SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2003.
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________.
Commission File Number 0-8041
GeoResources, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0505444
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1407 West Dakota Parkway, Suite 1-B, Williston, ND 58801
(Address of principal executive offices)
Issuer's telephone number: (701) 572-2020
_________________________________________
CHECK WHETHER THE ISSUER (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE 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 stock, as of the latest practicable date.
Class Outstanding at October 31, 2003
Common Stock, par value $.01 per share 3,723,977 shares
Transitional Small Business Disclosure Format (check one): YES_____ NO__X__.
_____________________________________________________________
GEORESOURCES, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
(September 30, 2003, and December 31, 2002)
Consolidated Statements of Operations 4
(Three months ended September 30, 2003, and 2002
and nine months ended September 30, 2003, and 2002)
Consolidated Statements of Cash Flows 5
(Nine months ended September 30, 2003, and 2002)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Controls and Procedures 10
PART II. OTHER INFORMATION 11
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2003 2002
ASSETS ------------ ------------
CURRENT ASSETS:
Cash and equivalents $ 413,492 $ 329,302
Trade receivables, net 662,158 821,459
Inventories 256,055 207,998
Income tax receivable -- 50,192
Prepaid expenses 30,358 28,326
------------ ------------
Total current assets 1,362,063 1,437,277
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties, using the
full cost method of accounting:
Properties being amortized 24,351,868 22,636,316
Properties not subject to amortization 258,894 251,714
Drilling rig and equipment 1,166,683 1,077,551
Leonardite plant and equipment 3,267,634 3,262,200
Other 757,273 757,431
------------ ------------
29,802,352 27,985,212
Less accumulated depreciation, depletion,
amortization and impairment (20,105,319) (20,386,789)
------------ ------------
Net property, plant and equipment 9,697,033 7,598,423
------------ ------------
OTHER ASSETS 6,875 12,500
------------ ------------
TOTAL ASSETS $ 11,065,971 $ 9,048,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 787,647 $ 659,282
Accrued expenses 333,297 335,219
Current maturities of long-term debt 462,611 132,260
------------ ------------
Total current liabilities 1,583,555 1,126,761
LONG-TERM DEBT, less current maturities 1,483,665 1,910,228
ASSET RETIREMENT OBLIGATION 1,667,100 --
DEFERRED INCOME TAXES 404,000 395,000
------------ ------------
Total liabilities 5,138,320 3,431,989
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
authorized 10,000,000 shares;
issued and outstanding 3,723,977
and 3,787,477 shares, respectively 37,240 37,875
Additional paid-in capital 295,932 384,185
Retained earnings 5,594,479 5,194,151
------------ ------------
Total stockholders' equity 5,927,651 5,616,211
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,065,971 $ 9,048,200
============ ============
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
OPERATING REVENUES:
Oil and gas $ 878,889 $ 858,197 $ 2,632,859 $ 2,096,737
Leonardite 130,339 202,110 445,029 446,180
Drilling 206,787 3,188 206,787 177,599
----------- ----------- ----------- -----------
1,216,015 1,063,495 3,284,675 2,720,516
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Oil and gas production 426,967 396,925 1,263,489 1,159,452
Cost of leonardite sold 133,620 161,106 460,668 429,611
Drilling costs 118,702 7,378 118,702 131,459
Depreciation and depletion 219,164 225,369 555,113 642,880
Selling, general
and administrative 109,531 141,681 405,963 394,164
----------- ----------- ----------- -----------
1,007,984 932,459 2,803,935 2,757,566
----------- ----------- ----------- -----------
Operating
income (loss) 208,031 131,036 480,740 (37,050)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (21,837) (25,443) (66,428) (66,397)
Interest income 461 451 8,168 11,558
Other income, net 3,498 4,950 13,848 14,100
----------- ----------- ----------- -----------
(17,878) (20,042) (44,412) (40,739)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 190,153 110,994 436,328 (77,789)
Income tax (expense) benefit (19,000) (7,000) (13,000) 43,000
