UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
McClendon Transportation Group, Inc.
------------------------------------
(Name of Small Business in its Charter)
Nevada 22-3714235
------------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
121 South Lafayette Street, Lafayette, Alabama 36362
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (334-864-9311)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be to registered each class is to be registered
------------------------------ ------------------------
------------------------------ ------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock par value $.001
----------------------------
(Title of class)
----------------------------
(Title of class)
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business 1
ITEM 2. Management's Discussion and Analysis or Plan of Operation 4
ITEM 3. Description of Property 6
ITEM 4. Security Ownership of Certain Beneficial Owners and Management 7
ITEM 5. Directors, Executive Officers, Promoters and Control Persons 7
ITEM 6. Executive Compensation 8
ITEM 7. Certain Relationships and Related Transactions 8
ITEM 8. Description of Securities 8
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Stockholder Matters 9
ITEM 2. Legal Proceedings 9
ITEM 3. Changes in and Disagreements with Accountants 9
ITEM 4. Recent Sales of Unregistered Securities 10
ITEM 5. Indemnification of Directors and Officers 10
PART F/S 10
PART III
ITEM 1. Index to Exhibits 10
ITEM 2. Description of Exhibits 10
Signature Page 11
i
<PAGE>
PART I
ITEM 1. Description of Business.
McClendon Transportation Group, Inc. (Transportation") was incorporated
in the State of Delaware on February 20, 1996 as RDA Services, Inc. ("RDA"). In
November, 1999, RDA acquired 100% of the assets of Glenn McClendon Trucking
Company, Inc., an Alabama corporation ("McClendon Trucking") in a reverse merger
transaction and RDA changed its name to McClendon Transportation Group, Inc
("Transportation"). In March, 2000 Transportation merged into its wholly owned
subsidiary, a Nevada corporation with the same name. The merger was effected
solely for the purpose of changing the Company's state of domicile to Nevada.
Transportation has no operations and acts as a holding company. Operations are
conducted through Transportation's subsidiary, McClendon Trucking . Unless
otherwise indicated herein, all references to the "Company" or "McClendon"
include both Transportation and McClendon Trucking.
The Company operates a medium-haul, irregular route, truckload carrying
business of general commodities. The McClendon Trucking fleet transports freight
primarily throughout the eastern United States.
Headquartered in LaFayette, Alabama, McClendon Trucking grew from one
truck at inception in 1933 to today's fleet of approximately 200 company owned
trucks, 900 dry-van trailers, three maintenance and storage terminals, and over
230 owner-operator contract drivers, servicing customers throughout the United
States. McClendon has affiliations with 147 trucking companies which gives us
access to over 5,000 additional trucks nationwide. McClendon Trucking offers dry
load transportation services in the truckload carrier market primarily to
high-volume, time-sensitive customers.
We have secured and maintained strong customer relationships by (1)
focusing on technology; (2) operating premium, late model equipment; (3) hiring
experienced drivers; and (4) maintaining an efficient cost structure. We have
written contracts with most of our customers. The contracts generally require
the customer to use McClendon Trucking for a specified minimum amount of
shipments each year.
Through the use of our satellite-based communication system, which is
complemented by our fully integrated mainframe computer system, dispatchers
monitor the location and delivery schedules of all shipments and equipment to
coordinate routes and maximize utilization of our equipment and drivers. Our
electronic data interchange systems enable us to exchange data directly with a
third party or with a customer's freight payment agent or bank.
Our productive, cost-efficient use of technology is a differentiating
factor in our market share battle. We utilize a satellite based tracking and
communications system to monitor operating efficiency, fleet management and
customer service and to maintain direct communication between our drivers and
fleet managers. Our electronic data interchange system allows customers and the
company to communicate electronically providing real-time information flow such
as delivery, local distribution, and account payment instructions; customers can
receive updates on cargo position, estimated delivery time and other
information. In addition, we monitor engine idle time, speed, performance and
other factors affecting operating efficiency.
McClendon's driver training and safety program
We mandate a stringent driver training and safety program to ensure our
drivers are well-trained, carefully screened and commercial drivers' license
qualified. Our program has included pre-employment and periodic drug testing
since 1987.
1
<PAGE>
McClendon focuses on customer service
McClendon Trucking organized customer service teams that are assigned
geographically and connect the Sales Force and Operations Division directly to
the customer. The customer service teams offer our customers the following:
o Customer service 24-hours a day, 7 days a week through
toll-free WATS, with the flexibility and authority to provide
immediate response.
o Access to on-line dispatch and satellite tracking systems
centralized into McClendon Trucking's mainframe information
system, to give the customer instantaneous responses to
questions on virtually any aspect of their shipment.
o Modern equipment that is well maintained and backed by a
preventative maintenance program.
Our Growth Strategy
Our current strategy is to capitalize on the trends toward core carrier
consolidation, private fleet conversions, dedicated fleets and just-in-time
(time definite) supply-chain inventory management. Core carrier consolidation is
a result of shippers attempting to lower costs by reducing the number of
carriers used. Private fleet conversions are taking place due to the number of
smaller carriers that cannot compete on a long-term basis with the larger
carriers. The dedicated trend occurred due to shippers choosing to use an
outside provider for trucking service needed on demand. The trend most directly
affecting McClendon Trucking is just-in-time inventory management. An increasing
number of companies are having inventory arrive just in time in an effort to
lower warehousing costs. Increasing the owner-operator segment of our fleet,
coupled with the strategic acquisition of contract carriers will allow McClendon
Trucking to leverage its 98% on time performance and service reputation in
penetration of this growth segment of the market.
Our strategy is to identify and acquire mid-size trucking companies,
primarily with annual revenues between $10 million and $100 million, that
possess strong market positions, sound management and a commitment to a high
level of service and quality. We have no assurance that we will be able to
identify appropriate candidates or that such candidates will be available on
terms acceptable to us. In the alternative, even if we do locate suitable
candidates, we may not have the capital to finance the acquisition on terms
agreeable to us, if at all.
CONCERNS AND CONSIDERATIONS ASSOCIATED WITH OUR BUSINESS
McClendon Trucking is dependent on fuel availability
Motor carrier service is dependent upon the availability of diesel
fuel. Historically, our fuel expenses have been at or below industry norms.
McClendon Trucking continually monitors fuel usage, miles per gallon, cost per
mile and cost per gallon. We have not experienced any difficulty in maintaining
fuel supplies sufficient to support our operations. Shortages of fuel and
rationing of petroleum products could have a material adverse effect on our
operations and profitability. We are protected by a fuel surcharge clause in our
contract, and in the event of increases in fuel prices or fuel tax rates, we
pass these increases on to our customers.
