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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] 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)
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<S> <C>
ALBERTA, CANADA N/A
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
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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: 3,120,894 Common Shares, no
par value, were outstanding as of August 7, 1997.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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VENTURE SEISMIC LTD.
INDEX TO FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1997
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PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and September 30, 1996............................................. 3
Consolidated Statements of Income
Three and nine months ended June 30, 1997 and 1996............................... 4
Consolidated Statements of Cash Flows
Nine months ended June 30, 1997 and 1996......................................... 5
Notes to Consolidated Financial Statements.......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................... 8
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PART II. OTHER INFORMATION
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Item 2. Changes in Securities........................................................ 11
Item 6. Exhibits and Reports on Form 8-K............................................. 11
Signatures............................................................................ 12
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PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
VENTURE SEISMIC LTD.
CONSOLIDATED BALANCE SHEETS
(IN U.S. DOLLARS)
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<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
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ASSETS
Current
Cash.......................................................... $ 844,253 $ --
Accounts receivable........................................... 3,367,562 2,644,659
Work-in-progress.............................................. 1,175,829 381,273
Income taxes recoverable...................................... -- 430,975
Other receivables............................................. 98,553 135,048
Prepaid expenses and deposits................................. 241,609 156,678
----------- -----------
5,727,806 3,748,633
Advances to shareholders........................................ 14,684 14,684
Deferred income taxes........................................... -- 63,875
Capital assets.................................................. 11,170,225 9,614,265
Intangible assets............................................... 1,600,043 1,491,783
----------- -----------
$18,512,758 $14,933,240
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness............................................. $ 506,879 $ 164,630
Accounts payable and accrued liabilities...................... 2,572,055 2,764,723
Income taxes payable.......................................... 634,958 --
Current portion of long term debt (note 4).................... 1,372,918 1,520,000
----------- -----------
5,086,810 4,449,353
----------- -----------
Long term debt (note 4)......................................... 3,713,251 2,356,060
----------- -----------
Deferred income taxes........................................... 251,991 --
----------- -----------
Shareholders' equity
Share capital (note 5)........................................ 7,594,773 7,539,902
Retained earnings............................................. 1,799,019 494,843
Cumulative translation adjustment............................. 66,914 93,082
----------- -----------
9,460,706 8,127,827
----------- -----------
$18,512,758 $14,933,240
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VENTURE SEISMIC LTD.
CONSOLIDATED STATEMENTS OF INCOME
(IN U.S. DOLLARS)
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue................................. $5,623,773 $2,370,983 $21,306,774 $9,835,269
Direct expenses......................... 4,330,862 2,016,155 15,481,083 7,532,388
---------- ---------- ----------- ----------
Gross margin............................ 1,292,911 354,828 5,825,691 2,302,881
---------- ---------- ----------- ----------
Expenses
General and administrative............ 479,652 340,299 1,365,942 971,965
Depreciation and amortization......... 602,838 385,300 1,765,947 962,915
---------- ---------- ----------- ----------
1,082,490 725,599 3,131,889 1,934,880
---------- ---------- ----------- ----------
Income from operations.................. 210,421 (370,771) 2,693,802 368,001
Other income (expense)
Interest and other income............. 13,952 23,963 20,502 105,228
Interest expense...................... (104,112) (61,670) (377,450) (218,925)
---------- ---------- ----------- ----------
(90,160) (37,707) (356,948) (113,697)
---------- ---------- ----------- ----------
Income before income taxes.............. 120,261 (408,478) 2,336,854 254,304
Income taxes
Current............................... (99,736) (274,900) 603,878 (130,920)
Deferred.............................. 161,636 95,355 428,800 242,345
---------- ---------- ----------- ----------
61,900 (179,545) 1,032,678 111,425
---------- ---------- ----------- ----------
Net income.............................. $ 58,361 $ (228,933) $ 1,304,176 $ 142,879
========== ========== =========== ==========
Earnings per common share (note 3)
Basic................................. $ 0.02 $ (0.08) $ 0.42 $ 0.05
Fully diluted......................... $ 0.02 $ (0.08) $ 0.33 $ 0.05
Weighted average number of common shares
outstanding (note 3)
Basic................................. 3,114,000 3,023,000 3,108,000 2,771,000
Fully diluted......................... 5,354,000 3,023,000 5,348,000 2,771,000
</TABLE>
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VENTURE SEISMIC LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN U.S. DOLLARS)
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<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
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Operating activities:
Net income $1,304,176 $ 142,879
Items not involving cash:
Depreciation and amortization.............................. 1,765,947 962,915
Deferred income taxes...................................... 428,800 227,756
Cumulative translation adjustment............................. (84,231) 82,723
Net change in non-cash working capital........................ (692,630) (1,839,684)
---------- -----------
2,722,062 (423,411)
---------- ----------
Financing activities:
Proceeds on issuance of shares................................ 100,000 6,889,332
Increase (decrease) in bank indebtedness...................... 342,249 (263,251)
Proceeds from long term debt.................................. 4,472,041 1,049,964
Principal payments on long term debt.......................... (3,261,932) (668,906)
Net change in non-cash working capital........................ (100,000) --
---------- ----------
1,552,358 7,007,139
---------- ----------
Investment activities:
Purchase of capital assets.................................... (3,118,167) (4,837,936)
Acquisitions.................................................. (312,000) (1,740,000)
Net change in non-cash working capital........................ -- 200,000
---------- ----------
(3,430,167) (6,377,936)
---------- ----------
Increase in cash for the period................................. 844,253 205,792
Cash, beginning of period....................................... -- --
---------- ----------
Cash, end of period............................................. $ 844,253 $ 205,792
========== ==========
</TABLE>
5
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VENTURE SEISMIC LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of Venture Seismic Ltd. (the
"Company") 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 June 30, 1997, operating
results for the three months and nine months ended June 30, 1997 and June 30,
1996 and statements of cash flows for the nine months ended June 30, 1997 and
June 30, 1996. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1996. The foregoing interim results for
the three months and nine months ended June 30, 1997 are not necessarily
indicative of the results for the entire fiscal year ending September 30, 1997.
The consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"). Certain of
these principles differ from those applicable in the United States ("U.S.
GAAP"). Differences, if material, are disclosed in note 3 -- United States
Accounting Principles and Earnings per Share.
2. CURRENCY PRESENTATION AND EXCHANGE RATES
All dollar amounts, unless otherwise stated, are expressed in United States
dollars. Since the completion of its initial public offering the Company has
selected U.S. dollars as its currency for financial reporting and display
purposes on the basis that the securities of the Company are currently only
listed for trading on the Nasdaq Stock Market and the primary users of the
financial statements are U.S. residents. Accordingly, the Company 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 June 30, 1997 and June 30, 1996 are US
$0.7214 = $1.00 Canadian and US $0.7327 = $1.00 Canadian, respectively. The
average exchange rates for the nine months ended June 30, 1997 and June 30, 1996
are US $0.7326 = $1.00 Canadian and US $0.7335 = $1.00 Canadian, respectively.
The period end exchange rates at June 30, 1997 and September 30, 1996 are US
$0.7241 = $1.00 Canadian and US $0.7342 = $1.00 Canadian, respectively.
3. UNITED STATES ACCOUNTING PRINCIPLES AND EARNINGS PER SHARE
For the periods ended June 30, 1997 and June 30, 1996 there were no
material differences in net income using Canadian and U.S. GAAP. For U.S. GAAP
purposes earnings per share is based on the weighted average number of common
shares and dilutive common equivalent shares outstanding during the period.
Earnings per share assuming full dilution was determined in the same manner as
earnings per common share and common equivalent shares. For the three and nine
month periods ended June 30, 1997 and 1996 the outstanding common stock options
and warrants were not included in the calculation of weighted average number of
common shares since they were antidilutive.
