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Delaware (State or other jurisdiction of incorporation or organization)		1389 (Primary Standard Industrial Classification Code Number)		39-0126090 (I.R.S. Employer Identification No.)

5075 Westheimer, Suite 890 Houston, Texas 77056 (713) 369-0550 (Address, including Zip Code, and telephone number, including area code, of registrant’s principal executive offices)		Victor M. Perez, Chief Financial Officer 5075 Westheimer, Suite 890 Houston, Texas 77056 (713) 369-0550 (Name, address, including Zip Code, and telephone number, including area code, of agent for service)

Joseph P. Bartlett, Esq. Greenberg Glusker Fields Claman Machtinger & Kinsella LLP 1900 Avenue of the Stars, Suite 2100 Los Angeles, California 90067 (310) 201-7481		Charles H. Still, Jr., Esq. Bracewell & Giuliani LLP 711 Louisiana Suite 2300 Houston, Texas 77002 (713) 221-3309

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The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

		Per Share				Total
Public offering price		$				$
Underwriting discount		$				$
Proceeds to us before expenses		$				$
Proceeds to selling stockholders		$				$

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		Page
PROSPECTUS SUMMARY			1
RISK FACTORS			7
USE OF PROCEEDS			13
DIVIDEND POLICY			13
PRICE RANGE OF COMMON STOCK			14
CAPITALIZATION			15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			16
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION			17
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			20
BUSINESS			39
MANAGEMENT			47
TRANSACTIONS WITH SELLING STOCKHOLDERS AND OTHER RELATED PARTIES			55
DESCRIPTION OF CAPITAL STOCK			58
PRINCIPAL AND SELLING STOCKHOLDERS			61
UNDERWRITING			66
WHERE YOU CAN FIND MORE INFORMATION			67
LEGAL MATTERS			67
EXPERTS			68
CERTAIN DEFINITIONS			69
INDEX TO FINANCIAL STATEMENTS			F-1
Consent of Gordon, Hughes and Banks, LLP
Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP
Consent of Johnson, Miller & Co.
Consent of Accounting & Consulting Group, LLP
Consent of Wright, Moore, Dehart, Dupuis & Hutchinson, LLC
Consent of Curtis Blakely & Co, PC
Consent of Accounting & Consulting Group, LLP

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	•	economic conditions in the United States and elsewhere;
	•	changes in global supply and demand for oil and natural gas;
	•	the level of production of the Organization of Petroleum Exporting Countries, commonly called “OPEC;”
	•	the level of production of non-OPEC countries;
	•	the price and quantity of imports of foreign oil and natural gas;
	•	political conditions, including embargoes, in or affecting other oil and natural gas producing activities;
	•	the level of global oil and natural gas inventories; and
	•	advances in exploration, development and production technologies.

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	•	curtailment of services
	•	weather-related damage to equipment resulting in suspension of operations;
	•	weather-related damage to our facilities;
	•	inability to deliver materials to jobsites in accordance with contract schedules; and
	•	loss of productivity.

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	•	impair our ability to obtain additional financing;
	•	make us more vulnerable to economic downturns and declines in oil and natural gas prices and declines in drilling activities; and
	•	make us more vulnerable to increases in interest rates.

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	•	our ability to obtain financing;
	•	the competitive environment for acquisitions; and
	•	the integration and synergy issues described in the next two risk factors.

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	•	Chief Executive Officer and Chairman Munawar H. Hidayatallah; and
	•	President and Chief Operating Officer David Wilde.

	•	terrorist acts, war and civil disturbances;

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	•	changes in laws or policies regarding the award of contracts; and
	•	the inability to collect or repatriate income or capital.

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		Year Ended
		December 31, 2003
		High				Low
First Quarter		$	4.50			$	0.55
Second Quarter			5.00				2.25
Third Quarter			4.50				2.60
Fourth Quarter			6.00				2.60

		Year Ended
		December 31, 2004
		High				Low
First Quarter		$	10.05			$	2.55
Second Quarter			10.25				4.25
Third Quarter			9.75				4.75
Fourth Quarter			5.40				3.25

		Year Ended
		December 31, 2005
		High				Low
First Quarter		$	7.25			$	3.64
Second Quarter			5.22				4.38
Third Quarter (through August 16, 2005)			14.70				5.65

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				At June 30, 2005
												Pro Forma
				Actual				Pro Forma(1)				As Adjusted(2)
								(unaudited)
								(in thousands)
Cash and cash equivalents				$	2,693			$	2,693			$
Long-term debt, including current maturities(3)				$	37,890			$	50,182			$	50,182
Stockholders’ Equity:
	Common stock: $0.01 par value, 20,000,000 shares authorized, 14,022,800, 14,022,800 and 15,022,400 shares issued and outstanding on an actual, pro forma and pro forma as adjusted basis(4)			$	140			$	140			$
	Additional paid-in capital				42,077				42,077
	Accumulated deficit				(2,022	)			(2,588	)
		Total stockholders’ equity		$	40,195			$	39,629			$
Total capitalization				$	78,085			$	89,811			$

(1)	Gives effect to the acquisition transactions described above in “Prospectus Summary — Summary Historical and Pro Forma Consolidated Financial Information.”
(2)	Gives effect to the acquisition transactions and this offering.
(3)	The actual long-term debt, including current maturities, consists of $17.9 million of borrowings under our principal credit facility, $13.0 million of borrowings by our subsidiary AirComp LLC, a $3.3 million 7.5% subordinated note payable by our subsidiary Jens’ Oilfield Service, Inc. and $3.7 million of other debt. We refinanced our principal credit facility and AirComp’s principal credit facility in July 2005. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments.” The pro forma and pro forma as adjusted long-term debt, including current maturities, include (a) borrowings under our new bank facilities of approximately $13.1 million to fund the cash required to acquire M-I’s interest in AirComp and W.T. Enterprises, Inc., and (b) a subordinated note in the amount of $4.0 million issued to M-I as partial consideration for its interest in AirComp, which additional debt was partially offset by the assignment to us by M-I of a subordinated note in the principal amount of $4.8 million issued by AirComp to M-I.
(4)	On August 16, 2005, we amended our certificate of incorporation to increase our authorized shares to 100,000,000 shares of common stock and 25,000,000 shares of preferred stock.

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																						Six Months Ended
		Year Ended December 31,																				June 30,
		2000				2001(1)				2002				2003				2004				2004				2005
																						(unaudited)
		(in thousands, except per share amounts)
STATEMENT OF OPERATIONS AND OTHER INFORMATION:
Revenues		$	—			$	4,796			$	17,990			$	32,724			$	47,726			$	21,083			$	42,922
Cost of revenues			—				3,331				14,640				24,029				35,300				15,947				30,482
Gross profit			—				1,465				3,350				8,695				12,426				5,136				12,440
General and administrative expense			383				2,898				3,792				6,169				8,011				2,956				7,279
Personnel restructuring costs			—				—				495				—				—				—				—
Abandoned acquisition/private placement costs			244				—				233				—				—				—				—
Post-retirement medical costs							—				(98	)			(99	)			188				—				—
Total operating expenses			627				2,898				4,422				6,070				8,199				2,956				7,279
Income (loss) from operations			(627	)			(1,433	)			(1,072	)			2,625				4,227				2,180				5,161
Other income (expense):
Interest income			—				41				49				3				32				—				—
Interest expense			—				(869	)			(2,256	)			(2,467	)			(2,808	)			(1,068	)			(1,166	)
Factoring costs on note receivable			—				—				(191	)			—				—				—				—
Settlement on lawsuit			—				—				—				1,034				—				—				103
Gain on sale of interest in AirComp			—				—				—				2,433				—				—				—
Other			—				(12	)			(40	)			12				272				205				55
Total other income (expense)			—				(840	)			(2,438	)			1,015				(2,504	)			(863	)			(1,008	)
Net income (loss) before income taxes and minority interest			(627	)			(2,273	)			(3,510	)			3,640				1,723				1,317				4,153
Minority interests in income of subsidiaries			—				—				(189	)			(343	)			(321	)			(212	)			(488	)
Provision for foreign income tax			—				—				(270	)			(370	)			(514	)			(220	)			(329	)
Net income (loss) from continuing operations			(627	)			(2,273	)			(3,969	)			2,927				888				885				3,336

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																							Six Months Ended
			Year Ended December 31,																				June 30,
			2000				2001(1)				2002				2003				2004				2004				2005
																							(unaudited)
			(in thousands, except per share amounts)
(Loss) from discontinued operations				—				(291	)			—				—				—				—				—
(Loss) from sales of discontinued operations				—				(2,013	)			—				—				—				—				—
Net (loss) from discontinued operations				—				(2,304	)			—				—				—				—				—
Net income (loss)				(627	)			(4,577	)			(3,969	)			2,927				888				885				3,336
Preferred stock dividend				—				—				(321	)			(656	)			(124	)			(124	)			—
Net income (loss) attributed to common stockholders			$	(627	)		$	(4,577	)		$	(4,290	)		$	2,271			$	764			$	761			$	3,336
Income (loss) per common share — basic
	Continuing operations		$	(7.84	)		$	(2.88	)		$	(1.14	)		$	0.58			$	0.10			$	0.15			$	0.24
	Discontinued operations			—				(2.91	)			—				—				—				—				—
			$	(7.84	)		$	(5.79	)		$	(1.14	)		$	0.58			$	0.10			$	0.15			$	0.24
Income (loss) per common share — diluted
	Continuing operations		$	(7.84	)		$	(2.88	)		$	(1.14	)		$	0.50			$	0.09			$	0.13			$	0.22
	Discontinued operations			—				(2.91	)			—				—				—				—				—
			$	(7.84	)		$	(5.79	)		$	(1.14	)		$	0.50			$	0.09			$	0.13			$	0.22
Weighted average number of common shares outstanding:
	Basic			80				790				3,766				3,927				7,930				5,091				13,800
	Diluted			80				790				3,766				5,850				9,510				6,907				14,900
Adjusted EBITDA(2)			$	(627	)		$	(330	)		$	1,509			$	5,561			$	7,805			$	3,787			$	7,987

		As of December 31,																				As of
																						June 30,
		2000				2001				2002				2003				2004				2005
																						(unaudited)
		(in thousands, except per share amounts)
BALANCE SHEET INFORMATION:
Cash and cash equivalents		$	4			$	152			$	146			$	1,299			$	7,344			$	2,693
Total assets			2,360				12,465				34,778				53,662				80,192				95,299
Long-term debt (including current portion)			—				7,856				21,221				32,233				30,473				37,890
Stockholders’ equity			2,348				1,250				1,009				4,541				35,109				40,195

(1)	We entered the oil and gas service business in 2001. We sold our last non-oil and gas service business in December 2001, which is reflected in our financial statements for 2001 as a discontinued operation.
(2)	“Adjusted EBITDA” is a non-GAAP financial measure of earnings (net income) from continuing operations before interest, taxes, depreciation, amortization, gain on asset sales and litigation settlements, minority interest and other income and expense. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be

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	considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

	•	It is widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired among other factors;
	•	It helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure; and
	•	It is used by our management for various purposes, including as a measure of operating performance, in presentations to its board of directors, as a basis for strategic planning and forecasting, and as a component for setting incentive compensation.

There are material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring and non-recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies. The following table reconciles Adjusted EBITDA to our net income, the most directly comparable GAAP financial measure:

																						Six Months Ended
		Year Ended December 31,																				June 30,
		2000				2001				2002				2003				2004				2004				2005
																						(unaudited)
		(in thousands)
Adjusted EBITDA		$	(627	)		$	(330	)		$	1,509			$	5,561			$	7,805			$	3,787			$	7,987
Depreciation and amortization			—				(1,103	)			(2,581	)			(2,936	)			(3,578	)			(1,607	)			(2,826	)
GAAP income (loss) from operations			(627	)			(1,433	)			(1,072	)			2,625				4,227				2,180				5,161
Interest expense, net			—				(828	)			(2,207	)			(2,464	)			(2,776	)			(1,068	)			(1,166	)
Income taxes			—				—				(270	)			(370	)			(514	)			(220	)			(329	)
Gain in assets sales and litigation			—				—				—				3,467				—				—				103
Minority interest and other expense			—				(12	)			(420	)			(331	)			(49	)			(7	)			(433	)
Net income (loss)			(627	)			(2,273	)			(3,969	)			2,927				888				885				3,336

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	•	For all periods involved we had not applied the treasury stock method of accounting for options and warrants as prescribed in SFAS No. 128. Specifically, we overstated diluted shares outstanding because we failed to reduce diluted shares outstanding by the number of shares that could be purchased with the proceeds to us from the exercise of dilutive warrants and options.
	•	In 2003 and 2004, we overstated diluted shares by not correctly calculating the number of common shares into which our preferred stock was convertible; by not applying the “if converted” method of calculating diluted net earnings which requires that dividends actually paid on preferred stock be added to net income attributed to common shares in calculating diluted earnings per common share; and by continuing to report the preferred shares as dilutive after the preferred shares were converted to common stock on April 2, 2004.
	•	During the third quarter of 2004, we misstated the number of common shares outstanding on a weighted average basis due to a mathematical error in calculating the number of days certain shares issued during the quarter were outstanding.

	•	The addition of experienced accounting personnel with appropriate experience and qualifications to perform quality review procedures and to satisfy our financial reporting obligation. During August 2004, we hired a new chief financial officer and in October of 2004 we hired an in-house general counsel. In March 2005, we hired a certified public accountant as our financial reporting manager and in July 2005 we hired as chief accounting officer a certified public accountant who has significant prior experience as a chief accounting officer of a publicly traded company.
	•	In the fourth quarter of 2004, we engaged an independent internal controls consulting firm which is in the process of documenting, analyzing, identifying and testing our internal controls and

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		procedures, including our controls over internal financial reporting. Our audit committee dismissed our prior independent auditors in October 2004 and engaged new independent auditors who we believe have greater experience with publicly traded companies.
	•	We are in the process of implementing new accounting software to facilitate timely and accurate reporting.

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		Revenues												Income (Loss) from Operations
		Six Months Ended June 30,												Six Months Ended June 30,
		2004				2005				Change				2004				2005				Change
		(in thousands)
Directional drilling services		$	11,675			$	20,835			$	9,160			$	1,389			$	3,373			$	1,984
Casing and tubing services			4,386				7,493				3,107				1,225				2,679				1,454
Compressed air drilling services			5,022				9,047				4,025				594				1,529				935
Production services			—				3,607				3,607				—				(2	)			(2	)
Rental tools			—				1,940				1,940				—				326				326
General corporate			—				—				—				(1,028	)			(2,744	)			(1,716	)
Total		$	21,083			$	42,922			$	21,839			$	2,180			$	5,161			$	2,981

	Directional Drilling Services Segment

	Casing and Tubing Services Segment

	Compressed Air Drilling Services Segment

	Production Services Segment

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		Revenues												Income (Loss) from Operations
		Year Ended December 31,												Year Ended December 31,
		2003				2004				Change				2003				2004				Change
		(in thousands)
Directional drilling services		$	16,008			$	24,787			$	8,779			$	1,103			$	3,061			$	1,958
Casing and tubing services			10,037				10,391				354				3,628				3,217				(411	)
Compressed air drilling services			6,679				11,561				4,882				17				1,169				1,152
Other services			—				987				987				—				(67	)			(67	)
General corporate			—				—				—				(2,123	)			(3,153	)			(1,030	)
Total		$	32,724			$	47,726			$	15,002			$	2,625			$	4,227			$	1,602

	Directional Drilling Services Segment

	Casing and Tubing Services Segment

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	Compressed Air Drilling Services Segment

	Other Services Segment

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		Revenues												Income (Loss) from Operations
		2002				2003				Change				2002				2003				Change
		(in thousands)
Directional drilling services		$	6,529			$	16,008			$	9,479			$	(576	)		$	1,103			$	1,679
Casing and tubing services			7,796				10,037				2,241				2,495				3,628				1,133
Compressed air drilling services			3,665				6,679				3,014				(945	)			17				962
General corporate			—				—				—				(2,046	)			(2,123	)			(77	)
Total		$	17,990			$	32,724			$	14,734			$	(1,072	)		$	2,625			$	3,697

	Directional Drilling Services Segment

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	Casing and Tubing Services Segment

	Compressed Air Drilling Services Segment

	Operating Activities

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	Investing Activities

	Financing Activities

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	•	A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $6.9 million as of June 30, 2005.
	•	A term loan with a principal balance at June 30, 2005 of $5.1 million providing for monthly payments of principal of $105,583. We were also required to prepay this term loan by an amount equal to 20% of the accounts receivables collections from our largest customer in Mexico.
	•	A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility were payable monthly over four years beginning January 2006. Availability of this capital expenditure term loan facility was subject to security acceptable to the lender in the form of equipment or other acquired collateral. Outstanding borrowings under this line of credit were $6.0 million as of June 30, 2005.

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	•	A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible accounts receivables plus 50% of eligible inventory (up to a maximum of $2.0 million of borrowings based on eligible inventory). This facility will be used to finance working capital requirements and other general corporate purposes, including the issuance of standby letters of credit.
	•	An $18.0 million term loan.
	•	A $24.0 million term loan.

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	•	A $3.5 million bank line of credit of which $520,000 was outstanding at June 30, 2005. Interest accrued at an adjustable rate based on the prime rate. The average interest rate was 7.0% as of June 30, 2005. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line of credit were subject to a borrowing base consisting of 80% of eligible accounts receivable.
	•	A term loan with a remaining principal balance of $6.2 million at June 30, 2005 which accrued interest at an adjustable rate based on either the London Interbank Offered Rate, which is referred to as LIBOR, or the prime rate. The average interest rate was 8.25% as of June 30, 2005. Principal payments of $286,000 plus interest were due quarterly with a final maturity date of June 27, 2007.
	•	A “delayed draw” term loan facility in the amount of $1.5 million to be used for capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or the prime rate. The loan was to mature on June 27, 2007. The outstanding principal balance was $1.5 million as of June 30, 2005.

		Payments by Periods
						Less than
Contractual Obligations		Total				1 Year				2 – 3 Years				4 – 5 Years				After 5 Years
		(in thousands)
Notes Payable		$	30,473			$	5,541			$	17,406			$	7,526			$	—
Interest Payments on notes payable			2,133				316				1,470				346				—
Operating Lease			1,834				550				813				471				—
Employment Contracts			2,566				1,006				1,560				—				—
Total Contractual Cash Obligations		$	37,006			$	7,413			$	21,249			$	8,343			$	—

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	•	Oil and gas exploration and production companies are currently consolidating their supplier base to streamline their purchasing operations and generate economies of scale by purchasing from fewer suppliers;
	•	Producers are favoring larger suppliers that provide a comprehensive list of products and services;
	•	Companies that can meet customers’ demands will continue to earn new and repeat business;
	•	Many businesses in the highly fragmented oilfield industry lack sufficient size (many businesses generate annual revenues of less than $15 million), lack depth of management (many businesses are family-owned and managed) and have less sophisticated service and control capabilities;
	•	We can offer customers significant advantages over our smaller competitors; and
	•	Opportunities exist to acquire competing businesses and successfully integrate and enhance their operations within our operating structure.
	•	Consolidation among larger oilfield service providers has created an opportunity for us to compete effectively in certain niche markets which are under-served by the large oilfield service and equipment companies and in which we can provide better products and services than the smaller competitors currently providing a significant portion of the services in this industry.

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	•	Improvement of total cumulative recoverable reserves;
	•	Improved reservoir production performance beyond conventional vertical wells; and
	•	Reduction of the number of field development wells.

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Name		Age				Position
Munawar H. Hidayatallah			61			Chairman and Chief Executive Officer
David Wilde			50			President and Chief Operating Officer
Victor M. Perez			52			Chief Financial Officer
Theodore F. Pound III			51			General Counsel and Secretary
Bruce Sauers			41			Vice President and Corporate Controller
Todd C. Seward			43			Vice President — Corporate Systems
Alya H. Hidayatallah			30			Vice President — Planning and Development
Terrence P. Keane			53			President and Chief Executive Officer of AirComp
David K. Bryan			47			President and Chief Executive Officer of Strata
Jens H. Mortensen, Jr.			52			Vice Chairman
John E. McConnaughy, Jr.			76			Director(1)
Victor F. Germack			65			Director(1)
David A. Groshoff			33			Director(1)
Thomas E. Kelly			50			Director(2)
Thomas O. Whitener, Jr.			58			Director(2)(3)
Robert E. Nederlander			72			Director(3)
Jeffrey R. Freedman			58			Director
Leonard Toboroff			72			Vice Chairman

(1)	Member of Audit Committee
(2)	Member of Compensation Committee
(3)	Member of Nominating Committee

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																		Long Term
																		Compensation
						Annual Compensation												Awards Securities
														Other Annual				Underlying
Name and Principal Position		Year				Salary ($)				Bonus ($)				Compensation(1)				Options/SARS (#)
Munawar H. Hidayatallah,			2004				337,500				580,000	(2)			3,375				—
Chairman & Chief Executive Officer			2003				300,000	(3)			81,775				3,000				400,000
			2002				294,666	(4)			143,000				—				—
David Wilde,			2004				200,000				188,364				1,672				110,000
President and Chief Operating			2003				187,626				30,000				1,876				100,000
Officer(5)			2002				146,393				—				—				—
Jens H. Mortensen, Jr.,			2004				150,000				—				1,500				—
Vice-Chairman(6)			2003				150,000				—				1,500				100,000
			2002				137,500				—				—				—
Terrence P. Keane,			2004				153,508				50,000				—				—
President and Chief Executive Officer			2003				72,086				—				—				—
of AirComp(7)			2002				—				—				—				—
Todd C. Seward,			2004				131,000				65,500	(8)			650				—
Chief Accounting Officer(9)			2003				123,192				40,000				1,232				30,000
			2002				35,000				—				—				—

(1)	Represents contributions to 401K plans. We match contributions made by all employees up to a maximum 1% of each employee’s salary.
(2)	Of this amount $175,000 was paid in 2005. The bonuses awarded to Mr. Hidayatallah for fiscal years 2002 and 2003 were determined pursuant to his 2001 employment agreement, based on acquisitions completed for fiscal years 2002 and 2003, and the bonus for fiscal year 2004 was based on Mr. Hidayatallah’s attaining certain strategic objectives set forth in his 2004 employment agreement (see, “Employment Agreements with Management,” below).

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(3)	Of this amount, $60,000 was deferred and paid during 2004.
(4)	Of this amount, $65,000 was deferred and paid during 2003.
(5)	Mr. Wilde was President and Chief Executive Officer of Strata, one of our subsidiaries, until February 2005 when he was named our President and Chief Operating Officer.
(6)	Mr. Mortensen served as President of Jens’ since we acquired Jens’ in February 2002 until February 2005 and served as our President and Chief Operating Officer from February 2003 until February 2005.
(7)	Mr. Keane serves as President and Chief Executive Officer of AirComp, LLC and as such is considered an executive officer.
(8)	Of this amount, $32,500 was paid in 2005.
(9)	In July 2005, Mr. Seward became our Vice President — Corporate Systems.

Individual Grants

Potential Realizable

Value at Assumed Annual

Number of

% of Exercise

Rates of Stock Price

Securities

Options/SARs

Exercise

Appreciation for Option

Underlying

Granted to

Price

Terms(3)

Options/SARs

Employees

per Share

Expiration

Name

Granted(1)

in 2004

($/Sh)(2)

Date

5% ($)

10% ($)

David Wilde

110,000

42.5

%

$

4.85

9/23/2014

$

335,515

$

850,965

(1)	All options were granted under our 2003 Incentive Stock Plan. All options granted by us to date vest and become exercisable in three equal installments, one of which vested upon the grant of the options and one of which will vest upon each of the first and second anniversaries of the date of grant of option, provided that all options will become fully exercisable upon the occurrence of a change of control (as defined in the 2003 Incentive Stock Plan). At our annual meeting of stockholders held on August 11, 2005, stockholders approved a proposal to increase the number of shares of our common stock that may be granted under our 2003 Incentive Stock Plan from 2,400,000 shares to the lesser of 3,000,000 shares and 15% of the total number of our shares outstanding from time to time on a fully-diluted basis.
(2)	The exercise price for these options is equal to the fair market value of the common stock on September 28, 2004, the date of grant. The exercise price may be paid in cash or in shares of common stock valued at the fair market value on the exercise date.
(3)	The 5% and 10% assumed rates of appreciation are prescribed by the rules and regulations of the Securities and Exchange Commission and do not represent our estimate or projection of the future trading prices of our common stock. The calculations assume annual compounding and continued retention of the options or the underlying common stock by the optionee for the full option term of ten years. Unless the market price of the common stock actually appreciates over the option term, no value will be realized by the optionee from these option grants. Actual gains, if any, on stock option exercises are dependent on numerous factors, including, without limitation, the future performance of the Company, overall business and market conditions, and the optionee’s continued employment with the Company throughout the entire vesting period and option term, which factors are not reflected in this table.

