UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
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(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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT OF 1934
Commission file number 0-27070
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VENTURE SEISMIC LTD.
(Exact name of small business issuer as
specified in its charter)
ALBERTA, CANADA N/A
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3110 - 80th Avenue S.E.
Calgary, Alberta T2C 1J3
(Address of principal executive offices)
(403) 777-9070
(Issuer's telephone number)
----------------------------------------------------------
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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___
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 3,004,050 shares of Common
Stock, no par value, were outstanding as of May 3, 1996.
Transitional Small Business Disclosure Format (Check one): Yes ____ No X
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VENTURE SEISMIC LTD.
INDEX TO FORM 10QSB
For the Quarter ended March 31, 1996
Part I. Financial Information
Item 1. Consolidated Financial Statements PAGE
Consolidated Balance Sheets
March 31, 1996 and September 30, 1995 ............................... 2
Consolidated Income Statements
Three and six months ended March 31, 1996 and 1995 .................. 3
Consolidated Statements of Cash Flows
Six months ended March 31, 1996 and 1995 ........................... 4
Notes to Consolidated Financial Statements ........................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........................ 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ............................ 11
Signatures ........................................................... 11
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<PAGE>
PART 1. FINANCIAL INFORMATION
- - - ------------------------------
Item 1. Consolidated Financial Statements
Venture Seismic Ltd.
Consolidated Balance Sheets
(in U.S. Dollars)
MARCH 31, 1996 SEPT 30, 1995
-------------- -------------
ASSETS
Current
Cash and cash equivalents $ 1,489,623 $ --
Accounts receivable 7,442,994 1,420,599
Work-in-progress 809,307 58,760
Other receivables 120,971 35,712
Current portion of advances to shareholders 7,334 7,399
Prepaid expenses and deposits 285,754 385,442
----------- -----------
10,155,983 1,907,912
Advances to shareholders 22,002 22,197
Fixed assets 7,377,903 5,071,686
$17,555,888 $ 7,001,795
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness $ 440,000 $ 373,081
Accounts payable and accrued liabilities 5,385,440 1,598,435
Income taxes payable 76,444 7,374
Current portion of long term debt 825,075 836,775
----------- -----------
6,726,959 2,815,665
----------- -----------
Long term debt 1,993,931 2,440,594
----------- -----------
Deferred income taxes 587,855 454,323
----------- -----------
Shareholders' equity
Share capital 6,630,866 131,671
Retained earnings 1,531,353 1,159,542
Cumulative translation adjustment 84,924 --
----------- -----------
8,247,143 1,291,213
----------- -----------
$17,555,888 $ 7,001,795
=========== ===========
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<PAGE>
Venture Seismic Ltd.
Consolidated Income Statements
(in U.S. Dollars)
<TABLE>
Three months ended Six months ended
March 31, March 31,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
-------- -------- -------- --------
Revenue $5,872,360 $4,896,731 $7,464,286 $7,223,947
Direct expenses 4,246,177 3,483,147 5,516,233 5,080,906
----------- ---------- --------- ---------
Gross margin 1,626,183 1,413,584 1,948,053 2,143,041
----------- ---------- --------- ---------
Other income
Interest and other income 39,819 957 81,265 1,834
Gain on sale of fixed assets -- -- -- 9,518
----------- ---------- --------- ---------
39,819 957 81,265 11,352
----------- ---------- --------- ---------
1,666,002 1,414,541 2,029,318 2,154,393
----------- --------- ---------- ---------
Expenses
General and administrative 344,728 182,749 631,667 358,486
Depreciation 305,293 207,632 577,615 363,165
Interest 72,517 65,217 157,255 123,286
----------- ---------- ---------- ---------
722,538 455,598 1,366,537 844,937
----------- ---------- --------- ---------
Income before income taxes 943,464 958,943 662,781 1,309,456
Income taxes
Current 365,200 353,770 143,980 456,287
Deferred 51,128 36,950 146,990 120,828
----------- ---------- ----------- ---------
416,328 390,720 290,970 577,115
----------- ---------- ----------- ---------
Net income $ 527,136 $ 568,223 $ 371,811 $ 732,341
=========== ========== ========= ========
Net income per common share (see note 3)
Basic 0.18 0.41 0.14 0.52
Fully diluted 0.12 0.39 0.11 0.50
Weighted average number of common
shares outstanding
Basic 3,004,050 1,400,000 2,646,283 1,400,000
Fully diluted 5,199,050 1,483,846 4,841,283 1,483,846
</TABLE>
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<PAGE>
Venture Seismic Ltd.