2
<PAGE>
Competition in the trucking industry
The trucking industry is highly competitive and fragmented. McClendon
Trucking competes primarily with other dry-load contract carriers, internal
shipping conducted by existing and potential customers and, to a lesser extent,
railroads. Deregulation of the trucking industry during the 1980's created an
influx of new truckload carriers which, along with certain other factors,
continues to create substantial downward pressure on the industry's rate
structure. Competition for the freight transported is based primarily on service
and efficiency and, to a lesser degree, on freight rates. Our revenues and
operating results will be adversely affected if we fail to compete successfully
Our business is subject to governmental regulation
The trucking industry is subject to regulatory oversight and
legislative changes that can affect the economics of the industry by requiring
certain operating practices or influencing the demand for, and the costs of
providing services to shippers. The Intermodal Surface Transportation Board
(ISTB) and various state agencies have broad powers, generally governing such
matters as authority to engage in motor carrier operations, rates and charges,
accounting systems, certain mergers, consolidations and acquisitions and
periodic financial reporting.
The Federal Motor Carrier Act of 1980 commenced a program to increase
competition among motor carriers and to diminish the level of regulation in the
industry. Following this deregulation, applicants have more easily been able to
obtain operating authority, and interstate motor carriers such as McClendon
Trucking have been able to implement certain rate changes without federal
approval.
We are, and will continue to be, subject to intense competition in our
targeted markets. Significant competitive factors which will affect future sales
in the marketplace include regulatory approvals, performance and pricing.
We are required to adhere to a wide variety of other regulations
governing the operation of our business. Noncompliance with local, state or
federal requirements can result in serious penalties that could harm our
business. Although we believe that our operations comply with applicable
regulations, there can be no assurance that subsequent adoption of laws or
interpretations of existing laws will not regulate, restrict or otherwise
adversely affect our business.
OUR EMPLOYEES
We currently have 247 full-time employees. The personnel is distributed
as follows: officers - 6; managers - 9; clerical - 75; salesmen - 3; mechanics -
31; drivers -123.
ADDITIONAL INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") that requires us to file reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information may be
inspected at public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington D.C. 20549; Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New
York, New York, 10048; and 5670 Wilshire Boulevard, Los Angeles, California
90036. Copies of such material can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, D.C.
20549 at prescribed rates.
3
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and the related notes appearing subsequently in Part F/S. This
discussion contains forward-looking statements based upon current expectations
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
be aware that our actual results and the timing of certain events could differ
materially from those anticipated in these forward-looking statements and could
have an adverse effect on our business, results of operations and financial
conditions.
The Company cautions readers that any such forward-looking statements
made by or on behalf of the Company are based on management's current
expectations and beliefs, but are not guarantees of future performance. Actual
results could differ materially from those expressed or implied in the
forward-looking statements.
The following financial analysis reflects the operations of Glenn
McClendon Trucking Company Inc. since prior to the reverse merger RDA was a
shell structure and had no assets or liabilities.
RESULTS OF OPERATIONS
Total revenues for year ended December 31, 1999 compared to year ended
December 31, 1998
Total revenues decreased from $61,748,800 in 1998 to $48,448,406 in
1999. This decrease in revenues resulted primarily from the shrinking of the
operating territory from all 48 contiguous states at the beginning of 1998 to
approximately 26 states in the Midwest, East and Southeast at the end of 1999.
This resulting change reduced the total fleet size, customer base and resulting
revenues. This decrease was made to help increase the fleet utilization in the
Company's more profitable traffic lanes.
Cost of Sales (operating expenses) decreased from $62,827,975 in 1998
to $48,547,127 in 1999, a decrease of $14,280,848. This decrease resulted from
the reduced operating territories and the resulting increase in total fleet
utilization
Salaries, Wages and Benefit Expenses decreased from $19,581,373 in 1998
to $13,159,108 in 1999, a decrease of $6,422,265. This decrease was primarily
due to two factors. The main factor is the previously mentioned decrease in
fleet size. This resulted in a decrease in both the number of company drivers
and support personnel. The second factor is the continued shifting from company
drivers who are employees to lease drivers who are not employees; therefore,
their compensation is not reflected as salaries.
Operations and Maintenance Expense decreased from $12,052,533 in 1998
to $8,024,183 in 1999, a decrease of $4,028,350. This decrease is a result of
the decreased number of tractors in the fleet. This decrease in the fleet caused
a reduction in fuel expense, repairs and maintenance expense, and recruiting
expense. These expenses represent the majority of the variable expenses and are
directly linked to the number of tractors in service.
4
<PAGE>
Taxes and License Expenses decreased from $1,360,007 in 1998 to
$885,851 in 1999, a decrease of $474,156. This item is composed mainly of state
and federal fuel taxes as well as the tag expense for the tractors. This
decrease is a direct result of the decrease in the number of tractors.
Insurance and Claims Expense decreased from $3,773,905 in 1998 to
$2,537,758 in 1999, a decrease of $1,236,147. This decrease is primarily due to
a reduction in actual losses. The Company is self- insured for the first
$100,000 on all liability and cargo claims. More stringent hiring practices
instituted in 1997 as well as other safety policy changes implemented in the
past several years combined to dramatically decrease the actual number and
severity of accidents and losses in the current year.
Communications and Utilities Expense decreased from $884,696 in 1998 to
$623,083 in 1999, a decrease of $261,613. Approximately $132,000 of this
decrease is related to decreased satellite tracking costs on the tractors. This
decrease in costs resulted from the decrease in the number of tractors. The
remaining decrease resulted from the overall decrease in the cost of long
distance service.
Depreciation Expense decreased from $5,357,246 in 1998 to $3,535,824 in
1999, a decrease of $1,821,422. This decrease is primarily due to the decrease
in Company owned tractors from 455 units at the beginning of 1998 to 178 units
at the end of 1999 combined with an approximate decrease of 330 Company owned
trailers over the same time period.
Rent and Purchased Transportation Expense increased from $19,474,901 in
1998 to $20,465,177 in 1999, an increase of $990,276. The largest component of
this category is the expense for leased drivers. These drivers are not employees
of the Company and own their own tractors and pay their own maintenance and fuel
bills. The number of leased drivers increased from 157 at the beginning of 1998
to 201 at the end of 1999.
During 1999 the Company had a $683,857 gain on the disposal of assets.
This resulted from the sale of over 60 tractors and over 250 trailers during
1999.
Interest Expense decreased from $2,660,403 in 1998 to $1,786,011 in
1999, a decrease of $874,392. This decrease was accomplished through the
decrease in the outstanding loan balance with Navistar on equipment from
$17,243,699 at the beginning of 1998 to $13,861,824 at December 31, 1998 to
$8,927,960 at December 31, 1999. This reduction was achieved through the sale of
equipment and the retirement of the related debt. The majority of the equipment
was sold for a price that was at or near the debt balance owed on it.
During 1999 the Company was able to book a settlement with its former
liability insurance carrier, Carolina Casualty. This one-time settlement allowed
the Company to write off non-cash insurance liability reserves and accounts
payable balances resulting in an extraordinary gain of $1,106,951.
Net cash decreased from $512,298 at December 31, 1998 to $20,290 at
December 31, 1999, a decrease of $492,008. Working Capital was at a deficit of
$16,818,412 at December 31, 1998 as compared to a deficit of $7,798,394 at
December 31, 1999, a decrease in deficit of $9,020,018. The Company's source of
funding operations included an operating line of credit through Systran
Financial Services Corporation secured by the Company's accounts receivable as
well as loans through Columbus Bank and trust Company secured by various other
assets.
