COUNTRY WIDE TRANSPORT SERVICES INC, 10-K, 1996-10-15

COUNTRY WIDE TRANSPORT SERVICES INC
10-K, 1996-10-15
TRUCKING (NO LOCAL)

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------

FORM 10-K

[X} Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934

For the fiscal year ended June 30, 1996

Commission File No. 0-23360

COUNTRY WIDE TRANSPORT SERVICES, INC.
-------------------------------------

(Name of Registrant as specified in its charter)

Delaware 95-4105996
- -------- ------------------
(State or Other Jurisdiction (I.R.S. Employer
or Organization) Identification No.)

325 N. Cota Street, Corona, California 91720
- -------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (909) 549-6000
--------------

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------

Common Stock, $.02 par value NASDAQ
Bulletin Board

Indicate by check whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
----- -----

<PAGE>

As of September 13, 1996, there were 4,800,487 shares of the Company's Common
Stock, $.02 par value, outstanding. The aggregate market value of the voting
stock held by non-affiliates of the registrant on September 13, 1996 was
$1,815,000.

<PAGE>

PART I

ITEM 1. BUSINESS

THE BUSINESS

The Company's core business consists of truck transportation of
temperature-controlled products throughout the United States and Canada. Such
business operates as Country Wide Truck Service, Inc., a wholly-owned subsidiary
of the Company. The Company's strategy is to provide a high level of service to
customers requiring temperature-controlled transportation and other specialized
transportation services. The Company uses team drivers in approximately forty
(40%) percent of its trips in order to provide safe and reliable on-time
delivery for long-haul shipments. With the purchase of Vertex Transportation
Inc., a freight forwarder, effective July 1, 1994, the Company actively entered
the third party transportation logistics business. Sales for the logistics
division approximated fifty (50%) percent of transportation revenue. Vertex, in
business since 1978, provides its customers with full-service logistics
capabilities in less-than-truckload (LTL), truckload, intermodal, and
international transportation.

BUSINESS HISTORY AND DEVELOPMENT

Country Wide Truck Service, Inc. ("CW Truck"), one of the Company's wholly-
owned subsidiaries, was incorporated in California in 1962. The Company was
organized under the laws of the State of Delaware in February 1987 and all of
the outstanding common stock of CW Truck was transferred to the Company in
exchange for shares of the Company's Common Stock. On April 3, 1987, the Company
issued 750,000 shares of its Common Stock in a public common stock offering. In
1988, CSX/Sea-Land Logistics, Inc. acquired a controlling interest in the
Company, and expanded the business in a manner which created significant losses.
The original owners reacquired control in 1990 and thereafter downsized the
operations. By virtue of a Plan and Agreement of Reorganization effective as of
July 1, 1992, the Company acquired from Martrade, Ltd., a Minnesota corporation,
all of the issued and outstanding shares of common stock of Nationwide Produce
Co. (formerly Yellowstone Transportation, Inc.), a Minnesota corporation
("Nationwide"), in exchange for 1,275,000 shares of the Company's Common Stock.
On August 31, 1992, Martrade, Ltd., whose majority shareholder is William
Martindale, purchased an aggregate of 1,000,000 additional shares of the
Company's Common Stock from its then principal shareholders, Barry Plost and
David J. Abts, in a private transaction, thereby acquiring a controlling
interest in the Company. (See Item 12, Security Ownership of Certain Beneficial
Owners and Management.)

Effective April 1, 1993, CW Truck purchased certain assets of Freight
Peddlers, Inc. Freight Peddlers operated as a non-exclusive worldwide
transportation sales and marketing company for various transportation related
businesses in all modes of transportation. On March 1, 1996, CW Truck sold
certain assets of Freight Peddlers for $50,000 cash and a fully reserved
$200,000 unsecured promissory note receivable to a former officer of the
Company.

<PAGE>

Effective July 1, 1994, CW Truck acquired Vertex Transportation, Inc.
("Vertex"). Vertex was established in October 1978 as Vertex Associates
Transportation, Inc., a New York corporation. It was originally established as
an agent for CW Truck. In 1980, Vertex received authority as a broker and,
while continuing to serve CW Truck as agent, began to expand its business beyond
its relationship with CW Truck. During the 1980's, Vertex developed its
brokerage and logistics management capabilities and began representing many
large corporations, including Kodak, Xerox, DuPont, Bausch & Lomb, Champion
Products and General Motors. In 1988, the company changed its name to Vertex
Transportation, Inc., in order to more succinctly describe its dedication to
third party transportation logistics. In 1992, Vertex ceased to be a regulated
FHA broker of property and became an unregulated freight forwarder. This change
was not simply a change of name or form but was a step to signal a total
consolidated freight management service. Vertex operated as a division of CW
Truck through June 27, 1996, when it was incorporated and presently operates as
a subsidiary of the Company.

Vertex was acquired to enhance the marketing arm of Country Wide Truck
Service, Inc. and is a transportation brokerage company operating multi-modal
services worldwide, specializing in the North America continent with rail and
truck service throughout the U.S., Canada and Mexico. Vertex currently operates
from a company office in Rochester, New York. With the addition of Vertex, the
Company has positioned itself to offer both small and large shippers multi-modal
transportation services available at their fingertips on a daily basis.

On September 10, 1996 the Company signed a letter of intent to be acquired
by Continental American Transportation , Inc. The acquisition will be effected
through an exchange of stock (five shares of the Company's for one share of
Continental). The acquisition is subject to the execution of a definitive
agreement, approval of both parties Board of directors, confirmation that the
transaction can be treated as a pooling of interests, approval of all applicable
regulatory agencies and the approval of both parties shareholders.

TRANSPORTATION OPERATIONS

CW Truck is an irregular-route truckload common and contract carrier which
transports temperature-controlled commodities throughout the United States and
Canada. CW Truck concentrates on the hauling of temperature-sensitive products
such as photographic materials, pharmaceuticals, fresh produce and food
products. At June 30, 1996, CW Truck's operations involved the use of 118 late-
model tractors, 226 48-foot temperature-controlled trailers and 5 53-foot dry
vans. Vertex is a full service freight forwarder providing its customers a
complete range of transportation services including truckload, less than
truckload (LTL) distribution, management and logistics implementation,
intermodal, international and airfreight services.

<PAGE>

TRUCKING AND DATA PROCESSING. The Company maintains an operational system
designed to serve its customers and maximize control of its drivers and
equipment at all times. The Company currently employs a total of four dispatch
managers who together communicate with each driver on a daily basis to monitor
pick-up information and progress. These dispatch managers report directly to the
Operations Vice-President, keeping him abreast of the status of operations and
the pulse of the trucking operations. Additionally, effective July 1, 1994, the
Company culminated a sixteen year working relationship with Vertex, which
provides dispatching and terminal services for the Company in the Northeastern
part of the United States by consummating the Vertex Merger. An on-line
computer service is utilized to monitor the Company drivers, equipment, delivery
schedules and pickup requirements of customers. The system enables the Company
to constantly update the location and status of each truck, respond promptly to
customer inquiries, match equipment with the next available load and provide
reliable delivery of time-sensitive loads.

MARKETING AND CUSTOMERS. In marketing its services, the Company emphasizes its
commitment to customer service and its expertise in service oriented shipments,
particularly time-sensitive deliveries. The Company employs a marketing and
sales staff which is responsible for marketing the Company's services to
existing and new customers in specified geographical areas. To minimize empty
miles, the Company's marketing representatives place special emphasis on
soliciting customers whose shipping requirements allow the Company to balance
the number of load originations and terminations in any given area.
Approximately nine (9%) percent of the Company's total miles in fiscal 1996 were
empty miles.

During the fiscal year ended June 30, 1996, the Company transported a
variety of commodities including retail goods, produce, auto parts,
pharmaceuticals, and photographic materials. The Company's customers included
Eastman Kodak, Xerox and Sunkist Growers. During fiscal 1996, the Company's
largest 25, 10 and 5 customers accounted for approximately 63%, 51% and 43%,
respectively, of the Company's total trucking operation revenues. During that
period, the Company's two largest customers, Kodak and National Grocers, in
aggregate accounted for approximately thirty-two (32%) percent of the Company's
total revenue from its transportation operations. The loss of any of these
customers could have a material adverse effect on the Company. No other customer
accounted for the more than five (5%) percent of the revenue for the
transportation operations.

MAINTENANCE. The Company services all the Company-owned tractors and trailers
under a comprehensive maintenance and repair program. Company employed mechanics
and outside maintenance personnel perform inspections and routine repair and
maintenance on vehicles approximately every 20,000 miles at its maintenance and
repair facility in Corona, California. All vehicles undergo routine maintenance
and safety inspections each time they return to the Corona maintenance facility.
The Corona facility contains six bays for tractor maintenance and safety
inspection and six bays for trailer maintenance and safety inspections. The
Company's current policy of selling its tractors at a time approximately
concurrent with the expiration of the manufacturer's warranty period is intended
to reduce maintenance expenses.

<PAGE>

EQUIPMENT. The Company purchases tractors and trailers tailored to fill the
specific requirements of its trucking operations. Operation of standardized
tractors and trailers enables the Company to take advantage of discount bulk
purchase arrangements with manufacturers, control the cost of spare part
inventories, simplify driver training programs and facilitate tractor and
trailer repair and maintenance. Currently, the average cost of a tractor is
approximately $79,000 and the average cost of a trailer is approximately
$39,000. The following chart described the Company's fleet as of June 30, 1996.

AVERAGE AGE
COMPANY OWNED LEASED (YEARS) MANUFACTURER
------------- ------ ----------- ------------

Tractors 44 74 2.1 International

Trailers -- 231 1.8 Trailmobile

DRIVER SAFETY. The Company currently has in excess of 167 drivers and
contractors. Through its safety department, all applicants go through a two-part
program. Part One, includes drug testing, motor vehicle license background
review and previous employment history. Part Two includes a Classroom Safety
Instruction course, which covers the Company's policies, procedures, and safety
techniques as well as a road test. The Company maintains a safety department of
five individuals who operate the Company's driver screening, training and safety
instruction programs. Company safety personnel instruct new drivers on
Department of Transportation safety regulations as well as Company safety
policies and closely monitor drivers' performances and logs in order to identify
and prevent safety problems.

Approximately forty (40%) percent of the Company's fleet is operated by
team drivers. Company employed drivers are paid on the basis of miles driven,
loading and unloading, layovers, stops-in-transit and length of service with the
Company.

The Company contracts with independent contractors for the use of tractors
and drivers. These independent contractors are typically required to bear all
the costs of operation of their equipment including compensation of drivers,
maintenance costs, fuel costs, insurance premium, taxes, license and permits.
Independent contractors are compensated primarily on the basis of miles
operated. All drivers provided by independent contractors are subject to the
same qualifications and training procedures as drivers employed by the Company.

EMPLOYEES. At June 30, 1996, the Company employed 129 persons in its
transportation operations. The Company's employees are not represented by any
union and the Company believes that its employee relations are excellent.

FUEL & TIRE DISCOUNT PROGRAMS. The Company has a fuel discount program with a
major oil company and a similar contract with a tire manufacturer for discounts
on purchases made by its drivers while in transit.

<PAGE>

COMPETITION

The freight carrying industry is highly competitive, with over 2,000
competitors vying to carry freight (many of which have greater financial
resources, own more equipment or carry a greater volume of freight than the
Company). While there are thousands of trucking competitors, management
believes that the Company ranks in the top 100 companies engaged in temperature-
controlled freight handling when ranked by revenue. The Company competes
primarily with other trucking companies of its class and to a lesser extent with
airlines and railroads. Although the increased competition resulting from
deregulation has created pressure to reduce rates, the Company competes
primarily on the basis of its quality of service and its ability to provide
temperature-controlled and other specialized services. Unlike many other
carriers, the Company offers a wide range of specialized services such as
handling temperature-controlled freight, time-sensitive deliveries and
intermodal transportation. The Company believes that by providing a wider range
of transportation services, it is able to attract and retain customers with
diverse and specialized needs.