Consolidated Statements of Cash Flows
(in U.S. Dollars)
Six months ended
March 31,
1996 1995
------------------------
Operating activities:
Net income $ 371,811 $ 732,341
Items not involving cash:
Gain on sale of fixed assets -- (9,518)
Depreciation 577,615 363,165
Deferred income taxes 133,532 53,591
---------- ----------
1,082,958 1,139,579
Cumulative translation adjustment 84,924 --
Net change in non-cash working capital (2,902,373) 105,766
----------- ---------
(1,734,491) 1,245,345
Financing activities:
Proceeds on issuance of shares 6,499,195 --
Decrease (increase) in due from shareholders 195 (1,410)
Increase (decrease) in bank indebtedness 66,919 (375,845)
Increase (decrease) in bank indebtedness (458,363) 1,159,906
----------- ---------
6,107,946 782,651
---------- ----------
Investment activities:
Purchase of fixed assets (2,883,832) (2,037,514)
Proceeds from sale of fixed assets -- 9,518
----------- ----------
(2,883,832) (2,027,996)
Increase in cash and cash equivalents 1,489,623 --
Cash and cash equivalents, beginning of period -- --
----------------------------
Cash and cash equivalents, end of period $ 1,489,623 $ --
============================
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<PAGE>
VENTURE SEISMIC LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. Basis of Financial Statement Presentation
The consolidated financial statements of Venture Seismic Ltd. are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position as of March 31, 1996, operating results for the three months
and the six months ended March 31, 1996 and March 31, 1995 and statements of
cash flows for the six months ended March 31, 1996 and March 31, 1995. The
foregoing interim results are not necessarily indicative of the results for the
entire fiscal year ending September 30, 1996.
The consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles ("Canadian GAAP"). Certain of these
principles differ in respect from those applicable in the United States (" U.S.
GAAP). Differences, if material, are disclosed in note 3 United States
Accounting Principles.
2. Currency Presentation and Exchange Rates
All dollar amounts, unless otherwise stated, are expressed in United States
dollars. The Company has selected U.S. dollars as its currency for financial
reporting and display purposes and accordingly applies the current rate method
to translate its accounts measured in Canadian dollars to U.S. dollars. Under
this method, average exchange rates are used for items included in the
consolidated income statement and period end exchange rates for the assets and
liabilities. Any significant gains or losses are included as a separate
component of shareholders' equity.
For translation purposes the exchange rates of the Canadian dollar in exchange
for U.S. dollars, is calculated from the exchange rates reported by the Federal
Reserve Bank of New York as the noon buying rate in New York for cable transfers
in Canadian dollars as certified for custom purposes. The average exchange rates
for the three months ended March 31, 1996 and March 31, 1995 are $0.7304 = $1.00
Canadian and $0.7107 = $1.00 Canadian respectively. The average exchange rates
for the six months ended March 31, 1996 and March 31, 1995 are $0.7339 = $1.00
Canadian and $0.7208 = $1.00 Canadian respectively. The period end exchange
rates at March 31, 1996 and September 30, 1995 are $0.7334 = $1.00 Canadian and
$0.7438 = $1.00 Canadian respectively.
