`
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

   (Mark One)
           X  Quarterly Report pursuant to Section 13 or 15(d) of the Securities
          --- Exchange Act of 1934 for the quarterly period ended March 31,
              2002; or

              Transition report pursuant to Section 13 or 15(d) of the
          --- Securities Exchange Act of 1934 for the transition period
              from             to           .
                   ------------   ----------

                         Commission File Number 0-18754
                                                -------

                          BLACK WARRIOR WIRELINE CORP.
          --------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          DELAWARE                                             11-2904094
--------------------------------------------------------------------------------
(State or other jurisdiction of                             (I.R.S employer
incorporation of organization)                             identification no.)

                 100 ROSECREST LANE, COLUMBUS, MISSISSIPPI 39701
                 -----------------------------------------------
               (Address of principal executive offices, zip code)

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


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                    YES    X               NO
                          ---                  ---


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         As of July 1, 2001, 12,496,408 shares of the Registrant's Common Stock,
$.0005 par value, were outstanding.



<PAGE>


                          BLACK WARRIOR WIRELINE CORP.

                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX


PART I - FINANCIAL INFORMATION
                                                                       Page
                                                                       ----


Item 1.    Financial Statements

           Condensed Balance Sheets - March 31, 2002 (unaudited)
           and December 31, 2001                                        3

           Condensed Statements of Operations -
           Three Months Ended March 31, 2002 (unaudited) and
           March 31, 2001 (unaudited)                                   4

           Condensed Statements of Cash Flows -
           Three Months Ended March 31, 2002 (unaudited) and
           March 31, 2001 (unaudited)                                   5

           Notes to Condensed Financial Statements -
           Three Months Ended March 31, 2002 (unaudited) and
           March 31, 2001 (unaudited)                                   6


Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations               16

PART II - OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K                            25


                                       2

<PAGE>


PART I - FINANCIAL INFORMATION
      ITEM 1.  FINANCIAL STATEMENTS

BLACK WARRIOR WIRELINE CORP.
----------------------------
CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                          MARCH 31,          DECEMBER 31,
                                                                                            2002                 2001
                                                                                         (UNAUDITED)
<S>                                                                                      <C>                 <C>

                                        ASSETS
Current assets:
     Cash and cash equivalents                                                           $  1,246,006        $  2,819,236
     Accounts receivable, less allowance of $960,000 and $958,573, respectively            10,977,210          13,356,718
     Prepaid expenses                                                                       1,614,538              98,552
     Other receivables                                                                        455,397             450,808
     Other current assets                                                                     675,610             641,177
                                                                                         ------------        ------------

           Total current assets                                                            14,968,761          17,366,491

Land and building, held for sale                                                              156,250             156,250
Inventories                                                                                 4,386,804           4,279,133
Property, plant and equipment, less accumulated depreciation                               25,002,780          24,634,846
Loan to Shareholder                                                                           180,000                  --
Other assets                                                                                1,304,105           1,083,713
Goodwill, less accumulated amortization of $690,438 and $690,438, respectively              2,960,442           2,960,442
                                                                                         ------------        ------------

           Total assets                                                                  $ 48,959,142        $ 50,480,875
                                                                                         ============        ============

                         LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                                                                    $  4,484,191        $  6,310,029
     Accrued salaries and vacation                                                            673,987             790,225
     Accrued interest payable                                                                 128,964             128,871
     Other accrued expenses                                                                 1,037,019             980,588
     Current maturities of long-term debt and capital lease obligations                    10,334,098           8,619,507
                                                                                         ------------        ------------

           Total current liabilities                                                       16,658,259          16,829,220

Notes payable to related parties, net of unamortized discount                              24,115,031          24,387,044
Non current accrued interest payable to related parties                                     7,954,427           7,062,010
Long-term debt, less current maturities                                                    13,033,670          12,750,000
Deferred revenue                                                                              100,000             100,000
                                                                                         ------------        ------------

           Total liabilities                                                               61,861,387          61,128,274
                                                                                         ------------        ------------

Stockholders' deficit:
     Preferred stock, $.0005 par value, 2,500,000 shares authorized,
         none issued at March 31, 2002 or December 31, 2001                                        --                  --
     Common stock, $.0005 par value, 175,000,000 shares authorized,
         12,496,408 shares issued at March 31, 2002 and
         December 31, 2001, respectively                                                        6,248               6,248
     Additional paid-in capital                                                            20,243,227          19,956,227
     Accumulated deficit                                                                  (32,568,327)        (30,026,481)
     Treasury stock, at cost, 4,620 shares at March 31, 2002 and December 31, 2001           (583,393)           (583,393)
                                                                                         ------------        ------------

           Total stockholders' deficit                                                    (12,902,245)        (10,647,399)
                                                                                         ------------        ------------

           Total liabilities and stockholders' deficit                                   $ 48,959,142        $ 50,480,875
                                                                                         ============        ============


</TABLE>

          See accompanying notes to the condensed financial statements.

                                       3


<PAGE>


BLACK WARRIOR WIRELINE CORP.
----------------------------
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2002 and March 31, 2001

<TABLE>
<CAPTION>



                                                                     MARCH 31, 2002           MARCH 31, 2001
                                                                       (UNAUDITED)              (UNAUDITED)
<S>                                                                   <C>                      <C>

Revenues                                                              $ 12,649,603             $ 17,815,184

Operating costs                                                          9,143,614               11,234,022

Selling, general and administrative expenses                             2,830,310                1,868,924

Depreciation and amortization                                            1,948,060                1,491,871
                                                                      ------------             ------------

        Income (loss) from continuing operations                        (1,272,381)               3,220,367

Interest expense and amortization of debt discount                      (1,295,442)              (1,296,135)

Net gain on sale of fixed assets                                            18,333                       --

Other income                                                                 7,644                   24,143
                                                                      ------------             ------------

        Income (loss) before provision for income taxes,
         discontinued operations and extraordinary items                (2,541,846)               1,948,375

Provision for income taxes                                                      --                   38,846
                                                                      ------------             ------------

        Income (loss) before discontinued operations and
         extraordinary items                                            (2,541,846)               1,909,529

Discontinued Operations:

        Loss from operations of discontinued Drilling
          and Completion segment, net of income taxes
          of $0                                                                 --                   (6,080)
                                                                      ------------             ------------

          Net income (loss)                                           $ (2,541,846)            $  1,903,449
                                                                      ------------             ------------

Net income (loss) per share - basic and diluted:
        Income (loss) before discontinued operations                  $       (.20)            $        .15

        Discontinued operations                                                 --                       --
                                                                      ------------             ------------

Net income (loss) per share - basic and diluted                       $       (.20)            $        .15
                                                                      ============             ============


</TABLE>


          See accompanying notes to the condensed financial statements.


