<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-QSB - A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1995.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File No. 0-16140
U.S. TRANSPORTATION SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of the Registrant as specified in Charter)
Nevada 34-1397328
- ------------------------- --------------------------
(State of Incorporation) (I.R.S. Employer ID Number)
33 W. Main Street, Suite 205, Elmsford, New York 10523
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number including Area Code: 914-345-3339
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO _____
As of May 9, 1996, there were 18,447,545 shares of Common Stock, $.01 par value,
net of treasury shares.
Transitional Small Business Disclosure Format
YES _____ NO __X__
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC.
AND SUBSIDIARIES
Index
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of June 30, 1995 3-4
Consolidated Statements of Income for the Six
Months Ended June 30, 1995 and 1994 5
Consolidated Statements of Income for the Three
Months Ended June 30, 1995 and 1994 6
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1994 and the
Six Months Ended June 30, 1995 7-8
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 9-10
Notes to Consolidated Financial Statements 11-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-15
PART II. OTHER INFORMATION
Signatures 16
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1995
ASSETS
Current assets:
Cash and cash equivalents $ 1,231,724
Cash - restricted 100,303
Accounts receivable, net of allowance for doubtful
accounts of $442,000 1,927,637
Other receivables 235,768
Net investment in sales-type leases 402,037
Inventories 470,660
Deferred taxes 300,000
Prepaid and other assets 946,792
-------------
Total current assets 5,614,921
Property, plant and equipment:
Revenue equipment - highway coaches 1,064,074
Revenue equipment - other 2,092,227
Other 1,889,418
-------------
Total - at cost 5,045,719
Less: Accumulated depreciation 2,574,351
-------------
Property, plant and equipment - net 2,471,368
Assets held for resale 2,088,962
Other assets:
Net investment in sales-type leases 1,400,306
Other receivables 389,946
Other assets 249,628
Cash - restricted 86,766
Goodwill, net of amortization of $137,209 1,090,623
Other intangibles, principally operating rights - net
of amortization of $68,835 316,090
-------------
Total other assets 3,533,359
-------------
Total assets $13,708,610
=============
See notes to consolidated financial statements.
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 786,993
Accounts payable 443,384
Other current liabilities 656,957
Due to related party 658,384
-------------
Total current liabilities 2,545,718
Long-term obligations, net of current maturities:
Notes payable 2,182,138
Due to related party 76,276
-------------
Total long-term obligations, net of
current maturities 2,258,414
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized - 20,000,000 shares
Issued and outstanding - 8,133,190 shares 81,132
Preferred stock, par value $.01 per share:
Authorized - 10,000,000 shares
Outstanding - 350,000 shares 3,840,000
Additional paid-in capital 12,993,159
Deferred compensation (734,932)
Accumulated deficit (7,274,881)
-------------
Total stockholders' equity 8,904,478
-------------
Total liabilities and stockholders' equity $ 13,708,610
=============
See notes to consolidated financial statements.
4
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Six Months Ended June 30, 1995 and 1994
1995 1994
------------- ------------
Revenues $ 7,086,473 $ 5,637,290
----------- -----------
Expenses:
Cost of goods sold 797,829 --
Operating expenses 3,656,020 3,539,823
Selling, general and administrative 1,682,526 1,324,161
Depreciation 181,626 249,936
Amortization of intangible assets 51,113 24,460
Rent expense 109,547 107,172
----------- -----------
Total expenses 6,478,661 5,245,552
----------- -----------
Income from operations 607,812 391,738
----------- -----------
Other income (expenses):
Interest expense (151,955) (93,066)
Interest income 98,137 67,565
Gain (loss) on sales of assets (157,060) 26,500
Other 8,038 93,433
Net other expenses (202,840) 94,432
----------- -----------
Net income 404,972 486,170
Less: Preferred dividends 95,850 --
----------- -----------
Net income applicable to common shareholders $ 309,122 $ 486,170
=========== ===========
Earnings per common share $ 0.05 $ 0.08
=========== ===========
Weighted average common shares outstanding 6,855,252 6,166,702
=========== ===========
See notes to consolidated financial statements.
