UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

TGC INDUSTRIES, INC.

(Exact name of small business issuer as specified in its charter)

 

101 East Park Blvd., Suite 955

Plano, Texas  75074

(Address of principal executive offices)

972-881-1099

(Issuer’s telephone number)

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 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  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer  o    Accelerated filer  x     Non-accelerated filer   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o   No  x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

 

PART I — FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

	Reference is made to the succeeding pages for the following financial information:
	Balance Sheets as of June 30, 2007 (unaudited) and December 31, 2006.
	Statements of Income for the three months and six months ended June 30, 2007 and 2006 (unaudited)
	Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)
	Notes to Financial Statements.

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TGC INDUSTRIES, INC.

BALANCE SHEET

		June 30,			December 31,
		2007			2006
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	5,551,842		$	9,388,769
Trade accounts receivable		6,862,721			7,448,602
Cost and estimated earnings in excess of billings on uncompleted contracts		1,851,303			989,451
Prepaid expenses and other		2,021,243			508,925
Prepaid federal income tax		451,002			183,705
Current deferred tax asset		4,538			9,075
Total current assets		16,742,649			18,528,527
PROPERTY AND EQUIPMENT - at cost
Machinery and equipment		64,385,199			55,234,222
Automobiles and trucks		7,030,221			6,609,057
Furniture and fixtures		352,200			342,447
Leasehold improvements		14,994			14,994
		71,782,614			62,200,720
Less accumulated depreciation and amortization		(31,120,867		)	(24,552,074		)
		40,661,747			37,648,646
Goodwill		201,530			201,530
Other assets		20,817			20,817
Total assets		$	57,626,743		$	56,399,520

 

See Notes to Financial Statements

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		June 30,			December 31,
		2007			2006
		(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable		$	5,205,892		$	4,951,985
Accrued liabilities		1,499,617			1,111,023
Deferred share-based compensation		75,000			—
Billings in excess of costs and estimated earnings on uncompleted contracts		3,743,830			6,159,514
Federal and state income taxes payable		—			415,501
Current maturities of notes payable		4,626,326			3,629,395
Current portion of capital lease obligations		1,115,544			1,082,729
Total current liabilities		16,266,209			17,350,147
NOTES PAYABLE, less current maturities		710,733			2,046,908
CAPITAL LEASE OBLIGATIONS, less current portion		831,993			1,017,154
LONG-TERM DEFERRED TAX LIABILITY		1,127,808			942,153
COMMITMENTS AND CONTINGENCIES		—			—
SHAREHOLDERS’ EQUITY
Preferred stock, $1.00 par value; 4,000,000 shares authorized; issued - none		—			—
Common stock, $.01 par value; 25,000,000 shares authorized; 16,581,268 and 15,753,396 issued in each period		165,813			157,535
Additional paid-in capital		26,506,698			26,461,640
Unearned restricted stock; 96,500 shares in each period		(643,684		)	(822,208		)
Retained earnings		12,918,496			9,503,514
Treasury stock, at cost (37,803 shares)		(257,323		)	(257,323		)
		38,690,000			35,043,158
Total liabilities and shareholders’ equity		$	57,626,743		$	56,399,520

 

See Notes to Financial Statements

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TGC INDUSTRIES, INC.

STATEMENTS OF INCOME

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		(Unaudited)						(Unaudited)
		2007			2006			2007			2006
Revenue		$	21,717,840		$	14,894,774		$	40,326,136		$	29,688,481
Cost and expenses
Cost of services		14,825,158			8,380,445			25,638,804			16,140,591
Selling, general and administrative		926,500			708,901			1,758,059			1,355,203
Depreciation and amortization expense		3,509,530			2,183,091			6,811,027			3,902,970
		19,261,188			11,272,437			34,207,890			21,398,764
Income from operations		2,456,652			3,622,337			6,118,246			8,289,717
Interest expense		191,280			212,529			347,435			408,687
Income before income taxes		2,265,372			3,409,808			5,770,811			7,881,030
Income tax expense		929,805			1,352,879			2,355,829			3,051,944
NET INCOME		$	1,335,567		$	2,056,929		$	3,414,982		$	4,829,086
Earnings per common share:
Basic		$	.08		$	.13		$	.21		$	.29
Diluted		$	.08		$	.12		$	.21		$	.29
Weighted average number of shares outstanding:
Basic		16,539,912			16,412,265			16,525,310			16,394,413
Diluted		16,622,994			16,536,945			16,616,396			16,522,745

 

See Notes to Financial Statements

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TGC INDUSTRIES, INC.

Statements of Cash Flows (Unaudited)

 

		Six Months Ended
		June 30,
		2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	3,414,982		$	4,829,086
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,811,027			3,902,970
Gain on disposal of property and equipment		(62,474		)	(18,397		)
Non-cash compensation		278,451			99,164
Deferred income taxes		190,192			(22,537		)
Changes in operating assets and liabilities
Trade accounts receivable		585,881			(220,896		)
Cost and estimated earnings in excess of billings on uncompleted contracts		(861,852		)	3,091,812
Prepaid expenses		599,580			526,340
Other assets		—			(734		)
Trade accounts payable		253,907			802,305
Accrued liabilities		388,594			231,987
Billings in excess of cost and estimated earnings on uncompleted contracts		(2,415,684		)	1,122,551
Federal and state income taxes		(682,798		)	427,451
NET CASH PROVIDED BY OPERATING ACTIVITIES		8,499,806			14,771,102
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(9,398,289		)	(9,351,643		)
Purchase of assets of Highland Industries		—			(1,800,000		)
Proceeds from sale of property and equipment		132,173			46,759
NET CASH USED IN INVESTING ACTIVITIES		(9,266,116		)	(11,104,884		)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable		(2,451,142		)	(2,195,246		)
Principal payments on capital lease obligations		(647,884		)	(419,393		)
Proceeds from exercise of stock options		29,335			19,999
Payment of dividends		(926		)	(929		)
NET CASH USED IN FINANCING ACTIVITIES		(3,070,617		)	(2,595,569		)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(3,836,927		)	1,070,649
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		9,388,769			9,499,409
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	5,551,842		$	10,570,058
Supplemental cash flow information
Interest paid		$	347,435		$	409,480
Income taxes paid		$	2,855,935		$	2,649,706
Noncash investing and financing activities
Capital lease obligations incurred		$	495,538		$	877,661
Financed equipment purchase		$	—		$	—
Financed insurance premiums		$	2,111,898		$	1,625,148

 

See Notes to Financial Statements

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TGC INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

June 30, 2007

NOTE A

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and the instructions to Form 10-Q.  Accordingly, they do not include all of the financial information and footnotes required by generally accepted accounting principles for complete financial statements.

