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                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

Mark One:
         |X| Annual  Report  pursuant  to Section 13 or 15(d) of the  Securities
         Exchange Act of 1934. For the fiscal year ended December 31, 1999; or

         |_| Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange  Act of 1934 For the  transition  period  from  __________  to
         __________.

                           COMMISSION FILE NO. 0-18754

                          BLACK WARRIOR WIRELINE CORP.
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                 (Name of Small Business Issuer in its Charter)

DELAWARE                                                   11-2904094
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(State or Other Jurisdiction of                           (IRS Employer
Incorporation or Organization)                          Identification No.)

3748 HIGHWAY #45 NORTH, COLUMBUS, MISSISSIPPI                 39701
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(Address of Principal Executive Offices)                    (Zip Code)

                                 (662) 329-1047
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                (Issuer's Telephone Number, Including Area Code)

    Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE

      Securities Registered Pursuant to Section 12(g) of the Exchange Act:
                              (Title of Each Class)
                    COMMON STOCK, PAR VALUE $.0005 PER SHARE

     Check  whether  the Issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past twelve (12) months (or
for such shorter period that the Issuer was required to file such reports),  and
(2) has been subject to such filing  requirements for the past ninety (90) days.
|X| Yes |_| No

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained,  to the
best of  Issuer's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference in Part III of this Form 10-KSB,  or any amendment to
this Form 10-KSB. |X|

     State Issuer's revenues for its most recent fiscal year: $29,293,373
     State the aggregate market value of the voting stock held by non-affiliates
as of March 31, 2000:
              COMMON STOCK, PAR VALUE $.0005 PER SHARE, $5,609,195
     (Non-affiliates  have been  determined  on the basis of holdings  set forth
under Item 11 of this Annual Report on Form 10-KSB.)
     Indicate the number of shares  outstanding of each of the Issuer's  classes
of common equity, as of the latest practicable date:

          Class: COMMON STOCK, PAR VALUE $.0005 PER SHARE
          Outstanding at March 31, 2000: 7,478,927 SHARES

                       DOCUMENTS INCORPORATED BY REFERENCE
No  documents  are  incorporated  by reference  into this Annual  Report on Form
10-KSB
            Transitional Small Business Issuer Format: |_| Yes |X| No

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                                     PART I

     ITEM 1. DESCRIPTION OF BUSINESS

GENERAL

     Black  Warrior  Wireline  Corp.  (the  "Company") is an oil and gas service
company  currently  providing  various  services  to oil and gas well  operators
primarily in the Black Warrior and  Mississippi  Salt Dome Basins in Alabama and
Mississippi,  the Permian Basin in West Texas and New Mexico, the San Juan Basin
in New Mexico, Colorado and Utah, the East Texas and Austin Chalk Basins in East
Texas,  the Anadarko Basin in Oklahoma,  the Powder River and Green River Basins
in Wyoming and  Montana,  the  Williston  Basin in North Dakota and areas of the
Gulf of Mexico offshore Louisiana and South Texas. The Company's principal lines
of business include (a) wireline services,  (b) directional  drilling services ,
and (c) workover  services.  Since November 1996,  the Company  completed  seven
acquisitions,  the most recent of which were the  acquisitions  of the  drilling
assets of Phoenix Drilling  Services,  Inc., in March 1998 and Petro Wireline in
June 1998.

RECENT RECAPITALIZATION

     On January 24, 2000, the Company entered into a Loan and Security Agreement
(the "Loan  Agreement")  with Coast  Business  Credit,  a division  of  Southern
Pacific  Bank  ("Coast")  pursuant  to  which  it is  enabled  to  make  secured
borrowings in the aggregate  amount of up to the lesser of $25.0 million or such
maximum aggregate amount as is available to be borrowed under a receivables loan
and two term loans described below. Of such amount, $14.5 million,  based on the
lesser of 75% of the  appraised  net eligible  forced  liquidation  value of the
Company's equipment or $14.5 million, is a term loan, an additional $2.0 million
is a term loan,  and the  balance is  available  to be borrowed in an amount not
exceeding 80% of the Company's eligible  receivables.  On February 15, 2000, the
Company  borrowed an aggregate of $15.6 million  pursuant to the Loan Agreement.
The proceeds were used to repay the Company's  former senior  secured  lender in
the  amount of $13.5  million,  to repay  other  indebtedness  aggregating  $1.5
million, and the balance was used for general corporate purposes,  including the
payment of outstanding accounts payable. In addition, commencing on December 17,
1999 and during the first quarter of 2000, the Company sold to private investors
$7.0 million principal amount of convertible promissory notes due on January 15,
2001 and warrants to purchase 28.7 million  shares of Common  Stock.  All of the
Company's remaining indebtedness is subordinate to Coast.

     During  the first  quarter  of 2000,  the  Company  executed  a  Compromise
Agreement of Release with Bendover Company  ("Bendover") whereby Bendover agreed
to return to the  Company  promissory  notes  aggregating  $2,000,000  principal
amount and receive in exchange  2,666,666  shares of the Company's  common stock
and a promissory  note in the principal  amount of $1,182,890 due on January 15,
2001, bearing interest at 10% per annum.

                                       1

<PAGE>

     Since October 1, 1999, the Company has resolved  pending legal  proceedings
including,  among others,  lawsuits  instituted by Bendover  Company,  Southwick
Investments,   Inc.  Dreco,  Inc.,  Thomas  Tools,  Inc.,  Greenspan  and  Saxon
Industries, Inc.

WIRELINE SERVICES

     The Company's wireline logging service activities  contributed  revenues of
$17.7  million   (approximately  60.5%  of  revenues)  in  1999,  $11.6  million
(approximately 33.7% of revenues) in 1998, and $9.5 million (approximately 55.7%
of revenues) in 1997.  At December 31, 1999,  the Company  owned 48  operational
motor  vehicle  mounted  wireline  units,  of  which  31  are  equipped  with  a
state-of-the-art  computer  system,  6 are analog  equipped  and 11 are  devoted
exclusively  to hoisting  operations.  In the third quarter of 1998, the Company
commenced  providing  wireline services offshore to customers with operations in
the Gulf of Mexico.  As of December 31, 1999,  the Company  owned 6  operational
cased-hole  wireline  units  skid-mounted  for offshore  work,  all of which are
equipped with state of the art computers.

     Truck or  skid-mounted  wireline  logging  services  are  used to  evaluate
downhole  conditions at various stages of the process of drilling and completing
oil and gas  wells as well as at  various  times  thereafter  until  the well is
depleted  and  abandoned.  Such  services  are  provided  using a wireline  unit
equipped with an armored  cable that is lowered by winch into an existing  well.
The cable  lowers  instruments  and tools  into the well to perform a variety of
services  and tests.  The wireline  unit's  instrument  cab contains  electronic
equipment  to supply power to the  downhole  instruments,  to receive and record
data from those instruments in order to produce the "logs" which define specific
characteristics  of  each  formation  and to  display  the  data  received  from
downhole.  The  Company's  wireline  units are  equipped  with  state-of-the-art
computerized systems or analog equipment.

     Open hole wireline  services are  performed  after the drilling of the well
but prior to its completion.  Cased hole wireline  services are performed during
and after the  completion of the well,  as well as from time to time  thereafter
during  the  life of the  well.  The  Company's  services  primarily  relate  to
providing cased hole wireline services.  Cased hole services include radioactive
and acoustic  logging used to evaluate  downhole  conditions  such as lithology,
porosity,  production patterns and the cement bonding  effectiveness between the
casing and the formation.  Other cased hole services include perforating,  which
opens up the casing to allow  production from the  formation(s),  and free-point
and  back-off,  which locates and frees pipe that has become lodged in the well.
Cased  hole  services  are  used in the  initial  completion  of the well and in
virtually all subsequent  workover and stimulation  projects throughout the life
of the well. The Company performs these services on a contract basis at the well
site for operators and producers of the wells primarily on a bid basis at prices
related to Company standard prices.

     These  services are routinely  provided to the Company's  customers and are
subject to the customers'  time schedule,  weather  conditions,  availability of
Company  personnel and


                                       2
<PAGE>

complexity of the operation.  These procedures  generally take approximately one
to one-and-one-half days to perform.

     Manufacturing.  The Company  operates a manufacturing  facility  located in
Laurel,  Mississippi to assemble and install  wireline service  equipment,  both
mounted on motor vehicles and on wireline  skids,  for internal use and for sale
to others. During the year ended December 31, 1999, the Company manufactured for
internal use three new wireline trucks and one new offshore  wireline skids. The
manufacturing  facility also totally  refurbished  for internal use six wireline
trucks and refurbished to a lesser extent one wireline  truck.  The Company also
manufactured and sold to a third-party customer and three wireline skids.


DIRECTIONAL DRILLING SERVICES

     The Company's  directional  drilling services contributed revenues of $10.3
million  (approximately 35.2% of revenues) in 1999, $21.3 million (approximately
61.9% of revenues) in 1998, and $5.9 million  (approximately  34.8% of revenues)
in 1997.  The  revenues  realized  in 1997  were  primarily  the  result  of the
acquisition  by the Company in October  1997 of  Diamondback  Directional,  Inc.
Prior thereto, the Company had no revenues from directional drilling services.

     Directional  drilling  is the  intentional  deviation  of a well bore.  The
deviation is achieved by  utilizing  downhole  motors and guidance  equipment to
move the well bore in a given  direction and intersect a target  formation at an
angle up to horizontal.

     On March 16, 1998,  the Company  completed the  acquisition of the domestic
oil and gas well  directional  drilling and downhole  survey  service  business,
including the related operating  assets,  from Phoenix Drilling  Services,  Inc.
This acquisition contributed to further increases in the Company's revenues from
directional  drilling  services  commenced  by the  acquisition  of  Diamondback
Directional,  Inc. in 1997. In addition, the Phoenix acquisition has enabled the
Company to provide downhole survey services to the oil and gas industry.

     The Company's Multi-Shot division provides  directional  surveying services
and  directional  surveying  equipment to operators in the oil and gas industry.
These services  include gyros,  magnetic,  single shot,  high accuracy  magnetic
probe,  electric surface  recording gyro, and MWD (measurement  while drilling).
Management of the Company believes these services are state-of-the-art.


                                       3
<PAGE>

WORKOVER AND COMPLETION SERVICES

     These activities  contributed revenues of $1.3 million  (approximately 4.3%
of revenues) in 1999, $1.5 million (approximately 4.4% of revenues) in 1998, and
$1.6  million  (approximately  9.5% of  revenues)  in 1997.  These  services are
performed primarily on an hourly basis.

     Workover  services  include  those  operations   performed  on  wells  when
originally  completed and on wells previously placed in production and requiring
additional work to restore or increase production.  A completion or workover rig
is used to position  tubing,  pumps and other  production  equipment  in a cased
hole.  The unit is used for the initial  completion  of the well and  subsequent
workover and remedial service.  A completion or workover rig is generally a four
to six axle  truck-mounted  hoist unit with a 85 to 100 foot derrick  capable of
lowering and hoisting up to 300,000 pound loads.

OTHER SERVICES

     The  Company  also  engages  in other oil and gas well  service  activities
including,  primarily,  the sale, rental and service of tools and equipment used
in the oil field services  industry and conducts tool and equipment  inspection,
maintenance and testing services.  These activities are not deemed by management
to be material.

PRINCIPAL CUSTOMERS AND MARKETING

     During the year ended  December 31, 1999,  two  customers  (Collins & Ware,
Inc.  and  Burlington  Resources)  accounted  for  approximately  21.0%  of  the
Company's net revenues while no single  customer  accounted for more than 10% of
the  Company's  net revenues in 1998.  During the year ended  December 31, 1997,
three customers  accounted for a total of  approximately  25.7% of the Company's
net revenues.

     The Company does not have any long-term agreements with its customers,  and
services  are  provided  pursuant to  short-term  agreements  negotiated  by the
Company with the customer.

     The Company's  services are marketed by its executive  officers and a sales
staff of approximately  eighteen persons working from its district offices.  The
Company relies  extensively on its reputation in the industry to create customer
awareness of its services.

OPERATING HAZARDS AND INSURANCE


                                       4
<PAGE>

     The services of the Company are used in oil and gas well drilling, workover
and production  operations that are subject to inherent risks such as blow-outs,
fires,  poisonous  gas and other oil and gas  field  hazards,  many of which can
cause personal injury and loss of life,  severely  damage or destroy  equipment,
suspend  production  operations  and cause  substantial  damage to  property  of
others.  Ordinarily,  the operator of the well assumes the risk of damage to the
well, the producing  reservoir and surrounding  property and revenue loss in the
event of accident, except in the case of gross or willful negligence on the part
of the Company or its employees.

     The  Company has  general  liability,  property,  casualty,  officers'  and
directors', and workers' compensation insurance. Although, in the opinion of the
Company's  management,  the limits of its insurance coverage are consistent with
industry  practices,  such  insurance may not be adequate to protect the Company
against liability or losses occurring from all the consequences of such risks or
incidents.  The  occurrence  of an event not fully  covered by insurance  (and a
determination of the liability of Company for  consequential  losses or damages)
could result in substantial  losses to the Company and have a materially adverse
effect upon its financial condition, results of operations, and cash flows.

     The Company  maintains  two policies  totaling  $2.0 million on the life of
William L. Jenkins,  its President and Chief  Operating  Officer,  and maintains
$1.0  million  policies  on the  lives  of  each of  Allen  R.  Neel,  Executive
Vice-President,  Danny  Ray  Thornton,  Vice  President,  and  Alan  Mann,  Vice
President.  See Item 9, "Directors,  Executive  Officers,  Promoters and Control
Persons;  Compliance with Section 16(a) of the Exchange Act." The benefits under
such policies are payable to the Company.

COMPETITION

     Most of the  Company's  competitors  are  divisions  of larger  diversified
corporations  which  offer  a  wide  range  of  oilfield  services.   Its  chief
competitors include  Halliburton  Company,  Schlumberger,  Ltd. and Baker Hughes
Incorporated,  as well as a number of other  companies  active in the  industry.
These  competitors  have  substantially  greater  economic  resources  than  the
Company.  Recent business  combinations  involving oil and gas service companies
may have the  effect  of  intensifying  competition  in the  industry.  With the
decline in 1998 and early 1999 in demand for oil and natural gas well  services,
competition  has  intensified.  Competition  principally  occurs in the areas of
technology,   price,   quality  of  products  and  field  personnel,   equipment
availability and facility locations.  Although price competition has been in the
past a  significant  characteristic  of the industry,  the Company's  ability to
offer more  technologically  advanced services is believed by management to have
reduced its exposure to severe price competition.  The Company continues to make
a conscious  effort to compete,  not just on price,  but on its ability to offer
advanced technology, experienced personnel, and a safe working environment.


                                       5
<PAGE>

     The  Company's  growth is dependent  upon its ability to attract and retain
skilled  oilfield and management  personnel.  The competition for such qualified
employees is frequently  intense and there can be no assurance  that  sufficient
qualified  persons will be available at such times as the Company requires their
services.

REGULATION

     The oil and gas business is a heavily  regulated  industry.  The  Company's
activities  are subject to various  licensing  requirements  and minimum  safety
procedures  and  specifications,  anti-pollution  controls on  equipment,  waste
discharge  and other  environmental  and  conservation  requirements  imposed by
federal  and  state  regulatory  authorities.  Serious  penalties  and fines are
imposed for violations from such  directives and violations  could result in the
loss of licenses and other penal proceedings.

     The Company is not  currently  the subject of any,  nor is it aware of any,
threatened  investigations or actions under any federal or state  environmental,
occupational  safety or other regulatory laws. The Company believes that it will
be able to continue compliance with such laws and regulations without a material
adverse effect on its earnings and competitive position.  However,  there can be
no assurance that unknown future changes in such laws and regulations  would not
have such an effect if and when such changes occur.

EMPLOYEES

     As of March 15, 2000, the Company employed  approximately  266 persons on a
full-time basis. Of the Company's employees, 23 are management personnel, 17 are
administrative  personnel and 226 are  operational  personnel.  The Company also
uses the services of  approximately 40 to 50 independent  contract  drillers and
directional  guidance personnel.  None of the Company's employees is represented
by a labor  union,  and the  Company is not aware of any current  activities  to
unionize its  employees.  Management of the Company  considers the  relationship
between the Company and its employees to be good.

INCORPORATION

     The  Company  was  incorporated  under the laws of the State of Delaware in
1987 under the name Teletek,  Ltd. and in June 1989 Teletek,  Ltd. merged with a
predecessor of the Company  incorporated  under the laws of the State of Alabama
and  concurrently  changed its name to Black Warrior  Wireline Corp. The Company
and its predecessors  have been engaged in providing  wireline and other oil and
gas well support services since 1984.


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<PAGE>

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

     With the exception of  historical  matters,  the matters  discussed in this
Report are "forward-looking statements" as defined under the Securities Exchange
Act of 1934, as amended,  that involve risks and uncertainties.  Forward-looking
statements include, but are not limited to, the matters described below, as well
as "Item 1.  Description  of Business - General,"  "-  Principal  Customers  and
Marketing,"   "--Operating   Hazards  and   Insurance,"   "--Competition,"   and
"--Regulations."  "Item  6.  Management's  Discussion  and  Analysis  or Plan of
Operations - General," "-Twelve-Month Periods Ended December 31, 1999 and 1998",
"- Liquidity and Capital Resources." Such  forward-looking  statements relate to
the Company's  ability to maintain,  implement and, if  appropriate,  expand its
cost-cutting  program  instituted in 1998,  to generate  revenues and attain and
maintain  profitability  and cash flow,  improvement in,  stability and level of
prices for oil and natural gas, pricing in the oil and gas services industry and
the  willingness  of customers to commit for oil and natural gas well  services,
the  ability  of the  Company to compete in the  premium  services  market,  the
ability of the Company to redeploy its equipment  among  regional  operations as
required,  the ability of the Company to provide services using state of the art
tooling,  the  ability of the  Company to raise  additional  capital to meet its
requirements and to obtain additional  financing when required,  and its ability
to maintain  compliance  with the  covenants of its various loan  documents  and
other agreements pursuant to which securities have been issued. The inability of
the Company to meet these  objectives  or the  consequences  on the Company from
adverse developments in general economic conditions, adverse developments in the
oil and gas industry, decline and fluctuations in the prices for oil and natural
gas and the absence of any material  decline in those prices,  and other factors
could  have a material  adverse  effect on the  Company.  The  Company  cautions
readers  that various risk  factors  described  below could cause the  Company's
operating  results,  and  financial  condition to differ  materially  from those
expressed  in any  forward-looking  statements  made by the  Company  and  could
adversely affect the Company's financial condition and its ability to pursue its
business  strategy  and plans.  Risk  factors  that could  affect the  Company's
revenues,  profitability and future business operations  include,  among others,
the following:

     Substantial  Indebtedness.  At  December  31,  1999,  the  Company's  total
indebtedness,  inclusive of accrued interest,  was approximately  $46.4 million.
After reflecting a refinancing of the Company's senior secured  indebtedness and
an additional $7.0 million of junior indebtedness  borrowed in December 1999 and
the first  quarter of 2000,  the Company had  outstanding  at February  29, 2000
total indebtedness of $49.5 million. The Company's level of indebtedness and the
potential  defaults  thereunder  pose  substantial  risk to the  Company and the
holders of its securities, including the possibility that the Company may not be
able to generate  sufficient  cash flow to pay the  principal of and interest on
the indebtedness when due or to refinance such indebtedness.


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<PAGE>

     Restrictions Imposed by Lenders; Secured Borrowing;  Reliance on St. James.
The Company has  outstanding  at February 29, 2000 senior  secured  indebtedness
aggregating  approximately  $17.8  million under the Loan  Agreement  with Coast
dated  January  24,  2000.  The  Company's  initial  borrowings  under  the Loan
Agreement  were made on February 15,  2000,  at which time it repaid in full all
outstanding  indebtedness  to its prior senior secured lender and eliminated all
defaults  under its  outstanding  indebtedness.  The  instruments  governing the
Company's  indebtedness  to Coast impose  significant  operating  and  financial
restrictions  on the Company.  Such  restrictions  affect,  and in many respects
significantly limit or prohibit,  among other things, the ability of the Company
to incur additional indebtedness, pay dividends, repay indebtedness prior to its
stated  maturity,  sell  assets or  engage in  mergers  or  acquisitions.  These
restrictions also limit the ability of the Company to effect future  financings,
make  certain  capital  expenditures,  withstand  a  downturn  in the  Company's
business  or  economy in  general,  or  otherwise  conduct  necessary  corporate
activities.  The Loan Agreement places  restrictions on the Company's ability to
borrow money under the revolving  credit  provisions of the Loan Agreement.  The
Company's ability to borrow under this revolving credit arrangement is necessary
to fund  the  Company's  ongoing  operations.  The  collateral  under  the  Loan
Agreement  includes  substantially  all of the Company's  assets. If the Company
were to default on its  indebtedness  owing to Coast and such  indebtedness  was
accelerated,  so as to  become  due and  immediately  payable,  there  can be no
assurance  that the assets of the Company  would be  sufficient to repay in full
such  indebtedness  and  the  Company's  other  liabilities.  In  addition,  the
acceleration  of the Company's  indebtedness  owing to Coast would  constitute a
default under other  indebtedness  of the Company which may result in such other
indebtedness   also   becoming   immediately   due  and   payable.   Under  such
circumstances,  the holders of the Company's  Common Stock may realize little or
nothing on their investment in the Company.  Even if additional  financing could
be  obtained,  there  can be no  assurance  that it would  be on terms  that are
favorable or acceptable to the Company or its equity security holders.

     Principal  and  interest  under  the Loan  Agreement  has been  guaranteed,
subject to certain  limitations,  by St. James,  principal  stockholders  of the
Company,  and Charles  Underbrink,  a partner of St. James and a Director of the
Company. In addition,  St. James has guaranteed all of the Company's obligations
under the Loan Agreement,  subject to certain  limitations.  The guaranty of St.
James is  backed by a pledge  of  certain  securities  owned by it,  subject  to
certain  limitations.  Loans  under  the  Loan  Agreement  were  subject  to the
fulfillment of a number of closing  conditions and the accuracy of the Company's
representations and warranties in the Loan Agreement.

     By virtue of such guarantees, in the event of a default under the Company's
Loan  Agreement  with Coast,  Coast may seek to collect from St.  James  Capital
Partners, L.P. ("SJCP") and SJMB, L.L.C ("SJMB"), as well as Mr. Underbrink, the
outstanding  principal  and interest on the Company's  obligation to Coast,  and
such persons have advised the Company of their  willingness  and ability to meet
such  obligations.  Mr.  Underbrink's  liability is limited to no more than $5.0
million.  Such persons have further advised the Company of their willingness and


                                       8
<PAGE>

ability to support the Company's operations at least through January 2, 2001 and
in that connection have waived any default that may occur on indebtedness  owing
to them through April 12, 2000.  Without  material  improvement in the Company's
revenues, the Company may be substantially dependent upon the continuing support
of SJCP and SJMB during 2000 to fund its ongoing obligations.