REGULATIONS

TRUCKING OPERATIONS The Company is a common and contract motor carrier
regulated by the FHA, the DOT and various state agencies. These regulatory
authorities have broad powers, generally governing activities such as authority
to engage in motor carrier operations, rates and charges, and certain mergers,
consolidations and acquisitions. The Motor Carrier Act of 1980 substantially
increased competition among motor carriers and limited the level of regulation
in the industry. The Act enables applicants to obtain FHA operating authority
more easily and allows interstate motor carriers such as the Company to change
their rates without FHA approval. The law also allows for the removal of many
route and commodity restrictions on the transportation of freight.

Federal regulations have been instituted regarding drug and alcohol testing
of drivers and uniform commercial driver's licenses. The Company believes it is
in compliance with the federal regulations.

The Company was granted an Ontario, Canada operating license in February
1989, and Quebec, Canada operating license in June 1993, allowing the Company to
haul truckload freight between all points in the Provinces of Ontario and Quebec
and the United States.

During January and February of 1996, CW Truck underwent operating license
audits by the Department of Transportation, California Highway Patrol and the
Province of Ontario, Canada. As a result of these audits, unsatisfactory
ratings were issued by all three agencies pending a further audit by the
California Highway Patrol, which was conducted in July 1996. As a result of this
audit, CW Truck was issued a conditional rating until January 1997 when all
three agencies will again perform new audits. A less than satisfactory rating
at this time could result in CW Truck experiencing difficulties obtaining
operating license authority from one or more of these agencies. Management has
instituted a compliance program it feels will enable CW Truck to achieve the
satisfactory rating during January 1997.

<PAGE>

The Company transports no petroleum products or other hazardous waste
materials and none of its facilities store fuel.

Federal regulations require tractor manufacturers to certify that new
tractors meet certain federal emissions standards. The Company receives such
certificates with each new tractor it purchases. Certain environmental
regulations require the Company to conduct fuel, and oil spill prevention
programs and to comply with certain regulations concerning the disposal and
discharge of waste oil. The Company believes that it is in compliance, in all
material respects, with all applicable waste disposal and emissions regulations
and all other applicable regulatory requirements relative to its trucking
business. Federal, state and local regulations relating to the work place and
the discharge of materials into the environment are continually changing;
therefore, it is difficult to gauge the total future impact of such regulations
of the Company. Although no assurances may be given, existing government
regulations are not expected to have a material effect on the Company's
competitive position, operating results or planned capital expenditures.

DISCONTINUED OPERATIONS

Through its former subsidiary, Nationwide Produce Co. ("Nationwide"), the
Company operated a "mixer" produce operation. Having experienced significant
losses in certain divisions of Nationwide during the quarter ended March 31,
1995, management began a review of its entire product sales group. As a result
of the review, two of Nationwide's divisions (Salinas lettuce packing and the
tomato repackaging divisions) were closed in May of 1995. Continued losses in
the Company's product sales segment through June 30, 1995 with no possibility of
improvement forced management and the Board of Directors on June 26, 1995 to
decide to discontinue the entire segment through an orderly liquidation process
which they estimated would occur over the subsequent two month period.
Immediately thereafter, the operations were begun to close, and on September
18, 1995 the Company made a General Assignment of all assets of its subsidiary,
Nationwide Produce Co., for the pro rata benefit of all creditors of the
subsidiary. A general assignment under California State Law is an alternative
to Chapter 7 bankruptcy liquidation. The Company had provided both organic and
commercial produce from growers in and around California, the Pacific Northwest,
Mexico and the Southeastern United States to the principal chain supermarkets,
wholesalers and food service distributors in the United States and Canada as
well as overseas.(See also Certain Relationships and Related Transactions and
Management's Discussion and Analysis of Financial Condition and Results of
Operations herein)

Nationwide Produce Co. ("Nationwide") operated a full-service marketing
firm in Los Angeles, California importing, exporting and distributing
conventional and organic produce nationwide and overseas. Operating from a
100,000 square foot leased warehouse adjacent to the Los Angeles Produce Market,
Nationwide shipped domestically and internationally to major domestic food
retailers and wholesalers. Another division of Nationwide, Martrade, operated
as an export sales arm of principal food and other consumer product
manufacturers.

<PAGE>

OASIS MOUNTAIN CITRUS, INC. Oasis Mountain Citrus, Inc. ("Oasis") is an
inactive corporation which operated a citrus packing facility located in Oasis,
California whose products were sold by various in-house sales organizations.
During the quarter ended June 30, 1994, the Company executed an agreement to
sell its produce packing operations and related assets.

REGULATIONS

PRODUCE OPERATIONS. The Company's produce operations were subject to
significant Federal, State and regional regulations for the purpose of promoting
health and sanitation standards, and establishing safety standards for the
protection of employees and the environment.

The principal Federal and State agencies charged with certain
responsibilities over produce packing and processing operations include the
United States Department of Agriculture ("USDA"), the United States Food and
Drug Administration, the United States Environmental Protection Agency,
California Department of Food and Agriculture, California Department of
Industrial Relations, California Department of Health Services, California
Agricultural Labor Relations Board, State and regional water and air quality
control boards and various county commissioners. USDA and California Department
of Food and Agriculture representatives monitor produce for compliance with
Federal and State standards for size and grade.

The Company was also required to obtain various business licenses from
Federal, State and local authorities since its business involved citrus fruit
and other perishable agricultural commodities.

The Company believes that it complied with all relevant Federal, State,
local and regional rules and regulations governing its operations including
marketing and the safe use and handling of chemicals, air emissions and waste
water discharge. The Company believes that it was in compliance with all other
laws including all governmental regulations pertaining to environmental or
occupational safety and health considerations.

INSURANCE. The Company has the following types of insurance coverage:

DEDUCTIBLE PER
TYPE OF INSURANCE MAXIMUM ANNUAL COVERAGE OCCURRENCE
----------------- ----------------------- --------------

Auto & General Liability . . . . . . . $10,000,000 $5,000

Cargo . . . . . . . . . 500,000 5,000

Physical Damage . . . . actual cash value 2,500

The Company's management believes that its current insurance coverages are
adequate in light of the scope and nature of its operations.

<PAGE>

ITEM 2. PROPERTIES

At June 30, 1996, the Company owned tractors, trailers and other equipment
valued at $3,580,000. The Company leases the following facilities within the
transportation segments:

LOCATIONS TYPE SIZE ANNUAL RENTAL
- --------- ---- ---- -------------

Corona, Terminal, Office 20,000 Sq. Feet
California Maintenance on 5.4 acres $ 148,800

East Rochester,
New York Warehouse, Office 10,000 Sq. Feet $ 90,000

Leases relating to the product sales segment have not been presented since these
operations have been discontinued.

ITEM 3. LEGAL PROCEEDINGS

The nature of the Company's business routinely results in litigation,
primarily claims for personal injury and property damage incurred in the
transportation of freight. The Company believes that all pending litigation of
this type is adequately covered by insurance and that adverse results in one or
more of these matters would not have a material adverse affect on its financial
position or operations.

Effective September 18, 1995, the Company's subsidiary, Nationwide Produce
Co., which comprised the entire product sales segment of the Company, made a
General Assignment of all assets of the corporation to Credit Managers
Association of California for the pro rata benefit of all creditors of the
corporation. The Company has ceased all business functions in its product sales
segment.

On December 13, 1995, in Los Angeles Superior Court, Credit Managers
Association of California, on behalf of all creditors of Nationwide Produce Co.
filed suit against a former director and officer of the Company to recover
$497,000 of funds which Credit Managers Association of California believes was
misappropriated by the former officer to a corporation he owned and controlled.

On February 27, 1996, Credit Managers Association of California, on behalf
of all creditors of Nationwide Produce Co., filed suit to collect more than
$600,000 arising from the sale of a business division of Nationwide in 1994.

On February 27, 1996, Credit Managers Association of California, on behalf
of all creditors of Nationwide Produce Co., filed suit to recover at least
$70,000 from two former employees of Nationwide. The suit alleges that while
employees of Nationwide, the defendants used Nationwide assets for the benefit
of another business.

<PAGE>

During the month of September 1995, the Company's transportation
subsidiary, CW Truck, had a cargo claim that approximated $600,000 filed against
it by one of its customers. The insurance carrier citing certain exceptions in
the cargo policy declined to pay the claim and referred the issue to litigation
on February 27, 1996. The Company initiated legal action against the insurance
carrier and its agent. The customer additionally filed a cross claim against
the Company. Management feels that the Company's suit will be successful.
Therefore, no contingent liability has been recorded in the Company's financial
statements as of June 30, 1996.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fiscal
year covered by this report.

<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET

The Company's common Stock was traded on the NASDAQ Electronic Market under
the symbol CWTS until August 1996. Having failed to meet the listing
requirements of the NASDAQ Electronic Market the Company's shares have since
August 1996 traded on the Bulletin Board The following table presents high and
low prices for the Company's Common Stock published by the National Quotation
Service, Inc., as well as the range of closing high and low bid prices as so
reported. The quotations represent prices in the over-the-counter-market between
dealers in securities and do not include retail markup, markdown or commissions
and do not necessarily represent actual transactions. Quarterly market price
information for the Company's shares of Common Stock is as follows:

QUARTER ENDING BID PRICES ASK PRICES
High Low High Low
---- ---- ---- ---

Sept. 30, 1994 5-1/4 3-1/4 5-3/8 3-1/2

Dec. 31, 1994 5-1/8 3-1/2 5-1/2 3-3/4

Mar. 31, 1995 4-1/2 2-7/8 4-3/4 3

Jun. 30, 1995 3-5/8 1-3/8 3-7/8 1-9/16

Sept. 30, 1995 2-3/16 1-1/8 2-1/8 1-1/16

Dec. 31, 1995 15/16 17/32 15/16 17/32

Mar. 31, 1996 11/16 9/32 5/8 1/4

Jun. 30, 1996 7/16 5/32 3/8 5/32

SHAREHOLDERS

As of June 30, 1996, the number of shareholders of record of common stock,
excluding the number of beneficial owners whose securities are held in street
name was approximately 179.

<PAGE>

DIVIDEND POLICY

The Company plans to retain future earnings, if any, for use in its
business and, accordingly, the Company does not anticipate paying dividends in
the foreseeable future. Any earnings are expected to be used for the operation
and expansion of the Company's business. Payment of dividends is within the
discretion of the Company's Board of Directors and will depend, among other
factors, upon the Company's earnings, financial condition and capital
requirements. In addition, as a holding company, the Company's ability to pay
dividends may be dependent upon distributions received from its operating
subsidiaries. The Company's subsidiaries have line of credit agreements which
contain certain provisions which limit the ability of the subsidiaries to pay
dividends.

ITEM 6. SELECTED FINANCIAL DATA

Effective July 1, 1992, Martrade Ltd., a Minnesota corporation, executed an
agreement to exchange 100% of the issued and outstanding stock of Nationwide
Produce Co. (formerly Yellowstone Transportation, Inc.) for 1,275,000 shares of
newly issued common stock of CWTS. As a result of this transaction, Martrade
Ltd. obtained a controlling interest in CWTS which has been accounted for as a
reverse acquisition in accordance with APB Opinion 16, Business Combinations,
and EITF 90-13, Accounting for Simultaneous Common Control Mergers.

The capital stock accounts of the combined enterprise have been adjusted to
reflect that of Country Wide Transport Services, Inc. as the surviving legal
corporate entity. However, in accordance with the applicable accounting
pronouncements, Nationwide Produce Co. has been treated as the acquiring
enterprise in the business combination and, as a result, its equity is presented
as the equity of the combined enterprise.

Nationwide recorded the acquired assets and liabilities of CWTS at fair
value as of the date of acquisition as required by the purchase method of
accounting and the operations of CWTS are reflected in the operations of the
combined entity from the date of acquisition.

Set forth below is selected historical financial data of Nationwide for the
years prior to the merger and selected historical financial data of the Company
for the fiscal years ended June 30, 1996, 1995, 1994 and 1993 (after the merger)
and should be read in conjunction with the respective consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.

