<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 March 31, 1997
/ / 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.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 34-1397328
-------------------------------- -----------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
33 West Main Street
Elmsford, New York 10523
- --------------------------------------- ------------
(Address of Principal Executive Office) (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 Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirement for the past 90 days.
Yes _X_ No ___
As of June 13, 1997, there were 6,855,678 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
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
ASSETS
--------
CURRENT ASSETS:
Cash and cash equivalents $ 1,520,317
Cash - restricted 345,570
Accounts receivable, net allowance for doubtful
accounts of $546,000 7,062,092
Notes receivables 1,305,308
Net investment in sales-type leases 807,965
Inventories 672,966
Prepaid and other assets 1,023,291
------------
TOTAL CURRENT ASSETS 12,737,508
------------
PROPERTY, PLANT AND EQUIPMENT:
Revenue equipment 16,313,776
Land & Building 1,046,402
Other 1,574,705
------------
Total - at cost 18,934,883
Less: Accumulated depreciation (7,836,746)
------------
PROPERTY, PLANT AND EQUIPMENT- NET 11,098,137
------------
ASSETS HELD FOR RESALE 209,033
------------
OTHER ASSETS:
Net investment in sales-type leases 1,500,505
Goodwill, net of accumulated amortization
of $548,810 1,783,345
Other intangible assets, net of accumulated
amortization of $195,081 1,227,495
Notes receivable 5,539,600
Marketable Securities 903,125
Other assets 402,230
------------
TOTAL OTHER ASSETS 11,356,300
------------
TOTAL ASSETS $35,400,978
============
See notes to consolidated financial statements.
1
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,876,644
Line of credit 5,156,620
Accounts payable 1,294,570
Accrued liabilities 826,535
Due to related party 400,507
------------
TOTAL CURRENT LIABILITIES 10,554,876
------------
LONG-TERM OBLIGATIONS, NET OF CURRENT
MATURITIES:
Notes payable 5,594,050
Minority Interest in Subsidiary 546,110
Due to related party 600,761
------------
TOTAL LONG-TERM OBLIGATIONS, NET OF
CURRENT MATURITIES 6,740,921
------------
COMMITMENTS AND CONTINGENCIES
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 - 6,855,679 shares 68,557
Additional paid-in capital 29,308,848
Stock subscription receivable (35,785)
Deferred compensation (515,625)
Retained earnings (deficit) (12,520,814)
------------
TOTAL STOCKHOLDERS' EQUITY 18,105,181
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $35,400,978
============
See notes to consolidated financial statements.
2
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
-------------- ----------
REVENUES $7,747,443 $4,153,986
----------- ------------
EXPENSES:
Cost of goods sold 174,084 386,604
Operating expenses 5,172,033 1,930,693
Selling, general and administrative 1,733,190 857,732
Depreciation expense 448,610 189,503
Rent expense 360,845 259,668
Amortization of intangible assets 172,755 32,910
----------- ------------
TOTAL EXPENSES 8,061,517 3,657,110
----------- ------------
INCOME (LOSS) FROM OPERATIONS (314,074) 496,876
----------- ------------
OTHER INCOME (EXPENSES):
Interest expense (150,744) (98,550)
Interest income 97,879 68,711
Gain / (loss) on sales of assets 0 50,427
Minority interest in subsidiary losses 49,474 0
Other 23,686 (8,383)
----------- ------------
Total other income (expense), net 20,295 12,205
----------- ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
(CARRIED FORWARD) $ (293,779) $ 509,081
----------- ------------
See notes to consolidated financial statements.
