<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998
REGISTRATION NO. 333-45681
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 2 to
REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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VENTURE SEISMIC LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
ALBERTA, CANADA N/A
(State or other jurisdiction of Incorporation) (I.R.S. employer I.D. number)
</TABLE>
VENTURE SEISMIC LTD.
3110 80th Avenue, SE
Calgary, Alberta T2C 1J3
(403) 777-9070
(Address and telephone number of Registrant's principal executive offices)
BRIAN KOZUN
Chief Executive Officer and President
VENTURE SEISMIC LTD.
3110 80th Avenue, SE
Calgary, Alberta T2C 1J3
(403) 777-9070
(Address and telephone number of agent for service)
COPIES TO:
JILL M. COHEN, ESQ.
BACHNER, TALLY, POLEVOY & MISHER LLP
380 Madison Avenue
New York, New York 10017
(212) 687-7000
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF ADDITIONAL
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE ADDITIONAL REGISTRATION FEE
OF SECURITIES TO BE REGISTERED REGISTERED UNIT (1) OFFERING PRICE (2)*
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Common Shares, no par value........... 100,000 $5.44(2) $544,000 $160.48
Total................................. 100,000 $5.44(2) $544,000 $160.48
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* Previously Paid.
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(a) under the Securities Act of 1933.
(2) Fee for common shares to be sold by the selling securityholder is based on
the average of the high and low price of the common shares on February 2,
1998, as reported by the Nasdaq National Market
Pursuant to Rule 416, there are also being registered for resale such
additional Common Shares as may become issuable pursuant to "anti-dilution"
provisions of the warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
DATED MAY 29, 1998
VENTURE SEISMIC LTD.
100,000 COMMON SHARES
This Prospectus relates to 100,000 Common Shares, no par value (the "Common
Shares"), of Venture Seismic Ltd. (the "Company") issuable upon exercise of
warrants, which Common Shares may be offered and sold by a Securityholder named
herein (the "Selling Securityholder").
Except as otherwise set forth in a Prospectus Supplement, the Common Shares
covered by this Prospectus may be offered and sold from time to time in
transactions to purchase in certain states or U.S. territories on the Nasdaq
National Market or other exchanges or markets on which the Common Shares may be
traded, in the over-the counter market, in negotiated transactions, through the
writing of options on the Common Shares or a combination of such methods of sale
or through other means. Sales may be effected at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices, through registered broker-dealers (including broker-dealers
which may be affiliated with the Selling Securityholder) receiving compensation
in the form of discounts, concessions or commissions from the seller or the
purchasers of the Common Shares for whom such broker-dealers may act as agent or
to whom they sell as principal or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). See "Selling
Securityholder" and "Plan of Distribution."
None of the proceeds from the sale of the Common Shares will be received by
the Company, although the Company will receive proceeds from any exercise of the
warrants. The Company has agreed to bear certain expenses in connection with the
registration and sale of the shares being offered by the Selling Securityholder.
The Company's Common Shares are traded on the Nasdaq National Market
("Nasdaq") under the symbol VSEIF. On May 28, 1998, the closing bid price of the
Common Shares on Nasdaq was $6.75.
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THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL LOSS OF THEIR INVESTMENT. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May , 1998
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act of 1993, as amended ("Act") covering the securities offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in such Registration Statement and the exhibits thereto. For further
information with respect to the Company and the securities offered by this
Prospectus reference is hereby made to the Registration Statement and the
exhibits thereto, which may be inspected without charge at the public reference
facilities maintained at the principal office of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained upon written request from the public
reference section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Electronic registration statements made through the
Electronic Data Gathering, Analysis and Retrieval System are publicly available
through the Commission's Web site (http://www.sec.gov). Statements contained in
the Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed (or incorporated by reference)
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Such reports
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at the addresses shown
above. Copies of such material can be obtained from the Public Reference Section
of the Commission at the address shown above at prescribed rates or through the
Commission's Web site. Reports and other information concerning the Company may
also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Common Shares are listed on the Nasdaq National Market under the symbol
"VSEIF". Certain information, reports and proxy statements of the Company are
also available for inspection at the offices of the Nasdaq National Market
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-27070)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1997 including any amendments thereto or documents or
portions thereof incorporated by reference therein;
2. The Company's definitive proxy statement dated January 27, 1998, filed
pursuant to Section 14 of the Exchange Act;
3. The Company's Quarterly Reports on Form 10-QSB for the periods ended
December 31, 1997 and March 31, 1998;
4. The Company's current reports on Form 8-K as filed with the Commission
February 19, March 30 and May 29, 1998;
5. The description of the Company's Common Shares contained in the Company's
Registration Statement on Form 8-A declared effective on November 6, 1995,
as amended, registering the Common Shares under the Exchange Act; and
6. All other documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of this offering.
Any statement contained in this Prospectus or in any document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus
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<PAGE> 4
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute
a part of this Prospectus. The Company will provide without charge to each
person to whom this Prospectus is delivered, upon written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits to such documents which are not specifically
incorporated by reference into such documents). Requests for such documents
should be directed to the Company, 3110 80th Avenue SE, Calgary, Alberta T2C
1J3, Attention: Chief Financial Officer, telephone (403) 777-9074.
3
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein. Investors
should also carefully consider the information set forth under the heading "Risk
Factors."
THE COMPANY
Venture Seismic Ltd. (the "Company") is engaged primarily in the
acquisition of land and water-based seismic data for use in the exploration for
and development and field management of oil and natural gas reserves. The
Company acquires both traditional two-dimensional ("2D") and three-dimensional
("3D") seismic data on possible oil and gas reserves for its customers, which
range from junior exploration companies to fully-integrated multi-national
corporations. Acquisition of seismic data, a principal technique used in oil and
gas exploration to determine geological conditions, involves using either
explosives, vibroseis (vibrations) or airguns to generate and transmit acoustic
energy downward into the earth and subsequently capturing and recording the
information which is reflected back toward the surface by the various
intervening geological layers.
The Company acquires seismic data only on a contract basis for its
customers, who retain all rights to the information obtained, and the Company's
seismic data acquisition crews operate at the customers' exploration and
development field locations. During the fiscal years ended September 30, 1995,
1996 and 1997, the Company performed a total of approximately 500 projects for
over 100 different customers. The Company believes its seismic data technology
assists its customers in enhancing their exploration for new reserves, better
delineating their existing oil and gas fields and improving their reservoir
management techniques. Use of the Company's seismic data acquisition technology
may also result in decreased oil and gas finding costs and associated drilling
risks and the elimination of prospects that are unlikely to be successful.
The Company operates land and transition zone crews in Canada and the
southern United States. The Company owns approximately 10,700 channels and has
approximately 1,400 channels under short term rental. Equipment is moved between
the Canadian and U.S. markets depending upon the demand of the geographic areas
of operation. During the 1997-98 winter season the Company had six crews in
Canada and three in the United States. In response to current project demands in
the southern United States, the Company reconfigured its crews for the summer
season resulting in five crews in the United States and three in Canada. All of
the Company's equipment employs 24 bit technology and approximately 9,600
channels use telemetry technology to transmit the seismic data from the remote
acquisition modules to the central recording unit. The telemetry technology
employed by the Company permits the Company to operate efficiently in marsh or
swamp areas, rivers and shallow lakes, areas of difficult terrain and areas of
dense population. The telemetry systems also operate very well in sensitive
environmental areas by limiting environmental contact and damage. Although there
are several geophysical services companies in Canada, the Company believes that
it is currently the only one providing telemetry technology based services in
Canada.