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		Number of Securities								Value of Unexercised
		Underlying Unexercised								In-the-Money
		Options/SARs								Options/SARs
		at Fiscal Year-End (#)								at Fiscal Year-End ($)(1)
Name		Exercisable				Unexercisable				Exercisable				Unexercisable
Munawar H. Hidayatallah			266,667				133,333				573,348				286,674
Jens H. Mortensen, Jr.			66,667				33,333				143,337				71,669
David Wilde			103,334				106,666				145,170				75,335
Terrence P. Keane			—				—				—				—
Todd C. Seward			20,000				10,000				43,000				21,500

(1)	Based on a value of $4.90 per share, the closing price per share on the American Stock Exchange on December 31, 2004, less the exercise price.

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	•	restricting dividends on the common stock;
	•	diluting the voting power of the common stock;

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	•	impairing the liquidation rights of the common stock; and
	•	delaying or preventing a change in control of our Company.

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																						Shares Owned After Offering
																						Shares
		Shares Owned Prior to Offering																Shares Being				Beneficially				%
																		Offered				Owned Upon				Beneficially
		Shares				%				Shares				%				Pursuant				Completion of				Owned Upon
		Owned				of				Beneficially				Beneficially				to this				this				Completion of
Name		Directly(1)				Outstanding(1)				Owned(2)				Owned(2)(3)				Prospectus				Offering(2)				this Offering(3)
Selling Stockholders:
Energy Spectrum Partners LP(4)			2,579,562				18.4				7,343,005				46.7				2,579,562				—				—
CTTV Investments LLC(5)			195,708				1.4				195,708				1.4				195,708				—				—
Tom Whittington			167,336				1.2				167,336				1.2				167,336				—				—
M Bar Ranch, L.P.(6)			141,255				1.0				141,255				1.0				141,255				—				—
Meadowbrook Opportunity Fund(7)			180,000				1.3				180,000				1.3				80,000				100,000				*
Dale Redman			94,307				*				94,307				*				80,000				14,307				*
Thomas E. Kelly(8)			94,201				*				94,201				*				80,000				14,201				*
Werlyn Bourgeois			55,778				*				55,778				*				55,778				—				—
Wells Fargo Credit, Inc.(9)			30,000				*				30,000				*				30,000				—				—
Andrew Mills			13,453				*				13,453				*				13,453				—				—
Mike Wilhite			13,453				*				13,453				*				13,453				—				—
Nagi Soas			166,423				1.2				166,423				1.2				166,423				—				—
Morgan Joseph and Co., Inc.(10)			340,000				2.4				340,000				2.4				340,000				—				—
John E. McConnaughy, Jr.(11)			300,000				2.1				300,000				2.1				200,000				100,000				*
Emily J. Kelly(12)			2,000				*				2,000				*				2,000				—				—
Winston S. Kelly(12)			2,000				*				2,000				*				2,000				—				—
Kathryn E. Kelly(12)			2,000				*				2,000				*				2,000				—				—
Audra G. Hocutt(12)			2,000				*				2,000				*				2,000				—				—
Miranda R. Hocutt(12)			2,000				*				2,000				*				2,000				—				—
Todd A. Seward(13)			20,000				*				10,000				*				10,000				10,000				*
Total Number of Shares to be Sold by Selling Stockholders																			4,162,968
Other Officers and Directors:
David K. Bryan(28)			45,334				*				45,334				*				—				45,334				*
Jeffrey R. Freedman(14)			119,000				*				119,000				*				—				119,000				*
Victor F. Germack(15)			—				—				—				—				—				—				—
David A. Groshoff(16)			4,000				*				4,000				*				—				4,000				*
Munawar H. Hidayatallah(17)			1,311,667				9.1				7,343,005				46.7				—				1,311,667				8.3
Terrence P. Keane(18)			8,334				*				8,334				*				—				8,334				*

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																						Shares Owned After Offering
																						Shares
		Shares Owned Prior to Offering																Shares Being				Beneficially				%
																		Offered				Owned Upon				Beneficially
		Shares				%				Shares				%				Pursuant				Completion of				Owned Upon
		Owned				of				Beneficially				Beneficially				to this				this				Completion of
Name		Directly(1)				Outstanding(1)				Owned(2)				Owned(2)(3)				Prospectus				Offering(2)				this Offering(3)
Jens H. Mortensen(31)			1,567,258				11.2				7,343,005				46.7				—				1,567,258				10.2
Robert E. Nederlander(19)			715,594				5.1				7,343,005				46.7				—				715,594				4.6
Victor M. Perez(29)			18,333				*				18,333				*				—				18,333				*
Theodore F. Pound(30)			21,667				*				21,667				*				—				21,667				*
Leonard Toboroff(20)			695,593				4.9				7,343,005				46.7				—				695,593				4.4
Thomas O. Whitener, Jr.(21)			—				—				7,343,005				46.7				—				—				—
David Wilde(22)			175,000				1.2				175,000				1.2				—				175,000				1.1
All directors and executive officers as a group (18 persons)(23)			7,710,542				49.0				8,183,873				51.0				2,869,562				4,840,980				29.0
Other Stockholders:
Christopher Engel(24)			260,438				1.9				7,343,005				46.7				—				260,438				1.7
Donald Engel(25)			212,893				1.5				7,343,005				46.7				—				212,893				1.4
Palo Alto Investors(26)			1,666,667				11.9				1,666,667				11.9								1,666,667				10.9
Steve Emerson(27)			1,174,000				8.4				1,174,000				8.4				—				1,174,000				7.7

	*	less than one percent

	(1)	The number of shares listed as owned directly includes all shares of common stock owned by, or which may be obtained within 60 days upon the exercise of warrants and options held by, the stockholder (or group) and the stockholder’s (or group’s) affiliates. This amount excludes other shares deemed to be beneficially owned under the rules of the Securities and Exchange Commission, including shares deemed to be beneficially owned as a result of the stockholders agreement described in “Transactions With Selling Stockholders and Other Related Parties — Stockholders Agreement,” which we refer to herein as the stockholders agreement. Under the rules of the Securities and Exchange Commission, all parties to the stockholders agreement may be deemed to beneficially own all common stock beneficially owned by each party to the stockholders agreement. Percentage ownership is based upon 14,022,800 shares of common stock of the Registrant issued and outstanding as of August 4, 2005.
	(2)	Beneficial ownership is calculated in accordance with the rules of the Securities and Exchange Commission and includes, with respect to each stockholder, the shares described in footnote (1) plus the shares the stockholder is deemed to beneficially owned in accordance with the rules of the Securities and Exchange Commission, including as a result of being a party to the stockholders agreement.
	(3)	Percentage of shares beneficially owned is calculated in accordance with the rules of the Securities and Exchange Commission.
	(4)	Energy Spectrum includes Energy Spectrum Partners LP, a Delaware limited partnership, the principal business of which is investments, Energy Spectrum Capital LP, a Delaware limited partnership, the principal business of which is serving as the general partner of Energy Spectrum Partners LP, Energy Spectrum LLC, a Texas limited liability company, the principal business of which is serving as the general partner of Energy Spectrum Capital, and Sidney L. Tassin, James W. Spann, James P. Benson, Leland B. White and Thomas O. Whitener, Jr., executives and principals of the foregoing persons. The principal business address of each of the foregoing persons is 5956 Sherry Lane, Suite 900, Dallas, Texas 75225. Messrs. Tassin, Spann, Benson, White and Whitener are the members and managers of Energy Spectrum LLC, and Messrs. Tassin (President), Whitener (Chief Operating Officer) and Spann (Chief Investment Officer) are executive officers of Energy Spectrum LLC. Mr. Whitener is a principal of Energy Spectrum Partners LP’s affiliates and the other persons listed above are also deemed to beneficially own the securities held of record by Energy Spectrum Partners LP. Energy Spectrum Partners LP is the record owner of

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		2,311,062 shares of our common stock, warrants to purchase 262,500 shares of common stock with an exercise price of $0.75 per share, or $196,875 in the aggregate, and an option to purchase 6,000 shares of common stock granted under our 2003 Incentive Stock Plan with an exercise price of $2.75 per share, or $16,500 in the aggregate. Pursuant to the terms of the warrants and the options, the selling stockholder may acquire the number of shares subject to the warrants and options for cash or, in lieu of an exercise for cash, may acquire a number of shares equal to the number of shares subject to the warrant or option less that number of shares having a value (based on the average closing price of our common stock on the American Stock Exchange on the ten trading days preceding the date of exercise) equal to the cash exercise price of the warrants and options (a cashless exercise). It is currently contemplated that the warrants and options will be exercised on a cashless basis and that we will not receive any proceeds from the exercise of the warrants and the options. If the warrants and options are exercised on August 18, 2005, as currently contemplated, we will reduce the number of shares issuable upon exercise of the warrants by 16,557 shares and will issue 245,943 shares upon exercise of the warrants, and will reduce the number of shares issuable upon exercise of the options by 1,387 shares and will issue 4,613 shares upon exercise of the options. The shares being offered by this selling stockholder will include all shares exercisable upon exercise of the warrants and options. Energy Spectrum is also deemed to beneficially own 4,763,443 shares of common stock that are owned by (or that may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the stockholders agreement.
	(5)	CTTV Investments LLC is a subsidiary of Chevron Corporation, a publicly traded company.
	(6)	Wesley J. Mahone exercises investment and voting authority with respect to the shares owned by this selling stockholder.
	(7)	MYR Pautreus, LLC and its Managing Member, Michael Ragins, exercise investment and voting authority with respect to the shares owned by this selling stockholder.
	(8)	Mr. Kelly’s address is 450 North Marienfield, Suite 200, Midland, Texas 79701.
	(9)	The number of shares indicated in the above table as beneficially owned by Wells Fargo Credit, Inc. represents shares that may be acquired by Wells Fargo Credit within 60 days upon the exercise of warrants issued to it by us. The warrants are exercisable for 30,000 shares at an exercise price of $0.50 per share, or $15,000 in the aggregate. Pursuant to the terms of the warrants, Wells Fargo Credit may acquire shares of our common stock upon exercise of the warrants for cash or, in lieu of an exercise for cash, may acquire a number of shares equal to 30,000 less that number of shares having a value (based on the closing sale price of our common stock on the trading day immediately prior to the date of exercise) equal to the cash exercise price (a cashless exercise). It is currently contemplated that the warrants will be exercised on a cashless basis. If the warrants and options are exercised on August 18, 2005, as currently contemplated, we will reduce the number of shares issuable upon exercise of the warrants by 1,358 shares and will issue 28,642 shares upon exercise of the warrants. The shares being offered by this selling stockholder will include all shares exercisable upon exercise of the warrants.

(10)

The number of shares indicated in the above table as beneficially owned by Morgan Joseph and Co., Inc. represents shares that may be acquired by Morgan Joseph within 60 days upon the exercise of warrants issued to it by us. The warrants are exercisable for 340,000 shares at an exercise price of $2.50 per share, or $850,000 in the aggregate. Pursuant to the terms of the warrants, the selling stockholder may acquire the number of shares subject to the warrants for cash or, in lieu of an exercise for cash, may acquire a number of shares equal to the number of shares subject to the warrant less that number of shares having a value (based on the average closing price of our common stock on the American Stock Exchange on the ten trading days preceding the date of exercise) equal to the cash exercise price of the warrants (a cashless exercise). It is currently contemplated that the warrants will be exercised on a cashless basis. If the warrants are exercised on August 18, 2005, as currently contemplated, we will reduce the number of shares issuable upon exercise of the warrants by 71,488 shares and will issue 268,512 shares upon exercise of the warrants

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	The shares being offered by this selling stockholder will include all shares exercisable upon exercise of the warrants.
(11)	Includes 300,000 shares of common stock owned by Mr. McConnaughy. Mr. McConnaughy’s address is 2 Parklands Drive, Darien, CT 06820.
(12)	These selling stockholders are the children of Thomas E. Kelly.
(13)	The number of shares indicated in the above table as beneficially owned by Mr. Seward represents shares that may be acquired by Mr. Seward within 60 days upon the exercise of options issued pursuant to our 2003 Incentive Stock Plan. The options are currently exercisable for 20,000 shares at an exercise price of $2.75 per share, or $55,000 in the aggregate. Pursuant to the terms of our 2003 Incentive Option Plan, the selling stockholder may acquire the number of shares subject to the options for cash or, in lieu of an exercise for cash, may acquire a number of shares equal to the number of shares subject to the option less that number of shares having a value (based on the average closing price of our common stock on the American Stock Exchange on the ten trading days preceding the date of exercise) equal to the cash exercise price (a cashless exercise). It is currently contemplated that the options will be exercised on a cashless basis and the shares being offered by this selling stockholder will be those shares issued upon the exercise of the option with respect to 10,000 shares. If the options are exercised on August 18, 2005, as currently contemplated, we will reduce the number of shares issuable upon exercise of the options by 2,312 shares and will issue 7,688 shares upon exercise of the options. These shares will be offered by the selling stockholder.
(14)	Includes 103,000 shares owned by this stockholder and 16,000 shares which may be issued upon the exercise of warrants owned by this stockholder. Mr. Freedman’s address is 123 Via Verde Way, Palm Beach, FL 33418.
(15)	Mr. Germack’s address is 845 3rd Avenue, Suite 1410, New York, New York, 10022
(16)	Includes 2,000 shares of common stock and currently exercisable options to purchase 2,000 shares of common stock owned by Mr. Groshoff. Mr. Groshoff’s address is 8044 Montgomery Rd., Suite 480, Cincinnati, OH 45236.
(17)	Shares owned directly include (i) 875,000 shares owned by the Hidayatallah Family Trust and (ii) 466,667 shares that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Shares beneficially owned include 6,031,338 shares that are owned by (or may be obtained within sixty days upon the exercise of options and warrants held by) the other parties to the stockholders agreement. Mr. Hidayatallah, our Chief Executive Officer and Chairman, exercises investment and voting authority with respect to 875,000 shares of common stock owned by the Hidayatallah Family Trust. Mr. Hidayatallah’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(18)	Includes 8,334 shares of common stock that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Mr. Keane’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(19)	Shares owned directly include (i) 446,528 shares of common stock owned directly by Mr. Nederlander or by RER Corp. or QEN Corp., corporations controlled by Mr. Nederlander, and (ii) currently exercisable options and warrants to purchase 269,066 shares of common stock owned directly by Mr. Nederlander or RER Corp. Shares beneficially owned include 6,627,411 shares of common stock that are owned by (or may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the stockholders agreement. Mr. Nederlander’s address is 1450 Broadway, Suite 2001, New York, NY 10018.
(20)	Shares owned directly include (i) 326,527 shares of common stock owned directly by Mr. Toboroff or Lenny Corp., a corporation wholly-owned by Mr. Toboroff, and (ii) currently exercisable options and warrants to purchase 369,066 shares of common stock owned directly by Mr. Toboroff. Shares beneficially owned include 6,647,412 shares of common stock that are owned by (or may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the

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	stockholders agreement described below. Mr. Toboroff’s address is 1450 Broadway, Suite 2001, New York, NY 10018.

(21)	Shares beneficially owned include the shares beneficially owned by Energy Spectrum described in Note (4).
(22)	Shares owned directly include (i) 5,000 shares of common stock owned of record by Mr. Wilde, and (ii) 170,000 shares that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Mr. Wilde’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(23)	Includes shares described in Notes (5), (10) and (12) through (22) as well as shares owned by (or which may be obtained within 60 days upon the exercise of warrants held by) our other executive officers.
(24)	Shares listed as owned directly include (i) 77,461 shares owned by this stockholder, (ii) 99,950 shares which may be issued upon the exercise of warrants owned by this stockholder, (iii) 36,251 shares owned by the Engel Defined Benefit Plan and (iv) 46,776 shares which may be issued upon the exercise of warrants owned by the Engel Defined Benefit Plan. Christopher Engel exercises investment and voting authority with respect to securities owned by Engel Defined Benefit Plan. Shares listed as beneficially owned include 7,082,567 shares owned by (or that may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the stockholders agreement.
(25)	Shares owned directly include 92,953 shares owned by this stockholder and 119,940 shares which may be issued upon the exercise of warrants owned by this stockholder. Shares listed as beneficially owned include 7,165,594 shares owned by (or that may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the stockholders agreement.
(26)	Consists of 920,000 shares, 666,667 shares and 80,000 shares owned by Micro Cap Partners, L.P., UBTI Free, L.P. and Palo Alto Global Energy Fund, L.P., respectively. Palo Alto Investors, LLC acts as the general partner of Micro Cap Partners, L.P., UBTI Free, L.P. and Palo Alto Global Energy Fund, L.P. Palo Alto Investors, Inc. is the manager of Palo Alto Investors, LLC, and William L. Edwards is the President of Palo Alto Investors, Inc. Palo Alto Investors, LLC, Palo Alto Investors, Inc. and William L. Edwards each have investment and voting authority with respect to the shares owned by this stockholder. The business address for each of theses persons is 470 University Avenue, Palo Alto, CA 94301.
(27)	Mr. Emerson’s address is 1522 Ensley Avenue, Los Angeles, California 90024.
(28)	Includes 33,334 shares of common stock that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Mr. Bryan’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(29)	Includes 18,333 shares of common stock that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Mr. Perez’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(30)	Includes 16,667 shares of common stock that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Mr. Pound’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.
(31)	Shares owned directly include (i) 1,500,591 shares of common stock owned of record by Mr. Mortensen, and (ii) 66,667 shares that may be issued within 60 days upon the exercise of options granted under our 2003 Incentive Stock Plan. Shares beneficially owned include 5,775,747 shares of common stock that are owned by (or may be obtained within 60 days upon the exercise of options and warrants held by) the other parties to the stockholders agreement described below. Mr. Mortensen’s address is 5075 Westheimer, Suite 890, Houston, Texas 77056.

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Per Share

Total

Without Option

With Option

Underwriting discount paid by us

Underwriting discount paid by selling stockholders

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“blow out preventers”		Large safety devices placed on the surface of a well to maintain high pressure well bores.
“booster”		A machine that increases the volume of air when used in conjunction with a compressor or a group of compressors.
“casing”		The pipe placed in a drilled well to secure the well bore and formation.
“casing tongs”		Hydraulic wrenches used to screw casing pipes together.
“directional drilling”		The technique of drilling a well with varying the angle of direction of a well and changing the direction of a well to hit a specific target.
“drill pipe”		A pipe that attaches to the drill bit to drill a well.
“heavy weight spiral drill pipe”		Heavy drill pipe used for special applications primarily in directional drilling. The ‘spiral‘ design increases flexibility and penetration of the pipe.
“horizontal drilling”		The technique of drilling wells at a 90-degree angle.
“lay down machines”		A truck mounted machine used to move pipe and casing and tubing onto a pipe rack (from which a derrick crane lifts the drill pipe, casing and tubing and inserts it into the well).
“links”		Adaptors that fit on the blocks to attach handling tools.
“LWD” or “log while drilling”		The technique of measuring, in real time, the formation pressure and the position of equipment inside of a well.
“MWD” or “measurement while drilling”		The technique used to measure direction and angle while drilling a well.
“protectors”		A device placed on a drill pipe and casing pipe to protect the threads.
“reciprocating compressor”		A piston type compressor that constantly pushes air with reciprocating pistons.
“screw compressor”		A compressor that utilizes a positive displacement mechanism.
“slips”		Tools used to hold casing in place while installing casing in wells.
“spacer spools”		High pressure connections or links which are stacked to elevate the blow out preventers to the drilling rig floor.
“test plugs”		A device used to test the connections of well heads and the blow out preventers.
“torque turn service”		Monitoring device to insure proper makeup of the casing.
“tubing”		A pipe placed inside the casing to allow the well to produce.
“under balanced drilling”		A technique in which oil, gas, or geothermal wells are drilled by creating a pressure within the well that is lower than the reservoir pressure. The result is increased rate of penetration, reduced formation damage, and reduced drilling costs.

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ALLIS-CHALMERS ENERGY INC.
Reports of Independent Registered Public Accounting Firms		F-4
Consolidated Balance Sheets as of December 31, 2004 and 2003		F-6
Consolidated Statements of Operations for the Years Ended December 31, 2004, December 31, 2003 and December 31, 2002		F-7
Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2004, December 31, 2003 and December 31, 2002		F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, December 31, 2003 and December 31, 2002		F-9
Notes to Consolidated Financial Statements		F-10
Consolidated Balance Sheets as of June 30, 2005 (unaudited) and December 31, 2004		F-47
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and June 30, 2004 (unaudited)		F-48
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and June 30, 2004 (unaudited)		F-49
Notes to Unaudited Consolidated Financial Statements		F-50
DIAMOND AIR DRILLING SERVICES, INC.
Independent Auditors’ Reports		F-68
Balance Sheets as of July 31, 2004 and December 31, 2003 and 2002		F-70
Statements of Income for the Seven Months Ended July 31, 2004 and the Years Ended December 31, 2003 and 2002		F-71
Statements of Stockholders’ Equity for the Seven Months Ended July 31, 2004 and the Years Ended December 31, 2003 and 2002		F-72
Statements of Cash Flows for the Seven Months Ended July 31, 2004 and the Years Ended December 31, 2003 and 2002		F-73
Notes to Financial Statements		F-74
MARQUIS BIT CO., LLC
Independent Auditors’ Report		F-80
Balance Sheets as of July 31, 2004 and December 31, 2003 and 2002		F-82
Statements of Income and Members’ Equity for the Seven Months Ended July 31, 2004, the Year Ended December 31, 2003 and the Period from Inception, October 1, 2002, through December 31, 2002		F-83
Statements of Cash Flows for the Seven Months Ended July 31, 2004, the Year Ended December 31, 2003 and the Period from Inception, October 1, 2002, through December 31, 2002		F-84
Notes to Financial Statements		F-85
DOWNHOLE INJECTION SERVICES, LLC
Independent Auditors’ Report		F-88
Balance Sheets as of November 30, 2004 and December 31, 2003		F-89
Statements of Operations and Members’ Equity for the Eleven Months Ended November 30, 2004 and the Year Ended December 31, 2003		F-90
Statements of Cash Flows for the Eleven Months Ended November 30, 2004 and the Year Ended December 31, 2003		F-91
Notes to Financial Statements		F-92

F-1

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DELTA RENTAL SERVICE, INC.
Independent Auditors’ Report		F-98
Balance Sheets as of December 31, 2004 and 2003		F-99
Statements of Operations for the Years Ended December 31, 2004 and 2003		F-101
Statements of Retained Earnings for the Years Ended December 31, 2004 and 2003		F-102
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003		F-103
Notes to Financial Statements		F-104
Balance Sheets as of March 31, 2005		F-108
Statements of Operations for the Three Months Ended March 31, 2005 and 2004		F-109
Statement of Retained Earnings for the Three Months Ended March 31, 2005 and 2004		F-110
Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004		F-111
CAPCOIL TUBING SERVICES, INC.
Independent Auditors’ Report		F-112
Balance Sheets as of December 31, 2004 and 2003		F-113
Statements of Operations and Retained Earnings for the Years Ended December 31, 2004 and 2003		F-115
Statements of Cash Flows for the Years Ended December 31, 2004 and 2003		F-116
Notes to Financial Statements		F-117
Independent Auditors’ Report on Additional Information		F-124
Statements of Operations with Additional Information		F-125
Balance Sheet as of March 31, 2005		F-127
Statement of Income and Retained Earnings for the Three Months Ended March 31, 2005 and 2004		F-128
Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004		F-129
W. T. ENTERPRISES, INC.
Independent Auditors’ Report		F-130
Balance Sheets as of March 31, 2005, December 31, 2004 and 2003		F-131
Statements of Income for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003		F-132
Statements of Stockholders’ Equity for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003		F-133
Statements of Cash Flows for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003		F-134
Notes to Financial Statements		F-135