5
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Three Months Ended June 30, 1995 and 1994
1995 1994
------------- ------------
Revenues $ 3,659,162 $ 2,942,858
----------- -----------
Expenses:
Cost of goods sold 421,132 --
Operating expenses 1,796,436 1,924,448
Selling, general and administrative 847,665 636,566
Depreciation 149,834 142,377
Amortization of intangible assets 21,381 12,230
Rent expense 38,768 26,831
----------- -----------
Total expenses 3,275,216 2,742,452
----------- -----------
Operating income 383,946 200,406
----------- -----------
Other income (expenses):
Interest expense (85,999) (50,998)
Interest income 47,722 31,748
Gain (loss) on sales of assets (117,612) 24,000
Other (75) 84,294
----------- -----------
Net other expenses (155,964) 89,044
----------- -----------
Net income 227,982
289,450
Less: Preferred dividends 47,925 --
----------- -----------
Net income applicable to common shareholders $ 180,057 $ 289,450
=========== ===========
Earnings per common share $ 0.02 $ 0.05
=========== ===========
Weighted average common shares outstanding 7,257,314 6,166,702
=========== ===========
See notes to consolidated financial statements.
6
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the Year Ended December 31, 1994 and
the Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Common Stock Preferred Stock
--------------------------- -------------------------
Shares Amount Shares Amount
----------- --------- --------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 6,153,240 $ 61,532 - $ -
- --------------------------
Net proceeds from warrants exercised 17,950 180 - -
Common stock issued in connection with
purchase of Suncoast Transportation 375,000 3,750 - -
Preferred stock issued in connection with
purchase of Camelot Consultants, Inc. (327,000) (3,270) 180,000 1,800,000
Restricted stock grant issuance 1,100,000 11,000 - -
Stock options issued - - - -
Other 14,000 140 - -
Net income - - - -
------------- ---------- ------------- ----------
Balance, December 31, 1994
(carried forward) 7,333,190 $ 73,332 180,000 $1,800,000
------------- ---------- ------------- ----------
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred Retained
Paid-In Compen- Earnings
Capital sation (Deficit) Total
------------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 $13,610,693 $ - $ (7,460,268) $ 6,211,957
- --------------------------
Net proceeds from warrants exercised 44,695 - - 44,875
Common stock issued in connection with
purchase of Suncoast Transportation 114,632 - - 118,382
Preferred stock issued in connection with
purchase of Camelot Consultants, Inc. (1,116,273) - - 680,457
Restricted stock grant issuance 814,000 (780,803) - 44,197
Stock options issued 34,376 (30,556) - 3,820
Other 6,860 - - 7,000
Net income - - (94,995) (94,995)
----------- ----------- ------------- ------------
Balance, December 31, 1994
(carried forward) $13,508,983 $ (811,359) $ (7,555,263) $ 7,015,693
----------- ----------- ------------- ------------
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Concluded)
For the Year Ended December 31, 1994 and
the Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Common Stock Preferred Stock
--------------------------- -------------------------
Shares Amount Shares Amount
----------- --------- --------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1994
(brought forward) 7,333,190 $ 73,332 180,000 $1,800,000
Preferred stock issuance - - 170,000 2,040,000
Restricted stock grant issuance - - - -
Stock options issued - - - -
Preferred dividends - - - -
Common stock issued in connection with
purchase of Armstrong Freight Express 780,000 7,800 - -
Net income - - - -
------------- ---------- ------------- ----------
Balance, June 30, 1995 8,113,190 $ 81,132 350,000 $3,840,000
============= ========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Additional Deferred Retained
Paid-In Compen- Earnings
Capital sation (Deficit) Total
------------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1994
(brought forward) $13,508,983 $ (811,359) $ (7,555,263) $ 7,015,693
Preferred stock issuance (1,073,524) - - 966,476
Restricted stock grant issuance - 67,833 - 67,833
Stock options issued - 8,594 - 8,594
Preferred dividends - - (124,590) (124,590)
Common stock issued in connection with
purchase of Armstrong Freight Express 557,700 - - 565,500
