<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File No. 000-22571
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
(Exact name of registrant as specified in its charter)
Georgia 58-1915632
------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
1950 Spectrum Circle, Suite B-100, Marietta, Georgia 30067
----------------------------------------------------------
(Address of principal executive offices)
(678) 264-0400
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the registrant has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and has been subject to such filing requirements for the past 90 days.
Yes [X] No___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes___ No___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common Stock, no par value per share, _______shares issued and
outstanding as of May 12, 2000.
Redeemable Common Stock Purchase Warrants, 1,437,500 issued and
outstanding as of May 12, 1999.
Transitional Small Business Disclosure Format (check one): YES ____ NO [X]
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QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999..........................3
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999...................................................................4
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 ........................................................................5
Notes to the Consolidated Financial Statements..................................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation............8
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................12
ITEM 6. Exhibits and Reports on Form 8-K...............................................................14
Signatures.....................................................................................15
</TABLE>
2
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I - FINANCIAL INFORMATION
Item 1. Financial Statements -
PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 199,803 $ 199,803
Certificate of deposit 268,734 268,734
Trade accounts receivable, net of allowance for doubtful accounts of
$697,765 at March 31, 2000 and $634,765 at December 31, 1999 10,260,888 5,398,210
Due from affiliate 429,365 429,365
Due from shareholder 2,298,262 402,503
Prepaid expenses 765,848 401,169
Other current assets 578,779 534,275
------------ ------------
Total current assets 14,801,679 7,634,059
PROPERTY AND EQUIPMENT, net 6,075,384 6,308,225
NONCURRENT NOTES AND RECEIVABLES 3,313,831 3,313,831
OTHER ASSETS 301,114 229,801
GOODWILL 617,188 --
------------ ------------
Total assets $ 25,109,196 $ 17,485,916
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 1,027,732 $ 544,610
Accounts payable 4,773,428 2,674,258
Accrued liabilities 2,364,570 2,697,036
Line of credit 6,906,242 6,465,742
Current maturities of long-term debt and capital lease obligations 1,434,723 1,444,167
------------ ------------
Total current liabilities 16,506,695 13,825,813
------------ ------------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, net of current maturities 4,614,310 3,840,833
------------ ------------
337,209 237,209
DEFERRED INCOME TAXES AND OTHER LIABILITIES ------------ ------------
SHAREHOLDERS' EQUITY:
Series A Convertible Preferred stock 3,000 shares authorized, 217 and 325
shares issued and outstanding on March 31, 2000 and December 31, 1999,
respectively 217,000 325,000
Common stock; no par value, 20,000,000 shares authorized, 6,847,356 and
5,163,422 issued and outstanding at March 31, 2000 and December 31, 1999,
respectively -- --
Warrants 353,867 353,867
Additional paid-in capital 10,579,880 7,004,655
Accumulated earnings (deficit) (7,499,766) (8,101,461)
------------ ------------
Total shareholders' equity (deficit) 3,650,981 (417,939)
------------ ------------
Total liabilities and shareholders' equity $ 25,109,195 $ 17,485,916
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
2000 1999
(unaudited)
<S> <C> <C>
Operating revenues $ 9,060,383 $ 9,798,380
Agency revenues 5,057,599 --
TOTAL REVENUES 14,117,982 9,798,380
OPERATING EXPENSES:
Salaries, wages and benefits 4,471,608 4,469,831
Purchased transportation 3,648,523 959,712
Operating supplies and expenses 2,086,798 2,161,512
Fuel and fuel taxes 1,591,750 1,111,580
Communications and utilities 160,271 220,014
Depreciation and amortization 265,654 246,200
Operating taxes and licenses 73,473 146,984
Bad debt expense 63,000 3,000
Other operating expenses 854,784 496,832
------------ ------------
Total operating expenses 13,215,861 9,815,665
INCOME (LOSS) FROM OPERATIONS 902,121 (17,285)
OTHER INCOME (EXPENSE):
Interest expense (306,338) (272,437)
Other income, net 5,912 72,045
------------ ------------
INCOME (LOSS) BEFORE
INCOME TAXES 601,695 (217,676)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET INCOME (LOSS) $ 601,695 $ (217,676)
============ ============
NET LOSS PER COMMON SHARE - basic $ 0.10 $ (0.06)
============ ============
NET LOSS PER COMMON SHARE - diluted $ 0.08 $ (0.06)
============ ============
Weighted average common and common
equivalent shares outstanding - basic 6,275,520 3,892,604
============ ============
Weighted average common and common equivalent
shares outstanding - diluted 7,547,005 3,892,604
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
NOT UPDATED
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
2000 1999
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 601,695 $ (217,676)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization 295,653 246,200
Provision for doubtful accounts 63,000 3,000
Changes in operating assets and liabilities:
