SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ------------------------------------------------------------------------------
FORM 8-K/A*
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 30, 1998
GEOKINETICS INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-9268 94-1690082
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
5555 SAN FELIPE, SUITE 780, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (713) 850-7600
* This form 8-K/A is being filed to include certain pro forma adjustments in
the pro forma financial information contained in Item 7(b) of the Form 8-K/A
filed on July 14, 1998. The inclusion of such pro forma adjustments is the
only change in the information contained in such Form 8-K/A.
<PAGE>
GEOKINETICS INC.
FORM 8-K/A
INDEX
PAGE
Item 7. Financial Statements, Pro Forma Financial Statements
(a) Financial Statements of Business Acquired..................4
(b) Pro Forma Financial Information...........................22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned herein to duly authorized.
Dated: July 29, 1998
GEOKINETICS INC.
By: \s\ JAY D. HABER
Jay D. Haber, Chief Executive Officer
<PAGE>
GEOPHYSICAL DEVELOPMENT
CORPORATION
FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
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<PAGE>
C O N T E N T S
PAGE
NUMBER
------
INDEPENDENT AUDITOR'S REPORT............................................6
FINANCIAL STATEMENTS
BALANCE SHEETS.......................................................7
STATEMENTS OF INCOME.................................................9
STATEMENTS OF RETAINED EARNINGS......................................10
STATEMENTS OF CASH FLOWS.............................................11
NOTES TO FINANCIAL STATEMENTS......................................13
SUPPLEMENTAL INFORMATION:
STATEMENTS OF OPERATING EXPENSES....................................20
-5-
<PAGE>
[EASLEY, ENDRES, PARKHILL & BRACKENDORFF, P.C. LETTERHEAD]
Independent Auditor's Report
September 8, 1997
Board of Directors
GEOPHYSICAL DEVELOPMENT CORPORATION
Houston, Texas
We have audited the accompanying balance sheets of GEOPHYSICAL DEVELOPMENT
CORPORATION as of June 30, 1997 and 1996, and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of GEOPHYSICAL DEVELOPMENT
CORPORATION as of June 30, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental statements of operating
expenses are presented for the purposes of additional analysis and are not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ EASLEY, ENDRES, PARKHILL & BRACKENDORFF, P.C.
-6-
<PAGE>
The accompanying notes are an integral
part of this financial statement.
GEOPHYSICAL DEVELOPMENT CORPORATION
BALANCE SHEETS
JUNE 30, 1997 AND 1996
ASSETS
1997 1996
CURRENT ASSETS ---- ----
Cash and cash equivalents $ 517,358 $ 430,221
Accounts receivable, trade 2,627,117 1,610,839
Prepaid expenses 33,181 6,724
Deferred taxes 12,548 6,274
----------- -----------
TOTAL CURRENT ASSETS 3,190,204 2,054,058
----------- -----------
PROPERTY AND EQUIPMENT
Computer hardware 1,765,850 2,617,104
Equipment, office and computer 74,629 263,994
Automobiles 83,157 83,157
Furniture and fixtures 76,728 91,483
Computer software 167,830 567,225
Equipment under lease obligations 654,198 -0-
----------- -----------
Total Cost 2,822,392 3,622,963
Less accumulated depreciation and amortization 1,259,455 2,820,757
----------- -----------
NET PROPERTY AND EQUIPMENT 1,562,937 802,206
----------- -----------
OTHER ASSETS
Cash surrender value of life insurance 239,113 150,739
Deposits 10,000 10,000
----------- -----------
TOTAL OTHER ASSETS 249,113 160,739
----------- -----------
TOTAL ASSETS $ 5,002,254 $ 3,017,003
=========== ===========
-7-
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
CURRENT LIABILITIES ---- ----
Current maturities of long-term debt $ 296,135 $ 281,684
Current maturities of capital lease obligation 199,893 -0-
Accounts payable 40,285 65,163
Accrued salaries payable 2,400,000 1,376,598
Payroll taxes payable 47,200 19,575
Accrued profit sharing contributions 423,642 373,402
Federal income taxes payable 32,105 66,635
Other payables 5,043 10,589
Dividends payable 67,500 33,750
Accrued charitable contributions 30,000 30,000
----------- -----------
TOTAL CURRENT LIABILITIES 3,541,803 2,257,396
----------- -----------
NONCURRENT LIABILITIES
Long-term debt, net of current maturities 248,263 115,570
Capital lease obligation, net of current maturities 454,305 -0-
----------- -----------
TOTAL NONCURRENT LIABILITIES 702,568 115,570
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $1.00 par value each,
50,000 shares authorized, 6,750
shares issued and outstanding 6,750 6,750
Additional paid-in capital 103,500 103,500
Retained earnings 647,633 533,787
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 757,883 644,037
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,002,254 $ 3,017,003
=========== ===========
-8-
<PAGE>
The accompanying notes are an integral
part of this financial statement.
