SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9268
GEOKINETICS INC.
(Exact name of small business issuer as specified in its charter)
Delaware 94-1690082
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5555 San Felipe, Suite 780
Houston, Texas 77056
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 850-7600
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X___ No ____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
Registrant's revenues for its most recent fiscal year were $33,062,340.
As of December 31, 1998, 19,332,480 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was approximately $3,861,886 based on the last reported sales
price of such stock on that date.
DOCUMENTS INCORPORATED BY REFERENCE
Documents incorporated by reference: None.
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This Report omits Items 6 and 7, which will be filed as an amendment to this
Form 10-KSB
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GEOKINETICS INC.
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Description of Business..............................................1
Item 2. Description of Property..............................................8
Item 3. Legal Proceedings...................................................11
Item 4. Submission of Matters to a Vote of Security Holders.................12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............12
Item 6. Management's Discussion and Analysis or Plan of Operation...........12
Item 7. Financial Statements................................................13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................................13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..................13
Item 10. Executive Compensation.............................................16
Item 11. Security Ownership of Certain Beneficial Owners and Management.....18
Item 12. Certain Relationships and Related Transactions.....................20
Item 13. Exhibits and Reports on Form 8-K...................................23
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Development of Current Business Operations
The predecessor corporation of Geokinetics Inc. ("Geokinetics" or the
"Company") was organized in 1969 under the laws of California. The Company was
incorporated in Delaware in April 1980, and the California corporation was
merged into the Company. During 1994, the Company acquired certain oil and gas
properties from two independent oil and gas companies located in Houston, Texas.
The Company completed these acquisitions by means of a merger of HOC Operating
Co., Inc. and Hale Exploration Company, each Texas corporations, into two
newly-formed subsidiaries of the Company.
Since April 1997, the Company has repositioned itself from an oil & gas
exploration and production company into a technologically advanced provider of
seismic acquisition and high-end seismic data processing services to the oil and
gas industry. Through equipment purchases, acquisitions of certain competitors
and the completion of a series of private equity transactions, the Company now
has the capacity to operate five seismic crews in the Rocky Mountain and Gulf
Coast regions of the United States ("US"). The Company intends to divest its
interests in its oil and gas properties during 1999.
o On April 25, 1997, the Company obtained $500,000 in short-term financing in
the form of 12% senior notes from William R. Ziegler and Steven A. Webster
(both of whom were appointed to the Company's Board of Directors effective
August 1, 1997). As additional consideration for providing this financing,
the Company issued warrants entitling each of Messrs. Ziegler and Webster
to purchase 500,000 shares (subject to anti-dilution provisions contained
therein) of the Company's Common Stock, par value $.01 per share (the
"Common Stock") at a price of $0.75 per share. On July 18, 1997, pursuant
to the Securities Purchase and Exchange Agreement, described below, these
notes were exchanged for (i) 458,333 newly-issued shares of the Company's
Common Stock, (ii) 15,625 newly-issued shares of the Company's Series A
Preferred Stock and (iii) Shadow Warrants to purchase an additional 592,009
shares of the Company's Common Stock at a price of $0.20 per share.
o On July 18, 1997, the Company entered into a Securities Purchase and
Exchange Agreement (the "Purchase Agreement") with Blackhawk Investors,
L.L.C., William R. Ziegler and Steven A. Webster (referred to collectively
as the "Blackhawk Group"). Pursuant to the Purchase Agreement, the
Blackhawk Group acquired from the Company (i) 5,500,000 newly-issued shares
of the Company's Common Stock, (ii) 187,500 newly-issued shares of the
Company's Series A Preferred Stock (which were converted into an aggregate
of 2,500,000 shares of Common Stock on November 24, 1997), and (iii) Shadow
Warrants to purchase up to an additional 7,104,103 shares of Common Stock
at a price of $0.20 per share, in exchange for (x) an aggregate of
$5,500,000 in cash paid to the Company and (y) the exchange of certain
indebtedness in the principal amount of $500,000 owed by the Company to
Messrs. Ziegler and Webster.
o On July 24, 1997, Blackhawk Investors, L.L.C. acquired 100,000 shares of
the Company's newly-issued Series B Preferred Stock for $1 million in cash.
The Series B Preferred Stock was automatically converted into an aggregate
of 1,333,333 shares of Common Stock on January 1, 1998.
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o On July 18, 1997, the Company acquired Signature Geophysical Services,
Inc., a Michigan corporation ("Signature"). Signature, based in Houston,
Texas, is engaged in the business of providing 3D seismic surveys of oil
and gas properties, focusing primarily on the Gulf Coast of the United
States, with particular emphasis on coastal swamp operations.
o On January 26, 1998, the Company acquired Reliable Exploration
Incorporated, a Montana corporation ("Reliable"). Reliable, based in
Billings, Montana, is engaged in the business of providing 2D and 3D
seismic surveys to the oil & gas industry, focusing on the Rocky Mountain
region of the United States.
o On April 30, 1998, the Company completed the acquisition of Geophysical
Development Corporation, a Texas corporation ("GDC"). GDC, based in
Houston, Texas is a high-end provider of seismic data processing, software
and consultation services to the oil and gas industry.
o On April 30, 1998, the Company completed a private offering of $40,000,000
of certain securities designated as its 12% Senior Subordinated Notes (the
"Notes") to DLJ Investment Partners, L.P. and certain additional investors
("Purchasers") pursuant to the terms of a Securities Purchase Agreement by
and among the Company and the Purchasers. Additionally, the Company (i)
caused certain of its wholly-owned subsidiaries to execute guarantees of
the Notes pursuant to an Indenture executed by each of them, (ii) granted
warrants (the "Warrants") to the Purchasers entitling them to purchase up
to an aggregate of 7,618,594 shares of Common Stock at a price of $2.00 per
share, subject to certain adjustments, and (iii) granted certain
registration rights in favor of the Purchasers with respect to the Notes,
the Warrants and the shares of Common Stock which may be acquired upon
exercise of the Warrants. The completion of this offering enabled the
Company to purchase an additional 3,000 channel I/O System Two RSR System
and complete the acquisition of GDC.
As a result of these transactions, the Company has evolved into a
technologically focused provider of 3D seismic services to the oil and gas
industry. By completing the transactions described above, the Company has been
able to expand its seismic acquisition capabilities and significantly increase
its overall capabilities by being able to provide high-end seismic data
processing services.
Although the industry is currently experiencing a significant downturn, the
Company intends to continue to evaluate opportunities which would allow the
Company to expand its capabilities and become a significant provider of
land-based seismic acquisition services as well as continuing to increase the
high-end services provided by its seismic data processing business.
The Company's corporate headquarters is located in Houston, Texas. The
Company's address is 5555 San Felipe, Houston, Texas 77056 and its telephone
number is (713) 850-7600.
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Forward-Looking Information
This report contains forward-looking statements, including statements
regarding future financial performance and results and other statements that are
not historical facts. Such statements are included in Item 1 ("Business"), Item
2 ("Property"), and Item 6 ("Management's Discussion and Analysis of Financial
Condition and Results of Operations"). When used in this report, words such as
"anticipate," "believe," "expect," "estimate," "intend," "may," and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in these forward-looking statements are
reasonable, there can be no assurance that actual results or developments
anticipated by the Company will be realized or, even if realized, that they will
have the expected effects on its business or operations. Actual results could
differ materially from those contemplated by the forward-looking statements as a
result of certain factors beyond the Company's control. Such factors include,
but are not limited to, dependence upon oil and gas industry spending, worldwide
prices, demand for oil and gas, technological changes and developments in the
seismic acquisition business, operating risks, regulatory changes, and changes
in economic conditions both domestic and international.
Industry Overview
Seismic surveys enable oil and gas companies to determine whether
subsurface conditions are favorable for finding new oil and gas accumulations
and assist oil and gas companies in determining the size and structure of
previously identified oil and gas fields. Seismic surveys consist of the
acquisition and processing of two dimensional ("2D") and three dimensional
("3D") seismic data, which is used to produce computer generated graphic
cross-sections, maps and 3D images of the subsurface. These resulting images are
then analyzed and interpreted by geophysicists and are used by oil and gas
companies in the acquisition of new leases, the selection of drilling locations
on exploratory prospects and in managing and developing producing reservoirs.
With the advent of modern 3D technology, the seismic industry has changed
profoundly. In the past the role of seismic, in particular 2D surveys, was
restricted to that of simply illustrating gross structural features. In
contrast, 3D surveys provide detailed views of subsurface geologic structures
and much higher resolution of the structures than is available from a 2D survey.
Moreover, 3D surveys have proven to be more reliable indicators of the oil and
gas potential in the surveyed area than 2D surveys. As a result, drilling based
on 3D seismic surveys has improved the economics of discovering oil and gas by
reducing risks and finding costs for the oil and gas industry. Consequently, the
demand for 3D seismic surveys has significantly increased in the past several
years. In technical literature, it is 3D seismic technology that is cited time
and again as the technology most impacting exploration and production economics
over the last five years. Additionally, as the image quality of 3D seismic has
improved, the role of 3D seismic has expanded beyond the identification of
exploration drilling prospects and into the realm of field development and
production management.