                                       4

<PAGE>



BLACK WARRIOR WIRELINE CORP.
----------------------------
CONDENSED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2002 and March 31, 2001

<TABLE>
<CAPTION>


                                                                          MARCH 31, 2002         MARCH 31, 2001
                                                                            (Unaudited)            (Unaudited)
<S>                                                                        <C>                    <C>

Cash (used in) provided by operations:                                     $(1,305,535)           $ 1,993,084
                                                                           -----------            -----------


Cash flows from investing activities:
          Acquisitions of property, plant and equipment                     (2,284,286)            (1,419,683)
          Proceeds from sale of property, plant and equipment                   18,333                     --
                                                                           -----------            -----------
Cash used in investing activities:                                          (2,265,953)            (1,419,683)
                                                                           -----------            -----------

Cash flows from financing activities:
         Debt issuance costs                                                        --               (172,584)
         Proceeds from bank and other borrowings                             2,843,471                 88,853
         Principal payments on long-term debt, notes payable and
         capital lease obligations                                            (946,757)            (1,117,902)
         Net draws on working revolver                                         101,544                498,625
                                                                           -----------            -----------
Cash provided by (used in) financing activities                              1,998,258               (703,008)
                                                                           -----------            -----------

Net decrease in cash and cash equivalents                                   (1,573,230)              (129,607)
Cash and cash equivalents, beginning of period                               2,819,236              1,373,699
                                                                           -----------            -----------
Cash and cash equivalents, end of period                                   $ 1,246,006            $ 1,244,092
                                                                           ===========            ===========

Supplemental disclosure of cash flow information:
         Interest paid                                                     $   402,931            $   735,998
         Income taxes paid                                                 $         0            $         0

Supplemental disclosure of non-cash investing and financing
activities
      Notes payable and capital lease obligations incurred to
      acquire property, plant and equipment                                $   134,351            $         0




</TABLE>


          See accompanying notes to the condensed financial statements.


                                       5





<PAGE>

                          BLACK WARRIOR WIRELINE CORP.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS

1.       GENERAL

         The accompanying condensed financial statements reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. (the "Company"). Such
adjustments are of a normal recurring nature. The results of operations for the
interim period are not necessarily indicative of the results to be expected for
the full year. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 should be read in conjunction with this document.

         The Company is an oil and gas service company currently providing
various services to oil and gas well operators primarily in the continental
United States and in the Gulf of Mexico. The Company's principal lines of
business include (a) wireline services, and (b) directional oil and gas well
drilling and downhole surveying services. In July 2001, the Company sold its
workover and completion line of business. The Company has restated its
operations for the quarter ended March 31, 2001 for the discontinued operations
(see Note 8).

RECENT RECAPITALIZATION

         2001 Credit Agreement. On September 14, 2001, the Company entered into
a Credit Agreement with General Electric Capital Corporation, as agent and
lender, ("GECC") providing for the extension of revolving, term and capital
expenditure ("capex") credit facilities to the Company aggregating up to $40.0
million (referred to herein as the "Credit Facility"). The Company and GECC
entered into amendments to the Credit Facility in January 2002 and June 2002. As
amended, the Credit Facility includes a revolving loan of up to $15.0 million,
but not exceeding 85% of eligible accounts receivable, as defined , a term loan
of $17.0 million, and a capex loan of up to $8.0 million, but not exceeding the
lesser of 70% of the hard costs of acquired eligible equipment, 100% of its
forced liquidation value and the Company's EBITDA for the month then ended, less
certain principal, interest and maintenance expenses. Eligible accounts are
defined to exclude, among other items, accounts outstanding of debtors that are
more than 60 days' overdue or 90 days following the original invoice date and of
debtors that have suspended business or commenced various insolvency proceedings
and accounts with reserves established against them to the extent of such
reserves as GECC may set from time to time in its reasonable credit judgment.
The interest rate on borrowings under the revolving loan is 1.75% above a base
rate and on borrowings under the term loan and capex loan is 2.5% above the base
rate. The base rate is the higher of (i) the rate publicly quoted from time to
time by the Wall Street Journal as the base rate on corporate loans posted by at
least 75% of the nation's thirty largest banks, or (ii) the average of the rates
on overnight Federal funds transactions by members of the Federal Reserve
System, plus 0.5%. Subject to the absence of an event of default and fulfillment
of certain other conditions, the Company can elect to borrow or convert any loan
and pay interest at the LIBOR rate plus applicable margins of 3.25% on the
revolving loan and 4.0% on the term loan and capex loan. Pursuant to the June
10, 2002 loan amendment discussed below, the LIBOR conversion and borrowing
option was suspended until the quarter

                                       6

<PAGE>


ending March 31, 2003 or such earlier date as the Company is in compliance with
certain financial covenants. If an event of default has occurred, the interest
rate is increased by 2%. Advances under the Credit Facility are collateralized
by a senior lien against substantially all of the Company's assets. The Credit
Facility expires on September 14, 2004.

         Initial borrowings under the Credit Facility advanced on September 14,
2001 aggregated $21.6 million. The proceeds of the initial borrowings were used
primarily to repay outstanding indebtedness aggregating $21.4 million to Coast
Business Credit ("Coast"), Bendover Company ("Bendover") and certain other
indebtedness. At March 31, 2002, borrowings under the Credit Facility aggregated
$21.2 million of which $4.5 million was outstanding under the revolving loan,
$15.3 million was outstanding under the term loan and $1.4 million was
outstanding under the capex loan. Borrowings under the revolving loan are able
to be repaid and re-borrowed from time to time for working capital and general
corporate needs, subject to the Company's continuing compliance with the terms
of the agreement. The outstanding balance of the revolving loan is to be paid in
full at the expiration of the Credit Facility on September 14, 2004. The term
loan is to be repaid in 35 equal monthly installments of $283,333 with a final
installment of $7,083,333 due and payable on September 14, 2004. The capex loan
is available to be borrowed through September 14, 2003 and is to be repaid in
equal monthly installments of 1/60th of each of the amounts borrowed from time
to time with the remaining outstanding balance of the entire capex loan due and
payable on September 14, 2004.