Trade accounts receivable, net (4,925,678) (1,085,872)
Due from affiliate -- --
Other current assets (409,183) (464,298)
Accounts payable and accrued liabilities 1,566,705 1,000,523
----------- -----------
Total adjustments (3,439,523) (300,447)
----------- -----------
Net cash used in operating activities (2,837,828) (518,123)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment 25,000 --
Note receivable -- (59,177)
Goodwill (625,000) --
Increase (decrease) in other liabilities 100,000 --
Increase in other assets (71,313) (4,183)
----------- -----------
Net cash used in investing activities
(621,313) (54,994)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayment of) line of credit (440,500) (200,000)
Cash overdraft 483,122 --
Repayments of long-term debt and capital lease obligations (385,967) (367,215)
Issuance of 10% convertible debentures 1,150,000 --
Net proceeds from sale of common stock and common stock
purchase warrants 3,467,225 298,920
Due to (from) Shareholder 1,895,759 --
Net cash provided by (used in) financing activities 3,259,121 (268,295)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS -- (841,412)
CASH AND CASH EQUIVALENTS, beginning of period 199,803 1,003,783
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 199,803 $ 162,371
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
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PROFESSIONAL TRANSPORTATION GROUP LTD., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 and 1999
1. ORGANIZATION AND OPERATION
Professional Transportation Group Ltd., Inc. ("PTG, Ltd.") serves as a
holding company for its operating subsidiaries, Timely Transportation, Inc.
("Timely"), Truck-Net, Inc. ("Truck-Net"), Timely North, Inc. ("Timely-North"),
and PTG, Inc. (collectively, the "Subsidiaries") (PTG, Ltd. together with the
Subsidiaries is hereafter referred to as the "Company"). The Company, through
the Subsidiaries, provides transportation and logistics services primarily for
the air freight industry throughout the continental United States. Timely
operates a fleet of company-owned and leased vehicles to provide time-definite
truckload transportation services for companies in the air freight and expedited
delivery markets. Truck-Net provides brokerage services to companies, mainly in
the air freight industry, that are in need of third-party transportation. Timely
North provided time-definite truckload transportation services for companies in
the floorcovering industry (1998 and 1997). PTG, Inc. operated a courier service
in the Atlanta, Georgia, metropolitan region (d.b.a. Rapid Transit) and
currently provides third-party logistics services in recovering copiers, fax
machines, and telephone equipment that are in need of repair or recovery under
expired leases. The Company terminated the operations of both Timely North and
Rapid Transit in April 1998 and September 1999, respectively.
In the second quarter of 1999 Timely initiated its agency program which
is a cooperative for smaller, time-definite, expedited truckload carriers and
brokers that operate under the Company's authority as an agent. The agents are
provided access to the Company's application software and global positioning
technologies and receive economies of scale through the Company's purchasing
power and billing and collection services. The Company's commitment to this
program has enabled it to grow from four agents in 1999 with revenues of $2.2
million to 13 agents with revenues of $5.1 million for the first quarter of
2000.
Prior to January 1997, the Subsidiaries were owned and operated by the
(then) majority shareholder of the Company as separate operating companies. On
January l, 1997, the respective shares of stock in the Subsidiaries were
contributed to PTG, Ltd. by their sole shareholder, whereupon each became a
wholly owned subsidiary of PTG, Ltd. PTG, Ltd., which had previously been an
operating company, then transferred its operations to PTG, Inc.
In July 1997, the Company completed an initial public offering (the
"Offering") of its common stock and redeemable common stock purchase warrants.
FINANCIAL CONDITION
The Company had a working capital deficit of $1.7 million at March 31,
2000, which includes a liability of $6.9 million under the Company's line of
credit agreement. This agreement is currently due to expire on May 31, 2000.
While the Company continues to work with its bank to extend and/or modify its
credit facility, the Company has ongoing discussions with others in order to
determine a satisfactory path with respect to the Company's liquidity issues.
The Company believes that any new credit arrangements, if entered into, in
addition to recent debt and equity transactions, the continued growth of the
agency program and funds which the Company expects to receive from the exercise
of its publicly traded warrants resulting from the May 8, 2000 formal call of
these warrants, will be sufficient to satisfy its contemplated cash requirements
over the next 12 months. There can be no assurance that the Company will be
successful in obtaining an extension of its credit agreement or in arranging
alternative financing under commercially reasonable terms or at all. As a result
of the above factors, there is substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
6
<PAGE> 7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of PTG, Ltd.
and the Subsidiaries. All significant intercompany balances and transactions
have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
Net operating loss carryforwards will be utilized to fully offset
income generated in the first quarter of 2000. Therefore, no income tax
provision was recorded.
