Delaware
|
39-0126090
|
(State
or Other Jurisdiction of Incorporation or
Organization)
|
(I.R.S.
Employer Identification
No.)
|
Joseph P. Bartlett, Esq. |
Alan B. Spatz, Esq. |
Greenberg Glusker Fields Claman |
Troy & Gould Professional Corporation |
Machtinger & Kinsella LLP |
1801 Century Park East, 16th Floor |
1900 Avenue of the Stars, Suite 2100 |
Los Angeles, California 90067-2367 |
Los Angeles, California 90067 |
(310) 789-1231 |
(310) 201-7481 |
SUBJECT TO COMPLETION, DATED AUGUST 15, 2005
14,080,290
Shares Of Common Stock
The date of this prospectus is ___________________, 2005
TABLE OF CONTENTS
Page |
|
Prospectus
Summary
|
1 |
Risk
Factors
|
4 |
Dividend Policy
|
10 |
Special Note Regarding Forward-Looking Statements |
10 and 13 |
Use
of Proceeds
|
10 |
Price Range of Common Stock |
11 |
Capitalization
|
12 |
Selected
Historical Financial Information
|
14 |
Management's
Discussion and Analysis of Financial Condition and Results of Operations
|
16 |
Business
|
34 |
Management
|
42 |
Transactions
with Selling Stockholders and Other Related Parties
|
50 |
Description
of Capital Stock
|
53 |
Principal Holders of Common Stock |
56 |
Selling
Stockholders Table
|
58 |
Plan
of Distribution
|
63 |
Where
You Can Find More Information
|
64 |
Legal
Matters
|
64 |
Experts
|
65 |
Certain
Definitions
|
66 |
Index
to Financial Statements
|
F-1 |
| Directional Drilling Services. We provide directional, horizontal and measurement while drilling services to oil and gas exploration companies. Our teams of experienced personnel utilize state of the art tools to provide services including well planning and engineering to meet drilling performance and geological or reservoir targets set by the customer, directional drilling tool configuration, well site directional drilling supervision and guidance, new well and reentry drilling, steerable drilling and logging while drilling services. Our directional drilling services segment had revenues and operating income of $24.8 million and $3.1 million, respectively, in the year December 31, 2004 and had revenues and operating income of $20.8 million and $3.4 million, respectively, in the six months ended June 30, 2005. | |
| Casing and Tubing Services. We provide specialized equipment and trained operators to install casing and tubing, change out drill pipe and retrieve production tubing for both onshore and offshore drilling and workover operations. Our casing and tubing services segment had revenues and operating income of $10.4 million and $3.2 million, respectively, in the year ended December 31, 2004 and had revenues and operating income of $7.5 million and $2.7 million, respectively, in the six months ended June 30, 2005. | |
| Compressed Air Drilling Services. We provide compressed air and related products and services for the air drilling, workover, completion, and transmission segments of the oil and natural gas industries. Our compressed air drilling services segment had revenues and operating income of $11.6 million and $1.2 million, respectively, in the year ended December 31, 2004 and had revenues and operating income of $9.0 million and $1.5 million, respectively, in the six months ended | |
1
June 30, 2005. In July 2005, we acquired the compressed air drilling assets of W.T. Enterprises, Inc. | ||
| Production Services. We supply specialized equipment and trained operators to install capillary tubing and coiled tubing up to depths of approximately 20,000 feet to inject chemicals to increase production from oil and gas wells, typically without interrupting production, for both onshore and offshore producing wells. Our production services segment was established with the acquisition of Downhole Injection Systems, LLC in December 2004, and the acquisition of Capcoil Tubing Services, Inc. in May 2005. For the six months ended June 30, 2005, the production services segment had revenues of $3.6 million and a slight operating loss of $2,000. | |
| Rental Tools. We provide specialized rental equipment for both onshore and offshore drilling and workover operations. Our rental tools segment was established with the acquisition of Safco-Oil Field Products, Inc. in September 2004 and of Delta Rental Service, Inc. in April 2005. For the six months ended June 30, 2005, the rental tools segment had revenues of $1.9 million and operating income of $0.3 million. | |
2
About The Offering
Common stock to be offered by the selling
stockholders from time to time, assuming the exercise of all outstanding
options and warrants held by the selling stockholders are exercised |
14,080,290 shares |
|
Common stock to be offered by the selling
stockholders from time to time, assuming no exercise of outstanding
options and warrants held by the selling stockholders are exercised |
12,869,490 shares |
|
Shares outstanding prior to the offering |
14,022,800 shares as of August 12, 2005. |
|
Shares outstanding after the offering,
assuming the exercise of outstanding options and warrants held by the
selling stockholders |
16,739,098 |
|
Use of proceeds |
We
will not receive any proceeds from the sale of shares by the selling
stockholders. |
|
Dividend Policy |
We
do not intend to declare or pay dividends in the foreseeable future.
Instead, we generally intend to invest any future earnings in our
business. |
|
Risk factors |
Please
read "Risk
Factors" for a discussion of factors you should consider carefully
before
deciding to invest in shares of our common stock. |
|
American
Stock
Exchange trading symbol |
ALY |
|
The number of shares outstanding after the offering includes the
following shares being registered for resale pursuant to the
registration statement of which this prospectus is a part: 12,869,490 shares of currently outstanding common stock,
1,210,800 shares which may be issued upon the exercise of outstanding options
to
purchase common stock, and 1,505,498 shares which may be issued upon the
exercise of outstanding warrants to purchase common stock. |
3
| economic conditions in the United States and elsewhere; | |
| changes in global supply and demand for oil and natural gas; | |
| the level of production of the Organization of Petroleum Exporting Countries, commonly called OPEC; | |
| the level of production of non-OPEC countries; | |
| the price and quantity of imports of foreign oil and natural gas; | |
| political conditions, including embargoes, in or affecting other oil and natural gas producing activities; | |
| the level of global oil and natural gas inventories; and | |
| advances in exploration, development and production technologies. |
4
| curtailment of services | |
| weather-related damage to equipment resulting in suspension of operations; | |
| weather-related damage to our facilities; | |
| inability to deliver materials to jobsites in accordance with contract schedules; and | |
| loss of productivity. |
5
| impair our ability to obtain additional financing; | |
| make us more vulnerable to economic downturns and declines in oil and natural gas prices and declines in drilling activities; and | |
| make us more vulnerable to increases in interest rates. |
6
| our ability to obtain financing; | |
| the competitive environment for acquisitions; and | |
| the integration and synergy issues described in the next two risk factors. |
7
| Chief Executive Officer and Chairman Munawar H. Hidayatallah; and | |
| President and Chief Operating Officer David Wilde. |
| terrorist acts, war and civil disturbances; |
8
| changes in laws or policies regarding the award of contracts; and | |
| the inability to collect or repatriate income or capital. |
Sales of substantial amounts of shares of common stock in the public market could have an adverse effect on the market value of our common stock. The registration statement of which this prospectus is a part registers the resale of approximately 11.5 million shares of our currently outstanding common stock and approximately 2.7 million shares of common stock which may be issued upon exercise of options and warrants. Most other outstanding shares of common stock are freely tradable. Market sales of common stock or the availability of common stock may reduce the price of the common stock. In addition, this downward pressure could encourage holders of our common stock to engage in short sales of common stock, which could further reduce the market price of our common stock. See Description of Common Stock - Shares Eligible for Future Sale.
9
10
Year Ended | ||||||||
December 31, 2003 | ||||||||
High | Low | |||||||
First Quarter
|
$ | 4.50 | $ | 0.55 | ||||
Second Quarter
|
5.00 | 2.25 | ||||||
Third Quarter
|
4.50 | 2.60 | ||||||
Fourth Quarter
|
6.00 | 2.60 |
Year Ended | ||||||||
December 31, 2004 | ||||||||
High | Low | |||||||
First Quarter
|
$ | 10.05 | $ | 2.55 | ||||
Second Quarter
|
10.25 | 4.25 | ||||||
Third Quarter
|
9.75 | 4.75 | ||||||
Fourth Quarter
|
5.40 | 3.25 |
Year Ended | ||||||||
December 31, 2005 | ||||||||
High | Low | |||||||
First Quarter
|
$ | 7.25 | $ | 3.64 | ||||
Second Quarter
|
5.22 | 4.38 | ||||||
Third Quarter (through August 12, 2005)
|
14.60 | 5.65 |
11
|
||||
At June 30, 2005
|
||||
Cash
and cash equivalents
|
$
|
2,693
|
||
Long-term
debt, including current maturities(1)
|
$
|
37,890
|
||
Stockholders’
Equity:
|
||||
Common
stock: $0.01 par value, 20,000,000 shares authorized,
14,022,800,
14,022,800 and 15,022,400 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis(2) |
$
|
140
|
||
Additional
paid-in capital
|
42,077
|
|||
Accumulated
deficit
|
(2,022
|
)
|
||
Total
stockholders’ equity
|
$
|
40,195
|
||
Total
capitalization
|
$
|
78,085
|
(1) | The actual long-term debt, including current maturities, consists of $17.9 million of borrowings under our principal credit facility, $13.0 million of borrowings by our subsidiary AirComp LLC, a $3.3 million 7.5% subordinated note payable by our subsidiary Jens Oilfield Service, Inc. and $3.7 million of other debt. We refinanced our principal credit facility and AirComps principal credit facility in July 2005. See Managements Discussion and Analysis of Financial Condition and Results of Operations Recent Developments. The pro forma and pro forma as adjusted long-term debt, including current maturities, include (a) borrowings under our new bank facilities of approximately $13.1 million to fund the cash required to acquire M-Is interest in AirComp and W.T. Enterprises, Inc., and (b) a subordinated note in the amount of $4.0 million issued to M-I as partial consideration for its interest in AirComp, which additional debt was partially offset by the assignment to us by M-I of a subordinated note in the principal amount of $4.8 million issued by AirComp to M-I. |
(2) | On August 11, 2005, our stockholders approved an amendment to our certificate of incorporation to increase our authorized shares to 100,000,000 shares of common stock and 25,000,000 shares of preferred stock. |
12
13
Six Months Ended | ||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | |||||||||||||||||||||||||||
2000 | 2001(1) | 2002 | 2003 | 2004 | 2004 | 2005 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||||||
STATEMENT OF OPERATIONS AND OTHER INFORMATION:
|
||||||||||||||||||||||||||||
Revenues
|
$ | | $ | 4,796 | $ | 17,990 | $ | 32,724 | $ | 47,726 | $ | 21,083 | $ | 42,922 | ||||||||||||||
Cost of revenues
|
| 3,331 | 14,640 | 24,029 | 35,300 | 15,947 | 30,482 | |||||||||||||||||||||
Gross profit
|
| 1,465 | 3,350 | 8,695 | 12,426 | 5,136 | 12,440 | |||||||||||||||||||||
General and administrative expense
|
383 | 2,898 | 3,792 | 6,169 | 8,011 | 2,956 | 7,279 | |||||||||||||||||||||
Personnel restructuring costs
|
| | 495 | | | | | |||||||||||||||||||||
Abandoned acquisition/private placement costs
|
244 | | 233 | | | | | |||||||||||||||||||||
Post-retirement medical costs
|
| (98 | ) | (99 | ) | 188 | | | ||||||||||||||||||||
Total operating expenses
|
627 | 2,898 | 4,422 | 6,070 | 8,199 | 2,956 | 7,279 | |||||||||||||||||||||
Income (loss) from operations
|
(627 | ) | (1,433 | ) | (1,072 | ) | 2,625 | 4,227 | 2,180 | 5,161 | ||||||||||||||||||
Other income (expense):
|
||||||||||||||||||||||||||||
Interest income
|
| 41 | 49 | 3 | 32 | | | |||||||||||||||||||||
Interest expense
|
| (869 | ) | (2,256 | ) | (2,467 | ) | (2,808 | ) | (1,068 | ) | (1,166 | ) | |||||||||||||||
Factoring costs on note receivable
|
| | (191 | ) | | | | | ||||||||||||||||||||
Settlement on lawsuit
|
| | | 1,034 | | | 103 | |||||||||||||||||||||
Gain on sale of interest in AirComp
|
| | | 2,433 | | | | |||||||||||||||||||||
Other
|
| (12 | ) | (40 | ) | 12 | 272 | 205 | 55 | |||||||||||||||||||
Total other income (expense)
|
| (840 | ) | (2,438 | ) | 1,015 | (2,504 | ) | (863 | ) | (1,008 | ) | ||||||||||||||||
Net income (loss) before income taxes and minority interest
|
(627 | ) | (2,273 | ) | (3,510 | ) | 3,640 | 1,723 | 1,317 | 4,153 | ||||||||||||||||||
Minority interests in income of subsidiaries
|
| | (189 | ) | (343 | ) | (321 | ) | (212 | ) | (488 | ) | ||||||||||||||||
Provision for foreign income tax
|
| | (270 | ) | (370 | ) | (514 | ) | (220 | ) | (329 | ) | ||||||||||||||||
Net income (loss) from continuing operations
|
(627 | ) | (2,273 | ) | (3,969 | ) | 2,927 | 888 | 885 | 3,336 |
14
Six Months Ended | |||||||||||||||||||||||||||||
Year Ended December 31, | June 30, | ||||||||||||||||||||||||||||
2000 | 2001(1) | 2002 | 2003 | 2004 | 2004 | 2005 | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||
(Loss) from discontinued operations
|
| (291 | ) | | | | | | |||||||||||||||||||||
(Loss) from sales of discontinued operations
|
| (2,013 | ) | | | | | | |||||||||||||||||||||
Net (loss) from discontinued operations
|
| (2,304 | ) | | | | | | |||||||||||||||||||||
Net income (loss)
|
(627 | ) | (4,577 | ) | (3,969 | ) | 2,927 | 888 | 885 | 3,336 | |||||||||||||||||||
Preferred stock dividend
|
| | (321 | ) | (656 | ) | (124 | ) | (124 | ) | | ||||||||||||||||||
Net income (loss) attributed to common stockholders
|
$ | (627 | ) | $ | (4,577 | ) | $ | (4,290 | ) | $ | 2,271 | $ | 764 | $ | 761 | $ | 3,336 | ||||||||||||
Income (loss) per common share basic
|
|||||||||||||||||||||||||||||
Continuing operations
|
$ | (7.84 | ) | $ | (2.88 | ) | $ | (1.14 | ) | $ | 0.58 | $ | 0.10 | $ | 0.15 | $ | 0.24 | ||||||||||||
Discontinued operations
|
| (2.91 | ) | | | | | | |||||||||||||||||||||
$ | (7.84 | ) | $ | (5.79 | ) | $ | (1.14 | ) | $ | 0.58 | $ | 0.10 | $ | 0.15 | $ | 0.24 | |||||||||||||
Income (loss) per common share diluted
|
|||||||||||||||||||||||||||||
Continuing operations
|
$ | (7.84 | ) | $ | (2.88 | ) | $ | (1.14 | ) | $ | 0.50 | $ | 0.09 | $ | 0.13 | $ | 0.22 | ||||||||||||
Discontinued operations
|
| (2.91 | ) | | | | | | |||||||||||||||||||||
$ | (7.84 | ) | $ | (5.79 | ) | $ | (1.14 | ) | $ | 0.50 | $ | 0.09 | $ | 0.13 | $ | 0.22 | |||||||||||||
Weighted average number of common shares outstanding:
|
|||||||||||||||||||||||||||||
Basic
|
80 | 790 | 3,766 | 3,927 | 7,930 | 5,091 | 13,800 | ||||||||||||||||||||||
Diluted
|
80 | 790 | 3,766 | 5,850 | 9,510 | 6,907 | 14,900 | ||||||||||||||||||||||
As of December 31, | As of | |||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||||
BALANCE SHEET INFORMATION:
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 4 | $ | 152 | $ | 146 | $ | 1,299 | $ | 7,344 | $ | 2,693 | ||||||||||||
Total assets
|
2,360 | 12,465 | 34,778 | 53,662 | 80,192 | 95,299 | ||||||||||||||||||
Long-term debt (including current portion)
|
| 7,856 | 21,221 | 32,233 | 30,473 | 37,890 | ||||||||||||||||||
Stockholders equity
|
2,348 | 1,250 | 1,009 | 4,541 | 35,109 | 40,195 |
(1) | We entered the oil and gas service business in 2001. We sold our last non-oil and gas service business in December 2001, which is reflected in our financial statements for 2001 as a discontinued operation. |
15
16
17
18
Revenues | Income (Loss) from Operations | |||||||||||||||||||||||
Six Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2004 | 2005 | Change | 2004 | 2005 | Change | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Directional drilling services
|
$ | 11,675 | $ | 20,835 | $ | 9,160 | $ | 1,389 | $ | 3,373 | $ | 1,984 | ||||||||||||
Casing and tubing services
|
4,386 | 7,493 | 3,107 | 1,225 | 2,679 | 1,454 | ||||||||||||||||||
Compressed air drilling services
|
5,022 | 9,047 | 4,025 | 594 | 1,529 | 935 | ||||||||||||||||||
Production services
|
| 3,607 | 3,607 | | (2 | ) | (2 | ) | ||||||||||||||||
Rental tools
|
| 1,940 | 1,940 | | 326 | 326 | ||||||||||||||||||
General corporate
|
| | | (1,028 | ) | (2,744 | ) | (1,716 | ) | |||||||||||||||
Total
|
$ | 21,083 | $ | 42,922 | $ | 21,839 | $ | 2,180 | $ | 5,161 | $ | 2,981 | ||||||||||||
Directional Drilling Services Segment |
Casing and Tubing Services Segment |
Compressed Air Drilling Services Segment |
Production Services Segment |
19
20
Revenues | Income (Loss) from Operations | |||||||||||||||||||||||
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||
2003 | 2004 | Change | 2003 | 2004 | Change | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Directional drilling services
|
$ | 16,008 | $ | 24,787 | $ | 8,779 | $ | 1,103 | $ | 3,061 | $ | 1,958 | ||||||||||||
Casing and tubing services
|
10,037 | 10,391 | 354 | 3,628 | 3,217 | (411 | ) | |||||||||||||||||
Compressed air drilling services
|
6,679 | 11,561 | 4,882 | 17 | 1,169 | 1,152 | ||||||||||||||||||
Other services
|
| 987 | 987 | | (67 | ) | (67 | ) | ||||||||||||||||
General corporate
|
| | | (2,123 | ) | (3,153 | ) | (1,030 | ) | |||||||||||||||
Total
|
$ | 32,724 | $ | 47,726 | $ | 15,002 | $ | 2,625 | $ | 4,227 | $ | 1,602 | ||||||||||||
Directional Drilling Services Segment |
Casing and Tubing Services Segment |
21
Compressed Air Drilling Services Segment |
Other Services Segment |
22
Revenues | Income (Loss) from Operations | |||||||||||||||||||||||
2002 | 2003 | Change | 2002 | 2003 | Change | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Directional drilling services
|
$ | 6,529 | $ | 16,008 | $ | 9,479 | $ | (576 | ) | $ | 1,103 | $ | 1,679 | |||||||||||
Casing and tubing services
|
7,796 | 10,037 | 2,241 | 2,495 | 3,628 | 1,133 | ||||||||||||||||||
Compressed air drilling services
|
3,665 | 6,679 | 3,014 | (945 | ) | 17 | 962 | |||||||||||||||||
General corporate
|
| | | (2,046 | ) | (2,123 | ) | (77 | ) | |||||||||||||||
Total
|
$ | 17,990 | $ | 32,724 | $ | 14,734 | $ | (1,072 | ) | $ | 2,625 | $ | 3,697 | |||||||||||
Directional Drilling Services Segment |
23
Casing and Tubing Services Segment |
Compressed Air Drilling Services Segment |
Operating Activities |
24
25
Investing Activities |
Financing Activities |
26
| A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $6.9 million as of June 30, 2005. | |
| A term loan with a principal balance at June 30, 2005 of $5.1 million providing for monthly payments of principal of $105,583. We were also required to prepay this term loan by an amount equal to 20% of the accounts receivables collections from our largest customer in Mexico. | |
| A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility were payable monthly over four years beginning January 2006. Availability of this capital expenditure term loan facility was subject to security acceptable to the lender in the form of equipment or other acquired collateral. Outstanding borrowings under this line of credit were $6.0 million as of June 30, 2005. | |
27
| A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible accounts receivables plus 50% of eligible inventory (up to a maximum of $2.0 million of borrowings based on eligible inventory). This facility will be used to finance working capital requirements and other general corporate purposes, including the issuance of standby letters of credit. | |
| An $18.0 million term loan. | |
| A $24.0 million term loan. |
28
| A $3.5 million bank line of credit of which $520,000 was outstanding at June 30, 2005. Interest accrued at an adjustable rate based on the prime rate. The average interest rate was 7.0% as of June 30, 2005. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line of credit were subject to a borrowing base consisting of 80% of eligible accounts receivable. | |
| A term loan with a remaining principal balance of $6.2 million at June 30, 2005 which accrued interest at an adjustable rate based on either the London Interbank Offered Rate, which is referred to as LIBOR, or the prime rate. The average interest rate was 8.25% as of June 30, 2005. Principal payments of $286,000 plus interest were due quarterly with a final maturity date of June 27, 2007. | |
| A delayed draw term loan facility in the amount of $1.5 million to be used for capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or the prime rate. The loan was to mature on June 27, 2007. The outstanding principal balance was $1.5 million as of June 30, 2005. | |
Payments by Periods | ||||||||||||||||||||
Less than | ||||||||||||||||||||
Contractual Obligations | Total | 1 Year | 2 3 Years | 4 5 Years | After 5 Years | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Notes Payable
|
$ | 30,473 | $ | 5,541 | $ | 17,406 | $ | 7,526 | $ | | ||||||||||
Interest Payments on notes payable
|
2,133 | 316 | 1,470 | 346 | | |||||||||||||||
Operating Lease
|
1,834 | 550 | 813 | 471 | | |||||||||||||||
Employment Contracts
|
2,566 | 1,006 | 1,560 | | | |||||||||||||||
Total Contractual Cash Obligations
|
$ | 37,006 | $ | 7,413 | $ | 21,249 | $ | 8,343 | $ | | ||||||||||
29
On June 22, 2005, we filed a registration statement with the Securities and Exchange Commission pursuant to which we currently anticipate we would sell 1,000,000 shares and selling stockholders would sell 3,819,156 shares of common stock in an underwritten offering. 3,062,173 of the shares sold by selling stockholders would be carried forward from shares that are also being offered pursuant to this prospectus. In addition to the foregoing, if the underwriters exercise their over allotment option, we would sell up to an additional 722,873 shares of our common stock. The offering is currently scheduled to close in late August 2005. There can be no assurance that the proposed offering will be consummated.
In July 2005 we acquired the compressed air drilling assets of W. T. Enterprises, Inc., based in south Texas, for $6.0 million. We expect to integrate the compressed air drilling operations of W. T. Enterprises into the other compressed air drilling operations of our AirComp subsidiary.
In July 2005, we acquired from M-I its 45% interest in AirComp and a subordinated note in the principal amount of $4.8 million issued by AirComp, for which we paid M-I $7.1 million in cash and issued to M-I a $4.0 million subordinated note bearing interest at 5% per annum. As a result, we now own 100% of AirComp. The note issued to M-I is convertible into up to 700,000 shares of our common stock at a conversion price equal to the market value of the common stock at the time of conversion.
In May 2005, we acquired 100% of the outstanding capital stock of Capcoil Tubing Services, Inc. for $2.7 million, 168,161 shares of our common stock and the payment or assumption of approximately $1.3 million of debt. Capcoil, located in Kilgore, Texas, provides capillary and coil tubing services to enhance production from existing wells. Capcoil had revenues of $5.8 million for the year ended December 31, 2004.
In April 2005, we acquired 100% of the outstanding stock of Delta Rental Service, Inc. for $4.6 million in cash, 223,114 shares of our common stock and two promissory notes totaling $350,000. Delta, located in Lafayette, Louisiana, is a rental tool company providing specialty rental items to the oilfield such as spiral heavy weight drill pipe, test plugs used to test blow-out preventers, well head retrieval tools, spacer spools and assorted handling tools. For the year ended December 31, 2004, Delta had revenues of $3.3 million.
30
31
32
33
34
| Oil and gas exploration and production companies are currently consolidating their supplier base to streamline their purchasing operations and generate economies of scale by purchasing from fewer suppliers; | |
| Producers are favoring larger suppliers that provide a comprehensive list of products and services; | |
| Companies that can meet customers demands will continue to earn new and repeat business; | |
| Many businesses in the highly fragmented oilfield industry lack sufficient size (many businesses generate annual revenues of less than $15 million), lack depth of management (many businesses are family-owned and managed) and have less sophisticated service and control capabilities; | |
| We can offer customers significant advantages over our smaller competitors; and | |
| Opportunities exist to acquire competing businesses and successfully integrate and enhance their operations within our operating structure. | |
| Consolidation among larger oilfield service providers has created an opportunity for us to compete effectively in certain niche markets which are under-served by the large oilfield service and equipment companies and in which we can provide better products and services than the smaller competitors currently providing a significant portion of the services in this industry. |
35
| Improvement of total cumulative recoverable reserves; | |
| Improved reservoir production performance beyond conventional vertical wells; and | |
| Reduction of the number of field development wells. |
36
37
38
39
40
41
Name | Age | Position | ||||
Munawar H. Hidayatallah
|
61 | Chairman and Chief Executive Officer | ||||
David Wilde
|
50 | President and Chief Operating Officer | ||||
Victor M. Perez
|
52 | Chief Financial Officer | ||||
Theodore F. Pound III
|
51 | General Counsel and Secretary | ||||
Bruce Sauers
|
41 | Vice President and Corporate Controller | ||||
Todd C. Seward
|
43 | Vice President Corporate Systems | ||||
Alya H. Hidayatallah
|
30 | Vice President Planning and Development | ||||
Terrence P. Keane
|
53 | President and Chief Executive Officer of AirComp | ||||
David K. Bryan
|
47 | President and Chief Executive Officer of Strata | ||||
Jens H. Mortensen, Jr.
|
52 | Vice Chairman | ||||
John E. McConnaughy, Jr.
|
76 | Director(1) | ||||
Victor F. Germack
|
65 | Director(1) | ||||
David A. Groshoff
|
33 | Director(1) | ||||
Thomas E. Kelly
|
50 | Director(2) | ||||
Thomas O. Whitener, Jr.
|
58 | Director(2)(3) | ||||
Robert E. Nederlander
|
72 | Director(3) | ||||
Jeffrey R. Freedman
|
58 | Director | ||||
Leonard Toboroff
|
72 | Vice Chairman |
(1) | Member of Audit Committee |
(2) | Member of Compensation Committee |
(3) | Member of Nominating Committee |
42
43
44
45
Long Term | ||||||||||||||||||||
Compensation | ||||||||||||||||||||
Annual Compensation | Awards Securities | |||||||||||||||||||
Other Annual | Underlying | |||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Compensation(1) | Options/SARS (#) | |||||||||||||||
Munawar H. Hidayatallah,
|
2004 | 337,500 | 580,000 | (2) | 3,375 | | ||||||||||||||
Chairman & Chief Executive Officer
|
2003 | 300,000 | (3) | 81,775 | 3,000 | 400,000 | ||||||||||||||
2002 | 294,666 | (4) | 143,000 | | | |||||||||||||||
David Wilde,
|
2004 | 200,000 | 188,364 | 1,672 | 110,000 | |||||||||||||||
President and Chief Operating
|
2003 | 187,626 | 30,000 | 1,876 | 100,000 | |||||||||||||||
Officer(5)
|
2002 | 146,393 | | | | |||||||||||||||
Jens H. Mortensen, Jr.,
|
2004 | 150,000 | | 1,500 | | |||||||||||||||
Vice-Chairman(6)
|
2003 | 150,000 | | 1,500 | 100,000 | |||||||||||||||
2002 | 137,500 | | | | ||||||||||||||||
Terrence P. Keane,
|
2004 | 153,508 | 50,000 | | | |||||||||||||||
President and Chief Executive Officer
|
2003 | 72,086 | | | | |||||||||||||||
of
AirComp(7)
|
2002 | | | | | |||||||||||||||
Todd C. Seward,
|
2004 | 131,000 | 65,500 | (8) | 650 | | ||||||||||||||
Chief Accounting
Officer(9)
|
2003 | 123,192 | 40,000 | 1,232 | 30,000 | |||||||||||||||
2002 | 35,000 | | | |
(1) | Represents contributions to 401K plans. We match contributions made by all employees up to a maximum 1% of each employees salary. |
(2) | Of this amount $175,000 was paid in 2005. The bonuses awarded to Mr. Hidayatallah for fiscal years 2002 and 2003 were determined pursuant to his 2001 employment agreement, based on acquisitions |
46
completed for fiscal years 2002 and 2003, and the bonus for fiscal year 2004 was based on Mr. Hidayatallahs attaining certain strategic objectives set forth in his 2004 employment agreement (see, Employment Agreements with Management, below). |
(3) | Of this amount, $60,000 was deferred and paid during 2004. |
(4) | Of this amount, $65,000 was deferred and paid during 2003. |
(5) | Mr. Wilde was President and Chief Executive Officer of Strata, one of our subsidiaries, until February 2005 when he was named our President and Chief Operating Officer. |
(6) | Mr. Mortensen served as President of Jens since we acquired Jens in February 2002 until February 2005 and served as our President and Chief Operating Officer from February 2003 until February 2005. |
(7) | Mr. Keane serves as President and Chief Executive Officer of AirComp, LLC and as such is considered an executive officer. |
(8) | Of this amount, $32,500 was paid in 2005. |
(9) | In July 2005, Mr. Seward became our Vice President Corporate Systems. |
Individual Grants | Potential Realizable | |||||||||||||||||||||||
Value at Assumed Annual | ||||||||||||||||||||||||
Number of | % of Exercise | Rates of Stock Price | ||||||||||||||||||||||
Securities | Options/SARs | Exercise | Appreciation for Option | |||||||||||||||||||||
Underlying | Granted to | Price | Terms(3) | |||||||||||||||||||||
Options/SARs | Employees | per Share | Expiration | |||||||||||||||||||||
Name | Granted(1) | in 2004 | ($/Sh)(2) | Date | 5% ($) | 10% ($) | ||||||||||||||||||
David Wilde
|
110,000 | 42.5 | % | $ | 4.85 | 9/23/2014 | $ | 335,515 | $ | 850,965 |
(1) | All options were granted under our 2003 Incentive Stock Plan. All options granted by us to date vest and become exercisable in three equal installments, one of which vested upon the grant of the options and one of which will vest upon each of the first and second anniversaries of the date of grant of option, provided that all options will become fully exercisable upon the occurrence of a change of control (as defined in the 2003 Incentive Stock Plan). At our annual meeting of stockholders scheduled to be held on August 11, 2005, stockholders will be presented with a proposal to increase the number of shares of our common stock that may be granted under our 2003 Incentive Stock Plan from 2,400,000 shares to the lesser of 3,000,000 shares and 15% of the total number of our shares outstanding from time to time on a fully-diluted basis. |
(2) | The exercise price for these options is equal to the fair market value of the common stock on September 28, 2004, the date of grant. The exercise price may be paid in cash or in shares of common stock valued at the fair market value on the exercise date. |
(3) | The 5% and 10% assumed rates of appreciation are prescribed by the rules and regulations of the Securities and Exchange Commission and do not represent our estimate or projection of the future trading prices of our common stock. The calculations assume annual compounding and continued retention of the options or the underlying common stock by the optionee for the full option term of ten years. Unless the market price of the common stock actually appreciates over the option term, no value will be realized by the optionee from these option grants. Actual gains, if any, on stock option exercises are dependent on numerous factors, including, without limitation, the future performance of the Company, overall business and market conditions, and the optionees continued employment with the Company throughout the entire vesting period and option term, which factors are not reflected in this table. |
47
Number of Securities | Value of Unexercised | |||||||||||||||
Underlying Unexercised | In-the-Money | |||||||||||||||
Options/SARs | Options/SARs | |||||||||||||||
at Fiscal Year-End (#) | at Fiscal Year-End ($)(1) | |||||||||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||
Munawar H. Hidayatallah
|
266,667 | 133,333 | 573,348 | 286,674 | ||||||||||||
Jens H. Mortensen, Jr.
|
66,667 | 33,333 | 143,337 | 71,669 | ||||||||||||
David Wilde
|
103,334 | 106,666 | 145,170 | 75,335 | ||||||||||||
Terrence P. Keane
|
| | | | ||||||||||||
Todd C. Seward
|
20,000 | 10,000 | 43,000 | 21,500 |
(1) | Based on a value of $4.90 per share, the closing price per share on the American Stock Exchange on December 31, 2004, less the exercise price. |
48
49
50
51
52
Until December 2004, Mr. Hidayatallah was a personal guarantor of substantially all of the financing extended to us by commercial banks. In December 2004, we refinanced most of our outstanding debt and obtained the release of Mr. Hidayatallah's guarantees. Currently, Mr. Hidayatallah guarantees approximately $5.5 million of our outstanding debt. We have agreed to pay Mr. Hidayatallah a guarantee fee equal to one-quarter of one percent of the total amount of the debt guaranteed by Mr. Hidayatallah from time to time. The fee is payable quarterly, in arrears, based upon the average amount of debt outstanding in the prior quarter. During 2004, Mr. Hidayatallah received $48,331 in respect of his guarantee of the Company's debt. During the first three months of 2005, Mr. Hidayatallah received $3,625 in respect of this guarantee.
In April 2004, we entered into an oral consulting agreement with Mr. Toboroff pursuant to which we pay him $10,000 per month to advise us regarding financing and acquisition opportunities.