3. United States Accounting Principles
For the period ended March 31, 1996 and March 31, 1995 there were no material
differences in net income using Canadian and U.S. GAAP. Under U.S. GAAP the
calculation of primary income per share is based on the number of issued and
outstanding shares plus common share equivalents, including stock options, if
they would have a dilutive effect. Under U.S. GAAP outstanding shares
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<PAGE>
would be 3,004,050 for the three months ended March 31, 1996, 2,647,440 for the
six months ended March 31, 1996 and 1,400,000 for the periods ended March 31,
1995.
Three months ended Six months ended
March 31, March 31,
1996 1995 1996 1995
------------------- ------------------
Primary earnings per common share
using U.S. basis $0.18 $0.41 $0.14 $0.52
Fully diluted earnings per common
share using U.S. basis $0.13 $0.39 $0.13 $0.50
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the description of historical facts contained herein, this Form
10-QSB contains certain forward-looking statements that involve risks and
uncertainties as detailed herein and from time to time in the Company's SEC
filings under "Risk Factors" and elsewhere. These risks include, among other
factors, the capital intensive nature of the Company's business and its need
for additional funds for operations and debt service requirements,
fluctuations in operating results, dependence upon principal customers and on
the activity of the oil and gas industry, risks associated with international
operations and regulatory, competitive and contractual risks.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1995
Results of Operations
Revenue for the three months ended March 31, 1996 increased 20% to $5,872,000
from $4,897,000 for the corresponding period in the previous year. This
increase was primarily attributable to increased activity in the Canadian
seismic industry during this period and the Company utilizing six crews during
the period as compared to five crews for the corresponding period in the
previous year.
Direct expenses for the three month period ended March 31, 1996 increased 22%
to $4,246,000 as compared to $3,483,000 for the corresponding period in the
previous year. Gross margin as a percentage of revenue decreased to
approximately 28% in the second quarter of fiscal 1996 from approximately 29%
in the second quarter in fiscal 1995. The decrease in gross margin percentage
results from extremely cold weather during the month of January and part of
February which decreased daily production and the costs of leasing certain
equipment to outfit the Company's sixth crew.
Other income increased to $40,000 in the second quarter of fiscal 1996 from
$1,000 in the second quarter of fiscal 1995. This increase results from
interest income from funds invested on completion of the Company's initial
public offering in November 1995.
General and administrative expenses increased by 88% to $345,000 in the second
quarter of fiscal 1996 from $183,000 in the second quarter of fiscal 1995.
This increase results from increased marketing activities related to Company's
attempts to expand operations outside of its Western Canadian base, higher
personnel costs and additional costs associated with the Company's public
company status.
Depreciation expense increased by 47% to $305,000 in the second quarter of
fiscal 1996 from $208,000 in the second quarter of fiscal 1995. The increase
in depreciation is attributable to the Company's acquisition of its third
telemetry system and four vibroseis units in December 1995.
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<PAGE>
Interest expense increased by 12% to $73,000 in the second quarter of fiscal
1996 from $65,000 in the second quarter of fiscal 1995. The increase results
from additional indebtedness that was incurred to finance the acquisition of
the Company's second telemetry system.
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED
MARCH 31, 1995
Results of Operations
Revenue for the six months ended March 31, 1996 increased 3% to $7,464,000
from $7,224,000 for the corresponding period in the previous year. This
increase resulted from the Company utilizing six crews during February and
March of 1996 as compared to five crews for the corresponding period in the
previous year. A decrease in activity in the Canadian seismic industry in the
first quarter of fiscal 1996, resulting from unseasonably warm weather in
Western Canada during this time period, was offset by an extremely active
period from January to March 1996 as oil and gas companies attempted to catch
up on projects delayed in the first quarter of fiscal 1996.
Direct expenses for the six month period ended March 31, 1996 increased 9% to
$5,516,000 as compared to $5,081,000 for the corresponding period in the
previous year. Gross margin as a percentage of revenue decreased to
approximately 26% during the period as compared to 30% in the corresponding
period in fiscal 1995. The decrease in gross margin percentage results
primarily from increased fixed costs such as vehicle leases, insurance and
licenses and permits which significantly impacted the Company's margins during
the first quarter of fiscal 1996 when activity was reduced.