Seismic data is acquired by land, transition zone and offshore crews.
Seismic data is generated by the propagation of sound waves near the earth's
surface by controlled sources, such as dynamite or vibration equipment. The
seismic waves radiate into the earth and are reflected back to the surface with
the information collected by strategically positioned data collection devices
known in the industry as "geophones". This data is then input into a specialized
data processing system that enhances the recorded signal by reducing noise and
distortion and improving resolution and arranges the input data to produce an
image of the subsurface area. Practically speaking, 3D seismic surveys collect
far more information than previously used seismic methods, generating
significantly greater detail about the underlying reservoirs. With advances in
equipment and computer power resulting in lower costs, 3D technology is now
being applied to virtually all exploration ventures as well as field development
and prospect delineation.
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Since 1988 the offshore seismic data acquisition market has changed from a
market that was roughly 50-60% proprietary 3D seismic surveys to one that is
entirely multi-client or "spec surveys". The major difference between a
proprietary survey and a multi-client survey is the data acquired from a
proprietary survey is exclusively owned by the customer whereas the data
acquired from a multi-client survey is owned by the contractor and can be
resold. The reduced cost which customers generally enjoy from participating in a
multi-client survey more than offset the loss of exclusive data ownership. This
fact and the general industry perception that seismic acquisition is a commodity
business have been the primary reasons for the rapid expansion of multi-client
data in the offshore. Most exploration companies use processing, interpretation
or other in-house technology as a means of differentiation rather than acquired
data. This same circumstance is now occurring on land. In the next few years, as
small onshore oil and gas companies become more comfortable with a multi-client
business model, it will become the preferred method of acquiring 3D seismic data
causing a reduction in proprietary surveys.
The seismic service industry has undergone a significant change during
1998. The year began with an abundance of work, attractive gross margins
(20-30%) and a solid oil and gas price premise. With the deterioration of the
price of oil beginning in the Spring of 1998, the industry is currently
experiencing a significant downturn. Margins have been reduced significantly,
the number of 3D proprietary seismic surveys to be acquired has been greatly
reduced, seismic crews are being stacked and a number of seismic service
companies are experiencing financial difficulties. Couple this with a continuing
trend towards larger crews with a greater number of channels and more
technologically capable equipment and it is clear that properly capitalized
companies with access to lower costing capital will have a significant advantage
in a high capital cost business. These conditions also apply to the seismic data
processing segment of the industry. Margins are continuing to deteriorate,
although not as yet to the levels seen in acquisition, and the number of
processing opportunities also has decreased. Seismic data processing companies
with proprietary processing techniques, large computing infrastructure and
industry recognized staffs will have a significant advantage going forward.
Seismic Acquisition Services
The Company is engaged in land-based and transition zone seismic
acquisition services on a contract basis for its clients. The Company's
equipment is capable of collecting both 2D and 3D seismic acquisition data, has
a combined recording capacity of approximately 10,200 channels and can be
configured to operate up to 5 crews. A majority of the Company's land and
transition zone acquisition services involve 3D surveys. The Company is
currently operating two crews; one in the Rocky Mountain region and one in the
Gulf Coast region.
On a typical land seismic survey, the seismic crew is supported by a
surveying crew which lays out the lines to be recorded and identifies the sites
for shot-hole placement, a drilling crew which creates the holes for the
explosive charges which produce the necessary acoustical impulse or a mechanical
vibrating unit in areas where explosives are not utilized. The seismic crew lays
out the geophones and recording instruments, directs shooting operations and
records the acoustical signal reflected from subsurface strata. The survey crew
and drill crew are typically provided by third parties and supervised by Company
personnel. A fully staffed 3D seismic crew typically consists of twenty-five to
fifty persons, including a party manager, an observer, a head linesman and crew
laborers. The number of individuals on each crew is dependent upon the size and
nature of the seismic survey requested by the customer.
The Company uses helicopters to assist its crews in seismic data
acquisition in circumstances where such use will reduce overall costs and
improve productivity. These savings are achieved by deploying the crew and its
equipment more rapidly and significantly reducing surface damages.
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Seismic Data Processing
The Company currently operates one seismic data processing center in
Houston, Texas capable of processing 2D and 3D seismic data acquired from its
own crews as well as data acquired by other geophysical crews. A majority of the
Company's data processing services is performed on 3D seismic data. Seismic data
is processed to produce an image of the earth's subsurface using proprietary
computer software and techniques developed by the Company. The Company also
reprocesses older seismic data using new techniques designed to enhance the
quality of the data.
The Company's data processing center operates high capacity, advanced
technology data processing systems based primarily on Sun(R) computer systems
using high-speed networks. These systems utilize the Company's proprietary data
processing software. The Company processes both land and marine seismic data.
The geophysical industry is highly technical, and the technological
requirements for the acquisition and processing of seismic data have increased
continuously over time. Thus, the Company must continually take steps to ensure
that its technological capabilities that are comparable or superior to those of
its competitors, whether through continuing research and development, strategic
alliances with equipment manufacturers or by acquiring technology under license
from others. The Company has introduced several technological innovations that
have become industry-standard products in the seismic data processing business.
The Company's seismic data processing operations are conducted by
Geophysical Development Corporation ("GDC"), its wholly-owned subsidiary. GDC,
which was founded in 1981 to provide geophysical processing, software and
consultation services to the oil and gas industry, was acquired by the Company
in April 1998.
Capital Expenditures
The seismic service industry is capital intensive, and the Company will
need to raise additional capital to continue to expand its seismic service
capabilities. The cost of sophisticated seismic acquisition equipment has
increased significantly over the last several years. The cost of equipping a
crew with a state-of-the-art system such as an I/O System Two, can range from $4
to $10 million. The Company's ability to expand its business operations is
dependent upon the availability of internally generated cash flow and financing
alternatives. Such financing may consist of bank or commercial debt, forward
sales of production, equity or debt securities or any combination thereof. There
can be no assurance that the Company will be successful in obtaining additional
financing if and when required. Any substantial alteration or increase in the
Company's capitalization through the issuance of debt or equity securities or
otherwise may significantly increase the leverage and decrease the financial
flexibility of the Company. Due to the uncertainties surrounding the changing
market for seismic services, increases in technological requirements, and other
matters associated with the Company's operations, the Company is unable to
estimate the amount of any financing that it may need to acquire, upgrade and
maintain seismic equipment and continue its diversification as a full-scale
geotechnology enterprise. If the Company is unable to obtain such financing if
and when needed, it will be forced to curtail its business objectives, and to
finance its business activities with only such internally generated funds as may
then be available.
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Operating Conditions
The Company's seismic acquisition activities are often conducted under
extreme weather, in difficult terrain and under other hazardous conditions. As a
result, these activities are subject to risks of injury to Company personnel and
loss of seismic acquisition equipment. The Company maintains insurance against
the destruction of its seismic acquisition equipment and injury to person and
property that may result from its operations and considers the amount of such
insurance to be adequate. However, the Company is not fully insured for all
risks, either because such insurance is not available or because the Company
elects not to obtain insurance coverage because of cost.
Fixed costs, including costs associated with operating leases, labor costs,
depreciation and interest expense account for a substantial percentage of the
Company's costs and expenses. Accordingly, downtime or low productivity
resulting from weather interruptions, reduced demand, equipment failures or
other causes can result in significant operating losses.
The Company believes it will have the opportunity to generate its highest
revenues during the third quarter (July 1 through September 30) primarily
because this period typically provides for more recording hours due to longer
days and less curtailment of operations due to poor weather. Although certain
seasons generally provide better working conditions, adverse conditions may
impact revenues at any time throughout the year.
Marketing
The Company's seismic acquisition services are marketed from its corporate
offices. The Company's seismic data processing services are marketed from its
Houston processing center. While the Company relies upon the traditional
utilization of Company personnel in making sales calls, it anticipates receiving
a significant amount of work through word-of-mouth referrals and sales, repeat
customer sales and the Company's industry reputation and presence of its
personnel.
Contracts are obtained either through competitive bidding, in response to
invitations to bid, or by direct negotiation with a prospective client. A
significant portion of the Company's contracts result from competitive bidding.
Contracts are awarded primarily on the basis of price, crew experience and
availability, technological expertise and reputation for dependability and
safety.