REVENUE RECOGNITION

Seismic Surveys

The Company provides seismic data acquisition survey services to its customers under general service agreements which define certain obligations for the Company and for its customers.  A supplemental agreement setting forth the terms of a specific project, which may be cancelled by either party upon 60 days advance written notice, is entered into for every project.  These supplemental agreements are either “turnkey” agreements providing for a fixed fee to be paid for each unit of seismic data acquired or “term” agreements providing for a fixed hourly, daily, or monthly fee during the term of the project.  The duration of these projects will vary from a few days to several months.  The Company recognizes revenue when services are performed under both types of agreements.  Services are defined as the commencement of data acquisition.  Under turnkey agreements, the total number of units of seismic data to be gathered is set forth in the agreement and revenue is recognized as services are performed on a per unit of seismic data acquired rate.  Under term agreements, revenue is recognized as services are performed based on the time worked rate provided in the term agreement.  Under both turkey and term agreements, cost of earned revenue is recognized by multiplying total estimated agreement cost by the percentage-of-completion of the agreement.  The excess of that amount over the cost of earned revenue reported in prior periods is recognized as cost of earned revenue for the period.  Agreements are not segmented nor combined for purposes of calculating percentage of completion.  The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts” represents cost incurred on turnkey agreements in excess of billings on those agreements.  The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings on turnkey agreements in excess of cost on those agreements.  Claims have been negligible in the six month period ended June 30, 2007 and the year ended December 31, 2006.

Gravity Data

The Company owns a data bank which contains gravity data, and to a lesser extent magnetic data, from many of the major oil and natural gas producing areas located within the U.S.  When an order for gravity data is received, the portion of gravity data requested by the customer is prepared in digital format for licensing and shipment to the customer.  This process is performed by an employee in the Company’s headquarters office and normally takes a few days at the most.  In addition, the licensing of gravity data is not a material part of the Company’s revenue.  There was no gravity data revenue during the six month period ended June 30, 2007.  Gravity revenue for the year ended December 31, 2006, was only $500.

NOTE B — MANAGEMENT PRESENTATION

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position, results of operations, and changes in financial position have been

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included.  The results of the interim periods are not necessarily indicative of results to be expected for the entire year.  For further information, refer to the financial statements and the footnotes thereto included in the Company’s Annual Report for the year ended December 31, 2006, filed on Form 10-KSB.

NOTE C — EARNINGS PER SHARE

Basic earnings per common share are based upon the weighted average number of shares of common stock outstanding.  Diluted earnings per share are based upon the weighted average number of common shares outstanding and, when dilutive, common shares issuable for stock options, warrants, and convertible securities.  All earnings per common share for the three-month and six-month periods ended June 30, 2007 and 2006 have been adjusted for the 5% stock dividend paid April 27, 2007 to shareholders of record as of April 13, 2007.

The following is a reconciliation of net income and weighted average common shares outstanding for purposes of calculating basic and diluted net income per share:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		(Unaudited)						(Unaudited)
		2007			2006			2007			2006
Basic:
Numerator:
Net income		$	1,335,567		$	2,056,929		$	3,414,982		$	4,829,086
Denominator:
Basic - weighted average  common shares outstanding		16,539,912			16,412,265			16,525,310			16,394,413
Basic EPS		$	.08		$	.13		$	.21		$	.29
Diluted:
Numerator:
Net income		$	1,335,567		$	2,056,929		$	3,414,982		$	4,829,086
Denominator:
Weighted average common  shares outstanding		16,539,912			16,412,265			16,525,310			16,394,413
Effect of Dilutive Securities:
Warrants		26,143			26,314			25,869			26,016
Stock options		56,939			98,366			65,217			102,316
		16,622,994			16,536,945			16,616,396			16,522,745
Diluted EPS		$	.08		$	.12		$	.21		$	.29

 

NOTE D — DIVIDENDS

On March 30, 2007, the Company declared a five percent (5%) stock dividend on its outstanding common stock.  The 5% stock dividend was paid on April 27, 2007, to shareholders of record as of April 13, 2007.   Cash in lieu of fractional shares in the total amount of $926 was paid to shareholders based on the last sales price of the Company’s common stock on the record date.

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NOTE E – INCOME TAXES

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.  In addition, the Company paid federal and various state estimated income taxes for tax year 2007, as well as various state income taxes for tax year 2006, during the first six months of 2007.

NOTE F – STOCK-BASED COMPENSATION

Prior to January 1, 2006, the Company accounted for its stock options under the recognition and measurement principles of APB Opinion No. 25 and related interpretations.  Accordingly, no stock-based employee compensation cost was reflected in our financial statements prior to January 1, 2006, since all options to purchase common stock of the Company have an exercise price equal to, or greater than, the market value of the underlying common stock on the date of grant.

Effective January 1, 2006, the Company implemented Statement of Financial Accounting Standards (SFAS) No. 123R, “Share Based Payment (SFAS 123R)” for stock-based compensation awards granted after that date and for unvested awards outstanding at that date using the modified prospective application method.  We recognize the fair value of the stock-based compensation awards as wages in the Statements of Income on a straight-line basis over the vesting period.  Such implementation is expected to have minimal impact on our results of operations, financial position, and liquidity.  The adoption of SFAS 123R resulted in the recognition of compensation expense, relative to stock-based awards, in wages in the Statements of Income of approximately $102,000 and $85,000, less than $0.01 per share, for the three months ended June 30, 2007 and 2006, respectively, and approximately $203,000, or approximately $.01 per share, and approximately $99,000, or less than $.01 per share, for the six months ended June 30, 2007 and 2006, respectively.  In accordance with the modified prospective application method permitted by SFAS 123R, prior period amounts have not been restated to reflect the recognition of stock-based compensation costs.