         Before reflecting the June 2002 amendments to the Credit Facility, the
Company was in violation of the financial covenants relating to its fixed charge
coverage ratio, minimum interest coverage ratio, and ratio of senior funded debt
to EBITDA. These covenant violations also resulted in violations and events of
default of the subordinated debt under the cross default provisions of the
subordinated debt agreements. By amendment to the Credit Facility entered into
as of June 10, 2002, GECC waived these defaults as well as violations relating
to the Company's failure to timely deliver its financial statements for the year
ended December 31, 2001 as required by the Credit Facility and selling certain
assets in violation of the terms of the Credit Facility. The Company agreed to
pay GECC a fee of $100,000 in connection with entering into the amendment. The
violations under the subordinated debt agreements were waived by the
debt-holders.

         As amended, the financial covenants the Company is required to comply
with include (a) limitations on capital expenditures to $8.0 million during each
of the years 2002 and 2003 and $5.0 million during the six-months ending June
30, 2004, (b) having a fixed charge coverage ratio at the end of each quarter,
commencing with the quarter ending March 31, 2003, of not less than 1.3:1.0 for
the preceding twelve-month period, (c) having an interest coverage ratio at the
end of each quarter, commencing with the quarter ending March 31, 2003, of not
less than 3.0:1.0 for the preceding twelve-month period, and (d) commencing with
the quarter ending March 31, 2003, having a ratio of senior funded debt to
EBITDA, minus capital expenditures paid in cash, of not more than 2:0:1.0 for
the four fiscal quarters then ended. The Company is required to maintain a
cumulative operating cash flow at the end of each month, commencing with the
month ended May 31, 2002, increasing from $(725,000) at the end of May 2002 to
$6.6 million at the end of February 2003.


                                       7

<PAGE>


         Future advances are subject to the continuing accuracy of the Company's
representations and warranties as of such date (other than those relating
expressly to an earlier date), the absence of any event or circumstance
constituting a "material adverse effect," as defined, the absence of any default
or event of default under the Credit Facility, and the borrowings not exceeding
the applicable borrowing availability under the Credit Facility, after giving
effect to such advance. A "material adverse effect" is defined to include an
event having a material adverse effect on the Company's business, assets,
operations, prospects or financial or other condition, on the Company's ability
to pay the loans, or on the collateral and also includes a decline in the
"Average Rig Count" (excluding Canada and international rigs) published by Baker
Hughes, Inc. falling below 675 for 12 consecutive weeks. The Company's liquidity
is dependent upon the availability of funds borrowed under the Credit Facility.


         The agreement provides that if the outstanding balance of the term loan
exceeds 70% of the Forced Liquidation Value of the eligible term equipment an
immediate repayment is required to eliminate the excess. Likewise, if the
outstanding balance of the Capex Loan exceeds the lesser of (i) the Maximum
Capex Amount and (ii) 100% of the Forced Liquidation Value of eligible Capex
equipment, an immediate repayment of the excess is required. The June 10, 2002
amendment limits the borrowing base on the Capex loan to the lesser of (i) 70%
of the arms-length hard cost of the eligible Capex equipment, (ii) 100% of the
Forced Liquidation Value of all eligible Capex equipment and (iii) consolidated
EBITDA for the fiscal month then ended less interest expense paid in cash during
such month plus scheduled payments of indebtedness during such month plus
$250,000 for routine capital expenditures. This limitation provides for any
unused borrowings under this provision to be carried over to the next month. The
amendment further requires an immediate repayment if the combined aggregate
outstanding balance on the Term Loan and Capex Loan exceed 50% of the Forced
Liquidation Value of eligible Capex equipment and eligible term equipment. This
amendment currently limits the Company's combined maximum borrowings pursuant to
its Term Loan and Capex Loan to approximately $21.7 million.


         Note Extensions. In connection with the GECC refinancing, the Company
agreed with the holders of $6.9 million of the $7.0 million principal amount of
promissory notes due on June 30, 2001 to extend the maturity date to December
31, 2004. The remainder of the outstanding principal was repaid. The notes bear
interest at 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 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. St. James and its affiliates (a related party) purchased
$1.6 million from noteholders who chose not to extend the maturity dates. As a
condition to extend the maturity date, holders of the notes are to receive
additional five-year common stock purchase warrants exercisable at $0.75 per
share if the Company has not entered into a purchase or merger agreement on or
before certain dates. Because such an

                                       8

<PAGE>


agreement was not entered into by December 31, 2001, the Company became
obligated to issue approximately 2.4 million additional warrants. In the event
such an agreement is not entered into by December 31, 2002 with a closing by
March 31, 2003, the Company will be obligated to issue approximately 5.2 million
additional warrants and if such agreement is not entered into by December 31,
2003 with a closing by March 31, 2004, the Company will be obligated to issue
approximately 10.4 million additional warrants. Under the terms of the note
extensions, in the event that the Company has not entered into a purchase or
merger agreement by December 31, 2003 with a closing date no later than March
31, 2004, an aggregate of 18.0 million additional warrants will have been
issued. The exercise price of the warrants that are to be issued are subject to
anti-dilution adjustments 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.

         The Company also extended until December 31, 2004 the promissory notes
totaling $17.7 million owing to St. James Capital Partners, L.P., SJMB, L.P.,
and certain other of their affiliates which matured in March, 2001. St. James
Capital Partners, L.P., SJMB, L.P. and certain of its affiliated entities and
partners are hereafter collectively referred to as "St. James". The notes bear
interest at 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 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 Company also extended the expiration date of 28.7
million warrants until December 31, 2004 in connection with the extension of the
St. James promissory notes.

         The Company continues to be highly leveraged and has an accumulated
deficit of $33 million. The Company is subject to certain debt covenants
requiring minimal operational and cash flow levels. Failure to comply with these
debt covenants and or generate sufficient cash flow from operations, could
significantly impair the Company's liquidity position and could result in the
lender exercising prepayment options under the Company's credit facility. While
the Company believes that it will have adequate borrowing base and cash flows,
it can make no assurances that it will comply with its debt covenants or
generate sufficient cash flows to service its debt and fund operations. Should
the Company be unable to borrow funds under its current credit facility or if
prepayment of those borrowings were required, it can make no assurances that
alternative funding could be obtained.