We leased a yard in Pearsall, Texas, from Mr. Mortensen for which we paid $28,800 rental payments in each of 2004 and 2003. In addition, Mr. Mortensen and members of his family own 100% of Tex-Mex Rental & Supply Co., a Texas corporation, that sold approximately $167,000 and $173,000 of equipment and other supplies to us in 2004 and 2003, respectively.
In October 2004, we hired Theodore F. Pound III as our General Counsel. Prior to joining us, Mr. Pound practiced law at Wilson Cribbs & Goren, P.C., who has served as counsel to the Company since 2001. Mr. Pound has served as lead acquisition counsel in each of our acquisitions since 2001. We incurred legal fees and expenses to Wilson Cribbs & Goren of $149,000 in 2003 and $178,638 in 2004.
Other than the transactions described above or as described in the table below, we had no material relationship with any selling stockholder during the three years preceding the date of this prospectus or other material transactions with our officers, directors or principal stockholders during the three years preceding the date of this prospectus. We believe each of the foregoing transactions between us and our officers and directors was on terms at least as favorable to us as could have been obtained from unrelated third parties.
53
| restricting dividends on the common stock; | |
| diluting the voting power of the common stock; | |
| impairing the liquidation rights of the common stock; and | |
| delaying or preventing a change in control of our Company. |
Sales of substantial amounts of shares of common stock in the public market could have an adverse effect on the market value of our common stock. With the exception of certain shares issued in connection with acquisitions consummated during the past year, substantially all outstanding shares of our common stock are either freely tradable or tradable pursuant to Rule 144 or pursuant to the registration statement described below.
The registration statement of which this prospectus is a part registers the resale of approximately 11.6 million shares of our currently outstanding common stock and approximately 2.7 million shares of common stock which may be issued upon exercise of options and warrants, We issued 1,956,634 shares and 3,504,667 shares in private placements in September and August of 2005, respectively. All of these shares (other than approximately 260,000 shares previously sold pursuant to the registration statement of which this prospectus is a part) are being offered pursuant to this prospectus. In addition the shares sold in August 2004 are currently eligible for sale under Rule 144 and the shares sold in September 2004 will become eligible for sale under Rule 144 in September 2005. Pursuant to Rule 144, shares of our common stock that have been held for at least one year may generally be sold in brokers transactions provided that the amount of shares sold by any stockholder (and the stockholder's transferees under certain circumstances) in any three month period does not exceed the greater of 1% of the outstanding stock (currently approximately 140,000 shares) or the four-week average weekly trading volume of the common stock. Such sales may be effected provided the requirements of Rule 144 are met, including the requirement that at the time of the sale we have filed all reports required to be filed under the Securities and Exchange Act of 1934. Pursuant to Rule 144, shares of our common stock that have been held by persons who are not our affiliates for at least two years may generally be sold without restriction under Rule 144.
Delaware Anti-Takeover Law And Charter And By-Law Provisions
54
55
Beneficial
|
||
Number
of
Shares
|
Ownership
|
|
Beneficially
Owned
|
Percentage
|
|
Energy
Spectrum
(1)
|
7,343,005
|
46.7%
|
Munawar H. Hidallah (2) | 7,343,005 | 46.7% |
Robert
E.
Nederlander (3)
|
7,343,005
|
46.7%
|
Leonard
Toboroff
(4)
|
7,343,005
|
46.7%
|
Thomas
O. Whitener,
Jr. (1)
|
7,343,005
|
46.7%
|
Jeffrey
R. Freedman
(5)
|
119,000
|
*%
|
David
Groshoff
(6)
|
4,000
|
*%
|
Thomas
E. Kelly
(7)
|
94,201
|
*%
|
Jens
H. Mortensen,
Jr. (8)
|
7,343,005
|
46.1%
|
John
E. McConnaughy,
Jar (9)
|
300,000
|
2.1%
|
David
Wilde
(10)
|
175,000
|
*
|
Todd
C. Seward
(11)
|
20,000
|
*
|
All
directors and executive officers as a group (18
persons)(12)
|
7,710,542
|
51.0%
|
Palo
Alto Investors
(13)
|
1,666,667
|
11.9%
|
Steve
Emerson
(14)
|
1,174,000
|
8.4%
|
(1) |
Energy
Spectrum
includes Energy Spectrum Partners LP, a Delaware limited
partnership, the
principal business of which is investments, Energy Spectrum
Capital LP, a
Delaware limited partnership, the principal business of which
is serving
as the general partner of Energy Spectrum Partners LP, Energy
Spectrum
LLC, a Texas limited liability company, the principal business
of which is
serving as the general partner of Energy Spectrum Capital,
and Sidney L.
Tassin, James W. Spann, James P. Benson, Leland B. White
and Thomas O.
Whitener, Jr., executives and principals of the foregoing
persons. The
principal business address of each of the foregoing persons
is 5956 Sherry
Lane, Suite 900, Dallas, Texas 75225. Messrs. Tassin, Spann,
Benson, White
and Whitener are the members and managers of Energy Spectrum
LLC, and
Messrs. Tassin (President), Whitener (Chief Operating Officer)
and Spann
(Chief Investment Officer) are executive officers of Energy
Spectrum LLC.
Messrs. Whitener and Spann are principals of Energy Spectrum
Partners LP's
affiliates and the other persons listed above are also deemed
to
beneficially own the securities held of record by Energy
Spectrum Partners
LP. Energy Spectrum Partners LP is the record owner of 2,311,062
shares of
our common stock, warrants to purchase 262,500 shares of
common stock, and
an option to purchase 6,000 shares of common stock. Energy
Spectrum is
also deemed to beneficially own 4,763,443 shares of common
stock that are
owned by (or that may be obtained within 60 days upon the
exercise of
options and warrants held by) the other parties to the stockholders
agreement described below. Under the rules of the Securities
and Exchange
Commission, all parties to the stockholders agreement may
be deemed to
beneficially own all common stock beneficially owned by each
party to the
stockholders agreement.
|
(2) |
Mr.
Hidayatallah is
the trustee of the Hidayatallah Family Trust, which is the
record owner of
845,000 shares of our common stock, and Mr. Hidayatallah
holds options to
purchase 1,000,000 shares of common stock, of which options
to purchase
466,667 shares are exercisable within 60 days. In addition,
Mr.
Hidayatallah is deemed to beneficially own 6,031,338 shares
of common
stock that are owned by (or may be obtained within 60 days
upon the
exercise of options and warrants held by) the other parties
to the
stockholders agreement described below. Mr. Hidayatallah's
address is 5075
Westheimer, Suite 890, Houston, TX
77056.
56
|
(3)
|
Includes
(a) 446,528
shares of common stock owned directly by Mr. Nederlander
or by RER Corp.
or QEN Corp., corporations controlled by Mr. Nederlander,
(b) currently
exercisable options and warrants to purchase 269,066 shares
of common
stock owned directly by Mr. Nederlander or RER Corp., and
(c) 6,627,411
shares of common stock that are owned by (or may be obtained
within 60
days upon the exercise of options and warrants held by) the
other parties
to the stockholders agreement described below. Mr. Nederlander's
address
is 1450 Broadway, Suite 2001, New York, NY
10018.
|
(4) |
Includes
(a) 326,527
shares of common stock owned directly by Mr. Toboroff or
Lenny Corp., a
corporation wholly-owned by Mr. Toboroff, (b) currently exercisable
options and warrants to purchase 369,066 shares of common
stock owned
directly by Mr. Toboroff, and (c) 6,647,412 shares of common
stock that
are owned by (or may be obtained within 60 days upon the
exercise of
options and warrants held by) the other parties to the stockholders
agreement described below. Mr. Toboroff's address is 1450
Broadway, Suite
2001, New York, NY 10018.
|
(5) |
Includes
16,000
shares that may be issued upon the exercise of warrants owned
by Mr.
Freedman. Mr. Freedman's address is 123 Via Verde Way, Palm
Beach, FL
33418.
|
(6) |
Includes
2,000
shares of common stock and currently exercisable options
to purchase 2,000
shares of common stock owned by Mr. Groshoff Mr. Groshoff's
address is
8044 Montgomery Rd., Suite 480, Cincinnati, OH
45236.
|
(7) |
Mr.
Kelly's address
is 450 North Marienfield, Suite 200, Midland, TX
79701.
|
(8) |
Includes
(a)
1,565,591 shares of common stock owned of record by Mr. Mortensen,
(b)
options to purchase 100,000 shares of common stock, of which
options to
purchase 66,667 shares are exercisable within 60 days, and
(c) 5,775,747
shares of common stock that are owned by (or may be obtained
within 60
days upon the exercise of options and warrants held by) the
other parties
to the stockholders agreement described below. Mr. Mortensen's
address is
5075 Westheimer, Suite 890, Houston, TX
77056.
|
(9) |
Includes
300,000
shares of common stock owned by Mr. McConnaughy. Mr. McConnaughy's
address
is 2 Parklands Drive, Darien, CT
06820.
|
(10) |
Includes
5,000
shares of common stock owned by Mr. Wilde and 170,000 shares
of common
stock which may be obtained upon exercise of an option granted
under our
2003 Incentive Stock Plan. Mr. Wilde's address is 5075 Westheimer,
Suite
890, Houston, TX 77056.
|
(11) |
Includes
20,000
shares of common stock which may be obtained upon exercise
of an option
granted under our 2003 Incentive Stock Plan. Mr. Sewards'
address is 5075
Westheimer, Suite 890, Houston, TX
77056.
|
(12) |
Includes
the shares
described in Notes (1) through
(11).
|
(13) |
Consists
of 920,000
shares, 666,667 shares and 80,000 shares owned by Micro Cap
Partners,
L.P., UBTI Free, L.P. and Palo Alto Global Energy Fund, L.P.,
respectively. Palo Alto Investors, LLC acts as the general
partner of
Micro Cap Partners, L.P., UBTI Free, L.P. and Palo Alto Global
Energy
Fund, L.P. Palo Alto Investors, Inc. is the manager of Palo
Alto
Investors, LLC, and William L. Edwards is the President of
Palo Alto
Investors, Inc. Palo Alto Investors, LLC, Palo Alto Investors,
Inc. and
William L. Edwards each have investment and voting authority
with respect
to the shares owned by this stockholder. The business address
for each of
theses persons is 470 University Avenue, Palo Alto, CA
94301.
|
(14) |
Consists
of 528,000
shares, 400,000 shares and 50,000 shares owned by J. Steven
Emerson IRA RO
II, Bear Stearns Securities Corporation, Custodian, J. Steven
Emerson Roth
IRA, Bear Stearns Securities Corporation, Custodian and Emerson
Partners,
Bear Stearns Securities Corporation, Custodian, respectively.
J. Steven
Emerson has investment and voting authority with respect
to the shares
owned by J. Steven Emerson IRA RO II, Bear Stearns Securities
Corporation,
Custodian, J. Steven Emerson Roth IRA, Bear Stearns Securities
Corporation, Custodian and Emerson Partners, Bear Stearns
Securities
Corporation, Custodian. Mr. Emerson's business address is
1522 Ensley
Avenue, Los Angeles, CA 90024.
|
57
PERCENTAGE
OF
|
||||
COMMON
STOCK
|
COMMON
STOCK
|
COMMON
STOCK
|
||
COMMON
STOCK
|
BEING
OFFERED
|
OWNED
UPON
|
OWNED
UPON
|
|
OWNED
PRIOR
TO
|
PURSUANT
TO
THIS
|
COMPLETION
OF
|
COMPLETION
OF
|
|
NAME
|
THE
OFFERING
|
PROSPECTUS
|
THIS
OFFERING
|
THIS
OFFERING (1)
|
Bear
Stearns
Securities Corp.,
Custodian J. Steven Emerson Roth IRA (2) |
596,000 |
596,000 |
0 |
-- |
Bear
Stearns
Securities Corp.,
Custodian J. Steven Emerson Roth IRA R.O. II (3) |
528,000 |
528,000 |
0 |
-- |
Bear
Stearns
Securities Corp.,
Custodian Emerson Partners (4) |
50,000 |
50,000 |
0 |
-- |
Energy
Spectrum
Partners, LP (5)
|
2,579,562
|
2,579,562
|
0
|
--
|
Christopher
Engel
(6)
|
177,411
|
177,411
|
0
|
--
|
Donald
Engel
(7)
|
212,893
|
212,893
|
0
|
--
|
Engle
Defined
Benefit Plan (8)
|
83,027
|
83,027
|
0
|
--
|
Jeffrey
Freedman
(9)
|
119,000
|
119,000
|
0
|
--
|
GSSF
Master Fund, LP
(10)
|
152,967
|
152,967
|
0
|
--
|
Hidayatallah
Family
Trust (11)
|
845,000
|
845,000
|
0 |
-- |
Munawar
H.
Hidayatallah (12)
|
1,000,000
|
1,000,000
|
0
|
-- |
Nadia
Hidayatallah
|
5,000
|
5,000
|
0
|
--
|
Alya
Hidayatallah
|
5,000
|
5,000
|
0
|
--
|
Yasmin
Indrizzo
|
3,800
|
3,800
|
0
|
--
|
Lenny
Corp.
(13)
|
17,862
|
17,862
|
0 |
-- |
MK Employee
Early Stage Fund, L.P.
|
36,600
|
36,600
|
0
|
--
|
May
Management, Inc.
|
||||
Bank of California, Custodian(15) | 10,000 | 10,000 | 0 | -- |
Micro Cap Partners, L.P.(16) | 920,000 | 920,000 | 0 | -- |
Morgan Joseph & Co. Inc.(17) | 340,000 | 340,000 | 0 | -- |
Jens H. Mortensen (18) | 1,665,591 | 1,665,591 | 0 | -- |
Robert Nederlander (19) | 174,400 | 174,400 | 0 | -- |
Palo Alto Global Energy Fund, L.P.(20) | 666,667 | 666,667 | 0 | -- |
58
PERCENTAGE
OF
|
||||
COMMON
STOCK
|
COMMON
STOCK
|
COMMON
STOCK
|
||
COMMON
STOCK
|
BEING
OFFERED
|
OWNED
UPON
|
OWNED
UPON
|
|
OWNED
PRIOR
TO
|
PURSUANT
TO
THIS
|
COMPLETION
OF
|
COMPLETION
OF
|
|
NAME
|
THE
OFFERING
|
PROSPECTUS
|
THIS
OFFERING
|
THIS
OFFERING (1)
|
The
Pension Benefit Guaranty Corporation(21) |
117,020 |
117,020 |
0 |
-- |
QEN,
Inc.
(22)
|
17,862
|
17,862
|
0
|
-- |
RER
Corp. (23)
|
523,332
|
523,332
|
0
|
--
|
Morgan Keegan
Early Stage Fund,
L.P. (24) |
10,000 |
10,000 |
0 |
-- |
Strauss-GEPT
Partners, LP(26)
|
133,333
|
133,333
|
0
|
--
|
Strauss
Partners,
L.P.(27)
|
200,000
|
200,000
|
0
|
--
|
Leonard
Toboroff(28)
|
577,732
|
577,732
|
0
|
--
|
UBTI
Free, L.P.(29)
|
80,000
|
80,000
|
Wells
Fargo Credit,
Inc. (30) |
20,000
|
20,000
|
0
|
--
|
Wells
Fargo Energy
Capital, Inc.(31) |
67,000
|
67,000
|
0
|
--
|
Basic
Energy
Limited(32) |
420,667
|
420,667
|
0
|
--
|
Milton
H. Dresner
Revocable Living Trust(33) |
51,125 |
50,000 |
1,125 |
-- |
Joseph
S.
Dresner(34) |
51,125
|
50,000
|
1,125
|
--
|
Waverly
Limited
Partnership(35) |
100,000
|
100,000
|
0
|
--
|
Rosebury,
L.P.(36) |
117,300
|
117,300
|
0
|
--
|
Meteoric,
L.P.(36) |
104,400
|
104,400
|
0
|
--
|
Barbara
C.
Crane |
2,700
|
2,700
|
0
|
--
|
Bristol Investment Fund, Ltd.(37)
|
461,000
|
461,000
|
0
|
--
|
The
Schmieding Foundation(38) |
100,000
|
100,000
|
0
|
--
|
Meadowbrook Opportunity Fund LLC(39) |
180,000
|
180,000
|
0
|
--
|
Kenneth
Malkes(40) |
6,667
|
6,666
|
0
|
--
|
John
E.
McConnaughy |
300,000
|
300,000
|
0
|
--
|
Bestin
Worldwide
Limited |
100,000
|
100,000
|
0
|
--
|
Theodore
F. Pound
III |
5,000
|
5,000
|
0
|
--
|
Dave
Wilde |
5,000
|
5,000
|
0
|
--
|
Dick
Backset |
5,000
|
5,000
|
0
|
--
|
David
K.
Bryan |
12,000
|
12,000
|
0
|
--
|
James
Davey |
3,000
|
3,000
|
0
|
--
|
59
(1)
|
Percentage
ownership
is based upon 14,022,800 shares of common stock of the Registrant
issued
and outstanding as of the date of this prospectus.
|
(2)
|
J.
Steven Emerson
exercises investment and voting authority over the shares
owned by this
selling stockholder. |
(3)
|
J.
Steven Emerson
exercises investment and voting authority over the shares
owned by this
selling stockholder. |
(4)
|
J.
Steven Emerson
exercises investment and voting authority over the shares
owned by this
selling stockholder. |
(5)
|
Includes
2,311,062
shares owned by this selling stockholder and 262,500 shares
which may be
issued upon the exercise of warrants owned by this selling
stockholder
with an exercise price of $0.75. The warrants expire in February
2013 and
6,000 shares which may be sold upon the exercise of options
issued for
this selling stockholder with an exercise price of $2.75
per share,
expiring in 2013. Thomas O. Whitener, Jr., an executive of
Energy
Spectrum, serve as one of our directors. Energy Spectrum
Capital LP, a
Delaware limited partnership, serves as the general partner
of Energy
Spectrum Partners LP. Energy Spectrum LLC, a Texas limited
liability
company, serves as the general partner of Energy Spectrum
Capital LP.
Sidney L. Tassin, James W. Spann, James P. Benson, Leland
B. White and
Thomas O. Whitener, Jr., are executives and principals of
Energy Spectrum
Capital LP and are the members and managers of Energy Spectrum
LLC.
Messrs. Tassin (President), Whitener (Chief Operating Officer)
and Spann
(Chief Investment Officer) are also the executive officers
of Energy
Spectrum LLC. Energy Spectrum Capital LP, Energy Spectrum
LLC, and Messrs.
Tassin, Spann, Benson, White and Whitener exercise investment
and voting
authority with respect to the shares owned by this selling
stockholder. |
(6)
|
Includes
77,461
shares owned by this selling stockholder and 99,950 shares
which may be
issued upon the exercise of warrants owned by this selling
stockholder
with an exercise price of $2.50 per share. These warrants
expire on April
1, 2006.
|
(7)
|
Includes
92,953
shares owned by this selling stockholder and 119,940 shares
which may be
issued upon the exercise of warrants owned by this selling
stockholder
with an exercise price of $2.50 per share. These warrants
expire on April
1, 2006.
|
(8)
|
Includes
36,251
shares owned by this selling stockholder and 46,776 shares
which may be
issued upon the exercise of warrants owned by this selling
stockholder
with an exercise price of $2.50 per share. These warrants
expire on April
1, 2006. Chris Engel exercises investment and voting authority
with
respect to securities owned by Engel Defined Benefit
Plan
|
(9)
|
Includes
103,000
shares owned by this selling stockholder and 16,000 shares
which may be
issued upon the exercise of warrants owned by this selling
stockholder
with an exercise price of $4.65 per share. These warrants
expire in May
2009.
|
(10)
|
E.B.
Lyon IV
exercises investment and voting authority with respect to
the securities
owned by this selling stockholder.
|
(11)
|
Mr.
Hidayatallah,
our Chief Executive Officer and Chairman, exercises investment
and voting
authority with respect to 875,000 shares of common stock
owned by the
Hidayatallah Family Trust.
|
(12)
|
Represents
options
to purchase 1,000,000 shares issued pursuant to our 2003
Incentive Stock
Plan. Options to purchase 400,000 shares have an exercise
price of $2.75
per share and expire in December 2013. Options to purchase
600,000 shares
have an exercise price of $3.86 per share and expire in February
2015. The
options are currently exercisable with respect to 466,667
shares.
|
(13)
|
Includes
17,862
shares owned by this selling stockholder. Leonard Toboroff,
one of our
directors and selling stockholder, is the sole director and
officer of
this selling stockholder and exercises investment and voting
authority
with respect to the securities owned by this selling stockholder.
(14)
Gerald Lisac exercises investment and voting authority with
respect to the
securities owned by this selling stockholder.
|
(14) |
Merchant Bankers,
Inc. is the general partner of this selling stockholder.
Merchant Bankers, Inc., its Chairman, Alan B. Morgan, its
President, Minor Perkins, and its Secretary and Treasurer,
Joseph C. Wells, exercise investment and voting authority
with respect to the securities owned by this selling
stockholder. |
(15)
|
May
Management,
Inc., its President, Roger May, and its Chairman, Earl May,
exercise
investment and voting authority with respect to the securities
owned by
this selling stockholder.
|
(16)
|
Palo
Alto Investors,
LLC, Palo Alto Investors Inc. and William L. Edwards exercise
investment
and voting authority with respect to the securities owned
by this selling
stockholder. Palo Alto Investors, LLC is the general partner
of this
selling stockholder. Palo Alto Investors, Inc. is the Manager
of Palo Alto
Investors, LLC. William L. Edwards is the President of Palo
Alto
Investors, Inc.
|
60
(17)
|
Represents
shares
which may be issued upon the exercise of warrants issued
to this selling
stockholder. The warrants are exercisable for $2.50 per share
and expire
in February 2009.
|
(18)
|
Includes
1,565,591
shares owned by Mr. Mortensen and 100,000 shares which may
be issued upon
the exercise of options granted to Mr. Mortensen pursuant
to our 2003
Incentive Stock Plan. The options have an exercise price
of $2.75 and
expire in December 2013. The options are currently exercisable
with
respect to 33,333 shares, and will become exercisable with
respect to an
additional 33,333 shares in each of December 2004 and December
2005.
|
(19)
|
Includes
172,000
shares owned by this selling stockholder and 2,400 shares
which may be
issued upon the exercise of options owned by this selling
stockholder.
Options to purchase 400 shares have an exercise price of
$13.75 per share
and expire in March 2010. Options to purchase 2,000 shares
have an
exercise price of $2.75 per share and expire in December
2013.
|
(20)
|
Palo
Alto Investors,
LLC, Palo Alto Investors Inc. and William L. Edwards exercise
investment
and voting authority with respect to the securities owned
by this selling
stockholder. Palo Alto Investors, LLC is the general partner
of this
selling stockholder. Palo Alto Investors, Inc. is the Manager
of Palo Alto
Investors, LLC. William L. Edwards is the President of Palo
Alto
Investors, Inc.
|
(21)
|
J.P. Morgan
Investment Management, Inc. and its officers, James P. Shanahan, Jr. and W. Scott Telford III,
exercise
investment and voting authority with respect to the securities
owned by
this selling stockholder.
|
(22)
|
Includes
17,862
shares owned by this selling stockholder. Robert E. Nederlander
is the
sole stockholder and officer of this selling stockholder
and exercises
investment and voting authority with respect to the securities
owned by
this selling stockholder.
|
(23)
|
Includes
256,666
shares owned by this selling stockholder and 266,667 shares
which may be
issued upon exercise of warrants owned by this selling stockholder.
The
warrants have an exercise price of $2.50 per share and expire
in April
2006. Robert E. Nederlander is the sole stockholder and officer
of this
selling stockholder and exercises investment and voting authority
with
respect to the securities owned by this selling
stockholder.
|
|
|
(24)
|
May
Management,
Inc., its President, Roger May, and its Chairman, Earl May,
exercise
investment and voting authority with respect to the securities
owned by
this selling stockholder. |
(25) | Merchant Bankers, Inc. is the general partner of this selling stockholder. Merchant Bankers, Inc., its Chairman, Alan B. Morgan, its President, Minor Perkins, and its Secretary and Treasurer, Joseph C. Wells, exercise investment and voting authority with respect to the securities owned by this selling stockholder. |
(26)
|
Melville
Straus is
the Managing Principal and exercises investment and voting
authority with
respect to the securities owned by this selling
stockholder. |
(27)
|
Melville
Straus is
the Managing Principal and exercises investment and voting
authority with
respect to the securities owned by this selling
stockholder. |
(28)
|
Includes
308,665
shares owned by this selling stockholder, 266,667 shares
which may be
issued upon exercise of warrants owned by this selling stockholder
and
102,400 shares which may be issued upon exercise of options
owned by this
selling stockholder. The warrants have an exercise price
of $2.50 per
share and expire in April 2006. Options to purchase 100,000
shares have an
exercise price of $2.50 per share and expire in October 2011.
Options to
purchase 400 shares have an exercise price of $13.75 per
share and expire
in March 2010. Options to purchase 2,000 shares have an exercise
price of
$2.75 per share and expire in December 2013. Mr. Toboroff
is one of our
directors. |
(29)
|
Palo
Alto Investors,
LLC, Palo Alto Investors Inc. and its President William L. Edwards exercise
investment
and voting authority with respect to the securities owned
by this
stockholder. Palo Alto Investors, LLC is the general partner
of this
selling stockholder. Palo Alto Investors, Inc. is the Manager
of Palo Alto
Investors, LLC. |
(30)
|
Represents
shares
which may be issued upon exercise of warrants owned by this
selling
stockholder. The warrants have an exercise price of $0.75
per share and
expire in April 2014. This selling stockholder is a wholly-owned
subsidiary of Wells Fargo & Company, a publicly-traded bank holding
company. |
61
(31)
|
Represents
shares
which may be issued upon exercise of warrants owned by this
selling
stockholder. The warrants have an exercise price of $5.00
per share and
expire in February 2012. This selling stockholder is a wholly-owned
subsidiary of Wells Fargo & Company, a publicly-traded bank holding
company. |
(32)
|
Transcontinental
Capital and its President, Rolando Gonzalez Bunster, exercise
investment
and voting authority with respect to the securities owned
by this selling
stockholder. |
(33)
|
Milton
H. Dresner
exercises investment and voting authority with respect to
the securities
owned by this selling stockholder. |
(34)
|
Joseph
S. Dresner
exercises investment and voting authority with respect to
the securities
owned by this selling stockholder. |
(35)
|
Graham
R. Smith is
the managing general partner of and exercises investment
and voting
authority with respect to the securities owned by this selling
stockholder. |
(36)
|
Guild
Investment
Management, Inc. and its President, Anthony R. Danaher, exercise
investment and voting authority with respect to the securities
owned by
this selling stockholder. |
(37)
|
Bristol
Capital
Advisors, LLC and its manager, Paul Kessler, exercise investment
and
voting authority with respect to the securities owned by
this selling
stockholder. Mr. Kessler disclaims beneficial ownership of
these
securities. |
(38)
|
L.H.
Schmieding is
Chief Executive Officer of The Schmieding Foundation, and
exercises
investment and voting authority with respect to, the securities
owned by
this selling stockholder. |
(39)
|
MYR
Pautreus, LLC
and its Managing Member, Michael Ragins, exercise investment
and voting
authority with respect to the securities owned by this selling
stockholder.
|
(40)
|
Kenneth
Malkes
exercises investment and voting authority with respect to
the securities
owned by this selling stockholder.
|
62
· |
Ordinary
brokerage
transactions and transactions in which the broker-dealer
solicits
purchasers;
|
· |
Block
trades in
which the broker-dealer will attempt to sell the shares as
agent but may
position and resell a portion of the block as principal to
facilitate the
transaction;
|
· |
Purchases
by a
broker-dealer as principal and resale by the broker-dealer
for its
account;
|
· |
An
exchange
distribution in accordance with the rules of the applicable
exchange;
|
· |
Privately
negotiated
transactions;
|
· |
Settlement
of put or
call option transactions;
|
· |
Settlement
of short
sales;
|
· |
Broker-dealers
may
agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
· |
A
combination of any
such methods of sale; and
|
· |
Any
other method
permitted pursuant to applicable
law.
|
63
WHERE YOU CAN FIND MORE INFORMATION
64
65
blow out preventers | Large safety devices placed on the surface of a well to maintain high pressure well bores. | |
booster | A machine that increases the volume of air when used in conjunction with a compressor or a group of compressors. | |
casing | The pipe placed in a drilled well to secure the well bore and formation. | |
casing tongs | Hydraulic wrenches used to screw casing pipes together. | |
directional drilling | The technique of drilling a well with varying the angle of direction of a well and changing the direction of a well to hit a specific target. | |
drill pipe | A pipe that attaches to the drill bit to drill a well. | |
heavy weight spiral drill pipe | Heavy drill pipe used for special applications primarily in directional drilling. The spiral design increases flexibility and penetration of the pipe. | |
horizontal drilling | The technique of drilling wells at a 90-degree angle. | |
lay down machines | A truck mounted machine used to move pipe and casing and tubing onto a pipe rack (from which a derrick crane lifts the drill pipe, casing and tubing and inserts it into the well). | |
links | Adaptors that fit on the blocks to attach handling tools. | |
LWD or log while drilling | The technique of measuring, in real time, the formation pressure and the position of equipment inside of a well. | |
MWD or measurement while drilling | The technique used to measure direction and angle while drilling a well. | |
protectors | A device placed on a drill pipe and casing pipe to protect the threads. | |
reciprocating compressor | A piston type compressor that constantly pushes air with reciprocating pistons. | |
screw compressor | A compressor that utilizes a positive displacement mechanism. | |
slips | Tools used to hold casing in place while installing casing in wells. | |
spacer spools | High pressure connections or links which are stacked to elevate the blow out preventers to the drilling rig floor. | |
test plugs | A device used to test the connections of well heads and the blow out preventers. | |
torque turn service | Monitoring device to insure proper makeup of the casing. | |
tubing | A pipe placed inside the casing to allow the well to produce. | |
under balanced drilling | A technique in which oil, gas, or geothermal wells are drilled by creating a pressure within the well that is lower than the reservoir pressure. The result is increased rate of penetration, reduced formation damage, and reduced drilling costs. |
66
ALLIS-CHALMERS ENERGY INC.
|
||
F-4 | ||
F-6 | ||
F-7 | ||
F-8 | ||
F-9 | ||
F-10 | ||
F-47 | ||
F-48 | ||
F-49 | ||
F-50 | ||
DIAMOND AIR DRILLING SERVICES, INC.
|
||
F-68 | ||
F-70 | ||
F-71 | ||
F-72 | ||
F-73 | ||
F-74 | ||
MARQUIS BIT CO., LLC
|
||
F-80 | ||
F-82 | ||
F-83 | ||
F-84 | ||
F-85 | ||
DOWNHOLE INJECTION SERVICES, LLC
|
||
F-88 | ||
F-89 | ||
F-90 | ||
F-91 | ||
F-92 |
F-1
DELTA RENTAL SERVICE, INC.
|
||
F-98 | ||
F-99 | ||
F-101 | ||
F-102 | ||
F-103 | ||
F-104 | ||
F-108 | ||
F-109 | ||
F-110 | ||
F-111 | ||
CAPCOIL TUBING SERVICES, INC.