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Balance Sheet as of June 30, 2005		139
Statements of Income and Retained Earnings for the Six Months ended June 30, 2005 and June 30, 2004		140
Schedule of Cost of Revenue and Operating Expenses for the Six Months ended June 30, 2005 and June 30, 2004		141
Statements of Cash Flows for the Six Months ended June 30, 2005 and June 30, 2004		142
PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated Condensed Financial Statements		F-143
Unaudited Pro Forma Consolidated Condensed Statement of Financial Position as of June 30, 2005		F-145
Unaudited Pro Forma Consolidated Condensed Statement of Operations for the Six Months Ended March 31, 2005		F-146
Unaudited Pro Forma Consolidated Condensed Statement of Operations for the Year Ended December 31, 2004		F-147
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements		F-148

F-3

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	/s/ UHY Mann Frankfort Stein & Lipp CPAs, LLP

F-4

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	/s/ GORDON, HUGHES & BANKS, LLP

F-5

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				December 31,
				2004				2003
								(restated)
				(in thousands, except
				for share amounts)
ASSETS
Cash and cash equivalents				$	7,344			$	1,299
Trade receivables, net of allowance for doubtful accounts of $265 and $168 at December 31, 2004 and 2003, respectively					12,986				8,823
Inventory					2,373				—
Lease receivable, current					180				180
Prepaid expenses and other					1,495				887
	Total current assets				24,378				11,189
Property and equipment, at costs net of accumulated depreciation of $5,251 and $2,586 at December 31, 2004 and 2003, respectively					37,679				31,128
Goodwill					11,776				7,661
Other intangible assets, net of accumulated amortization of $2,036 and $1,254 at December 31, 2004 and 2003, respectively					5,057				2,290
Debt issuance costs, net of accumulated amortization of $828 and $462 at December 31, 2004 and 2003, respectively					685				567
Lease receivable, less current portion					558				787
Other Assets					59				40
		Total assets		$	80,192			$	53,662
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current maturities of long-term debt				$	5,541			$	3,992
Trade accounts payable					5,694				3,133
Accrued salaries, benefits and payroll taxes					615				591
Accrued interest					470				152
Accrued expenses					1,852				1,761
Accounts payable, related parties					740				787
		Total current liabilities			14,912				10,416
Accrued postretirement benefit obligations					687				545
Long-term debt, net of current maturities					24,932				28,241
Other long-term liabilities					129				270
Redeemable warrants					—				1,500
Redeemable convertible preferred stock, $0.01 par value (4,200,000 shares authorized; 3,500,000 issued and outstanding at December 31, 2003)($1 redemption value) including accrued dividends					—				4,171
		Total liabilities			40,660				45,143
Commitments and Contingencies (Note 9 and Note 21)
Minority interests					4,423				3,978
STOCKHOLDERS’ EQUITY (NOTE 10)
Common stock, $0.01 par value (20,000,000 shares authorized; 13,611,525 and 3,926,668 issue and outstanding at December 31, 2004 and December 31, 2003, respectively					136				39
Capital in excess of par value					40,331				10,748
Accumulated deficit					(5,358	)			(6,246	)
		Total stockholders’ equity			35,109				4,541
		Total liabilities and stockholders’ equity		$	80,192			$	53,662

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			Years Ended December 31,
			2004				2003				2002
			(restated)				(restated)
Revenues			$	47,726			$	32,724			$	17,990
Cost of revenues				35,300				24,029				14,640
Gross margin				12,426				8,695				3,350
General and administrative expense				8,011				6,169				3,792
Personnel restructuring costs				—				—				495
Abandoned acquisition/private placement costs				—				—				233
Post retirement medical costs				188				(99	)			(98	)
Total operating expenses				8,199				6,070				4,422
Income (loss) from operations				4,227				2,625				(1,072	)
Other income (expense):
Interest income				32				3				49
Interest expense				(2,808	)			(2,467	)			(2,256	)
Minority interests in income of subsidiaries				(321	)			(343	)			(189	)
Factoring costs on note receivable				—				—				(191	)
Settlement on lawsuit				—				1,034				—
Gain on sale of interest in AirComp				—				2,433				—
Other				272				12				(40	)
Total other income (expense)				(2,825	)			672				(2,627	)
Net income (loss) before income taxes				1,402				3,297				(3,699	)
Provision for foreign income tax				(514	)			(370	)			(270	)
Net income (loss)				888				2,927				(3,969	)
Preferred stock dividend				(124	)			(656	)			(321	)
Net income (loss) attributed to common stockholders			$	764			$	2,271			$	(4,290	)
Income (loss) per common share — basic			$	0.10			$	0.58			$	(1.14	)
Income (loss) per common share — diluted			$	0.09			$	0.50			$	(1.14	)
Weighted average number of common shares outstanding:
	Basic			7,930				3,927				3,766
	Diluted			9,510				5,850				3,766

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		Common Stock								Capital in
										Excess of				Accumulated
		Shares				Amount				Par Value				Deficit				Total
Balances, December 31, 2001			2,317,626			$	23			$	6,431			$	(5,204	)		$	1,250
Issuance of common stock in connection with the purchase of Jens’			279,570				3				627				—				630
Issuance of stock purchase warrants in connection with the purchase of Jens’			—				—				47				—				47
Issuance of common stock in connection with the purchase of Strata			1,311,972				13				2,939				—				2,952
Issuance of stock purchase warrants in connection with the purchase of Strata			—				—				267				—				267
Issuance of common stock in connection with the purchase of Strata			17,500				—				153				—				153
Accrual of preferred dividends			—				—				(321	)			—				(321	)
Net (Loss)			—				—				—				(3,969	)			(3,969	)
Balances, December 31, 2002			3,926,668			$	39			$	10,143			$	(9,173	)		$	1,009
Effect of consolidation of AirComp			—				—				955				—				955
Accrual of preferred dividends			—				—				(350	)			—				(350	)
Net Income (RESTATED)			—				—				—				2,927				2,927
Balances, December 31, 2003, as restated (RESTATED)			3,926,668			$	39			$	10,748			$	(6,246	)		$	4,541
Issuance of common stock in connection with the $2 million equity raise			620,000				6				1,544				—				1,550
Issuance of stock purchase warrants in Connection with the $2 million equity raise			—				—				450				—				450
Issuance of common stock in Connection with the $16.4 million equity raise			5,461,301				55				14,056				—				14,111
Issuance of stock purchase warrants in Connection with the $16.4 million equity raise			—				—				641				—				641
Issuance of common stock in connection With the 19% conversion of Jens			1,300,000				13				6,421				—				6,434
Conversion of preferred stock			1,718,090				17				4,278				—				4,295
Issuance of common stock for services			14,000				—				97				—				97
Issuance of common stock for services			3,000				—				2				—				2
Issuance of stock purchase warrants in Connection with the issuance of debt			—				—				47				—				47
Issuance of common stock for Purchase of Downhole Injector Systems			568,466				6				2,171				—				2,177
Accrual of preferred dividends			—				—				(124	)			—				(124	)
Net Income			—				—				—				888				888
Balances, December 31, 2004			13,611,525			$	136			$	40,331			$	(5,358	)		$	35,109

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		Years Ended December 31,
		2004				2003				2002
		(restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/ (loss)		$	888			$	2,927			$	(3,969	)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation expense			2,702				2,052				1,837
Amortization expense			876				884				744
Issuance of stock options for services			14				—				—
Amortization of discount on debt			350				516				475
(Gain) on change in PBO liability			—				(125	)			—
(Gain) on settlement of lawsuit			—				(1,034	)			—
(Gain) on sale of interest in AirComp			—				(2,433	)			—
Minority interest in income of subsidiaries			321				343				189
Loss on sale of property			—				82				119
Changes in working capital:
Decrease (increase) in accounts receivable			(2,292	)			(4,414	)			(713	)
Decrease (increase) in due from related party			(7	)			—				61
Decrease (increase) in other current assets			(612	)			(1,260	)			1,644
Decrease (increase) in other assets			(19	)			1				902
Decrease (increase) in lease deposit			—				525				176
(Decrease) increase in accounts payable			1,140				2,251				1,316
(Decrease) increase in accrued interest			299				(126	)			651
(Decrease) increase in accrued expenses			(276	)			397				(339	)
(Decrease) increase in other long-term liabilities			(141	)			—				(123	)
(Decrease) increase in accrued employee benefits and payroll taxes			19				1,293				(788	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			3,262				1,879				2,182
Cash flows from investing activities:
Acquisition of Jens’, net of cash acquired			—				—				(8,120	)
Acquisition of Strata, net of cash acquired			—				—				(179	)
Acquisition of Safco			(947	)			—				—
Acquisition of Diamond Air, net of cash acquired			(2,530	)			—				—
Acquisition of Downhole Services, net of cash acquired			(982	)			—				—
Purchase of equipment			(4,603	)			(5,354	)			(518	)
Proceeds from sale of equipment			—				843				367
NET CASH USED IN INVESTING ACTIVITIES			(9,062	)			(4,511	)			(8,450	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			8,169				14,127				9,683
Payments on long-term debt			(13,505	)			(10,826	)			(4,079	)
Payments on related party debt			—				(246	)			—
Proceeds from issuance of common stock			16,883				—				—
Borrowings on lines of credit			689				1,138				1,246
Debt issuance costs			(391	)			(408	)			(588	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			11,845				3,785				6,262
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			6,045				1,153				(6	)
Cash and cash equivalents:
Beginning of year			1,299				146				152
END OF YEAR		$	7,344			$	1,299			$	146
SUPPLEMENTAL INFORMATION:
Interest paid		$	2,159			$	2,341			$	1,082
Foreign taxes paid		$	514			$	370			$	270

F-9

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Note 1 —	Nature of Business and Summary of Significant Accounting Policies

F-10

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F-11

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F-12

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F-13

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			For the Year Ended December 31,
			2004				2003				2002
			(restated)				(restated)
			(in thousands, except per share)
Net income/(loss): As reported			$	764			$	2,271			$	(4,290	)
Less total stock based employee compensation expense determined under fair value based method for all awards net of tax related effects				(1,072	)			(2,314	)			—
Pro-forma net income (loss) to common stockholders’			$	(308	)		$	(43	)		$	(4,290	)
Net income/(loss) per share:
	Basic   As reported		$	0.10			$	0.58			$	(1.14	)
	Pro forma			(0.04	)			(0.01	)			(1.14	)
	Diluted As reported		$	0.09			$	0.50			$	(1.14	)
	Pro forma			(0.02	)			0.10				(1.14	)

F-14

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		For the Year Ended December 31,
		2004				2003				2002
Expected dividend yield			—				—				—
Expected price volatility			89.76	%			265.08	%			—
Risk-free interest rate			7.0	%			6.25	%			—
Expected life of options			7 years				7 years				—
Weighted average fair value of options granted at market value		$	3.19			$	2.78			$	—

F-15

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				2004				2003
				(restated)				(restated)
				(in thousands, except
				earnings per share)
Year Ended December 31,
Numerator:
Net income available for common stockholders				$	764			$	2,271
Plus income impact of assumed conversions:
	Preferred stock dividends/interest				124				656
Net income (loss) applicable to common stockholders Plus assumed conversions				$	888			$	2,927
Denominator:
	Denominator for basic earnings per share — weighted average shares outstanding				7,930				3,927
	Effect of potentially dilutive common shares:
		Convertible preferred stock and employee and director stock options			1,580				1,923
Denominator for diluted earnings per share — weighted average shares outstanding and assumed conversions					9,510				5,850
Basic earnings (loss) per share				$	0.10			$	0.58
Diluted earning (loss) per share				$	0.09			$	0.50

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Note 2 —	Restatement

			Three Months Ended March 31, 2005
			As
			Previously								As
			Reported				Adjustments				Restated
Income/(loss) per common share — diluted			$	0.09			$	0.02			$	0.11
Weighted average number of common shares outstanding —
	diluted			17,789				(3,094	)			14,695

			Year Ended December 31, 2004
			As
			Previously								As
			Reported				Adjustments				Restated
Income/(loss) per common share — diluted			$	0.07			$	0.02			$	0.09
Weighted average number of common shares outstanding —
	diluted			11,959				(2,449	)			9,510

F-17

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			Three Months Ended September 30, 2004
			As
			Previously								As
			Reported				Adjustments				Restated
Income/(loss) per common share — basic			$	0.04			$	0.02			$	0.06
Income/(loss) per common share — diluted			$	0.04			$	0.01			$	0.05
Weighted average number of common shares outstanding:
	Basic			11,599				(3,301	)			8,298
	Diluted			14,407				(4,579	)			9,828

		Three Months Ended June 30, 2004
		As
		Previously								As
		Reported				Adjustments				Restated
Income/(loss) per common share — diluted		$	0.04			$	0.01			$	0.05
Weighted average number of common shares outstanding — diluted			10,237				(2,618	)			7,619

		Three Months Ended March 31, 2004
		As
		Previously								As
		Reported				Adjustments				Restated
Income/(loss) per common share — diluted		$	0.05			$	0.03			$	0.08
Weighted average number of common shares outstanding — diluted			5,762				478				6,240

		Year Ended December 31, 2003
		As
		Previously								As
		Reported				Adjustments				Restated
Income/(loss) per common share — diluted		$	0.39			$	0.11			$	0.50
Weighted average number of common shares outstanding — diluted			5,761				89				5,850

		Three Months Ended September 30, 2003
		As
		Previously								As
		Reported				Adjustments				Restated
Income/(loss) per common share — diluted		$	0.60			$	(0.01	)		$	0.59
Weighted average number of common shares outstanding — diluted			5,761				208				5,969

F-18

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F-19

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Table of Contents

		At December 31, 2003
		As
		Previously				Restatement				As
		Reported				Adjustments				Restated
ASSETS
Cash and cash equivalents		$	1,299							$	1,299
Trade receivables, net of allowance for doubtful accounts			8,823								8,823
Lease Receivable, current			180								180
Prepaid expenses and other			887								887
Total current assets			11,189								11,189
Property and equipment, net of accumulated depreciation			26,339				4,789				31,128
Goodwill			7,661								7,661
Other intangible assets, net of accumulated amortization			2,290								2,290
Debt issuance costs, net of accumulated amortization			567								567
Lease receivable, less current portion			787								787
Other Assets			40								40
Total Assets		$	48,873			$	4,789			$	53,662
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current maturities of long-term debt		$	3,992							$	3,992
Trade accounts payable			3,133								3,133
Accrued salaries, benefits and payroll taxes			591								591
Accrued interest			152								152
Accrued expenses			1,761								1,761
Accounts payable, related parties			787								787
Total current liabilities			10,416								10,416
Accrued postretirement benefit obligations			545								545
Long-term debt, net of current maturities			28,241								28,241
Other long-term liabilities			270								270
Redeemable warrants			1,500								1,500
Redeemable convertible preferred stock including accrued dividends			4,171								4,171
Total liabilities			45,143								45,143
Commitments and Contingencies
Minority interests			2,523				1,455				3,978
COMMON STOCKHOLDERS’ EQUITY
Common stock			39								39
Capital in excess of par value			9,793				955				10,748
Accumulated (deficit)			(8,625	)			2,379				(6,246	)
Total stockholders’ equity			1,207				3,334				4,541
Total liabilities and stockholders’ equity		$	48,873			$	4,789			$	53,662

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			Year Ended December 31, 2003
			As
			Previously				Restatement				As
			Reported				Adjustments				Restated
Revenues			$	32,724				—			$	32,724
Cost of revenues				23,931				98				24,029
Gross margin				8,793				(98	)			8,695
General and administrative expense				6,169				—				6,169
Income/ (loss) from operations				2,624				(98	)			2,526
Other income (expense):
Interest income				3				—				3
Interest expense				(2,467	)			—				(2,467	)
Minority interests in income of subsidiaries				(387	)			44				(343	)
Settlement on lawsuit				1,034				—				1,034
Gain on sale of stock in a subsidiary				—				2,433				2,433
Other				111				—				111
Total other income (expense)				(1,706	)			2,477				771
Net income/ (loss) before income taxes				918				2,379				3,297
Provision for foreign income tax				(370	)			—				(370	)
Net income/ (loss)				548				2,379				2,927
Preferred stock dividend				(656	)			—				(656	)
Net income attributed to common stockholders			$	(108	)		$	2,379			$	2,271
Income/ (loss) per common share — basic			$	(0.03	)						$	0.58
Income/ (loss) per common share — diluted			$	(0.03	)						$	0.39
Weighted average number of common shares outstanding:
	Basic			3,927								3,927
	Diluted			5,761								5,761

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		Year Ended December 31, 2003
		As
		Previously				Restatement				As
		Reported				Adjustment				Restated
Cash flows from operating activities:
Net income/(loss)		$	548			$	2,379			$	2,927
Adjustments to reconcile net income/ (loss) to net cash provided by operating activities:
Depreciation expense			1,954				98				2,052
Amortization expense			884				—				884
Issuance of stock options for services			—				—				—
Amortization of discount on debt			516				—				516
(Gain)/ loss on change PBO liability			(125	)			—				(125	)
(Gain)/ loss on settlement of lawsuit			(1,034	)			—				(1,034	)
(Gain)/ loss on sale of interest in AirComp			—				(2,433	)			(2,433	)
Minority interest in income of subsidiaries			387				(44	)			343
Loss on sale of property			82				—				82
Changes in working capital:
Decrease (increase) in accounts receivable			(4,414	)			—				(4,414	)
Decrease (increase) in due from related party			—				—				—
Decrease (increase) in other current assets			(1,260	)			—				(1,260	)
Decrease (increase) in other assets			1				—				1
Decrease (increase) in lease deposit			525				—				525
Increase (decrease) in accounts payable			2,251				—				2,251
Increase (decrease) in accrued interest			(126	)			—				(126	)
Increase (decrease) in accrued expenses			397				—				397
Increase (decrease) in other long-term liabilities			—				—				—
Increase (decrease) in accrued employee benefits and payroll taxes			1,293				—				1,293
Net cash provided by operating activities			1,879				—				1,879
Cash flows from investing activities:
Recapitalization, net of cash received			—				—				—
Business acquisition costs			—				—				—
Acquisition of MADSCO assets, net of cash acquired			—				—				—
Acquisition of Jens’, net of cash acquired			—				—				—
Acquisition of Strata, net of cash acquired			—				—				—
Purchase of equipment			(5,354	)			—				(5,354	)
Proceeds from sale-leaseback of equipment, net of lease deposit			—				—				—
Proceeds from sale of equipment			843				—				843
Net cash (used) by investing activities			(4,511	)			—				(4,511	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			14,127				—				14,127
Payments on long-term debt			(10,826	)			—				(10,826	)
Payments on related party debt			(246	)			—				(246	)
Proceeds from issuance of common stock, net			—				—				—
Borrowing on lines of credit			30,537				—				30,537
Payments on lines of credit			(29,399	)			—				(29,399	)
Debt issuance costs			(408	)			—				(408	)
Net cash provided (used) by financing activities			3,785				—				3,785
Net increase (decrease) in cash and cash equivalents			1,153				—				1,153
Cash and cash equivalents:
Beginning of the year			146				—				146
End of the year		$	1,299				—			$	1,299
Supplemental information:
Interest paid		$	2,341				—			$	2,341

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		Three Months				Three Months				Three Months
		Ended				Ended				Ended
		March 31,				June 30,				September 30,
		2004				2004				2004
		(in thousands except per share amounts)
Net income attributed to common stockholders
Previously reported		$	501			$	434			$	576
Adjustment — depreciation expense			(139	)			(79	)			(79	)
Adjustment — minority interest expense			22				22				22
Restated			384				377				519
Net income (loss) per share, basic
Previously reported		$	0.13			$	0.07			$	0.05
Total adjustments			(0.03	)			(0.01	)			(0.01	)
Restated			0.10				0.06				0.04

		Three Months				Three Months				Three Months
		Ended				Ended				Ended
		March 31,				June 30,				September 30,
		2003				2003				2003
		(in thousands except per share amounts)
Net income (loss) attributed to common stockholders
Previously reported		$	(183	)		$	(330	)		$	1,136
Adjustment — gain on sale of stock in a subsidiary			—				—				2,433
Adjustment — depreciation expense			—				—				(49	)
Adjustment — minority interest expense			—				—				22
Adjustment — foreign tax expense			(158	)			(92	)			(93	)
Restated			(341	)			(422	)			3,449
Net income (loss) per share, basic and diluted
Previously reported		$	(0.05	)		$	(0.08	)		$	0.29
Total adjustments			(0.04	)			(0.03	)			0.58
Restated			(0.09	)			(0.11	)			0.87

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Note 4 —	Acquisitions

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			Year Ended December 31,
			2004				2003				2002
			(restated)				(restated)
			(unaudited)
			(in thousands, except per share)
Revenues			$	58,103			$	34,446			$	19,142
Operating income (loss)			$	5,405			$	3,008			$	(401	)
Net income (loss)			$	1,367			$	411			$	(4,431	)
Net income (loss) per common share
	Basic		$	0.17			$	0.10			$	(1.18	)
	Diluted		$	0.14			$	0.07			$	(1.18	)

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Note 5 —	Inventories

		2004				2003
Hammer bit inventory
Finished goods		$	857			$	—
Work in process			385				—
Raw materials			151				—
Total hammer bit inventory		$	1,393			$	—
Hammer inventory			417				—
Chemical inventory			254				—
Coil tubing and related inventory			309				—
Total inventory		$	2,373			$	—

Note 6 —	Property and Other Intangibles Assets

		Depreciation
		Period				2004				2003
										(restated)
Land			—			$	27			$	27
Building and improvements			15–20 years				740				729
Machinery and equipment			3–15 years				41,120				28,860
Tools, furniture, fixtures and leasehold improvements			3–7 years				1,043				4,098
Total						$	42,930			$	33,714
Less: accumulated depreciation							(5,251	)			(2,586	)
Property and equipment, net						$	37,679			$	31,128

		Amortization
		Period				2004				2003
Intellectual Property			20 years			$	1,009			$	1,009
Non-compete agreements			3–5 years				2,856				1,535
Patent			15 years				496				—
Other intangible assets			3–10 years				2,732				1,000
Total						$	7,093			$	3,544
Less: accumulated amortization							(2,036	)			(1,254	)
Intangibles assets, net						$	5,057			$	2,290

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		2004												2003
		Gross				Accumulated				Current Year				Gross				Accumulated				Current Year
		Value				Amortization				Amortization				Value				Amortization				Amortization
Intellectual Property		$	1,009			$	239			$	56			$	1,009			$	183			$	46
Non-compete agreements			2,856				1,032				300				1,535				731				347
Patent			496				6				6				—				—				—
Other intangible assets			2,732				759				420				1,000				340				135
Total		$	7,093			$	2,036			$	782			$	3,544			$	1,254			$	528

		Intangible Amortization by Period
		Year Ended December 31,
																		2009 and
		2005				2006				2007				2008				Thereafter
Intangible Assets Amortization
Intellectual property		$	56			$	56			$	56			$	56			$	546
Non-compete agreements			484				481				275				234				349
Patent			33				33				33				33				358
Other intangible assets			244				244				214				214				1,057
Total Intangible Amortization		$	817			$	814			$	578			$	537			$	2,310

Note 7 —	Income Taxes

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		2004				2003
Deferred non-current income tax assets:
Net future tax deductible items		$	533			$	500
Net operating loss carry forwards			4,894				2,975
A-C Reorganization Trust claims			30,112				35,000
Total deferred non-current income tax assets			35,539				38,475
Valuation allowance			(35,539	)			(38,475	)
Net deferred non-current income taxes		$	—			$	—

		2004				2003				2002
Income tax expense based on the U.S. statutory tax rate		$	—			$	—			$	—
Foreign income subject to foreign taxes a rate different than the U.S. statutory rate			514				370				270
Total		$	514			$	370			$	270

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		December 31,
		2004				2003
		(in thousands)
Debt of Allis-Chalmers Energy
Revolving line of credit		$	2,353			$	—
Bank term loan			6,335				—
Notes payable to former directors			402				386
12.0% subordinated note			—				2,675
Debt of Jens’
Revolving line of credit			—				26
Bank term loan			—				4,654
Bank real estate note			—				207
Subordinated seller note			4,000				4,000
Note payable under non-compete agreement			514				761
Bank term loan			263				354
Equipment installment note			321				—
Debt of Strata
Revolving line of credit			—				2,413
Vendor financing			1,164				2,383
Debt of Safco
Note payable under non-compete agreement			150				—
Debt of Downhole
Vehicle installment note			11				—
Notes payable to a former stockholders			49				—
Debt of Mountain Air
Term loan			198				247
Seller note			1,600				1,511
Debt of AirComp
Revolving line of credit			1,520				369
Bank term loan			6,775				7,429
Subordinated note payable to M-I LLC			4,818				4,818
Total debt		$	30,473			$	32,233
Less: short-term debt and current maturities			5,541				3,992
Long-term debt obligations		$	24,932			$	28,241

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		Maturities of Debt
		(in thousands)
Year Ending:
December 31, 2005		$	5,541
December 31, 2006			7,378
December 31, 2007			10,028
December 31, 2008			2,638
December 31, 2009			4,888
Thereafter			—
Total		$	30,473

	•	A $10.0 million revolving line of credit. Borrowings are subject to a borrowing base based on 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $2.4 million as of December 31, 2004.
	•	A term loan in the amount of $6.3 million to be repaid in monthly payments of principal of $105,583 per month. Prepayments are also required in an amount equal to 20% of our collections from Matyep in Mexico. Proceeds of the term loan were used to prepay the term loan owed by our Jens’ subsidiary and to prepay the 12% $2.4 million subordinated note and retire its related warrants. The outstanding balance was $6.3 million as of December 31, 2004.
	•	A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility are to be repaid monthly over four years beginning January 2006. Availability of this capital expenditure term loan facility is subject to security acceptable to the lender in the form of equipment or other acquired collateral. There were no outstanding borrowings as of December 31, 2004

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	•	A $3.5 million bank line of credit of which $1.5 million was outstanding at December 31, 2004. Interest accrues at a floating rate based on the prime rate. The interest rate was 7.50% as of December 31, 2004. There is a 0.5% per annum fee on the undrawn portion of the facility. Borrowings under the line of credit are subject to a borrowing base consisting of eligible accounts receivable.
	•	A $7.1 million term loan with an adjustable, floating interest rate based on either the prime rate or the London interbank offered rate or (“LIBOR”). The interest rate was 6.25% as of December 31, 2004. Principal payments of $286,000 plus accrued interest are due quarterly, with a final maturity date of June 27, 2007. The balance at December 31, 2004 was $6.8 million.
	•	A $1.5 million term loan facility to be used for capital expenditures. Interest accrues at a floating interest rate based on either the prime rate or LIBOR. Quarterly principal payments commence on March 31, 2006 in an amount equal to 5.0% of the outstanding balance as of December 31, 2005,

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		with a final maturity of June 27, 2007. There were no borrowings outstanding under this facility as of December 31, 2004.