GEOPHYSICAL DEVELOPMENT CORPORATION
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
INCOME ---- ----
Data processing $ 5,584,174 $ 4,386,296
Log analysis projects 5,050,998 2,567,862
Software sales 92,790 144,986
Consulting 3,428 16,247
----------- -----------
10,731,390 7,115,391
OPERATING EXPENSES (9,915,027) (6,480,526)
----------- -----------
INCOME FROM OPERATIONS 816,363 634,865
----------- -----------
OTHER INCOME (EXPENSES)
Investment income 12,421 1,948
Profit sharing contribution (423,642) (373,402)
Interest (76,432) (64,794)
Loss on disposal of assets (41,534) -0-
TOTAL OTHER INCOME (EXPENSES) (529,187) (436,248)
----------- -----------
INCOME BEFORE INCOME TAXES 287,176 198,617
FEDERAL INCOME TAX (105,830) (76,812)
----------- -----------
NET INCOME $ 181,346 $ 121,805
=========== ===========
-9-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
RETAINED EARNINGS, BEGINNING OF YEAR $ 533,787 $ 445,732
NET INCOME 181,346 121,805
----------- -----------
715,133 567,537
DIVIDENDS DECLARED (67,500) (33,750)
----------- -----------
RETAINED EARNINGS, END OF YEAR $ 647,633 $ 533,787
=========== ===========
-10-
<PAGE>
The accompanying notes are an integral
part of this financial statement.
GEOPHYSICAL DEVELOPMENT CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES $ 618,956 $ 368,917
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets
and software (645,213) (392,680)
----------- ------------
CASH USED FOR INVESTING ACTIVITIES (645,213) (392,680)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to stockholders (33,750) -0-
Proceeds from long-term debt 1,325,423 268,360
Repayment of long-term debt (1,178,279) (470,789)
----------- -----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 113,394 (202,429)
----------- -----------
NET INCREASE (DECREASE) IN CASH 87,137 (226,192)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 430,221 656,413
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 517,358 $ 430,221
=========== ===========
-11-
<PAGE>
1997 1996
----------- --------
RECONCILIATION OF NET INCOME
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $ 181,346 $ 121,805
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 497,146 313,711
Cash surrender value of life insurance (88,374) (64,251)
Loss on disposal of assets 41,534 -0-
Cash increase (decrease)
resulting from changes in
working capital:
Accounts receivable, trade (1,016,278) (980,648)
Other current assets (32,731) (1,082)
Accounts payable, trade (34,470) (81,338)
Accrued liabilities 1,071,196 1,066,210
Other current liabilities (413) (5,490)
----------- -----------
CASH PROVIDED BY OPERATING ACTIVITIES $ 618,956 $ 368,917
=========== ===========
INTEREST PAID $ 71,972 $ 64,794
=========== ===========
INCOME TAXES PAID $ 80,000 $ 10,139
=========== ===========
--12--
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Geophysical Development Corporation (the Company) is a Texas corporation
engaged in geophysical data processing and other related services to the oil
and gas industry worldwide. The Company's significant accounting policies are
as follows:
REVENUE RECOGNITION
The books are maintained on the accrual basis. Income is recorded when earned
and expenses are charged against income during the period in which they are
incurred.