----------- ----------- ----------- -----------
Income (loss) before
cumulative effect
of change in
accounting principle 171,153 103,994 423,328 (34,789)
Cumulative effect on prior
years accounting change,
net of tax -- -- (23,000) --
----------- ----------- ----------- -----------
Net income (loss) $ 171,153 $ 103,994 $ 400,328 $ (34,789)
=========== =========== =========== ===========
EARNINGS PER SHARE:
Income (loss) before
cumulative effect of
accounting change $ .05 $ .03 $ .12 $ (.01)
Cumulative effect of
accounting change -- -- (.01) --
----------- ----------- ----------- -----------
Net income (loss),
basic and diluted $ .05 $ .03 $ .11 $ (.01)
=========== =========== =========== ===========
PRO FORMA AMOUNTS, assuming
retroactive application
of new accounting method:
Net income (loss) $ 171,153 $ 87,170 $ 423,328 $ (75,965)
=========== =========== =========== ===========
Net income (loss) per share,
basic and diluted $ .05 $ .02 $ .12 $ (.02)
=========== =========== =========== ===========
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
----------------------------
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 400,328 $ (34,789)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 547,530 642,880
Cumulative effect of accounting change 23,000 --
Accretion of asset retirement obligation 56,100 --
Deferred income taxes 13,000 2,000
Other 5,625 8,743
Changes in assets and liabilities:
Decrease (increase) in:
Trade receivables 159,301 (212,693)
Inventories (48,057) (46,751)
Income tax receivable 50,192 (27,032)
Prepaid expenses and other (2,032) (8,963)
Increase (decrease) in:
Accounts payable 39,128 (207,937)
Accrued expenses (1,922) 10,324
------------ ------------
Net cash provided by
operating activities 1,242,193 125,782
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant
and equipment (972,903) (976,922)
------------ ------------
Net cash used in
investing activities (972,903) (976,922)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings -- 1,010,000
Principal payments on long-term debt (96,212) (95,724)
Cost to purchase common stock (88,888) (11,172)
------------ ------------
Net cash provided by (used in)
financing activities (185,100) 903,104
------------ ------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 84,190 51,964
CASH AND EQUIVALENTS, beginning of period 329,302 191,328
------------ ------------
CASH AND EQUIVALENTS, end of period $ 413,492 $ 243,292
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) for:
Interest $ 66,428 $ 66,397
Income taxes (49,119) 1,758
See Notes to Consolidated Financial Statements.
GEORESOURCES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In our opinion, the accompanying unaudited financial statements contain
all adjustments (consisting of only normal recurring accruals) necessary
to present fairly our financial position as of September 30, 2003, and
the results of operations and cash flows for the three months and nine
months ended September 30, 2003, and 2002.
The results of operations for the periods ended September 30, 2003, are
not necessarily indicative of the results to be expected for the full
fiscal year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Therefore, it is
suggested that these financial statements be read in connection with the
audited consolidated financial statements and the notes included in our
Annual Report on Form 10-KSB for the year ended December 31, 2002.
2. Certain accounts in the prior-year financial statements have been
reclassified for comparative purposes to conform with the presentation
in the current-year financial statements.
3. We assess performance and allocate resources based upon our products
and services, which consist principally of: A) oil and gas exploration,
development and production; B) mining and processing of leonardite; and C)
oil and gas drilling. All operations are conducted within the United
States. Operations of the drilling segment commenced in January 2002.
Sales and other material transactions between the segments have been
eliminated. Certain corporate costs, assets and capital expenditures that
are considered to benefit the entire organization are not allocated to our
operating segments. Interest income, interest expense and income taxes are
also not allocated to operating segments. There are no significant
accounting differences between internal segment reporting and consolidated
external reporting.