     Fluctuations  in Levels of Prices for Oil and Natural Gas;  Recent Business
Environment.  The  business  environment  for the Company and its  corresponding
operating results are affected  significantly by petroleum industry  exploration
and production  expenditures.  These expenditures are influenced strongly by oil
company expectations about the supply and demand for oil and natural gas, energy
prices, and finding and development costs. Petroleum supply and demand, pricing,
and finding and development  costs, in turn, are influenced by numerous  factors
including,  but not limited to the extent of domestic  production,  the level of
imports of foreign  natural gas and oil, the general level of market demand on a
regional, national and worldwide basis, domestic and foreign economic conditions
that determine levels of industrial production,  political events in foreign oil
producing  regions,  and variations in governmental  regulations and tax laws or
the  imposition of new  governmental  requirements  upon the natural gas and oil
industry,  among  other  factors.  Prices for natural gas and oil are subject to
worldwide  fluctuation in response to relatively  minor changes in supply of and
demand for natural gas and oil,  market  uncertainty and a variety of additional
factors that are beyond the Company's control.

     Crude oil  prices  experienced  record low  levels in 1998,  trading  below
$15/bbl for most of the year and averaging  only  $14.41/bbl - the lowest yearly
average  recorded  since 1983 and down over 30 percent from  prior-year  levels.
Prices were lower due to increased supply from renewed Iraqi exports,  increased
OPEC and non-OPEC production, higher inventories (particularly in North America)
and a simultaneous  slowing of demand growth due to the Asian economic  downturn
and a generally  warmer than normal  winter.  U.S.  natural gas weakened in 1998
compared to the prior year periods,  also due to abnormally warm winter weather.
In response to lower oil prices which  continued  into 1999,  oil  companies cut
upstream capital spending, particularly in the second half of 1998.

     As a  consequence  of the  decline in levels of oil and  natural gas prices
throughout 1999 from levels  experienced in 1997 and 1996,  producers of oil and
natural gas  curtailed  their  utilization  of oil and natural gas well  service
activities.  Recent  increases  since mid-1999 in prices for oil and natural gas
have led  industry  analysts to believe  there will be a  resultant  increase in
demand for oil and natural gas well services. There can be no assurance that the
Company will experience any material  increase in the demand for and utilization
of its services.

     Material Charge to Operations  During 1998. In accordance with SFAS No. 121
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed Of, the Company  recognizes  impairment  losses on long-lived assets
used in operations when


                                       9

<PAGE>

indicators of impairment are present and the projected  undiscounted  cash flows
over the life of the assets are less than the  asset's  carrying  amount.  If an
impairment  exists,  the  amount  of such  impairment  is  calculated  based  on
projections of future discounted cash flows.  These projections are for a period
of five years using a discount  rate and terminal  value  multiple that would be
customary for evaluating current oil and gas service company transactions.

     The  Company   considers   external   factors  in  making  its  assessment.
Specifically,  changes in oil prices and other economic  conditions  surrounding
the industry,  consolidation within the industry, competition from other oil and
gas well  service  providers,  the  ability  to employ  and  maintain  a skilled
workforce,  and other  pertinent  factors are among the factors  that could lead
management  to reassess the  realizability  and/or  amortization  periods of its
goodwill.

     In 1998, the Company experienced a large decline in demand for its services
as a result of a large  decrease in the price of oil and natural gas, as well as
the  loss  of  a  major  customer.   Consequently,   management   evaluated  the
recoverability  of its long-lived  assets in relation to its business  segments.
The  analysis  was first  performed  on an  undiscounted  basis which  indicated
impairment  in  its  directional  drilling  segment.  The  impairment  was  then
calculated using  projections of discounted cash flows over five years utilizing
a discount rate and terminal  value multiple  commensurate  with current oil and
gas services company  transactions.  At December 31, 1998, the discount rate and
the terminal multiple used was 12% and 6.5,  respectively.  The assumptions used
in this analysis represent management's best estimate of future results.

     The analysis resulted in a charge to operations for the year ended December
31, 1998 of $11.1 million which consisted of a write-down of approximately  $8.1
million,  approximately $2.4 million, and approximately  $624,000,  to goodwill,
property, plant and equipment, and inventory, respectively.

     Substantial  Dilution;  Possible  Defaults on Obligations.  The Company has
outstanding as of February 29, 2000, common stock purchase warrants, options and
convertible securities entitled to purchase or be converted into an aggregate of
99,116,011  shares of the  Company's  Common  Stock at exercise  and  conversion
prices ranging from $0.75 to $8.01.  Accordingly,  if all such  securities  were
exercised  or  converted,  the  7,478,927  shares of  Common  Stock  issued  and
outstanding on February 29, 2000, would represent 7.0% of the shares outstanding
on a fully diluted basis.

     As of February 29, 2000, the Company's Certificate of Incorporation permits
it to issue up to 12,500,000  shares of Common Stock.  Accordingly,  the Company
has an insufficient  number of shares of Common Stock authorized for issuance in
the event all its  outstanding  warrants and options were  exercised in full and
convertible  securities  fully  converted.  The Company's loan  agreement  dated
February 18, 1999 with SJMB,  an affiliate  of SJCP,  provides  that the Company
shall, at or before its next annual meeting of shareholders, secure an amendment
to its  Certificate of  Incorporation  to increase the number of shares that the
Company


                                       10
<PAGE>

is authorized  to issue to a number  sufficient to authorize the issuance of its
current  outstanding  shares and all shares that are issuable upon conversion of
the  Company's  outstanding  shares  and  all  shares  that  are  issuable  upon
conversion of the Company's  outstanding  convertible  notes and exercise of any
warrants or options to purchase Common Stock.  Pursuant to this  provision,  the
Company  intends  to submit  to a vote of its  shareholders  at its next  annual
meeting a proposal to increase the number of shares of Common  Stock  authorized
to 150 million  shares.  Approval of this  amendment  will require the favorable
vote of the  holders of a  majority  of the  shares of Common  Stock  issued and
outstanding.  Management  believes  it  will  be able  to  obtain  the  required
shareholder approval.

     The failure of the  shareholders of the Company to approve the amendment of
the  Certificate  of  Incorporation  will  constitute a breach of the  Company's
agreement with SJMB and, if such default remains uncured for 45 days, constitute
an Event of Default under the  Company's  $2.5 million  promissory  note held by
SJMB.  Under  those  circumstances,  the  principal  of the note and all accrued
interest would become  automatically  immediately due and payable.  Such default
would also  constitute a default under all of the Company's  other  indebtedness
owing to SJCP and its affiliates,  aggregating  $20.9 million as of February 29,
2000,  as  well  as  a  default  under  the  Company's  borrowings  from  Coast.
Accordingly,  an aggregate of $38.7 million of the Company's  indebtedness would
be in default and would entitle the creditors to foreclose on substantially  all
of the Company's assets.

     Availability  of  Trained   Personnel.   The  operation  of  the  wireline,
directional  drilling and other oil and gas well service  equipment  utilized by
the Company requires the services of employees having the technical training and
experience  necessary to obtain the proper  operational  results.  The Company's
operations  are  to  a  considerable   extent   dependent  upon  the  continuing
availability of personnel with the necessary level of training and experience to
adequately  operate its  equipment.  In the event the Company  should suffer any
material loss of personnel to competitors  or be unable to employ  additional or
replacement  personnel  with the requisite  level of training and  experience to
adequately  operate its equipment its  operations  could be adversely  affected.
While the  Company  believes  that its wage rates are  competitive  and that its
relationship  with its  workforce is good, a  significant  increase in the wages
paid by other employers could result in a reduction in the Company's  workforce,
increases  in wage rates,  or both.  If either of these  events  occurred  for a
significant period of time, the Company's revenues could be impacted.

     Dependence  on  Major  Customers.  Historically,  a  large  portion  of the
Company's  revenues  has  been  generated  from a  relatively  small  number  of
companies.  During the year ended  December 31, 1999,  two customers  (Collins &
Ware, Inc. and Burlington  Resources)  accounted for approximately  21.0% of the
Company's revenues. A significant reduction in business done by the Company with
its  principal  customers,  if not  offset  by  revenues  from  new or  existing
customers,  could  have a material  adverse  effect on the  Company's  business,
results of operations and prospects.


                                       11
<PAGE>

     Substantial Control by Principal  Investor.  As of February 29, 2000, SJCP,
including certain of its affiliated entities and partners, collectively referred
to as ("St.  James")  held  promissory  notes of the  Company  convertible  into
26,866,667  shares of Common Stock and held  warrants to purchase an  additional
36,145,276  shares of Common Stock. Upon conversion of the notes and exercise of
the  warrants,   St.  James  would  hold  an  aggregate  of  63,011,943   shares
representing 89.4% of the Company's shares of Common Stock then outstanding.  In
addition, St. James has certain additional contractual rights which, among other
things,  give to St.  James the right to nominate one person for election to the
Company's  Board of Directors,  certain  preferential  rights to provide  future
financings for the Company, subject to certain exceptions,  prohibitions against
the  Company  consolidating,  merging or  entering  into a share  exchange  with
another person, with certain  exceptions,  without the consent of St. James. The
foregoing  give St. James the ability to exert  significant  influence  over the
business and affairs of the Company.  The  interests of St. James may not always
be the same as the interests of the Company's other securityholders.

     Competition.   The  wireline,   directional  drilling,  workover  and  well
servicing industry is a intensely competitive and cyclical business. A number of
large and small  contractors  provide  competition in all areas of the Company's
business. The wireline service trucks and other equipment used is mobile and can
be moved from one region to another in response to increased demand. Many of the
Company's  competitors have greater financial resources than the Company,  which
may  enable  them to  better  withstand  industry  downturns,  to  compete  more
effectively on the basis of price, and to acquire existing or new equipment.

     Operating  Hazards and  Uninsured  Risks.  The  Company's  oil and gas well
service  operations are subject to the many hazards  inherent in the oil and gas
drilling and production  industry.  These hazards can result in personal  injury
and loss of life,  severe damage to or  destruction  of property and  equipment,
pollution or  environmental  damage and  suspension of  operations.  The Company
maintains insurance protection as it deems appropriate. Such insurance coverage,
however,  may not in all  situations  provide  sufficient  funds to protect  the
Company from all liabilities that could result from its operations.

     Environmental   Risks.   The  Company  is  subject  to  numerous   domestic
governmental  regulations  that relate directly or indirectly to its operations,
including  certain  regulations  controlling the discharge of materials into the
environment,  requiring  removal and cleanup  under  certain  circumstances,  or
otherwise  relating to the protection of the  environment.  Laws and regulations
protecting the environment have become more stringent in recent years and may in
certain  circumstances impose "strict liability" and render a company liable for
environmental  damage  without regard to negligence or fault on the part of such
company.  Such laws and  regulations may expose the Company to liability for the
conduct of, or  conditions  caused by,  others,  or for acts of the Company that
were in compliance with all applicable laws at the time


                                       12
<PAGE>

such acts were performed.  The application of these requirements or the adoption
of new requirements could have a material adverse effect on the Company.

     Seasonality  and Weather  Risks.  The Company's  operations  are subject to
seasonal variations in weather conditions,  daylight hours and favorable weather
conditions for its off-shore wireline operations. Since the Company's activities
take place  outdoors,  the average number of hours worked per day, and therefore
the number of wells serviced per day, generally is less in winter months than in
summer months,  due to an increase in snow,  rain, fog and cold conditions and a
decrease in  daylight  hours.  Furthermore,  demand for the  Company's  wireline
services by oil and gas companies in the first  quarter is generally  lower than
at other times of the year. As a result,  the Company's revenue and gross profit
during the first quarter of each year are typically low as compared to the other
quarters.

     Dependence on Key Personnel.  The Company's success depends on, among other
things,  the continued active  participation  of William L. Jenkins,  President,
Allen R. Neel,  Executive  Vice-President,  Danny R.  Thornton,  Vice-President,
Wireline Operations, Alan W. Mann, Vice-President, Diamondback Directional, Gary
J.  Vaughn,  Vice-President,  Multi-Shot,  and  certain of the  Company's  other
officers  and key  operating  personnel.  The loss of the services of any one of
these persons could have a material  adverse effect on the Company.  The Company
has entered into  employment  agreements  with each of its  executive  officers,
including Messrs. Jenkins (through December 2001) and Thornton and Neel (through
April 1, 2003), and has purchased  "key-man" life insurance with respect to each
of such persons.

     Absence  of  Dividends.  The  Company  has not  declared  or paid  any cash
dividends  on  the  Common  Stock  and  currently   anticipates  that,  for  the
foreseeable  future,  any earnings will be retained for the  development  of the
Company's  business.  Accordingly,  no cash  dividends  are  contemplated  to be
declared or paid on the Common Stock. In addition,  the Company's  existing loan
agreements  prohibit the payment of cash  dividends.  See "Price Range of Common
Stock; Dividend Policy."

ITEM 2. PROPERTIES

     The  Company  leases  3,500  square  feet  of  office  space  in  Columbus,
Mississippi  for a  five-year  term  expiring  on  September  30,  2001  for its
executive  offices.  The  monthly  rental  is  $1,900,  plus  electric  and  gas
utilities.

     The  Company  also  maintains  an  approximately  787 square foot office in
Conroe, Texas used for executive offices.  These offices are leased for a rental
of $1,049 per month pursuant to a lease expiring October 1, 2000.


                                       13
<PAGE>

     The Company  maintains  District  Offices at 21  locations  throughout  its
service area and a manufacturing facility in Laurel, Mississippi.  The aggregate
annual rental for these  facilities is $522,000.  Of such  facilities  three are
owned by the Company  and the others are leased  with  rental  periods of from a
month-to-month  basis  to five  years.  The  Company  believes  that  all of the
facilities are adequate for its current requirements.

ITEM 3.  LEGAL PROCEEDINGS

     The Company and certain of its officers and Directors are respondents in an
arbitration  proceeding  commenced by Monetary Advancement  International,  Inc.
before the American Arbitration  Association in New York, New York. The claimant
seeks  recompense  against the Company and the other named  respondents  for the
alleged  failure  to pay  compensation  in the  form of  shares  of stock of the
Company for services  allegedly  rendered.  The  respondents  have  submitted an
answer and counterclaims and have initiated a Court proceeding seeking a partial
stay of the  arbitration  proceeding.  The Company deems the  allegations of the
claimant to be without merit and intends to vigorously contest the case.

     The Company is a defendant in a number of other legal  proceedings which it
considers to be routine  litigation  that is  incidental  to its  business.  The
Company does not expect to incur any material liability as a consequence of such
litigation.

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

     No matter was submitted  during the fourth quarter of the fiscal year ended
December 31,  1999,  to a vote of security  holders of the Company,  through the
solicitation of proxies, or otherwise.


                                       14
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

     The  Company's  Common Stock is quoted in the OTC Bulletin  Board under the
trading  symbol  BWWL.  The  following  table  sets forth the bid prices for the
Company's Common Stock for the periods indicated as provided by the OTC Bulletin
Board:

<TABLE>
<CAPTION>

                                                                      BID PRICES
                                                   ---------------------------------------------------
                             1998                           HIGH                      LOW
              ----------------------------------------------------------------------------------------
              <S>                                          <C>                       <C>
              First Quarter                                $8.00                     $5.88
              Second Quarter                               $9.34                     $5.00
              Third Quarter                                $5.75                     $2.38
              Fourth Quarter                               $2.69                     $0.88
</TABLE>

<TABLE>
<CAPTION>
                                                                       BID PRICES
                                                   ---------------------------------------------------
                              1999                           HIGH                      LOW
                ---------------------------------- ------------------------- -------------------------
                <S>                                        <C>                       <C>
                First Quarter                               $2.50                     $1.00
                Second Quarter                              $1.25                     $0.88
                Third Quarter                               $1.56                     $0.81
                Fourth Quarter                              $1.00                     $0.25
</TABLE>

<TABLE>
<CAPTION>
                                                                       BID PRICES
                                                   ---------------------------------------------------
                              2000                           HIGH                      LOW
                ---------------------------------- ------------------------- -------------------------
                <S>                                        <C>                       <C>
                First Quarter                               $0.88                     $0.38
</TABLE>

     The foregoing amounts represent inter-dealer  quotations without adjustment
for retail markups, markdowns or commissions, and do not represent the prices of
actual transactions. On March 30, 2000, the closing bid quotation for the Common
Stock, as reported by the OTC Bulletin Board, was $0.75.

     As of April 6, 2000,  the Company had  approximately  445  shareholders  of
record and  believes  it has in excess of 500  beneficial  holders of its Common
Stock.  The  Company  has never paid a cash  dividend  on its  Common  Stock and
management has no present intention of commencing to pay dividends.


                                       15
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

GENERAL

     The Company's results of operations are affected primarily by the extent of
utilization  and rates paid for its services and equipment.  The energy services
sector is completely dependent upon the upstream spending of the exploration and
production  side  of the  industry.  Much  of the  activity  increase  from  the
exploration  and production  side of the industry during the latter half of 1999
was in the area of  infield  recovery  of  properties  shut-in  as a  result  of
depressed commodity prices. These infield recovery efforts were those that would
provide the least capital expenditure, least risk of capital and would result in
a more rapid  improvement of cash flow streams due to higher commodity  pricing.
With the continued  increase of commodity prices and anticipated price stability
along with the Company's debt refinancing, the Company believes it is positioned
to  experience  an increase in demand for its  services due in large part to the
broad base of services offered. While the aforementioned factors are expected to
continue to increase the Company's revenues,  there can be no assurance that the
Company will experience any material  increase in the demand for and utilization
of its services.

         The following  table sets forth the  Company's  revenues from its three
principal  lines of business for each of the years ended December 31, 1999, 1998
and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                1999                      1998                      1997
------------------------------------- ------------------------- ------------------------- --------------------------
<S>                                           <C>                        <C>                       <C>
Wireline Services                             $ 17,727                   $11,592                   $ 9,513

Directional Drilling                            10,310                    21,311                     5,932
Workover and Completion                          1,256                     1,533                     1,618

                                      ------------------------- ------------------------- --------------------------
                                              $ 29,293                   $34,437                   $17,063
                                      ========================= ========================= ==========================
</TABLE>

TWELVE-MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998

     Revenues  decreased by $5.1 million or 14.9% to $29.3  million for the year
ended  December  31, 1999 as compared to revenues of $34.4  million for the year
ended December 31, 1998. Wireline services revenues increased by $6.1 million in
1999  primarily  because of the  acquisition  of Petro  Wireline,  the Company's
establishment  of an offshore  wireline  operation  and a new  onshore  wireline
facility at Minden, Louisiana and Corpus Christi, Texas. Directional


                                       16

<PAGE>

drilling  revenues  decreased as a  consequence  of the general level of oil and
natural gas well drilling activity which remained depressed for most of 1999.

     Operating  costs  decreased by $7.7 million for the year ended December 31,
1999, as compared to 1998.  This decrease was due primarily to a combination  of
the Company's  cost  reduction  program and the reduced demand for the Company's
services.  Salaries and benefits  decreased by $3.9 million for 1999 as compared
to  1998.  This  was due  primarily  to the  Company's  cost  reduction  program
implemented in 1998 and continuing through 1999. Operating costs as a percentage
of revenues  decreased to 77.8% in 1999 from 88.5% in 1998 primarily  because of
the cost reduction program implemented in 1998.

     Selling,  general and  administrative  expenses  decreased by approximately
$1.2 million from $7.5 million in 1998 to $6.3 million in 1999.  As a percentage
of revenues,  selling,  general and administrative expenses decreased from 21.6%
in 1998 to 21.4% in 1999,  primarily as a result of the revenue level  generated
in 1999 and the cost reduction program implemented in 1998.

     Depreciation and amortization  increased from $4.8 million in 1998, to $5.0
million  in 1999,  primarily  because of the  higher  asset base of  depreciable
properties in 1999 over 1998 due to the inclusion of a full year's  depreciation
on the  assets  associated  with the  Phoenix  and  Petro-Log  acquisitions  and
operations in Houma, Louisiana.

     In accordance with SFAS No. 121 Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to be  Disposed  Of, the  Company  recognizes
impairment  losses on long-lived  assets used in operations  when  indicators of
impairment  are  present  and the  undiscounted  cash flows over the life of the
assets are less than the asset's carrying amount. If an impairment  exists,  the
amount  of  such  impairment  is  calculated  based  on  projections  of  future
discounted cash flows.  These projections are for a period of five years using a
discount rate and terminal value multiple that would be customary for evaluating
current oil and gas service company transactions.

     The  Company   considers   external   factors  in  making  its  assessment.
Specifically,  changes in oil prices and other economic  conditions  surrounding
the industry,  consolidation within the industry, competition from other oil and
gas well  service  providers,  the  ability  to employ  and  maintain  a skilled
workforce,  and other  pertinent  factors are among the factors  that could lead
management  to reassess the  realizability  and/or  amortization  periods of its
goodwill.

     In 1998, the Company experienced a large decline in demand for its services
as a result of a large  decrease in the price of oil and natural gas, as well as
the  loss  of  a  major  customer.   Consequently,   management   evaluated  the
recoverability  of its long-lived  assets in relation to its business  segments.
The  analysis  was first  performed  on an  undiscounted  basis which  indicated
impairment  in  its  directional  drilling  segment.  The  impairment  was  then
calculated using


                                       17

<PAGE>

projections of discounted  cash flows over five years  utilizing a discount rate
and  terminal  value  multiple  commensurate  with  current oil and gas services
company  transactions.  At December 31, 1998, the discount rate and the terminal
multiple  used  was 12% and  6.5,  respectively.  The  assumptions  used in this
analysis represent management's best estimate of future results.

     The analysis resulted in a charge to operations for the year ended December
31, 1998 of $11.1 million which consisted of a write-down of approximately  $8.1
million,  approximately $2.4 million, and approximately  $624,000,  to goodwill,
property, plant and equipment, and inventory, respectively.


     Interest  expense  and  amortization  of debt  discount  increased  by $0.6
million for 1999 as compared to 1998. This was directly related to the increased
amounts of indebtedness  outstanding incurred to finance acquisitions  completed
in 1998.

     Net gain or loss on sale of fixed assets decreased in 1999 to a net loss of
$7,000 from a $155,000 net gain in 1998.  Other  income  increased by $45,000 in
1999.

     Income tax  benefit  was $0 million in 1999  compared  to $1.1  million for
1998.  The income tax  benefit  arises out of the  Company's  net losses for the
year. See "Note 10 of Notes to Consolidated Financial Statements."

     The Company's net loss for 1999 was $8.0  million.  The Company's  loss was
primarily  attributable  to declines in demand for the  Company's  services  and
equipment  utilization  which arose in 1998 and continued into the first half of
1999 resulting from the declines in prices for oil and natural gas.

LIQUIDITY AND CAPITAL RESOURCES

     Cash used in Company  operating  activities was $517,000 for the year ended
December 31, 1999 as compared to cash used in operating  activities  of $826,000
for the year ended December 31, 1998.  Investing  activities of the Company used
cash of $1.8 million during the year ended December 31, 1999 for the acquisition
of property,  plant and  equipment  and was offset by proceeds  from the sale of
fixed assets of $35,000.  During the year ended December 31, 1998,  acquisitions
of property,  plant and equipment and other businesses used cash of $6.5 million
offset  by  proceeds  of  $296,000  from  the sale of  fixed  assets.  Financing
activities provided cash of $6.9 million from the net proceeds from the issuance
of  convertible  notes and warrants and other  borrowings  during the year ended
December  31, 1999 offset by principal  payments on long-term  notes and capital
lease  obligations and loan origination  costs of $3.2 million.  During the year
ended December 31, 1998, the sale of convertible notes and warrants, the sale of
common stock and other  borrowings  resulted in proceeds of $10.4 million offset
by principal  payments on long-term debt and capital lease  obligations and loan
origination costs of $2.7 million.