DEPRECIATION
Property and equipment are recorded at cost and expenditures for maintenance
and repair are expensed as incurred. Depreciation is computed on all fixed
assets using the declining balance method for both financial reporting and
federal income tax purposes over the useful lives of five to seven years.
AMORTIZATION
Computer software costs are amortized using the straight-line method over
thirty-six (36) months for both financial reporting and federal income tax
purposes.
ACCOUNTS RECEIVABLE
The Company grants trade credits to both U.S. and international customers.
Company management believes that all receivables as of June 30, 1997 are
collectible, and accordingly, there is no allowance for doubtful accounts
recorded.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers cash
and highly liquid investments with maturities of three months or less when
purchased to be cash or cash equivalents.
--13--
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
As of June 30, 1997 and 1996, the Company had cash deposits with financial
institutions in excess of the $100,000 amount insured by the Federal Deposit
Insurance Corporation. Management believes that credit risk in these deposits
is minimal.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts for the year ended June 30, 1996 have been reclassified for
purposes of comparison with the presentation for the year ended June 30,
1997.
NOTE 2: LONG-TERM NOTES PAYABLE
INTEREST
LENDER/SECURITY/DUE DATE RATE 1997 1996
---------------------------- ---- --------- -----
Commercial bank; equipment and
accounts receivable; on demand,
but if no demand is made, monthly Prime
installments of $7,778 plus Plus
accrued interest, due April 1, 1998 .5% $ 67,596 $ 160,929
-14-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2: LONG-TERM NOTES PAYABLE (CONTINUED)
INTEREST
LENDER/SECURITY/DUE DATE RATE 1997 1996
---------------------------- ---- ------ ------
Commercial bank; equipment and
accounts receivable; monthly
installments of $2,177 plus
accrued interest, due
August 1, 1998 Prime 30,473 54,417
Commercial bank; equipment and
accounts receivable; monthly
installments of $2,500 plus accrued
interest, due September 1, 1998 Prime 37,500 67,500
Finance company; automobile;
monthly installments of $512
including interest 2.9% 17,178 22,742
Commercial bank; equipment and
accounts receivable; monthly
installments of $2,778 plus
accrued interest, due
February 28, 1999 Prime 55,554 91,666
Commercial bank; equipment and
accounts receivable; monthly
installments of $2,779 plus
accrued interest, due
October 1, 1999 Prime 77,770 -0-
Commercial bank; equipment and
accounts receivable; monthly
installments of $2,779 plus
accrued interest, due
November 4, 1999 Prime 80,549 -0-
-15-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 2: LONG-TERM NOTES PAYABLE (CONTINUED)
INTEREST
LENDER/SECURITY/DUE DATE RATE 1997 1996
---------------------------- ---- ------ ------
Commercial bank; equipment and
accounts receivable; monthly
installments of $5,556 plus
accrued interest, due
February 15, 2000 Prime 177,778 -0-
--------- ---------
544,398 397,254
Less amount due within one year 296,135 281,684
--------- ---------
Amount due after one year $ 248,263 $ 115,570
========= =========
Certain stockholders of the corporation have personally guaranteed the
commercial bank indebtedness as of June 30, 1997.
Maturities of long term notes payable for the years ended June 30 are as
follows:
1998 $ 296,135
1999 173,324
2000 74,939
-----------
$ 544,398
===========
NOTE 3: INCOME TAXES
The Company records its federal tax liability in accordance with Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes".
