<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended June 30, 1997
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________ to ____________
Commission file number 33-22097-NY
BOOTS & COOTS
INTERNATIONAL WELL CONTROL, INC.
(Name of Small Business Issuer in Its Charter)
DELAWARE 11-2908692
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5151 SAN FELIPE, SUITE 450 77056
HOUSTON, TEXAS (Zip Code)
(Address of Principal Executive Offices)
713-621-7911
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Securities registered under Section 12(g) of the Exchange Act: None
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 [_].
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].
State issuer's revenues for its most recent fiscal year: $ 2,564,087
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.
The aggregate market value of such stock on December 3, 1997, based on
the average of the bid and asked prices on that date was $118,817,044.
The number of shares of the issuer's common stock outstanding on December
3, 1997 was 29,704,261.
<PAGE>
FORM 10-KSB/A
ANNUAL REPORT
FOR THE YEAR ENDED JUNE 30, 1997
TABLE OF CONTENTS
________________________________________________________________________________
Page
----
PART I...................................................................... 1
Item 1. Description of Business...................................... 1
Item 2. Description of Property...................................... 5
Item 3. Legal Proceedings............................................ 6
Item 4. Submission of Matters to a Vote of Security-Holders.......... 6
PART II...................................................................... 6
Item 5. Market for Common Equity and Related Stockholder Matters..... 6
Item 6. Management's Discussion and Analysis or Plan of Operation.... 6
Item 7. Financial Statements......................................... 9
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.......................... 9
PART III...................................................................... 9
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act... 9
Item 10. Executive Compensation.......................................12
Item 11. Security Ownership of Certain Beneficial Owners and
Management...................................................13
Item 12. Certain Relationships and Related Transactions...............13
Item 13. Exhibits List and Reports on Form 8-K........................14
SIGNATURES....................................................................15
FINANCIAL STATEMENTS..........................................................16
Independent Auditor's Report...........................................16
Consolidated Balance Sheets............................................17
Consolidated Statements of Operations..................................18
Consolidated Statements of Shareholders' Equity........................19
Consolidated Statements of Cash Flows..................................20
Notes to the Consolidated Financial Statements.........................21
<PAGE>
Purpose of this Amendment
On September 29, 1997, the registrant filed its Form 10-KSB for the fiscal
year ended June 30, 1997, a period during which the registrant had no material
business or assets. Subsequent to its year end, the registrant acquired IWC
Services, Inc. ("IWC Services" or the "Company"). The registrant reported the
acquisition of IWC Services on a Form 8-K filed August 13, 1997. Nevertheless,
the registrant believes that although it has previously reported the acquisition
of IWC Services, the significance of the acquisition to the registrant and the
interest of the public in such acquisition deserves greater disclosure than that
required by Form 8-K. Accordingly, in order to provide such disclosure, the
registrant has commissioned the independent audit of the consolidated financial
statements of IWC Services and its subsidiaries as of June 30, 1997, and has
elected to amend its previously filed Form 10-KSB. Such consolidated financial
statements and management's discussion and analysis herein do not reflect the
consolidated financial statements or operations of the registrant as of June 30,
1997, which were immaterial for such period. Such financial statements and
discussion are contained in the Form 10-KSB filed September 29, 1997.
For ease of reference for the reader, the registrant has elected to restate
its responses to all of the Items to its previously filed Form 10-KSB, as well
as update such information to a more current date, where appropriate.
Subsequent to the registrant's acquisition of IWC Services, IWC Services
acquired all of the operating assets of Boots & Coots, L.P., which was reported
by the registrant in Form 8-K filed August 13, 1997. There have been additional
significant recent events that affect the financial position of the registrant.
In order to give the reader a better understanding of the financial position of
the registrant after giving effect to such events, Note H--Events Subsequent to
June 30, 1997 in Notes to Consolidated Financial Statements of IWC Services
attached hereto contains an unaudited condensed consolidated balance sheet as of
September 30, 1997, and a condensed consolidated statement of operations for the
three months ended September 30, 1997.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Havenwood Ventures, Inc. ("Havenwood"), incorporated in Delaware in April
1988, was originally formed to serve as a blind pool investment fund, and in
July 1988 raised $499,500 in an initial public offering of its common stock.
After completing its initial public offering, Havenwood elected to use its
available resources to develop a theme attraction in Sedona, Arizona. During the
fiscal year ended June 30, 1992, Havenwood elected to discontinue development of
the attraction as a result of its inability to attract financing for further
development of the project. Havenwood thereafter divested itself of the project
and was left with no material assets or liabilities and no ongoing business
activities.
Havenwood remained inactive until it acquired IWC Services, Inc., a Texas
corporation, on July 29, 1997. Havenwood acquired IWC Services in a transaction
structured as a "reverse triangular merger" (the "Merger") between Havenwood
Acquisition Corporation, a Texas corporation ("Newco"), which was a wholly owned
subsidiary of Havenwood formed for the sole purpose of consummating the Merger,
and IWC Services. In furtherance of the Merger, Havenwood effected a "reverse
split" of its common stock in the ratio of one new share for every 135 shares
held by a stockholder of Havenwood; provided, however, that no single
stockholder's ownership was reduced to fewer than 100 shares. Immediately prior
to the Merger, the principal stockholders of Havenwood surrendered a total of
740,740 shares of common stock to Havenwood for cancellation. As a result of the
Merger, Havenwood issued to the former stockholders, warrantholders and
optionholders of IWC Services (i) 15,502,000 shares of common stock of Havenwood
(approximately 92% of the then issued and outstanding common stock); (ii)
warrants to purchase up to $3,000,000 of Havenwood's common stock; and (iii)
options to purchase 1,955,000 shares of Havenwood's Common Stock at a price of
$0.43 per share and (iv) IWC Services became a wholly-owned subsidiary of
Havenwood. Immediately after the Merger Havenwood changed its name to Boots &
Coots International Well Control, Inc. ("Boots & Coots/IWC" or "B&C/IWC").
On July 31, 1997, IWC Services acquired all the operating assets of Boots &
Coots, L.P., a Colorado limited partnership, and all the issued and outstanding
stock of Boots & Coots de Venezuela, S.A., and Boots & Coots Overseas, Ltd. For
more information regarding the acquisition of IWC Services by B&C/IWC and IWC
Services' acquisition of the assets of Boots & Coots, L.P., see the Form 8-K of
the Company filed with the Securities and Exchange Commission (the "SEC") on
August 13, 1997.
On September 18, 1997, Boots & Coots/IWC closed the offering through
private placement of the sale of 7,475,000 shares of common stock at $1 per
share for a total of $7,475,000. Proceeds to the Company after placement agent's
fees and expenses of the offering were approximately $6,323,000 and were used to
pay the Boots & Coots L.P. acquisition notes and for working capital.
On September 25, 1997, IWC Services formed a wholly-owned subsidiary
company, ABASCO, Inc. to purchase the assets of ITS Environmental, a
manufacturer of oil spill containment booms, mops and other oilfield emergency
equipment. The Company paid $1,590,000 cash and issued 300,000 shares of common
stock to acquire the manufacturing equipment, inventory and customer lists.
As of the date hereof, B&C/IWC, through its operating subsidiary, IWC
Services is a global-response well control service company that specializes in
oil field emergencies, including blowouts and well fires. In addition, IWC
Services provides snubbing and other non-critical well control services. IWC
Services was organized in June 1995 by six former key employees of the Red Adair
Company who resigned their positions after Mr. Adair retired and sold the
1
<PAGE>
company. IWC Services conducts its current operations through seven subsidiaries
and one strategic alliance. IWC Services' wholly-owned subsidiaries are Hell
Fighters, Inc., a Texas Corporation, Boots & Coots Overseas, Ltd., a British
Virgin Islands Corporation, International Well Control Services, Ltd., a Cayman
Islands Corporation, Boots & Coots de Venezuela, S.A., a Venezuela Corporation,
IWC Engineering, Inc. a Texas Corporation, and ABASCO, Inc., a Texas
Corporation. IWC de Venezuela, C.A., a Venezuelan corporation is a majority-
owned (90%) subsidiary of International Well Control Services, Ltd.
For convenience of reference, IWC Services, the surviving operating entity
of the Merger, and its subsidiaries are collectively referred to herein as the
"Company".
SERVICES PROVIDED BY IWC SERVICES
The Company is a global-response oil field services company that
specializes in responding to and controlling oil field emergencies, including
blowouts and well fires. In addition, the Company provides snubbing and other
non-critical services for the oil service sector. The Company's staff of well
control specialists has a combined total of over 220 years of experience in oil
well firefighting and an excellent safety record. Throughout their careers,
these professionals have worked in virtually every major oil producing region in
the world and controlled more than 4,000 oil well fires, including the 1963
Devil's Cigarette Lighter fire, the 1988 Piper-Alpha Platform disaster and the
1991 Burgan Field fires that were started by Iraqi troops during their retreat
from Kuwait during the Gulf War. The Company's principal services lines include:
Well Control. This service line is divided into two distinct service
levels: (1) "Critical Event" response is ordinarily reserved for well control
projects where hydrocarbons are escaping from a well bore, regardless of whether
a fire has occurred; (2) "Non-critical Event" response, on the other hand, is
intended for the more common operating problems that do not involve escaping
hydrocarbons.