Contracts, whether bid or negotiated, provide for payment on either a
turnkey or a time basis or on a combination of both methods. A turnkey contract
provides for a fixed fee to be paid per square mile of data acquired. Such a
contract causes the Company to bear substantially all the risks of business
interruption caused by weather delays and other hazards. Time contracts provide
for payments based on agreed rates per units of time, which may be expressed in
periods ranging from days to months. This type of contract causes the client to
bear substantially all of the business interruption risks. When a combination of
both turnkey and time methods is used, the risk of business interruption is
shared by the Company and the client. In either case, progress payments are
usually required unless it is expected the job can be accomplished in a short
period. The Company's contracts for seismic acquisition have been predominantly
on a turnkey or combination of turnkey/time basis. The Company's contracts
currently provide that the seismic data acquired by the Company is the exclusive
property of the Company's client. Substantially all of the Company's data
processing contracts are on a turnkey basis.
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Customers
The Company's customers include a number of major oil industry companies
and their affiliates, including Mobil, Seitel, Marathon and Phillips as well as
many smaller, independent oil and gas companies. The table below sets forth
customers that accounted for more than 10% of the Company's revenues during the
fiscal year ended December 31, 1998:
FOR THE YEAR ENDED
DECEMBER 31, 1998
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REVENUES PERCENTAGE OF TOTAL REVENUES
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Seitel Data $7,845,000 23.7%
SMK Energy, Inc.(1) $5,337,000 16.1%
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(1) Approximately $2.8 million of amounts due from SMK have not yet been
collected. (See "Legal Proceedings" below).
No other customer accounted for more than 10% of the Company's revenues in
1998.
Backlog
At March 31, 1999, the Company's backlog of commitments for services was
$5.7 million. It is anticipated that significantly all of the March 31, 1999
backlog will be completed in the next 12 months. This backlog consists of
written orders or commitments believed to be firm. Contracts for services are
occasionally varied or modified by mutual consent and in certain instances are
cancelable by the customer on short notice without penalty. As a result of these
factors, the Company's backlog as of any particular date may not be indicative
of the Company's actual operating results for any succeeding fiscal period.
Competition
The acquisition and processing of seismic data for the oil and gas industry
is highly competitive. Although reliable comparative figures are not available,
the Company believes its principal competitors have more extensive and
diversified operations and also have financial, operating and other resources
substantially in excess of those available to the Company. Competitive factors
include the type and capability of equipment used to conduct seismic surveys and
that equipment's availability. In addition to price, the performance and
dependability of a crew significantly affect a potential customer's decision to
award a contract to a company or one of its competitors.
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The Company's major competitors include Western Geophysical (a division of
Baker Hughes), Veritas DGC, Geco-Prakla (a division of Schlumberger Ltd.), Eagle
Geophysical, Inc., Dawson Geophysical Company and PGS, Inc.
Regulation
The Company's operations are subject to numerous federal, state and local
laws and regulations. These laws and regulations govern various aspects of
operations, including the discharge of explosive materials into the environment,
requiring removal and clean-up of materials that may harm the environment or
otherwise relating to the protection of the environment and access to private
and governmental land to conduct seismic surveys. The Company believes it has
conducted its operations in substantial compliance with applicable environmental
laws and regulations governing its activities.
Technology
The Company relies on certain proprietary information, trade secrets, and
confidentiality and licensing agreements (collectively, "Intellectual Property")
to conduct its current operations. The Company's future success will depend, in
part, on its ability to maintain and preserve its Intellectual Property, without
infringing the rights of any third parties. There can be no assurance that the
Company will be successful in protecting its Intellectual Property or that its
competitors will not develop technologies that are substantially equivalent or
superior to the Company's technologies. The Company continues to incur expenses
associated with research and development and expects that research and
development expenditures will increase as the Company's expansion into other
areas of seismic operations develops.
Employees
At March 31, 1999, the Company had approximately 150 full-time employees.
None of the Company's employees are parties to a collective bargaining
agreement. The Company considers the relations with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company is leasing approximately 11,694 square feet of office space
under two separate leases at its corporate headquarters located at 5555 San
Felipe, Houston, Texas 77056. One lease provides for a base rent of $73,370.86
per year plus estimated yearly operating expenses of $37,877.28, and the other
lease provides for base rent of $65,889.10 per year plus estimated operating
expenses of $45,738.60. In 1998, the Company's rent expenses under the leases
(including base rent and operating expenses) were $166,270.13. The Company
leases 26,956 square feet of office space in Houston, Texas for its geophysical
data processing center under a lease expiring April 30, 2001. In addition, the
Company owns approximately one acre of property in Brookshire, Texas, which is
serving as the Company's maintenance facility for its seismic acquisition
operations. The Brookshire, Texas property consists of a facility of
approximately 5,400 square feet where maintenance activities are conducted and a
smaller storage facility of approximately 1,200 square feet. The Brookshire
facility is subject to a Deed of Trust, Security Agreement and Fixtures
Financing Statement dated March 1, 1996 from Quantum Geophysical, Inc. (now
Quantum Geophysical Services, Inc.), Mortgagor, to Benefit Life Insurance
Company, Mortgagee. The Company also leases an office and maintenance facility
of approximately 5,000 square feet in Billings, Montana. The Company's annual
rent under this lease is $41,400. The lease has an eleven-year term that will
expire in December of 2009, but may be terminated by the Company in February
2001 under certain circumstances. The Company currently has no plans to
renovate, improve or develop any of its forgoing properties, and believes each
of the properties is adequately covered by insurance. The Company also believes
that its present facilities are sufficient for the foreseeable future and that
it will be able to negotiate a favorable lease renewals of the leased facilities
or find a suitable replacement facilities without substantial difficulty.
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The Company does not invest in real estate, interests in real estate or
real estate mortgages and does not acquire assets primarily for capital gain or
primarily for income.
Certain Definitions Concerning Oil and Gas Properties
As used in this Form 10-KSB with respect to its oil and gas operations,
"Mcf" means thousand cubic feet, "MMcf" means million cubic feet, "Bcf" means
billion cubic feet, "Bbl" means barrel, "MBbls" means thousand barrels, "MMBbls"
means million barrels, "BOE" means equivalent barrels of oil and "MBOE" means
thousand equivalent barrels of oil. Unless otherwise indicated in this Form
10-KSB, gas volumes are stated at the legal pressure base of the state or area
in which the reserves are located and at 60" Fahrenheit. Barrels of oil
equivalent are determined using the ratio of six Mcf of gas to one Bbl of crude
oil, condensate or natural gas liquids. The term "gross" refers to the total
acres or wells in which the Company has a working interest. The term "net"
refers to gross acres or wells multiplied by the percentage working interest
owned by the Company. Unless the context requires otherwise, all references to
the "Company" include Geokinetics Inc. and its consolidated subsidiaries.
Acquisition and Exploitation of Properties
The Company owns working interest in 23 producing oil and gas wells located
in Texas. The Company is also the operator of each of these 23 wells. All of the
Company's wells were originally drilled and have been continuously operated by
current management and their predecessor companies.
Oil and Gas Sales Prices and Production Costs
The following table sets forth for the Company, its subsidiaries and their
predecessors, the pro forma average sales prices per Bbl of oil (including
condensate) and per Mcf of gas produced, and the production costs (including
taxes on production and property and transportation charges) per BOE produced
for each of the last three fiscal years:
Company, Subsidiaries and their Predecessors
Year Ended
December 31
------------------------------------
1996 1997 1998
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Weighted average sales price per
Bbl of oil produced $20.67 $18.98 $12.05
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Weighted average sales price per
Mcf of gas produced $ 2.55 $ 2.86 $ 2.40
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Weighted average production
cost per BOE $ 5.22 $ 5.42 $ 7.97
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Reserves
The following table sets forth, as of December 31, 1998, certain
information about the pro forma estimated developed and undeveloped proved
reserves of the Company's subsidiaries and their predecessors:
Company Subsidiaries
Pro Forma
--------------------
December 31, 1998
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Proved developed:
Oil (Bbls) 57,685
Gas (Mcf) 679,260
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Proved undeveloped:
Oil (Bbls) 198,275
Gas (Mcf) 2,544,972
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Total Proved:
Oil (Bbls) 255,960
Gas (Mcf) 3,224,232
Estimated future net cash
Flows, before income taxes 4,851,900
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Present value of estimated
future net cash flows, before
income taxes, discounted
at 10% 2,611,200
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There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve data set forth in the above table represent only estimates. Reserve
engineering is a subjective process of estimating underground accumulations of
oil and gas that cannot be measured in an exact manner, and the accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geologic interpretation and judgment. As a result, estimates by
different engineers often vary, sometimes significantly. In addition, physical
factors, such as the results of drilling, testing and production subsequent to
the date of an estimate, as well as economic factors, such as an increase or
decrease in product prices that renders production of such reserves more or less
economic, may justify revision of such estimates. Accordingly, reserve estimates
are different from the quantities of oil and gas that are ultimately recovered.