Other income increased to $81,000 for the six months ended March 31, 1996 as
compared to $11,000 for the corresponding period in previous year. This
increase results primarily from interest income from funds invested on
completion of the Company's initial public offering in November 1995.
General and administrative expenses increased by 76% to $632,000 for the six
months ended March 31, 1996 as compared to $358,000 for the six months ended
March 31,1995. This increase results from increased marketing activities
related to the Company's attempts to expand operation outside of its Western
Canadian base, higher personnel costs and additional costs associated with the
Company's public company status.
Depreciation expense increased by 59% to $578,000 during the six months ended
March 31, 1996 from $363,000 for the comparable period in fiscal 1995. The
increase in depreciation is primarily attributable to the Company's
acquisition of its third telemetry system and four vibroseis units in December
1995.
Interest expense increased by 28% to $157,000 during the six months ended
March 31, 1996 from $123,000 for the comparable period in fiscal 1995. The
increase results from additional indebtedness that was incurred to finance the
acquisition of the Company's second telemetry system.
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<PAGE>
Quarterly Fluctuations
The Company's business is subject to substantial quarterly variations as a
result of activity variations in the Canadian seismic industry. Generally
increased activity occurs in the Canadian seismic industry during the Canadian
winter season, from November to March. During this period the colder weather
freezes the ground and permits easier access to marshy terrain in the northern
areas of Western Canada and agricultural areas. During the spring, bans are
placed on road use, which limits access to many areas where the Company
conducts its operations. Further, due to the soft wet ground conditions and
marshy terrain in the northern areas of Western Canada, both of which are
extremely sensitive to traffic and heavy equipment, the extent to which the
Company can conduct its operations during the spring and summer is
significantly reduced. As a result the Company has historically experienced a
fluctuation in quarterly results with generally increased activity in the
Company's first and second quarters and a significant decrease in revenues and
net income during the third and fourth quarters. The Company is focusing on
expanding its operations into certain regions of the United States and
internationally, and if successful, this expansion will reduce the seasonality
traditionally associated with Company's Canadian operations. Due to the
factors noted above, the Company's results of operations may be subject to
fluctuations, particularly on a quarterly basis and the Company's stock price
may be affected by such results.
In March 1996, the Company entered into a letter of intent to acquire a
seismic data acquisition company based in Texas and in April 1996, the Company
entered into a contract to perform a seismic data acquisition survey in
Pakistan. Both of these developments were undertaken with management's
expectation that these operations would expand and diversify the Company's
customer base thereby reducing the seasonality currently associated with the
Company's operations. See "Other Information".
Liquidity and Capital Resources
At March 31, 1996 the Company had working capital of approximately $3.4
million, including cash and cash equivalents of approximately $1.5 million.
Non-cash working capital increased significantly during the three months ended
March 31, 1996 as a result of the increased activity that occurs in the
Canadian seismic industry during the period November to March. As a result of
the increased activity during this period the Company's accounts receivable at
March 31, 1996 were $7,442,994 and accounts payable were $5,385,440. Included
in these account receivable and account payable balances are significant
amounts for reimbursable costs which have been incurred in accordance with the
terms of the Company's contracts. These reimbursable costs are not included in
the Company's revenue or direct costs however they have been consistently
included in the Company's accounts receivable and accounts payable. The
collection of accounts receivable and the payment of accounts payable are
expected to occur in the normal 30 to 60 day time period following billing.
The increase in cash and cash equivalents for the six months ended March 31,
1996 was due primarily to the completion of the Company's initial public
offering in November 1995 which resulted in net proceeds of $6.5 million. This
increase was partially offset by capital expenditures of $2.9 million,
primarily for the acquisition of the Company's third telemetry system and the
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<PAGE>
acquisition of four vibroseis units. During the six months ended March 31,
1996 the Company reduced its long term debt by approximately $458,000.