Critical Events. Critical Events frequently result in explosive fires, the
loss of life, the destruction of drilling and production facilities,
substantial environmental damage and the loss of hundreds of thousands of
dollars per day in production revenue. Since Critical Events ordinarily
arise from equipment failures or human error, it is impossible to
accurately predict the timing or scope of the Company's Critical Event
work. Notwithstanding the foregoing, a Critical Event of catastrophic
proportions could result in revenues to the Company in excess of $5 million
in the year of the incident.
Non-critical Events. Non-critical Events frequently occur in connection
with the drilling of new wells into high pressure reservoirs. In most Non-
critical Events, the blowout preventers and other safety systems on the
drilling rig function according to design and the Company is then called
upon to supervise and assist in the well control effort so that drilling
operations can resume as promptly as safety permits. While Non-critical
Events do not ordinarily have the revenue impact of a Critical Event, they
are much more common and predictable.
Equipment Rentals. This service line includes the rental of specialty well
control and firefighting equipment by the Company primarily for use in
conjunction with Critical Events. Such equipment includes, but is not limited
to, firefighting pumps, pipe-racks, Athey Wagons, pipe cutters, crimping tools,
and deluge safety systems. The Company charges this equipment out on a per diem
basis. Past experience indicates that rentals can be expected to average
approximately 40% of revenues associated with a Critical Event.
2
<PAGE>
Equipment Sales and Service. This service line involves the sale of
complete firefighting equipment packages, together with maintenance, monitoring,
updating of equipment and ongoing consulting services. A typical example of this
service line is the industry supported Fire Station (as defined below) that the
Company recently established in the North Slope of Alaska. In connection with
the establishment of this Fire Station, the original sale included approximately
$485,000 in equipment. In addition, the Company has entered into a long-term
agreement to provide ongoing consulting services including education,
contingency planning, safety inspections and emergency response drills.
Consulting; Drilling Engineering. The Company has the ability to provide
through its highly-specialized in-house engineering staff, supplemented if
necessary by outside engineering consultants and the Halliburton Energy Services
division (see the "Halliburton Alliance" below), engineering services for such
areas as: (1) planning and design of relief well drilling (trajectory planning,
directional control and equipment specifications, and on-site supervision of the
drilling operations), (2) planning and design of production facilities which are
susceptible to well capping or other control procedures; and, (3) mechanical and
computer aided designs for well control equipment.
Consulting; Inspections. A cornerstone of the Company's strategy of
preventive well control services involves on-site services for drilling and
workover rigs, drilling and production platforms, and field production
facilities. Since these inspection services will be offered as a standard option
in Halliburton's field service programs, the Company anticipates that inspection
services will become an important source of revenue.
Consulting; Training. The Company provides specialized training in well
control procedures for drilling, exploration and production personnel. To date
such training programs have been provided for both U.S. and international
operators. Since the Company's training services will be offered in conjunction
with ongoing educational programs sponsored by Halliburton, the Company believes
the training segment of its business offers considerable potential for growth.
Strategic Event Planning (S.T.E.P.). A key element of the services offered
by the Halliburton Alliance is a strategic and tactical planning process
addressing action steps, resources and equipment necessary for an operator to
control a blowout. This planning process incorporates organizational structures,
action plans, specifications, people and equipment mobilization plans with
engineering details for well firefighting, capping, relief well and kill
operations. It also addresses optimal recovery of well production status,
insurance recovery, public information and relations and safety/environmental
issues. While the S.T.E.P. program includes a standardized package of services,
it is easily modified to suit the particular needs of a specific client.
Regional Fire Stations. The Company, in conjunction with Halliburton, plans
to pre-position in selected geographic locations throughout the world complete
complements of specialty firefighting equipment and ancillary tools and
equipment ("Fire Stations"). The equipment for these proposed Fire Stations will
either be purchased by the Company for its own account, using cash flow, if any,
from operations, or purchased by a consortium of local producers who will then
contract with the Company for maintenance and consulting services. The Company
plans to deploy at least one Fire Station per year over the next five years. It
is believed these Fire Stations, once established, will place the Halliburton
Alliance in an unique competitive position within the industry and allow the
alliance to gain market share by reducing the mobilization time and costs
traditionally involved in controlling major blowout events.
Manufacturing of emergency containment equipment. Through IWC Services'
newly acquired subsidiary, ABASCO, Inc., the Company manufactures a full line of
containment booms, mops and oil skimming equipment for sale around the world.
3
<PAGE>
HALLIBURTON ALLIANCE
In response to ongoing changes in the emergency response segment of the oil
field service industry, the Company entered into a global strategic alliance
with Halliburton in October 1995. Halliburton is widely recognized as an
industry leader in the pumping, cementing, snubbing, production enhancement,
coiled tubing and related services segment of the oil field services industry.
This alliance, "WELLCALL"(SM), draws on the expertise and abilities of both
companies and offers a total well control solution for oil and gas producers
worldwide. WELLCALL(SM) provides a complete range of well control services
including blowout control, snubbing services, pumping services, debris removal,
firefighting, relief well planning, pre-event troubleshooting, contingency
planning, and other specialized services. The specific benefits that
WELLCALL(SM) provides to an operator include:
. Quick response with a global logistics system supported by an
international communications network that operates around the clock,
seven days a week.
. A full-time team of experienced well control specialists that are
dedicated to safety.
. Specialized equipment design, rental, and sales.
. Contingency planning consultation where WELLCALL(SM) specialists meet
with customers, identify potential problems, and help develop a
comprehensive contingency plan.
. A single-point contact to activate a coordinated total response to
well control needs.
Operators contracting with WELLCALL(SM) receive a Strategic Event Plan, or
S.T.E.P., a comprehensive contingency plan for well control that is region-
specific, reservoir-specific, site-specific and well-specific. The S.T.E.P. plan
provides the operator with a written, comprehensive and coordinated action plan
that incorporates historical data, pre-planned call outs of Company and
Halliburton personnel, pre-planned call outs of necessary equipment and
logistical support to minimize response time and coordinate the entire well
control effort. Thereafter, in the event of a blowout, WELLCALL(SM) provides the
worldwide engineering and well control equipment capabilities of Halliburton and
the firefighting expertise of the Company through an integrated contract with
the operator.
As a result of the Halliburton Alliance, the Company is directly involved
in Halliburton's well control projects that require firefighting expertise,
Halliburton is a primary service vendor to the Company and the Company has
exclusive rights to use to certain firefighting technologies developed by
Halliburton. It is presently expected that most of the Company's Fire Stations
will be established at existing Halliburton facilities and that maintenance of
the Fire Station equipment will be performed by Halliburton employees. The
Halliburton Alliance also gives the Company access to Halliburton's global
communications and currency management systems, capabilities that could prove
invaluable in connection with the Company's international operations.
Consistent with the Halliburton Alliance, the Company's focus has evolved
to meet its clients' needs in a global theater of operations. With the increased
emphasis by operators on operating efficiencies and outsourcing many engineering
services, the Company has developed a proactive menu of services to meet today's
needs. These services emphasize pre-event planning and training to minimize the
likelihood of a blowout and minimize damages in the event of an actual blowout.
The Company provides comprehensive advance training, readiness, preparation,
inspections and mobilization drills which allow client companies
4
<PAGE>
to pursue every possible preventive measure and to react in the most cohesive
manner possible when an event occurs. The Halliburton Alliance stresses the
importance of safety, environmental protection and cost control, along with
asset protection and liability minimization.
BUSINESS STRATEGY
Over the next few years, the Company intends to expand its operations and
build upon its demonstrated strengths while increasing revenues from consulting
services and Non-critical Event activities. Recognizing that the well control
services business is a finite market whose upside potential is dependent upon
the occurrence of blowouts which cannot be reasonably predicted, the Company's
business strategy is to market its pre-event services on a global basis to
establish a stable revenue base. IWC Services intends to accomplish its
objectives by promoting the Halliburton Alliance, integrating the business of
Boots & Coots L.P. with the business of IWC Services, increasing the
geographical scope of its education programs, capitalizing on the industry
reputation of IWC Services' key firefighting personnel and establishing
additional Company-owned Fire Stations at locations outside the United States.
Like the IWC Services owned Fire Stations in Houston, Texas, and Duncan,
Oklahoma, the industry supported Fire Stations on the North Slope of Alaska and
the Fire Station in Anaco, Venezuela, the proposed Company-owned Fire Stations
would include the equipment required to respond to a blowout or fire. Using its
education programs, its Fire Stations and the Halliburton Alliance as a
foundation, IWC Services then plans to offer a broader range of services to oil
and gas producers worldwide, thereby increasing both its market share and the
absolute size of the market.
Due to the fragmented nature of the oil field services industry, IWC
Services believes a number of attractive acquisition opportunities exist in the
pressure control, emergency response and environmental services segments of the
business. The oil field services business in general, and the emergency response
and environmental remediation segments in particular, are characterized by a
small number of dominant global competitors and a significant number of locally
oriented businesses, many of which tend to be viable acquisition targets. IWC
Services believes that the owners of locally oriented companies may be willing
to consider becoming part of a larger organization.
IWC Services hopes to expand its existing well control operations and enter
the training, specialty tools and environmental services businesses through
internal growth, acquisitions, joint-ventures and strategic alliances.
EMPLOYEES
As of the date hereof, the Company has 60 full-time and contractual full-
time employees, including two executive officers, seventeen well control and
firefighting specialists, seventeen manufacturing employees, nine sales and
marketing representatives and fifteen administrative staff members. In addition,
the Company has several part-time employees and consultants. The Company is not
subject to any collective bargaining agreements and it considers its relations
with its employees to be good.