Earnings per share in 1999 were ($.33) before extraordinary gain and
($.11) per share after extraordinary gain.
5
<PAGE>
The Company currently believes that it has adequate cash resources to
fund current operations. There can be no assurance, however, that the Company's
actual capital needs will not exceed anticipated levels, or that the Company
will generate sufficient revenues to fund its operations in the absence of other
sources. To finance its growth plan, the Company is considering a number of
alternatives, including additional equity financing. There can be no assurance
that any such transactions will be available at terms acceptable to the Company
or that the Company will have sufficient working capital to fund its growth
plan.
Our operations were not affected by Year 2000 compliance issues
To date, we have not been affected by Year 2000 compliance problems. We
conducted a comprehensive Year 2000 initiative with respect to our internal
business-critical systems. This initiative encompassed information technology
systems and applications, as well as non-information technology systems and
equipment with embedded technology, such as fax machines and telephone systems.
None of these systems were affected by the passage into the Year 2000.
Nonetheless, we have no assurance that we will not experience isolated system
failures as a result of customer or other third party technical problems. If so,
our business could be harmed and we could suffer disruptions in our ability to
schedule or receive payment for our services.
ITEM 3. Description of Property.
The corporate offices for McClendon Trucking are located at 121 South
Lafayette Street, Lafayette, AL 36362. The telephone number is (334) 864-9311.
The offices are leased for a five-year term from January 1, 2000 through
December 31, 2005 at a monthly rental of $11,000. (See "Certain Relationship and
Related Transactions")
Our operations center, located at 810 South LaFayette Street,
LaFayette, Alabama, is our main maintenance terminal and training facility. The
property is collateral for a $480,000 note to be paid in installments and
maturing on October 1, 2004.
We own two additional maintenance facilities at 1516 Alduc Court,
Montgomery, Alabama and 33 Market Street, Charleston, Tennessee. These
facilities are pledged to Navistar Financial Corporation as collateral security
for a loan.
Our properties at the following locations are for sale. These
properties were pledged as security for lines of credit, and upon sale, the net
proceeds after expenses will be utilized to satisfy the credit lines:
1. U.S. #17 and A1A (S.R. #200), Yulee, Florida
2. Lawrence Country Road #48 (Route 1, Box 165-A), Courtland, Alabama
3. Northern By-pass, Montgomery, Alabama
4. Albany, Georgia (under sale)
5. Georgia Highway No. 194, Durand, Georgia
6. Findowrie Street (Route 3, Box 712), Eden, North Carolina
7. 102 Anderson Drive, US Highway 76 By-pass, Laurens, South Carolina
These parcels were operated as terminals for our trucks when alternate parking
accommodations were not available. However, there is no need for such facilities
at the present time.
6
<PAGE>
ITEM 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of March 31, 2000, certain
information regarding beneficial ownership of the common stock by (i) those
persons beneficially holding more than five percent of McClendon
Transportation's common stock, (ii) McClendon Transportation's directors who
beneficially own shares of the common stock, (iii) the officers named in the
Compensation table below, and (iv) all of McClendon Transportation's directors
and officers as a group.
Name and Address Amount of Shares Percent
Of Beneficial Owner (1) of Beneficial Owner of Class
----------------------- ------------------- --------
Hugh F. McClendon 7,795,000 39.9%
James W. McClendon 7,795,000 39.9%
H. Glenn Scarborough -0- -0-
All Officers and Directors
As a Group (3 persons) 15,590,000 79.8%
--------------------
(1) For purposes of this table, a person is considered to "beneficially own" any
shares with respect to which he/she directly or indirectly has or shares voting
or investment power or of which he or she has the right to acquire the
beneficial ownership within 60 days. Unless otherwise indicated and subject to
applicable community property law, voting power and investment power are
exercised solely by the person named above or shared with members of his or her
household.
ITEM 5. Directors, Executive Officers, Promoters and Control Persons.
The McClendon Transportation directors and executive officers and their
ages as of the date of this document are as follows:
Name Age Position
---- --- --------
Hugh F. McClendon 42 Chairman, Chief Executive Officer
James W. McClendon 40 President, Chief Operating Officer, Director
H. Glenn Scarborough 35 Vice President of Finance, Director
Biographical Information
Hugh F. McClendon --Hugh F. McClendon has been Chairman of the Board and Chief
Executive Officer for the past 6 years. He formerly served as Executive Vice
President. He began his career with McClendon Trucking in 1979. Mr. McClendon
has served on the Board of Directors of the Alabama Trucking Association and the
Truckload Carriers Conference of the American Trucking Association. Mr.
McClendon received his B.A. from Auburn University in 1979.
James W. McClendon --James W. McClendon has been President and Chief Operating
Officer since 1995 and Vice Chairman of the Board since 1993. He has been with
McClendon Trucking since 1980. He formerly served as Secretary-Treasurer and
Vice President of Administration from 1983-1988. Mr. McClendon received his B.A.
from Auburn University in 1980.
H. Glenn Scarborough --Mr. Scarborough has been Vice President of Finance since
1998. Mr. Scarborough is a CPA who began his career in public accounting. He
also worked in the hospitality, manufacturing and telecommunications industries
before joining McClendon in December, 1998. Mr. Scarborough received his B.A.
from the University of Georgia in 1986.
7
<PAGE>
ITEM 6. Executive Compensation.
Compensation for the officers and directors of the Company is presented
below. There are no other benefits or compensation provided.
Aggregated Option Exercises in last Fiscal year and Fiscal year-end Option Value
The Company does not have any officer or director stock option plan.
The Company intends to incorporate one after a public offering. The Company does
not have an employee stock option plan (ESOP). The Company intends to
incorporate one after a public offering.
The following table shows all the cash compensation paid by the Company
as well as certain other compensation paid during the fiscal years indicated, to
the President and others who received total annual salary and bonus in excess of
$100,000.
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------------------------
Annual compensation Awards Payouts
------------------- ------------------------------------------------ --------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name and Annual Restricted All Other
Principal Compen Stock Options LTIP Compen-
Position Year Salary Bonus sation($) Awards($) SARs Payouts($) sation($)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hugh F. McClendon
Chairman, CEO 1999 $403,266 N/A---------------------------------------------------------------------
James W. McClendon
President, COO 1999 144,373 N/A---------------------------------------------------------------------
H. Glenn Scarborough
Vice President-Finance 1999 102,680 N/A---------------------------------------------------------------------
</TABLE>
ITEM 7. Certain Relationships and Related Transactions.
The Company's offices located at 121 South LaFayette Street, LaFayette,
Alabama 36862 are leased pursuant to an agreement with McClendon Enterprises.
McClendon Enterprises is an Alabama partnership owned by James and Hugh
McClendon. The rent of $11,000 per month is consistent with market rates for
similar properties in the area.
ITEM 8. Description of Securities.
COMMON STOCK
The Company has 100,000,000 shares of Common Stock, par value $.001
authorized. Each outstanding share of common stock is entitled to one vote,
either in person or by proxy, on all matters that may be voted upon by the
owners thereof at meetings of the shareholders.