The Company acquired a set of vibroseis units in December 1995 and in
October 1996. These units gave the Company the capability of performing
vibroseis projects for the first time in Western Canada (the Company does not
currently have vibroseis capability in the United States). Vibroseis projects
accounted for approximately 20%, 17% and 10% of the Company's revenues during
fiscal 1996 and 1997 and the six months ended March 31, 1998, respectively.
In addition the Company has expanded its operations through certain
strategic acquisitions. In June 1996 the Company acquired Boone Geophysical,
Inc. ("Boone"), a Texas based company engaged in the acquisition of land and
transition zone seismic data in the southern United States. For the fiscal 1997
year and for the six months ended March 31, 1998 approximately 35% and 55%,
respectively, of the consolidated revenue of the Company was derived from
projects conducted by Boone. In April 1997 the Company acquired Hydrokinetic
Surveys of Canada Ltd. ("Hydrokinetic"), a company based in Western Canada which
provides shallow marine airgun and survey services.
4
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The Company was organized under the laws of Alberta in August 1984. The
Company has three wholly owned subsidiaries, Boone Geophysical, Inc.,
Hydrokinetic Surveys of Canada Ltd. and an inactive subsidiary, Venture Seismic
Inc. (Texas). The Company's executive offices are located at 3110 80th Avenue
SE, Calgary, Alberta T2C 1J3 and its telephone number is (403) 777-9070.
RECENT DEVELOPMENTS
Warrant Redemption. On November 7, 1997, the Company called for redemption,
at a redemption price of $.10 per Warrant, all of the outstanding redeemable
Warrants ("Warrants") of the Company which were outstanding after 5:00 p.m., New
York Time, on January 5, 1998. Each Warrant entitled the holder thereof to
purchase one common share of the Company, no par value per share (the "Shares")
at an exercise price of $6.00 per Share. As of January 6, 1998 1,513,690
Warrants had been exercised, resulting in the issuance of 1,513,690 Shares and
aggregate net proceeds of $9,082,140 to the Company. Under the terms of the
Warrant Agreement the remaining 96,310 Warrants were redeemed by the Company at
a price of $0.10 per Warrant, or $9,631 in the aggregate. Of the proceeds, the
Company used approximately (i) $3,160,000 of the proceeds to exercise certain
purchase options on capital equipment leases in December 1997 and January 1998
and (ii) approximately $4 million as a loan to Continental Holdings Ltd.
("Continental") in connection with the proposed acquisition (the "Continental
Acquisition"). The Company intends to use the remaining proceeds from the
exercise of the Warrants to fund the acquisition of capital equipment and to
fund a portion of the acquisition cost of the Continental Acquisition.
Continental Acquisition. In March, 1998, the Company announced it had
entered into a definitive Securities Purchase Agreement (the "Purchase
Agreement") for the previously announced acquisition of 100% of the outstanding
capital stock of Continental, for consideration of 2,080,000 Common Shares
(valued at approximately $12 million as of the date of execution of the amended
Letter of Intent) and cash payments aggregating $1.5 million. The Purchase
Agreement also includes provision for employment agreements with the existing
management of Continental for a period of three years, as well as the nomination
of an individual selected by Continental to Venture's Board of Directors for
each of the next three fiscal years. If the Continental Acquisition is
consummated, the liabilities of Continental will be reflected on a consolidated
basis on the balance sheet of the Company. On a pro forma consolidated basis,
giving effect to the Continental Acquisition and the additional borrowings
related to the equipping of a second marine vessel, the Company anticipates its
long-term debt to increase by approximately $3 million and its debt service
requirements to increase by approximately $120,000 per month. The closing of the
Continental Acquisition is subject to a number of conditions, including receipt
of the requisite shareholder approval from the shareholders of the Company, as
well as receipt of certain third-party consents.
Continental is a privately held marine seismic data acquisition company,
based in Calgary, which currently leases and operates one marine seismic vessel
capable of performing 2D or 3D seismic surveys. To date Continental has only
performed 20 seismic surveys. Continental has completed seismic surveys in the
Persian-gulf, the North Sea, the Falkland Islands area, the Mediterranean and
off the coasts of West Africa and Norway. Audited revenue for Continental's
fiscal years ended December 31, 1996 and 1997 was $8.5 million and $9.6 million,
respectively, and net income was approximately $.6 million in 1996 and $1.9
million in 1997, after an adjustment to reflect normalized owner/management
compensation. The adjustments to net income accounts for the declaration by
Continental of discretionary owner/management bonuses, and the related income
tax effect of such bonuses which, in 1997, was declared in accordance with the
terms of the Purchase Agreement. These bonuses do not necessarily reflect the
economic value of management services provided but rather are a common tax
planning transaction for Canadian private companies. Reference is made to the
Company's Annual Report on Form 10-KSB, as at and for the year ended September
30, 1997, as amended, and its quarterly report on Form 10-QSB for the period
ended March 31, 1998 and the Company's current report on Form 8-K filed with the
Securities Exchange Commission on May 29, 1998 which includes certain financial
information relating to Continental and the Continental Acquisition.
5
<PAGE> 7
Continental has entered into an agreement in principle to lease a second
marine vessel, for a five year period commencing in March 1998, at an annual
cost of $2.7 million increasing to $3.1 million by the final year of the lease.
In addition Continental will be required to purchase capital assets, at an
estimated cost of $10 million to equip and refurbish the vessel (the
"Refurbishment"). Simultaneously with the execution of the Purchase Agreement
the Company agreed to loan, and in April 1998, loaned $4 million to Continental
(the "Continental Loan"), pursuant to a credit agreement (the "Credit
Agreement") dated March 27, 1998, payable in quarterly installments of principal
and interest commencing December 1, 1999 and bearing interest at the prime
lending rate of the Royal Bank of Canada plus 1%. The Continental Loan is to be
used by Continental to fund a portion of the costs of the Refurbishment. The
Continental Loan is secured by certain assets of Continental. Should closing of
the Continental Acquisition not occur, the Continental Loan, including interest,
is payable in quarterly instalments commencing December 1, 1999, consisting of
principal and accrued interest, and is subject to an equity conversion
provision, during the period from August 31, 1998 to December 1, 1999, equal to
approximately 26% of the capital of Continental, on a fully diluted basis at the
time of conversion. Upon the closing of the Continental Acquisition, the
Continental Loan will become an intercompany debt, due and payable to Venture.
In connection with the Refurbishment, Continental has agreed to enter into a
term loan for $3 million for a period of five years and bearing interest at
8.75%, for which the Company has agreed to act as guarantor, in the event the
Continental Acquisition is consummated. The remainder of the cost of the
Refurbishment is expected to be financed from cash resources of Continental and
supplier financing.
The Company has received correspondence, including a draft of a statement
of claim, from, and has been advised by, Canaccord Capital Corporation
("Canaccord"), a Canadian investment bank, indicating that Canaccord may pursue
legal action against each of the Company and Continental with respect to a claim
of entitlement to a fee of approximately $300,000 in connection with the
Continental Acquisition. In October and November 1997, representatives of the
Company, Continental and Canaccord had preliminary discussions regarding the
arrangement by Canaccord for the Company of a possible private financing to
assist in funding costs related to a potential acquisition of a Continental by
the Company. As of May 29, 1998, the Company had not received notice of any
formal legal proceedings.
