<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1996.
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
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of September 30, 1996 3-4
Consolidated Statements of Income for the Nine
Months Ended September 30, 1996 and 1995 5
Consolidated Statements of Operations for the Three
Months Ended September 30, 1996 and 1995 6
Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1995 and the
Nine Months Ended September 30, 1996 7-8
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 9-12
Notes to Consolidated Financial Statements 13-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
Signatures 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 3,821,964
Cash - restricted 168,816
Accounts receivable, net of allowance for bad debts
of $321,000 6,305,490
Other receivables 393,415
Costs and estimated earnings in excess of billings 941,955
Net investment in sales-type leases 545,999
Inventories 1,235,491
Prepaid and other assets 793,755
-----------
Total current assets 14,206,885
Property, plant and equipment:
Revenue equipment - highway coaches 7,580,064
Other 3,269,488
-----------
Total - at cost 10,849,552
Less: Accumulated depreciation 3,198,577
-----------
Property, plant and equipment - net 7,650,975
Assets held for sale 55,953
Other assets:
Net investment in sales-type leases 1,928,720
Deferred taxes 750,000
Other receivables 522,380
Other assets 1,442,845
Goodwill, net of accumulated amortization of $760,509 5,644,135
Other intangible assets, principally operating rights - net
of accumulated amortization of $111,162 956,405
-----------
Total other assets 11,244,485
-----------
Total assets $33,158,298
===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
September 30, 1996
(Unaudited)
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 484,565
Notes payable 4,598,228
Accounts payable 1,227,520
Accrued liabilities 652,516
Billings in excess of costs and estimated earnings 49,203
Due to related party 697,987
-----------
Total current liabilities 7,710,019
Long-term obligations, net of current maturities:
Notes payable 3,487,337
Due to related party 420,384
-----------
Total long-term obligations, net of current maturities 3,907,721
Stockholders' equity:
Preferred stock - par value $.01 per share, redemption
value $10.00 per share:
Authorized - 10,000,000 shares
Issued and outstanding - 180,000 shares 1,800,000
Common stock - par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 5,496,702 shares 54,967
Additional paid-in capital 26,266,143
Stock subscription receivable (37,785)
Deferred compensation (574,553)
Accumulated deficit (5,968,214)
-----------
Total stockholders' equity 21,540,558
-----------
Total liabilities and stockholders' equity $33,158,298
===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues $22,968,848 $11,481,654
Expenses:
Cost of goods sold 5,617,047 1,229,975
Operating expenses 9,510,572 6,123,459
Selling, general and administrative 4,310,794 2,513,081
Depreciation and amortization 742,986 405,371
Amortization of intangible assets 541,418 90,060
Rent expense 780,493 179,968
----------- -----------
Total expenses 21,503,310 10,541,914
----------- -----------
Income from operations 1,465,538 939,740
----------- -----------
Other income (expenses):
Interest expense (479,592) (251,845)
Interest income 212,465 143,465
Gain (loss) on sales of assets 80,285 (206,721)
Bridge loan expense (441,038) --
Other (10,312) 5,142
----------- -----------
Other expenses - net (638,192) (309,959)
----------- -----------
Net income 827,346 629,781
Less: Preferred dividends 143,775 143,775
----------- -----------
Net income applicable to common shareholders $ 683,571 $ 486,006
=========== ===========
Earnings per common share $ .21 $ .30
=========== ===========
Weighted average common shares outstanding 3,307,110 1,604,676
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues $9,250,080 $4,395,181
Expenses:
Cost of goods sold 1,943,535 432,146
Operating expenses 4,502,670 2,467,439
Selling, general and administrative 1,589,877 830,555
Depreciation and amortization 243,329 223,745
Amortization of intangible assets 203,752 38,947
Rent expense 244,628 70,421
---------- ----------
Total expenses 8,727,791 4,063,253
---------- ----------
Income from operations 522,289 331,928
---------- ----------
Other income (expenses):
Interest expense (198,699) (99,890)
Interest income 77,583 45,328
Gain (loss) on sales of assets 24,457 (49,661)
Bridge loan expense (441,038) -
Other 8,271 (2,896)
---------- ----------
Other expenses - net (529,426) (107,119)
---------- ----------
Net income (loss) (7,137) 224,809
Less: Preferred dividends 47,925 47,925
---------- ----------
Net income (loss) applicable to common shareholders $ (55,062) $ 176,884
========== ==========
Earnings per common share $ (.01) $ .10
=========== ==========
Weighted average common shares outstanding 4,018,501 1,802,964
========== ==========
</TABLE>
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, 1995 and
the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