ITEM 2. DESCRIPTION OF PROPERTY
IWC Services owns a facility in northwest Houston, Texas, that includes
approximately two acres of land, a 4,000 square foot office building and a
12,000 square foot manufacturing and warehouse building. The Company leases a
7,000 square foot office in the Halliburton Center, Houston, Texas. This space
is rented from an unaffiliated landlord through May 2002 for an average monthly
rental of $7,000. In
5
<PAGE>
addition, the Company leases an 11,000 square foot Fire Station facility in
Houston, Texas, which space is rented through January 2000 for a monthly rental
of $4,476.
ITEM 3. LEGAL PROCEEDINGS
B&C/IWC is not a party to any pending legal proceeding, nor is its
property the subject of a pending legal proceeding, which is not routine
litigation incidental to its business or in which the amount involved, exclusive
of interest and costs, exceeds ten percent of the current assets on a
consolidated basis.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of the security holders of B&C/IWC
(formerly Havenwood) during the fourth quarter of the fiscal year covered by
this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
B&C/IWC's Common Stock is traded in the over-the-counter market
OTCBB:BCWC. For the year ended June 30, 1997, B&C/IWC (formerly Havenwood) had
no business or assets and bid prices for its stock were not published.
Subsequent to June 30, 1997, and after the acquisition of IWC Services, Inc.,
limited trading in B&C/IWC's stock occurred. Trading has occurred only for one
complete calendar quarter, which information is reflected below.
Quarter Ended September 30, 1997
--------------------------------
High Bid Low Bid
-------- -------
$10.80 $1.35
The bid information has been provided by National Quotation Bureau, Inc.,
and reflects inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions. As of December 1, 1997
B&C/IWC 's Common Stock was held by approximately 228 holders of record. B&C/IWC
estimates that it has a significantly larger number of shareholders because a
substantial number of B&C/IWC's shares are held of record by broker-dealers for
their customers in street name. B&C/IWC has not paid any cash dividends on its
Common Stock to date. There are no restrictions which limit B&C/IWC's ability to
pay cash dividends on its Common Stock; however, B&C/IWC's current policy is to
retain earnings to provide funds for the operation and expansion of its
business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
Consolidated Financial Statements of IWC Services and the notes thereto included
elsewhere herein. The following discussion contains certain forward-looking
statements. These forward-looking statements are subject to certain risks and
uncertainties which may cause actual results to differ significantly from such
forward-looking statements. The following discussion does not include results of
operations of B&C/IWC (formerly Havenwood) which were immaterial for such
periods or the results of operations of Boots & Coots L.P. Accordingly, the
historical results described below are not necessarily indicative of future
levels of revenues and expenses. See Note H - Events Subsequent to June 30, 1997
in Notes to Consolidated Financial Statements.
6
<PAGE>
GENERAL
IWC Services commenced operations on May 4, 1995 through its wholly-owned
subsidiary Hell Fighters, Inc. Accordingly, results of operations for the period
from May 4, 1995 through June 30, 1995 are not comparable to results of
operations for the fiscal years ended June 30, 1996 and 1997. A significant
portion of the Company's revenues are derived from blowout control of Critical
and Non-critical Events. The timing and magnitude of such events result from
acts of nature, equipment failures or human error and therefore are not
specifically predictable. Accordingly, the IWC Services revenues from such
services can vary significantly from period to period.
RESULTS OF OPERATIONS
Comparison of Year Ended June 30, 1996 with Year Ended June 30, 1997.
Revenues were $1,662,121 for the year ended June 30, 1996 ("fiscal 1996")
compared to $2,564,087 for the year ended June 30, 1997 ("fiscal 1997"). This
increase was the result of increased market share from diversification of IWC
Services' client base.
Operating expenses were $1,320,702 for fiscal 1996, compared to $1,459,640
for fiscal 1997. The increase was the result of expanded operations in the
fourth quarter of fiscal 1997 due to expanded business activity.
7
<PAGE>
General and administrative expenses were $772,626 for fiscal 1996, compared
to $1,061,259 for fiscal 1997. The increase was primarily the result of
investments in expanded corporate infrastructure and expanded marketing and
advertising to increase market share and diversify the Company's client base.
Depreciation and amortization expense increased from $49,893 for fiscal
1996, compared to $111,469 for fiscal 1997, primarily as the result of a full
year of depreciation on equipment additions made in fiscal 1996.
Other income (expenses) was $4,216 for fiscal 1996, compared to a net
expense of ($62,774) for fiscal 1997, resulting primarily from higher interest
expense on financed equipment purchases made during the 1996 period and interest
expense on the 12% Senior Subordinated Notes sold through June 30, 1997.
Income taxes for fiscal 1996, includes a credit for the reversal of a
deferred federal income tax provision of $139,000 for the 1995 start-up period.
Substantially all of the balance of income taxes for both fiscal 1996 and fiscal
1997 represents foreign taxes withheld on various international projects.
IWC Services sustained a net loss of $339,066 for fiscal 1996, compared to
a net loss of $155,624 for the comparable period in 1997 as a result of the
revenue and expense variations discussed above.
Liquidity and Capital Resources. IWC Services' capital resources consist
of capital raised directly by IWC Services ("Direct Capital") and capital raised
through strategic alliances, joint ventures and similar arrangements ("Indirect
Capital"). In general, the amount and availability of Direct Capital and
Indirect Capital will affect the scope of IWC Services' operations, its
profitability and the speed of its growth. While IWC Services has historically
relied on Direct Capital for substantially all of its business activities, it is
anticipated that a significant portion of the capital required for the
establishment by IWC Services of additional Fire Stations may be financed with
Indirect Capital.
IWC Services had working capital of $221,619 and $1,235,066 at June 30,
1996 and 1997, respectively. IWC Services received during the period from May 4,
1995 through June 30, 1996 a total of $691,835 in cash from the issuance of
shares of Common Stock to founding shareholders. These funds were used for
working capital and payment of vendors for Emergency Resources International,
Inc., as discussed in Note A to the accompanying consolidated financial
statements.
During the year ended June 30, 1997, IWC Services sold, in a private
placement, $1,555,000 in principal amount of 12% Senior Subordinated Notes (the
"Notes") with detachable warrants with an additional $1,445,000 sold subsequent
to June 30, 1997. The net proceeds from such sales were used to fund the cash
requirements at closing of the acquisition of the operating assets of Boots &
Coots L.P. ($1,125,000) and to add to working capital. IWC Services terminated
the offering of the Notes in July 1997 and made an offer to the Noteholders to
exchange, effective September 12, 1997, their warrants and notes into B&C/IWC
common stock at $0.75 per share. Notes and warrants with face amount of
$2,900,000 were exchanged for common stock.
On September 18, 1997, B&C/IWC closed the offering through private
placement of the sale of 7,475,000 shares of common stock at $1 per share for a
total of $7,475,000. Proceeds to B&C/IWC after placement agent's fees and
expenses of the offering were approximately $6,323,000 and were used to pay the
Notes issued in connection with the acquisition of the operating assets of Boots
& Coots L.P. and for working capital.
B&C/IWC believes it will have sufficient cash, together with cash resources
available from working capital and cash flow from operations, to carry out its
business plan over the upcoming twelve month period, including the beginning of
a program for the establishment of additional regional Fire Stations and
implementation of a multi-year marketing program for the Halliburton Alliance.
8
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements of IWC Services appear at pages 16
through 30 hereof and are incorporated herein by reference. The Audited
Financial Statements of B&C/IWC were filed with Form 10-KSB filed September 29,
1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
B&C/IWC has not had any disagreements with its independent accountants and
auditors, however, in connection with the acquisition of IWC Services, B&C/IWC
(formerly Havenwood) changed accounting firms, as disclosed in the Form 8-K
filed with the SEC on August 13, 1997.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
In connection with the acquisition by B&C/IWC of IWC Services, the officers
and directors of B&C/IWC resigned and were replaced by the officers and
directors of IWC Services. This report sets forth information regarding the
officers and directors of B&C/IWC as of September 26, 1997.
The following table lists the name and age of each director and executive
officer of B&C/IWC, as well as those persons expected to make a significant
contribution to B&C/IWC.
Name Age Position
---- --- --------
Larry H. Ramming 50 Chief Executive Officer, Chairman
Brian Krause 41 President, Director
Thomas L. Easley 52 Chief Financial Officer
Raymond Henry 53 Director of Well Control Operations
K. Kirk Krist 38 Director
Jerry Winchester 38 Director Nominee
Doug Johnson 45 Director Nominee
Other key officers, technical and operating personnel of B&C/IWC and its
principal subsidiaries and their ages are as follows:
Name Age Position
---- --- --------
Richard Hatteberg 58 Senior Vice President, Well Control
Danny Clayton 49 Senior Vice President, President of IWC de
Venezuela
Mike Foreman 35 Senior Well Control Specialist
Juan Moran 38 Senior Well Control Specialist
Rolando A. Gomez 41 Manager, Engineering and Training
James Tuppen 41 Senior Vice President, Well Control
W. D. Cochran 63 Service Manager, Industrial and Marine
Division
Larry Flak 41 Vice President, Engineering Services
9
<PAGE>
Larry H. Ramming has served as the Chairman of the Board and Chief
Executive Officer of IWC Services since May 1995 and as the Chairman of the
Board and Chief Executive Officer of the Company since the acquisition of IWC
Services by the Company on July 29, 1997. In addition to his positions with the
Company, Mr. Ramming has been actively involved in mortgage banking and the
packaging and resale of mortgage notes, consumer loans and other debt
instruments for over 15 years. In addition to his involvement in financial
instrument trading, Mr. Ramming is an active venture capital investor and
entrepreneur with substantial holdings in a number of public and private
corporations.