As of June 30, 2007, there was approximately $689,000 of unrecognized compensation expense related to our two share-based compensation plans.  There were no stock-based awards granted during the six-month period ended June 30, 2007 from either of those two plans.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Form 10-Q. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, and intentions. The cautionary statements made in this Form 10-Q should be read as applying to all related forward-looking statements wherever they appear in this Form 10-Q. Our actual results could differ materially from those anticipated in the forward-looking statements. Factors that could cause our actual results to differ materially from those anticipated include those discussed in Part II, Item 1A. “RISK FACTORS.”

Forward Looking Statements

This report includes “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.  All statements other than statements of historical fact included in this report regarding the Company’s strategies and plans for growth are forward-looking statements.  These forward-looking statements are often characterized by the terms “may,” “will,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” and other words and

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terms of similar meanings and do not reflect historical facts.  Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Important factors that could cause actual results to differ materially from such expectations are disclosed in the Company’s Securities and Exchange Commission filings, and include, but are not limited to, the dependence upon energy industry spending for seismic services, the unpredictable nature of forecasting weather, the potential for contract delay or cancellation, the potential for fluctuations in oil and gas prices, and the availability of capital resources.  The forward-looking statements contained herein reflect the current views of the Company’s management, and the Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those contemplated by such forward-looking statements.

Executive Overview

The Company is a leading provider of seismic data acquisition services throughout the continental U.S.  We currently operate eight seismic crews.  These seismic crews supply seismic data to companies engaged in the domestic exploration and development of oil and natural gas on land and in land-to-water transition areas. Our customers rely on seismic data to identify areas where subsurface conditions are favorable for the accumulation of existing hydrocarbons, to optimize the development and production of hydrocarbon reservoirs, to better delineate existing oil and natural gas fields, and to augment reservoir management techniques.

We acquire geophysical data using the latest in 3-D survey techniques. We introduce acoustic energy into the ground by using vibration equipment or dynamite detonation, depending on the surface terrain and subsurface requirements. The reflected energy, or echoes, is received through geophones, converted into a digital signal at a multi-channel recording unit, and then transmitted to a central recording vehicle. Subsurface requirements dictate the number of channels necessary to perform our services. With our state-of-the-art seismic equipment, including computer technology and multiple channels, we acquire, on a cost effective basis, immense volumes of seismic data that when processed and interpreted produce more precise images of the earth’s subsurface. Our customers then use our seismic data to generate 3-D geologic models that help reduce finding costs and improve recovery rates from existing wells.

Currently, the seismic data acquisition industry is made up of a number of companies divided into two groups. The first group is made up of five publicly-traded companies with long operating histories who field numerous crews and work in a number of different regions and terrain.  This group includes us, Dawson Geophysical Company, Geo Kinetics, Inc., CGG-Veritas, and Petroleum Geo Services.  These companies field approximately 50% of the estimated 58 seismic crews currently operating in the continental U.S.  The second group is made up of smaller companies who generally run one or two seismic crews and often specialize in specific regions or type of operation.

We provide our seismic data acquisition services primarily to domestic onshore oil and natural gas exploration and development companies for use in the onshore drilling and production of oil and natural gas in the continental U.S. The main factors influencing demand for seismic data acquisition services in our industry are the level of drilling activity by oil and natural gas companies and the sizes of such companies’ exploration and development budgets, which, in turn, depend largely on current and anticipated future crude oil and natural gas prices and depletion rates.

Our customers are major and independent oil and natural gas exploration and development companies. The services we provide to our customers vary according to the size and needs of each customer. Our services are marketed by supervisory and executive personnel who contact customers to determine their needs and respond to customer inquiries regarding the availability of crews. Contacts are based principally upon professional relationships developed over a number of years. There are a number of consultants in the oil and natural gas

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industry who process and interpret seismic data for oil and natural gas companies. These consultants can have an influence in determining which company their customers use to acquire seismic data.

The acquisition of seismic data for the oil and natural gas industry is a highly competitive business. There are approximately 58 seismic crews currently operating in the continental United States. Contracts for such services generally are awarded on the basis of price quotations, crew experience, and the availability of crews to perform in a timely manner, although factors other than price, such as crew safety performance history, technological and operational expertise, are often determinative. Our competitors include companies with financial resources that are significantly greater than our own as well as companies of comparable and smaller size. Our primary competitors are Dawson Geophysical Company, Geo Kinetics, Inc., Petroleum Geo Services, and to a lesser extent, CGG-Veritas. In addition to the previously named companies, we also compete for projects from time to time with smaller seismic companies which operate in local markets with only one or two crews.  We believe that our long-term industry expertise, the customer relationships developed over our history, and our financial stability gives us an advantage over most of our competitors in the industry.

Results of Operations

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006 (Unaudited)

Revenues.  Our revenues were $40,326,136 for the six months ended June 30, 2007 compared to $29,688,481 for the same period of 2006, an increase of 35.8%.  This increase in revenues was attributable to several factors, including operating eight seismic data acquisition crews for six months in 2007 compared with six crews the first four months and seven crews for the last two months of the same period of 2006, as well as the fact that approximately 29% of revenues in the first six months of 2007 were derived from lower margin shot-hole contracts compared with approximately 17% for the same period of 2006.  These shot-hole contracts typically generate higher revenues but lower gross margins than vibroseis contracts due to higher third party costs.