Deferred taxes are recorded for temporary differences in the recognition of
income and expense for tax and financial reporting purposes at the average
federal tax rate on the first $100,000 of taxable income, which is the tax rate
expected to be utilized
-16-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 3: INCOME TAXES (CONTINUED)
when such differences reverse. Temporary differences result principally from
charitable contributions which were not deductible for tax purposes in the prior
year. Differences between income tax expense and statutory tax rates result from
certain expenses which are not deductible for tax purposes. Income tax expense
was computed as follows:
1997 1996
---------- --------
Income tax at statutory rates $ 95,249 $ 60,711
Plus tax effect of:
Temporary differences 6,274 691
Permanent differences 4,307 15,410
--------- --------
Total federal income tax $ 105,830 $ 76,812
========= ========
NOTE 4: EMPLOYEE BENEFIT PLAN
The Company maintains a qualified contributory employee profit sharing plan
covering all employees with more than one year of service. The amount of the
Company contribution is determined annually at the discretion of the Board of
Directors, up to the maximum amount allowed under the Internal Revenue Code.
Contributions totaled $423,642 and $373,402 for the years ended June 30, 1997
and 1996, respectively.
NOTE 5: LEASE COMMITMENTS
OPERATING LEASES
The Company has entered into an operating lease for office space and a company
vehicle which expire in 2001 and 1999, respectively. The Company incurred rent
expense of $229,416 and $214,007 for the years ended June 30, 1997 and 1996,
-17-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 5: LEASE COMMITMENTS (CONTINUED)
respectively. Minimum future noncancellable lease payments for years ended
June 30 are as follows:
1998 $ 239,484
1999 238,734
2000 236,484
2001 197,070
----------
$ 911,772
==========
CAPITAL LEASES
The Company has acquired $654,198 of equipment under the provisions of
long-term leases. The equipment was placed in service in June, 1997. Under the
provisions of the lease, a one time payment of $654,198 was made during July,
1997 to cover the entire lease term of three years. The payment of the lease
obligation was financed through a commercial bank. Under the terms of the note,
principal payments of $18,172 plus accrued interest are due monthly for 36
months.
Due to refinancing subsequent to year end, the Company has restated its
maturities under its lease obligation pursuant to the terms obtained from the
commercial bank lender. Maturities for years ended June 30 are as follows:
1998 $ 199,893
1999 218,066
2000 218,065
2001 18,174
----------
$ 654,198
==========
NOTE 6: NON CASH TRANSACTIONS
During the years ended June 30, 1997 and 1996, the Company purchased fixed
assets with notes payable and lease obligations in the amounts of $654,198 and
$23,198, respectively. These transactions are not included in the statements of
cash flows.
NOTE 7: BUY-SELL AGREEMENT
The Company's stockholders have entered into an agreement to sell their stock
to the Company upon the occurrence of death, or certain other qualifying events.
The purchase price to be paid by the Company is determined under formulas
defined in the agreement. The Company has the option to pay the purchase price
in installments over a four year period, with interest accruing at the rate of
nine percent.
-18-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
To fund its obligation under this agreement, the Company has purchased
insurance on the life of the majority shareholders with a total face value of
$3,000,000. At June 30, 1997 and 1996, the cash surrender value of these
policies was $239,113 and $150,739, respectively.
