<PAGE> 1
EXHIBIT 99.1
DEDICATED TRANSPORTATION SERVICES, INC.
FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
<PAGE> 2
DEDICATED TRANSPORTATION SERVICES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Shareholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
<PAGE> 3
INDEPENDENT AUDITOR'S REPORT
Shareholders
Dedicated Transportation Services, Inc.
Santa Ana, California
We have audited the accompanying balance sheets of Dedicated Transportation
Services, Inc. as of January 31, 2000 and 1999 and the related statements of
operations, changes in shareholders' equity and cash flows for the years ended
January 31, 2000, 1999 and 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dedicated Transportation
Services, Inc. as of January 31, 2000 and 1999 and the combined results of their
operations and cash flows for the years ended January 31, 2000, 1999 and 1998 in
conformity with generally accepted accounting principles.
In May 2000, the Company was sold to Professional Transportation Group Ltd.,
Inc. (see Note 10).
/s/ Yohalem, Gillman & Company, LLP
New York, New York
July 7, 2000
<PAGE> 4
DEDICATED TRANSPORTATION SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $1,492,428 $ 397,634
Accounts receivable, net of allowance for
doubtful accounts of $135,540 in 2000
and $161,260 in 1999, respectively 6,016,131 4,893,834
Deferred income taxes 89,477 103,424
Other current assets 228,251 204,599
---------- ----------
Total current assets 7,826,287 5,599,491
PROPERTY AND EQUIPMENT, NET 161,820 115,619
SECURITY DEPOSITS 150,556 180,504
---------- ----------
$8,138,663 $5,895,614
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and
capital lease obligations $ 8,099 $ 39,603
Accounts payable - trade 4,790,597 4,147,645
Accrued liabilities 1,465,516 667,819
---------- ----------
Total current liabilities 6,264,212 4,855,067
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
NET OF CURRENT MATURITIES 9,725 6,669
DEFERRED INCOME TAXES 14,336 15,171
---------- ----------
Total liabilities 6,288,273 4,876,907
---------- ----------
SHAREHOLDERS' EQUITY
Common stock, no par value, 10,000 shares authorized,
2,000 issued and outstanding 2,000 2,000
Retained earnings 1,848,390 1,016,707
---------- ----------
Total shareholders' equity 1,850,390 1,018,707
---------- ----------
$8,138,663 $5,895,614
========== ==========
</TABLE>
See accompanying notes.
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<PAGE> 5
DEDICATED TRANSPORTATION SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
2000 1999 1998
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING REVENUES $43,958,730 $41,241,640 $ 39,022,800
----------- ----------- ------------
Salaries, wages and benefits 9,417,440 8,334,983 7,800,254
Purchased transportation 27,760,747 27,465,947 25,903,774
Operating supplies and expenses 1,784,219 2,232,785 2,195,213
Advertising and promotion 9,718 14,131 18,151
Depreciation 55,337 66,528 65,963
Fuel and fuel taxes 164,359 139,732 146,383
Insurance 105,532 123,126 124,845
Bad debt expense 27,804 -- 205,794
Licenses and permits 17,733 20,368 11,998
Rent (office and equipment), utilities
and related costs 2,346,102 2,075,613 1,762,854
Other operating expenses 919,038 681,883 702,629
----------- ----------- ------------
Total operating expenses 42,608,029 41,155,096 38,937,858
----------- ----------- ------------
INCOME FROM OPERATIONS 1,350,701 86,544 84,942
OTHER INCOME (EXPENSE) 45,994 5,115 (23,335)
----------- ----------- ------------
INCOME BEFORE INCOME TAXES 1,396,695 91,659 61,607
Provision for income taxes 565,012 8,097 30,514
----------- ----------- ------------
NET INCOME $ 831,683 $ 83,562 $ 31,093
=========== =========== ============
Earnings per share:
Basic and fully diluted $ 415.84 $ 41.78 $ 15.55
=========== =========== ============
</TABLE>
See accompanying notes.
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<PAGE> 6
DEDICATED TRANSPORTATION SERVICES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
Common Stock Retained
Shares $ Earnings Total
<S> <C> <C> <C> <C>
BALANCE -- JANUARY 31, 1997 2,000 $2,000 $ 902,052 $ 904,052
Net income -- -- 31,093 31,093
BALANCE -- JANUARY 31, 1998 2,000 2,000 933,145 935,145
Net income -- -- 83,562 83,562
BALANCE -- JANUARY 31, 1999 2,000 2,000 1,016,707 1,018,707
Net income -- -- 831,683 831,683
BALANCE -- JANUARY 31, 2000 2,000 $2,000 $1,848,390 $1,850,390
====== ====== ========== ==========
</TABLE>
See accompanying notes.