6
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<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Primary earnings per share...................... $0.02 $(0.08) $0.42 $0.05
Weighted average number of common shares
outstanding................................... 3,114,000 3,023,000 3,108,000 2,771,000
</TABLE>
4. LONG TERM DEBT
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<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
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Capital loan, bearing interest at the lender's cost of funds plus
3.0% and repayable in monthly installments of $102,000
($140,000 Canadian), due February 15, 2001..................... $4,460,456 --
Capital loan, bearing interest at the lender's cost of funds plus
2.75% and repayable in monthly installments of $13,000 ($18,000
Canadian), due June 15, 2001................................... 625,713 --
Capital loan..................................................... -- $2,409,094
Equipment purchase contract...................................... -- 795,528
Equipment lease purchase contract................................ -- 671,438
---------- ----------
5,086,169 3,876,060
Less current portion............................................. (1,372,918) (1,520,000)
---------- ----------
$3,713,251 $2,356,060
========== ==========
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A general security agreement on all equipment and a fixed charge on certain
equipment have been pledged as collateral for the capital loans. Aggregate
principal repayments for long term debt are as follows:
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<S> <C>
1997, remainder of fiscal year........................................... $ 343,000
1998..................................................................... 1,373,000
1999..................................................................... 1,373,000
2000..................................................................... 1,373,000
2001..................................................................... 624,169
----------
$5,086,169
==========
</TABLE>
5. SHARE CAPITAL
During the nine months ended June 30, 1997 an income tax benefit of
$110,000 associated with fiscal 1996 share issue expenses has been recorded in
the share capital account. The remaining income tax benefit of $120,776 will be
recognized in the share capital account when realized.
6. SUBSEQUENT EVENTS
Subsequent to June 30, 1997 the Company entered into an Offer to Finance
whereby the Company's existing capital asset lender agreed to provide
approximately $1,520,000 of additional term debt to fund a portion of the
purchase price of three data acquisition systems. Delivery of these systems is
scheduled to occur in August, September and November 1997. This term debt will
bear interest at the lender's cost of funds plus 2.75%, is repayable in monthly
principal installments of $31,700 plus interest and matures in September 2001. A
general security agreement on equipment and a fixed charge on the purchased
equipment have been pledged as collateral for the capital loan.
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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. Actual results could differ from those anticipated due to a
number of factors including 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.
RESULTS OF OPERATIONS
Revenue for the three and nine month periods ended June 30, 1997 ("1997
three and nine months") increased by approximately 137% and 117% to $5,623,773
and $21,306,774, respectively, as compared to $2,370,983 and $9,835,269 for the
three and nine month periods ended June 30, 1996 ("1996 three and nine months"),
respectively. These increases were primarily attributable to additional revenue
from the United States market generated by the Company's wholly owned
subsidiary, Boone Geophysical, Inc. ("Boone") as well as increased activity in
the Canadian market. Boone was acquired in June 1996 and generated revenue of
$2,478,853 and $5,539,711 for the 1997 three and nine months, respectively, as
compared to $206,107 for the 1996 three and nine months. Revenue for the 1997
three and nine months from the Canadian market increased by approximately 97.2%
and 74.1% to $3,144,920 and $15,767,063 respectively, as compared to $1,594,540
and $9,058,826 for the 1996 three and nine months, respectively. For the 1996
three and six months an international project contributed revenue of $570,336.
As a percentage of revenue Canadian based operations contributed 55.9% and 74.0%
for the 1997 three and nine months as compared to 67.3% and 92.1%, respectively,
for the 1996 three and six months.
During the nine months ended June 30, 1997 and June 30, 1996 one customer
accounted for 42% and 61% of the revenues, respectively. Although the projects
performed by the Company were generally short term, the inability to replace
significant customers would cause the Company's revenues and operating results
to fluctuate significantly from period to period, and the loss of certain
customers would have a material adverse impact on the business. Because of the
limited number of data acquisition crews owned by the Company, and thus the
limited number of data acquisition crews that the Company is able to deploy at
any given time, the Company anticipates that a substantial portion of future
revenues will continue to be attributable to a few customers, who may change
from time to time.
Direct expenses for the 1997 three and nine months increased by 115% and
106% to $4,330,862 and $15,481,083, respectively, as compared to $2,016,155 and
$7,532,388 for the 1996 three and nine months, respectively. Direct expenses as
a percentage of revenue for the 1997 three and nine months decreased to 77.0%
and 72.7%, respectively, as compared to 85.0% and 76.6% for the 1996 three and
nine months, respectively. The decrease in direct costs as a percentage of
revenue in the 1997 three and nine months is due to increased activity which
decreased the effect of fixed direct costs, improvements in contracted rates due
to increased demand in the market and the completion of a greater number of 3D
projects, which generate higher margins than 2D projects, during the period.
General and administrative expenses for the 1997 three and nine months
increased by 41.0% and 40.5% to $479,652 and $1,365,942, respectively, as
compared to $340,299 and $971,965 for the 1996 three and nine months,
respectively. These increases were primarily attributable to increased activity
levels in the Canadian market and the inclusion of general and administrative
expenses related to the Boone operations in the U.S. market.
Depreciation and amortization expense for the 1997 three and nine months
increased by 56% and 83% to $602,838 and $1,765,947, respectively, as compared
to $385,300 and $962,915 for the 1996 three and nine months, respectively. The
increase in depreciation is primarily attributable to additional equipment
related to the acquisition of Boone in June 1996 and the acquisition of two
telemetry systems in November and December 1996. The 1997 three and nine months
also includes an amortization charge of $46,580 and $123,740, respectively,
related to the amortization of goodwill recognized on the acquisition of Boone
and the
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acquisition of Hydrokinetic Surveys of Canada Ltd. ("Hydrokinetic"),
respectively. Hydrokinetic was acquired in April 1997.
Interest and other income for the 1997 three and nine months decreased by
$10,011 and $84,726, to $13,952 and $20,502, respectively as compared to $23,963
and $105,228 for the 1996 three and nine months, respectively. The 1996 three
and nine month period includes interest income generated on the proceeds from
the Company's initial public offering in November 1995.
Interest expense for the 1997 three and nine months increased by 68.8% and
72.4% to $104,112 and $377,450, respectively, as compared to $61,670 and
$218,925 for the 1996 three and nine months, respectively. These increases
primarily result from increased debt levels related to the acquisition of two
data acquisition systems, geophones and cables for the Company's U.S. operation
and a new set of vibroseis units.
The Company's effective income tax rate was approximately 44% for all
reported periods. Minor variances from this rate are due to certain
non-deductible expenses.
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 temporarily 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 fiscal quarters and a significant decrease in revenues and net income
during the third and fourth fiscal quarters. With the acquisition of Boone in
June 1996 the Company has expanded and diversifed its operations into the United
States, which has somewhat reduced 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.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997 the Company had cash of $844,253 and working capital of
$640,996, which includes the current portion of long term debt in the amount of
$1,372,918.
In December 1996 the Company entered into a financing agreement whereby the
Company's then existing capital loan and equipment financing was refinanced and
additional funding was provided for the acquisition of capital equipment
("CapLoan #1"). This refinancing resulted in term debt in the principal amount
of approximately $5,105,100 for which all of the Company's equipment is pledged
as collateral. CapLoan #1 is evidenced by a debenture bearing interest at a rate
equal to the lender's cost of funds plus 3.00% (the Company's effective interest
cost at July 15, 1997 was 6.719%), is payable in monthly principal installments
of $102,000 plus interest, and matures in February 2001.
In October 1996 the Company entered into a "lease to purchase" agreement
for a telemetry data acquisition system whereby the Company had the right to
exercise a purchase option (the "Purchase Option") on April 30, 1997 with credit
being given for a portion of the lease payments made during the period November
1, 1996 to April 30, 1997. In April 1997 the Company exercised the Purchase
Option and entered into a financing agreement ("CapLoan #2") with its existing
capital asset lender to provide approximately $650,000 for the exercise of the
Purchase Option. CapLoan #2 is evidenced by a debenture bearing interest at a
rate equal to the lender's cost of funds plus 2.75% (the Company's effective
interest cost at July 15, 1997 was 6.469%) and is repayable in monthly principal
installments of $13,000 plus interest, and matures in June 2001.