-19-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
SUPPLEMENTAL
INFORMATION
-20-
<PAGE>
GEOPHYSICAL DEVELOPMENT CORPORATION
STATEMENTS OF OPERATING EXPENSES
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
------------ -----------
Advertising $ 13,111 $ 14,447
Amortization 43,966 35,593
Auto expense 25,929 22,111
Bad debts -0- 21,235
Communications 26,471 27,054
Computer supplies 296,941 185,093
Contract labor 5,879 29,886
Depreciation 453,180 278,118
Dues and subscriptions 9,600 6,563
Employee benefits 17,626 8,146
Entertainment 26,166 32,730
Filming, plotting 126,126 110,542
Freight 44,548 41,497
Insurance 394,072 333,472
Insurance, officers life 3,780 27,904
Leasing, auto 3,013 750
Leasing, equipment 49,730 6,289
Legal and accounting 25,214 23,778
Maintenance, computer 9,224 28,705
Maintenance, software 32,009 40,513
Office and drafting supplies 25,014 17,607
Outside contractors 156,766 204,441
Rent 229,416 214,007
Repairs and maintenance 9,060 15,051
Salaries 7,375,071 4,364,442
SEG expense 28,534 5,500
Seminars 34,950 22,418
Sponsorships and donations 55,630 30,250
Taxes, general 25,500 17,183
Taxes, payroll 295,089 234,390
Travel, meals 2,270 3,388
Travel 31,931 26,437
Utilities 39,211 50,986
------------ ------------
$ 9,915,027 $ 6,480,526
============ ============
-21-
<PAGE>
GEOKINETICS INC.
PRO FORMA FINANCIAL STATEMENT INFORMATION
ACQUISITIONS
On April 30, 1998, the Company completed the acquisition of Geophysical
Development Corporation (GDC) pursuant to the terms of a Stock Purchase
Agreement, whereby the Company acquired 100% of the shares of the outstanding
common stock of GDC in exchange for $26,000,000 in cash and 1,000,000
newly-issued shares of the Company's common stock. GDC is engaged in the
business of providing seismic data processing, software and consultation
services to the oil and gas industry.
The acquisition will be accounted for as a purchase and the results of
operations of GDC will be included in the consolidated financial statements from
the date of acquisition. The following represents the unaudited pro forma
results of operations as if the acquisition had occurred at the beginning of
each period presented. In addition to combining the historical results of
operations of the two companies, the pro forma calculations include amortization
of goodwill. Excess of cost over the fair value of net assets acquired of
$27,967,807 is being amortized on a straight-line basis over 10 years.
DEBT STRUCTURE
In connection with the acquisition of GDC, the Company completed a private
offering of $40,000,000 designated as its 12% Senior Subordinated Notes due
April 15, 2005. In addition to the notes, the Company granted warrants to
purchase up to 7,618,594 shares of common stock resulting in original issue
discount in the amount of $9,020,415. The notes are included on the balance
sheet, net of the unamortized discount, as long-term debt in the amount of
$30,979,585. The amortization of the discount included in interest expense on
the pro forma income statement for the year ended December 31, 1997 is $734,300
and for the quarter ended March 31, 1998 is $173,340.
COST OF PRIVATE OFFERING
The cost incurred to complete the private offering was $221,927 and is included
as an other asset on the Company's balance sheet. This deferred cost is being
amortized on a straight-line basis over the life of the notes. Included in
depreciation and amortization expense on the pro forma income statement for the
year ended December31, 1997 is $31,704 and for the quarter ended March 31, 1998
is $7,926.