                                       9

<PAGE>


2.       EARNINGS PER SHARE

The calculation of basic and diluted earning per share ("EPS") is as follows:

<TABLE>
<CAPTION>


                                     FOR THE THREE MONTHS                             FOR THE THREE MONTHS
                                     ENDED MARCH 31, 2002                             ENDED MARCH 31, 2001
                                     --------------------                             --------------------
                           Loss             Shares            Per Share      Income          Shares            Per Share
                           Numerator        Denominator       Amount         Numerator       Denominator       Amount
                           ---------        -----------       ------         ---------       -----------       ------
<S>                        <C>              <C>               <C>            <C>             <C>               <C>

Net income (loss)          $(2,541,846)                                      $1,903,449
                           ============                                      ==========

BASIC AND DILUTED EPS
Income (loss) available
to common shareholders     $(2,541,846)     12,491,788        $(0.20)        $1,903,449      12,491,788        $0.15

</TABLE>



         Options and warrants to purchase 81,480,519 and 78,015,078 shares of
common stock at prices ranging from $0.75 to $8.01 were outstanding during the
three months ended March 31, 2002 and 2001, respectively, but were not included
in the computation of diluted EPS because the effect would be anti-dilutive (see
Note 7.).

          Convertible debt instruments, including convertible interest, which
would result in the issuance of 43,231,134 and 32,866,667 shares of common
stock, if the conversion features were exercised, were outstanding during the
three months ended March 31, 2002 and 2001, respectively, but were not included
in the computation of the diluted EPS because the effect would be anti-dilutive.
The conversion price of these instruments is $0.75 per share as of March 31,
2002 (see Note 7).


3.       INVENTORIES

         Inventories consist of tool components, subassemblies, and expendable
parts and supplies used in all segments of the Company's operations. Inventories
are classified as a long-term asset rather than a current asset as is consistent
with industry practice.


4.       COMMITMENTS AND CONTINGENCIES


         The Company is a defendant in 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.


5.     SEGMENT AND RELATED INFORMATION

       At March 31, 2002, the Company is organized into, and manages its
business based on the performance of two 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 two reportable
segments: wireline and directional drilling, since the long-term financial
performance of these reportable segments is affected by similar economic
conditions.

                                       10

<PAGE>


       At March 31, 2001, the Company was organized into three business units.
As more fully described in Note 8, the workover and completion segment was
discontinued during 2001. Accordingly, the results of its operations prior to
discontinuance have been presented as discontinued operations in the statement
of operations. Prior period financial statements and segment information have
been restated to reflect the discontinued operations.

       WIRELINE - This segment consists of two business units that perform
various procedures to evaluate and modify 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 quarter ended March 31,
2002 included Burlington Resources, Walter Oil & Gas, and Continental Resources.

       DIRECTIONAL DRILLING - This segment performs procedures to enter
hydrocarbon producing zones directionally, using specialized drilling equipment,
and expand the area of interface of hydrocarbons and thereby greatly enhancing
recoverability. It also engages in oil and gas well downhole 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
quarter ended March 31, 2002 included Encore Operating, BP Amoco and Clayton
Williams Energy.

       The accounting policies of the reportable segments are the same as those
described in Note 3 of the Company's Annual Report of Form 10-K for the fiscal
year ended December 31, 2001. 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
three months ended March 31, 2002 and 2001 is as follows:




                                       11
<PAGE>




          Three months ended March 31, 2002

                                                     DIRECTIONAL
                                     WIRELINE        DRILLING        TOTAL
                                     --------        --------        -----

           Segment revenues          $7,598,054      $5,051,549      $12,649,603
           Segment EBITDA            $1,049,335      $  347,668      $ 1,397,003



          Three months ended March 31, 2001

                                                     DIRECTIONAL
                                     WIRELINE        DRILLING        TOTAL
                                     --------        --------        -----

           Segment revenues          $9,910,682      $7,904,502      $17,815,184
           Segment EBITDA            $3,737,500      $1,436,315      $ 5,173,815




The Company has certain expenses that are not allocated to the individual
operating segments. A reconciliation of total segment EBITDA to income (loss)
from operations for the three months ended March 31, 2002 and 2001 is presented
as follows:

Three months ended March 31:

                                                          2002          2001

                  Total segment EBITDA                $ 1,397,003    $5,173,815
                  Depreciation and amortization        (1,948,060)   (1,491,871)
                  Unallocated corporate expense          (721,324)     (461,577)
                                                      -------------------------
                       Income (loss) from operations  $(1,272,381)   $3,220,367
                                                      ===========    ==========

6.       RELATED PARTY TRANSACTIONS

         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 affiliated with a member of the Company's
Board of Directors, for $200,000. As of March 31, 2002, the Company has
collected $100,000 of the sale price and the remaining $100,000 is included in
deferred revenue.

         During 2000, the Company entered into three capital leases totalling
$918,000 with MWD Technology Company ("MWD"). The principal owners of MWD
include employees of the Company. There was $596,749 outstanding on these leases
as of March 31, 2001. The outstanding balance of $136,000 of the leases was paid
in full in connection with the GECC refinancing in September 2001.

                                       12

<PAGE>


         On November 20, 2000, the Company entered into a capital lease
agreement for approximately $539,000 with Big Foot Tool Rental Service, LLC,
which is partially owned by an officer and an employee of the Company. There was
$449,546 outstanding on this lease as of March 31, 2001. The outstanding balance
of $393,000 of the lease was paid in full in connection with the GECC
refinancing.

         During the first quarter of 2000, Hub, Inc. purchased a note payable to
Fleet Capital Corporation ("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 principal in Hub, Inc.
This note was paid in full with the refinancing plan with Coast Business Credit
in 2001.

         In February 2001, the Company issued to a Director of the Company and
SJCP five-year warrants to purchase 700,000 and 400,000 shares, respectively, of
the Company's Common Stock at exercise prices of $0.75 per share. The warrants
were issued in consideration of guarantees extended to Coast Business Credit by
the Director and SJCP in connection with the Company's borrowings from Coast
Business Credit in 2000.

         The Company has executed notes payable to St. James Merchant Bankers,
L.P ("SJMB") and St. James Capital Partners, L.P. ("SJCP"), whose chairman and
chief executive officer both serve on the Company's Board of Directors, in
connection with acquisitions and to provide funding for operations. At March 31,
2002 and 2001, notes due to SJMB, SJCP, their principal partners and affiliates
totalled $23,566,882 and $23,650,000, respectively. The notes bear interest at
15% and, as more fully described in Note 1, permit conversion to equity under
certain conditions, which would result in substantial dilutions to existing
shareholders.