At March 31, 1996 the Company had a capital term loan of approximately
$2,819,000. This loan is evidenced by a debenture bearing interest at a rate
equal to the lender's cost of funds plus 3.25% (which based on the lender's
cost of funds at April 15, 1996 aggregated approximately 9% at such date), is
payable in monthly principal installments of $68,653 plus interest, and
matures in September 1999. Based on the lender's cost of funds at April 15,
1996 the Company's debt service requirements in connection with the capital
term loan are expected to aggregate approximately $530,000 for the remainder
of fiscal 1996.
The Company continues to maintain its operating line of credit which provides
for an aggregate of up to $875,000 in advances available to the Company
subject to a limit of: i) the excess in value of current assets over current
liabilities (excluding the current portion of long-term debt) and ii) 70% of
the value of the accounts receivable of the Company which are less than ninety
days old. Borrowings under the operating line are payable on demand, bear
interest at the bank's prime rate plus 1%. The Company's trade receivables
have been pledged as collateral for the operating line. At March 31, 1996 the
Company had approximately $435,000 available under the operating line.
The Company anticipates, based on its current plans and assumptions, that its
existing cash resources combined with funds expected to be generated from
operations will be sufficient to satisfy its currently anticipated cash
requirements for fiscal 1996.
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<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
During the three months ended March 31, 1996 the Company entered into a
letter of intent to acquire Boone Geophysical, Inc. ("Boone"), a seismic data
acquisition company based in Huntsville, Texas. The proposed acquisition is
subject to a number of conditions, including execution of definitive
agreements, completion of due diligence and regulatory and/or other third
party approvals. The letter of intent contemplates a purchase price of
$1,750,000, of which up to $500,000 may be paid by the issuance of Company
Common Stock. The acquisition, assuming completion, will be accounted for as a
purchase and accordingly, the operating results of Boone will be included in
the Company's consolidated statement of income from the date of acquisition.
The excess of the aggregate purchase price over the fair market value of the
net assets acquired will be recognized as goodwill and be amortized over an
appropriate time period.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 - Articles of Incorporation of the Registrant and Certificates of
Amendment thereto (1)
3.2 - By-laws of the Registrant (1)
4.1 - Revised Form of Warrant Agreement (1)
4.2 - Revised Form of Underwriter's Warrant (1)
10.1 - Debenture issued by Registrant to Roynat Inc. dated July 19, 1995
and the amendments thereto dated September 6, 1995 and
September 19, 1995 (1)
10.3 - Priorities Agreement between Province of Alberta Treasury Roynat
Inc., and Registrant, dated July 25, 1995 (1)
10.4 - Buy-Back Agreement between Opseis Inc., Roynat Inc. and
Registrant, dated July 25, 1995 (1)
10.5 - Agreement to Assign Life Insurance between Brian Kozun,
Registrant and Roynat Inc. dated July 19, 1995 (1)
10.6 - Outline of Credit between Registrant and Province of Alberta
Treasury Branches, dated June 21, 1995 (1)
10.7 - Waiver letter from Alberta Treasury Branches, dated Aug 18,1995 (1)
10.8 - Representative Agreement between Registrant and S. Antonio Velarde,
dated July 1, 1995 (1)
10.9 - Joint Venture Agreement, and amendment thereto, between
Registrant and Aguasuelos Ingenieria, C.A. dated March 17,
1995 and English translation thereto (1)
10.10 - 1995 Stock Option Plan (1)
10.11 - Employment Agreement between Registrant and Brian Kozun dated
September 14, 1995 (1)
10.12 - Employment Agreement between Registrant and P. Daniel McArthur
dated July 11, 1994, Clarification and Amendment Agreement effective
as of July 11, 1994, Novation Agreement, dated June 28,1995 and
Waiver letter dated September 8, 1995 (1)
10.13 - Form of Indemnity Agreement (1)
10.14 - Lease between Registrant and BRL Corporation, dated September 2,
1994 (1)
10.15 - Revised Form of Consulting Agreement between the Registrant and the
Underwriter (1)
- - - -------------------
(1) Incorporated by reference from Registrant's Registration Statement on
Form SB-2 (File No. 33-97132) declared effective on November 6, 1995
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<PAGE>
10.16 - Representative Agreement between the Registrant and Geotrex, dated
July 1, 1995 (1)
10.17 - Memorandum of Understanding between Registrant and Shiv-Vani
Drilling Limited, dated February 28, 1995 (1)
10.18 - Lease between Registrant and Opseis, Inc. dated September 27,1995 (1)
10.19 - Letter of intent re: proposed acquisition of shares of Boone
Geophysical, Inc.