Presented below are our identifiable net assets as of September 30,
2003, and December 31, 2002:
September 30, December 31,
2003 2002
------------ ------------
Oil and gas $ 8,274,116 $ 6,176,486
Leonardite 750,534 860,868
Drilling 1,202,681 1,150,093
General corporate assets 838,640 860,753
------------ ------------
$ 11,065,971 $ 9,048,200
============ ============
Presented below is information concerning our operating segments for the
three- and nine-month periods ended September 30, 2003, and 2002:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenue:
Oil and gas $ 878,889 $ 858,197 $ 2,632,859 $ 2,096,737
Leonardite 130,339 202,110 445,029 446,180
Drilling 206,787 3,188 206,787 177,599
----------- ----------- ----------- -----------
$ 1,216,015 $ 1,063,495 $ 3,284,675 $ 2,720,516
=========== =========== =========== ===========
Income (loss) before income taxes:
Oil and gas $ 315,154 $ 295,252 $ 957,939 $ 472,041
Leonardite (33,448) 7,544 (109,425) (77,466)
Drilling 48,347 (32,002) 48,347 (36,780)
General corporate
activities (122,022) (139,758) (416,121) (394,845)
Other income and
expenses (17,878) (20,042) (44,412) (40,739)
----------- ----------- ----------- -----------
$ 190,153 $ 110,994 $ 436,328 $ (77,789)
=========== =========== =========== ===========
4. Change in Accounting Principle
Effective January 1, 2003, the Company adopted SFAS 143, "Accounting for
Asset Retirement Obligations" which requires that the fair value of a
liability for an asset retirement obligation associated with a tangible
long-lived asset be recognized in the period in which it is incurred if
a reasonable estimate of the fair value can be made. The fair value is
measured using expected future cash outflows discounted at the Company's
credit-adjusted risk-free interest rate. Accretion expenses will be
recognized over time as the discounted liability is accreted to its
expected settlement value. The associated asset retirement cost is
capitalized as part of the carrying amount of the long-lived asset and
consequentially is depreciated over the assets useful life.
The asset retirement obligation recorded by the Company relates to the
plugging and abandonment of its oil and gas wells. Previously, the
Company assumed that the salvage value of oil and gas well equipment
equaled the dismantlement, restoration and reclamation costs.
Therefore, no accruals for retirement obligations were made. Under SFAS
143, the Company is required to recognize the fair value of the
liability to plug and abandon a well in the period in which the
liability is incurred. The initial adoption of SFAS 143 on January 1,
2003, resulted in a one-time non-cash after-tax charge to operations of
$23,000 recorded as the cumulative effect of a change in accounting
principle. The adoption also resulted in an increase to oil and gas
properties being amortized of $1,562,000, a discounted liability for
asset retirement obligations of $1,589,000, and a decrease of deferred
income tax liabilities of $4,000. In addition, the Company has recorded
a pre-tax charge to income of $56,000 to reflect the accretion of the
liability through September 30, 2003.
There are no assets legally restricted for the purpose of settling asset
retirement obligations. There is no impact on the Company's cash flows
as a result of adopting SFAS 143.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of
operations, and other sections of this report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform
Act of 1995, that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the oil, gas and leonardite
industry, the economy and about us. Words such as "may," "will," "expect,"
"anticipate," "estimate" or "continue," or comparable words are intended to
identify forward-looking statements. These statements are not guarantees
of future performance and involve risks, uncertainties and assumptions that
are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. Therefore, our actual results and outcomes may
materially differ from what may be expressed or forecasted in our forward-
looking statements. Furthermore, we undertake no obligation to update,
amend or clarify forward-looking statements, whether as a result of new
information, future events or otherwise.
The following discussion should be read in conjunction with our
consolidated financial statements and related notes included elsewhere
herein. Important factors that could cause actual results to differ
materially from the forward-looking statements include, but are not limited
to, changes in production volumes; worldwide supply and demand which affect
commodity prices for oil; the timing and extent of our success in
discovering, acquiring, developing and producing oil, natural gas and
leonardite reserves; risks inherent in the drilling and operation of oil
and natural gas wells and the mining and processing of leonardite products;
future production and development costs; the effect of existing and future
laws, governmental regulations and the political and economic climate of
the United States; and conditions in the capital markets.
We caution the reader that a number of important factors discussed
herein, and in other reports filed with the Securities and Exchange
Commission, particularly our Annual Report on Form 10-KSB for the Year
Ended December 31, 2002, could affect our actual results and cause actual
results to differ materially from those discussed in forward-looking
statements.
Results of Operations - Three Months and Nine Months Ended September 30,
2003, compared to Three Months and Nine Months
Ended September 30, 2002.