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		Operating Leases
		(in thousands)
Year Ending:
December 31, 2005		$	550
December 31, 2006			425
December 31, 2007			388
December 31, 2008			265
December 31, 2009			206
Thereafter			—
Total		$	1,834

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	•	In exchange for an investment of $2.0 million the Company issued 620,000 shares of common stock for a purchase price equal to $2.50 per share, and issued warrants to purchase 800,000 shares of common stock at an exercise price of $2.50 per share, expiring on April 1, 2006, to an investor group (the “Investor Group”) consisting of entities affiliated with Donald and Christopher Engel and directors Robert Nederlander and Leonard Toboroff. The aggregate purchase price for the common stock was $1.55 million and the aggregate purchase price for the warrants was $450,000.
	•	Energy Spectrum converted its 3,500,000 shares of Series A 10% Cumulative Convertible Preferred Stock, including accrued dividend rights, into 1,718,090 shares of common stock. The conversion of the preferred stock will have an impact on the earnings per share in future periods since the Company will not record any dividends.
	•	The Company, the Investor Group, Energy Spectrum, and former director Saeed Sheikh and officers and directors Munawar H. Hidayatallah and Jens H. Mortensen entered into a stockholders agreement pursuant to which the parties agreed to vote for the election to the board of directors of the Company three persons nominated by Energy Spectrum, two persons nominated by the Investor Group and one person nominated by Messrs. Hidayatallah, Mortensen and Sheikh. In addition, the parties and the Company agreed that in the event the Company has not effected a public offering of its shares prior to September 30, 2005, then, at the request of Energy Spectrum, the Company will retain an investment banking firm to identify candidates for a transaction involving the sale of the Company or its assets. Energy Spectrum has agreed to enter into an amendment to the Stockholders Agreement to eliminate the requirement that an investment bank be retained to sell the Company. Two of Energy Spectrum’s three designated directors on the Board resigned January 14, 2005 and Energy Spectrum has agreed not to utilize its right to appoint more than one director unless and until the parties to the Stockholders of the Company of its determination to reassert such right.

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						December 31, 2004								December 31, 2003								December 31, 2002
		Shares Under				Weighted Avg.				Shares Under				Weighted Avg.				Shares Under				Weighted Avg.
		Options				Exercise Price				Option				Exercise Price				Option				Exercise Price
Beginning balance			973,300			$	2.78				104,800			$	3.00				104,800			$	3.00
Granted			248,000				4.85				868,500				2.75				—				—
Canceled			(6,300	)			2.78				—				—				—				—
Exercised			—				—				—				—				—				—
Ending balance			1,215,000			$	3.20				973,300			$	2.78				104,800			$	3.00

										Weighted Average
		Fair Value				Shares Under				Remaining				Options				Fair Value of
		Exercise Price				Option				Contractual Life				Exercisable				Exercise Price
		$	2.50				100,000				6.79 years				100,000			$	2.50
		$	13.75				4,800				5.24 years				4,800			$	13.75
		$	2.75				862,200				8.96 years				574,800			$	2.75
		$	4.85				248,000				9.73 years				82,667			$	4.85
		$	3.20				1,215,000				8.93 years				762,267			$	3.01

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		Year Ended December 31,
		2004				2003				2002
		(restated)
REVENUES:
Casing services		$	10,391			$	10,037			$	7,796
Directional drilling services			24,787				16,008				6,529
Compressed air drilling services			11,561				6,679				3,665
Other services			987				—				—
Total revenues		$	47,726			$	32,724			$	17,990
OPERATING INCOME (LOSS):
Casing services		$	3,217			$	3,628			$	2,495
Directional drilling services			3,061				1,103				(576	)
Compressed air drilling services			1,169				17				(945	)
Other services			(67	)			—				—
General corporate			(3,153	)			(2,123	)			(2,046	)
Total income/loss) from operations		$	4,227			$	2,625			$	(1,072	)
DEPRECIATION AND AMORTIZATION EXPENSE:
Casing services		$	1,597			$	1,413			$	1,265
Directional drilling services			466				275				295
Compressed air drilling services			1,329				1,139				955
Other services			66				—				—
General corporate			120				109				65
Total depreciation and amortization expense		$	3,578			$	2,936			$	2,580

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		Year Ended December 31,
		2004				2003				2002
		(restated)
INTEREST EXPENSE:
Casing services		$	827			$	1,044			$	643
Directional drilling services			321				268				215
Compressed air drilling services			801				839				761
Other services			4				—				—
General corporate			855				316				637
Total interest expense		$	2,808			$	2,467			$	2,256
CAPITAL EXPENDITURES
Casing services		$	1,285			$	2,176			$	137
Directional drilling services			1,552				1,066				83
Compressed air drilling services			1,399				2,093				288
Other services			338				—				—
General corporate			29				19				10
Total capital expenditures		$	4,603			$	5,354			$	518
GOODWILL:
Casing services		$	3,673			$	—			$	—
Directional Drilling Services			4,168				4,168				4,168
Compressed Air Drilling Services			3,510				3,493				3,493
Other services			425				—				—
General Corporate			—				—				—
Total Goodwill		$	11,776			$	7,661			$	7,661
ASSETS:
Casing services		$	21,197			$	18,191			$	15,681
Directional drilling services			14,166				11,529				8,888
Compressed air drilling services			29,147				22,735				9,138
Other services			7,097				—				—
General corporate			8,585				1,207				1,071
Total assets		$	80,192			$	53,662			$	34,778
REVENUES
United States		$	42,466			$	28,995			$	15,321
International			5,260				3,729				2,669
TOTAL		$	47,726			$	32,724			$	17,990

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		December 31,				December 31,				December 31,
		2004				2003				2002
		(restated)
		(in thousands)
Non-cash investing and financing transactions in connection with the acquisitions of Jens’ and Strata:
Fair value of net assets acquired		$	—			$	—			$	(13,945	)
Goodwill and other intangibles			—				—				(5,903	)
Note payable to Seller of Jens’ Oilfield Service			—				—				4,000
Value of common stock issued			—				—				3,735
Issuance of preferred stock			—				—				3,500
Fair value of warrants issued			—				—				314
Net cash paid to acquire subsidiary		$	—			$	—			$	(8,299	)
Other non-cash investing and financing transactions:
Sale of property & equipment in connection with the direct financing lease (Note 14)		$	—			$	—			$	1,193
(Gain) on settlement of debt			—				(1,034	)			—
Amortization of discount on debt			—				442				—
Purchase of equipment financed through assumption of debt or accounts payable			—				906				—
Non-cash investing and financing transactions in connection with the formation of AirComp:
Other non-cash investing and financing transactions in connection with AirComp:
Issuance of debt to joint venture by M-I			—				(4,818	)			—
Contribution of property, plant and equipment by M-I to joint venture			—				10,268				—
Increase in minority interest			—				(2,063	)			—
(Gain) on sale of stock in a subsidiary			—				(2,433	)			—
Difference of Company’s investment cost basis in AirComp and their share of underlying equity of net assets of AirComp			—				(954	)			—
Net cash paid in connection with the joint venture		$	—			$	—			$	—

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		December 31,				December 31,				December 31,
		2004				2003				2002
		(restated)
		(in thousands)
Non-cash investing and financing transactions in connection with the acquisitions of Safco, Diamond Air and Downhole:
Fair Value of net assets acquired		$	(4,867	)		$	—			$	—
Goodwill and other intangibles			(3,839	)			—				—
Value of common stock, issued			2,177				—				—
Value of minority interest contribution			2,070				—				—
		$	(4,459	)		$	—			$	—
Non-cash investing and financing transaction in connection with the remaining acquisition of the 19% of Jens:
Fair Value of net assets acquired		$	(813	)			—				—
Goodwill and other intangibles			(3,676	)			—				—
Value of common stock issued			6,434				—				—
Value of minority interest retirement			(1,945	)			—				—
		$	—			$	—			$	—

		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter
		(restated)
		(in thousands, except per share amounts)
YEAR 2004
Revenues		$	9,661			$	11,422			$	11,888			$	14,755
Operating income			1,030				1,150				1,239				808
Net income (loss)			472				413				519				(516	)
Preferred stock dividend			(88	)			(36	)			—				—
Net income (loss) attributed to common shares		$	384			$	377			$	519			$	(516	)
Income (loss) per common share Basic:		$	.10			$	.06			$	.06			$	(0.04	)
Income (loss) per common share Diluted:		$	.08			$	.05			$	.05			$	(0.04	)

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			First				Second				Third				Fourth
			Quarter				Quarter				Quarter				Quarter
											(restated)				(restated)
			(in thousands, except per share amounts)
YEAR 2003
Revenues			$	6,999			$	7,340			$	8,089			$	10,296
Operating income				1,023				910				678				14
Net income (loss)				53				(335	)			3,537				(328	)
Preferred stock dividend				(394	)			(87	)			(88	)			(87	)
Net income (loss) attributed to common shares			$	(341	)		$	(422	)		$	3,449			$	(415	)
Income (loss) per common share
	(Basic)		$	(0.09	)		$	(0.11	)		$	0.88			$	(0.11	)
Income (loss) per common share
	Diluted:		$	(0.09	)		$	(0.11	)		$	0.59			$	(0.11	)

Note 21 —	Legal Matters

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			June 30,				December 31,
			2005				2004
			(unaudited)
ASSETS
Cash and cash equivalents			$	2,693			$	7,344
Trade receivables, net				18,001				12,986
Inventory				3,901				2,373
Lease receivable, current				180				180
Prepaid expenses and other				1,650				1,495
	Total current assets			26,425				24,378
Property and equipment, net				49,585				37,679
Goodwill				11,892				11,776
Other intangible assets, net				6,175				5,057
Debt issuance costs, net				671				685
Lease receivable, less current portion				432				558
Other assets				119				59
	Total assets		$	95,299			$	80,192
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current maturities of long-term debt			$	3,952			$	5,541
Trade accounts payable				6,907				5,694
Accrued salaries, benefits and payroll taxes				834				615
Accrued interest				509				470
Accrued expenses				2,815				1,852
Accounts payable, related parties				75				740
	Total current liabilities			15,092				14,912
Accrued postretirement benefit obligations				661				687
Long-term debt, net of current maturities				33,938				24,932
Other long-term liabilities				502				129
	Total liabilities			50,193				40,660
Commitments and Contingencies
Minority interests				4,911				4,423
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value (20,000,000 shares authorized; 14,022,800 and 13,611,525 issued and outstanding at June 30, 2005 and December 31, 2004, respectively)				140				136
Capital in excess of par value				42,077				40,331
Accumulated deficit				(2,022	)			(5,358	)
	Total stockholders’ equity			40,195				35,109
	Total liabilities and stockholders’ equity		$	95,299			$	80,192

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				For the Three Months								For the Six Months
				Ended June 30,								Ended June 30,
				2005				2004				2005				2004
								(Restated)								(Restated)
Revenues				$	23,588			$	11,422			$	42,922			$	21,083
Cost of revenues
	Direct costs				15,691				7,833				28,476				14,742
	Depreciation				1,092				586				2,006				1,205
		Total cost of revenues			16,783				8,419				30,482				15,947
		Gross margin			6,805				3,003				12,440				5,136
General and administrative					3,465				1,670				6,459				2,554
Amortization					426				183				820				402
	Income from operations				2,914				1,150				5,161				2,180
Other income (expense):
	Interest				(645	)			(499	)			(1,166	)			(1,068	)
	Other				10				18				158				205
		Total other income (expense)			(635	)			(481	)			(1,008	)			(863	)
		Net income before minority interest and income taxes			2,279				669				4,153				1,317
Minority interest in income of subsidiaries					(344	)			(139	)			(488	)			(212	)
Provision for foreign taxes					(166	)			(117	)			(329	)			(220	)
		Net income			1,769				413				3,336				885
Preferred stock dividend					—				(36	)			—				(124	)
Net income attributed to common shareholders				$	1,769			$	377			$	3,336			$	761
Net income per common share:
		Basic		$	0.13			$	0.06			$	0.24			$	0.15
		Diluted		$	0.12			$	0.05			$	0.22			$	0.13
Weighted average shares outstanding:
		Basic			13,967				6,256				13,800				5,091
		Diluted			15,103				7,619				14,900				6,907

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							For the Six Months
							Ended June 30,
							2005				2004
											(restated)
Cash flows from operating activities:
	Net income						$	3,336			$	885
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation					2,006				1,205
			Amortization					820				402
			Amortization of note discount					6				109
			Minority interest in income of subsidiaries					488				212
			Changes in operating assets and liabilities, net of acquisitions:
				(Increase) in accounts receivable				(3,024	)			(1,482	)
				(Increase) in other current assets				(889	)			(236	)
				Decrease (increase) in other assets				(375	)			84
				Increase in accounts payable				610				258
				Increase in accrued interest				35				60
				(Decrease) in accrued expenses				(296	)			(429	)
				(Decrease) increase in accrued salaries, benefits and payroll taxes				172				(185	)
				(Decrease) in other long-term liabilities				—				(141	)
					Net cash provided by operating activities			2,889				742
Cash flows from investing activities:
	Acquisition of Delta, net of cash received							(4,481	)			—
	Acquisition of Capcoil, net of cash received							(2,607	)			—
	Purchase of equipment							(5,463	)			(1,879	)
					Net cash used in investing activities			(12,551	)			(1,879	)
Cash flows from financing activities:
	Proceeds from issuance of common stock, net							—				1,865
	Proceeds from long-term debt, net							5,210				—
	Repayments on long-term debt							—				(1,331	)
	Debt issuance costs							(199	)			(211	)
					Net cash provided by financing activities			5,011				323
Net change in cash								(4,651	)			(814	)
Cash and cash equivalents at beginning of year								7,344				1,299
Cash and cash equivalents at end of period							$	2,693			$	485
Supplemental information:
	Interest paid						$	1,166			$	1,068
	Foreign taxes paid						$	329			$	220
	Non-cash investing and financing transactions in connection with the acquisitions of Delta and Capcoil:
		Fair value of net assets acquired					$	(8,449	)		$	—
		Goodwill and other intangibles						(1,515	)			—
		Value of common stock issued						1,750				—
		Notes payable to Sellers of Delta						350				—
		Debt assumed at closing						776				—
		Net cash paid to acquire subsidiaries					$	(7,088	)		$	—

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Note 2 —	Acquisitions

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			For the Three Months								For the Six Months
			Ended June 30,								Ended June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Revenues			$	24,215			$	16,744			$	45,904			$	31,019
Operating income				2,273				1,897				5,147				3,401
Net income				1,359				1,161				3,478				1,733
Net income per common share:
	Basic		$	0.10			$	0.17			$	0.25			$	0.32
	Diluted		$	0.09			$	0.15			$	0.23			$	0.25

Note 3 —	Stock-Based Compensation

			For the Three Months								For the Six Months
			Ended June 30,								Ended June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Net income as reported			$	1,769			$	377			$	3,336			$	761
Less: stock based employee compensation expense determined under fair value based method for all awards, net of tax				(836	)			—				(1,505	)			—
	Pro forma net income		$	933			$	377			$	1,831			$	761

			For the Three								For the Six
			Months Ended								Months Ended
			June 30,								June 30,
			2005				2004				2005				2004
Basic net income per common share:
	As reported		$	0.13			$	0.06			$	0.24			$	0.15
	Pro forma		$	0.07			$	0.06			$	0.13			$	0.15
Diluted net income per common share:
	As reported		$	0.12			$	0.05			$	0.22			$	0.13
	Pro forma		$	0.06			$	0.05			$	0.12			$	0.13

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						For the
		For the				Six Months
		Three Months				Ended
		Ended				June 30,
		June 30, 2005				2005
Expected dividend yield			—				—
Expected price volatility			89.91	%			98.65	%
Risk-free interest rate			6.25	%			6.63	%
Expected life of options			7 years				7 years
Weighted average fair value of options granted at market value		$	4.01			$	3.12

Note 4 —	Income Per Common Share

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			For the								For the
			Three Months Ended								Six Months Ended
			June 30,								June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Numerator:
Net income available for common stockholders			$	1,769			$	377			$	3,336			$	761
Plus income impact of assumed conversions:
	Preferred stock dividends			—				36				—				124
Net income applicable to common stockholders plus assumed conversions			$	1,769			$	413			$	3,336			$	885
Denominator:
Basic earnings per share — weighted average shares outstanding				13,967				6,256				13,800				5,091
Effect of potentially dilutive common shares:
	Convertible preferred stock and employee and director stock options			1,136				1,363				1,100				1,816
Diluted earnings per share — weighted average shares outstanding and assumed conversions				15,103				7,619				14,900				6,907
Net income per share — basic			$	0.13			$	0.06			$	0.24			$	0.15
Net income per share — diluted			$	0.12			$	0.05			$	0.22			$	0.13

Note 5 —	Goodwill and Intangible Assets

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	Earnings Per Share.

	AirComp Acquisition.

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			As
			Previously				At June 30, 2004				As
			Reported				Adjustments				Restated
Assets
Cash and cash equivalents			$	485			$	—			$	485
Trade receivables, net				10,305				—				10,305
Lease receivable, current				180				—				180
Prepaid expenses and other				1,137				—				1,137
	Total current assets			12,107				—				12,107
Property and equipment, net				27,234				4,571				31,805
Goodwill				7,661				—				7,661
Other intangible assets, net				2,054				—				2,054
Debt issuance costs, net				612				—				612
Lease receivable, less current portion				664				—				664
Deferred offering costs				2,650				—				2,650
Other				79				—				79
	Total Assets		$	53,061			$	4,571			$	57,632
Liabilities and Stockholders’ Equity
Current maturities of long-term debt			$	4,848			$	—			$	4,848
Trade accounts payable				3,391				—				3,391
Accrued salaries, benefits and payroll taxes				677				—				677
Accrued interest				212				—				212
Accrued expenses				1,332				—				1,332
Accounts payable, related parties				541				—				541
	Total current liabilities			11,001				—				11,001
Accrued postretirement benefit obligations				520				—				520
Long-term debt, net of current maturities				26,163				—				26,163
Other long-term liabilities				129				—				129
Redeemable warrants				1,500				—				1,500
	Total Liabilities			39,313				—				39,313
Commitments and contingencies
Minority interests				2,782				1,411				4,193
Stockholders’ Equity
Common stock				63				—				63
Capital in excess of par value				18,593				955				19,548
Accumulated (deficit)				(7,690	)			2,205				(5,485	)
Total Stockholders’ Equity				10,966				3,160				14,126
Total Liabilities and Stockholders’ Equity			$	53,061			$	4,571			$	57,632

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				Three Months Ended June 30, 2004
				As
				Previously								As
				Reported				Adjustments				Restated
Revenue				$	11,422			$	—			$	11,422
Cost of revenues					8,340				79				8,419
	Gross margin				3,082				(79	)			3,003
General and administrative expense					1,853				—				1,853
	Income (loss) from operations				1,229				(79	)			1,150
Other income (expense):
	Interest				(499	)			—				(499	)
	Minority interests in income of subsidiaries				(161	)			22				(139	)
	Other				18				—				18
		Total other income (expense)			(642	)			22				(620	)
		Net income (loss) before income taxes			587				(57	)			530
Provision for foreign income tax					(117	)			—				(117	)
		Net income (loss)			470				(57	)			413
Preferred stock dividend					(36	)			—				(36	)
		Net income (loss) attributed to common stockholders		$	434			$	(57	)		$	377
Net income per common share — basic				$	0.07			$	(0.01	)		$	0.06
Net income per common share — diluted				$	0.04			$	—			$	0.04
Weighted average number of common shares outstanding:
	Basic				6,253				—				6,253
	Diluted				10,237				—				10,237

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				Six Months Ended June 30, 2004
				As
				Previously								As
				Reported				Adjustments				Restated
Revenue				$	21,083			$	—			$	21,083
Cost of revenues					15,729				218				15,947
	Gross margin				5,354				(218	)			5,136
General and administrative expense					2,956				—				2,956
	Income (loss) from operations				2,398				(218	)			2,180
Other income (expense):
	Interest				(1,068	)			—				(1,068	)
	Minority interests in income of subsidiaries				(256	)			44				(212	)
	Other				205				—				205
		Total other income (expense)			(1,119	)			44				(1,075	)
		Net income (loss) before income taxes			1,279				(174	)			1,105
Provision for foreign income tax					(220	)			—				(220	)
		Net income (loss)			1,059				(174	)			885
Preferred stock dividend					(124	)			—				(124	)
		Net income (loss) attributed to common stockholders		$	935			$	(174	)		$	761
Net income (loss) per common share — basic				$	0.18			$	(0.03	)		$	0.15
Net income per common share — diluted				$	0.11			$	(0.02	)		$	0.09
Weighted average number of common shares outstanding:
	Basic				5,077				—				5,077
	Diluted				8,394				—				8,394

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					Six Months Ended June 30, 2004
					As
					Previously								As
					Reported				Adjustments				Restated
Cash Flows From Operating Activities:
Net income (loss)					$	1,059			$	(174	)		$	885
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization expense					1,389				218				1,607
	Fair value of warrant issued to consultant					14				—				14
	Amortization of discount on debt					109				—				109
	Minority interest in income of subsidiaries					256				(44	)			212
	Changes in operating assets and liabilities:
		(Increase) in accounts receivable				(1,482	)			—				(1,482	)
		(Increase) in other current assets				(250	)			—				(250	)
		Decrease in other assets				84				—				84
		Increase in accounts payable				258				—				258
		Increase in accrued interest				60				—				60
		(Decrease) in accrued expenses				(429	)			—				(429	)
		(Decrease) in other long-term liabilities				(141	)			—				(141	)
		(Decrease) in accrued employee benefits and payroll taxes				(185	)			—				(185	)
			Net Cash Provided by Operating Activities			742				—				742
Cash Flows From Investing Activities:
Purchase of equipment						(1,879	)			—				(1,879	)
Proceeds from sale of equipment						—				—				—
			Net Cash Used by Investing Activities			(1,879	)			—				(1,879	)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock, net						1,865				—				1,865
Repayments of long-term debt						(1,331	)			—				(1,331	)
Debt issuance costs						(211	)			—				(211	)
			Net Cash Provided by Financing Activities			323				—				323
			Net decrease in cash and cash equivalents			(814	)			—				(814	)
Cash and cash equivalents at beginning of the year						1,299				—				1,299
Cash and cash equivalents at end of the period					$	485			$	—			$	485
Supplemental information:
	Interest paid				$	1,068			$	—			$	1,068

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				June 30,				December 31,
				2005				2004
Hammer bits
	Finished goods			$	660			$	857
	Work in process				495				385
	Raw materials				375				151
		Total hammer bits			1,530				1,393
Hammers					577				417
Chemicals					204				254
Coiled tubing and related inventory					1,193				309
Shop supplies and related inventory					397				—
		Total inventory		$	3,901			$	2,373

		June 30,				December 31,
		2005				2004
Debt of Allis-Chalmers Energy
Revolving line of credit		$	6,875			$	2,353
Bank term loan			5,064				6,335
Capital expenditure and acquisition line			6,000				—
Notes payable to former directors			96				402
Debt of Jens’ Oilfield Service, Inc.
Subordinated seller note			3,331				4,000
Note payable under non-compete agreement			391				514
Bank term loans			1,030				584
Debt of Strata Directional Technology, Inc.
Vendor financing			420				1,164
Debt of Safco Oil Field Products, Inc. and Delta
Note payable under non-compete agreement			150				150
Note payable to former owners of Delta			350				—
Debt of Downhole Injection Services, LLC and Capcoil
Vehicle and equipment installment notes			160				60
Note payable under non-compete agreements			330				—
Debt of Mountain Compressed Air Inc.
Term loan			172				198
Seller note			500				1,600

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		June 30,				December 31,
		2005				2004
Debt of AirComp
Revolving line of credit			520				1,520
Bank term loan			6,203				6,775
Delayed draw term loan			1,480				—
Subordinated note payable to M-I			4,818				4,818
Total debt			37,890				30,473
Less: short-term debt and current maturities			3,952				5,541
Long-term debt obligations		$	33,938			$	24,932

	•	A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible accounts receivables, as defined. Outstanding borrowings under this line of credit were $6.9 million as of June 30, 2005.
	•	A term loan with a principal balance at June 30, 2005 of $5.1 million payable in monthly payments of principal of $105,583. We were also required to prepay this term loan by an amount equal to 20% of receipts from our largest customer in Mexico.
	•	A $6.0 million capital expenditure and acquisition line of credit. Borrowings under this facility were payable monthly over four years beginning in January 2006. Outstanding borrowings under this line of credit were $6.0 million as of June 30, 2005.