         In connection with the five year employment agreement effective January
1, 2002 entered into with Mr. Jenkins to remain as the Company's President and
Chief Executive Officer, the Company agreed to loan Mr. Jenkins $190,000,
bearing interest at the applicable federal rate, to be repaid at the rate of
one-third of the principal, plus accrued interest on October 1 of each of the
years 2002, 2003 and 2004. If Mr. Jenkins remains employed by the Company on
September 30 preceeding the date annual principal and interest is due on the
loan, the sum due and owing the following day is forgiven. In the event of a
Change of Control, as defined, the death or permanent disability of Mr. Jenkins
or in the event his employment is terminated without cause, the entire amount
owing by Mr. Jenkins is forgiven. The Company is amortizing the loan balance
into compensation cost over the life of the loan. Compensation expense for the
quarter ended March 31, 2002 was approximately $10,000.


                                       13

<PAGE>


7.       ISSUANCE OF COMMON STOCK

         During the first quarter of 2000, the Company executed a Compromise
Agreement With Release with Bendover Company whereby Bendover agreed to return
to the Company promissory notes aggregating $2,000,000 principal amount and
receive in exchange 2,666,667 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 maturity of the promissory note was
subsequently extended to June 15, 2001 at an interest rate of 20% per annum with
10% per annum paid monthly and the balance deferred until maturity. In September
2001, the Company paid $1.1 million to Bendover out of the proceeds of the GECC
financing in full payment of all outstanding principal and interest obligations
owing to Bendover.

         The Company has outstanding at March 31, 2002 common stock purchase
warrants, options and convertible debt securities entitled to purchase or to be
converted into an aggregate 124,711,653 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 12,496,408 shares of Common
Stock issued and outstanding on March 31, 2002, would represent 9.1% of the
shares outstanding on a fully diluted basis.


NOTE 8 - DISCONTINUED OPERATIONS

         In July 2001, the Company sold all physical assets associated with its
workover and completion business unit for $525,000. The Company recorded a gain
of $476,172, net of income taxes of $0. This business unit had revenues of
approximately $316,000 and a loss of approximately $6,000 for the quarter ended
March 31, 2001.






                                       14
<PAGE>



NOTE 9 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations." SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Goodwill and
certain intangible assets will remain on the balance sheet and will be amortized
through December 31, 2001, and accounted for under SFAS No. 142. On an annual
basis, and when there is reason to suspect that their values have been
diminished or impaired, these assets must be tested for impairment, and
write-downs may be necessary. The Company implemented SFAS No. 141 on July 1,
2001.

         In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 142 changes the accounting for goodwill and other
indefinite-lived intangible assets from an amortization method to an
impairment-only approach. Amortization of goodwill and other indefinite-lived
intangible assets will cease upon adoption of this statement. The Company
implemented SFAS No. 142 on January 1, 2002 and ceased amortization of goodwill
and indefinite-lived intangible assets. SFAS No. 142 requires an assessment of
potential impairment upon adoption and annually thereafter in the month the
Company elects to perform its analysis or more frequently if events or
circumstances indicate that an impairment may have occurred. The Company has not
completed its initial assessment but does not expect that any potential
impairment will have a material impact on its financial statements however, the
Company can make no assurance as to the financial statement impact until the
assessment is complete.

         The following table presents the impact on net income and earnings per
share in prior periods had SFAS No. 142 been effective for those periods:

<TABLE>
<CAPTION>


                                                              Quarter Ended
                                                     ----------------------------------
                                                      March 31, 2002    March 31, 2001
                                                     ----------------  ----------------
         <S>                                           <C>                <C>
         Reported net income (loss)                    $(2,541,846)       $1,903,449
                Add:  Goodwill amortization,
                         net of tax of $0                       --            39,860
                                                       -----------        ----------
         Adjusted net income (loss)                    $(2,541,846)       $1,943,309
                                                       ===========        ==========

         Basic and diluted earnings per share:
                Reported net income
                (loss)                                 $     (0.20)       $     0.15

                Goodwill amortization, net of tax of
                $0                                              --                --
                                                       -----------        ----------
         Adjusted net income (loss)                    $     (0.20)       $     0.15
                                                       ===========        ==========

</TABLE>



         In October 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," effective for years beginning
after December 15, 2001. This Statement supersedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" but
retains the fundamental provisions of SFAS 121 for

                                       15

<PAGE>


recognition and measurement of the impairment of long-lived assets to be held
and used and measurement of long-lived assets to be held for sale. The statement
requires that whenever events or changes in circumstances indicate that a
long-lived asset's carrying value may not be recoverable, the asset should be
tested for recoverability. The statement also requires that a long-lived asset
classified as held for sale should be carried at the lower of its carrying value
or fair value, less cost to sell. The Company adopted SFAS 144 January 1, 2002
and it did not have a material effect on the financial statements upon adoption.


         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS 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. A recovery in the energy
industry began in the latter half of 1999 and continued throughout 2000 and into
early 2001 due mainly to strong oil and natural gas prices. These prices
declined throughout most of 2001. As a consequence, North American drilling
activity declined as well. The Company's strong revenues and income from
operations, experienced in the first three quarters of 2001, did not continue
into the fourth quarter of 2001 and the first quarter of 2002. While oil and
natural gas commodity prices have given evidence of improving, there can be no
assurance that the Company will experience the strong revenues and income from
operations in 2002 that were realized in the first three quarters of 2001. There
can be no assurance that the Company will continue to experience any material
increase in the demand for and utilization of its services.


         Management may in the future seek to raise additional capital, which
may be either debt or equity capital or a combination thereof or enter into
another material transaction involving the Company, including a possible sale of
the Company. As of June 26, 2002, no specific plans or proposals have been made
with regard to any additional financing or any other transaction. The Company
may engage in other material corporate transactions. In November 2001, the
Company retained Simmons & Company International as its financial advisor in
connection with examining various alternative means to maximize shareholder
value including a possible merger, sale of assets or other business combination
involving the Company. The Company is not engaged in any negotiations at July 1,
2002 that its management believes may lead to its acquisition or other material
transaction. The Company may seek to pursue a transaction leading to the
possible acquisition of the Company or a sale of some or all of its assets. Any
such transaction would be dependent upon the ability of the Company to realize
an acceptable price. There can be no assurance that the Company will seek to
enter into such a transaction and no representation is made as to the terms on
which any such a transaction may be entered into or that such a transaction will
occur. In the event the Company should seek or be required to raise


                                       16

<PAGE>


additional equity capital, there can be no assurance that such a transaction
will not dilute the interests of the Company's existing security holders.
Fluctuations in interest rates may adversely affect the Company's ability to
raise capital.


RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE
MONTHS ENDED MARCH 31, 2001

         The following table sets forth the Company's revenues from its two
principal lines of business for the three months ended March 31, 2002 and 2001,
respectively:

                                                THREE MONTHS ENDED
                                              3/31/02           3/31/01

                 Wireline                   $ 7,598,054       $ 9,910,682
                 Directional Drilling         5,051,549         7,904,502
                                            -----------------------------
                                            $12,649,603       $17,815,184



         Total revenues decreased by approximately $5.2 million to approximately
$12.6 million for the three months ended March 31, 2002 as compared to total
revenues of approximately $17.8 million for the three months ended March 31,
2001. Wireline services revenues decreased by approximately $2.3 million in 2002
primarily due to the decreased demand for the Company's services. Directional
drilling revenues decreased by approximately $2.9 million as a consequence of
the general decreased level of oil and natural gas well drilling activity.

         Operating costs decreased by approximately $2.1 million for the three
months ended March 31, 2002, as compared to the same period of 2001. Operating
costs were 72.2% of revenues for the three months ended March 31, 2002 as
compared with 63.1% of revenues in the same period in 2001. The decrease in
operating costs was primarily the result of the lower overall level of
activities in the three months ended March 31, 2002 compared with 2001. The
increase in operating costs as a percentage of revenues was primarily because of
the decreased level of activity in the industry. Salaries and benefits increased
by approximately $500,000 for the three months ended March 31, 2002, as compared
to the same period in 2001, while the total number of employees decreased from
352 at March 31, 2001 to 327 at March 31, 2002. The increase in salaries and
benefits is primarily due to the increase in employee benefits costs as well as
the costs associated with the start up of the Company's tubing conveyed
perforating ("TCP") operations.

         Selling, general and administrative expenses increased by approximately
$961,000 to $2.7 million in the three months ended March 31, 2002 from $1.9
million in the three months ended March 31, 2001. As a percentage of revenues,
selling, general and administrative expenses increased to 22.4% in the three
months ended March 31, 2002 from 10.5% in 2001, primarily as a result of
decreased revenue levels as well as higher insurance costs in the first quarter
of 2002.

                                       17

<PAGE>


         Depreciation and amortization increased from approximately $1.5 million
in the three months ended March 31, 2001, or 8.4% of revenues, to approximately
$1.9 million in 2002 or 15.4% of revenues, primarily because of the capital
expenditures made in the second half of 2001.

         Interest expense and amortization of debt discount decreased by
approximately $1,000 for the three months ended March 31, 2002 as compared to
the same periods in 2001. See "Note 6 of Notes to Financial Statements" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001.

         The Company's net loss for the quarter ended March 31, 2002 was $2.5
million, compared with net income of $1.9 million for the quarter ended March
31, 2001. The decline in operating results for the quarter ended March 31, 2002
was the result of the general decline in demand for the Company's services that
commenced in the last quarter of 2001.

LIQUIDITY AND CAPITAL RESOURCES

         Cash used in the Company's operating activities was approximately $1.3
million for the three months ended March 31, 2002 as compared to cash provided
of approximately $2.0 million for the same period in 2001. Investing activities
used cash of approximately $2.3 million during the three months ended March 31,
2002 for the acquisition of property, plant and equipment. During the three
months ended March 31, 2001, investing activities used cash of approximately
$1.4 million for the acquisition of property, plant and equipment. Financing
activities provided cash of approximately $3.3 million from proceeds from bank
and other borrowings and net draws on working capital revolving loans offset by
principal payments on debt and capital lease obligations of approximately $1.3
million. For the same period in 2001, financing activities used cash of
approximately $1.1 million for principal payments on debt and capital lease
obligations offset by proceeds from bank and other borrowings of approximately
$89,000 and net draws on the working capital revolving loan of approximately
$499,000.

         Cash at March 31, 2002 was approximately $1.2 million as compared with
cash at March 31, 2001 of approximately $2.8 million.

         The Company's outstanding indebtedness includes primarily senior
secured indebtedness aggregating approximately $21.2 million at March 31, 2002,
owed to GECC, other indebtedness of approximately $2.0 million, and $24.6
million owed to St. James and or its affiliates.

GECC LOAN DESCRIPTION

         On September 14, 2001, the Company entered into the Credit Facility
with GECC providing for the extension of revolving, term and capex credit
facilities to the Company aggregating up to $40.0 million. The Company and GECC
entered into amendments to the Credit Facility in January 2002 and June 2002. As
amended, the Credit Facility includes a

                                       18

<PAGE>


revolving loan of up to $15.0 million, but not exceeding 85% of eligible
accounts receivable, a term loan of $17.0 million, and a capex loan of up to
$8.0 million, but not exceeding the lesser of 70% of the hard costs of acquired
eligible equipment, 100% of its forced liquidation value and the Company's
EBITDA for the month then ended, less certain principal, interest and
maintenance payments. Eligible accounts are defined to exclude, among other
items, accounts outstanding of debtors that are more than 60 days' overdue or 90
days following the original invoice date and of debtors that have suspended
business or commenced various insolvency proceedings and accounts with reserves
established against them to the extent of such reserves as GECC may set from
time to time in its reasonable credit judgment. The interest rate on borrowings
under the revolving loan is 1.75% above a base rate and on borrowings under the
term loan and capex loan is 2.5% above the base rate. The base rate is the
higher of (i) the rate publicly quoted from time to time by the Wall Street
Journal as the base rate on corporate loans posted by at least 75% of the
nation's thirty largest banks, or (ii) the average of the rates on overnight
Federal funds transactions by members of the Federal Reserve System, plus 0.5%.
Subject to the absence of an event of default and fulfillment of certain other
conditions, commencing March 31, 2003 or such earlier date as the Company is in
compliance with certain financial covenants, the Company can elect to borrow or
convert any loan and pay interest at the LIBOR rate plus applicable margins of
3.25% on the revolving loan and 4.0% on the term loan and capex loan. Pursuant
to the June 10, 2002 loan amendment, the LIBOR conversion and borrowing option
was suspended until the quarter ending March 31, 2003 or such earlier date as
the Company is in compliance with certain financial covenants. If an event of
default has occurred, the interest rate is increased by 2%. Advances under the
Credit Facility are collateralized by a senior lien against substantially all of
the Company's assets. The Credit Facility expires on September 14, 2004.