The holders of common stock (i) have equal ratable rights to dividends
from funds legally available therefor, when, and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of common stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
vote per share on all matters on which shareholders may vote at all meetings of
shareholders.
8
<PAGE>
The Company's transfer agent is Manhattan Transfer Registrar Co., 58
Dorchester Road, Lake Ronkonkoma, New York.
PART II
ITEM 1. Market Price of and Dividends on the Registrant's Common Equity and
Other Stockholder Matters.
There has been no established public trading market for the Company's
securities since its inception on February 26, 1996. However, the Company's
securities are traded on the national Quotation Bureau pink sheets with no bid
and no offer. The Company's trading symbol is MCLG. As of April 30, 2000 there
were 19,548,000 shares outstanding, and the Company has 27 shareholders of
record. No dividends have been paid to date, and the Company's Board of
Directors does not anticipate paying dividends in the foreseeable future.
ITEM 2. Legal Proceedings.
The following matters represent contingent liabilities which might
exceed $25,000:
1. Navistar Financial Corporation vs. Glenn McClendon Trucking
Company, Inc., et al. This action is in the Circuit Court for
Montgomery County, Alabama. It has been on the administrative
docket since August, 1998, subject to terms of a forbearance
and settlement agreement between the parties.
2. State of Alabama Department of Revenue vs.Glenn McClendon
Trucking Co., Inc., is a 1999 administrative proceeding
assessing approximately $54,000 in state use taxes is pending
departmental conference(s).
3. McClendon operates a self-insured workers' compensation
program under the supervision of the Alabama Department of
Industrial Relations. Open claims include 18 cases in the
Circuit Courts of Chambers and Montgomery counties in Alabama
and 2 litigated cases in Georgia. This matter is ongoing and
standard within the industry. The Company believes that its
maximum liability on the aggregate 20 pending claims is
$700,000.
4. Under our current Liberty Mutual insurance coverage for
vehicle liability claims, we continue a self-insurance
retention level of $100,000 per incident.
McClendon Transportation is not presently a party to any other material
litigation, nor is any such litigation threatened to our knowledge.
ITEM 3. Changes in and Disagreements with Accountants.
We have had no changes in or disagreements with accountants on
accounting or financial disclosure matters.
9
<PAGE>
ITEM 4. Recent Sales of Unregistered Securities.
The following unregistered securities of the Company have been issued
in the past three years.
1. On November 11, 1999, the Company issued 95,000 restricted
shares to each of four affiliates for an aggregate of 380,000
shares. Said shares were issued pursuant to an exemption from
registration pursuant to Section 4(2) of the Securities Act of
a933, as amended (the "Act").
2. On March 27, 2000, the Company issued 17,000 restricted shares
to a non-affiliate in consideration of $4.00 per share. Said
shares were issued pursuant to an exemption from registration
under Section 4(2) of the Act.
3. On March 27, 2000, the Company issued 11,000,000 shares to two
affiliates pursuant to an exemption from registration under
Section 4(2) of the Act.
4. On April 6, 2000, the Company issued 31,000 restricted shares
to three non-affiliates in consideration of $5.00 per shares.
Said shares were issued pursuant to an exemption from
registration pursuant to Section 4(2) of the Act.
5. On April 6, 2000 the Company issued 3,400,000 restricted
shares to a non-affiliate as collateral security for a loan
in the principal amount of $3,250,000. Said shares were issued
pursuant to an exemption from registration under Section 4(2)
of the Act.
ITEM 5. Indemnification of Directors and Officers.
The Bylaws of the Company provide that the Company will indemnify its officers
and directors for costs and expenses incurred in connection with the defense of
actions, suits or proceedings where the officer or director acted in good faith
an in the manner he reasonably believed to be in the Company's best interest and
is a party by reason of his status as an officer or director, absent a finding
of negligence or misconduct in the performance of his duties.
PART F/S
The Financial Statements of McClendon Transportation Group, Inc., required by
Regulation S-B commence on page F-1 hereof and are incorporated herein by
reference.
PART III
ITEM 1 & 2. Index to Exhibits and Description of Exhibits.
3.1. Articles of Incorporation. *
3.2. By-Laws. *
10.1 Lease for 121 South Lafayette Street *
10.2 Form of Equipment and Service Agreement with contract drivers *
10.3 Renewal Term Note with Columbus Bank & Trust Company *
* Previously filed
10
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
MCCLENDON TRANSPORTATION GROUP, INC.
Date: July 24, 2000 By: /s/ James W. McClendon
------------------------------
James W. McClendon, President
11
<PAGE>
<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
BALANCE SHEETS
MARCH 31, 2000 AND 1999
UNAUDITED UNAUDITED
2000 1999
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................ $ 663,255 $ 577,659
Restricted investments ................................... 1,125,000 100,213
Accounts receivable
Trade .................................................. 3,935,912 4,623,412
Other .................................................. 164,480 415,274
Inventories .............................................. 199,552 248,993
Prepaid expenses 1,860,650 3,090,474
----------- -----------
Total current assets ............................. 7,948,849 9,056,025
FIXED ASSETS (net of accumulated
depreciation and amortization) ........................... 8,665,709 12,346,862
OTHER ASSETS 293,151 456,234
----------- -----------
Total assets ..................................... $16,907,709 $21,859,121
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Bank overdraft ........................................... $ 1,839,612 $ 475,930
Short-term borrowings .................................... 6,783,607 5,333,000
Current maturities of long-term debt ..................... 3,766,888 4,756,809
Accounts payable ......................................... 1,956,209 2,645,322
Accrued taxes other than income .......................... 190,119 174,689
Other accrued expenses ................................... 2,268,631 3,491,392
Estimated income taxes payable (155,375) (260,074)
----------- -----------
Total current liabilities ........................ 16,649,691 16,617,068
LONG-TERM DEBT (less current maturities) ................... 8,193,345 10,946,775
DEFERRED INCOME TAXES ...................................... 2,824,390 3,066,918
----------- -----------
Total liabilities ................................ 27,667,426 30,630,761
----------- -----------
STOCKHOLDERS' EQUITY
COMMON STOCK ............................................... 10,000 10,000
PAID-IN CAPITAL ............................................ 144,883 94,883
RETAINED EARNINGS .......................................... (10,914,600) (8,876,523)
----------- -----------
Total stockholders' equity ....................... (10,759,717) (8,771,640)
Total liabilities and stockholders' equity ....... $ 16,907,709 $21,859,121
========== ===========
</TABLE>
<PAGE>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
UNAUDITED UNAUDITED
2000 1999
--------------- -------------
Balance, January 1 ........................ $ (10,033,314) $ (9,256,772)
Net income (loss)........................ (881,286) 454,982
Dividends declared ...................... - (74,733)
--------------- -------------
Balance, March 31 ......................... $ (10,914,600) $ (8,876,523)
=============== =============
<PAGE>
<TABLE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF INCOME
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
UNAUDITED UNAUDITED
2000 1999
----------- -----------
<S> <C> <C>
OPERATING REVENUES
Freight revenues ............................................. $10,026,085 $12,543,336
Other revenues ............................................... 53,137 25,782
----------- -----------
Total revenues ....................................... 10,079,222 12,569,118
----------- -----------
OPERATING EXPENSES
Salaries, wages and benefits ................................. 2,698,838 3,884,616
Operations and maintenance ................................... 1,917,164 2,209,002
Taxes and licenses ........................................... 175,953 242,583
Insurance and claims ......................................... 588,956 861,928
Communications and utilities ................................. 136,730 176,030