------------------------- -------------------------- Paid-In
Shares Amount Shares Amount Capital
--------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,222,198 $ 12,222 180,000 $ 1,800,000 $ 13,570,093
Preferred stock issuance -- -- 170,000 2,040,000 (1,073,524)
Preferred stock conversion 425,000 4,250 (170,000) (2,040,000) 2,035,750
Restricted stock grant issuance -- -- -- -- --
Stock options issued -- -- -- -- --
Preferred dividends 9,580 96 -- -- (96)
Common stock issued in connection with
purchase of Armstrong Freight Express 130,000 1,300 -- -- 564,200
Common stock issued in connection with
purchase of Trans-Lynx Express 19,423 194 -- -- 84,297
Common stock issued in connection with
purchase of Automated Solutions 300,000 3,000 -- -- 1,347,000
Common stock issued in exchange for consulting
services 55,833 558 -- -- 242,066
Common stock issued in connection with
contract settlement 8,333 83 -- -- 36,167
Stock options exercised 61,668 617 -- -- 250,558
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 (carried forward) 2,232,035 $ 22,320 180,000 $ 1,800,000 $ 17,056,511
------------ ------------ ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stock Sub- Deferred Retained
scription Compen- Earnings
Receivable sation (Deficit) Total
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1994 $ -- $ (811,359) $ (7,555,263) $ 7,015,693
Preferred stock issuance -- -- -- 966,476
Preferred stock conversion -- -- -- --
Restricted stock grant issuance -- 135,667 -- 135,667
Stock options issued -- 17,188 -- 17,188
Preferred dividends -- -- (220,440) (220,440)
Common stock issued in connection with
purchase of Armstrong Freight Express -- -- -- 565,500
Common stock issued in connection with
purchase of Trans-Lynx Express -- -- -- 84,491
Common stock issued in connection with
purchase of Automated Solutions -- -- -- 1,350,000
Common stock issued in exchange for consulting
services -- -- -- 242,624
Common stock issued in connection with
contract settlement (36,250) -- -- --
Stock options exercised (254,035) -- -- (2,860)
Net income -- -- 1,123,918 1,123,918
------------ ------------ ------------ ------------
Balance, December 31, 1995 (carried forward) $ (290,285) $ (658,504) $ (6,651,785) $ 11,278,257
------------ ------------ ------------ ------------
</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, 1995 and
the Nine Months Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
-------------------------- -------------------------- Paid-In
Shares Amount Shares Amount Capital
--------- ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 (brought forward) 2,232,035 $ 22,320 180,000 $ 1,800,000 $ 17,056,511
Debentures converted into common stock 753,667 7,537 -- -- 1,768,751
Preferred stock issuance -- -- 300 300,000 (43,272)
Preferred stock conversion 88,889 889 (300) (300,000) 299,111
Restricted stock grant issuance -- -- -- -- --
Preferred dividends -- -- -- -- --
Repurchase of common stock (47,500) (475) -- -- (213,275)
Treasury stock issued in connection with
purchase of Krogel 18,333 183 -- -- 82,317
Net proceeds from warrants exercised 33,333 333 -- -- 74,667
Proceeds from equity portion of bridge loan 109,957 1,100 -- -- 248,454
Stock options exercised 26,667 267 -- -- 132,233
Common stock issued in regards to
employment contract 16,667 167 -- -- 74,833
Common stock issued in exchange for
consulting services 104,167 1,042 -- -- 467,708
Common stock issued in connection with
a covenant not to compete 119,444 1,194 -- -- 548,806
Common stock issuance 1,705,043 17,050 -- -- 5,100,659
Common stock issued in connection with
Banc-Pro acquisition 336,000 3,360 -- -- 668,640
Net income -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance, September 30, 1996 5,496,702 $ 54,967 180,000 $ 1,800,000 $ 26,266,143
============ ============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stock Sub- Deferred Retained
scription Compen- Earnings
Receivable sation (Deficit) Total
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 (brought forward) $ (290,285) $ (658,504) $ (6,651,785) $ 11,278,257
Debentures converted into common stock -- -- -- 1,776,288
Preferred stock issuance -- -- -- 256,728
Preferred stock conversion -- -- -- --
Restricted stock grant issuance -- 97,319 -- 97,319
Preferred dividends -- -- (143,775) (143,775)
Repurchase of common stock -- -- -- (213,750)
Treasury stock issued in connection with
purchase of Krogel -- -- -- 82,500
Net proceeds from warrants exercised -- -- -- 75,000
Proceeds from equity portion of bridge loan -- -- -- 249,554
Stock options exercised -- -- -- 132,500
Common stock issued in regards to
employment contract -- -- -- 75,000
Common stock issued in exchange for
consulting services 252,500 (13,368) -- 707,882
Common stock issued in connection with
a covenant not to compete -- -- -- 550,000
Common stock issuance -- -- -- 5,117,709
Common stock issued in connection with
Banc-Pro acquisition -- -- -- 672,000
Net income -- -- 827,346 827,346
------------ ------------ ------------ ------------
Balance, September 30, 1996 $ (37,785) $ (574,553) $ (5,968,214) $ 21,540,558