Brian Krause has served as the President and as a Director of IWC Services
since May 1995 and as the President and as a Director of the Company since the
acquisition of IWC Services by the Company on July 29, 1997. Mr. Krause brings
over 19 years of well control and firefighting experience to the Company. Before
joining the group that founded IWC Services, Mr. Krause was employed for 18
years by the Red Adair Company, Houston, Texas. Mr. Krause joined the Red Adair
Company as a Well Control Specialist in August 1978, was promoted to Vice
President in June 1989 and was again promoted to Vice President & Senior Well
Control Specialist in February 1994. During his tenure with the Red Adair
Company, Mr. Krause participated in hundreds of well control events worldwide.
Mr. Krause, along with Messrs. Henry, Hatteberg and Clayton, resigned from the
Red Adair Company in August 1994 and began the independent business activities
that led to the formation of IWC Services in May 1995.
Thomas L. Easley has served as IWC Services' Chief Financial Officer since
September 1996 and as the Chief Financial Officer of the Company since the
acquisition of IWC Services by the Company on July 29, 1997. From May 1995
through July 1996, Mr. Easley served as Vice President and Chief Financial
Officer of DI Industries, Inc. a publicly-held oil and gas drilling contractor
with operations in the U.S., Mexico, Central America and South America.
Previously, from June 1992 through May 1995, he served as Vice President-Finance
of Huthnance International, Inc., a closely-held offshore oil and gas drilling
contractor. From April 1984 through June 1992, Mr. Easley was Vice President and
Chief Financial Officer for the Granada group of companies. Mr. Easley is a
graduate of Tarleton State University (BS 1967) and Texas A&M University (MBA
1968). Mr. Easley is also a Certified Public Accountant.
Raymond Henry has served as IWC Services' Director of Well Control
Operations since May 1995 and as the Director of Well Control Operations of the
Company since the acquisition of IWC Services by the Company on July 29, 1997.
Mr. Henry brings over 34 years of well control and firefighting experience to
the Company. Before joining the group that founded IWC Services, Mr. Henry was
employed for 32 years by the Red Adair Company, Houston, Texas. Mr. Henry joined
the Red Adair Company as a Well Control Specialist in June 1962 and was promoted
to Senior Vice President in June 1979. During his tenure with the Red Adair
Company, Mr. Henry participated in hundreds of well control events worldwide.
Mr. Henry, along with Messrs. Krause, Hatteberg and Clayton, resigned from the
Red Adair Company in August 1994 and began the independent business activities
that led to the formation of IWC Services in May 1995.
K. Kirk Krist has served as a member of IWC Services' Board of Directors
since May 1995 and of the Company's Board of Directors since the acquisition of
IWC Services by the Company on July 29, 1997. Mr. Krist has been a self employed
oil and gas investor and venture capitalist since 1982. Mr. Krist is a graduate
of the University of Texas (BBA 1982).
Jerry Winchester has been nominated by the Board to serve as a Class II
Director for a two-year term that will expire on the date of the 1999 annual
meeting of stockholders. He has not previously held a position or office with
the Company. Mr. Winchester presently serves as product manager for Well
10
<PAGE>
Control, Coiled Tubing and Special Services of Halliburton Energy Services, a
position he has held since 1993. Before assuming this position, Mr. Winchester
was employed by Halliburton Energy Services for 10 years in other positions of
increasing responsibility. Mr. Winchester is a graduate of Oklahoma State
University.
Doug Johnson has been nominated by the Board to serve as a Class II
Director for a two-year term that will expire on the date of the 1999 annual
meeting of stockholders. He has not previously held a position or office with
the Company. Mr. Johnson presently serves as president of Johnson Broadcasting,
Inc., a privately-held company that owns KNWS-TV51 in Houston, Texas and KLDT-
TV55 in Dallas, Texas. Previously, Mr. Johnson served as Vice President of DJ
Broadcasting, Inc. a family-owned corporation that operated WXON-TV20 in
Detroit, Michigan. Mr. Johnson attended the University of Michigan.
Richard Hatteberg has served as a Senior Vice President of IWC Services
since May 1995 and as a Senior Vice President of the Company since the
acquisition of IWC Services by the Company on July 29, 1997. Mr. Hatteberg
brings over 31 years of well control and firefighting experience to the Company.
Before joining the group that founded the Company, Mr. Hatteberg was employed
for 29 years by the Red Adair Company, Houston, Texas. Mr. Hatteberg joined the
Red Adair Company as a Senior Well Control Specialist in June 1965 and was
promoted to Senior Vice President & Senior Well Control Specialist in February
1994. During his tenure with the Red Adair Company, Mr. Hatteberg participated
in hundreds of well control events worldwide. Mr. Hatteberg, along with Messrs.
Krause, Henry and Clayton, resigned from the Red Adair Company in August 1994
and began the independent business activities that led to the formation of IWC
Services in May 1995.
Danny Clayton has served as a Senior Vice President of IWC Services since
May 1995 and as a Senior Vice President of the Company since the acquisition of
IWC Services by the Company on July 29, 1997 and as President of IWC de
Venezuela since January 1996. Mr. Clayton brings over 18 years of well control
and firefighting experience to IWC Services. Before joining the group that
founded the Company, Mr. Clayton was employed for 18 years by the Red Adair
Company, Houston, Texas. Mr. Clayton joined the Red Adair Company as a Well
Control Specialist in June 1979, was promoted to Vice President in January 1989
and was again promoted to Vice President & Senior Well Control Specialist in
February 1994. During his tenure with the Red Adair Company, Mr. Clayton
participated in hundreds of well control events worldwide. Mr. Clayton, along
with Messrs. Henry, Krause and Hatteberg, resigned from the Red Adair Company in
August 1994 and began the independent business activities that led to the
formation of IWC Services in May 1995.
Mike Foreman has served as a Senior Well Control Specialist for IWC
Services since May 1995 and as a Senior Well Control Specialist of the Company
since the acquisition of IWC Services by the Company on July 29, 1997. Mr.
Foreman brings over 11 years of well control and firefighting experience to IWC
Services. Before joining the Company, Mr. Foreman was employed for 9 years by
the Red Adair Company, Houston, Texas, as a Well Control Specialist. During his
tenure with the Red Adair Company, Mr. Foreman participated in a large number of
well control events worldwide, including offshore blowouts in Nigeria, and
Venezuela, onshore blowouts in North and South America, and the Piper Alpha
platform disaster. Mr. Foreman resigned from the Red Adair Company in August
1994 in order to work with Messrs. Henry, Krause, Hatteberg and Clayton in their
new venture.
Juan Moran has served as a Senior Well Control Specialist for IWC Services
since May 1995 and as a Senior Well Control Specialist of the Company since the
acquisition of IWC Services by the Company
11
<PAGE>
on July 29, 1997. Mr. Moran brings over 8 years of well control and firefighting
experience to the Company. Before joining IWC Services, Mr. Moran was employed
for 6 years by the Red Adair Company, Houston, Texas, as a Well Control
Specialist. During his tenure with the Red Adair Company, Mr. Moran participated
in a large number of well control events worldwide, including offshore blowouts
in Nigeria, and Venezuela, onshore blowouts in North and South America, and the
Piper Alpha platform disaster. Mr. Moran resigned from the Red Adair Company in
August 1994 in order to work with Messrs. Henry, Krause, Hatteberg and Clayton
in their new venture.
Rolando A. Gomez has served as Manager, Engineering and Training for IWC
Services since April 1996 and as Manager, Engineering and Training of the
Company since the acquisition of IWC Services by the Company on July 29, 1997.
Before joining the Company, Mr. Gomez spent approximately 18 years in various
technical positions in the energy sector including drilling engineering
consultant, energy claims adjustor, licensed property and marine surveying,
sales manager in the Latin American region of a drilling and completion
equipment manufacturer and as a senior well control instructor and drilling
fluids instructor. Mr. Gomez has a BS in Civil Engineering Technology from Texas
A&M University (1977).
James Tuppen was a partner of Boots & Coots prior to joining the Company,
and is a 20 year well control veteran serving as a lead fire control specialist
on both offshore and onshore blowouts. Mr. Tuppen has controlled blowouts and
fires in North America, South America, Northern Africa, Australia and the Middle
East and recently served as co-manager of the Pedernales Old Well Abandonment
Project in the jungles of Venezuela's lower Orinoco River Delta.
W.D. "Dave" Cochran has 40 years' experience in industrial firefighting and
managed Boots & Coots worldwide industrial firefighting operations prior to
joining the Company. In this position, Mr. Cochran led the Boots & Coots
flammable liquid production, transportation and storage facilities fire control
team. In addition, he managed the Boots & Coots marketing team for the sale and
rental of firefighting equipment, supplies and safety equipment.
Larry Flak is a registered professional engineer who trained under W.C.
Goins, the father of modern well control, and has devoted more than 20 years to
drilling engineering and well control supervision. During his career, Mr. Flak
has participated in the control of numerous blowouts and has formulated and
implemented kill procedures and relief well plans in field locations worldwide.