3. BASIS OF PRESENTATION
In the opinion of management, the unaudited consolidated financial
statements contain all normal and recurring adjustments necessary to present
fairly the consolidated financial position of the Company at March 31, 2000 and
the consolidated results of the Company's operations and its cash flows for the
three month periods ended March 31, 2000 and 1999. Certain information and
footnote disclosures usually found in financial statements prepared in
accordance with generally accepted accounting principles consistently applied
have been condensed or omitted. Operating results for the interim periods are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
4. BUSINESS SEGMENT INFORMATION
The following table summarizes revenues and operating income by
business segment for the quarters ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
TIMELY TRUCK-NET PTG, INC. TOTAL
- --------------------------------------------------------------------------------------------------------------
2000:
<S> <C> <C> <C> <C>
Revenues from external customers 13,989,252 60,173 68,557 14,117,982
Intersegment revenues 53,241 1,700 0 54,941
Operating profit 1,229,632 (78,777) 2,267 1,152,122
1999:
Revenues from external customers 7,745,266 1,807,264 245,850 9,798,380
Intersegment revenues 674,735 42,937 0 717,672
Operating profit (loss) (105,975) 38,098 89,442 21,565
</TABLE>
7
<PAGE> 8
The following table reconciles segment profit to consolidated income
for the quarters ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---------- --------
<S> <C> <C>
Total operating profit for reportable segments 1,152,122 21,565
Interest expense (306,338) (272,436)
Salaries, wages and benefits 0 0
Other unallocated amounts (244,089) 33,195
---------- --------
Total consolidated income (loss) 601,695 (217,676)
---------- --------
</TABLE>
5. ACQUISITIONS
On January 3, 2000 Timely purchased selected assets of ATECH Commercial
Corporation, a Florida-based transportation and brokerage company. The following
table presents selected pro forma financial data for the three months ended
March 31, 1999 as if the acquisition had occurred on January 1, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
------------------------------------------
Reported ATECH Combined
---------- ---------- -----------
<S> <C> <C> <C>
Revenues $9,798,380 $1,036,725 $10,835,105
Operating loss (17,285) (6,815) (24,100)
Net loss $ (217,676) $ (11,902) $ (229,578)
Basic and diluted net loss
per common share $ (0.06) $ (0.06)
Weighted average shares
outstanding 3,892,604 3,862,604
</TABLE>
Supplemental Schedule of Non-cash Investing and Financing Activities
The Company purchased selected assets of ATECH Commercial Corporation for
$650,000. In conjunction with the acquisition, the Company paid cash and
incurred liabilities for further payments as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired $650,000
Purchase price at closing 350,000
--------
Liability for future payment of purchase price $300,000
</TABLE>
6. RESTATED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company had significant changes in its operations during 1999,
including but not limited to the transfer of its operations from Calhoun,
Georgia to the Company's current operating facilities in Marietta, Georgia. As
a result of the move, the Company lost substantially all of its accounting
staff. Moreover, the move also resulted in substantial changes in the Company's
data processing systems and operations. The Company has discovered that these
changes caused certain errors to occur in recording certain revenues in the
first three fiscal quarters of 1999 that were previously undetected until the
completion of the Company's financial audit by its independent certified public
accountants for its 1999 fiscal year. As a result, the Company has restated its
unaudited results of operations and affected balance sheet items for the first
three fiscal quarters of 1999. These items related only to the Company's 1999
unaudited quarterly operating results and affected balance sheet items, and had
no impact on previously reported cash flows. These errors resulted in an
overstatement of previously reported net sales of $2.1 million during the first
three quarters of 1999. As a result, the Company is restating its results of
operations for the first three fiscal quarters of 1999. The above items related
only to the Company's 1999 unaudited quarterly operating results and
had no impact on previously reported cash flows. The Company's unaudited
quarterly results of operations as previously reported and as restated are as
follows:
<TABLE>
<CAPTION>
Income Statement:
- -----------------
March 31, 1999 June 30, 1999 September 30, 1999
------------------------------ ----------------------------- -----------------------------
As previously As previously As previously
reported As restated reported As restated reported As restated
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues............... $10,102,224 $ 9,798,380 $11,604,670 $10,774,226 $11,491,398 $10,504,615
Operating expenses............... 9,815,665 9,815,665 11,344,595 11,344,595 11,096,938 11,096,938
Operating income (loss).......... 286,559 (17,285) 260,075 (570,367) 394,460 (592,323)
Other income (expense) net....... (200,391) (200,391) (137,583) (137,583) (200,023) (200,023)
Net income (loss)................ $ 86,168 $ (217,676) $ 122,492 $ (707,950) $ 194,437 $ (792,346)
Net income (loss) per share:
Basic.......................... $ 0.02 $ (0.06) $ 0.03 $ (0.17) $ 0.04 $ (0.18)
Diluted........................ $ 0.02 $ (0.06) $ 0.02 $ (0.17) $ 0.04 $ (0.18)
Balance Sheet:
- --------------
Accounts receivable............... $ 8,020,448 $ 7,716,604 $ 9,734,958 $ 8,904,516 $10,206,201 $ 9,219,418
Accumulated deficit............... (5,120,656) (5,424,500) (4,998,164) (5,828,606) (4,803,727) (5,790,510)