|
||
F-112 | ||
F-113 | ||
F-115 | ||
F-116 | ||
F-117 | ||
F-124 | ||
F-125 | ||
F-127 | ||
F-128 | ||
F-129 | ||
W. T. ENTERPRISES, INC.
|
||
F-130 | ||
F-131 | ||
F-132 | ||
F-133 | ||
F-134 | ||
F-135 |
F-2
139 | ||
140 | ||
141 | ||
142 | ||
PRO FORMA FINANCIAL INFORMATION
|
||
F-143 | ||
F-145 | ||
F-146 | ||
F-147 | ||
F-148 |
F-3
/s/ UHY Mann Frankfort Stein & Lipp CPAs, LLP | |
|
F-4
/s/ GORDON, HUGHES & BANKS, LLP | |
|
F-5
December 31, | ||||||||||
2004 | 2003 | |||||||||
(restated) | ||||||||||
(in thousands, except | ||||||||||
for share amounts) | ||||||||||
ASSETS | ||||||||||
Cash and cash equivalents
|
$ | 7,344 | $ | 1,299 | ||||||
Trade receivables, net of allowance for doubtful accounts of
$265 and $168 at December 31, 2004 and 2003, respectively
|
12,986 | 8,823 | ||||||||
Inventory
|
2,373 | | ||||||||
Lease receivable, current
|
180 | 180 | ||||||||
Prepaid expenses and other
|
1,495 | 887 | ||||||||
Total current assets
|
24,378 | 11,189 | ||||||||
Property and equipment, at costs net of accumulated depreciation
of $5,251 and $2,586 at December 31, 2004 and 2003,
respectively
|
37,679 | 31,128 | ||||||||
Goodwill
|
11,776 | 7,661 | ||||||||
Other intangible assets, net of accumulated amortization of
$2,036 and $1,254 at December 31, 2004 and 2003,
respectively
|
5,057 | 2,290 | ||||||||
Debt issuance costs, net of accumulated amortization of $828 and
$462 at December 31, 2004 and 2003, respectively
|
685 | 567 | ||||||||
Lease receivable, less current portion
|
558 | 787 | ||||||||
Other Assets
|
59 | 40 | ||||||||
Total assets
|
$ | 80,192 | $ | 53,662 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||
Current maturities of long-term debt
|
$ | 5,541 | $ | 3,992 | ||||||
Trade accounts payable
|
5,694 | 3,133 | ||||||||
Accrued salaries, benefits and payroll taxes
|
615 | 591 | ||||||||
Accrued interest
|
470 | 152 | ||||||||
Accrued expenses
|
1,852 | 1,761 | ||||||||
Accounts payable, related parties
|
740 | 787 | ||||||||
Total current liabilities
|
14,912 | 10,416 | ||||||||
Accrued postretirement benefit obligations
|
687 | 545 | ||||||||
Long-term debt, net of current maturities
|
24,932 | 28,241 | ||||||||
Other long-term liabilities
|
129 | 270 | ||||||||
Redeemable warrants
|
| 1,500 | ||||||||
Redeemable convertible preferred stock, $0.01 par value
(4,200,000 shares authorized; 3,500,000 issued and
outstanding at December 31, 2003)($1 redemption value)
including accrued dividends
|
| 4,171 | ||||||||
Total liabilities
|
40,660 | 45,143 | ||||||||
Commitments and Contingencies (Note 9 and Note 21)
|
||||||||||
Minority interests
|
4,423 | 3,978 | ||||||||
STOCKHOLDERS EQUITY (NOTE 10) | ||||||||||
Common stock, $0.01 par value (20,000,000 shares
authorized; 13,611,525 and 3,926,668 issue and outstanding at
December 31, 2004 and December 31, 2003, respectively
|
136 | 39 | ||||||||
Capital in excess of par value
|
40,331 | 10,748 | ||||||||
Accumulated deficit
|
(5,358 | ) | (6,246 | ) | ||||||
Total stockholders equity
|
35,109 | 4,541 | ||||||||
Total liabilities and stockholders equity
|
$ | 80,192 | $ | 53,662 | ||||||
F-6
Years Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
(restated) | (restated) | ||||||||||||
Revenues
|
$ | 47,726 | $ | 32,724 | $ | 17,990 | |||||||
Cost of revenues
|
35,300 | 24,029 | 14,640 | ||||||||||
Gross margin
|
12,426 | 8,695 | 3,350 | ||||||||||
General and administrative expense
|
8,011 | 6,169 | 3,792 | ||||||||||
Personnel restructuring costs
|
| | 495 | ||||||||||
Abandoned acquisition/private placement costs
|
| | 233 | ||||||||||
Post retirement medical costs
|
188 | (99 | ) | (98 | ) | ||||||||
Total operating expenses
|
8,199 | 6,070 | 4,422 | ||||||||||
Income (loss) from operations
|
4,227 | 2,625 | (1,072 | ) | |||||||||
Other income (expense):
|
|||||||||||||
Interest income
|
32 | 3 | 49 | ||||||||||
Interest expense
|
(2,808 | ) | (2,467 | ) | (2,256 | ) | |||||||
Minority interests in income of subsidiaries
|
(321 | ) | (343 | ) | (189 | ) | |||||||
Factoring costs on note receivable
|
| | (191 | ) | |||||||||
Settlement on lawsuit
|
| 1,034 | | ||||||||||
Gain on sale of interest in AirComp
|
| 2,433 | | ||||||||||
Other
|
272 | 12 | (40 | ) | |||||||||
Total other income (expense)
|
(2,825 | ) | 672 | (2,627 | ) | ||||||||
Net income (loss) before income taxes
|
1,402 | 3,297 | (3,699 | ) | |||||||||
Provision for foreign income tax
|
(514 | ) | (370 | ) | (270 | ) | |||||||
Net income (loss)
|
888 | 2,927 | (3,969 | ) | |||||||||
Preferred stock dividend
|
(124 | ) | (656 | ) | (321 | ) | |||||||
Net income (loss) attributed to common stockholders
|
$ | 764 | $ | 2,271 | $ | (4,290 | ) | ||||||
Income (loss) per common share basic
|
$ | 0.10 | $ | 0.58 | $ | (1.14 | ) | ||||||
Income (loss) per common share diluted
|
$ | 0.09 | $ | 0.50 | $ | (1.14 | ) | ||||||
Weighted average number of common shares outstanding:
|
|||||||||||||
Basic
|
7,930 | 3,927 | 3,766 | ||||||||||
Diluted
|
9,510 | 5,850 | 3,766 | ||||||||||
F-7
Common Stock | Capital in | |||||||||||||||||||
Excess of | Accumulated | |||||||||||||||||||
Shares | Amount | Par Value | Deficit | Total | ||||||||||||||||
Balances, December 31, 2001
|
2,317,626 | $ | 23 | $ | 6,431 | $ | (5,204 | ) | $ | 1,250 | ||||||||||
Issuance of common stock in connection with the purchase of
Jens
|
279,570 | 3 | 627 | | 630 | |||||||||||||||
Issuance of stock purchase warrants in connection with the
purchase of Jens
|
| | 47 | | 47 | |||||||||||||||
Issuance of common stock in connection with the purchase of
Strata
|
1,311,972 | 13 | 2,939 | | 2,952 | |||||||||||||||
Issuance of stock purchase warrants in connection with the
purchase of Strata
|
| | 267 | | 267 | |||||||||||||||
Issuance of common stock in connection with the purchase of
Strata
|
17,500 | | 153 | | 153 | |||||||||||||||
Accrual of preferred dividends
|
| | (321 | ) | | (321 | ) | |||||||||||||
Net (Loss)
|
| | | (3,969 | ) | (3,969 | ) | |||||||||||||
Balances, December 31, 2002
|
3,926,668 | $ | 39 | $ | 10,143 | $ | (9,173 | ) | $ | 1,009 | ||||||||||
Effect of consolidation of AirComp
|
| | 955 | | 955 | |||||||||||||||
Accrual of preferred dividends
|
| | (350 | ) | | (350 | ) | |||||||||||||
Net Income (RESTATED)
|
| | | 2,927 | 2,927 | |||||||||||||||
Balances, December 31, 2003, as restated (RESTATED)
|
3,926,668 | $ | 39 | $ | 10,748 | $ | (6,246 | ) | $ | 4,541 | ||||||||||
Issuance of common stock in connection with the $2 million
equity raise
|
620,000 | 6 | 1,544 | | 1,550 | |||||||||||||||
Issuance of stock purchase warrants in Connection with the
$2 million equity raise
|
| | 450 | | 450 | |||||||||||||||
Issuance of common stock in Connection with the
$16.4 million equity raise
|
5,461,301 | 55 | 14,056 | | 14,111 | |||||||||||||||
Issuance of stock purchase warrants in Connection with the
$16.4 million equity raise
|
| | 641 | | 641 | |||||||||||||||
Issuance of common stock in connection With the 19% conversion
of Jens
|
1,300,000 | 13 | 6,421 | | 6,434 | |||||||||||||||
Conversion of preferred stock
|
1,718,090 | 17 | 4,278 | | 4,295 | |||||||||||||||
Issuance of common stock for services
|
14,000 | | 97 | | 97 | |||||||||||||||
Issuance of common stock for services
|
3,000 | | 2 | | 2 | |||||||||||||||
Issuance of stock purchase warrants in Connection with the
issuance of debt
|
| | 47 | | 47 | |||||||||||||||
Issuance of common stock for Purchase of Downhole Injector
Systems
|
568,466 | 6 | 2,171 | | 2,177 | |||||||||||||||
Accrual of preferred dividends
|
| | (124 | ) | | (124 | ) | |||||||||||||
Net Income
|
| | | 888 | 888 | |||||||||||||||
Balances, December 31, 2004
|
13,611,525 | $ | 136 | $ | 40,331 | $ | (5,358 | ) | $ | 35,109 | ||||||||||
F-8
Years Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(restated) | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net income/ (loss)
|
$ | 888 | $ | 2,927 | $ | (3,969 | ) | |||||
Adjustments to reconcile net income/(loss) to net cash provided
by operating activities:
|
||||||||||||
Depreciation expense
|
2,702 | 2,052 | 1,837 | |||||||||
Amortization expense
|
876 | 884 | 744 | |||||||||
Issuance of stock options for services
|
14 | | | |||||||||
Amortization of discount on debt
|
350 | 516 | 475 | |||||||||
(Gain) on change in PBO liability
|
| (125 | ) | | ||||||||
(Gain) on settlement of lawsuit
|
| (1,034 | ) | | ||||||||
(Gain) on sale of interest in AirComp
|
| (2,433 | ) | | ||||||||
Minority interest in income of subsidiaries
|
321 | 343 | 189 | |||||||||
Loss on sale of property
|
| 82 | 119 | |||||||||
Changes in working capital:
|
||||||||||||
Decrease (increase) in accounts receivable
|
(2,292 | ) | (4,414 | ) | (713 | ) | ||||||
Decrease (increase) in due from related party
|
(7 | ) | | 61 | ||||||||
Decrease (increase) in other current assets
|
(612 | ) | (1,260 | ) | 1,644 | |||||||
Decrease (increase) in other assets
|
(19 | ) | 1 | 902 | ||||||||
Decrease (increase) in lease deposit
|
| 525 | 176 | |||||||||
(Decrease) increase in accounts payable
|
1,140 | 2,251 | 1,316 | |||||||||
(Decrease) increase in accrued interest
|
299 | (126 | ) | 651 | ||||||||
(Decrease) increase in accrued expenses
|
(276 | ) | 397 | (339 | ) | |||||||
(Decrease) increase in other long-term liabilities
|
(141 | ) | | (123 | ) | |||||||
(Decrease) increase in accrued employee benefits and payroll
taxes
|
19 | 1,293 | (788 | ) | ||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
3,262 | 1,879 | 2,182 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Acquisition of Jens, net of cash acquired
|
| | (8,120 | ) | ||||||||
Acquisition of Strata, net of cash acquired
|
| | (179 | ) | ||||||||
Acquisition of Safco
|
(947 | ) | | | ||||||||
Acquisition of Diamond Air, net of cash acquired
|
(2,530 | ) | | | ||||||||
Acquisition of Downhole Services, net of cash acquired
|
(982 | ) | | | ||||||||
Purchase of equipment
|
(4,603 | ) | (5,354 | ) | (518 | ) | ||||||
Proceeds from sale of equipment
|
| 843 | 367 | |||||||||
NET CASH USED IN INVESTING ACTIVITIES
|
(9,062 | ) | (4,511 | ) | (8,450 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from issuance of long-term debt
|
8,169 | 14,127 | 9,683 | |||||||||
Payments on long-term debt
|
(13,505 | ) | (10,826 | ) | (4,079 | ) | ||||||
Payments on related party debt
|
| (246 | ) | | ||||||||
Proceeds from issuance of common stock
|
16,883 | | | |||||||||
Borrowings on lines of credit
|
689 | 1,138 | 1,246 | |||||||||
Debt issuance costs
|
(391 | ) | (408 | ) | (588 | ) | ||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
11,845 | 3,785 | 6,262 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
6,045 | 1,153 | (6 | ) | ||||||||
Cash and cash equivalents:
|
||||||||||||
Beginning of year
|
1,299 | 146 | 152 | |||||||||
END OF YEAR
|
$ | 7,344 | $ | 1,299 | $ | 146 | ||||||
SUPPLEMENTAL INFORMATION:
|
||||||||||||
Interest paid
|
$ | 2,159 | $ | 2,341 | $ | 1,082 | ||||||
Foreign taxes paid
|
$ | 514 | $ | 370 | $ | 270 | ||||||
F-9
Note 1 | Nature of Business and Summary of Significant Accounting Policies |
F-10
F-11
F-12
F-13
For the Year Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
(restated) | (restated) | ||||||||||||
(in thousands, except per share) | |||||||||||||
Net income/(loss): As reported
|
$ | 764 | $ | 2,271 | $ | (4,290 | ) | ||||||
Less total stock based employee compensation expense determined
under fair value based method for all awards net of tax related
effects
|
(1,072 | ) | (2,314 | ) | | ||||||||
Pro-forma net income (loss) to common stockholders
|
$ | (308 | ) | $ | (43 | ) | $ | (4,290 | ) | ||||
Net income/(loss) per share:
|
|||||||||||||
Basic As reported
|
$ | 0.10 | $ | 0.58 | $ | (1.14 | ) | ||||||
Pro forma
|
(0.04 | ) | (0.01 | ) | (1.14 | ) | |||||||
Diluted As reported
|
$ | 0.09 | $ | 0.50 | $ | (1.14 | ) | ||||||
Pro forma
|
(0.02 | ) | 0.10 | (1.14 | ) | ||||||||
F-14
For the Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Expected dividend yield
|
| | | |||||||||
Expected price volatility
|
89.76 | % | 265.08 | % | | |||||||
Risk-free interest rate
|
7.0 | % | 6.25 | % | | |||||||
Expected life of options
|
7 years | 7 years | | |||||||||
Weighted average fair value of options granted at market value
|
$ | 3.19 | $ | 2.78 | $ | |
F-15
2004 | 2003 | |||||||||
(restated) | (restated) | |||||||||
(in thousands, except | ||||||||||
earnings per share) | ||||||||||
Year Ended December 31,
|
||||||||||
Numerator:
|
||||||||||
Net income available for common stockholders
|
$ | 764 | $ | 2,271 | ||||||
Plus income impact of assumed conversions:
|
||||||||||
Preferred stock dividends/interest
|
124 | 656 | ||||||||
Net income (loss) applicable to common stockholders Plus assumed
conversions
|
$ | 888 | $ | 2,927 | ||||||
Denominator:
|
||||||||||
Denominator for basic earnings per share weighted
average shares outstanding
|
7,930 | 3,927 | ||||||||
Effect of potentially dilutive common shares:
|
||||||||||
Convertible preferred stock and employee and director stock
options
|
1,580 | 1,923 | ||||||||
Denominator for diluted earnings per share weighted
average shares outstanding and assumed conversions
|
9,510 | 5,850 | ||||||||
Basic earnings (loss) per share
|
$ | 0.10 | $ | 0.58 | ||||||
Diluted earning (loss) per share
|
$ | 0.09 | $ | 0.50 | ||||||
F-16
Note 2 | Restatement |
Three Months Ended March 31, 2005 | |||||||||||||
As | |||||||||||||
Previously | As | ||||||||||||
Reported | Adjustments | Restated | |||||||||||
Income/(loss) per common share diluted
|
$ | 0.09 | $ | 0.02 | $ | 0.11 | |||||||
Weighted average number of common shares outstanding
|
|||||||||||||
diluted
|
17,789 | (3,094 | ) | 14,695 | |||||||||
Year Ended December 31, 2004 | |||||||||||||
As | |||||||||||||
Previously | As | ||||||||||||
Reported | Adjustments | Restated | |||||||||||
Income/(loss) per common share diluted
|
$ | 0.07 | $ | 0.02 | $ | 0.09 | |||||||
Weighted average number of common shares outstanding
|
|||||||||||||
diluted
|
11,959 | (2,449 | ) | 9,510 | |||||||||
F-17
Three Months Ended September 30, 2004 | |||||||||||||
As | |||||||||||||
Previously | As | ||||||||||||
Reported | Adjustments | Restated | |||||||||||
Income/(loss) per common share basic
|
$ | 0.04 | $ | 0.02 | $ | 0.06 | |||||||
Income/(loss) per common share diluted
|
$ | 0.04 | $ | 0.01 | $ | 0.05 | |||||||
Weighted average number of common shares outstanding:
|
|||||||||||||
Basic
|
11,599 | (3,301 | ) | 8,298 | |||||||||
Diluted
|
14,407 | (4,579 | ) | 9,828 | |||||||||
Three Months Ended June 30, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Income/(loss) per common share diluted
|
$ | 0.04 | $ | 0.01 | $ | 0.05 | ||||||
Weighted average number of common shares outstanding
diluted
|
10,237 | (2,618 | ) | 7,619 | ||||||||
Three Months Ended March 31, 2004 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Income/(loss) per common share diluted
|
$ | 0.05 | $ | 0.03 | $ | 0.08 | ||||||
Weighted average number of common shares outstanding
diluted
|
5,762 | 478 | 6,240 | |||||||||
Year Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Income/(loss) per common share diluted
|
$ | 0.39 | $ | 0.11 | $ | 0.50 | ||||||
Weighted average number of common shares outstanding
diluted
|
5,761 | 89 | 5,850 | |||||||||
Three Months Ended September 30, 2003 | ||||||||||||
As | ||||||||||||
Previously | As | |||||||||||
Reported | Adjustments | Restated | ||||||||||
Income/(loss) per common share diluted
|
$ | 0.60 | $ | (0.01 | ) | $ | 0.59 | |||||
Weighted average number of common shares outstanding
diluted
|
5,761 | 208 | 5,969 | |||||||||
F-18
F-19
At December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | Restatement | As | ||||||||||
Reported | Adjustments | Restated | ||||||||||
ASSETS | ||||||||||||
Cash and cash equivalents
|
$ | 1,299 | $ | 1,299 | ||||||||
Trade receivables, net of allowance for doubtful accounts
|
8,823 | 8,823 | ||||||||||
Lease Receivable, current
|
180 | 180 | ||||||||||
Prepaid expenses and other
|
887 | 887 | ||||||||||
Total current assets
|
11,189 | 11,189 | ||||||||||
Property and equipment, net of accumulated depreciation
|
26,339 | 4,789 | 31,128 | |||||||||
Goodwill
|
7,661 | 7,661 | ||||||||||
Other intangible assets, net of accumulated amortization
|
2,290 | 2,290 | ||||||||||
Debt issuance costs, net of accumulated amortization
|
567 | 567 | ||||||||||
Lease receivable, less current portion
|
787 | 787 | ||||||||||
Other Assets
|
40 | 40 | ||||||||||
Total Assets
|
$ | 48,873 | $ | 4,789 | $ | 53,662 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||
Current maturities of long-term debt
|
$ | 3,992 | $ | 3,992 | ||||||||
Trade accounts payable
|
3,133 | 3,133 | ||||||||||
Accrued salaries, benefits and payroll taxes
|
591 | 591 | ||||||||||
Accrued interest
|
152 | 152 | ||||||||||
Accrued expenses
|
1,761 | 1,761 | ||||||||||
Accounts payable, related parties
|
787 | 787 | ||||||||||
Total current liabilities
|
10,416 | 10,416 | ||||||||||
Accrued postretirement benefit obligations
|
545 | 545 | ||||||||||
Long-term debt, net of current maturities
|
28,241 | 28,241 | ||||||||||
Other long-term liabilities
|
270 | 270 | ||||||||||
Redeemable warrants
|
1,500 | 1,500 | ||||||||||
Redeemable convertible preferred stock including accrued
dividends
|
4,171 | 4,171 | ||||||||||
Total liabilities
|
45,143 | 45,143 | ||||||||||
Commitments and Contingencies
|
||||||||||||
Minority interests
|
2,523 | 1,455 | 3,978 | |||||||||
COMMON STOCKHOLDERS EQUITY
|
||||||||||||
Common stock
|
39 | 39 | ||||||||||
Capital in excess of par value
|
9,793 | 955 | 10,748 | |||||||||
Accumulated (deficit)
|
(8,625 | ) | 2,379 | (6,246 | ) | |||||||
Total stockholders equity
|
1,207 | 3,334 | 4,541 | |||||||||
Total liabilities and stockholders equity
|
$ | 48,873 | $ | 4,789 | $ | 53,662 | ||||||
F-20
Year Ended December 31, 2003 | |||||||||||||
As | |||||||||||||
Previously | Restatement | As | |||||||||||
Reported | Adjustments | Restated | |||||||||||
Revenues
|
$ | 32,724 | | $ | 32,724 | ||||||||
Cost of revenues
|
23,931 | 98 | 24,029 | ||||||||||
Gross margin
|
8,793 | (98 | ) | 8,695 | |||||||||
General and administrative expense
|
6,169 | | 6,169 | ||||||||||
Income/ (loss) from operations
|
2,624 | (98 | ) | 2,526 | |||||||||
Other income (expense):
|
|||||||||||||
Interest income
|
3 | | 3 | ||||||||||
Interest expense
|
(2,467 | ) | | (2,467 | ) | ||||||||
Minority interests in income of subsidiaries
|
(387 | ) | 44 | (343 | ) | ||||||||
Settlement on lawsuit
|
1,034 | | 1,034 | ||||||||||
Gain on sale of stock in a subsidiary
|
| 2,433 | 2,433 | ||||||||||
Other
|
111 | | 111 | ||||||||||
Total other income (expense)
|
(1,706 | ) | 2,477 | 771 | |||||||||
Net income/ (loss) before income taxes
|
918 | 2,379 | 3,297 | ||||||||||
Provision for foreign income tax
|
(370 | ) | | (370 | ) | ||||||||
Net income/ (loss)
|
548 | 2,379 | 2,927 | ||||||||||
Preferred stock dividend
|
(656 | ) | | (656 | ) | ||||||||
Net income attributed to common stockholders
|
$ | (108 | ) | $ | 2,379 | $ | 2,271 | ||||||
Income/ (loss) per common share basic
|
$ | (0.03 | ) | $ | 0.58 | ||||||||
Income/ (loss) per common share diluted
|
$ | (0.03 | ) | $ | 0.39 | ||||||||
Weighted average number of common shares outstanding:
|
|||||||||||||
Basic
|
3,927 | 3,927 | |||||||||||
Diluted
|
5,761 | 5,761 | |||||||||||
F-21
Year Ended December 31, 2003 | ||||||||||||
As | ||||||||||||
Previously | Restatement | As | ||||||||||
Reported | Adjustment | Restated | ||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income/(loss)
|
$ | 548 | $ | 2,379 | $ | 2,927 | ||||||
Adjustments to reconcile net income/ (loss) to net cash provided
by operating activities:
|
||||||||||||
Depreciation expense
|
1,954 | 98 | 2,052 | |||||||||
Amortization expense
|
884 | | 884 | |||||||||
Issuance of stock options for services
|
| | | |||||||||
Amortization of discount on debt
|
516 | | 516 | |||||||||
(Gain)/ loss on change PBO liability
|
(125 | ) | | (125 | ) | |||||||
(Gain)/ loss on settlement of lawsuit
|
(1,034 | ) | | (1,034 | ) | |||||||
(Gain)/ loss on sale of interest in AirComp
|
| (2,433 | ) | (2,433 | ) | |||||||
Minority interest in income of subsidiaries
|
387 | (44 | ) | 343 | ||||||||
Loss on sale of property
|
82 | | 82 | |||||||||
Changes in working capital:
|
||||||||||||
Decrease (increase) in accounts receivable
|
(4,414 | ) | | (4,414 | ) | |||||||
Decrease (increase) in due from related party
|
| | | |||||||||
Decrease (increase) in other current assets
|
(1,260 | ) | | (1,260 | ) | |||||||
Decrease (increase) in other assets
|
1 | | 1 | |||||||||
Decrease (increase) in lease deposit
|
525 | | 525 | |||||||||
Increase (decrease) in accounts payable
|
2,251 | | 2,251 | |||||||||
Increase (decrease) in accrued interest
|
(126 | ) | | (126 | ) | |||||||
Increase (decrease) in accrued expenses
|
397 | | 397 | |||||||||
Increase (decrease) in other long-term liabilities
|
| | | |||||||||
Increase (decrease) in accrued employee benefits and payroll
taxes
|
1,293 | | 1,293 | |||||||||
Net cash provided by operating activities
|
1,879 | | 1,879 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Recapitalization, net of cash received
|
| | | |||||||||
Business acquisition costs
|
| | | |||||||||
Acquisition of MADSCO assets, net of cash acquired
|
| | | |||||||||
Acquisition of Jens, net of cash acquired
|
| | | |||||||||
Acquisition of Strata, net of cash acquired
|
| | | |||||||||
Purchase of equipment
|
(5,354 | ) | | (5,354 | ) | |||||||
Proceeds from sale-leaseback of equipment, net of lease deposit
|
| | | |||||||||
Proceeds from sale of equipment
|
843 | | 843 | |||||||||
Net cash (used) by investing activities
|
(4,511 | ) | | (4,511 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from issuance of long-term debt
|
14,127 | | 14,127 | |||||||||
Payments on long-term debt
|
(10,826 | ) | | (10,826 | ) | |||||||
Payments on related party debt
|
(246 | ) | | (246 | ) | |||||||
Proceeds from issuance of common stock, net
|
| | | |||||||||
Borrowing on lines of credit
|
30,537 | | 30,537 | |||||||||
Payments on lines of credit
|
(29,399 | ) | | (29,399 | ) | |||||||
Debt issuance costs
|
(408 | ) | | (408 | ) | |||||||
Net cash provided (used) by financing activities
|
3,785 | | 3,785 | |||||||||
Net increase (decrease) in cash and cash equivalents
|
1,153 | | 1,153 | |||||||||
Cash and cash equivalents:
|
||||||||||||
Beginning of the year
|
146 | | 146 | |||||||||
End of the year
|
$ | 1,299 | | $ | 1,299 | |||||||
Supplemental information:
|
||||||||||||
Interest paid
|
$ | 2,341 | | $ | 2,341 | |||||||
F-22
Three Months | Three Months | Three Months | ||||||||||
Ended | Ended | Ended | ||||||||||
March 31, | June 30, | September 30, | ||||||||||
2004 | 2004 | 2004 | ||||||||||
(in thousands except per share amounts) | ||||||||||||
Net income attributed to common stockholders
|
||||||||||||
Previously reported
|
$ | 501 | $ | 434 | $ | 576 | ||||||
Adjustment depreciation expense
|
(139 | ) | (79 | ) | (79 | ) | ||||||
Adjustment minority interest expense
|
22 | 22 | 22 | |||||||||
Restated
|
384 | 377 | 519 | |||||||||
Net income (loss) per share, basic
|
||||||||||||
Previously reported
|
$ | 0.13 | $ | 0.07 | $ | 0.05 | ||||||
Total adjustments
|
(0.03 | ) | (0.01 | ) | (0.01 | ) | ||||||
Restated
|
0.10 | 0.06 | 0.04 |
Three Months | Three Months | Three Months | ||||||||||
Ended | Ended | Ended | ||||||||||
March 31, | June 30, | September 30, | ||||||||||
2003 | 2003 | 2003 | ||||||||||
(in thousands except per share amounts) | ||||||||||||
Net income (loss) attributed to common stockholders
|
||||||||||||
Previously reported
|
$ | (183 | ) | $ | (330 | ) | $ | 1,136 | ||||
Adjustment gain on sale of stock in a subsidiary
|
| | 2,433 | |||||||||
Adjustment depreciation expense
|
| | (49 | ) | ||||||||
Adjustment minority interest expense
|
| | 22 | |||||||||
Adjustment foreign tax expense
|
(158 | ) | (92 | ) | (93 | ) | ||||||
Restated
|
(341 | ) | (422 | ) | 3,449 | |||||||
Net income (loss) per share, basic and diluted
|
||||||||||||
Previously reported
|
$ | (0.05 | ) | $ | (0.08 | ) | $ | 0.29 | ||||
Total adjustments
|
(0.04 | ) | (0.03 | ) | 0.58 | |||||||
Restated
|
(0.09 | ) | (0.11 | ) | 0.87 |
F-23
F-24
Note 4 | Acquisitions |
F-25
Year Ended December 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
(restated) | (restated) | ||||||||||||
(unaudited) | |||||||||||||
(in thousands, except per share) | |||||||||||||
Revenues
|
$ | 58,103 | $ | 34,446 | $ | 19,142 | |||||||
Operating income (loss)
|
$ | 5,405 | $ | 3,008 | $ | (401 | ) | ||||||
Net income (loss)
|
$ | 1,367 | $ | 411 | $ | (4,431 | ) | ||||||
Net income (loss) per common share
|
|||||||||||||
Basic
|
$ | 0.17 | $ | 0.10 | $ | (1.18 | ) | ||||||
Diluted
|
$ | 0.14 | $ | 0.07 | $ | (1.18 | ) |
F-26
Note 5 | Inventories |
2004 | 2003 | |||||||
Hammer bit inventory
|
||||||||
Finished goods
|
$ | 857 | $ | | ||||
Work in process
|
385 | | ||||||
Raw materials
|
151 | | ||||||
Total hammer bit inventory
|
$ | 1,393 | $ | | ||||
Hammer inventory
|
417 | | ||||||
Chemical inventory
|
254 | | ||||||
Coil tubing and related inventory
|
309 | | ||||||
Total inventory
|
$ | 2,373 | $ | | ||||
Note 6 | Property and Other Intangibles Assets |
Depreciation | ||||||||||||
Period | 2004 | 2003 | ||||||||||
(restated) | ||||||||||||
Land
|
| $ | 27 | $ | 27 | |||||||
Building and improvements
|
1520 years | 740 | 729 | |||||||||
Machinery and equipment
|
315 years | 41,120 | 28,860 | |||||||||
Tools, furniture, fixtures and leasehold improvements
|
37 years | 1,043 | 4,098 | |||||||||
Total
|
$ | 42,930 | $ | 33,714 | ||||||||
Less: accumulated depreciation
|
(5,251 | ) | (2,586 | ) | ||||||||
Property and equipment, net
|
$ | 37,679 | $ | 31,128 | ||||||||
Amortization | ||||||||||||
Period | 2004 | 2003 | ||||||||||
Intellectual Property
|
20 years | $ | 1,009 | $ | 1,009 | |||||||
Non-compete agreements
|
35 years | 2,856 | 1,535 | |||||||||
Patent
|
15 years | 496 | | |||||||||
Other intangible assets
|
310 years | 2,732 | 1,000 | |||||||||
Total
|
$ | 7,093 | $ | 3,544 | ||||||||
Less: accumulated amortization
|
(2,036 | ) | (1,254 | ) | ||||||||
Intangibles assets, net
|
$ | 5,057 | $ | 2,290 | ||||||||
F-27
2004 | 2003 | |||||||||||||||||||||||
Gross | Accumulated | Current Year | Gross | Accumulated | Current Year | |||||||||||||||||||
Value | Amortization | Amortization | Value | Amortization | Amortization | |||||||||||||||||||
Intellectual Property
|
$ | 1,009 | $ | 239 | $ | 56 | $ | 1,009 | $ | 183 | $ | 46 | ||||||||||||
Non-compete agreements
|
2,856 | 1,032 | 300 | 1,535 | 731 | 347 | ||||||||||||||||||
Patent
|
496 | 6 | 6 | | | | ||||||||||||||||||
Other intangible assets
|
2,732 | 759 | 420 | 1,000 | 340 | 135 | ||||||||||||||||||
Total
|
$ | 7,093 | $ | 2,036 | $ | 782 | $ | 3,544 | $ | 1,254 | $ | 528 | ||||||||||||
Intangible Amortization by Period | ||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||
2009 and | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | Thereafter | ||||||||||||||||
Intangible Assets Amortization
|
||||||||||||||||||||
Intellectual property
|
$ | 56 | $ | 56 | $ | 56 | $ | 56 | $ | 546 | ||||||||||
Non-compete agreements
|
484 | 481 | 275 | 234 | 349 | |||||||||||||||
Patent
|
33 | 33 | 33 | 33 | 358 | |||||||||||||||
Other intangible assets
|
244 | 244 | 214 | 214 | 1,057 | |||||||||||||||
Total Intangible Amortization
|
$ | 817 | $ | 814 | $ | 578 | $ | 537 | $ | 2,310 | ||||||||||
Note 7 | Income Taxes |
F-28
2004 | 2003 | |||||||
Deferred non-current income tax assets:
|
||||||||
Net future tax deductible items
|
$ | 533 | $ | 500 | ||||
Net operating loss carry forwards
|
4,894 | 2,975 | ||||||
A-C Reorganization Trust claims
|
30,112 | 35,000 | ||||||
Total deferred non-current income tax assets
|
35,539 | 38,475 | ||||||
Valuation allowance
|
(35,539 | ) | (38,475 | ) | ||||
Net deferred non-current income taxes
|
$ | | $ | | ||||
2004 | 2003 | 2002 | ||||||||||
Income tax expense based on the U.S. statutory tax rate
|
$ | | $ | | $ | | ||||||
Foreign income subject to foreign taxes a rate different than
the U.S. statutory rate
|
514 | 370 | 270 | |||||||||
Total
|
$ | 514 | $ | 370 | $ | 270 | ||||||
F-29
F-30
December 31, | ||||||||
2004 | 2003 | |||||||
(in thousands) | ||||||||
Debt of Allis-Chalmers Energy
|
||||||||
Revolving line of credit
|
$ | 2,353 | $ | | ||||
Bank term loan
|
6,335 | | ||||||
Notes payable to former directors
|
402 | 386 | ||||||
12.0% subordinated note
|
| 2,675 | ||||||
Debt of Jens
|
||||||||
Revolving line of credit
|
| 26 | ||||||
Bank term loan
|
| 4,654 | ||||||
Bank real estate note
|
| 207 | ||||||
Subordinated seller note
|
4,000 | 4,000 | ||||||
Note payable under non-compete agreement
|
514 | 761 | ||||||
Bank term loan
|
263 | 354 | ||||||
Equipment installment note
|
321 | | ||||||
Debt of Strata
|
||||||||
Revolving line of credit
|
| 2,413 | ||||||
Vendor financing
|
1,164 | 2,383 | ||||||
Debt of Safco
|
||||||||
Note payable under non-compete agreement
|
150 | | ||||||
Debt of Downhole
|
||||||||
Vehicle installment note
|
11 | | ||||||
Notes payable to a former stockholders
|
49 | | ||||||
Debt of Mountain Air
|
||||||||
Term loan
|
198 | 247 | ||||||
Seller note
|
1,600 | 1,511 | ||||||
Debt of AirComp
|
||||||||
Revolving line of credit
|
1,520 | 369 | ||||||
Bank term loan
|
6,775 | 7,429 | ||||||
Subordinated note payable to M-I LLC
|
4,818 | 4,818 | ||||||
Total debt
|
$ | 30,473 | $ | 32,233 | ||||
Less: short-term debt and current maturities
|
5,541 | 3,992 | ||||||
Long-term debt obligations
|
$ | 24,932 | $ | 28,241 | ||||
F-31
Maturities of Debt | ||||
(in thousands) | ||||
Year Ending:
|
||||
December 31, 2005
|
$ | 5,541 | ||
December 31, 2006
|
7,378 | |||
December 31, 2007
|
10,028 | |||
December 31, 2008
|
2,638 | |||
December 31, 2009
|
4,888 | |||
Thereafter
|
| |||
Total
|
$ | 30,473 | ||
| A $10.0 million revolving line of credit. Borrowings are subject to a borrowing base based on 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $2.4 million as of December 31, 2004. | |