3
<PAGE>
U. S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
-------------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
(BROUGHT FORWARD) $ (293,779) $ 509,081
----------- ------------
DISCONTINUED OPERATIONS:
Gain on disposal of assets of discontinued
custom equipment manufacturing segment: 721,755 --
Gain on disposal of assets of discontinued
entertainment ticketing segment: 566,781 --
Adjustment of reserve for discontinued
operations -- (87,416)
----------- ------------
GAIN FROM DISCONTINUED OPERATIONS 1,288,536 (87,416)
----------- ------------
NET INCOME $ 994,757 $ 421,665
=========== ============
EARNINGS PER SHARE:
Income (loss) from continuing operations $ (.04) $ .16
Gain from discontinued operations .19 (.01)
----------- ------------
EARNINGS PER SHARE $ .15 $ .15
=========== ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,828,595 2,791,083
=========== ============
See notes to consolidated financial statements.
4
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
---------------------- --------------------- Paid-In
Shares Amount Shares Amount Capital
-------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 2,232,035 $ 22,320 180,000 $ 1,800,000 $17,056,511
- --------------------------- ---------- ---------- -------- ------------ -----------
Net proceeds from exercise of warrants and options 60,000 600 -- -- 206,900
Common stock issued in connection with
purchase of Krogel Freight 18,333 183 -- -- 54,817
Preferred stock issuance -- -- 300 300,000 (43,272)
Conversion of debentures into common stock 753,667 7,537 -- -- 1,768,751
Preferred stock conversion 88,889 889 (300) (300,000) 299,111
Restricted stock grant issuance -- -- -- -- --
Preferred stock dividends -- -- -- -- --
Repurchase of common stock (47,500) (475) -- -- (89,495)
Common stock issued in connection with bridge loan 109,957 1,100 -- -- 248,454
Common stock offering 1,705,043 17,050 -- -- 4,996,006
Common stock issued in connection with
consulting services 314,167 3,142 -- -- 874,733
Common stock issued in connection with
employment contracts 16,667 167 -- -- 124,833
Common stock issued in connection with
purchase of BancPro Transportation 336,000 3,360 -- -- 864,540
Common stock issued in exchange for
covenant not-to-compete 199,444 1,994 -- -- 548,006
Change in features of preferred stock -- -- -- -- 680,000
Obligation to issue 1,000,000 shares of common
stock in regards to long-term employment
agreement with Company officer 1,000,000 10,000 -- -- 1,552,500
Other 14,810 148 -- -- 61,786
Net loss -- -- -- -- --
---------- --------- -------- ---------- -----------
Balance, December 31, 1996 6,801,512 $ 68,015 180,000 $1,800,000 $29,204,181
========== ========= ======== ========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Stock Sub- Deferred Retained
scription Compen- Earnings
Receivable sation (Deficit) Total
------------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $(290,285) $ (658,504) $ (6,651,785) $11,278,257
- --------------------------- ----------- ----------- ------------- -----------
Net proceeds from exercise of warrants and options -- -- -- 207,500
Common stock issued in connection with
purchase of Krogel Freight -- -- -- 55,000
Preferred stock issuance -- -- -- 256,728
Conversion of debentures into common stock -- -- -- 1,776,288
Preferred stock conversion -- -- -- --
Restricted stock grant issuance -- 113,415 -- 113,415
Preferred stock dividends -- -- (169,335) (169,335)
Repurchase of common stock -- -- -- (89,970)
Common stock issued in connection with bridge loan -- -- -- 249,554
Common stock offering -- -- -- 5,013,056
Common stock issued in connection with
consulting services 252,500 -- -- 1,130,375
Common stock issued in connection with
employment contracts -- -- -- 125,000
Common stock issued in connection with
purchase of BancPro Transportation -- -- -- 867,900
Common stock issued in exchange for
covenant not-to-compete -- -- -- 550,000
Change in features of preferred stock -- -- -- 680,000
Obligation to issue 1,000,000 shares of common
stock in regards to long-term employment
agreement with Company officer -- -- -- 1,562,500
Other -- -- -- 61,934
Net loss -- -- (6,694,451) (6,694,451)
----------- ----------- ------------- -----------
Balance, December 31, 1996 $(37,785) $ (545,089) $(13,515,571) $16,973,751
=========== =========== ============= ===========