Productive Wells and Acreage
During the fiscal year ended December 31, 1998, neither the Company nor its
subsidiaries and their predecessors completed any productive or non-productive
wells. The following table sets forth the approximate number of gross productive
wells and net productive wells owned by the Company as of December 31, 1998:
Gross Net
----------------------------------------------
Texas Panhandle 15 1.16
----------------------------------------------
Texas Upper Gulf Coast 5 2.66
----------------------------------------------
Texas Lower Gulf Coast 3 1.76
----------------------------------------------
Total 23 5.57
----------------------------------------------
10
<PAGE>
The following table shows, by geological region, the approximate leasehold
acreage and royalty and mineral acreage of the Company as of December 31, 1998:
<TABLE>
<CAPTION>
Region Leasehold Acreage Royalty and Mineral Acreage
- - -------------------------------------------------------------------------------------------------
Producing Non-Producing/ Producing Non-Producing/
Undeveloped Undeveloped
Acreage (1) Acreage (1)
- - -------------------------------------------------------------------------------------------------
Gross Net Gross Net Gross Net Gross Net
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Texas
Panhandle 5,152 317 -- -- -- -- -- --
- - -------------------------------------------------------------------------------------------------
Texas -- --
Upper 2,520 -- -- -- 150(2) 12
Gulf Coast 1,423 --
- - -------------------------------------------------------------------------------------------------
Texas
Lower
Gulf Coast 440 215 -- -- -- -- -- --
- - -------------------------------------------------------------------------------------------------
Total 8,112 1,955 -- -- -- -- 150 12
- - -------------------------------------------------------------------------------------------------
</TABLE>
- - ----------
(1) Undeveloped Acreage is considered to be those lease acres on which wells
have not been drilled or completed to a point that would permit the
production of commercial quantities of oil and gas regardless of whether or
not such acreage contains proved reserves.
(2) Mineral Fee.
Drilling Activity
Through its seismic-based business operations, the Company earned a 5%
carried interest in an exploratory well to be drilled in Louisiana. The well was
drilled during the first quarter of 1998. This drilling activity resulted in a
dry hole. The Company anticipates that no additional drilling activities will
occur on this prospect.
Present Drilling Activity
None.
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
On September 9, 1998 the Company filed suit in Smith County, Texas against
SMK Energy Corporation ("SMK") to collect approximately $2.8 million due for
seismic data acquisition services performed by one of the Company's
subsidiaries. On January 13, 1999, the Company obtained a judgment against SMK
for approximately $3 million, including interest and attorneys' fees. SMK is
currently the subject of involuntary bankruptcy proceedings that were brought
against SMK in March 1999. The Company is vigorously pursuing all legal
alternatives available to it in order to collect its judgment against SMK. In
addition, the Company is considering other legal actions that may be available
to it against other parties involved in this seismic acquisition project.
Except for the proceedings discussed above, neither the Company nor any of
its subsidiaries is a party to any pending legal proceedings. Moreover, the
Company is not aware of any such legal proceedings that are contemplated by
governmental authorities with respect to the Company, any of its subsidiaries,
or any of their respective properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1998.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock, $.01 par value per share (the "Common Stock")
is traded on the Nasdaq OTC Bulletin Board under the trading symbol "GEOK." As
of December 31, 1998, the Company had 386 stockholders of record.
The following table sets forth the high and low closing prices for the
Common Stock during the Company's most recent fiscal quarter and its last two
fiscal years as reported by the National Association of Security Dealers on the
Nasdaq OTC Bulletin Board.
Symbol: GEOK
Listing: Nasdaq OTC Bulletin Board
- - --------------------------------------------------------------------------------
High Low
- - --------------------------------------------------------------------------------
Twelve Months Ended December 31, 1998
- - --------------------------------------------------------------------------------
Quarter Ended March 31, 1998 4 1/16 2 1/2
Quarter Ended June 30, 1998 4 3/8 3 3/8
Quarter Ended September 30, 1998 3 3/8 1 13/16
Quarter ended December 3, 1998 1 13/16 11/32
- - --------------------------------------------------------------------------------
Twelve Months Ended December 31, 1997
- - --------------------------------------------------------------------------------
Quarter Ended March 31, 1997 1 1/2 13/16
Quarter Ended June 30, 1997 1 1/2 3/4
Quarter Ended September 30, 1997 3 3/8 29/32
Quarter Ended December 31, 1997 5 5/8 3 1/2
- - --------------------------------------------------------------------------------
12
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company is currently working to complete its audit for the fiscal year
ended December 31, 1998 and expects that the 1998 audited financial statements
will be completed within sixty (60) days of this filing. The Company intends to
provide discussion of the Company's financial condition under this Item upon
receipt of such audited financial statements by amendment to this Form 10-KSB.
ITEM 7. FINANCIAL STATEMENTS.
The Company is currently working to complete its audited financial
statements for the fiscal year ended December 31, 1998. Such financial
statements will be provided by amendment to this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND OFFICERS
Set forth below are the names, ages and positions of the directors and
executive officers of the Company. Except for Antony T. F. Lundy, each of the
directors listed below were elected at the 1998 Annual Meeting of the Company's
Stockholders for a term of one year. Mr. Lundy was elected to the Board of
Directors on May 27, 1998 to fill the vacancy created in connection with the
Company's April 30,1998 private securities offering used to finance the
acquisition of Geophysical Development Corporation. Each of the directors named
below will be nominated at the 1999 Annual Meeting of Stockholders to serve on
the Company's Board of Directors for additional one year terms or until their
successors are elected.
13
<PAGE>
OFFICE HELD
NAME AGE POSITION WITH THE COMPANY SINCE
- - ---- --- ------------------------- -----
William R. Ziegler 56 Chairman (since February 2, 1999), 1997
and Director (1)
Lynn A. Turner 49 President and Chief Operating Officer 1997
Michael A. Dunn 44 Vice President and 1997
Chief Technology Officer
Thomas J. Concannon 45 Vice President and 1997
Chief Financial Officer
Michael A. Schott 54 Vice President of Financial 1998
Reporting and Compliance
Michael Hale 41 Vice President - Exploration and 1994
Production and Secretary
Christopher M. Harte 50 Director 1997
Steven A. Webster 46 Director 1997
Antony T. F. Lundy 38 Director 1998
- - ----------
(1) Effective February 2, 1999, Jay D. Haber resigned from his positions as
director, officer and employee of the Company, and William R. Ziegler was
appointed as the Company's Chairman.
There are no family relationships between any of the directors or executive
officers of the Company.
WILLIAM R. ZIEGLER, age 56, was appointed as the Company's Chairman on
February 2, 1999 succeeding Jay D. Haber. Mr. Ziegler is a partner of the law
firm of Parson & Brown, L.L.P., located in New York, New York, where he has
served as Chairman of that firm since June of 1994. Mr. Ziegler was formerly a
partner of Whitman Breed Abbott & Morgan, located in New York, New York (1993 -
May 1994), and a predecessor law firm, Whitman & Ransom (since 1976), where he
was Co-Chairman of its Corporate Department. Mr. Ziegler is a director of R&B
Falcon Corporation, a director and Vice Chairman of Grey Wolf, Inc., a director
of Ponder Industries, Inc., a director of Flotek Industries Inc. (an oil
services equipment supplier), a general partner of Somerset Capital Partners, a
general partner of White Owl Capital Partners, the managing member of Marlin
Investors, LLC, a principal stockholder of Flotek Industries, and a general
partner of Blackhawk Capital Partners, the managing member of Blackhawk
Investors, L.L.C. Mr. Ziegler has served as a member of the Company's Board of
Directors since August 1, 1997.
LYNN A. TURNER, age 49, has served as the President and Chief Operating
Officer of the Company since July 28, 1997. For more than the past five years,
Mr. Turner was employed by Fairfield Industries, Inc., a provider of seismic
acquisition services, most recently as Senior Vice President and Manager of Data
Acquisition. Mr. Turner has more than 20 years of experience in the seismic data
acquisition business.
14
<PAGE>
MICHAEL A. DUNN, age 44, has served as a Vice President and the Chief
Technology Officer of the Company since August 18, 1997. For more than the past
five years, Mr. Dunn was employed by Shell Oil Company, most recently as
Technology Manager at its Exploration and Production Center. Mr. Dunn has over
18 years background in all aspects of geoscience, including seismic acquisition,
seismic processing, exploration and research.
THOMAS J. CONCANNON, age 45, has served as a Vice President and the Chief
Financial Officer of the Company since July 15, 1997. For the past five years,
he has worked as a private consultant for various energy companies. Prior to
that time, he served as President of NJR Energy, an exploration company and as a
director of its parent company, NJ Resources, Inc. Mr. Concannon has over 12
years of energy industry experience.
MICHAEL A. SCHOTT, age 54, has served as Vice President of Financial
Reporting and Compliance, since August 5, 1998. For more than the past five
years, Mr. Schott has served as a Vice President and shareholder of a public
accounting firm in San Antonio, Texas. Prior to that time Mr. Schott served as
Controller, then Senior Vice President and Treasurer of Venus Oil Company. Mr.