Before joining the Company, Mr. Flak served as a consultant to Boots & Coots and
others, including as a special technical consultant to the U.S. Armed Forces
during his service with the Kuwait Oil Company, and he managed the daily
firefighting operations in Kuwait following the Gulf War. In this capacity, Mr.
Flak was personally responsible for the development, implementation and
logistical support for the control of nearly 700 burning wells that were set
ablaze by retreating Iraqi troops.
ITEM 10. EXECUTIVE COMPENSATION
For the fiscal year ended June 30, 1997, none of the former officers or
directors of B&C/IWC (formerly Havenwood) received compensation. For the fiscal
year ended June 30, 1997, none of the officers or directors of IWC Services
received compensation in excess of $100,000.
12
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the beneficial
ownership of B&C/IWC's equity securities at November 14, 1997 by (i) each person
who is known by B&C/IWC to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of B&C/IWC's directors and director nominees,
and (iii) all directors and officers as a group. Unless otherwise noted, the
named individual has sole voting and investment power with respect to
beneficially owned shares.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER (1) BENEFICIALLY OWNED OWNERSHIP
*Larry H. Ramming (2)(3) 9,165,400 30.86%
*Raymond Henry (2)(4) 4,791,200 16.13%
Mark S. Howells (5) 1,765,988 5.95%
Jeffrey J. Puglisi (5) 1,566,615 5.27%
*Brian Krause (2) 1,341,200 4.52%
*Doug Johnson 993,333 3.34%
*Richard Hatteburg (2) 1,150,000 3.87%
*Danny Clayton (2) 1,150,000 3.87%
*K. Kirk Krist 570,700 1.92%
*Thomas L. Easley 217,040 0.73%
*Jerry Winchester - -
*All officers and directors
as a group (eight persons) 10,946,473 36.85%
(1) Beneficial owners have sole voting and investment power with respect to the
shares unless otherwise noted.
(2) In May 1995, Messrs. Krause, Henry, Hatteberg and Clayton entered into the
Voting Trust Agreement which gives Messrs. Ramming and Henry, as co-trustees,
the absolute right to vote all the shares of the Company's Common Stock now
owned or hereafter acquired by Messrs. Krause, Henry, Hatteberg and Clayton
during the five-year period ending December 31, 2000. In the event that Messrs.
Ramming and Henry are unable to reach an agreement respecting the voting of such
shares, the Voting Trust Agreement designates Charles T. Phillips, attorney at
law, as the tie-breaker.
(3) Includes 4,374,200 shares owned by Mr. Ramming and members of his immediate
family, including certain family-owned entities and 4,791,200 shares owned by
Messrs. Krause, Henry, Hatteberg and Clayton, all of which are subject to the
Voting Trust Agreement under which Messrs. Ramming and Henry serve as co-
trustees.
(4) Includes 1,150,000 shares owned by Mr. Henry and 3,641,200 shares owned by
Messrs. Krause, Hatteberg and Clayton, all of which are subject to the Voting
Trust Agreement under which Messrs. Ramming and Henry serve as co-trustees.
(5) Messrs. Howells and Puglisi are principals of Arizona Securities. Includes
an aggregate of 1,431,002 shares of Common Stock purchased from a stockholder of
the Company for cash and an aggregate of 1,901,601 shares of Common Stock
transferred from Arizona Securities.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than discussed below, no relationships or transactions between the
registrant and the persons specified in Items 404 of Registration S-B occurred
during the past two fiscal years or are proposed which require disclosure
pursuant to Item 404 of Registration S-B.
B&C/IWC shares certain administrative facilities and services including
corporate office space, administrative personnel and office support equipment
with Buckingham Capital Corporation, an affiliate of the Company's controlling
shareholder. For the years ended June 30, 1996 and 1997, the Company paid
$214,542 and $235,981, respectively, to Buckingham Capital Corporation for such
services. Management believes such charges are comparable to what would have
been paid to outside parties for such facilities
13
<PAGE>
and services.
During the year ended June 30, 1997, IWC Services incurred $155,500 in
financial consulting fees for services rendered by Buckingham Capital
Corporation in connection with IWC Services' private offering of $3,000,000
principal amount of 12% Senior Subordinated Notes. Such amount was included with
deferred financing cost at June 30, 1997 and is being amortized over the term of
the Notes.
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Location
----------- ----------- --------
<C> <S> <C>
3.01 Amended and Restated Certificate of Exhibit 3.2 of Form 8-K filed
Incorporation August 13, 1997
3.02 Amendment to Certificate of Exhibit 3.3 of Form 8-K filed
Incorporation August 13, 1997.
3.03 Amended Bylaws Exhibit 3.4 of Form 8-K filed
August 13, 1997
4.01 Specimen Certificate for the Exhibit 4.1 of Form 8-K filed
Registrant's Common Stock August 13, 1997
4.02 Form of 12% Senior Subordinated Exhibit 4.2 of Form 8-K filed
Notes due December 31, 2000 August 13, 1997
4.03 Form of Noteholders' Warrants to Exhibit 4.3 of Form 8-K filed
Purchase $3,000,000 of Common Stock August 13, 1997
4.04 Form of Employees Options to Exhibit 4.4 of Form 8-K filed
Purchase 690,000 Shares of Common August 13, 1997
Stock
4.05 Form of Contractual Options to Exhibit 4.5 of Form 8-K filed
Purchase 1,265,000 Shares of Common August 13, 1997
Stock
9.01 Voting Trust Agreement between Larry Exhibit 9.1 of Form 8-K filed
H. Ramming, Raymond Henry, Richard August 13, 1997
Hatteberg, Danny Clayton and Brian
Krause
10.01 Alliance Agreement between IWC Exhibit 10.1 of Form 8-K filed
Services, Inc. and Halliburton August 13, 1997
Energy Services, a division of
Halliburton Company
10.02 Executive Employment Agreement of Exhibit 10.2 of Form 8-K filed
Larry H. Ramming August 13, 1997
10.03 Executive Employment Agreement of Exhibit 10.3 of Form 8-K filed
Raymond Henry August 13, 1997
10.04 Executive Employment Agreement of Exhibit 10.4 of Form 8-K filed
Brain Krause August 13, 1997
10.05 Executive Employment Agreement of Exhibit 10.5 of Form 8-K filed
Richard Hatteberg August 13, 1997
10.06 Executive Employment Agreement of Exhibit 10.6 of Form 8-K filed
Danny Clayton August 13, 1997
10.07 Asset Purchase Agreement of Exhibit 10.1 of Form 10-QSB/A
ABASCO, Inc. filed November 26, 1997
10.08 Stock Purchase Agreement of Exhibit 10.2 of Form 10-QSB/A
ABASCO, Inc. filed November 26, 1997
11.01 Computation of Per Share Earnings Filed herewith
21.01 List of subsidiaries Exhibit 11.01 of Form 10-KQSB filed
September 9, 1997
27.01 Financial Data Schedule Filed herewith
</TABLE>
b) Form 8-K filed on August 13, 1997 regarding changes in control of the
Registrant, Acquisition of Assets, changes in Registrant's Certifying
Accountant, other Events and Resignations of Directors and Executive officers is
incorporated herein by reference.
14
<PAGE>
SIGNATURES
IN ACCORDANCE WITH SECTION 13 OR 15(D) OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED.
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
By: /s/ Larry H. Ramming Date: December 2, 1997
-------------------------------------
LARRY H. RAMMING, CHIEF EXECUTIVE OFFICER
IN ACCORDANCE WITH THE EXCHANGE ACT, THIS REPORT HAS BEEN SIGNED BELOW BY
THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON
THE DATE INDICATED.
Signature Title Date
--------- ----- ----
By: /s/ LARRY H. RAMMING Chief Executive Officer and December 2, 1997
------------------------ Director
Larry H. Ramming
By: /s/ THOMAS L. EASLEY Chief Financial Officer December 2, 1997
------------------------
Thomas L. Easley
By: /s/ BRIAN KRAUSE President and Director December 2, 1997
------------------------
Brian Krause
By: /s/ KIRK KRIST Director December 2, 1997
------------------------
Kirk Krist
By: /s/ DAVID G. WILLIAMS Controller December 2, 1997
------------------------
David G. Williams
15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
IWC Services, Inc. (a wholly-owned
subsidiary of Boots & Coots International Well Control, Inc.)