                                       18

<PAGE>

     During the year ended December 31, 1999, the Company expended  $108,000 for
the acquisition of property,  plant and equipment  financed under capital leases
and notes payable. During the year ended December 31, 1998, the Company expended
$898,000 for the  acquisition  of property,  plant and equipment  financed under
capital  leases and notes  payable and incurred an  additional  $20.2 million of
notes payable in connection with the acquisition of businesses.

     During 1998 and 1999,  the Company  experienced a decline in the demand for
its products and services as a result of a significant  decrease in the price of
oil and natural gas.  The decline in demand  materially  impacted the  Company's
revenues,  liquidity and its ability to remain in compliance  with  covenants in
its loan  agreements  and meet its  obligations  during 1999.  Management of the
Company  believes that an  improvement  in its revenues will be dependent upon a
continuing  period of  improved  pricing  and  decisions  by oil and natural gas
producers  to  make   commitments   to  engage  in  oil  and  natural  gas  well
enhancements.

         The  Company's  outstanding   indebtedness  includes  primarily  senior
indebtedness aggregating approximately $18.9 million at December 31, 1999, other
indebtedness of approximately $3.6 million,  and $20.9 million owing to SJCP and
its affiliates.

Coast Business Credit Loan and Security Agreement

     On January 24, 2000, the Company entered into the Loan Agreement with Coast
pursuant  to which it is enabled to make  secured  borrowings  in the  aggregate
amount of up to the lesser of $25.0 million or such maximum  aggregate amount as
is  available  to be  borrowed  under a  receivables  loan  and two  term  loans
described  below. Of such amount,  $14.5 million,  based on the lesser of 75% of
the appraised net eligible forced  liquidation value of the Company's  equipment
or $14.5 million,  is a term loan (the  "Equipment  Loan"),  an additional  $2.0
million is a term loan (the "Installment Loan"), and the balance is available to
be borrowed in an amount not exceeding 80% of the Company's eligible receivables
(the "Receivables  Loan"). The Equipment Loan is repayable  commencing on August
30, 2000 in monthly  installments  over a term of six years,  with interest only
payable  monthly prior to August 1, 2000.  The Equipment  Loan further  requires
that the Company make additional monthly principal payments of 50% of its excess
cash flow during the preceding month during the period ending February 28, 2001,
and thereafter  additional  monthly principal payments of 40% of its excess cash
flow during the preceding month. Excess cash flow is defined to be the Company's
net income before income taxes,  depreciation  and  amortization  during a month
minus the sum of  principal  and interest  payments  made and taxes paid in cash
("EBITDA").  The Installment Loan is repayable in monthly installments over four
years  commencing March 31, 2000, and, after the Equipment Loan is paid in full,
is also repayable out of excess cash flow as provided above.  The Loan Agreement
ceases  to be in  effect on  February  28,  2003,  provided,  however,  the Loan
Agreement  will  automatically  renew for  additional  terms of one year  unless
either  party elects not to renew the term.  In the event the Loan  Agreement is
not renewed on February 28, 2003, or at the end of


                                       19
<PAGE>

any renewal term  thereafter,  all borrowings  then  outstanding  under the Loan
Agreement are then due and payable.

     On February 15, 2000,  the Company  borrowed an aggregate of $15.6  million
pursuant to the Loan  Agreement.  The proceeds  were used to repay the Company's
former  senior  secured  lender in the amount of $13.5  million,  to repay other
indebtedness  aggregating  $1.5  million,  and the  balance was used for general
corporate purposes, including the payment of outstanding accounts payable.

     The  Equipment  Loan and the  Installment  Loan bear  interest at the prime
rate, as defined,  plus 2% per annum, and the Receivables Loan bears interest at
the prime rate, as defined,  plus 1% per annum. The Company's  obligations under
the Loan Agreement are  collateralized by a senior lien and security interest in
substantially all of the Company's assets. Principal and interest under the Loan
Agreement has been  guaranteed,  subject to certain  limitations,  by St. James,
principal stockholders of the Company, and Charles Underbrink,  a partner of St.
James and a Director of the Company.  In addition,  St. James has guaranteed all
of the  Company's  obligations  under the Loan  Agreement,  subject  to  certain
limitations.  The  guaranty  of St.  James  is  backed  by a pledge  of  certain
securities  owned by it,  subject to certain  limitations.  Loans under the Loan
Agreement were subject to the fulfillment of a number of closing  conditions and
the  accuracy  of the  Company's  representations  and  warranties  in the  Loan
Agreement.

     By virtue of such guarantees, in the event of a default under the Company's
loan agreement with Coast, Coast may seek to collect from SJCP and SJMB, as well
as Mr.  Underbrink,  the  outstanding  principal  and interest on the  Company's
obligation  to  Coast,  and such  persons  have  advised  the  Company  of their
willingness and ability to meet such obligations.  Mr. Underbrink's liability is
limited to no more than $5.0  million.  Such persons  have  further  advised the
Company of their willingness and ability to support the Company's  operations at
least  through  January 2, 2001 and in that  connection  have waived any default
that may occur on  indebtedness  owing to them through  April 12, 2000.  Without
material improvement in the Company's revenues, the Company may be substantially
dependent upon the  continuing  support of SJCP and SJMB during 2000 to fund its
ongoing obligations.

     Based on the  guarantee  of the debt and the  willingness  and  ability  to
support the Company's  operations,  the Company's financial statements have been
prepared on a going concern  basis.  Absent this  guarantee  and support,  there
would be  substantial  doubt about the Company's  ability to continue as a going
concern.

     Events  of  default  under the Loan  Agreement  include  (i) any  warranty,
representation,  statement,  report  or  certificate  delivered  to Coast by the
Company being untrue or misleading,  (ii) the failure of the Company to pay when
due any loans under the Loan  Agreement or any other monetary  obligation  under
the Loan Agreement, (iii) the total of the Company's loans outstanding exceeding
the Company's maximum borrowing limit under the Loan Agreement,  (iv) the breach
of various  covenants and  obligations of the Company under the Loan  Agreement,
(v) the insolvency or business failure of the Company or the commencement of any
reorganization  or  bankruptcy  proceedings,  (vi) a change  of  control  of the
Company without Coast's  consent,  (vii) the inability of the Company to pay its
debts as they come due, and (viii)


                                       20
<PAGE>

certain  other  events.  Upon such an event of default,  Coast may cease  making
loans to the Company and accelerate the due date of all indebtedness outstanding
under the Loan Agreement.

     The  Company is  obligated  to fulfill  various  affirmative  and  negative
covenants  contained in the Loan Agreement.  The affirmative  covenants  include
requirements  to comply with various  financial  covenants,  maintain  insurance
coverage,  apply 30% of the proceeds  from the sale of equity  securities to the
repayment of principal of the term loans,  provide written reports to Coast, and
provide Coast with access to the collateral for the indebtedness.  The financial
covenants  require  the  Company to have a tangible  net worth as defined in the
Loan  Agreement of $5.0 million on the closing date under the Loan Agreement and
increasing  quarterly  thereafter  by 80% of the  Company's  net  income for the
quarter,  have  a debt  service  coverage  ratio  of  1.25  to  1.00  quarterly,
commencing  March 31, 2000,  and have actual  revenue and EBIDTA of no less than
80% of an amount  projected  by the  Company.  Negative  covenants  prohibit the
Company,  without Coast's consent,  from merging or  consolidating  with another
entity; acquiring assets, subject to certain exceptions; entering into any other
transaction  outside the ordinary course of business;  selling any assets except
in  the  ordinary  course  of  business;  restrictions  on  the  disposition  of
inventory; loaning money, subject to certain exceptions;  incurring indebtedness
outside the ordinary  course of business which has a material  adverse effect on
the Company; paying or declaring any dividend or making any other distributions;
or a change in the  Company's  capital  structure  that has a  material  adverse
effect on it.

     At the closing of its initial borrowings, the Company paid a loan fee of 2%
of the  maximum  amount  able to be  borrowed  under the Loan  Agreement  and is
obligated to pay an annual fee of 0.5% of such amount. In addition,  the Company
is  obligated  to pay a  facility  fee of  $15,000  each  quarter  and an unused
facility fee of 0.375% of the undrawn  portion of the maximum  amount able to be
borrowed.  In the event of the sale or transfer of substantially  all the assets
or  ownership  interests in the Company  prior to February  28,  2003,  Coast is
entitled  to a success  fee of  $250,000.  In the event  the Loan  Agreement  is
terminated by the Company prior to February 15, 2001, Coast is entitled to a fee
of $750,000 and of $500,000 thereafter,  provided,  if the termination occurs at
any time as a result of the sale of substantially  all the Company's assets or a
controlling interest in the Company and the indebtedness to Coast is repaid, the
fee will be $500,000.

     Private Sale of $7.0 Million of Notes and Warrants

     Commencing on December 17, 1999 and during the first  quarter of 2000,  the
Company sold $7.0 million principal amount of convertible  promissory notes (the
"Notes")  due on January 15, 2001 and  warrants  ("Warrants")  to purchase  28.7
million  shares of Common  Stock.  The Notes and Warrants  were  purchased by 47
"accredited  investors," (the "Purchasers") as defined in Regulation D under the
Securities  Act of 1933,  as amended.  Payment of principal  and interest on the
Notes is collateralized by substantially all the assets of the Company, subject,
however,  to the terms of a subordination  agreement  between the Purchasers and
Coast.  The Notes bear


                                       21
<PAGE>

interest at 10% per annum through  September 30, 2000 and thereafter at the rate
of 15% per annum and are convertible  into shares of the Company's  Common Stock
at a conversion price of $0.75 per share,  subject to  anti-dilution  adjustment
for certain issuances of securities by the Company at prices per share of Common
Stock  less  than the  conversion  price  then in  effect,  in which  event  the
conversion price is reduced to the lower price at which such shares were issued.
The  Warrants  are  exercisable  at a price  of  $0.75  per  share,  subject  to
anti-dilution  adjustment for certain  issuances of securities by the Company at
prices per share of Common Stock less than the exercise price then in effect, in
which  event the  exercise  price is  reduced  to the lower  price at which such
shares were issued and the number of shares  issuable  is adjusted  upward.  The
shares  issuable on  conversion  of the Notes and exercise of the Warrants  have
demand and piggy-back  registration rights under the Securities Act of 1933. The
Notes contain  various  affirmative  and negative  covenants,  including,  among
others,  a prohibition  against the Company  consolidating,  merging or entering
into a share exchange with another person, with certain exceptions,  without the
consent of the  Purchasers.  Events of default  under the Notes  include,  among
other  events,  (i) a default in the  payment of  principal  or  interest on the
Notes;  (ii) a default in the  performance  of any covenant of the Note Purchase
Agreement  or other  agreement  entered  into in  connection  therewith  and the
failure  to cure such  default;  (iii) any  representation  or  warranty  of the
Company  in the Note  Purchase  Agreement  or other  agreement  entered  into in
connection  therewith  being  untrue in any  material  respect and such  default
remains  uncured;  (iv)  the  Company  defaults  in the  payment  when due or by
acceleration  of any other  indebtedness  having an aggregate  principal  amount
outstanding  in excess of  $100,000  and such  default  remains  uncured;  (v) a
judgment  for the payment of money in excess of $100,000 is entered  against the
Company;   and  (vi)  the  commencement  of  certain  bankruptcy  or  insolvency
proceedings. If an event of default occurs, the Notes may become immediately due
and payable.

INFLATION

     The  Company's  revenues  have  been and are  expected  to  continue  to be
affected by fluctuations in the prices for oil and gas. Inflation did not have a
significant effect on the Company's operations in 1999.


                                       22

<PAGE>

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



     BLACK WARRIOR WIRELINE CORP.
     FINANCIAL STATEMENTS
     FOR THE YEARS ENDED DECEMBER 1999, 1998, 1997




     Consolidated  Financial  Statements of the Company meeting the requirements
of  Regulation  S-B are  filed on the  succeeding  pages of this  Item 7 of this
Annual Report on Form 10-KSB, as listed below:

         Report of Independent Accountants for the Years Ended
         December 31, 1999, 1998 and 1997................................... F-1

         Consolidated Balance Sheets as of
         December 31, 1999 and 1998......................................... F-2

         Consolidated Statements of Operations for the Years Ended
         December 31, 1999, 1998 and 1997................................... F-3

         Consolidated Statements of Stockholders' Equity (Deficit) for the
         Years Ended December 31, 1999, 1998 and 1997....................... F-4

         Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1999, 1998 and 1997................................... F-5

         Notes to Consolidated Financial Statements......................... F-6




                                       23




<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

The Stockholders and Board of Directors
Black Warrior Wireline Corp.
Columbus, Mississippi

In our  opinion,  the  accompanying  balance  sheets and related  statements  of
operations,  stockholders'  (deficit),  and cash flows  present  fairly,  in all
material  respects,  the financial position of Black Warrior Wireline Corp. (the
Company) at December 31, 1999 and 1998,  and the results of its  operations  and
its cash flows for each of the three  years in the  period  ended  December  31,
1999, in conformity with accounting  principles generally accepted in the United
States.  These  financial  statements  are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance  with auditing  standards  generally  accepted in the United  States,
which require that we plan and perform the audit to obtain reasonable  assurance
about whether the financial  statements  are free of material  misstatement.  An
audit includes examining,  on a test basis,  evidence supporting the amounts and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.

March 17,  2000,  except as to the first
paragraph  of Note 18,  which is as of
April 12, 2000




                                      F-1
<PAGE>

BLACK WARRIOR WIRELINE CORP.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                           1999             1998
                                                                                     ---------------  ---------------
<S>                                                                                  <C>               <C>
                                 ASSETS

Current assets:
    Cash and cash equivalents                                                           $ 2,425,808      $ 1,041,242
    Short-term investments                                                                   50,000           50,000
    Accounts receivable, less allowance of $1,006,068 and $2,157,421, respectively        4,971,251        3,596,004
    Prepaid expenses                                                                        175,268          110,579
    Other receivables                                                                       146,392          236,273
    Other current assets                                                                    526,884          498,812
                                                                                     ---------------  ---------------
        Total current assets                                                              8,295,603        5,532,910
Land and building, held for sale                                                            400,000          400,000
Inventories                                                                               4,285,206        4,278,601
Property, plant, and equipment, less accumulated depreciation                            19,457,361       22,628,601
Other assets                                                                                604,649          539,537
Goodwill, less accumulated amortization of $361,714 and $215,678, respectively            3,289,165        3,435,201
                                                                                     ---------------  ---------------
        Total assets                                                                   $ 36,331,984     $ 36,814,850
                                                                                     ===============  ===============

                      LIABILITIES AND STOCKHOLDERS' (DEFICIT)

Current liabilities:
    Accounts payable                                                                    $ 6,936,572      $ 5,964,266
    Accrued salaries and vacation                                                           249,296           91,275
    Accrued interest payable                                                              3,027,901        1,527,674
    Other accrued expenses                                                                  777,598          826,366
    Deferred revenue                                                                        100,000          155,016
    Notes payable to related parties                                                      3,041,234       20,662,890
    Current maturities of long-term debt and capital lease obligations                    8,391,346       18,923,719
                                                                                     ---------------  ---------------
        Total current liabilities                                                        22,523,947       48,151,206
Notes payable to related parties                                                         21,412,356
Long-term debt and capital lease obligations, less current maturities                    10,542,555
                                                                                     ---------------  ---------------
        Total liabilities                                                                54,478,858       48,151,206
                                                                                     ---------------  ---------------

Commitments and contingencies (Notes 6, 7, 14, 15, and 19)

Stockholders' (deficit):
    Preferred stock,  $.0005 par value,  2,500,000 shares authorized none issued
      at December 31, 1999

    Common stock,  $.0005 par value,  12,500,000  shares  authorized in 1999 and
      1998, respectively; 4,812,260 and 3,897,451 shares
      issued at December 31, 1999 and 1998, respectively                                      2,406            1,948
    Additional paid-in capital                                                           13,316,081       12,107,551
    Accumulated deficit                                                                 (30,881,968)     (22,862,462)
    Treasury stock, at cost, 4,620 shares at December 31, 1999 and 1998                    (583,393)        (583,393)
                                                                                     ---------------  ---------------
        Total stockholders' (deficit)                                                   (18,146,874)     (11,336,356)
                                                                                     ---------------  ---------------
        Total liabilities and stockholders' (deficit)                                  $ 36,331,984     $ 36,814,850
                                                                                     ===============  ===============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-2
<PAGE>


BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                   1999               1998              1997
                                                              ----------------  -----------------  ----------------
<S>                                                           <C>               <C>                <C>
Revenues                                                         $ 29,293,373      $  34,436,553      $ 17,062,542

Operating costs                                                    22,788,586         30,484,788        12,247,630

Selling, general, and administrative expenses                       6,258,365          7,453,547         2,191,785

Depreciation and amortization                                       5,008,078          4,815,955         1,442,635

Loss from impairment of goodwill, inventories,
    and property, plant, and equipment (Notes 2 and 20)                               11,100,000
                                                              ----------------  -----------------  ----------------
      Income (loss) from operations                                (4,761,656)       (19,417,737)        1,180,492

Interest expense and amortization of debt discount                 (3,484,999)        (2,867,575)         (609,430)

Net (loss) gain on sale of fixed assets                                (7,263)           154,986            25,584

Other income                                                          106,741             61,948            72,642
                                                              ----------------  -----------------  ----------------

      Income (loss) before provision (benefit) for income
        taxes                                                      (8,147,177)       (22,068,378)          669,288

Provision (benefit) for income taxes                                                  (1,051,698)          222,041
                                                              ----------------  -----------------  ----------------

      Income (loss) before extraordinary gain                      (8,147,177)       (21,016,680)          447,247

Extraordinary gain on extinguishment of debt, net of
    income taxes of $0 (see Note 13)                                  127,671
                                                              ----------------  -----------------  ----------------

      Net income (loss)                                          $ (8,019,506)     $ (21,016,680)      $   447,247
                                                              ================  ================== ================


    Net income (loss) per common share - basic                     $    (1.81)       $     (5.86)        $     .18
                                                              ================  ================== ================


    Net income (loss) per common share - diluted                   $    (1.81)       $     (5.86)        $     .14
                                                              ================  ================== ================

Weighted average common shares outstanding                          4,424,035          3,589,235         2,533,650
                                                              ================  ================== ================
Weighted average common shares outstanding
    with dilutive securities                                        4,424,035          3,589,235         3,759,756
                                                              ================  ================== ================
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>


BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                            COMMON
                                       COMMON STOCK                                          STOCK           TREASURY STOCK
                                  ------------------------    PAID-IN      ACCUMULATED       TO BE       -----------------------
                                    SHARES      PAR VALUE     CAPITAL        DEFICIT        ISSUED        SHARES       COST
                                  -----------   ----------  -------------  -------------  ------------   ---------  ------------
<S>                               <C>          <C>          <C>            <C>            <C>            <C>        <C>
Balance, December 31, 1996         2,185,216    $   1,093   $  5,133,087   $ (2,293,029)                   4,620   $  (583,393)

Shares issued in consider-
    ation for consulting
    services                          65,000           32        136,461

Shares issued for
    acquisitions                     672,538          336      2,239,664

Shares to be issued in
    connection with
    acquisition (133,333 shares)                                                           $  280,000

Issuance of warrants                                              69,550

Shares issued from exercise
    of warrants                       67,500           34        134,966

Stock option plan
    compensation expense                                          31,225

Net income for the year ended
    December 31, 1997                                                           447,247
                                  -----------   ----------  -------------  -------------  ------------   ---------  ------------
Balance, December 31, 1997         2,990,254        1,495      7,744,953     (1,845,782)      280,000       4,620      (583,393)

Shares issued in private
    placement                        596,000          298      3,035,268

Shares issued in private
    placement                        176,364           88        902,012

Shares issued in connection
    with prior year acquisition      133,333           66        279,934                     (280,000)

Shares issued from exercise of
    warrants                           1,500            1          2,999

Issuance of warrants                                             142,385

Net loss for the year ended
    December 31, 1998                                                       (21,016,680)
                                  -----------   ----------  -------------  -------------  ------------   ---------  ------------
Balance, December 31, 1998         3,897,451        1,948     12,107,551    (22,862,462)           --       4,620      (583,393)

Shares issued to individuals in
    settlement of potential
    litigation                       770,364          386        914,421

Shares issued in connection
    with acquisition                  94,445           47         64,884


Shares issued in connection
    with acquisition                  50,000           25         64,975

Issuance of warrants                                             164,250

Net loss for the year ended
    December 31, 1999                                                        (8,019,506)
                                  -----------   ----------  -------------  -------------  ------------   ---------  ------------
Balance, December 31, 1999         4,812,260    $   2,406   $ 13,316,081   $ (30,881,968)   $      --       4,620   $  (583,393)
                                  -----------   ----------  -------------  -------------  ------------   ---------  ------------
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>


BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                            1999          1998           1997
                                                                        ------------- -------------- --------------
<S>                                                                     <C>           <C>            <C>
Cash flows from operating activities:
    Net income (loss)                                                    $(8,019,506)  $(21,016,680)  $    447,247
    Adjustments to reconcile net income (loss) to net cash (used in)
      provided by operating activities:
        Depreciation                                                       4,850,772      4,398,762      1,308,214
        Amortization                                                         157,306        417,193        134,421
        Provision for doubtful accounts                                      255,595      2,279,922         96,359
        Recoveries of doubtful accounts                                     (942,391)
        Issuance of shares in consideration of claims released               914,807
        Net loss (gain) on disposition of property, plant, and equipment       7,263       (154,986)      (124,384)
        Loss on impairment of goodwill, inventories, and property,
           plant, and equipment                                                          11,100,000
        Compensation, consulting, and management expenses paid
           by issuance of common stock                                                                     167,725
        Extraordinary gain on extinguishment of debt                         127,671
        Deferred tax expense (benefit)                                                   (1,051,698)       185,245
        Other                                                                188,953
        Change in:
           Accounts receivable                                              (688,451)      (416,237)    (1,843,476)
           Inventories                                                        (6,605)        97,304
           Prepaid expenses                                                  (64,689)       174,006       (336,720)
           Other receivables                                                  89,881       (221,327)          (310)
           Other current assets                                              (28,072)       (18,497)      (148,313)
           Other assets                                                      253,131        331,133       (283,551)
           Accounts payable and accrued liabilities                        2,387,829      3,255,141      1,562,981
                                                                        ------------- -------------- --------------
               Cash (used in) provided by operating activities              (516,506)      (825,964)     1,165,438
                                                                        ------------- -------------- --------------
Cash flows from investing activities:

    Acquisitions of property, plant, and equipment                        (1,803,041)    (5,992,397)    (3,087,666)
    Proceeds from sale of property, plant, and equipment                      34,820        295,658         74,448
    Purchase of short-term investments                                                                     (50,000)
    Acquisitions of businesses, net of cash acquired                                       (533,224)      (697,224)
                                                                        ------------- -------------- --------------
               Cash used in investing activities                          (1,768,221)    (6,229,963)    (3,760,442)
                                                                        ------------- -------------- --------------
Cash flows from financing activities:

    Proceeds from bank and other borrowings                                6,921,955      3,697,054      2,515,303
    Proceeds (payments) from (on) working revolver, net                   (1,424,378)     2,769,856
    Debt issue costs                                                        (188,312)      (369,765)
    Proceeds from issuance of common stock, net                                           3,940,666        135,000
    Principal payments on long-term debt, notes payable, and
      capital lease obligations                                           (1,639,972)    (2,376,487)      (346,908)
                                                                        ------------- -------------- --------------
               Cash provided by financing activities                       3,669,293      7,661,324      2,303,395
                                                                        ------------- -------------- --------------
               Net increase (decrease) in cash and cash equivalents        1,384,566        605,397       (291,609)
Cash and cash equivalents, beginning of year                               1,041,242        435,845        727,454
                                                                        ------------- -------------- --------------
Cash and cash equivalents, end of year                                    $2,425,808    $ 1,041,242   $    435,845
                                                                        ============= ============== ==============
Supplemental disclosure of cash flow information:
 Cash paid during the year for:

      Interest                                                            $1,984,772    $ 1,559,296   $    419,555
                                                                        ============= ============== ==============
      Income taxes                                                        $       --    $        --   $    132,649
                                                                        ============= ============== ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-5
<PAGE>


BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                 1999            1998            1997
                                                                             -------------  ---------------  -------------
<S>                                                                          <C>            <C>              <C>
Supplemental schedule of noncash investing and financing activities:
    Land and building with basis of $400,000 exchanged for a $500,000 note                                     $  500,000
    Default on notes receivable relating to land and building sale (Note 2)                    $   500,000
    Acquisition of property, plant, and equipment financed under capital
      leases and notes payable                                                  $ 107,527      $   897,509     $1,528,347
    Notes payable incurred in connection with acquisitions of businesses                       $20,201,140     $9,148,449
    Borrowings to refinance existing debt                                                                      $4,500,000
    Stock warrants issued                                                       $ 164,250      $   142,383     $   69,550
    Acquisition of property, plant, and equipment through stock issuance        $ 129,859
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-6
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 1 - GENERAL INFORMATION

Black Warrior Wireline Corp. (the Company),  a Delaware  corporation,  is an oil
and gas service company currently providing various services to oil and gas well
operators  primarily in the Black  Warrior and  Mississippi  Salt Dome Basins in
Alabama and  Mississippi,  the Permian  Basin in West Texas and New Mexico,  the
East  Texas  and  Austin  Chalk  Basins in East  Texas,  the  Anadarko  Basin in
Oklahoma,  the  Powder  River and Green  River  Basins in Wyoming  and  Montana,
Williston  Basin in North Dakota,  and the Gulf of Mexico  offshore of Louisiana
and in South  Texas.  The  Company's  principal  lines of  business  include (a)
wireline services, (b) directional oil and gas well drilling activities, and (c)
workover  services.  Further  discussion on business segments is located in Note
17.