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following analysis of the Company's financial condition as of March
31, 2000 and the Company's results of operations for the three month periods
ended March 31, 2000 and 1999 should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto. The following discussion
contains statements which constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These statements appear
in a number of places in this Quarterly Report and include all statements that
are not statements of historical fact regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things: (i) the Company's financing plans; (ii) trends affecting the
Company's financial condition or results of operations (including, but not
limited to, its ability to extend its credit facility or enter into new
arrangements to replace such facility); (iii) the Company's growth strategy and
operating strategy; and (iv) the declaration and payment of dividends. The words
"may," "would," "could," "will," "expect," "estimate," "anticipate," "believe,"
"intend," "plans," and similar expressions and variations thereof are intended
to identify forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's ability to
control. Actual results may differ materially from those projected in the
forward-looking statements as a result of various factors. Among the key risks,
assumptions and factors that may affect operating results, performance and
financial condition are the Company's reliance on a small number of customers
for a larger portion of its revenues, fluctuations in its quarterly results,
ability to continue and manage its growth, Year 2000 risks and concerns,
liquidity and other capital resources issues, competition and the other factors
discussed in detail in the Company's filings with the Securities and Exchange
Commission, including, but not limited to, the "Risk Factors" section of the
Company's Registration Statement on Form S-3 (Registration Number 333-70985), as
declared effective by the Securities and Exchange Commission on February 5,
1999. The financial information provided below has been rounded in order to
simplify its presentation. However, the percentages provided below are
calculated using the detailed financial information contained in the
Consolidated Financial Statements and the notes thereto.
OVERVIEW
Through December 31, 1996 the Company, Timely and Truck-Net operated as
three separate entities. At such time, Dennis A. Bakal, the Company's majority
stockholder and then sole director owned all of the shares of Timely and
Truck-Net. Effective January 1, 1997, Mr. Bakal contributed his ownership in
Timely and Truck-Net to the Company, along with his ownership of PTG, a
previously inactive company. On December 31, 1996, PTG acquired certain assets
(subject to certain liabilities), business, operating authorities, names and
customer lists of Rapid Transit ("Rapid"), the courier division of a company
controlled by Mr. Bakal, and certain fixed assets from another company owned by
Mr. Bakal, all in exchange for amounts due the Company, Timely and Truck-Net
from the former corporate owner of Rapid. On June 19, 1997, the Company
completed its initial public offering, which resulted in net proceeds to the
Company of approximately $5.7 million.
On December 3, 1999, the Company's majority shareholder, Chief
Executive Officer, President and director, Dennis A. Bakal, entered into an
agreement with Logistics Management, L.L.C., a Kentucky limited liability
company ("Logistics"), under which Mr. Bakal sold to Logistics all 2.5 million
shares of common stock owned by him. At the time, the purchase comprised
approximately 56% of the outstanding voting shares of the Company. The purchase
price for the shares was $3 million. Logistics is a controlling shareholder in
U.S. Trucking, Inc. (OTC: USTK).
Timely, organized in 1991, performs contract truckload ground
transportation services primarily for customers in the air freight and expedited
delivery markets. In November 1995, Timely entered into an agreement to perform
trucking services for FedEx and became one of FedEx's eight core carriers. Under
the core carrier concept, a limited number of carriers are selected by a shipper
to provide scheduled services between points for a contractually determined
period of time. Such agreements specify routes, pricing (normally determined by
route), equipment specifications and performance standards. In addition, such
agreements generally provide for pricing
9
<PAGE> 10
adjustments based on fuel pricing or changes in cost structure at predetermined
times. For the three months ended March 31, 2000 and 1999, FedEx accounted for
approximately 26% and 51%, respectively, of the Company's consolidated revenues.
Since the inception of the agreement, the Company has consistently exceeded the
required performance standards under the agreement. The term of the Company's
agreement with Fedex was recently extended to May 31, 2001.
In developing its niche in the industry, Timely has concentrated, since
January 1994, on the contract carriage of truckload freight for the air freight
and expedited delivery markets. By concentrating in these markets, the Company
has eliminated the need for terminals and has been able to focus its efforts on
acquiring equipment and recruiting drivers and other personnel. In the second
quarter of 1999 Timely initiated its agency program which is a cooperative for
smaller, time-definite, expedited truckload carriers and brokers that operate
under the Company's authority as agent. The agents are provided access to the
Company's application software and global positioning technologies and receive
economies of scale through the Company's purchasing power and billing and
collection services.