Cost of services.  Our cost of services was $25,638,804 for the six months ended June 30, 2007 compared to $16,140,591 for the same period of 2006, an increase of 58.8%.  This increase was attributable to several factors:  (1) the increase in revenues in the first six months of 2007 compared to the same period of 2006; (2) the higher third party costs associated with the additional shot-hole contracts in 2007 compared with 2006; (3) the adverse weather conditions in January and February in Colorado and Kansas which idled five of our eight crews for an average of 15 days per idled crew during the first quarter of 2007; and (4) the severe flooding conditions in the Mid-continent and Southwestern areas of the United States which idled all eight of our crews for an average of 11 days per crew during the second quarter of 2007. As a percentage of revenues, cost of services was 63.6% for the six months ended June 30, 2007 compared to 54.4% for the same period of 2006.

Selling, general, and administrative expenses.  SG&A expenses were $1,758,059 for the six months ended June 30, 2007 compared to $1,355,203 for the same period of 2006, an increase of 29.7%.  This increase was primarily attributable to additional expenses associated with additional selling and administrative personnel, additional compensation expense for deferred stock based compensation, increased insurance costs, and additional expenses associated with the operation of eight crews during the first six months of 2007 compared to six crews the first four months and seven crews the last two months of the same period of 2006.  SG&A expense as a percentage of revenues was 4.4% for the six months ended June 30, 2007 compared with 4.6% for the same period of 2006.

Depreciation and amortization expense.  Depreciation and amortization expense was $6,811,027 for the six months ended June 30, 2007 compared to $3,902,970 for the same period of 2006, an increase of 74.5%.  This increase was primarily attributable to depreciation and amortization expense associated with capital expenditures of approximately $22,500,000 since June 30, 2006.  Depreciation and amortization expense as a percentage of revenues was 16.9% for the six months ended June 30, 2007 compared to 13.1% for the same period of 2006.

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Income from operations.  Income from operations was $6,118,246 for the six months ended June 30, 2007 compared to $8,289,717 for the same period of 2006, a decrease of 26.2%.  This decrease was primarily attributable to the increase in cost of services, SG&A, and depreciation and amortization expense, partially offset by an increase in revenues.  EBITDA increased $736,586 to $12,929,273 for the six months ended June 30, 2007 from $12,192,687 for the same period of 2006, an increase of 6.0%.  This increase was a result of factors mentioned above.  For a definition of EBITDA, a reconciliation of EBITDA to net income, and discussion of EBITDA, please refer to the section entitled “EBITDA” found below.

Interest expense.  Interest expense was $347,435 for the six months ended June 30, 2007 compared to $408,687 for the same period of 2006.  This decrease was primarily attributable to the reduction of debt incurred for the purchase of three new ARAM ARIES seismic recording systems and three new vibration vehicles.

Income tax expense.  Income tax expense was $2,355,829 for the six months ended June 30, 2007 compared to $3,051,944 for the same period of 2006.  The effective tax rate for the six months ended June 30, 2007 was 40.8% compared to 38.7% for the same period of 2006.  See Note E of Notes to Financial Statements in Item 1.

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006 (Unaudited)

Revenues.  Our revenues were $21,717,840 for the three months ended June 30, 2007 compared to $14,894,774 for the same period of 2006, an increase of 45.8%.  This increase in revenues was attributable to several factors.  Operating eight seismic data acquisition crews for the three months ended June 30, 2007 compared with six crews operating the first month and seven crews operating the last two months of the same period of 2006 and over 40% of revenues being derived from lower margin shot-hole contracts compared with approximately 20% for the same period of 2006.  These shot-hole contracts typically generate higher revenues but lower gross margins than vibroseis contracts due to higher third party costs.

Cost of services.  Our cost of services was $14,825,158 for the three months ended June 30, 2007 compared to $8,380,445 for the same period of 2006, an increase of 76.9%.  This increase was attributable to several factors:  (1) the increase in revenues for the three months ended June 30, 2007 compared to the same period of 2006; (2) the higher third party costs associated with the additional shot-hole contracts in 2007 compared with 2006; and (3) the severe flooding conditions in the three months ended June 30, 2007, in the Mid-continent and Southwestern areas of the United States which idled all eight of our crews for an average of 11 days per crew during the period.  As a percentage of revenues, cost of services was 68.3% for the three months ended June 30, 2007 compared to 56.3% for the same period of 2006.

Selling, general, and administrative expenses.  SG&A expenses were $926,500 for the three months ended June 30, 2007 compared to $708,901 for the same period of 2006, an increase of 30.7%.  This increase was primarily attributable to additional expenses associated with additional selling and administrative personnel, additional compensation expense for deferred stock based compensation, increased insurance costs, and additional expenses associated with the operation of the additional crews during the three months ended June 30, 2007 compared to the same period of 2006.  SG&A expense as a percentage of revenues was 4.3% for the three months ended June 30, 2007 compared with 4.8% for the same period of 2006.

Depreciation and amortization expense.  Depreciation and amortization expense was $3,509,530 for the three months ended June 30, 2007 compared to $2,183,091 for the same period of 2006, an increase of 60.8%.  This increase was primarily attributable to depreciation and amortization expense associated with capital expenditures of approximately $22,500,000 since June 30, 2006.  Depreciation and amortization expense as a percentage of revenues was 16.2% for the six months ended June 30, 2007 compared to 14.7% for the same period of 2006.

Income from operations.  Income from operations was $2,456,652 for the three months ended June 30, 2007 compared to $3,622,337 for the same period of 2006, a decrease of 32.2%.  This decrease was primarily

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attributable to the increase in cost of services, SG&A, and depreciation and amortization expense, partially offset by an increase in revenues.  EBITDA increased $160,754 to $5,966,182 for the three months ended June 30, 2007 from $5,805,428 for the same period of 2006, an increase of 2.8%.  This increase was a result of factors mentioned above.  For a definition of EBITDA, a reconciliation of EBITDA to net income, and discussion of EBITDA, please refer to the section entitled “EBITDA” found below.

Interest expense.  Interest expense was $191,280 for the three months ended June 30, 2007 compared to $212,529 for the same period of 2006.  This decrease was primarily attributable to the reduction of debt incurred for the purchase of three new ARAM ARIES seismic recording systems and three new vibration vehicles.

