SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1996;
or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
________________.
Commission File Number 0-18754
Black Warrior Wireline Corp.
-------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-2904094
- --------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3748 Highway 45 North, Columbus, Mississippi 39701
-------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(601) 329-1047
--------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Indicate by a check mark whether the Issuer (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the Issuer
was required to file such Reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at November 12,1996
- ----------------------------- -------------------------------
Common Stock, par value 2,144,677 shares
$.0005 per share
Transitional Small Business Disclosure Format
YES NO X
----- ------
Page 1 of 14 Pages
<PAGE>
BLACK WARRIOR WIRELINE CORP.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I -- FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets -- September 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations --
Three Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Operations --
Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 1996 and 1995 6
Notes to Financial Statements --
Nine Months Ended September 30, 1996 and 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II -- OTHER INFORMATION
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 14 Pages
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 163,154 $ 284,825
Accounts receivable, less allowance for
doubtful accounts of $123,525 and $130,115
at September 30, 1996 and December 31, 1995,
respectively 1,297,760 830,384
Inventories 177,499 185,813
Prepaid expenses (55,954) 31,917
Federal income tax receivable 80,432 80,432
Other receivables 178
------------ -----------
Total current assets 1,662,891 1,413,549
Property, plant & equipment, less accumulated
depreciation of $3,596,444 and $3,311,919
at September 30, 1996 and December 31, 1995,
respectively 1,621,077 1,306,126
Other assets 5,771 5,405
------------ -----------
Total assets $ 3,289,740 $ 2,725,080
============ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 782,911 $ 821,254
Accrued salaries and vacation pay 33,923 15,839
Accrued interest payable 221,107 1,214,422
Other accrued expenses 205,217 229,446
Notes payable to bank 38,739 68,575
Notes payable, related parties 0 0
Current maturities of long-term debt and
capital lease obligations 471,775 1,526,127
------------ -----------
Total current liabilities 1,753,672 3,875,663
Long-term debt and capital lease obligations,
less current maturities 659,342 385,696
------------ -----------
Total liabilities 2,413,014 4,261,359
Common stock, par value $ .0005 per share,
50,000,000 shares authorized, 1,448,427
shares issued at September 30, 1996 and
759,052 at December 31, 1995 725 380
Additional paid-in capital 4,237,075 3,375,702
Accumulated deficit (2,777,680) (4,328,968)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
------------ -----------
Total stockholders' equity 876,726 (1,536,279)
------------ ------------
Total liabilities and stockholders' deficit $ 3,289,740 $ 2,725,080
============ ============
</TABLE>
Page 3 of 14 Pages
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
September 30, September 30,
1996 1995
-------------------------------------------------
<S> <C> <C>
Net revenues $ 2,053,346 $ 1,474,819
Operating costs and expenses $ (1,632,245) $(1,379,358)
Depreciation and amortization expense $ (145,042) $ (155,678)
------------------------------------------------
Operating income (loss) $ 276,059 $ (60,217)
Interest expense and amortization
of debt discount and expense $ (107,249) $ (152,660)
Other income $ 7,280 $ 32,725
------------------------------------------------
Net income (loss) before benefit
of taxes and extraordinary gain $ 176,090 $ (180,152)
Benefit for income taxes $ (595,713) $ 0
------------------------------------------------
Net income (loss) before $
extraordinary gain $ 771,803 $ (180,152)
Extraordinary gain on extinguishment of
debt, net of taxes of $595,713 $ 1,014,758 $ 0
(Note 2)
------------------------------------------------
Net income (loss) $ 1,786,561 $ (180,152)
========== ===========
Earnings (loss) per average of common share:
Earnings (loss) before tax benefit
and extraordinary gain $ .12 $ (0.24)
Benefit for income taxes $ .41 $ (0.24)
Extraordinary gain, net of taxes $ .70 $ (0.24)
Net income $ 1.23 $ (0.24)
Average common and common equivalent
shares outstanding 1,448,427 759,052(1)
- -------
</TABLE>
(1) Average common shares outstanding September 30, 1995, reflects 1 for 200
reverse split effectuated October 31, 1995.