During the third  quarter of 1999,  the Company  merged Boone  Wireline Co., its
wholly-owned  subsidiary,  into Black Warrior  Wireline Corp. Boone Wireline Co.
was  subsequently  dissolved.  The dissolution had no effect on prior or current
year earnings or equity.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid  investments
with an original maturity of three months or less to be cash equivalents.

ACCOUNTS  RECEIVABLE - Included in accounts receivable are recoverable costs and
related  profits not billed,  which consist  primarily of revenue  recognized on
contracts  for which  billings had not been  presented  to the  contract  owners
because  the amounts  were not  billable  at the  balance  sheet date.  Unbilled
amounts included in accounts receivable totaled $492,550 and $48,000 at December
31, 1999 and 1998, respectively.

INVENTORIES  -  Inventories  consist  of  tool  components,  subassemblies,  and
expendable parts used in directional oil and gas well drilling activities. Tools
manufactured and assembled are transferred to property,  plant, and equipment as
completed at the total cost of components,  subassemblies,  and expendable parts
of each tool. Components, subassemblies, and expendable parts are capitalized as
inventory  and expensed as tools are repaired and  maintained.  Inventories  are
classified  as a long-term  asset rather than a current  asset as is  consistent
with industry practice (see Note 20).

LAND AND BUILDING, HELD FOR SALE - Land and building held for sale was stated at
the lower of cost or estimated net  realizable  value.  During 1997, the Company
exchanged  land  and  building  with a basis of  $400,000  for a  $500,000  note
receivable.  The Company did not  recognize the $100,000 gain as no down payment
was  received.  The $100,000  was  included in deferred  revenue at December 31,
1997.  During 1998, the buyer failed to pay the note  receivable  when it became
due.  Accordingly,  the  transaction has been reversed and the land and building
are recorded on the balance sheet at cost.

PROPERTY,  PLANT,  AND EQUIPMENT - Property,  plant,  and equipment is stated at
cost. The cost of  maintenance  and repairs is charged to expense when incurred;
the cost of  betterments  is  capitalized.  The cost of assets sold or otherwise
disposed  of and the  related  accumulated  depreciation  are  removed  from the
accounts  and  the  gain or loss on such  disposition  is  included  in  income.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful  lives of the assets  which range from two to ten years.  At December 31,
1999,  significantly all of the property,  plant, and equipment has been pledged
as collateral for the Company's borrowings (see Note 20).

                                      F-7
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


GOODWILL - Goodwill is stated at cost and is being  amortized on a straight-line
basis   principally   over   twenty-five   years.   The  Company   assesses  the
recoverability  and the  amortization  period of goodwill  not  identified  with
impaired  assets by  determining  whether  the amount can be  recovered  through
undiscounted cash flows of the businesses  acquired,  excluding interest expense
and  amortization,  over the remaining  amortization  period.  If impairment was
indicated by this  analysis,  measurement of the loss would be based on the fair
market value of the  businesses  acquired  calculated by  discounting  projected
future  cash flows.  The  projections  would be over a five year period  using a
discount rate and terminal value multiple  commensurate with current oil and gas
service companies.

The Company considers  external factors in making its assessment.  Specifically,
changes in oil and natural gas prices and other economic conditions  surrounding
the industry,  consolidation within the industry, competition from other oil and
gas well  service  providers,  the  ability  to employ  and  maintain  a skilled
workforce,  and other  pertinent  factors  are among the items  that  could lead
management  to reassess the  realizability  and/or  amortization  periods of its
goodwill (see Note 20).

LONG-LIVED  ASSETS  - In  accordance  with  SFAS  No.  121,  Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the
Company  recognizes  impairment  losses on long-lived  assets used in operations
when indicators of impairment are present and the  undiscounted  cash flows over
the  life of the  assets  are less  than  the  asset's  carrying  amount.  If an
impairment  exists,  the  amount  of such  impairment  is  calculated  based  on
projections of future discounted cash flows.  These projections are for a period
of five years using a discount  rate and terminal  value  multiple that would be
customary for evaluating current oil and gas service company transactions.

The Company considers  external factors in making its assessment.  Specifically,
changes in oil and natural gas prices and other economic conditions  surrounding
the industry,  consolidation within the industry, competition from other oil and
gas well  service  providers,  the  ability  to employ  and  maintain  a skilled
workforce,  and other  pertinent  factors  are among the items  that  could lead
management  to reassess the  realizability  and/or  amortization  periods of its
long-lived assets (see Note 20).

INCOME  TAXES - The  Company  accounts  for  income  taxes  under an  asset  and
liability  approach  that  requires the  recognition  of deferred tax assets and
liabilities  for the expected  future tax  consequences of events that have been
recognized in the Company's  financial  statements or tax returns. In estimating
future tax  consequences,  the Company  generally  considers all expected future
events other than enactments of changes in the tax laws or rates.

STOCK-BASED  COMPENSATION  - In accordance  with the provisions of SFAS No. 123,
Accounting for Stock-Based  Compensation,  the Company has chosen to continue to
apply the accounting provisions of Accounting Principles Board (APB) Opinion No.
25,  Accounting  for Stock  Issued to  Employees,  to its  stock-based  employee
compensation arrangements.

USE OF ESTIMATES - The  preparation of financial  statements in conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the amounts reported in
the financial  statements and  accompanying  notes.  Actual results could differ
from these estimates.

REVENUE  RECOGNITION  -  Revenues  are  recognized  at  the  time  services  are
performed.

                                      F-8
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


EARNINGS PER SHARE - In accordance  with SFAS No. 128,  Earnings per Share,  the
Company  presents basic and diluted  earnings per share (EPS) on the face of the
statement of operations and a reconciliation of the numerator and denominator of
the basic EPS  computation  to the numerator and  denominator of the diluted EPS
computation.

Basic EPS  excludes  dilution  and is computed by dividing  income  available to
common stockholders by the weighted-average  number of common shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if
securities or other  contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that shared in the
earnings of the entity.  The number of common stock  equivalents  is  determined
using the  treasury  stock  method.  Options  have a dilutive  effect  under the
treasury  stock  method only when the average  market  price of the common stock
during the period exceeds the exercise price of the options.

SEGMENT  REPORTING - In 1998, the Company  adopted SFAS 131,  Disclosures  about
Segments of an Enterprise and Related Information,  which establishes  standards
for the way that public business  enterprises report information about operating
segments in annual financial statements, and requires selected information about
operating  segments  in interim  financial  reports.  Financial  information  is
required  to be  reported on the basis that is used  internally  for  evaluating
segment  performance  and  deciding how to allocate  resources to segments.  The
financial  information  required  includes a measure of segment  profit or loss,
certain specific revenue and expense items, segment assets, and a reconciliation
of  each  category  to  the  general  financial   statements.   The  descriptive
information   required  includes  the  way  that  the  operating  segments  were
determined,  the  products  and  services  provided by the  operating  segments,
differences  between the measurements used in reporting segment  information and
those used in the  general  purpose  financial  statements,  and  changes in the
measurement of segment  amounts from period to period.  The adoption of SFAS No.
131 did not affect results of operations or financial  position,  but did affect
the disclosure of segment information (see Note 17).

NOTE 3 - ACQUISITIONS

On March 16, 1998, the Company  acquired from Phoenix  Drilling  Services,  Inc.
(Phoenix) the assets of its domestic oil and gas well  directional  drilling and
downhole  survey service  business  (Phoenix  Acquisition)  for  $19,000,000.  A
portion of the  purchase  price was  financed  with the proceeds of a $9,000,000
note bearing  interest at 9%. The remaining  purchase price was financed through
two additional notes, $9,000,000 and $1,000,000,  both of which bear interest at
8% (see Note 4). For financial statement  purposes,  the Phoenix Acquisition was
accounted for as a purchase and, accordingly,  Phoenix's results are included in
the  financial  statements  since  the date of  acquisition.  The  excess of the
purchase  price of Phoenix  over net  assets  acquired,  goodwill,  approximated
$2,760,000 and was being  amortized over  twenty-five  years.  During the fourth
quarter of 1998,  the Company  finalized its allocation of the purchase price of
Phoenix which resulted in an increase to goodwill of approximately $260,000. The
following  is  a  summary  of  assets   acquired,   liabilities   assumed,   and
consideration paid in connection with the acquisition:

<TABLE>

<S>                                                                       <C>
Fair value of assets acquired, including goodwill                             $ 20,219,422
Cash paid for assets acquired and transaction costs incurred                      (510,765)
                                                                           ----------------
           Liabilities assumed or debt incurred                               $ 19,708,657
                                                                           ================



</TABLE>

                                      F-9
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


During the fourth quarter of 1998, the Company  assessed the  recoverability  of
long-lived assets relating to the Phoenix acquisition. The Company concluded the
goodwill  and certain  inventories  and  property,  plant,  and  equipment  were
impaired (see Note 20).

On June 1, 1998, the Company acquired Petro Wireline,  Inc. (Petro Acquisition),
which is engaged in the  wireline  business  in the  four-corners  region of New
Mexico,  Colorado,  Utah, and Arizona,  for $875,000.  A portion of the purchase
price was financed with the proceeds of a $525,000  note that bears  interest at
9%. The Company  entered  into a  promissory  note with the former owner for the
remaining amount of the purchase price. The $350,000 note bears interest at 1.5%
above the prime rate for  commercial  loans adjusted as of the first day of each
month  during  the  term of the  note  (see  Note 4).  For  financial  statement
purposes,   the  Petro   Acquisition  was  accounted  for  as  a  purchase  and,
accordingly,  Petro Wireline's results are included in the financial  statements
since  the  date of  acquisition.  The  excess  of the  purchase  price of Petro
Wireline over net assets acquired,  goodwill,  approximated $87,000 and is being
amortized over twenty-five years.

<TABLE>

<S>                                                                        <C>
Fair value of assets acquired, including goodwill                                $ 966,091
Cash paid for assets acquired and transaction costs incurred                       (22,459)
                                                                           ----------------
           Liabilities assumed or debt incurred                                  $ 943,632
                                                                           ================

</TABLE>

The following  table presents  unaudited pro forma results of operations for the
years ended December 31, 1999 and 1998, as if the  acquisitions  had occurred at
the beginning of the years presented. The pro forma summary information does not
necessarily  reflect the results of operations as they actually  would have been
if the acquisitions had occurred at the beginning of the years presented.

<TABLE>
<CAPTION>
                                                          1999               1998
                                                      (UNAUDITED)         (UNAUDITED)
                                                     ----------------  ------------------
<S>                                                     <C>                <C>
Revenues                                                $ 29,293,373       $  38,688,771
                                                     ================   =================

Loss before benefit for income taxes                    $ (8,147,177)      $ (22,259,312)
                                                     ================   =================
Net loss                                                $ (8,019,506)      $ (21,278,034)
                                                     ================   =================
Net loss per common share - basic                       $      (1.81)      $       (5.72)
                                                     ================   =================
Net loss per common share - diluted                     $      (1.81)      $       (5.72)
                                                     ================   =================
</TABLE>

The unaudited pro forma results  include the historical  accounts of the Company
and historical  accounts of the acquired  businesses and pro forma  adjustments,
including the  amortization  of the excess purchase price over the fair value of
the net assets  acquired,  the  increase  in  interest  expense  resulting  from
borrowings  used to finance the  acquisitions,  and the increase and decrease in
depreciation expense as a result of purchase price adjustments.


                                      F-10
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 4 - RELATED PARTY TRANSACTIONS

During 1997, the Company acquired substantially all of the assets and certain of
the liabilities of Diamondback  Directional Drilling,  Inc. (DDI). In connection
with the acquisition, the Company issued debt of approximately $3,200,000 to the
former  owners  of  DDI.  The two  majority  stockholders  (85%)  of DDI are now
employees of the Company and one is an officer and director of the Company.  The
notes bear  interest at 6.5% and are due August 1999,  with  quarterly  interest
payments due beginning in January 1998.  Interest payments were made in December
1999 for all accrued interest through that date (see Note 19 for the description
of the restructuring of this debt).

During 1997, the Company completed the acquisitions of Production Well Services,
Inc.  (PWS) and  Petro-Log,  Inc.  (Petro-Log).  In connection  with the PWS and
Petro-Log acquisitions,  the Company borrowed approximately  $7,900,000 from St.
James Capital Partners, L.P. (SJCP), whose chief executive officer and president
both  serve  on the  Company's  Board  of  Directors.  Of the  amount  borrowed,
$4,900,000  remained  outstanding  at December 31,  1999. A note for  $2,900,000
bearing  interest at 7% with the principal and interest  originally  due October
1999 extended to March 2001 in connection with the refinancing plan described in
Notes 6 and 19 remained  outstanding as of December 31, 1999.  Accrued  interest
payable on this  borrowing  totaled  approximately  $455,000  and $250,000 as of
December 31, 1999 and 1998,  respectively.  The other note for $2,000,000  bears
interest at 9% with the principal and interest due June 2002.  Accrued  interest
payable on this  borrowing  totaled  approximately  $477,000  and $283,000 as of
December 31, 1999 and 1998, respectively.

In connection with the Phoenix Acquisition, the Company borrowed $9,000,000 from
St. James Merchant  Bankers,  L.P.  (SJMB) and $1,000,000  from Falcon  Seaboard
Investment  Co., L.P.  (Falcon  Seaboard),  both affiliated with SJCP. The notes
bear interest at 8% with the  principal and interest due in March 2001.  Accrued
interest payable on this borrowing totaled approximately $1,500,000 and $688,000
as of December 31, 1999 and 1998, respectively.

The Company borrowed $2,000,000 from SJMB pursuant to an agreement dated October
30, 1998.  This note bears  interest at 10% with the  principal and interest due
March 16, 2001. Accrued interest payable on this borrowing totaled approximately
$243,000 and $45,000 as of December 31, 1999 and 1998, respectively.

The  Company  borrowed  $2,500,000  from SJMB  pursuant  to an  agreement  dated
February 18, 1999.  This note bears  interest at 10% with principal and interest
due  March  16,  2001.  Accrued  interest  payable  on  this  borrowing  totaled
approximately $221,000 as of December 31, 1999.

The Company  borrowed an  additional  $750,000  from SJMB and $800,000  from two
directors  of SJMB in  connection  with  its  December  1999  debt  issuance  of
$3,500,000  pursuant to an agreement  dated December 17, 1999.  These notes bear
interest at 10% with principal and interest due January 15, 2001.

At December  31,  1999 and 1998,  the  Company  has a mortgage  note  payable of
$230,000,  to the former  owner of Dyna Jet, an employee of the Company  through
November 1998 (see Note 6).

In connection with the Petro Acquisition,  the Company has a $175,000 promissory
note to a limited partnership partially owned by a person who is now an employee
of the  Company.  The note  bears  interest  at 1.5%  above the  prime  rate for
commercial  loans  adjusted as of the first day of each month during the term of
the note. Principal of $116,667 and accrued interest to date are due and payable
each June until


                                      F-11
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


June 1, 2001.  At December 31, 1999 and 1998,  the Company had accrued  interest
payable of  approximately  $56,000 and $21,000,  respectively,  relating to this
note.  At  December  31, 1999 and 1998,  the Company had a remaining  accrual of
approximately   $21,000  relating  to  the  Company's   commitment  to  pay  the
president's  tax liability  resulting from  previously  issued common stock as a
bonus.

At December 31, 1999, SJMB held a significant  ownership interest in Collins and
Ware, Inc., which is a customer of the Company.  Sales to Collins and Ware, Inc.
during 1999 were $2,955,918.

At December  31, 1999 and 1998 the Company was in default with SJCP,  SJMB,  and
Falcon Seaboard based on cross default provisions in the agreements.  During the
first  quarter  of 2000,  the  Company  executed  a  refinancing  plan,  as more
completely  described  in  Notes  6 and  19.  As a  result  of  this  plan,  the
outstanding  debt at December 31, 1999 has been  classified on the balance sheet
in accordance with the maturity terms of the new indebtedness. All notes payable
and accrued  interest to related  parties have been classified as current on the
balance  sheet as of December 31,  1998.  The Company was also in default on the
notes payable relating to the DDI acquisition (see Note 6).

During the year ended December 31, 1998, the Company paid approximately $902,000
to SJCP for consulting fees.

See Notes 6 and 8 for financing  arrangements and common stock transactions with
related parties.

NOTE 5 - PROPERTY, PLANT, AND EQUIPMENT

Property,  plant, and equipment  includes the following at December 31, 1999 and
1998:

<TABLE>
<CAPTION>

                                                             1999              1998
                                                        ----------------  ----------------
<S>                                                     <C>              <C>
Vehicles                                                   $  8,672,351      $  7,875,896
Land and building                                               245,000           245,000
Workover rigs and related equipment                             438,155           686,317
Operating equipment                                          23,336,048        22,270,613
Office equipment                                                576,648           537,668
                                                        ----------------  ----------------
                                                             33,268,202        31,615,494
Less accumulated depreciation                                13,810,841         8,986,893
                                                        ----------------  ----------------

Net property, plant, and equipment                         $ 19,457,361      $ 22,628,601
                                                        ================  ================
</TABLE>

Depreciation  expense for the years ended December 31, 1999,  1998, and 1997 was
$4,850,772, $4,398,762, and $1,308,214, respectively.

                                      F-12
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The  following is a summary of the  equipment  under  capital  leases  (included
above) at December 31, 1999 and 1998:

<TABLE>
<CAPTION>

                                                           1999              1998
                                                      ----------------  ----------------
<S>                                                   <C>               <C>
Workover rigs and related equipment                         $ 158,909        $  158,909
Vehicles                                                      257,508           257,508
                                                      ----------------  ----------------
                                                              416,417           416,417
Less accumulated depreciation                                 170,248            74,496
                                                      ----------------  ----------------
      Net equipment under capital lease                     $ 246,169        $  341,921
                                                      ================  ================

</TABLE>

NOTE 6 - LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

At December 31, 1999 and 1998,  long-term debt and other financing  arrangements
consisted of the following:

<TABLE>
<CAPTION>
                                                                                          1999             1998
                                                                                     ---------------   --------------
<S>                                                                                  <C>               <C>
Notes payable to Trustmark Bank, monthly payments in varying amounts
 through January 2004, including interest ranging from 7.75% to 8.75%.                 $     91,371      $        --

Installment notes payable, monthly payments required in varying amounts
 through November 2003, interest at rates ranging from 5.9% to 12.54%.                    1,708,658        1,302,669

Capitalized leases, monthly payments required in varying amounts through
July 2001, including interest ranging from 5.0% to 6.25%.                                   173,065          243,156

Notes payable to General Electric Capital Corporation, monthly payments
required in varying amounts through January 2003, interest at 8.75%.                      4,383,546        4,577,904

Notes payable to Fleet Capital Corporation, monthly payments required in
varying amounts through March 2002, interest rates ranging from 8.75% to 9.0%.           10,707,211       12,799,990

10% convertible note payable to various individuals.  Principal and
interest due January 2001.  Convertible at $0.75 per share at anytime up
to 30 business days following maturity.                                                   1,950,000               --
                                                                                     ---------------   --------------
                                                                                         19,013,851       18,923,719
      Less:
        Current portion of long-term debt (see below)                                     8,391,346       18,923,719
        Unamortized discount on long-term debt                                               79,950               --
                                                                                     ---------------   --------------

      Long-term debt and capital lease obligations, less current maturities            $ 10,542,555      $        --
                                                                                     ===============   ==============
</TABLE>

                                      F-13
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


Notes payable to related  parties  consist of the following at December 31, 1999
and 1998:

<TABLE>
<CAPTION>
                                                                                        1999             1998
                                                                                   ---------------  ---------------
<S>                                                                                <C>              <C>

Note payables to former owner of DDI,  principal  due August 1999,  interest due
quarterly at 6.5% (see description below regarding extension of
maturity date)                                                                        $ 3,182,890      $ 3,182,890

7% convertible note payable to SJCP, principal and interest due October 1999.
Convertible at $0.75 per share at any time up to 30 business days following
maturity (see description below regarding extension of maturity date).                  2,900,000        2,900,000

9% convertible note payable to SJCP, principal and interest due June 2002.
Convertible at $0.75 per share at any time up to 30 business days following
maturity (see description below regarding extension of maturity date).                  2,000,000        2,000,000

Promissory  note payable to the former owners of Petro  Wireline,  Inc., due and
payable each year in 1/3 increments starting in June 1999, including interest of
1.5% above the prime rate for commercial loans adjusted first
day of every month.                                                                       175,000          350,000

8% convertible note payable to SJMB, principal and interest due March 2001.
Convertible at $0.75 per share at anytime up to 30 business days following
maturity (see description below regarding extension of maturity date).                  9,000,000        9,000,000

8% convertible note payable to Falcon Seaboard, principal and interest due March
2001.  Convertible  at  $0.75  per  share  at any  time up to 30  business  days
following maturity (see description below regarding
extension of maturity date).                                                            1,000,000        1,000,000

10% convertible note payable to SJMB, principal and interest due March 2001.
Convertible at $0.75 per share at anytime up to 30 business days following
maturity (see description below regarding extension of maturity date).                  2,000,000        2,000,000

10% convertible note payable to SJMB, principal and interest due March 2001.
Convertible at $0.75 per share at anytime up to 30 business days following
maturity (see description below regarding extension of maturity date).                  2,500,000               --

10% convertible  note payable to SJMB,  principal and interest due January 2001.
Convertible  at $0.75 per share at  anytime  up to 30  business  days  following
maturity (see description below regarding extension of
maturity date).                                                                           750,000               --

10% convertible note payable to directors of SJMB, principal and interest due
January 2001.  Convertible at $0.75 per share at anytime up to 30 business days
following maturity (see description below regarding extension of                          800,000               --
maturity date).