Depreciation and amortization ................................ 538,895 990,000
Rent and purchased transportation ............................ 4,627,761 4,513,821
(Gain) loss on sale of fixed assets and other ................ 0 (199,795)
----------- -----------
Total operating expenses ............................. 10,684,297 12,678,185
----------- -----------
Operating income (loss) .............................. (605,075) (109,067)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income .............................................. 79,536 34,701
Interest expense ............................................. (331,382) (563,807)
Miscellaneous expense ........................................ (24,365) (13,796)
----------- -----------
Total other income (expense) ......................... (276,211) (542,902)
----------- -----------
Loss before provision for income tax expense
(benefit) and extraordinary item ................... (881,286) (651,969)
EXTRAORDINARY ITEM (Insurance settlement with Carolina Casualty) 0 1,106,951
PROVISION FOR INCOME TAX EXPENSE
(BENEFIT) .................................................... - -
----------- -----------
Net income (loss) .................................... $ (881,286) $ 454,982
=========== ===========
<PAGE>
<CAPTION>
GLENN McCLENDON TRUCKING COMPANY, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
UNAUDITED UNAUDITED
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ................................................. $(881,286) $ 454,892
--------- ----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .......................... 538,895 990,000
Deferred income taxes .................................. 5,130 275,218
(Gain) loss on sale of fixed assets .................... 0 (199,795)
Changes in current assets and liabilities:
Accounts receivable .................................. 327,509 89,913
Inventories .......................................... 11,045 43,889
Prepaid expenses ..................................... 1,161,085 49,610
Accounts payable ..................................... (77,770) 206,775
Other current liabilities ............................ (363,010) (682,687)
----------- -----------
Total adjustments .................................. 1,602,884 772,923
----------- -----------
Net cash provided by operating activities .......... 721,598 1,227,905
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets ................................ (5,867) (976,215)
Proceeds from sale of fixed assets ......................... 0 619,000
Other assets - net ......................................... 31,723 (53,767)
----------- -----------
Net cash provided by investing activities .......... 25,856 (410,982)
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - net ....................................... 909,005 (194,006)
Restricted investments - net ............................... (1,000,000) 0
Short-term borrowings - net ................................ 923,105 (193,904)
Proceeds of long-term debt ................................. 0 2,312,500
Principal payments on long-term debt ....................... (936,599) (2,601,419)
Dividends paid ............................................. - (74,733)
----------- -----------
Net cash used in financing activities .............. (104,489) (751,562)
----------- -----------
Net increase (decrease) in cash and cash equivalents 642,965 65,361
Cash and cash equivalents, January 1 ............... 20,290 512,298
----------- -----------
Cash and cash equivalents, March 31 ................ $ 663,255 $ 577,659
=========== ===========
</TABLE>
<PAGE>
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT................................Page 1
FINANCIAL STATEMENTS
Balance Sheet........................................... 2
Statements of Stockholders' Equity (Deficiency)......... 3
Statements of Operations................................ 4
Statements of Cash Flows................................ 5
Notes to Financial Statements........................... 6 - 20
<PAGE>
Robinson, Members
Grimes & - SEC and Private Companies
Company, P.C. Certified Public Accountants Practice Sections of the
American Institute of C.P.A.s
- Georgia Society of C.P.A.s
Independent Auditors' Report
The Directors and Stockholders
McClendon Transportation Group, Inc.
Lafayette, Alabama
We have audited the accompanying balance sheet of McClendon Transportation
Group, Inc. as of December 31, 1999, and the related statements of stockholders'
equity (deficiency), operations, and cash flows for each of the two years in the
period ended December 31, 1999. 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 McClendon Transportation Group,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 15 to the
financial statements, the Company has experienced significant operating losses
and is currently in default on certain debt. These conditions raise substantial
doubt about its ability to continue as a going concern. Management's plans
regarding those matters are also described in Notes 15 and 16. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Robinson, Grimes & Company, P.C.
------------------------------------
Robinson, Grimes & Company, P.C.
Certified Public Accountants
Columbus, Georgia
May 31, 2000
<PAGE>
<TABLE>
<CAPTION>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents ............................................... $ 76,020
Restricted investments .................................................. 201,548
Accounts receivable
Trade .............................................................. 4,353,589
Other .............................................................. 338,617
Inventories ............................................................. 210,597
Prepaid expenses ........................................................ 3,021,736
------------
Total current assets ............................................... 8,202,107
FIXED ASSETS (net of accumulated depreciation) .............................. 9,198,743
OTHER ASSETS ................................................................ 231,740
------------
Total assets ............................................................ $ 17,632,590
============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES
CURRENT LIABILITIES
Bank overdraft .......................................................... $ 1,262,885
Short term borrowings ................................................... 4,301,862
Current maturities of long term debt .................................... 11,097,818
Accounts payable ........................................................ 2,154,953
Accrued taxes other than income ......................................... 154,077
Other accrued expenses .................................................. 2,093,500
Estimated income taxes payable .......................................... 113,000
------------
Total current liabilities ................................... 21,178,095
LONG TERM DEBT (less current maturities) .................................. 3,980,612
DEFERRED INCOME TAXES ................................................... 2,406,000
------------
Total liabilities .......................................... 27,564,707
------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
COMMON STOCK (par value .001, 100,000,000 shares
authorized, 16,100,000 shares issued and outstanding) .................... 16,100
PAID IN CAPITAL .......................................................... 88,783
ACCUMULATED DEFICIT ...................................................... (10,037,000)
------------
Total stockholders' equity (deficiency) .................... (9,932,117)
------------
Total liabilties and stockholders' equity (deficiency) ..... $ 17,632,590
============
See Notes to Financial Statements.
-2-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
COMMON STOCK
--------------------------
NUMBER PAID IN ACCUMULATED EQUITY
OF SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 ..................... 15,590,000 $ 15,590 $ 89,293 $ (5,809,928) $ (5,705,045)
Net loss .................................. (3,131,753) (3,131,753)
Dividends declared ($.02 per share) ....... (315,091) (315,091)
---------- ------------ ------------ ------------ ------------
Balance, December 31, 1998 ................... 15,590,000 15,590 89,293 (9,256,772) (9,151,889)
Aquistion of assets of
RDA Services, Inc. ...................... 510,000 510 (510)
Net loss .................................. (592,699) (592,699)
Dividends declared ($.01 per share) ....... (187,529) (187,529)
---------- ------------ ------------ ------------ ------------
Balance, December 31, 1999 ................... 16,100,000 $ 16,100 $ 88,783 $(10,037,000) $ (9,932,117)
============ ============ ============ ============ ============
See Notes to Financial Statements.