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DEDICATED TRANSPORTATION SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
2000 1999 1998
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 831,683 $ 83,562 $ 31,093
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities
Depreciation 55,337 66,528 65,963
Loss on disposal of assets -- -- 33,922
Bad debts 27,804 -- 205,794
Deferred tax expense (benefit) 13,112 (28,280) 14,474
(Increase) decrease in:
Accounts receivable (1,150,101) (332,191) (202,461)
Other current assets (23,652) 91,302 (119,316)
Security deposits 29,948 (47,936) (41,174)
Increase (decrease) in:
Accounts payable 642,952 184,711 365,321
Accrued liabilities 797,697 (32,341) (42,735)
----------- --------- ---------
Net cash provided by (used in)
operating activities 1,224,780 (14,645) 310,881
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (101,538) (7,903) (68,259)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings of long-term
debt -- -- 25,000
Principal payments on long-term debt
and capital lease obligations (28,448) (53,447) (81,048)
----------- --------- ---------
Net cash used in financing
activities (28,448) (53,447) (56,048)
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH 1,094,794 (75,995) 186,574
Cash - beginning of year 397,634 473,629 287,055
----------- --------- ---------
CASH - END OF YEAR $ 1,492,428 $ 397,634 $ 473,629
=========== ========= =========
</TABLE>
See accompanying notes.
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<PAGE> 8
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
1. ORGANIZATION AND OPERATIONS
Dedicated Transportation Services, Inc. ("Dedicated or the Company"),
headquartered in Santa Ana, California is a time-definite,
less-than-truckload, transportation and logistics services company with
satellite offices strategically located throughout the United States.
The Company directs the movement of goods across the contiguous 48
states and assumes all related risks and responsibilities for freight
while in transit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECOGNITION OF REVENUE
For financial reporting purposes, the Company recognizes revenue when a
shipment is loaded and dispatched. Significant related costs associated
with earning this revenue are accrued at that time. In 1991, the
Emerging Issues Task Force ("EITF") released issue 91-B, "Revenue and
Expense Recognition for Freight Services in Process." The EITF reached
a consensus that the preferable method of recognizing revenue and
expenses was either (1) the recognition of both revenue and direct cost
when the shipment is completed or (2) the allocation of revenue between
reporting periods based on relative transit time in each reporting
period and the recognition of expenses as incurred. The difference
between the Company's method of revenue recognition and the preferable
methods described above is not material to the accompanying combined
financial statements.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major property additions,
replacements and betterments are capitalized, while maintenance and
repairs which do not extend the useful lives of these assets are
expensed as incurred. Depreciation is provided over the estimated
useful lives of the assets using the straight-line method for financial
reporting purposes and accelerated methods for income tax purposes.
Upon retirement or disposal of assets, the cost and related accumulated
depreciation are removed from the balance sheet, and any gain or loss
is reflected in earnings.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between property and
equipment depreciation and provision for allowance of doubtful accounts
of accounts receivable for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled.
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<PAGE> 9
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", effective December 31, 1997.
Earnings per share have been computed based on the weighted average
shares and dilutive potential common shares outstanding during the
year.
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.
3. PROPERTY AND EQUIPMENT
The details of property and equipment at January 31 are comprised of
the following:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Furniture and fixtures $ 45,943 $ 43,526
Equipment and improvements 397,834 298,712
---------- ----------
443,777 342,238
Less accumulated depreciation 281,957 226,619
---------- ----------
$ 161,820 $ 115,619
========== ==========
</TABLE>
The estimated useful lives of the various classes of physical assets
were as follows during 2000 and 1999:
<TABLE>
<S> <C>
Furniture and fixtures 5 years
Equipment and improvements 5 - 15 years
</TABLE>
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<PAGE> 10
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
4. ACCRUED LIABILITIES
At January 31, accrued liabilities consist of the following:
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Vacation $ 137,958 $ 91,539
Income taxes 474,852 20,637
Insurance 11,381 21,065
Payroll and deferred compensation 487,301 360,751
Transportation 247,362 125,773
Miscellaneous accrued expenses 106,662 48,054
---------- ----------
$1,465,516 $ 667,819
========== ==========
</TABLE>
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
LONG-TERM DEBT
<TABLE>
<CAPTION>
2000 1999
------ --------
<S> <C> <C>
Notes payable to a bank, bearing interest at
10.25% with monthly principal and interest
payments of $1,389 through November 1999,
secured by transportation equipment $ -- $ 13,889
Notes payable to a bank, bearing interest
at 11.10% with monthly principal and interest
payments of $695, secured by transportation
equipment. The note, which is scheduled to
mature in June 2000, was repaid as of
January 31, 2000 -- 11,806
------ --------
-- 25,695
Less: current maturities -- 22,227
$ -- $ 3,468
====== ========
</TABLE>
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<PAGE> 11
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
5. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
CAPITAL LEASES
The Company leases transportation and other equipment under capital
leases. Future minimum lease payments for assets under capital leases
at January 31 are as follows:
<TABLE>
<S> <C>
2001 $ 10,168
2002 6,914
2003 4,276
--------
Total minimum lease payments 21,358
Less amount representing interest 3,534
Present value of minimum lease payments 17,824
Less current maturities (8,099)
--------
$ 9,725
========
</TABLE>
As of January 31, 2000, the Company had net assets under capital leases
of approximately $23,338 included in property and equipment on the
accompanying balance sheets.