9
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In July 1997 the Company entered into an Offer to Finance agreement
("CapLoan #3") whereby the Company's existing capital asset lender agreed to
provide approximately $1,520,000 of additional term debt to fund a portion of
the purchase price of three data acquisition systems. Delivery of these systems
is scheduled to occur in August, September and November 1997. CapLoan #3 will
bear interest at the lender's cost of funds plus 2.75% and is repayable in
monthly principal installments of $31,700 plus interest, and matures in
September 2001.
Based on the lender's cost of funds at July 15, 1997 the Company's debt
service requirements in connection with CapLoan #1, CapLoan #2 and CapLoan #3
(the "Capital Loans") are expected to aggregate approximately $2,040,000 for the
next twelve months.
In addition to its capital asset financing the Company continues to
maintain operating lines of credit in Canada and the United States. The Canadian
line of credit provides for an aggregate of up to $1,200,000 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 and bear interest at the bank's prime rate plus .75%. The
Company's Canadian trade receivables have been pledged as collateral for
borrowings under the Canadian operating line. The United States line of credit
provides for an aggregate of up to $250,000 in advances available to the
Company. Borrowings under the United States operating line are payable on demand
and bear interest at prime plus 1.00%. The Company's United States trade
receivables have been pledged as collateral for borrowings under the United
States operating line. Advances under the Company's operating lines of credit
were $506,879 as of June 30, 1997.
Net operating cash flows provided by operating activities for the nine
months ended June 30, 1997 amounted to $2,722,062 and net operating cash flows
used by operating activities for the nine months ended June 30, 1996 amounted to
$423,411. The increase in operating cash flow for the 1997 nine months as
compared to the 1996 nine months is attributable to increased operating activity
and profitability, which resulted in increased cash generated from operations,
and a lesser reduction in non-cash working capital.
Net cash provided by financing activities for the 1997 nine months of
$1,552,358 is primarily attributable to an increase in the Company's term debt
and short term bank indebtedness. Net cash provided by financing activities for
the 1996 nine months is primarily attributable to proceeds from the Company's
initial public offering.
Cash used in investing activities of $3,430,167 for the 1997 nine months
results from the purchase of additional seismic data acquisition equipment and
the acquisition of Hydrokinetic at a cost of $312,000. Cash used in investing
activities of $6,377,936 for the 1996 nine months is primarily attributable to
capital equipment expenditures of $4,837,936 and the acquisition of Boone at a
cost of $1,740,000.
The Company will require satisfactory operating cash flows to continue
operations, complete capital expenditures and meet its principal and interest
obligations with respect to the Capital Loans. The Company anticipates, based on
its current plans and assumptions, funds expected to be generated from
operations will be sufficient to satisfy the Company's existing cash
requirements over the next twelve month period. However, the Company's ability
to meet its debt service and other obligations depends on its future performance
which is subject to general economic conditions, oil and gas commodity prices
and other business factors beyond the Company's control. If the Company is
unable to generate sufficient cash flow from operations or to comply with the
terms of the Capital Loans it may be required to refinance all or a portion of
its existing debt or to obtain additional financing, although there can be no
assurance that the Company will be able to obtain such refinancing or additional
financing.
As of June 30, 1997 the Company's backlog of commitments for services was
approximately $11.9 million, of which the backlog for the United States segment
of operations was approximately $10.6 million. It is anticipated that
substantially all of the orders and commitments included in the backlog will be
completed within the next six months. Such backlog consists of written orders or
commitments believed to be firm. Contracts for the Company's services are
occasionally varied or modified by mutual consent and in certain instances are
cancelable by the customer on short notice without penalty. As a result of these
factors the
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Company's backlog as of any particular date may not be indicative of the
Company's actual operating results for any succeeding period and is subject to
seasonal fluctuations as discussed.
Included in the June 30, 1997 accounts receivable balance of $3,367,562 and
the accounts payable and accrued liabilities balance of $2,572,055 were certain
reimbursable amounts which are not included in the Company's revenue or direct
costs. In accordance with the terms of various project agreements, certain costs
are paid by the Company and passed on or flowed through to the customer at cost.
As a result these reimbursable costs are included in accounts receivables and
accounts payable even though they do not impact revenue or direct expenses. The
collection of accounts receivable and the payment of accounts payable are
expected to continue to occur in the normal 30 to 60 day time period following
billing. As of August 5, 1997 approximately 91% of the June 30, 1997 accounts
receivable have been collected.
Work-in-progress at June 30, 1997 was $1,175,829 as compared to $381,273 as
at September 30, 1996. The increased value of work-in-progress primarily
reflects a larger component of project work which is still in progress and, in
accordance with the project terms, will be billed and recognized in accounts
receivable upon completion of the project.
The decrease in income taxes recoverable at June 30, 1997 resulted from the
recovery of approximately $430,000 of previously paid income taxes, which were
recoverable as a result of the 1996 operating loss. Income taxes payable of
$634,958 at June 30, 1997 recognizes the taxable nature of operating results for
the nine months ended June 30, 1997.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
In accordance with the terms of the Securities Purchase Agreement with
Boone Geophysical, Inc. and Lynn Boone dated as of May 31, 1996, the Company
issued 11,075 common shares, with a fair market value of $50,000, to Lynn Boone
effective June 1, 1997.
This transaction was a private transaction not involving a public offering
and was exempt from the registration provisions of the Securities Act of 1933,
as amended, pursuant to Section 4(2) thereof. The sale of securities was without
the use of an underwriter, and the certificate evidencing the common shares
bears a restrictive legend permitting the transfer thereof only upon
registration of the shares or an exemption under the Securities Act of 1933, as
amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<S> <C>
10.26 (Representative Form of one of three agreements) Conditional Sale Agreement
between Venture Seismic Ltd. and Geo-X Systems Ltd. dated June 19, 1997 (1)
10.27 Offer to Finance between Roynat, Inc. and Venture Seismic Ltd. dated July 16,
1997
27 Financial Data Schedule
</TABLE>
- ---------------
(1) Confidential Treatment requested for a portion of this Exhibit
(B) REPORTS ON FORM 8-K
The Registrant did not file any reports on Form 8-K during the three months
ended June 30, 1997.
11
<PAGE> 12
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/ GREG WIEBE
--------------------------------
By: Gregory B. Wiebe
Vice President Finance and Chief
Financial Officer
Dated: August 7, 1997
12
<PAGE> 1
EXHIBIT 10.26
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by an * and [ ], have
been separately filed with the Commission.
CONDITIONAL SALE AGREEMENT
THIS AGREEMENT made as of the 19th day of June, 1997,
BETWEEN:
VENTURE SEISMIC LTD., a body corporate having its head office
at
3110 - 80th Avenue S.E., Calgary, Alberta, Canada T2C 1J3
(hereinafter called the "Purchaser")
-- and --
GEO-X SYSTEMS LTD., a body corporate having its head office at
900, 425 - 1st Street S.W., Calgary, Alberta, Canada T2P 3L8
(hereinafter called the "Vendor")
WHEREAS:
1. The Purchaser wishes to purchase certain equipment from the Vendor, on
the terms and conditions hereinafter set forth.
2. The equipment to be purchased by the Purchaser from the Vendor is set
out and described in Schedule "A" attached hereto and forming part hereof
(the "Equipment").
