<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
----------------------------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE EXCHANGE ACT OF 1934
Commission file number 1-19971
---------
_________________________________________
UNIVERSAL SEISMIC ASSOCIATES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 76-0256086
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16420 Park Ten Place, Suite 300
Houston, Texas 77084-5051
(Address of principal executive offices)
(281) 578-8081
(Issuer's telephone number)
_________________________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
No ____
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 5,229,109 shares of Common
Stock, $.0001 par value, were outstanding as of November 7, 1996.
Transitional Small Business Disclosure Format (Check one):
Yes____ No X
PAGE 1 OF 9
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 875,011 $ 982,431
Trade accounts receivable, net 5,537,990 7,999,364
Accounts receivable - employees 53,138 47,597
Costs in excess of billings and estimated earnings on uncompleted contracts 2,088,181 1,733,525
Prepaid expenses and other current assets 577,605 626,254
-------------- -------------
Total current assets 9,131,925 11,389,171
Property and equipment:
Seismic property and equipment, net 17,575,535 17,953,678
Oil and gas properties 4,771,311 1,722,847
-------------- -------------
Total property and equipment, net 22,346,846 19,676,525
Other assets:
Deferred financing costs, net 198,982 217,945
Receivable from stockholder - 28,440
Other 476,095 181,227
Goodwill, net 639,827 652,538
-------------- -------------
Total assets $ 32,793,675 $ 32,145,846
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable, current $ 3,269,045 $ 5,473,870
Current portion of capital lease obligations - -
Billings and estimated earnings in excess of costs on
uncompleted contracts 1,079,201 2,185,926
Accounts payable 7,858,101 5,578,646
Other current liabilities 1,023,902 1,137,890
-------------- -------------
Total current liabilities 13,230,249 14,376,332
Notes payable, net of current maturities 8,010,506 9,870,689
Capital lease obligations, net of current portion - -
-------------- -------------
Total liabilities 21,240,755 24,247,021
-------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.0001 par value; 20,000,000 shares authorized; 4,283,147
shares issued at June 30, 1996 and 5,234,109 shares at September 30, 1996 523 428
Additional paid in capital 17,092,944 13,553,317
Accumulated deficit (5,634,920) (5,634,920)
Current period income (loss) 114,373 -
Less: Treasury stock, at cost; 5,000 shares (20,000) (20,000)
-------------- -------------
Total stockholders' equity 11,552,920 7,898,825
-------------- -------------
Total liabilities and stockholders' equity $ 32,793,675 $ 32,145,846
============== =============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 2 OF 9
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended September 30,
-------------------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Operating revenues:
Data acquisition revenues 7,257,623 4,625,104
Data processing revenues 414,581 232,045
-------------- -------------
Total operating revenues 7,672,204 4,857,149
Operating expenses:
Cost of data acquisition 6,246,934 3,425,081
Cost of data processing 192,359 218,076
Selling, general and administrative expenses 553,046 449,169
Depreciation and amortization 761,005 514,050
-------------- -------------
Total operating expenses 7,753,344 4,606,376
Gain on sale of oil and gas properties 559,461 -
-------------- -------------
Total operating income 478,321 250,773
Interest expense (366,252) (222,306)
Other income, net 2,304 8,786
-------------- -------------
Net Income (loss) $ 114,373 $ 37,253
============== =============
Earnings (loss) per share
Primary $ 0.02 $ 0.01
Fully Diluted 0.02 0.01
Weighted average common shares and
common share equivalents outstanding
Primary 4,788,944 4,207,573
Fully Diluted 4,889,800 4,212,225
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 3 OF 9
<PAGE>
PART I
FINANCIAL INFORMATION
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 114,373 $ 37,253
Adjustments to reconcile net income(loss) to net
cash provided by operating activities:
Depreciation and amortization 790,187 547,259
(Gain)loss on disposal of assets - (1,354)
(Gain)loss on sale of oil & gas properties (559,461) -
Changes in operating assets and liabilities:
Accounts receivable 2,455,833 (200,439)
Notes receivable - -
Costs in excess of billings (354,656) (74,802)
Other current assets (246,219) 66,320
Accounts payable 2,279,455 (56,164)
Billings and estimated earnings in excess of costs (1,106,725) 164,178
Other current liabilities (113,072) (256,897)
Other - (139,913)
-------------- -------------
Net cash provided (used) by operating activities 3,259,716 85,441
-------------- -------------
Net cash provided (used) by discontinued operations - -
-------------- -------------
Cash flows from investing activities:
Capital expenditures (1,691,378) (46,654)
Proceeds from sale of assets - 12,233
Proceeds from sale of oil & gas properties 680,625 -
Other net - -
-------------- -------------
Net cash provided (used) in investing activities (1,010,753) (34,421)
-------------- -------------
Cash flows from financing activities:
Proceeds from notes payable 6,666,372 4,350,795
Payments on notes payable (8,871,197) (3,945,278)
Payments on long term debt (218,749) (582,515)
Payments on capital leases 0 (94,162)
Purchase of treasury stock 0 -
Proceeds from issuance of common stock, net 38,750 -
Proceeds from receivable from Sierra Mgmnt, Inc. 28,440 12,000
Payment of financing costs 0 (119,000)
-------------- -------------
Net cash provided (used) by financing activities (2,356,384) (378,160)
-------------- -------------
Net increase (decrease) in cash and cash equivalents (107,420) (327,140)
Cash and cash equivalents at beginning of period 982,431 1,208,357
-------------- -------------
Cash and cash equivalents at end of period $ 875,011 $ 881,217
============== =============
Supplemental disclosures:
Interest paid $ 343,379 $ 191,916
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PAGE 4 OF 9
<PAGE>
UNIVERSAL SEISMIC ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The consolidated condensed financial statements of Universal Seismic
Associates, Inc. and subsidiaries ("the Company") have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest Annual Report to Shareholders and the
Annual Report to the Securities and Exchange Commission on form 10-KSB for
the year ended June 30, 1996. In the opinion of the Company, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position as of September 30, 1996, the results
of operations for the three months ended September 30, 1995 and 1996, and
statements of cash flows for the three months then ended have been
included.