         Initial borrowings under the Credit Facility advanced on September 14,
2001 aggregated $21.6 million. Proceeds of the initial borrowings were used to
repay outstanding indebtedness aggregating $21.4 million to Coast Business
Credit ("Coast"), Bendover Company ("Bendover") and certain other indebtedness.
At March 31, 2002, borrowings outstanding under the Credit Facility aggregated
$21.2 million, of which $4.5 million was outstanding under the revolving loan,
$15.3 million was outstanding under the term loan and $1.4 was outstanding under
the capex loan. Borrowings under the revolving loan are able to be repaid and
re-borrowed from time to time for working capital and general corporate needs,
subject to the Company's continuing compliance with the terms of the agreement,
with the outstanding balance of the revolving loan to be paid in full at the
expiration of the Credit Facility on September 14, 2004. The term loan is to be
repaid in 35 equal monthly installments of $283,333 with a final installment of
$7,083,333 due and payable on September 14, 2004. The capex loan is available to
be borrowed through September 14, 2003 and is to be repaid in equal monthly
installments of 1/60th of each of the amounts borrowed from time to time with
the remaining outstanding balance of the entire capex loan due and payable on
September 14, 2004

         Borrowings under the Credit Facility may be prepaid or the facility
terminated or reduced by the Company at any time subject to the payment of an
amount equal to 3% of the prepayment or reduction occurring before September 14,
2002, 2% of the prepayment or reduction occurring thereafter but before
September 14, 2003, and 1% of the prepayment or reduction occurring

                                       19

<PAGE>


thereafter but before September 14, 2004. In the event all the stock or
substantially all the assets of the Company are sold prior to September 14, 2003
and, in connection therewith, the Company pre-pays the Credit Facility, the
amount of such payment is reduced to 1%. The Company is required to prepay
borrowings out of the net proceeds from the sale of any assets, subject to
certain exceptions, or the stock of any subsidiary, the net proceeds from the
sale of any stock or debt securities by the Company, and any borrowings in
excess of the applicable borrowing availability, including borrowings under the
term loan and capex loan in excess of 50% of the forced liquidation value of the
eligible capex and term loan equipment and borrowings under the term loan in
excess of 70% of the forced liquidation value of eligible term loan equipment.
The value of the term loan equipment is established by appraisal and the
creditor can require the Company to obtain up to two appraisals per year.

         Initial borrowings under the Credit Facility were subject to the
fulfillment at or before the closing of a number of closing conditions,
including among others, the accuracy of the representations and warranties made
by the Company in the loan agreement, delivery of executed loan documents,
officers' certificates, an opinion of counsel, repayment of the Coast senior
secured loan, the extension of the maturity date of $24.6 million principal
amount of the Company's outstanding subordinated notes to December 31, 2004 with
no payments of principal or interest to be made prior to that date, and the
completion of due diligence. Future advances are subject to the continuing
accuracy of the Company's representations and warranties as of such date (other
than those relating expressly to an earlier date), the absence of any event or
circumstance constituting a "material adverse effect," as defined, the absence
of any default or event of default under the Credit Facility, and the borrowings
not exceeding the applicable borrowing availability under the Credit Facility,
after giving effect to such advance. A "material adverse effect" is defined to
include an event having a material adverse effect on the Company's business,
assets, operations, prospects or financial or other condition, on the Company's
ability to pay the loans, or on the collateral and also includes a decline in
the "Average Rig Count" (excluding Canada and international rigs) published by
Baker Hughes, Inc. falling below 675 for 12 consecutive weeks. The Company's
liquidity is dependent upon the availability of funds borrowed under the Credit
Facility.

         Under the Credit Facility, the Company is obligated to maintain
compliance with a number of affirmative and negative covenants. Affirmative
covenants the Company must comply with include requirements to maintain its
corporate existence and continue the conduct of its business substantially as
now conducted, promptly pay all taxes and governmental assessments and levies,
maintain its corporate records, maintain insurance, comply with applicable laws
and regulations, provide supplemental disclosure to the lenders, conduct its
affairs without violating the intellectual property of others, conduct its
operations in compliance with environmental laws and provide a mortgage or deed
of trust to the lenders granting a first lien on the Company's real estate upon
the request of the lenders, provide certificates of title on newly acquired
equipment with the lender's lien noted.

         Negative covenants the Company may not violate include, among others,
(i) forming or acquiring a subsidiary, merging with, acquiring all or
substantially all the assets or stock of another person, (ii) making an
investment in or loan to another person, (iii) incurring any


                                       20

<PAGE>

indebtedness other than permitted indebtedness, (iv) entering into any
transaction with an affiliate except on fair and reasonable terms no less
favorable than would be obtained from a non-affiliated person, (v) making loans
to employees in amounts exceeding $50,000 to any employee and a maximum of
$250,000 in the aggregate, (vi) making any change in its business objectives or
operations that would adversely affect repayment of the loans or in its capital
structure, including the issuance of any stock, warrants or convertible
securities other than (A) on exercise of outstanding securities or rights, (B)
the grant of stock in exchange for extensions of subordinated debt, (C) options
granted under an existing or future incentive option plan, or (D) in its charter
or by-laws that would adversely affect the ability of the Company to repay the
indebtedness, (vii) creating or permitting to exist any liens on its properties
or assets, with the exception of those granted to the lenders or in existence on
the date of making the loan, (viii) selling any of its properties or other
assets, including the stock of any subsidiary, except inventory in the ordinary
course of business and equipment or fixtures with a value not exceeding $100,000
per transaction and $250,000 per year, (ix) failing to comply with the various
financial covenants in the loan agreement, (x) making any restricted payment,
including payment of dividends, stock or warrant redemptions, repaying
subordinated debt, rescission of the sale of outstanding stock, (xi) making any
payments to stockholders of the Company other than compensation to employees and
payments of management fees to any stockholder or affiliate of the Company, or
(xii) amending or changing the terms of the Company's subordinated debt.

         The financial covenants the Company is required to comply with include
(a) limitations on capital expenditures to $8.0 million during each of the years
2002 and 2003 and $5.0 million during the six-months ended June 30, 2004, (b)
having a fixed charge coverage ratio at the end of each quarter, commencing with
the quarter ending March 31, 2003, of not less than 1.3:1.0 for the preceding
twelve-month period, (c) having an interest coverage ratio at the end of each
quarter, commencing with the quarter ending March 31, 2003, of not less than
3.0:1.0 for the preceding twelve-month period, and (d) commencing with the
quarter ending March 31, 2003, having a ratio of senior funded debt to EBITDA,
minus capital expenditures paid in cash, of not more than 2:0:1.0 for the four
fiscal quarters then ended. The Company is required to maintain a cumulative
operating cash flow at the end of each month, commencing with the month ended
May 31, 2002, increasing from $(725,000) at the end of May 2002 to $6.6 million
at the end of February 2003.