27 Financial Data Schedule
- - - -------------------
(b) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the three
months ended March 31, 1996.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Venture Seismic Ltd.
/S/ GREGORY B. WIEBE
---------------------------
By: Gregory B. Wiebe
Vice President Finance and
Chief Financial Officer
Dated: May 9, 1996
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Exhibit 10.19
VENTURE SEISMIC LTD.
3110 80th Avenue S.E.
Calgary, Alberta
T2C 1J3
March 20,1996
Boone Geophysical, Inc.
Post Office Drawer 1535
874A Wire Road
Huntsville, Texas 77347-1535
ATTENTION: PRESIDENT
Dear Sirs:
RE: PROPOSED ACQUISITION OF SHARES OF BOONE GEOPHYSICAL, INC. ("BOONE")
As discussed, this letter summarizes our understanding of the intent of the
parties to negotiate a proposed acquisition by Venture Seismic Ltd. ("VENTURE")
or its designee (either Venture or such designee, the "BUYER") from the
shareholders of Boone (collectively, the "SHAREHOLDERS") of all of the issued
and outstanding securities (the "SHARES") of Boone, on and subject to the
following terms and conditions:
1. PURCHASE PRICE
(a) The purchase price for the Shares shall be $1,750,000.00 (the
"PURCHASE PRICE"). Any reference to "DOLLARS" or "$" shall
refer to U.S. dollars. The Purchase Price shall be paid to the
Shareholders as follows:
(i) $1,550,000.00 on the Closing Date (as defined
herein), by the payment of $1,150,000.00 in cash and
Venture issuing that number of common shares to the
Shareholders equal to $400,000.00 divided by the
Trading Price (as defined herein); and
(ii) $200,000.00 in accordance with the following schedule:
DATE OF PAYMENT AMOUNT AND TYPE OF PAYMENT
(A) September 1, 1996 $50,000.00 cash
(B) December 1, 1996 $50,000.00 in common shares of Venture
(C) March 1, 1997 $50,000.00 cash
(D) June 1, 1997 $50,000.00 in common shares of Venture
Venture shall have the option to pay cash to the
Shareholders in lieu of the common shares described
in paragraph 1(a)(ii)(B) and (D). In the event
Venture elects to pay such amounts by issuing common
shares, such amounts will be determined by Venture
issuing that number of common shares to the
Shareholders equal to such amount divided by the
Trading Price (as defined herein).
<PAGE>
(b) "TRADING PRICE" means (i) with respect to paragraph 1(a)(i),
the average price per Venture common share for ten (10)
consecutive trading days ending on the date of execution of
this letter of intent, and (ii) with respect to paragraph
1(a)(ii), the average price per Venture common share for ten
consecutive trading days ending on the date on which the
payment in Venture common shares is to be made on the stock
exchange on which the majority of the volume of trading for
the Venture common shares occurs. The average price per common
share shall be determined by dividing the aggregate of the
daily closing prices for the common shares during such ten
(10) consecutive trading days. A trading day is a day in which
at least 100 Venture common shares has traded.
(c) The Shareholders acknowledge that the common shares issued by
Venture pursuant to paragraph 1(a) hereof are being issued
pursuant to exemptions from prospectus requirements of
applicable securities legislation, and will be subject to hold
periods or trading restrictions under such legislation of up
to two years.