Truck-Net, a licensed freight broker, performs truckload brokerage
services in the same air freight and expedited delivery markets served by
Timely. As a broker, Truck-Net matches a shipper with a specific routing and/or
equipment need with a carrier able to satisfy the shipper's particular
requirements. All carriers used by Truck-Net are required to be properly
certificated and to have a current certificate of insurance. In September 1999
Truck-Net's largest customer, Panalpina, the U.S. subsidiary of a major European
air freight forwarder, began servicing its needs in-house. As a result,
Truck-Net recorded significantly reduced revenues during the first quarter of
2000 and has since ceased operations.
RESULTS OF OPERATIONS
The Company had significant changes in its operations during 1999,
including, but not limited to, the transfer of its operations from Calhoun,
Georgia to the Company's current operating facilities in Marietta, Georgia. As
a result of the move, the Company lost substantially all of its accounting
staff. Moreover, the move also resulted in substantial changes in the Company's
data processing systems and operations. The Company has discovered that these
changes caused certain errors to occur in recording certain revenues in the
first three fiscal quarters of 1999 that were previously undetected until the
completion of the Company's financial audit for its 1999 fiscal year. As a
result, the Company has restated its unaudited results of operations and
affected balance sheet items for the first three fiscal quarters of 1999. These
items related only to the Company's 1999 unaudited quarterly operating results
and affected balance sheet items, and had no impact on previously reported cash
flows. See Footnote 6 to the Financial Statements.
Three Months Ended March 31, 2000 compared to Three Months Ended March 31, 1999
The Company's operating revenues increased approximately $4.3 million,
or 44%, to approximately $14.1 million for the three months ended March 31,
2000, from approximately $9.8 million for the three months ended March 31, 1999.
Timely's revenues increased by 81% to $14.0 million in the first three months of
2000 from $7.7 million for the same period in 1999. The increase is primarily
due to the inclusion in the first quarter of 2000 of approximately $5.1 million
of revenues from the Company's agency program and approximately $1.2 million
from the January 2000 acquisition of the assets of ATECH Commercial Corporation.
Truck-Net recorded revenues of approximately $60,000 in the first quarter of
2000 compared to $1.8 million for the same period in 1999.
The Company's operating expenses increased approximately $3.4 million,
or 35%, to approximately $13.2 million in the three months ended March 31, 2000
from approximately $9.8 million in the three months ended March 31, 1999.
Timely's operating expenses increased approximately 63% to $12.8 million from
$7.9 million. This increase was primarily the result of direct costs related to
the increased revenues discussed above and the increase in average fuel prices
to $1.32 per gallon in the first quarter of 2000 from $0.88 per gallon in the
same period of 1999. The Company remits a negotiated percentage of agency
revenue or gross profit back to the agents, net of fuel, insurance and equipment
charges. Additionally, the Company receives price breaks on increased fuel
purchases and is able to provide administrative functions for the agents with
minimal increase in overhead, thereby reducing costs. Truck-Net recorded
operating expenses of approximately $139,000 in the first quarter of 2000
compared to $1.8 million for the same period in 1999.
Net operating loss carryforwards will be utilized to fully offset
income generated in the first quarter of 2000. Therefore, no provision for
income taxes has been recorded.
The Company's net income was approximately $602,000 for the three
months ended March 31, 2000 compared to a loss of $ in the similar period of
1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company had negative working capital of approximately $1.7 million
at March 31, 2000 compared to negative working capital of $6.1 million at
December 31, 1999. This improvement in working capital is primarily
10
<PAGE> 11
due to the increase in accounts receivable to $10.3 million at March 31, 2000
compared to $5.4 million at December 31, 1999. This increase in accounts
receivable is attributable to increased revenues from the agency program and the
acquisition discussed above.
During the first quarter of 2000, the Company issued $1.2 million of
its 10% convertible debenture due on January 31, 2003 and increased
shareholders' equity an additional $3.4 million primarily through option and
warrant exercises and the sale of the Company's common stock in private
transactions.
The Company has available a combined $9.0 million line of credit with a
lending institution to provide for the Company's working capital and letter of
credit requirements. The loan is guaranteed by the Company's principal
shareholders and its Chief Executive Officer and bears interest at a rate equal
to 0.75% above the bank's base rate (as defined in the agreement). At March 31,
2000, the Company had $6.9 million outstanding under the line of credit. This
facility, is scheduled to mature on May 31, 2000. The Company is currently
negotiating a further extension and other modified terms with the bank regarding
the facility. In May 2000, the bank increased the Company's credit facility to
$9.5 million. However, there can be no assurance that the Company will be able
to further extend or enter into new arrangements with the bank or another
lending institution on terms favorable to the Company, if at all. Pursuant to
the loan agreement with the bank, the Company must satisfy certain financial and
other covenants. As of March 31, 2000, the Company was in default under several
non-monetary covenants. The Company has received from the bank waivers of
compliance with these covenants.