Note payable to former owner of Dyna Jet, Inc. due and payable in November
2002 with interest at the rate of the lesser of $1,500 per month or 8% per
annum on unpaid balance.                                                                  230,000          230,000
                                                                                   ---------------  ---------------
                                                                                       24,537,890       20,662,890
      Less:
      Current portion of notes payable to related parties (see below)                   3,041,234       20,662,890
      Unamortized discount on notes payable                                                84,300               --
                                                                                   ---------------  ---------------

      Total long-term notes payable to related parties                                $21,412,356      $        --
                                                                                   ===============   ==============
</TABLE>


                                      F-14
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


Substantially  all of the  Company's  assets are pledged as  collateral  for the
various debts described above.

A certificate  of deposit in the amount of $50,000 was pledged as collateral for
the Company's  corporate credit card line of credit of  approximately  $100,000.
There  were no  outstanding  borrowings  under  the  corporate  credit  cards at
December 31, 1999 and 1998.

Under the terms of the SJCP notes  payable,  SJCP,  among other things,  has the
right to nominate  one person for election to the  Company's  board of directors
and has  certain  preferential  rights to  provide  future  financing.  The note
agreement also contains prohibitions against consolidating, merging, or entering
into a share exchange with another person without SJCP's consent.

On October 30, 1998,  the Company  amended the agreements for the $2,900,000 and
$2,000,000  convertible  promissory  notes with SJCP.  The notes were amended to
include  anti-dilution  provisions  that if the Company  issues  equity  shares,
warrants,  or options  with a per share  price or  exercise  price less than the
original  conversion  prices on the notes,  the  conversion  prices on the notes
shall be adjusted  to equal the price at which the  shares,  options or warrants
were  issued.  During 1999,  the  exercise  price on these notes was adjusted to
$0.75 due to the anti-dilution provisions being triggered.

During 1998,  the due date of the $230,000  mortgage  note payable to the former
owner of Dyna Jet, Inc. was changed from August 1998 to November 2002.

At December 31, 1999 and 1998,  the Company was not in  compliance  with certain
general and financial  covenants of its loan and security  agreement with Fleet.
Under the terms of the loan agreement, the breach of these covenants constitutes
events of default and, at the option of Fleet, the obligations of the Company to
Fleet are subject to being declared by Fleet to be immediately  due and payable.
At December  31,  1999 and 1998,  the Company was unable to obtain any waiver of
covenant  violations from Fleet. Due to the  indebtedness  being callable at the
discretion of Fleet and normal cross default  provisions of all other debt,  all
of the Company's debt at December 31, 1999 is currently due and payable.  During
the first quarter of 2000, the Company executed a refinancing plan. As a part of
the  refinancing  plan, the Company  entered into a loan and security  agreement
with Coast  Business  Credit  ("Coast") in the amount of  $25,000,000,  obtained
private financing of $3,500,000,  and executed a compromise agreement of release
with the former owner of DDI which provided for $2,000,000 conversion of debt to
equity. The proceeds of these transactions, as more completely described in Note
19, were used to satisfy the Company's obligations to its senior secured lenders
in the amount of $13,500,000 and other indebtedness aggregating $1,500,000.

In connection with the refinancing  plan, which is more completely  described in
Note 19, the related party debt holders  signed  subordination  agreements  with
respect to the new indebtedness.  These  subordination  agreements  preclude the
repayment of this debt prior to the repayment of the new  indebtedness  which is
due to be repaid during 2001.

As a result of the  refinancing,  all  obligations  currently due and payable at
December  31,  1999,  pursuant  to the events of default  and cross  defaults as
discussed in the preceding  paragraph,  were fully satisfied.  Accordingly,  the
Company has classified its long-term debt as current and long-term  based on the
debt  maturity  schedules of the new  indebtedness.  The  remaining  outstanding
indebtedness  to the  former  owner  of DDI,  subsequent  to the  conversion  of
$2,000,000  of debt to equity,  has been  classified as current as no waiver for
previous defaults were obtained.


                                      F-15
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The loan and security agreement calls for the subordination of all notes payable
to related parties to the Coast  borrowings.  Agreements  guaranteeing the Coast
borrowings  have been signed by SJMB,  SJCP and the general  partner of SJMB and
SJCP.

Maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
             FISCAL
             YEAR
             ------
             <S>                                        <C>
             2000                                       $ 11,432,580
             2001                                         10,058,654
             2002                                         22,060,507
             2003                                                 --
             2004                                                 --
             Thereafter                                           --
                                                     ---------------
                                                        $ 43,551,741
                                                     ===============
</TABLE>


NOTE 7 - COMMITMENTS

The Company leases land,  office space,  and equipment  under various  operating
leases.  The leases  generally  are for terms of five  years and do not  contain
purchase  options.  Rent expense was  approximately  $1,099,000,  $922,000,  and
$558,000 for the years ended December 31, 1999, 1998, and 1997, respectively.

The future minimum lease payments required under noncancelable  operating leases
with initial or  remaining  terms of one or more years at December 31, 1999 were
as follows:

<TABLE>
               <S>                                      <C>
               2000                                     $   442,015
               2001                                         182,225
               2002                                          57,071
               2003                                          12,665
               2004                                          10,554
               Thereafter                                        --
                                                   ----------------
                                                        $   704,530
                                                   ================
</TABLE>


NOTE 8 - COMMON STOCK TRANSACTIONS

In March 1998, the Company sold in a private  placement 596,000 shares of common
stock at a purchase price of $5.50 per share. The proceeds of $3,035,268, net of
issue costs,  were used to fund a portion of the purchase price and related fees
of the Phoenix Acquisition.


                                      F-16
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


In April 1998,  the Company sold in a private  placement an  additional  176,364
shares of common stock at a purchase  price of $5.50 per share.  The proceeds of
$902,012, net of issue costs, were used to pay consulting fees of SJCP.

Pursuant to an agreement dated December 15, 1998, which was amended on April 15,
1999,  through  September 30, 1999,  the Company issued 144,445 shares of common
stock to Measurement  Specialists Inc. ("MSI").  The securities have been issued
in reliance upon Regulation D under the Securities Act of 1933, as amended.  The
securities  were  issued  in  connection  with an option  granted  by MSI to the
Company to acquire the assets of MSI. The Company  completed the  acquisition of
MSI, as more fully described in Note 19, during the first quarter of 2000.

Commencing  in April 1999,  the Company  offered to the  subscribers  in private
sales of the  Company's  securities  which  occurred in March and April 1998 the
right to receive one  additional  share of the  Company's  common stock for each
share purchased in the private sale. In exchange,  the subscribers were asked to
release the Company from all claims arising out of subscribers' allegations that
the Company breached its agreement to register under the Securities Act of 1933,
as amended (the "Securities  Act"), the public offer and sale of the shares sold
to the  subscribers  in 1998.  Subscribers  alleged  that  they  were  unable to
liquidate their shares  purchased as they had expected  because of the breach of
this agreement.  The Company  disputed the claim on the basis that it had timely
filed a  registration  statement  relating to the shares in accordance  with the
terms of the agreement.  The registration  statement remains on file but has not
been declared  effective under the Securities Act. The Company made the offer to
subscribers in order to resolve the matter.  The offering  terminated on May 28,
1999.  Accordingly,  during the third quarter, the company issued 770,364 shares
of common stock to the  subscribers in  consideration  of their release of their
claims.  Two  subscribers  who had purchased an aggregate of 2,000 shares in the
1998 private  placements did not accept the offer.  Management is of the opinion
that if claims are presented by these  shareholders,  there would be no material
impact on the Company. No underwriter participated in the sale of the securities
and no compensation was paid to any person in connection with the soliciting the
issuance of the shares.  The shares of common stock were issued in reliance upon
the exemption from  registration  requirements of the Securities Act afforded by
Section 4(2) and Regulation D thereunder.

Issuance of common stock for the  settlement of  liabilities  of the Company are
set forth below.  Since the market value of the Company's  stock was not readily
available,  the per share amounts for these transactions have been determined by
the Company's Board of Directors based on the Company's  consolidated  financial
results,  business developments,  common stock transfer restrictions,  number of
shares issued and other factors which would influence the fair value at the date
of Board approval.

<TABLE>
<CAPTION>

                                                                                                         AMOUNT
    MONTH OF          MONTH OF                                                                        RECORDED TO
     BOARD            ISSUANCE/                                             NUMBER       AMOUNT      STOCKHOLDERS'
    APPROVAL          PURCHASE                  DESCRIPTION               OF SHARES     PER SHARE        EQUITY
-----------------  ----------------  -----------------------------------  -----------   ----------   ---------------
<S>                <C>               <C>                                  <C>           <C>          <C>
May 1997           May 1997          Issuance to individuals in
                                     satisfaction of consulting fees          65,000      $  2.10        $  136,493
June 1999          June 1999         Issuance to individuals in
                                     settlement of potential litigation      770,365      $  1.19        $  914,421
</TABLE>


                                      F-17
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


As of December 31, 1999, the Company's  certificate of incorporation  permits it
to issue up to 12,500,0000 shares of common stock of which 4,812,260 shares were
issued and  outstanding.  The Company has  outstanding  as of December  31, 1999
common stock purchase warrants, options and convertible debt securities entitled
to  purchase or be  converted  into an  aggregate  of  84,286,806  shares of the
Company's  common stock at exercise and conversion  prices ranging from $0.75 to
$8.01.  Accordingly,  the Company has an insufficient number of shares of common
stock  authorized  for  issuance in the event all its  outstanding  warrants and
options were exercised and convertible  securities  were converted.  The Company
shall at or before its next annual meeting of  shareholders  secure an amendment
to its  certificate of  incorporation  to increase the number of shares that the
Company is authorized  to issue to  150,000,000  shares.  Such  amendment  would
provide  for  sufficient  authorization  of shares  in the  event the  warrants,
options and  convertible  securities  were exercised and converted.  The Company
intends to submit the proposed  amendment to a vote of its  shareholders  at its
next annual meeting.  Approval of this amendment will require the favorable vote
of the  holders  of the  majority  of the  shares of  common  stock  issued  and
outstanding.  Management  believes they will be able to obtain  approval of this
amendment.

The failure of the  shareholders  of the Company to approve the amendment of the
certificate of incorporation will result in an event of default on substantially
all the Company's outstanding notes for related parties. If such default remains
incurred for 45 days, all such debt would become immediately due and payable.

NOTE 9 - STOCK WARRANTS

During 1999,  the Company  issued  warrants to purchase  shares of the Company's
common stock with the  issuance of certain debt (see Note 6). The warrants  gave
the  holders  the  right to  purchase  up to  1,075,000  shares  at  $1.50,  and
14,350,000  shares at $0.75.  The 1,075,000  warrants  expire  February 18, 2004
while the 14,350,000 warrants expire December 31, 2004.

During 1998,  the Company  issued  warrants to purchase  shares of the Company's
common stock with the  issuance of certain debt (see Note 6). The warrants  gave
the holders the right to purchase  up to  2,000,000  shares at $5.50,  1,333,333
shares at $2.25,  and 47,680 shares at $6.05.  The 2,000,000 and 47,680 warrants
expire in March 2003 while the 1,333,333 warrants expire in October 2003.

During 1997,  the Company  issued  warrants to purchase  shares of the Company's
common stock in  connection  with the issuance of certain debt (see Note 6). The
warrants  give the holder  the right to  purchase  up to  666,000  shares of the
Company's stock at $2.75 per share through May 1998,  $3.25 through May 1999 and
$3.75  thereafter and through  maturity of the debt, and 725,000 shares at $4.63
per share.  The 666,000  warrants expire in June 2002 while the 725,000 warrants
expire in October 2002.

                                      F-18
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The warrants  issued  during 1999,  1998 and 1997 are subject to "Full  Ratchet"
anti-dilution provisions. In December of 1999, the Company issued the 14,350,000
warrants  at  an  exercise  price  of  $0.75.  Consequently,  the  anti-dilution
provisions on all warrants  subject to the provision were  triggered.  Upon each
adjustment of the exercise price,  the holder of the warrant shall thereafter be
entitled to purchase,  at the exercise price resulting from the adjustment,  the
number of shares of common stock obtained by  multiplying  the exercise price in
effect  immediately prior to the adjustment by the number of shares  purchasable
prior to the adjustment  and dividing the product  thereof by the exercise price
resulting from the adjustment.  The following table summarizes information about
warrants outstanding at December 31, 1999:

<TABLE>
<CAPTION>

                                                                                                                 EXERCISE
                                            BALANCE         1999      ANTI-DILUTION    1999        BALANCE       PRICE AT
                                            12/31/98      ISSUANCE     ISSUANCE     EXERCISED     12/31/99       12/31/99
                                           -----------   -----------  ------------  -----------  ------------  -------------
<S>                                        <C>           <C>          <C>           <C>          <C>            <C>
Debt conversion ($2.00 - expires 9/30/01)     234,750                                                234,750          $2.00
SJCP ($2.75 - expires 6/5/02)                 814,000                   1,628,000                  2,442,000          $0.75
SJCP ($4.6327 - expires 10/10/02)           1,492,759                   2,985,518                  4,478,277          $0.75
SJMB ($6.75 - expires 3/16/03)              5,400,000                  10,800,000                 16,200,000          $0.75
SJMB ($2.25 - expires 10/30/03)             1,333,333                   2,666,666                  3,999,999          $0.75
SJMB ($1.50 - expires 2/18/04)                            2,075,000     2,075,000                  4,150,000          $0.75
SJMB ($0.75 - expires 12/31/04)                           3,075,000                                3,075,000          $0.75
Denbury partners ($0.75 - expires 12/31/04)              11,275,000                               11,275,000          $0.75
Falcon Seaboard ($6.75 - expires 3/16/03)     600,000                   1,200,000                  1,800,000          $0.75
Harris Webb & Garrison
    ($6.05 -expires 3/15/03)                  128,206                     256,412                    384,618          $0.75
                                           -----------   -----------  ------------  -----------  ------------
                                           10,003,048    16,425,000    21,611,596           --    48,039,644
                                           ===========   ===========   ===========  ===========   ==========

</TABLE>


During 1996,  the Company  issued  warrants to purchase  shares of the Company's
common stock in connection  with the  conversion  of certain debt.  The warrants
give holders the right to purchase up to 303,750 shares of the Company's  common
stock at $2 per share.  The  warrants  expire on  September  30, 2001 and may be
redeemed,  at the  option  of the  Company,  at the  price of $.50 per  warrant,
provided  that the bid price of common stock has exceeded $5 per share ending on
the  trading day prior to the date on which the notice of  redemption  is given.
During 1998, 1,500 of these warrants were exercised  resulting in an increase to
common  stock and  additional  paid-in  capital  of  $3,000.  No  warrants  were
exercised during 1999.


                                      F-19
<PAGE>



BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 10 - INCOME TAXES

The provision (benefit) for income taxes consists of the following for the years
ended December 31, 1999, 1998, and 1997:

<TABLE>
<CAPTION>
                                         1999            1998           1997
                                      -----------   -------------  ------------
<S>                                    <C>             <C>          <C>
Federal:
    Current                           $       --    $         --   $    13,962
    Deferred                                  --        (958,652)      161,163
                                      -----------   -------------  ------------
                                              --        (958,652)      175,125
                                      -----------   -------------  ------------
State:
    Current                                   --              --        22,834
    Deferred                                  --         (93,046)       24,082
                                      -----------   -------------  ------------
                                              --         (93,046)       46,916
                                      -----------   -------------  ------------
      Total                           $       --    $ (1,051,698)  $   222,041
                                      ===========   =============  ============

</TABLE>


The  provision  (benefit)  for  federal  income  taxes  differs  from the amount
computed by  applying  the federal  income tax  statutory  rate of 34% to income
(loss) before provision  (benefit) for income taxes and  extraordinary  gain, as
follows:

<TABLE>
<CAPTION>
                                                                    1999              1998              1997
                                                               ---------------   ----------------  ---------------
<S>                                                              <C>                <C>                <C>
Provision (benefit) at federal statutory rate                    $ (2,726,632)      $ (7,503,249)      $   227,558
State income taxes, net of federal benefit                           (256,980)          (202,818)           29,238
Nondeductible tax expenses                                             78,949
(Decrease) increase in valuation allowance                          2,904,663          6,654,369
Other                                                                                                      (34,755)
                                                               ---------------   ----------------  ---------------
      Provision (benefit) for federal income taxes               $         --       $ (1,051,698)      $   222,041
                                                               ===============   ================  ===============
</TABLE>



At December 31, 1999 and 1998,  the Company has  available  net  operating  loss
carryforwards of  approximately  $20,308,000 and $8,697,000,  respectively,  for
federal tax purposes that expire at various  dates  through 2020.  Additionally,
the  Company  has  state  net  operating  loss  carryforwards  of  approximately
$13,351,000 which expire at various dates to 2020.


                                      F-20
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


Deferred  income  taxes  reflect  the impact of  temporary  differences  between
amounts of assets and liabilities  recorded for financial reporting purposes and
such amounts as measured in accordance with tax laws. The items which comprise a
significant portion of the deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                                      1999              1998
                                                                                 ----------------  ----------------
<S>                                                                                  <C>               <C>
Gross deferred tax assets:
    Allowance for doubtful accounts receivable                                       $   375,263       $   804,718
    Accrued bonuses and other                                                            124,299           128,389
    Operating loss carryforwards                                                       7,574,846         3,243,847
    Goodwill                                                                           3,993,679         4,236,568
    Valuation allowance                                                               (9,559,032)       (6,654,369)
                                                                                 ----------------  ----------------
      Gross deferred tax asset                                                         2,509,055         1,759,153
                                                                                 ----------------  ----------------

Gross deferred tax liabilities:
    Depreciation                                                                      (2,396,387)       (1,646,485)
    Other                                                                               (112,668)         (112,668)
                                                                                 ----------------  ----------------
      Gross deferred tax liability                                                    (2,509,055)       (1,759,153)
                                                                                 ----------------  ----------------

      Net deferred tax asset (liability)                                             $        --       $        --
                                                                                 ----------------  ----------------
</TABLE>


The Company is required to record a valuation  allowance  when it is more likely
than not  that  some  portion  or all of the  deferred  tax  assets  will not be
realized.  At December  31, 1999 and 1998,  the Company has recorded a valuation
allowance of $9,559,032 and $6,654,369 against the gross deferred tax asset.

                                      F-21
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 11 - EARNINGS (LOSS) PER SHARE

The calculation of basic and diluted EPS is as follows:

<TABLE>
<CAPTION>


                         For the Year Ended 1999                        For the Year Ended 1998          For the Year Ended 1997
                      -------------------------------------  ------------------------------------ ---------------------------------
                         Income         Shares    Per Share     Income        Shares    Per Share    Income      Shares   Per Share
                      (Numerator)   (Denominator)  Amount    (Numerator)  (Denominator)  Amount  (Numerator) (Denominator) Amount
                      -----------   -------------  ------    -----------  -------------  ------   ----------- -----------   ------

<S>                     <C>           <C>          <C>       <C>           <C>           <C>       <C>         <C>           <C>
Income (loss) before    (8,147,177)                          $(21,016,680)                         $ 447,247
extraordinary item
Extraordinary gain         127,671
                      -------------                          -------------                         ---------

   Net income (loss)  $ (8,019,506)                          $(21,016,680)                         $  447,247
                      ============                           ============                          ==========

BASIC EPS

Income (loss)
available to common
stockholders          $ (8,019,506)   4,424,035   $ (1.81)   $(21,016,680) 3,589,235     $ (5.86)  $ 447,247   $ 2,533,650   $ 0.18

Effect of Dilutive
 Securities

Stock warrants                                                                                                    371,552
Stock options                                                                                                     228,883
Convertible debt
 debenture                                                                                           93,377       625,671
                      -------------  ----------  ---------  ------------- -----------  ----------- ----------     --------  -------

DILUTED EPS

Income (loss)
 available to common
 stockholders plus
 assumed conversions  $(8,019,506)  $ 4,424,035   $ (1.81)  $(21,016,680)  3,589,235   $ (5.86)    $540,624    $ 3,759,756   $ 0.14
                      ===========   ===========    =======  =============  =========   ==========   =======    ===========   ======

</TABLE>

                                      F-22
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


Options to purchase  1,141,750  shares of common  stock and warrants to purchase
48,039,644  shares of common  stock at prices  ranging  from $0.75 to $8.01 were
outstanding  during 1999,  but were not included in the  computation of the 1999
diluted EPS because the effect would be anti-dilutive.

Options to purchase  1,177,750  shares of common  stock and warrants to purchase
10,303,048  shares of common  stock at prices  ranging  from $1.50 to $8.01 were
outstanding  during 1998,  but were not included in the  computation of the 1998
diluted EPS because the effect  would be  anti-dilutive.  There were also 24,000
options that were canceled  during 1998 that are not included in the computation
of the 1998 diluted EPS because the effect would be anti-dilutive.

Options  to  purchase  12,500  shares  of common  stock at $8.01 per share  were
outstanding  during  1997 but are not  included in the  computation  of the 1997
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares. The options, which expire December 2002, were
still outstanding at December 31, 1997.

Convertible  debt  instruments  which would result in the issuance of 30,533,334
and 7,511,111 shares of common stock, if the conversion features were exercised,
were outstanding  during 1999 and 1998,  respectively,  but were not included in
the  computation  of the 1999 or 1998  diluted EPS  because the effect  would be
anti-dilutive.  The conversion price of these instruments was $0.75 per share at
December  31,  1999 and  $2.25  per  share at  December  31,  1998 and  remained
outstanding at December 31, 1999.

NOTE 12 - MAJOR CUSTOMERS

Most of the Company's  business  activity is with customers  engaged in drilling
and  operating  oil and natural  gas wells  primarily  in the Black  Warrior and
Mississippi  Salt Dome Basins in Alabama and  Mississippi,  the Permian Basin in
West Texas and New Mexico, the San Juan Basin in New Mexico, Colorado, and Utah,
the East Texas and Austin Chalk Basins in East Texas, the Powder River and Green
River Basins in Wyoming and Montana,  the Williston  Basin in North Dakota,  and
the Gulf of Mexico offshore of Louisiana and in South Texas.  Substantially  all
of the Company's accounts receivable at December 31, 1999 and 1998 are from such
customers.  Performance in accordance  with the credit  arrangements  is in part
dependent upon the economic condition of the oil and natural gas industry in the
respective  geographic  areas.  The Company  does not require its  customers  to
pledge collateral on their accounts receivable.