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Operating activities:
Net income from continuing operations $ 827,346 $ 629,781
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,284,405 495,431
(Gain) loss on sale of assets (80,285) 206,721
Provision for bad debts - 12,003
Change in assets and liabilities:
Accounts receivable (2,204,632) 125,844
Inventories (258,588) (60,562)
Other receivables 42,092 (12,446)
Costs and estimated earnings in excess
of billings (698,660) -
Prepaid and other assets (6) (240,383)
Accounts payable (645,842) (143,585)
Billings in excess of costs and estimated
earnings (305,309) -
Accrued liabilities (86,606) (180,995)
------------ ----------
Net cash provided by (used in) continuing
operations (2,126,085) 831,809
Discontinued operations:
Adjustments - change in net assets and liabilities
of discontinued operations and cash used in
discontinued operations - (238,542)
------------ ----------
Net cash provided by (used in) operating
activities (carried forward) $ (2,126,085) $ 593,267
------------ ----------
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Net cash provided by (used in) operating activities
(brought forward) $ (2,126,085) $ 593,267
Investing activities:
Capital expenditures (266,117) (129,158)
Acquisition of intangible assets (506,000) -
Proceeds from sale of assets 10,500 841,121
Transfers from (to) cash - restricted (3,063) 49,402
Advances on notes and leases receivable (204,000) (341,910)
Collections of notes and leases receivable 300,757 460,935
Other 2,121 (75,389)
------------ ----------
Net cash provided by (used in) investing
activities (665,802) 805,001
Financing activities:
Principal payments to related party (367,354) (107,675)
Advances from related party 883,430 -
Cash overdraft 484,565 (35,570)
Proceeds from issuance of preferred stock - 1,555,933
Proceeds from common stock offering 5,117,709 -
Proceeds from bridge loan 887,554 -
Proceeds from issuance of convertible debentures 256,728 -
Preferred dividend (143,775) (172,515)
Proceeds from options and warrants 207,500 -
Borrowings on debt 5,886,614 7,051,655
Principal payments on long-term debt (8,326,909) (8,238,988)
------------ ----------
Net cash provided by financing activities 4,886,062 52,840
------------ ----------
Net increase in cash and cash equivalents 2,094,175 1,451,108
Cash and cash equivalents, beginning of year 1,727,789 -
------------ ----------
Cash and cash equivalents, end of period $ 3,821,964 $1,451,108
============ ==========
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
Supplemental Disclosure of Cash Flow Information
------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
--------------- -------------
<S> <C> <C>
Cash paid during the period for:
Interest $ 454,000 $ 315,000
============= =============
</TABLE>
Supplemental Schedule of Non-Cash Investing
-------------------------------------------
and Financing Activities
------------------------
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.
During the nine months ended September 30, 1996 and 1995, the
Company sold buses in exchange for $154,000 and $1,244,000, respectively, of
sales-type financing leases receivable.
During the nine months ended September 30, 1996 and 1995, the
Company acquired revenue equipment utilizing long-term debt of $4,555,205 and
$149,137, respectively.
During the nine months ended September 30, 1996, holders of
$1,776,288 of convertible debentures converted such debentures into 753,667
shares of the Company's common stock.
During the nine months ended September 30, 1996, the Company
converted 300 shares of convertible preferred stock into 88,889 shares of common
stock.
During the nine months ended September 30, 1996, the Company
acquired 47,500 shares of its common stock for $213,750.
During the nine months ended September 30, 1996 and 1995, the
Company accrued $150,660 of preferred dividends in both periods.
In February 1996, the Company issued 18,333 shares of its common
stock valued at $82,500, as part of its acquisition of certain personal property
and contract rights from Krogel Freight Systems of Tampa, Inc. and Krogel Air
Freight, Inc.
See notes to consolidated financial statements.
11
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Concluded)
For the Nine Months Ended September 30, 1996 and 1995
(Unaudited)
Supplemental Schedule of Non-Cash Investing
-------------------------------------------
and Financing Activities
------------------------
In June 1995, the Company acquired Armstrong Freight Services in
exchange for 130,000 shares of its common stock.
In July 1995, the Company acquired Trans-Lynx Express in exchange
for 19,423 shares of its common stock.
In June 1996 and July 1996, respectively, the Company issued 16,666
and 119,444 shares of common stock in connection with covenants not to compete.
In June 1996, the Company issued 104,167 shares of common stock and
forgave notes aggregating $252,500 in exchange for a consulting agreement.
In September 1996, the Company acquired Banc-Pro Transportation,
Inc. in exchange for 336,000 shares of its common stock.
