SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996; or
|_| 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 0-18754
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Black Warrior Wireline Corp.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-2904094
- ---------------------------------- -----------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3748 Highway 45 North, Columbus, Mississippi 39701
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(Address of Principal Executive Offices)
(Zip Code)
(601) 329-1047
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(Issuer's Telephone Number, Including Area Code)
Indicate by a check mark whether the Issuer (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the Issuer
was required to file such Reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at August 12 1996
------------------------------ ----------------------------------
Common Stock, par value 759,052 shares
$.0005 per share
Transitional Small Business Disclosure Format
YES NO X
Page 1 of 13 Pages
BLACK WARRIOR WIRELINE CORP.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I -- FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Consolidated Balance Sheets -- June 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations --
Three Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Operations --
Six Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1996 and 1995 6
Notes to Financial Statements --
Six Months Ended June 30, 1996 and 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II -- OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 11
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 13 Pages
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
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ASSETS
Current Assets:
Cash and cash equivalents $ 110,228 $ 284,825
Accounts receivable, less allowance for
doubtful accounts of $129,830 and $130,115
at June 30, 1996 and December 31, 1995,
respectively 1,047,304 830,384
Inventories 184,714 185,813
Prepaid expenses (7,817) 31,917
Federal income tax receivable 80,432 80,432
Other receivables 178
--------- ---
Total current assets 1,414,861 1,413,549
Property, plant & equipment, less accumulated depreciation of $3,464,358 and
$3,311,919 at June 30, 1996 and December 31, 1995,
respectively 1,387,561 1,306,126
Other assets 5,711 5,405
----- -----
Total assets $ 2,808,132 $ 2,725,080
================= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 828,262 $ 821,254
Accrued salaries and vacation 22,320 15,839
Accrued interest payable 1,337,547 1,214,422
Other accrued expenses 289,682 229,446
Notes payable to bank 54,177 68,575
Notes payable, related parties 0 0
Current maturities of long-term debt and
capital lease obligations 1,574,707 1,526,127
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Total current liabilities 4,106,695 3,875,663
Long-term debt and capital lease obligations,
less current maturities 472,990 385,696
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Total liabilities 4,579,686 4,261,359
Common stock, par value $.0005 per share, 50,000,000 shares authorized,
759,052 shares issued at June 30, 1996 and December
31, 1995. 380 380
Additional paid-in capital 3,375,700 3,375,702
Accumulated deficit (4,564,241) (4,328,968)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
Total stockholders' equity (1,771,554) (1,536,279)
----------------- --------------
Total liabilities and stockholders' deficit $ 2,808,132 $ 2,725,080
================= ==============
Page 3 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
---------------------------------------------------------
June 30, June 30,
1996 1995
-------------------- -----------------------
Net revenues $ 1,612,448 $ 1,639,035
Operating costs and expenses (1,494,921) (1,482,650)
Depreciation and amortization expense (131,761) (184,252)
----------------- ----------------
Operating income (loss) (14,234) (27,868)
Interest expense and amortization
of debt discount and expense (103,808) (150,587)
Other income 67,762 16,967
----------------- ----------------
Net income (loss) $(50,280) $(161,488)
================= ================
Earnings (loss) per average common
share $(0.07) $(0.21)
Average common and common equivalent
shares outstanding 759,052 759,0521
================= ================
- --------
(1)Average common shares outstanding June 30, 1995, reflects 1 for 200
reverse split effectuated October 31, 1995.
Page 4 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
------------------------------------------------------
June 30, June 30,
1996 1995
-------------------- -----------------------
Net revenues $ 3,146,748 $ 3,164,354
Operating costs and expenses (2,979,193) (2,939,035)
Depreciation and amortization expense (275,272) (375,692)
----------------- -------------------
Operating income (loss) (107,716) (150,372)
Interest expense and amortization
of debt discount and expense (205,115) (300,919)
Other income 77,581 42,476
----------------- -------------------
Net income (loss) $(235,251) $(408,816)
================= ===================
Earnings (loss) per average common
share $(0.31) $(0.54)
Average common and common equivalent
shares outstanding 759,052 759,0522
================= ===================
- --------
(2)Average common shares outstanding June 30, 1995, reflects 1 for 200
reverse split effectuated October 31, 1995.
Page 5 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
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June 30, June 30,
1996 1995
---------------- ----------------------
Net cash flows from operating activities: $(11,394) $ 24,141
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Cash flows used in investing activities:
Proceeds from the sale of fixed assets 71,600 45,050
Acquisition of property,
plant and equipment (356,259) (231,227)
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Net cash flow provided
by investing activities (284,659) (186,177)
----------------------------- ----------
Cash flows provided by financing activities:
Net advances on receivables
financed 0 0
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Increase in notes payable 280,740 235,634
Reductions in notes payable (159,284) (107,164)
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Net cash flow used in financing activities 121,456 128,469
Net increase (decrease) in cash (174,597) (33,566)
Cash - beginning of period 284,825 40,453
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Cash - end of period $ 110,228 $ 6,886
========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 35,867 $ 43,331
Taxes paid $ 0 $ 0
Page 6 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
--------
The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. and subsidiaries
(the "Company"). Such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. The
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995 should be read in conjunction with this document.