6
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RISK FACTORS
The securities offered hereby are highly speculative in nature and involve
a high degree of risk. Prior to making an investment decision, prospective
investors in the Company's securities should give careful consideration to,
among other things, the risk factors set forth below. This Prospectus contains
forward-looking statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Reference is made in
particular to the description of the Company's plans and objectives for future
operations, assumptions underlying such plans and objectives and other
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms, variations of such terms
or the negative of such terms. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based. Factors which could cause such results to
differ materially from those described in the forward-looking statements
include, amongst other items, those set forth herein under "Risk Factors".
Capital Intensive Business; Cash Flow Shortages; Need for Additional
Funds. The Company's business is highly capital intensive requiring continuous
upgrading and expansion of its equipment base. In addition, capital is required
to operate and expand the Company's operations. In the event that the
Continental Acquisition is consummated, the business of Continental is highly
capital intensive and will require continual expansion and upgrading of its
existing equipment base. At March 31, 1998 the Company had cash of $5,229,339
and working capital of $5,544,025, which includes the current portion of long
term debt in the amount of $2,693,300. If the Continental Acquisition is
consummated, the Company's cash requirements will significantly increase in the
future. Because of the development of its 3D seismic data acquisition
infrastructure, the Company's working capital requirements increased
significantly over the last few years and are expected to continue to do so. In
addition, because the Company generally does not receive payment for a project
until 30 to 60 days following its completion, the Company is often required to
commit significant expenditures during the course of performing a project, prior
to its receipt of any payments from the customer. In addition, because fixed
costs account for a significant portion of the Company's costs and expenses, a
reduction in productivity or inability to obtain new contracts would result in
significant operating losses and cash flow shortages. Although the Company has
funded equipment purchases through bank borrowings and equipment lease purchase
contracts, it has no commitments to obtain any other additional debt or equity
financing for equipment purchases and there can be no assurance that additional
funds will be available, when required, on terms favorable to the Company or at
all. Any future issuances of equity securities would likely result in dilution
to the Company's then existing shareholders while the incurring of additional
indebtedness would result in increased interest expense and debt service
charges.
Debt Service Requirements; Consequences of Default and Covenants Under
Debenture. At March 31, 1998 the Company had long term debt consisting of
capital loans of $5,268,900 and equipment financing of $3,315,948. The capital
loans bear interest at the lender's cost of funds plus 2.75% and are payable in
monthly installments of approximately $141,200 plus interest and mature in
February, September and November 2001. The equipment lease bears interest at 9%
and is repayable in quarterly installments of approximately $196,000 comprised
of principal and interest and matures in January 2001. In May 1998, the Company
refinanced a lease purchase contract for 200 seismic acquisition remotes or
1,200 channels of data acquisition equipment, with a four year term loan with an
aggregate obligation of approximately $1,400,000. The term loan bears interest
at the lender's cost of funds plus 2.75% and is payable in monthly installments
of $28,000 plus interest and matures in July 2002. A general security agreement
on all equipment and a fixed charge on certain equipment have been pledged by
the Company as collateral for the long term debt. In addition, the Company has
assigned to the lender the proceeds of its key-man life insurance policy on
Brian Kozun, the Company's Chief Executive Officer. Debt service requirements
relating to the long term debt is estimated to aggregate approximately
$3,266,000 (including principal and interest payments) during the twelve month
period ending March 31, 1999. On a pro forma consolidated basis, giving effect
to the Continental Acquisition and
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<PAGE> 9
additional long term debt incurred by Continental related to the equipping of a
second marine vessel, the Company anticipates its long term debt to increase by
approximately $3,000,000 and its debt service requirements to increase by
approximately $70,000 per month. At March 31, 1998, the Company was in
compliance with all bank covenants. In addition, the Company maintains an
operating line of credit with a bank, under which advances of up to $1,200,000
could be available to the Company subject to certain limitations. As of March
31, 1998 the Company had advances of approximately $350,000 under the operating
line of credit and the Company believes substantially all of the additional
amounts under the operating line were available for borrowing. All of the
foregoing indebtedness is subject to various financial and operating covenants,
including requirements to maintain certain financial ratios. The Company's
ability to meet its debt service obligations will depend on the Company's future
operations, which are subject to prevailing industry conditions and other
factors, many of which are beyond the Company's control. Because both the
Company's term loan and its operating line of credit bear interest at rates that
fluctuate with prevailing interest rates, increases in such prevailing rates
would increase the Company's interest payment obligations and could have a
material adverse effect on the Company's financial condition and results of
operations. In the event of a violation by the Company of any of its loan
covenants or any other default by the Company on its obligations relating to its
term indebtedness the lenders could declare such indebtedness to be immediately
due and payable and in certain cases foreclose on the Company's assets. There
can be no assurance that in the event that the Company is in default of certain
of its loan covenants in the future, that the Company will be able to secure a
waiver from the lender. Moreover, to the extent that all of the Company's assets
continue to be pledged to secure outstanding indebtedness under the term loan
and its line of credit, such assets will not be available to secure additional
indebtedness, which may adversely affect the Company's ability to borrow in the
future. In the event of a default relating to the Company's indebtedness it is
likely that the Company's shareholders would forfeit all or a substantial
portion of their investment in the Company.
Risks Associated with the Consummation of the Continental
Acquisition. Although in March 1998, the company entered into the Purchase
Agreement, the consummation of the Continental Acquisition is subject to a
number of conditions, any of which may not occur, including receipt of requisite
shareholder, regulatory and/or third party approvals. Simultaneously with the
execution of the Purchase Agreement the Company agreed to loan, and in April
1998, the Company loaned $4 million to Continental, pursuant to the Credit
Agreement, payable in quarterly installments of principal and interest
commencing December 1, 1999 and bearing interest at the prime lending rate of
the Royal Bank of Canada plus 1%. The Continental Loan is to be used by
Continental to fund a portion of the costs of the Refurbishment. The Continental
Loan is secured by certain assets of Continental. Should closing of the
Continental Acquisition not occur, the Continental Loan, including interest, is
payable in quarterly instalments commencing December 1, 1999, consisting of
principal and accrued interest, and is subject to an equity conversion
provision, during the period from August 31, 1998 to December 1, 1999, equal to
approximately 26% of the outstanding capital of Continental on a fully-diluted
basis, at the time of conversion. Upon the closing of the Continental
Acquisition, the Continental Loan will become an intercompany debt, due and
payable to Venture. Continental has indicated to the Company that a portion of
the remainder of the cost of equipping the second marine vessel is expected to
be funded by borrowings of approximately $3 million under a term loan, existing
cash resources of Continental and supplier financing. Therefore, as a result of
the consummation of the Continental Acquisition, the Company's long-term debt,
on a consolidated basis will increase by approximately $3 million. Further, the
Company has agreed, in the event the Continental Acquisition is consummated, to
act as guarantor of the anticipated $3 million term loan. There can be no
assurance that Continental will be able to obtain financing for the
Refurbishment, on the terms anticipated, if at all. In the event that the
Continental Acquisition is not consummated, there can be no assurance that the
Company will be able to convert its advance to equity of Continental, on terms
acceptable to the Company, if at all, or that if the Continental Loan is
converted, that the Company will be able to liquidate its interest in
Continental on acceptable terms, if and when it chooses to do so. There can be
no assurance that all preconditions to the Continental Acquisition will be met
in a timely or satisfactory matter, or without undue expense to the Company.
Further, there can be no assurance, that, in connection with the consummation of
the Continental Acquisition, if ever, that Canaccord will not institute legal
proceedings against either the Company or Continental or that either party will
not incur any liability as a result of such proceedings, if any.