Information concerning our oil and gas operations for the three months
and nine months ended September 30, 2003, is set forth in the table below:
Oil and Gas Operations
% Increase % Increase
Three Months (Decrease) Nine Months (Decrease)
Ended From 2002 Ended From 2002
Sept. 30, 2003 Period Sept. 30, 2003 Period
-------------- ---------- -------------- ----------
Oil and gas production
sold (BOE) 33,976 (5%) 100,516 (4%)
Average price per BOE $ 25.87 8% $ 26.19 31%
Oil and gas revenue $ 878,889 2% $ 2,632,859 26%
Production costs $ 426,967 8% $ 1,263,489 9%
Average production cost
per BOE $ 12.57 14% $ 12.57 13%
Oil and gas production sold, expressed in barrels of oil equivalent
(BOE), declined 1,922 BOE, or 5%, and 4,126 BOE, or 4%, for the three- and
nine-month periods ended September 30, 2003, compared to the same periods
in the prior year. These small declines were not deemed by us to be a
significant change in our production or reserve base, but rather the result
of only one new marginally producing well being put on production by the
end of the third quarter out of the first two we drilled. A third well was
drilled during the third quarter, but that well had some completion
difficulties that prevented it from going on production by the end of the
third quarter. Workover operations have also been ongoing, however, much
of that work has been preparations for future secondary recovery operations
and efforts related to maintaining regulatory compliance on old wells. The
company's management believes oil production will increase through
continued drilling, although the amount of increase, if any, may not be
substantial for the remainder of 2003. Also with NYMEX oil prices nearing
a 24-month period above $25 per barrel, the availability of some supplies
and services is once again becoming a potential factor in planning for near
future operations. We do not believe this is a critical issue in our
operations at this time, but it could be a factor in the future.
The average price per BOE for the third quarter 2003 increased to $25.87,
a change of $1.96, or 8%, above the same period in 2002. The 2003 nine-
month period average price per BOE was $26.19, or $6.15 and 31% higher than
the same period in 2002. Oil and gas revenue for the three-month period
ended September 30, 2003, was essentially stable due to the 5% lower
production and 8% higher commodity values discussed above. Oil and gas
revenue for the 2003 nine-month period was notably higher however at
$2,633,000 for the nine months ended September 30, 2002, or $536,000 and
26% higher than the $2,097,000 for the same period last year.
With increases in revenue, oil and gas production costs also increased
$30,000, or 8%, and $104,000, or 9%, for the three- and nine-month periods
of 2003, respectively, when compared to the same periods in 2002. The
increase in both periods was primarily due to desires to use periods of
higher cash flow to perform more repair, maintenance and workover
operations. These higher production costs resulted in costs expressed on a
per-equivalent-barrel basis increasing 14% for the three-month period and
13% for the nine-month period of 2003 when compared to the same periods in
2002.
Information concerning our leonardite operations for the three months
and nine months ended September 30, 2003, is set forth in the table below:
Leonardite Operations
% Increase % Increase
Three Months (Decrease) Nine Months (Decrease)
Ended From 2002 Ended From 2002
Sept. 30, 2003 Period Sept. 30, 2003 Period
-------------- ---------- -------------- ----------
Leonardite production
sold (tons) 1,468 (36%) 4,871 (1%)
Average revenue per ton $ 88.79 --% $ 91.36 --%
Leonardite revenue $ 130,339 (35%) $ 445,029 --%
Cost of leonardite sold $ 133,620 (17%) $ 460,668 7%
Average production cost
per ton $ 91.02 29% $ 94.57 8%
Leonardite production sold decreased 809 tons, or 36%, and 31 tons, or
1%, respectively, for the three- and nine-month periods ended September 30,
2003, compared to the equivalent periods in 2002. For the three months,
sales declined mostly because one of our important customers had little
demand for deep drilling products. We hope the severity of these lower
sales was essentially a timing coincidence for the third quarter as sales
to that customer resumed at somewhat higher levels after September 30,
2003. For the nine months, the essentially flat sales with the prior year
reflects the relatively stable rig counts in the gulf coast offshore
Louisiana and Texas. Shallower land based onshore rig counts were up
approximately 30% from third quarter 2002 to third quarter 2003 but
offshore deep drilling was virtually flat over the same two periods. This
is not unusual as deep drilling is typically slower to start up as oil and
gas prices rise.