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	•	A $3.5 million bank line of credit of which $520,000 was outstanding at June 30, 2005. Interest accrued at an adjustable rate based on the prime rate. The average interest rate was 7.0% as of June 30, 2005. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line of credit were subject to a borrowing base consisting of 80% of eligible accounts receivable.
	•	A term loan with a principal balance of $6.2 million as of June 30, 2005 that accrued interest at an adjustable rate based on either LIBOR or the prime rate. The average interest rate was 8.25% as of June 30, 2005. Principal payments of $286,000 plus interest were due quarterly, with a final maturity date of June 27, 2007.
	•	A “delayed draw” term loan facility in the amount of $1.5 million to be used for capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or the prime rate. Quarterly principal payments were to commence on March 31, 2006 in an amount equal to 5.0% of the outstanding balance as of December 31, 2005, with a final maturity of June 27, 2007. The outstanding principal balance was $1.5 million as of June 30, 2005.

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			For the Three Months								For the Six Months
			Ended June 30,								Ended June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Revenues
	Directional drilling services		$	10,934			$	6,422			$	20,835			$	11,675
	Casing and tubing services			3,933				2,447				7,493				4,386
	Compressed air drilling services			4,866				2,553				9,047				5,022
	Production services			2,289				—				3,607				—
	Rental tools			1,566				—				1,940				—
			$	23,588			$	11,422			$	42,922			$	21,083
Operating Income (Loss):
	Directional drilling services		$	1,495			$	727			$	3,373			$	1,389
	Casing and tubing services			1,354				783				2,679				1,225
	Compressed air drilling services			1,002				339				1,529				594
	Production services			36				—				(2	)			—
	Rental tools			405				—				326				—
	General corporate			(1,378	)			(699	)			(2,744	)			(1,028	)
			$	2,914			$	1,150			$	5,161			$	2,180
Depreciation and Amortization:
	Directional drilling services		$	207			$	113			$	357			$	214
	Casing and tubing services			468				356				908				717
	Compressed air drilling services			422				275				870				626
	Production services			189				—				325				—
	Rental tools			176				—				265				—
	General corporate			56				25				101				50
			$	1,518			$	769			$	2,826			$	1,607
Interest Expense:
	Directional drilling services		$	2			$	67			$	24			$	142
	Casing and tubing services			97				155				196				320
	Compressed air drilling services			219				158				450				317
	Production services			3				—				4				—
	Rental tools			1				—				1				—
	General corporate			323				119				491				289
			$	645			$	499			$	1,166			$	1,068

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			For the Three Months								For the Six Months
			Ended June 30,								Ended June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Capital Expenditures:
	Directional drilling services		$	937			$	83			$	1,200			$	788
	Casing and tubing services			217				46				1,857				425
	Compressed air drilling services			1,147				338				1,926				664
	Production services			253				—				290				—
	Rental tools			7				—				7				—
	General corporate			174				1				183				2
			$	2,735			$	468			$	5,463			$	1,879

			As of
			June 30,				December 31,
			2005				2004
Goodwill:
	Directional drilling services		$	4,168			$	4,168
	Casing and tubing services			3,673				3,673
	Compressed air drilling services			3,510				3,510
	Production services			541				425
	Rental tools			—				—
	General corporate			—				—
			$	11,892			$	11,776
Assets:
	Directional drilling services		$	18,094			$	14,166
	Casing and tubing services			23,279				21,197
	Compressed air drilling services			28,186				29,147
	Production services			11,055				5,472
	Rental tools			8,573				1,625
	General corporate			6,112				8,585
			$	95,299			$	80,192

			For the Three Months								For the Six Months
			Ended								Ended
			June 30,								June 30,
			2005				2004				2005				2004
							(restated)								(restated)
Revenues:
	United States		$	21,832			$	10,259			$	39,393			$	18,891
	International			1,756				1,163				3,529				2,192
			$	23,588			$	11,422			$	42,922			$	21,083

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Note 12 —	Legal Matters

	•	A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible accounts receivable and 50% of eligible inventory (up to a maximum of $2.0 million of borrowings based on inventory). This facility will be used to finance working capital requirements and other general corporate purposes, including the issuance of standby letters of credit.
	•	Two term loans totaling $42.0 million.

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	/s/ Accounting & Consulting Group, LLP
	Accounting & Consulting Group, LLP

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	/s/ Accounting & Consulting Group, LLP
	Accounting & Consulting Group, LLP

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				July 31,				December 31,				December 31,
				2004				2003				2002
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	123,171			$	38,566			$	129,612
	Accounts receivable (Note 3)				826,198				704,466				547,332
	Unbilled receivables				75,809				—				3,518
	Related party receivables (Note 2)				85,636				153,981				197,859
	Inventories (Note 4)				1,712,465				1,146,070				344,948
	Prepaid expenses				10,160				16,300				9,629
		TOTAL CURRENT ASSETS			2,833,439				2,059,383				1,232,898
Related party receivables (Note 2)					182,844				234,607				317,003
Property, Plant and Equipment, at cost (Note 5)					295,867				245,673				223,217
Other Assets (Note 12)					24,885				31,699				27,036
		TOTAL ASSETS		$	3,337,035			$	2,571,362			$	1,800,154
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Current maturities of long-term debt			$	341,184			$	171,561			$	164,535
	Current maturities of capital lease obligations				3,447				—				—
	Accounts payable				635,418				602,918				517,471
	Accrued expenses				97,366				197,588				269,489
	Related party payables (Note 2)				687,559				427,465				48,694
	Loans from related parties (Note 2)				768,281				667,137				209,000
		TOTAL CURRENT LIABILITIES			2,533,255				2,066,669				1,209,189
Long-Term Debt (Note 6)					312,085				309,612				410,524
Capital lease obligations (Note 5)					14,873				—				—
Commitments and Contingencies					—				—				—
		TOTAL LIABILITIES			2,860,213				2,376,281				1,619,713
STOCKHOLDERS’ EQUITY
	Common stock, par value $11,000 shares issued and outstanding				1,000				1,000				1,000
	Paid-in capital				2,370				2,370				2,370
	Retained earnings				473,452				191,711				177,071
		TOTAL STOCKHOLDERS’ EQUITY			476,822				195,081				180,441
		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,337,035			$	2,571,362			$	1,800,154

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				July 31,				December 31,				December 31,
				2004				2003				2002
NET SALES (Note 8)				$	3,984,512			$	5,470,208			$	4,073,653
Drilling expenses					2,803,729				4,592,677				3,394,507
Selling, general, and administrative					390,690				620,776				492,067
Depreciation and amortization					91,902				99,730				102,648
Interest expense					34,156				48,279				16,217
		Total Costs and Expenses			3,320,477				5,361,462				4,005,439
		Operating income			664,035				108,746				68,214
Other income
	Gain (loss) on sale of assets				(7,104	)			9,841				15,906
	Interest income				11,008				23,053				5,232
NET INCOME				$	667,939			$	141,640			$	89,352

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		Common				Paid-in				Retained
		Stock				Capital				Earnings				Total
Balance, January 1, 2002		$	1,000			$	2,370			$	485,719			$	489,089
Net Income			—				—				89,352				89,352
Dividends paid			—				—				(398,000	)			(398,000	)
Balance, December 31, 2002			1,000				2,370				177,071				180,441
Net Income			—				—				141,640				141,640
Dividends paid			—				—				(127,000	)			(127,000	)
Balance, December 31, 2003			1,000				2,370				191,711				195,081
Net Income			—				—				667,939				667,939
Dividends paid			—				—				(386,198	)			(386,198	)
Balance, July 31, 2004		$	1,000			$	2,370			$	473,452			$	476,822

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			July 31,				December 31,				December 31,
			2004				2003				2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	667,939			$	141,640			$	89,352
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
	Depreciation and amortization			91,902				99,730				102,648
	Gain (loss) on sale of property, plant, and equipment			(7,104	)			9,841				15,906
Change in operating assets and liabilities:
	Accounts receivable			(197,541	)			(153,616	)			(165,294	)
	Inventory			(566,395	)			(801,122	)			(47,471	)
	Prepaid expenses			6,140				(6,671	)			(302	)
	Other noncurrent assets			6,814				(4,663	)			(13,780	)
	Accounts payable			292,594				464,218				198,954
	Accrued payroll and employee benefits			(100,224	)			(71,899	)			162,920
	NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES			194,125				(322,542	)			342,933
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment from loans to related parties				120,108				128,896				202,450
Loans made to related parties				—				(2,622	)			(430,370	)
Proceeds from sale of property, plant, and equipment				—				30,494				53,804
Capital expenditures on property, plant, and equipment				(115,314	)			(162,521	)			(140,047	)
	NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES			4,794				(5,753	)			(314,163	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt				(188,522	)			(219,947	)			(111,897	)
Proceeds from issuance of long-term debt				360,618				126,061				367,788
Repayment of short-term debt				(200,000	)			(200,000	)			—
Proceeds from issuance of short-term debt				200,000				200,000				—
Repayment of capital lease obligations				(1,358	)			—				—
Repayment of loans from related parties				(162,667	)			(302,494	)			(6,000	)
Proceeds from loans from related parties				263,813				760,629				215,000
Payment of dividend distributions to stockholders				(386,198	)			(127,000	)			(398,000	)
	NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES			(114,314	)			237,249				66,891
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				84,605				(91,046	)			95,661
Cash and Cash Equivalents at Beginning of Year				38,566				129,612				33,951
Cash and Cash Equivalents at End of Year			$	123,171			$	38,566			$	129,612
NON-CASH INVESTING AND FINANCING ACTIVITIES:
	Payments made directly to Marquis Bit Co., LLC from a loan obtained by the Company		$	—			$	—			$	102,565

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Note 1:	Summary of Significant Accounting Policies

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Note 2:	Related-Party Transactions

							December 31,
			July 31,
			2004				2003				2002
Note receivable from Marquis Bit Co, LLC, variable interest rate (currently 7.25%) payable in monthly installments of $7,315 maturing September 2005, unsecured			$	268,480			$	317,002			$	395,684
Note receivables from stockholders, due upon demand, bearing interest of 0%, unsecured				—				64,148				111,740
Note receivables from Marquis Bit Co, LLC, due upon demand, bearing interest of 0%, unsecured				—				7,438				7,438
	Subtotal			268,480				388,588				514,862
Less current portion				85,636				153,981				197,859
	Related party receivables		$	182,844			$	234,607			$	317,003

							December 31,
			July 31,
			2004				2003		2002
Trade accounts payable to Marquis Bit Co, LLC for fabrication of drill bits			$	687,559			$427,465		$48,694
	Related party payables		$	687,559			$427,465		$48,694

						December 31,
		July 31,
		2004				2003				2002
Notes payable to stockholders, due on demand, unsecured, bearing an interest rate of 0%		$	437,342			$	220,696			$	99,000
Loan payable to Marquis Bit Co, LLC, due on demand, unsecured, bearing an interest rate of 0%			257,439				257,439				—
Loan payable to various related entities (related due to certain Company stockholders owning majority interest in entities), due on demand, unsecured bearing an interest rate of 0%			73,500				189,000				110,000
		$	768,281			$	667,135			$	209,000

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						December 31,
		July 31,
		2004				2003		2002
Amount paid, or accrued, to Marquis Bit Co, LLC for the fabrication of drill bits		$	680,573			$1,271,242		$62,472

Note 3:	Accounts Receivable

							December 31,
			July 31,
			2004				2003				2002
Accounts receivable			$	831,086			$	713,644			$	550,161
Allowance for doubtful accounts				(4,888	)			(9,178	)			(2,829	)
	Total		$	826,198			$	704,466			$	547,332

Note 4:	Inventories

							December 31,
			July 31,
			2004				2003				2002
Air hammers			$	376,627			$	346,321			$	292,719
Finished drill bits				757,040				607,478				52,229
Drill bits in process				452,018				151,563				—
Raw materials				126,780				40,708				—
	Total		$	1,712,465			$	1,146,070			$	344,948

Note 5:	Property, Plant and Equipment

							December 31,
			July 31,
			2004				2003				2002
Equipment			$	99,721			$	95,995			$	58,956
Transportation equipment				427,714				395,331				336,304
Equipment under capital lease				19,678				—				—
	Total			547,113				491,326				395,260
Less: accumulated depreciation
	Accumulated depreciation			247,966				245,653				172,043
	Accumulated amortization			3,280				—				—
Net property, plant, and equipment			$	295,867			$	245,673			$	223,217

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			Amount
Year ending July 31,			$	—
	2005			4,788
	2006			4,788
	2007			4,788
	2008			4,788
	2009 and thereafter			2,793
Total minimum lease payments				21,945
Less amount representing interest				3,625
Total present value of minimum lease payments				18,320
Less current portion of such obligations				3,447
Long-term obligations			$	14,873

Note 6:	Long Term Debt and Related Matters

						December 31,
		July 31,
		2004				2003		2002
Various notes payable to banks and financing companies for transportation equipment, due in installments through February, 2010 at fixed interest rates ranging from 0.0% to 10.95%, collateralized by transportation equipment		$	209,788			$147,312		$173,675
Variable interest rate (currently 7.25%) note payable, due in monthly installments of $7,315 including interest through September 2005, collateralized by equipment (including equipment currently owned by Marquis Bit Co, LLC) with depreciated costs of $261,783, inventory, and accounts and notes receivable. This note is personally guaranteed by a stockholder of the Company			249,792			290,577		356,719

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							December 31,
			July 31,
			2004				2003				2002
4.0% note payable, due in monthly installments of $1,181 including interest, through November 2005, collateralized by accounts receivable and equipment (including equipment currently owned by Marquis Bit Co, LLC) with depreciated costs of $26,406. This note is personally guaranteed by a shareholder of the Company				18,689				26,425				38,965
Variable interest rate (Carlsbad National Bank base rate) line of credit agreement, $200,000 limit, expiring June 2005, collateralized by accounts receivable, equipment, and inventory				175,000				—				—
Miscellaneous notes payable, varying interest rates, due various dates				—				16,859				5,700
	Subtotal			691,468				483,176				577,061
Less current maturities				341,184				171,561				164,535
	Total		$	350,284			$	311,615			$	412,526

Note 7:	Stockholders’ Equity

						December 31,
		July 31,
		2004				2003				2002
Common stock authorized			1,000,000				1,000,000				1,000,000
Common stock issued			1,000				1,000				1,000
Common stock outstanding			1,000				1,000				1,000
Common stock, per share par value		$	1.00			$	1.00			$	1.00
Cash dividends paid on common stock		$	386,198			$	127,000			$	398,000

Note 8:	Dependence on Key Customers

Note 9:	Employee Benefit Plans

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Note 10:	Subsequent Event

Note 11.	Supplemental Cash Flow Information

Note 12.	Patent Pending

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	/s/ Accounting & Consulting Group, LLP
	Accounting & Consulting Group, LLP

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	/s/ Accounting & Consulting Group, LLP
	Accounting & Consulting Group, LLP

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				July 31,				December 31,				December 31,
				2004				2003				2002
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	—			$	5,223			$	1,504
	Accounts receivable (Note 2)				358,368				303,358				48,694
	Unbilled receivables				329,191				107,435				15,875
	Related party notes receivable (Note 2)				257,439				257,439				—
	Prepaid expenses				5,623				—				3,269
		TOTAL CURRENT ASSETS			950,621				673,455				69,342
Property, Plant and Equipment, net (Note 3)					261,783				305,472				386,704
Other Assets					1,323				1,485				1,011
		TOTAL ASSETS		$	1,213,727			$	980,412			$	457,057
LIABILITIES AND MEMBERS’ EQUITY
Current Liabilities:
	Bank overdraft			$	9,305			$	—			$	—
	Accounts payable				15,890				38,640				46,854
	Accrued expenses				14,597				9,076				6,580
	Loans from related parties (Note 2)				114,836				125,020				122,119
		TOTAL CURRENT LIABILITIES			154,628				172,736				175,553
Loans from Related Parties, net of current portion (Note 2)					182,844				234,607				317,002
Commitments and Contingencies					—				—				—
		TOTAL LIABILITIES			337,472				407,343				492,555
MEMBERS’ EQUITY					876,255				573,069				(35,498	)
		TOTAL LIABILITIES AND MEMBERS’ EQUITY		$	1,213,727			$	980,412			$	457,057

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			July 31,				December 31,				December 31,
			2004				2003				2002
SALES			$	697,245			$	1,238,695			$	78,347
COST OF GOODS SOLD				307,058				525,593				65,947
GROSS PROFIT				390,187				713,102				12,400
Selling, general, and administrative				33,504				67,423				35,424
Depreciation and amortization				43,689				86,232				7,242
Interest expense				11,008				23,053				5,232
	Total Costs and Expenses			88,201				176,708				47,898
	OPERATING INCOME (LOSS)			301,986				536,394				(35,498	)
Other income				1,200				72,173				—
NET INCOME (LOSS)				303,186				608,567				(35,498	)
Members’ equity, beginning of period				573,069				(35,498	)			—
MEMBERS’ EQUITY, END OF PERIOD				876,255				573,069				(35,498	)

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			July 31,				December 31,				December 31,
			2004				2003				2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	303,186			$	608,567			$	(35,498	)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
	Depreciation and amortization			43,689				86,232				7,242
Change in operating assets and liabilities:
	Accounts receivable			(276,766	)			(346,224	)			(64,569	)
	Prepaid expenses			(5,623	)			3,269				(3,269	)
	Other assets			162				(474	)			(1,011	)
	Accounts payable			(22,750	)			18,794				19,846
	Accrued payroll and employee benefits			5,521				2,496				6,580
	NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES			47,419				372,660				(70,679	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans made to others				—				(257,439	)			—
Capital expenditures on property, plant, and equipment				—				(32,008	)			(80,088	)
	NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES			—				(289,447	)			(80,088	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans from related parties				(120,058	)			(84,682	)			(34,259	)
Proceeds from loans from related parties				58,111				5,188				186,530
Net increase in bank overdrafts				9,305				—				—
	NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES			(52,642	)			(79,494	)			152,271
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(5,223	)			3,719				1,504
Cash and Cash Equivalents at Beginning of Period				5,223				1,504				—
Cash and Cash Equivalents at End of Period			$	—			$	5,223			$	1,504
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
	Property and equipment acquired with long-term debt		$	—			$	—			$	286,850

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Note 1:	Summary of Significant Accounting Policies

Note 2:	Related-Party Transactions

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							December 31,
			July 31,
			2004				2003				2002
Trade accounts receivable from Diamond Air Drilling Services, Inc. (related due to common ownership)			$	358,368			$	303,358			$	48,694
Unbilled receivables from Diamond Air Drilling Services, Inc. (related due to common ownership)				329,191				107,435				15,875
	Total accounts receivable from related parties		$	687,559			$	410,793			$	64,569

						December 31,
		July 31,
		2004				2003				2002
Loan receivable from Diamond Air Drilling Services, Inc. (related due to common ownership), due upon demand, bearing interest of 0%, unsecured Entire balance considered current		$	257,439			$	257,439			$	—

							December 31,
			July 31,
			2004				2003				2002
Loans payable to members, due on demand, unsecured, bearing an interest rate of 0%			$	29,200			$	25,188			$	25,000
Loan payable to various related entities (related due to certain Company stockholders owning majority interest in entities), due on demand, unsecured bearing an interest rate of 0%				—				17,437				18,437
Loan payable to Diamond Air Drilling Services, Inc. (related due to common ownership), variable interest rate (currently 7.25%) payable in monthly installments of $7,315 maturing September 2005, unsecured				268,480				317,002				395,684
	Subtotal			297,680				359,627				439,121
Less current maturities				114,836				125,020				122,119
Loans from related parties			$	182,844			$	234,607			$	317,002

						December 31,
		July 31,
		2004				2003				2002
Amount received, or accrued, from Diamond Air Drilling Services, Inc. (related due to common ownership) for the fabrication of drill bits		$	697,245			$	1,238,695			$	78,347

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Note 3:	Property, Plant and Equipment

							December 31,
			July 31,
			2004				2003				2002
Manufacturing equipment			$	386,789			$	386,789			$	381,789
Computer equipment				9,942				9,942				9,942
Leasehold improvements				2,215				2,215				2,215
	Total			398,946				398,946				393,946
Less:
	Accumulated depreciation			133,550				91,126				7,061
	Amortization of leasehold improvements			3,613				2,348				181
Net property, plant, and equipment			$	261,783			$	305,472			$	386,704

Note 4:	Dependence on Key Customers

Note 5:	Employee Benefit Plans

Note 6:	Subsequent Events

Note 7:	Restatement of Previously Issued Financial Statements

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	/s/ JOHNSON, MILLER & CO.