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Risks Associated with the Operations of the Company upon Consummation of
the Continental Acquisition. In the event that the Continental Acquisition is
consummated, the Company will be subject to a number of potential risks: capital
requirements; assimilation of new operations and personnel, including
management; adverse short-term effects on reported operating results; the
potential loss of key employees; the diversion of resources from the Company's
existing business, capabilities, equipment and technologies; coordination of
geographically separated facilities and work forces; management challenges
associated with the integration of the companies in addition to the other
requirements associated with growth of the Company's infrastructure and
capabilities; and maintenance of the Company's existing standards, controls,
procedures and policies. No assurance can be given that difficulties encountered
in integrating the operations of Continental will be overcome. In the event that
the Company consummates the Continental Acquisition, the process of integrating
Continental's operations, including its personnel, could cause interruption of,
or loss of momentum in, the activities of the Company's business and operations,
including those of the business to be acquired.
In addition, there can be no assurance that the Company will not incur
additional charges in subsequent periods to reflect other costs associated with
the Continental Acquisition or from the integration of operations after the
Continental Acquisition. As a result of the Continental Acquisition the
Company's annual amortization charge will increase significantly. There can be
no assurance that the Continental Acquisition will not have a material adverse
effect on the business, financial condition and results of operations of the
Company, will not result in significant unexpected liabilities or that the
Company will realize the benefits and strategic objectives sought through the
Continental Acquisition, including the addition of new capabilities, equipment
and technologies. Costs associated with the Continental Acquisition, or
liabilities and expenses associated with the operations of Continental, that
exceed the expectations of the Company, could have a material adverse effect on
the Company's financial condition and results of operations.
Continental has entered into an agreement in principle to lease a second
marine vessel, for a five year term commencing in March 1998, at an initial
annual cost of approximately $2.7 million increasing to $3.1 million by the end
of the lease. In addition, Continental will be required to complete the
Refurbishment, at an estimated cost of $10 million. A portion of the
Refurbishment is expected to be financed by Continental through (i) a $3 million
term loan, (ii) existing cash resources of Continental and (iii) supplier
financing. In connection with the anticipated $3 million term loan, the Company
has agreed, in the event the Continental Acquisition is consummated, to
guarantee the repayment of such obligation. To finance the remainder of the cost
in connection with the Refurbishment and pursuant to the Credit Agreement
entered into upon the execution of the Purchase Agreement, the Company has
advanced $4 million to Continental, subject to an equity conversion feature in
the event that the Continental Acquisition is not consummated. The Continental
Loan is secured by certain assets of Continental. In the event that the
Continental Loan Acquisition is not consummated, there can be no assurance that
the Company will be able to convert its advance to equity of Continental on
terms acceptable to the Company, if at all. Further, in the event that the
Continental Acquisition is not consummated and the Company converts the
Continental Loan into equity of Continental, there can be no assure that the
Company will be able to liquidate its position in Continental, especially since
Continental is a privately held company.
In order to manage any future growth, the Company will be required to
continue to improve its operating systems, attract and retain superior
management, and update and expand the Company's equipment. If the Company is
unable to effectively manage its growth, the Company's business, operating
results and financial condition could be adversely affected. Future growth, if
achieved, may also strain the Company's capital resources. There can be no
assurance that the Company will be able to successfully negotiate or obtain
additional financing, or that such financing will be on terms favorable or
acceptable to the Company. The failure to secure necessary financing could have
a material adverse impact on the Company.
Dependence Upon Principal Customers. During the fiscal years ended
September 30, 1995, 1996 and 1997 three, two and two customers, respectively,
each accounted for over 10% of the Company's revenues. One customer accounted
for over 10% of the Company's revenues in each period, including 43% in fiscal
1995, 54% in fiscal 1996 and 32% in fiscal 1997; one other customer accounted
for over 10% in fiscal 1996 and two other customers accounted for over 10% of
revenues in fiscal 1995. The Company's three largest customers
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accounted for 71%, 71%, and 53% of revenues during fiscal 1995, 1996 and 1997,
respectively, and at September 30, 1997, approximately 35% of the Company's
accounts receivable were represented by three customers. Although the projects
performed by the Company for its customers are 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 Company's
business. Because of the limited number of data acquisition systems 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 period to period. Further, on an historical basis, a
substantial portion of Continental's revenue has been attributed to a few
customers, and should the Continental Acquisition be consummated, the Company
anticipates a substantial portion of Continental's revenue will continue to be
attributable to a few customers, who may change from time to time. Since
Continental's projects are generally longer in duration Continental provides its
offshore seismic acquisition services to a small group of customers annually.
Seasonality of Operations; Fluctuations in Quarterly Performance. 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
cash flow and results of operation 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 diversified its
operations into the United States, which has somewhat reduced the seasonality
traditionally associated with the Company's Canadian operations. However, 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.
Fixed Price Contracts; Lack of Written Contracts. A substantial portion of
the Company's contracts with its customers are fixed price or "turn-key"
contracts pursuant to which the Company bears substantially all the risk
associated with inclement weather or other productivity delays. To the extent
the Company incurs costs in excess of those estimated to complete a project its
margins are reduced, and, in some cases, the Company has incurred, and may in
the future incur, a loss on a particular contract as a result of such excess
costs. In addition, a large portion of the projects entered into by the Company
are not governed by any written contract or other documentation, including, for
the fiscal years ended September 30, 1997, 1996 and 1995, projects which were
performed for a single customer and which accounted for approximately 32%, 54%
and 43%, respectively, of the Company's revenues. As a result, in the event of a
dispute with regard to work performed in connection with a project or relating
to the collection of fees for a project, the Company may not be able to resolve
such dispute as quickly or effectively as it might have been able to do if a
written contract existed. In addition, in the absence of a written agreement,
there may be discrepancies with regard to payment terms, project scope or other
matters which may, in turn, result in delays, cash flow shortages, increased
costs and lower revenues or profits.
If the Company consummates the Continental Acquisition, it will be subject
to a number of risks in completing such transaction, including the need to rely
upon certain representations and warranties made by Continental and the
shareholders of Continental with respect to Continental and its operations as
well as it own due diligence investigation of Continental. There can be no
assurance that such representations and warranties will be true in all respects
or that the Company's due diligence will uncover all materially adverse facts
relating to the assets, liabilities, capabilities and operations of Continental.
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Dilution to Existing Shareholders as a Result of the Continental
Acquisition. In the event that the Continental Acquisition is consummated, the
Purchase Price for the Continental Acquisition will involve cash and the
issuance of approximately 2,100,000 Common Shares, which, as of March 31, 1998,
equal 45% of the outstanding Common Shares of the Company, which will result in
dilution to existing shareholders of the Company and, depending upon the timing
of any purchases of the Common Shares offered hereby, may result in dilution to
such purchasers, and which may not be accretive in earnings per share. Assuming
the prior closing of the Continental Acquisition and after giving effect to the
receipt by the Company of the net proceeds on the exercise of warrants by the
Selling Securityholder (anticipated to approximate $500,000) the net tangible
book value of the Company would be $3.09. The exact amount of dilution, if any,
to purchasers of the Common Shares offered hereby, will depend upon a number of
factors including the timing of the purchase in relation to the consummation of
the Continental acquisition, if ever, and purchased value of the securities. As
a result, the Company cannot quantify what dilution such purchasers may
experience, if at all.
Dependence on Activity of Oil and Gas Industry. Demand for the Company's
services depends primarily upon the level of spending by oil and gas companies
for exploration, production and development and field management activities.