Income tax expense.  Income tax expense was $929,805 for the three months ended June 30, 2007 compared to $1,352,879 for the same period of 2006.  The effective tax rate for the three months ended June 30, 2007 was 41.0% compared to 39.7% for the same period of 2006.  See Note E of Notes to Financial Statements in Item 1.

EBITDA

We define EBITDA as net income plus interest expense, income taxes, and depreciation and amortization expense. We use EBITDA as a supplemental financial measure to assess:

·                  the financial performance of our assets without regard to financing methods, capital structures, taxes, or historical cost basis;

·                  our liquidity and operating performance over time and in relation to other companies that own similar assets and that we believe calculate EBITDA in a manner similar to us; and

·                  the ability of our assets to generate cash sufficient for us to pay potential interest costs.

We also understand that such data is used by investors to assess our performance. However, EBITDA is not a measure of operating income, operating performance, or liquidity presented in accordance with generally accepted accounting principles. When assessing our operating performance or our liquidity, you should not consider this data in isolation or as a substitute for our net income, cash flow from operating activities, or other cash flow data calculated in accordance with generally accepted accounting principles.  EBITDA excludes some, but not all, items that affect net income and operating income, and these measures may vary among other companies.  Therefore, EBITDA as presented below may not be comparable to similarly titled measures of other companies.  Further, the results presented by EBITDA cannot be achieved without incurring the costs that the measure excludes: interest, taxes, depreciation and amortization.

The following table reconciles our EBITDA to our net income:

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2007			2006			2007			2006
		(unaudited)						(unaudited)
Net income		$	1,335,567		$	2,056,929		$	3,414,982		$	4,829,086
Depreciation and amortization		3,509,530			2,183,091			6,811,027			3,902,970
Interest expense		191,280			212,529			347,435			408,687
Income tax expense		929,805			1,352,879			2,355,829			3,051,944
EBITDA		$	5,966,182		$	5,805,428		$	12,929,273		$	12,192,687

 

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Liquidity and Capital Resources

Cash Flows

Cash flows from operating activities.

Net cash provided by operating activities was $8,499,806 for the six months ended June 30, 2007 compared to $14,771,102 for the same period of 2006.  The $6,271,296 decrease in the first six months of 2007 from the same period of 2006 was principally attributable to timing of receipt and payment of invoices, the timing of billings and revenue recognition, and the mix of contracts.  Changes in significant components of cash provided by operations were a $1,414,104 change in net income, a $2,908,057 change in depreciation and amortization expense, a $806,777 change in trade accounts receivable, a $3,953,664 change in cost and estimated earnings in excess of billings on uncompleted contracts, a $548,398 change in trade accounts payable, a $3,538,235 change in billings in excess of cost and estimated earnings on uncompleted contracts, and a $1,110,249 change in federal and state income taxes.

Working capital decreased $701,940 to $476,440 as of June 30, 2007 from the December 31, 2006 working capital of $1,178,380.  This decrease was primarily due to a decrease in cash and cash equivalents of $3,836,927 and an increase in current maturities of notes payable of $996,931 (partially offset by an increase in cost and estimated earnings in excess of billings on uncompleted contracts of $861,852, an increase in prepaid expenses and other of $1,512,318, and a decrease in billings in excess of costs and estimated earnings on uncompleted contracts of $2,415,684).

Cash flows used in investing activities.

Net cash used in investing activities was $9,266,116 for the six months ended June 30, 2007 and $11,104,884 for the six months ended June 30, 2006.  This decrease was due primarily to a decrease in capital expenditures of $1,753,354.

Cash flows used in financing activities.

Net cash used in financing activities was $3,070,617 for the six months ended June 30, 2007 and $2,595,569 for the six months ended June 30, 2006.  The increase was due primarily to an increase in the amount of principal payments on our outstanding notes payable of $255,896 and an increase in the amount of principal payments on capital lease obligations of $228,491.

Capital expenditures.

During the six months ended June 30, 2007, capital expenditures of $9,893,827 were used to acquire additional seismic equipment and vehicles.  Major capital expenditures included approximately $2,623,000 for seven new vibration vehicles and approximately $2,908,000 for the additional 4,000 channels of ARAM ARIES seismic recording equipment.  In January of 2007, we entered into an equipment sales contract to purchase two new shot-hole drill rigs.  We anticipate delivery of these units in August of 2007.  Cash generated from operations will be used to fund this commitment.  Although we do not budget for our capital expenditures, we currently have no plans for significant additional capital expenditures other than the two new shot-hole drill rigs; however, we may purchase additional equipment during 2007 as the demand for our services increases.

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Liquidity

Our primary source of liquidity is cash generated from operations and short-term borrowings from commercial banks and equipment lenders.  Based on current forecasts, we believe that we have sufficient available cash and borrowing capacity to fund our working capital needs over the next twelve months.

Capital Resources

Since 2005, we have relied on cash generated from operations, short-term borrowings from commercial banks, and proceeds from a public offering of our common stock to fund our working capital requirements and capital expenditures.

In April of 2005, we entered into a revolving credit agreement with a commercial bank. On September 16, 2005, we amended our revolving credit agreement under which we could have borrowed, repaid, and re-borrowed, from time to time until September 16, 2006, up to $3,500,000.  Effective September 16, 2006, we renewed our revolving credit agreement and increased the borrowing limit from $3,500,000 to $5,000,000.  The revolving credit agreement will expire on September 16, 2007.  Our obligations under this agreement are secured by a security interest in our accounts receivable.  Interest on the outstanding amount under the revolving credit agreement is payable monthly at the prime rate of interest.  The credit loan agreement provides for non-financial and financial covenants including a minimum debt service coverage ratio in excess of 2.0 to 1.0 and a ratio of debt to worth not in excess of 1.25 to 1.0.  As of June 30, 2007, we had no borrowings outstanding under the revolving credit agreement.