3. Delivery of the equipment is to occur on or before August 1, 1997.
NOW THEREFORE IN CONSIDERATION OF the mutual premises and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
4. The purchase price for the Equipment shall be the total of (A), (B)
and (F) as set forth in the following statement:
STATEMENT
<TABLE>
<S> <C> <C>
(A) Regular cash selling price $ [ ] *
(B) G.S.T. @ 7% $ [ ] *
(C) Regular Cash Selling Price plus G.S.T. $ [ ] *
(D) Less: Cash Down Payment $ [ ] *
(E) Balance of Cash Price $ [ ] *
(F) Add: Credit (Finance) charges
ANNUAL PERCENTAGE RATE -- 0.00% $ [ ] *
(G) Time Balance $ [ ] *
(H) TOTAL PURCHASE PRICE [TOTAL OF (A), (B) AND (F)] $ [ ] *
</TABLE>
5. The Purchaser hereby promises and agrees to pay the said Total *
Purchase Price of $[ ] to the Vendor at Calgary, Alberta as
follows:
(a) The sum of $[ ] shall be payable on the date of execution *
of this Agreement.
1
<PAGE> 2
The information below marked by * and [ ] has been omitted pursuant to
a request for confidential treatment. The omitted portion has been separately
filed with the Commission.
(b) The sum of $[ ] on delivery of the Equipment together with *
interest on all overdue installments or so much thereof as may from
time to time remain unpaid, and on any other amounts owing as
described hereafter and remaining unpaid from time to time, at the
rate of twelve (12) per centum per annum to be computed monthly not
in advance from the date of default in payment thereof, both before
and after judgment (hereinafter called the "Interest").
6. The Vendor shall mount the Equipment in a recording truck supplied by
the Purchaser and prepared to the reasonable specifications of the Vendor.
This installation shall take place at a mutually agreeable location.
7. The Vendor shall test the Equipment prior to delivery to ensure that
the Equipment is performing to the Vendor's published specifications. The
Purchaser's representatives may be present for and participate in this
testing.
8. By accepting the Equipment, the Purchaser acknowledges and agrees that
the Equipment has been prepared and is operating for its intended purpose
and the Purchaser acknowledges that the Equipment is sold on an "as is"
and "where is" basis, and that otherwise as expressly set out in this
Agreement, Vendor makes no representations or warranties, express or
implied (by statute or otherwise), as to the Equipment and assumes no
responsibility for the condition or intended use of the same.
9. The Vendor shall provide the following warranty with regard to the
Equipment from the date of delivery thereof,
(a) Twelve months parts and labour warranty on all Central Recording
Unit components.
(b) Twenty four months parts and labour warranty on all Remote
Acquisition Modules and Line Tap Units.
(c) The standard cable manufacturer's warranty on cables.
(d) No warranty is provided on batteries.
(e) This warranty does not apply to connectors or to units which have
been subject to physical damage, misuse, unauthorized repair or
modification or loss due to any reason.
(f) When warranty service is required at a remote location, the
Purchaser shall reimburse the Vendor for travel and living expenses
for the Vendor's technicians to travel from Calgary, Alberta to the
location of the Equipment and return to Calgary, Alberta.
10. After the warranty period, the Vendor shall offer maintenance for the
Equipment at the Vendor's then prevailing shop rates.
11. It shall be the Purchaser's responsibility to conduct such tests as
are appropriate with sufficient frequency to ensure that the Equipment is
functioning properly. The Vendor specifically does not accept and shall
not be responsible for any direct or indirect liability or loss (including
loss of profit, business, revenue, goodwill, or anticipated savings)
resulting out of or in any way connected with the Purchaser's use of the
Equipment, including without limitation any malfunction or non-operation
of the Equipment or any of its component parts.
12. The Purchaser acknowledges and agrees that any and all trade marks,
trade names, copyrights, patents and other intellectual property rights
used or embodied in or in connection with the ARAM 24 Seismic Recording
System shall be and remain the sole property of the Vendor. In the event
that new inventions, designs or processes evolve in the performance of or
as a result of the use of the ARAM 24 Seismic Recording System by the
Purchaser, the Purchaser acknowledges and agrees that the same shall be
the property of the Vendor unless otherwise agreed in writing by the
Vendor.
2
<PAGE> 3
13. The Purchaser further recognizes and accepts that the Equipment and
information and know how relative thereto incorporates certain proprietary
information (the "Proprietary Information"). The Purchaser undertakes to
keep all such Proprietary Information confidential and not directly or
indirectly, at any time or in any place, disclose to any others (excepting
the Purchaser's officers or employees having a need to know or otherwise
as permitted by this Agreement) or use in any way other than in connection
with the proper use of the Equipment, and Proprietary Information. As part
of its obligation under this Clause 13, the Purchaser shall counsel its
employees and representatives regarding its and their obligations
regarding the Proprietary Information.
14. The Purchaser shall not, without the prior written consent of the
Vendor, copy or manufacture or permit to be copied any of the Equipment
including, without limitation, those elements of the Equipment
incorporating Proprietary Information.
15. The Purchaser shall not, without the prior written consent of the
Vendor, show or permit to be shown any internal feature of the said
Equipment and supplies or any drawings, schematics, diagrams, manuals or
instructions or other documentation relative thereto to any other person;
provided, however, that the foregoing prohibition shall not prevent the
Purchaser showing any of the foregoing to any of the Purchaser's employees
or others having a need to know for the purpose of the proper conduct of
the Purchaser's business, subject to the Purchaser giving written
instruction to such employees or others that the features and
documentation are to be treated in a confidential manner in accordance
with this Agreement.
16. The Purchaser shall enter into a Software License with the Vendor as
per Schedule "B" attached hereto and forming a part hereof.
17. In the event of default by the Purchaser, the Purchaser shall
reimburse all costs and expenses incurred by the Vendor, including but not
limited to removing, holding, preparing for sale and selling the Equipment
or any of it, judicial costs, legal costs and legal fees on a solicitor to
his own client basis (hereinafter collectively called the "Costs"), and
such Costs incurred and paid by the Vendor shall be immediately due and
payable by the Purchaser to the Vendor with Interest as aforesaid.
18. It is agreed that until the said Total Purchase Price and applicable
Costs and Interest are fully paid, title to and ownership in the Equipment
shall remain with the Vendor and the Equipment shall remain the property
of the Vendor, but the same shall be entirely at the Purchaser's risk.
19. During the term of this Agreement, and so long as title to and
ownership of the Equipment remain with the Vendor, the Equipment shall
only be used in British Columbia, Alberta and Saskatchewan or such other
locations as the Vendor shall consent to in writing. The Purchaser shall
promptly reimburse the Vendor for legal expenses to register this
Agreement in any other jurisdiction in which the use of the Equipment is
specifically granted by the Vendor.
20. The Purchaser agrees that in the event it makes default under this
Agreement and in particular in any of the payments required to be made
pursuant to this Agreement, the whole unpaid balance of the said Total
Purchase Price and applicable Costs and Interest shall immediately become
due and payable, and the Vendor or its agent, may enter upon any premises
where the Equipment may be and take possession of the Equipment without
any previous demand, using such force as may be required for that purpose
and may re-sell the Equipment or any portion thereof, notwithstanding that
a part of the Total Purchase Price may have been paid, or that security
may have been given therefor and discounted by the Purchaser's bank or any
other party. If possession of the Equipment or any portion thereof is
taken by the Vendor, the Purchaser shall nevertheless upon a re-sale of
the Equipment, conducted pursuant to applicable law, the net amount
received from such re-sale by the Vendor, after deducting all Costs
applicable to the resale, shall be credited against the Purchaser's
obligations under this Agreement, and if the amount so credited exceeds
the balance then due by the Purchaser upon the same the Purchaser shall be
entitled to have such balance paid to it, but if such net amount received
form the re-sale is less than the amount then owing by the Purchaser then
the Purchaser shall remain liable for the amount still owing after such
credit is given it and the Vendor may, at its sole discretion,
3
<PAGE> 4
bring action against the Purchaser for the full amount of the Total
Purchase Price and applicable Costs and Interest remaining unpaid.