<PAGE>

STATEMENT OF OPERATIONS DATA

(in thousands, except per share amount)

YEAR ENDED JUNE 30

1996 1995 1994 1993 1992
---- ---- ---- ---- ----

OPERATING REVENUE:

Transportation revenue $ 47,356 $ 54,744 $ 34,210 $ 27,117 $ 1,087

Operating expenses 48,959 54,551 32,499 25,859 1,002
-------- -------- -------- -------- -------

Operating income (loss) (1,603) 193 1,711 1,258 85
-------- -------- -------- -------- -------

Net income (loss) from
continuing operations (2,552) (169) 677 444 44
-------- -------- -------- -------- -------

Net income (loss) per
common share from
continuing operations (0.53) (0.03) 0.18 0.13 0.04
-------- -------- -------- -------- -------

Average shares
outstanding 4,801 4,774 3,832 3,481 1,275
-------- -------- -------- -------- -------

<PAGE>

BALANCE SHEET DATA

(in thousands, except per share amount)
JUNE 30

1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Cash and
cash equivalents $ 37 $ 57 $ 910 $ 165 $ 44

Working capital
(deficit) (3,980) (1,691) 3,199 (340) (74)

Property and
equipment, net 3,580 4,069 5,752 7,916 189

Total assets 14,608 18,910 21,626 19,510 3,251

Long-term debt and
capital leases,
excluding current
portion 2,616 1,579 5,730 6,715 95

Total liabilities 12,706 15,538 14,264 13,981 2,386

Total stockholders'
equity 1,902 3,372 7,362 5,529 849

Dividends per
common share ----- ----- ----- ----- $0.62

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information and analysis of the Company's
financial condition and results of operations for the years ended June 30, 1996,
1995 and 1994. The discussion should be read in conjunction with the Company's
audited financial statements and notes thereto and "Selected Financial Data"
included elsewhere herein.

<PAGE>

INTRODUCTION

For the fiscal year ended June 30, 1996, the Company derived revenue from
transportation services. For the fiscal years ended June 30, 1995 and 1994, the
Company derived revenues from two principal lines of business: transportation
services and product sales. However, the product sales segment was discontinued
effective June 26, 1995. When practical, the Company realized the benefit from
administrative economies of scale by utilizing centralized credit, personnel,
safety, and accounting functions for the benefit of the consolidated group.

The following analysis of the Company's financial condition and results of
operations for the fiscal years ended June 30, 1996, 1995 and 1994, should be
read in conjunction with the Consolidated Financial Statements, related Notes
thereto, and other information presented elsewhere in this Form 10K. Average
balances, including such balances used in calculating financial and performance
ratios, are generally a blend of month-end averages, which management believes
are representative of the operations of the Company.

RESULTS OF OPERATIONS

FINANCIAL INFORMATION FOR THE
YEARS ENDED JUNE 30, 1996 AND 1995

Net loss from continuing operations for the year ended June 30, 1996
amounted to $2,552,000, compared to net loss of $169,000 for the year ended
June 30, 1995. The decrease in profitability was primarily attributable to a
soft market for trucking services, severe winter weather, unfavorable prior year
governmental audits, increased insurance claims and a one time loss on the sale
of a business division.

Operating revenue for the year ended June 30, 1996 decreased 13.5% to
$47,356,000 from $54,744,000 for the comparable 1995 period. Revenue within the
Company's transportation logistics division decreased by $100,000 to $24,039,000
for the year ended June 30, 1996 from $24,139,000 for the comparable 1995
period. Revenue within the Company's truckload division decreased by $7,288,000
to $23,317,000 for the year ended June 30, 1996 from $30,605,000 for the
comparable 1995 period. The decrease is attributable to the negative market
conditions as well as a reduction in the Company's tractor fleet from 216 units
at June 30, 1995 to 118 units at June 30, 1996. Loaded miles decreased from
26,776,000 to 20,535,000 for the period while pricing increased $.021 per
loaded mile for the year ended June 30, 1996.

<PAGE>

Operating costs decreased $5,592,000 to $48,959,000 for the year ended
June 30, 1996 from $54,551,000 for the year ended June 30, 1995, a 10.3%
decrease. As a percentage of sales, operating costs increased to 103.4% for the
year ended June 30, 1996 from 99.7% for the year ended June 30, 1995. The
percentage increase is primarily attributable the results of two unfavorable
audits conducted by governmental agencies, for prior periods, and increased
insurance claims for the period. The percentage increase consists of an $330,000
and .8% increase in operating taxes and licenses attributable to the
aforementioned governmental audits, a $117,000 and .6% increase in insurance
claims, a $300,000 and 1.1% increase in increase in revenue equipment rentals
which reflects the Company's acquiring of equipment through operating leases and
a larger than normal tractor to trailer ratio, and a .2% increase in general
operating expenses including a $105,000 cost for professional fees the Company
incurred in connection with the aforementioned governmental audits.

Interest expense increased $174,000 for the year ended June 30, 1996
compared to the prior year period and is reflective of the Company's higher
incremental borrowing rates for working capital as well as higher rates for new
upgraded tractor equipment financed during the second quarter of the current
year.

The Company also sold certain assets of it's Freight Peddlers logistics
division effective March 1, 1996 resulting in a loss on the sale of that
division of $222,000 which included a fully reserved unsecured $200,000 note
receivable.

The Company also had a $111,000 decrease in gain on the sale of assets as
compared to the previous years comparable period due to a need to sell
equipment in a generally depressed equipment market.

During the fiscal year ended June 30, 1995, the Company discontinued its
product sales segment which operated within the Company's subsidiary, Nationwide
Produce Co. Having experienced significant losses in certain divisions of
Nationwide Produce during the quarter ended March 31, 1995, management began a
review of its entire product sales group. As a result of the review, two of
Nationwide's divisions (Salinas lettuce packing and the tomato repackaging
division) which together lost a total of $1,400,000 during the quarter ended
March 31, 1995, were closed during May 1995. In addition the Company closed its
Country Wide Produce division which consisted of marketing and distribution of
organic produce from facilities in Thermal, California and Pittsburgh,
Pennsylvania. After continued losses in the product sales segment through
June 30, 1995 with no possibility of improvement, management and the board of
directors determined on June 26, 1995 to wind-down and discontinue the entire
product sales operations effective June 30, 1995. This process culminated in
the filing of a General Assignment during September 1995 of all assets of
Nationwide Produce for the pro rata benefit of all creditors of the subsidiary.
A General Assignment is an alternative to a Chapter 7 bankruptcy liquidation.
Results of operations for the product sales segment have been classified as
discontinued operations in the Company's audited financial statements for all
periods presented.

<PAGE>

During the year ended June 30, 1996, the Company's product sales segment
generated a loss before income tax expense of approximately $959,000. This
reflects the continuing operating losses generated by Nationwide Produce Co.
before the General Assignment for the benefit of creditors as well as wind down
expenses associated with the general assignment. The product sales segment also
generated a gain on forgiveness of debt of $2,370,000 net of income tax benefit
of $1,630,000 for the year ended June 30, 1996. Management feels that adequate
reserves exist as of June 30, 1996 for any future expenses associated with the
General Assignment.

During the fiscal year ended June 30, 1996, the Company experienced
significant losses from continuing operations. These losses were primarily
generated by CW Truck, which generated a pre-tax loss of $3,223,000 An
approximately $7.2 million decrease in revenue was due to a soft market for
trucking services, severe winter weather conditions and an eroding customer
base. The aforementioned, unfavorable government audits and increased insurance
claims further increased the losses.

The above-mentioned losses, lack of compliance with financial covenants of
its primary lender and the resulting negative working capital, have caused the
Company's independent auditors to conclude that substantial doubt exists as to
the Company's ability to continue as a going concern.

FINANCIAL INFORMATION FOR THE
YEARS ENDED JUNE 30, 1995 AND 1994

Net loss from continuing operations for the year ended June 30, 1995
amounted to $169,000, compared to net income of $677,000 for the year ended
June 30, 1994. The decrease in profitability was primarily attributable to a
reduction in produce-related temperature-controlled freight in the California
market area due to extreme adverse weather conditions during the prime Spring
growing season which corresponds with the second half of the Company's fiscal
year.

Operating revenue for the year ended June 30, 1995 increased 60.4% to
$54,744,000 from $34,210,000 for the comparable 1994 period. The increase
reflects the Company's expanded efforts within its transportation logistics
division including the July 1994 acquisition of Vertex Transportation. Revenue
within the Company's transportation logistics division increased by $20,470,000
to $24,138,000 for the year ended June 30, 1995 from $3,668,000 for the
comparable 1994 period. Revenue within the Company's truckload division
increased by $54,000 to $29,111,000 for the year ended June 30, 1995 from
$29,057,000 for the comparable 1994 period which is attributable to a 1.0%
increase in the Company's loaded miles to 26,776,000 for the year ended June 30,
1995 from 26,522,000 for the year ended June 30, 1994 and a corresponding
decrease in revenue per loaded mile to $1.09 from $1.10 for the prior year
period. Revenue within the Company's drayage division increased by $10,000 to
$1,495,000 for the year ended June 30, 1995 from $1,485,000 for the comparable
1994 period.

<PAGE>

Operating costs increased $22,052,000 to $54,551,000 for the year ended
June 30, 1995 from $32,499,000 for the year ended June 30, 1994, a 67.9%
increase. As a percentage of sales, operating costs increased to 99.6% for the
year ended June 30, 1995 from 95.0% for the year ended June 30, 1994. The
increase is primarily attributable to the larger percentage of revenue generated
by the transportation logistics division, which traditionally pays a larger
percentage of purchase transportation since it maintains none of its own revenue
equipment. The $22,052,000 increase consists of an $18,404,000 increase in
purchased transportation, a $1,515,000 increase in salaries and related expenses
and a $389,000 increase in general supplies and expenses which are attributable
to the acquisition of Vertex Transportation in July 1994 as well as a $1,113,000
increase in revenue equipment rentals which reflects the Company's acquiring of
equipment through operating leases, a $70,000 increase in depreciation and
amortization reflecting additional goodwill amortization resulting from the
Vertex merger and a $561,000 increase in general operating expenses including
additional insurance and claims expense due to positive reserve adjustments in
the prior year period.

There has been no material effect on the Company's operating costs as a
result of the increase in federal gasoline tax which became effective October 1,
1993. The lack of impact is due to the fact that the bulk of fuel used is
purchased by owner operators.

Interest expense decreased $108,000 for the year ended June 30, 1995
compared to the prior year period and is reflective of more favorable financing
terms obtained by the Company under its credit facilities during May 1994.

<PAGE>

During the year ended June 30, 1995, the Company's product sales segment
generated a loss before income tax benefit of approximately $7.4 million.
Through a series of events and circumstances including rapid and ill-timed
expansion in operations involving citrus packing and tomato repackaging, an
organic produce marketing and distribution division without a full appreciation
of the competitive marketplace, and a retail produce concern at the Los Angeles
Wholesale Produce Market, all contributed to a pre-tax loss from operations for
the year of approximately $3.25 million. These circumstances combined with
extreme adverse weather conditions in Southern California, bad debt write-offs
in excess of $2.5 million, a $647,000 expense associated with goodwill and
leasehold improvement write-offs associated with discontinuance of the segment,
a $532,000 investment loss in an attempt to acquire three retail bays in the Los
Angeles Produce Market from a company which filed for bankruptcy protection,
and an inventory write-down in January 1995 of approximately $300,000 associated
with a substantial devaluation of the Mexican currency, all contributed to the
pre-tax loss for the product sales segment of approximately $7.4 million for the
year ended June 30, 1995.

In connection with the Company's discontinuance of the product sales
segment, Nationwide Produce Co., the Company discovered a potential irregularity
relative to misappropriation of cash receipts totaling approximately $497,000 by
an officer/director. Current management and the other members of the board of
directors have performed an initial review of the method of concealment which
consisted of depositing customer checks into a bank account of an entity owned
by the officer/director. Management has notified corporate as well as outside
legal counsel, Credit Manager's Association of California which is the trustee
of Nationwide Produce Co. pursuant to the filing of a General Assignment for the
Benefit of Creditors, and Nationwide's secured lender whose collateral is the
subject of the potential irregularity. As a result of the foregoing, the
Company has established a reserve as of June 30, 1995 of $497,000 against the
trade receivables of the discontinued segment. Based on procedures performed by
the Company, management does not believe that there exists any other potential
material irregularities; however, management is continuing to investigate the
matter.