In October of 2001, the Company entered into a three-year operating lease for the Company’s headquarters facility located in Plano, Texas. In April of 2004, the Company executed an addendum to its operating lease. The addendum extended the term of the lease until March 31, 2009, and increased the square footage of the office and outdoor storage area.  In August of 2005, the Company entered into a 38-month operating lease for additional office and warehouse space in Plano, Texas.  This operating lease will expire in October of 2008.  In January of 2006, we entered into a 24-month operating lease for a sales office in Houston, Texas.  This operating lease will expire in January of 2008.  In July of 2006, the Company entered into an operating lease for additional office space for its corporate offices in Plano, Texas.  In September 2006, the Company relocated its corporate offices to this facility.  This lease will expire in January of 2012.  Additionally, in October of 2006, the Company entered into a one-year lease for a sales office in Oklahoma City, Oklahoma.

Contractual Obligations

The following table summarizes payments due in specific periods related to our contractual obligations as of June 30, 2007:

		Payments Due by Period (1) (In thousands)
					Within									After
		Total			1 Year			1-3 Years			3-5 Years			5 Years
Contractual Obligations
Operating lease obligations		$	795		$	254		$	330		$	211		$	-0-
Debt Obligations		$	5,337		$	4,626		$	711		$	-0-		$	-0-
Capital lease obligations		$	1,948		$	1,116		$	832		$	-0-		$	-0-
Total		$	8,080		$	5,996		$	1,873		$	211		$	-0-

 

(1) See “Capital Resources” above for a discussion of the contractual obligations we have incurred since December 31, 2006.

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We believe that our capital resources, including our short-term investments, funds available under our revolving credit agreement, and cash flow from operations will be adequate to meet our current operational needs. We believe that we will be able to finance our 2007 capital expenditures through cash flow from operations, borrowings from commercial lenders, and the funds available under our line of credit loan agreement.  However, our ability to satisfy working capital requirements, meet debt repayment obligations, and fund future capital requirements will depend principally upon our future operating performance, which is subject to the risks inherent in our business.

Off-Balance Sheet Arrangements

As of June 30, 2007, we had no off-balance sheet arrangements.

Critical Accounting Policies

A discussion of our critical accounting policies can be found in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006.  There have been no material changes to these policies (including critical accounting estimates and assumptions or judgments affecting the application of those estimates and assumptions) during the first six months of 2007.

Recently Issued Accounting Pronouncements

A discussion of recently issued accounting pronouncements can be found in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006.

Recent Events

In January of 2007, we entered into an equipment sales contract to purchase two new shot-hole drill rigs.  We anticipate delivery of these units in August of 2007.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We have not entered into any hedging agreements or swap agreements.  Our principal market risks include fluctuations in commodity prices which affect demand for and pricing for our services and the risk related to the concentration of our customers in the oil and natural gas industry.  Since all of our customers are involved in the oil and natural gas industry, there may be a positive or negative effect on our exposure to credit risk because our customers may be similarly affected by changes in economic and industry conditions.  For the year ended December 31, 2006, no customer accounted for 10% or more of our revenues.  For the year ended December 31, 2005, our top two customers accounted for approximately 11.6% and 10.6%, respectively, of our revenues.

ITEM 4. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Principal Financial and Accounting Officer, the Company performed an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of June 30, 2007.  Based upon that evaluation, the Chief Executive Officer and Principal Financial and Accounting Officer concluded that the Company’s disclosure controls and procedures are effective in enabling the Company to record, process, summarize, and report information required to be included in reports filed or submitted under the Exchange Act within the required time period.  There were no changes in the Company’s internal controls over financial

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reporting or in other factors during the quarter ended June 30, 2007, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company continues to take action to assure compliance with the internal controls, disclosure controls, and other requirements of the Sarbanes-Oxley Act of 2002.  Our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, cannot guarantee that our internal controls and disclosure controls will prevent all possible errors or all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be relative to their costs.  Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.  Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls.  Notwithstanding the foregoing, the Company’s Chief Executive Officer and Principal Financial and Accounting Officer believe that their determination, contained in the preceding paragraph, that the Company’s disclosure controls and procedures are effective has been made at a reasonable assurance level.

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, a control may be inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate.  Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Currently we are not a defendant in any legal actions.  However, we have been or may become a defendant in other legal actions that arose or may arise out of the normal course of business.  In our opinion, none of these actions have or will result in any significant loss to us.

ITEM 1A. RISK FACTORS

In addition to the “Risk Factors” discussed below and the other information set forth in this report, you should carefully consider the “Risk Factors” discussed in Part II, under “Item 6. Management’s Discussion and Analysis” contained in our Annual Report on Form 10-KSB for the year ended December 31, 2006, which could materially affect our business, financial condition, or future results.  Except as set forth herein, there have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006.  The risks described in our Annual Report on Form 10-KSB are not the only risks facing our Company.  Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, and/or operating results.

We have a history of losses, and we may incur losses again.

Although we reported net income of approximately $3,415,000 for the six months ended June 30, 2007, we have a history of losses with only four profitable years since 1998.  For the year 2006 we had net income of approximately $8,111,000; for the year 2005 we had net income (before dividend requirements on preferred stock) of approximately $6,201,000; for the year 2004 we had net income (before dividend requirements on preferred stock) of approximately $2,868,000; and for the year 2003 we had net income (before dividend requirement on preferred stock) of approximately $555,000. Our ability to be profitable in the future will depend

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on many factors beyond our control, but primarily on the level of demand for land-based seismic data acquisition services by oil and natural gas exploration and development companies. Even if we are able to continue our profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our revenues and operating results can be expected to fluctuate from period to period.