21. To give full effect to the last sentence in Clause 20 above, the
Purchaser acknowledges it is a body corporate and the Equipment is not
used or acquired for use primarily for personal, family or household
purposes and the Purchaser hereby expressly waives all rights, protection
and benefits afforded to it by Section 49 of the Law of Property Act
(Alberta) or the Limitation of Civil Rights Act (Saskatchewan) or by any
other section or legislation offering similar rights, protections or
benefits in present or future statutes. The Vendor's rights and remedies
herein are in addition to any given by law.
22. The Purchaser agrees to assume all risk of loss or damage to the
Equipment from whatsoever cause arising and to properly care for the
Equipment and keep all of it in good repair and not to remove the
Equipment, or any of it, from British Columbia, Alberta and Saskatchewan
without the prior written consent of the Vendor.
23. The Purchaser further agrees to keep the Equipment insured, more
specifically:
(a) The Purchaser shall ensure that at all times the Equipment is
insured against loss or damage by an "All Risks" Contractors
Equipment Floater, including without limitation loss by fire
(including extended coverage), theft, collision, sinking through
ice and muskeg, and such other risks of loss as are customarily
covered by insurance on the type of equipment sold hereunder by
prudent operators of business similar to that in which Purchaser is
engaged, in such amounts, in such form and with such insurers as
shall be satisfactory to Vendor, but in no event shall such
insurance be less than the full replacement value of the Equipment;
and
(b) The Purchaser shall maintain during the term of this Agreement
public liability and property damage insurance in respect of the
use, operation and possession of the Equipment with insurers
satisfactory to the Vendor in a minimum amount of $5,000,000 per
occurrence; and
(c) The insurance referred to in paragraphs a) and b) above shall be
arranged by Purchaser as a specific separate item of insurance such
that it does not form part of Purchaser's overall "blanket limit"
of coverage; and
(d) The insurance policy shall name Purchaser and Vendor as insureds,
shall name Vendor as loss payee thereof and shall contain a clause
requiring the insurer to give to Vendor at least 30 days' prior
written notice of any alteration in terms of such policy or of the
cancellation thereof. At Vendor's request, Purchaser shall furnish
to Vendor a certificate or certificates of insurance or other
evidence satisfactory to Vendor that such coverage is in effect,
provided, however, that Vendor shall be under no duty to either
ascertain the existence of or to examine such insurance policy or
to advise Purchaser in the event such insurance coverage shall not
comply with the requirements hereof. Purchaser shall, at its
expense, make all proofs of loss and take all other steps necessary
to recover insurance benefits unless advised in writing by Vendor
that Vendor desires so to do at Purchaser's expense. The Purchaser
and Vendor shall be noted on the Insurance Certificate as loss
payees as their interest may appear; and
(e) Purchaser shall immediately notify Vendor of any loss or damage to
any of the Equipment, or of any claim made against it relative to
the Purchaser's use, operation or possession of the Equipment.
24. The Purchaser further agrees that the bringing of an action or the
recovery of judgment by the Vendor against the Purchaser for the total
Purchase Price and applicable Costs and Interest under this Agreement or
any part thereof shall not vest in the Purchaser the title of the
Equipment, but that such title shall, notwithstanding such action or
judgment, be and remain in the Vendor until payment in full of its claim
against the Purchaser herein and shall be subject to the Vendor's right to
sell title to a third party on default.
4
<PAGE> 5
25. The Purchaser grants to the Vendor a purchase money security interest
in the Equipment, as security for the satisfaction of all of the
Purchaser's obligation to the Vendor hereunder or under any other
agreement made between the Purchaser and the Vendor.
26. The Purchaser may not assign the Purchaser's rights and obligations
under this Agreement and may not lease, loan or otherwise dispose of the
Equipment or any part thereof, unless the Vendor gives its prior written
approval. The Vendor shall have the right to assign this Agreement and all
its rights hereunder, at any time, to any individual, firm or corporation.
27. The Purchaser's obligations under clauses 12, 13, 14 and 15 of this
Agreement shall remain in effect even after completion or termination of
this Agreement.
28. Time shall in every respect be of the essence of this Agreement.
29. This Agreement shall enure to the benefit of and be binding upon the
parties hereto, their respective heirs, executors, administrators,
successors and assigns, and wherever the singular or masculine is used
herein, the same shall include the plural or feminine whenever the context
or circumstances so require.
30. The Purchaser shall keep the Equipment free of all liens, mortgages,
encumbrances, charges and other security interests.
31. No previous waiver or course of dealing shall affect the Vendor's
right to strict performance of other or future obligations of the
Purchaser.
32. Any provision of this Agreement prohibited by law shall be effective
to the extent of such prohibition without invalidating the remaining
provisions of this Agreement and the Vendor shall be entitled to any other
remedies available by law or statute.
33. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta applicable therein.
34. Any notice or other document required or permitted by any of the
provisions of the Agreement shall be given to the parties by written
notice at the following addresses or to such other addresses as the
parties may specify in writing:
If to the Purchaser, at:
VENTURE SEISMIC LTD.
3110 - 80TH AVENUE S.E.
CALGARY, ALBERTA, CANADA
T2C 1J3
ATTENTION: BRIAN KOZUN, PRESIDENT & CEO
If to the Vendor, at:
GEO-X SYSTEMS LTD.
900, 425 - 1ST STREET S.W.
CALGARY, ALBERTA, CANADA
T2P 3L8
ATTENTION: DON SIMPSON, PRESIDENT
Notice shall be effective if given personally to a director or officer of
a party, if delivered to the addresses specified above during normal business
hours, or if mailed by prepaid registered mail to the addresses and persons
specified above. If notice is mailed by prepaid registered mail, it shall be
deemed to have been received five days after deposit in a post office in Canada.
If at the time of mailing or between the time of mailing and deemed receipt
thereof, there occurs a mail strike, a slow-down or other labour dispute which
may affect the delivery of notice by mail, the notice given by mail shall be
effective only if actually delivered.
5
<PAGE> 6
35. All fees, levies, custom duties, taxes and charges of any nature
whatsoever, including goods and services or other governmental charges and
any additions or charges thereon, now and hereafter imposed by any
federal, provincial, state or municipal government or taking authority,
regulatory authority or political subdivision thereof or therein, relating
to the sale, delivery, use, financing or disposition of the Equipment or
the use of the Software or to any documents relating thereto, or relating
to this Agreement or anything contained herein, shall be for the account
of and be forthwith paid by the Purchaser as prescribed and if the
Purchaser neglects to pay, as aforesaid, the Vendor may pay and any amount
so paid by the Vendor shall be added to the Total Purchase Price and the
Total Purchase Price, or so much thereof as may remain unpaid, shall
become immediately due and payable by the Purchaser to the Vendor with
Interest as aforesaid.
36. Except as caused solely by Vendor negligence, Purchaser shall
indemnify Vendor for all losses, costs and liability (including but not
limited to claims based on strict liability in tort or as may be contained
in any legislation) which Vendor incurs in connection with the Equipment.
All indemnities and liability limitations in favour of Vendor shall
continue after the term of the Agreement and even if the Agreement is
terminated for any reason.
37. Purchaser shall from time to time provide Vendor with any credit
information relative to this Agreement which Vendor may reasonably
request.
38. This Agreement is the entire agreement between Purchaser and Vendor
with respect to the subject matter hereof and may be varied only by
written documentation signed by both Purchaser and Vendor.
39. All Vendor's rights are cumulative and not alternative and may be
exercised by Vendor separately or together in any order or combination.
40. Purchaser shall do all acts and execute all documents as Vendor may
require to give effect to this Agreement and to preserve and protect
Vendor's rights.