LIQUIDITY AND CAPITAL RESOURCES

Pursuant to a loan agreement with a commercial bank dated June 30, 1996,
the Company's transportation segment utilizes a credit facility which provides
for maximum outstanding borrowings of $4.75 million reducing to $4.5 million at
October 1, 1996. The Agreement bears interest at the bank's reference rate plus
3%. The credit facility, which expires on December 31, 1996, is secured by
substantially all assets of the Company, including accounts receivable.
Management has commenced negotiations with other lending institutions in order
to have alternative financing in place upon expiration of this agreement. At
June 30, 1996, the outstanding indebtedness under the transportation facility
was $2,726,000 and is classified as a current liability in the Company's audited
financial statements.

<PAGE>

The Company's product sales segment utilized a $3.5 million credit facility
with the same commercial bank with stated interest at the bank's reference rate
plus 5.00%. Outstanding indebtedness under the product sales line of credit at
June 30, 1996 was approximately $834,000. The product sales line of credit is
cross-guaranteed and cross-collateralized by the Company's transportation
subsidiary, Country Wide Truck Service, Inc.. The indebtedness was effectively
assumed by the Company on September 5, 1996 and at which time the interest rate
was restated to the bank's reference rate plus 3%.

The Company provided $1,114,000 of cash flow from continuing operations and
utilized $992,000 in discontinued operations during the year ended June 30,
1996. $3,028,000 of proceeds from the disposal of property and equipment,
$70,000 proceeds from the sale of a business division were used to purchase
$408,000 of new equipment and to pay down $2,832,000 of debt to financial
institutions.

As of June 30, 1996, the Company had total debt of $12,706,000. The
Company's ratio of current assets to current liabilities and its debt to equity
were .6:1 and 6.7:1, respectively, as compared to .8:1 and 4.6:1 respectively,
at June 30, 1995. These ratios were negatively affected by the Company's
operating results for its fiscal year, the assumption of the produce sales
credit facility as of June 30, 1996 and the purchase of new upgraded tractors
during the year ended June 30, 1996.

The Company intends to utilize the services of owner-operators to expand
the volume of its long-haul trucking operations rather than financing all growth
through additional borrowings. Management intends to maintain a fleet of
Company-owned trailers proportionate to the change in the owner-operator fleet.
The Company expects that it will acquire a significant portion of its future
revenue equipment through operating leases when leasing is a favorable financing
alternative. No significant capital expenditures were planned or committed as of
June 30, 1996.

During July 1994, the Company consummated a stock acquisition of Vertex
Transportation, Inc. Cash required for the acquisition was financed with funds
available under the Company's credit facility. Management believed that the
acquisition would increase overall future cash flow of the Company based on
historical profitability and working capital acquired. Concurrent with the
acquisition, the Company experienced an immediate increase in availability under
its existing credit facility, based on acquired trade receivables, of
approximately $1,374,000 which was utilized, in part, to finance the
transaction. Prior to acquisition, Vertex Transportation had no long-term debt
or working capital credit facility.

The Company ended the June 30, 1996 period with $37,000 cash and cash
equivalents, and negative working capital of $3,980,000. Based upon expected
cash flow from operations and funds available under existing or substitute
credit facilities, management believes that the Company's capital resources are
sufficient to meet its presently anticipated operating needs and capital
expenditure requirements. However, should these sources prove inadequate or
unavailable, the Company may be required to seek additional financing through
capital investment.

<PAGE>

EFFECTS OF INFLATION

Inflation can be expected to have an impact on the Company's operating
costs. A prolonged period of inflation would cause interest rates, fuel costs
and other costs to increase and would adversely affect the Company's results of
operations unless freight rates could be increased. The effect of inflation has
been minimal over the past three years.

SEASONALITY

In the transportation industry generally, results of operations show a
seasonal pattern because customer's reduce shipments during and after the winter
holiday season and because of weather variations during the winter months. The
Company's operating expenses have historically been higher in the winter months
primarily due to decreased fuel efficiency and increased maintenance costs in
colder weather. Extreme prolonged periods of rain in the western United States
can result in adverse efforts on revenue due to the reduced availability of
produce freight.

FORWARD LOOKING INFORMATION

The Company's current plan continues to reflect the need to expand
marketing in its CW Truck subsidiary, reduce operating costs, obtain additional
working capital and the need to successfully negotiate certain agreements with
its lender.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SEE INDEX TO FINANCIAL STATEMENTS

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT

The following table sets forth the names and ages of all directors and
executive officers of the Company as of June 30, 1996, all positions and offices
with the Company held by each person, each person's term of office as a Director
and their business experience for each of the past five years.

NAME AGE POSITION
- ---- --- --------

TIMOTHY LEPPER 48 DIRECTOR, CHIEF EXECUTIVE OFFICER,
PRESIDENT-COUNTRY WIDE TRUCK
SERVICE, INC.

WAYNE N. PARRY 45 DIRECTOR, SECRETARY, PRESIDENT-
VERTEX TRANSPORTATION, INC.

MARK T. BOYER 39 DIRECTOR

JOHN C. RUSSELL 61 DIRECTOR

NATHAN W. GORDON 58 CHIEF FINANCIAL OFFICER

On November 10, 1993, by Consent to Action by a majority of stockholders,
the By-laws of the Company were amended to provide for three classes of
directors; Class A consisting of two directors elected for a three-year term;
Class B consisting of two directors elected for a two-year term; Class C
consisting of three directors elected for a one-year term. On November 10,
1993, William Martindale was elected a Class A director, Kenneth Gordon was
elected a Class B director and Messrs. Michael McCowan and John Russell were
elected Class C directors each to hold office for the term specified and until
their successors are elected and qualified. On July 6, 1994, Timothy Lepper was
elected a Class B director and Wayne N. Parry was elected a Class C director. On
November 3, 1994, Mark Boyer was elected a Class A director. Messrs. Gordon,
McCowan, and Martindale resigned effective August 25, 1995, September 18, 1995,
and September 30, 1995, respectively. At the Company's annual meeting held on
January 12, 1996 Messrs. Russell and Parry were elected Class C directors. No
replacements for Messrs. Gordon, McGowan, or Martindale have been elected.

<PAGE>

Set forth below is certain information with respect to the directors,
executive officers and key employees of the Company:

TIMOTHY LEPPER - Director, Chief Executive Officer and President- Country
Wide Truck Service graduated in 1973 from Brockport State College. From 1971-
1974 he was employed as a salesman for REA Express and later promoted to
District Sales Manager, Rochester and Buffalo, NY From 1974-1978 he was employed
by Time D.C. as Terminal Manager in Rochester and Buffalo, NY In 1978 Mr.
Lepper was Terminal Manager for Transcon Lines, Rochester, NY In 1978 he co-
founded Vertex Transportation, Inc. Mr. Lepper served as President of Vertex
from 1978 until its acquisition by CW Truck on July 1, 1994.

WAYNE N. PARRY - Director and President of Vertex Transportation graduated
in 1973 cum laude from Niagara University with a B.S. in Transportation. In
1973 he joined the management training program at Red Star Express Lines,
Buffalo, NY and become Customer Service Manager. In 1975 he was employed with
Mobil Chemical Company, Macedone, NY as a Transportation Manager and in 1977 was
promoted to Customer Service/Distribution Manager. In 1978 he co-founded Vertex
Transportation Inc. Mr. Parry served as Vice President and Secretary of Vertex
from 1978 until its acquisition by CW Truck on July 1, 1994.

JOHN C. RUSSELL - Director, is an attorney who has engaged in the private
practice of law for over thirty years. Mr. Russell is counsel to Kroll & Tract
with offices in New York City. He has served as an officer and director of
numerous corporations. From December 1987 to February 1993 he was President and
a Director of OB Systems & Mining, a manufacturer of electrical equipment for
the mining and transit industries. On June 28, 1996 Mr. Russell became General
Counsel of W.P. Stewart & Co. Inc. in New York, New York.

MARK T. BOYER - Director, has spent the majority of his working career in
the investment business. Since July 1992, Mr. Boyer has been the president and a
director of ROI Capital Management. During the preceding year, Mr. Boyer
managed his personal securities portfolio. From February 1988 to July 1991, he
was general partner and portfolio manager with Volpe, Welty & Company, in San
Francisco, California, and from May 1982 to February 1988, he was an analyst and
fund manager with Fidelity Management Research, Inc., in Boston, Massachusetts.
Mr. Boyer received his BA degree, magna cum laude, in finance, accounting, and
computer sciences from American University in 1980 and his MBA degree in finance
and accounting from Columbia University in 1982.

NATHAN W. GORDON - CFO, Has been engaged in the public accounting
profession as a sole practitioner for over thirty years. His firm Nathan W.
Gordon CPA has served as the independent accountant for Vertex since its
inception prior to the Company's acquisition in July of 1994. Mr. Gordon
continues to actively participate as a public accountant and at present is
considered a part time employee of the Company.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth cash compensation paid to the chief
executive officer and the executive officers of the Company and its subsidiaries
for services rendered to the Company and its subsidiaries during the fiscal year
ending June 30, 1996, whose total cash compensation exceeded $100,000.

SUMMARY COMPENSATION TABLE

FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------- ------ ------ ----- ------------

Timothy Lepper (1) 1995 $250,000 - -
president, CEO 1996 $250,000

Wayne N. Parry (1)
President - Vertex
Transportation 1995 $250,000 - -
1996 $250,000

Howard F. Fogle, Jr. (1) 1994 $125,000 - -
Vice President - Marketing 1995 $150,000 - -
1996 $108,000 - -

William A. Martindale (1)(2)
Chairman of the Board, 1994 $140,000 - -
President, 1995 $250,000 - -
CEO 1996 -- - -

Kenneth L. Gordon (4) 1994 $120,000 - -
Vice President 1995 $135,000 - -
Nationwide Produce Co. 1996 -- - -

Barry D. Plost (1)(3) 1994 $162,500 $8,000 -
President, CEO 1995 - - -
1996 - - -

<PAGE>

(1) Aggregate value of perquisites and other personal benefits was less than
10% of total salary and bonus.

(2) Mr. Martindale resigned September 1, 1995 and was replaced as President and
CEO by Timothy Lepper. Mr. Martindale resigned as a director on
September 30, 1995.

(3) Mr. Plost resigned July 6, 1994 and was replaced as President and CEO by
William Martindale.

(4) Mr. Gordon resigned on September 18, 1995.

DIRECTOR COMPENSATION

The Company's Board of Directors presently consists of four members. Two
directors hold salaried positions with the Company and receive no additional
compensation. Two directors presently receive compensation of $6,000 per annum.

STOCK OPTIONS

In April, 1993, the Company entered into a Stock Option Agreement with
Howard F. Fogle, Jr. Pursuant to the agreement, the Company granted Mr. Fogle
an option to acquire 50,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share. The option granted to Mr. Fogle vests at the rate of
10,000 shares on each of the first through fifth anniversary of the agreement.
Vesting of options are generally conditioned upon Mr. Fogle being in the
employment of the Company on the vesting dates. All options granted in the
Stock Option Agreement were canceled March 1, 1996, in connection with the sale
of Freight Peddlers to Mr. Fogle.

In August 1993, the Company entered into a Stock Option Agreement with
Barry D. Plost. Pursuant to the agreement, the Company granted Mr. Plost an
option to acquire 100,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share. The option granted to Mr. Plost vested at the rate of
20,000 shares on each of the first through fifth anniversary of the agreement.
Vesting of options were generally conditioned upon Mr. Plost being in the
employment of the Company on the vesting dates. All options granted in the
Stock Option Agreement expire in September 1998. Pursuant to the Consulting
Agreement by and between the Company and Mr. Plost effective July 5, 1994,
options covering 20,000 shares became vested. The options for the remaining
80,000 shares were canceled. The option to acquire 20,000 shares was exercised
in January 1995.