| A term loan in the amount of $6.3 million to be repaid in monthly payments of principal of $105,583 per month. Prepayments are also required in an amount equal to 20% of our collections from Matyep in Mexico. Proceeds of the term loan were used to prepay the term loan owed by our Jens subsidiary and to prepay the 12% $2.4 million subordinated note and retire its related warrants. The outstanding balance was $6.3 million as of December 31, 2004. | |
| A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility are to be repaid monthly over four years beginning January 2006. Availability of this capital expenditure term loan facility is subject to security acceptable to the lender in the form of equipment or other acquired collateral. There were no outstanding borrowings as of December 31, 2004 |
F-32
| A $3.5 million bank line of credit of which $1.5 million was outstanding at December 31, 2004. Interest accrues at a floating rate based on the prime rate. The interest rate was 7.50% as of December 31, 2004. There is a 0.5% per annum fee on the undrawn portion of the facility. Borrowings under the line of credit are subject to a borrowing base consisting of eligible accounts receivable. | |
| A $7.1 million term loan with an adjustable, floating interest rate based on either the prime rate or the London interbank offered rate or (LIBOR). The interest rate was 6.25% as of December 31, 2004. Principal payments of $286,000 plus accrued interest are due quarterly, with a final maturity date of June 27, 2007. The balance at December 31, 2004 was $6.8 million. | |
| A $1.5 million term loan facility to be used for capital expenditures. Interest accrues at a floating interest rate based on either the prime rate or LIBOR. Quarterly principal payments commence on March 31, 2006 in an amount equal to 5.0% of the outstanding balance as of December 31, 2005, |
F-33
with a final maturity of June 27, 2007. There were no borrowings outstanding under this facility as of December 31, 2004. |
F-34
Operating Leases | ||||
(in thousands) | ||||
Year Ending:
|
||||
December 31, 2005
|
$ | 550 | ||
December 31, 2006
|
425 | |||
December 31, 2007
|
388 | |||
December 31, 2008
|
265 | |||
December 31, 2009
|
206 | |||
Thereafter
|
| |||
Total
|
$ | 1,834 | ||
F-35
| In exchange for an investment of $2.0 million the Company issued 620,000 shares of common stock for a purchase price equal to $2.50 per share, and issued warrants to purchase 800,000 shares of common stock at an exercise price of $2.50 per share, expiring on April 1, 2006, to an investor group (the Investor Group) consisting of entities affiliated with Donald and Christopher Engel and directors Robert Nederlander and Leonard Toboroff. The aggregate purchase price for the common stock was $1.55 million and the aggregate purchase price for the warrants was $450,000. | |
| Energy Spectrum converted its 3,500,000 shares of Series A 10% Cumulative Convertible Preferred Stock, including accrued dividend rights, into 1,718,090 shares of common stock. The conversion of the preferred stock will have an impact on the earnings per share in future periods since the Company will not record any dividends. | |
| The Company, the Investor Group, Energy Spectrum, and former director Saeed Sheikh and officers and directors Munawar H. Hidayatallah and Jens H. Mortensen entered into a stockholders agreement pursuant to which the parties agreed to vote for the election to the board of directors of the Company three persons nominated by Energy Spectrum, two persons nominated by the Investor Group and one person nominated by Messrs. Hidayatallah, Mortensen and Sheikh. In addition, the parties and the Company agreed that in the event the Company has not effected a public offering of its shares prior to September 30, 2005, then, at the request of Energy Spectrum, the Company will retain an investment banking firm to identify candidates for a transaction involving the sale of the Company or its assets. Energy Spectrum has agreed to enter into an amendment to the Stockholders Agreement to eliminate the requirement that an investment bank be retained to sell the Company. Two of Energy Spectrums three designated directors on the Board resigned January 14, 2005 and Energy Spectrum has agreed not to utilize its right to appoint more than one director unless and until the parties to the Stockholders of the Company of its determination to reassert such right. |
F-36
F-37
December 31, 2004 | December 31, 2003 | December 31, 2002 | ||||||||||||||||||||||
Shares Under | Weighted Avg. | Shares Under | Weighted Avg. | Shares Under | Weighted Avg. | |||||||||||||||||||
Options | Exercise Price | Option | Exercise Price | Option | Exercise Price | |||||||||||||||||||
Beginning balance
|
973,300 | $ | 2.78 | 104,800 | $ | 3.00 | 104,800 | $ | 3.00 | |||||||||||||||
Granted
|
248,000 | 4.85 | 868,500 | 2.75 | | | ||||||||||||||||||
Canceled
|
(6,300 | ) | 2.78 | | | | | |||||||||||||||||
Exercised
|
| | | | | | ||||||||||||||||||
Ending balance
|
1,215,000 | $ | 3.20 | 973,300 | $ | 2.78 | 104,800 | $ | 3.00 | |||||||||||||||
Weighted Average | ||||||||||||||||||||
Fair Value | Shares Under | Remaining | Options | Fair Value of | ||||||||||||||||
Exercise Price | Option | Contractual Life | Exercisable | Exercise Price | ||||||||||||||||
$ | 2.50 | 100,000 | 6.79 years | 100,000 | $ | 2.50 | ||||||||||||||
$ | 13.75 | 4,800 | 5.24 years | 4,800 | $ | 13.75 | ||||||||||||||
$ | 2.75 | 862,200 | 8.96 years | 574,800 | $ | 2.75 | ||||||||||||||
$ | 4.85 | 248,000 | 9.73 years | 82,667 | $ | 4.85 | ||||||||||||||
$ | 3.20 | 1,215,000 | 8.93 years | 762,267 | $ | 3.01 |
F-38
F-39
F-40
Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(restated) | ||||||||||||
REVENUES:
|
||||||||||||
Casing services
|
$ | 10,391 | $ | 10,037 | $ | 7,796 | ||||||
Directional drilling services
|
24,787 | 16,008 | 6,529 | |||||||||
Compressed air drilling services
|
11,561 | 6,679 | 3,665 | |||||||||
Other services
|
987 | | | |||||||||
Total revenues
|
$ | 47,726 | $ | 32,724 | $ | 17,990 | ||||||
OPERATING INCOME (LOSS):
|
||||||||||||
Casing services
|
$ | 3,217 | $ | 3,628 | $ | 2,495 | ||||||
Directional drilling services
|
3,061 | 1,103 | (576 | ) | ||||||||
Compressed air drilling services
|
1,169 | 17 | (945 | ) | ||||||||
Other services
|
(67 | ) | | | ||||||||
General corporate
|
(3,153 | ) | (2,123 | ) | (2,046 | ) | ||||||
Total income/loss) from operations
|
$ | 4,227 | $ | 2,625 | $ | (1,072 | ) | |||||
DEPRECIATION AND AMORTIZATION EXPENSE:
|
||||||||||||
Casing services
|
$ | 1,597 | $ | 1,413 | $ | 1,265 | ||||||
Directional drilling services
|
466 | 275 | 295 | |||||||||
Compressed air drilling services
|
1,329 | 1,139 | 955 | |||||||||
Other services
|
66 | | | |||||||||
General corporate
|
120 | 109 | 65 | |||||||||
Total depreciation and amortization expense
|
$ | 3,578 | $ | 2,936 | $ | 2,580 | ||||||
F-41
Year Ended December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
(restated) | ||||||||||||
INTEREST EXPENSE:
|
||||||||||||
Casing services
|
$ | 827 | $ | 1,044 | $ | 643 | ||||||
Directional drilling services
|
321 | 268 | 215 | |||||||||
Compressed air drilling services
|
801 | 839 | 761 | |||||||||
Other services
|
4 | | | |||||||||
General corporate
|
855 | 316 | 637 | |||||||||
Total interest expense
|
$ | 2,808 | $ | 2,467 | $ | 2,256 | ||||||
CAPITAL EXPENDITURES
|
||||||||||||
Casing services
|
$ | 1,285 | $ | 2,176 | $ | 137 | ||||||
Directional drilling services
|
1,552 | 1,066 | 83 | |||||||||
Compressed air drilling services
|
1,399 | 2,093 | 288 | |||||||||
Other services
|
338 | | | |||||||||
General corporate
|
29 | 19 | 10 | |||||||||
Total capital expenditures
|
$ | 4,603 | $ | 5,354 | $ | 518 | ||||||
GOODWILL:
|
||||||||||||
Casing services
|
$ | 3,673 | $ | | $ | | ||||||
Directional Drilling Services
|
4,168 | 4,168 | 4,168 | |||||||||
Compressed Air Drilling Services
|
3,510 | 3,493 | 3,493 | |||||||||
Other services
|
425 | | | |||||||||
General Corporate
|
| | | |||||||||
Total Goodwill
|
$ | 11,776 | $ | 7,661 | $ | 7,661 | ||||||
ASSETS:
|
||||||||||||
Casing services
|
$ | 21,197 | $ | 18,191 | $ | 15,681 | ||||||
Directional drilling services
|
14,166 | 11,529 | 8,888 | |||||||||
Compressed air drilling services
|
29,147 | 22,735 | 9,138 | |||||||||
Other services
|
7,097 | | | |||||||||
General corporate
|
8,585 | 1,207 | 1,071 | |||||||||
Total assets
|
$ | 80,192 | $ | 53,662 | $ | 34,778 | ||||||
REVENUES
|
||||||||||||
United States
|
$ | 42,466 | $ | 28,995 | $ | 15,321 | ||||||
International
|
5,260 | 3,729 | 2,669 | |||||||||
TOTAL
|
$ | 47,726 | $ | 32,724 | $ | 17,990 | ||||||
F-42
December 31, | December 31, | December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||||
(restated) | ||||||||||||
(in thousands) | ||||||||||||
Non-cash investing and financing transactions in connection with
the acquisitions of Jens and Strata:
|
||||||||||||
Fair value of net assets acquired
|
$ | | $ | | $ | (13,945 | ) | |||||
Goodwill and other intangibles
|
| | (5,903 | ) | ||||||||
Note payable to Seller of Jens Oilfield Service
|
| | 4,000 | |||||||||
Value of common stock issued
|
| | 3,735 | |||||||||
Issuance of preferred stock
|
| | 3,500 | |||||||||
Fair value of warrants issued
|
| | 314 | |||||||||
Net cash paid to acquire subsidiary
|
$ | | $ | | $ | (8,299 | ) | |||||
Other non-cash investing and financing transactions:
|
||||||||||||
Sale of property & equipment in connection with the
direct financing lease (Note 14)
|
$ | | $ | | $ | 1,193 | ||||||
(Gain) on settlement of debt
|
| (1,034 | ) | | ||||||||
Amortization of discount on debt
|
| 442 | | |||||||||
Purchase of equipment financed through assumption of debt or
accounts payable
|
| 906 | | |||||||||
Non-cash investing and financing transactions in connection with
the formation of AirComp:
|
||||||||||||
Other non-cash investing and financing transactions in
connection with AirComp:
|
||||||||||||
Issuance of debt to joint venture by M-I
|
| (4,818 | ) | | ||||||||
Contribution of property, plant and equipment by M-I to joint
venture
|
| 10,268 | | |||||||||
Increase in minority interest
|
| (2,063 | ) | | ||||||||
(Gain) on sale of stock in a subsidiary
|
| (2,433 | ) | | ||||||||
Difference of Companys investment cost basis in AirComp
and their share of underlying equity of net assets of AirComp
|
| (954 | ) | | ||||||||
Net cash paid in connection with the joint venture
|
$ | | $ | | $ | | ||||||
F-43
December 31, | December 31, | December 31, | ||||||||||
2004 | 2003 | 2002 | ||||||||||
(restated) | ||||||||||||
(in thousands) | ||||||||||||
Non-cash investing and financing transactions in connection with
the acquisitions of Safco, Diamond Air and Downhole:
|
||||||||||||
Fair Value of net assets acquired
|
$ | (4,867 | ) | $ | | $ | | |||||
Goodwill and other intangibles
|
(3,839 | ) | | | ||||||||
Value of common stock, issued
|
2,177 | | | |||||||||
Value of minority interest contribution
|
2,070 | | | |||||||||
$ | (4,459 | ) | $ | | $ | | ||||||
Non-cash investing and financing transaction in connection with
the remaining acquisition of the 19% of Jens:
|
||||||||||||
Fair Value of net assets acquired
|
$ | (813 | ) | | | |||||||
Goodwill and other intangibles
|
(3,676 | ) | | | ||||||||
Value of common stock issued
|
6,434 | | | |||||||||
Value of minority interest retirement
|
(1,945 | ) | | | ||||||||
$ | | $ | | $ | | |||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(restated) | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
YEAR 2004
|
||||||||||||||||
Revenues
|
$ | 9,661 | $ | 11,422 | $ | 11,888 | $ | 14,755 | ||||||||
Operating income
|
1,030 | 1,150 | 1,239 | 808 | ||||||||||||
Net income (loss)
|
472 | 413 | 519 | (516 | ) | |||||||||||
Preferred stock dividend
|
(88 | ) | (36 | ) | | | ||||||||||
Net income (loss) attributed to common shares
|
$ | 384 | $ | 377 | $ | 519 | $ | (516 | ) | |||||||
Income (loss) per common share Basic:
|
$ | .10 | $ | .06 | $ | .06 | $ | (0.04 | ) | |||||||
Income (loss) per common share Diluted:
|
$ | .08 | $ | .05 | $ | .05 | $ | (0.04 | ) | |||||||
F-44
First | Second | Third | Fourth | ||||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||
YEAR 2003
|
|||||||||||||||||
Revenues
|
$ | 6,999 | $ | 7,340 | $ | 8,089 | $ | 10,296 | |||||||||
Operating income
|
1,023 | 910 | 678 | 14 | |||||||||||||
Net income (loss)
|
53 | (335 | ) | 3,537 | (328 | ) | |||||||||||
Preferred stock dividend
|
(394 | ) | (87 | ) | (88 | ) | (87 | ) | |||||||||
Net income (loss) attributed to common shares
|
$ | (341 | ) | $ | (422 | ) | $ | 3,449 | $ | (415 | ) | ||||||
Income (loss) per common share
|
|||||||||||||||||
(Basic)
|
$ | (0.09 | ) | $ | (0.11 | ) | $ | 0.88 | $ | (0.11 | ) | ||||||
Income (loss) per common share
|
|||||||||||||||||
Diluted:
|
$ | (0.09 | ) | $ | (0.11 | ) | $ | 0.59 | $ | (0.11 | ) | ||||||
Note 21 | Legal Matters |
F-45
F-46
June 30, | December 31, | ||||||||
2005 | 2004 | ||||||||
(unaudited) | |||||||||
ASSETS
|
|||||||||
Cash and cash equivalents
|
$ | 2,693 | $ | 7,344 | |||||
Trade receivables, net
|
18,001 | 12,986 | |||||||
Inventory
|
3,901 | 2,373 | |||||||
Lease receivable, current
|
180 | 180 | |||||||
Prepaid expenses and other
|
1,650 | 1,495 | |||||||
Total current assets
|
26,425 | 24,378 | |||||||
Property and equipment, net
|
49,585 | 37,679 | |||||||
Goodwill
|
11,892 | 11,776 | |||||||
Other intangible assets, net
|
6,175 | 5,057 | |||||||
Debt issuance costs, net
|
671 | 685 | |||||||
Lease receivable, less current portion
|
432 | 558 | |||||||
Other assets
|
119 | 59 | |||||||
Total assets
|
$ | 95,299 | $ | 80,192 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY
|
|||||||||
Current maturities of long-term debt
|
$ | 3,952 | $ | 5,541 | |||||
Trade accounts payable
|
6,907 | 5,694 | |||||||
Accrued salaries, benefits and payroll taxes
|
834 | 615 | |||||||
Accrued interest
|
509 | 470 | |||||||
Accrued expenses
|
2,815 | 1,852 | |||||||
Accounts payable, related parties
|
75 | 740 | |||||||
Total current liabilities
|
15,092 | 14,912 | |||||||
Accrued postretirement benefit obligations
|
661 | 687 | |||||||
Long-term debt, net of current maturities
|
33,938 | 24,932 | |||||||
Other long-term liabilities
|
502 | 129 | |||||||
Total liabilities
|
50,193 | 40,660 | |||||||
Commitments and Contingencies
|
|||||||||
Minority interests
|
4,911 | 4,423 | |||||||
STOCKHOLDERS EQUITY
|
|||||||||
Common stock, $0.01 par value (20,000,000 shares
authorized; 14,022,800 and 13,611,525 issued and outstanding at
June 30, 2005 and December 31, 2004, respectively)
|
140 | 136 | |||||||
Capital in excess of par value
|
42,077 | 40,331 | |||||||
Accumulated deficit
|
(2,022 | ) | (5,358 | ) | |||||
Total stockholders equity
|
40,195 | 35,109 | |||||||
Total liabilities and stockholders equity
|
$ | 95,299 | $ | 80,192 | |||||
F-47
For the Three Months | For the Six Months | |||||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||||
(Restated) | (Restated) | |||||||||||||||||
Revenues
|
$ | 23,588 | $ | 11,422 | $ | 42,922 | $ | 21,083 | ||||||||||
Cost of revenues
|
||||||||||||||||||
Direct costs
|
15,691 | 7,833 | 28,476 | 14,742 | ||||||||||||||
Depreciation
|
1,092 | 586 | 2,006 | 1,205 | ||||||||||||||
Total cost of revenues
|
16,783 | 8,419 | 30,482 | 15,947 | ||||||||||||||
Gross margin
|
6,805 | 3,003 | 12,440 | 5,136 | ||||||||||||||
General and administrative
|
3,465 | 1,670 | 6,459 | 2,554 | ||||||||||||||
Amortization
|
426 | 183 | 820 | 402 | ||||||||||||||
Income from operations
|
2,914 | 1,150 | 5,161 | 2,180 | ||||||||||||||
Other income (expense):
|
||||||||||||||||||
Interest
|
(645 | ) | (499 | ) | (1,166 | ) | (1,068 | ) | ||||||||||
Other
|
10 | 18 | 158 | 205 | ||||||||||||||
Total other income (expense)
|
(635 | ) | (481 | ) | (1,008 | ) | (863 | ) | ||||||||||
Net income before minority interest and income taxes
|
2,279 | 669 | 4,153 | 1,317 | ||||||||||||||
Minority interest in income of subsidiaries
|
(344 | ) | (139 | ) | (488 | ) | (212 | ) | ||||||||||
Provision for foreign taxes
|
(166 | ) | (117 | ) | (329 | ) | (220 | ) | ||||||||||
Net income
|
1,769 | 413 | 3,336 | 885 | ||||||||||||||
Preferred stock dividend
|
| (36 | ) | | (124 | ) | ||||||||||||
Net income attributed to common shareholders
|
$ | 1,769 | $ | 377 | $ | 3,336 | $ | 761 | ||||||||||
Net income per common share:
|
||||||||||||||||||
Basic
|
$ | 0.13 | $ | 0.06 | $ | 0.24 | $ | 0.15 | ||||||||||
Diluted
|
$ | 0.12 | $ | 0.05 | $ | 0.22 | $ | 0.13 | ||||||||||
Weighted average shares outstanding:
|
||||||||||||||||||
Basic
|
13,967 | 6,256 | 13,800 | 5,091 | ||||||||||||||
Diluted
|
15,103 | 7,619 | 14,900 | 6,907 |
F-48
For the Six Months | |||||||||||||
Ended June 30, | |||||||||||||
2005 | 2004 | ||||||||||||
(restated) | |||||||||||||
Cash flows from operating activities:
|
|||||||||||||
Net income
|
$ | 3,336 | $ | 885 | |||||||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|||||||||||||
Depreciation
|
2,006 | 1,205 | |||||||||||
Amortization
|
820 | 402 | |||||||||||
Amortization of note discount
|
6 | 109 | |||||||||||
Minority interest in income of subsidiaries
|
488 | 212 | |||||||||||
Changes in operating assets and liabilities, net of acquisitions:
|
|||||||||||||
(Increase) in accounts receivable
|
(3,024 | ) | (1,482 | ) | |||||||||
(Increase) in other current assets
|
(889 | ) | (236 | ) | |||||||||
Decrease (increase) in other assets
|
(375 | ) | 84 | ||||||||||
Increase in accounts payable
|
610 | 258 | |||||||||||
Increase in accrued interest
|
35 | 60 | |||||||||||
(Decrease) in accrued expenses
|
(296 | ) | (429 | ) | |||||||||
(Decrease) increase in accrued salaries, benefits and payroll
taxes
|
172 | (185 | ) | ||||||||||
(Decrease) in other long-term liabilities
|
| (141 | ) | ||||||||||
Net cash provided by operating activities
|
2,889 | 742 | |||||||||||
Cash flows from investing activities:
|
|||||||||||||
Acquisition of Delta, net of cash received
|
(4,481 | ) | | ||||||||||
Acquisition of Capcoil, net of cash received
|
(2,607 | ) | | ||||||||||
Purchase of equipment
|
(5,463 | ) | (1,879 | ) | |||||||||
Net cash used in investing activities
|
(12,551 | ) | (1,879 | ) | |||||||||
Cash flows from financing activities:
|
|||||||||||||
Proceeds from issuance of common stock, net
|
| 1,865 | |||||||||||
Proceeds from long-term debt, net
|
5,210 | | |||||||||||
Repayments on long-term debt
|
| (1,331 | ) | ||||||||||
Debt issuance costs
|
(199 | ) | (211 | ) | |||||||||
Net cash provided by financing activities
|
5,011 | 323 | |||||||||||
Net change in cash
|
(4,651 | ) | (814 | ) | |||||||||
Cash and cash equivalents at beginning of year
|
7,344 | 1,299 | |||||||||||
Cash and cash equivalents at end of period
|
$ | 2,693 | $ | 485 | |||||||||
Supplemental information:
|
|||||||||||||
Interest paid
|
$ | 1,166 | $ | 1,068 | |||||||||
Foreign taxes paid
|
$ | 329 | $ | 220 | |||||||||
Non-cash investing and financing transactions in connection with
the acquisitions of Delta and Capcoil:
|
|||||||||||||
Fair value of net assets acquired
|
$ | (8,449 | ) | $ | | ||||||||
Goodwill and other intangibles
|
(1,515 | ) | | ||||||||||
Value of common stock issued
|
1,750 | | |||||||||||
Notes payable to Sellers of Delta
|
350 | | |||||||||||
Debt assumed at closing
|
776 | | |||||||||||
Net cash paid to acquire subsidiaries
|
$ | (7,088 | ) | $ | | ||||||||
F-49
F-50
Note 2 | Acquisitions |
F-51
For the Three Months | For the Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Revenues
|
$ | 24,215 | $ | 16,744 | $ | 45,904 | $ | 31,019 | |||||||||
Operating income
|
2,273 | 1,897 | 5,147 | 3,401 | |||||||||||||
Net income
|
1,359 | 1,161 | 3,478 | 1,733 | |||||||||||||
Net income per common share:
|
|||||||||||||||||
Basic
|
$ | 0.10 | $ | 0.17 | $ | 0.25 | $ | 0.32 | |||||||||
Diluted
|
$ | 0.09 | $ | 0.15 | $ | 0.23 | $ | 0.25 |
Note 3 | Stock-Based Compensation |
For the Three Months | For the Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Net income as reported
|
$ | 1,769 | $ | 377 | $ | 3,336 | $ | 761 | |||||||||
Less: stock based employee compensation expense determined under
fair value based method for all awards, net of tax
|
(836 | ) | | (1,505 | ) | | |||||||||||
Pro forma net income
|
$ | 933 | $ | 377 | $ | 1,831 | $ | 761 | |||||||||
For the Three | For the Six | ||||||||||||||||
Months Ended | Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
Basic net income per common share:
|
|||||||||||||||||
As reported
|
$ | 0.13 | $ | 0.06 | $ | 0.24 | $ | 0.15 | |||||||||
Pro forma
|
$ | 0.07 | $ | 0.06 | $ | 0.13 | $ | 0.15 | |||||||||
Diluted net income per common share:
|
|||||||||||||||||
As reported
|
$ | 0.12 | $ | 0.05 | $ | 0.22 | $ | 0.13 | |||||||||
Pro forma
|
$ | 0.06 | $ | 0.05 | $ | 0.12 | $ | 0.13 |
F-52
For the | ||||||||
For the | Six Months | |||||||
Three Months | Ended | |||||||
Ended | June 30, | |||||||
June 30, 2005 | 2005 | |||||||
Expected dividend yield
|
| | ||||||
Expected price volatility
|
89.91 | % | 98.65 | % | ||||
Risk-free interest rate
|
6.25 | % | 6.63 | % | ||||
Expected life of options
|
7 years | 7 years | ||||||
Weighted average fair value of options granted at market value
|
$ | 4.01 | $ | 3.12 |
Note 4 | Income Per Common Share |
F-53
For the | For the | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Numerator:
|
|||||||||||||||||
Net income available for common stockholders
|
$ | 1,769 | $ | 377 | $ | 3,336 | $ | 761 | |||||||||
Plus income impact of assumed conversions:
|
|||||||||||||||||
Preferred stock dividends
|
| 36 | | 124 | |||||||||||||
Net income applicable to common stockholders plus assumed
conversions
|
$ | 1,769 | $ | 413 | $ | 3,336 | $ | 885 | |||||||||
Denominator:
|
|||||||||||||||||
Basic earnings per share weighted average shares
outstanding
|
13,967 | 6,256 | 13,800 | 5,091 | |||||||||||||
Effect of potentially dilutive common shares:
|
|||||||||||||||||
Convertible preferred stock and employee and director stock
options
|
1,136 | 1,363 | 1,100 | 1,816 | |||||||||||||
Diluted earnings per share weighted average shares
outstanding and assumed conversions
|
15,103 | 7,619 | 14,900 | 6,907 | |||||||||||||
Net income per share basic
|
$ | 0.13 | $ | 0.06 | $ | 0.24 | $ | 0.15 | |||||||||
Net income per share diluted
|
$ | 0.12 | $ | 0.05 | $ | 0.22 | $ | 0.13 | |||||||||
Note 5 | Goodwill and Intangible Assets |
F-54
Earnings Per Share. |
AirComp Acquisition. |
F-55
As | |||||||||||||
Previously | At June 30, 2004 | As | |||||||||||
Reported | Adjustments | Restated | |||||||||||
Assets | |||||||||||||
Cash and cash equivalents
|
$ | 485 | $ | | $ | 485 | |||||||
Trade receivables, net
|
10,305 | | 10,305 | ||||||||||
Lease receivable, current
|
180 | | 180 | ||||||||||
Prepaid expenses and other
|
1,137 | | 1,137 | ||||||||||
Total current assets
|
12,107 | | 12,107 | ||||||||||
Property and equipment, net
|
27,234 | 4,571 | 31,805 | ||||||||||
Goodwill
|
7,661 | | 7,661 | ||||||||||
Other intangible assets, net
|
2,054 | | 2,054 | ||||||||||
Debt issuance costs, net
|
612 | | 612 | ||||||||||
Lease receivable, less current portion
|
664 | | 664 | ||||||||||
Deferred offering costs
|
2,650 | | 2,650 | ||||||||||
Other
|
79 | | 79 | ||||||||||
Total Assets
|
$ | 53,061 | $ | 4,571 | $ | 57,632 | |||||||
Liabilities and Stockholders Equity | |||||||||||||
Current maturities of long-term debt
|
$ | 4,848 | $ | | $ | 4,848 | |||||||
Trade accounts payable
|
3,391 | | 3,391 | ||||||||||
Accrued salaries, benefits and payroll taxes
|
677 | | 677 | ||||||||||
Accrued interest
|
212 | | 212 | ||||||||||
Accrued expenses
|
1,332 | | 1,332 | ||||||||||
Accounts payable, related parties
|
541 | | 541 | ||||||||||
Total current liabilities
|
11,001 | | 11,001 | ||||||||||
Accrued postretirement benefit obligations
|
520 | | 520 | ||||||||||
Long-term debt, net of current maturities
|
26,163 | | 26,163 | ||||||||||
Other long-term liabilities
|
129 | | 129 | ||||||||||
Redeemable warrants
|
1,500 | | 1,500 | ||||||||||
Total Liabilities
|
39,313 | | 39,313 | ||||||||||
Commitments and contingencies
|
|||||||||||||
Minority interests
|
2,782 | 1,411 | 4,193 | ||||||||||
Stockholders Equity
|
|||||||||||||
Common stock
|
63 | | 63 | ||||||||||
Capital in excess of par value
|
18,593 | 955 | 19,548 | ||||||||||
Accumulated (deficit)
|
(7,690 | ) | 2,205 | (5,485 | ) | ||||||||
Total Stockholders Equity
|
10,966 | 3,160 | 14,126 | ||||||||||
Total Liabilities and Stockholders Equity
|
$ | 53,061 | $ | 4,571 | $ | 57,632 | |||||||
F-56
Three Months Ended June 30, 2004 | ||||||||||||||
As | ||||||||||||||
Previously | As | |||||||||||||
Reported | Adjustments | Restated | ||||||||||||
Revenue
|
$ | 11,422 | $ | | $ | 11,422 | ||||||||
Cost of revenues
|
8,340 | 79 | 8,419 | |||||||||||
Gross margin
|
3,082 | (79 | ) | 3,003 | ||||||||||
General and administrative expense
|
1,853 | | 1,853 | |||||||||||
Income (loss) from operations
|
1,229 | (79 | ) | 1,150 | ||||||||||
Other income (expense):
|
||||||||||||||
Interest
|
(499 | ) | | (499 | ) | |||||||||
Minority interests in income of subsidiaries
|
(161 | ) | 22 | (139 | ) | |||||||||
Other
|
18 | | 18 | |||||||||||
Total other income (expense)
|
(642 | ) | 22 | (620 | ) | |||||||||
Net income (loss) before income taxes
|
587 | (57 | ) | 530 | ||||||||||
Provision for foreign income tax
|
(117 | ) | | (117 | ) | |||||||||
Net income (loss)
|
470 | (57 | ) | 413 | ||||||||||
Preferred stock dividend
|
(36 | ) | | (36 | ) | |||||||||
Net income (loss) attributed to common stockholders
|
$ | 434 | $ | (57 | ) | $ | 377 | |||||||
Net income per common share basic
|
$ | 0.07 | $ | (0.01 | ) | $ | 0.06 | |||||||
Net income per common share diluted
|
$ | 0.04 | $ | | $ | 0.04 | ||||||||
Weighted average number of common shares outstanding:
|
||||||||||||||
Basic
|
6,253 | | 6,253 | |||||||||||
Diluted
|
10,237 | | 10,237 | |||||||||||
F-57
Six Months Ended June 30, 2004 | ||||||||||||||
As | ||||||||||||||
Previously | As | |||||||||||||
Reported | Adjustments | Restated | ||||||||||||
Revenue
|
$ | 21,083 | $ | | $ | 21,083 | ||||||||
Cost of revenues
|
15,729 | 218 | 15,947 | |||||||||||
Gross margin
|
5,354 | (218 | ) | 5,136 | ||||||||||
General and administrative expense
|
2,956 | | 2,956 | |||||||||||
Income (loss) from operations
|
2,398 | (218 | ) | 2,180 | ||||||||||
Other income (expense):
|
||||||||||||||
Interest
|
(1,068 | ) | | (1,068 | ) | |||||||||
Minority interests in income of subsidiaries
|
(256 | ) | 44 | (212 | ) | |||||||||
Other
|
205 | | 205 | |||||||||||
Total other income (expense)
|
(1,119 | ) | 44 | (1,075 | ) | |||||||||
Net income (loss) before income taxes
|
1,279 | (174 | ) | 1,105 | ||||||||||
Provision for foreign income tax
|
(220 | ) | | (220 | ) | |||||||||
Net income (loss)
|
1,059 | (174 | ) | 885 | ||||||||||
Preferred stock dividend
|
(124 | ) | | (124 | ) | |||||||||
Net income (loss) attributed to common stockholders
|
$ | 935 | $ | (174 | ) | $ | 761 | |||||||
Net income (loss) per common share basic
|
$ | 0.18 | $ | (0.03 | ) | $ | 0.15 | |||||||
Net income per common share diluted
|
$ | 0.11 | $ | (0.02 | ) | $ | 0.09 | |||||||
Weighted average number of common shares outstanding:
|
||||||||||||||
Basic
|
5,077 | | 5,077 | |||||||||||
Diluted
|
8,394 | | 8,394 | |||||||||||
F-58
Six Months Ended June 30, 2004 | |||||||||||||||
As | |||||||||||||||
Previously | As | ||||||||||||||
Reported | Adjustments | Restated | |||||||||||||
Cash Flows From Operating Activities:
|
|||||||||||||||
Net income (loss)
|
$ | 1,059 | $ | (174 | ) | $ | 885 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|||||||||||||||
Depreciation and amortization expense
|
1,389 | 218 | 1,607 | ||||||||||||
Fair value of warrant issued to consultant
|
14 | | 14 | ||||||||||||
Amortization of discount on debt
|
109 | | 109 | ||||||||||||
Minority interest in income of subsidiaries
|
256 | (44 | ) | 212 | |||||||||||
Changes in operating assets and liabilities:
|
|||||||||||||||
(Increase) in accounts receivable
|
(1,482 | ) | | (1,482 | ) | ||||||||||
(Increase) in other current assets
|
(250 | ) | | (250 | ) | ||||||||||
Decrease in other assets
|
84 | | 84 | ||||||||||||
Increase in accounts payable
|
258 | | 258 | ||||||||||||
Increase in accrued interest
|
60 | | 60 | ||||||||||||
(Decrease) in accrued expenses
|
(429 | ) | | (429 | ) | ||||||||||
(Decrease) in other long-term liabilities
|
(141 | ) | | (141 | ) | ||||||||||
(Decrease) in accrued employee benefits and payroll taxes
|
(185 | ) | | (185 | ) | ||||||||||
Net Cash Provided by Operating Activities
|
742 | | 742 | ||||||||||||
Cash Flows From Investing Activities:
|
|||||||||||||||
Purchase of equipment
|
(1,879 | ) | | (1,879 | ) | ||||||||||
Proceeds from sale of equipment
|
| | | ||||||||||||
Net Cash Used by Investing Activities
|
(1,879 | ) | | (1,879 | ) | ||||||||||
Cash Flows From Financing Activities:
|
|||||||||||||||
Proceeds from issuance of common stock, net
|
1,865 | | 1,865 | ||||||||||||
Repayments of long-term debt
|
(1,331 | ) | | (1,331 | ) | ||||||||||
Debt issuance costs
|
(211 | ) | | (211 | ) | ||||||||||
Net Cash Provided by Financing Activities
|
323 | | 323 | ||||||||||||
Net decrease in cash and cash equivalents
|
(814 | ) | | (814 | ) | ||||||||||
Cash and cash equivalents at beginning of the year
|
1,299 | | 1,299 | ||||||||||||
Cash and cash equivalents at end of the period
|
$ | 485 | $ | | $ | 485 | |||||||||
Supplemental information:
|
|||||||||||||||
Interest paid
|
$ | 1,068 | $ | | $ | 1,068 |
F-59
June 30, | December 31, | |||||||||
2005 | 2004 | |||||||||
Hammer bits
|
||||||||||
Finished goods
|
$ | 660 | $ | 857 | ||||||
Work in process
|
495 | 385 | ||||||||
Raw materials
|
375 | 151 | ||||||||
Total hammer bits
|
1,530 | 1,393 | ||||||||
Hammers
|
577 | 417 | ||||||||
Chemicals
|
204 | 254 | ||||||||
Coiled tubing and related inventory
|
1,193 | 309 | ||||||||
Shop supplies and related inventory
|
397 | | ||||||||
Total inventory
|
$ | 3,901 | $ | 2,373 | ||||||
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
Debt of Allis-Chalmers Energy
|
||||||||
Revolving line of credit
|
$ | 6,875 | $ | 2,353 | ||||
Bank term loan
|
5,064 | 6,335 | ||||||
Capital expenditure and acquisition line
|
6,000 | | ||||||
Notes payable to former directors
|
96 | 402 | ||||||
Debt of Jens Oilfield Service, Inc.