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<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
-------------------------------------------------------
Geophysical
Geokinetics Development Pro Forma
Inc. Corporation Adjustments Combined
------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 9,647,931 $ 15,207,381 $ 24,855,312
Seismic operations (5,563,525) (5,563,525)
General and administrative (2,441,581) (1,370,045) (3,811,626)
Data processing expenses (6,190,126) (6,190,126)
Amortization, depreciation and
depletion expense (1,207,812) (621,867) (2,827,885) (4,657,564)
Interest expense (1,210,240) (111,084) (5,534,300) (6,855,624)
Income tax (expense) benefit 375,000 (2,359,670) 1,700,000 (284,670)
Lease operating expenses (613,167) (613,167)
Cost of oil and gas leases sold (168,735) (168,735)
Interest income 66,309 25,946 92,255
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (1,115,820)$ 4,580,535 $ (6,662,185)$ (3,197,470)
============= ============= ============= =============
Earnings (Loss) per Common
Share $ (0.14) $ ( 0.35)
============= =============
Earnings (Loss) per Share -
Assuming Dilution $ (0.07) $ (0.20)
============= =============
Weighted Average Common
Shares Outstanding 8,091,336 1,000,000 9,091,336
============= ============= =============
Fully Diluted Common Shares 14,956,023 1,000,000 15,956,023
============= ============= =============
-23-
<PAGE>
For the Quarter Ended March 31, 1998
---------------------------------------------------------
Geophysical
Geokinetics Development Pro Forma
Inc. Corporation Adjustments Combined
--------------- ------------ ------------ ------------
Revenues $ 5,798,508 $ 3,910,501 $ 9,709,009
Seismic operations (2,876,523) (2,876,523)
General and administrative (1,124,093) (794,330) (1,918,423)
Data processing expenses (1,058,692) (1,058,692)
Amortization, depreciation and
depletion expense (897,712) (165,123) (706,971) (1,769,806)
Interest expense (459,797) (20,137) (1,373,340) (1,853,274)
Income tax (expense) benefit (645,852) 425,000 (220,852)
Lease operating expenses (80,432) (80,432)
Cost of oil and gas leases sold 0
Interest income 21,902 27,346 49,248
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 381,853 $ 1,253,713 (1,655,311) $ (19,745)
============ ============ ============ ============
Earnings (Loss) per Common
Share $ 0.02 $ (0.001)
============ ============
Earnings (Loss) per Share -
Assuming Dilution $ 0.01 $ (0.000)
============ ============
Weighted Average Common
Shares Outstanding 18,218,205 1,000,000 19,218,205
============ ============ ============
Fully Diluted Common Shares 32,967,283 1,000,000 33,967,283
============ ============ ============
</TABLE>
-24-
<PAGE>
The following represents the unaudited pro forma condensed balance sheet as of
December 31, 1997:
<TABLE>
<CAPTION>
Geophysical
Development Pro Forma
Geokinetics Inc. Corporation Adjustments Combined
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,212,681 $ 2,387,513 $ 13,778,073 $ 18,378,267
Receivables 4,218,234 3,583,108 0 7,801,342
Other current assets 378,908 21,472 0 400,380
--------------- -------------- --------------- --------------
Total Current Assets 6,809,823 5,992,093 13,778,073 26,579,989
PROPERTY AND EQUIPMENT 17,314,325 1,405,638 0 18,719,963
OTHER ASSETS
Deferred tax asset 2,292,430 0 0 2,292,430
Other assets 136,792 249,113 221,927 607,832
Goodwill 1,949,626 0 27,678,615 29,628,241
--------------- -------------- --------------- --------------
Total Other Assets 4,378,848 249,113 27,900,542 32,528,503
--------------- -------------- --------------- --------------
TOTAL ASSETS $ 28,502,996 $ 7,646,844 $ 41,678,615 $ 77,828,455
=============== ============== =============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,282,037 $ 50,122 $ 0 $ 2,332,159
Other current liabilities 4,943,903 4,693,227 0 9,637,130
Notes payable 896,686 0 0 896,686
--------------- -------------- --------------- --------------
Total Current Liabilities 8,122,626 4,743,349 0 12,865,975
LONG-TERM DEBT 12,129,420 519,610 30,979,585 43,628,615
--------------- -------------- --------------- --------------
TOTAL LIABILITIES 20,252,046 5,262,959 30,979,585 56,494,590
STOCKHOLDERS' EQUITY
Preferred stock 1,000,000 0 0 1,000,000
Common stock 165,985 6,750 3,250 175,985
Additional paid in capital 14,017,394 103,500 12,969,415 27,090,309
Accumulated earnings (deficit) (6,932,429) 2,273,635 (2,273,635) (6,932,429)
--------------- -------------- --------------- --------------
TOTAL STOCKHOLDERS'
EQUITY 8,250,950 2,383,885 10,699,030 21,333,865
--------------- -------------- --------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 28,502,996 $ 7,646,844 $ 41,678,615 $ 77,828,455
=============== ============== =============== ==============
</TABLE>
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisition occurred at the beginning of
the periods depicted or of results which may occur in the future.