Houston, Texas
We have audited the accompanying consolidated balance sheets of IWC Services,
Inc. and subsidiaries as of June 30, 1996 and June 30, 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IWC Services, Inc.
and subsidiaries as of June 30, 1996 and June 30, 1997, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ HEIN + ASSOCIATES LLP
HEIN + ASSOCIATES LLP
Houston, Texas
November 19, 1997
16
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, JUNE 30,
1996 1997
ASSETS -------- ----------
------
CURRENT ASSETS:
Cash $ 53,957 $ 701,321
Receivables - trade and other (no allowance
for doubtful accounts) 305,028 1,380,570
Inventories and supplies - 288,265
Prepaid expenses 6,450 49,754
-------- ----------
Total current assets 365,435 2,419,910
-------- ----------
PROPERTY AND EQUIPMENT:
Firefighting equipment 143,896 151,442
Shop and other equipment 162,013 157,014
Vehicles 27,697 27,697
Office equipment and improvements 49,694 165,029
-------- ----------
383,300 501,182
Accumulated depreciation and amortization (37,279) (110,476)
-------- ----------
346,021 390,706
-------- ----------
OTHER ASSETS:
Deferred financing costs and other assets - net 18,337 443,448
Goodwill - net of amortization of $12,614 and
$25,677 at June 30, 1996 and 1997,
respectively 176,601 170,272
-------- ----------
Total assets $906,394 $3,424,336
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 65,016 $ 666,458
Accrued liabilities and customer advances - 496,175
Notes payable - current portion 28,800 22,211
Loan from shareholder 50,000 -
-------- ----------
Total current liabilities 143,816 1,184,844
-------- ----------
Notes Payable - noncurrent 28,800 14,338
12% Senior Subordinated Notes - 1,399,500
Commitments and Contingencies (Note F)
Shareholders' Equity:
Preferred stock ($.00001 par, 5,000,000 shares
authorized, no shares issued or outstanding) - -
Common stock ($.00001 par, 50,000,000 shares
authorized, 5,000,000 and 6,168,421 shares
issued and outstanding at June 30, 1996
and 1997, respectively) 50 62
Additional paid-in capital 800,710 1,048,198
Accumulated deficit (66,982) (222,606)
-------- ----------
Total shareholders' equity 733,778 825,654
-------- ----------
Total liabilities and shareholders' equity $906,394 $3,424,336
======== ==========
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30,
-----------------------
1996 1997
---------- ----------
REVENUES $1,662,121 $2,564,087
COSTS AND EXPENSES:
Operating expenses 1,320,702 1,459,640
General and administrative 772,626 1,061,259
Depreciation and amortization 49,893 111,469
---------- ----------
2,143,221 2,632,368
---------- ----------
OPERATING LOSS (481,100) (68,281)
OTHER INCOME (EXPENSES) 4,216 (62,774)
---------- ----------
LOSS BEFORE INCOME TAXES (476,884) (131,055)
INCOME TAX EXPENSE (BENEFIT) (137,818) 24,569
---------- ----------
NET LOSS $ (339,066) $ (155,624)
========== ==========
LOSS PER SHARE (PRIMARY AND FULLY-DILUTED) $ (0.07) $ (0.03)
========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 5,000,000 5,300,509
========== ==========
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
RETAINED TOTAL
COMMON STOCK ADDITIONAL EARNINGS SHARE-
------------------ PAID-IN (ACCUMULATED HOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCES, July 1, 1995 1,000 $ 0 $ 1,000 $ 272,084 $ 273,084
Common stock issued 4,999,000 50 799,710 - 799,760
Net loss - - - (339,066) (339,066)
--------- --- ---------- ---------- ---------
BALANCES, June 30, 1996 5,000,000 50 800,710 (66,982) 733,778
Common stock options issued
for services rendered - - 46,000 - 46,000
Common stock issued for services
Rendered 100,000 1 9,999 - 10,000
Common stock issued 1,068,421 11 (11) - -
Common stock issued as compensation - - 36,000 - 36,000
Sale of common stock warrants - - 155,500 - 155,500
Net loss - - - (155,624) (155,624)
--------- --- ---------- ---------- ---------
BALANCES, June 30, 1997 6,168,421 $62 $1,048,198 $ (222,606) $ 825,654
========= === ========== ========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
19
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (339,066) $ (155,624)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 37,279 74,480
Amortization 12,614 36,989
Common stock issued as compensation - 36,000
Deferred income taxes (139,000) -
Net effect of changes in assets and liabilities
related to operating accounts:
Receivables 135,864 (1,075,542)
Inventories and supplies - (288,265)
Prepaid expenses (6,450) (43,304)
Deferred costs and other assets - (33,950)
Accounts payable 15,016 601,442
Accounts liabilities and customer advances - 496,175
----------- -----------
Net cash used in operating activities (283,743) (351,599)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (362,294) (122,882)
Disposition of assets - 4,010
Acquisition of business and other (115,378) (44,983)
----------- -----------
Net cash used in investing activities (477,672) (163,855)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds for issuance of debt and warrants 65,330 1,555,000
Deferred financing costs - (321,132)
Debt repayments (97,997) (71,050)
Proceeds from sales of common stock 690,835 -
----------- -----------
Net cash provided by financing activities 658,168 1,162,818
----------- -----------
NET INCREASE (DECREASE) IN CASH (103,247) 647,364
CASH, beginning of year 157,204 53,957
----------- -----------
CASH, end of year $ 53,957 $ 701,321
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest $ 968 $ 53,427
Cash paid for income taxes $ 1,182 $ 22,996
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock and options issued in exchange for property
and equipment and services rendered (deferred) $ 108,925 $ 56,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
IWC SERVICES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
Organization - IWC Services, Inc. (IWC or the Company) was incorporated in
the state of Texas on June 27, 1995, commenced business activities July 1,
1995, and issued 100,000 shares of no par common stock (increased to
5,000,000 pursuant to 50 to one stock split discussd in Note D) in
exchange for cash of $549,000, property and equipment valued at $108,925
assigned by Buckingham Capital Corporation, and services performed by
certain other shareholders. The shareholders of Hell Fighters, Inc. (Hell
Fighters), a Texas corporation incorporated on May 4, 1995, contributed to
IWC all of their outstanding common shares of Hell Fighters, which then
became a wholly-owned subsidiary of IWC. Prior to the acquisition of Hell
Fighters, the Company had no operations; therefore, Hell Fighters is
deemed the predecessor business of IWC Services, Inc.
IWC and its subsidiaries are engaged in the oil and natural gas well
control segment of the oil- field services industry, providing services on
an international basis in well blowout control and/or firefighting,
specialized firefighting and well control equipment rental and sales,
consulting engineering services, drilling rig and production facilities
inspection, safety training courses and blowout contingency planning.
The accompanying consolidated financial statements include the financial
transactions and accounts of IWC and its majority-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation.
Property and Equipment - Property and equipment is stated at cost.
Depreciation is provided principally using the straight-line method over
the estimated useful lives of the respective assets as follows:
firefighting equipment (8 years), shop and other equipment (8 years),
vehicles (5 years) and office equipment and furnishings (5 years). Office
leasehold improvements are amortized over the remaining primary lease
terms.
Goodwill - In 1994, Buckingham Funding Corporation, an affiliate of
Buckingham Capital Corporation, acquired a majority interest in the
outstanding shares of Emergency Resources International, Inc. (ERI), a
corporation engaged in oil and natural gas well control services, in
exchange for payment of certain ERI liabilities and assumption of certain
contingent liabilities. Effective May 4, 1995, the Company, through its
subsidiary Hell Fighters, retained the services of certain employees of
ERI, and in exchange for payments to vendors for certain ERI contractual
obligations for equipment, materials and services, and was assigned by ERI
ownership rights to such equipment, technology and the use of the trade
name of International Well Control. In addition, Hell Fighters assumed
the contractual rights and obligations for then existing client service
contracts. The excess of ERI related expenditures over related revenues
collected for ERI operational activities prior to May 1995 has been
accounted for as goodwill and is being amortized ratably over 15 years.
Revenue Recognition - Revenue is recognized on the Company's service
contracts either as earned on the basis of day work completed or, for
turnkey contracts, on the percentage-of-completion method based upon costs
incurred to date and estimated total contract costs. Revenue and cost
from equipment sales is recognized upon contract completion.
21
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Foreign Currency Translation - The functional currency of the Company's
foreign operations is the U.S. dollar. All customer invoices and vender
payments are denominated in U.S. currency. Revenues and expenses from
foreign operations are remeasured into U.S. dollars on the respective
transaction dates and foreign currency transaction gains or losses are
included in the Consolidated Statements of Operations.
Inventories - Inventories consist primarily of equipment, parts and
supplies in work-in-progress. Inventories are valued at the lower of cost
or market using the average cost method.
Earnings per share - Primary earnings per common and common equivalent
share and the earnings per common and common equivalent share assuming
full dilution are computed on the weighted average number of shares
outstanding adjusted for the incremental shares attributed to outstanding
options and warrants to purchase common stock.
Income Taxes - The Company accounts for income taxes pursuant to the
liability method, which requires recognition of deferred income tax
liabilities and assets for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. Under this method, deferred income tax liabilities and assets
are determined based on the temporary differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities and available tax carryforwards.
Recent Accounting Pronouncements - The Financial Accounting Standards
Board (FASB) issued SFAS No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of, which is
effective for fiscal years beginning after December 15, 1995. This
pronouncement specifies certain events and circumstances which indicate
the cost of an asset or assets may be impaired, the method by which the
evaluation should be performed, and the method by which writedowns, if
any, of the asset or assets are to be determined and recognized. The
adoption of this pronouncement in 1996 did not have a material impact on
the Company's financial condition or operating results.
The FASB issued SFAS No. 123, Accounting for Stock Based Compensation,
effective for fiscal years beginning after December 15, 1995. This
pronouncement allows companies to choose to adopt the statement's new
rules for accounting for employee stock based compensation plans. For
those companies who choose not to adopt the new rules, the statement
requires disclosures as to what earnings would have been if the new rules
had been adopted. Management adopted the provisions of this statement in
the fiscal year ended June 30, 1997; see note D -Capital Stock for further
discussion.
The FASB issued SFAS No. 128, entitled Earnings Per Share, during February
1997. The new statement, which is effective for financial statements
issued after December 31, 1997, including interim periods, establishes
standards for computing and presenting earnings per share. The new
statement requires retroactive restatement of all prior-period per share
data presented. The Company does not believe the new statement will have a
material impact upon previously presented earnings per share information.