The  Company  earned  revenues in excess of 10% of its total  revenues  from the
following  customers  for the years ended  December 31, 1999,  1998 and 1997, as
follows:

<TABLE>
<CAPTION>

                                                        1999        1998         1997
                                                    -----------  ----------   ---------

<S>                                                <C>                       <C>
Collins & Ware, Inc.                               $ 2,955,918
Burlington Resources                               $ 3,200,666
Taurus Exploration, Inc.                                                      $ 1,752,849
Pioneer Resources, Inc. (formerly Parker
    and Parsley Development Company)                                          $ 2,118,484

</TABLE>


                                      F-23
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 13 - EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT

During  December of 1999, the Company  executed  agreements  with certain of its
vendors to  discount  the  outstanding  obligations  due to these  vendors.  The
agreements  provided for a decrease in the outstanding  obligations of $127,671.
Accordingly,  the Company has recognized an extraordinary gain on extinguishment
of debt of $127,671, net of income taxes of $0.

NOTE 14 - STOCK OPTIONS

The 1997 Omnibus  Incentive  Plan  (Omnibus  Plan)  provides for the granting of
either incentive stock options or nonqualified  stock options to purchase shares
of the Company's common stock to key employees responsible for the direction and
management of the Company.  The Omnibus Plan  authorizes the issuance of options
to purchase up to an aggregate of 600,000  shares of common stock,  with maximum
option  terms of ten  years  from the date of  grant.  During  1998,  the  Board
authorized  an amendment to the Omnibus  Plan to allow  additional  issuances of
options to purchase 400,000 shares of common stock. This amendment increases the
total  aggregate  number  of shares  under the  Omnibus  Plan to  1,000,000.  At
December  31,  1999,  948,750  options  had been  granted  with  51,250  options
available for issue.

The 1997  Non-Employee  Stock Option Plan  (Non-Employee  Plan) provides for the
granting  of  nonqualified  stock  options to purchase  shares of the  Company's
common stock to non-employee  directors and consultants.  The Non-Employee  Plan
authorizes  the  issuance of options to purchase up to an  aggregate  of 100,000
shares of common stock,  with maximum option terms of ten years from the date of
grant.  During 1998, the Board authorized an amendment to the Non-Employee  Plan
to allow  additional  issuances of options to purchase  200,000 shares of common
stock.  This amendment  increases the total aggregate number of shares under the
Non-Employee  Plan  to  300,000,  and  must  be  submitted  to  a  vote  of  the
shareholders for final approval.  At December 31, 1999 and 1998, 113,000 options
had been granted.

Additionally,  of the 240,000 options  outstanding at December 31, 1996, options
to purchase  160,000 shares of the Company's  common stock were canceled  during
1997. Pertinent information regarding stock options is as follows:

                                      F-24
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                      Weighted
                                                                                      Average
                                                                         Weighted    Fair Value
                                                                          Average     of Stock
                                            Number of       Range of     Exercise       at            Vesting
                                             Options        Exercise       Price    Grant Date      Provisions
                                             -------        --------       -----    ----------      ---------

<S>                                         <C>              <C>            <C>      <C>         <C>
Options outstanding, December 31, 1996       240,000        $1.50 - $2.00   $1.75
                                         -----------

Options canceled                             (60,000)    50% of mean
                                                          share price
                                                        for 3 months prior
                                                            to grant
                                            (100,000)         $2.00         $2.00
                                         ------------
                                            (160,000)
                                         ------------


Options granted                                 160,000         $2.625      2.625     $2.625     62.5% immediate; 12.5% per year
   Exercise price equals FMV                     67,500         $2.625      2.625     $2.625     33.3% immediate; 22.22% per year
    of stock at grant date                       81,250         $2.625      2.625     $2.625     20% immediate; 20% per year
                                                 40,000         $2.625      2.625     $2.625     25% immediate; 25% per year
                                                 10,000          $3.38      $3.38      $3.38     25% immediate; 25% per year
                                         --------------
                                                358,750
                                         --------------

   Exercise price less than FMV                  20,000          $3.00      $3.00      $3.50     25% immediate; 25% per year
    of stock at grant date               --------------

   Exercise price greater than
    FMV of stock
    at grant date                                90,000          $4.63       $4.63      $4.25     16.67% immediate; 16.67% per year
                                                112,000          $4.63       $4.63      $4.25     3 year pro rata
                                                 10,000          $4.63       $4.63      $4.25     2 year pro rata
                                                 30,000          $4.63       $4.63      $4.25     5 year pro rata
                                                 12,500          $8.01       $8.01      $7.94     5 year pro rata
                                                  4,000          $4.63       $4.63      $4.25     1 year cliff
                                         --------------
                                                258,500

                                         ---------------

Options outstanding, December 31, 1997          717,250      $1.50 - $8.01   $3.30
                                         ---------------

Options canceled                                (22,500)         $2.63       $2.63
                                                (60,000)         $4.63       $4.63
                                                 (5,000)         $4.63       $4.63
                                         --------------
                                                (87,500)

                                         --------------

</TABLE>

                                      F-25
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                                         Weighted
                                                                                          Average
                                                                          Weighted      Fair Value
                                                           Range of        Average       of Stock
                                           Number of       Exercise       Exercise          at            Vesting
                                            Options         Prices          Price       Grant Date      Provisions
                                         -------------  ---------------  -----------  -------------   ---------------



<S>                                             <C>       <C>               <C>           <C>      <C>
Options granted
    Exercise price equals FMV
    of stock at grant date                       7,500         $6.28        $6.28         $6.28    3 year pro rata
                                                13,000         $6.63        $6.63         $6.63    2 year pro rata
                                               100,000         $6.50        $6.50         $6.50    5 year pro rata
                                                68,000         $6.50        $6.50         $6.50    25% immediate; 25% per year
                                               200,000         $6.69        $6.69         $6.69    25% immediate; 25% per year
                                                 4,500         $8.00        $8.00         $8.00    4 year pro rata
                                         -------------
                                               393,000
                                         -------------

Exercise price greater than FMV
    of stock at grant date                    155,000         $7.50        $7.50         $6.81    4 year pro rata
                                         -------------

Options outstanding, December 31, 1998       1,177,750     $1.50 - $8.01   $4.90
                                         -------------

Options cancelled                              (10,000)        $6.50       $6.50
                                               (10,000)        $4.63       $4.63
                                                (5,000)        $4.63       $4.63
                                                (3,000)        $4.63       $4.63
                                                (3,000)        $4.63       $4.63
                                                (5,000)        $6.50       $6.50
                                         -------------
                                               (36,000)

                                         -------------

Options outstanding, December 31, 1999       1,141,750     $1.50 - $8.01     $3.34
                                         =============



</TABLE>



                                      F-26
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The following table summarizes  information  about stock options  outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

                                 OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
                      ---------------------------------------------------       -------------------------------
                                           WEIGHTED
                                           AVERAGE           WEIGHTED                              WEIGHTED
   RANGE OF              NUMBER           REMAINING           AVERAGE               NUMBER          AVERAGE
   EXERCISE            OUTSTANDING       CONTRACTUAL         EXERCISE            EXERCISABLE       EXERCISE
    PRICES              12/31/99             LIFE              PRICE               12/31/99          PRICE
    ------              --------             ----              -----               --------          -----

<S>                      <C>                   <C>             <C>                  <C>              <C>
     $1.50               80,000                1.75            $1.50                80,000           $1.50
     $2.63              326,250                6.65            $2.63               197,484           $2.63
     $3.00               20,000                2.42            $3.00                10,000           $3.00
     $3.38               10,000                2.50            $3.38                 5,000           $3.38
     $4.63              160,000                2.67            $4.63                50,832           $4.63
     $6.28                7,500                6.42            $6.28                    --           $6.28
     $6.50              153,000                4.24            $6.50                13,250           $6.50
     $6.63               13,000                3.45            $6.63                    --           $6.63
     $6.69              200,000                8.00            $6.69                50,000           $6.69
     $7.50              155,000                3.42            $7.50                    --           $7.50
     $8.00                4,500                3.36            $8.00                 1,125           $8.00
     $8.01               12,500                2.96            $8.01                 2,500           $8.01
                     ----------                                                 ----------
                      1,141,750                5.02            $4.90               410,191           $3.34
                      =========                                                 ===========

</TABLE>

The  Company applies  principles  from SFAS No. 123 in accounting  for its stock
option  plan.  In  accordance  with SFAS No. 123, the Company has elected to not
report the impact of the fair value of its stock  options in the  statements  of
operations  but,  instead,  to disclose  the pro forma effect and to continue to
apply APB Opinion No. 25 and related interpretations in accounting for its stock
options.  Accordingly,  no  compensation  expense has been  recognized for stock
options  issued to  employees  with an exercise  price at fair  market  value or
above.  Compensation expense of $70,710, $83,540 and $27,267 has been recognized
for the years ended December 31, 1999, 1998 and 1997, respectively,  for 134,000
options  granted during 1997 as compensation  to  non-employees  at the options'
fair market value in accordance with SFAS No. 123. Had compensation cost for all
of the Company's stock options issued been determined based on the fair value at
the grant dates for awards  consistent  with the method  prescribed  in SFAS No.
123, the Company's  net income  (loss) and earnings  (loss) per share would have
been reduced or increased to the pro forma amounts indicated as follows:

<TABLE>
<CAPTION>

                                                           1999                1998               1997
                                                      ----------------   -----------------  ------------------

<S>                                                     <C>                 <C>                  <C>
Net income (loss) - as reported                           $(8,019,506)      $ (21,016,680)       $  447,247
Net income (loss) - pro forma                             $(8,480,318)      $ (21,530,723)       $  268,327
Earnings (loss) per share - as reported (basic)           $     (1.81)      $       (5.86)       $      .18
Earnings (loss) per share - pro forma (basic)             $     (1.92)      $       (6.00)       $      .11
Earnings (loss) per share - as reported (diluted)         $     (1.81)      $       (5.86)       $      .14
Earnings (loss)  per share - pro forma (diluted)          $     (1.92)      $       (6.00)       $      .10

</TABLE>


                                      F-27
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The pro forma amounts  reflected above are not  representative of the effects on
reported net income  (loss) in future  years  because,  in general,  the options
granted  typically do not vest  immediately and additional  awards are made each
year.

The fair value of each  option  grant is  estimated  on the grant date using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions.

<TABLE>
<CAPTION>

                                       1999            1998            1997
                                      -------        -------          -------

<S>                                     <C>             <C>             <C>
Dividend yield                             0 %             0 %             0 %
Expected life (years)                   5.62            5.62               4
Expected volatility                     74.7 %          74.7 %          60.6 %
Risk-free interest rate                 5.48 %          5.48 %          6.11 %

</TABLE>

NOTE 15 - CONTINGENCIES

The Company and certain of its  officers and  directors  are  respondents  in an
arbitration  proceeding commenced by Monetary Advancements  International,  Inc.
("MAII") before the American Arbitration  Association in New York, New York. The
claimant seeks  recompense from the Company and other named  respondents for the
alleged  failure  to pay  compensation  in the  form of  shares  of stock of the
Company for services  allegedly  rendered.  The  respondents  have  submitted an
answer and counterclaims,  and have initiated a Court proceeding seeking partial
stay of the  arbitration  proceeding.  Management  does not believe the ultimate
outcome of these actions will have a materially  adverse effect on the financial
position, results of operations or cash flows of the Company.

The Company and  Southwick  Investments,  Inc.  were  parties in an  arbitration
proceeding  before  the  American  Arbitration  Association  arising  out  of an
agreement  entered  into by the  parties.  Southwick  was engaged to develop and
implement a plan for raising  additional  capital and provide  certain  advisory
services.  Southwick was seeking to be awarded damages in an unspecified  amount
for breach of the  contract  and the loss in value to  Southwick of an option to
purchase fifty thousand shares of the common stock of the Company at an exercise
price of $4 per share.  In August 1999, the  arbitration  panel issued its award
requiring  the  Company to pay  Southwick  $100,000,  but  dismissing  all other
claims.  This  award  was  recognized  as  a  charge  to  selling,  general  and
administrative  expenses  in the  third  quarter  of 1999 and paid in the  first
quarter of 2000.

The Company also is the subject of various legal actions in the ordinary  course
of business.  Management does not believe the ultimate  outcome of these actions
will have a materially  adverse  effect on the  financial  position,  results of
operations or cash flows of the Company.

On November 30, 1995, the Company executed a  Reorganization  Agreement with the
holders of certain  debt of the Company  whereby  the  Company  converted a note
payable to RABAD,  a  partnership  of  officers  and  spouses of officers of the
Company, to 148,565 shares of common stock.


                                      F-28
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


The  Company  guaranteed  that  RABAD  would  be able to sell its  common  stock
received  in the  1995  conversion  for $2 per  share  within  one  year of this
conversion.  RABAD engaged Monetary  Advancement  International,  Inc. (MAII) to
sell the shares received in this conversion. Due to the dispute with the Company
described  above,  MAII had  refused to pay RABAD or return  any unsold  shares.
RABAD and MAII entered into a settlement  agreement in September 1998. The terms
of the agreement  called for MAII to reimburse  RABAD for the shares  originally
transferred  to MAII for sale.  The Company does not believe the  aforementioned
guarantee  will result in any liability to the Company based on the terms of the
settlement.

In  connection  with the above  proceedings,  the Company has paid legal fees on
behalf of four  employees  in the amount of $5,693,  $26,072 and $12,420  during
1999, 1998 and 1997, respectively.

NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value:

CASH AND CASH EQUIVALENTS,  SHORT-TERM INVESTMENTS, ACCOUNTS RECEIVABLE, CURRENT
PORTION OF  LONG-TERM  DEBT,  AND ACCOUNTS  PAYABLE - The  carrying  amount is a
reasonable  estimate  of the fair value  because of the short  maturity of these
instruments.

LONG-TERM  DEBT - Given the  Company's  operating  results  and  severe  lack of
liquidity,  as discussed in Note 18, it is not  practical to determine  the fair
market value of the long-term debt at December 31, 1999 and 1998.

NOTE 17 - SEGMENT AND RELATED INFORMATION

At December 31, 1999 and 1998,  the Company is organized  into,  and manages its
business based on the performance  of, five business  units.  The business units
have separate management teams and infrastructures  that offer different oil and
gas well services. The business units have been aggregated into three reportable
segments: wireline,  directional drilling, and workover and completion since the
long-term  financial  performance  of these  reportable  segments is affected by
similar economic conditions.

WIRELINE - This  segment  consists of two business  units that  perform  various
procedures to evaluate downhole conditions at different stages of the process of
drilling and  completing  oil and gas wells as well as various times  thereafter
until the well is depleted and  abandoned.  This segment  engages in onshore and
offshore  servicing,  as well as  other  oil and  gas  well  service  activities
including  renting  and  repairing  equipment.  The  principal  markets for this
segment  include all major oil and gas producing  regions of the United  States.
Major  customers of this segment for the years ended  December 31, 1999 and 1998
included Burlington  Resources,  Chevron,  Inc., Collins and Ware, Inc., Pioneer
Natural Resources and Phillips Petroleum.

DIRECTIONAL DRILLING SERVICES - This segment consists of two business units that
perform procedures to enter a oil producing zone horizontally, using specialized
drilling equipment, and expand the area of interface of hydrocarbons and thereby
greatly enhances  recoverability of oil. The segment also engages in oil and gas
well surveying  activities.  The principal  markets for this segment include all
major oil and gas producing  regions of the United  States.  Major  customers of
this segment for the years ended December 31, 1999 and 1998 included Texaco E&P,
Union Pacific Resources, Clayton Williams Energy, and Chesapeake Operations.


                                      F-29
<PAGE>
BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


WORKOVER  AND  COMPLETION - This  segment  consists of a business  unit in which
services include those operations  performed on wells when originally  completed
or on wells  previously  placed in production and requiring  additional  work to
restore or increase  production.  The  principal  market for this segment is the
Black Warrior Basin of Alabama. The major customer of this segment for the years
ended December 31, 1999 and 1998 was Energen Corporation.

The  accounting  policies  of the  reportable  segments  are the  same as  those
described in Note 2 of Notes to Financial Statements.  The Company evaluates the
performance of its operating segments based on earnings before interest,  taxes,
depreciation,  and  amortization  (EBITDA),  which is derived from revenues less
operating expenses and selling,  general, and administrative  expenses.  Segment
information for the years ended December 31, 1999 and 1998 is as follows:


<TABLE>
<CAPTION>

                                                                                   WORKOVER
                                                               DIRECTIONAL            AND
1999                                           WIRELINE          DRILLING          COMPLETION            TOTAL
--------                                 -----------------  -----------------  -----------------    --------------

<S>                                         <C>                <C>                 <C>                <C>
Segment revenues                            $  17,726,484      $  10,310,319       $  1,255,970       $ 29,292,773
Segment EBITDA                              $   1,608,648      $     721,452       $    145,434       $  2,475,534
Segment assets                              $  16,710,665      $  19,305,569       $    249,285       $ 36,265,519

</TABLE>

<TABLE>
<CAPTION>

                                                                       WORKOVER
                                                   DIRECTIONAL            AND
1998                              WIRELINE           DRILLING          COMPLETION           TOTAL
--------                      -----------------  -----------------  -----------------  -----------------

<S>                              <C>                <C>                 <C>                <C>
Segment revenues                 $  11,591,727      $  21,311,450       $  1,533,376      $  34,436,553
Segment EBITDA                   $  (1,589,874)     $ (12,028,475)      $    (60,260)     $ (13,678,609)
Segment assets                   $  15,607,165      $  20,853,147       $    283,868      $  36,744,180

</TABLE>

The Company has  certain  expenses  and assets  which are not  allocated  to the
individual  operating  segments.  A  reconciliation  of total segment  EBITDA to
income (loss) from operations and total segment assets to total assets,  for the
years ended December 31, 1999 and 1998 is presented as follows:

<TABLE>
<CAPTION>
                                                      1999                 1998
                                               ------------------   ------------------
EBITDA

<S>                                                <C>                 <C>
Total segment EBITDA                               $   2,475,534       $  (13,678,609)
Depreciation and amortization                         (5,008,078)          (4,815,955)
Unallocated corporate expense                         (2,229,112)            (923,173)
                                               ------------------   ------------------

    Income (loss) from operations                 $   (4,761,656)      $  (19,417,737)
                                               ==================   ==================

ASSETS

Total segment assets                              $   36,265,519        $  36,744,180
Unallocated corporate assets                              46,465               70,670
                                                ------------------   ------------------

      Total assets                                $   36,311,984        $  36,814,850
                                                ==================    =================

</TABLE>

                                      F-30
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 18 - RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS

The Company incurred a loss of $8,019,506 in 1999 and had current liabilities in
excess of current  assets of  $14,228,344  at December 31, 1999. As discussed in
Note 6, at December  31, 1999 and 1998,  the Company was in violation of certain
general and financial debt covenants.  Currently,  the Company does not have the
liquidity necessary to satisfy its current  obligations.  As discussed in Note 6
and 19, the Company executed a refinancing plan during the first quarter of 2000
that  satisfied all  outstanding  obligations  that were subject to the covenant
violations at December 31, 1999. The refinancing  plan also corrected all events
of default on the  outstanding  obligations  not  refinanced.  Accordingly,  the
Company  has  classified  outstanding  indebtedness  at  December  31,  1999  in
accordance  with  the  maturities  of  the  new  indebtedness.  The  outstanding
indebtedness with regard to the refinancing plan  (approximately  $19,000,000 as
of  February  29,  2000)  has  been  guaranteed  by SJMB,  SJCP,  and one of the
Company's  board  members,  who is a major  investor in SJMB and SJCP. The board
member's  guarantee  is  up to  $5,000,000.  Furthermore,  SJMP  and  SJCP  have
confirmed  to the Company in writing that they will  support  operations  of the
Company through at least January 2, 2001. Based on the guarantee of the debt and
the agreement to support  operations,  the Company's  financial  statements have
been prepared on a going concern basis. Absent this guarantee and support, there
would be  substantial  doubt about the entities'  ability to continue as a going
concern.

During 1999, the Company  experienced a continued  decline in the demand for its
products  and services as a result of a decrease in the price of oil and natural
gas for the  majority  of 1999.  The decline in demand  continued  to impact the
Company's  revenues,  liquidity  and its  ability to remain in  compliance  with
covenants in its loan agreements and meet its  obligations  during most of 1999.
Management of the Company  believes that an  improvement in its revenues will be
bolstered by its  improved  financial  condition  while still  dependent  upon a
continuing  period of  improved  pricing  and  decisions  by oil and natural gas
producers  to  make   commitments   to  engage  in  oil  and  natural  gas  well
enhancements.

The Company's  outstanding  indebtedness  includes primarily senior indebtedness
aggregating  approximately  $15,091,000 at December 31, 1999, other indebtedness
of approximately $7,511,000, and approximately $20,950,000 owed to SJMB and SJCP
and its affiliates and directors

Management  believes that, provided oil and natural gas prices remain relatively
stable with the level of prices that  existed as of December 31, 1999 and during
the first  quarter  of 2000,  the  refinancing  plan  accomplished  in the first
quarter of 2000 together with the cost-reduction program implemented in 1998 and
continued  in 1999,  which  included  reductions  in  personnel  and salaries of
existing personnel, closing and consolidating certain district offices, together
with other  cost-reduction  activities  should  enable the  Company to return to
levels sufficient to sustain operations.

Management of the Company is unable to assure that its efforts  described  above
will be successful.  Management  expects that in order to return to levels which
will  sustain  operations,  substantial  amounts  of  equity  securities  may be
required  to be issued  which  may  materially  dilute  the  Company's  existing
stockholders.


                                      F-31
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


NOTE 19 - SUBSEQUENT EVENTS

During the first quarter of 2000,  the Company  entered into a Loan and Security
Agreement  (the "Loan  Agreement")  with Coast  Business  Credit,  a division of
Southern Pacific Bank ("Coast"). Pursuant to the Loan Agreement, the Company may
make  collateralized  borrowings in the aggregate  amount of up to the lesser of
$25,000,000  or such  maximum  aggregate  amount as is  available to be borrowed
under a receivables  loan and two term loans  described  below.  Of such amount,
$14,000,000,  based on the lesser of 75% of the  appraised  net eligible  forced
liquidation value of the Company's equipment or $14,000,000, is a term loan (the
"Equipment  Loan"),  an additional  $2,000,000 is a term loan (the  "Installment
Loan"),  and the balance is available to be borrowed in an amount not  exceeding
80%  of  the  Company's  eligible  receivables  (the  "Receivables  Loan").  The
Equipment   Loan  is  repayable   commencing  on  August  30,  2000  in  monthly
installments  over a term of six years, with interest only payable monthly prior
to August 1, 2000.  The  Equipment  Loan further  requires that the Company make
additional  monthly principal payments of 50% of its excess cash flow during the
preceding  month for each month during the period ending  February 28, 2001, and
thereafter  additional monthly principal payments of 40% of its excess cash flow
during the preceding month.  Excess cash flow is defined to be the Company's net
income before  income  taxes,  depreciation  and  amortization  minus the sum of
principal  and interest  payments  made and taxes paid in cash  ("EBITDA").  The
Installment Loan is repayable in monthly installments over four years commencing
March 31, 2000, and, after the Equipment Loan is paid in full, is also repayable
out of excess cash flow as provided  above.  The Loan Agreement  ceases to be in
effect  on  February  28,  2003,  provided,  however,  the Loan  Agreement  will
automatically  renew for additional terms of one year unless either party elects
not to renew  the  term.  In the  event the Loan  Agreement  is not  renewed  on
February 28, 2003, or at the end of any renewal term thereafter,  all borrowings
then  outstanding  under the Loan  Agreement are then due and payable.  The Loan
Agreement has been guaranteed by SJMB, SJCP and a personal  guarantee by a board
member of the Company, who is also an investor in SJMB and SJCP.