<PAGE>

In August 1993, the Company entered into a Stock Option Agreement with
William A. Martindale. Pursuant to the agreement, the Company granted Mr.
Martindale an option to acquire 150,000 shares of the Company's Common Stock at
an exercise price of $4.00 per share. The option granted to Mr. Martindale
vested at the rate of 30,000 shares on each of the first through fifth
anniversary of the agreement. Vesting of options were generally conditioned
upon Mr. Martindale being in the employment of the Company on the vesting dates.
All options granted in the Stock Option Agreement expire in September 1998.
Pursuant to the agreement, thirty days subsequent to Mr. Martindale's
September 1, 1995 resignation, all options covered by the agreement were
automatically canceled.

On June 1, 1994, the Company, as compensation for investment banking
services, entered into Stock Option Agreements with Joseph Charles & Company,
Andrew Lassak, Vestcap International Management Ltd. and Paige and Associates
Corp. The option granted Joseph Charles & Company covers 12,500 shares of
common stock at an exercise price of $3.50 per share and expires November 30,
1996. The option granted to Andrew Lassak covers 37,500 shares of common stock
at an exercise price of $3.50 per share and expires November 30, 1996. The
option granted to Vestcap International Management Ltd. covers 50,000 shares of
common stock at an exercise price of $4.00 per share and expired on May 31,
1996. The option granted to Paige and Associates Corp. covers 100,000 shares of
common stock at an exercise price of $3.00 per share and expires on May 31,
1997. Paige and Associates Corp. exercised options to acquire 30,500 shares
during the fiscal year ended June 30, 1995.

BENEFIT PLANS

Effective April 1, 1993, the Company adopted a Deferred Compensation 401K
Plan (the "Plan") covering all full-time employees of itself and its
subsidiaries. To be eligible to participate in the Plan, employees, with the
exception of drivers, must have been employed by the Company for 90 days;
drivers are eligible to participate following one year of service. Employees
involved in the Plan may contribute up to 20% of their compensation, on a pre-
tax basis, subject to statutory and Internal Revenue Service guidelines.
Contributions to the Plan are invested at the direction of the participant.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of June 30, 1996 by (i) each director of the
Company, (ii) each person nominated to become a director of the Company, (iii)
each of the executive officers named in the Summary Compensation Table above,
(iv) all directors and executive officers of the Company as a group, and (v)
each person known by the Company to own beneficially more than five (5%) percent
of the Common Stock.

<PAGE>

AMOUNT AND
TITLE OF CLASS NAME AND ADDRESS OF NATURE OF
PERCENT OF CLASS BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
- ---------------- -------------------- ---------- ---------

Common Timothy Lepper . . . .313,300 6.53
18 Kilkenny Court
Fairport, NY 14450

Common Mark Boyer (1) . . . .289,200 6.02
1 Bush Street, #1150
San Francisco, CA 94104

Common Wayne N. Parry . . . .325,000 6.77
27 Fall Meadow Drive
Pittsford, NY 14534

Common Barry Plost . . . .250,000 5.21
10701 Wilshire Blvd.
Suite 1802
Los Angeles, CA 90024

Common Special Situations Funds . . . .333,333 6.94
625 Madison Avenue
10th Floor
New York, NY 10022

Common Salcot Holdings Limited . . . .350,000 7.29
c/o McGoodwin James & Co.
611 Anton Blvd.
Suite 1250
Costa Mesa, CA 92626

Common All Directors and Officers . . . .927,500 19.32
as a group (3 individuals)

(1) 217,200 of the shares attributed to Mark Boyer are owned by ROI
Partners, ROI & Lane L. P. or accounts controlled by ROI Partners. Mr.
Boyer is a general partner of ROI Partners and as such, controls said
shares.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with the Company's discontinuance of the product sales
segment, Nationwide Produce Co., the Company discovered a potential irregularity
relative to misappropriation of cash receipts totaling approximately $497,000 by
an former officer and director. Current management and the other members of the
board of directors performed a review of the method of concealment which
consisted of depositing customer checks into a bank account of an entity owned
by the former officer and director. Management notified corporate as well as
outside legal counsel, Credit Manager's Association of California, which is the
trustee of Nationwide Produce Co. and Nationwide's secured lender whose
collateral is the subject of the potential irregularity. As a result of the
foregoing, the Company established a reserve as of June 30, 1995 of $497,000
against the trade receivables of the discontinued segment. Based on procedures
performed by the Company, management does not believe that there exists any
other potential material irregularities. (See also Item #3 Legal Proceedings
contained herewithin).

Effective September 18, 1995, the Company's subsidiary, Nationwide Produce
Co., made a General Assignment of all assets of the corporation for the pro rata
benefit of all creditors of the Corporation. A General Assignment under
California state law is an alternative to Chapter 7 bankruptcy liquidation.

Effective July 1, 1994, the Company acquired Vertex Transportation, Inc.
from Timothy Lepper and Wayne Parry. the former shareholders. The purchase price
of $3,571,000 was paid in cash of $2,231,000 and through the issuance of 500,000
newly issued shares of common stock valued at $2.50 per share. Additionally,
effective July 1, 1994 CW Truck entered into a five year lease of certain
office space and warehouse facilities in East Rochester, NY with Vertex
Investment Partners, a partnership whose partners are Wayne Parry and Timothy
Lepper. The lease provides for annual rental payments of $90,000.

Effective September 1, 1995, William Martindale resigned as an officer and
employee of the Company. For and in consideration of (a) the execution of a
consulting agreement through June 30, 1998 totaling approximately $200,000, (b)
the transfer and assignment of 88,845 shares of the Company's common stock to
the Company by Martindale and/or Martrade Ltd., (c) the release of Martindale
from any and all guaranties to repay indebtedness, if any, of Martrade Ltd. to
the Company or any of its subsidiaries under a certain loan agreement dated
August 31, 1994, and (d) cancellation of Martindale's employment agreement with
the Company, the debt of Martrade Ltd. to Nationwide Produce Co. of
approximately $666,000 was settled and compromised as of September 1, 1995 Also
effective September 30, 1995, Martindale resigned as a director of the Company.
On November 30, 1995, the board of directors informed Martindale of their
decision to cancel the above-mentioned consulting agreement with an effective
date of September 1, 1995.

<PAGE>

On June 1, 1994 Martrade Ltd. purchased from Barry Plost an option to
acquire 410,000 shares of the Company's Common Stock at prices ranging from
$4.30 to $4.50 per share. Martrade Ltd. paid Barry Plost consideration totaling
$300,000 to acquire the option. On July 5, 1994, Martrade Ltd. exercised its
right to acquire 200,000 of the option shares on January 4, 1995. Also on
July 5, 1994, Martrade Ltd. exercised its right to acquire 210,000 of the option
shares on June 1, 1995. Martrade Ltd. did not consummate the purchase of the
option shares.

Effective May 15, 1994, the Company acquired from Martrade Ltd. certain
food brokerage trading businesses and related supply and agency agreements for a
consideration of $750,000. The consideration consisted of $150,00 cash and
$600,000 reduction of debt.

Martrade Ltd. and William A. Martindale are parties to an agreement with
the Company which requires Martrade Ltd. to repay monies it has received from
the Company. At June 30, 1995, the amount owed by Martrade Ltd. to the Company
for such monies was approximately $669,000. Such note was forgiven upon Mr.
Martindale's resignation on September 1, 1995 (see further disclosure herein).

During the fiscal years ended June 30, 1996 and 1995 the Company received
$58,000 and $63,000 of management fee income from a company which is owned in
part by two officers/directors of the Company. Subsequent to June 30, 1996 the
Company began direct billings to this company for transportation brokerage
services.

During the fiscal years ended June 30, 1996, 1995 and 1994, the Company
paid to law firms which John C. Russell, a director, is or was a partner of,
approximately $53,000, $172,000 and $97,000, respectively.

During the fiscal years ended June 30, 1996 and 1995 the Company paid to a
CPA firm which Nathan W. Gordon, the CFO was the owner , approximately $10,000
and $10,000, respectively.

<PAGE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS
ON FORM 8-K

(a) 1. Financial Statements

The financial statements listed on the accompanying Index to Financial
Statements and Financial Statement Schedule Covered by Report of
Independent Auditors are filed as part of this report.

2. Schedule

The schedule listed on the accompanying Index to Financial Statements and
Financial Statement Schedule Covered by Report of Independent Auditors are
filed as part of this report.

3. Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed as part
of this report.

(b) Reports on Form 8-K

1. Report on Form 8-K dated September 15, 1995 regarding resignation of
William A. Martindale as Chairman of the Board, President and Chief
Executive Officer.

2. Report on Form 8-K dated September 18, 1995 regarding resignation of
Michael R. McCowan, director, and the filing by Nationwide Produce Co.
of a General Assignment for the Benefit of Creditors.

3. Report on Form 8-K dated October 26, 1995 regarding resignation of
William A. Martindale as a director.

4. Report on Form 8-K dated September 23, 1996 regarding the letter of
intent for the acquisition of the Company by Continental American
Transportation, Inc..

<PAGE>

SIGNATURES

Pursuant to the Requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on October 11, 1996.

COUNTRY WIDE TRANSPORT SERVICES, INC.

By: S/ Timothy Lepper
------------------
Timothy Lepper, President
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities indicated as of October 11, 1996.

COUNTRY WIDE TRANSPORT SERVICES, INC.

By: S/ Nathan W. Gordon
-------------------
Nathan W. Gordon
Chief Financial Officer

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on behalf of the registrant by the following persons
constituting a majority of the directors of the registrant on October 11, 1996.

Signatures Title Date
- ---------- ----- ----

S/Timothy Lepper October 11, 1996
- -------------------------
Timothy Lepper President, CEO,
Director

S/John C. Russell October 11, 1996
- -------------------------
John C. Russell Director

S/Wayne N. Parry October 11, 1996
- -------------------------
Wayne N. Parry Director

<PAGE>

INDEX TO FINANCIAL STATEMENTS

PAGE
----

INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . . . . . F-2

CONSOLIDATED BALANCE SHEETS - June 30, 1996 and 1995 . . . . . . . . . . . . F-3

CONSOLIDATED STATEMENTS OF OPERATIONS - For the Years Ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . F-4

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - For the Period from
July 1, 1993 through June 30, 1996 . . . . . . . . . . . . . . . . . . . . F-6

CONSOLIDATED STATEMENTS OF CASH FLOWS - For the Years Ended
June 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . F-7

NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . F-9

F-1

<PAGE>

INDEPENDENT AUDITOR'S REPORT

The Board of Directors and Stockholders
Country Wide Transport Services, Inc.
Corona, California

We have audited the consolidated balance sheets of Country Wide Transport
Services, Inc. and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three year period ended June 30, 1996. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Country
Wide Transport Services, Inc. and subsidiaries as of June 30, 1996 and 1995 and
the results of their operations and their cash flows for each of the years in
the three year period ended June 30, 1996 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 2 to the
financial statements, the Company suffered a loss from operations during each of
the years ended June 30, 1996 and 1995, and has a working capital deficiency at
June 30, 1996. Additionally, the Company is not in compliance with debt
covenants for its working capital line of credit, and payment terms on other
debt, and management has not yet been able to obtain waivers, nor are they
assured that they will be able to obtain waivers, from the banks regarding this
noncompliance. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are described in Note 2. The financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.

Our audits referred to above include audits of the financial statement schedule
listed under Item 14(a)(2) of Form 10K. In our opinion, the financial statement
schedule presents fairly, in all material respects, in relation to the financial
statements taken as a whole, the information required to be stated therein.