F-88

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Table of Contents

					2004				2003
ASSETS
CURRENT ASSETS
	Cash and cash equivalents (note A12)				$	71,881			$	20,064
	Accounts receivable, net of allowance of $10,000 and $10,000 Customers					1,242,346				466,435
		Employees				—				2,447
	Inventories (note A8)					295,040				189,287
	Prepaid expenses					155,626				60,263
		Total current assets				1,764,893				738,496
PROPERTY AND EQUIPMENT, NET (notes A8, A9 and C)						719,322				682,564
OTHER ASSETS (notes A9, A10 and D)						4,617				55,400
		Total assets			$	2,488,832			$	1,476,460
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
	Current portion of notes payable (note E)				$	757,406			$	159,846
	Current portion of capitalized lease obligations (note F)					45,735				67,367
	Accounts payable					1,002,375				572,238
	Accrued expenses					105,333				78,583
	Sales tax payable					21,937				9,340
	Interest payable					19,827				4,314
			Total current liabilities			1,952,613				891,688
DEFERRED REVENUE						197,400				197,400
NOTES PAYABLE, net of current portion (note E)						17,070				103,744
CAPITALIZED LEASE OBLIGATIONS, net of current portion (note F)						66,702				—
COMMITMENTS AND CONTINGENCIES (notes G and H) MEMBERS’ EQUITY						255,047				283,628
			Total liabilities and members’ equity		$	2,488,832			$	1,476,460

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				2004				2003
Sales				$	4,792,719			$	3,835,414
Cost of sales					3,875,646				3,050,921
		Gross profit			917,073				784,493
General and administrative expenses					871,927				792,603
Income (loss) from operations					45,146				(8,110	)
Other income (expense)
	Interest income				22				403
	Interest expense				(73,749	)			(41,673	)
	Impairment loss on patent (note D)				—				(983,278	)
					(73,727	)			(1,024,548	)
NET LOSS					(28,581	)			(1,032,658	)
Members’ equity — beginning of period					283,628				1,316,286
Members’ equity — end of period				$	255,047			$	283,628

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				2004				2003
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
	Net loss			$	(28,581	)		$	(1,032,658	)
	Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
		Depreciation and amortization			326,034				283,765
		Impairment loss on patent			—				983,278
	Change in account balances
		(Increase) decrease in accounts receivable — trade			(775,911	)			69,523
		Decrease in accounts receivable — employees			2,447				2,722
		Increase in inventories			(105,753	)			(51,145	)
		(Increase) decrease in prepaid expenses			(95,363	)			46,792
		Increase (decrease) in accounts payable			430,137				(73,388	)
		Increase (decrease) in accrued expenses			26,750				(39,028	)
		Increase (decrease) in sales tax payable			12,597				(5,268	)
		Increase in deferred revenue			—				135,000
		Increase in interest payable			15,513				4,314
	Net cash (used in) provided by operating activities				(192,130	)			323,907
Cash flows provided by (used in) investing activities
	Purchase of property, plant and equipment				(174,305	)			(137,267	)
	Net cash used in investing activities				(174,305	)			(137,267	)
Cash flows provided by (used in) financing activities
	Issuance of notes payable				1,090,335				—
	Repayments on notes payable				(579,449	)			(171,830	)
	Repayments of capital lease obligations				(92,634	)			(119,594	)
	Net cash provided by (used in) financing activities				418,252				(291,424	)
Net increase (decrease) in cash and cash equivalents					51,817				(104,784	)
Cash and cash equivalents
	Beginning of period				20,064				124,848
	End of period			$	71,881			$	20,064
Supplemental disclosure of cash flow information
	Interest paid			$	58,236			$	37,359
Non-cash investing and financing activities:
	Acquisition of property and equipment through capital lease financing			$	137,704			$	—
	Acquisition of Ener-Coil, L.L.C. (see note B)				—				—

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Table of Contents

1.	Formation of Company

2.	Nature of Operations

3.	Product, Geographic Location and Customer Concentrations

			2004
Type of Services Rendered:
	Installation of Tubing			60	%
	Removal and Repair of Customer Owned Tubing			37	%
	Rental and Other			3	%
Geographic Location of Services Rendered:
	Texas			47	%
	Oklahoma			7	%
	Louisiana			16	%
	United Arab Emirates			3	%
	Other Locations			27	%

4.	Supplier Concentration

5.	Revenue Recognition and Deferred Revenue

6.	Allowance for Uncollectible Accounts Receivable

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7.	Inventory

8.	Property, Plant and Equipment

9.	Long-Lived Assets

10.	Intangible Assets

11.	Income Taxes

12.	Cash Flow and Non-Cash Investing and Financing Transactions

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13.	Advertising Expenses

14.	Management’s Use of Estimates

Accounts receivable		$	360,327
Other current assets			39,305
Property, plant and equipment			154,679
Notes payable			(533,929	)
Accounts payable and accrued expenses			(20,382	)
		$	—

		November 30,				December 31,
		2004				2003
Computer Equipment		$	115,649			$	115,137
Machinery and Equipment			1,318,938				1,082,616
Vehicles			203,813				128,638
Furniture and Fixtures			50,451				50,451
			1,688,851				1,376,842
Less accumulated depreciation			(969,529	)			(694,278	)
		$	719,322			$	682,564

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		November 30,
		2004
Promissory note payable to Michael Weaver, 4 months of $7,750, interest rate at 0%, unsecured		$	7,750
Revolving line of credit with Bank of America, with maximum borrowings of $600,000, matures March 8, 2005, interest rate variable, collateralized by substantially all of the Company’s assets			585,822
Promissory note payable to PAS, Inc. and W.T. Butler Enterprises, 58 months of $3,500 each, interest rate at 6%, unsecured			1,566
Promissory note payable Robert Patterson, former shareholder, 24 months of $2,436, interest rate at 0% collateralized by certain specific assets of the Company			12,315
Promissory note payable to Herb Sostek, 24 months of $6,648, interest rate at 6%, unsecured			45,620
Promissory note payable to Local Bank of Oklahoma, 60 payments of $2,219, interest rate at 6.75%, collateralized by certain specific assets of the Company			43,778
Promissory note payable to Ford Motor Credit Corp, 36 payments of $1,137, interest rate at 0% collateralized by 2003 Ford F350			14,783
Promissory note payable to Local Bank of Oklahoma, 60 Payments of $2,147, interest rate at 6.75%, collateralized by equipment		$	62,842
			774,476
Less — Current Portion			(757,406	)
		$	17,070

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		December 31,
		2003
Promissory note payable to PAS, Inc. and W.T. Butler Enterprises, 58 months of $3,500 each, interest rate at 6%, unsecured		$	76,208
Promissory note payable to Herb Sostek, 24 months of $6,648, interest rate at 6%, unsecured			41,168
Promissory note payable to Local Bank of Oklahoma, 60 payments of $2,219, interest rate at 6.75%, collateralized by certain specific assets of the Company			62,931
Promissory note payable to Ford Motor Credit Corp, 60 payments of $798.94, interest rate at 9.25% collateralized by 1999 Ford F350			2,360
Promissory note payable to Local Bank of Oklahoma, 60 Payments of $2,147, interest rate at 6.75%, collateralized by certain specific assets of the Company			80,923
			263,590
Less — Current Portion			(159,846	)
		$	103,744

November 30,
	2005		$	757,406
	2006			17,070
			$	774,476

		Present Value
		of Obligation
Capital lease payable to Outsource Lease, 60 monthly payments of $3,710 commencing April 11, 2002, interest rate at 10.67%, collateralized by tubing unit		$	21,259
Capital lease payable to Outsource Lease, 60 monthly payments of $865 commencing April 29, 2002, interest rate at 10.67%, collateralized by computer network			91,178
			112,437
Less — Current Portion			45,735
		$	66,702

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Year		Total Payment
2005		$	54,900
2006			54,900
2007			21,232
Total Future Minimum Lease Payments			131,032
Total Amount Representing Interest			18,595
Present Value of Lease Obligation		$	112,437

2005		$	166,235
2006			132,245
2007			60,161
2008			30,000
2009			10,000
		$	398,641

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	/s/	WRIGHT, MOORE, DEHART,

	DUPUIS & HUTCHINSON, L.L.C.

	Certified Public Accountants

F-98

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Table of Contents

					December 31,
					2004				2003
ASSETS
CURRENT ASSETS
	Cash				$	891,338			$	705,553
	Accounts Receivable					1,095,587				713,929
	Prepaid Insurance					13,838				14,067
	Prepaid Income Taxes					—				51,411
	Current Deferred Tax Asset					—				77,595
	Employee Advances
		Total Current Assets				2,000,763				1,562,555
PROPERTY AND EQUIPMENT
	Office Equipment					33,624				32,407
	Rental Equipment					3,699,987				3,341,816
	Transportation Equipment					144,260				144,260
	Yard Equipment					77,211				77,211
		Total				3,955,082				3,595,694
	Less: Accumulated Depreciation					(2,610,143	)			(2,307,864	)
			Net Property and Equipment			1,344,939				1,287,830
OTHER ASSETS
	Cash Surrender Value of Life Insurance					38,261				35,446
		Total Other Assets				38,261				35,446
			TOTAL ASSETS		$	3,383,963			$	2,885,831

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					December 31,
					2004				2003
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts Payable				$	53,949			$	40,829
	Payroll Liabilities Payable					17,157				16,063
	Sales Tax Payable					12,308				3,487
	Accrued Interest Expense					3,734				4,244
	Income Taxes Payable					92,448				—
	Current Portion of Stockholder Loan					93,994				87,674
		Total Current Liabilities				273,590				152,297
LONG-TERM LIABILITIES
	Stockholder Loan (Less Current Portion)					547,784				641,775
	Long-Term Deferred Tax Liability					353,147				311,762
	Stockholder Loan
		Total Long-Term Liabilities				900,931				953,537
		Total Liabilities				1,174,521				1,105,834
STOCKHOLDERS’ EQUITY
	Common Stock (No Par Value, 300,000 Shares Authorized, 27,083 Shares Issued and 8,333 Outstanding)					27,083				27,083
	Additional Paid-In Capital					64,574				64,574
	Retained Earnings					3,117,785				2,688,340
	Less: Treasury Stock (18,750 Shares at Cost)					(1,000,000	)			(1,000,000	)
		Total Stockholders’ Equity				2,209,442				1,779,997
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,383,963			$	2,885,831

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				Twelve Months Ended
				December 31,
				2004				2003
REVENUES				$	3,249,338			$	2,662,091
COST OF REVENUES
	Direct				796,194				766,196
GROSS PROFIT					2,453,144				1,895,895
ADMINISTRATIVE EXPENSES
	General and Administrative				1,798,414				1,926,173
	Depreciation				30,061				31,678
		Total Administrative Expenses			1,828,475				1,957,851
INCOME (LOSS) FROM OPERATIONS					624,669				(61,956	)
OTHER INCOME (EXPENSES)
	Interest Expense				(48,503	)			(61,177	)
	Interest Income				4,064				2,234
	Life Insurance Dividends				930				930
	Gain on Sale of Assets				113,435				354,382
		Total Other Income (Expenses)			69,926				296,369
INCOME BEFORE PROVISION FOR INCOME TAXES					694,595				234,413
PROVISION FOR INCOME TAXES
	Current				146,170				—
	Deferred				118,980				134,274
		Total Income Tax Provision			265,150				134,274
NET INCOME				$	429,445			$	100,139

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		Twelve Months Ended
		December 31,
		2004				2003
BEGINNING BALANCE		$	2,688,340			$	2,588,201
NET INCOME			429,445				100,139
ENDING BALANCE		$	3,117,785			$	2,688,340

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						Twelve Months Ended
						December 31,
						2004				2003
CASH FLOWS FROM OPERATING ACTIVITIES
	Net Income					$	429,445			$	100,139
	Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
			Depreciation and Amortization				346,615				308,587
			Gain on Sale of Assets				(113,435	)			(354,382	)
Change in Assets and Liabilities:
		Accounts Receivable					(381,658	)			(7,963	)
		Prepaid Expenses					51,640				62,610
		Accounts Payable and Accrued Expenses					114,973				(29,129	)
		Deferred Taxes					118,980				134,274
				Total Adjustments			137,115				113,997
Net Cash Provided By Operating Activities							566,560				214,136
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of Equipment						(480,371	)			(781,152	)
	Proceeds from Sale of Assets						190,082				522,911
	Cash Surrender Value — Life Insurance						(2,815	)			(2,816	)
Net Cash Used In Investing Activities							(293,104	)			(261,057	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Principal Payments on Treasury Stock Note						—				(506,036	)
	Proceeds From Long-Term Debt						—				—
	Proceeds From Stockholder Note Payable						—				450,000
	Principal Payments Stockholder Note Payable						(87,671	)			(20,550	)
Net Cash Used in Financing Activities							(87,671	)			(76,586	)
NET INCREASE (DECREASE) IN CASH							185,785				(123,507	)
CASH AT BEGINNING OF YEAR							705,553				829,060
CASH AT END OF YEAR						$	891,338			$	705,553
SUPPLEMENTAL DISCLOSURES:
	Interest Paid					$	49,013			$	84,650
	Income Taxes Paid					$	2,311			$	37,460

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F-104

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		2004				2003
Billed Accounts Receivable		$	699,442			$	407,556
Accrued Unbilled Revenue			396,145				306,373
Total		$	1,095,587			$	713,929

					2004				2003
Current
	Federal				$	128,548			$	—
	States					17,622				—
		Total Current Income Tax Expense				146,170				—
Deferred						118,980				134,274
			Total Income Tax Expense		$	265,150			$	134,274

			2004				2003
Depreciation Timing Difference			$	882,867			$	779,405
Net Operating Loss Carry-Forward				—				(163,311	)
Charitable Contribution Carryover				—				(30,678	)
				882,867				585,416
Blended Federal and State Rates				40	%			40	%
	Deferred Income Tax Liability (Net)		$	353,147			$	234,167

		2004				2003
Current Deferred Tax Asset		$	—			$	(77,595	)
Long-Term Deferred Tax Liability			353,147				311,762
Total		$	353,147			$	234,167

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Twelve Months Ending December 31,
	2005			$	93,994
	2006				100,772
	2007				108,038
	2008				115,827
	2009				124,178
	Later				98,969
		Total		$	641,778

Twelve Months Ending December 31,
	2005			$36,000
		Total		$36,000

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										Percentage of
		Sales				Percentage of				Total Accounts
		Amount				Total Revenue				Receivable
Customer A		$	488,589				18.35	%			14.39	%
Customer B		$	401,265				15.07	%			9.85	%
Customer C		$	296,570				11.14	%			11.71	%
Customer D		$	269,963				10.14	%			9.61	%

										Percentage of
		Sales				Percentage of				Total Accounts
		Amount				Total Revenue				Receivable
Customer A		$	549,678				16.92	%			14.31	%
Customer B		$	528,474				16.26	%			22.51	%
Customer C		$	329,160				10.13	%			6.40	%
Customer D		$	308,133				9.48	%			13.15	%

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						March 31,
						2005
ASSETS
CURRENT ASSETS
	Cash					$	169,154
	Accounts Receivable						936,156
	Prepaid Insurance						—
	Prepaid Income Taxes						—
	Current Deferred Tax Asset						160,349
	Employee Advances
			Total Current Assets				1,265,659
PROPERTY AND EQUIPMENT
	Office Equipment						33,624
	Rental Equipment						3,739,342
	Transportation Equipment						144,180
	Yard Equipment						77,211
		Total					3,994,357
	Less: Accumulated Depreciation						(2,652,825	)
			Net Property and Equipment				1,341,532
OTHER ASSETS
	Cash Surrender Value of Life Insurance						—
			Total Other Assets				—
				TOTAL ASSETS		$	2,607,191
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
	Accounts Payable					$	31,630
	Payroll Liabilities Payable						398
	Sales Tax Payable						7,433
	Accrued Insurance Payable						19,447
	Accrued Interest Expense						—
	Accrued Profit Sharing Payable						—
	Income Taxes Payable						374,492
	Note Payable — Insurance						—
	Current Portion of Stockholder Loan						—
			Total Current Liabilities				433,400
LONG-TERM LIABILITIES
	Stockholder Loan (Less Current Portion)						—
	Long-Term Deferred Tax Liability						373,153
			Total Long-Term Liabilities				373,153
			Total Liabilities				806,553
STOCKHOLDERS’ EQUITY
	Common Stock (No Par Value, 300,000 Shares Authorized, 27,083 Shares Issued and 8,333 Outstanding)						27,083
	Additional Paid-In Capital						64,574
	Retained Earnings						2,708,981
	Less: Treasury Stock (18,750 Shares at Cost)						(1,000,000	)
			Total Stockholders’ Equity				1,800,638
				TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,607,191

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				Three Months Ended
				March 31,
				2005				2004
REVENUES				$	820,769			$	744,811
COST OF REVENUES
	Direct				203,271				265,230
GROSS PROFIT					617,498				479,581
ADMINISTRATIVE EXPENSES
	General and Administrative				984,505				1,106,656
	Depreciation				7,578				7,465
		Total Administrative Expenses			992,083				1,114,121
LOSS FROM OPERATIONS					(374,585	)			(634,540	)
OTHER INCOME (EXPENSES)
	Interest Expense				(10,937	)			(13,166	)
	Interest Income				2,896				364
	Gain on Sale of Assets				115,519				36,850
		Total Other Income (Expenses)			107,478				24,048
LOSS BEFORE PROVISION FOR INCOME TAXES					(267,107	)			(610,492	)
PROVISION (BENEFIT) FOR INCOME TAXES
	Current				—				—
	Deferred				141,697				(221,825	)
		Total Income Tax Provision (Benefit)			141,697				(221,825	)
NET LOSS				$	(408,804	)		$	(388,667	)

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		Three Months Ended
		March 31,
		2005				2004
BEGINNING BALANCE		$	3,117,785			$	2,688,340
NET LOSS			(408,804	)			(388,667	)
ENDING BALANCE		$	2,708,981			$	2,299,673

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						Three Months Ended
						March 31,
						2005				2004
CASH FLOWS FROM OPERATING ACTIVITIES
	Net Loss					$	(408,804	)		$	(388,667	)
	Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
			Depreciation and Amortization				94,220				83,854
			Gain on Sale of Assets				(115,519	)			(36,850	)
Change in Assets and Liabilities:
		Accounts Receivable					159,431				(97,326	)
		Prepaid Expenses					13,838				(10,933	)
		Accounts Payable and Accrued Expenses					253,804				256,078
		Deferred Taxes					(140,343	)			(221,825	)
				Total Adjustments			265,431				(27,002	)
Net Cash Used In Operating Activities							(143,373	)			(415,669	)
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of Equipment						(151,956	)			(40,557	)
	Proceeds from Sale of Assets						176,662				44,440
	Cash Surrender Value — Life Insurance						38,261				(473	)
Net Cash Used In Investing Activities							62,967				3,410
CASH FLOWS FROM FINANCING ACTIVITIES
	Principal Payments Stockholder Note Payable						(641,778	)			(21,349	)
Net Cash Used in Financing Activities							(641,778	)			(21,349	)
NET DECREASE IN CASH							(722,184	)			(433,608	)
CASH AT BEGINNING OF PERIOD							891,338				705,553
CASH AT END OF PERIOD						$	169,154			$	271,945
SUPPLEMENTAL DISCLOSURES:
	Interest Paid					$	7,203			$	13,166
	Income Taxes Paid					$	—			$	—
	Non-Cash Financing of Insurance Premiums					$	—			$	30,351

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	/s/ CURTIS BLAKELY & CO., PC

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				December 31,
				2004				2003
ASSETS
CURRENT ASSETS:
	Cash and Cash Equivalents			$	348,674			$	45,857
	Accounts Receivable				538,658				818,736
	Inventory				386,685				384,431
	Prepaid Expenses				107,703				92,306
		TOTAL CURRENT ASSETS			1,381,720				1,341,330
PROPERTY AND EQUIPMENT:
	Furniture, Fixtures and Equipment				11,343				5,870
	Software				3,127				3,127
	Production Equipment				2,078,897				1,709,196
	Vehicles				172,720				107,442
	Production Equipment Under Construction				94,332				-0-
		TOTAL PROPERTY AND EQUIPMENT			2,360,419				1,825,635
	Less: Accumulated Depreciation				(433,800	)			(221,451	)
		NET PROPERTY AND EQUIPMENT			1,926,619				1,604,184
OTHER ASSETS:
	Organizational Costs				12,057				18,085
		TOTAL ASSETS		$	3,320,396			$	2,963,599

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				December 31,
				2004				2003
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Current Portion of Long-term Debt			$	445,924			$	431,452
	Current Portion of Obligation Under Capital Lease				447				-0-
	Current Portion of Long-term Debt — Related Party				22,824				-0-
	Accounts Payable — Trade				383,762				891,508
	Accrued Interest Payable				4,018				-0-
	Accrued Wages				6,400				-0-
	Short-term Borrowings				430,314				422,321
	Short-term Borrowings — Related Party				130,000				-0-
		TOTAL CURRENT LIABILITIES			1,423,689				1,745,281
LONG-TERM DEBT, LESS CURRENT MATURITIES:
	Long-term Debt				471,451				451,262
	Long-term Debt — Related Party				31,213				-0-
	Obligation Under Capital Lease				2,880				-0-
		TOTAL LONG-TERM DEBT			505,544				451,262
		TOTAL LIABILITIES			1,929,233				2,196,543
STOCKHOLDERS’ EQUITY:
	Common Stock — $1 Par Value
		100,000 Shares Authorized
		1,000 Shares Issued and Outstanding			600,000				600,000
	Additional Paid-in Capital				50,000				50,000
	Retained Earnings				741,163				117,056
		TOTAL STOCKHOLDERS’ EQUITY			1,391,163				767,056
		TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	3,320,396			$	2,963,599

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				Years Ended December 31,
				2004				2003
REVENUE				$	5,774,442			$	5,478,666
Cost of Sales and Services					4,371,316				4,523,702
Gross Profit					1,403,126				954,964
OPERATING EXPENSES:
	General and Administrative				159,677				131,254
	Depreciation				35,456				24,648
	Insurance				228,112				186,125
	Lease Expense				29,250				27,000
	Salaries — Administration				126,520				89,287
	Taxes				126,222				68,838
	Interest				73,782				51,380
		TOTAL OPERATING EXPENSES			779,019				578,532
		NET INCOME			624,107				376,432
		RETAINED EARNINGS (DEFICIT) — BEGINNING OF PERIOD			117,056				(259,376	)
		RETAINED EARNINGS — END OF PERIOD		$	741,163			$	117,056

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						Years Ended December 31,
						2004				2003
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net Income					$	624,107			$	376,432
	Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
			Depreciation and Amortization				218,375				170,317
	Change in Assets and Liabilities:
		Accounts Receivable					280,078				(595,486	)
		Inventory					(428,090	)			298,810
		Prepaids					(15,395	)			(32,465	)
		Accounts Payable and Accruals					(42,242	)			95,417
				TOTAL ADJUSTMENTS			12,726				(63,407	)
NET CASH PROVIDED BY OPERATING ACTIVITIES							636,833				313,025
CASH FLOWS FROM INVESTING ACTIVITIES:
	Additions to Plant and Equipment						(462,998	)			(541,551	)
NET CASH USED IN INVESTING ACTIVITIES							(462,998	)			(541,551	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Payments of Short-term Borrowings						(101,736	)			(124,513	)
	Payments of Long-term Debt						(519,383	)			(377,668	)
	Payments of Capital Lease Obligation						(89	)			-0-
	Proceeds From Short-term Debt Borrowing						239,729				223,578
	Proceeds From Long-term Debt Borrowing						510,461				441,265
	Proceeds From Additional Paid-in Capital						-0-				50,000
NET CASH PROVIDED BY FINANCING ACTIVITIES							128,982				212,662
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS							302,817				(15,864	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR							45,857				61,721
CASH AND CASH EQUIVALENTS AT END OF YEAR						$	348,674			$	45,857

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Note 1 —	Summary of Significant Accounting Policies:

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Note 2 —	Organizational Costs:

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Note 3 —	Property and Equipment:

			Depreciation
			Rate (%)				2004				2003
Furniture, fixtures, and equipment				20%			$	11,343			$	5,870
Software				33%				3,127				3,127
Production equipment				10% – 20%				2,078,897				1,709,196
Vehicles				20%				172,720				107,442
Production equipment under construction				N/A				94,332				-0-
	Total Property and Equipment							2,360,419				1,825,635
	Less: Accumulated Depreciation							(433,800	)			(221,451	)
	Net Property and Equipment						$	1,926,619			$	1,604,184

Note 4 —	Capital Lease Obligations:

				2004
Total				$	3,327
Less:		Current portion			(447	)
		Long-Term Portion		$	2,880

		2004
2005		$	1,072
2006			1,072
2007			1,072
2008			1,072
2009			894
			5,182
Less: Amount representing interest			(1,855	)
Present Value of Future Minimum Lease payments		$	3,327