While the Company continues to work with its bank to extend and/or
modify its credit facility, the Company has ongoing discussions with others in
order to determine a satisfactory path with respect to the Company's liquidity
issues. The Company believes that any new credit arrangements, if entered into,
along with the additional debt and equity transactions discussed above, the
continued growth of the agency program and funds which the Company expects to
receive from the exercise of its publicly-traded warrants resulting from the May
8, 2000 formal call of these warrants, will be sufficient to satisfy its
contemplated cash requirements over the next 12 months. The Company's financial
requirements will depend upon, among other things, the growth rate of the
Company's business, the amount of cash generated by operations and the Company's
ability to borrow funds or enter into lease or purchase financing arrangements
for the acquisition of new equipment or for working capital purposes. Should the
Company require additional debt or equity financing to support its operations or
to make acquisitions, there can be no assurance that such additional financing
will be available to the Company on commercially reasonable terms, or at all. If
the Company is unable to replace its existing line of credit prior to any
extended maturity date, the Company's business, financial condition and results
of operations would be materially adversely affected. As a result of this
uncertainty, the Company's independent certified public accountants added an
explanatory paragraph to their report on the Company's financial statements for
the year ended December 31, 1999 which makes references to the uncertainties
regarding the Company's ability to continue as a going concern. Certain of the
statements in this paragraph are "forward-looking" statements which are subject
to the risks and uncertainties discussed above.
INFLATION
Inflation has not had a material effect on the Company's operations. If
inflation increases, the Company will attempt to increase its rates to offset
its increased expenses. No assurances can be given, however, that the Company
will be able to adequately increase its prices in response to inflation. With
the rise in fuel prices during 1999, the Company instituted a fuel surcharge to
its customers in September 1999. If the Company is unable to pass the fuel
surcharge to its customers, increases in fuel prices would have a direct effect
on the Company's operating results.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
LITIGATION
An involuntary bankruptcy petition was filed on or about May 26, 1998
against Continental American, the parent corporation of Carpet Transport, Inc.
(" CTI" ), in the case styled In re: Continental American Transportation, Inc.,
Case No. 98-41900 HR, U.S. Bankruptcy Court for the Northern District of Georgia
(Rome Division). This action was initiated by several parties purporting to be
creditors of Continental American. The involuntary bankruptcy petition resulted
in the appointment of a trustee. The Trustee has pursued all bankruptcy claims
against the Company under the Carpet Transport bankruptcy. See below.
An involuntary bankruptcy petition was filed on or about August 7, 1998
by CTI Properties, Inc., a wholly-owned subsidiary of Continental American, in
the case styled In re: CTI Properties, Inc., Case No. R98-42886-HR, U.S.
Bankruptcy Court for the Northern District of Georgia (Rome Division). The same
Trustee has been appointed for both Continental American and CTI Properties. The
Trustee has filed an adversary proceeding against the Company asserting that the
Company's first priority security deed may be avoided as a fraudulent
conveyance, claiming that CTI Properties did not receive the benefit of the
loans. The Company has answered the Trustee's complaint and intend to contest
the case vigorously. Discovery in this case has been conducted within the Carpet
Transport bankruptcy. See below.
On or about June 17, 1998, a lawsuit was filed against Timely North and
the Company in the case styled CIT Finance Group, Inc. v. Timely North, Inc. and
Professional Transportation Group Ltd., Inc., Case No. 98-CV2280-2, Superior
Court of Clayton County, Georgia. This action was filed by a lessor of rolling
stock to CTI. The complaint alleges generally that Timely North and the Company
are indebted to CIT in an amount to be determined at trial, but that CIT alleges
to be approximately $350,000, an amount disputed by the Company. While neither
Timely North nor the Company has had any contractual relationship with CIT, CIT
asserts in its complaint that the use of its rolling stock entitles CIT to
receive from Timely North and the Company the fair rental value of the rolling
stock during the period of time that Timely North used the rolling stock. Timely
North and the Company have timely filed answers to CIT's complaint, and intend
to contest the case vigorously. Discovery in the case is proceeding. A pretrial
conference has been set for June 14, 2000.
An involuntary bankruptcy petition was filed on or about June 17, 1998
against CTI in the case styled In re: Carpet Transport, Inc., Case No. 98-42224
HR, U.S. Bankruptcy Court for the Northern District of Georgia (Rome Division).