HEIN + ASSOCIATES LLP
Certified Public Accountants

Orange, California
September 9, 1996

<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30,
-------------------------
1996 1995
----------- -----------

ASSETS

CURRENT ASSETS:
Cash $ 37,000 $ 57,000
Accounts receivable, net 5,199,000 6,455,000
Accounts receivable - officers and employees 85,000 39,000
Driver advances 203,000 408,000
Inventories 29,000 31,000
Prepaid expenses 380,000 471,000
----------- -----------
Total current assets 5,933,000 7,461,000

PROPERTY AND EQUIPMENT, net 3,580,000 4,069,000

OTHER ASSETS:
Deposits 270,000 212,000
Covenants not to compete, net - 154,000
Excess of purchase price over fair value of net
assets acquired, net 4,825,000 5,055,000
Net long-term deferred tax asset - 1,959,000
----------- -----------
Total assets $14,608,000 $18,910,000
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Notes payable and current portion of long-term
debt $ 4,329,000 $ 4,159,000
Current portion of capital lease obligations - 166,000
Accounts payable and accrued liabilities 5,584,000 4,827,000
----------- -----------
Total current liabilities 9,913,000 9,152,000
LONG-TERM DEBT, LESS CURRENT PORTION 2,616,000 1,077,000
LONG-TERM CAPITAL LEASE OBLIGATIONS, LESS CURRENT
PORTION - 502,000
LIABILITIES IN EXCESS OF ASSETS OF DISCONTINUED
OPERATIONS 177,000 4,807,000
----------- -----------
Total liabilities 12,706,000 15,538,000
----------- -----------

COMMITMENTS AND CONTINGENCIES (Notes 9, 10, 11,
and 15)

STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, issuable in series, none issued - -
Common stock, $.02 par value, 10,000,000 shares
authorized, 4,801,000 shares issued and
outstanding 96,000 96,000
Warrants 40,000 40,000
Additional paid-in capital 6,763,000 6,763,000
Retained earnings (deficit) (4,997,000) (3,527,000)
----------- -----------
Total stockholders' equity 1,902,000 3,372,000
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,608,000 $18,910,000
----------- -----------
----------- -----------

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
NET REVENUES:
Transportation revenue $ 47,356,000 $ 54,744,000 $ 34,210,000
------------- ------------- -------------
OPERATING COSTS AND EXPENSES:
Purchased transportation 33,044,000 38,169,000 19,765,000
Salaries and related expenses 5,653,000 6,333,000 4,818,000
Operating expenses 4,786,000 4,598,000 4,037,000
Revenue equipment rentals 1,884,000 1,584,000 471,000
General supplies and expenses 2,336,000 2,499,000 2,110,000
Depreciation and amortization 1,256,000 1,368,000 1,298,000
------------- ------------- -------------
Total operating costs and
expenses 48,959,000 54,551,000 32,499,000
------------- ------------- -------------

OPERATING INCOME (LOSS) (1,603,000) 193,000 1,711,000

OTHER INCOME (EXPENSE):
Interest expense (741,000) (567,000) (675,000)
Interest income 33,000 22,000 2,000
Other, net (36,000) (12,000) (1,000)
Loss on sale of business division (222,000) - -
Gain on disposition of assets 19,000 130,000 55,000
------------- ------------- -------------
Total other income (expense) (947,000) (427,000) (619,000)
------------- ------------- -------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE PROVISION FOR
INCOME TAXES, DISCONTINUED
OPERATIONS AND EXTRAORDINARY
ITEM (2,550,000) (234,000) 1,092,000

PROVISION FOR INCOME TAX (EXPENSE)
BENEFIT (2,000) 65,000 (415,000)
------------- ------------- -------------

INCOME (LOSS) FROM CONTINUING
OPERATIONS (2,552,000) (169,000) 677,000
------------- ------------- -------------

DISCONTINUED OPERATIONS:
Income (loss) from discontinued
business segments, net of
applicable income tax (expense)
benefit of ($329,000), $2,116,000
and ($3,000) for the years ended
June 30, 1996, 1995 and 1994,
respectively (1,288,000) (5,242,000) 4,000
------------- ------------- -------------

NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (3,840,000) (5,411,000) 681,000
EXTRAORDINARY ITEM:
Gain on forgiveness of debt of
discontinued operations, net of
applicable income tax expense
of $1,630,000 (Note 10) 2,370,000 - -
------------- ------------- -------------

(continued)

F-4

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
NET INCOME (LOSS) $ (1,470,000) $ (5,411,000) $ 681,000
------------- ------------- -------------
------------- ------------- -------------

NET INCOME (LOSS) PER COMMON
SHARE:
Continuing operations $ (0.53) $ (0.03) $ 0.18
Discontinued operations (0.27) (1.10) -
Extraordinary item 0.49 - -
------------- ------------- -------------
Net Income (loss) per common
share (0.31) $ (1.13) $ 0.18
------------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 4,801,000 4,774,000 3,832,000
------------- ------------- -------------
------------- ------------- -------------

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------- ADDITIONAL RETAINED TOTAL
NUMBER OF PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT WARRANTS CAPITAL (DEFICIT) EQUITY
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, July 1, 1993 3,500,000 $ 70,000 $ - $ 4,256,000 $ 1,203,000 $ 5,529,000

Sale of stock, net of costs 750,000 15,000 40,000 1,682,000 - 1,737,000
Excess of purchase price over net
assets acquired of business
operations under common control - - - (735,000) - (735,000)
Excess of fair market value over
option prices for options issued
in connection with services to
be rendered - - - 150,000 - 150,000
Net income - - - - 681,000 681,000
------------ ------------ ------------ ------------ ------------ ------------

BALANCES, June 30, 1994 4,250,000 85,000 40,000 5,353,000 1,884,000 7,362,000

Stock issued for Vertex acquisition 500,000 10,000 - 1,240,000 - 1,250,000
Exercise of options 51,000 1,000 - 170,000 - 171,000
Net loss - - - - (5,411,000) (5,411,000)
------------ ------------ ------------ ------------ ------------ ------------

BALANCES, June 30, 1995 4,801,000 96,000 40,000 6,763,000 (3,527,000) 3,372,000

Net loss - - - - (1,470,000) (1,470,000)
------------ ------------ ------------ ------------ ------------ ------------

BALANCES, June 30, 1996 4,801,000 $ 96,000 $ 40,000 $ 6,763,000 $ (4,997,000) $ 1,902,000
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from continuing operations $ (2,552,000) $ (169,000) $ 677,000
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Deferred income taxes - - 423,000
Depreciation and amortization 1,256,000 1,368,000 1,298,000
Gain on disposition of assets (19,000) (130,000) (56,000)
Loss on disposal of business divisions 222,000 - -
Provision for uncollectible accounts
receivable (76,000) 17,000 274,000
Reserve adjustments - (232,000)
(Increase) decrease in:
Accounts receivable 1,332,000 (1,812,000) (2,561,000)
Accounts receivable - officers and employees (46,000) 134,000 (135,000)
Drivers advances 204,000 (54,000) (370,000)
Inventories 2,000 71,000 (387,000)
Prepaid expenses 92,000 29,000 (318,000)
Deposits (58,000) (40,000) (76,000)
Increase (decrease) in:
Accounts payable and accrued liabilities 757,000 1,518,000 1,361,000
------------ ------------ ------------
Net cash provided by (used in) operating
activities from continuing operations 1,114,000 932,000 (102,000)
------------ ------------ ------------

Net income (loss) from discontinued operations (1,288,000) (5,242,000) 4,000
Depreciation and amortization 8,000 132,000 150,000
(Gain) loss on disposition of assets 14,000 - (238,000)
Deferred income taxes - (2,116,000) -
Provision for uncollectible accounts and
notes receivable - 1,327,000 -
Valuation allowance on forgiven note
receivable from related party - 613,000 -
Reserve for loss on potential irregularity - 497,000 -
Changes in operating assets 274,000 2,249,000 -
------------ ------------ ------------
Net cash used in operating activities
from discontinued operations (992,000) (2,540,000) (84,000)
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in notes receivable - (3,000) (181,000)
Collections on notes receivable - 81,000 87,000
Increase in note receivable - related party - (17,000) (1,242,000)
Collections on note receivable - related party - 135,000 764,000
Additions to property and equipment (408,000) (844,000) (520,000)
</TABLE>
(continued)

F-7
<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Proceeds from disposal of property
and equipment 3,028,000 774,000 950,000
Proceeds from disposal of business division 70,000 - -
Additions to intangibles - (222,000) (1,000)
Merger and acquisition costs - - (33,000)
------------ ------------ ------------
Net cash provided by (used in) investing
activities 2,690,000 (96,000) (176,000)
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (58,954,000) (65,676,000) (4,830,000)
Net cash borrowings from line of credit 56,151,000 66,356,000 4,035,000
Payments on notes payable (29,000) - -
Sale of common stock, net - 171,000 1,902,000
------------ ------------ ------------
Net cash provided by (used in) financing
activities (2,832,000) 851,000 1,107,000
------------ ------------ ------------

INCREASE (DECREASE) IN CASH (20,000) (853,000) 745,000

CASH, at beginning of year 57,000 910,000 165,000
------------ ------------ ------------

CASH, at end of year $ 37,000 $ 57,000 $ 910,000
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 719,000 $ 870,000 $ 761,000
------------ ------------ ------------
------------ ------------ ------------
Income taxes $ 47,000 $ 25,000 $ 28,000
------------ ------------ ------------
------------ ------------ ------------

Non-cash investing and financing transactions:
Purchase of property and equipment with
debt or reduction of receivable $ 3,316,000 $ 117,000 $ 101,000
------------ ------------ ------------
------------ ------------ ------------
Property and equipment purchased for
forgiveness of note receivable
- related party $ - $ - $ 600,000
------------ ------------ ------------
------------ ------------ ------------
Propery and equipment sold for note
receivable $ - $ - $ 620,000
------------ ------------ ------------
------------ ------------ ------------
Reduction of debt and goodwill associated
with Delfino & Rosen asset sale $ - $ - $ 45,000
------------ ------------ ------------
------------ ------------ ------------
Excess of fair market value over option
price for options issued for services
to be rendered $ - $ - $ 150,000
------------ ------------ ------------
------------ ------------ ------------
Equipment sold for short-term receivable $ - $ - $ 450,000
------------ ------------ ------------
------------ ------------ ------------
Net assets of Vertex Transportation, Inc.
acquired with common stock $ - $ 1,250,000 $ -
------------ ------------ ------------
------------ ------------ ------------
Liabilities surrendered in connection
with disposal of business division $ 43,835 $ - $ -
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to these consolidated financial statements.

F-8

<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Country Wide Transport Services, Inc. ("CWTS") was incorporated in the
State of Delaware in 1987. Its wholly-owned subsidiary, Country Wide Truck
Service, Inc. ("CW Truck") is an irregular-route, truckload common and
contract carrier which transports a wide variety of commodities requiring
temperature control throughout the continental United States and Canada.
During the fiscal year ended June 30, 1996, CW Truck sold its CK Trucking
and Freight Peddlers Divisions. Through its wholly-owned subsidiary,
Vertex Transportation, Inc. ("Vertex"), CW Truck operates as a full service
logistics company which provides truckload, less-than truckload (LTL),
intermodal, and international transportation services. Vertex operated as
a division of CW Truck until its incorporation on June 27, 1996.

Through its wholly-owned subsidiary, Nationwide Produce Co. ("Nationwide"),
the Company operated a full service product sales marketing firm importing,
exporting and distributing conventional and organic produce as well as
consumer food products nationwide and overseas. CWTS merged with
Nationwide Produce Co. (formerly known as Yellowstone Transportation, Inc.,
"Yellowstone") effective July 1, 1992 (See Note 3). During the fiscal year
ended June 30, 1995, the Company discontinued the product sales segment
operated by Nationwide as a result of significant losses within the
subsidiary. Results of operations for the product sales segment have been
classified as discontinued operations for all periods presented (See Note
10).

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of CWTS and subsidiaries ("the Company"). All significant
intercompany transactions have been elminated in consolidation.

DRIVER ADVANCES - The Company periodically advances funds to drivers during
the normal course of business. Drivers are advanced funds for expenses
incurred during trips. All such advances are offset against total amounts
due upon settlement.

INVENTORIES - Inventories for the trucking operations consist primarily of
spare parts and oil and are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are stated
at cost. Provision for depreciation and amortization on property and
equipment is calculated using the straight-line and accelerated methods
over the estimated useful lives of the assets. Salvage values of 20% to
30% are used in the calculation of depreciation for transportation revenue
equipment.

When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts, and any resulting
gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to income as incurred whereas
significant renewals and betterments are capitalized. Maintenance and
repairs expense for the transportation segment for the years ended June 30,
1996, 1995 and 1994 was $518,000, $682,000 and $1,111,000, respectively.

Tires on new transportation revenue equipment are capitalized as a
component of the related equipment cost when the vehicle is placed in
service and recovered through depreciation over the life of the vehicle.