|
||||||||
Subordinated seller note
|
3,331 | 4,000 | ||||||
Note payable under non-compete agreement
|
391 | 514 | ||||||
Bank term loans
|
1,030 | 584 | ||||||
Debt of Strata Directional Technology, Inc.
|
||||||||
Vendor financing
|
420 | 1,164 | ||||||
Debt of Safco Oil Field Products, Inc. and Delta
|
||||||||
Note payable under non-compete agreement
|
150 | 150 | ||||||
Note payable to former owners of Delta
|
350 | | ||||||
Debt of Downhole Injection Services, LLC and Capcoil
|
||||||||
Vehicle and equipment installment notes
|
160 | 60 | ||||||
Note payable under non-compete agreements
|
330 | | ||||||
Debt of Mountain Compressed Air Inc.
|
||||||||
Term loan
|
172 | 198 | ||||||
Seller note
|
500 | 1,600 |
F-60
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
Debt of AirComp
|
||||||||
Revolving line of credit
|
520 | 1,520 | ||||||
Bank term loan
|
6,203 | 6,775 | ||||||
Delayed draw term loan
|
1,480 | | ||||||
Subordinated note payable to M-I
|
4,818 | 4,818 | ||||||
Total debt
|
37,890 | 30,473 | ||||||
Less: short-term debt and current maturities
|
3,952 | 5,541 | ||||||
Long-term debt obligations
|
$ | 33,938 | $ | 24,932 | ||||
| A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $6.9 million as of June 30, 2005. | |
| A term loan with a principal balance at June 30, 2005 of $5.1 million payable in monthly payments of principal of $105,583. We were also required to prepay this term loan by an amount equal to 20% of receipts from our largest customer in Mexico. | |
| A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility were payable monthly over four years beginning in January 2006. Outstanding borrowings under this line of credit were $6.0 million as of June 30, 2005. | |
F-61
| A $3.5 million bank line of credit of which $520,000 was outstanding at June 30, 2005. Interest accrued at an adjustable rate based on the prime rate. The average interest rate was 7.0% as of June 30, 2005. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line of credit were subject to a borrowing base consisting of 80% of eligible accounts receivable. | |
| A term loan with a principal balance of $6.2 million as of June 30, 2005 that accrued interest at an adjustable rate based on either LIBOR or the prime rate. The average interest rate was 8.25% as of June 30, 2005. Principal payments of $286,000 plus interest were due quarterly, with a final maturity date of June 27, 2007. | |
| A delayed draw term loan facility in the amount of $1.5 million to be used for capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or the prime rate. Quarterly principal payments were to commence on March 31, 2006 in an amount equal to 5.0% of the outstanding balance as of December 31, 2005, with a final maturity of June 27, 2007. The outstanding principal balance was $1.5 million as of June 30, 2005. | |
F-62
F-63
For the Three Months | For the Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Revenues
|
|||||||||||||||||
Directional drilling services
|
$ | 10,934 | $ | 6,422 | $ | 20,835 | $ | 11,675 | |||||||||
Casing and tubing services
|
3,933 | 2,447 | 7,493 | 4,386 | |||||||||||||
Compressed air drilling services
|
4,866 | 2,553 | 9,047 | 5,022 | |||||||||||||
Production services
|
2,289 | | 3,607 | | |||||||||||||
Rental tools
|
1,566 | | 1,940 | | |||||||||||||
$ | 23,588 | $ | 11,422 | $ | 42,922 | $ | 21,083 | ||||||||||
Operating Income (Loss):
|
|||||||||||||||||
Directional drilling services
|
$ | 1,495 | $ | 727 | $ | 3,373 | $ | 1,389 | |||||||||
Casing and tubing services
|
1,354 | 783 | 2,679 | 1,225 | |||||||||||||
Compressed air drilling services
|
1,002 | 339 | 1,529 | 594 | |||||||||||||
Production services
|
36 | | (2 | ) | | ||||||||||||
Rental tools
|
405 | | 326 | | |||||||||||||
General corporate
|
(1,378 | ) | (699 | ) | (2,744 | ) | (1,028 | ) | |||||||||
$ | 2,914 | $ | 1,150 | $ | 5,161 | $ | 2,180 | ||||||||||
Depreciation and Amortization:
|
|||||||||||||||||
Directional drilling services
|
$ | 207 | $ | 113 | $ | 357 | $ | 214 | |||||||||
Casing and tubing services
|
468 | 356 | 908 | 717 | |||||||||||||
Compressed air drilling services
|
422 | 275 | 870 | 626 | |||||||||||||
Production services
|
189 | | 325 | | |||||||||||||
Rental tools
|
176 | | 265 | | |||||||||||||
General corporate
|
56 | 25 | 101 | 50 | |||||||||||||
$ | 1,518 | $ | 769 | $ | 2,826 | $ | 1,607 | ||||||||||
Interest Expense:
|
|||||||||||||||||
Directional drilling services
|
$ | 2 | $ | 67 | $ | 24 | $ | 142 | |||||||||
Casing and tubing services
|
97 | 155 | 196 | 320 | |||||||||||||
Compressed air drilling services
|
219 | 158 | 450 | 317 | |||||||||||||
Production services
|
3 | | 4 | | |||||||||||||
Rental tools
|
1 | | 1 | | |||||||||||||
General corporate
|
323 | 119 | 491 | 289 | |||||||||||||
$ | 645 | $ | 499 | $ | 1,166 | $ | 1,068 | ||||||||||
F-64
For the Three Months | For the Six Months | ||||||||||||||||
Ended June 30, | Ended June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Capital Expenditures:
|
|||||||||||||||||
Directional drilling services
|
$ | 937 | $ | 83 | $ | 1,200 | $ | 788 | |||||||||
Casing and tubing services
|
217 | 46 | 1,857 | 425 | |||||||||||||
Compressed air drilling services
|
1,147 | 338 | 1,926 | 664 | |||||||||||||
Production services
|
253 | | 290 | | |||||||||||||
Rental tools
|
7 | | 7 | | |||||||||||||
General corporate
|
174 | 1 | 183 | 2 | |||||||||||||
$ | 2,735 | $ | 468 | $ | 5,463 | $ | 1,879 | ||||||||||
As of | |||||||||
June 30, | December 31, | ||||||||
2005 | 2004 | ||||||||
Goodwill:
|
|||||||||
Directional drilling services
|
$ | 4,168 | $ | 4,168 | |||||
Casing and tubing services
|
3,673 | 3,673 | |||||||
Compressed air drilling services
|
3,510 | 3,510 | |||||||
Production services
|
541 | 425 | |||||||
Rental tools
|
| | |||||||
General corporate
|
| | |||||||
$ | 11,892 | $ | 11,776 | ||||||
Assets:
|
|||||||||
Directional drilling services
|
$ | 18,094 | $ | 14,166 | |||||
Casing and tubing services
|
23,279 | 21,197 | |||||||
Compressed air drilling services
|
28,186 | 29,147 | |||||||
Production services
|
11,055 | 5,472 | |||||||
Rental tools
|
8,573 | 1,625 | |||||||
General corporate
|
6,112 | 8,585 | |||||||
$ | 95,299 | $ | 80,192 | ||||||
For the Three Months | For the Six Months | ||||||||||||||||
Ended | Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||
(restated) | (restated) | ||||||||||||||||
Revenues:
|
|||||||||||||||||
United States
|
$ | 21,832 | $ | 10,259 | $ | 39,393 | $ | 18,891 | |||||||||
International
|
1,756 | 1,163 | 3,529 | 2,192 | |||||||||||||
$ | 23,588 | $ | 11,422 | $ | 42,922 | $ | 21,083 | ||||||||||
F-65
Note 12 | Legal Matters |
| A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible accounts receivable and 50% of eligible inventory (up to a maximum of $2.0 million of borrowings based on inventory). This facility will be used to finance working capital requirements and other general corporate purposes, including the issuance of standby letters of credit. | |
| Two term loans totaling $42.0 million. | |
F-66
F-67
/s/ Accounting & Consulting Group, LLP | |
|
|
Accounting & Consulting Group, LLP |
F-68
/s/ Accounting & Consulting Group, LLP | |
|
|
Accounting & Consulting Group, LLP |
F-69
July 31, | December 31, | December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||||
ASSETS | ||||||||||||||
CURRENT ASSETS:
|
||||||||||||||
Cash and cash equivalents
|
$ | 123,171 | $ | 38,566 | $ | 129,612 | ||||||||
Accounts receivable (Note 3)
|
826,198 | 704,466 | 547,332 | |||||||||||
Unbilled receivables
|
75,809 | | 3,518 | |||||||||||
Related party receivables (Note 2)
|
85,636 | 153,981 | 197,859 | |||||||||||
Inventories (Note 4)
|
1,712,465 | 1,146,070 | 344,948 | |||||||||||
Prepaid expenses
|
10,160 | 16,300 | 9,629 | |||||||||||
TOTAL CURRENT ASSETS
|
2,833,439 | 2,059,383 | 1,232,898 | |||||||||||
Related party receivables (Note 2)
|
182,844 | 234,607 | 317,003 | |||||||||||
Property, Plant and Equipment, at cost (Note 5)
|
295,867 | 245,673 | 223,217 | |||||||||||
Other Assets (Note 12)
|
24,885 | 31,699 | 27,036 | |||||||||||
TOTAL ASSETS
|
$ | 3,337,035 | $ | 2,571,362 | $ | 1,800,154 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||||
CURRENT LIABILITIES:
|
||||||||||||||
Current maturities of long-term debt
|
$ | 341,184 | $ | 171,561 | $ | 164,535 | ||||||||
Current maturities of capital lease obligations
|
3,447 | | | |||||||||||
Accounts payable
|
635,418 | 602,918 | 517,471 | |||||||||||
Accrued expenses
|
97,366 | 197,588 | 269,489 | |||||||||||
Related party payables (Note 2)
|
687,559 | 427,465 | 48,694 | |||||||||||
Loans from related parties (Note 2)
|
768,281 | 667,137 | 209,000 | |||||||||||
TOTAL CURRENT LIABILITIES
|
2,533,255 | 2,066,669 | 1,209,189 | |||||||||||
Long-Term Debt (Note 6)
|
312,085 | 309,612 | 410,524 | |||||||||||
Capital lease obligations (Note 5)
|
14,873 | | | |||||||||||
Commitments and Contingencies
|
| | | |||||||||||
TOTAL LIABILITIES
|
2,860,213 | 2,376,281 | 1,619,713 | |||||||||||
STOCKHOLDERS EQUITY
|
||||||||||||||
Common stock, par value $11,000 shares issued and
outstanding
|
1,000 | 1,000 | 1,000 | |||||||||||
Paid-in capital
|
2,370 | 2,370 | 2,370 | |||||||||||
Retained earnings
|
473,452 | 191,711 | 177,071 | |||||||||||
TOTAL STOCKHOLDERS EQUITY
|
476,822 | 195,081 | 180,441 | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
$ | 3,337,035 | $ | 2,571,362 | $ | 1,800,154 | ||||||||
F-70
July 31, | December 31, | December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||||
NET SALES (Note 8)
|
$ | 3,984,512 | $ | 5,470,208 | $ | 4,073,653 | ||||||||
Drilling expenses
|
2,803,729 | 4,592,677 | 3,394,507 | |||||||||||
Selling, general, and administrative
|
390,690 | 620,776 | 492,067 | |||||||||||
Depreciation and amortization
|
91,902 | 99,730 | 102,648 | |||||||||||
Interest expense
|
34,156 | 48,279 | 16,217 | |||||||||||
Total Costs and Expenses
|
3,320,477 | 5,361,462 | 4,005,439 | |||||||||||
Operating income
|
664,035 | 108,746 | 68,214 | |||||||||||
Other income
|
||||||||||||||
Gain (loss) on sale of assets
|
(7,104 | ) | 9,841 | 15,906 | ||||||||||
Interest income
|
11,008 | 23,053 | 5,232 | |||||||||||
NET INCOME
|
$ | 667,939 | $ | 141,640 | $ | 89,352 | ||||||||
F-71
Common | Paid-in | Retained | ||||||||||||||
Stock | Capital | Earnings | Total | |||||||||||||
Balance, January 1, 2002
|
$ | 1,000 | $ | 2,370 | $ | 485,719 | $ | 489,089 | ||||||||
Net Income
|
| | 89,352 | 89,352 | ||||||||||||
Dividends paid
|
| | (398,000 | ) | (398,000 | ) | ||||||||||
Balance, December 31, 2002
|
1,000 | 2,370 | 177,071 | 180,441 | ||||||||||||
Net Income
|
| | 141,640 | 141,640 | ||||||||||||
Dividends paid
|
| | (127,000 | ) | (127,000 | ) | ||||||||||
Balance, December 31, 2003
|
1,000 | 2,370 | 191,711 | 195,081 | ||||||||||||
Net Income
|
| | 667,939 | 667,939 | ||||||||||||
Dividends paid
|
| | (386,198 | ) | (386,198 | ) | ||||||||||
Balance, July 31, 2004
|
$ | 1,000 | $ | 2,370 | $ | 473,452 | $ | 476,822 | ||||||||
F-72
July 31, | December 31, | December 31, | |||||||||||
2004 | 2003 | 2002 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||||||
Net income
|
$ | 667,939 | $ | 141,640 | $ | 89,352 | |||||||
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
|
|||||||||||||
Depreciation and amortization
|
91,902 | 99,730 | 102,648 | ||||||||||
Gain (loss) on sale of property, plant, and equipment
|
(7,104 | ) | 9,841 | 15,906 | |||||||||
Change in operating assets and liabilities:
|
|||||||||||||
Accounts receivable
|
(197,541 | ) | (153,616 | ) | (165,294 | ) | |||||||
Inventory
|
(566,395 | ) | (801,122 | ) | (47,471 | ) | |||||||
Prepaid expenses
|
6,140 | (6,671 | ) | (302 | ) | ||||||||
Other noncurrent assets
|
6,814 | (4,663 | ) | (13,780 | ) | ||||||||
Accounts payable
|
292,594 | 464,218 | 198,954 | ||||||||||
Accrued payroll and employee benefits
|
(100,224 | ) | (71,899 | ) | 162,920 | ||||||||
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
|
194,125 | (322,542 | ) | 342,933 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||||||
Repayment from loans to related parties
|
120,108 | 128,896 | 202,450 | ||||||||||
Loans made to related parties
|
| (2,622 | ) | (430,370 | ) | ||||||||
Proceeds from sale of property, plant, and equipment
|
| 30,494 | 53,804 | ||||||||||
Capital expenditures on property, plant, and equipment
|
(115,314 | ) | (162,521 | ) | (140,047 | ) | |||||||
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
|
4,794 | (5,753 | ) | (314,163 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||
Repayment of long-term debt
|
(188,522 | ) | (219,947 | ) | (111,897 | ) | |||||||
Proceeds from issuance of long-term debt
|
360,618 | 126,061 | 367,788 | ||||||||||
Repayment of short-term debt
|
(200,000 | ) | (200,000 | ) | | ||||||||
Proceeds from issuance of short-term debt
|
200,000 | 200,000 | | ||||||||||
Repayment of capital lease obligations
|
(1,358 | ) | | | |||||||||
Repayment of loans from related parties
|
(162,667 | ) | (302,494 | ) | (6,000 | ) | |||||||
Proceeds from loans from related parties
|
263,813 | 760,629 | 215,000 | ||||||||||
Payment of dividend distributions to stockholders
|
(386,198 | ) | (127,000 | ) | (398,000 | ) | |||||||
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
|
(114,314 | ) | 237,249 | 66,891 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
84,605 | (91,046 | ) | 95,661 | |||||||||
Cash and Cash Equivalents at Beginning of Year
|
38,566 | 129,612 | 33,951 | ||||||||||
Cash and Cash Equivalents at End of Year
|
$ | 123,171 | $ | 38,566 | $ | 129,612 | |||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|||||||||||||
Payments made directly to Marquis Bit Co., LLC from a loan
obtained by the Company
|
$ | | $ | | $ | 102,565 | |||||||
F-73
Note 1: | Summary of Significant Accounting Policies |
F-74
Note 2: | Related-Party Transactions |
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Note receivable from Marquis Bit Co, LLC, variable interest rate
(currently 7.25%) payable in monthly installments of $7,315
maturing September 2005, unsecured
|
$ | 268,480 | $ | 317,002 | $ | 395,684 | |||||||
Note receivables from stockholders, due upon demand, bearing
interest of 0%, unsecured
|
| 64,148 | 111,740 | ||||||||||
Note receivables from Marquis Bit Co, LLC, due upon demand,
bearing interest of 0%, unsecured
|
| 7,438 | 7,438 | ||||||||||
Subtotal
|
268,480 | 388,588 | 514,862 | ||||||||||
Less current portion
|
85,636 | 153,981 | 197,859 | ||||||||||
Related party receivables
|
$ | 182,844 | $ | 234,607 | $ | 317,003 | |||||||
December 31, | |||||||||
July 31, | |||||||||
2004 | 2003 | 2002 | |||||||
Trade accounts payable to Marquis Bit Co, LLC for fabrication of
drill bits
|
$ | 687,559 | $427,465 | $48,694 | |||||
Related party payables
|
$ | 687,559 | $427,465 | $48,694 | |||||
December 31, | ||||||||||||
July 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Notes payable to stockholders, due on demand, unsecured, bearing
an interest rate of 0%
|
$ | 437,342 | $ | 220,696 | $ | 99,000 | ||||||
Loan payable to Marquis Bit Co, LLC, due on demand, unsecured,
bearing an interest rate of 0%
|
257,439 | 257,439 | | |||||||||
Loan payable to various related entities (related due to certain
Company stockholders owning majority interest in entities), due
on demand, unsecured bearing an interest rate of 0%
|
73,500 | 189,000 | 110,000 | |||||||||
$ | 768,281 | $ | 667,135 | $ | 209,000 | |||||||
F-75
December 31, | ||||||||
July 31, | ||||||||
2004 | 2003 | 2002 | ||||||
Amount paid, or accrued, to Marquis Bit Co, LLC for the
fabrication of drill bits
|
$ | 680,573 | $1,271,242 | $62,472 | ||||
Note 3: | Accounts Receivable |
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Accounts receivable
|
$ | 831,086 | $ | 713,644 | $ | 550,161 | |||||||
Allowance for doubtful accounts
|
(4,888 | ) | (9,178 | ) | (2,829 | ) | |||||||
Total
|
$ | 826,198 | $ | 704,466 | $ | 547,332 | |||||||
Note 4: | Inventories |
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Air hammers
|
$ | 376,627 | $ | 346,321 | $ | 292,719 | |||||||
Finished drill bits
|
757,040 | 607,478 | 52,229 | ||||||||||
Drill bits in process
|
452,018 | 151,563 | | ||||||||||
Raw materials
|
126,780 | 40,708 | | ||||||||||
Total
|
$ | 1,712,465 | $ | 1,146,070 | $ | 344,948 | |||||||
Note 5: | Property, Plant and Equipment |
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Equipment
|
$ | 99,721 | $ | 95,995 | $ | 58,956 | |||||||
Transportation equipment
|
427,714 | 395,331 | 336,304 | ||||||||||
Equipment under capital lease
|
19,678 | | | ||||||||||
Total
|
547,113 | 491,326 | 395,260 | ||||||||||
Less: accumulated depreciation
|
|||||||||||||
Accumulated depreciation
|
247,966 | 245,653 | 172,043 | ||||||||||
Accumulated amortization
|
3,280 | | | ||||||||||
Net property, plant, and equipment
|
$ | 295,867 | $ | 245,673 | $ | 223,217 | |||||||
F-76
Amount | |||||
Year ending July 31,
|
$ | | |||
2005
|
4,788 | ||||
2006
|
4,788 | ||||
2007
|
4,788 | ||||
2008
|
4,788 | ||||
2009 and thereafter
|
2,793 | ||||
Total minimum lease payments
|
21,945 | ||||
Less amount representing interest
|
3,625 | ||||
Total present value of minimum lease payments
|
18,320 | ||||
Less current portion of such obligations
|
3,447 | ||||
Long-term obligations
|
$ | 14,873 | |||
Note 6: | Long Term Debt and Related Matters |
December 31, | ||||||||
July 31, | ||||||||
2004 | 2003 | 2002 | ||||||
Various notes payable to banks and financing companies for
transportation equipment, due in installments through February,
2010 at fixed interest rates ranging from 0.0% to 10.95%,
collateralized by transportation equipment
|
$ | 209,788 | $147,312 | $173,675 | ||||
Variable interest rate (currently 7.25%) note payable, due in
monthly installments of $7,315 including interest through
September 2005, collateralized by equipment (including equipment
currently owned by Marquis Bit Co, LLC) with depreciated costs
of $261,783, inventory, and accounts and notes receivable. This
note is personally guaranteed by a stockholder of the Company
|
249,792 | 290,577 | 356,719 |
F-77
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
4.0% note payable, due in monthly installments of $1,181
including interest, through November 2005, collateralized by
accounts receivable and equipment (including equipment currently
owned by Marquis Bit Co, LLC) with depreciated costs of $26,406.
This note is personally guaranteed by a shareholder of the
Company
|
18,689 | 26,425 | 38,965 | ||||||||||
Variable interest rate (Carlsbad National Bank base rate) line
of credit agreement, $200,000 limit, expiring June 2005,
collateralized by accounts receivable, equipment, and inventory
|
175,000 | | | ||||||||||
Miscellaneous notes payable, varying interest rates, due various
dates
|
| 16,859 | 5,700 | ||||||||||
Subtotal
|
691,468 | 483,176 | 577,061 | ||||||||||
Less current maturities
|
341,184 | 171,561 | 164,535 | ||||||||||
Total
|
$ | 350,284 | $ | 311,615 | $ | 412,526 | |||||||
Note 7: | Stockholders Equity |
December 31, | ||||||||||||
July 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Common stock authorized
|
1,000,000 | 1,000,000 | 1,000,000 | |||||||||
Common stock issued
|
1,000 | 1,000 | 1,000 | |||||||||
Common stock outstanding
|
1,000 | 1,000 | 1,000 | |||||||||
Common stock, per share par value
|
$ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||
Cash dividends paid on common stock
|
$ | 386,198 | $ | 127,000 | $ | 398,000 |
Note 8: | Dependence on Key Customers |
Note 9: | Employee Benefit Plans |
F-78
Note 10: | Subsequent Event |
Note 11. | Supplemental Cash Flow Information |
Note 12. | Patent Pending |
F-79
/s/ Accounting & Consulting Group, LLP | |
|
|
Accounting & Consulting Group, LLP |
F-80
/s/ Accounting & Consulting Group, LLP | |
|
|
Accounting & Consulting Group, LLP |
F-81
July 31, | December 31, | December 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||||
ASSETS
|
||||||||||||||
CURRENT ASSETS:
|
||||||||||||||
Cash and cash equivalents
|
$ | | $ | 5,223 | $ | 1,504 | ||||||||
Accounts receivable (Note 2)
|
358,368 | 303,358 | 48,694 | |||||||||||
Unbilled receivables
|
329,191 | 107,435 | 15,875 | |||||||||||
Related party notes receivable (Note 2)
|
257,439 | 257,439 | | |||||||||||
Prepaid expenses
|
5,623 | | 3,269 | |||||||||||
TOTAL CURRENT ASSETS
|
950,621 | 673,455 | 69,342 | |||||||||||
Property, Plant and Equipment, net (Note 3)
|
261,783 | 305,472 | 386,704 | |||||||||||
Other Assets
|
1,323 | 1,485 | 1,011 | |||||||||||
TOTAL ASSETS
|
$ | 1,213,727 | $ | 980,412 | $ | 457,057 | ||||||||
LIABILITIES AND MEMBERS EQUITY
|
||||||||||||||
Current Liabilities:
|
||||||||||||||
Bank overdraft
|
$ | 9,305 | $ | | $ | | ||||||||
Accounts payable
|
15,890 | 38,640 | 46,854 | |||||||||||
Accrued expenses
|
14,597 | 9,076 | 6,580 | |||||||||||
Loans from related parties (Note 2)
|
114,836 | 125,020 | 122,119 | |||||||||||
TOTAL CURRENT LIABILITIES
|
154,628 | 172,736 | 175,553 | |||||||||||
Loans from Related Parties, net of current portion (Note 2)
|
182,844 | 234,607 | 317,002 | |||||||||||
Commitments and Contingencies
|
| | | |||||||||||
TOTAL LIABILITIES
|
337,472 | 407,343 | 492,555 | |||||||||||
MEMBERS EQUITY
|
876,255 | 573,069 | (35,498 | ) | ||||||||||
TOTAL LIABILITIES AND MEMBERS EQUITY
|
$ | 1,213,727 | $ | 980,412 | $ | 457,057 | ||||||||
F-82
July 31, | December 31, | December 31, | |||||||||||
2004 | 2003 | 2002 | |||||||||||
SALES
|
$ | 697,245 | $ | 1,238,695 | $ | 78,347 | |||||||
COST OF GOODS SOLD
|
307,058 | 525,593 | 65,947 | ||||||||||
GROSS PROFIT
|
390,187 | 713,102 | 12,400 | ||||||||||
Selling, general, and administrative
|
33,504 | 67,423 | 35,424 | ||||||||||
Depreciation and amortization
|
43,689 | 86,232 | 7,242 | ||||||||||
Interest expense
|
11,008 | 23,053 | 5,232 | ||||||||||
Total Costs and Expenses
|
88,201 | 176,708 | 47,898 | ||||||||||
OPERATING INCOME (LOSS)
|
301,986 | 536,394 | (35,498 | ) | |||||||||
Other income
|
1,200 | 72,173 | | ||||||||||
NET INCOME (LOSS)
|
303,186 | 608,567 | (35,498 | ) | |||||||||
Members equity, beginning of period
|
573,069 | (35,498 | ) | | |||||||||
MEMBERS EQUITY, END OF PERIOD
|
876,255 | 573,069 | (35,498 | ) | |||||||||
F-83
July 31, | December 31, | December 31, | |||||||||||
2004 | 2003 | 2002 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||||||
Net income (loss)
|
$ | 303,186 | $ | 608,567 | $ | (35,498 | ) | ||||||
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
|
|||||||||||||
Depreciation and amortization
|
43,689 | 86,232 | 7,242 | ||||||||||
Change in operating assets and liabilities:
|
|||||||||||||
Accounts receivable
|
(276,766 | ) | (346,224 | ) | (64,569 | ) | |||||||
Prepaid expenses
|
(5,623 | ) | 3,269 | (3,269 | ) | ||||||||
Other assets
|
162 | (474 | ) | (1,011 | ) | ||||||||
Accounts payable
|
(22,750 | ) | 18,794 | 19,846 | |||||||||
Accrued payroll and employee benefits
|
5,521 | 2,496 | 6,580 | ||||||||||
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
|
47,419 | 372,660 | (70,679 | ) | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||||||
Loans made to others
|
| (257,439 | ) | | |||||||||
Capital expenditures on property, plant, and equipment
|
| (32,008 | ) | (80,088 | ) | ||||||||
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
|
| (289,447 | ) | (80,088 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||||||
Repayment of loans from related parties
|
(120,058 | ) | (84,682 | ) | (34,259 | ) | |||||||
Proceeds from loans from related parties
|
58,111 | 5,188 | 186,530 | ||||||||||
Net increase in bank overdrafts
|
9,305 | | | ||||||||||
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
|
(52,642 | ) | (79,494 | ) | 152,271 | ||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(5,223 | ) | 3,719 | 1,504 | |||||||||
Cash and Cash Equivalents at Beginning of Period
|
5,223 | 1,504 | | ||||||||||
Cash and Cash Equivalents at End of Period
|
$ | | $ | 5,223 | $ | 1,504 | |||||||
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
|
|||||||||||||
Property and equipment acquired with long-term debt
|
$ | | $ | | $ | 286,850 | |||||||
F-84
Note 1: | Summary of Significant Accounting Policies |
Note 2: | Related-Party Transactions |
F-85
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Trade accounts receivable from Diamond Air Drilling Services,
Inc. (related due to common ownership)
|
$ | 358,368 | $ | 303,358 | $ | 48,694 | |||||||
Unbilled receivables from Diamond Air Drilling Services, Inc.
(related due to common ownership)
|
329,191 | 107,435 | 15,875 | ||||||||||
Total accounts receivable from related parties
|
$ | 687,559 | $ | 410,793 | $ | 64,569 | |||||||
December 31, | ||||||||||||
July 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Loan receivable from Diamond Air Drilling Services, Inc.