</TABLE>
5
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional
---------------------- --------------------- Paid-In
Shares Amount Shares Amount Capital
-------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 (carried forward) 6,801,512 $ 68,015 180,000 $1,800,000 $29,204,181
---------- --------- -------- ---------- -----------
Other 4,167 42 -- -- 8,292
Common stock issued in connection with
Mencor acquisition 37,500 375 -- -- 74,625
Stock options exercised 12,500 125 -- -- 21,750
Net income -- -- -- -- --
---------- --------- -------- ---------- -----------
Balance, March 31, 1997 6,855,679 $ 68,557 180,000 $1,800,000 $29,308,848
========== ========= ======== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Stock Sub- Deferred Retained
scription Compen- Earnings
Receivable sation (Deficit) Total
------------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 (carried forward) ($37,785) $(545,089) $(13,515,571) $16,973,751
---------- ---------- ------------- -----------
Other 2,000 -- -- 10,334
Common stock issued in connection with
Mencor acquisition -- -- -- 75,000
Stock options exercised -- -- -- 21,875
Net income -- -- 994,757 994,757
---------- ---------- ------------- -----------
Balance, March 31, 1997 $(35,785) $(515,625) $(12,520,814) $18,105,181
========== ========== ============= ===========
</TABLE>
6
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
--------- ---------
OPERATING ACTIVITIES:
Income from continuing operations $ (293,779) $ 509,081
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 621,365 222,413
Amortization of deferred compensation 29,464 --
Minority Interest in Subsidiary Losses (49,474) --
Gain on sales of assets -- (47,861)
Change in assets and liabilities:
Accounts receivable (373,929) (896,430)
Inventories 57,769 138,130
Notes Receivable (12,264) (6,367)
Prepaid and other assets (58,869) 34,799
Accounts payable (204,838) (384,042)
Accrued liabilities 108,999 (93,891)
------------ ------------
Net cash used in continuing operations (175,556) (524,168)
------------ ------------
Income (loss) from Discontinued Operations: 1,288,536 (87,416)
Adjustments:
Change in net assets and liabilities
of discontinued operations (2,431,220) (575,315)
Proceeds from Sale of Assets Held for Sale 100,000 --
Depreciation and Amortization -- 144,698
------------ ------------
Net cash used in discontinued operations (1,042,684) (518,033)
------------ ------------
NET CASH USED IN OPERATING
ACTIVITIES (CARRIED FORWARD) $(1,218,240) $(1,042,201)
------------ ------------
7
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
--------- ---------
NET CASH USED IN OPERATING
ACTIVITIES (BROUGHT FORWARD) $(1,218,240) $(1,042,201)
------------ ------------
INVESTING ACTIVITIES:
Capital expenditures (108,248) (1,775)
Acquisition of intangible assets (126,016) (150,000)
Transfers to restricted cash (185,823) (1,282)
Advances on notes receivable (265,000) (25,000)
Collection of notes receivable 629,475 21,458
Collection of leases receivable 52,267 90,726
Other 27,314 74,128
------------ ------------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 23,969 8,255
------------ ------------
FINANCING ACTIVITIES:
Cash overdraft (395,156) --
Advances to related party -- 50,630
Proceeds from issuance of convertible debentures -- 256,728
Payment of preferred dividends -- (47,925)
Principal payments to related party (103,846) (107,932)
Principal payments on debt (2,862,433) (2,291,980)
Borrowings on debt 2,661,519 2,221,950
Proceeds from options and warrants
exercised 21,875 --
------------ ------------
NET CASH PROVIDED BY (USED IN)-
FINANCING ACTIVITIES (678,041) 81,471
------------ ------------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,872,312) (952,475)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,392,629 1,727,789
------------ ------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 1,520,317 $ 775,314
============ ============
8
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
1997 1996
---- ----
Cash paid during the year for:
Interest $264,000 $135,000
======== ========
Taxes $ -0- $ -0-
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
In January 1997, the Company sold the assets of its discontinued
entertainment segment in exchange for 850,000 shares of common stock of
Packaging Plus Services, Inc. (See Note 3.)