2. DUE DILIGENCE PERMITTED
For the purposes of allowing the Buyer to review the business and affairs of
Boone so as to enable the Buyer to determine if there are any facts relating to
the Shares or to the business of Boone which, if known to the Buyer, would cause
the Buyer to elect not to proceed with the acquisition of the Shares, Boone
hereby permits the Buyer to conduct, upon execution hereof by Boone and the
Shareholders, up to and including the business day that is five (5) days prior
to the Closing Date, such investigations of the Shares, Boone's financial
conditions, contractual obligations, business affairs and corporate affairs as
the Buyer may deem reasonably necessary or advisable in order to ensure that
each of the representations, warranties, covenants and agreements as are
required by the Buyer to ensure the validity and existence of the Shares are
true and correct on the Closing Date (the "DUE DILIGENCE PERIOD").
3. CONDITIONS OF CLOSING
On or before June 1, 1996 or such other time as the parties hereto may agree
(the "CLOSING DATE"), the Buyer will purchase the Shares for the Purchase Price,
upon fulfilment of each of the following conditions precedent:
(a) The Shareholders and the Buyer shall have entered into a
formal purchase and sale agreement, in form and substance
satisfactory to the Buyer (the "SECURITIES PURCHASE
<PAGE>
AGREEMENT"), wherein the Shareholders shall make
representations and warranties necessary to the Buyer;
(b) All representations and warranties of the Shareholders
contained in the Securities Purchase Agreement shall be true
and correct as at the Closing Date;
(c) The Buyer shall have been furnished with reports and opinions
satisfactory to it as to the results of the investigations
conducted by its representatives during the Due Diligence
Period;
(d) Venture or Boone shall have entered into employment agreements
with the Shareholders, for a period of at least twenty-five
(25) months from the Closing Date, on terms satisfactory to
such parties, which will include appropriate non-competition
provisions after termination of employment, and will provide
for an aggregate compensation of $125,000.00 per annum to and
including June 30, 1998 and a bonus provision whereby the
Shareholders may earn a bonus of five percent (5%) of net
income after tax generated by Boone as calculated in
accordance with generally accepted accounting principles,
consistently applied;
(e) Prior to the Closing Date, Boone shall cause the land and
buildings located at 874A Wire Road, Huntsville, Texas (the
"PROPERTY") to be transferred to the Shareholders or their
nominee and Venture shall cause Boone, as of the Closing Date,
to enter into a lease agreement for the Property with the
Shareholders or their nominee, as landlord, for the period
ending June 30, 1998, at a monthly rent of $1,500.00., with
all utilities for the Property to be paid by Boone, as
controlled by Venture;
(f) On or before the Closing Date, the Shareholders shall have
completed the transfer of a central recording unit of Opseis
5586 from the Shareholder's personal limited liability company
to Boone, all on terms satisfactory to the Buyer;
(g) On or before the Closing Date, the Shareholders shall be
permitted to transfer from all bank accounts of Boone all cash
in excess of $50,000.00. All accounts receivable of Boone
uncollected as of the Closing Date shall be assigned by Boone
to the Shareholders for collection and all accounts payable of
Boone incurred prior to the Closing Date shall be assumed and
paid by the Shareholders;
(h) The approval of the transaction contemplated by this letter of
intent by the board of directors of Venture;
(i) Boone providing such audited financial statements as may be
required by regulatory or stock exchange authorities, with the
cost of such audit to be paid by Boone, as controlled by
Venture;
<PAGE>
(j) Boone will have obtained key-man life insurance on the life of
Lynn Boone on terms satisfactory to Venture, with the cost of
such insurance to be paid by Boone, as controlled by Venture;
(k) The Buyer shall have obtained all applicable governmental,
regulatory, stock exchange and contractual approvals to
complete the transactions contemplated by the Securities
Purchase Agreement; and
(l) The Shareholders and Boone shall have obtained all third party
consents or approvals required to complete the transactions
contemplated by the Securities Purchase Agreement.