Leonardite revenue decreased $72,000, or 35% for the three-month period
ended September 30, 2003, and varied only slightly for the nine-month
period compared to the same periods in 2002. Revenue decreased due to the
lack of sales as discussed above. Average revenue per ton for the three
and nine months ended September 30, 2003, was the same as in 2002 for the
same periods. Revenue was also tied to the fact that deep wells generally
require specialty products for their drilling muds. With less deep
drilling we tend to have less higher priced specialty product revenue.
Cost of leonardite sold was 17% lower for the three-month period ended
September 30, 2003, and increased 7% for the nine-month period compared to
the same periods in 2002. Average per ton production costs increased 29%
and 8%, respectively, for the three- and nine-month periods ended September
30, 2003, compared to the same periods in 2002. Production costs were
affected by the increased cost of natural gas used in the drying and
processing of our lignite. At the present time, we do not have the product
demand to spread these costs and fixed costs over a larger production base.
Drilling Operations
During the first nine months of 2003, our subsidiary, Western Star
Drilling Company ("WSDC"), drilled five wells, three for us and two for
other operators. The second well for the outside operator was spudded mid-
September and did not reach total depth until late October. Drilling
revenues, through September 30, 2003, from the external projects were
$207,000, and associated costs of those projects were $119,000, yielding an
operating income from drilling operations of $88,000 before depreciation.
These results compare to the same period of 2002, when WSDC drilled two
wells for other operators resulting in revenue of $178,000, costs of
$131,000 and an operating income before depreciation of $47,000.
Consolidated Analysis
Total operating revenues increased $153,000, or 14%, and $564,000, or
21%, respectively, for the three- and nine-month periods ended September
30, 2003, compared to the same periods in 2002 due to increased energy
prices. Total operating expenses increased $76,000, or 8%, and $46,000, or
2%, for the same periods. Operating expenses for oil and gas, leonardite,
and drilling were previously discussed. Depreciation, depletion and
amortization for the three and nine months ended September 30, 2003,
decreased compared to the prior year periods primarily because of lower
depletion of oil and gas properties resulting from a lower depletion rate
on higher 2002 year-end reserve volumes. Selling, general and
administrative decreased $32,000, or 23%, and increased $12,000, or 3%,
respectively, for the three- and nine-month periods ended September 30,
2003, compared to the same periods in 2002. The lower cost in the third
quarter 2003 is primarily due to a reserve set aside in 2002 for the claim
by a bankruptcy trustee of a former leonardite customer.
Operating income increased to $208,000 and $481,000 for the three- and
nine-month periods ended September 30, 2003, compared to income of $131,000
and a loss of $37,000 for the same periods in 2002. After provisions for
non-operating expenses and income taxes, resulting income before the
cumulative effect of the change in accounting principle was $171,000, or
$0.05, per share and $423,000, or $0.12, per share for the three- and nine-
month periods ended September 30, 2003 compared to a net income of
$104,000, or $0.03, per share and a net loss of $35,000, or $0.01, per
share for the same periods in 2002.
Liquidity and Capital Resources
At September 30, 2003, we had a working capital deficit of $221,000
compared to working capital of $311,000 at December 31, 2002. Our current
ratio was .86 to 1 at September 30, 2003, compared to 1.28 to 1 at year-end
2002. The deficit in our working capital at September 30, 2003, was due to
the combination of lower trade receivables, higher accounts payable and
considerably higher current maturities as our 2001 RLOC converts to a term
loan in 2004. During 2003, we have been in discussions with our bank about
a new line-of-credit for the future and our repayment scheduling. We
anticipate that these discussions will result in a new line-of-credit
before the current line-of-credit expires.
Net cash provided by operating activities was $1,242,000 for the nine
months ended September 30, 2003, compared to $126,000 for the same period
in 2002. Cash was utilized in 2003 to make payments of $973,000 for
additions to property, plant and equipment, $96,000 for payments on long-
term debt and $89,000 for stock repurchases.
We believe our cash requirements can be met by cash flows from operations
and, if necessary, borrowings on our existing $3,000,000 line-of-credit, of
which $1,225,000 remained available for use at September 30, 2003. Future
cash requirements might also be provided by possible forward sales of oil
reserves or additional debt or equity financing.