(related due to common ownership), due upon demand, bearing
interest of 0%, unsecured Entire balance considered current
|
$ | 257,439 | $ | 257,439 | $ | | ||||||
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Loans payable to members, due on demand, unsecured, bearing an
interest rate of 0%
|
$ | 29,200 | $ | 25,188 | $ | 25,000 | |||||||
Loan payable to various related entities (related due to certain
Company stockholders owning majority interest in entities), due
on demand, unsecured bearing an interest rate of 0%
|
| 17,437 | 18,437 | ||||||||||
Loan payable to Diamond Air Drilling Services, Inc. (related due
to common ownership), variable interest rate (currently 7.25%)
payable in monthly installments of $7,315 maturing September
2005, unsecured
|
268,480 | 317,002 | 395,684 | ||||||||||
Subtotal
|
297,680 | 359,627 | 439,121 | ||||||||||
Less current maturities
|
114,836 | 125,020 | 122,119 | ||||||||||
Loans from related parties
|
$ | 182,844 | $ | 234,607 | $ | 317,002 | |||||||
December 31, | ||||||||||||
July 31, | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Amount received, or accrued, from Diamond Air Drilling Services,
Inc. (related due to common ownership) for the fabrication of
drill bits
|
$ | 697,245 | $ | 1,238,695 | $ | 78,347 | ||||||
F-86
Note 3: | Property, Plant and Equipment |
December 31, | |||||||||||||
July 31, | |||||||||||||
2004 | 2003 | 2002 | |||||||||||
Manufacturing equipment
|
$ | 386,789 | $ | 386,789 | $ | 381,789 | |||||||
Computer equipment
|
9,942 | 9,942 | 9,942 | ||||||||||
Leasehold improvements
|
2,215 | 2,215 | 2,215 | ||||||||||
Total
|
398,946 | 398,946 | 393,946 | ||||||||||
Less:
|
|||||||||||||
Accumulated depreciation
|
133,550 | 91,126 | 7,061 | ||||||||||
Amortization of leasehold improvements
|
3,613 | 2,348 | 181 | ||||||||||
Net property, plant, and equipment
|
$ | 261,783 | $ | 305,472 | $ | 386,704 | |||||||
Note 4: | Dependence on Key Customers |
Note 5: | Employee Benefit Plans |
Note 6: | Subsequent Events |
Note 7: | Restatement of Previously Issued Financial Statements |
F-87
/s/ JOHNSON, MILLER & CO. | |
|
F-88
2004 | 2003 | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS
|
|||||||||||
Cash and cash equivalents (note A12)
|
$ | 71,881 | $ | 20,064 | |||||||
Accounts receivable, net of allowance of $10,000 and $10,000
Customers
|
1,242,346 | 466,435 | |||||||||
Employees
|
| 2,447 | |||||||||
Inventories (note A8)
|
295,040 | 189,287 | |||||||||
Prepaid expenses
|
155,626 | 60,263 | |||||||||
Total current assets
|
1,764,893 | 738,496 | |||||||||
PROPERTY AND EQUIPMENT, NET (notes A8, A9 and C)
|
719,322 | 682,564 | |||||||||
OTHER ASSETS (notes A9, A10 and D)
|
4,617 | 55,400 | |||||||||
Total assets
|
$ | 2,488,832 | $ | 1,476,460 | |||||||
LIABILITIES AND MEMBERS EQUITY | |||||||||||
CURRENT LIABILITIES
|
|||||||||||
Current portion of notes payable (note E)
|
$ | 757,406 | $ | 159,846 | |||||||
Current portion of capitalized lease obligations (note F)
|
45,735 | 67,367 | |||||||||
Accounts payable
|
1,002,375 | 572,238 | |||||||||
Accrued expenses
|
105,333 | 78,583 | |||||||||
Sales tax payable
|
21,937 | 9,340 | |||||||||
Interest payable
|
19,827 | 4,314 | |||||||||
Total current liabilities
|
1,952,613 | 891,688 | |||||||||
DEFERRED REVENUE
|
197,400 | 197,400 | |||||||||
NOTES PAYABLE, net of current portion (note E)
|
17,070 | 103,744 | |||||||||
CAPITALIZED LEASE OBLIGATIONS, net of current portion
(note F)
|
66,702 | | |||||||||
COMMITMENTS AND CONTINGENCIES (notes G and H) MEMBERS
EQUITY
|
255,047 | 283,628 | |||||||||
Total liabilities and members equity
|
$ | 2,488,832 | $ | 1,476,460 | |||||||
F-89
2004 | 2003 | |||||||||
Sales
|
$ | 4,792,719 | $ | 3,835,414 | ||||||
Cost of sales
|
3,875,646 | 3,050,921 | ||||||||
Gross profit
|
917,073 | 784,493 | ||||||||
General and administrative expenses
|
871,927 | 792,603 | ||||||||
Income (loss) from operations
|
45,146 | (8,110 | ) | |||||||
Other income (expense)
|
||||||||||
Interest income
|
22 | 403 | ||||||||
Interest expense
|
(73,749 | ) | (41,673 | ) | ||||||
Impairment loss on patent (note D)
|
| (983,278 | ) | |||||||
(73,727 | ) | (1,024,548 | ) | |||||||
NET LOSS
|
(28,581 | ) | (1,032,658 | ) | ||||||
Members equity beginning of period
|
283,628 | 1,316,286 | ||||||||
Members equity end of period
|
$ | 255,047 | $ | 283,628 | ||||||
F-90
2004 | 2003 | |||||||||
Increase (Decrease) in Cash and Cash Equivalents
|
||||||||||
Cash flows from operating activities
|
||||||||||
Net loss
|
$ | (28,581 | ) | $ | (1,032,658 | ) | ||||
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities:
|
||||||||||
Depreciation and amortization
|
326,034 | 283,765 | ||||||||
Impairment loss on patent
|
| 983,278 | ||||||||
Change in account balances
|
||||||||||
(Increase) decrease in accounts receivable trade
|
(775,911 | ) | 69,523 | |||||||
Decrease in accounts receivable employees
|
2,447 | 2,722 | ||||||||
Increase in inventories
|
(105,753 | ) | (51,145 | ) | ||||||
(Increase) decrease in prepaid expenses
|
(95,363 | ) | 46,792 | |||||||
Increase (decrease) in accounts payable
|
430,137 | (73,388 | ) | |||||||
Increase (decrease) in accrued expenses
|
26,750 | (39,028 | ) | |||||||
Increase (decrease) in sales tax payable
|
12,597 | (5,268 | ) | |||||||
Increase in deferred revenue
|
| 135,000 | ||||||||
Increase in interest payable
|
15,513 | 4,314 | ||||||||
Net cash (used in) provided by operating activities
|
(192,130 | ) | 323,907 | |||||||
Cash flows provided by (used in) investing activities
|
||||||||||
Purchase of property, plant and equipment
|
(174,305 | ) | (137,267 | ) | ||||||
Net cash used in investing activities
|
(174,305 | ) | (137,267 | ) | ||||||
Cash flows provided by (used in) financing activities
|
||||||||||
Issuance of notes payable
|
1,090,335 | | ||||||||
Repayments on notes payable
|
(579,449 | ) | (171,830 | ) | ||||||
Repayments of capital lease obligations
|
(92,634 | ) | (119,594 | ) | ||||||
Net cash provided by (used in) financing activities
|
418,252 | (291,424 | ) | |||||||
Net increase (decrease) in cash and cash equivalents
|
51,817 | (104,784 | ) | |||||||
Cash and cash equivalents
|
||||||||||
Beginning of period
|
20,064 | 124,848 | ||||||||
End of period
|
$ | 71,881 | $ | 20,064 | ||||||
Supplemental disclosure of cash flow information
|
||||||||||
Interest paid
|
$ | 58,236 | $ | 37,359 | ||||||
Non-cash investing and financing activities:
|
||||||||||
Acquisition of property and equipment through capital lease
financing
|
$ | 137,704 | $ | | ||||||
Acquisition of Ener-Coil, L.L.C. (see note B)
|
| |
F-91
1. | Formation of Company |
2. | Nature of Operations |
3. | Product, Geographic Location and Customer Concentrations |
2004 | |||||
Type of Services Rendered:
|
|||||
Installation of Tubing
|
60 | % | |||
Removal and Repair of Customer Owned Tubing
|
37 | % | |||
Rental and Other
|
3 | % | |||
Geographic Location of Services Rendered:
|
|||||
Texas
|
47 | % | |||
Oklahoma
|
7 | % | |||
Louisiana
|
16 | % | |||
United Arab Emirates
|
3 | % | |||
Other Locations
|
27 | % |
4. | Supplier Concentration |
5. | Revenue Recognition and Deferred Revenue |
6. | Allowance for Uncollectible Accounts Receivable |
F-92
7. | Inventory |
8. | Property, Plant and Equipment |
9. | Long-Lived Assets |
10. | Intangible Assets |
11. | Income Taxes |
12. | Cash Flow and Non-Cash Investing and Financing Transactions |
F-93
13. | Advertising Expenses |
14. | Managements Use of Estimates |
Accounts receivable
|
$ | 360,327 | ||
Other current assets
|
39,305 | |||
Property, plant and equipment
|
154,679 | |||
Notes payable
|
(533,929 | ) | ||
Accounts payable and accrued expenses
|
(20,382 | ) | ||
$ | | |||
November 30, | December 31, | |||||||
2004 | 2003 | |||||||
Computer Equipment
|
$ | 115,649 | $ | 115,137 | ||||
Machinery and Equipment
|
1,318,938 | 1,082,616 | ||||||
Vehicles
|
203,813 | 128,638 | ||||||
Furniture and Fixtures
|
50,451 | 50,451 | ||||||
1,688,851 | 1,376,842 | |||||||
Less accumulated depreciation
|
(969,529 | ) | (694,278 | ) | ||||
$ | 719,322 | $ | 682,564 | |||||
F-94
November 30, | ||||
2004 | ||||
Promissory note payable to Michael Weaver, 4 months of
$7,750, interest rate at 0%, unsecured
|
$ | 7,750 | ||
Revolving line of credit with Bank of America, with maximum
borrowings of $600,000, matures March 8, 2005, interest
rate variable, collateralized by substantially all of the
Companys assets
|
585,822 | |||
Promissory note payable to PAS, Inc. and W.T. Butler
Enterprises, 58 months of $3,500 each, interest rate at 6%,
unsecured
|
1,566 | |||
Promissory note payable Robert Patterson, former shareholder,
24 months of $2,436, interest rate at 0% collateralized by
certain specific assets of the Company
|
12,315 | |||
Promissory note payable to Herb Sostek, 24 months of
$6,648, interest rate at 6%, unsecured
|
45,620 | |||
Promissory note payable to Local Bank of Oklahoma, 60 payments
of $2,219, interest rate at 6.75%, collateralized by certain
specific assets of the Company
|
43,778 | |||
Promissory note payable to Ford Motor Credit Corp, 36 payments
of $1,137, interest rate at 0% collateralized by 2003 Ford F350
|
14,783 | |||
Promissory note payable to Local Bank of Oklahoma, 60 Payments
of $2,147, interest rate at 6.75%, collateralized by equipment
|
$ | 62,842 | ||
774,476 | ||||
Less Current Portion
|
(757,406 | ) | ||
$ | 17,070 | |||
F-95
December 31, | ||||
2003 | ||||
Promissory note payable to PAS, Inc. and W.T. Butler
Enterprises, 58 months of $3,500 each, interest rate at 6%,
unsecured
|
$ | 76,208 | ||
Promissory note payable to Herb Sostek, 24 months of
$6,648, interest rate at 6%, unsecured
|
41,168 | |||
Promissory note payable to Local Bank of Oklahoma, 60 payments
of $2,219, interest rate at 6.75%, collateralized by certain
specific assets of the Company
|
62,931 | |||
Promissory note payable to Ford Motor Credit Corp, 60 payments
of $798.94, interest rate at 9.25% collateralized by 1999 Ford
F350
|
2,360 | |||
Promissory note payable to Local Bank of Oklahoma, 60 Payments
of $2,147, interest rate at 6.75%, collateralized by certain
specific assets of the Company
|
80,923 | |||
263,590 | ||||
Less Current Portion
|
(159,846 | ) | ||
$ | 103,744 | |||
November 30,
|
|||||
2005
|
$ | 757,406 | |||
2006
|
17,070 | ||||
$ | 774,476 | ||||
Present Value | ||||
of Obligation | ||||
Capital lease payable to Outsource Lease, 60 monthly
payments of $3,710 commencing April 11, 2002, interest rate
at 10.67%, collateralized by tubing unit
|
$ | 21,259 | ||
Capital lease payable to Outsource Lease, 60 monthly
payments of $865 commencing April 29, 2002, interest rate
at 10.67%, collateralized by computer network
|
91,178 | |||
112,437 | ||||
Less Current Portion
|
45,735 | |||
$ | 66,702 | |||
F-96
Year | Total Payment | |||
2005
|
$ | 54,900 | ||
2006
|
54,900 | |||
2007
|
21,232 | |||
Total Future Minimum Lease Payments
|
131,032 | |||
Total Amount Representing Interest
|
18,595 | |||
Present Value of Lease Obligation
|
$ | 112,437 | ||
2005
|
$ | 166,235 | ||
2006
|
132,245 | |||
2007
|
60,161 | |||
2008
|
30,000 | |||
2009
|
10,000 | |||
$ | 398,641 | |||
F-97
/s/ | WRIGHT, MOORE, DEHART, |
DUPUIS & HUTCHINSON, L.L.C. |
Certified Public Accountants |
F-98
December 31, | |||||||||||
2004 | 2003 | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS
|
|||||||||||
Cash
|
$ | 891,338 | $ | 705,553 | |||||||
Accounts Receivable
|
1,095,587 | 713,929 | |||||||||
Prepaid Insurance
|
13,838 | 14,067 | |||||||||
Prepaid Income Taxes
|
| 51,411 | |||||||||
Current Deferred Tax Asset
|
| 77,595 | |||||||||
Employee Advances
|
|||||||||||
Total Current Assets
|
2,000,763 | 1,562,555 | |||||||||
PROPERTY AND EQUIPMENT
|
|||||||||||
Office Equipment
|
33,624 | 32,407 | |||||||||
Rental Equipment
|
3,699,987 | 3,341,816 | |||||||||
Transportation Equipment
|
144,260 | 144,260 | |||||||||
Yard Equipment
|
77,211 | 77,211 | |||||||||
Total
|
3,955,082 | 3,595,694 | |||||||||
Less: Accumulated Depreciation
|
(2,610,143 | ) | (2,307,864 | ) | |||||||
Net Property and Equipment
|
1,344,939 | 1,287,830 | |||||||||
OTHER ASSETS
|
|||||||||||
Cash Surrender Value of Life Insurance
|
38,261 | 35,446 | |||||||||
Total Other Assets
|
38,261 | 35,446 | |||||||||
TOTAL ASSETS
|
$ | 3,383,963 | $ | 2,885,831 | |||||||
F-99
December 31, | |||||||||||
2004 | 2003 | ||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||||||||
CURRENT LIABILITIES
|
|||||||||||
Accounts Payable
|
$ | 53,949 | $ | 40,829 | |||||||
Payroll Liabilities Payable
|
17,157 | 16,063 | |||||||||
Sales Tax Payable
|
12,308 | 3,487 | |||||||||
Accrued Interest Expense
|
3,734 | 4,244 | |||||||||
Income Taxes Payable
|
92,448 | | |||||||||
Current Portion of Stockholder Loan
|
93,994 | 87,674 | |||||||||
Total Current Liabilities
|
273,590 | 152,297 | |||||||||
LONG-TERM LIABILITIES
|
|||||||||||
Stockholder Loan (Less Current Portion)
|
547,784 | 641,775 | |||||||||
Long-Term Deferred Tax Liability
|
353,147 | 311,762 | |||||||||
Stockholder Loan
|
|||||||||||
Total Long-Term Liabilities
|
900,931 | 953,537 | |||||||||
Total Liabilities
|
1,174,521 | 1,105,834 | |||||||||
STOCKHOLDERS EQUITY
|
|||||||||||
Common Stock (No Par Value, 300,000 Shares Authorized,
27,083 Shares Issued and 8,333 Outstanding)
|
27,083 | 27,083 | |||||||||
Additional Paid-In Capital
|
64,574 | 64,574 | |||||||||
Retained Earnings
|
3,117,785 | 2,688,340 | |||||||||
Less: Treasury Stock (18,750 Shares at Cost)
|
(1,000,000 | ) | (1,000,000 | ) | |||||||
Total Stockholders Equity
|
2,209,442 | 1,779,997 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
$ | 3,383,963 | $ | 2,885,831 | |||||||
F-100
Twelve Months Ended | ||||||||||
December 31, | ||||||||||
2004 | 2003 | |||||||||
REVENUES
|
$ | 3,249,338 | $ | 2,662,091 | ||||||
COST OF REVENUES
|
||||||||||
Direct
|
796,194 | 766,196 | ||||||||
GROSS PROFIT
|
2,453,144 | 1,895,895 | ||||||||
ADMINISTRATIVE EXPENSES
|
||||||||||
General and Administrative
|
1,798,414 | 1,926,173 | ||||||||
Depreciation
|
30,061 | 31,678 | ||||||||
Total Administrative Expenses
|
1,828,475 | 1,957,851 | ||||||||
INCOME (LOSS) FROM OPERATIONS
|
624,669 | (61,956 | ) | |||||||
OTHER INCOME (EXPENSES)
|
||||||||||
Interest Expense
|
(48,503 | ) | (61,177 | ) | ||||||
Interest Income
|
4,064 | 2,234 | ||||||||
Life Insurance Dividends
|
930 | 930 | ||||||||
Gain on Sale of Assets
|
113,435 | 354,382 | ||||||||
Total Other Income (Expenses)
|
69,926 | 296,369 | ||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES
|
694,595 | 234,413 | ||||||||
PROVISION FOR INCOME TAXES
|
||||||||||
Current
|
146,170 | | ||||||||
Deferred
|
118,980 | 134,274 | ||||||||
Total Income Tax Provision
|
265,150 | 134,274 | ||||||||
NET INCOME
|
$ | 429,445 | $ | 100,139 | ||||||
F-101
Twelve Months Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
BEGINNING BALANCE
|
$ | 2,688,340 | $ | 2,588,201 | ||||
NET INCOME
|
429,445 | 100,139 | ||||||
ENDING BALANCE
|
$ | 3,117,785 | $ | 2,688,340 | ||||
F-102
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2004 | 2003 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net Income
|
$ | 429,445 | $ | 100,139 | ||||||||
Adjustments to Reconcile Net Income to Net Cash Provided By
Operating Activities:
|
||||||||||||
Depreciation and Amortization
|
346,615 | 308,587 | ||||||||||
Gain on Sale of Assets
|
(113,435 | ) | (354,382 | ) | ||||||||
Change in Assets and Liabilities:
|
||||||||||||
Accounts Receivable
|
(381,658 | ) | (7,963 | ) | ||||||||
Prepaid Expenses
|
51,640 | 62,610 | ||||||||||
Accounts Payable and Accrued Expenses
|
114,973 | (29,129 | ) | |||||||||
Deferred Taxes
|
118,980 | 134,274 | ||||||||||
Total Adjustments
|
137,115 | 113,997 | ||||||||||
Net Cash Provided By Operating Activities
|
566,560 | 214,136 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of Equipment
|
(480,371 | ) | (781,152 | ) | ||||||||
Proceeds from Sale of Assets
|
190,082 | 522,911 | ||||||||||
Cash Surrender Value Life Insurance
|
(2,815 | ) | (2,816 | ) | ||||||||
Net Cash Used In Investing Activities
|
(293,104 | ) | (261,057 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Principal Payments on Treasury Stock Note
|
| (506,036 | ) | |||||||||
Proceeds From Long-Term Debt
|
| | ||||||||||
Proceeds From Stockholder Note Payable
|
| 450,000 | ||||||||||
Principal Payments Stockholder Note Payable
|
(87,671 | ) | (20,550 | ) | ||||||||
Net Cash Used in Financing Activities
|
(87,671 | ) | (76,586 | ) | ||||||||
NET INCREASE (DECREASE) IN CASH
|
185,785 | (123,507 | ) | |||||||||
CASH AT BEGINNING OF YEAR
|
705,553 | 829,060 | ||||||||||
CASH AT END OF YEAR
|
$ | 891,338 | $ | 705,553 | ||||||||
SUPPLEMENTAL DISCLOSURES:
|
||||||||||||
Interest Paid
|
$ | 49,013 | $ | 84,650 | ||||||||
Income Taxes Paid
|
$ | 2,311 | $ | 37,460 | ||||||||
F-103
F-104
2004 | 2003 | |||||||
Billed Accounts Receivable
|
$ | 699,442 | $ | 407,556 | ||||
Accrued Unbilled Revenue
|
396,145 | 306,373 | ||||||
Total
|
$ | 1,095,587 | $ | 713,929 | ||||
2004 | 2003 | ||||||||||
Current
|
|||||||||||
Federal
|
$ | 128,548 | $ | | |||||||
States
|
17,622 | | |||||||||
Total Current Income Tax Expense
|
146,170 | | |||||||||
Deferred
|
118,980 | 134,274 | |||||||||
Total Income Tax Expense
|
$ | 265,150 | $ | 134,274 | |||||||
2004 | 2003 | ||||||||
Depreciation Timing Difference
|
$ | 882,867 | $ | 779,405 | |||||
Net Operating Loss Carry-Forward
|
| (163,311 | ) | ||||||
Charitable Contribution Carryover
|
| (30,678 | ) | ||||||
882,867 | 585,416 | ||||||||
Blended Federal and State Rates
|
40 | % | 40 | % | |||||
Deferred Income Tax Liability (Net)
|
$ | 353,147 | $ | 234,167 | |||||
2004 | 2003 | |||||||
Current Deferred Tax Asset
|
$ | | $ | (77,595 | ) | |||
Long-Term Deferred Tax Liability
|
353,147 | 311,762 | ||||||
Total
|
$ | 353,147 | $ | 234,167 | ||||
F-105
Twelve Months Ending December 31,
|
||||||
2005
|
$ | 93,994 | ||||
2006
|
100,772 | |||||
2007
|
108,038 | |||||
2008
|
115,827 | |||||
2009
|
124,178 | |||||
Later
|
98,969 | |||||
Total
|
$ | 641,778 | ||||
Twelve Months Ending December 31,
|
||||
2005
|
$36,000 | |||
Total
|
$36,000 | |||
F-106
Percentage of | ||||||||||||
Sales | Percentage of | Total Accounts | ||||||||||
Amount | Total Revenue | Receivable | ||||||||||
Customer A
|
$ | 488,589 | 18.35 | % | 14.39 | % | ||||||
Customer B
|
$ | 401,265 | 15.07 | % | 9.85 | % | ||||||
Customer C
|
$ | 296,570 | 11.14 | % | 11.71 | % | ||||||
Customer D
|
$ | 269,963 | 10.14 | % | 9.61 | % |
Percentage of | ||||||||||||
Sales | Percentage of | Total Accounts | ||||||||||
Amount | Total Revenue | Receivable | ||||||||||
Customer A
|
$ | 549,678 | 16.92 | % | 14.31 | % | ||||||
Customer B
|
$ | 528,474 | 16.26 | % | 22.51 | % | ||||||
Customer C
|
$ | 329,160 | 10.13 | % | 6.40 | % | ||||||
Customer D
|
$ | 308,133 | 9.48 | % | 13.15 | % |
F-107
March 31, | ||||||||
2005 | ||||||||
ASSETS | ||||||||
CURRENT ASSETS
|
||||||||
Cash
|
$ | 169,154 | ||||||
Accounts Receivable
|
936,156 | |||||||
Prepaid Insurance
|
| |||||||
Prepaid Income Taxes
|
| |||||||
Current Deferred Tax Asset
|
160,349 | |||||||
Employee Advances
|
||||||||
Total Current Assets
|
1,265,659 | |||||||
PROPERTY AND EQUIPMENT
|
||||||||
Office Equipment
|
33,624 | |||||||
Rental Equipment
|
3,739,342 | |||||||
Transportation Equipment
|
144,180 | |||||||
Yard Equipment
|
77,211 | |||||||
Total
|
3,994,357 | |||||||
Less: Accumulated Depreciation
|
(2,652,825 | ) | ||||||
Net Property and Equipment
|
1,341,532 | |||||||
OTHER ASSETS
|
||||||||
Cash Surrender Value of Life Insurance
|
| |||||||
Total Other Assets
|
| |||||||
TOTAL ASSETS
|
$ | 2,607,191 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
CURRENT LIABILITIES
|
||||||||
Accounts Payable
|
$ | 31,630 | ||||||
Payroll Liabilities Payable
|
398 | |||||||
Sales Tax Payable
|
7,433 | |||||||
Accrued Insurance Payable
|
19,447 | |||||||
Accrued Interest Expense
|
| |||||||
Accrued Profit Sharing Payable
|
| |||||||
Income Taxes Payable
|
374,492 | |||||||
Note Payable Insurance
|
| |||||||
Current Portion of Stockholder Loan
|
| |||||||
Total Current Liabilities
|
433,400 | |||||||
LONG-TERM LIABILITIES
|
||||||||
Stockholder Loan (Less Current Portion)
|
| |||||||
Long-Term Deferred Tax Liability
|
373,153 | |||||||
Total Long-Term Liabilities
|
373,153 | |||||||
Total Liabilities
|
806,553 | |||||||
STOCKHOLDERS EQUITY
|
||||||||
Common Stock (No Par Value, 300,000 Shares Authorized,
27,083 Shares Issued and 8,333 Outstanding)
|
27,083 | |||||||
Additional Paid-In Capital
|
64,574 | |||||||
Retained Earnings
|
2,708,981 | |||||||
Less: Treasury Stock (18,750 Shares at Cost)
|
(1,000,000 | ) | ||||||
Total Stockholders Equity
|
1,800,638 | |||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
$ | 2,607,191 | ||||||
F-108
Three Months Ended | ||||||||||
March 31, | ||||||||||
2005 | 2004 | |||||||||
REVENUES
|
$ | 820,769 | $ | 744,811 | ||||||
COST OF REVENUES
|
||||||||||
Direct
|
203,271 | 265,230 | ||||||||
GROSS PROFIT
|
617,498 | 479,581 | ||||||||
ADMINISTRATIVE EXPENSES
|
||||||||||
General and Administrative
|
984,505 | 1,106,656 | ||||||||
Depreciation
|
7,578 | 7,465 | ||||||||
Total Administrative Expenses
|
992,083 | 1,114,121 | ||||||||
LOSS FROM OPERATIONS
|
(374,585 | ) | (634,540 | ) | ||||||
OTHER INCOME (EXPENSES)
|
||||||||||
Interest Expense
|
(10,937 | ) | (13,166 | ) | ||||||
Interest Income
|
2,896 | 364 | ||||||||
Gain on Sale of Assets
|
115,519 | 36,850 | ||||||||
Total Other Income (Expenses)
|
107,478 | 24,048 | ||||||||
LOSS BEFORE PROVISION FOR INCOME TAXES
|
(267,107 | ) | (610,492 | ) | ||||||
PROVISION (BENEFIT) FOR INCOME TAXES
|
||||||||||
Current
|
| | ||||||||
Deferred
|
141,697 | (221,825 | ) | |||||||
Total Income Tax Provision (Benefit)
|
141,697 | (221,825 | ) | |||||||
NET LOSS
|
$ | (408,804 | ) | $ | (388,667 | ) | ||||
F-109
Three Months Ended | ||||||||
March 31, | ||||||||
2005 | 2004 | |||||||
BEGINNING BALANCE
|
$ | 3,117,785 | $ | 2,688,340 | ||||
NET LOSS
|
(408,804 | ) | (388,667 | ) | ||||
ENDING BALANCE
|
$ | 2,708,981 | $ | 2,299,673 | ||||
F-110
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net Loss
|
$ | (408,804 | ) | $ | (388,667 | ) | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided By
Operating Activities:
|
||||||||||||
Depreciation and Amortization
|
94,220 | 83,854 | ||||||||||
Gain on Sale of Assets
|
(115,519 | ) | (36,850 | ) | ||||||||
Change in Assets and Liabilities:
|
||||||||||||
Accounts Receivable
|
159,431 | (97,326 | ) | |||||||||
Prepaid Expenses
|
13,838 | (10,933 | ) | |||||||||
Accounts Payable and Accrued Expenses
|
253,804 | 256,078 | ||||||||||
Deferred Taxes
|
(140,343 | ) | (221,825 | ) | ||||||||
Total Adjustments
|
265,431 | (27,002 | ) | |||||||||
Net Cash Used In Operating Activities
|
(143,373 | ) | (415,669 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of Equipment
|
(151,956 | ) | (40,557 | ) | ||||||||
Proceeds from Sale of Assets
|
176,662 | 44,440 | ||||||||||
Cash Surrender Value Life Insurance
|
38,261 | (473 | ) | |||||||||
Net Cash Used In Investing Activities
|
62,967 | 3,410 | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Principal Payments Stockholder Note Payable
|
(641,778 | ) | (21,349 | ) | ||||||||
Net Cash Used in Financing Activities
|
(641,778 | ) | (21,349 | ) | ||||||||
NET DECREASE IN CASH
|
(722,184 | ) | (433,608 | ) | ||||||||
CASH AT BEGINNING OF PERIOD
|
891,338 | 705,553 | ||||||||||
CASH AT END OF PERIOD
|
$ | 169,154 | $ | 271,945 | ||||||||
SUPPLEMENTAL DISCLOSURES:
|
||||||||||||
Interest Paid
|
$ | 7,203 | $ | 13,166 | ||||||||
Income Taxes Paid
|
$ | | $ | | ||||||||
Non-Cash Financing of Insurance Premiums
|
$ | | $ | 30,351 | ||||||||
F-111
/s/ CURTIS BLAKELY & CO., PC | |
|
F-112
December 31, | ||||||||||
2004 | 2003 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS:
|
||||||||||
Cash and Cash Equivalents
|
$ | 348,674 | $ | 45,857 | ||||||
Accounts Receivable
|
538,658 | 818,736 | ||||||||
Inventory
|
386,685 | 384,431 | ||||||||
Prepaid Expenses
|
107,703 | 92,306 | ||||||||
TOTAL CURRENT ASSETS
|
1,381,720 | 1,341,330 | ||||||||
PROPERTY AND EQUIPMENT:
|
||||||||||
Furniture, Fixtures and Equipment
|
11,343 | 5,870 | ||||||||
Software
|
3,127 | 3,127 | ||||||||
Production Equipment
|
2,078,897 | 1,709,196 | ||||||||
Vehicles
|
172,720 | 107,442 | ||||||||
Production Equipment Under Construction
|
94,332 | -0- | ||||||||
TOTAL PROPERTY AND EQUIPMENT
|
2,360,419 | 1,825,635 | ||||||||
Less: Accumulated Depreciation
|
(433,800 | ) | (221,451 | ) | ||||||
NET PROPERTY AND EQUIPMENT
|
1,926,619 | 1,604,184 | ||||||||
OTHER ASSETS:
|
||||||||||
Organizational Costs
|
12,057 | 18,085 | ||||||||
TOTAL ASSETS
|
$ | 3,320,396 | $ | 2,963,599 | ||||||
F-113
December 31, | ||||||||||
2004 | 2003 | |||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||
CURRENT LIABILITIES:
|
||||||||||
Current Portion of Long-term Debt
|
$ | 445,924 | $ | 431,452 | ||||||
Current Portion of Obligation Under Capital Lease
|
447 | -0- | ||||||||
Current Portion of Long-term Debt Related Party
|
22,824 | -0- | ||||||||
Accounts Payable Trade
|
383,762 | 891,508 | ||||||||
Accrued Interest Payable
|
4,018 | -0- | ||||||||
Accrued Wages
|
6,400 | -0- | ||||||||
Short-term Borrowings
|
430,314 | 422,321 | ||||||||
Short-term Borrowings Related Party
|
130,000 | -0- | ||||||||
TOTAL CURRENT LIABILITIES
|
1,423,689 | 1,745,281 | ||||||||
LONG-TERM DEBT, LESS CURRENT MATURITIES:
|
||||||||||
Long-term Debt
|
471,451 | 451,262 | ||||||||
Long-term Debt Related Party
|
31,213 | -0- | ||||||||
Obligation Under Capital Lease
|
2,880 | -0- | ||||||||
TOTAL LONG-TERM DEBT
|
505,544 | 451,262 | ||||||||
TOTAL LIABILITIES
|
1,929,233 | 2,196,543 | ||||||||
STOCKHOLDERS EQUITY:
|
||||||||||
Common Stock $1 Par Value
|
||||||||||
100,000 Shares Authorized
|
||||||||||
1,000 Shares Issued and Outstanding
|
600,000 | 600,000 | ||||||||
Additional Paid-in Capital
|
50,000 | 50,000 | ||||||||
Retained Earnings
|
741,163 | 117,056 | ||||||||
TOTAL STOCKHOLDERS EQUITY
|
1,391,163 | 767,056 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
$ | 3,320,396 | $ | 2,963,599 | ||||||
F-114
Years Ended December 31, | ||||||||||
2004 | 2003 | |||||||||
REVENUE
|
$ | 5,774,442 | $ | 5,478,666 | ||||||
Cost of Sales and Services
|
4,371,316 | 4,523,702 | ||||||||
Gross Profit
|
1,403,126 | 954,964 | ||||||||
OPERATING EXPENSES:
|
||||||||||
General and Administrative
|
159,677 | 131,254 | ||||||||
Depreciation
|
35,456 | 24,648 | ||||||||
Insurance
|
228,112 | 186,125 | ||||||||
Lease Expense
|
29,250 | 27,000 | ||||||||
Salaries Administration
|
126,520 | 89,287 | ||||||||
Taxes
|
126,222 | 68,838 | ||||||||
Interest
|
73,782 | 51,380 | ||||||||
TOTAL OPERATING EXPENSES
|
779,019 | 578,532 | ||||||||
NET INCOME
|
624,107 | 376,432 | ||||||||
RETAINED EARNINGS (DEFICIT) BEGINNING OF PERIOD
|
117,056 | (259,376 | ) | |||||||
RETAINED EARNINGS END OF PERIOD
|
$ | 741,163 | $ | 117,056 | ||||||
F-115
Years Ended December 31, | ||||||||||||
2004 | 2003 | |||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
Net Income
|
$ | 624,107 | $ | 376,432 | ||||||||
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
|
||||||||||||
Depreciation and Amortization
|
218,375 | 170,317 | ||||||||||
Change in Assets and Liabilities:
|
||||||||||||
Accounts Receivable
|
280,078 | (595,486 | ) | |||||||||
Inventory
|
(428,090 | ) | 298,810 | |||||||||
Prepaids
|
(15,395 | ) | (32,465 | ) | ||||||||
Accounts Payable and Accruals
|
(42,242 | ) | 95,417 | |||||||||
TOTAL ADJUSTMENTS
|
12,726 | (63,407 | ) | |||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
636,833 | 313,025 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||
Additions to Plant and Equipment
|
(462,998 | ) | (541,551 | ) | ||||||||
NET CASH USED IN INVESTING ACTIVITIES
|
(462,998 | ) | (541,551 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||
Payments of Short-term Borrowings
|
(101,736 | ) | (124,513 | ) | ||||||||
Payments of Long-term Debt
|
(519,383 | ) | (377,668 | ) | ||||||||
Payments of Capital Lease Obligation
|
(89 | ) | -0- | |||||||||
Proceeds From Short-term Debt Borrowing
|
239,729 | 223,578 | ||||||||||
Proceeds From Long-term Debt Borrowing
|
510,461 | 441,265 | ||||||||||
Proceeds From Additional Paid-in Capital
|
-0- | 50,000 | ||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
128,982 | 212,662 | ||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
302,817 | (15,864 | ) | |||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
45,857 | 61,721 | ||||||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
$ | 348,674 | $ | 45,857 | ||||||||
F-116
Note 1 | Summary of Significant Accounting Policies: |
F-117
Note 2 | Organizational Costs: |
F-118
Note 3 | Property and Equipment: |
Depreciation | |||||||||||||
Rate (%) | 2004 | 2003 | |||||||||||
Furniture, fixtures, and equipment
|
20% | $ | 11,343 | $ | 5,870 | ||||||||
Software
|
33% | 3,127 | 3,127 | ||||||||||
Production equipment
|
10% 20% | 2,078,897 | 1,709,196 | ||||||||||
Vehicles
|
20% | 172,720 | 107,442 | ||||||||||
Production equipment under construction
|
N/A | 94,332 | -0- | ||||||||||
Total Property and Equipment
|
2,360,419 | 1,825,635 | |||||||||||
Less: Accumulated Depreciation
|
(433,800 | ) | (221,451 | ) | |||||||||
Net Property and Equipment
|
$ | 1,926,619 | $ | 1,604,184 | |||||||||
Note 4 | Capital Lease Obligations: |
2004 | ||||||
Total | $ | 3,327 | ||||
Less:
|
Current portion | (447 | ) | |||
Long-Term Portion | $ | 2,880 | ||||
2004 | ||||
2005
|
$ | 1,072 | ||
2006
|
1,072 | |||
2007
|
1,072 | |||
2008
|
1,072 | |||
2009
|
894 | |||
5,182 | ||||
Less: Amount representing interest
|
(1,855 | ) | ||
Present Value of Future Minimum Lease payments
|
$ | 3,327 | ||
F-119
Creditor | Terms | Collateral | 2004 | 2003 | ||||||
Texas Bank & Trust
|
$350,000 line-of-credit expiring December 2005 bearing interest at prime (5.25 percent at December 31, 2004). | Equipment | $349,923 | $350,000 | ||||||
Texas Bank & Trust
|
$375,000 line of credit expiring December 2004 bearing interest at prime. | Equipment | -0- | 3,029 | ||||||
AICCO, Inc.