Page 4 of 14 Pages
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
September 30, September 30,
1996 1995
<S> <C> <C>
Net revenues $ 5,200,094 $ 4,639,173
Operating costs and expenses $(4,611,438) $(4,318,393)
Depreciation and amortization expense $ (420,313) $ (531,369)
-------------------------------------------
Operating income (loss) $ 168,342 $ (210,589)
Interest expense and amortization
of debt discount and expense $ (312,364) $ (453,580)
Other income $ 84,861 $ 75,201
-------------------------------------------
Net income (loss) before benefit
of taxes and extraordinary gain $ (59,161) $ (588,968)
Benefit for income taxes $ (595,713) $ 0
-------------------------------------------
Net income (loss) before
extraordinary gain $ 536,552 $ (588,968)
Extraordinary gain on extinguishment of
debt, net of taxes of $595,713 $ 1,014,758 $ 0
(Note 2)
-------------------------------------------
Net income (loss) $ 1,551,310 $ (588,968)
=========== ===========
Earnings (loss) per average common share:
Earnings (loss) before tax benefit
and extraordinary gain $ (0.04) (0.78)
Benefit for income taxes $ .41 (0.78)
Extraordinary gain, net of taxes $ .70 (0.78)
Net income $ 1.07 (0.78)
Average common and common equivalent
shares outstanding 1,448,427 759,052(2)
- ----------
</TABLE>
(2) Average common shares outstanding September 30, 1995, reflects 1 for
200 reverse split effectuated October 31, 1995.
Page 5 of 14 Pages
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------
September September
30, 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Net cash flows from operating activities: $ 170,525 $ 138,487
-------------- ---------------
Cash flows used in investing activities:
Proceeds from the sale of fixed assets 76,045 50,250
Acquisition of property,
plant and equipment (737,456) (303,556)
-------------- ---------------
Net cash flow provided
by investing activities (661,411) (253,306)
-------------- ---------------
Cash flows provided by financing activities:
Net advances on receivables
financed 0 0
Increase in notes payable 610,404 329,878
Reductions in notes payable (241,190) (163,894)
-------------- ---------------
Net cash flow used in financing activities 369,215 165,984
Net increase (decrease) in cash (121,671) (51,164)
Cash - beginning of period 284,825 40,453
-------------- ---------------
Cash - end of period $ 163,154 $ 91,617
============== ===============
Supplemental disclosure of cash flow information:
Interest paid $ 57,582 $ 66,176
Taxes paid $ 0 $ 0
Supplemental schedule of noncash investing and financing:
Subordinated debentures converted to common stock $ 1,168,750
Accrued interest forgiven $ 1,197,065
Accrued penalties forgiven $ 106,375
</TABLE>
Page 6 of 14 Pages
<PAGE>
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
--------
The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. and subsidiaries
(the "Company"). Such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. The
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995 should be read in conjunction with this document.
2. LONG-TERM DEBT
--------------
On November 30 1995, the Company executed a Reorganization Agreement
with the holders of certain debt of the Company whereby the Company
exchanged $656,250 of 13% convertible subordinated debentures and
$644,168 of notes payable to affiliates of the Company into an
aggregate of 648,151 shares of common stock and 98,438 common stock
purchase warrants. In September, 1996, the holders of an aggregate of
$393,750 principal amount of the Company's outstanding 13% convertible
subordinated debentures and $775,000 principal amount of the Company's
outstanding 14% subordinated debentures exchanged such debentures for
an aggregate of 689,375 shares of common stock and 179,062 common stock
purchase warrants. All of such debentures had been in default.
Accordingly, at September 30, 1996 an aggregate of $125,000 principal
amount of the 14% subordinated debentures remained outstanding, all of
which were in default, and an aggregate of $50,000 principal amount of
the 13% subordinated debentures remained outstanding, all of which were
in default. Subsequent to September 30, 1996, the remaining $125,000
principal amount of the 14% subordinated debentures and $50,000
principal amount of the 13% subordinated debentures were exchanged for
an aggregate of 96,250 shares of common stock and 26,250 common stock
purchase warrants. The holders of all the debentures exchanged forgave
the payment of all interest and penalties owing on such indebtedness.