2. LONG-TERM DEBT
--------------
On November 30 1995, the Company executed a Reorganization Agreement
with the holder of certain debt of the Company whereby the Company
converted a portion of the 13% convertible subordinated debentures and
the notes payable to related parties to common stock. In conjunction
with the conversion, accrued interest and certain debt were forgiven by
the debtholders, resulting in the recognition of an extraordinary gain
of $387,967, net of income taxes of $226,554. The Company is in default
of its 14% subordinated debenture and 13% convertible subordinated
debenture agreements due to its failure to make scheduled principal and
interest payments. Debenture holders representing $800,000 of the 14%
subordinated debentures outstanding at December 31, 1995 and 1994 have
notified the Company of default and requested immediate payment of the
entire outstanding balance. In accordance with the default provisions
in the 14% subordinated debenture and 13% subordinated debenture
agreements, the stated interest rate was increased to 2% per month
effective November 30, 1991 and June 30, 1992, respectively.
In addition, the Company is in violation of several other covenants
related to the 14% and 13% subordinated debenture agreements,
including, but not limited to, timely payment of taxes and compliance
with provisions and terms of all material agreements and commitments.
Although the 14% debenture holders and the remaining 13% debenture
holders have not notified the Company regarding acceleration of
payment, the debenture holders have the right to require immediate
payment. Accordingly, the entire balances of the debentures have been
classified as current liabilities.
Under the covenants of the debenture agreements, the Company is
prohibited from declaring or paying any dividends to stockholders as
long as the debentures are in default.
3. NOTES PAYABLE - RELATED PARTIES
-------------------------------
In October 1991, the Company entered into an agreement with a
partnership consisting of officers and spouses of officers of the
Company called "RABAD",
Page 7 of 13 Pages
whereby such partnership advanced funds to the Company for operations.
These advances are collateralized by certain accounts receivable of the
Company and bear interest at a rate of prime plus 2%. On December 20,
1995, RABAD accepted 148,565 shares of common stock of the Company in
full satisfaction of advances totaling $297,131. In addition, the
Company guaranteed that RABAD would be able to sell the common stock
received in the satisfaction for $2 per share within one year of the
date of the satisfaction. This agreement is collateralized by $100,000
of the Company's accounts receivable.
The Company had an outstanding balance of $334,237 in notes payable and
$8,976 in accrued interest at December 31, 1994 to the President of the
Company and his spouse. Interest expense recognized for 1995, 1994, and
1993 was $28,611, $31,491, and $11,600, respectively. On December 20,
1995, the president of the Company and his spouse accepted 200,000
shares of the Company's common stock in full satisfaction of the
outstanding balance of notes payable.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company experienced a net loss of $50,280 for the second quarter of
1996 as compared with a net loss of $161,488 for the same period of 1995. During
the first six months of 1996, the Company had a net loss of $235,251 as compared
with a net loss of $408,816 for the first six months of 1995. The improvements
in the net losses are related to several factors. First, there was an increase
in Completion (workover services) and Tools and Packers (sales and rental of
bridge plugs) margins for the periods stated above. Liquidation of surplus
equipment and a reduction in interest expense also contributed to this
improvement.
Revenues decreased by $26,587 to $1,612,448 for the second quarter of
1996 compared with $1,639,035 in the same period in 1995. Revenues for the first
six months of 1996 decreased $17,605 to $3,146,748 as compared to $3,164,354 for
the same period last year. In the Permian Basin and the Black Warrior Basin,
there was a substantial reduction in wireline services for the three month and
the six month periods as compared to the equivalent period last year. This
reduction can be attributed to a temporary decrease in the Company's cased hole
wireline services. The bulk of this reduction was offset by an increase in
directional drilling services. Revenues from the Tools and Packers division
increased slightly due to a general rise in activity by the division's
customers. Completion work revenues increased as a direct result of a P & A
contract from a major customer. Revenues by division are summarized below:
Page 8 of 13 Pages
Six Months Ended Three Months Ended
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June June June June
30, 1996 30, 1995 30, 1996 30, 1995
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Wireline services
(logging, directional
services, perforating) $ 2,137,106 $ 2,369,114 $ 1,074,658 $ 1,244,267
Completion (workover
services) $ 845,716 $ 686,621 $ 463,137 $ 340,815
Tools and Packers
(sales and rentals of
bridge plugs) $ 163,926 $ 108,619 $ 74,653 $ 53,953
------------- -------------- --------------- ------------
Total $ 3,146,748 $ 3,164,354 $ 1,612,448 $ 1,639,035
============= ============== =============== ============
============= ============== =============== ============
Costs and expenses increased $12,270 for the second quarter of 1996 and
$40,157 for the first six months of 1996 as compared with the same periods in
1995. This increase was due to increased costs for supplies and materials from
our vendors. Salaries increased $49,360 for the first six months of 1996 with
the total number of employees increasing to 96 at June 30, 1996 from 89 at June
30, 1995. This increase was the result of an effort by the Company to remain
competitive and retain its key employees as well as the increase in the
activities of the "Completion Workover" services.