In March 1997, the Company sold the assets of its discontinued custom
equipment manufacturing segment in exchange for $100,000 cash and notes with a
present value of $5,810,868. (See Note 3.)
In January 1997, the Company acquired 100% of the common stock of
Mencor Inc. in exchange for $70,000 cash and 37,500 shares of the Company's
common stock. (See Note 2.)
In January 1997, the Company acquired 100% of the common stock of
Gulf Northern Transport, Inc. in exchange for $225,000 cash and common shares of
its subsidiary U.S. Trucking, Inc. ("USTI") representing 25% of the issued and
outstanding common stock of USTI. (See Note 2.)
During the three months ended March 31, 1996, the Company sold buses
in exchange for $154,351 of sales type financing lease receivables.
During the three months ended March 31, 1996, the Company acquired
revenue equipment utilizing long term debt of $529,359.
During the three months ended March 31, 1996, holders of $1,776,288
of convertible debentures converted such debentures into 4,522,002 shares of the
Company's common stock.
In January, 1996, the Company issued 300 shares of convertible
preferred stock for $256,728; these shares were converted into 533,334 shares of
common stock prior to March 31, 1996.
During the three months ended March 31, 1996, the Company acquired
110,000
F-10
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
shares of its common stock for $82,500.
In February 1996, the Company issued 110,000 shares of common stock
as part of its acquisition of certain personal property and contract rights from
Krogel Freight Systems of Tampa, Inc. and Krogel Air Freight, Inc.
F-11
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
[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 three months ended March 31, 1997 and
1996, and, accordingly, all adjustments (which include only normal recurring
adjustments) necessary to permit that fair presentation have been made. Certain
information and footnote disclosures normally required by financial accounting
principles have been condensed or omitted. It is recommended that these
statements be read in conjunction with the financial statements and notes
thereto included in the Company's December 31, 1996 Form 10-KSB report. The
results of operations for the period ended March 31, 1997 are not necessarily
indicative of the operating results for the full year.
[2] ACQUISITIONS
On January 30, 1997 the Company formed a wholly-owned subsidiary
named U. S. Trucking, Inc. ("USTI"). Thereafter, the following transactions
contemporaneously took place:
--100% of the issued and outstanding stock of the Company's
wholly-owned tractor-trailer subsidiaries, Trans Lynx Express, Inc.
and Jay & Jay Transportation, Inc., were merged into USTI as
wholly-owned subsidiaries thereof;
--USTI acquired 100% of the issued and outstanding stock of Mencor,
Inc. ("Mencor"), a tractor-trailer brokerage company in exchange for
$75,000 and 37,500 shares of the Company's common stock;
--USTI acquired 100% of the issued and outstanding stock of Gulf
Northern Transport, Inc. ("GNT"), a tractor-trailer delivery company,
for common shares of USTI which represented 25% of the issued and
outstanding stock of USTI and for $225,000 cash.
The acquisitions of Mencor and GNT were accounted for as purchases
and resulted in goodwill of $352,396. Additionally, at the time the acquisition
of GNT, the Company recorded a liability for the resulting minority interest in
USTI of $595,584.
[3] DISCONTINUED OPERATIONS
On March 28, 1997 the Company sold ASI as a continuing operation for:
$100,000 cash; a 10.5% interest bearing note of approximately $5,200,000 with
monthly payments of approximately $80,000, the unpaid principal fully due on
April 1, 1999; and a non-interest bearing note of $685,000 due April 1, 1999.
This transaction resulted in a gain on disposal of $721,755.