On February 15, 2000, the Company borrowed an aggregate of $15,600,000  pursuant
to the Loan  Agreements.  The proceeds were used to repay the  Company's  former
senior secured lenders in the amount of $13,000,000, to repay other indebtedness
aggregating $1,500,000, and the balance was used for general corporate purposes,
including the payment of outstanding accounts payable.

During the first  quarter of 2000,  the Company  sold an  additional  $3,500,000
principal  amount of promissory  notes (the "Notes") due on January 15, 2001 and
warrants ("Warrants") to purchase 14,400,000 shares of common stock. Payments of
principal and interest on the Notes is  collateralized  by substantially all the
assets of the Company,  subject,  however, to terms of a subordinated  agreement
between  the note  holders and Coast.  The notes bear  interest at 10% per annum
(increases to 15% after September 30, 2000) and are  convertible  into shares of
the Company's common stock at a conversion price of $0.75 per share,  subject to
an anti-dilution  adjustment for certain  issuances of securities by the Company
at prices  per share of common  stock  less than the  conversion  price  then in
effect,  in which  event the  conversion  price is reduced to the lower price at
which the shares were issued.  The Warrants are  exercisable at a price of $0.75
per share, subject to anti-dilution adjustments.  The proceeds of this debt were
used to repay substantially all the nonrelated party indebtedness outstanding at
December 31, 1999.


                                      F-32
<PAGE>


BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
--------------------------------------------------------------------------------


During the first quarter of 2000, the Company executed a Compromise Agreement of
Release with Bendover Company  ("Bendover")  whereby the parties compromised and
settled their disputes arising out of the Company's acquisition of the assets of
Diamondback  Directional,  Inc.  in October  1997.  Pursuant  to the  agreement,
Bendover agreed to return to the Company promissory notes aggregating $2,000,000
principal  amount and  receive in  exchange  2,666,666  shares of the  Company's
common stock and a promissory note in the principal  amount of $1,182,890 due on
January 15, 2001, bearing interest at 10% per annum. The agreement also provides
for the  election  of Alan Mann,  a  principal  stockholder  of  Bendover,  as a
Director of the  Company,  the payment of  approximately  $26,000 to Mr. Mann on
account of  outstanding  claims  against the Company,  and the  dismissal of the
lawsuit between the Company and Bendover.

During the first quarter of 2000, the Company  executed  agreements with certain
of its vendors to discount the  outstanding  obligations to these  vendors.  The
agreements provided for a decrease in the outstanding obligations of $1,027,028.

During the first quarter of 2000, Hub, Inc. purchased a note payable to Fleet of
approximately $800,000 for $500,000. In connection with this transaction,  Fleet
released the Company from all indebtedness to Fleet.  Hub, Inc. agreed to cancel
the note in exchange for a payment of $500,000. A board member of the Company is
a  principle  in Hub,  Inc.  This note was paid in full in  connection  with the
refinancing plan executed in the first quarter of 2000.

On March 1, 2000, the Company executed its option to purchase the assets of MSI.
The option to purchase and  extensions  to the option  called for the Company to
pay approximately $75,000, to issue 144,495 shares of the Company's common stock
and  to  pay  outstanding  notes  payable  related  to the  acquired  assets  of
approximately $385,000. The shares were issued during 1999. One of the owners of
MSI has entered into an  employment  agreement  with the Company  which  expires
December 2002.

NOTE 20 - IMPAIRMENT OF LONG-LIVED ASSETS

During  1998,  the  Company  experienced  a  material  decline in demand for its
services as a result of a  significant  decrease in the price of oil and natural
gas, as well as the loss of a major customer. Consequently, management evaluated
the  recoverability  of its  long-lived  assets  in  relation  to  its  business
segments.  The analysis was first performed on an  undiscounted  cash flow basis
which indicated  impairment in its directional  drilling segment. The impairment
was then calculated  using  projections of discounted cash flows over five years
utilizing a discount rate and terminal value multiple  commensurate with current
oil and gas services  company  transactions.  The discount rate and the terminal
multiple  used  were 12% and 6.5,  respectively.  The  assumptions  used in this
analysis represent management's best estimate of future results.

The analysis  resulted in a charge to operations for the year ended December 31,
1998 of $11,100,000  which consisted of a write-down of $8,121,684,  $2,354,221,
and $624,095,  to goodwill,  property,  plant,  and  equipment,  and  inventory,
respectively.


                                      F-33


<PAGE>


Item 8.  Changes in and Disagreements on Accounting and Financial Disclosure:

During the two fiscal years ended  December 31, 1999,  the Company has not filed
any Current  Report on Form 8-K  reporting  any change in  accountants  in which
there was a reported  disagreement  on any matter of  accounting  principles  or
practices, financial statement disclosure or auditing scope or procedure.


                                       24

<PAGE>



                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

     The following table contains  information  concerning the current Directors
and executive officers of the Company:

<TABLE>
<CAPTION>
                            NAME                       AGE                        POSITION
             --------------------------------------------------------------------------------------------
             <S>                                       <C>         <C>
                     William L. Jenkins                47            President, Chief Operating Officer
                                                                                and Director

                       Allen R. Neel                   42          Executive Vice-President and Secretary

                     Danny R. Thornton                 49                Vice-President Operations

                        Alan W. Mann                   45              Vice  President - Operations and
                                                                                  Director

                      John L. Thompson                 41                         Director

                   Charles E. Underbrink               45                         Director


</TABLE>


     William L.  Jenkins  has been  President,  Chief  Operating  Officer  and a
Director of the Company since March 1989. From 1973 until 1980, Mr. Jenkins held
a variety of field engineering and training positions with Welex - A Halliburton
Company,  in the South and  Southwest.  From 1980 until March 1989,  Mr. Jenkins
worked with Triad Oil & Gas,  Inc.,  as a  consultant,  providing  services to a
number of oil and gas  companies.  During that time, Mr. Jenkins was involved in
the  organization  of a number  of  drilling  and oil field  service  companies,
including   a   predecessor   of  the   Company,   of   which   he   served   as
Secretary/Treasurer until 1988. Mr. Jenkins has over twenty years' experience in
the oil field service business. Mr. Jenkins is Mr. Thornton's brother-in-law.

     Allen R. Neel, is the Executive Vice-President and Secretary of the Company
and has been  employed by the Company  since  August  1990.  He is  currently in
charge of the Company's Survey,  Administration and Legal matters.  In 1981, Mr.
Neel  received his BS Degree in Petroleum  Engineering  from the  University  of
Alabama.  From  1981 to 1987,  Mr.  Neel  worked  in  engineering  and sales for
Halliburton  Services.  From 1987 to 1989,  he worked as a District


                                       25
<PAGE>

Manager for Graves Well  Drilling  Co. When the Company  acquired  the assets of
Graves in 1990, Mr. Neel assumed a position with the Company.

     Danny R. Thornton is a Vice-President  of the Company and has been employed
by the Company since March 1989.  From 1982 to March 1989, Mr.  Thornton was the
president  and  a  principal  stockholder  of  Black  Warrior  Mississippi,  the
Company's operational predecessor.  Mr. Thornton has been engaged in the oil and
gas services  industry in various  capacities  since 1978. His principal  duties
with the Company  include  supervising  and  consulting on wireline and workover
operations. Mr. Thornton is Mr. Jenkins' brother-in-law.

     John L. Thompson is a Director and President of St. James Capital Corp. and
SJMB, L.L.C., Houston-based merchant banking firms. St. James Capital Corp. also
serves as the general  partner of St.  James  Capital  Partners,  L.P. and SJMB,
L.L.C.  serves  as  the  general  partner  of  SJMB,  L.P.,  investment  limited
partnerships specializing in merchant banking related investments. Additionally,
he is a Director of  Industrial  Holdings,  Inc.,  a  publicly-held  company and
Collins & Ware,  Inc., a privately  held energy and  exploration  and production
company.  Prior to  co-founding  St. James Capital Corp. and SJMB,  L.L.C.,  Mr.
Thompson  served as a Managing  Director of  Corporate  Finance at Harris Webb &
Garrison,  a  regional  investment  banking  firm  with a focus on  mergers  and
acquisitions,  financial restructuring and private placements of debt and equity
issues. Mr. Thompson was elected to the Company's Board of Directors pursuant to
the terms of agreements between the Company and St. James Capital Partners, L.P.
See "Certain Transactions" for a description of the transaction.

     Charles E.  Underbrink  was elected a Director on April 1, 1998.  He is the
Chief  Executive  Officer and  Chairman of St.  James  Capital  Corp.  and SJMB,
L.L.C.,  Houston based merchant  banking firms.  Mr.  Underbrink has been,  from
August  1996 to the  present,  a  principal  of HUB,  Inc.  a  lender  to  small
capitalization businesses and the operator of mini-storage facilities located in
Minnesota and Wisconsin.  Additionally, he is a Director of Industrial Holdings,
Inc., Summerset House Publishing, Inc. and Monorail Computer Corporation..

     Alan W.  Mann  was  elected  a  Director  effective  March 1,  2000.  He is
Vice-President of Operations for the Diamondback  Directional Division,  joining
the Company with the purchase of Diamondback Directional, Inc. in 1997. Prior to
forming Diamondback Directional, Inc. in 1995, Mr. Mann was employed by Becfield
Drilling Services in operations and management.  Mr. Mann was elected a Director
pursuant to the terms of an agreement  entered  into with the Company  resolving
certain litigation between Mr. Mann and the Company.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors,  and persons who  beneficially own more than ten percent
(10%) of a registered class of the Company's equity securities,  to file reports
of  ownership  and  changes  in  ownership


                                       26
<PAGE>

with the Securities and Exchange Commission.  Officers, Directors and beneficial
owners of more than ten percent (10%) of the Company's Common Stock are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
that they file. To the best of the Company's knowledge, based solely on a review
of such reports as filed with the Securities and Exchange  Commission,  all such
persons have complied with such reporting requirements.

ITEM 10. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION - GENERAL

     The  following  table  sets forth the  compensation  paid or awarded to the
President and Chief  Executive  Officer of the Company and each other  executive
officer of the Company who received compensation  exceeding $100,000 during 1999
for all  services  rendered to the  Company in each of the years 1999,  1998 and
1997.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                          ANNUAL COMPENSATION                LONG-TERM COMPENSATION
                               ----------------------------------------- ------------------------------
                                                          BONUS/ANNUAL    SECURITIES      LONG-TERM
          NAME AND                                          INCENTIVE     UNDERLYING      INCENTIVE       ALL OTHER
     PRINCIPAL POSITION          YEAR         SALARY          AWARD         OPTIONS        PAYOUTS      COMPENSATION
----------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>               <C>          <C>>             <C>             <C>
William L. Jenkins               1999        $137,140          -0-                           -0-             $1,216(1)
   President                     1998        $146,275          -0-          200,000          -0-             $1,216(1)
                                 1997        $110,000          -0-            -0-            -0-             $1,216(1)

Allen R. Neel                    1999        $ 92,761          -0-                           -0-             $8,400(2)
  Executive Vice President       1998        $131,334          -0-                           -0-             $8,400(2)
                                 1997        $ 78,500          -0-          80,000           -0-               -0-
</TABLE>
---------------------------------

(1)  Includes the premiums paid by the Company on a $1,000,000  insurance policy
     on the life of Mr. Jenkins which names his wife as beneficiary and owner of
     the policy.
(2)  Automobile allowance paid to Mr. Neel.


                                       27
<PAGE>

STOCK OPTION HOLDINGS AT DECEMBER 31, 1999.

     The following  table provides  information  with respect to the above named
executive  officers  regarding  Company options held at the end of the Company's
year ended  December 31, 1999 (such officers did not exercise any options during
the most recent fiscal year).

<TABLE>
<CAPTION>
                                                                                       VALUE OF UNEXERCISED
                                    NUMBER OF UNEXERCISED OPTIONS                      IN-THE-MONEY OPTIONS
                                        AT DECEMBER 31, 1999                         AT DECEMBER 31, 1999 (1)

         NAME                   EXERCISABLE              UNEXERCISABLE           EXERCISABLE        UNEXERCISABLE
------------------------ -------------------------- ------------------------- ------------------ --------------------
<S>                               <C>                       <C>                      <C>                 <C>
William L. Jenkins                100,000                   100,000                  -0-                 -0-
Allen R. Neel                      70,000                    10,000                  -0-                 -0-
</TABLE>
----------------------------
(1)  Based on the closing sales price on December 31,1999 of $0.625.

EMPLOYMENT AGREEMENTS

     The Company has entered  into an  Employment  Agreement,  dated  January 1,
1998,  with  William L.  Jenkins,  to serve as its  President,  Chief  Executive
Officer  and  a  Director  of  the  Company.  The  Employment  Agreement,  which
terminates on December 31, 2001, provides for an annual base salary of $225,000.
The  Employment  Agreement  provides for certain  increases in Mr.  Jenkins base
compensation  in the years  1999,  2000 and 2001 if the  Company  meets  certain
performance  objectives.  Pursuant to the  agreement,  Mr. Jenkins was granted a
ten-year option to purchase  200,000 shares of the Company's  common stock at an
exercise  price of $6.6875  per  share,  the fair  market  value of the stock on
January 1, 1998, the date the option was granted.  With certain exceptions,  the
agreement  restricts Mr. Jenkins from engaging in activities in competition with
the Company  during the term of his  employment  and,  in the event Mr.  Jenkins
terminates the agreement prior to its termination date, for a period of eighteen
(18) months  thereafter and also in the event he terminates the agreement,  from
soliciting  for employment any employee of the Company for a period of two years
after termination.

     The Company has entered into three-year employment  agreements  terminating
on April 1, 2003 with each of Allen R. Neel, Executive  Vice-President and Danny
R. Thornton, Vice-President,  Operations, of the Company. Mr. Neel is to receive
base  compensation of $135,000 per year. Mr. Thornton receives base compensation
of $75,000 per year. On each anniversary date of the agreements, the Company and
the employee agree to  renegotiate  the base salary taking into account the rate
of inflation,  overall  profitability and the cash position of the Company,  the
performance and profitability of the areas for which the employee is responsible
and other factors.  The agreements contain restrictions on such persons engaging
in  activities  in  competition  with  the  Company  during  the  term of  their
employment and for a period of two years thereafter. In addition, the agreements
provide for the grant to such employees of options


                                       28
<PAGE>

to purchase  50,000  shares of the  Company's  Common  Stock on execution of the
agreements and 10,000 shares on each of the first three anniversary dates of the
agreements,  provided  such  persons  continue to be  employed  by the  Company,
exercisable at a price of $2.625 per share.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following  table sets forth certain  information  regarding  beneficial
ownership  of the  Company's  Common  Stock as of February  29, 2000 (a) by each
person who is known by the Company to own  beneficially  more than five  percent
(5%) of the Company's Common Stock,  (b) by each of the Company's  Directors and
officers,  and (c) by all Directors and officers as a group.  As of February 29,
2000, the Company had 7,478,927 shares of Common Stock outstanding.

<TABLE>
<CAPTION>

                                                                                        PERCENTAGE OF
                                                              NUMBER OF SHARES           OUTSTANDING
                       NAME AND ADDRESS (1)(2)                     OWNED                  SHARES(3)
              ------------------------------------------- ------------------------- -----------------------
              <S>                                               <C>                         <C>
              William L. Jenkins                                   410,000 (4)               5.2%

              Danny R. Thornton                                     80,666 (5)               1.1%

              Allen R. Neel                                         80,000 (5)               1.1%

              Charles E. Underbrink                              4,346,667 (8)              36.8%
              John L. Thompson
              777 Post Oak Blvd.
              Suite 950
              Houston, TX 77056

              St. James Capital Partners, L.P.
                and affiliates(6)
              777 Post Oak Boulevard - Suite 950                63,011,943                  89.4%

              Bendover Corp. (7)
              Alan W. Mann                                       3,314,235                  44.3%
              M. Dale Jowers

              1053 The Cliffs Blvd.
              Montgomery, TX 77356

              All Directors and Officers as a Group
                 (5 persons including the above) (8)            67,929,275 (4)(5)(6)        90.0%
</TABLE>


                                       29
<PAGE>

-----------------------------------

(1)  This tabular information is intended to conform with Rule 13d-3 promulgated
     under the Securities  Exchange Act of 1934 relating to the determination of
     beneficial ownership of securities. The tabular information gives effect to
     the exercise of warrants or options  exercisable within 60 days of the date
     of this table  owned in each case by the person or group  whose  percentage
     ownership is set forth opposite the  respective  percentage and is based on
     the assumption that no other person or group exercise their option.
(2)  Unless otherwise indicated,  the address for each of the above is c/o Black
     Warrior  Wireline  Corp.,  3748  Highway #45 North,  Columbus,  Mississippi
     39701.
(3)  The  percentage of outstanding  shares  calculation is based upon 7,478,927
     shares outstanding as of March 31, 2000, except as otherwise noted.
(4)  Includes 200,000 shares issuable on exercise of an option.

(5)  Includes  80,000  shares  issuable  on  exercise of an option at a price of
     $2.625 per share, of which 75,000 shares are immediately exercisable and an
     additional 12,500 shares will become  exercisable on April 1, 2000 and each
     anniversary  thereafter,  provided,  the employee  remains  employed by the
     Company.
(6)  Includes  shares  issuable  to St.  James  Capital  Partners,  LP  and  its
     affiliates on  conversion of notes and exercise of warrants.  See "Item 12.
     Certain Relationships and Related Transactions."
(7)  Based on  information  contained in the Schedule 13D dated October 9, 1997.
     On October 9, 1997,  the Company issued 647,569 shares and paid $586,000 in
     cash to purchase  substantially all the assets of Diamondback  Directional,
     Inc. (which corporation  subsequently  changed its name to Bendover Corp.).
     As of December 22, 1999, the Company issued an additional  2,666,666 shares
     to  Bendover  Corp as part of the  consideration  paid to  resolve  certain
     litigation.  Messrs.  Mann and Jowers each own  approximately  42.5% of the
     outstanding capital stock of Bendover Corp.
(8)  Also  includes  the shares  held by St.  James and the shares  issuable  on
     exercise of the vested portion of the options held by Messrs.  Thornton and
     Neel.
(9)  Includes 4,075,000 shares issuable upon exercise of options held by Messrs.
     Thompson and Underbrink as tenants in common and 271,667 shares issuable to
     Mr. Underbrink upon exercise of an option.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On March 9, 1998,  the Messr.  Danny R.  Thornton,  Allen R. Neel and Reese
James,  officers and  employees of the Company,  agreed to release their lien on
the Company's receivables in exchange for confirmation by the Company of certain
obligations to such persons which consist of (i)  reimbursement  of such persons
for their legal fees and expenses  incurred in connection  with their efforts to
recover from Monetary Advancement  International Inc., and (ii) the agreement to
make  such  persons  whole by  issuing  stock of the  Company  having a value of
$240,000, based on the bid price at the date of issuance, less any recovery from
MAII.

     In March 1995, the Company received a letter from the District  Director of
the  Internal  Revenue  Service  (the "IRS") in which he formally  notified  the
Company that the IRS had  preliminarily  calculated  deficiencies of $35,057 and
$541,727 in federal taxes for the years ended December 31, 1989 and December 31,
1990,  respectively.  The adjustments proposed by the IRS included the valuation
of bonus stock compensation to William L. Jenkins,  President of the Company, as
well as certain  other items.  The Company  agreed to pay whatever  personal tax
liability was determined to be owing by Mr.  Jenkins  related to the bonus stock
resulting from an  unfavorable  resolution of the IRS' proposed  adjustment.  In
June 1996,  the Company  settled this matter with the IRS on terms which,  among
other  things,  resulted in an additional  tax  liability to Mr.  Jenkins in the
amount of $98,524 for taxes,  penalties and interest related to the bonus stock.
The  Company  reimbursed  Mr.  Jenkins  for this sum on January 23, 1997 and has
agreed to further  reimburse Mr.  Jenkins for the tax liability  resulting  from
this payment and any further tax  reimbursement  payments made to Mr. Jenkins in
future years.


                                       30
<PAGE>

     Commencing in June 1997 through December 17, 1999, the Company entered into
a series of transactions  with St. James,  its affiliates and partners,  whereby
the Company sold to St. James on the following  dates for an aggregate  purchase
price of $20.95 million, the following securities:

<TABLE>
<CAPTION>
                    DATE                                     SECURITY                       PRINCIPAL AMOUNT
---------------------------------------------   ------------------------------------   -------------------------
<S>                                             <C>                                         <C>
June 6, 1997                                    9% Convertible Promissory Note              $2.0 million (1)
October 9, 1997                                 7% Convertible Promissory Note              $2.9 million (2)
January 23, 1998                                8% Convertible Promissory Note              $10.0 million(3)
October 30, 1998                                10% Convertible Promissory Note             $2.0 million (4)
February 18, 1999                               10% Convertible Promissory Note             $2.5 million (5)
December 17, 1999                               10% Convertible Promissory Note             $1.55 million (6)
</TABLE>

<TABLE>
<CAPTION>
               DATE                        NUMBER OF WARRANTS (7)(8)                     EXPIRATION DATE
------------------------------------    -------------------------------------------    ------------------------
<S>                                              <C>                                    <C>
June 6, 1997                                       2,442,000                               June 5, 2002

October 9, 1997                                    4,478,277                             October 10, 2002

January 23,1998                                   16,200,000                             January 23, 2003

October 30, 1998                                   4,000,000                             October 30, 2003

February 18, 1999                                  4,150,000                            February 18, 2004

December 17, 1999                                  3,075,000                            December 31, 2004
</TABLE>

---------------------------

(1)  Convertible at a current  conversion  price of $0.75 per share, as adjusted
     through  December 17, 1999 pursuant to anti-dilution  adjustments,  into an
     aggregate of 2,666,667 shares of Common Stock.
(2)  Convertible at a current  conversion  price of $0.75 per share, as adjusted
     through  December 17, 1999 pursuant to anti-dilution  adjustments,  into an
     aggregate of 3,866,667 shares of Common Stock.
(3)  Convertible  at an exercise price of $0.75 per share,  as adjusted  through
     December 17, 1999 pursuant to anti-dilution adjustments,  into an aggregate
     of 13,333,333 shares of Common Stock.
(4)  Convertible at a current  conversion  price of $0.75 per share, as adjusted
     through  December 17, 1999 pursuant to anti-dilution  adjustments,  into an
     aggregate of 2,666,666 shares of Common Stock.
(5)  Convertible at a current  conversion  price of $0.75 per share, as adjusted
     through  December 17, 1999 pursuant to anti-dilution  adjustments,  into an
     aggregate of 3,333,333 shares of Common Stock.
(6)  Convertible at a current  conversion  price of $0.75 per share,  subject to
     anti-dilution adjustments,  into an aggregate of 2,066,667 Shares of Common
     Stock.
(7)  Each warrant  represents the right to purchase one share of Common Stock at
     $0.75 per share, subject to anti-dilution adjustments.
(8)  As adjusted and subject to further anti-dilution adjustment.