41. The Purchaser acknowledges receipt of a duplicate copy of this
Agreement immediately on the execution thereof, and it waives any rights
it may have with respect to receiving notification or copies of any
registrations made at any public registries with respect thereto.
42. All dollar amounts and references to currency herein are in Canadian
dollars.
43. This Agreement may be executed in counterparts.
DATED at the City of Calgary, in the Province of Alberta as of the date first
above written.
Purchaser:
VENTURE SEISMIC LTD.
Per: /s/ Greg Wiebe c/s
-------------------------------------
Chief Financial Officer
Vendor:
GEO-X SYSTEMS LTD.
Per: /s/ D.W. Simpson c/s
-------------------------------------
President
6
<PAGE> 7
The information below marked by * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
SCHEDULE "A" TO CONDITIONAL SALE AGREEMENT
BETWEEN GEO-X SYSTEMS LTD. AND VENTURE SEISMIC LTD.
The Equipment to be purchased by Venture Seismic Ltd. from Geo-X Systems Ltd.
and subject to the terms of this Agreement is as follows:
ARAM 24 Seismic Recording System components as listed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
CENTRAL RECORDING UNIT QTY UNIT PRICE EXTENDED PRICE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCLUDING:
- ------------------------------------------------------------------------------------------------
Basic acquisition module with 3 Line Interface Cards
- ------------------------------------------------------------------------------------------------
200 MHz P-6 PC controller -- 512 Kbytes of cache
- ------------------------------------------------------------------------------------------------
-- Quad configurable w/single P6
- ------------------------------------------------------------------------------------------------
-- 128 MB of ram memory
- ------------------------------------------------------------------------------------------------
-- 9 Gbyte Hard drive
- ------------------------------------------------------------------------------------------------
-- CD ROM
- ------------------------------------------------------------------------------------------------
2 ea. Exabyte backup tape drives
- ------------------------------------------------------------------------------------------------
17" Monitor, Keyboard & Roller Ball Mouse
- ------------------------------------------------------------------------------------------------
Interfaces to system, tape, plotter
- ------------------------------------------------------------------------------------------------
ARAM 24 Dynamite Recording System software license
- ------------------------------------------------------------------------------------------------
ARAM 24 Power Supply & 19" System Rack 1 [*] [*]
- ------------------------------------------------------------------------------------------------
CRU OPTIONS & UPGRADES
- ------------------------------------------------------------------------------------------------
Additional Line Interface Cards 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to 256 MB of ram memory 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to 512 MB of ram memory 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to 1024 MB of ram memory 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to Dual P-6 CPU operation [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to Triple P-6 CPU operation [*] [*]
- ------------------------------------------------------------------------------------------------
Upgrade PC to Quad P-6 CPU operation [*] [*]
- ------------------------------------------------------------------------------------------------
Vibroseis option 0 [*] [*]
- ------------------------------------------------------------------------------------------------
CRU PERIPHERALS
- ------------------------------------------------------------------------------------------------
Uninterrupted power supply 1 [*] [*]
- ------------------------------------------------------------------------------------------------
Fujitsu 3480 tape drive 1 [*] [*]
- ------------------------------------------------------------------------------------------------
Thermal plotter -- OYO 612 1 [*] [*]
- ------------------------------------------------------------------------------------------------
Phillips 4 Channel Oscilloscope 1 [*] [*]
- ------------------------------------------------------------------------------------------------
Sub-total for Central Recording Unit Equipment [*]
- ------------------------------------------------------------------------------------------------
LINE EQUIPMENT
- ------------------------------------------------------------------------------------------------
RAM MK-II, 8 channels each 45 [*] [*]
- ------------------------------------------------------------------------------------------------
Field Replaceable connectors (per RAM) 45 [*] [*]
- ------------------------------------------------------------------------------------------------
Line Tap Units (LTUs) 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Field Replaceable connectors (per LTU) 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Microwave repeater unit -- per pair 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Battery packs -- 12 amp hour 90 [*] [*]
- ------------------------------------------------------------------------------------------------
Solar Battery pack 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Battery Chargers -- charge 10 packs simultaneously 3 [*] [*]
- ------------------------------------------------------------------------------------------------
CABLES -- CABLES -- CABLES, 220 METER, 12.8 KG.
- ------------------------------------------------------------------------------------------------
ARAM 24 6 Pair 2DL cable 55 [*] [*]
- ------------------------------------------------------------------------------------------------
2D Inline Jumper Cable 22 meter -- Takeouts (8) 2 [*] [*]
- ------------------------------------------------------------------------------------------------
Sub-total for Line Equipment [*]
- ------------------------------------------------------------------------------------------------
TEST EQUIPMENT
- ------------------------------------------------------------------------------------------------
RAM test/maintenance station [*] [*]
- ------------------------------------------------------------------------------------------------
Truck simulator / stand alone line tester [*] [*]
- ------------------------------------------------------------------------------------------------
Cable tester 0 [*] [*]
- ------------------------------------------------------------------------------------------------
Hand held test unit with meter 2 [*] [*]
- ------------------------------------------------------------------------------------------------
Power Head with 9 volt battery 4 [*] [*]
- ------------------------------------------------------------------------------------------------
Sub-total for Test Equipment [*]
- ------------------------------------------------------------------------------------------------
--------------
SUB-TOTAL [*]
- ------------------------------------------------------------------------------------------------
DISCOUNT [*]
- ------------------------------------------------------------------------------------------------
--------------
TOTAL [*]
- ------------------------------------------------------------------------------------------------
--------------
</TABLE>
All dollar amounts and references to currency herein are in Canadian dollars.
7
<PAGE> 8
SCHEDULE "B" TO CONDITIONAL SALE AGREEMENT
BETWEEN GEO-X SYSTEMS LTD. AND VENTURE SEISMIC LTD.
SOFTWARE LICENSE
GRANT OF LICENSE TO VENTURE SEISMIC LTD. ("VENTURE") BY GEO-X SYSTEMS LTD.
("GEO-X")
GEO-X SOFTWARE PRODUCT
This software product is the object code of all software used in or with the
ARAM 24 Seismic Recording System Package, including all amendments, supplements,
modifications, enhancements and new versions thereof (collectively, the
"Software").
The documentation (the "Documentation") includes all instructional information,
user manuals and other materials, together with all amendments, supplements,
modifications and new versions thereof, which relate to or are used in
association with the Software and/or the ARAM 24 Seismic Recording System
Package. The Software and Documentation are herein collectively referred to as
the "Products".
GEO-X SOFTWARE LICENSE
1. GRANT OF LICENSE. In consideration of Venture's purchase of an ARAM 24
Seismic Recording System and entering into a Conditional Sale Agreement with
Geo-X Systems Ltd. dated June 19th, 1997 (the "Conditional Sale Agreement"),
Geo-X, as licensor, grants to Venture, as licensee, a non-exclusive,
nontransferable, and limited right use of the Products.
2. REVISIONS AND UPGRADES. During the first year following delivery of
Venture's ARAM 24 Seismic Recording System, and providing that Venture has
accepted the Equipment contained in the Conditional Sale Agreement, Geo-X will
provide to Venture any new released versions of the Software and Documentation
pertaining thereto which Geo-X develops. Following that time, Geo-X will offer
subsequent upgrades of the Software and Documentation pertaining thereto at
Geo-X's then prevailing upgrade fees. The terms of this agreement shall apply to
all upgraded or revised versions of the Software and Documentation pertaining
thereto.
3. OWNERSHIP OF SOFTWARE. As licensee, Venture owns the physical media on which
the Products are originally or subsequently recorded (subject to any retention
of title contained in the Conditional Sale Agreement), but Geo-X retains title
and ownership of the Software recorded on the original media and all subsequent
copies of the Software, regardless of the form or media in or on which the
original and other copies exist.