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Creditor		Terms		Collateral				2004		2003
Texas Bank & Trust		$350,000 line-of-credit expiring December 2005 bearing interest at prime (5.25 percent at December 31, 2004).			Equipment			$349,923		$350,000
Texas Bank & Trust		$375,000 line of credit expiring December 2004 bearing interest at prime.			Equipment			-0-		3,029
AICCO, Inc.		Due $11,760 per month through July 2005 including interest at 7.15 percent.			None			80,391		-0-
AICCO, Inc.		Due $10,114 per month through July 2004 including interest at 6.50 percent.			None			-0-		69,292
Total Short-Term Borrowings								$430,314		$422,321

Creditor		Terms		Collateral				2004		2003
M Bar Ranch, L.P.		$130,000 promissory note, interest of 8 percent and principal due at maturity date — August 2005.			None			$130,000		$-0-

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Creditor				Terms		Collateral		2004				2003
Texas Bank & Trust				Due $6,048 per month through August 2006, including interest at prime (5.25% at December 2004).		Equipment - Accounts		$	117,138			$	183,232
Texas Bank & Trust				Due $7,037 per month through March 2007, including interest at prime (5.25% at December 2004).		Equipment - Accounts			176,501				251,566
Texas Bank & Trust				Due $7,000 per month through March 2006, including interest at prime (5.25% at December 2004).		Equipment - Accounts			101,957				179,620
Texas Bank & Trust				Due $30,000 per month through June 2004, including interest at prime (Pd in full at December 2004).		Equipment - Accounts			-0-				171,541
Texas Bank & Trust				Due $7,407 per month through March 2007, including interest at prime (5.25% at December 2004).		Equipment - Accounts			191,125				-0-
Texas Bank & Trust				Due $6,100 per month through October 2007, including interest at prime (5.25% at December 2004).		Equipment - Accounts			195,082				-0-
Navistar				Due $1,055 per month through November 2005, including interest at 9.95 percent.		Equipment			11,046				22,004
Navistar				Due $1,055 per month through November 2005, including interest at 9.95 percent.		Equipment			11,046				21,075
Navistar				Due $998 per month through June 2007, including interest at 11.50 percent.		Equipment			24,405				-0-
Ford Motor Credit				Due $738 per month through May 2006, including interest at 2.90 percent.		Vehicle			12,275				20,641
Ford Motor Credit				Due $1,112 per month through August 2006, including interest at 5.50 percent.		Vehicle			21,211				33,035
Ford Motor Credit				Due $1,173 per month through July 2007, including interest at 2.90 percent.		Vehicle			35,007				-0-
Ford Motor Credit				Due $730 per month through August 2007, including interest at 7.25 percent.		Vehicle			20,582				-0-
	Total Long-Term Notes Payable								917,375				882,714
	Current Maturities								(445,924	)			(431,452	)
	Long-Term Notes Payable,
		Net of Current Maturities						$	471,451			$	451,262

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2005			$	445,924
2006				349,064
2007				122,387
	Total		$	917,375

Creditor			Terms		Collateral				2004				2003
M Bar Ranch, L.P.			Due $2,194 per month through March 2007, including interest at 8.00 percent.			Vehicle			$	54,037			$-0-
	Current Maturities									(22,824	)		-0-
	Long-Term Note Payables — Related Party, Net of Current Maturities								$	31,213			$-0-

2005			$	22,824
2006				24,719
2007				6,494
	Total		$	54,037

2005		$	27,000
2006			27,000
2007			5,625

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			2004				2003
Cash paid during the year:
	Interest		$	69,764			$	51,380

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	/s/     CURTIS BLAKELY & CO., PC

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				Year Ended December 31,
				2004				2003
REVENUE				$	5,774,442			$	5,478,666
COST OF SALES AND SERVICES:
	Inventory Purchases				2,684,319				3,400,025
	Wages				854,041				546,858
	Contract Services				153,192				152,432
	Location Expenses				84,709				58,027
	Repairs and Maintenance				132,846				70,024
	Depreciation				182,919				145,669
	Fuel and Oil				114,112				74,836
	Freight				14,432				11,646
	Sales Commissions				15,352				323
	Sales Expense				13,307				10,827
	Supplies				61,494				28,165
	Other Expenses				12,082				6,676
	Equipment Leases and Rentals				48,511				18,194
		TOTAL COST OF GOODS SOLD			4,371,316				4,523,702
GROSS PROFIT					1,403,126				954,964
GENERAL AND ADMINISTRATIVE:
	Accounting				41,794				22,456
	Telephone				26,939				19,842
	Auto				17,955				15,203
	Consulting				15,100				15,012
	Advertising and Promotional				12,715				6,847
	License and Fees				10,719				7,110
	Office Supplies				7,818				7,644
	Utilities				7,582				6,397
	Janitorial				5,542				2,953
	Office Expense				4,248				3,332
	Postage				4,084				4,556
	Other General and Administrative				1,643				829
	Meals				1,393				1,899
	Contract Service — Office				1,145				16,779
	Contributions				1,000				395
		TOTAL GENERAL AND ADMINISTRATIVE			159,677				131,254

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				Year Ended December 31,
				2004				2003
DEPRECIATION AND AMORTIZATION:
	Depreciation Expense				29,428				18,620
	Amortization Expense				6,028				6,028
		TOTAL DEPRECIATION AND AMORTIZATION			35,456				24,648
INSURANCE EXPENSE:
	Insurance — General				119,039				118,023
	Insurance — Health				65,583				40,792
	Insurance — Workmen’s Compensation				41,445				25,265
	Insurance — Keyman Life				2,045				2,045
		TOTAL INSURANCE			228,112				186,125
LEASE OF BUILDINGS AND STORAGE FACILITIES					29,250				27,000
SALARIES — ADMINISTRATIVE
	Salaries — Officers				89,115				77,769
	Salaries — Office Employees				37,405				11,518
		TOTAL SALARIES — ADMINISTRATIVE			126,520				89,287
TAX EXPENSE:
	Taxes — Payroll				78,536				52,205
	Taxes — Property				43,495				13,926
	Taxes — Other				2,501				1,832
	Taxes — State Franchise				1,690				875
		TOTAL TAX EXPENSE			126,222				68,838
INTEREST					73,782				51,380
		TOTAL OPERATING EXPENSES			779,019				578,532
		NET INCOME		$	624,107			$	376,432

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ASSETS
Current Assets
	Cash in Bank — TB&T					183,614.45
	Accounts Receivable					1,021,133.53
	Inventory					334,309.46
	Prepaid Expenses					79,136.57
		Total Current Assets				1,618,194.01
Property and Equipment Equipment						2,474,765.35
	Accumulated Depreciation					(492,780.50	)
	Net Property and Equipment					1,981,984.85
	Other Assets Organization Costs					2,242.25
	Startup Costs					27,898.75
	Accumulated Amortization					(19,590.00	)
	Deposits					10,875.00
		Total Other Assets				21,426.00
			Total Assets			3,621,604.86
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
	Accounts Payable					449,217.60
	Payroll Taxes Payable					3,448.71
	Sales Tax Payable					44,997.92
	Accrued Interest Payable					4,017.53
	Salaries Payable					16,143.77
	Current Income Taxes Payable					94,000.00
	N/ P — Insurance					46,139.99
	N/ P — M-BAR Ranch					130,000.00
	N/ P TB&T LOC					349,923.29
	Current Maturities of L-T					467,915.64
		Total Current Liabilities				1,605,804.45
Long-Term Liabilities N/ P — FMC						135,292.77
N/ P — Navistar						39,147.38
N/ P — TB&T						686,059.55
N/ P — M-BAR						48,500.43
N/ P — IKON RICOH						3,258.52
Current Maturities of L-T						(467,915.64	)
		Total Long-Term Liabilities				444,343.01
			Total Liabilities			2,050,147.46
Deferred Income Taxes						6,898.00
Stockholders’ Equity Capital Stock						600,000.00
	Contribution to Capital					50,000.00
	Retained Earnings					914,559.40
		Total Stockholders’ Equity				1,564,559.40
			Total Liabilities and Stockholders’ Equity			3,621,604.86

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				Three Months Ended March 31,
				2005				2004
Revenue
	Sales — Service				622,283.61				355,661.68
	Sales — Materials				911,615.67				1,190,200.66
		Total Revenue			1,533,899.28				1,545,862.34
Cost of Goods Sold					950,535.70				1,131,968.64
		Gross Profit			583,363.58				413,893.70
Operating Expenses Contract Services					3,007.50				8,548.13
	Insurance				61,206.10				57,193.97
	Lease				59,372.36				24,618.30
	Supplies				28,500.98				14,705.44
	Taxes				26,077.65				16,749.81
	Accounting & Legal				28,478.91				13,481.21
	Advertising & Promotional				844.43				882.50
	Amortization				1,506.00				1,506.00
	Bank Charges				128.60				129.20
	Commission — Salesman				4,000.00				0.00
	Consulting				4,200.00				3,300.00
	Depreciation				9,240.66				5,926.17
	Dues & Subscriptions				1,189.39				0.00
	Employee — Medical				978.22				436.06
	Freight				8,259.61				340.00
	Interest				20,360.28				18,007.80
	License & Fees				150.46				1,364.98
	Maint & Repairs — General				98.51				815.40
	Meals & Entertainment				0.00				101.85
	Office Expense				3,326.71				964.16
	Postage				1,117.54				999.49
	Janitorial				1,300.00				1,340.75
	Salaries — Officers				21,000.00				21,000.00
	Salaries — Office				8,830.06				5,805.94
	Sales Expense				3,679.23				2,649.54
	Telephone				8,483.66				4,296.17
	Uniforms				824.89				0.00
	Utilities				1,610.44				1,828.06
	Waste Water				714.00				475.00
	Travel				0.00				246.75
	Truck Expense				583.27				218.00
		Total Operating Expenses			309,069.46				207,930.68
		Income/(Loss) Before Income Taxes			274,294.12				205,963.02
Income Taxes					(100,898.00	)			0.00
Other Income					0.00				1,000.00
		Net Income (Loss)			173,396.12				206,963.02
Retained Earnings at Beginning of Period					741,163.28				117,056.14
		Retained Earnings at End of Period			914,559.40				324,019.16

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			Three Months Ended
			March 31,
			2005				2004
Cash flows from operating activities:
Net income (loss)			$	173,396			$	206,963
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation and amortization expense				51,247				44,236
Changes in working capital:
	Decrease (increase) in accounts receivable			(482,476	)			69,545
	Decrease (increase) in other current assets			80,942				163,895
	Decrease (increase) in other assets			(10,875	)			(375	)
	(Decrease) increase in accounts payable			65,456				(306,063	)
	(Decrease) increase in accrued expenses			138,998				21,643
	(Decrease) increase in other long-term liabilities			6,898				—
	(Decrease) increase in accrued employee benefits and payroll taxes			13,193				67
Net cash provided by operating activities				36,779				199,911
Cash flows from investing activities:
	Purchase of equipment			(105,107	)			(35,739	)
Net cash provided (used) by investing activities				(105,107	)			(35,739	)
Cash flows from financing activities:
	Repayments of long-term debt			(96,732	)			(161,241	)
	Proceeds form issuance of long-term debt			—				307,399
Net cash provided (used) by financing activities				(96,732	)			146,158
Net increase (decrease) in cash and cash equivalents				(165,060	)			310,330
Cash and cash equivalents at beginning of year				348,674				45,857
Cash and cash equivalents at end of period			$	183,614			$	356,187

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	Accounting & Consulting Group, LLP

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				March 31,				December 31,				December 31,
				2005				2004				2003
ASSETS
Current Assets:
	Cash and cash equivalents			$	123,093			$	49,695			$	39,821
	Accounts receivable				359,875				418,290				446,646
	Unbilled receivables				129,325				101,400				47,000
	Related party receivable (Note 2)				7,967				9,673				15,991
	Prepaid income taxes				—				—				3,507
	Prepaid expenses				10,497				11,593				11,697
		Total Current Assets			630,757				590,651				564,662
Property and Equipment:
	Transportation equipment				137,555				137,555				137,555
	Machinery and equipment				1,905,235				1,867,336				1,248,414
	Office furniture and equipment				7,131				7,131				7,131
	Accumulated depreciation				(748,646	)			(677,475	)			(428,031	)
		Total Property and Equipment			1,301,275				1,334,547				965,069
		Total Assets		$	1,932,032			$	1,925,198			$	1,529,731
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Current maturities of long-term debt (Note 4)			$	283,194			$	312,414			$	235,137
	Short-term notes payable (Note 3)				54,601				86,765				149,995
	Accounts payable				82,369				117,928				129,895
	Accrued expenses				131,188				62,726				63,514
	Deferred income taxes (Note 9)				68,644				72,204				33,425
		Total Current Liabilities			619,996				652,037				611,966
Long-Term Debt (Note 4)					89,959				153,675				279,349
Deferred income taxes (Note 9)					136,593				132,577				78,565
		Total Liabilities			846,548				938,289				969,880
Stockholders’ Equity:
	Common stock, par value $10 100 shares issued and outstanding				1,000				1,000				1,000
	Retained earnings				1,084,484				985,909				558,851
		Total stockholders’ equity			1,085,484				986,909				559,851
		Total liabilities and stockholders’ equity		$	1,932,032			$	1,925,198			$	1,529,731

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				March 31,				December 31,				December 31,
				2005				2004				2003
Revenue
	Service revenue			$	926,906			$	3,862,005			$	2,415,266
	Other income				—				—				2,800
		Total revenue			926,906				3,862,005				2,418,066
Expenses
	Service-related expenses				552,472				2,514,373				1,582,313
	Selling, general, and administrative expenses				150,499				514,211				459,186
	Depreciation and amortization				71,171				249,444				174,386
	Interest expense				8,656				44,344				27,604
		Total expenses			782,798				3,322,372				2,243,489
		Operating income			144,108				539,633				174,577
Other income
	Gain (loss) on sale of assets				—				—				6,723
	Interest income				93				585				905
Income before income taxes					144,201				540,218				182,205
Federal and state income taxes (Note 9)					45,626				113,160				37,121
Net income				$	98,575			$	427,058			$	145,084

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		Common				Paid-in				Retained
		Stock				Capital				Earnings				Total
Balance, January 1, 2003		$	1,000			$	—			$	413,767			$	414,767
Net Income			—				—				145,084				145,084
Dividends paid			—				—				—				—
Balance, December 31, 2003			1,000				—				558,851				559,851
Net Income			—				—				427,058				427,058
Dividends paid			—				—				—				—
Balance, December 31, 2004			1,000				—				985,909				986,909
Net Income			—				—				98,575				98,575
Dividends paid			—				—				—				—
Balance, March 31, 2005		$	1,000			$	—			$	1,084,484			$	1,085,484

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				March 31,				December 31,				December 31,
				2005				2004				2003
Cash flows from operating activities:
Net income				$	98,575			$	427,058			$	145,084
Adjustments to reconcile net income to net cash provided (used) by operating activities:
	Depreciation and amortization				71,171				249,444				174,386
	Gain (loss) on sale of property, plant, and equipment				—				—				(6,723	)
	Deferred income taxes				457				92,791				37,121
Change in operating assets and liabilities:
	Accounts receivable				30,490				(26,044	)			(309,046	)
	Shareholder loans				1,707				6,318				5,695
	Prepaid expenses				1,096				104				(858	)
	Prepaid income tax				—				3,507				(3,507	)
	Accounts payable				(35,559	)			(11,967	)			81,718
	Accrued payroll and employee benefits				29,696				(14,467	)			31,379
	Income tax payable				38,764				13,679				(2,076	)
	Net Cash Provided (Used) by Operating Activities				236,397				740,423				153,173
Cash flows from investing activities:
Proceeds from sale of property, plant, and equipment					—				—				25,000
Capital expenditures on property, plant, and equipment					(37,899	)			(406,618	)			(220,385	)
	Net Cash Provided (Used) by Investing Activities				(37,899	)			(406,618	)			(195,385	)
Cash flows from financing activities:
Repayment of long-term debt					(92,936	)			(322,686	)			(190,748	)
Proceeds from issuance of long-term debt					—				160,000				155,105
Repayment of short-term debt					(32,164	)			(1,550,165	)			(479,550	)
Proceeds from issuance of short-term debt					—				1,388,920				561,260
	Net Cash Provided (Used) by Financing Activities				(125,100	)			(323,931	)			46,067
Net Increase (Decrease) in Cash and Cash Equivalents					73,398				9,874				3,855
Cash and Cash Equivalents at Beginning of Year					49,695				39,821				35,966
Cash and Cash Equivalents at End of Year				$	123,093			$	49,695			$	39,821
Supplemental Schedule of Noncash Investing and Financing Activities:
		Purchase of equipment financed with debt proceeds		$	—			$	212,303			$	378,396
	Cash paid for interest			$	8,954			$	44,045			$	27,022

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Note 1:	Summary of Significant Accounting Policies

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Note 2:	Related-Party Transactions

						December 31,
		March 31,
		2005				2004				2003
Note receivables from shareholders, due upon demand, bearing interest of 0%, unsecured		$	7,967			$	9,673			$	15,991

Note 3:	Pledged Assets and Short-Term Notes Payable

						December 31,
		March 31,
		2005				2004				2003
Note payable, FNB, $150,000 line of credit, 6.0 to 6.25% interest rate		$	—			$	—			$	103,850
Note payable, FNB, $53,485, 6.0 to 7.75% interest rate			—				—				24,299
Note payable, FNB, $53,485, 6.25 to 8.75% interest rate			—				—				21,846
Note payable, FNB, $46,145, 6.0 to 7.25% interest rate			13,380				21,106				—
Note payable, CAT Financial, $98,013, 6.7% interest rate			41,221				65,659				—
		$	54,601			$	86,765			$	149,995

Note 4:	Pledged Assets and Long-Term Debt

							December 31,
			March 31,
			2005				2004				2003
Various notes payable to banks and financing companies for vehicles and equipment, due in installments through March, 2008 at fixed interest rates ranging from 0.0% to 8.75%, collateralized by vehicles, equipment and accounts receivable			$	138,594			$	160,674			$	250,893
Various notes payable to banks and financing companies for vehicles and equipment, due in installments through March, 2007 at variable interest rates ranging from 4.15% to 7.25%, collateralized by vehicles, equipment and accounts receivable				234,559				305,415				263,593
Subtotal				373,153				466,089				514,486
	Less current maturities			283,194				312,414				235,137
Total Long-term debt			$	89,959			$	153,675			$	279,349

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Year Ending March 31,
2006		$	283,194
2007			79,845
2008			10,114
		$	373,153

Note 5:	Leases

Year Ending March 31,
2006		$	144,000

Note 6:	Stockholders’ Equity

						December 31,
		March 31,
		2005				2004				2003
Common stock authorized			100				100				100
Common stock issued			100				100				100
Common stock outstanding			100				100				100
Common stock, per share par value		$	10			$	10			$	10
Cash dividends paid on common stock			—				—				—

Note 7:	Dependence on Key Customers

Note 8:	Subsequent Events

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Note 9:	Income Tax Matters

							December 31,
			March 31,
			2005				2004				2003
Deferred Tax Liabilities:
	Property and equipment		$	136,593			$	132,577			$	78,565
	Cash basis receivables			95,394				101,340				96,261
	Prepaid expenses			2,047				2,261				2,281
				234,034				236,178				177,107
Deferred Tax Assets:
	Net operating loss carryforward			—				—				31,099
	Cash basis accounts payable and accrued expenses			28,797				31,397				34,018
				28,797				31,397				65,117
Net deferred tax liabilities			$	205,237			$	204,781			$	111,990

						December 31,
		March 31,
		2005				2004				2003
Current liabilities		$	68,644			$	72,204			$	33,425
Noncurrent liabilities			136,593				132,577				78,566
		$	205,237			$	204,781			$	111,991

						December 31,
		March 31,
		2005				2004				2003
Current tax expense		$	45,169			$	51,469			$	—
Deferred tax expense			457				92,790				37,121
Benefit of operating loss carryforward			—				(31,099	)			—
		$	45,626			$	113,160			$	37,121

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ASSETS
Current Assets
	Cash				$	153,254.16
	Trade Receivables					422,900.00
	Trade Receivables-WIP					111,225.00
	Loans to Shareholder					6,242.36
	Prepaid Expense					19,120.50
		Total Current Assets							$	712,742.02
Property and Equipment
	Transportation Equipment					178,238.71
	Machinery & Equipment					2,140,792.13
	Office Furniture & Equipment					7,131.34
	Accumulated Depreciation					(829,395.00	)
		Net Property and Equipment								1,496,767.18
			Total Assets						$	2,209,509.20
LIABILITIES AND EQUITY
Current Liabilities
	Accounts Payable				$	85,265.16
	Accrued Expenses					114,569.38
	Income Tax Payable					80,329.09
	Deferred Income Taxes					71,781.00
	Notes Payable					246,301.98
	Current Portion of L.T. Debt					206,298.26
		Total Current Liabilities							$	804,544.87
Deferred Income Tax										158,816.00
Long-Term Debt, Net of Current Portion										16,014.91
Stockholders’ Equity
	Common Stock, $10 Par Value					1,000.00
	Retained Earnings					1,229,133.42
		Total Stockholders’ Equity								1,230,133.42
			Total Liabilities & Stockholders’ Equity						$	2,209,509.20

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				Six Months Ended								Six Months Ended
				Jun. 30, 2005				Pct				Jun. 30, 2004				Pct
Revenue
	Service Revenue			$	1,949,131.25				100.00			$	1,839,365.00				100.00
		Total Revenue			1,949,131.25				100.00				1,839,365.00				100.00
Cost of Revenue					1,257,348.70				64.51				1,421,254.04				77.27
		Gross Profit			691,782.55				35.49				418,110.96				22.73
Operating Expenses					328,061.99				16.83				269,719.48				14.66
		Income From Operations			363,720.56				18.66				148,391.48				8.07
Other Income (Expense)
	Interest Income				168.77				0.01				343.36				0.02
	Interest Expense				(16,139.41	)			(0.83	)			(24,819.02	)			(1.35	)
		Total Other Income (Expense)			(15,970.64	)			(0.82	)			(24,475.66	)			(1.33	)
		Income Before Taxes			347,749.92				17.84				123,915.82				6.74
Income Taxes
	Current Income Tax				78,710.75				4.04
	Deferred Income Taxes				25,816.00				1.32				23,830.00				1.30
					104,526.75				5.36				23,830.00				1.30
		Net Income			243,223.17				12.48				100,085.82				5.44
Beginning Retained Earnings					985,910.25								558,852.46
		Ending Retained Earnings		$	1,229,133.42							$	658,938.28

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				Six Months Ended								Six Months Ended
				Jun. 30, 2005				Pct				Jun. 30, 2004				Pct
Cost of Revenue
	Contract Air				191,500.00				9.83				352,300.00				19.15
	Freight & Trucking				11,529.98				0.59				13,788.47				0.75
	Auto Expense				57,800.36				2.97				57,554.74				3.13
	Depreciation				148,285.00				7.61				110,875.00				6.03
	Fuel				0.00				0.00				12,906.32				0.70
	Insurance				27,634.49				1.42				21,697.12				1.18
	Laundry/ Uniforms				1,365.96				0.07				5,223.46				0.28
	Maintenance & Repairs				95,822.66				4.92				73,610.05				4.00
	Equipment Rental				141,320.17				7.25				175,289.72				9.53
	Subcontracting — Other				2,942.50				0.15				1,800.00				0.10
	Supplies				104,745.30				5.37				139,860.66				7.60
	Taxes				34,631.08				1.78				33,779.21				1.84
	Travel				2,666.50				0.14				0.00				22.97
	Wages				437,054.70				22.42				422,569.29				22.97
		Total Cost of Revenue		$	1,257,348.70				64.51			$	1,421,254.04				77.27
Operating Expenses
	Advertising & Promotional				0.00				0.00				454.56				0.02
	Bank Charges				0.00				0.00				632.62				0.03
	Contract Labor				0.00				0.00				924.00				0.05
	Car & Truck Expense				3,400.29				0.17				0.00				0.05
	Contributions				2,250.00				0.12				1,000.00				0.05
	Depreciation				3,635.00				0.19				3,341.00				0.18
	Dues & Subscriptions				71.70				0.00				170.40				0.01
	Insurance				21,057.11				1.08				20,040.54				1.09
	Laundry & Uniforms				1,748.23				0.09				0.00				1.09
	Life Insurance				288.00				0.01				269.00				0.01
	Medical Reimbursement				0.00				0.00				3,621.06				0.20
	Meals & Entertainment				7,604.96				0.39				1,441.28				0.08
	Office Expense				936.47				0.05				1,510.61				0.08
	Professional fees				5,171.03				0.27				1,054.00				0.06
	Rent				6,026.48				0.31				6,938.15				0.38
	Repairs & Maintenance				154.20				0.01				0.00				0.38
	Supplies				497.90				0.03				40.00				0.00
	Taxes				19,904.64				1.02				11,195.41				0.61
	Travel				6,104.48				0.31				1,564.70				0.09
	Utilities & Telephone				13,329.50				0.68				8,322.15				0.45
	Wages				43,482.00				2.23				8,322.15				0.45
	Salaries-Officers				192,400.00				9.87				207,200.00				11.26
		Total Operating Expenses		$	328,061.99				16.83			$	269,719.48				14.66