|
Due $11,760 per month through July 2005 including interest at 7.15 percent. | None | 80,391 | -0- | ||||||
AICCO, Inc.
|
Due $10,114 per month through July 2004 including interest at 6.50 percent. | None | -0- | 69,292 | ||||||
Total Short-Term Borrowings
|
$430,314 | $422,321 | ||||||||
Creditor | Terms | Collateral | 2004 | 2003 | ||||||
M Bar Ranch, L.P.
|
$130,000 promissory note, interest of 8 percent and principal due at maturity date August 2005. | None | $130,000 | $-0- |
F-120
Creditor | Terms | Collateral | 2004 | 2003 | ||||||||||
Texas Bank & Trust
|
Due $6,048 per month through August 2006, including interest at prime (5.25% at December 2004). | Equipment - Accounts | $ | 117,138 | $ | 183,232 | ||||||||
Texas Bank & Trust
|
Due $7,037 per month through March 2007, including interest at prime (5.25% at December 2004). | Equipment - Accounts | 176,501 | 251,566 | ||||||||||
Texas Bank & Trust
|
Due $7,000 per month through March 2006, including interest at prime (5.25% at December 2004). | Equipment - Accounts | 101,957 | 179,620 | ||||||||||
Texas Bank & Trust
|
Due $30,000 per month through June 2004, including interest at prime (Pd in full at December 2004). | Equipment - Accounts | -0- | 171,541 | ||||||||||
Texas Bank & Trust
|
Due $7,407 per month through March 2007, including interest at prime (5.25% at December 2004). | Equipment - Accounts | 191,125 | -0- | ||||||||||
Texas Bank & Trust
|
Due $6,100 per month through October 2007, including interest at prime (5.25% at December 2004). | Equipment - Accounts | 195,082 | -0- | ||||||||||
Navistar
|
Due $1,055 per month through November 2005, including interest at 9.95 percent. | Equipment | 11,046 | 22,004 | ||||||||||
Navistar
|
Due $1,055 per month through November 2005, including interest at 9.95 percent. | Equipment | 11,046 | 21,075 | ||||||||||
Navistar
|
Due $998 per month through June 2007, including interest at 11.50 percent. | Equipment | 24,405 | -0- | ||||||||||
Ford Motor Credit
|
Due $738 per month through May 2006, including interest at 2.90 percent. | Vehicle | 12,275 | 20,641 | ||||||||||
Ford Motor Credit
|
Due $1,112 per month through August 2006, including interest at 5.50 percent. | Vehicle | 21,211 | 33,035 | ||||||||||
Ford Motor Credit
|
Due $1,173 per month through July 2007, including interest at 2.90 percent. | Vehicle | 35,007 | -0- | ||||||||||
Ford Motor Credit
|
Due $730 per month through August 2007, including interest at 7.25 percent. | Vehicle | 20,582 | -0- | ||||||||||
Total Long-Term Notes Payable
|
917,375 | 882,714 | ||||||||||||
Current Maturities
|
(445,924 | ) | (431,452 | ) | ||||||||||
Long-Term Notes Payable,
|
||||||||||||||
Net of Current Maturities
|
$ | 471,451 | $ | 451,262 | ||||||||||
F-121
2005
|
$ | 445,924 | |||
2006
|
349,064 | ||||
2007
|
122,387 | ||||
Total
|
$ | 917,375 | |||
Creditor | Terms | Collateral | 2004 | 2003 | |||||||||
M Bar Ranch, L.P.
|
Due $2,194 per month through March 2007, including interest at 8.00 percent. | Vehicle | $ | 54,037 | $-0- | ||||||||
Current Maturities
|
(22,824 | ) | -0- | ||||||||||
Long-Term Note Payables Related Party, Net of
Current Maturities
|
$ |
31,213 |
$-0- |
||||||||||
2005
|
$ | 22,824 | |||
2006
|
24,719 | ||||
2007
|
6,494 | ||||
Total
|
$ | 54,037 | |||
2005
|
$ | 27,000 | ||
2006
|
27,000 | |||
2007
|
5,625 |
F-122
2004 | 2003 | ||||||||
Cash paid during the year:
|
|||||||||
Interest
|
$ | 69,764 | $ | 51,380 |
F-123
/s/ CURTIS BLAKELY & CO., PC | |
|
F-124
Year Ended December 31, | ||||||||||
2004 | 2003 | |||||||||
REVENUE
|
$ | 5,774,442 | $ | 5,478,666 | ||||||
COST OF SALES AND SERVICES:
|
||||||||||
Inventory Purchases
|
2,684,319 | 3,400,025 | ||||||||
Wages
|
854,041 | 546,858 | ||||||||
Contract Services
|
153,192 | 152,432 | ||||||||
Location Expenses
|
84,709 | 58,027 | ||||||||
Repairs and Maintenance
|
132,846 | 70,024 | ||||||||
Depreciation
|
182,919 | 145,669 | ||||||||
Fuel and Oil
|
114,112 | 74,836 | ||||||||
Freight
|
14,432 | 11,646 | ||||||||
Sales Commissions
|
15,352 | 323 | ||||||||
Sales Expense
|
13,307 | 10,827 | ||||||||
Supplies
|
61,494 | 28,165 | ||||||||
Other Expenses
|
12,082 | 6,676 | ||||||||
Equipment Leases and Rentals
|
48,511 | 18,194 | ||||||||
TOTAL COST OF GOODS SOLD
|
4,371,316 | 4,523,702 | ||||||||
GROSS PROFIT
|
1,403,126 | 954,964 | ||||||||
GENERAL AND ADMINISTRATIVE:
|
||||||||||
Accounting
|
41,794 | 22,456 | ||||||||
Telephone
|
26,939 | 19,842 | ||||||||
Auto
|
17,955 | 15,203 | ||||||||
Consulting
|
15,100 | 15,012 | ||||||||
Advertising and Promotional
|
12,715 | 6,847 | ||||||||
License and Fees
|
10,719 | 7,110 | ||||||||
Office Supplies
|
7,818 | 7,644 | ||||||||
Utilities
|
7,582 | 6,397 | ||||||||
Janitorial
|
5,542 | 2,953 | ||||||||
Office Expense
|
4,248 | 3,332 | ||||||||
Postage
|
4,084 | 4,556 | ||||||||
Other General and Administrative
|
1,643 | 829 | ||||||||
Meals
|
1,393 | 1,899 | ||||||||
Contract Service Office
|
1,145 | 16,779 | ||||||||
Contributions
|
1,000 | 395 | ||||||||
TOTAL GENERAL AND ADMINISTRATIVE
|
159,677 | 131,254 | ||||||||
F-125
Year Ended December 31, | ||||||||||
2004 | 2003 | |||||||||
DEPRECIATION AND AMORTIZATION:
|
||||||||||
Depreciation Expense
|
29,428 | 18,620 | ||||||||
Amortization Expense
|
6,028 | 6,028 | ||||||||
TOTAL DEPRECIATION AND AMORTIZATION
|
35,456 | 24,648 | ||||||||
INSURANCE EXPENSE:
|
||||||||||
Insurance General
|
119,039 | 118,023 | ||||||||
Insurance Health
|
65,583 | 40,792 | ||||||||
Insurance Workmens Compensation
|
41,445 | 25,265 | ||||||||
Insurance Keyman Life
|
2,045 | 2,045 | ||||||||
TOTAL INSURANCE
|
228,112 | 186,125 | ||||||||
LEASE OF BUILDINGS AND STORAGE FACILITIES
|
29,250 | 27,000 | ||||||||
SALARIES ADMINISTRATIVE
|
||||||||||
Salaries Officers
|
89,115 | 77,769 | ||||||||
Salaries Office Employees
|
37,405 | 11,518 | ||||||||
TOTAL SALARIES ADMINISTRATIVE
|
126,520 | 89,287 | ||||||||
TAX EXPENSE:
|
||||||||||
Taxes Payroll
|
78,536 | 52,205 | ||||||||
Taxes Property
|
43,495 | 13,926 | ||||||||
Taxes Other
|
2,501 | 1,832 | ||||||||
Taxes State Franchise
|
1,690 | 875 | ||||||||
TOTAL TAX EXPENSE
|
126,222 | 68,838 | ||||||||
INTEREST
|
73,782 | 51,380 | ||||||||
TOTAL OPERATING EXPENSES
|
779,019 | 578,532 | ||||||||
NET INCOME
|
$ | 624,107 | $ | 376,432 | ||||||
F-126
ASSETS | |||||||
Current Assets
|
|||||||
Cash in Bank TB&T
|
183,614.45 | ||||||
Accounts Receivable
|
1,021,133.53 | ||||||
Inventory
|
334,309.46 | ||||||
Prepaid Expenses
|
79,136.57 | ||||||
Total Current Assets
|
1,618,194.01 | ||||||
Property and Equipment Equipment
|
2,474,765.35 | ||||||
Accumulated Depreciation
|
(492,780.50 | ) | |||||
Net Property and Equipment
|
1,981,984.85 | ||||||
Other Assets Organization Costs
|
2,242.25 | ||||||
Startup Costs
|
27,898.75 | ||||||
Accumulated Amortization
|
(19,590.00 | ) | |||||
Deposits
|
10,875.00 | ||||||
Total Other Assets
|
21,426.00 | ||||||
Total Assets
|
3,621,604.86 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY | |||||||
Current Liabilities
|
|||||||
Accounts Payable
|
449,217.60 | ||||||
Payroll Taxes Payable
|
3,448.71 | ||||||
Sales Tax Payable
|
44,997.92 | ||||||
Accrued Interest Payable
|
4,017.53 | ||||||
Salaries Payable
|
16,143.77 | ||||||
Current Income Taxes Payable
|
94,000.00 | ||||||
N/ P Insurance
|
46,139.99 | ||||||
N/ P M-BAR Ranch
|
130,000.00 | ||||||
N/ P TB&T LOC
|
349,923.29 | ||||||
Current Maturities of L-T
|
467,915.64 | ||||||
Total Current Liabilities
|
1,605,804.45 | ||||||
Long-Term Liabilities N/ P FMC
|
135,292.77 | ||||||
N/ P Navistar
|
39,147.38 | ||||||
N/ P TB&T
|
686,059.55 | ||||||
N/ P M-BAR
|
48,500.43 | ||||||
N/ P IKON RICOH
|
3,258.52 | ||||||
Current Maturities of L-T
|
(467,915.64 | ) | |||||
Total Long-Term Liabilities
|
444,343.01 | ||||||
Total Liabilities
|
2,050,147.46 | ||||||
Deferred Income Taxes
|
6,898.00 | ||||||
Stockholders Equity Capital Stock
|
600,000.00 | ||||||
Contribution to Capital
|
50,000.00 | ||||||
Retained Earnings
|
914,559.40 | ||||||
Total Stockholders Equity
|
1,564,559.40 | ||||||
Total Liabilities and Stockholders Equity
|
3,621,604.86 | ||||||
F-127
Three Months Ended March 31, | ||||||||||
2005 | 2004 | |||||||||
Revenue
|
||||||||||
Sales Service
|
622,283.61 | 355,661.68 | ||||||||
Sales Materials
|
911,615.67 | 1,190,200.66 | ||||||||
Total Revenue
|
1,533,899.28 | 1,545,862.34 | ||||||||
Cost of Goods Sold
|
950,535.70 | 1,131,968.64 | ||||||||
Gross Profit
|
583,363.58 | 413,893.70 | ||||||||
Operating Expenses Contract Services
|
3,007.50 | 8,548.13 | ||||||||
Insurance
|
61,206.10 | 57,193.97 | ||||||||
Lease
|
59,372.36 | 24,618.30 | ||||||||
Supplies
|
28,500.98 | 14,705.44 | ||||||||
Taxes
|
26,077.65 | 16,749.81 | ||||||||
Accounting & Legal
|
28,478.91 | 13,481.21 | ||||||||
Advertising & Promotional
|
844.43 | 882.50 | ||||||||
Amortization
|
1,506.00 | 1,506.00 | ||||||||
Bank Charges
|
128.60 | 129.20 | ||||||||
Commission Salesman
|
4,000.00 | 0.00 | ||||||||
Consulting
|
4,200.00 | 3,300.00 | ||||||||
Depreciation
|
9,240.66 | 5,926.17 | ||||||||
Dues & Subscriptions
|
1,189.39 | 0.00 | ||||||||
Employee Medical
|
978.22 | 436.06 | ||||||||
Freight
|
8,259.61 | 340.00 | ||||||||
Interest
|
20,360.28 | 18,007.80 | ||||||||
License & Fees
|
150.46 | 1,364.98 | ||||||||
Maint & Repairs General
|
98.51 | 815.40 | ||||||||
Meals & Entertainment
|
0.00 | 101.85 | ||||||||
Office Expense
|
3,326.71 | 964.16 | ||||||||
Postage
|
1,117.54 | 999.49 | ||||||||
Janitorial
|
1,300.00 | 1,340.75 | ||||||||
Salaries Officers
|
21,000.00 | 21,000.00 | ||||||||
Salaries Office
|
8,830.06 | 5,805.94 | ||||||||
Sales Expense
|
3,679.23 | 2,649.54 | ||||||||
Telephone
|
8,483.66 | 4,296.17 | ||||||||
Uniforms
|
824.89 | 0.00 | ||||||||
Utilities
|
1,610.44 | 1,828.06 | ||||||||
Waste Water
|
714.00 | 475.00 | ||||||||
Travel
|
0.00 | 246.75 | ||||||||
Truck Expense
|
583.27 | 218.00 | ||||||||
Total Operating Expenses
|
309,069.46 | 207,930.68 | ||||||||
Income/(Loss) Before Income Taxes
|
274,294.12 | 205,963.02 | ||||||||
Income Taxes
|
(100,898.00 | ) | 0.00 | |||||||
Other Income
|
0.00 | 1,000.00 | ||||||||
Net Income (Loss)
|
173,396.12 | 206,963.02 | ||||||||
Retained Earnings at Beginning of Period
|
741,163.28 | 117,056.14 | ||||||||
Retained Earnings at End of Period
|
914,559.40 | 324,019.16 | ||||||||
F-128
Three Months Ended | |||||||||
March 31, | |||||||||
2005 | 2004 | ||||||||
Cash flows from operating activities:
|
|||||||||
Net income (loss)
|
$ | 173,396 | $ | 206,963 | |||||
Adjustments to reconcile net (loss) to net cash provided by
operating activities:
|
|||||||||
Depreciation and amortization expense
|
51,247 | 44,236 | |||||||
Changes in working capital:
|
|||||||||
Decrease (increase) in accounts receivable
|
(482,476 | ) | 69,545 | ||||||
Decrease (increase) in other current assets
|
80,942 | 163,895 | |||||||
Decrease (increase) in other assets
|
(10,875 | ) | (375 | ) | |||||
(Decrease) increase in accounts payable
|
65,456 | (306,063 | ) | ||||||
(Decrease) increase in accrued expenses
|
138,998 | 21,643 | |||||||
(Decrease) increase in other long-term liabilities
|
6,898 | | |||||||
(Decrease) increase in accrued employee benefits and payroll
taxes
|
13,193 | 67 | |||||||
Net cash provided by operating activities
|
36,779 | 199,911 | |||||||
Cash flows from investing activities:
|
|||||||||
Purchase of equipment
|
(105,107 | ) | (35,739 | ) | |||||
Net cash provided (used) by investing activities
|
(105,107 | ) | (35,739 | ) | |||||
Cash flows from financing activities:
|
|||||||||
Repayments of long-term debt
|
(96,732 | ) | (161,241 | ) | |||||
Proceeds form issuance of long-term debt
|
| 307,399 | |||||||
Net cash provided (used) by financing activities
|
(96,732 | ) | 146,158 | ||||||
Net increase (decrease) in cash and cash equivalents
|
(165,060 | ) | 310,330 | ||||||
Cash and cash equivalents at beginning of year
|
348,674 | 45,857 | |||||||
Cash and cash equivalents at end of period
|
$ | 183,614 | $ | 356,187 | |||||
F-129
Accounting & Consulting Group, LLP |
F-130
March 31, | December 31, | December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||||
ASSETS | ||||||||||||||
Current Assets:
|
||||||||||||||
Cash and cash equivalents
|
$ | 123,093 | $ | 49,695 | $ | 39,821 | ||||||||
Accounts receivable
|
359,875 | 418,290 | 446,646 | |||||||||||
Unbilled receivables
|
129,325 | 101,400 | 47,000 | |||||||||||
Related party receivable (Note 2)
|
7,967 | 9,673 | 15,991 | |||||||||||
Prepaid income taxes
|
| | 3,507 | |||||||||||
Prepaid expenses
|
10,497 | 11,593 | 11,697 | |||||||||||
Total Current Assets
|
630,757 | 590,651 | 564,662 | |||||||||||
Property and Equipment:
|
||||||||||||||
Transportation equipment
|
137,555 | 137,555 | 137,555 | |||||||||||
Machinery and equipment
|
1,905,235 | 1,867,336 | 1,248,414 | |||||||||||
Office furniture and equipment
|
7,131 | 7,131 | 7,131 | |||||||||||
Accumulated depreciation
|
(748,646 | ) | (677,475 | ) | (428,031 | ) | ||||||||
Total Property and Equipment
|
1,301,275 | 1,334,547 | 965,069 | |||||||||||
Total Assets
|
$ | 1,932,032 | $ | 1,925,198 | $ | 1,529,731 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||||||||
Current Liabilities:
|
||||||||||||||
Current maturities of long-term debt (Note 4)
|
$ | 283,194 | $ | 312,414 | $ | 235,137 | ||||||||
Short-term notes payable (Note 3)
|
54,601 | 86,765 | 149,995 | |||||||||||
Accounts payable
|
82,369 | 117,928 | 129,895 | |||||||||||
Accrued expenses
|
131,188 | 62,726 | 63,514 | |||||||||||
Deferred income taxes (Note 9)
|
68,644 | 72,204 | 33,425 | |||||||||||
Total Current Liabilities
|
619,996 | 652,037 | 611,966 | |||||||||||
Long-Term Debt (Note 4)
|
89,959 | 153,675 | 279,349 | |||||||||||
Deferred income taxes (Note 9)
|
136,593 | 132,577 | 78,565 | |||||||||||
Total Liabilities
|
846,548 | 938,289 | 969,880 | |||||||||||
Stockholders Equity:
|
||||||||||||||
Common stock, par value $10 100 shares issued and
outstanding
|
1,000 | 1,000 | 1,000 | |||||||||||
Retained earnings
|
1,084,484 | 985,909 | 558,851 | |||||||||||
Total stockholders equity
|
1,085,484 | 986,909 | 559,851 | |||||||||||
Total liabilities and stockholders equity
|
$ | 1,932,032 | $ | 1,925,198 | $ | 1,529,731 | ||||||||
F-131
March 31, | December 31, | December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||||
Revenue
|
||||||||||||||
Service revenue
|
$ | 926,906 | $ | 3,862,005 | $ | 2,415,266 | ||||||||
Other income
|
| | 2,800 | |||||||||||
Total revenue
|
926,906 | 3,862,005 | 2,418,066 | |||||||||||
Expenses
|
||||||||||||||
Service-related expenses
|
552,472 | 2,514,373 | 1,582,313 | |||||||||||
Selling, general, and administrative expenses
|
150,499 | 514,211 | 459,186 | |||||||||||
Depreciation and amortization
|
71,171 | 249,444 | 174,386 | |||||||||||
Interest expense
|
8,656 | 44,344 | 27,604 | |||||||||||
Total expenses
|
782,798 | 3,322,372 | 2,243,489 | |||||||||||
Operating income
|
144,108 | 539,633 | 174,577 | |||||||||||
Other income
|
||||||||||||||
Gain (loss) on sale of assets
|
| | 6,723 | |||||||||||
Interest income
|
93 | 585 | 905 | |||||||||||
Income before income taxes
|
144,201 | 540,218 | 182,205 | |||||||||||
Federal and state income taxes (Note 9)
|
45,626 | 113,160 | 37,121 | |||||||||||
Net income
|
$ | 98,575 | $ | 427,058 | $ | 145,084 | ||||||||
F-132
Common | Paid-in | Retained | ||||||||||||||
Stock | Capital | Earnings | Total | |||||||||||||
Balance, January 1, 2003
|
$ | 1,000 | $ | | $ | 413,767 | $ | 414,767 | ||||||||
Net Income
|
| | 145,084 | 145,084 | ||||||||||||
Dividends paid
|
| | | | ||||||||||||
Balance, December 31, 2003
|
1,000 | | 558,851 | 559,851 | ||||||||||||
Net Income
|
| | 427,058 | 427,058 | ||||||||||||
Dividends paid
|
| | | | ||||||||||||
Balance, December 31, 2004
|
1,000 | | 985,909 | 986,909 | ||||||||||||
Net Income
|
| | 98,575 | 98,575 | ||||||||||||
Dividends paid
|
| | | | ||||||||||||
Balance, March 31, 2005
|
$ | 1,000 | $ | | $ | 1,084,484 | $ | 1,085,484 | ||||||||
F-133
March 31, | December 31, | December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||||
Cash flows from operating activities:
|
||||||||||||||
Net income
|
$ | 98,575 | $ | 427,058 | $ | 145,084 | ||||||||
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
|
||||||||||||||
Depreciation and amortization
|
71,171 | 249,444 | 174,386 | |||||||||||
Gain (loss) on sale of property, plant, and equipment
|
| | (6,723 | ) | ||||||||||
Deferred income taxes
|
457 | 92,791 | 37,121 | |||||||||||
Change in operating assets and liabilities:
|
||||||||||||||
Accounts receivable
|
30,490 | (26,044 | ) | (309,046 | ) | |||||||||
Shareholder loans
|
1,707 | 6,318 | 5,695 | |||||||||||
Prepaid expenses
|
1,096 | 104 | (858 | ) | ||||||||||
Prepaid income tax
|
| 3,507 | (3,507 | ) | ||||||||||
Accounts payable
|
(35,559 | ) | (11,967 | ) | 81,718 | |||||||||
Accrued payroll and employee benefits
|
29,696 | (14,467 | ) | 31,379 | ||||||||||
Income tax payable
|
38,764 | 13,679 | (2,076 | ) | ||||||||||
Net Cash Provided (Used) by Operating Activities
|
236,397 | 740,423 | 153,173 | |||||||||||
Cash flows from investing activities:
|
||||||||||||||
Proceeds from sale of property, plant, and equipment
|
| | 25,000 | |||||||||||
Capital expenditures on property, plant, and equipment
|
(37,899 | ) | (406,618 | ) | (220,385 | ) | ||||||||
Net Cash Provided (Used) by Investing Activities
|
(37,899 | ) | (406,618 | ) | (195,385 | ) | ||||||||
Cash flows from financing activities:
|
||||||||||||||
Repayment of long-term debt
|
(92,936 | ) | (322,686 | ) | (190,748 | ) | ||||||||
Proceeds from issuance of long-term debt
|
| 160,000 | 155,105 | |||||||||||
Repayment of short-term debt
|
(32,164 | ) | (1,550,165 | ) | (479,550 | ) | ||||||||
Proceeds from issuance of short-term debt
|
| 1,388,920 | 561,260 | |||||||||||
Net Cash Provided (Used) by Financing Activities
|
(125,100 | ) | (323,931 | ) | 46,067 | |||||||||
Net Increase (Decrease) in Cash and Cash Equivalents
|
73,398 | 9,874 | 3,855 | |||||||||||
Cash and Cash Equivalents at Beginning of Year
|
49,695 | 39,821 | 35,966 | |||||||||||
Cash and Cash Equivalents at End of Year
|
$ | 123,093 | $ | 49,695 | $ | 39,821 | ||||||||
Supplemental Schedule of Noncash Investing and Financing
Activities:
|
||||||||||||||
Purchase of equipment financed with debt proceeds
|
$ | | $ | 212,303 | $ | 378,396 | ||||||||
Cash paid for interest
|
$ | 8,954 | $ | 44,045 | $ | 27,022 | ||||||||
F-134
Note 1: | Summary of Significant Accounting Policies |
F-135
Note 2: | Related-Party Transactions |
December 31, | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Note receivables from shareholders, due upon demand, bearing
interest of 0%, unsecured
|
$ | 7,967 | $ | 9,673 | $ | 15,991 | ||||||
Note 3: | Pledged Assets and Short-Term Notes Payable |
December 31, | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Note payable, FNB, $150,000 line of credit, 6.0 to 6.25%
interest rate
|
$ | | $ | | $ | 103,850 | ||||||
Note payable, FNB, $53,485, 6.0 to 7.75% interest rate
|
| | 24,299 | |||||||||
Note payable, FNB, $53,485, 6.25 to 8.75% interest rate
|
| | 21,846 | |||||||||
Note payable, FNB, $46,145, 6.0 to 7.25% interest rate
|
13,380 | 21,106 | | |||||||||
Note payable, CAT Financial, $98,013, 6.7% interest rate
|
41,221 | 65,659 | | |||||||||
$ | 54,601 | $ | 86,765 | $ | 149,995 | |||||||
Note 4: | Pledged Assets and Long-Term Debt |
December 31, | |||||||||||||
March 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Various notes payable to banks and financing companies for
vehicles and equipment, due in installments through March, 2008
at fixed interest rates ranging from 0.0% to 8.75%,
collateralized by vehicles, equipment and accounts receivable
|
$ | 138,594 | $ | 160,674 | $ | 250,893 | |||||||
Various notes payable to banks and financing companies for
vehicles and equipment, due in installments through March, 2007
at variable interest rates ranging from 4.15% to 7.25%,
collateralized by vehicles, equipment and accounts receivable
|
234,559 | 305,415 | 263,593 | ||||||||||
Subtotal
|
373,153 | 466,089 | 514,486 | ||||||||||
Less current maturities
|
283,194 | 312,414 | 235,137 | ||||||||||
Total Long-term debt
|
$ | 89,959 | $ | 153,675 | $ | 279,349 | |||||||
F-136
Year Ending March 31, | ||||
2006
|
$ | 283,194 | ||
2007
|
79,845 | |||
2008
|
10,114 | |||
$ | 373,153 | |||
Note 5: | Leases |
Year Ending March 31, | ||||
2006
|
$ | 144,000 | ||
Note 6: | Stockholders Equity |
December 31, | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Common stock authorized
|
100 | 100 | 100 | |||||||||
Common stock issued
|
100 | 100 | 100 | |||||||||
Common stock outstanding
|
100 | 100 | 100 | |||||||||
Common stock, per share par value
|
$ | 10 | $ | 10 | $ | 10 | ||||||
Cash dividends paid on common stock
|
| | |
Note 7: | Dependence on Key Customers |
Note 8: | Subsequent Events |
F-137
Note 9: | Income Tax Matters |
December 31, | |||||||||||||
March 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Deferred Tax Liabilities:
|
|||||||||||||
Property and equipment
|
$ | 136,593 | $ | 132,577 | $ | 78,565 | |||||||
Cash basis receivables
|
95,394 | 101,340 | 96,261 | ||||||||||
Prepaid expenses
|
2,047 | 2,261 | 2,281 | ||||||||||
234,034 | 236,178 | 177,107 | |||||||||||
Deferred Tax Assets:
|
|||||||||||||
Net operating loss carryforward
|
| | 31,099 | ||||||||||
Cash basis accounts payable and accrued expenses
|
28,797 | 31,397 | 34,018 | ||||||||||
28,797 | 31,397 | 65,117 | |||||||||||
Net deferred tax liabilities
|
$ | 205,237 | $ | 204,781 | $ | 111,990 | |||||||
December 31, | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Current liabilities
|
$ | 68,644 | $ | 72,204 | $ | 33,425 | ||||||
Noncurrent liabilities
|
136,593 | 132,577 | 78,566 | |||||||||
$ | 205,237 | $ | 204,781 | $ | 111,991 | |||||||
December 31, | ||||||||||||
March 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Current tax expense
|
$ | 45,169 | $ | 51,469 | $ | | ||||||
Deferred tax expense
|
457 | 92,790 | 37,121 | |||||||||
Benefit of operating loss carryforward
|
| (31,099 | ) | | ||||||||
$ | 45,626 | $ | 113,160 | $ | 37,121 | |||||||
F-138
ASSETS | |||||||||||
Current Assets
|
|||||||||||
Cash
|
$ | 153,254.16 | |||||||||
Trade Receivables
|
422,900.00 | ||||||||||
Trade Receivables-WIP
|
111,225.00 | ||||||||||
Loans to Shareholder
|
6,242.36 | ||||||||||
Prepaid Expense
|
19,120.50 | ||||||||||
Total Current Assets
|
$ | 712,742.02 | |||||||||
Property and Equipment
|
|||||||||||
Transportation Equipment
|
178,238.71 | ||||||||||
Machinery & Equipment
|
2,140,792.13 | ||||||||||
Office Furniture & Equipment
|
7,131.34 | ||||||||||
Accumulated Depreciation
|
(829,395.00 | ) | |||||||||
Net Property and Equipment
|
1,496,767.18 | ||||||||||
Total Assets
|
$ | 2,209,509.20 | |||||||||
LIABILITIES AND EQUITY | |||||||||||
Current Liabilities
|
|||||||||||
Accounts Payable
|
$ | 85,265.16 | |||||||||
Accrued Expenses
|
114,569.38 | ||||||||||
Income Tax Payable
|
80,329.09 | ||||||||||
Deferred Income Taxes
|
71,781.00 | ||||||||||
Notes Payable
|
246,301.98 | ||||||||||
Current Portion of L.T. Debt
|
206,298.26 | ||||||||||
Total Current Liabilities
|
$ | 804,544.87 | |||||||||
Deferred Income Tax
|
158,816.00 | ||||||||||
Long-Term Debt, Net of Current Portion
|
16,014.91 | ||||||||||
Stockholders Equity
|
|||||||||||
Common Stock, $10 Par Value
|
1,000.00 | ||||||||||
Retained Earnings
|
1,229,133.42 | ||||||||||
Total Stockholders Equity
|
1,230,133.42 | ||||||||||
Total Liabilities & Stockholders Equity
|
$ | 2,209,509.20 | |||||||||
F-139
Six Months Ended | Six Months Ended | |||||||||||||||||
Jun. 30, 2005 | Pct | Jun. 30, 2004 | Pct | |||||||||||||||
Revenue
|
||||||||||||||||||
Service Revenue
|
$ | 1,949,131.25 | 100.00 | $ | 1,839,365.00 | 100.00 | ||||||||||||
Total Revenue
|
1,949,131.25 | 100.00 | 1,839,365.00 | 100.00 | ||||||||||||||
Cost of Revenue
|
1,257,348.70 | 64.51 | 1,421,254.04 | 77.27 | ||||||||||||||
Gross Profit
|
691,782.55 | 35.49 | 418,110.96 | 22.73 | ||||||||||||||
Operating Expenses
|
328,061.99 | 16.83 | 269,719.48 | 14.66 | ||||||||||||||
Income From Operations
|
363,720.56 | 18.66 | 148,391.48 | 8.07 | ||||||||||||||
Other Income (Expense)
|
||||||||||||||||||
Interest Income
|
168.77 | 0.01 | 343.36 | 0.02 | ||||||||||||||
Interest Expense
|
(16,139.41 | ) | (0.83 | ) | (24,819.02 | ) | (1.35 | ) | ||||||||||
Total Other Income (Expense)
|
(15,970.64 | ) | (0.82 | ) | (24,475.66 | ) | (1.33 | ) | ||||||||||
Income Before Taxes
|
347,749.92 | 17.84 | 123,915.82 | 6.74 | ||||||||||||||
Income Taxes
|
||||||||||||||||||
Current Income Tax
|
78,710.75 | 4.04 | ||||||||||||||||
Deferred Income Taxes
|
25,816.00 | 1.32 | 23,830.00 | 1.30 | ||||||||||||||
104,526.75 | 5.36 | 23,830.00 | 1.30 | |||||||||||||||
Net Income
|
243,223.17 | 12.48 | 100,085.82 | 5.44 | ||||||||||||||
Beginning Retained Earnings
|
985,910.25 | 558,852.46 | ||||||||||||||||
Ending Retained Earnings
|
$ | 1,229,133.42 | $ | 658,938.28 | ||||||||||||||
F-140
Six Months Ended | Six Months Ended | |||||||||||||||||
Jun. 30, 2005 | Pct | Jun. 30, 2004 | Pct | |||||||||||||||
Cost of Revenue
|
||||||||||||||||||
Contract Air
|
191,500.00 | 9.83 | 352,300.00 | 19.15 | ||||||||||||||
Freight & Trucking
|
11,529.98 | 0.59 | 13,788.47 | 0.75 | ||||||||||||||
Auto Expense
|
57,800.36 | 2.97 | 57,554.74 | 3.13 | ||||||||||||||
Depreciation
|
148,285.00 | 7.61 | 110,875.00 | 6.03 | ||||||||||||||
Fuel
|
0.00 | 0.00 | 12,906.32 | 0.70 | ||||||||||||||
Insurance
|
27,634.49 | 1.42 | 21,697.12 | 1.18 | ||||||||||||||
Laundry/ Uniforms
|
1,365.96 | 0.07 | 5,223.46 | 0.28 | ||||||||||||||
Maintenance & Repairs
|
95,822.66 | 4.92 | 73,610.05 | 4.00 | ||||||||||||||
Equipment Rental
|
141,320.17 | 7.25 | 175,289.72 | 9.53 | ||||||||||||||
Subcontracting Other
|
2,942.50 | 0.15 | 1,800.00 | 0.10 | ||||||||||||||
Supplies
|
104,745.30 | 5.37 | 139,860.66 | 7.60 | ||||||||||||||
Taxes
|
34,631.08 | 1.78 | 33,779.21 | 1.84 | ||||||||||||||
Travel
|
2,666.50 | 0.14 | 0.00 | 22.97 | ||||||||||||||
Wages
|
437,054.70 | 22.42 | 422,569.29 | 22.97 | ||||||||||||||
Total Cost of Revenue
|
$ | 1,257,348.70 | 64.51 | $ | 1,421,254.04 | 77.27 | ||||||||||||
Operating Expenses
|
||||||||||||||||||
Advertising & Promotional
|
0.00 | 0.00 | 454.56 | 0.02 | ||||||||||||||
Bank Charges
|
0.00 | 0.00 | 632.62 | 0.03 | ||||||||||||||
Contract Labor
|
0.00 | 0.00 | 924.00 | 0.05 | ||||||||||||||
Car & Truck Expense
|
3,400.29 | 0.17 | 0.00 | 0.05 | ||||||||||||||
Contributions
|
2,250.00 | 0.12 | 1,000.00 | 0.05 | ||||||||||||||
Depreciation
|
3,635.00 | 0.19 | 3,341.00 | 0.18 | ||||||||||||||
Dues & Subscriptions
|
71.70 | 0.00 | 170.40 | 0.01 | ||||||||||||||
Insurance
|
21,057.11 | 1.08 | 20,040.54 | 1.09 | ||||||||||||||
Laundry & Uniforms
|
1,748.23 | 0.09 | 0.00 | 1.09 | ||||||||||||||
Life Insurance
|
288.00 | 0.01 | 269.00 | 0.01 | ||||||||||||||
Medical Reimbursement
|
0.00 | 0.00 | 3,621.06 | 0.20 | ||||||||||||||
Meals & Entertainment
|
7,604.96 | 0.39 | 1,441.28 | 0.08 | ||||||||||||||
Office Expense
|
936.47 | 0.05 | 1,510.61 | 0.08 | ||||||||||||||
Professional fees
|
5,171.03 | 0.27 | 1,054.00 | 0.06 | ||||||||||||||
Rent
|
6,026.48 | 0.31 | 6,938.15 | 0.38 | ||||||||||||||
Repairs & Maintenance
|
154.20 | 0.01 | 0.00 | 0.38 | ||||||||||||||
Supplies
|
497.90 | 0.03 | 40.00 | 0.00 | ||||||||||||||
Taxes
|
19,904.64 | 1.02 | 11,195.41 | 0.61 | ||||||||||||||
Travel
|
6,104.48 | 0.31 | 1,564.70 | 0.09 | ||||||||||||||
Utilities & Telephone
|
13,329.50 | 0.68 | 8,322.15 | 0.45 | ||||||||||||||
Wages
|
43,482.00 | 2.23 | 8,322.15 | 0.45 | ||||||||||||||
Salaries-Officers
|
192,400.00 | 9.87 | 207,200.00 | 11.26 | ||||||||||||||
Total Operating Expenses