4. COPY RESTRICTIONS. The Products are copyrighted by Geo-X. Unauthorized
copying of the Products is expressly forbidden. If the Equipment is accepted and
the sale completed, the Software may be copied by Venture for backup purposes so
long as it is used solely for Venture's ARAM 24 Seismic Recording System, which
is the subject of the Conditional Sale Agreement.
5. USE RESTRICTIONS. Venture may use the Software on up to three computers
provided that its use is solely for the preparation and analysis of data to be
acquired or having been acquired with Venture's ARAM 24 Seismic Recording
System, which is the subject of the Conditional Sale Agreement.
6. TRANSFER RESTRICTIONS. The Products are licensed only by Venture, the
licensee, and may not be transferred to any other individual or company without
the prior written consent of Geo-X. In no event may Venture transfer, assign,
rent, lease, sell, or otherwise dispose of the Products on a temporary or
permanent basis without such written consent.
7. CONFIDENTIAL INFORMATION. All information, data, drawings, specifications,
documentation, software listings, source or object codes which Geo-X may have
imparted and may from time to time impart
8
<PAGE> 9
to Venture relating to the Products, is proprietary and confidential. Venture
hereby agrees that it shall use the same solely in accordance with the
provisions of this License and that it shall not at any time during or after
expiry or termination of this License, disclose the same, whether directly or
indirectly, to any third party without Geo-X's prior written consent. Venture
further agrees that it shall not itself or through any subsidiary, agent or
third party modify, vary, enhance, copy, sell, lease, license, sub-license or
otherwise deal with the Products or any part or parts or variations,
modifications, copies, releases, versions or enhancements thereof or have any
software or other program written or developed for itself based on any
confidential information supplied to it by Geo-X.
8. TERMINATION. This License shall be effective until terminated. This License
shall terminate automatically without notice from Geo-X if:
(a) Venture fails to comply with or is in breach of any term, condition or
provision of this License or the Conditional Sale Agreement; or
(b) Venture is declared or adjudged bankrupt or if a receiver or
receiver-manager or liquidator is appointed over any of its assets or
undertaking.
Upon termination Venture shall destroy all copies of the Software, including
modified copies, if any. This License will terminate automatically after 10
years following the date of delivery of the Software or any upgrades or
revisions to the Software. After such 10 year period, Venture may use the
Software without restriction.
9. LIMITED WARRANTY. The Products are provided "as is" without warranty of any
kind. Further, Geo-X does not warrant, guarantee, or make any representations
regarding the use, or the result of use, of the Products in terms of
correctness, accuracy, reliability, currentness, or otherwise. The entire risk
as to the results and performance of the Products or any consequences resulting
form any use of the Products is assumed entirely by Venture. Geo-X warrants that
the media on which the Software is recorded is free from defects in materials
and workmanship under normal use and service for a period of fifteen months from
the date of Venture's receipt of the media. The foregoing is the only warranty
of any kind, either express or implied (by statute or otherwise). No oral or
written information or advice given by Geo-X or its representatives shall create
a warranty or in any way increase the scope of this warranty.
10. LIMITATION OF LIABILITY. Geo-X's entire liability and Venture's exclusive
remedy as to the media shall be replacement of the media that does not meet
Geo-X's Limited Warranty as set out above, and which is returned to Geo-X with a
copy of the receipt. If failure of the media has resulted from accident, abuse,
or misapplication, Geo-X shall have no responsibility or obligation to replace
the media. Any replacement media shall be warranted for the remainder of the
original warranty period only. Neither Geo-X nor any of its representatives or
anyone else who has been involved in the creation, production, sale, or delivery
of this product shall be liable for any damages, including but not limited to,
direct, indirect, consequential, special, exemplary, or incidental damages
(including damages for the loss of business profits, business interruption, loss
of data or information, and the like) arising out of the use of, inability to
use, or performance of such product, even if Geo-X has been advised of the
possibility of such damages.
11. INTELLECTUAL PROPERTY RIGHTS. Venture acknowledges that nay and all of the
trade marks, trade names, copyrights, patents and other intellectual property
rights used or embodied in or in connection with the Products shall be and
remain the sole property of Geo-X. Venture shall not during or at any time after
the expiry or termination of this License in any way question or dispute the
ownership by Geo-X of any such rights. In the event that new inventions, designs
or processes evolve in performance of or as a result of this License, Venture
acknowledges that the same shall be the property of Geo-X unless otherwise
agreed in writing by Geo-X, and Venture shall hold same in trust for Geo-X and
forthwith upon the request of Geo-X assign the same to Geo-X.
12. WAIVER. Failure or neglect by Geo-X to enforce at any time any of the
provisions hereof shall not be construed nor shall be deemed to be a waiver of
Geo-X's rights hereunder nor in any way affect the validity of the whole or any
part of this License nor prejudice Geo-X's rights to take subsequent action.
9
<PAGE> 10
13. HEADINGS. The headings of the terms and conditions herein contained are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of any of the terms and conditions of
this License.
14. SEVERABILITY. In the event that nay of these terms, conditions or
provisions shall be determined invalid, unlawful or unenforceable to any extent,
such term, condition or provision shall be severed form the remaining terms,
conditions and provisions which shall continue to be valid to the fullest extent
permitted by law.
15. GOVERNING LAW. This License and its terms and conditions shall be governed
and interpreted in accordance with the laws of the Province of Alberta, Canada.
ACCEPTED AND AGREED this 20th day of June, 1997.
VENTURE SEISMIC LTD.
Per: /s/ Greg Wiebe c/s
10
<PAGE> 1
EXHIBIT 10.27
ROYNAT INC.
Suite 4500, Canterra Tower, 400 -- 3(RD) Avenue, S.W.
Calgary, Alberta T2P 4H2
Tel: (403) 269-7755 Fax: (403) 269-7701
July 16, 1997
CONFIDENTIAL
Venture Seismic Ltd.
3110 - 80th Avenue S.E.
Calgary, Alberta
T2C 1J3
ATTENTION: MR. BRIAN KOZUN, PRESIDENT
Gentlemen:
OFFER OF FINANCE
We are pleased to offer you supplemental financing in the amount of $2,100,000
to be allocated to the following program:
<TABLE>
<CAPTION>
PURPOSE SOURCE
- --------------------------------- ---------------------------------
<S> <C> <C> <C>
Purchase data acquisition
equipment...................... 2,500,000 RoyNat........................... 2,100,000
Working Capital.................. 400,000
---------- ----------
$2,500,000 $2,500,000
========== ==========
</TABLE>
Program changes may only be made with our prior written approval.
REPAYMENT
The principal amount of the financing is to be repaid by 48 monthly instalments
of $43,750.00 on the 15th of each month commencing October 15, 1997.
If disbursement is delayed, we may, at our option, extend the dates for
scheduled principal repayments.
INTEREST
Interest will be payable on the 15th day of each month at RoyNat's Floating Base
Rate plus 2.75% per annum.
Once the disbursement commences we will advise you monthly of the interest rate
in effect and the amount payable on the 15th of that month. RoyNat's Floating
Base Rate for the latest monthly period was 3.95% per annum.
Roynat's Floating Base Rate for the monthly period will be the arithmetic
average of the 1 month rate applicable to Canadian Dollar bankers' acceptances
on each Business Day during the monthly period, plus .50%.
You may, as provided in the attached Schedule "A", notify us in writing that you
wish to convert the rate of interest to a fixed rate equivalent to RoyNat's Term
Base Rate plus 2.75% per annum.
1
<PAGE> 2
RoyNat's Term Base Rate, when set, shall be equal to the then existing
Government of Canada Bond Yield for terms of 1 or 2 years plus .55%, and for
terms of 3, 4 or 5 years plus .75%, as the case may be, for the fixed term
selected.
SECURITY
This financing will be secured by:
1. Our standard Debenture as follows:
a) A fixed charge on all seismic equipment subject only to our prior
charge securing the existing financing. Our security will also include a
first fixed charge over three Aram 360 Channel Data Acquisition Systems
(detailed description to be provided).
b) A floating charge on all other assets subject only to RoyNat's
existing floating charge which will permit you to deal with these assets
in the ordinary course of business or give security to your Bankers by
way of an assignment of Trade Account Receivables and Trade Inventories.