These spending levels, in turn, tend to correspond to fluctuations in the
commodity prices for oil and gas. Consequently, demand for the Company's
services is affected to some degree by market prices for natural gas and crude
oil, which have historically been very volatile. A decrease in oil and gas
exploration expenditures could result from such factors as unfavorable tax and
other legislation, international economic or political turmoil or uncertainty
concerning governmental energy policies. A substantial or extended decline in
oil and gas prices could have a material adverse effect on the Company's
financial position and results of operations and could cause the Company to
alter its capital spending plans. There can be no assurance that current levels
of oil and gas activities will be maintained or that demand for the Company's
services will reflect the level of such activities.
Weather and Productivity. Since the Company's operations are especially
sensitive to hazardous conditions and certain inclement weather, particularly
rain, the Company may periodically experience equipment failures, accidents,
shortages and delays in the delivery of equipment or loss of productivity as a
result of such conditions. Loss of productivity could materially adversely
affect the Company due to the high fixed costs associated with the Company's
business, including debt service costs, equipment acquisition and lease costs,
and depreciation expense.
Competition and Technological Obsolescence. The seismic data acquisition
industry is highly competitive. Many of the Company's competitors are
substantially larger than the Company or are subsidiaries or divisions of major
industrial enterprises with much greater financial and technical resources and
longer operating histories than the Company. In addition, the Company is
experiencing and will continue to face substantially increased competition as it
expands outside of Canada, particularly in the United States. There can be no
assurance that the Company will compete effectively in the industry. In
addition, the seismic data services industry is characterized by constantly
evolving technology. There can be no assurance that the Company's current
systems will not become obsolete before the Company has the resources to replace
them or that, in the future, the Company will have sufficient resources to
acquire new technology, as needed, or be able to use new technology to compete
effectively.
Risks Relating to Growth and Expansion. Growth of the Company's business
may place significant pressure on the Company's management, operational and
technical resources. The Company intends to pursue a strategy for expansion and
to acquire equipment to enable it to expand its operations in Canada and the
United States. Although the Company intends to focus its marketing and
operational efforts on the Canadian and U.S. marketplaces and is not currently
marketing its services internationally, the Company may, from time to time, as
market conditions permit, consider pursuing operations in the international
market through joint ventures or other arrangements with strategic partners in
geophysics services or related industries in the United States, South America,
and Asia and/or by contracting directly with oil and gas companies located in
such markets. The success of the Company's growth and expansion will depend upon
a number of factors not entirely within the Company's control, including, among
others, the cost and availability of equipment, the ability to meet project
schedules, the securing of required government permits and other regulatory
approvals, the hiring and training of management and other personnel,
competition in the industry, demand for seismic
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<PAGE> 13
data, the terms and availability of financing and other general economic and
business conditions. Any problems or delays encountered in any one of these
areas could result in substantial increases in costs to the Company. In
connection with any growth or expansion, the Company will be required to develop
and improve operational, management and financial systems and controls. There
can be no assurance that the Company will be able to effectively manage its
expanding operations and anticipate all of the changing demands that growth will
impose on its systems and controls. Failure to manage growth would have a
material adverse effect on the Company's business. See -- "Risks Associated with
the Operation of the Company upon Consummation of the Continental Acquisition".
Geographical Concentration of Operations; Risks Associated with
International Expansion. Until fiscal 1997, other than a number of projects
conducted in the United States and one project conducted in Pakistan, the
Company's operations had been conducted exclusively in Western Canada, and the
majority of the Company's revenues were derived therefrom. The Company is still
currently highly dependent upon demand for data acquisition services in Western
Canada and approximately 65% of revenue in fiscal 1997 resulted from operations
based in Western Canada. To the extent that the Company continues to conduct
substantially all of its operations in this region, the Company's operating
results may be materially adversely affected by unfavorable economic, weather,
industry trends or other conditions in this region that are beyond the Company's
control. The Company may be unable to mitigate the effects of any unfavorable
regional condition due to the lack of geographical diversity of its operations.
Although the Company intends to focus its marketing and operational efforts on
the Canadian and U.S. marketplaces and is not currently marketing its services
internationally, the Company may, from time to time, as market conditions
permit, consider pursuing operations in the international market through joint
ventures or other arrangements with strategic partners in geophysics services or
related industries in the United States, South America and Asia and/or by
contracting directly with oil and gas exploration companies located in such
markets. There can be no assurance that the Company will be successful in
penetrating international markets or that any international operations will be
profitable. International operations can also be expected to be subject to a
number of risks, including greater difficulties in accounts receivable
collection, longer payment cycles, exposure to currency fluctuations, political
and economic instability and the burdens of complying with a wide variety of
foreign laws and regulatory requirements. With the acquisition of Boone in June
1996 the Company has expanded and diversified its operations into the United
States, which has somewhat reduced its dependence on demand for data acquisition
services in Canada. In addition, in the United States and other international
markets, the Company will face intense competition from established entities
offering competitive technology.
Dependence on Suppliers. Currently, the Company obtains its seismic data
acquisition equipment from a few select vendors, and, in the case of its
telemetry based 3D, 24 bit data acquisition systems, from a sole source. The
Company does not have long-term supply contracts with any of its suppliers and
purchases its equipment on a purchase order basis. No assurance can be given
that shortages will not occur in the future or that the sole or limited sources
of such equipment will be able to support the future equipment requirements of
the Company. In addition, there can be no assurance that the Company will not
experience delays or other supply problems that may materially adversely affect
the Company's operations or that the Company will be able to obtain supplies,
including additional data acquisition systems, in a timely manner in the event
of an increase in demand for its services. The inability to obtain seismic data
acquisition equipment as required, or to develop alternative sources as required
in the future, could materially adversely affect the Company's business,
operating results and financial condition.
Income tax Contingency. The Company has recently received notice that the
Canadian taxation authorities have disallowed certain expenses related to the
1994, 1995 and 1996 taxation years. The Company has also deducted similar
expenses in 1997. These reassessments and the potential reassessment for the
current year, would result in additional income taxes of approximately $340,000
($485,000 Canadian). Based on a recently decided court case, involving another
company with a set of circumstances similar to the Company's situation, the
Company is in disagreement with the basis of the reassessment and has filed
notices of objection. The Company does not expect to receive a decision
regarding the outcome of these notice of objections until the similar court case
proceeds through the appeal process. There can be no assurance that the
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reassessment will not be upheld. Should the reassessments be upheld, any
resulting loss would be charged to operations in the year the outcome was
determined.
Operating Hazards and Insurance. The Company's operations are subject to
the general risks incident to land and water based seismic data acquisition
activities, including the use of explosives, which subject personnel to risk of
injury due to accidental explosions resulting from the mishandling of equipment
and supplies. Further, the Company operates in remote areas, often characterized
by difficult terrain, and under extreme weather conditions. The Company's crews
are mobile and its equipment and personnel are subject to vehicular accidents.
Some or all of these hazards may result in personal injury and loss of life,
severe damage to or destruction of property and equipment, environmental damage
or suspension of operations. The Company has not experienced any material losses
or environmental claims to date, but there can be no assurance that it will not
experience such losses or claims in the future. To the extent available, the
Company maintains general liability insurance coverage against these potential
claims, the nature and amount of which the Company believes to be customary in
the industry. There can be no assurance that adequate insurance will be
available in the future or that the Company will be able to maintain adequate
insurance on terms and conditions it finds acceptable. In the event of an
uninsured or inadequately insured claim, the Company's business and financial
condition could be materially adversely affected.