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					6 Months Ended				6 Months Ended
					Jun. 30, 2005				Jun. 30, 2004
Cash Flow from Operating Activities
	Net Income (Loss)				$	242,223.17			$	100,085.82
	Adjustments to Reconcile Cash Flow
		Depreciation				151,920.00				114,216.00
		Deferred Income Tax				25,816.00				23,830.00
	Decrease (Increase) in Current Assets
		Trade Receivables				(4,610.00	)			56,721.00
		Trade Receivable WIP				(9,825.00	)			(30,025.00	)
		Loans to Shareholder				3,432.23				2,959.58
		Prepaid Expense				(7,527.57	)			(321.51	)
		Prepaid Income Taxes				0.00				894.00
	Increase (Decrease) in Current Liabilities
		Accounts Payable				(32,662.73	)			(19,411.84	)
		Accrued Expenses				65,522.20				2,781.13
		Credit Cards Payable				66,650.50				10,690.02
			Total Adjustments			258,714.63				162,333.38
			Cash Provided (Used) by Operations			501,937.80				262,419.20
Cash Flow From Investing Activities
	Sales (Purchases) of Assets
		Machinery & Equipment				(314,139.87	)			(397,016.47	)
			Cash Provided (Used) by Investing			(314,139.87	)			(397,016.47	)
Cash Flow From Financing Activities
	Cash (Used) or provided by:
		Short-Term Debt				159,537.27				42,475.87
		Long-Term Debt				(243,775.81	)			137,312.81
			Cash Provided (Used) by Financing			(84,238.54	)			179,788.68
			Net Increase (Decrease) in Cash			103,559.39				45,191.41
			Cash at Beginning of Period			49,694.77				39,821.42
			Cash at End of Period		$	153,254.16			$	85,012.83

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			Allis-								W. T. Enterprises				M-I				Allis-
			Chalmers				W. T. Enterprises				Purchase				Purchase				Chalmers
			Consolidated				Historical				Adjustments				Adjustments				Consolidated
ASSETS
Cash and cash equivalents			$	2,693			$	153			$	(153	)(G)		$	—			$	2,693
																				—
Trade Receivables				18,001				534				(534	)(G)			—				18,001
Inventories, net				3,901				—				—				—				3,901
Lease receivable, net				180				—				—				—				180
Prepaids and other current assets				1,650				25				(25	)(G)			—				1,650
	Total Current Assets			26,425				712				(712	)			—				26,425
Net Property, plant and equipment				49,585				1,497				2,900	(J)			940	(R)			54,860
												(62	)(A)
												—
Goodwill				12,392				—				1,103	(K)							13,495
Other intangibles, net				5,675				—				500	(K)			—				6,150
												(25	)(E)
Debt issuance costs, net				671												—				671
Lease receivable				432												—				432
Other assets				119				—				—				—				119
	Total Assets		$	95,299			$	2,209			$	3,704			$	940			$	102,152
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current maturities of long-term debt			$	3,952			$	206			$	(206	)(G)		$	—			$	3,952
Trade accounts payable				6,907				85				(85	)(G)			—				6,907
Accrued employee benefits				834				—				—				—				834
Accrued interest				509				—				113	(I)			(75	)(N)			547
Accrued expenses				2,815				267				(267	)(G)			—				2,815
Accounts payable, related parties				75				—				—				—				75
	Total Current Liabilities			15,092				558				(446	)			(75	)			15,130
Accrued postretirement benefit obligations				661				—				—				—				661
Long-term debt				33,938				262				5,738	(H)			6,292	(M)			46,230
Other long-term liabilities				502				159				(159	)(G)							502
Redeemable Warrant				0																0
Preferred Stock				0				—				—				—				0
				50,193				979				5,134				6,217				62,523
Minority Interest				4,911				—				—				(4,911	)(L)			0
Shareholders’ equity
	Common stock			140				1				(1	)(G)			—				140
Capital in excess of par value				42,077				—				—				—
												—				—
				—				—				—				—
												—				—				42,077
Accumulated earnings (deficit)				(2,022	)			1,229				(1,229	)(G)			(366	)(N)			(2,588	)
												(62	)(A)
												(25	)(E)			—
												(113	)(I)
	Total Shareholders’ Equity			40,195				1,230				(1,430	)			(366	)			39,629
	Total Liabilities and Shareholders’ Equity		$	95,299			$	2,209			$	3,704			$	940			$	102,152

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			Allis-																								W.T.
			Chalmers								Delta								Capcoil				W.T.				Enterprises				M-I				Allis-
			Consolidated				Delta				Purchase				Capcoil				Purchase				Enterprises				Purchase				Purchase				Chalmers
			Historical				Historical				Adjustments				Historical				Adjustments				Historical				Adjustments				Adjustments				Consolidated
Sales			$	42,922			$	821			$	—			$	2,161							$	1,949											$	47,853
Cost of Sales				30,483				211				75	(A)			1,458				133	(A)			1,261				(271	)(O)			—				33,350
Gross Profit				12,439				610				(75	)			703				(133	)			688				271				—				14,503
Marketing and Administrative Expense				7,279				985				(665	)(B)			421				28	(E)			324				23	(E)			—				8,395
																																				—
Income (Loss) from Operations				5,160				(375	)			590				282				(160	)			364				248				—				6,108
Other Income
	Interest Income			—				3				—				—				—				—				—				—				3
	Interest Expense			(1,166	)			(11	)			11	(C)			(26	)			(16	)(F)			(16	)			(97	)(I)			(366	)(N)			(1,687	)
	Settlement on lawsuit			103																																103
	Other			55				116				—				—				—																172
Income (Loss) Before Taxes				4,152				(267	)			601				256				(176	)			348				151				(366	)			4,698
Minority Interest				(488	)			—				—				—				—												488	(P)			0
Taxes				(329	)			(142	)			142	(D)			(87	)			87	(D)			(105	)			105	(D)			—				(329	)
Net Income/(Loss)				3,336				(409	)			743				169				(89	)			243				256				122				4,370
	Preferred Dividend			—				—				—				—				—				—				—				—				—
Net income/(loss) attributed to common shares			$	3,336			$	(409	)		$	743			$	169			$	(89	)		$	243			$	256			$	122			$	4,370
Pro forma net income (loss) per common share
Basic			$	0.24																															$	0.32
Diluted			$	0.22																															$	0.29
Weighted average shares outstanding
Basic				13,800																																13,800
Diluted				14,900																																14,900

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			Allis-
			Chalmers								Diamond								Downhole								Delta								Capcoil								W.T. Enterprises				M-I				Allis-
			Consolidated				Diamond				Purchase				Downhole				Purchase				Delta				Purchase				Capcoil				Purchase				W.T. Enterprises				Purchase				Purchase				Chalmers
			Historical				Historical				Adjustments				Historical				Historical				Historical				Adjustments				Historical				Adjustments				Historical				Adjustments				Adjustments				Consolidated
Sales			$	47,726			$	5,584			$	—			$	4,793			$	—			$	3,249			$	—			$	5,774			$	—			$	3,862							$	—			$	70,988
Cost of Sales				35,300				3,566				—				3,876				—				826				298	(A)			4,400				398	(A)			2,764			$	(904	)(Q)			—				50,523
Gross Profit				12,426				2,018				—				917				—				2,423				(298	)			1,374				(398	)			1,098				904				—				20,464
Marketing and Administrative Expense				8,199				664				163	(E)			872				83	(E)			1,798				(940	)(B)			676				110				514				93	(E)			—				12,232
Income (Loss) from Operations				4,227				1,354				(163	)			45				(83	)			625				642				698				(508	)			584				811				—				8,232
Other Income
	Interest Income			32				—				—				—				—				4				—				—				—				—				—				—				36
	Interest Expense			(2,808	)			(59	)			59	(C)			(74	)			74	(C)			(49	)			49	(C)			(74	)			74	(C)			(44	)			(406	)(I)			(733	)(N)			(3,991	)
	Other			272				(26	)			—				—				—				114				—				—				—				—				—				—				360
Income (Loss) Before Taxes				1,723				1,269				(104	)			(29	)			(9	)			694				691				624				(434	)			540				405				(733	)			4,637
Minority Interest				(321	)			—				(524	)			—				—				—				—				—				—				—				—				845	(P)			(0	)
Taxes				(514	)			—				—				—				—				(265	)			265	(D)			—				—				(113	)			113	(D)			—				(514	)
Net Income/(Loss)				888				1,269				(628	)			(29	)			(9	)			429				956				624				(434	)			427				518				112				4,123
	Preferred Dividend			(124	)			—				—				—				—				—				—				—				—				—				—				—				(124	)
Net income/(loss) attributed to common shares			$	764			$	1,269			$	(628	)		$	(29	)		$	(9	)		$	429			$	956			$	624			$	(434	)		$	427			$	518			$	112			$	3,999
Pro forma net income (loss) per common share
Basic			$	0.10																																															$	0.48
Diluted			$	0.06																																															$	0.41
Weighted average shares outstanding
Basic				7,930																																																8,321
Diluted				11,959																																																9,901

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	A.) Increase in depreciation due to the increase in the fair value of assets acquired.
	B.) Elimination of the year end bonus paid to the employees of Delta.
	C.) Reduction interest expense due to the reduction on debt not assumed.
	D.) Elimination of tax provision due to the Company’s net operating losses to offset the income from operations thus reducing the amount of federal income tax liability.
	E.) Increase in amortization due to the increase in other intangible asset value of acquired company.
	F.) To record interest expense related to cash borrowed to purchase Capcoil.
	G.) Elimination of assets and liabilities not acquired.
	H.) To record cash borrowed to purchase W.T. Enterprises.
	I.) To record interest expense related to cash borrowed to purchase W.T. Enterprises.
	J.) Recognition of fair value of assets in connection with the acquisition of W.T. Enterprises.
	K.) Recognition of goodwill and other intangible assets in connection with the acquisition of W.T. Enterprises.
	L.) To record the elimination of M-I’s 45% at time of purchase in AirComp.
	M.) To record cash borrowed to purchase M-I’s 45% of AirComp.
	N.) To record interest expense related to cash borrowed to purchase M-I’s 45% in AirComp.
	O.) To record elimination of lease expense not assumed net of additional depreciation expense of $333,000 due to the increase value of assets acquired at W.T. Enterprises.
	P.) Elimination of M-I’s 45% minority interest expense.
	Q.) To record elimination of lease expense not assumed net of additional depreciation expense of $249,000 due to the increase value of assets acquired at W.T. Enterprises.
	R.) Recognition of fair value of assets in connection with the acquisition of M-I’s 45%.

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Item 13.	Other Expenses of Issuance and Distribution.

Registration fee — Securities and Exchange Commission			$	2,261.90
Legal Fees and Expenses			$	80,000
Accounting Fees and Expenses			$	30,000
Estimated Printing			$	70,000
Miscellaneous Expenses			$	12,000
	Total		$	194,261.90

Item 14.	Indemnification of Directors and Officers.

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Item 15.	Recent Sales of Unregistered Securities

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Item 16.	Exhibits and Financial Statement Schedules

Item 17.	Undertakings.

	(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
	(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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	ALLIS-CHALMERS ENERGY INC.

	By:	/s/ Munawar H. Hidayatallah

	Munawar H. Hidayatallah
	Chief Executive Officer

		Signature		Title		Date
/s/ Munawar H. Hidayatallah   Munawar H. Hidayatallah				Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)		August 18, 2005
/s/ Victor M. Perez   Victor M. Perez				Chief Financial Officer (Principal Financial Officer)		August 18, 2005
/s/ Bruce Sauers   Bruce Sauers				Chief Accounting Officer (Principal Accounting Officer)		August 18, 2005
*   Jeffrey R. Freedman				Director		August 18, 2005
*   Victor F. Germack				Director		August 18, 2005
*   David A. Groshoff				Director		August 18, 2005

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		Signature		Title		Date
*   Thomas E. Kelly				Director		August 18, 2005
*   John E. McConnaughy, Jr				Director		August 18, 2005
*   Jens H. Mortensen				Director		August 18, 2005
*   Robert E. Nederlander				Director		August 18, 2005
*   Leonard Toboroff				Director		August 18, 2005
*   Thomas O. Whitener, Jr				Director		August 18, 2005
By:		/s/ Victor M. Perez   Victor M. Perez, Attorney-in-fact

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Exhibit						Description
	1	.1				Form of Underwriting Agreement (previously filed)
	2	.1				First Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code, dated September 14, 1988, which includes the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 (incorporated by reference to Registrant’s Current Report on Form 8-K dated December 1, 1988).
	2	.2				Agreement and Plan of Merger dated as of May 9, 2001 by and among Registrant, Allis-Chalmers Acquisition Corp. and OilQuip Rentals, Inc. (incorporated by reference to Registrant’s Current Report on Form 8-K filed May 15, 2001).
	2	.3				Stock Purchase Agreement dated February 1, 2002 by and between Registrant and Jens H. Mortensen, Jr. (incorporated by reference to Registrant’s Current Report on Form 8-K filed February 21, 2002).
	3	.1				Amended and Restated Certificate of Incorporation of Registrant (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
	3	.2				Amended and Restated By-laws of Registrant (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
	3	.3				Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on June 9, 2004 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	3	.4				Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on January 5, 2005 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed January 11, 2005).
	3	.4				Certificate of Amendment of Certificate of Incorporation filed with the Delaware Secretary of State on August 16, 2005 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed August 17, 2005).
	4	.2				Registration Rights Agreement dated as of March 31, 1999, by and between Allis-Chalmers Corporation and the Pension Benefit Guaranty Corporation (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
	4	.3				Option Agreement dated October 15, 2001 by and between Registrant and Leonard Toboroff (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
	4	.4				Warrant Purchase Agreement dated February 1, 2002 by and between Allis-Chalmers Corporation and Wells Fargo Energy Capital, Inc., including form of warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed February 21, 2002)
	4	.5				Warrant Purchase Agreement dated February 1, 2002 by and between Allis-Chalmers Corporation and Energy Spectrum Partners LP, including form of warrant (incorporated by reference to the Registrant’s Current Report on Form 8-K filed February 21, 2002)
	4	.6*				2003 Incentive Stock Plan (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
	4	.7*				Form of Option Certificate issued pursuant to 2003 Incentive Stock Plan (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
	4	.8				Warrant dated March 1, 2004, issued to Morgan Joseph & Co., Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	4	.9				Form of warrant issued to Investors pursuant to Stock and Warrant Purchase Agreement dated April 2, 2004 by and among Registrant and Donald Engel, Christopher Engel The Engel Defined Benefit plan, RER Corp. and Leonard Toboroff (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	4	.10				Registration Rights Agreement dated April 2, 2004 by and between Registrant and the Stockholder signatories thereto (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).

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Exhibit						Description
	4	.11				Warrant dated May 19, 2004, issued to Jeffrey R. Freedman (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	4	.12				2003 Incentive Stock Plan as amended and approved by stockholders on August 11, 2005 (incorporated by reference to the Registrant’s Form 8-K filed on August 17, 2005).
	5	.1				Opinion of Greenberg Glusker Fields Claman Machtinger & Kinsella LLP. (previously filed)
	9	.1				Shareholders Agreement dated February 1, 2002 by and among Registrant and the stockholder and warrant holder signatories thereto (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
	9	.2				Stockholders Agreement dated April 2, 2004, by and among Registrant and the Stockholder signatories thereto. (incorporated by reference to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2003).
	9	.3				First Amendment to Stockholders Agreement dated April 2, 2004, by and among Registrant and the Stockholder signatories thereto. (incorporated by reference to the registrant’s current Report on Form 8-K filed on August 5, 2005).
	10	.1				Amended and Restated Retiree Health Trust Agreement dated September 14, 1988 by and between Registrant and Wells Fargo Bank (incorporated by reference to Exhibit C-1 of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrant’s Current Report on Form 8-K dated December 1, 1988).
	10	.2				Amended and Restated Retiree Health Trust Agreement dated September 18, 1988 by and between Registrant and Firstar Trust Company (incorporated by reference to Exhibit C-2 of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrant’s Current Report on Form 8-K dated December 1, 1988).
	10	.3				Reorganization Trust Agreement dated September 14, 1988 by and between Registrant and John T. Grigsby, Jr., Trustee (incorporated by reference to Exhibit D of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrant’s Current Report on Form 8-K dated December 1, 1988).
	10	.4				Product Liability Trust Agreement dated September 14, 1988 by and between Registrant and Bruce W. Strausberg, Trustee (incorporated by reference to Exhibit E of the First Amended and Restated Joint Plan of Reorganization dated September 14, 1988 included in Registrant’s Current Report on Form 8-K dated December 1, 1988).
	10	.5*				Allis-Chalmers Savings Plan (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988).
	10	.6*				Allis-Chalmers Consolidated Pension Plan (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1988).
	10	.7				Agreement dated as of March 31, 1999 by and between Registrant and the Pension Benefit Guaranty Corporation (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
	10	.8				Letter Agreement dated May 9, 2001 by and between Registrant and the Pension Benefit Guarantee Corporation (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q filed on May 15, 2002).
	10	.9				Termination Agreement dated May 9, 2001 by and between Registrant, the Pension Benefit Guarantee Corporation and others (incorporated by reference to Registrant’s Current Report on Form 8-K filed on May 15, 2002).
	10	.10				Stock Purchase Agreement dated February 1, 2002 by and among Registrant, Energy Spectrum Partners LP, and Strata Directional Technology, Inc. (incorporated by reference to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
	10	.11				Joint Venture Agreement dated June 27, 2003 by and between Mountain Compressed Air, Inc. and M-I L.L.C. (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 16, 2003).
	10	.12				Credit and Security Agreement by and between AirComp, L.L.C. and Wells Fargo Bank Texas NA, including Term Note, Revolving Line of Credit, and Delayed Draw Term Note, each filed as of June 27, 2003 (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 16, 2003).
	10	.13				Security Agreement by and between AirComp, L.L.C. and Wells Fargo Bank Texas NA, filed as of June 27, 2003 (incorporated by reference to Registrant’s Current Report on Form 8-K dated July 16, 2003).

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Exhibit						Description
	10	.14*				Employment Agreement dated July 1, 2003 by and between AirComp, L.L.C. and Terry Keane (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 16, 2003).
	10	.15				Second Amendment to Credit Agreement dated September 30, 2003 by and between Jens’ Oilfield Service, Inc. and Wells Fargo Credit Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2003).
	10	.16				Third Amendment to Credit Agreement dated September, 2003 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2003).
	10	.17				First Amendment to Credit Agreement dated October 1, 2003 by and between Registrant and Wells Fargo Energy Capital Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2003).
	10	.18				Fourth Amendment to Credit Agreement dated as of January 30, 2004 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.19				Letter Agreement dated February 13, 2004 by and between Registrant and Morgan Joseph & Co., Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	10	.20*				Employment Agreement dated as of April 1, 2004 between Registrant and Munawar H. Hidayatallah (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.21*				Employment Agreement dated as of April 1, 2004 between Registrant and David Wilde (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.22				Stock and Warrant Purchase Agreement dated April 2, 2004 by and among Registrant and Donald Engel, Christopher Engel, the Engel Defined Benefit Plan, RER Corp. and Leonard Toboroff (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.23				Preferred Stock Conversion Agreement dated April 2, 2004 by and between Registrant and Energy Spectrum Partners LP (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.24				Second Amendment to Credit Agreement dated as of April 2, 2004 between AirComp, LLC and Wells Fargo Bank, NA (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.25				Amendment to Credit Agreement by and between Registrant and Wells Fargo Energy Capital dated April 2, 2004 (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.26				Fifth Amendment to Credit Agreement dated as of April 6, 2004 by and between Strata Directional Technology, Inc., and Wells Fargo Credit Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.27				Third Amendment to Credit Agreement dated as of April 6, 2004 by and between Jens’ Oilfield Service, Inc. and Wells Fargo Credit Inc. (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	10	.28				Letter Agreement dated June 8, 2004 by and between the Registrant and Morgan Keegan & Company, Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	10	.29*				Employment Agreement dated July 26, 2004 by and between the Registrant and Victor M. Perez (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	10	.30				Stock Purchase Agreement dated August 10, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	10	.31				Amendment to Stock Purchase Agreement dated August 10, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).
	10	.32				Letter Agreement relating to Stock Purchase Agreement dated August 5, 2004 (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 118916) filed on September 10, 2004).

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Exhibit						Description
	10	.33				Addendum to Stock Purchase Agreement dated September 29, 2004 (incorporated by reference to Registrant’s Current Report on Form 8-K filed on September 30, 2004).
	10	.34*				Employment Agreement dated October 11, 2004, between the Registrant and Theodore F. Pound III (incorporated by reference to Registrant’s Current Report on Form 8-K filed on October 15, 2004).
	10	.35				Asset Purchase Agreement dated November 10, 2004 by and among AIRCOMP L.L.C., a Delaware limited liability company, DIAMOND AIR DRILLING SERVICES, INC., a Texas corporation, and MARQUIS BIT CO., L.L.C., a New Mexico limited liability company, GREG HAWLEY and TAMMY HAWLEY, residents of Texas and CLAY WILSON and LINDA WILSON, residents of New Mexico. (incorporated by reference to the Current Report on Form 8-K filed on November 15, 2004).
	10	.36				Purchase Agreement and related Agreements by and among Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and others dated December 10, 2004 (incorporated by reference to the Current Report on Form 8-K filed on December 16, 2004).
	10	.37				Amended and Restated Credit Agreement dated December 7, 1003, by and between AirComp LLC and Wells Fargo Bank, N.A. (incorporated by reference to Registrant’s Current Report on Form 8-K filed on December 10, 2004).
	10	.38				Purchase Agreement and related agreements by and among Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and others dated December 10, 2004 (incorporated by reference to Registrant’s Current Report on Form 8-K filed on December 16, 2004).
	10	.39				Stock Purchase Agreement dated April 1, 2005, by and among the Company, Thomas A. Whittington, Sr., Werlyn R. Bourgeois and SAM and D, LLC. (incorporated by reference to Registrant’s Current Report on Form 8-K filed April 5, 2005).
	10	.40				Stock Purchase Agreement effective May 1, 2005, by and among the Company, Wesley J. Mahone, Mike T. Wilhite, Andrew D. Mills, and Tim Williams (incorporated by reference to Registrant’s Current Report on Form 8-K filed May 6, 2005).
	10	.41				Credit Agreement dated July 11, 2005 with Royal Bank of Canada, as administrative agent, with the notes attached thereto as exhibits and form of the Pledge and Security Agreement (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 15, 2005).
	10	.42				Purchase Agreement dated July 11, 2005 among the Company, Mountain Compressed Air, Inc. and M-I L.L.C. (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 15, 2005).
	10	.43				Asset Purchase Agreement dated July 11, 2005 between AirComp L.L.C., W.T. Enterprises, Inc. and William M. Watts (incorporated by reference to Registrant’s Current Report on Form 8-K filed July 15, 2005).
	21	.1				Subsidiaries of Registrant (previously filed)
	23	.1				Consent of Greenberg Glusker Fields Claman Machtinger & Kinsella LLP (included in Exhibit 5.1).
	23	.2				Consent of Gordon, Hughes and Banks, LLP.
	23	.3				Consent of UHY Mann Frankfort Stein & Lipp CPAs, LLP
	23	.4				Consent of Johnson, Miller & Co.
	23	.5				Consent of Accounting & Consulting Group, LLP
	23	.6				Consent of Wright, Moore, Dehart, Dupuis & Hutchinson, LLC
	23	.7				Consent of Curtis Blakely & Co., PC
	23	.8				Consent of Accounting & Consulting Group, LLP
	24	.1				Power of Attorney (included in signature page).

*	Compensation Plan or Agreement

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