2. The existing guarantee on our standard form of Boone Geophysical Inc. for
$2,000,000 supported by a collateral debenture secured by a charge on one
1200 Opseis Eagle Data Acquisition system and a floating charge on all
other assets which will permit you to deal with these assets in the
ordinary course of business or give security to your Bankers by way of an
assignment of Trade Account Receivables and Trade Inventories, will be
extended to cover this financing.
3. Waiver for the period this financing is outstanding of the landlord's
interest in your assets located at 3110 - 80th Avenue S.E., Calgary,
Alberta.
Upon acceptance, our Solicitor will contact your Solicitor to obtain the
information necessary to prepare the security documents. Our Solicitor's fees
and disbursements will be for your account.
INSURANCE
Insurance appropriate to the risks involved will be maintained by you, with loss
payable to RoyNat Inc. as mortgagee. If requested, the policies are to be
provided to us.
The existing assignment of insurance of $1,000,000 on the life of Brian Kozun
will be extended to cover this financing.
2
<PAGE> 3
ACCEPTANCE
This Offer of Finance and the attached schedule are open for acceptance until
July 18, 1997. A commitment fee of $15,750 is earned and payable at the time of
acceptance.
Thank you for the opportunity to participate in your long-term financing
requirements. We appreciate your business and look forward to receiving your
acceptance.
YOURS TRULY,
ROYNAT INC.
<TABLE>
<S> <C>
/s/ Blain Clow /s/ P. K. Gaudet
- ---------------------------------------- ----------------------------------------
Senior Account Manager Assistant Vice-President
</TABLE>
/sa
<TABLE>
<C> <S>
Date Accepted: July 17, 1997
For: Venture Seismic Ltd.
By: /s/ Brian Kozun
------------------------------------------------
Brian Kozun, President
</TABLE>
CORPORATE GUARANTOR:
<TABLE>
<C> <S>
Date: July 17, 1997
For: BOONE GEOPHYSICAL INC.
Per: /s/ Brian Kozun
------------------------------------------------
</TABLE>
3
<PAGE> 4
SCHEDULE "A"
TO OFFER OF FINANCE DATED JULY 16, 1997
IN THE AMOUNT OF $2,100,000
MADE BY ROYNAT INC. TO VENTURE SEISMIC LTD.
WARRANTY
By your acceptance of this Offer of Finance, you warrant that all information
which you furnish is true and correct.
DISBURSEMENT
1. Our funds are to be disbursed not later than January 16, 1998 and extension
of that date is subject to our approval.
2. Our funds will be disbursed after:
a) Completion of legal documentation, satisfactory to our solicitors.
b) Satisfaction of insurance requirements.
c) Satisfactory confirmation of program expenditures.
d) The other funds, if any, required to finance the Program have been
provided.
e) Satisfaction of the following contingent condition:
I) A review, satisfactory to RoyNat, of the lease purchase agreements
confirming that the equipment can be returned at any time within
the initial 12 month lease period.
3. Disbursement may be withheld if, in our opinion, a material adverse change
in risk has occurred.
STANDBY FEE
A standby fee of 2% per annum on the amount undisbursed will be calculated and
payable on the 15th day of each month commencing January 16, 1998. We may, at
our option, deduct these from our disbursements.
PREPAYMENT
Prepayment in whole or in part may be made at any time upon payment of 3 months'
interest on the principal amount prepaid. Partial prepayment will be applied in
reverse order of scheduled repayment.
However, you may prepay without penalty in each year, on the anniversary date of
the loan, an amount not exceeding 15% of the balance outstanding at the date of
prepayment, non-cumulative.
CANCELLATION
This Offer of Finance, when accepted, will be a binding contract. If you are
unable or unwilling to carry out the contract, you will pay to us as liquidated
damages an amount equal to 3 months' interest on the amount contracted at the
rate that would be applicable on the date of cancellation, as well as any other
fees or charges accrued to that date.
CONVERSION OPTION
We shall, within 60 days of receipt of your written request to convert this
financing to a fixed rate, confirm to you:
1. The rate that will apply.
2. The effective date of the conversion.
4
<PAGE> 5
3. Any extension of the term of the financing that we may require.
4. The prepayment conditions that will apply following conversion.
If you wish to proceed with the conversion on these terms, you must accept our
Amending Letter. If you do not accept our Amending Letter your conversion
request will be considered as withdrawn.
Following conversion, interest at the fixed rate will be calculated and payable
on the 15th day of each month.
A fee of $250.00 will be applicable to the conversion.
UNDERLYING CONDITIONS
1. Working capital will be maintained at not less than a ratio of 1:1. The
calculation of working capital will exclude the current portion of term
debt.
2. Venture Seismic Ltd. will remain a public company with Brian Kozun holding
approximately 30% of the voting common shares (no other individual
shareholder has more than a 5% interest in the company).
3. Should any equipment subject to our security be moved form either the
Alberta, Saskatchewan, Northwest Territories, British Columbia, Manitoba,
Texas, Louisiana, Arkansas, Alabama, Mississippi, Montana or North Dakota
jurisdictions, we are to be notified of its destination in advance so that
we may obtain the necessary security in the new location.
4. Default under any other financing, present or future, provided by us to you
will constitute default under this financing.
5. All conditions of the existing financing will remain unchanged.
ENVIRONMENTAL POLICY
You undertake to have our Standard Environmental Agreements executed and, during
the term of this financing to comply with all applicable environmental laws and
regulations; to notify RoyNat promptly of any claims, requests or violation
notices received concerning any of your property or the business carried out on;
and to indemnify and save harmless RoyNat against any losses or costs arising
from any breach by you of the environmental laws, which is claimed against
RoyNat Inc.
FINANCIAL STATEMENTS
Your audited financial statements must be provided within 120 days after the end
of each fiscal year and your unaudited semi-annual financial statements within
45 days after the end of the half year. All unaudited financial statements will
be approved by the signature of an Officer of the Company.
PRE-AUTHORIZED PAYMENT SYSTEM
By your acceptance of this Offer of Finance, you authorize RoyNat Inc. to draw
monthly cheques or prepare debits, by paper or electronic entry, in amounts
sufficient to cover payments on the loan and you authorize and instruct your
bank to honour those cheques or debits. However, if RoyNat requests payment by
cheque of amounts due to it, you agree to pay those amounts in this manner.
Please attach your cheque marked "VOID" to this Offer of Finance. You also agree
to renew this authorization if you change your bank or branch or account. For
this authorization, your bank is:
<TABLE>
<S> <C>
Bank: The Alberta Treasury Branch
Address: #5, 2681 - 36th Street N.E.
Calgary, Alberta T1Y 5S3
</TABLE>
- ------------------------------------------------------------------------------
ATTACH SAMPLE CHEQUE MARKED "VOID"
- ------------------------------------------------------------------------------
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.D.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 844,253
<SECURITIES> 0
<RECEIVABLES> 3,367,562
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,728,006
<PP&E> 15,932,618
<DEPRECIATION> 4,762,393
<TOTAL-ASSETS> 18,512,758
<CURRENT-LIABILITIES> 5,086,810
<BONDS> 3,713,251
<COMMON> 7,594,773
0
0
<OTHER-SE> 1,865,933
<TOTAL-LIABILITY-AND-EQUITY> 18,512,758
<SALES> 0
<TOTAL-REVENUES> 5,623,773
<CGS> 0
<TOTAL-COSTS> 4,330,862
<OTHER-EXPENSES> 1,082,490
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,112
<INCOME-PRETAX> 120,261
<INCOME-TAX> 61,900
<INCOME-CONTINUING> 58,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,361
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