22
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The FASB issued SFAS No. 130, Reporting Comprehensive Income and SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components
of comprehensive income be reported in a financial statement that displays
with the same prominence as other financial statements. SFAS No. 131
supercedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. SFAS No. 131 establishes standards on the way that public
companies report financial information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and
services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and
in assessing performance.
SFAS Nos. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of these standards, management has
been unable to fully evaluate the impact if any, the standards may have on
the future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of these
standards.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
notes. Actual results could differ from these estimates.
Cash Flow Information - The Company considers all unrestricted, highly
liquid investments with a maturity of three months or less at the time of
purchase to be cash equivalents.
Unaudited Interim Information - The accompanying financial information as
of September 30, 1997 and for the three month period ended September 30,
1997 has been prepared by the Company, without audit. The financial
statements reflect all adjustments, consisting of normal recurring
accruals, which are, in the opinion of management, necessary to fairly
present such information in accordance with generally accepted accounting
principals.
B. INCOME TAXES:
The Company and its wholly-owned domestic subsidiaries file a consolidated
federal income tax return. The Company's wholly-owned subsidiary, Hell
Fighters, filed on a separate return basis utilizing the cash method of
accounting for its initial period of operations from May 4, 1995 through
June 30, 1995. Deferred taxes of approximately $139,000 were provided for
such short tax period and reversed as a credit for the year ended June 30,
1996 when Hell Fighters and other wholly-owned domestic subsidiaries were
included in a consolidated federal income tax return for IWC.
23
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
B: INCOME TAXES: (CONTINUED)
The provision for income taxes shown in the Consolidated Statements of
Operations differs from the amount that would be computed if the loss
before income taxes were multiplied by the federal income tax rate
(statutory rate) as follows:
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------
1996 1997
---------- ---------
<S> <C> <C>
Tax benefit at statutory rate $(162,141) $ (44,559)
Foreign taxes 1,182 24,569
Unrecognized net operating losses 23,141 44,559
--------- ---------
Provision (benefit) for income taxes $(137,818) $ 24,569
========= =========
</TABLE>
The approximate tax effect of significant temporary differences representing
deferred tax assets and liabilities at June 30, 1996 and 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
---------- ---------
<S> <C> <C>
Net operating loss carryforwards $ 30,000 $ 74,000
Valuation allowance (30,000) (74,000)
---------- ---------
Net deferred tax asset, net $ - $ -
========== =========
</TABLE>
The valuation allowance increased $30,000 and $44,000 in the year ended
June 30, 1996 and 1997, respectively, because of net operating loss
carryforwards generated in those years.
As of June 30, 1997, the Company has net operating loss carryforwards of
approximately $219,000 expiring in various amounts beginning in 2011.
C. NOTES PAYABLE:
Notes payable consisted of the following at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Vehicle and equipment notes bearing interest at rates from
9.24% to 12.25%, payable in monthly installments, through
April 1999 and collateralized by vehicles and equipment. $ 57,600 $ 36,549
</TABLE>
The $50,000 unsecured loan from shareholder outstanding at June 30, 1996
was repaid in full in July 1996, together with interest at 10%.
In January 1997, the Company commenced an offering for up to $5,000,000 of
debt financing on a "best-efforts" basis through a Private Placement
Memorandum providing for the issuance of a minimum of 500 and a maximum of
5,000 Investment Units at a price of $1,000 per Unit with a
24
<PAGE>
IWC SERVICES, INC AND SUBSIDIARIES
C. NOTES PAYABLE: (CONTINUED)
minimum investment of 25 Units. Each Unit consisted of a 12% Senior
Subordinated Note of the Company in the principal amount of $1,000 with a
warrant to purchase under certain circumstances shares of the Company's
common stock at a discounted price. Management has estimated the fair
value of the proceeds applicable to the warrants issued as of June 30,
1997 to be $155,500, which amount has been reflected as a discount on the
Subordinated Notes and an increase to additional paid-in capital. Interest
on the Notes at the rate of 12% per annum (13.3% effective interest rate
based on reduced note balances) is payable semi-annually commencing July
1, 1997 with maturity date for the Notes on December 31, 2000, subject to
extension for up to two periods of six months each with an increase in the
interest rate to 14%. Net proceeds, after sales commissions and offering
expenses, (deferred and amortized over term of notes) from this planned
financing were utilized for working capital and business expansion
purposes. Through June 30, 1997 subscriptions for $1,555,000 had been
received and funded. See Note H regarding conversion of notes and warrants
to Common Stock subsequent to June 30, 1997. Subsequent to June 30, 1997
the Company received additional subscription agreements of approximately
$1,445,000 through termination of the offering in July 1997.
D. CAPITAL STOCK:
At June 30, 1996, the Company had authorized capital stock of 1,000,000
shares of no par common stock of which 100,000 shares were issued and
outstanding. Effective December 17, 1996, the Company amended its Articles
of Incorporation and By-Laws increasing its authorized capital stock to
50,000,000 shares of $0.01 par value common stock by effecting a 50 to 1
stock split and 5,000,000 shares of $0.00001 par value preferred stock,
which may be issued at the discretion of the Board of Directors. At June
30, 1996 and June 30, 1997, a total of 5,000,000 shares and 6,168,421
shares, respectively, of common stock were issued and outstanding. As
discussed in Note H, on July 29, 1997 the Company completed a merger with
Havenwood Ventures, Inc. and the par value of the common stock became
$.00001 per share. All references herein have been restated to reflect the
amended amounts.
In November 1996, the Board of Directors approved the 1996 Incentive Stock
Plan which allowed the Board of Directors to grant up to 500,000 incentive
stock options to eligible employees. At June 30, 1997, an aggregate of
200,000 incentive stock options (adjusted to 460,000 shares at the
completion of the merger with Havenwood Ventures, Inc., as discussed in
Note H) had been issued which are exercisable by the holders thereof for a
period of 10 years from the date of grant at an exercise price of $1.00
per share (adjusted to $.43 per share at the completion of the merger with
Havenwood Ventures, Inc. as discussed in Note H). As of June 30, 1997 all
of these options are currently exercisable and remain unexercised.
In December 1996 and April 1997, the Company issued a total of 550,000
contractual stock options to five persons, including 200,000 options
issued to certain officers and directors and 350,000 options issued to two
attorneys (adjusted to 1,265,000 shares, 460,000 and 805,000 shares
respectively at the completion of the merger with Havenwood Ventures, Inc.
as discussed in Note H). These contractual stock options have a two-year
term beginning on the original date of grant, are fully vested and are
immediately exercisable by the holders thereof at a price of $1.00 per
share (adjusted to $.43 per share at the completion of the merger with
Havenwood Ventures, Inc. as discussed in Note H). As of June 30, 1997 all
of these options are currently exercisable and remain
25
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
D. CAPITAL STOCK: (CONTINUED)
unexercised.
The Company applies APB Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock option
plans. Had compensation expense for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates for
awards under those plans, consistent with the method of SFAS No. 123, the
Company's reported net loss and net loss per common share would have been
decreased to the pro forma amounts indicate below:
<TABLE>
<CAPTION>
Year ended June 30,
1997
--------------------
<S> <C> <C>
Net loss As reported $(155,624)
Pro forma $(219,724)
Net loss per common share As reported $ (.03)
Pro forma $ (.04)
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions; risk free rates of 7%, volatility of zero, no assumed
dividend yield and expected lives of three years.
E. RELATED PARTY TRANSACTIONS:
The Company shares certain administrative facilities and services
including corporate office space, administrative personnel and office
support equipment with Buckingham Capital Corporation, an affiliate of the
Company's controlling shareholder. For the years ended June 30, 1996 and
1997, the Company paid $214,542 and $235,981, respectively, to Buckingham
Capital Corporation for such services. Management believes such charges
are comparable to what would have been paid to outside parties for such
facilities and services.
During the year ended June 30, 1997, the Company incurred $155,500 in
financial consulting fees for services rendered by Buckingham Capital
Corporation in connection with the Company's private offering of
$3,000,000 principal amount of 12% Senior Subordinated Notes. Such amount
was included with deferred financing cost at June 30, 1997 and is being
amortized over the term of the Notes.
F. COMMITMENTS AND CONTINGENCIES:
The Company leases shop and equipment storage facilities under a five-year
operating lease expiring January 2000 at a monthly rental of $4,476.
Effective March 22, 1997, the Company entered into a sub-lease for new
corporate office facilities under an operating lease expiring August 31,
2003 at an initial monthly base rental rate of $8,431 through September
23, 1997, decreasing to $7,410 per month through February 28, 1998 and
$6,255 per month thereafter.
26
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
F. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
At June 30, 1997, future minimum lease payments under these noncancellable
operating leases are approximately:
<TABLE>
<CAPTION>
Years Ending June 30, Amount
--------------------- ---------
<S> <C>
1998 $ 141,000
1999 129,000
2000 102,000
2001 75,000
2002 75,000
Thereafter 88,000
----------
$ 610,000
==========
</TABLE>
Rent expense for the years ended June 30, 1996 and 1997, was approximately
$47,000 and $77,000, respectively.
In June 1997, the Company was included as a co-defendant in an amendment
to a lawsuit originally filed by the Community Survivor and the Estate of
certain deceased employees of Boots & Coots resulting from an accident in
May 1995. The Company filed and was granted a motion for dismissal from
this lawsuit.