ITEM 3. Controls and Procedures
As of the end of the period covered by this report, we evaluated, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, the effectiveness of
the design and operation of our disclosure controls and procedures over
financial reporting pursuant to Rule 13a-15 and 15d-15 of the Securities
Exchange Act of 1934. Based upon that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and procedures over financial reporting are adequate and effective in
timely alerting them to material information required to be included in
this quarterly report on Form 10-QSB.
Disclosure controls and procedures, no matter how well designed and
implemented, can provide only reasonable assurance of achieving an entity's
disclosure objectives. The likelihood of achieving such objectives is
affected by limitations inherent in disclosure controls and procedures.
These limitations include the fact that human judgment in decision-making
can be faulty and that breakdowns in internal control can occur because of
human failures such as simple errors or mistakes or because of intentional
circumvention of the established process.
During the period covered by this report, there have been no significant
changes in our internal controls over financial reporting or in other
factors, which could significantly affect internal controls over financial
reporting, including any corrective actions with regard to significant
deficiencies or material weaknesses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are a defendant in a bankruptcy case with respect to a preference
claim brought on November 8, 2002, in the United States Bankruptcy Court,
Southern District of Texas, Houston Division (adversary proceeding number
02-03827.) The bankruptcy trustee of a former leonardite customer, Ambar,
Inc. (n/k/a Ramba, Inc.) has brought a preference claim of approximately
$160,000 alleging that we received preferential transfers from Ambar, Inc.
within 90 days of its bankruptcy petition filed on November 21, 2000. We
and other similarly situated defendants have joined together to share a
common defense in order to reduce legal costs. We are defending against
the claim based on the position that the payments we received were not
preferential transfers but rather were (a) payments on a trade account that
were received in the normal course of business, or (b) payments that did
not come from the debtor. We may also consider a settlement on the claim
if we deem it economically advisable. As of December 31, 2002, and
September 30, 2003, we have a reserve recorded of $50,000 with respect to
this matter.
Except as discussed herein, we are not a party, nor are any of our
properties subject, to any pending material legal proceedings. We know of
no legal proceedings contemplated or threatened against us.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
31.1 Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act.
31.2 Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act.
32.1 Certification of the Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act.
32.2 Certification of the Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act.
(b) Reports on Form 8-K.
On August 19, 2003, the Registrant filed its earnings press release
for the second quarter of 2003 under Item 12 of Form 8-K.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GEORESOURCES, INC.
November 14, 2003
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number
31.1 Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act (filed herewith).
31.2 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act (filed herewith).
32.1 Certification of the Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act (filed herewith).
32.2 Certification of the Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act (filed herewith).
EXHIBIT 31.1
Certification of Chief Executive Officer Under
Section 302 of the Sarbanes-Oxley Act of 2002
I, J.P. Vickers, Chief Executive Officer of GeoResources, Inc.,
certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of
GeoResources, Inc. ("registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Reserved;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
of operation of internal control over financial reporting which are
reasonably likely to adversely effect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2003
Signature: /s/ J. P. Vickers
J. P. Vickers
Title: Chief Executive Officer
EXHIBIT 31.2
Certification of Chief Financial Officer Under
Section 302 of the Sarbanes-Oxley Act of 2002
I, J. P. Vickers, Chief Financial Officer of GeoResources, Inc.
certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of
GeoResources, Inc. ("registrant");
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Reserved;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
of operation of internal control over financial reporting which are
reasonably likely to adversely effect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2003
Signature: /s/ J. P. Vickers
J. P. Vickers
Title: Chief Financial Officer
EXHIBIT 32.1
Certification of Chief Executive Officer
of GeoResources, Inc Pursuant to 18 U.S.C. Section 1350
I, J. P. Vickers, certify that:
In connection with the Quarterly Report on Form 10-QSB of GeoResources,
Inc. (the "Company") for the period ended September 30, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, J. P. Vickers, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/S/ J. P. Vickers
J. P. Vickers
Chief Executive Officer
November 14, 2003
EXHIBIT 32.2
Certification of Chief Financial Officer
of GeoResources, Inc. Pursuant to 18 U.S.C. Section 1350
I, J. P. Vickers, certify that:
In connection with the Quarterly Report on Form 10-QSB of GeoResources,
Inc. (the "Company") for the period ended September 30, 2003, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"),
I, J. P. Vickers, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. the Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/S/ J. P. Vickers
J. P. Vickers
Chief Financial Officer
November 14, 2003