The warrants are exercisable for a period of five years at an exercise
price of $2 per share. The holders of such warrants have the right,
subject to certain limitations, to have the shares of common stock
issuable on exercise of such warrants included at the Company's expense
in any registration statement filed by the Company under the Securities
Act of 1993, as amended. The warrants are redeemable by the Company
provided the bid price for the Company's common stock has exceeded $5
per share on twenty consecutive trading days ending on the trading day
prior to the date on which the notice of redemption is given.
3. NOTES PAYABLE - RELATED PARTIES
-------------------------------
In October 1991, the Company entered into an agreement with a
partnership consisting of officers and spouses of officers of the
Company called "RABAD",
Page 7 of 14 Pages
<PAGE>
whereby such partnership advanced funds to the Company for operations.
These advances are collateralized by certain accounts receivable of the
Company and bear interest at the prime interest rate plus 2%. On
December 20, 1995, RABAD accepted 148,565 shares of common stock of the
Company in full satisfaction of advances totaling $297,131. In
addition, the Company guaranteed that RABAD would be able to sell the
common stock received in the transaction for $2 per share within one
year thereafter. This agreement is collateralized by $100,000 of the
Company's accounts receivable.
The Company had an outstanding balance of $334,237 in notes payable and
$8,976 in accrued interest at December 31, 1994 owing to the President
of the Company and his spouse. Interest expense recognized on this
indebtedness for 1995, 1994, and 1993 was $28,611, $31,491, and
$11,600, respectively. On December 20, 1995, the President of the
Company and his spouse accepted 200,000 shares of the Company's common
stock in full satisfaction of the outstanding balance of notes payable
and accrued interest.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
After reflecting an extraordinary gain on extinguishment of debt, net
of taxes, which occurred in the third quarter of 1996, the Company had net
income of $1,786,561 for the third quarter of 1996 as compared with a net loss
of $180,152 for the same period of 1995. Also after reflecting the same
extraordinary gain, during the first nine months of 1996, the Company had net
income of $1,551,310 as compared with a net loss of $588,968 for the first nine
months of 1995. The improvement in the net income is related primarily to the
exchange of debentures for equity and the resulting recognition of an
extraordinary gain, net of taxes, of $1,014,758. Enhanced revenue levels and
improving operating margins by all divisions also contributed to the overall
improvement.
Net revenues increased by $578,527 to $2,053,346 for the third quarter
of 1996 compared with net revenues of $1,474,819 in the same period in 1995. Net
revenues for the first nine months of 1996 increased $560,921 to $5,200,094 as
compared to $4,639,173 for the same period last year. Increased completion
revenues were primarily the result of a large contract awarded to the Company by
a large operator in the Black Warrior Basin. This contract will continue into
the forth quarter of 1996. Wireline services benefited from a major project
initiated by an operator in the Permian Basin. The Company supplies all wireline
services for this project, which is expected to continue through the rest of
1996. A general increase in demand for services from all customers, as well as
improved pricing, was a contributing factor in the improvement of revenues.
Revenues by division are summarized below:
Page 8 of 14 Pages
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
---------------------------------- ---------------------------------
September September September September
30,1996 30,1995 30,1996 30,1995
--------------- --------------- ------------- ------------
<S> <C> <C> <C>
Wireline services
(logging, directional
services, perforating) $ 3,681,558 $ 3,473,888 $ 1,544,453 $ 1,104,774
Completion (workover
services) $ 1,294,715 $ 1,010,861 $ 449,000 $ 324,240
Tools and Packers
(sales and rentals of
bridge plugs) $ 223,821 $ 154,424 $ 59,893 $ 45,805
--------------- --------------- --------------- ------------
Total $ 5,200,094 $ 4,639,173 $ 2,053,346 $ 1,474,819
=============== =============== ============== =============
=============== =============== ============== =============
</TABLE>
Operating costs and expenses increased by $252,887 in the third quarter
of 1996 and by $293,045 in the first nine months of 1996 as compared with the
same periods in 1995. This increase was due to increased costs for supplies and
materials from vendors, attributable to the increase in revenues and in the
amount of materials and supplies purchased for each particular job. Salaries
increased $101,838 for the first nine months of 1996 with the total number of
employees increasing to 98 at September 30, 1996 from 84 at September 30, 1995.