-25-
<PAGE>
The following represents the unaudited pro forma condensed balance sheet as of
March 31, 1998:
<TABLE>
<CAPTION>
Geophysical
Development Pro Forma
Geokinetics Inc. Corporation Adjustments Combined
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,111,331 $ 5,466,081 $ 13,778,073 $ 20,355,485
Receivables 4,523,231 2,870,800 0 7,394,031
Other current assets 1,270,479 21,472 0 1,291,951
--------------- -------------- --------------- --------------
Total Current Assets 6,905,041 8,358,353 13,778,073 29,041,467
PROPERTY AND EQUIPMENT 16,935,161 1,833,770 0 18,768,931
OTHER ASSETS
Deferred tax asset 2,292,430 0 0 2,292,430
Other assets 265,786 291,320 221,927 779,033
Goodwill 4,965,483 0 26,424,902 31,390,385
--------------- -------------- --------------- --------------
Total Other Assets 7,523,699 291,320 26,646,829 34,461,848
--------------- -------------- --------------- --------------
TOTAL ASSETS $ 31,363,901 $ 10,483,443 $ 40,424,902 $ 82,272,246
=============== ============== =============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,420,453 $ 5,422 $ 0 $ 2,425,875
Other current liabilities 5,128,513 5,972,190 0 11,100,703
Notes payable 2,172,281 0 0 2,172,281
--------------- -------------- --------------- --------------
Total Current Liabilities 9,721,247 5,977,612 0 15,698,859
LONG-TERM DEBT 11,970,476 868,233 30,979,585 43,818,294
--------------- -------------- --------------- --------------
TOTAL LIABILITIES 21,691,723 6,845,845 30,979,585 59,517,153
STOCKHOLDERS' EQUITY
Common stock 183,268 6,750 3,250 193,268
Additional paid in capital 16,039,486 103,500 12,969,415 29,112,401
Accumulated earnings (deficit) (6,550,576) 3,527,348 (3,527,348) (6,550,576)
--------------- -------------- --------------- --------------
TOTAL STOCKHOLDERS'
EQUITY 9,672,178 3,637,598 9,445,317 22,755,093
--------------- -------------- --------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 31,363,901 $ 10,483,443 $ 40,424,902 $ 82,272,246
=============== ============== =============== ==============
</TABLE>
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisition occurred at the beginning of
the periods depicted or of results which may occur in the future.
-26-
<PAGE>
Geophysical Development Corporation
Unaudited Statements of Income and Cash Flows
For the Nine Months Ended March 31, 1998
REVENUES $ 12,985,630
EXPENSES
Data processing expenses (3,465,794)
General and administrative (2,177,150)
Depreciation and amortization (497,370)
Interest expense (94,300)
Interest income 40,991
Income tax expense (2,309,000)
----------------
NET INCOME $ 4,483,007
================
CASH FLOWS FROM OPERATING ACTIVITIES
Inflows
Cash received from customers $ 12,741,947
Interest received 40,991
----------------
12,782,938
Outflows
Cash paid to suppliers and employees (7,147,003)
Interest paid (83,827)
Income taxes paid (114,343)
----------------
(7,345,173)
----------------
Net Cash Provided by Operating Activities 5,437,765
CASH FLOW FROM INVESTING ACTIVITIES
Outflows
Cash payments for the purchase of property (768,204)
----------------
Net Cash Used by Investing Activities (768,204)
CASH FLOWS FROM FINANCING ACTIVITIES
Inflows
Proceeds from long-term debt 560,000
Outflows
Payments on long-term debt (280,838)
----------------
Net Cash Provided by Operating Activities 279,162
----------------
NET INCREASE IN CASH 4,948,723
CASH, beginning of year 517,358
----------------
CASH, end of year $ 5,466,081
================
-27-