     On each of June 6 and October 9, 1997,  January 23 and  October  30,  1998,
February 18,  1999,  and  December  17, 1999 the Company  entered into  Purchase
Agreements,   and  related   notes,   warrants  and  security   documents   (the
"Agreements") with St. James or certain affiliated


                                       31
<PAGE>


entities regarding the purchase of the securities described in the tables above.
Except for those terms relating to the amounts of securities purchased, maturity
and expiration dates,  interest rates, and conversion and exercise prices,  each
of such  Agreements  contained  substantially  identical  terms  and  conditions
relating to the purchase of the  securities  involved.  Payment of principal and
interest on all the notes is  collateralized  by substantially all the assets of
the Company,  subordinated,  as of March 31, 2000,  to borrowings by the Company
from  Coast in the  maximum  aggregate  amount of $25.0  million.  The notes are
convertible into shares of the Company's  Common Stock at the conversion  prices
set forth in the tables above, subject to anti-dilution  adjustments for certain
issuances of  securities by the Company at prices per share of Common Stock less
than the conversion  price then in effect in which event the conversion price is
reduced to the lower  price at which such shares  were  issued.  Pursuant to the
Agreements,  the Company agreed to issue to St. James for nominal  consideration
warrants to purchase  shares of Common Stock of the Company  exercisable  at the
prices set forth in the tables above,  subject to  anti-dilution  adjustment for
certain  issuances  of  securities  by the Company at prices per share of Common
Stock less than the  exercise  prices then in effect in which event the exercise
price is reduced to the lower price at which such shares were issued. The shares
issuable on conversion of the notes and exercise of the warrants have demand and
piggy-back  registration  rights under the  Securities  Act of 1933. The Company
agreed that one person designated by St. James will be nominated for election to
the Company's Board of Directors. Mr. John L. Thompson,  currently a Director of
the Company,  serves in this capacity.  The  Agreements  grant St. James certain
preferential  rights to provide  future  financings  to the Company,  subject to
certain  exceptions.  The notes also contain  various  affirmative  and negative
covenants, including a prohibition against the Company consolidating, merging or
entering into a share  exchange with another  person,  with certain  exceptions,
without the consent of St.  James.  Events of default  under the notes  include,
among other events, (i) a default in the payment of principal or interest;  (ii)
a default  under any of the notes and the failure to cure such  default for five
days, which will constitute a cross default under each of the other notes; (iii)
a breach of the Company's covenants, representations and warranties under any of
the  Agreements;  (iv) a breach under any of the Agreements  between the Company
and St. James, subject to certain exceptions; (v) any person or group of persons
acquiring  40% or more of the voting power of the Company's  outstanding  shares
who was not the owner  thereof as of October 30,  1998,  a merger of the Company
with  another  person,  its  dissolution  or  liquidation  or a  sale  of all or
substantially  all its assets;  and (vi) certain  events of  bankruptcy.  In the
event of a default under any of the notes,  subject to the terms of an agreement
between  St.  James and Coast,  St.  James could seek to  foreclose  against the
collateral for the notes.

     In March 1998,  St. James agreed to certain  amendments  to its  agreements
with the Company in connection with the Company's  borrowings from Fleet Capital
Corporation  ("Fleet") to finance the  completion of the  acquisition  of assets
from Phoenix  Drilling  Services,  Inc.  Among other  things,  these  amendments
required St. James to extend the maturity date of $10.0 million of  indebtedness
owing to it from  maturing in 18 months to maturing in 36 months,  required  St.
James  to fully  subordinate  the  payment  of  principal  and  interest  on the
indebtedness


                                       32
<PAGE>


owing to it to the prior payment in full of the Company's indebtedness to Fleet,
and required  St.  James to refrain  from selling  shares of Common Stock of the
Company below certain  percentage levels of the Company's shares  outstanding so
long as the  indebtedness  remains owing to Fleet.  In  consideration  for these
amendments,  the Company agreed to reduce the exercise and conversion  prices of
the common stock purchase  warrants and note issued to St. James in January 1998
to $5.50 per share and to  provide  that in the event  shares  are issued by the
Company  thereafter  at a price  less than  $5.50 per share  such  exercise  and
conversion  prices  will be reduced  to a price  equal to the price at which the
shares are  issued.  The $5.50  price was based on a price at which the  Company
issued shares of Common Stock in a private  placement in March 1998, at the time
St. James agreed to the amendments to its agreements.

     At June 30, 1998, the Company was not in compliance with certain  financial
covenants of its Loan and Security  Agreement with Fleet. Under the terms of the
loan agreement,  the breach of these covenants constituted events of default and
at the option of Fleet,  the obligations of the Company to Fleet were subject to
being declared by Fleet to be immediately due and payable.

     On October 30, 1998, the Company  entered into an Amended and Restated Loan
Agreement with Fleet pursuant to which, among other things, Fleet waived any and
all defaults which existed under the prior loan agreement. Under the Amended and
Restated Loan Agreement, Fleet agreed to loan to the Company up to an additional
$1.2  million,  subject  however to the Company  borrowing  an  additional  $1.5
million  subordinated  to the Company's  borrowings from Fleet and an additional
$500,000  borrowed by the Company  from St.  James in July 1998 being  converted
into a loan subordinated to the Company's indebtedness owing to Fleet.

     In order to obtain the additional $1.5 million of  subordinated  borrowings
necessary to complete  the closing of the  Company's  Amended and Restated  Loan
Agreement with Fleet, on October 30, 1998, the Company entered into an agreement
with SJMB,  whereby SJMB agreed to purchase up to $2.0 million  principal amount
of the Company's convertible  promissory note due on March 16, 2001. Such amount
included a refinancing of the $500,000 loaned in July 1998 and provided $750,000
to the  Company on October 30, 1998 to close the  amended  loan  agreement  with
Fleet. Subject to the Company meeting certain conditions, SJMB agreed to loan an
additional $750,000 to the Company, which funds were loaned on December 1, 1998.
The note issued to SJMB is convertible into shares of the Company's Common Stock
at an original  conversion  price of $2.25 per share,  subject to  anti-dilution
adjustment  for certain  issuances  of  securities  by the Company at prices per
share of Common Stock less than the  conversion  price then in effect,  in which
event the  conversion  price is reduced to the lower  price at which such shares
are issued. The Company also agreed to issue to SJMB warrants to purchase shares
of  Common  Stock  exercisable  at a  price  of  $2.25  per  share,  subject  to
anti-dilution  adjustment for certain  issuances of securities by the Company at
prices per share of Common Stock less than the exercise price then in effect, in
which event the exercise price is reduced to the lower price at


                                       33
<PAGE>


which such  shares are issued  and the  number of shares  issuable  is  adjusted
upward.  Under the agreement with SJMB, warrants to purchase 1,333,333 shares of
Common Stock were issued.

     On February 18,  1999,  in order to obtain the  additional  $2.5 million of
borrowings  necessary to complete the closing under the  Forebearance  Agreement
with Fleet,  the Company  entered into an agreement  with SJMB to purchase up to
$2.5 million principal amount of the Company's  convertible  promissory note due
on March 16, 2001. The note is convertible  into shares of the Company's  Common
Stock  at  an  original  conversion  price  of  $1.50  per  share,   subject  to
anti-dilution  adjustment for certain  issuances of securities by the Company at
prices per share of Common Stock less than the conversion  price then in effect,
in which event the conversion  price is reduced to the lower price at which such
shares are issued. The Company also issued warrants to purchase 2,075,000 shares
of  Common  Stock  exercisable  at a  price  of  $1.50  per  share,  subject  to
anti-dilution  adjustment for certain  issuances of securities by the Company at
prices per share of Common Stock less than the exercise price then in effect, in
which  event the  exercise  price is  reduced  to the lower  price at which such
shares are issued and the number of shares issuable is adjusted upward.

     As a consequence of the issuance of the  convertible  notes and warrants to
SJMB and others in December 1999 with  conversion and exercise  prices of $0.75,
under the terms of the anti-dilution  provisions of the outstanding  convertible
notes and warrants held by St. James,  including  certain of its  affiliates and
assignees,  the conversion  prices and exercise prices of those  securities were
reduced  to $0.75  per  share  with the  total  number  of  shares  issuable  on
conversion and exercise being adjusted upward to 58,936,942 shares.

     The ability of St. James and its  affiliates  to fully  exercise or convert
their  warrants  and  notes is  dependent  upon an  amendment  to the  Company's
Certificate  of  Incorporation  to increase the number of shares of Common Stock
the Company is authorized to issue from 12,500,000 shares to 150,000,000  shares
at the Company's forthcoming annual meeting of stockholders.

     During  the years  ended  December  31,  1998 and 1999,  the  Company  paid
$902,012 and $0, respectively to St. James Capital Corp. for consulting fees.

     At December 31, 1999 SJMB held a significant  ownership interest in Collins
& Ware, Inc., which is a customer of the Company. Sales to Collins & Ware during
1999 were $2,993,470.  The Company's sales to Collins & Ware, Inc., were no less
favorable to the Company than its sales to other customers.

     On June 17, 1999, the Company sold approximately $329,000 of trade accounts
receivable,  which was fully reserved due to the customer declaring  bankruptcy,
to RJ Air, LLC, an entity  partially owned by John L. Thompson,  a member of the
Company's Board of Director's,  for $200,000.  As of March 31, 2000, the Company
has collected  $100,000 of the sale price and the remaining $100,000 is included
in deferred revenue on the balance sheet.


                                       34
<PAGE>


     On December 22, 1999, the Company entered into a Compromise  Agreement with
Release with Bendover Company  ("Bendover")  whereby the parties compromised and
settled their disputes arising out of the Company's acquisition of the assets of
Diamondback  Directional,  Inc.  in October  1997.  Pursuant  to the  agreement,
Bendover  returned to the Company  promissory  notes  aggregating  $2.0  million
principal  amount and  received in exchange  2,666,666  shares of the  Company's
Common Stock and a promissory note in the principal  amount of $1,182,890 due on
January 15, 2001,  bearing interest at 10% per annum. The note is collateralized
by the same assets of the Company as collateralize  the notes owing to St. James
and is subject to a  subordination  agreement  with Coast.  The shares of Common
Stock issued to Bendover have demand and piggyback  registration rights pursuant
to an agreement  entered into with the Company.  The agreement also provided for
the election of Alan W. Mann, a principal stockholder of Bendover, as a Director
of the Company,  the payment of approximately  $26,000 to Mr. Mann on account of
outstanding claims against the Company, and the dismissal of the lawsuit between
the Company and Bendover.


                                       35
<PAGE>


                           GLOSSARY OF INDUSTRY TERM

     The  following  are  definitions  of certain  technical  terms used in this
Annual Report relating to the Company's business:

     "3-D Seismic" Involves the acquisition of a dense grid of seismic data over
a precisely  defined  area. An energy  source  creates an acoustic  impulse that
penetrates  the subsurface  and is reflected off  underlying  rock layers.  This
reflected  energy is recorded by  sensitive  receivers  (geophones  connected to
sophisticated computers). The resulting data is then analyzed and interpreted by
geophysicists  and  used by oil  and  natural  gas  producing  companies  in the
acquisition of new leases, the selection of drilling locations and for reservoir
management. The technology is particularly useful with directional drilling. 3-D
Seismic data provides greater precision and improved subsurface  resolution than
is provided by 2-D seismic surveys.

     "Casing"  Steel pipe lowered into the drilled  hole  (borehole)  to prevent
"caving  in"  and to  provide  isolation  of  zones  and  permit  production  of
hydrocarbons

     "Cased Hole" The drilled hole after casing has been lowered and cemented in
place.

     "Directional  Drilling" Enables the drilling of computer guided directional
wellbores from existing or newly drilled wells intended to increase the exposure
of the  well  bore to  producing  hydrocarbon  zones.  Directional  drilling  is
facilitated through the use of 3-D Seismic technology.

     "Downhole" Any part of the borehole below the ground surface.

     "Junk Basket" A mechanical  device  lowered into the borehole with wireline
to remove  extraneous or unwanted debris. A gauge ring is run  simultaneously to
check conformity of hole size.

     "Cement Bond Log" A cement  quality and bonding  evaluation  performed with
sonic  transmitters and receivers lowered into the borehole with wireline.  This
survey is recorded by surface computers.

     "Hoisting and Steering  Services" Services provided utilizing the Company's
wireline  trucks and equipment for  operating  surveying  equipment and steering
tools owned and operated by others.

     "Logs" (a) Open Hole:  The  measurement  of  properties  of  formations  to
determine  hydrocarbon  bearing  characteristics.  Open  hole  logs  are  mainly
radioactive (porosity) and electric (resistivity).


                                       36
<PAGE>


     (b) Cased Hole: The  measurement of gamma rays  (different  formations have
different  levels),  casing collars  (joints in casing) for  correlation to open
hole depths,  and cement quality and bonding.  Porosity logs can be run in cased
holes with Compensation Neutron Tools.

     "Rigs"  (a) A  drilling  rig is one which  drills  the  borehole.  This rig
normally is used for setting the casing in the borehole.

     (b) A  completion  or workover  rig is used to position  tubing,  pumps and
other  production  equipment in the cased hole. As the name plies,  this is used
for subsequent "workover" or remedial service.

     "Winch  Unit" A powerful  machine with one or more drums on which to coil a
cable or chain for hauling or hoisting.

     "Workover"  Operations  pertaining  to work on wells  previously  placed in
production  but  needing  additional  work  in  order  to  restore  or  increase
production.

                                       37
<PAGE>


                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     The Exhibits required by Regulation S-B are set forth in the following list
and are filed either by  incorporation  by reference from previous  filings with
the Securities and Exchange Commission or by attachment to this Annual Report on
Form 10-KSB as so indicated in such list.

         Exhibit        Designation
         -------        -----------
          3.2           Restated Certificate of Incorporation of the Company, as
                        filed  with  the  Secretary  of  State  of the  State of
                        Delaware on June 21, 1989  (incorporated by reference to
                        the  Company's  Annual  Report  on Form  10-KSB  for the
                        fiscal year ended December 31, 1990).

          3.3           By-Laws of the Company (incorporated by reference to the
                        Company's Registration Statement on Form S-18, effective
                        date December 6, 1988).

         10.1           Employment Agreement,  dated September 18, 1996, between
                        William L.  Jenkins and the  Company.  (Filed as Exhibit
                        10.1 to the  Company's  Annual Report on Form 10-KSB for
                        the fiscal year ended December 31, 1996.)

         10.2           Employment  Agreement,  dated January 31, 1997,  between
                        Danny  Ray  Thornton  and  the  Company,  and  amendment
                        thereto.

         10.3           Employment  Agreement,  dated January  31,1997,  between
                        Allen R. Neel and the Company, and amendment thereto.

         10.4           Purchase and Sale  Agreement  dated June 6, 1997 between
                        Black  Warrior  Wireline  Corp.  and Vernon E. Tew, Jr.,
                        Mark  R.  Roberts,  E.J.  Wooten,  Chester  Whatley  and
                        William A. Tew.  (Filed as an  exhibit to the  Company's
                        Current Report on Form 8-K for June 6, 1997)

         10.5           Purchase and Sale  Agreement  dated June 9, 1997 between
                        Black  Warrior   Wireline  Corp.  and  John  L.  Morton,
                        Theodore W.  Morton,  and John D.  Morton.  (Filed as an
                        exhibit to the Company's  Current Report on Form 8-K for
                        June 6, 1997)


                                       38
<PAGE>


         10.6           Agreement  for  Purchase  and Sale  dated  June 6,  1997
                        between  Black  Warrior  Wireline  Corp.  and St.  James
                        Capital  Partners,  L.P.  (Filed  as an  exhibit  to the
                        Company's Current Report on Form 8-K for June 6, 1997)

         10.7           $2,000,000  Convertible  Promissory  Note  dated June 6,
                        1997 issued to St. James Capital  Partners,  L.P. (Filed
                        as an exhibit to the  Company's  Current  Report on Form
                        8-K for June 6, 1997)

         10.8           $3,000,000  Bridge  Loan  Promissory  Note dated June 6,
                        1997 issued to St. James Capital  Partners,  L.P. (Filed
                        as an exhibit to the  Company's  Current  Report on Form
                        8-K for June 6, 1997)

         10.9           Warrant dated June 6, 1997 to purchase 546,000 shares of
                        Common Stock issued to St. James Capital Partners,  L.P.
                        (Filed as an exhibit to the  Company's  Annual Report on
                        Form 10-KSB for the year ended December 31, 1997).

         10.10          Warrant dated June 6, 1997 to purchase 120,000 shares of
                        Common Stock issued to St. James Capital Partners,  L.P.
                        (Filed as an exhibit to the  Company's  Annual Report on
                        Form 10-KSB for the year ended December 31, 1997).

         10.11          Registration  Rights  Agreement  between  Black  Warrior
                        Wireline  Corp.  and St. James  Capital  Partners,  L.P.
                        dated  June  6,  1997.  (Filed  as  an  exhibit  to  the
                        Company's Current Report on Form 8-K for June 6, 1997)

         10.12          Asset Purchase  Agreement  dated as of September 1, 1997
                        between Black Warrior  Wireline  Corp.  and  Diamondback
                        Directional,  Inc.,  Alan Mann and Michael  Dale Jowers.
                        (Filed as an exhibit to the Company's  Current Report on
                        Form 8-K for October 9, 1997).

         10.13          Employment  Agreement  effective as of September 1, 1997
                        between the Company and Alan Mann.  (Filed as an exhibit
                        to the Company's  Current Report on Form 8-K for October
                        9, 1997).

         10.14          Employment  Agreement  effective as of September 1, 1997
                        between the Company and Michael Dale  Jowers.  (Filed as
                        an exhibit to the Company's  Current  Report on Form 8-K
                        for October 9, 1997).


                                       39
<PAGE>


         10.15          Registration  Rights  Agreement  dated  October 10, 1997
                        between the Company and DDI. (Filed as an exhibit to the
                        Company's  Current  Report  on Form 8-K for  October  9,
                        1997).

         10.16          $3.0 million  promissory note due August 31, 1999 issued
                        to DDI.  (Filed as an exhibit to the  Company's  Current
                        Report on Form 8-K for October 9, 1997).

         10.17          Agreement  for Purchase  and Sale dated  October 9, 1997
                        between  Black  Warrior  Wireline  Corp.  and St.  James
                        Capital  Partners,  L.P.  (Filed  as an  exhibit  to the
                        Company's  Current  Report  on Form 8-K for  October  9,
                        1997).

         10.18          $2,900,000 Convertible Promissory Note dated October 10,
                        1997 issued to St. James Capital  Partners,  L.P. (Filed
                        as an exhibit to the  Company's  Current  Report on Form
                        8-K for October 9, 1997).

         10.19          Warrant  dated  October  10,  1997 to  purchase  725,000
                        shares  of Common  Stock  issued  to St.  James  Capital
                        Partners,  L.P.  (Filed as an exhibit  to the  Company's
                        Current Report on Form 8-K for October 9, 1997).

         10.20          Amendment No. 1 to Registration Rights Agreement between
                        Black  Warrior  Wireline  Corp.  and St.  James  Capital
                        Partners,  L.P.  dated  October 10,  1997.  (Filed as an
                        exhibit to the Company's  Current Report on Form 8-K for
                        October 9, 1997).

         10.21          Asset  Purchase  Agreement  dated as of  January 1, 1998
                        between  Black  Warrior   Wireline   Corp.  and  Phoenix
                        Drilling  Services,  Inc.  (Filed as an  exhibit  to the
                        Company's  Current  Report on Form 8-K for  January  23,
                        1998).

         10.22          Agreement  for Purchase and Sale dated  January 23, 1998
                        between  Black  Warrior  Wireline  Corp.  and St.  James
                        Capital  Partners,  L.P.  (Filed  as an  exhibit  to the
                        Company's  Current  Report on Form 8-K for  January  23,
                        1998).

         10.23          $10,000,000  Convertible  Promissory  Note dated January
                        23,  1998 issued to St.  James  Capital  Partners,  L.P.
                        Filed as an exhibit to the Company's  Current  Report on
                        Form 8-K for January 23, 1998).


                                       40
<PAGE>


         10.24          Warrant  dated  January  23,  1998 to  purchase  200,000
                        shares  of Common  Stock  issued  to St.  James  Capital
                        Partners,  L.P.  (Filed as an exhibit  to the  Company's
                        Current Report on Form 8-K for January 23, 1998).

         10.25          Amendment No. 2 to Registration Rights Agreement between
                        Black  Warrior  Wireline  Corp.  and St.  James  Capital
                        Partners,  L.P.  dated  January 23,  1998.  (Filed as an
                        exhibit to the Company's  Current Report on Form 8-K for
                        January 23, 1998).

         10.26          Loan and  Security  Agreement by and between the Company
                        and  Coast  Business  Credit,  a  division  of  Southern
                        Pacific Bank, dated as of January 24, 2000. (Filed as an
                        exhibit to the Company's  Current Report on Form 8-K for
                        February 15, 2000).

         10.27          Form of  Agreement  for  Purchase  and Sale  dated as of
                        December   17,   1999   between   the  Company  and  the
                        Purchasers.  (Filed  as  an  exhibit  to  the  Company's
                        Current Report on Form 8-K for February 15, 2000).

         10.28          Form of Promissory Note dated December 17, 1999.  (Filed
                        as an exhibit to the  Company's  Current  Report on Form
                        8-K for February 15, 2000).

         10.29.1        Compromise  Agreement  with Release  dated  December 22,
                        1999 among the Company,  Bendover Company, Alan Mann and
                        Michael  Dale  Jowers.  (Filed  as  an  exhibit  to  the
                        Company's  Current  Report on Form 8-K for  February 15,
                        2000).

         10.30          Letter  dated April 12,  2000 to the Company  from SJCP,
                        SJMB and Charles Underbrink

         21             Subsidiaries. The Company has no subsidiaries.

         27             Financial Data Schedule.
------------------------

     (b) Reports on Form 8-K.

     During the quarter  ended  December 31, 1999,  the Company did not file any
Current Reports on Form 8-K.


                                       41
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

     Dated: April 12, 2000


                          BLACK WARRIOR WIRELINE CORP.


                 By:      /s/ William L. Jenkins
                          ---------------------------------
                          William L. Jenkins, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

Signature                    Capacity                             Date
---------                    --------                             ----

/s/ William L. Jenkins       President,  CEO and Director         April 12, 2000
-------------------------
William L. Jenkins


/s/ Ron E. Whitter           CFO                                  April 12, 2000
-------------------------
Ron E. Whitter


/s/ John L. Thomspon         Director                             April 12, 2000
-------------------------
John L. Thompson

/s/ Charles E. Underbrink    Director                             April 12, 2000
-------------------------
Charles E. Underbrink

/s/ Alan W. Mann             Director                             April 12, 2000
-------------------------
Alan W. Mann


                                       42