This action was filed by several parties purporting to be creditors of CTI and
alleges among other things that Timely North or its affiliates had collected a
portion of CTI's receivables, that a representative of the Company had caused
CTI's withholding tax payments to the IRS to be diverted to Timely North's
benefit (to pay Form 2290 taxes), and that Timely North had sold portions of
CTI's equipment without accounting for the sales proceeds. A Trustee has been
appointed and is investigating these potential claims. The Trustee has also
questioned the receipt by the Company of a payment it received for a consulting
and non-competition agreement. The Trustee also questioned the fully-secured
status and priority of the Company's September 12, 1997 secured loan to CTI and
its affiliates. The Trustee has also asserted that Timely North and Timely
Transportation are "successor" corporations of CTI and therefore liable for the
debts of CTI and responsible to account for the revenues of CTI from September
1997 to date. The Trustee questioned whether the Company was entitled to the
proceeds of the sale of certain rolling stock formerly leased by CTI. The
Trustee has filed a Partial Motion for Summary Judgment against Timely
Transportation and the Company seeking an accounting based upon an alleged
fiduciary relationship between CTI and the Company or Timely Transportation or
Timely North. Timely North is not a party to the action. Timely Transportation
and the Company have responded to the Motion and deny the Trustee's allegations
that Timely Transportation and the Company owe a fiduciary duty to CTI. In the
event that the Trustee should pursue any of these claims against the Company or
its affiliates, the Company and/or its affiliates intend to vigorously defend
against any such claim. Discovery in this case is proceeding.
12
<PAGE> 13
On or about July 30, 1998, an action was brought against Timely and
other defendants in the case styled The CIT Group/Equipment Financing, Inc. v.
Timely Transportation, Inc., et al., Case No. 98-14395, Court of Common Pleas of
Montgomery County, Pennsylvania. The plaintiff as a secured creditor of various
defendants other than Timely alleges that those defendants defaulted in their
installment payments to the plaintiff, that the plaintiff sold the collateral in
a foreclosure sale, that the plaintiff has been damaged in the amount of
approximately $151,000, and that Timely is a " successor" to the other
defendants and therefore owes to ClT Group its damages. On May 8, 2000, the
parties reached a settlement in this case in which the Company agreed to pay a
nominal amount of money to the plaintiff, and Timely has been released from any
liability in connection with this litigation.
On or about September 4, 1998, an action was filed against the Company,
Timely and Timely North in the case styled U.S. Bancorp Leasing & Financial v.
Timely North, Inc., Timely Transportation, Inc. and Professional Transportation
Group Ltd., Inc., Case No. 34611, Superior Court of Gordon County, Georgia. This
action was filed by a lessor of rolling stock to CTI. The complaint alleges
generally that the Company, Timely and Timely North, are indebted to U.S.
Bancorp in an amount to be determined at trial. U.S. Bancorp is seeking
$290,534.50, an amount disputed by the Company. While neither Timely, Timely
North nor the Company has had any contractual relationship with U.S. Bancorp,
U.S. Bancorp asserts in its complaint that the use of its rolling stock entitles
it to receive from Timely, Timely North and the Company the fair rental value of
the rolling stock during the period of time that Timely North used the rolling
stock. Timely, Timely North and the Company have filed answers to U.S. Bancorp's
complaint, and intend to contest the case vigorously.
Scott Logistics Corporation v. Timely North, Inc. and Timely
Transportation, Inc., Civil Action File No. 34324, Superior Court of Gordon
County, Georgia. The plaintiff filed suit in response to Timely North's efforts
to collect $9,709.23 due on account from the plaintiff. The plaintiff filed suit
against both Timely North and Timely seeking claims for $8,342.34 for alleged
damages to freight and approximately $60,000 based on allegations of tortious
interference with plaintiff's relationships with one or more of its customers.
Timely and Timely North have filed an answer to the suit and are vigorously
defending against plaintiff's claims. In addition, Timely North has filed a
counterclaim in the amount of $9,709.23 for sums due on account from the
plaintiff. Timely and Timely North plan to file a motion for summary judgement
in the near future.
T.M.B. Inc. v. Timely Transportation Inc. and Timely North, Inc., Case
No. 98-CV-1931, U.S. District Court for the Northern District of Georgia,
Atlanta Division. The plaintiff seeks to recover $103,157.46 for truck parts.
Timely North did not content liability, and default judgement was entered in
1998 against Timely North for the full amount sought by the plaintiff. Timely
has filed an answer denying liability, and is vigorously defending against
plaintiff's claims. Cross motions for summary judgement are pending in the case.