-3-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC
LAFAYETTE, ALABAMA
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING REVENUES
Freight revenues ................................... $ 48,267,343 $ 61,626,123
Other revenues ..................................... 404,222 122,677
------------ ------------
Total operating revenues ..................... 48,671,565 61,748,800
------------ ------------
OPERATING EXPENSES
Salaries, wages and benefits ....................... 13,168,293 19,581,373
Purchased transportation (owner operators) ......... 19,399,640 16,982,430
Other rent expense ................................. 1,745,839 2,492,471
Operations and maintenance ......................... 7,099,219 12,052,533
Taxes and licenses ................................. 885,851 1,360,007
Insurance and claims ............................... 2,537,758 3,773,905
Communications and utilities ....................... 607,015 844,696
Depreciation and amortization ...................... 3,535,823 5,357,246
(Gain) loss on sale of fixed assets and other ...... (225,802) 383,314
------------ ------------
Total operating expenses .................. 48,753,636 62,827,975
------------ ------------
Operating loss ............................ (82,071) (1,079,175)
------------ ------------
OTHER INCOME (EXPENSE)
Interest income .................................... 57,795 85,337
Interest expense ................................... (1,786,010) (2,660,403)
Miscellaneous expense .............................. (70,676) (137,107)
------------ ------------
Total other income (expense) .............. (1,798,891) (2,712,173)
------------ ------------
Loss before provision for income tax
benefit and extraordinary item .......... (1,880,962) (3,791,348)
PROVISION FOR INCOME TAX BENEFIT ....................... (181,312) (659,595)
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM ......................... (1,699,650) (3,131,753)
EXTRAORDINARY ITEM (NOTE 7) ............................ 1,106,951 0
------------ ------------
Net loss .................................. $ (592,699) $ (3,131,753)
============ ============
BASIC AND DILUTED LOSS PER SHARE
Loss before extraordinary item ..................... $ (0.11) $ (0.20)
Extraordinary item ................................. 0.07 0
------------ ------------
Net loss .................................. $ (0.04) $ (0.20)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES ...................... 15,652,000 15,590,000
============ ============
See Notes to Financial Statements.
-4-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................. $ (592,699) $(3,131,753)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .................. 3,535,823 5,357,246
Deferred income taxes .......................... (385,700) (883,571)
(Gain) loss on sale of fixed assets ............ (683,857) 227,124
Forgiveness of debt ............................ (1,106,951) 0
Changes in current assets and liabilities:
Accounts receivable ........................ 436,393 1,777,874
Inventories ................................ 82,285 63,505
Prepaid expenses ........................... 118,348 (1,310,781)
Accounts payable ........................... (283,594) (369,494)
Other current liabilities .................. (621,165) 267,491
----------- -----------
Total adjustments ....................... 1,091,582 5,129,394
----------- -----------
Net cash provided by operating activites 498,883 1,997,641
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets ........................... (1,103,916) (1,922,025)
Proceeds from sale of fixed assets .................... 1,198,844 2,028,811
Other assets - net .................................... 170,719 68,088
----------- -----------
Net cash provided by investing activities 265,647 174,874
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - net .................................. 592,949 (197,876)
Restricted investments - net.......................... (101,335) 475,000
Short term borrowings - net........................... (745,042) (262,473)
Proceeds of long term debt ............................ 4,361,304 1,861,525
Principal payments on long term debt .................. (5,121,155) (3,771,502)
Dividends paid ........................................ (187,529) (315,091)
----------- -----------
Net cash used in financing activities ... (1,200,808) (2,210,417)
----------- -----------
Net decrease in cash and cash equivalents (436,278) (37,902)
Cash and cash equivalents, January 1 .... 512,298 550,200
----------- -----------
Cash and cash equivalents, December 31 .. $ 76,020 $ 512,298
=========== ===========
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1: Nature of Operations
The Company is a medium-haul, irregular route, truckload carrier
of general commodities which transports freight primarily
throughout the Southeastern and Eastern United States. No single
customer accounted for more than 5% of revenue for 1998 or 1999.
On November 11, 1999, Glenn McClendon Trucking Company, Inc.
(GMTC) merged into RDA Services, Inc. (RDA). GMTC was treated as
the acquirer and RDA as the acquiree. The resulting merged entity
was then renamed McClendon Transportation Group, Inc. For
accounting purposes, the acquisition has been treated as an
acquisition with all costs in excess of any cash received charged
to expense.
NOTE 2: Summary of Significant Accounting Policies
Accounts Receivable - Trade - Trade receivables represent amounts
due from various companies for shipment services. Bad debts are
normally accounted for using the allowance method, based on the
credit worthiness of its customers, as well as general economic
conditions.
Inventories - Inventories consist of fuel, tires, and repair parts
and are valued at the lower of cost or market, with cost being
determined by the first-in, first-out method.
Fixed Assets and Related Depreciation and Amortization - Fixed
assets are stated at cost and are depreciated on the straight-line
method for financial reporting purposes. For income tax reporting,
the Company uses accelerated methods. The cost of revenue
equipment includes items such as tires, air deflectors, and
communication equipment used in or on the tractors and trailers.
Maintenance, repairs and minor renewals are expensed as incurred,
while additions and major renewals are capitalized. The useful
lives presently employed for computing depreciation on principal
classes of fixed assets for financial reporting purposes are:
Buildings and land improvements 10 - 40 years
Revenue equipment:
Tractors 6 years
Trailers 8 years
Furniture and fixtures 5 - 10 years
Other fixed assets 5 - 20 years
-6-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 2: Summary of Significant Accounting Policies (Continued)
Revenue equipment is depreciated to a 20% salvage value for
trailers and a 15% salvage value for tractors.
Revenue Recognition - Revenue is recognized when the shipment
is completed and bills of lading received.
Income Taxes - Deferred income taxes are provided for differences
in the timing of reporting income for financial statement and tax
purposes, and result primarily from differences in depreciation
methods.
Statements of Cash Flows - For purposes of the statements of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Reclassifications - Certain items in the 1998 financial statements
have been reclassified in order to be in conformity with the 1999
statement presentation.
Fair Value of Financial Instruments - The carrying amounts
reflected in the balance sheet for cash, receivables and
short-term borrowings approximate their values due to the short
maturities. Management is unable to estimate the fair value of its
other financial instruments.
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.
Earnings (Loss) Per Share - Basic earnings (loss) per common share
is calculated by dividing net earnings (loss) by the average
number of common shares outstanding during the year. Diluted
earnings (loss) per common share is calculated by adjusting
outstanding shares, assuming conversion of all potentially
dilutive securities. The Company has a simple capital structure
with no potentially dilutive securities.
