was successful in converting approximately $3.4 million of its accounts payable to one year unsecured promissory notes.   The notes provide for 12 level monthly payments to be made to the holders including 12% interest on the remaining unpaid balance.  All current note payments have been timely made during the first six months of the year and the total balance outstanding has been reduced to approximately $1.6 million at June 30, 2002.  All other financial obligations due during the first six months of 2002 were satisfied in a timely manner.  In addition, the Company continues its negotiations with the holders of the Company’s 13.5% Senior Secured Notes to convert the outstanding principal and all accrued and unpaid interest thereon into Common Stock of the Company or to accept an agreed cash payment in exchange for extinguishment of the Senior Secured Notes.  The Company continues to negotiate with GeoLease Partners, L.P. to restructure the current payment terms as well as extend the term of its equipment lease with the Company.  The Company is also negotiating with a group of investors that has indicated a willingness to invest approximately $3.5 million to purchase newly-issued shares of Common Stock from the Company when the Company’s Senior Secured Notes are converted into Common Stock or otherwise satisfied on acceptable terms.  The Company anticipates that these transactions will be completed in early fourth quarter of 2002.  However, any of such proposed transactions with the holders of the Senior Secured Notes and new investors would be subject to a number of conditions precedent, including, among other things, the approval of such transactions by a majority of the existing holders of the Company’s Common Stock.  As a result, there can be no assurance that any of such transactions will be completed.  The ownership held by the Company’s current stockholders would be substantially diluted by the proposed transactions.

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The Company believes that its current cash balances, anticipated cash flow from its seismic acquisition and seismic data processing operations and the completion of the transactions outlined above, will provide sufficient liquidity to continue operations beyond 2002.  The Company’s financial results will continue to be negatively impacted until a recovery in the seismic service industry occurs.  The Company is presently unable to predict when such a recovery will occur.

Part II Other Information

Item 5. Other Information

See the third and fourth paragraphs under “Liquidity and Capital Resources” in Part I Item 2 regarding a restructuring of certain indebtedness and lease obligations of the Company

Item 6.  Exhibits and Reports on Form 8-K

(a)	Exhibits:
		99.1	Joint Processing Agreement dated January 16, 2002 among Geophysical Development Corporation and Screen Imaging Technology, Inc.
		99.2	Certifications Purusant to 18 U.S.C. 1350
(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, 2002	/s/ Thomas J. Concannon
	Thomas J. Concannon
	Vice President and Chief Financial Officer

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EX-99.1

Exhibit 99.1

JOINT PROCESSING AGREEMENT

This Joint Processing Agreement (“Agreement”) dated as of January 16, 2002, is by and between GEOPHYSICAL DEVELOPMENT CORPORATION, a Texas corporation with its principal place of business at One Riverway, Suite 2100, Houston, Texas 77056 (Company), and Screen Imaging Technology, Inc., a Texas corporation, with its principal place of business at 7322 Southwest Freeway, Suite 1508, Houston, Texas 75093 (“SITI”).

Introduction

                The Company is an industry leader in processing and interpretation of seismic data for the petroleum industry.  SITI has certain proprietary software for pre-stack time and pre-stack depth migration seismic data processing services.  The Company receives raw seismic data for processing from its customers, who have varying requirements for the types of seismic data processing services that they require.  In some cases, the Company believes that its customers would value including SITI’s pre-stack time and pre-stack depth migration seismic data processing software within the services that the Company renders to such customers.  Accordingly, the Company desires to enter into an arrangement with SITI whereby SITI will install and insure that its pre-stack time and pre-stack depth migration software is properly executing on the Company’s Sun clustered computers at the Company’s Houston office.  The Company will, using raw seismic data from the Company’s customers, process pre-stack time and pre-stack depth migration seismic data with SITI’s software.  In addition, the Company will provide processing staff and all the marketing and sales efforts for the services described above.  All service work whether preformed at the Company’s offices or at SITI will be coordinated through the Company and SITI.  The Company and SITI desire to enter into such a joint processing arrangement on the terms and conditions set forth below.

                NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties intending to be legally bound, agree as follows:

Agreement

1.     JOINT PROCESSING.  The Company and SITI agree that the Company shall perform pre-stack time and pre-stack depth migration seismic data processing services for customers of the Company using SITI’s software.  SITI will provide and install such software and object code at the Company’s Houston office.  The Company will treat such software as confidential information of SITI, and will return to SITI all such information and other tangible embodiments which are provided by SITI at the conclusion of this Agreement.  At all times during the term of the Agreement, such items shall be the sole property of SITI, and the Company shall have no proprietary or other interest therein.