Compliance with Governmental Regulations. The oil and gas industry is
subject to an extensive array of federal, provincial, state and local laws and
regulations, which may be changed from time to time in response to economic or
political conditions. Laws and regulations that have the effect of reducing or
curtailing exploration and production activities by energy companies could also
adversely affect the Company's operations and its financial condition by
reducing the demand for its services. In addition, oil and gas exploration is
subject to regulations governing environmental quality and pollution control.
The Company is required to expend financial and managerial resources to comply
with such laws in its operations, and anticipates that it will continue to be
required to do so in the future. Further, in many instances, the Company must
abide by permit requirements in order to conduct its operations and must abide
by environmental operating restrictions during the breeding period of certain
specific wildlife. To date the Company's cost of complying with such laws and
regulations has not been material, but because such laws and regulations are
changed frequently, it is not possible for the Company to enumerate or to
accurately predict the cost or impact of such laws and regulations on its future
operations. There can be no assurance that in the future the Company will be
able to acquire all of the necessary permits to conduct its business or that the
costs associated with complying with laws and regulations affecting its business
will not have a material adverse effect upon the Company. In the past, certain
environmental operating restrictions by which the Company was required to abide
have adversely affected the Company's operating results, and contributed to a
significant decrease in revenues and a net loss, during certain periods.
Further, there can be no assurance that such laws or regulations will not change
frequently. In recent years, there has been a trend toward more expansive and
stricter environmental laws and regulations.
Dependence on Key Personnel. The Company is highly dependent on the
services and expertise provided to it by its executive officers and key
personnel, especially those of its President, Chief Executive Officer, and
principal shareholder, Mr. Brian Kozun, the loss of which could substantially
impair the Company's operations. The Company has a key person life insurance
policy on the life of Mr. Kozun in the amount of $2,100,000 ($3,000,000
Canadian), the proceeds of which are pledged as collateral to the Company's
lenders. Because of the specialized nature of the business of the Company, the
future success of the Company depends in large part upon its ability to attract
and retain highly qualified personnel. The Company faces intense competition for
such highly qualified personnel from other geophysical services companies, as
well as from oil, gas and other natural resource organizations, and may have to
pay higher salaries to attract and retain such personnel. There can be no
assurance that the Company will be able to hire sufficient qualified personnel
on a timely basis or retain such personnel. Although the Company has entered
into multiple-year employment contracts with each of its executive officers, the
loss of these or other personnel or the failure to recruit additional key
personnel by the Company could have a material adverse effect on the Company's
business, financial condition and results of operations.
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Year 2000. The Company has commenced review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and will
develop an implementation plan to resolve the issue. The Year 2000 issue is the
result of computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company expects to identify Year 2000 problems in its
existing software and if necessary to modify its existing software or convert to
new software in 1998/99, in order to address Year 2000 problems, if any. If
necessary modifications or conversions to new software are not completed on a
timely basis, the Year 2000 problem may have an adverse effect on the Company's
business, financial condition and results of operations.
Control by Current Management; Control by Former Continental
Shareholders. As of May 28, 1998 the Company's current officers and directors
own or have the right to vote approximately 21% of the Company's outstanding
Common Shares. Mr. Kozun, the Company's President, owns approximately 17% of the
Company's Common Shares, of which approximately 460,000 have been pledged in
favor of a bank to secure certain outstanding personal indebtedness. As a
result, such individuals will likely be able to determine the outcome of
corporate transactions or other matters submitted for shareholder approval.
Should the Continental Acquisition be consummated, the former shareholders of
Continental will acquire in the aggregate approximately 2.1 million, or as of
May 28, 1998, 31% of the issued and outstanding Shares of the Company, after the
issuance of such Shares to them. As a result the former shareholders of
Continental will be able to significantly influence the outcome of corporate
transactions or other matters submitted for shareholder approval. Such control
could preclude any unsolicited acquisition of the Company and consequently
adversely affect the market price of the Common Shares.
Potential Anti-Takeover Provisions. The Company's Board is authorized to
issue from time to time, without shareholder authorization, an unlimited number
of preferred shares in one or more designated series or classes. Further,
Alberta law requires that at least 50% of the Board of Directors of the Company
be residents of Canada. Any of these provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less likely
that shareholders receive a premium for their shares as a result of any such
attempt.
Limitation of Liability and Indemnification of Officers and
Directors. Pursuant to the Company's By-laws, as authorized under applicable
Alberta law, directors and officers of the Company are indemnified for monetary
damages except where the liability relates to the failure to act honestly and in
good faith with a view to the best interests of the Company. Further, the
Company's By-laws provide that the Company shall indemnify its directors,
officers, employees or agents to the full extent permitted by the Business
Corporations Act (Alberta), and the Company shall have the right to purchase and
maintain insurance on behalf of any such person against the liability except
where the liability relates to the directors' failure to act honestly and in
good faith with a view to the best interests of the Company. The Company
maintains an insurance policy covering its officers and directors and
indemnifying them against loss on account of claims made against them. The
Company has entered into indemnification agreements with each of its directors
and officers, which provide that the Company will indemnify the indemnitee to
the fullest extent permitted by applicable law, provided the indemnitee acted in
good faith and in a matter he reasonably believed to be in the best interest of
the Company and, with respect to any criminal action, had reasonable cause to
believe his conduct was lawful. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Risk of Enforcing Judgments Against Foreign Persons and Corporations. The
Company is an Alberta, Canada corporation. The majority of the Company's
directors and officers and the experts named herein are residents of Canada and
most of their and the Company's assets are located outside of the United States.
As a result, it may be difficult for shareholders resident in the United States
to effect service within the United States upon the Company and such persons, or
to realize in the United States upon judgments of courts of the United States
predicated upon the civil liability provisions of the United States federal
securities laws. The Company has been advised by its Canadian counsel, Burstall
Ward, that there are certain factual and legal
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issues that Canadian courts would consider before (i) enforcing judgments of
United States courts obtained against the Company or such other persons
predicated upon the civil liabilities provisions of such securities laws or (ii)
imposing liabilities in original actions against the Company or such other
persons predicated solely upon such securities laws.
No Dividends. The Company has paid cash dividends on its Common Shares
only once in connection with proceeds received by the Company from an insurance
policy upon the death of an officer of the Company and does not expect to
declare or pay any cash or other dividends in the foreseeable future. In
addition, pursuant to the terms of the Company's bank operating line of credit,
the extent to which the Company may pay dividends in the future is restricted to
a maximum of $72,000 ($100,000 Canadian dollars) per annum.
Shares Eligible for Future Sale. Future sales of Common Shares by existing
shareholders pursuant Rule 144 under the Securities Act could have an adverse
effect on the price of the Company's securities. Of the Company's 4,634,584
Common Shares outstanding at May 28, 1998, 1,045,623 are "restricted securities"
as that term is defined in Rule 144 promulgated under the "Act" and under
certain circumstances may be sold without registration pursuant to such Rule and
the remaining 3,588,966 are freely transferable without restriction or further
registration under the Act. The 2,080,000 common shares to be issued on the
consummation of the Continental Acquisition will also be "restricted securities"
as that term is defined in Rule 144 promulgated under the "Act" and under
certain circumstances may be sold without registration pursuant to such Rule.
The Company is unable to predict the effect that sales made under Rule 144, or
otherwise, may have on the then prevailing market price of the Company's
securities although any substantial sale of restricted securities pursuant to
Rule 144 may have an adverse effect. Sales of Common Shares, or the possibility
of such sales, in the public market may adversely affect the market price of the
securities offered hereby. None of the existing shareholders of the Company has
any registration rights with respect to the Common Shares; however Whale
Securities Co. L.P. has demand and piggy-back registration rights with respect
to the securities underlying the Underwriter's Warrant.