The increase in salaries was the result of an effort by the Company to remain
competitive and retain its key employees as well as the increase in the
activities of the completion workover services.
Interest expense decreased by $45,411 in the third quarter of 1996 and
$141,216 in the first nine months of 1996 as compared with the same periods in
1995. Three to five year notes were used to purchase new vehicles during the
last quarter of 1995 and the first nine months of 1996. Net new borrowing for
the first nine months of 1996 totaled $610,404. Interest on the debt ranged from
prime (8.75% as of September 30, 1996) to 12.00%. The decrease in interest
expense is directly related to the exchange of an aggregate of $1,300,418
principal amount of subordinated debentures and notes payable to Company's
related parties to equity during the last quarter of 1995.
Liquidity and Capital Resources
Net cash flow provided from operating activities was $170,525 for the
nine months ended September 30, 1996 as compared with $138,487 for the nine
months ended September 30, 1995. Cash from operating activities during the nine
months ended September 30, 1996 was applied primarily to the purchase of
property, plant and equipment and repayment of indebtedness. Other uses of cash
consisted of
Page 9 of 14 Pages
<PAGE>
purchasing tools and supplies rather than purchasing them on credit.
On November 30 1995, the Company executed a Reorganization Agreement with the
holders of certain debt of the Company whereby the Company exchanged $656,250 of
13% convertible subordinated debentures and $644,168 of notes payable to
affiliates of the Company into an aggregate of 648,151 shares of common stock
and 98,438 common stock purchase warrants In September, 1996, the holders of an
aggregate of $393,750 principal amount of the Company's outstanding 13%
convertible subordinated debentures and $775,000 principal amount of the
Company's outstanding 14% subordinated debentures exchanged such debentures for
an aggregate of 689,375 shares of common stock and 179,062 common stock purchase
warrants. All of such debentures had been in default. Accordingly, at September
30, 1996 an aggregate of $125,000 principal amount of the 14% subordinated
debentures remained outstanding, all of which were in default, and an aggregate
of $50,000 principal amount of the 13% subordinated debentures remained
outstanding, all of which were in default. Subsequent to September 30, 1996, the
remaining $125,000 principal amount of the 14% subordinated debentures and
$50,000 principal amount of the 13% subordinated debentures were exchanged for
an aggregate of 96,250 shares of common stock and 26,250 common stock purchase
warrants. The holders of all the debentures exchanged and forgave the payment of
all interest and penalties owing on such indebtedness. The warrants are
exercisable for a period of five years at an exercise price of $2 per share. The
holders of such warrants have the right, subject to certain limitations, to have
the shares of common stock issuable on exercise of such warrants included at the
Company's expense in any registration statement filed by the Company under the
Securities Act of 1993, as amended. The warrants are redeemable by the Company
provided the bid price for the Company's common stock has exceeded $5 per share
on twenty consecutive trading days ending on the trading day prior to the date
on which the notice of redemption is given.
On October 25, 1996 the Company completed the private sale to twelve
investors of an aggregate of 600,000 shares of Common Stock and realized gross
proceeds of $750,000. Each of the investors represented to the Company that he
or she was an "accredited investor" as defined under Regulation D under the
Securities Act of 1993, as amended (the "Act"), that the securities were
purchased for his or her own account for investment and not with a view toward
resale or distribution and agreed that the certificate for the shares would bear
a legend indicating the restriction on the further transfer of such shares
without compliance with the Act. The Company paid $75,000 to the placement agent
in the transaction and paid an additional $22,500 for the non-accountable
expenses of the placement agent. The Company has agreed that the shares of
Common Stock sold to such persons will be included in the next registration
statement filed by the Company under the Act unless the holder elects to have
none or only a portion of his or her shares included, provided, however, the
Company has no obligation to include the securities of any holder if such
holder, at the request of the managing underwriter of such offering, refuses to
agree in writing that he or she will not offer or sell such securities for 180
days after the effective date of such registration statement.