-7-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 3: Accounts Receivable
Trade accounts receivable are summarized as follows:
Trade accounts receivable $4,466,470
Allowance for doubtful accounts (112,881)
----------
Total accounts receivable - trade $4,353,589
==========
Accounts receivable other than trade are summarized as follows:
Officers and employees (Note 11) $ 122,486
Insurance premium refunds 35,361
Miscellaneous 180,770
----------
Total accounts receivable - other $ 338,617
===========
NOTE 4: Prepaid Expenses
Prepaid expenses are summarized as follows:
Insurance, including deposits $2,545,943
Taxes, licenses and permits 418,491
Other 57,302
----------
Total prepaid expenses $3,021,736
==========
-8-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 5: Fixed Assets and Related Depreciation
Major classes of fixed assets and accumulated depreciation are
summarized as follows:
Land $ 338,944
Buildings and land improvements 1,696,967
Revenue equipment 27,704,954
Furniture, fixtures and other 3,336,609
--------------
33,077,474
Accumulated depreciation (23,878,731)
-------------
Fixed assets - net $ 9,198,743
=============
NOTE 6: Short-Term Borrowings
Short-term borrowings consists of the following:
$5,000,000 line of credit from Systran Financial Services
Corporation, with interest at prime plus 2%, accounts
receivable as collateral. Borrowings on the line of credit
are limited by various restrictions on the above
collateral $3,802,323
Demand note from Columbus Bank & Trust 13,049
Unsecured note from Valley National Bank, interest at 8.50% 250,000
Note payable - stockholders 49,990
Other 186,500
----------
$4,301,862
==========
-9-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 7: Other Accrued Expenses
Other accrued expenses are summarized as follows:
Accrued self-insured liability claims (See below) $ 542,880
Accrued workers' compensation (Note 14) 1,028,049
Other accrued expenses 522,571
----------
Total other accrued expenses $2,093,500
==========
During 1998, the Company negotiated with its previous liability
insurance carrier for forgiveness of $1,106,951 of outstanding
claims under its old policy. The forgiveness was accepted, subject
to certain contingencies which were not resolved until 1999.
Accordingly, this debt forgiveness income is recognized in the
1999 statement of operations as an extraordinary item. There was
no tax effect on the forgiveness.
-10-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 8: Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MATURITIES
-------------------------
CURRENT LONG-TERM
----------- ----------
<S> <C> <C>
Note payable - equipment: Navistar Financial Corporation.
See below. $ 7,599,038 $ 0
Note payable - equipment: Navistar Financial Corporation,
weekly payments total $9,205 as of December 31, 1999,
including interest at 9.50%, final payment due December,
2002 369,367 959,554
Notes payable - equipment:
Associates Commercial Corporation, monthly payments total
$33,098 as of December 31, 1999, including interest at 9.25%,
final payment due April, 2001 399,855 127,464
Note payable - equipment:
TBCC Funding Trust I, monthly payments total $75,034 as of
December 31, 1999 including interest at 10.4%, final payment
due March, 2002 754,974 985,341
Note payable - equipment:
Financial Federal Credit, Inc. monthly principal payments
of $36,100 plus interest at 10.75%, final payment due July,
2002 433,200 685,346
Note payable - real estate:
Columbus Bank & Trust Co., interest only through October,
2000, thereafter, monthly pay ment of $12,235, including
interest at prime plus 2%, final payment due October, 2004 15,343 464,657
Note payable - Columbus Bank & Trust Company. See below. 1,500,000 0
Note payable - vehicles:
Ford Credit, monthly payments total $2,314, including
interest at 2.90%, final payment due September, 2003 26,041 73,250
Accrued workers' compensation (Note 14) 0 685,000
-------- ---------
Total notes payable $11,097,818 $3,980,612
=========== ==========
</TABLE>
-11-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 8: Long-Term Debt (Continued)
During 1998, the Company restructured certain of its debt
obligations with Navistar Financial Corporation. Terms of the
restructuring allowed for cancellation of $3,131,348 of the debt
in exchange for accelerated payments and additional collateral for
the remaining obligations. The adjusted loan balance, after the
planned cancellation, was approximately $11,583,000 as of August
1998. The terms required that a certain amount be repaid by
February 28, 1999, at which time the above amount would be
cancelled. While the Company reduced its fleet and paid down on
the debt significantly, the total had not been retired by that
date. Accordingly all applicable amounts were reflected as current
maturities as of December 31, 1998, since, according to the
agreement, Navistar could elect to reinstate the total debt.
However, Navistar formally agreed to an extension and the Company
made additional payments in an effort to comply with the terms of
the agreement. As of April 30, 2000 the outstanding balance of the
adjusted loan was approximately $3,766,000.
Subsequent to December 31, 1999, the Company and Navistar have
agreed, in principle, to a revised restructuring agreement,
whereby in addition to the forgiveness mentioned above, Navistar
will convert approximately $1,000,000 of the remaining debt to
equity in the Company. Other remaining notes will also have terms
modified by the new restructuring agreement. However, for
financial statement purposes, the notes remain classified as
current liabilities as the agreement has not yet been finalized.
The $3,131,348 is expected to be recognized as debt forgiveness
income in 2000.
In addition, subsequent to December 31, 1999, the Company and
Columbus Bank & Trust Company agreed, in principle, to the
conversion of approximately $1,500,000 of debt to equity. This
debt was remaining from the previous line of credit loan, which
was taken over by Systran Financial Services Corporation in 1999,
as discussed in Note 6. Similarly, due to the tentative nature of
the agreement, the $1,500,000 has continued to be classified as
current debt at December 31, 1999.
Equipment notes are collateralized by substantially all revenue
equipment with a total book value of approximately $7,394,000.
Personal endorsements by the Company's principal stockholders are
also used as collateral on certain notes.
-12-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 8: Long-Term Debt - (Continued)
Aggregate maturities under these arrangements for years subsequent
to December 31, 1999 are as follows:
2000 $11,097,818
2001 $2,083,635
2002 1,285,456
2003 479,532
2004 131,989
3,980,612
--------- ----------
Total $15,078,430
==========
-13-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 9: Operating Leases
The Company has acquired trailers through operating leases with
various leasing companies with an option to purchase the equipment
at its fair market value at the end of the lease. The leases are
for periods of 6 - 7 years; however, after 3 years the lease may
be canceled by the Company upon meeting specified conditions in
the contract. Under a terminal rental adjustment clause, the
Company guarantees a 20% residual value.
The Company also leases certain real estate properties from
McClendon Enterprises (a related party). See Note 11. Below is a
schedule of future minimum payments under the above operating
leases:
<TABLE>
McCLENDON TOTAL
TRAILER ENTERPRISES OPERATING
LEASES LEASES LEASES
---------- --------- ----------
<S> <C> <C> <C>
Amounts due during:
2000 $ 820,776 $ 132,000 $ 952,776
2001 760,357 132,000 892,357
2002 48,627 132,000 180,627
2003 0 132,000 132,000
2004 0 132,000 132,000
--------- --------- ---------
Total five year payments $1,629,760 $ 660,000 $2,289,760
========== ========= ==========
</TABLE>
During 1997, the Company started a program whereby the Company
leases tractors with qualified drivers from independent operators,
("owner-operators"). Owner-operator expense amounted to
$19,399,640 and $16,982,430 for 1999 and 1998, respectively, and
is reflected on the Statements of Operations as Purchased
Transportation.