2.     EXCLUSIVITY.  During the term of this Agreement, SITI agrees that it shall not enter into any agreements with or otherwise do business with any entity or person engaged in the selling of pre-stack time and pre-stack depth migration services.  During the term of this Agreement, the Company agrees that it shall not enter into any agreements with or

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otherwise do business with any entity or person engaged in selling wave equation based pre-stack time or pre-stack depth migration software products.  Nothing contained in this Agreement shall prevent SITI from entering into agreements and/or alliances with entities or persons that are not engaged in the selling of pre-stack time and pre-stack depth migration services or prevent SITI from selling its software products to oil and gas companies, universities, or national oil companies.  During the term of this Agreement, SITI shall not sell or license to, or permit the use of its pre-stack time and pre-stack depth migration software to any geophysical service company without the prior written permission from the Company.  Nothing contained in this Agreement shall prevent SITI from entering into agreements with other geophysical service companies for SITI’s other geophysical software products (AVO, etc.).  Nothing contained in this Agreement shall prevent the Company from entering into agreements and/or alliances with entities or persons that are not engaged in wave equation based pre-stack time or pre-stack depth migration seismic data processing.

During the term of this Agreement, the Company and SITI will coordinate their marketing efforts on services related to pre-stack time and pre-stack depth migration.  All bids relating to pre-stack time and pre-stack depth migration will be jointly reviewed by the Company and SITI insuring that an individual customer does not receive duplicate bids for the same project.  Nothing contained in this Agreement shall prevent SITI from performing pre-stack time and pre-stack depth migration service work.

3.     INTELLECTUAL PROPERTY.  Each of the Company and SITI agrees that it does not acquire from the other party any title, ownership, or other intellectual property right or license under this Agreement.  The Company will continue to conduct its business using the intellectual property that it currently possesses, and SITI will fulfill its obligations under this Agreement using the intellectual property that it currently possesses.  The parties agree that this Agreement does not contemplate any joint development of technology, and that all seismic data processing performed hereunder shall be performed using the respective intellectual property of each of the parties hereto.  However if for business reasons joint development is required, any sharing of the intellectual property will be defined by a subsequent written agreement.

4.     COMPENSATION.  For all accounts for which the Company uses SITI’s software to render seismic data processing services under Section 1 of this Agreement, the Company shall pay to SITI the first $100,000 of total revenue on such account.  After this initial payment the Company will pay to SITI twenty five percent (25%) of the total seismic data processing revenue that is generated using SITI’s pre-stack time and pre-stack depth software.  In general, especially for marine seismic data processing projects, the total revenue generated form SITI’s pre-stack time and prestack depth software shall equal the total project revenue.  However, there will be cases, such as certain land seismic data processing projects, that require a significant amount of front end processing where the total revenue generated from SITI’s pre-stack time and prestack depth software shall be less than the total project revenue.  For these latter projects the revenue breakdown shall be predetermined between the Company and SITI prior to beginning the

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seismic data processing.  For pre-stack time and pre-stack depth seismic data processing that is performed at SITI’s facility but was generated through the Company’s sales and marketing efforts, the Company will receive twenty five per cent (25%) of the total revenue.  The Company shall cause to be prepared and delivered to SITI no later than thirty (30) days after the end of each calendar month a statement setting forth with particularity the accounts for which the Company has used SITI’s software to perform seismic data processing services hereunder, the revenue for each such account, and the total amount to which SITI is entitled in accordance with the immediately preceding sentence.  SITI will receive payment for its services no later than 30 days after GDC receives payment by the client out of the proceeds of such payments.  SITI acknowledges and agrees that it shall have no right to any compensation in respect of the Company’s accounts for which the Company does not directly use SITI’s software to perform seismic data processing services hereunder.

5.     CERTAIN AGREEMENTS.  The parties agree that all seismic data processing services to be provided hereunder shall be provided in the name and for the benefit of the Company, and that SITI shall be entitled to compensation in respect of such services only on the terms provided herein.