F-9
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The cost of replacement tires, including recapped tires, is capitalized and
amortized over the estimated tire lives.

INTANGIBLE ASSETS - The excess of the aggregate purchase price over the
fair value of net assets of businesses acquired is included in the
accompanying balance sheet as "Excess of purchase price over fair value of
net assets acquired" ("Goodwill") and is being amortized over periods
ranging from 25 to 30 years using the straight-line method. Goodwill
amounts are reported net of accumulated amortization of $599,000 and
$392,000 at June 30, 1996 and 1995, respectively. The carrying value of
goodwill is evaluated at least annually. The Company considers current
facts and circumstances related to purchased entities, including expected
future operating income, to determine whether it is probable that
impairment has occurred. The value attributed for goodwill is reduced by
the tax effect from utilization of net operating loss carryforwards
acquired in the merger (See Note 13).

Covenants not to compete are being amortized over the terms of their
respective agreements and are carried at cost, less accumulated
amortization of, $39,000 at June 30, 1995. There were no covenants not to
compete in effect at June 30, 1996.

ACCOUNTING FOR LONG-LIVED ASSETS - In March 1995, the Financial Accounting
Standards Board issued statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets". The Company adopted
SFAS No. 121 upon its issuance. SFAS 121 requires the Company to compare
the net carrying value of long-lived assets to the related estimates of
future cash flows, and other criteria, if recoverability of a long-lived
asset is in doubt, to determine if impairment has occurred. If it is
determined that the net carrying value is overstated, then impairment is
recognized to reduce the carrying value to the estimated fair value. The
change in the Company's accounting policy for impairment for long-lived
assets had no effect on the Company's financial statements on the date of
adoption.

ACCRUED INSURANCE AND LOSS RESERVES - The Company retains a portion of the
risk under vehicle liability, cargo loss, physical damage and other
insurance programs. Reserves have been recorded which reflect estimated
liabilities including claims incurred but not reported. Amounts estimated
to be paid within one year have been classified as accrued expenses with
the remainder, if any, included in other non-current liabilities.

REVENUE RECONGNITION - Transportation revenues and related expenses are
recognized using a method which approximates recognition of both revenue
and direct costs when shipment is completed.

INCOME TAXES - The Company accounts for income taxes under the liability
method, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between
the financial statements and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.

ACCOUNTING FOR STOCK-BASED COMPENSATION - In October 1995, the Financial
Accounting Standards Board issued a new statement titled "Accounting for
Stock-Based Compensation" (FAS 123). The new statement is effective for
fiscal years beginning after December 15, 1995. FAS 123 encourages, but
does not

F-10
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments to employees based on fair
value. Companies that do not adopt the fair value accounting rules must
disclose the impact of adopting the new method in the notes to the
financial statements. Transactions in equity instruments with non-
employees for goods or services must be accounted for on the fair value
method. The Company currently does not intend to adopt the fair value
accounting prescribed by FAS 123 for its employees, and will be subject
only to the disclosure requirements prescribed by FAS 123. However, the
Company intends to continue its analysis of FAS 123 and may elect to adopt
its provisions in the future.

EARNINGS PER COMMON SHARE - Earnings per common share was computed based on
the weighted average number of shares outstanding during the period
presented. The effect on earnings per common share from outstanding stock
options and warrants was antidilutive or immaterial.

STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

USE OF ESTIMATES - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company's management to make estimates and assumption that
affect the amount reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.

The Company's financial statements are based upon a number of significant
estimates, including the allowance for doubtful accounts, the estimated
useful lives for property and equipment, realizability of deferred tax
assets, recoverability of goodwill, and claims reserve. Due to the
uncertainties inherent in the estimation process, it is at least reasonably
possible that these estimates will be further revised in the near term and
such revisions could be material.

CONCENTRATIONS OF CREDIT RISK - Credit Risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk
(whether on or off balance sheet) that arise from financial instruments
exist for groups of customers or groups of counterparties when they have
similar ecomonmic characteristics that would cause their ability to meet
contractual obligations to be similarly effected by changes in economic or
other conditions described below. In accordance with FASB Statement No.
105, DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-
BALANCE-SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT
RISK, the credit risk amounts shown do not take into account the value of
any collateral or security.

FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values for
financial instruments under SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS, are determined at discrete points in time based on
relevant market information. These estimates invlove uncertainties and
cannot be determined with precision. The estimated fair values of the
Company's financial instruments, which includes all cash, accounts
receivables, accounts payable, long-term debt, and other debt, approximates
the carrying value in the consolidated financial statements at June 30,
1996.

RECLASSIFICATION - Certain reclassifications have been made to the prior
year consolidated financial

F-11
<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

statements to conform with the current presentation. Such
reclassifications had no effect on net income (loss).

2. UNCERTAINTY AS TO GOING CONCERN:

As shown in the accompanying consolidated financial statements, the Company
has reported significant net losses for the years ended June 30, 1996 and
1995, and at June 30, 1996, had a deficit in working capital of $3,980,000.
Additionally, the Company was in default with the majority of the loan
covenants on loans with its primary lender. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern.

Management commenced a program during 1995 to downsize the remaining
operations and to eliminate all excessive expenses. Such program continues
to be implemented, however, there is no assurance that the program will
ultimately be successful in returning the Company to profitability.

The financial statements do not include any adjustments relating to the
recoverability and classification of reported asset amounts or the amounts
and classification of liabilities that might result from the outcome of
this uncertainity.

3. MERGERS, ACQUISITIONS, AND DIVESTITURES:

During October 1992, the Company formed Oasis Mountain Citrus, Inc.
("Oasis"), a California corporation and wholly-owned subsidiary of CW
Truck, for the purpose of acquiring assets of a citrus packing operation
located in Thermal, California. The purchase price was $160,000 and the
transaction was accounted for using the purchase method. Amounts assigned
in the accompanying consolidated balance sheets to assets purchased and
liabilities assumed as of the date of acquisition were based upon their
estimated fair values (See Note 8). Oasis had insignificant operations
through the date of acquisition.

On April 29, 1994, the Company executed an agreement to sell its produce
packing operation and related assets located in Thermal, California. The
purchaser was an unrelated corporation and the purchase was effective June
30, 1994. The sales price was $900,000 payable in $220,000 cash and a
$680,000 interest bearing note payable over six years. The sale resulted
in a gain to the Company in the amount of approximately $247,000. For the
year ended June 30, 1994, the packing operation incurred a pretax loss of
approximately $252,000 on revenue of approximately $950,000. As of June
30, 1995 the note was in default and in dispute with the maker.
Accordingly, the balance was fully reserved as of June 30, 1995.

Effective April 1, 1993, CW Truck acquired certain assets of Freight
Peddlers, Inc. for $100,000. This transcation was accounted for using the
purchase method and resulted in $12,000 of goodwill, representing the
excess of the purchase price over the fair market value of net assets
acquired. In addition, the Company paid the former owner $100,000 in the
form of notes payable and 25,000 shares of the Company's common stock,
valued at $81,000, for a covenant not to compete (See Note 8). Freight
Peddlers had insignificant operations through the date of acquisition.
Effective March 1, 1996, the

F-12
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company sold certain assets of its Freight Peddlers division to a former
officer of the Company for $50,000 cash and a fully-reserved $200,000
unsecured promissory note receivable. The note receivable is payable over
time through a reduction in potential future commission expense incurred by
the Company and payable to the buyer. The net loss on the sale was
$222,000 which includes the fully-reserved, unsecured $200,000 promissory
note receivable. Revenues for the division for the years ended June 30,
1996, 1995 and 1994 were $1,204,000, $2,524,000 and $4,163,000,
respectively and operating losses for the same periods were $319,000,
$119,000 and $99,000, respectively.

On November 17, 1995, the Company sold certain assets of its CK Trucking
division for $20,000 and the assumption of certain liabilities totaling
approximately $44,000. The net gain on the sale was approximately $6,000.
Revenues for the division for the years ended June 30, 1996, 1995, and 1994
were $588,000, $1,496,000, and $1,485,000, respectively and operating
income (losses) for the same periods were $(24,000), $78,000, and $95,000,
respectively.

During May 1994, the Company purchased the export trading and animal feed
ingredients businesses of Martrade Ltd. for $150,000 in cash and the
extinguishment of $600,000 in debt owed by Martrade Ltd. to the Company.
Martrade Ltd. was 100% owned by an officer/director/stockholder of the
Company prior to its acquisition. For a ninety day period commencing on
July 1, 1996, the Company will have the right to require Martrade Ltd. to
repurchase the business segments and assets for $750,000 if the sales
volume does not meet certain specificed criteria for fiscal years ending
June 30, 1995 and 1996. The operations and assets purchased of Martrade
Ltd. were not material to the operations of the Company. In consummating
the transaction, the Company reviewed an independent appraisal of the
business segments purchased, which indicated a value of approximately 100%
greater than the purchase price. Additionally, the Board of Directors
formed a subcommittee to evaluate the transaction. The subcommittee
retained its own independent accounting and legal counsel to review the
transaction. After the subcommittee's review, they reported unanimously
that the transaction should be completed. Accordingly, in accordance with
Accounting Principal Board Opinion Number 16, the transaction was accounted
for as a purchase, with the net assets recorded at their historical net
book value. The excess of the purchase price over the historical net book
value was charged to paid in capital due to the transaction occurring
between entities under common control.

Effective June 30, 1994, Yellowstone, Nationwide, Delfino and Rosen and CW
Produce merged into Yellowstone as the surviving entity and the shares of
the subsidiary corporations were surrendered and canceled. Effective June
30, 1994, Yellowstone formally changed its name to Nationwide Produce Co.

On July 1, 1994, the Company completed the acquisition of Vertex
Transportation, Inc., a privately-held, integrated logistics company
located in Rochester, New York for $2,321,000 in cash and 500,000 shares of
the Company's common stock valued at $2.50 per share in exchange for all of
the Vertex outstanding shares. The acquisition was accounted for as a
purchase. Vertex operated as a division of Country Wide Truck Services,
Inc. from July 1, 1994 until June 27, 1996 at which time Vertex was
incorporated as a wholly-owned subsidiary of the Company. The purchase
price of $3,571,000 was allocated to the net assets acquired, which
approximated their fair market value. The excess of purchase price over
the recorded book value has been allocated to "Excess of purchase price
over fair value of net assets acquired" which orginally totaled $2,776,000.
Such amount are amortized to expense using the straight-line method

F-13
<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

over a twenty-five year period. Vertex operations have been consolidated
with the Company and are included in the accompanying statement of
operations commencing on the effective merger date.

In connection with the purchase, the two prior owners entered into three-
year convenants not to compete and five-year employment contracts which
provide for minimum salary levels of $250,000 each per annum and incentive
bonuses. Additionally, the Company has agreed to rent a facility from the
prior owners for a term of 5 years commencing July 1, 1994 at an amount of
$90,000 per annum.

Additionally, see Note 10.

4. ACCOUNTS RECEIVABLE:

For the fiscal years ended June 30, 1995 and 1994, the Company operated in
two industry segments, transportation and the marketing and selling of food
products. Effective September 18, 1995, the Company ceased the marketing
and selling of food products by making a General Assignment of all of the
segments assets for the pro-rata benefit of all creditors (See Note 10).

The Company's transportation segment provides services to the temperature-
controlled and general commodities truckload freight market throughout the
continental United States and Canada. Accounts receivable for the
transportation segment, net of allowance for doubtful accounts, amounted to
$5,199,000 and $6,455,000, at June 30, 1996, and 1995, respectively. The
Company performs periodic credit evaluation of its customers' financial
condition and generally does not require collateral. The Company has
recorded allowances of $122,000, and $198,000, at June 30, 1996 and 1995,
respectively, which have been netted against the related amounts
receivable.

The Company's product sales segment was primarily concentrated in the
western United States including Hawaii, Guam, and the Pacific Rim.
Accounts receivable for the product sales segment, net of allowance for
doubtful accounts, amounted to $4,606,000, at June 30, 1995. The balance
at June 30, 1995 is included in the accompanying balance sheet in the
account entitled "Liabilities in excess of assets of discontinued
operations." The Company has recorded an allowance of $250,000, at June
30, 1995, which has been netted against related amounts receivable (See
Note 10).