Our revenues, operating results, and profitability may fluctuate from period to period. These fluctuations are attributable to the level of new business in a particular period, the timing of the initiation, progress, or cancellation of significant projects, higher revenues and expenses on our dynamite contracts, and costs we incur to train new crews we may add in the future to meet increased customer demand. Fluctuations in our operating results may also be affected by other factors that are outside of our control such as permit delays, weather delays, and crew productivity. Oil and natural gas prices are at record highs and have resulted in increasing demand for our services. There can be no assurance that these high prices will continue. The demand for our services will be adversely affected by a significant reduction in oil and natural gas prices. Since our business has high fixed costs, the negative effect of one or more of these factors could trigger wide variations from quarter to quarter in our operating revenues, EBITDA margin, and profitability, which render quarter-to-quarter comparisons unreliable as an indicator of performance. Due to the factors discussed above, you should not expect sequential growth in our quarterly revenues and profitability.

We are dependent upon significant customers.

Although for the year ended December 31, 2006, no customer accounted for more than 10% of our revenues, in the past we have derived a significant amount of our revenues from a small number of oil and natural gas exploration and development companies. During 2005, our two largest customers accounted for approximately 22.2% of revenues.  While our revenues are derived from a concentrated customer base, our significant customers may vary between years. If we lose one or more major customers in the future, or if one or more customers encounter financial difficulties, our business, financial condition, and results of operations could be materially and adversely affected.

We may be subject to liability claims that are not covered by our insurance.

Our business is subject to the general risks inherent in land-based seismic data acquisition activities. Our activities are often conducted in remote areas under dangerous conditions including the detonation of dynamite. These operations are subject to risks of injury to personnel and equipment. Our crews are mobile, and equipment and personnel are subject to vehicular accidents. These risks could cause us to experience equipment losses, injuries to our personnel, and interruptions in our business.

In addition, we could be subject to personal injury or real property damage claims in the normal operation of our business. Such claims may not be covered under the indemnification provisions contained in our general service agreements to the extent that the damage is due to our negligence, gross negligence, or intentional misconduct.

We do not carry insurance against certain risks that we could experience, such as business interruption resulting from equipment maintenance or weather delays. We obtain insurance against certain property and personal casualty risks and other risks when such insurance is available and when our management considers it advisable to do so. Currently we maintain employers liability coverage with limits of $1,000,000 per accident and $2,000,000 in the aggregate, commercial general liability coverage of $1,000,000 per accident and $2,000,000 in the aggregate, pollution liability coverage of $1,000,000 per accident and $2,000,000 in the aggregate, and automobile liability coverage with a $1,000,000 combined single limit and a $10,000,000 umbrella policy. Our general service agreements require us to have specific amounts of insurance. There can be no assurance, however,

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that any insurance obtained by us will be adequate to cover any losses or liabilities, or that this insurance will continue to be available or available on terms which are acceptable to us. Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have a materially adverse effect on us.

We derive all of our revenues from companies in the oil and natural gas exploration and development industry – historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and natural gas prices.

Any prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in oil and natural gas prices or otherwise, can adversely impact us in many ways by negatively affecting:

·                                          our revenues, cash flows, and profitability;

·                                          our ability to maintain or increase our borrowing capacity;

·                                          our ability to obtain additional capital to finance our business and the cost of that capital; and

·                                          our ability to attract and retain skilled personnel whom we would need in the event of an upturn in the demand for our services.

Worldwide political, economic, and military events have contributed to oil and natural gas price volatility and are likely to continue to do so in the future. Depending on the market prices of oil and natural gas, oil and natural gas exploration and development companies may cancel or curtail their drilling programs thereby reducing demand for our services. Oil and natural gas prices have been volatile historically and, we believe, will continue to be so in the future. Many factors beyond our control affect oil and natural gas prices, including:

·                                          the cost of exploring for, producing, and delivering oil and natural gas;

·                                          the discovery rate of new oil and natural gas reserves;

·                                          the rate of decline of existing and new oil and natural gas reserves;

·                                          available pipeline and other oil and natural gas transportation capacity;

·                                          the ability of oil and natural gas companies to raise capital;

·                                          actions by OPEC (the Organization of Petroleum Exporting Countries);

·                                          political instability in the Middle East and other major oil and natural gas producing regions;

·                                          economic conditions in the U.S. and elsewhere;

·                                          domestic and foreign tax policy;

·                                          weather conditions in the U.S. and elsewhere;

·                                          the pace adopted by foreign governments for the exploration, development, and production of their national reserves;

·                                          the price of foreign imports of oil and natural gas; and

·                                          the overall supply and demand for oil and natural gas.

Our industry has recently experienced shortages in the availability of equipment. Any difficulty we experience replacing or adding equipment could adversely affect our business.

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We may not be able to acquire equipment to replace our existing equipment or add additional equipment. The high demand for the services that we provide has decreased the supply of geophysical equipment resulting in extended delivery dates on orders of new equipment. Any delay in obtaining equipment could delay the implementation of additional crews and restrict the productivity of our existing crews. A delay in obtaining equipment essential to our operations could have a material adverse effect on our operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. - None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES. – None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.  –

Our annual meeting of shareholders was held on June 5, 2007.  The following matters were voted upon and approved by the Company’s shareholders:

a.               Election to the Board of Directors of Mr. Wayne A. Whitener was approved by the shareholders by a majority vote of 9,974,171 to 3,022,600, Mr. William J. Barrett was elected to the Board of Directors by a majority vote of 9,974,359 to 3,022,412, Mr. Herbert M Gardner was elected to the Board of Directors by a majority vote of 11,779,205 to 1,217,566, Mr. Allen T. McInnes was elected to the Board of Directors by a majority vote of 10,532,771 to 2,464,000, Mr. Edward L. Flynn was elected to the Board of Directors by a majority vote of 11,798,172 to 1,198,599, and Mr. William C. Hurtt, Jr. was elected to the Board of Directors by a majority vote of 11,800,711 to 1,196,060.

b.              Ratification of the selection of the Company’s independent registered public accounting firm, Lane Gorman Trubitt, L.L.P., was approved by the shareholders by a majority vote of 12,983,730 to 10,298, with 2,743 abstaining.

ITEM 5. OTHER INFORMATION. – None.

ITEM 6. EXHIBITS.