6.     TERM.  The term of this Agreement will commence as of the date hereof and will end on the earlier of January 15, 2005 or

(a)   the joint written agreement of Company and SITI;

(b)   the adjudication of either Company or SITI as bankrupt, its filing of a voluntary petition in bankruptcy, the filing of any petition against it under any federal or state bankruptcy law, or its filing of a petition or answer seeking the appointment of a receiver of its assets or an arrangement with creditors under any such laws; or

(c)   the breach by either Company or SITI or of any material covenant under this Agreement (subject to the provisions of Paragraph 7, below).

(d)   the 90 day written notice by either party in the case of a merger, acquisition or reorganization by the Company or SITI.

7.     NOTICE AND CURE OF A MATERIAL BREACH.  If there is a material breach of this Agreement, the party intending to terminate must give the defaulting party five days written notice thereof, detailing the particular action or condition that is claimed to constitute a material breach.  The defaulting party may cure the breach during the 30-day period following the receipt of such notice, and if cured, then this Agreement will not terminate.

8.     REPRESENTATIONS.  Each of Company and SITI represent to the other as follows:

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(a)   Each is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation, with all requisite corporate power, authority, and legal right to own its property and conduct its business as now conducted and as contemplated under this Agreement.

(b)   Each is duly qualified to do business in each jurisdiction in which the nature of its properties or its business requires such qualification and in which the failure to so qualify would materially adversely affect its business or financial condition.

(c)   The execution, delivery, and performance by each of this Agreement and the performance by each of its obligations thereunder (i) are within their respective power and authority; (ii) have been duly authorized by all necessary action on the part of their respective governing bodies; and (iii) will not contravene any provision of law or regulation, or any writ or decree of any court or governmental instrumentality or their respective articles or certificates of incorporation, organizational documents or other agreement of either, or any other agreement, instrument, or undertaking binding upon either or any of their respective assets; and (iv) will not contravene any agreements with any of lenders or investors of either.

(d)   This Agreement has been duly executed and delivered by such party and constitutes the valid, legal, and binding obligation of such party, enforceable in accordance with its terms.

9.     ASSIGNMENT.  The rights, benefits, and obligations existing under this Agreement cannot be assigned by any party without the prior written consent of the other party, except by operation of law, and any purported assignment without the prior written consent of the other party shall be void.

10.   NOT A PARTNERSHIP.  This Agreement shall not be deemed to create a partnership or any other entity between Company and SITI.

11.   ENTIRE AGREEMENT.  This Agreement constitutes the final and entire agreement and understanding between the parties to this Agreement relative to the subject matter of this Agreement and supersedes all prior agreements and understandings (whether written or oral) between such parties concerning the subject matter of this Agreement.  No alleged representation, warranty, promise, inducement, or statement of intention not expressly set forth in this Agreement is binding on any party to this Agreement.

12.   GOVERNING LAW.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Texas, without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other

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jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

13.   SURVIVAL.  All of the representations and covenants contained in this Agreement will survive the termination of this Agreement.

14.   FURTHER ACTIONS.  Each party to this Agreement will execute such additional documents and take such further actions as may be necessary or reasonably desirable to effectuate the agreements, purposes and intentions of this Agreement.

15.   AMENDMENTS.  No modification, amendment, or waiver of any provision of this Agreement, or consent to any departure by either party therefrom, shall in any event be effective unless the same shall be in writing and signed by the other party.

16.   SEVERABILITY.  In case any one or more of the provisions contained in this Agreement should be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.

17.   COUNTERPARTS.  This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall constitute but one instrument.

18.   TIME OF THE ESSENCE.  Time is of the essence in the performance of the obligations under this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above.

GEOPHYSICAL DEVELOPMENT CORPORATION
By:	/s/ Michael A. Dunn
Name:	Michael A Dunn
Title:	President
SCREEN IMAGING TECHNOLOGY, INC.
By:	/s/ Shengwen Jin
	Shengwen Jin, CEO

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EX-99.2

Exhibit 99.2

Certification Pursuant to 18 U.S.C. § 1350 (Section 906 of Sarbanes-Oxley Act of 2002)

Geokinetics Inc.

In connection with the Quarterly Report of Geokinetics Inc, (“the Company”) on form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (“the Report”), we, Lynn A. Turner, President and Chief Operating Officer of the Company, and Thomas J. Concannon, Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of Sarbanes-Oxley Act of 2002, that:

(1)The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 14, 2002

/s/ LYNN A. TURNER	/s/ THOMAS J. CONCANNON
Lynn A. Turner	Thomas J. Concannon
President and Chief Operating Officer	Vice President and Chief Financial Officer