Effect of Outstanding Options and Warrants. The Company has outstanding
(i) Underwriter's Warrants to purchase an aggregate of 280,000 Shares, (ii)
options to purchase 384,500 Shares under the Company's 1995 Stock Option Plan,
as amended and (iii) a warrant to purchase 100,000 Shares. For the respective
terms of such securities, the holders thereof are given an opportunity to profit
from a rise in the market price of the Company's Common Shares with a resulting
dilution in the interests of the other shareholders. Further, the terms on which
the Company may obtain additional financing during that period may be adversely
affected by the existence of such options and warrants. The holders of such
securities may exercise them at a time when the Company might be able to obtain
additional capital through a new offering of securities on terms more favorable
than those provided by therein.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of any of the
Common Shares by the Selling Securityholder, although the Company will receive
proceeds from any exercise of the warrants.
The Selling Securityholder is not obligated to exercise his warrants and
there can be no assurance that such holder will choose to exercise all or any of
his warrants. In the event that all of the 100,000 outstanding warrants
exercisable for Common Shares offered hereby are exercised, the estimated net
proceeds to the Company would be $500,000 after deducting expenses of this
Offering.
The Company intends to use the estimated net proceeds received upon
exercise of the warrants, if any, for costs associated with the Continental
Acquisition and working capital.
The allocation of the estimated net proceeds from this Offering set forth
above represents the Company's best estimate based upon its current plans and
assumptions regarding general economic and industry conditions and its
anticipated future revenues and expenditures, including that no events occur
(such as a significant decline in the demand for its services) which would cause
the Company to abandon any particular efforts and that competitive conditions
remain stable. If any of these factors change, or if cash flow generated from
operations does not meet expectations, the Company may find it necessary or
advisable to reallocate
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some of the proceeds within the above-described categories or to use portions
thereof for other purposes. Accordingly, the Company reserves the right, as
unanticipated events occur, to reallocate the proceeds from this Offering,
including possibly for the acquisition of or merger with similar or
complementary companies. However, the Company has no agreements, understandings
or commitments with respect to any such transaction.
SELLING SECURITYHOLDER
The following table sets forth the name of the Selling Securityholder and
the number of Common Shares beneficially owned at the commencement of this
Offering, and the number of Common Shares offered for sale, based on information
provided to the Company by such Selling Securityholder. The Common Shares are
being registered to permit public secondary trading of the Common Shares, and
the Selling Securityholder may offer the Common Shares for resale from time to
time. See "Plan of Distribution."
The Company has filed with the Commission under the Act a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Common Shares. The Company has agreed, among other things, to
bear certain expenses in connection with the registration and sale of the Common
Shares being offered by the Selling Securityholder. See "Plan of Distribution."
The Selling Securityholder holds warrants issued by the Company which, upon
exercise, allow such Selling Securityholder to purchase Common Shares. The
Selling Securityholder is expected to exercise his warrants and pay for his
Common Shares immediately prior to offering such Common Shares pursuant to this
Prospectus.
The Selling Securityholder is not an officer or director of the Company and
beneficially owns less than one percent of the outstanding Common Shares of the
Company.
SELLING SECURITYHOLDER
<TABLE>
<CAPTION>
AMOUNT AMOUNT
BENEFICIALLY OWNED BEING
PRIOR TO OFFERING(1) OFFERED(1)
-------------------- -------------
<S> <C> <C>
Thomas Payne................................................ 100,000 100,000
Total....................................................... 100,000 100,000
======= =======
</TABLE>
- ---------------
(1) Based on information provided by the Selling Securityholder. The number of
Common Shares owned prior to the Offering and the number of Common Shares
being offered includes the Common Shares issuable upon exercise of warrants
owned by the Selling Securityholder. The Selling Securityholder is
registering for resale the Common Shares issuable upon exercise of the
warrants.
PLAN OF DISTRIBUTION
The Company has been advised that the Common Shares offered hereby by the
Selling Securityholder may be sold by the Selling Securityholder or by his
transferees or other successors in interest. The distribution of all securities
offered hereby may be effected from time to time in one or more transactions on
the Nasdaq National Market or on other exchanges on which the Common Shares may
be traded, in the over-the-counter market, in negotiated transactions, through
the writing of options on the Common Shares or a combination of such methods of
sale, or through other means. Sales may be effected at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Selling
Securityholder is not restricted as to the price or prices at which they may
sell their Common Shares. Sales of Common Shares by the Selling Securityholder
may depress the market price of the Company's Common Shares since the number of
Common Shares which may be sold by the Selling Securityholder is relatively
large compared to the historical average weekly trading of the Company's Common
Shares, and therefore, if the Selling Securityholder were to sell, or attempt to
sell, all of such
16
<PAGE> 18
Common Shares at once, the Company believes such a transaction could adversely
impact the market price for the Company's Common Shares.
Transactions may be effected by sales to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the sellers or the purchasers of the Common
Shares for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation to a particular broker-dealer might be in
excess of customary commissions). The Selling Securityholder and any
broker-dealers or agents who participate in the distribution of Common Shares
hereunder may be deemed to be "underwriters" as that term is defined in the Act,
and any commissions received by them and profit on any resale of the Common
Shares as principal might be deemed to be underwriting discounts and commissions
under the Act.
The Selling Securityholder is subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of Common Shares.
The Company has registered the Common Shares for resale pursuant to an
agreement with the Selling Securityholder and has agreed to pay the expenses of
registration in connection with this Offering. The Company will not receive any
proceeds from the sale of Common Shares by the Selling Securityholder although
the Company will receive proceeds from any exercise of the Warrants.
At the time a particular offer of Common Shares is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Common Shares being offered and
the terms of the Offering.
In order to comply with certain states' securities laws, if applicable, the
Common Shares may be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Common Shares may not be sold
unless they have been registered or qualified for sale in such state, or unless
an exemption from registration or qualification is available and is obtained.
LEGAL MATTERS
The validity of the securities offered hereby and certain legal matters in
connection with the offering with respect to Canadian law have been passed upon
for the Company by Burstall Ward, Calgary, Alberta.
EXPERTS
The financial statements of the Company incorporated in this Prospectus by
reference to the Annual Report on Form 10-KSB, as amended, for each of the three
years ended September 30, 1997, have been incorporated herein in reliance on the
report of Ernst & Young, Chartered Accountants, given on their authority as
experts in accounting and auditing. The financial statements of Continental for
the year ended December 31, 1997 incorporated in this Prospectus by reference to
the Current Report on Form 8-K as filed with the Securities and Exchange
Commission on May 29, 1998 have been incorporated herein in reliance on the
report of Ernst & Young, Chartered Accountants, given on their authority as
experts in accounting and auditing. The financial statements of Continental
incorporated in this Prospectus by reference to the Annual Report on Form
10-KSB, for the years ended December 31, 1996 and 1995, have been incorporated
herein in reliance on the report of Meyers Norris Penny & Co., Chartered
Accountants, given on their authority as experts in accounting and auditing.
17
<PAGE> 19
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Prospectus Summary..................... 4
Risk Factors........................... 7
Use of Proceeds........................ 15
Selling Securityholder................. 16
Plan of Distribution................... 16
Legal Matters.......................... 17
Experts................................ 17
===============================================
</TABLE>
======================================================
VENTURE SEISMIC LTD.