Schott is a Certified Public Accountant with 30 years of experience, including
10 years in the oil and gas exploration industry and 20 years in the practice of
public accounting. Mr. Schott is a member of the Texas Society of Public
Accountants and the American Institute of CPAs.
MICHAEL HALE, age 41, has served as the Vice President of the Company since
August 1, 1994, when the Company acquired certain oil and gas properties from a
corporation owned by Mr. Hale. For more than the past five years, Mr. Hale has
served as the Vice President of certain privately-owned oil and gas exploration
and production companies, including Haber Resources Corporation and HOC
Operating Co., Inc., and as President of Hale Exploration Corporation.
CHRISTOPHER M. HARTE, age 50, is a private investor. From 1992 to 1994, Mr.
Harte was the President of Portland Newspapers, Inc. Mr. Harte is a director of
several corporations, including Harte-Hanks Communications, Inc. (a direct
marketing and shopper publishing company), Wildfire Fire Equipment Inc. (a
forest fire pump manufacturer) and Hi-Port Inc. (a petroleum product contract
packaging company), and is an investor member of Blackhawk Investors, L.L.C. Mr.
Harte has served as a member of the Company's Board of Directors since August 1,
1997.
STEVEN A. WEBSTER, age 45, is the Chief Executive Officer of R&B Falcon
Corporation, a marine oil and gas drilling contractor, and from November of 1991
through December 31, 1997, was the Chairman, Chief Executive Officer and
Treasurer of Falcon Drilling Company, Inc., a marine oil and gas drilling
contractor that, prior to becoming a wholly-owned subsidiary of R&B Falcon
Corporation on January 1, 1998, was listed on the New York Stock Exchange. Mr.
Webster serves as a director of Grey Wolf, Inc. (formerly DI Industries, Inc.)
(an international land drilling company), Ponder Industries, Inc. (an oilfield
service and rental tool company), Crown Resources Corporation (a mining
company), Carrizo Oil & Gas, Inc. (an independent oil and gas company), and as a
trust manager of Camden Property Trust (a real estate investment trust). Mr.
Webster is also a general partner of Equipment Asset Recovery Fund (an
investment fund), a general partner of Somerset Capital Partners, a principal
stockholder of Grey Wolf, Inc., a general partner of White Owl Capital Partners,
the managing member of White Owl Investors, LLC, a principal stockholder of
Ponder Industries and a general partner of Blackhawk Capital Partners, the
managing member of Blackhawk Investors, L.L.C. Mr. Webster has served as a
member of the Company's Board of Directors since August 1, 1997.
15
<PAGE>
ANTONY T. F. LUNDY, age 38, is a Managing Director in the New York
investment banking office of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and a member of DLJ's energy group. Mr. Lundy first joined DLJ in August
1983. In 1988 and 1989, Mr. Lundy served as Vice President of mergers and
acquisitions for Castle & Cooke, Inc., a food and real estate development
company. Mr. Lundy is a Chartered Financial Analyst. Mr. Lundy was appointed a
member of the Board of Directors of the Company on May 27, 1998.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16(a)-3(e) during the fiscal year ended
December 31, 1998 and Form 5 and amendments thereto furnished to the Company
with respect to such period, the Company is not aware of any director, officer,
or beneficial owner of more 10% of any class of equity securities of the Company
registered pursuant to Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act") that has failed to file on a timely basis, as disclosed in the
above forms, reports required by Section 16(a) of the Exchange Act during the
Company's most recent fiscal year or prior years.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table reflects all forms of compensation paid to the
Company's chief executive officer and its other executive officers for each of
the Company's last three completed fiscal years. No other director or executive
officer received compensation which exceeded $100,000 during any of such
periods.
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
Annual compensation Long term compensation
- - -----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- - -----------------------------------------------------------------------------------------------------------------------------------
Other Restricted Securities
Name and annual Stock underlying All other
principal position Year Salary Bonus compensation Awards options/SARs LTIP payouts compensation
($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jay D. Haber, 1998 $165,000 -- -- -- --
President and
Chief Executive
Officer
- - -----------------------------------------------------------------------------------------------------------------------------------
Lynn A. Turner, 1998 $135,000 -- -- -- -- -- --
President and
Chief Operating
Officer
- - -----------------------------------------------------------------------------------------------------------------------------------
Michael A. Dunn, 1998 $150,000 -- -- -- -- -- --
Vice President
and Chief
Technology
Officer
- - -----------------------------------------------------------------------------------------------------------------------------------
Thomas J. 1998 $120,000 -- -- -- --
Concannon(1)
(1) Vice
President and
Financial Officer
- - -----------------------------------------------------------------------------------------------------------------------------------
Michael Hale, 1998 $120,000 -- -- -- -- --
Vice President
and Secretary
- - -----------------------------------------------------------------------------------------------------------------------------------
Jay D. Haber, 1997 $156,250 600,000(2)
President and
Chief Executive
Officer through
August 1, 1997;
Chairman and
Chief Executive
Officer since
August 1, 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
Lynn A. Turner, 1997 $ $156,780(3) $1,200 -- 500,000(4) -- --
President and
Chief Operating
Officer since July
28, 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
Michael A. Dunn, 1997 $ $ 90,000 -- 550,000(5) -- --
Vice President
and Chief
Technology
Officer since
August 18, 1997
- - -----------------------------------------------------------------------------------------------------------------------------------
Michael Hale, 1997 $111,249 -- -- 300,000(6) -- --
Vice President
and Secretary
- - -----------------------------------------------------------------------------------------------------------------------------------
Jay D. Haber, 1996 $140,000 -- -- 50,000(7) -- --
President and
Chief Executive
Officer
- - -----------------------------------------------------------------------------------------------------------------------------------
Michael Hale, 1996 $ 98,000 -- -- 50,000(7) -- --
Vice President
and Secretary
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
- - ----------
(1) In 1997, the Company granted incentive stock options entitling Mr.
Concannon to purchase 300,000 shares of Common Stock under the Company's
1995 Stock Option Plan in accordance with the employment agreement between
Mr. Concannon and the Company. (See "Certain Relationships and Related
Transactions--Employment Agreements" below).
(2) Refers to incentive stock options to purchase 600,000 shares of Common
Stock granted to Mr. Haber under the Company's 1995 Stock Option Plan, in
accordance with the new employment agreement between Mr. Haber and the
Company (See "Certain Relationships and Related Transactions--Employment
Agreements" below).
(3) Includes a $156,780 bonus paid to Mr. Turner on February 13, 1998, in
accordance with the employment agreement between Mr. Turner and the Company
(See "Certain Relationships and Related Transactions--Employment
Agreements" below).
(4) Refers to non-qualified stock options to purchase 500,000 shares of Common
Stock granted to Mr. Turner under the Company's 1995 Stock Option Plan, in
accordance with the employment agreement between Mr. Turner and the Company
(See "Certain Relationships and Related Transactions--Employment
Agreements" below).
(5) Refers to non-qualified stock options to purchase 550,000 shares of Common
Stock granted to Mr. Dunn under the Company's 1995 Stock Option Plan, in
accordance with the employment agreement between Mr. Dunn and the Company
(See "Certain Relationships and Related Transactions--Employment
Agreements" below).
(6) Refers to incentive stock options to purchase 300,000 shares of Common
Stock granted to Mr. Hale under the Company's 1995 Stock Option Plan, in
accordance with the new employment agreement between Mr. Hale and the
Company (See "Certain Relationships and Related Transactions--Employment
Agreements" below).
(7) Refers to non-qualified stock options to purchase 15,000 shares of Common
Stock granted to each of Mr. Haber and Mr. Hale under the 1995 Stock Option
Plan adopted by the Company's stockholders at the 1995 Annual Meeting of
Stockholders, in accordance with the terms of their respective employment
agreements with the Company dated August 1, 1994 (the "Initial Employment
Agreements"). In addition, Mr. Haber and Mr. Hale were each awarded
incentive stock options to purchase 35,000 shares of Common Stock as
compensation in connection with the successful funding of a loan obtained
by a subsidiary of the Company.
17
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
On August 5, 1998, the Company granted Michael A. Schott, the Company's
Vice President of Financial Reporting and Compliance, incentive stock options to
purchase 200,000 shares of Common Stock under the 1997 Stock Awards Plan in
accordance with the employment agreement between Mr. Schott and the Company (See
"Certain Relations and Related Transactions" below). Except for the options
granted to Mr. Schott, the Company did not grant any stock options or stock
appreciation rights ("SARs") to any of its executive officers during the fiscal
year ended December 31, 1998.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
None of the Company's executive officers exercised any options during the
fiscal year ended December 31, 1998. The Company has not issued any SARs during
the fiscal year ended December 31, 19978.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
None of the Company's executive officers were granted awards under any
long-term incentive plan during the fiscal year ended December 31, 1998.
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees receive $2,500 per year for
their services as directors. Directors also receive $250 per meeting attended.