Page 10 of 14 Pages
<PAGE>
PART II -- OTHER INFORMATION
Item 5. Other Information
On November 30 1995, the Company executed a Reorganization Agreement with the
holders of certain debt of the Company whereby the Company converted $656,250 of
the 13% convertible subordinated debentures and $644,168 of notes payable to
affiliates of the Company into an aggregate of 648,151 shares of common stock
and common stock purchase warrants. In September, 1996, the holders of an
aggregate of $393,750 principal amount of the Company's outstanding 13%
convertible subordinated debentures and $775,000 principal amount of the
Company's outstanding 14% subordinated debentures exchanged such debentures for
an aggregate of 689,375 shares of common stock and 179,062 common stock purchase
warrants. All of such debentures had been in default. Accordingly, at September
30, 1996 an aggregate of $125,000 principal amount of the 14% subordinated
debentures remained outstanding, all of which were in default, and an aggregate
of $50,000 principal amount of the 13% subordinated debentures remained
outstanding, all of which were in default. Subsequent to September 30, 1996, the
remaining $125,000 principal amount of the 14% subordinated debentures and
$50,000 principal amount of the 13% subordinated debentures were exchanged for
an aggregate of 96,250 shares of common stock and 26,250 common stock purchase
warrants. The holders of all the debentures exchanged and forgave the payment of
all interest and penalties owing on such indebtedness. The warrants are
exercisable for a period of five years at an exercise price of $2 per share. The
holders of such warrants have the right, subject to certain limitations, to have
the shares of common stock issuable on exercise of such warrants included at the
Company's expense in any registration statement filed by the Company under the
Securities Act of 1993, as amended. The warrants are redeemable by the Company
provided the bid price for the Company's common stock has exceeded $5 per share
on twenty consecutive trading days ending on the trading day prior to the date
on which the notice of redemption is given.
On October 25, 1996 the Company completed the private sale to twelve
investors of an aggregate of 600,000 shares of Common Stock and realized gross
proceeds of $750,000. Each of the investors represented to the Company that he
or she was an "accredited investor" as defined under Regulation D under the
Securities Act of 1993, as amended (the "Act"), that the securities were
purchased for his or her own account for investment and not with a view toward
resale or distribution and agreed that the certificate for the shares would bear
a legend indicating the restriction on the further transfer of such shares
without compliance with the Act. The Company paid $75,000 to the placement agent
in the transaction and paid an additional $22,500 for the non-accountable
expenses of the placement agent. The Company has agreed that the shares of
Common Stock sold to such persons will be included in the next registration
statement filed by the Company under the Act unless the holder elects to have
none or only a portion of his or her shares included, provided, however, the
Company has no obligation to include the securities of any holder if such
holder, at the request of the managing underwriter of such offering, refuses to
agree in writing that he or she will not offer or sell
Page 11 of 14 Pages
<PAGE>
such securities for 180 days after the effective date of such registration
statement.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Current Reports on Form 8-K during the
quarter for which this Quarterly Report on Form 10-QSB is
filed.
No other Items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-QSB.
Page 12 of 14 Pages
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLACK WARRIOR WIRELINE CORP.
----------------------------
(Registrant)
Date: November 12, 1996 /s/ William L. Jenkins
---- ---------------------------
William L. Jenkins
President and Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
Page 13 of 14 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 163,154
<SECURITIES> 0
<RECEIVABLES> 1,297,760
<ALLOWANCES> (123,525)
<INVENTORY> 177,499
<CURRENT-ASSETS> 1,662,891
<PP&E> 5,217,521
<DEPRECIATION> (3,596,444)
<TOTAL-ASSETS> 3,289,740
<CURRENT-LIABILITIES> 1,753,672
<BONDS> 175,000
0
0
<COMMON> 725
<OTHER-SE> (583,393)
<TOTAL-LIABILITY-AND-EQUITY> 3,289,740
<SALES> 2,053,346
<TOTAL-REVENUES> 5,200,094
<CGS> 0
<TOTAL-COSTS> 5,344,115
<OTHER-EXPENSES> 4,611,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 312,364
<INCOME-PRETAX> 176,090
<INCOME-TAX> (595,713)
<INCOME-CONTINUING> (59,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,014,758
<CHANGES> 0
<NET-INCOME> 1,786,561
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>