L.T.D. Logistics, Inc. and Arrow Lines Services, Inc. v. Timely
Transportation, Inc., Timely North, Inc. and Professional Transportation Group
Ltd., Inc., Civil Action File No. 981-6827-99, Superior Court of Cobb County,
Georgia. The plaintiffs claim that they are owed $71,328.30 for services
allegedly rendered. The Company filed an answer denying liability and asserting
that the liability, if any, is solely that of Timely North, Inc. In addition,
Timely North, Inc. has asserted setoffs to the plaintiff's claims.
USF&G v. Timely Transportation, et al, Civil Action No. 98A5879-4,
State Court of Cobb County, Georgia. USF&G is seeking recovery in the amount of
$52,229.66 for alleged workers' compensation insurance audit premiums, dating
back to 1994. Timely has filed an answer denying responsibility for such
premiums and intends to vigorously defend this matter. The case is awaiting
trial.
Gainey Transportation Services, Inc. v. Timely Transportation, Inc.,
Timely North, Inc. and Professional Transportation Group Ltd., Inc., Civil
Action File No. 99-1-5811-99, Superior Court of Cobb County, Georgia. The
plaintiff filed suit claiming that it is owed approximately $65,356.22 for
services rendered. The Company has filed an answer denying liability and
asserting that the liability, if any, is solely that of Timely North.
Client Server Solutions, Inc. v. Professional Transportation Group
Ltd., Inc., Case No. 99-CV-01909D, State Court of Clayton County, Georgia. The
plaintiff seeks to recover approximately $87,448.62 for services allegedly
rendered. The Company disputes the plaintiff's claim and filed an answer denying
liability. It appears that the
13
<PAGE> 14
Company may have counterclaims against the plaintiff, and counsel is presently
investigating such counterclaims, which will likely be added to the lawsuit in
the near future.
Michelin North America, Inc. v. Professional Transportation Group Ltd.,
Inc., Case No. 2000A854-5, State Court of Cobb County, Georgia. Plaintiff filed
suit in February 2000, seeking $56,373.19 allegedly past due on account for
goods sold, plus interest. The Company has negotiated a settlement of this case,
which calls for the Company to pay the principal alleged to be due over a
six-month period.
International Container Express, Inc. v. Truck-Net, Inc., Case No.
99L14111, Circuit Court of Cook County, Illinois. Plaintiff filed suit in
December 1999, seeking recovery of $98,020.77 allegedly owed by the Company's
subsidiary, Truck-Net, Inc. for services rendered. Truck-Net, Inc. has retained
counsel in Illinois to defend the matter. The answer is not yet due. The amounts
owed are disputed and the Company has several counterclaims which it intends to
assert. Settlement discussions are ongoing.
The Company is not a party to any other material legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form SB-2, amended, No. 333-24619 (the "Registration
Statement") and the Company's Registration Statement on Form S-3 filed
on November 15, 1999, No. 333-90955.
3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the
Registration Statement).
4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit
4.1 of the Registration Statement).
4.2 Specimen Redeemable Warrant Certificate (incorporated by reference to
Exhibit 4.2 of the Registration Statement).
27.1 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
The Company filed two current reports on Form 8-K during the first
quarter of 2000:
(1) Current Report filed on January 25, 2000 with respect to the sale
of the Company's 10% convertible debentures due on January 31, 2003.
(2) Current Report filed on March 3, 2000 with respect to the change in
independent auditors for the Company's 1999 audit.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
PROFESSIONAL TRANSPORTATION GROUP LTD., INC.
Date: May 15, 2000 By: /s/ Dennis A. Bakal
-------------------- ---------------------------------------
Dennis A. Bakal
President, Chief Executive Officer
(principal executive officer)
Date: May 15, 2000 By: /s/ Susan P. Dial
-------------------- ---------------------------------------
Susan P. Dial
Chief Financial Officer
(principal financial and accounting
officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ISSUER'S
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2000, SET FORTH IN THE ACCOMPANYING FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.0
<CASH> 199,803
<SECURITIES> 268,734
<RECEIVABLES> 10,958,653
<ALLOWANCES> 697,765
<INVENTORY> 0
<CURRENT-ASSETS> 14,801,679
<PP&E> 9,037,327
<DEPRECIATION> 2,961,943
<TOTAL-ASSETS> 25,109,196
<CURRENT-LIABILITIES> 16,506,695
<BONDS> 0
0
0
<COMMON> 217,000
<OTHER-SE> 3,433,981
<TOTAL-LIABILITY-AND-EQUITY> 25,109,196
<SALES> 14,117,982
<TOTAL-REVENUES> 14,117,982
<CGS> 0
<TOTAL-COSTS> 13,215,861
<OTHER-EXPENSES> (5,912)
<LOSS-PROVISION> 63,000
<INTEREST-EXPENSE> 306,338
<INCOME-PRETAX> 601,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 601,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 601,695
<EPS-BASIC> 0.10
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