Directors, who are not employees or officers of the Company, are reimbursed for
their actual expenses incurred in attending meetings of the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1999, the number of shares
of the Company's Common Stock beneficially owned by (i) each person known by the
Company (based on filings under Section 13(d) or 13(g) of the Exchange Act) to
be the holder of more than five percent of its voting securities, (ii) each
director or nominee for election as a director, and (iii) all of the Company's
directors and officers as a group. Unless otherwise indicated, each holder has
sole voting and investment power with respect to the shares of Common Stock
owned by such holder.
18
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF
OF GROUP TITLE OF CLASS BENEFICIAL OWNERSHIP CLASS (1)
------------------- -------------- -------------------- ---------
<S> <C> <C> <C>
Jay D. Haber Common 1,289,602 shares (2) 6.59%
5555 San Felipe, Suite 780
Houston, TX 77056
Steven A. Webster Common 16,375,602 (3) 61.31%
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, TX 77079
William R. Ziegler Common 16,425,625 (4) 61.39%
Parson & Brown LLP
666 Third Avenue
New York, NY 10017
Christopher M. Harte Common 85,500 shares (5) .44%
364 Spring Street
Portland, ME 04102
Blackhawk Investors, Common 14,341,506 shares (6) 57.35%
L.L.C.
3662 Piping Rock
Houston, TX 77027
Blackhawk Capital Common 14,341,506 shares (7) 57.35%
Partners
3662 Piping Rock
Houston, TX 77027
All Directors and Common 21,215,677 shares (7) 72.03%
Executive Officers as a
Group
</TABLE>
- - ----------
(1) These percentages are calculated on the basis of 19,322,480 shares of
Common Stock, that were issued and outstanding on March 31, 1999, plus,
with respect to each person or entity listed, such number of shares of
Common Stock as such person or entity has the right to acquire within 60
days pursuant to options, warrants, conversion privileges or other rights
held by such person or entity. Certain shares are deemed beneficially owned
by more than one person or entity listed in the table.
19
<PAGE>
(2) Includes 320,000 shares of Common Stock purchasable pursuant to options
granted to Mr. Haber under the Company's 1995 Stock Option Plan.
(3) Includes (i) 1,482,512 shares of Common Stock issuable pursuant to the
warrants held by Mr. Webster, (ii) 333,326 shares owned of record by Mr.
Webster, (iii) (A) 8,666,667 shares of Common Stock owned of record by
Blackhawk Investors, L.L.C. ("Blackhawk") and (B) 5,674,839 shares of
Common Stock presently exercisable pursuant to the Shadow Warrant issued to
Blackhawk, since Mr. Webster is one of two partners of Blackhawk Capital
Partners ("BCP"), the managing member of Blackhawk, and (iv) 218,258 shares
of Common Stock presently exercisable pursuant to the Shadow Warrant issued
to Mr. Webster; excludes 979,607 shares of Common Stock not presently
exercisable under the Shadow Warrant issued to Blackhawk and 37,676 shares
not presently exercisable under the Shadow Warrant issued to Mr. Webster.
(4) Includes (i) 1,482,512 shares of Common Stock issuable pursuant to the
warrants held by Mr. Ziegler, (ii) 333,340 shares owned of record by Mr.
Ziegler, (iii) (A) 8,666,667 shares of Common Stock owned of record by
Blackhawk (B) 5,674,839 shares of Common Stock presently exercisable
pursuant to the Shadow Warrant issued to Blackhawk, since Mr. Ziegler is
one of two partners of BCP, the managing member of Blackhawk, (iv) 50,000
shares of Common Stock issuable pursuant to stock options held by Mr.
Ziegler, and (v) 218,267 shares of Common Stock presently exercisable
pursuant to the Shadow Warrant issued to Mr. Ziegler; excludes 979,607
shares of Common Stock not presently exercisable under the Shadow Warrant
issued to Blackhawk and 37,678 shares not presently exercisable under the
Shadow Warrant issued to Mr. Ziegler.
(5) Includes 85,500 shares of Common Stock issuable pursuant to warrants held
by Mr. Harte, which warrants were issued in accordance with the terms of
that certain promissory note dated March 24, 1998 of the Company payable to
Mr. Harte.
(6) Includes (i) 8,666,667 shares owned of record by Blackhawk and (ii)
5,674,839 shares of Common Stock presently exercisable pursuant to the
Shadow Warrant issued to Blackhawk; excludes 979,607 shares of Common Stock
not presently exercisable under the Shadow Warrant issued to Blackhawk.
(7) Includes (i) 8,666,667 shares owned of record by Blackhawk and (ii)
5,674,839 shares of Common Stock presently exercisable pursuant to the
Shadow Warrant issued to Blackhawk, which are deemed beneficially owned by
BCP as the managing member of Blackhawk; excludes 979,607 shares of Common
Stock not presently exercisable under the Shadow Warrant issued to
Blackhawk.
(8) Includes an aggregate of (i) 11,093,789 issued and outstanding shares
beneficially owned by the directors and executive officers as a group, (ii)
10,121,888 shares of Common Stock that such persons have the right to
acquire within 60 days pursuant to options, warrants, conversion privileges
or other rights held by such persons (inclusive of 6,111,365 shares of
Common Stock presently exercisable pursuant to the Shadow Warrants issued
to Blackhawk and Messrs. Webster and Ziegler); excludes 1,054,961 shares of
Common Stock not presently exercisable under the Shadow Warrants issued to
Blackhawk and Messrs. Webster and Ziegler.
20
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
EMPLOYMENT AGREEMENTS
Under the terms of their Initial Employment Agreements, Mr. Haber and Mr.
Hale were each entitled to receive grants of non-qualified stock options
covering 15,000 shares of the Company's Common Stock on August 1 of each year of
service rendered to the Company.
Effective June 19, 1997, the Company entered into a new employment
agreement with Mr. Haber, pursuant to which Mr. Haber served as the Chief
Executive Officer of the Company. The agreement required Mr. Haber to devote
substantially all of his business time, attention, skill, and energy exclusively
to the business of the Company, and to use his best efforts to promote the
success of the Company's business. Under this agreement, Mr. Haber was entitled
to (i) an annual salary, commencing August 1, 1997, of $165,000 (subject to
annual review by the Board of Directors), (ii) an incentive bonus in accordance
with the Company's bonus plan to be established for its senior executives, (iii)
options to purchase an aggregate of 600,000 shares of Common Stock at a price of
$1.00 per share which vest over a five-year period, and (iv) participation in
the Company's other employee benefit plans. Effective February 2, 1999, Mr.
Haber resigned as an officer, director and employee of the Company and on March
5, 1999, the Company and Mr. Haber entered into a Severance Agreement and
Release containing, among other things, certain agreements with respect to Mr.
Haber's resignation. (See "--Other Related Transactions" below.)
Effective June 19, 1997, the Company entered into a new employment
agreement with Michael Hale, pursuant to which Mr. Hale serves as a Vice
President and the Secretary of the Company. The agreement requires Mr. Hale to
devote substantially all of his business time, attention, skill, and energy
exclusively to the business of the Company, and to use his best efforts to
promote the success of the Company's business. In exchange, Mr. Hale is entitled
to (i) receive an annual salary, commencing August 1, 1997, of $120,000, (ii)
earn an incentive bonus in accordance with the Company's bonus plan to be
established for its senior executives, (iii) receive options to purchase an
aggregate of 300,000 shares of Common Stock at a price of $1.00 per share which
vest over a three-year period, and (iv) participate in the Company's other
employee benefit plans. Mr. Hale's employment agreement is terminable by the
Company at any time for "cause", as specified in the Agreement, and in certain
other events.
The Company is a party to an employment agreement with Lynn A. Turner,
dated July 15, 1997, pursuant to which Mr. Turner serves as the President and
Chief Operating Officer of the Company, with overall responsibility for
geophysical operations. The compensation payable to Mr. Turner under the
employment agreement consists of: (i) a "sign-on" bonus of $156,780 paid on
February 13, 1998, (ii) an annual base salary of $135,000 per year, (iii) an
annual incentive cash bonus equal to 100% of base salary if the Company's
geophysical operations meet certain goals set forth in a plan to be established
by the Board of Directors after consultation with Mr. Turner, plus an additional
bonus in excess of annual base salary if the financial results of the Company's
geophysical operations exceed such goals, and (iv) an option to acquire 500,000
shares of Common Stock, at an exercise price of $0.75 per share, which option
vests in equal one-fifth increments of 100,000 shares each on each of July 15,
1998, 1999, 2000, 2001 and 2002, provided that he continues to be employed by
the Company on such dates, and he exercises such option prior to or on July 15,
2004. Mr. Turner's employment agreement has a term of five years and is
terminable by the Company upon its good faith determination that there has been
a willful violation of the terms of the agreement and in certain other events.