6. EMPLOYEE BENEFIT PLAN
Dedicated established a 401(k) Defined Contribution Plan for the
benefit of its employees. The Company, at its discretion, may match
employee contributions based upon a percentage of employee
contributions. Contributions for the years ended January 31, 2000, 1999
and 1998 amounted to approximately $44,000, $29,000 and $16,000,
respectively.
7. INCOME TAXES
For all periods presented, the accompanying financial statements
reflect provisions for income taxes computed in accordance with the
requirements of SFAS No. 109, "Accounting for Income Taxes."
The significant components of the provision for income taxes at January
31, are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Current provision $551,900 $ 36,627 $ 16,040
Deferred provision 13,112 (28,530) 14,474
-------- -------- --------
Total provision for income taxes $565,012 $ 8,097 $ 30,514
======== ======== ========
</TABLE>
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<PAGE> 12
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
7. INCOME TAXES (CONTINUED)
A reconciliation of the provision for income taxes at the statutory
federal income tax rate to the Company's tax provision as reported in
the accompanying statements of operations is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Federal statutory income tax rate $474,876 $ 31,164 $ 20,946
State income taxes, net of federal
benefit 105,512 9,760 7,056
Miscellaneous items (28,488) (4,297) (11,965)
Deferred taxes 13,112 (28,530) 14,477
-------- -------- --------
Total provision for income taxes $565,012 $ 8,097 $ 30,514
======== ======== ========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Deferred tax assets:
Provision for allowance for
doubtful accounts $ 46,084 $ 54,828 $ 52,213
Accrued deferred compensation 43,393 48,596 17,920
-------- -------- --------
$ 89,477 $103,424 $ 70,133
======== ======== ========
Deferred tax liabilities:
Depreciation $(14,336) $(15,171) $(10,160)
======== ======== ========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES-UNRELATED PARTIES
The Company leases transportation and office equipment under
noncancelable operating leases from unrelated parties. The expense for
noncancelable operating leases was approximately $564,000, $490,000,
and $457,000 for the years ended January 31, 2000, 1999 and 1998,
respectively.
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<PAGE> 13
DEDICATED TRANSPORTATION SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2000 AND 1999
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum rental commitments as of January 31, 2000 under
noncancelable operating lease agreements are as follows:
<TABLE>
<S> <C>
2001 $ 428,344
2002 251,326
2003 99,274
2004 77,958
2005 11,794
----------
$ 868,696
==========
</TABLE>
Rent expense for noncancelable operating leases pertaining to office
space was approximately $1,283,386, $1,181,198 and $998,084 for the
years ended January 31, 2000, 1999 and 1998, respectively.
Future minimum rental commitments as of January 31, 2000 under
noncancelable operating lease agreements are as follows:
<TABLE>
<S> <C>
2001 $1,276,420
2002 1,054,260
2003 780,673
2004 694,435
2005 526,461
Thereafter 102,663
----------
$4,434,912
==========
</TABLE>
9. SUPPLEMENTAL DISCLOSURES OF CASH AND NONCASH FLOW INFORMATION
<TABLE>
<CAPTION>
JANUARY 31,
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTARY DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for interest $ 7,023 $ 8,848 $ 13,324
Cash paid for income taxes 97,685 35,391 73,198
</TABLE>
During the year ended January 31, 1998, the Company purchased equipment
of approximately $22,000 by securing equipment leases.
10. SUBSEQUENT EVENT
During May 2000, the Company was sold to Professional Transportation
Group Ltd., Inc. ("PTG") in exchange for 1,860,000 shares of PTG with a
guaranteed market value of $9,300,000. The purchase price is subject to
a maximum reduction of 60,000 shares ($300,000) based on certain
formulas contained in the agreement.
11. OTHER MATTERS
The Company is subject to routine litigation incidental to its
business. The Company believes that any resulting liabilities would not
be material to the accompanying financial statements.
The Company, from time to time, maintains cash balances in banks in
excess of insured limits.
The carrying amounts reflected in the balance sheets for cash,
receivables, loans and notes payable and long-term debt approximate
their respective fair values. Fair values are based primarily on quoted
prices for those or similar instruments.
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