Interest expense decreased by $46,779 for the second quarter of 1996
and $95,804 for the first six months of 1996 as compared with the same periods
in 1995. Three to five year notes were used to purchase new vehicles during the
last quarter of 1995 and the first six months of 1996. Net new borrowing for the
first six months of 1996 totaled $280,740. Interest on the debt ranged from
prime to 12.00%. The decrease in interest expense is directly related to the
conversion of portions of the 13% debenture holders to equity during the last
quarter of 1995.
The Company is continually reevaluating its strengths and weaknesses to
meet the demands of an evolving oil and gas industry. Efforts to redirect
personnel and resources to areas in which the Company has a competitive
advantage are ongoing. Two such areas are directional drilling services and
cased hole wireline services. In the Permian Basin, the Company is preceding
with its plan to modernize its wireline fleet. The Company is able to build
"in-house" technologically advanced wireline units rather than purchasing them
from an outside party, thus saving a great deal of funds. This equipment is
directed to areas of greatest demand.
The Company is also seeking financing for downhole tools to complement
the wireline units mentioned above. The tools will allow the Company to increase
its market share in the "Deep-Hole" sector. This sector of the market, where
well depths are below 10,000 feet, has fewer competitors and much lower customer
Page 9 of 13 Pages
discounts.
The Company, whose Common Stock is traded on the OTC Bulletin Board,
effected a reverse stock split on a 1-for-200 basis effective October 30, 1995.
Liquidity and Capital Resources
Negative cash flow provided by Company operations was $(11,394) for the
period ended June 30, 1996 as compared with a positive $24,141 for the period
ended June 30, 1995. This decrease is a result of purchasing supplies and tools
with cash rather than on account. The Company's net loss of $235,251 for the
first six months, after adjusting for depreciation and amortization of $275,272,
would increase operating cash flow by $40,021. Uses of the Company's cash went
to reduce current liabilities and to repay $159,284 net principal indebtedness.
The Company is in default in payment of principal and interest on
$900,000 in aggregate principal amount of its 14% Subordinated Debentures due
August 31, 1993. At June 30, 1996, the Company had failed to make principal
payments aggregating $900,000 and interest payments aggregating $896,500
including interest at the penalty rate, as discussed below. The holders of
$800,000 of such debentures have given notice of the default and acceleration
thereunder. Under the terms of the debentures, the entire principal balance plus
accrued but unpaid interest is due by virtue of the notice of default and
acceleration. In addition, the stated interest rate applicable to the debentures
was increased to 2% per month as of November 30, 1991.
The Company is also in default of payment of interest under the
Company's $443,750 in outstanding aggregate principal amount of 13% Convertible
Subordinated Debentures due August 31, 1995. At June 30, 1996, interest
arrearage amounted to $411,517. The Company began accruing an additional 2% per
month for penalties in September of 1995. The total amount accrued as a penalty,
is $88,750.
The Company is in the process of raising additional funds to remove the
remaining debenture holders. Even if the remaining debenture obligations were
satisfied, the Company will still require improved cash flow from operations and
additional working capital to meet its obligations. Therefore, the Company is
seeking commitments from investment bankers to assist the Company in raising
such capital in the financial markets.
Page 10 of 13 Pages
PART II -- OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
The Company is in default in payment of principal and interest on
$900,000 in aggregate principal amount of its 14% Subordinated Debentures due
August 31, 1993. At June 30, 1996, the Company had failed to make principal
payments aggregating $900,000 and interest payments aggregating $896,500
including interest at the penalty rate, as discussed below. The holders of
$800,000 of such debentures have given notice of the default and acceleration
thereunder. Under the terms of the debentures, the entire principal balance plus
accrued but unpaid interest is due by virtue of the notice of default and
acceleration. In addition, the stated interest rate applicable to the debentures
was increased to 2% per month as of November 30, 1991.
The Company is also in default of payment of interest under the
Company's $443,750 in outstanding aggregate principal amount of 13% Convertible
Subordinated Debentures due August 31, 1995. At June 30, 1996, interest
arrearage amounted to $411,517. The Company began accruing an additional 2% per
month for penalties in September of 1995. The total amount accrued as a penalty,
is $88,750.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
for which this Quarterly Report on Form 10-QSB is filed.
No other Items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-QSB.
Page 11 of 13 Pages
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
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(Registrant)
Date: August 12 , 1996 WILLIAM L. JENKINS
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William L. Jenkins
President and
Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
Page 12 of 13 Pages