21
<PAGE>
The Company is a party to an employment agreement with Michael A. Dunn,
dated July 15, 1997, pursuant to which Mr. Dunn serves as a Vice President and
the Chief Technical Officer of the Company. The compensation payable to Mr. Dunn
under the employment agreement consists of: (i) a "sign on" bonus of $90,000,
paid upon commencement of employment, (ii) an annual base salary of $150,000 per
year, (iii) an annual incentive cash bonus commensurate with his position at the
Company in accordance with a plan to be established by the Board of Directors
after consultation with Mr. Dunn, and (iv) stock options to acquire (A) 50,000
shares of Common Stock, at an exercise price of $0.75 per share, which option
became exercisable on August 18, 1997 and has an expiration date of July 15,
2002, and (B) an additional 500,000 shares of Common Stock, at an exercise price
of $0.75 per share, which option vests in equal one-fifth increments of 100,000
shares each on each of July 15, 1998, 1999, 2000, 2001 and 2002, provided that
he continues to be employed by the Company on such dates, and he exercises such
option prior to or on July 15, 2004. Mr. Dunn's employment agreement has a term
of five years and is terminable by the Company upon its good faith determination
that there has been a willful violation of the terms of the agreement and in
certain other events.
The Company is a party to an employment agreement with Thomas J. Concannon
dated July 15, 1997, pursuant to which Mr. Concannon serves as a Vice President
and the Chief Financial Officer of the Company. The compensation payable to Mr.
Concannon under the employment agreement consists of: (i) an annual base salary
of $120,000 per year, (ii) participation in any and all current and future
employee/officer incentive plans, employee/officer stock plans, employee/officer
stock option plans and any and all other employee/officer benefit/compensation
plans of the Company, (iii) stock options to acquire (A) an aggregate of 150,000
shares of Common Stock, at an exercise price of $0.75 per share, which option
became exercisable on July 15, 1997 and has an expiration date of July 15, 2002,
and (B) an additional 150,000 shares of Common Stock, at an exercise price of
$0.75 per share, which option vests in equal one-third increments of 50,000
shares each on each of July 15, 1998, 1999 and 2000, provided that he continues
to be employed by the Company on such dates, and he exercises such option prior
to or on July 15, 2002. Mr. Concannon's employment agreement has a term of three
years and is terminable by the Company upon its good faith determination that
there has been a willful violation of the terms of the agreement and in certain
other events.
The Company is a party to an employment agreement with Michael A. Schott
dated August 5, 1998, pursuant to which Mr. Schott serves as a Vice President of
Financial Reporting and Compliance. The compensation payable to Mr. Schott under
the employment agreement consists of: (i) an annual base salary of $105,000 per
year, (ii) participation in any and all current and future employee/officer
incentive plans, employee/officer stock plans, employee/officer stock option
plans and any and all other employee/officer benefit/compensation plans of the
Company, (iii) a stock option to acquire an aggregate of 200,000 shares of
Common Stock at an exercise price of $2.625 per share, which option vests in
equal one-fifth increments of 40,000 shares on each of September 5, 1998 and
August 5, 1999, 2000, 2001 and 2002, provided that he continues to be employed
by the Company on such dates, and he exercises such option prior to or on August
5, 2004. Mr. Schott's employment agreement has a term of four years and is
terminable by the Company upon its good faith determination that there has been
a willful violation of the terms of the agreement and in certain other events.
22
<PAGE>
OTHER RELATED TRANSACTIONS
The father of a Vice-President of the Company is a participant in the
Company's lease acquisition program with a note balance of $110,500 at December
31, 1998.
On April 25, 1997, the Company obtained $500,000 in short-term financing in
the form of 12% senior notes from William R. Ziegler and Steven A. Webster (both
of whom were appointed to the Company's Board of Directors effective August 1,
1997). As additional consideration for providing this financing, the Company
issued warrants entitling each of Messrs. Ziegler and Webster to purchase
500,000 shares (subject to anti-dilution provisions contained therein) of the
Company's Common Stock at a price of $0.75 per share. On July 18, 1997, pursuant
to the Securities Purchase and Exchange Agreement, described below, these notes
were exchanged for (i) 458,333 newly-issued shares of the Company's Common
Stock, (ii) 15,625 newly-issued shares of the Company's Series A Preferred Stock
and (iii) Shadow Warrants to purchase an additional 592,009 shares of the
Company's Common Stock at a price of $0.20 per share. As part of this financing
transaction, the Company entered into a three-year consulting agreement with
William R. Ziegler pursuant to which Mr. Ziegler agreed to provide the Company
certain strategic planning and other consulting services. Under Mr. Ziegler's
consulting agreement, Mr. Ziegler is entitled to receive a quarterly consulting
fee equal to one-half of 1% of the total investment made by him and certain
other persons or before July 31, 1997 in debt and equity securities of the
Company that are outstanding as of the end of each quarter during the term of
the consulting agreement. As of December 31, 1998 and 1997, respectively, the
Company owed Mr. Ziegler $203,207 and $63,207 in consulting fees pursuant to the
agreement. In addition, pursuant to the consulting agreement, the Company
granted Mr. Ziegler options to purchase 50,000 shares of Common Stock of the
Company at a price of $0.75 per share.
On July 18, 1997, the Company entered into a Securities Purchase and
Exchange Agreement (the "Purchase Agreement") with Blackhawk Investors, L.L.C.,
William R. Ziegler and Steven A. Webster (referred to collectively as the
"Blackhawk Group"). Pursuant to the Purchase Agreement, the Blackhawk Group
acquired from the Company (i) 5,500,000 newly-issued shares of the Company's
Common Stock, (ii) 187,500 newly-issued shares of the Company's Series A
Preferred Stock (which were converted into an aggregate of 2,500,000 shares of
Common Stock on November 24, 1997), and (iii) Shadow Warrants to purchase up to
an additional 7,104,103 shares of Common Stock at a price of $0.20 per share, in
exchange for (x) an aggregate of $5,500,000 in cash paid to the Company and (y)
the exchange of certain indebtedness in the principal amount of $500,000 owed by
the Company to Messrs. Ziegler and Webster.
On July 24, 1997, Blackhawk Investors, L.L.C. acquired 100,000 shares of
the Company's newly-issued Series B Preferred Stock for $1 million in cash. The
Series B Preferred Stock was automatically converted into an aggregate of
1,333,333 shares of Common Stock on January 1, 1998.
On March 27, 1998, the Company obtained a $1,500,000 private short-term
financing from a group of individuals, including William R. Ziegler, Steven A.
Webster and Christopher M. Harte and several related family members who
collectively provided $1,000,000 of this financing. The Company issued
promissory notes, with interest at prime plus 2% to these individuals.
Additionally, Christopher M. Harte and the related family members were granted
warrants to purchase 150,000 shares of Common Stock of the Company at a purchase
price of $2.00 per share. The Company paid these notes in full with interest on
May 1, 1998 including interest payments of $11,083 to the related parties and
family members.
23
<PAGE>
On April 30, 1998, the Company completed a private offering of $40,000,000
of certain securities designated as its 12% Senior Subordinated Notes (the
"Notes") to DLJ Investment Partners, L.P. and certain additional investors
("Purchasers") pursuant to the terms of a Securities Purchase Agreement by and
among the Company and the Purchasers. Additionally, the Company (i) caused
certain of its wholly-owned subsidiaries to execute guarantees of the Notes
pursuant to an Indenture executed by each of them, (ii) granted warrants (the
"Warrants") to the Purchasers entitling them to purchase up to an aggregate of
7,618,594 shares of Common Stock at a price of $2.00 per share, subject to
certain adjustments, and (iii) granted certain registration rights in favor of
the Purchasers with respect to the Notes, the Warrants and the shares of Common
Stock which may be acquired upon exercise of the Warrants. The completion of
this offering enabled the Company to purchase an additional 3,000 channel I/O
System Two RSR System and complete the acquisition of GDC.
William R. Ziegler is a partner of the New York-based law firm of Parson &
Brown, L.L.P. which, from time to time, provides legal services to the Company.
During the fiscal years ended December 31, 1997 and December 31, 1998, Parson &
Brown billed the Company $110,112.39 and $204,282.72 respectively, for services
rendered.
On March 2, 1999, the Company and Jay D. Haber entered into a Separation
Agreement and Release confirming certain agreements and effecting mutual
releases relating to Mr. Haber's resignation as a director, officer and employee
of the Company. This agreement provides, among other things, that the Company
pay Mr. Haber a severance payment of $165,000 in twelve (12) equal monthly
installments.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
3.1 Certificate of Incorporation of the Company (incorporated by
reference from Exhibit 3(a) to Amendment No. 1 to the Company's
Registration Statement on Form S-3, filed with the Securities
and Exchange Commission on March 25, 1980 (file no.
000-09268)).
3.2 Certificate of Amendment of Certificate of Incorporation of the
Company (incorporated by reference from Exhibit 3.2 to Form
10-KSB filed with the Securities and Exchange Commission on
April 24, 1996 (file no. 000-09268)).