Net income - - 404,972 404,972
----------- ----------- ------------- ------------
Balance, June 30, 1995 $12,993,159 $ (734,932) $ (7,274,881) $ 8,904,478
=========== =========== ============= ============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1994
1995 1994
--------- ----------
Operating activities:
Income from continuing operations $ 404,972 $ 486,170
Adjustments:
Depreciation 232,739 274,396
Gain on investment -- (93,433)
Gain on sale of assets 157,060 (26,500)
Change in assets and liabilities:
Accounts receivable 149,756 (326,713)
Inventory (74,479) (39,267)
Notes receivable 7,783 3,151
Prepaid and other assets (197,408) (362,505)
Accounts payable (295,747) (34,176)
Accrued liabilities (77,704) 66,138
--------- ----------
Net cash provided by (used in) continuing
operations 306,972 (52,739)
--------- ----------
Discontinued operations:
Adjustments:
Changes in net assets and liabilities and net cash
provided by (used in) discontinued operations (289,046) 779,724
--------- ----------
Net cash provided by operating activities 17,926 726,985
--------- ----------
Investing activities:
Capital expenditures (154,196) (486,110)
Proceeds from sale of assets 798,922 26,500
Transfers to restricted cash (4,590) (20,000)
Advances on notes (252,405) (698,819)
Collections of notes and leases receivable 357,824 228,111
Other (35,542) (79,150)
--------- ----------
Net cash provided by (used in) investing
activities 710,013 (1,029,468)
--------- -----------
See notes to consolidated financial statements.
9
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Concluded)
For the Six Months Ended June 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
Financing activities:
Principal payments to related party $ (100,000) $ (179,708)
Advances from related party 134,875 --
Bank overdraft (35,570) --
Proceeds from preferred issuance 1,555,933 --
Borrowings on debt 4,301,528 (7,397)
Proceeds from warrants exercised -- 44,875
Principal payments on debt (5,352,981) (201,075)
----------- -----------
Net cash provided by (used in) financing
activities 503,785 (343,305)
----------- -----------
Net increase (decrease) to cash and cash equivalents 1,231,724 (645,788)
Cash and cash equivalents, beginning of year -- 743,034
----------- -----------
Cash and cash equivalents, end of period $ 1,231,724 $ 97,246
=========== ===========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 210,000 $ 264,000
=========== ===========
</TABLE>
Supplemental Schedule of Non-Cash Investing and
Financing Activities
During the six months ended June 30, 1995, the Company sold buses in
exchange for $898,118 of sales-type financing leases receivable.
During the six months ended June 30, 1995, the Company purchased
$149,137 of school buses through the issuance of debt.
In March 1995, the Company sold a substantial portion of the assets of
Suncoast Transportation for $25,000 cash and a promissory note of $175,000.
On June 30, 1995, the Company acquired 100% of the outstanding stock
of Priority Express Service, Inc. and Avante Delivery Service, Inc. in exchange
for 780,000 shares of common stock.
See notes to consolidated financial statements.
10
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Management's Representation
In the opinion of management, the accompanying unaudited financial
statements present fairly, in all material respects, the financial position of
U.S. Transportation Systems, Inc. and Subsidiaries and the results of their
operations and their cash flows for the six months ended June 30, 1995 and 1994,
and, accordingly, all adjustments (which include only normal recurring
adjustments) necessary to permit that fair presentation has been made. Certain
information and footnote disclosures normally required by financial accounting
principles has been condensed or omitted. It is suggested that these statements
be read in conjunction with the financial statements and notes thereto included
in the Company's December 31, 1994 Form 10-KSB report. The results of operations
for the period ended June 30, 1995 are not necessarily indicative of the
operating results for the full year.
Note 2 - Discontinued Operations
On December 31, 1993, the Company adopted a formal plan to discontinue
its charter bus operations, which plan will be completed by October 31, 1995.