-14-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 9: Operating Leases (Continued)
Other rent expense is summarized as follows:
1999 1998
----------- ----------
Trailer leases $ 888,966 $1,351,372
McClendon Enterprises leases 229,500 229,500
Spotting service 388,192 541,435
Other rents 239,181 370,164
----------- ----------
Total $1,745,839 $2,492,471
========== ==========
NOTE 10: Income Taxes
The Company's net carrying basis of long-term assets exceeded its
tax basis for such assets by approximately $6,197,000 at December
31, 1999. See Note 2.
Net deferred tax liabilities in the accompanying balance sheet
reflect the liabilities associated with temporary differences,
principally depreciation of fixed assets.
Provision for income tax benefit is summarized as follows:
1999 1998
----------- -----------
Current tax expense:
Federal $ 161,716 $ 104,758
State 42,672 119,218
Deferred tax benefit (385,700) (883,571)
----------- -----------
Net provision for income
tax benefit $ (181,312) $ (659,595)
=========== ===========
The income tax benefit differs from the income tax benefit that
would result from applying statutory rates to pretax income. This
is due primarily to the payment of per diems to drivers, which are
only partly tax deductible.
-15-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 11: Related Party Transactions
McClendon Enterprises
The Company leases its present operating facility and other real
estate from McClendon Enterprises, a partnership comprised of the
two Company stockholders. For both financial statement and tax
purposes, the leases have been classified as operating leases.
Total rent expense on these leases was $229,500 for 1999 and 1998,
respectively.
The Company had $38,198 outstanding at December 31, 1999 from
McClendon Enterprises for a loan made for building improvements.
The non-current portion of this note has been included with other
assets in the accompanying financial statements for 1998.
Other
The Company's two stockholders are obligated to a previously
redeemed stockholder on notes executed to acquire the previous
stockholder's stock. The balance of these notes as of December 31,
1999 was $432,595 with quarterly principal and interest payments
due through 2001. The Company has declared periodic dividends to
the stockholders to assist in these payments.
The Company has a loan outstanding from a stockholder in the
amount of $49,990. This amount is included in short-term
borrowings.
The Company also has various loans and other receivables from
certain officers and stockholders, summarized as follows:
Stockholder notes receivable, interest at 7% $ 91,000
Other stockholder receivables 9,677
Other officer and employee receivables 21,809
-------------
Total $ 122,486
=============
-16-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 12: Profit Sharing Plan
The Company maintains a qualified defined contribution profit
sharing plan with 401(k) provisions covering substantially all
employees with over one year of service. Contributions based on a
percentage of compensation are determined annually by the board of
directors. The Company made 401(k) contributions totaling $37,991
and $50,755 to the Plan for the years ending December 31, 1999 and
1998, respectively.
NOTE 13: Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
1999 1998
----------- -----------
Interest $ 1,786,010 $ 2,660,403
Taxes $ 302,179 $ 0
Non-Cash Financing Activity - The Company refinanced parts of
certain loans with Navistar Financial Corporation as disclosed in
Note 8. As part of this refinancing, certain equipment with agreed
values was turned in to Navistar as payment on the debt in the
amount of $634,000 and $1,905,000 for the year ended December 31,
1999 and 1998, respectively.
NOTE 14: Contingencies
Self-Insurance Plans
The Company is partially self-insured with respect to various risk
areas as follows:
Liability, Cargo and Physical Damage
For automobile liability, the Company is responsible for any
claims less than $100,000 and for claims in excess of the
$1,000,000 policy limit. The Company also has a $4,000,000
umbrella policy per occurrence.
-17-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 14: Contingencies (Continued)
For general liability, the Company is responsible for any
claims less than $10,000 and for claims in excess of
$1,000,000 per occurrence. The policy has a $2,000,000
annual aggregate limit. The Company also has a $4,000,000
annual aggregate umbrella policy.
For cargo damage, the Company is responsible for any claims
less than $100,000 and for claims in excess of the $300,000
policy limit.
For physical damage to the revenue equipment, the Company is
responsible for any claims less than $1,000.
Worker's Compensation
The Company is also self-insured with respect to worker's
compensation. Claims in excess of $300,000 are covered by an
insurance policy. The Company is responsible for any claims
less than $300,000. Due to the uncertainty of estimated
outstanding claims, such claims were accounted for on a cash
basis prior to 1996. As a result of state requirements, an
actuarial valuation was obtained in 1996 which estimated the
expected future claims. Accordingly, the Company accrued, in
1996, the estimated present value of claims outstanding and
those incurred but not reported. These values have
subsequently been adjusted based on increases and decreases
to estimated claims as computed by the Company's insurance
carrier. The next actuarial valuation is expected in the
fourth quarter of 2000.
Group Health
The Company has elected to self-insure for its group health
insurance coverage. Blue Cross-Blue Shield acts as
administrator for the plan whereby the Company is
responsible for all health claims, not to exceed $50,000
annually, per insured individual. The claims are accounted
for on a cash basis.
Credit Risks
The Company extends credit across different industries and
geographic areas and requires no collateral from its
customers.
-18-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 15: Going Concern
As shown in the accompanying financial statements, the Company has
experienced significant operating losses and has deficits in
working capital and net worth. As a result, the Company has been
in violation of various covenants of loan agreements. These
factors raise substantial doubt about the Company's ability to
continue as a going concern.
Management is working with its primary lenders to monitor the
status of its indebtedness and is currently evaluating methods to
reduce costs and improve results of operations. During 1998, the
Company refinanced certain liabilities with its liability
insurance carrier reflecting a debt forgiveness of approximately
$1.1 million. In addition, as reflected in Note 8, the Company has
tentatively renegotiated certain debt obligations with Navistar
Financial Corporation and Columbus Bank & Trust Company, that are
expected to further reduce its outstanding indebtedness by
approximately $5,631,000 through a combination of forgiveness and
equity conversion. Additionally, certain equipment and other idle
facilities have been sold and/or listed for disposition. Finally,
during 1999, the Company signed certain agreements to effect a
reorganization plan as more fully described in Note 16.
If the Company is unsuccessful in its efforts, it may be necessary
to undertake such other actions as may be appropriate to preserve
asset value. The financial statements do not include any
adjustments, other than the classification of long-term debt as
disclosed in Note 8, that might result from the outcome of this
uncertainty.
-19-
<PAGE>
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 16: Reorganization
During June, 1999, the Company initiated a plan of reorganization.
As a result the Company entered into a reverse merger transaction
with RDA Services, Inc. in November, 1999 whereby RDA Services,
Inc. purchased Glenn McClendon Trucking Company, Inc. (GMTC)
through issuance of its stock. RDA Services, Inc. then changed its
name to McClendon Transportation Group, Inc. The principal
shareholders of GMTC retained 90% of the stock of the newly merged
Company. The transaction also included refinancing certain
portions of the line-of-credit agreement, as well as other
long-term debt obligations as discussed in Note 8. To date,
certain of the above items are still subject to contingent events.
-20-