3.3 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on July
14, 1997 (incorporated by reference from Exhibit 3.3 to Form
10-KSB filed with the Securities and Exchange Commission on
March 31, 1998 (file no.000-09268))
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company filed with the Secretary of State of Delaware on
November 24, 1997 (incorporated by reference from Exhibit 3.4 to
Form 10-KSB filed with the Securities and Exchange Commission on
March 31, 1998 (file no.000-09268)).
3.5 Amended and Restated Bylaws of the Company (incorporated by
reference from Exhibit 3.5 to Form 10-KSB filed with the
Securities and Exchange Commission on March 31, 1998 (file
no.000-09268)).
24
<PAGE>
4.1 Statement of Designations of the Company's Series A Preferred
Stock (incorporated by reference from Exhibit 4 to Form 8-K
filed with the Securities and Exchange Commission on August 5,
1997 (file no.000-09268)).
4.2 Indenture dated as of April 30, 1998, executed by the Company,
HOC Production Co., Inc., Geokinetics Production Co., Inc.,
Quantum Geophysical, Inc., Geoscience Software Solutions, Inc.,
Signature Geophysical Services, Inc., Reliable Exploration,
Incorporated, and Geophysical Development Corporation
(incorporated by reference from Exhibit (4.4) to Form 8-K filed
with the Securities and Exchange Commission on
May 15, 1998 (file no.000-09268)).
8.1 Tax Opinion of David E. Hammer, P.C. concerning the
deductibility of the Company's net operating loss carryforwards
following the Company's acquisition of certain oil and gas
properties effective August 1, 1994 (incorporated by reference
from Exhibit 8.1 to Form 10-KSB filed with the Securities and
Exchange Commission on May 19, 1995 (file no.000-09268)).
10.1 Securities Purchase Agreement dated as of April 25, 1997 among
the Company and each of William R. Ziegler and Steven A. Webster.
(incorporated by reference from Exhibit II to the Schedule 13D
filed with the Securities and Exchange Commission by William R.
Ziegler on May 5, 1997 (file no. 005-32355)).
10.2 Form of 12% Senior Secured Promissory Note dated as of April 25,
1997 in the principal amount of $250,000 executed by the Company
to each of William R. Ziegler and Steven A. Webster
(incorporated by reference from Exhibit III to the Schedule 13D
filed with the Securities and Exchange Commission by William R.
Ziegler on May 5, 1997 (file no. 005-32355)).
10.3 Registration Rights Agreement dated as of April 25, 1997
executed by the Company and each of the William R. Ziegler and
Steven A. Webster (incorporated by reference from Exhibit V to
the Schedule 13D filed with the Securities and Exchange
Commission by William R. Ziegler on May 5, 1997 (file no.
005-32355)).
10.4 Form of Warrant to Purchase Common Stock dated as of April 25,
1997 issued by the Company to each of William R. Ziegler and
Steven A. Webster (incorporated by reference from Exhibit IV to
the Schedule 13D filed with the Securities and Exchange
Commission by William R. Ziegler on May 5, 1997 (file no.
005-32355)).
10.5 Consulting Agreement dated as of April 25, 1997 executed by the
Company and William R. Ziegler (incorporated by reference from
Exhibit VI to the Schedule 13D filed with the Securities &
Exchange Commission by William R. Ziegler on May 5, 1997 (file
no. 005-32355)).
10.6 Securities Purchase and Exchange Agreement dated as of July 18,
1997 among the Company, Blackhawk Investors, L.L.C., William R.
Ziegler, and Steven A. Webster (incorporated by reference from
Exhibit (2.1) to Form 8-K filed on August 5, 1997 (file
no.000-09268)).
25
<PAGE>
10.7 Investment Monitoring Agreement dated July 18, 1997, between the
Company and Blackhawk Capital Partners, L.P. (incorporated by
reference from Exhibit 10.2 to Form 8-K filed August 5, 1997
(file no.000-09268)).
10.8 Letter Agreement re Additional Investment dated July 24, 1997,
between the Company and Blackhawk Investors, L.L.C.
(incorporated by reference from Exhibit (2.3) to Form 8-K filed
on August 5, 1997 (file no.000-09268)).
10.9 Stock Purchase Agreement dated as of June 25, 1997 among the
Company, Signature Geophysical Services, Inc., Gallant Energy,
Inc. and James Gallant (incorporated by reference from Exhibit
(2.2) to Form 8-K filed on August 5, 1997 (file no.000-09268)).
10.10 Stock Purchase Agreement dated December 3, 1997, by and among
the Company, Reliable Exploration, Incorporated, Allen Rein,
Scott Schmitt, and Kim Nordberg. (incorporated by reference from
Exhibit (2) to Form 8-K filed with the Securities and Exchange
Commission on February 10, 1998 (file no.000-09268)).
10.11 Stock Purchase Agreement dated as of March 24, 1998, among the
Company, Geophysical Development Corporation and the holders of
all of the capital stock of Geophysical Development Corporation
(incorporated by reference from Exhibit 2.1 to Form 8-K filed
with the Securities and Exchange Commission on May 15, 1998
(file no.000-09268)).
10.12 Employment Agreement dated as of July 15, 1997 between the
Company and Lynn A. Turner (incorporated by reference from
Exhibit 10.5 to Form 10-KSB filed with the Securities and
Exchange Commission on March 31, 1998 (file no.000-09268)).
10.13 Employment Agreement dated as of July 15, 1997 between the
Company and Michael A. Dunn (incorporated by reference from
Exhibit 10.6 to Form 10-KSB filed with the Securities and
Exchange Commission on March 31, 1998 (file no.000-09268)).
10.14 Employment Agreement dated as of July 15, 1998 between the
Company and Thomas J. Concannon (incorporated by reference from
Exhibit 10.7 to Form 10-KSB filed with the Securities and
Exchange Commission on March 31, 1998 (file no.000-09268)).
10.15 Securities Purchase Agreement dated as of April 30, 1998, among
the Company, DLJ Investment Partners, L.P. and certain
additional investors (incorporated by reference from Exhibit
(4.1) to Form 8-K filed with the Securities and Exchange
Commission on May 15, 1998 (file no.000-09268))
10.16 Warrant Agreement dated as of April 30, 1998, among the Company,
DLJ Investment Partners, L.P. and certain additional investors
(incorporated by reference from Exhibit (4.2) to Form 8-K filed
with the Securities and Exchange Commission on May 15, 1998
(file no.000-09268)).
10.17 Note Registration Rights Agreement dated as of April 30, 1998,
among the Company, DLJ Investment Partners, L.P. and certain
additional investors (incorporated by reference from Exhibit
(4.3) to Form 8-K filed with the Securities and Exchange
Commission on May 15, 1998 (file no.000-09268)).
26
<PAGE>
10.18 Tag Along-Drag Along Agreement dated as of April 30, 1998 among
the Company, DLJ Investment Partners, L.P. and certain
additional investors (incorporated by reference from Exhibit
(4.5) to Form 8-K filed with the Securities and Exchange
Commission on May 15, 1998 (file no.000-09268)).
22 Following is a list of the Company's Subsidiaries:
OTHER NAME UNDER
WHICH SUBSIDIARY JURISDICTION OF
NAME OF SUBSIDIARY CONDUCTS BUSINESS INCORPORATION
------------------ ----------------- -------------
HOC Operating Co., Inc. None Texas
(formerly HOC Acquisition
Corp.)
Geokinetics Production Co., Inc. None Texas
(formerly HLX Acquisition
Corp.)
Quantum Geophysical Services, Inc. None Texas
(formerly Quantum Geophysical,
Inc.)
Geoscience Software Solutions, None Texas
Inc.
Quantum Geophysical, Inc. None
Texas
Geophysical Development Corporation None Texas
27
<PAGE>
Following is a list of the subsidiaries of Quantum Geophysical, Inc.:
OTHER NAME UNDER
WHICH SUBSIDIARY JURISDICTION OF
NAME OF SUBSIDIARY CONDUCTS BUSINESS INCORPORATION
------------------ ----------------- -------------
Signature Geophysical Services, Inc. None Michigan
Reliable Exploration, Incorporated None Montana
(B) REPORTS ON FORM 8-K FILED DURING THE LAST QUARTER OF THE PERIOD COVERED BY
THIS FORM 10-KSB.
None
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GEOKINETICS INC.
Date: March 31, 1999 By: _______________________________
Lynn A. Turner, President and
Chief Operating Officer
By: _______________________________
Thomas J. Concannon
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
- - --------- ----- ----
______________________ President and Chief Operating March 31, 1999
Lynn A. Turner Officer
______________________ Vice President and March 31, 1999
Thomas J. Concannon Chief Financial Officer
______________________ Director and Chairman March 31, 1999
William R. Ziegler
______________________ Director March 31, 1999
Steven A. Webster
______________________ Director March 31, 1999
Christopher M. Harte
______________________ Director March 31, 1999
Antony T. F. Lundy
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