The Company's charter operations were primarily located in New York, Atlantic
City and Toledo. The Company's charter operations have had minimal gross profit
margins which have continued to decrease over the last few years and, in fact,
were profitable only when used in conjunction with contract operations. The
Company is confident that some aspects of these charter operations can be sold
as continuing businesses. In any case, where the charter operations cannot be
sold as a continuing business, it is the Company's intent to sell the assets of
the discontinued operations as a group or individually. The Company has
reclassified the segment's net assets (which consist primarily of revenue
equipment) which it plans to sell. The Company generated $1,254,000 from the
disposal of the assets of the discontinued operations during the six months
ended June 30, 1995, $822,800 in the form of sale-type leases.
Net sales of the Company's charter segment were $731,000 and
$2,013,000 for the six months ended June 30, 1995 and 1994, respectively. Such
amounts are not included in net sales in the accompanying statements of
operations.
Interest expense has been allocated to discontinued operations.
Interest expense allocated to discontinued operations totals $127,000 in 1995
and $175,000 in 1994 and is made up of: 1) interest directly attributable to the
discontinued operations; and (2) interest not directly attributable to any
operating segment, which amount has been allocated based upon the ratio of net
assets of the discontinued operation to the sum of the Company's total net
assets.
11
<PAGE>
Note 3 - Secondary Offerings
In February 1995, the Company completed an underwriting consisting
of 170,000 preferred stock units. Each unit consists of one share of Series A
Cumulative Convertible Redeemable Preferred Stock, and one Redeemable Class A
Warrant. The Preferred Stock is convertible at a rate of 15 shares for every
share of Preferred Stock, subject to adjustment in certain events. The Preferred
Stock will be automatically converted into Common Stock at a rate of 12 shares
of Common Stock for each share of Preferred Stock, subject to adjustment, either
(1) on February 21, 1998; or (2) if the closing price of the Common Stock
exceeds $1.75 for five consecutive trading days. Each Class A warrant entitles
the holder to purchase one share of the Company's Common Stock and one
Redeemable Class B Common Stock Purchase Warrant ("Class B Warrant"), at an
exercise price of $1.35. Class A Warrants expire on August 20, 1996, unless the
Company modifies the Class A Warrants to also permit exercise from August 21,
1996 through February 20, 1998 at $1.60 per share. Each Class B Warrant entitles
the holder to purchase one share of the Company's Common Stock at a price of
$1.65. Class B Warrants expire on February 20, 1997 unless the Company modifies
the Class B Warrants to permit exercise from February 21, 1997 through February
21, 1999 at $2.00 per share. At any time that the Class A and Class B Warrants
(collectively, the "Warrants") are exercisable, the Warrants are also subject to
redemption by the Company on not less than 30 days notice at $.01 per Warrant,
provided the average closing price of the Company Stock exceeds $1.75 per share
for five consecutive trading days. Dividends on the Preferred Stock are
cumulative from the date of issue and are payable semi-annually. During the
first year the Company will pay total dividends on each share of Preferred Stock
equal to $.60 cash plus up to 1.2 shares of Common Stock, provided that the
value of the stock dividend will not exceed $1.20 per annum, based on 100% of
the average closing price of the Common Stock as reported for the ten trading
days before the record dates for the dividends. During subsequent years, the
Company may either pay an annual dividend equal to $.60 in cash and up to 1.2
shares of Common Stock or, at the Company's discretion, no cash and up to 1.8
shares of Common Stock, provided that the value of the stock dividend will not
exceed $1.20 or $1.86 2/3 per annum, depending on which option the Company
chooses. Between August 21, 1996 and February 20, 1998, the Preferred Stock is
redeemable by the Company, in whole or in part, at $12.60 in cash per share, at
which time the Company would be required to pay any dividends which had accrued
but not been paid through the date of the redemption. In the event of the
liquidation of the Company, holders of the Preferred Stock will be entitled to a
liquidation preference of $12.00 per share, plus any accrued but unpaid
dividends. Holders of the Preferred Stock will not have any voting rights.