See notes to consolidated financial statements.
12
<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 nine months ended September 30, 1996 and
1995, 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 have 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, 1995 Form 10-KSB report. The results of operations
for the period ended September 30, 1996 are not necessarily indicative of the
operating results for the full year.
Note 2 - Capitalization
--------------
In January 1996, the Company issued $300,000 of convertible preferred
stock, which were converted into 533,334 shares of common stock in March 1996.
On February 21, 1996, the Board of Directors approved an increase in
the authorized common stock shares from 20,000,000 to 50,000,000 shares.
On April 18, 1996, the Company issued $1,200,000 of 5% subordinated
promissory notes and bridge units. Simultaneously with the issuance of this
note, the holder hereof is entitled to receive such number of shares of the
Company's common stock and common stock purchase warrants, as equals (a) 35% of
the principal amount of this note, divided by the lesser of the closing high bid
price of the common stock (the "Bid Price") on the day on which a registration
statement pursuant to the Securities Act of 1993, registering such Unit
Securities is declared effective, or the price of the units to be sold by the
Company in its proposed secondary public offering pursuant to such registration
statement, if such effective date shall occur on or prior to four months from
the final closing; or (b) 40% of the principal amount of this note divided by
the lesser of the Bid Price or the offering price on the effective date, if such
effective date shall occur between five months and seven months from the final
closing; or (c) 50% of the principal amount of this note divided by the lesser
of the Bid Price or the offering price on the effective date, if such effective
date shall occur on or after the end of seven months from the final closing.
These notes were paid in August 1996, and the Company recorded expenses related
to this issuance of $441,038 during the nine months ended September 30, 1996.
13
<PAGE>
Note 2 - Capitalization (Continued)
--------------------------
In August 1996, the Company's Board of Directors approved and
declared a one-for-six reverse stock split of its common stock, effective August
27, 1996. The par value remains at $.01 per share, and all share data has been
adjusted for this split.
In August 1996, the Company had a common stock unit offering
whereby 1,705,043 units, each comprising of one share of common stock and one
warrant (exercisable under certain conditions) at $3.82 for one share of common
stock, were issued.
Note 3 - Acquisitions
------------
On February 23, 1996, the Company purchased certain personal
property, intangible assets and contract rights from Krogel Air Freight, Inc.
and Krogel Freight Systems of Tampa, Inc. for $150,000 in cash and 110,000
shares of common stock. This acquisition was accounted for as a purchase.
On June 24, 1996, the Company purchased certain assets from Jackson
& Johnson, Inc. for $160,000 in cash and the assumption of approximately
$2,930,000 in accrued debt. This acquisition will be accounted for as a
purchase.
On September 12, 1996, the Company purchased 100% of the
outstanding stock of Banc-Pro Transportation, Inc. for 336,000 shares of its
common stock. This acquisition will be accounted for as a purchase.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996 vs.
Nine Months Ended September 30, 1995
Results of Operations
- ---------------------
The Company's revenue for the first nine months of 1996 increased
significantly from the same period in 1995, from $11,481,654 in 1995 to
$22,968,848 in 1996, i.e., by 100 percent. This increase substantially resulted
from the acquisition of Armstrong Freight in June 1995, Trans Lynx in July 1995,
Automated Solutions (ASI) in November 1995, Krogel in February 1996, Jackson &
Johnson in June 1996 and Banc-Pro Transportation, Inc. in September 1996.
Armstrong's revenue (combined with Trans Lynx and Krogel, the
operations of which acquisitions have been merged into Armstrong), for the nine
months ended September 30, 1996 was $4,974,409. ASI's revenue for the nine
months ended September 30, 1996 was $5,541,731. Jackson & Johnson's revenue for
the nine months ended September 30, 1996 was $1,051,592. Banc-Pro
Transportation's revenue for the period was $157,612.
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. All charter operations have been
discontinued, sold or otherwise dissolved by the end of 1995. As of September
30, 1996, the only asset remaining from the discontinued segment was one (1)
motor coach bus with a book value of $55,953.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital of $6,496,866 at September 30, 1996
represented an increase of $5,080,605 from the Company's working capital of
$1,416,261 at December 31, 1995. This increase is chiefly the result of the
Company's August 1996 stock offering.
Cash flow from operations was $2,031,466 for the nine months ended
September 30, 1996 before the application of funds to working capital
components. 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.
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 November 20, 1996 by the undersigned, thereunto duly authorized.
U.S. TRANSPORTATION SYSTEMS, INC.
---------------------------------
(Registrant)
/s/ Michael Margolies
----------------------------------
MICHAEL MARGOLIES
CHIEF EXECUTIVE OFFICER
/s/ Terry A. Watkins
-----------------------------------
TERRY A. WATKINS
CHIEF FINANCIAL OFFICER
16