G. REVENUES FROM MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
During the periods presented below, the following customers represented
significant concentrations of revenues:
<TABLE>
<CAPTION>
Years Ended
June 30,
----------------------
1996 1997
-------- --------
<S> <C> <C>
Customer A $679,099 $385,002
Customer B - $757,375
Customer C $222,500 -
Customer D - $416,011
The Company's revenues are generated geographically as follows:
Years Ended
June 30,
----------------------
1996 1997
-------- --------
Domestic customers 34% 71%
Foreign customers 66% 29%
</TABLE>
27
<PAGE>
G. REVENUES FROM MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK: (CONTINUED)
Two of the Company's largest customers account for 13% of outstanding
accounts receivable at June 30, 1996 and four other customers account, each
in excess of 10%, collectively are 86% of outstanding accounts receivable at
June 30, 1997. These accounts receivable were either subsequently collected
under normal credit terms or deemed collectible. The Company believes that
future accounts receivable with these companies will continue to be
collected under normal credit terms based on previous experience. The
Company performs ongoing evaluations of its customers and generally does not
require collateral. The Company assesses its credit risk and provides an
allowance for doubtful accounts for any accounts which it deems doubtful of
collection.
The Company maintains deposits in banks which may exceed the amount of
federal deposit insurance available. Management believes that any possible
deposit loss is minimal.
H. EVENTS SUBSEQUENT TO JUNE 30, 1997:
On July 2, 1997, an announcement was made that the Company had reached an
agreement to enter into a merger transaction with Havenwood Ventures, Inc.
(Havenwood), a publicly listed corporation listed on the Over-the-Counter
Bulletin Board. The principal activities of Havenwood from inception have
been organizational matters and the sale and issuance of shares of its
$.00001 par value common stock and preliminary development of a theme park,
which was disposed of during fiscal 1991. Havenwood had no operations from
fiscal 1992 through fiscal 1997 and during such time continued to pursue
acquisition opportunities. On July 29, 1997, Havenwood completed the merger
transaction with the Company, and under the plan of merger (i) the
outstanding voting securities of Havenwood were reverse split in the ratio
of one post-split share for every 135 pre-split shares held by a
shareholder, provided, however, that no single shareholder's share ownership
was reduced to fewer than 100 post-split shares; (ii) certain principal
shareholders of Havenwood surrendered a total of 740,740 post-split shares
to Havenwood for cancellation, leaving a total of 1,173,074 shares of common
stock issued and outstanding on the closing date; (iii) each issued and
outstanding share of common stock of the Company was converted into 2.30
post-merger shares of Havenwood's common stock, amounting to approximately
15,502,000 post-merger shares in the aggregate; (iv) outstanding options and
warrant to purchase shares of the authorized and unissued common stock of
the Company were converted into substantially similar options and warrants
to purchase shares of Havenwood's authorized and unissued common stock, and
(v) the Company became a wholly-owned subsidiary of Havenwood with the
former IWC shareholders, as a group, acquiring shares representing
approximately 92% of the resulting capitalization of Havenwood. Following
the completion of the transactions, there were approximately 18,630,000
shares of Havenwood's common stock issued and outstanding, on a fully
diluted basis. Immediately after the merger, all the officers and directors
of Havenwood resigned and were replaced by representatives of the Company.
The transaction was accounted for as a reverse merger with IWC as the
accounting acquiring company. Purchase accounting was applied and the
acquired assets of Havenwood were revalued at fair market value as of July
29, 1997 resulting in no goodwill.
28
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
H. EVENTS SUBSEQUENT TO JUNE 30, 1997: (CONTINUED)
On July 1, 1997, IWC announced it had reached an agreement to acquire all of
the operating assets of Boots & Coots, L.P. ("Boots & Coots"), a diversified
well blowout, industrial and marine firefighting company. This acquisition
was closed on July 31,1997 with the Company: (i) paying at closing, $369,432
cash to Boots & Coots and placing in escrow $680,568 cash to pay certain
debts of Boots & Coots; (ii) issuing two promissory notes, payable September
2, 1997, to Boots & Coots in the aggregate principal amount of $4,760,977;
and (iii) issuing to Boots & Coots a contractual right to receive $1,000,000
in common stock of Havenwood. The promissory notes are secured by the
acquired assets of Boots & Coots, and have been paid, with the exception of
approximately $1,544,000 relating to disposition of estimated foreign tax
obligations. This transaction was accounted for as a purchase and the
acquired assets of Boots & Coots were revalued at fair market value as of
July 31, 1997 resulting goodwill of $50,000 which will be amortized over 15
years.
After completion of the merger and the Boots & Coots acquisition, the name
of Havenwood was changed to Boots & Coots International Well Control, Inc.
(Boots & Coots/IWC). Its common shares are traded on the OTCBB under the
symbol "BCWC".
On September 18, 1997, Boots & Coots/IWC closed the offering through private
placement of the sale of 7,475,000 shares of common stock at $1 per share
for a total of $7,475,000. Proceeds to the Company after placement agent's
fees and expenses of the offering were approximately $6,323,000 and were
used to pay the Boots & Coots acquisition notes and for working capital.
On September 25, 1997, Boots & Coots/IWC formed a wholly-owned subsidiary
company, ABASCO, Inc. to purchase the assets of ITS Environmental, a
manufacturer of oil spill containment booms, mops and other oilfield
emergency equipment. The Company paid $1,590,000 cash and issued 300,000
shares of common stock to acquire the manufacturing equipment, inventory and
customer lists. This transaction was accounted for as a purchase and the
acquired assets of ABASCO, Inc. were revalued at fair market value as of
September 12, 1997 resulting in goodwill of approximately $687,000 which
will be amortized over 15 years.
Holders of the Company's 12% Senior Subordinated Notes were offered,
effective as of September 12, 1997, the election to exercise the warrants
into common stock of the Company at an exchange rate of $.75 per share with
payment accomplished through surrender and retirement of their notes. An
aggregate face amount of $2,900,000 of notes were converted into an
aggregate of 3,866,653 shares of common stock with $193,000 recognized as a
non-recurring charge to operations for inducement costs, pursuant to
Statement of Financial Accounting Standards No. 84 - Induced Conversions of
Convertible Debt, during the three months ended September 30, 1997.
29
<PAGE>
IWC SERVICES, INC. AND SUBSIDIARIES
H. EVENTS SUBSEQUENT TO JUNE 30, 1997: (CONTINUED)
At September 30, 1997, the above transactions had all been completed. A
Condensed Consolidated Balance Sheet (unaudited) of Boots & Coots/IWC and a
Condensed Statement of Operations (unaudited) of Boots & Coots/IWC for the
three months ended September 30, 1997 are as follows:
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30,1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Current Assets $ 6,363,156
Property & Equipment (net) 7,127,531
Other Assets 983,626
-----------
Total Assets $14,474,313
===========
Current Liabilities $ 3,590,205
12% Senior Subordinated Note 90,000
Shareholders' Equity 10,794,108
-----------
Total Liabilities and Shareholders' Equity $14,474,313
===========
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30,1997
(UNAUDITED)
<TABLE>
<S> <C>
Revenues $ 2,094,510
Operating Expenses 1,190,639
General and Administrative 506,583
Non-recurring Inducement Costs 193,333
Depreciation and Amortization 196,158
-----------
2,086,713
-----------
Operating Income 7,797
Other Income (expenses) (90,326)
-----------
Loss Before Income Taxes (82,529)
Income Tax Expense 6,272
-----------
Net Loss $ (88,801)
===========
</TABLE>
30
<PAGE>
EXHIBIT 11.01
EARNINGS PER SHARE CALCULATION OF IWC SERVICES, INC.
(A WHOLLY-OWNED SUBSIDIARY OF
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.)
<TABLE>
<CAPTION>
DAYS WEIGHTED
SHARES OUTSTANDING SHARES
------ ----------- --------
<S> <C> <C> <C>
Year Ended June 30, 1996:
Balance June 30, 1995 5,000,000 365 5,000,000
--------- ---------
Balance June 30, 1996 5,000,000 5,000,000
========= =========
Year Ended June 30, 1997:
Balance June 30, 1996 5,000,000 365 5,000,000
Common shares issued 12/17/96 210,000 195 112,192
Common shares issued 3/1/97 200,000 121 66,301
Common shares issued 4/25/97 298,421 66 53,961
Common shares issued 5/7/97 460,000 54 68,055
--------- ---------
Balance June 30, 1997 6,168,421 5,300,509
========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 701,321
<SECURITIES> 0
<RECEIVABLES> 1,380,570
<ALLOWANCES> 0
<INVENTORY> 288,265
<CURRENT-ASSETS> 2,419,910
<PP&E> 501,182
<DEPRECIATION> 110,476
<TOTAL-ASSETS> 3,424,336
<CURRENT-LIABILITIES> 1,184,844
<BONDS> 1,399,500
0
0
<COMMON> 62
<OTHER-SE> 825,592
<TOTAL-LIABILITY-AND-EQUITY> 3,424,336
<SALES> 0
<TOTAL-REVENUES> 2,564,087
<CGS> 0
<TOTAL-COSTS> 2,632,368
<OTHER-EXPENSES> 62,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,427
<INCOME-PRETAX> (131,055)
<INCOME-TAX> 24,569
<INCOME-CONTINUING> (155,624)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,624)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