4. COVENANTS OF BOONE AND SHAREHOLDERS
(a) The Shareholders and Boone agree that during the Due Diligence
Period, Boone and the Shareholders shall not have discussions
or negotiations nor entertain offers from any third parties
for the disposition or proposed disposition by Boone of its
assets or its Shareholders of their interest in Boone, whether
by a sale of the Shares of Boone or sale of its assets or
otherwise, in whole or in part, without the express prior
written consent of Buyer.
(b) The Shareholders and Boone agree that they will not, without
the prior written consent of the Buyer, disclose to any person
(i) that discussions or negotiations are taking place with
Venture concerning the possible acquisition of Boone, or (ii)
any of the terms, conditions or other facts with respect to
any such possible acquisition, including the status thereof.
5. GOVERNING LAW
This letter of intent shall be governed by and construed and interpreted in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein.
6. EXPIRY DATE
This letter of intent is open for acceptance until 4:00 p.m., MST, on March 22,
1996, unless extended in writing by the Buyer. Acceptance shall not be valid
unless executed by the Shareholders and Boone and delivered to the Buyer prior
to that time and date.
7. ASSIGNMENT
This letter of intent may not be assigned by either party without the prior
written consent of the other party. Notwithstanding this provision, the Buyer
may assign its rights and obligations (or any portion thereof) to any of its
affiliates.
<PAGE>
8. EXPENSES
Each of Venture, Boone and the Shareholders will pay for their respective costs
incurred pursuant to this letter and the transactions contemplated by the
Securities Purchase Agreement.
9. DEPOSIT
Upon execution hereof by the Shareholders, the Buyer shall cause the sum of
$25,000.00 to be placed in trust or escrow with Boone's legal counsel, Hal R.
Ridley, as a deposit towards the Purchase Price, on and subject to the terms of
this letter of intent.
Notwithstanding anything herein contained, this letter of intent shall be a
non-binding agreement until the execution and delivery of the Securities
Purchase Agreement referred to in paragraph 3(a) hereof, other than the
covenants of the Shareholders and Boone contained in paragraph 4 hereof and the
payment of expenses in paragraph 8 hereof, which shall be binding upon the
parties upon execution hereof. Should the terms and conditions of this letter of
intent be acceptable to you, please indicate your acceptance by executing and
returning a duplicate, fully executed copy of this letter by telecopier to us
prior to the expiry date stated in paragraph 6.
Yours truly,
VENTURE SEISMIC LTD.
Per: /s /GREG WIEBE
-------------------------------
Name: Greg Wiebe
Title: Vice-President, Finance &
Chief Financial Officer
ACKNOWLEDGED, ACCEPTED AND AGREED
TO THIS 22ND DAY OF MARCH, 1996
BOONE GEOPHYSICAL, INC.
Per: /S/LYNN BOONE
-------------------------------
Name:Lynn Boone
Title:President
SHAREHOLDERS
/S/ LYNN BOONE /S/ DONNA BOONE
- - - ----------------------- ------------------------
LYNN BOONE DONNA BOONE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIONEXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTITERY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,489,623
<SECURITIES> 0
<RECEIVABLES> 7,442,994
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,155,983
<PP&E> 9,558,723
<DEPRECIATION> 2,180,820
<TOTAL-ASSETS> 17,555,888
<CURRENT-LIABILITIES> 6,726,959
<BONDS> 1,993,931
0
0
<COMMON> 6,630,866
<OTHER-SE> 1,616,277
<TOTAL-LIABILITY-AND-EQUITY> 17,555,888
<SALES> 0
<TOTAL-REVENUES> 5,872,360
<CGS> 0
<TOTAL-COSTS> 4,246,177
<OTHER-EXPENSES> 722,538
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,517
<INCOME-PRETAX> 943,364
<INCOME-TAX> 416,328
<INCOME-CONTINUING> 527,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,136
<EPS-PRIMARY> .18
<EPS-DILUTED> .13
</TABLE>