|
$ | 328,061.99 | 16.83 | $ | 269,719.48 | 14.66 | ||||||||||||
F-141
6 Months Ended | 6 Months Ended | ||||||||||
Jun. 30, 2005 | Jun. 30, 2004 | ||||||||||
Cash Flow from Operating Activities
|
|||||||||||
Net Income (Loss)
|
$ | 242,223.17 | $ | 100,085.82 | |||||||
Adjustments to Reconcile Cash Flow
|
|||||||||||
Depreciation
|
151,920.00 | 114,216.00 | |||||||||
Deferred Income Tax
|
25,816.00 | 23,830.00 | |||||||||
Decrease (Increase) in Current Assets
|
|||||||||||
Trade Receivables
|
(4,610.00 | ) | 56,721.00 | ||||||||
Trade Receivable WIP
|
(9,825.00 | ) | (30,025.00 | ) | |||||||
Loans to Shareholder
|
3,432.23 | 2,959.58 | |||||||||
Prepaid Expense
|
(7,527.57 | ) | (321.51 | ) | |||||||
Prepaid Income Taxes
|
0.00 | 894.00 | |||||||||
Increase (Decrease) in Current Liabilities
|
|||||||||||
Accounts Payable
|
(32,662.73 | ) | (19,411.84 | ) | |||||||
Accrued Expenses
|
65,522.20 | 2,781.13 | |||||||||
Credit Cards Payable
|
66,650.50 | 10,690.02 | |||||||||
Total Adjustments
|
258,714.63 | 162,333.38 | |||||||||
Cash Provided (Used) by Operations
|
501,937.80 | 262,419.20 | |||||||||
Cash Flow From Investing Activities
|
|||||||||||
Sales (Purchases) of Assets
|
|||||||||||
Machinery & Equipment
|
(314,139.87 | ) | (397,016.47 | ) | |||||||
Cash Provided (Used) by Investing
|
(314,139.87 | ) | (397,016.47 | ) | |||||||
Cash Flow From Financing Activities
|
|||||||||||
Cash (Used) or provided by:
|
|||||||||||
Short-Term Debt
|
159,537.27 | 42,475.87 | |||||||||
Long-Term Debt
|
(243,775.81 | ) | 137,312.81 | ||||||||
Cash Provided (Used) by Financing
|
(84,238.54 | ) | 179,788.68 | ||||||||
Net Increase (Decrease) in Cash
|
103,559.39 | 45,191.41 | |||||||||
Cash at Beginning of Period
|
49,694.77 | 39,821.42 | |||||||||
Cash at End of Period
|
$ | 153,254.16 | $ | 85,012.83 | |||||||
F-142
F-143
F-144
Allis- | W. T. Enterprises | M-I | Allis- | ||||||||||||||||||
Chalmers | W. T. Enterprises | Purchase | Purchase | Chalmers | |||||||||||||||||
Consolidated | Historical | Adjustments | Adjustments | Consolidated | |||||||||||||||||
ASSETS
|
|||||||||||||||||||||
Cash and cash equivalents
|
$ | 2,693 | $ | 153 | $ | (153 | )(G) | $ | | $ | 2,693 | ||||||||||
| |||||||||||||||||||||
Trade Receivables
|
18,001 | 534 | (534 | )(G) | | 18,001 | |||||||||||||||
Inventories, net
|
3,901 | | | | 3,901 | ||||||||||||||||
Lease receivable, net
|
180 | | | | 180 | ||||||||||||||||
Prepaids and other current assets
|
1,650 | 25 | (25 | )(G) | | 1,650 | |||||||||||||||
Total Current Assets
|
26,425 | 712 | (712 | ) | | 26,425 | |||||||||||||||
Net Property, plant and equipment
|
49,585 | 1,497 | 2,900 | (J) | 940 | (R) | 54,860 | ||||||||||||||
(62 | )(A) | ||||||||||||||||||||
| |||||||||||||||||||||
Goodwill
|
12,392 | | 1,103 | (K) | 13,495 | ||||||||||||||||
Other intangibles, net
|
5,675 | | 500 | (K) | | 6,150 | |||||||||||||||
(25 | )(E) | ||||||||||||||||||||
Debt issuance costs, net
|
671 | | 671 | ||||||||||||||||||
Lease receivable
|
432 | | 432 | ||||||||||||||||||
Other assets
|
119 | | | | 119 | ||||||||||||||||
Total Assets
|
$ | 95,299 | $ | 2,209 | $ | 3,704 | $ | 940 | $ | 102,152 | |||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY
|
|||||||||||||||||||||
Current maturities of long-term debt
|
$ | 3,952 | $ | 206 | $ | (206 | )(G) | $ | | $ | 3,952 | ||||||||||
Trade accounts payable
|
6,907 | 85 | (85 | )(G) | | 6,907 | |||||||||||||||
Accrued employee benefits
|
834 | | | | 834 | ||||||||||||||||
Accrued interest
|
509 | | 113 | (I) | (75 | )(N) | 547 | ||||||||||||||
Accrued expenses
|
2,815 | 267 | (267 | )(G) | | 2,815 | |||||||||||||||
Accounts payable, related parties
|
75 | | | | 75 | ||||||||||||||||
Total Current Liabilities
|
15,092 | 558 | (446 | ) | (75 | ) | 15,130 | ||||||||||||||
Accrued postretirement benefit obligations
|
661 | | | | 661 | ||||||||||||||||
Long-term debt
|
33,938 | 262 | 5,738 | (H) | 6,292 | (M) | 46,230 | ||||||||||||||
Other long-term liabilities
|
502 | 159 | (159 | )(G) | 502 | ||||||||||||||||
Redeemable Warrant
|
0 | 0 | |||||||||||||||||||
Preferred Stock
|
0 | | | | 0 | ||||||||||||||||
50,193 | 979 | 5,134 | 6,217 | 62,523 | |||||||||||||||||
Minority Interest
|
4,911 | | | (4,911 | )(P) | 0 | |||||||||||||||
Shareholders equity
|
|||||||||||||||||||||
Common stock
|
140 | 1 | (1 | )(G) | | 140 | |||||||||||||||
Capital in excess of par value
|
42,077 | | | | |||||||||||||||||
| | ||||||||||||||||||||
| | | | ||||||||||||||||||
| | 42,077 | |||||||||||||||||||
Accumulated earnings (deficit)
|
(2,022 | ) | 1,229 | (1,229 | )(G) | (366 | )(N) | (2,588 | ) | ||||||||||||
(62 | )(A) | ||||||||||||||||||||
(25 | )(E) | | |||||||||||||||||||
(113 | )(I) | ||||||||||||||||||||
Total Shareholders Equity
|
40,195 | 1,230 | (1,430 | ) | (366 | ) | 39,629 | ||||||||||||||
Total Liabilities and Shareholders Equity
|
$ | 95,299 | $ | 2,209 | $ | 3,704 | $ | 940 | $ | 102,152 | |||||||||||
F-145
Allis- | W.T. | ||||||||||||||||||||||||||||||||||||
Chalmers | Delta | Capcoil | W.T. | Enterprises | M-I | Allis- | |||||||||||||||||||||||||||||||
Consolidated | Delta | Purchase | Capcoil | Purchase | Enterprises | Purchase | Purchase | Chalmers | |||||||||||||||||||||||||||||
Historical | Historical | Adjustments | Historical | Adjustments | Historical | Adjustments | Adjustments | Consolidated | |||||||||||||||||||||||||||||
Sales
|
$ | 42,922 | $ | 821 | $ | | $ | 2,161 | $ | 1,949 | $ | 47,853 | |||||||||||||||||||||||||
Cost of Sales
|
30,483 | 211 | 75 | (A) | 1,458 | 133 | (A) | 1,261 | (271 | )(O) | | 33,350 | |||||||||||||||||||||||||
Gross Profit
|
12,439 | 610 | (75 | ) | 703 | (133 | ) | 688 | 271 | | 14,503 | ||||||||||||||||||||||||||
Marketing and Administrative Expense
|
7,279 | 985 | (665 | )(B) | 421 | 28 | (E) | 324 | 23 | (E) | | 8,395 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||
Income (Loss) from Operations
|
5,160 | (375 | ) | 590 | 282 | (160 | ) | 364 | 248 | | 6,108 | ||||||||||||||||||||||||||
Other Income
|
|||||||||||||||||||||||||||||||||||||
Interest Income
|
| 3 | | | | | | | 3 | ||||||||||||||||||||||||||||
Interest Expense
|
(1,166 | ) | (11 | ) | 11 | (C) | (26 | ) | (16 | )(F) | (16 | ) | (97 | )(I) | (366 | )(N) | (1,687 | ) | |||||||||||||||||||
Settlement on lawsuit
|
103 | 103 | |||||||||||||||||||||||||||||||||||
Other
|
55 | 116 | | | | 172 | |||||||||||||||||||||||||||||||
Income (Loss) Before Taxes
|
4,152 | (267 | ) | 601 | 256 | (176 | ) | 348 | 151 | (366 | ) | 4,698 | |||||||||||||||||||||||||
Minority Interest
|
(488 | ) | | | | | 488 | (P) | 0 | ||||||||||||||||||||||||||||
Taxes
|
(329 | ) | (142 | ) | 142 | (D) | (87 | ) | 87 | (D) | (105 | ) | 105 | (D) | | (329 | ) | ||||||||||||||||||||
Net Income/(Loss)
|
3,336 | (409 | ) | 743 | 169 | (89 | ) | 243 | 256 | 122 | 4,370 | ||||||||||||||||||||||||||
Preferred Dividend
|
| | | | | | | | | ||||||||||||||||||||||||||||
Net income/(loss) attributed to common shares
|
$ | 3,336 | $ | (409 | ) | $ | 743 | $ | 169 | $ | (89 | ) | $ | 243 | $ | 256 | $ | 122 | $ | 4,370 | |||||||||||||||||
Pro forma net income (loss) per common share
|
|||||||||||||||||||||||||||||||||||||
Basic
|
$ | 0.24 | $ | 0.32 | |||||||||||||||||||||||||||||||||
Diluted
|
$ | 0.22 | $ | 0.29 | |||||||||||||||||||||||||||||||||
Weighted average shares outstanding
|
|||||||||||||||||||||||||||||||||||||
Basic
|
13,800 | 13,800 | |||||||||||||||||||||||||||||||||||
Diluted
|
14,900 | 14,900 | |||||||||||||||||||||||||||||||||||
F-146
Allis- | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Chalmers | Diamond | Downhole | Delta | Capcoil | W.T. Enterprises | M-I | Allis- | ||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | Diamond | Purchase | Downhole | Purchase | Delta | Purchase | Capcoil | Purchase | W.T. Enterprises | Purchase | Purchase | Chalmers | |||||||||||||||||||||||||||||||||||||||||
Historical | Historical | Adjustments | Historical | Historical | Historical | Adjustments | Historical | Adjustments | Historical | Adjustments | Adjustments | Consolidated | |||||||||||||||||||||||||||||||||||||||||
Sales
|
$ | 47,726 | $ | 5,584 | $ | | $ | 4,793 | $ | | $ | 3,249 | $ | | $ | 5,774 | $ | | $ | 3,862 | $ | | $ | 70,988 | |||||||||||||||||||||||||||||
Cost of Sales
|
35,300 | 3,566 | | 3,876 | | 826 | 298 | (A) | 4,400 | 398 | (A) | 2,764 | $ | (904 | )(Q) | | 50,523 | ||||||||||||||||||||||||||||||||||||
Gross Profit
|
12,426 | 2,018 | | 917 | | 2,423 | (298 | ) | 1,374 | (398 | ) | 1,098 | 904 | | 20,464 | ||||||||||||||||||||||||||||||||||||||
Marketing and Administrative Expense
|
8,199 | 664 | 163 | (E) | 872 | 83 | (E) | 1,798 | (940 | )(B) | 676 | 110 | 514 | 93 | (E) | | 12,232 | ||||||||||||||||||||||||||||||||||||
Income (Loss) from Operations
|
4,227 | 1,354 | (163 | ) | 45 | (83 | ) | 625 | 642 | 698 | (508 | ) | 584 | 811 | | 8,232 | |||||||||||||||||||||||||||||||||||||
Other Income
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Income
|
32 | | | | | 4 | | | | | | | 36 | ||||||||||||||||||||||||||||||||||||||||
Interest Expense
|
(2,808 | ) | (59 | ) | 59 | (C) | (74 | ) | 74 | (C) | (49 | ) | 49 | (C) | (74 | ) | 74 | (C) | (44 | ) | (406 | )(I) | (733 | )(N) | (3,991 | ) | |||||||||||||||||||||||||||
Other
|
272 | (26 | ) | | | | 114 | | | | | | | 360 | |||||||||||||||||||||||||||||||||||||||
Income (Loss) Before Taxes
|
1,723 | 1,269 | (104 | ) | (29 | ) | (9 | ) | 694 | 691 | 624 | (434 | ) | 540 | 405 | (733 | ) | 4,637 | |||||||||||||||||||||||||||||||||||
Minority Interest
|
(321 | ) | | (524 | ) | | | | | | | | | 845 | (P) | (0 | ) | ||||||||||||||||||||||||||||||||||||
Taxes
|
(514 | ) | | | | | (265 | ) | 265 | (D) | | | (113 | ) | 113 | (D) | | (514 | ) | ||||||||||||||||||||||||||||||||||
Net Income/(Loss)
|
888 | 1,269 | (628 | ) | (29 | ) | (9 | ) | 429 | 956 | 624 | (434 | ) | 427 | 518 | 112 | 4,123 | ||||||||||||||||||||||||||||||||||||
Preferred Dividend
|
(124 | ) | | | | | | | | | | | | (124 | ) | ||||||||||||||||||||||||||||||||||||||
Net income/(loss) attributed to common shares
|
$ | 764 | $ | 1,269 | $ | (628 | ) | $ | (29 | ) | $ | (9 | ) | $ | 429 | $ | 956 | $ | 624 | $ | (434 | ) | $ | 427 | $ | 518 | $ | 112 | $ | 3,999 | |||||||||||||||||||||||
Pro forma net income (loss) per common share
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic
|
$ | 0.10 | $ | 0.48 | |||||||||||||||||||||||||||||||||||||||||||||||||
Diluted
|
$ | 0.06 | $ | 0.41 | |||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Basic
|
7,930 | 8,321 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted
|
11,959 | 9,901 | |||||||||||||||||||||||||||||||||||||||||||||||||||
F-147
A.) Increase in depreciation due to the increase in the fair value of assets acquired. | |
B.) Elimination of the year end bonus paid to the employees of Delta. | |
C.) Reduction interest expense due to the reduction on debt not assumed. | |
D.) Elimination of tax provision due to the Companys net operating losses to offset the income form operations thus reducing the amount of federal income tax liability. | |
E.) Increase in amortization due to the increase in other intangible asset value of acquired company. | |
F.) To record interest expense related to cash borrowed to purchase Capcoil. | |
G.) Elimination of assets and liabilities not acquired. | |
H.) To record cash borrowed to purchase W.T. Enterprises. | |
I.) To record interest expense related to cash borrowed to purchase W.T. Enterprises. | |
J.) Recognition of fair value of assets in connection with the acquisition of W.T. Enterprises. | |
K.) Recognition of goodwill and other intangible assets in connection with the acquisition of W.T. Enterprises. | |
L.) To record the elimination of M-Is 45% as time of purchase in AirComp. | |
M.) To record cash borrowed to purchase M-Is 45% of AirComp. | |
N.) To record interest expense related to cash borrowed to purchase M-Is 45% in AirComp. | |
O.) To record elimination of lease expense not assumed net of additional depreciation expense of $333,000 due to the increase value of assets acquired at W.T. Enterprises. | |
P.) Elimination of M-Is 45% minority interest expense. | |
Q.) To record elimination of lease expense not assumed net of additional depreciation expense of $249,000 due to the increase value of assets acquired at W.T. Enterprises. | |
R.) Recognition of fair value of assets in connection with the acquisition of M-Is 45%. | |
F-148
Item 13. Other Expenses Of Issuance And Distribution.
The following table itemizes the expenses incurred by the Registrant in connection with the offering. All the amounts shown are estimates except the Securities and Exchange Commission registration fee.
Registration
fee -
Securities and Exchange Commission
|
$
|
6,997
|
||
Legal
Fees and
Expenses
|
$
|
194,000
|
||
Accounting
Fees and
Expenses
|
$
|
70,000
|
||
Miscellaneous
Expenses
|
$
|
25,000
|
||
Total
|
$
|
295,997
|
Item 14. | Indemnification of Directors and Officers. |
II-1
Item 15. | Recent Sales of Unregistered Securities |
II-2
II-3
Item 16. | Exhibits and Financial Statement Schedules |
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes.
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
ALLIS-CHALMERS ENERGY INC. |
By: | /s/ Munawar H. Hidayatallah |
|
Munawar H. Hidayatallah | |
Chief Executive Officer |
Signature | Title | Date | ||||
/s/ Munawar H. Hidayatallah |
Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | August 15, 2005 | ||||
/s/ Victor M. Perez |
Chief Financial Officer (Principal Financial Officer) |
August 15, 2005 | ||||
/s/ Bruce Sauers |
Chief Accounting Officer (Principal Accounting Officer) |
August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
|
Director | August 15, 2005 |
II-5
Signature | Title | Date | ||||
* |
Director | August 15, 2005 | ||||
|
Director | August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
* |
Director | August 15, 2005 | ||||
By: |
/s/ Victor M. Perez Attorney-in-fact |
II-6
Exhibit | Description | |||||
2 | .1 | First Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code, dated September 14, 1988, which includes the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 (incorporated by reference to Registrants Current Report on Form 8-K dated December 1, 1988). | ||||
2 | .2 | Agreement and Plan of Merger dated as of May 9, 2001 by and among Registrant, Allis-Chalmers Acquisition Corp. and OilQuip Rentals, Inc. (incorporated by reference to Registrants Current Report on Form 8-K filed May 15, 2001). | ||||
2 | .3 | Stock Purchase Agreement dated February 1, 2002 by and between Registrant and Jens H. Mortensen, Jr. (incorporated by reference to Registrants Current Report on Form 8-K filed February 21, 2002). | ||||
3 | .1 | Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2001). | ||||
3 | .2 | Amended and Restated By-laws of Registrant (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2001). | ||||
3 | .3 | Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on June 9, 2004 (incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
3 | .4 | Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on January 5, 2005 (incorporated by reference to the Registrants Current Report on Form 8-K filed January 11, 2005). | ||||
4 | .2 | Registration Rights Agreement dated as of March 31, 1999, by and between Allis-Chalmers Corporation and the Pension Benefit Guaranty Corporation (incorporated by reference to the Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). | ||||
4 | .3 | Option Agreement dated October 15, 2001 by and between Registrant and Leonard Toboroff (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). | ||||
4 | .4 | Warrant Purchase Agreement dated February 1, 2002 by and between Allis-Chalmers Corporation and Wells Fargo Energy Capital, Inc., including form of warrant (incorporated by reference to the Registrants Current Report on Form 8-K filed February 21, 2002) | ||||
4 | .5 | Warrant Purchase Agreement dated February 1, 2002 by and between Allis-Chalmers Corporation and Energy Spectrum Partners LP, including form of warrant (incorporated by reference to the Registrants Current Report on Form 8-K filed February 21, 2002) | ||||
4 | .6* | 2003 Incentive Stock Plan (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2002). | ||||
4 | .7* | Form of Option Certificate issued pursuant to 2003 Incentive Stock Plan (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2002). | ||||
4 | .8 | Warrant dated March 1, 2004, issued to Morgan Joseph & Co., Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
4 | .9 | Form of warrant issued to Investors pursuant to Stock and Warrant Purchase Agreement dated April 2, 2004 by and among Registrant and Donald Engel, Christopher Engel The Engel Defined Benefit plan, RER Corp. and Leonard Toboroff (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
4 | .10 | Registration Rights Agreement dated April 2, 2004 by and between Registrant and the Stockholder signatories thereto (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
4 | .11 | Warrant dated May 19, 2004, issued to Jeffrey R. Freedman (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
5 | .1 | Opinion of Greenberg Glusker Fields Claman Machtinger & Kinsella LLP. | ||||
9 | .1 | Shareholders Agreement dated February 1, 2002 by and among Registrant and the stockholder and warrant holder signatories thereto (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2001). |
II-7
Exhibit | Description | |||||
9 | .2 | Stockholders Agreement dated April 2, 2004, by and among Registrant and the Stockholder signatories thereto. (incorporated by reference to the registrants Annual Report in Form 10-K for the year ended December 31, 2003). | ||||
9 | .3 | First Amendment to Stockholders Agreement dated April 2, 2004 by and among Registrant and the Stockholders signatories thereto, dated as of July 29, 2005 (incorporated by reference to Registrant's Current Report on Form 8-K filed on August 5, 2005) | ||||
10 | .1 | Amended and Restated Retiree Health Trust Agreement dated September 14, 1988 by and between Registrant and Wells Fargo Bank (incorporated by reference to Exhibit C-1 of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrants Current Report on Form 8-K dated December 1, 1988). | ||||
10 | .2 | Amended and Restated Retiree Health Trust Agreement dated September 18, 1988 by and between Registrant and Firstar Trust Company (incorporated by reference to Exhibit C-2 of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrants Current Report on Form 8-K dated December 1, 1988). | ||||
10 | .3 | Reorganization Trust Agreement dated September 14, 1988 by and between Registrant and John T. Grigsby, Jr., Trustee (incorporated by reference to Exhibit D of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrants Current Report on Form 8-K dated December 1, 1988). | ||||
10 | .4 | Product Liability Trust Agreement dated September 14, 1988 by and between Registrant and Bruce W. Strausberg, Trustee (incorporated by reference to Exhibit E of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrants Current Report on Form 8-K dated December 1, 1988). | ||||
10 | .5* | Allis-Chalmers Savings Plan (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 1988). | ||||
10 | .6* | Allis-Chalmers Consolidated Pension Plan (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 1988). | ||||
10 | .7 | Agreement dated as of March 31, 1999 by and between Registrant and the Pension Benefit Guaranty Corporation (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). | ||||
10 | .8 | Letter Agreement dated May 9, 2001 by and between Registrant and the Pension Benefit Guarantee Corporation (incorporated by reference to Registrants Quarterly Report on Form 10-Q filed on May 15, 2002). | ||||
10 | .9 | Termination Agreement dated May 9, 2001 by and between Registrant, the Pension Benefit Guarantee Corporation and others (incorporated by reference to Registrants Current Report on Form 8-K filed on May 15, 2002). | ||||
10 | .10 | Stock Purchase Agreement dated February 1, 2002 by and among Registrant, Energy Spectrum Partners LP, and Strata Directional Technology, Inc. (incorporated by reference to Registrants Annual Report on Form 10-K for the year ended December 31, 2001). | ||||
10 | .11 | Joint Venture Agreement dated June 27, 2003 by and between Mountain Compressed Air, Inc. and M-I L.L.C. (incorporated by reference to Registrants Current Report on Form 8-K filed July 16, 2003). | ||||
10 | .12 | Credit and Security Agreement by and between AirComp, L.L.C. and Wells Fargo Bank Texas NA, including Term Note, Revolving Line of Credit, and Delayed Draw Term Note, each filed as of June 27, 2003 (incorporated by reference to Registrants Current Report on Form 8-K filed July 16, 2003). | ||||
10 | .13 | Security Agreement by and between AirComp, L.L.C. and Wells Fargo Bank Texas NA, filed as of June 27, 2003 (incorporated by reference to Registrants Current Report on Form 8-K dated July 16, 2003). | ||||
10 | .14* | Employment Agreement dated July 1, 2003 by and between AirComp, L.L.C. and Terry Keane (incorporated by reference to Registrants Current Report on Form 8-K filed July 16, 2003). | ||||
10 | .15 | Second Amendment to Credit Agreement dated September 30, 2003 by and between Jens Oilfield Service, Inc. and Wells Fargo Credit Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the period ended September 30, 2003). | ||||
10 | .16 | Third Amendment to Credit Agreement dated September, 2003 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the period ended September 30, 2003). | ||||
10 | .17 | First Amendment to Credit Agreement dated October 1, 2003 by and between Registrant and Wells Fargo Energy Capital Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the period ended September 30, 2003). |
II-8
Exhibit | Description | |||||
10 | .18 | Fourth Amendment to Credit Agreement dated as of January 30, 2004 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .19 | Letter Agreement dated February 13, 2004 by and between Registrant and Morgan Joseph & Co., Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
10 | .20* | Employment Agreement dated as of April 1, 2004 between Registrant and Munawar H. Hidayatallah (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .21* | Employment Agreement dated as of April 1, 2004 between Registrant and David Wilde (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .22 | Stock and Warrant Purchase Agreement dated April 2, 2004 by and among Registrant and Donald Engel, Christopher Engel, the Engel Defined Benefit Plan, RER Corp. and Leonard Toboroff (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .23 | Preferred Stock Conversion Agreement dated April 2, 2004 by and between Registrant and Energy Spectrum Partners LP (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .24 | Second Amendment to Credit Agreement dated as of April 2, 2004 between AirComp, LLC and Wells Fargo Bank, NA (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .25 | Amendment to Credit Agreement by and between Registrant and Wells Fargo Energy Capital dated April 2, 2004 (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .26 | Fifth Amendment to Credit Agreement dated as of April 6, 2004 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .27 | Third Amendment to Credit Agreement dated as of April 6, 2004 by and between Jens Oilfield Service, Inc. and Wells Fargo Credit Inc. (incorporated by reference to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2004). | ||||
10 | .28 | Letter Agreement dated June 8, 2004 by and between the Registrant and Morgan Keegan & Company, Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
10 | .29* | Employment Agreement dated July 26, 2004 by and between the Registrant and Victor M. Perez (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
10 | .30 | Stock Purchase Agreement dated August 10, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
10 | .31 | Amendment to Stock Purchase Agreement dated August 10, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). | ||||
10 | .32 | Letter Agreement relating to Stock Purchase Agreement dated August 5, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004). |
II-9
Exhibit | Description | |||||
10 | .33 | Addendum to Stock Purchase Agreement dated September 29, 2004 (incorporated by reference to Registrants Current Report on Form 8-K filed on September 30, 2004). | ||||
10 | .34* | Employment Agreement dated October 11, 2004, between the Registrant and Theodore F. Pound III (incorporated by reference to Registrants Current Report on Form 8-K filed on October 15, 2004). | ||||
10 | .35 | Asset Purchase Agreement dated November 10, 2004 by and among AIRCOMP L.L.C., a Delaware limited liability company, DIAMOND AIR DRILLING SERVICES, INC., a Texas corporation, and MARQUIS BIT CO., L.L.C., a New Mexico limited liability company, GREG HAWLEY and TAMMY HAWLEY, residents of Texas and CLAY WILSON and LINDA WILSON, residents of New Mexico. (incorporated by reference to the Current Report on Form 8-K filed on November 15, 2004). | ||||
10 | .36 | Purchase Agreement and related Agreements by and among Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and others dated December 10, 2004 (incorporated by reference to the Current Report on Form 8-K filed on December 16, 2004). | ||||
10 | .37 | Amended and Restated Credit Agreement dated December 7, 1003, by and between AirComp LLC and Wells Fargo Bank, N.A. (incorporated by reference to Registrants Current Report on Form 8-K filed on December 10, 2004). | ||||
10 | .38 | Purchase Agreement and related agreements by and among Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and others dated December 10, 2004 (incorporated by reference to Registrants Current Report on Form 8-K filed on December 16, 2004). | ||||
10 | .39 | Stock Purchase Agreement dated April 1, 2005, by and among the Company, Thomas A. Whittington, Sr., Werlyn R. Bourgeois and SAM and D, LLC. (incorporated by reference to Registrants Current Report on Form 8-K filed April 5, 2005). | ||||
10 | .40 | Stock Purchase Agreement effective May 1, 2005, by and among the Company, Wesley J. Mahone, Mike T. Wilhite, Andrew D. Mills, and Tim Williams (incorporated by reference to Registrants Current Report on Form 8-K filed May 6, 2005). | ||||
10 | .41 | Credit Agreement dated July 11, 2005 with Royal Bank of Canada, as administrative agent, with the notes attached thereto as exhibits and form of the Pledge and Security Agreement (incorporated by reference to Registrants Current Report on Form 8-K filed July 15, 2005). | ||||
10 | .42 | Purchase Agreement dated July 11, 2005 among the Company, Mountain Compressed Air, Inc. and M-I L.L.C. (incorporated by reference to Registrants Current Report on Form 8-K filed July 15, 2005). | ||||
10 | .43 | Asset Purchase Agreement dated July 11, 2005 between AirComp LLC, W.T. Enterprises, Inc. and William M. Watts (incorporated by reference to Registrants Current Report on Form 8-K filed July 15, 2005). | ||||
21 | .1 | Subsidiaries of Registrant | ||||
23 | .1 | Consent of Greenberg Glusker Fields Claman Machtinger & Kinsella LLP (included in Exhibit 5.1). | ||||
23 | .2 | Consent of Gordon, Hughes and Banks, LLP. | ||||
23 | .3 | Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP | ||||
23 | .4 | Consent of Johnson, Miller & Co. | ||||
23 | .5 | Consent of Accounting & Consulting Group, LLP | ||||
23 | .6 | Consent of Wright, Moore, Dehart, Dupuis & Hutchinson, LLC | ||||
23 | .7 | Consent of Curtis Blakely & Co., PC | ||||
23 | .8 | Consent of Accounting & Consulting Group, LLP | ||||
24 | .1 | Power of Attorney (included in signature page). |
* | Compensation Plan or Agreement |
II-10