100,000 COMMON SHARES
---------------------------
PROSPECTUS
---------------------------
MAY , 1998
======================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are as follows:
<TABLE>
<S> <C>
SEC Registration Fee*...................................... $ 160.48
Accounting Fees and Expenses............................... $ 7,000.00
Legal Fees and Expenses.................................... $10,000.00
Miscellaneous Expenses..................................... $ 8,000.00
----------
Total...................................................... $25,160.48
==========
</TABLE>
- ---------------
* Previously Paid.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of the Registrant provides that the Registrant shall indemnify
any person to the full extent permitted by the Business Corporations Act
(Alberta) (the "BCA"). Section 119 of the BCA, relating to indemnification, is
hereby incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or controlling persons of the Registrant pursuant to the Registrant's
By-laws, the Registrant has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The Registrant's By-Laws include certain provisions permitted pursuant to
Alberta law whereby officers and directors of the Registrant are to be
indemnified against certain liabilities. The Registrant's By-Laws also limit, to
the fullest extent permitted by Alberta law, a director's liability for monetary
damages for breach of fiduciary duty, except liability for (i) breach of the
director's duty to act honestly and in good faith and (ii) acts or omissions
where the director did not have reasonable grounds for believing his conduct was
lawful.
The Registrant has entered into indemnification agreements with each of its
executive officers and directors, the form of which is filed as Exhibit 10.13 to
the Registrant's Registration Statement on Form SB-2 (File No. 33-97132).
The Registrant has obtained and maintains a policy of insurance covering
its officers and directors and indemnifying them against loss on account of
certain claims made against them.
II-1
<PAGE> 21
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
(a) 4.1 Form of Specimen Certificate of Company's Common Shares (1)
4.3* Form of Warrant
5.1* Opinion of Burstall Ward regarding legality of securities
being registered
10.31* Securities Purchase Agreement, dated March 27, 1998, by and
among the Registrant, Continental Holdings Ltd.
("Continental") and the Shareholders of Continental
10.32* Credit Agreement, dated March 27, 1998, between the
Registrant and Continental Holdings Ltd.
10.33* General Security Agreement, dated March 27, 1998, between
the Registrant and Continental Holdings Ltd.
10.34* Form of Employment Agreement between the Registrant and Mr.
Stinn, dated March 27, 1998.
23.1 Consent of Ernst & Young, Chartered Accountants
23.2 Consent of Meyers Norris Penny & Co., Chartered Accountants
23.3 Consent of Burstall Ward
24.1 Power of Attorney (contained on signature page hereof)
</TABLE>
- ---------------
* Previously Filed.
(1) Incorporated by reference from the Company's Registration Statement on form
SB-2 (File No. 33-97132)
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424 (b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
controlling persons pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
II-2
<PAGE> 22
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(5) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Calgary, Province of Alberta, on the 29th day of May, 1998.
VENTURE SEISMIC LTD.
/s/ BRIAN KOZUN
By:
--------------------------------------
Brian Kozun
Chairman, President and Chief
Executive Officer
II-4
<PAGE> 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Brian W. Kozun and
Gregory B. Wiebe or either of them, his true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign any or all amendments
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this post
effective Amendment to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BRIAN W.KOZUN Chairman of the Board of Directors, May 29, 1998
- --------------------------------------------- President and Chief Executive Officer
Brian W. Kozun (Principal Executive Officer)
/s/ GREG B. WIEBE Chief Financial Officer (Principal May 29, 1998
- --------------------------------------------- Financial and Accounting Officer)
Gregory B. Wiebe
/s/ P. DANIEL MCARTHUR Director May 29, 1998
- ---------------------------------------------
P. Daniel McArthur
/s/ J. JOSEPH CIAVARRA Director May 29, 1998
- ---------------------------------------------
J. Joseph Ciavarra
/s/ STUART NORMAN Director May 29, 1998
- ---------------------------------------------
Stuart Norman
/s/ MICHAEL J. BENINGER Director May 29, 1998
- ---------------------------------------------
Michael J. Beninger
/s/ BACHNER, TALLY,
POLEVOY & MISHER LLP Authorized representative of the May 29, 1998
- --------------------------------------------- Registrant in the United States
Bachner, Tally, Polevoy & Misher LLP
</TABLE>
II-5
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<C> <S> <C>
(a) 4.1 Form of Specimen Certificate of Company's Common Shares (1)
4.3 * Form of Warrant
5.1 * Opinion of Burstall Ward regarding legality of securities
being registered
10.31* Securities Purchase Agreement, dated March 27, 1998, by and
among the Registrant, Continental Holdings Ltd.
("Continental") and the Shareholders of Continental
10.32* Credit Agreement, dated March 27, 1998, between the
Registrant and Continental Holdings Ltd.
10.33* General Security Agreement, dated March 27, 1998, between
the Registrant and Continental Holdings Ltd.
10.34* Form of Employment Agreement between the Registrant and Mr.
Stinn, dated March 27, 1998.
23.1 Consent of Ernst & Young, Chartered Accountants
23.2 Consent of Meyers Norris Penny & Co., Chartered Accountants
23.3 Consent of Burstall Ward
24.1 Power of Attorney (contained on signature page hereof)
</TABLE>
- ---------------
* Previously Filed.
(1) Incorporated by reference from the Company's Registration Statement on form
SB-2 (File No. 33-97132)
II-6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Registration Statements of Venture Seismic
Ltd. (the "Company") including the Registration Statement and the related
Prospectus of the Company on Form S-3 (File No. 333-45681), the Company's Post
Effective Amendment No. 2 on Form S-3 to its Registration Statement on Form SB-2
(File No. 33-97132) and the Company's Registration Statement on Form S-8 (File
No. 333-38487) of our report dated March 26, 1998 (except for note 13 which is
as of May 26, 1998), with respect to the financial statements of Continental
Holdings Ltd. for the year ended December 31, 1997, as filed with the Company's
current report on Form 8-K, as filed with the Securities and Exchange Commission
on May 29, 1998 and of our report dated December 17, 1997 with respect to the
consolidated financial statements of the Company included in its Annual Report
(Form 10-KSB) for the year ended September 30, 1997, filed with the Securities
and Exchange Commission on December 24, 1997, as amended May 26, 1998.
Ernst & Young
Chartered Accountants
Calgary, Alberta
May 28, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Registration Statements of Venture Seismic
Ltd. (the "Company") including the Registration Statement and the related
Prospectus of the Company on Form S-3 (File No. 333-45681), the Company's Post
Effective Amendment No. 2 on Form S-3 to its Registration Statement on Form SB-2
(File No. 33-97132) and the Company's Registration Statement on Form S-8 (File
No. 333-38487) of our report dated February 19, 1997, with respect to the
financial statements of Continental Holdings Ltd. as of December 31, 1995 and
1996 and for each of the years in the two year period ended December 31, 1996
included in the Annual Report (Form 10-KSB) of Venture Seismic Ltd. for its year
ended September 30, 1997, filed with the Securities and Exchange Commission on
December 24, 1997, as amended May 26, 1998.
Meyers Norris Penny & Co.
Chartered Accountants
Calgary, Alberta
May 28, 1998
<PAGE> 1
Exhibit 23.3
CONSENT OF BURSTALL WARD
We hereby consent to the use of our name as counsel to the Corporation and
the statements with respect to us appearing under the headings "Risk Factors --
Risk of Enforcing Judgments against Foreign Persons and Corporations" and "Legal
Matters" included in the Registration Statement and in the Prospectus forming a
part thereof. In giving this consent, we do not thereby concede that we come
within the categories of persons whose consent is required by the Act or the
General Rules and Regulations promulgated thereunder.
Calgary, Alberta /s/ BURSTALL WARD
-------------
May 28, 1998 BURSTALL WARD