The following exhibits are included herein:

EXHIBIT NO.		DESCRIPTION
3.1		Restated Articles of Incorporation (with amendment) as filed with the Secretary of State of Texas on June 20, 2003, filed as Exhibit 3.4 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, and incorporated herein by reference.
3.2		Bylaws, as amended and restated December 1, 2004 filed as Exhibit 3.2 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.1		Form of Specimen Stock Certificate filed as Exhibit 4.1 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.2		Statement of Resolution Establishing Series of Preferred Stock of TGC Industries, Inc. filed as Exhibit 2 to the Company’s Current Report on Form 8-K filed on August 11, 1993, and incorporated herein by reference.

 

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4.3		Statement of Resolution Establishing Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit B to the Company’s Current Report on Form 8-K dated July 15, 1996, filed with the Securities and Exchange Commission and incorporated herein by reference.
4.4		Statement of Resolution Regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.3 to the Company’s Annual Report on Form 10-KSB/A for the fiscal year ended December 30, 1998, and incorporated herein by reference.
4.5		Statement of Resolution Regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.4 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2000, and incorporated herein by reference.
4.6		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.5 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2001, and incorporated herein by reference.
4.7		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.6 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2002, and incorporated herein by reference.
4.8		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.7 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, and incorporated herein by reference.
4.9		Form of Debenture Agreement and Debenture for 8% Subordinated Convertible Debentures, Series A, filed as Exhibit 4.2 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-12269), as amended, filed with the Securities and Exchange Commission on September 19, 1996, and incorporated herein by reference.
4.10		Form of Warrant Agreement dated July 28, 1995, as amended, and Warrant, filed as Exhibit 4.3 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-12269), as amended, filed with the Securities and Exchange Commission and incorporated herein by reference.
4.11		Debenture Agreement dated December 10, 1999, with respect to the Company’s $2,500,000 8 1/2% Convertible Subordinated Debenture, Series B payable to Wedge Energy Services, L.L.C., filed as Exhibit 4.6 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference.
4.12		Statement of Resolution Establishing 8-1/2% Senior Convertible Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.8 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2000, and incorporated herein by reference.
4.13		Statement of Resolution regarding 8-1/2% Senior Convertible Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.11 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2002, and incorporated herein by reference.
4.14		Form of Warrant Agreement and Warrant Certificate dated September 10, 2002, filed as Exhibit 4.14 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.

 

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4.15		Form of Warrant Agreement and Warrant Certificate dated June 12, 2003, filed as Exhibit 14.15 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.16		Form of Warrant Agreement and Warrant Certificate dated December 15, 2004, filed as Exhibit 4.16 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
*31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2		Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*Filed herewith.

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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.

		TGC INDUSTRIES, INC.
Date: August 7, 2007		/s/ Wayne A. Whitener
		Wayne A. Whitener
		President & Chief
		Executive Officer
		(Principal Executive Officer)
Date: August 7, 2007		/s/ Kenneth W. Uselton
		Kenneth W. Uselton
		Treasurer (Principal Financial
		and Accounting Officer)

 

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EXHIBITS INDEX

EXHIBIT NO.		DESCRIPTION
3.1		Restated Articles of Incorporation (with amendment) as filed with the Secretary of State of Texas on June 20, 2003, filed as Exhibit 3.4 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, and incorporated herein by reference.
3.2		Bylaws, as amended and restated December 1, 2004 filed as Exhibit 3.2 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.1		Form of Specimen Stock Certificate filed as Exhibit 4.1 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.2		Statement of Resolution Establishing Series of Preferred Stock of TGC Industries, Inc. filed as Exhibit 2 to the Company’s Current Report on Form 8-K filed on August 11, 1993, and incorporated herein by reference.
4.3		Statement of Resolution Establishing Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit B to the Company’s Current Report on Form 8-K dated July 15, 1996, filed with the Securities and Exchange Commission and incorporated herein by reference.
4.4		Statement of Resolution Regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.3 to the Company’s Annual Report on Form 10-KSB/A for the fiscal year ended December 30, 1998, and incorporated herein by reference.
4.5		Statement of Resolution Regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.4 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2000, and incorporated herein by reference.
4.6		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.5 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2001, and incorporated herein by reference.
4.7		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.6 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2002, and incorporated herein by reference.
4.8		Statement of Resolution regarding Series C 8% Convertible Exchangeable Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.7 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, and incorporated herein by reference.
4.9		Form of Debenture Agreement and Debenture for 8% Subordinated Convertible Debentures, Series A, filed as Exhibit 4.2 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-12269), as amended, filed with the Securities and Exchange Commission on September 19, 1996, and incorporated herein by reference.

 

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4.10		Form of Warrant Agreement dated July 28, 1995, as amended, and Warrant, filed as Exhibit 4.3 to the Company’s Registration Statement on Form SB-2 (Registration No. 333-12269), as amended, filed with the Securities and Exchange Commission and incorporated herein by reference.
4.11		Debenture Agreement dated December 10, 1999, with respect to the Company’s $2,500,000 8 1/2% Convertible Subordinated Debenture, Series B payable to Wedge Energy Services, L.L.C., filed as Exhibit 4.6 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999, and incorporated herein by reference.
4.12		Statement of Resolution Establishing 8-1/2% Senior Convertible Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.8 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2000, and incorporated herein by reference.
4.13		Statement of Resolution regarding 8-1/2% Senior Convertible Preferred Stock of TGC Industries, Inc. filed as Exhibit 4.11 to the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2002, and incorporated herein by reference.
4.14		Form of Warrant Agreement and Warrant Certificate dated September 10, 2002, filed as Exhibit 4.14 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.15		Form of Warrant Agreement and Warrant Certificate dated June 12, 2003, filed as Exhibit 14.15 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
4.16		Form of Warrant Agreement and Warrant Certificate dated December 15, 2004, filed as Exhibit 4.16 to the Company’s Registration Statement on Form SB-2/A on September 20, 2005 (Registration No. 333-128018), and incorporated herein by reference.
*31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2		Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*Filed herewith.