2. The foregoing interim results are not necessarily indicative of the results
of operations for the full fiscal year ending June 30, 1997.
3. In January 1996 the Company entered into a Note Purchase Agreement with
four limited partnerships (the "Partnerships") of which Resource Investors
Management Company ("RIMCO") is the sole general partner, pursuant to which
the Company executed four 5% Convertible Notes in the aggregate principal
amount of $500,000, with monthly payments of interest only from, March 1,
1996, until the maturity date of February 1, 1998. On August 14, 1996, the
Company converted the 5% Convertible Notes into 145,208 shares of common
stock of the Company.
4. In January 1996, UNEXCO, Inc., ("UNEXCO") a wholly owned subsidiary of the
Company, executed four Senior Secured Exchangeable General Obligation Notes
(the "Exchangeable Notes") with RIMCO in the aggregate principal amount of
$3,000,000, the proceeds of which were to be funded through January 19,
1998, and utilized to expand UNEXCO operations to include working interest
participation in 3D exploration and exploitation projects. On September
30, 1996, the total aggregate principal amount of $3,000,000 of the
Exchangeable Notes had been funded, and the Company converted the
Exchangeable Notes into 795,754 shares of common stock of the Company.
PAGE 5 OF 9
<PAGE>
5. On September 30, 1996, UNEXCO sold its 16.5% interest in the Bowie Lumber
leases (the "leases") within the Lake Boeuf Prospect 3D seismic survey (the
"Prospect") in Lafourche Parish, Louisiana for $680,625 to National Energy
Group. Previously, UNEXCO had purchased such interest in the leases from
Araxsas Exploration, Inc. for $121,164. The leases had previously been
reported, in an engineering study, to hold proven undeveloped reserves
("P.U.D."). This asset sale by UNEXCO of its interest in the above
referenced P.U.D., represents approximately 4% of the land area in the
Prospect. UNEXCO continues to be a 50% working interest partner in the
remaining approximate 14,000 acres of the Prospect.
6. On August 1, 1996, the Company executed a letter of intent providing for a
merger with SUELOPETROL c.a., of Caracas, Venezuela. The letter of intent
originally called for the Company to issue SUELOPETROL approximately 4.8
million shares of the Company's common stock and to pay up to $16 million
to SUELOPETROL shareholders, of which $4 million would be on an earn out
basis. The letter of intent has expired and, as of the date of this Report
discussions with SUELOPETROL are continuing. See "Item 5 - Other
Information".
PAGE 6 OF 9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS ENDED SEPTEMBER 30, 1995
OPERATING REVENUE AND COSTS
Operating Revenues. Operating revenues, totaling $7,672,204, for the
three month period ended September 30, 1996, represent an increase of
approximately 58% over revenues of $4,857,149 for the same three month period
ending September 30, 1995. Data acquisition revenues for the three month period
in 1996, increased by approximately 57%, to $7,257,623. This increase is
primarily due to the operation of the Company's fifth and sixth 3D data
acquisition crews placed in service in mid-December 1995 and late May 1996,
respectively. Data processing revenues for the three months ended September 30,
1996, totaling $414,581 represent an increase of approximately 79% over
revenues of $232,045 for the three month period ending September 30, 1995. The
increase highlights the Company's commitment to further establish itself in the
3D data processing market. Revenues from 3D data processing totaled $234,617
for the three month period ending September 30, 1996, compared to $121,349 for
the same period in 1995. This represents an increase of approximately 93% over
the previous year.
Operating Expenses. Operating expenses of $7,753,344 for the three month
period ended September 30, 1996, represent an increase of approximately 68% over
operating expenses of $4,606,376 in 1995. Direct costs of seismic acquisition
increased by approximately 82%, from $3,425,081 for the three month period
ending September 30, 1995, to $6,246,934 for the same period ending September
30, 1996. This increase was directly related to the operation of the Company's
fifth and sixth data acquisition crews. Direct costs of the data processing
decreased approximately 12% for the three month period, from $218,076 in 1995,
to $192,359 in 1996. The decrease reflects reduced costs from its 2D data
processing segment.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased approximately 23%, for the comparable three
month periods, from $449,169 in 1995 to $553,046 in 1996. The increase is
attributable to expanded marketing efforts, related to data acquisition, that
concluded the period ending September 30, 1996.