         Events of default under the Credit Facility include (a) the failure to
pay when due principal or interest or fees owing under the Credit Facility, (b)
the failure to perform the covenants under the Credit Facility relating to use
of proceeds, maintenance of a cash management system, maintenance of insurance,
delivery of certificates of title, delivery of required consents of holders of
outstanding subordinated notes, maintenance of compliance with the financial
covenants in the loan agreement and compliance with any of the loan agreement's
negative covenants, (c) the failure, within specified periods of 3 or 5 days of
when due, to deliver monthly unaudited and annual audited financial statements,
annual operating plans, and other reports, notices and information, (d) the
failure to perform any other provision of the loan agreement which remains
un-remedied for 20 days or more, (e) a default or breach under any other
agreement to which the Company is a party beyond any grace period that involves
the

                                       21

<PAGE>

failure to pay in excess of $250,000 or causes or permits to cause in excess of
$250,000 of indebtedness to become due prior to its stated maturity, (f) any
representation or warranty or certificate delivered to the lenders being untrue
or incorrect in any material respect, (g) a change of control of the Company,
(h) the occurrence of an event having a material adverse effect, and (i) the
attachment, seizure or levy upon of assets of the Company which continues for 30
days or more and various other bankruptcy and other events. Upon the occurrence
of a default or event of default, the lenders may discontinue making loans to
the Company. Upon the occurrence of an event of default, the lenders may
terminate the Credit Facility, declare all indebtedness outstanding under the
Credit Facility due and payable, and exercise any of their rights under the
Credit Facility which includes the ability to foreclose on the Company's assets.

         Before reflecting the June 2002 amendments to the Credit Facility, the
Company was in violation of the financial covenants relating to its fixed charge
coverage ratio, minimum interest coverage ratio, and ratio of senior funded debt
to EBITDA at December 31, 2001 and March 31, 2002. These covenant violations
also resulted in violations and events of default of the subordinated debt under
the cross default provisions of the subordinated debt agreements. By amendment
to the Credit Facility entered into as of June 10, 2002, GECC waived these
defaults as well as violations relating to the Company's failure to timely
deliver its financial statements for the year ended December 31, 2001 as
required by the Credit Facility and selling certain assets in violation of the
terms of the Credit Facility. The Company agreed to pay GECC a fee of $100,000
in connection with entering into the amendment. The violations under the
subordinated debt agreements were waived by the debt-holders.

         Reference is made to the Credit Agreement, filed as an Exhibit to the
Company's Current Report on Form 8-K for September 14, 2001,. and the First and
Second Amendments thereto, filed as exhibits to the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, for a complete statement of the
terms and conditions.

         The Company continues to be highly leveraged and has an accumulated
deficit of $33 million. The Company is subject to certain debt covenants
requiring minimal operational and cash flow levels. Failure to comply with these
debt covenants and or generate sufficient cash flow from operations, could
significantly impair the Company's liquidity position and could result in the
lender exercising prepayment options under the Company's credit facility. While
the Company believes that it will have adequate borrowing base and cash flows,
it can make no assurances that it will comply with its debt covenants or
generate sufficient cash flows to service its debt and fund operations. Should
the Company be unable to borrow funds under its current credit facility or if
prepayment of those borrowings were required, it can make no assurances that
alternative funding could be obtained.


                                       22

<PAGE>


INFLATION

         The Company's revenues have been and are expected to continue to be
affected by fluctuations in the prices for oil and gas. Inflationary pressures
did not have a significant effect on the Company's operations in the three
months ended March 31, 2002.

SIGNIFICANT ACCOUNTING POLICIES

         The Company's discussion and analysis of its financial condition and
results of operations are based upon its financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to the allowance for bad debts,
inventory, long-lived assets, intangibles and goodwill. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

         The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

         The Company carries its inventory at historical cost less an allowance
based on motor hour usage. Inventory is written down for estimated obsolescence
or unmarketable inventory with such write down being equal to the difference
between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

         The Company assesses the impairment of identifiable intangibles,
long-lived assets and related goodwill annually or more frequently whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. When the Company determines that the carrying value of intangibles,
long-lived assets and related goodwill may not be recoverable, any impairment is
measured based on a projected net cash flows expected to result from that asset,
including eventual disposition. 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 of its goodwill.

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<PAGE>


         Property and equipment are carried at original cost less applicable
depreciation. Depreciation is recognized on the straight line basis over lives
ranging from two to ten years. Major renewals and improvements are capitalized
and depreciated over each asset's estimated remaining useful life. Maintenance
and repair costs are charged to expense as incurred. When assets are sold or
retired, the remaining costs and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in income.

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. The Company
intends that the forward-looking statements herein be covered by the safe-harbor
provisions for forward-looking statements contained in the Securities Exchange
Act of 1934, as amended, and this statement is included for the purpose of
complying with these safe-harbor provisions. Forward-looking statements include,
but are not limited to, the matters described herein, including Management's
Discussion and Analysis of Financial Condition and Results of Operations. Such
forward-looking statements relate to the Company's ability, to generate revenues
and attain and maintain profitability and cash flow, the 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 implement any of the
possible alternative means to maximize shareholder value in conjunction with its
agreement retaining Simmons 7 Company International, including any possible
merger, sale of assets or other business combination transaction involving the
Company or raising additional debt or equity capital, to maintain, implement
and, if appropriate, expand its cost-cutting program instituted in 1998, the
ability of the Company to compete in the premium services market, the ability of
the Company to meet or refinance its debt obligations as they come due or to
obtain extensions of the maturity dates for the payment of principal, the
ability of the Company to re-deploy 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, declines 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 the various risk factors referred to above 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. The Company cautions readers that various risk
factors

                                       24

<PAGE>


described in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 could cause the Company's operating results 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. Readers should refer to the Annual
Report on Form 10-K and the risk factors discussed therein.


PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

              None

(b)      Reports on Form 8-K

              None



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<PAGE>



                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                      BLACK WARRIOR WIRELINE CORP.
                                      ------------------------------------------
                                             (Registrant)


Date:  July 1,  2002                  /S/  William L. Jenkins
                                      ------------------------------------------
                                           William L. Jenkins
                                      President and Chief Executive  Officer


                                      /S/  Ronald Whitter
                                      ------------------------------------------
                                           Ronald Whitter
                                      Principal Financial and Accounting Officer



















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