12
<PAGE>
Note 4 - Acquisitions
In June 1995, the Company acquired 100% of the outstanding common
stock of Priority Express Service, Inc. and Avanti Delivery Service, Inc.,
subsequently merged and operated under the assumed name of Armstrong Freight
Services ("Armstrong"), for 780,000 shares of stock. The Company has accounted
for this acquisition using the purchase method of accounting.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 1995 vs.
Six Months Ended June 30, 1994
Results of Operations
The Company's revenue for the first six months of 1995 increased
significantly from the same period in 1994, from $5,637,290 in 1994 to
$7,086,473 in 1995, i.e., by 20%. This increase substantially resulted from the
acquisition of ATAB of Texas, Inc. in October 1994.
The Company acquired Armstrong, a package delivery service operating
in the state of Florida, on June 30, 1995. Armstrong's revenue for the six
months ended June 30, 1995 was $938,399. The Company acquired assets, chiefly
accounts receivable and vehicles, with a book value of $385,640, and acquired
liabilities, chiefly accounts payable and vehicle debt, of $174,728. The Company
recorded goodwill of $330,416 as a result of the acquisition.
At the end of 1993, the Company's Board of Directors decided to
terminate the Company's charter bus operations. Charter operations had produced
very small profit margins in recent years and only when undertaken in
conjunction with contract operations. Management determined, in the face of
dwindling margins, that the Company's assets could be better utilized.
Accordingly, net assets and liabilities of the discontinued segment with a net
book value of $2,088,962 at June 30, 1995, have been reclassified as "Assets
Held for Resale," and the revenues and expenses of the Company's charter
operations have been eliminated from the Company's 1995 and 1994 Statements of
Operations. During the six months ended June 30, 1995 and 1994, net losses from
charter bus operations totalled $317,536 and $547,426, respectively.
Liquidity and Capital Resources
The Company's working capital of $3,069,206 at June 30, 1995
represented an increase of $1,195,796 from the Company's working capital of
$1,873,410 at June 30, 1994. This improvement is chiefly the result of the
Company's secondary offering in February 1995.
Cash flow from both continuing operations and discontinued operations
was positive during the first six months. The Company anticipates positive cash
flow from continuing operations in the foreseeable future. Further, the Company
anticipates that cash flow from the discontinued charter segment will continue
to be positive as the Company disposes of this segment's assets.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Six Months Ended June 30, 1995 vs.
Six Months Ended June 30, 1994
Liquidity and Capital Resources (Continued)
The Company has no significant commitments at this time which would
require it to expend capital and believes its current facilities and capital
equipment are adequate for the Company as currently structured.
15
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC.
AND SUBSIDIARIES
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf on August 14, 1996 by the undersigned, thereunto duly authorized.
U.S. TRANSPORTATION SYSTEMS, INC.
/s/ Michael Margolies
-----------------------------------
MICHAEL MARGOLIES
CHIEF EXECUTIVE OFFICER
/s/ Terry A. Watkins
-----------------------------------
TERRY A. WATKINS
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the audited financial
statements of U.S. Transportation Systems, Inc. for the quarter ended June 30,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,231,724
<SECURITIES> 0
<RECEIVABLES> 1,927,637
<ALLOWANCES> 442,000
<INVENTORY> 470,660
<CURRENT-ASSETS> 5,614,921
<PP&E> 5,045,719
<DEPRECIATION> 2,574,351
<TOTAL-ASSETS> 13,708,610
<CURRENT-LIABILITIES> 2,545,718
<BONDS> 2,182,138
0
3,840,000
<COMMON> 81,132
<OTHER-SE> 12,993,159
<TOTAL-LIABILITY-AND-EQUITY> 13,708,610
<SALES> 7,086,473
<TOTAL-REVENUES> 7,086,473
<CGS> 797,829
<TOTAL-COSTS> 6,478,661
<OTHER-EXPENSES> (202,840)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (151,955)
<INCOME-PRETAX> 404,972
<INCOME-TAX> 0
<INCOME-CONTINUING> 404,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 404,972
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