Depreciation and amortization. Depreciation and amortization increased by
approximately 48% from $514,050 in 1995 to $761,005 in 1996, due to major
equipment additions made during fiscal year 1996 by reason of the acquisition of
additional seismic crews.
Interest Expense. Interest expense increased approximately 65%, from
$222,306 for the three months ended September 30, 1995, to $366,252 for the same
period ended September 30, 1996. Equipment financing required for the addition
of the Company's sixth 3D data acquisition crew in May 1996, and additional
borrowing under the Company's revolving credit facility during July 1996, are
the reasons for the increase.
PAGE 7 OF 9
<PAGE>
Net Income. Net Income of $114,373 for the period ended September 30,
1996, represents an increase of $77,120 from the net income of $37,253 for the
same prior year period. The net income for the period ended September 30, 1996,
includes a $559,461 gain on an asset sale by UNEXCO. (See Note 5 to
Consolidated Condensed Financial Statements) Although data acquisition revenues
increased in the current three month period, gross profit margins decreased due
to competitive pressures in the marketplace.
LIQUIDITY AND CAPITAL RESOURCES
For the three months ended September 30, 1996, cash and cash equivalents
decreased by $107,420 to $875,011. Cash available at the beginning of the
period was used to fund the shortfall. Capital expenditures of $1,691,378
includes $1,321,229 invested in the oil and gas properties, $254,107 for data
processing equipment and upgrades, with the balance used for miscellaneous data
acquisition equipment. The Company reduced long term debt by $218,749 during
the quarter ended September 30, 1996. The Company incurred expenses relating to
the proposed SUELOPETROL merger of $212,599 during the three month period ending
September 30, 1996.
During the quarter ended September 30, 1996, UNEXCO received $680,625 from the
partial sale of leasehold interests. (See Note 5 to Consolidated Condensed
Financial Statement) Also, UNEXCO signed an agreement to reduce it's 50%
working interest on the Yuma-Raccoon Island Prospect. Under this agreement
UNEXCO will receive approximately $525,000 in January 1997, maintain a 10%
working interest on the prospect, and receive a 10% carried interest to casing
point on the first well.
The Company's accounts payable balance increased by $2,279,455 during the
current three month period. This can be attributed to the slow collection of
accounts receivable that restricted cash available to reduce accounts payable,
along with increased expenditures associated with the expanded crew operations.
The Company had approximately $1,400,000 in trade accounts receivables over 90
days past due, which level of aged accounts receivable is materially higher than
the Company typically experiences. The Company's management expects such
accounts receivable to be collected in the subsequent quarter and therefore no
allowance for doubtful accounts has been established with respect to these
receivables.
At September 30, 1996, the Company had cash balances of $875,011. The Company
feels its existing cash reserves, anticipated cash flow from its expanded crew
operations and diversification through the UNEXCO subsidiary and availability
under its accounts receivable credit facility will be sufficient to meet its
working capital requirements for the foreseeable future.
PAGE 8 OF 9
<PAGE>
SUBSEQUENT EVENTS
None
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On October 28, 1996, the Company announced that although the letter of intent
with respect to the above referenced proposed combination with SUELOPETROL has
expired, the Company is currently continuing discussions with SUELOPETROL. The
Company previously anticipated to close the transaction prior to October 31,
1996. The Company remains committed to pursue a transaction with SUELOPETROL
that is beneficial to its shareholders; however, completion of the transaction
remains subject to completion of due diligence and resolution of material terms
and definitive documentation.
Rick E. Trapp resigned as Chairman of the Board, effective September 16, 1996.
Mr. Trapp 45, has decided to pursue other interests outside of the seismic
industry.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIVERSAL SEISMIC ASSOCIATES, INC.
/s/ RONALD L. ENGLAND
RONALD L. ENGLAND
DATE: NOVEMBER 8, 1996 CHIEF FINANCIAL OFFICER
PAGE 9 OF 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM (Identify specific financial statements) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 875,011
<SECURITIES> 0
<RECEIVABLES> 8,256,914
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,131,925
<PP&E> 29,850,438
<DEPRECIATION> (7,503,592)
<TOTAL-ASSETS> 32,793,675
<CURRENT-LIABILITIES> 13,230,249
<BONDS> 0
0
0
<COMMON> 523
<OTHER-SE> 11,552,397
<TOTAL-LIABILITY-AND-EQUITY> 32,793,675
<SALES> 0
<TOTAL-REVENUES> 7,672,204
<CGS> 0
<TOTAL-COSTS> 6,439,293
<OTHER-EXPENSES> 1,314,051
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 366,252
<INCOME-PRETAX> 478,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 478,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,373
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