F-12
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
[3] DISCONTINUED OPERATIONS (continued)
On January 7, 1997 the Company sold the entertainment divisions as a
continuing operation for 850,000 shares of common stock of Packaging Plus
Services, Inc., a publicly-held company (Symbol: "PKGP"). PKGP was trading at
$1.0625 per share at the time of the sale. This transaction resulted in a gain
on disposal of $566,781.
At March 31, 1997, Assets Held for Sale consisted of one motorcoach
bus with a carrying value of $55,953 and land and building in Phoenix, Arizona
with a carrying value, net of related debt, of $153,080. The carrying values of
these assets approximate estimated realizable value.
F-13
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 vs.
Three Months Ended March 31, 1996
Results of Operations
The Company's revenues for the first three months of 1997 increased
by $3,593,457 from the same period in 1996, i.e., by 87 percent. This increase
resulted primarily from the acquisition of BancPro Transportation, Inc. in
September 1996, which had revenues of $577,964 in the first quarter of 1997, and
the acquisitions of the tractor-trailer operations, that is Jay & Jay
Transportation, Inc. in June 1996, Mencor, Inc. and Gulf Northern Transport,
Inc. in January 1997. The tractor-trailer operations, operated within the
Company's 75 percent owned subsidiary, USTI, had revenues of $2,976,654 in the
three months ended March 31, 1997.
Despite the aforementioned increase in revenues, the Company's income
from operations decreased substantially, from $509,081 in 1997 to a loss of
$296,904 in 1997. This resulted from several factors, as explained below:
USTI--Tractor-trailer operations incurred a loss of $307,376 in the
first quarter of 1997. As a result of reoganizing and aggressive
route restructuring, the Company expects its tractor-trailer
operations to be profitable by the end of the second quarter in 1997.
Armstrong--Local pick-up and delivery operations incurred operating
losses of $232,826 in the first quarter of 1997 after recording a
profit of $80,166 in the same quarter in 1996. The Company is
presently computerizing the operation, consolidating redundant duties
at the multiple locations, altering its customer mix to increase
margins and dropping unprofitable routes. As a result of these
actions, the Company expects Armstrong to reach profitability by
August 1997.
ATAB--As a result of ATAB's present contract work with its sole
customer, Stewart & Stevenson ("S&S"), having significantly lower
profit margins than the previous contract which was completed (and
not renewed) in October 1996, ATAB's income from operations decreased
from $147,282 in the three months ended March 31, 1996 to
approximately breakeven (ie., a loss from operations of $19,327) for
the same period in 1997. ATAB's present contract work with S&S will
be completed by the end of June 1997 and, at present, ATAB has no
commitments for future work.
Liquidity and Capital Resources
The Company's working capital of $2,182,632 at March 31, 1997
represents a slight increase from its working capital of $1,933,702 at March 31,
1996. Cash flow from operations was $307,376 for the three months ended March
31, 1997 before
F-14
<PAGE>
U.S. TRANSPORTATION SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
application of funds to working capital components. The Company anticipates
positive cash flow from continuing operations and discontinued operations in the
foreseeable future.
The Company sold the assets of both its discontinued custom equipment
manufacturing segment and its entertainment segment in the first quarter of
1997. The Company sold ASI and received $100,000 cash; a 10.5% interest bearing
note of approximately $5,200,000 with monthly payments of approximately $80,000,
the unpaid principal fully due on April 1, 1999; and a non-interest bearing note
of $685,000 due April 1, 1999. The Company sold the entertainment divisions in
exchange for 850,000 shares of common stock of Packaging Plus Services, Inc., a
publicly-held company (Symbol: "PKGP"), subject to various trading restrictions
for a two-year period. PKGP was trading for $1.33 on June 2, 1997.
The Company has no significant commitments at this time which would
require it to expend capital and believes its current facilities and cqpital
equipment are adequate for the Company as presently structured.
F-15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf 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