5. NOTES RECEIVABLE:

Notes receivable are attributed to the discontinued product sales segment;
therefore, the balances at June 30, 1995 are included in the accompanying
balance sheets in the account entitled "Liabilities in excess of assets of
discontinued operations."

F-14
<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes receivable consisted of the following:

JUNE 30, 1995

Unsecured note receivable, due on or before
September 1996 with interest at 9 1/2% $ 25,000
Note receivable, due in monthly installments of
$806 including interest at 10% through May 2001,
when the remaining principal balance is due,
collateralized by real property 64,000
Unsecured, non-interest bearing note
receivable, due on demand 76,000
Unsecured, non-interest bearing note
receivable, due in monthly installments
of $5,951 through January 1995 16,000
Note receivable, due in six annual installments
of $133,912, commencing June 1995 through
June 2000, plus interest with a face contract
amount of 5% discounted at 7 3/4% collateralized
by certain equipment. At June 30, 1995, the
face contract amount of the note was $680,000
while the related interest discount was $60,000 620,000
----------
801,000
Less current portion -
Less valuation allowances 656,000
----------
$ 145,000
----------
----------

The $620,000 note arose from the sale of the produce packing operations and
related assets of Oasis Mountain Citrus, Inc. effective June 30, 1994 (See Note
3). The borrower has defaulted on the first principal installment of $113,912
due June 1, 1995, citing a dispute arising from related grower advances. The
Company has not recognized interest income for the year ended June 30, 1995
pending resolution of the dispute and has reserved the entire balance as of June
30, 1995 (See Note 10).

F-15

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. INVENTORIES:

Inventories consisted of the following:

JUNE 30,
------------------------
1996 1995
---------- ----------

Transportation:

Spare parts and tires $ 28,000 $ 21,000
Fuel and oil 1,000 10,000
--------- ----------
29,000 31,000
--------- ----------
Product sales:

Produce - 67,000
Product held for export - 476,000
--------- ----------
- 543,000
--------- ----------
$ 29,000 $ 574,000
--------- ----------
--------- ----------

The balance at June 30, 1995 for the product sales segment is included in
the accompanying balance sheets in the account entitled "Liabilities in
excess of assets of discontinued operations" (See Note 10).

7. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following:
<TABLE>
<CAPTION>

JUNE 30, ESTIMATED
------------------------------
1996 1995 USEFUL LIVES
------------ ------------ ------------

<S> <C> <C> <C>
Revenue equipment $ 3,834,000 $ 5,535,000 5 to 7 years
Service cars 11,000 164,000 5 years
Furniture and office equipment 505,000 627,000 4 to 5 years
Machinery and equipment 29,000 37,000 5 years
Leasehold improvements 137,000 145,000 life of lease
------------ ------------
4,516,000 6,508,000
Less accumulated depreciation and
amortization (936,000) (2,439,000)
$ 3,580,000 $ 4,069,000
------------ ------------
------------ ------------

</TABLE>

The balance at June 30, 1995 for the product sales segment is included in
the accompanying balance sheets

F-16

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the account entitled "Liabilities in excess of assets of discontinued
operations" (See Note 10).

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

Accounts payable and accrued liabilities consisted of the following:

JUNE 30,
----------------------------
1996 1995
------------ ------------
Transportation:
Accounts payable $ 1,390,000 $ 1,957,000
Accrued insurance 469,000 652,000
Accrued purchased transportation 2,766,000 1,621,000
Other accrued expenses 959,000 597,000
------------ ------------
5,584,000 4,827,000
------------ ------------
Product sales:
Accounts payable - 6,473,000
Other accrued expenses - 360,000
------------ ------------
- 6,833,000
$ 5,584,000 $ 11,660,000
------------ ------------
------------ ------------

The balances at June 30, 1995 for the product sales segment are included in
the accompanying balance sheets in the account entitled "Liabilities in
excess of assets of discontinued operations" (See Note 10).

9. NOTES PAYABLE AND LONG-TERM DEBT:

Notes payable and long-term debt consisted of the following:

JUNE 30,
----------------------------
1996 1995
------------ ------------

Transportation:

Note payable to bank under a
revolving credit agreement, due on
demand, bearing interest at the
bank's prime rate plus 3%
(11 1/4% at June 30, 1996),
collateralized by substantially
all assets of CW Truck $2,726,000 $3,027,000

Note payable, payable in monthly
installments of $9,375 plus interest
at prime plus 3/4%, collateralized
by certain revenue equipment - 328,000

F-17

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30,
----------------------------
1996 1995
------------ ------------

Note payable to bank under a non-
revolving agreement, bearing
interest at the bank's prime rate
plus 3/4% collateralized by certain
equipment - 87,000

Notes payable, due in aggregate
monthly installments of $24,000
including interest at 9 3/4%,
maturing at various dates through
December 2000, collateralized by
certain revenue equipment 2,974,000 -

Notes payable, due in aggregate monthly
installments of $7,800 including
interest at 8 3/4%, maturing at
various dates through November 1997,
collateralized by certain revenue
equipment 44,000 1,733,000

Notes payable, due in aggregate
monthly installments of $2,000
including interest ranging from
12.6% to 28%, maturing at various
dates through June 1997,
collateralized by certain computer
equipment 23,000 40,000

Notes payable, due in quarterly
installments of $30,000 including
interest at 10%, maturing April 1996,
unsecured 269,000 -

Notes payable, due in aggregate
monthly installments of $18,900,
including interest at 6.99%,
maturing October 1996, unsecured 75,000 -

Notes payable, due in aggregate
monthly installments of $2,160
including interest ranging from
8.25% to 10.70%, collateralized
by certain service cars - 21,000
------------ ------------
6,111,000 5,236,000
------------ ------------
------------ ------------

Product Sales:

Note payable to bank under a
revolving credit agreement,
due on demand bearing interest
at the bank's prime rate plus
5% (13 1/4% at June 30, 1996),
collateralized by substantially
all assets of Nationwide,
guaranteed by CW Truck.Such
debt was assumed by CW Truck
during 1996. 834,000 3,305,000

Unsecured note payable to bank,
guaranteed by Martrade and its
majority stockholder, due in
monthly installments of $3,000
through September 1995, including
interest at 9%, with a final
principal payment of $126,000
due October 1995 - 145,000

F-18

<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30,
----------------------------
1996 1995
------------ ------------

Note payable, due in monthly
installments of $806 plus interest
at 15.2% through June 1999,
collateralized by certain
telephone equipment - 29,000
------------ ------------
834,000 3,479,000
------------ ------------
6,945,000 8,715,000

Less current portion (4,329,000) (7,638,000)
------------ ------------

$2,616,000 $1,077,000
------------ ------------
------------ ------------

The $2,726,000 note at June 30, 1996 arises from a credit agreement with a
commercial bank for CW Truck which provides for maximum outstanding
borrowings aggregating $4.75 million reducing to $4.5 million on October 1,
1996 and expiring on December 31, 1996. The aggregate amount of advances
under the revolving credit agreement is limited to 80% of the eligible
accounts receivable, less any reserves the bank elects to establish, not to
exceed the aggregate principal amount. The obligations are collateralized
by substantially all of the assets of the Company and include the personal
guarantee of a former director and member of senior management, aggregating
$500,000. Under the terms of the agreements, the borrower is restricted
from paying dividends on any classes of its stock and the Company is
required to maintain certain ratios and be in compliance with other
covenants. At June 30, 1996 and 1995, the Company was not in compliance
with certain covenant, and, as a result, is considered in default rendering
the corresponding obligations due on demand. Management has commenced
negotiations with the lender to obtain waivers and/or revised covenants
while continuing to utilize the facility on a revolving basis. The
outstanding indebtedness under these facilities has been classified as a
current obligation.

The $3,305,000 note at June 30, 1995 arises from Nationwide's revolving
credit agreement with the same commercial bank. The aggregate amount of
advances under the agreement was limited to 75% of the eligible accounts
receivable, less any reserves the bank elects to establish, not to exceed
the aggregate principal amount of $3.5 million. Effective September 1,
1995, the interest rate was increase to a default rate of 5.00% over the
bank's reference rate due to non-compliance with certain covenants of the
agreement. The obligation is classified as current and is cross-guaranteed
and cross-collateralized by CWTS and CW Truck. (See Note 10 regarding
General Assignment of Nationwide's assets). Subsequent to June 30, 1996 CW
Truck paid the remaining $834,000 balance on this note.

Scheduled maturities of notes payable and long term debt are as follows:

F-19

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED
JUNE 30, AMOUNT
------------ ------------

1997 $ 4,329,000
1998 759,000
1999 804,000
2000 780,000
2001 273,000

Total $ 6,945,000
------------
------------

10. DISCONTINUED OPERATIONS:

Having experienced significant losses in the product sales segment, the
Company's Board of Directors decided on June 26, 1995 to discontinue the
entire segment through an orderly liquidation process which they estimated
would occur over the subsequent two month period. Immediately thereafter,
the Company commenced to close the operations and on September 18, 1995
made a General Assignment of all assets of its subsidiary, Nationwide
Produce Co., for the pro rata benefit of all creditors of the subsidiary.
During the fiscal year ended June 30, 1996, the Company realized a net gain
to the extent of unpaid liabilities (not guaranteed or assumed by CWTS or
CW Truck) in excess of assets and operating losses from July 1, 1995 to
date of liquidation related to the liquidation of Nationwide.

At June 30, 1995, all related assets and liabilities of the product sales
segment were combined in the accompanying balance sheets in the account
entitled "Liabilities in excess of assets of discontinued operations" which
consisted of the following:

JUNE 30, 1995
--------------

Cash $ 15,000
Accounts receivable, net (Note 4) 4,606,000
Grower advances, net 6,000
Notes receivable, net (Note 5) 145,000
Inventories (Note 6) 543,000
Investment 76,000
Other assets 114,000
---------
5,505,000
---------

Accounts payable and accrued
liabilities (Note 8) 6,833,000

F-20

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes payable (Note 9) 3,479,000
------------
10,312,000
------------

Liabilities in excess of assets $ 4,807,000
------------
------------

At June 30, 1996, the Company has established a general accrual for
potential future expenses related to the discontinued segment amounting to
$177,000.

During the year ended June 30, 1996 and 1995, the Company's product sales
segment generated a net loss before income tax benefit of $959,000 and
$7,358,000, respectively, as follows:

JUNE 30,
----------------------------
1996 1995
------------ ------------

Revenue $ 4,307,000 $ 52,953,000
------------ ------------

Expenses:
Cost of sales 3,977,000 49,606,000
Salaries and related expenses 460,000 3,947,000
Operating expenses 134,000 509,000
General supplies and expense 116,000 3,554,000
Depreciation and amortization 8,000 130,000
Interest, net 171,000 294,000
Impairment expense on investment in
produce doors
- 533,000
Valuation allowance on forgiven note
receivable from related party - 613,000
Reserve for loss on potential
irregularity - 497,000
Impairment expense on property and
equipment, and goodwill - 548,000
Other 400,000 80,000
------------ ------------
Total expenses 5,266,000 60,311,000
------------ ------------

Loss before income tax
(expense) benefit $ (959,000) $(7,358,000)
------------ ------------
------------ ------------

Revenues applicable to the discontinued product sales segment were
approximately $4,307,000, $52,953,000, and $22,723,000, for the years ended
June 30, 1996, 1995, and 1994, respectively. During the year ended June
30, 1994, Nationwide discontinued its produce cultivating operation in the

F-21

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

country of Mexico. The assets of the operation consisted primarily of cash
and accounts receivable and were transferred back to Nationwide. Revenues
applicable to the discontinued operation were approximately $18,000 for the
year ended June 30, 1994.

11. COMMITMENTS AND CONTINGENCIES:

Leases - The Company has operating lease commitments for revenue equipment
and office and terminal property, exclusive of owner/operator lease
agreements, which expire over the next ten years. Property and equipment
includes revenue equipment under capital leases at June 30, 1995 of
$1,112,000 less accumulated amortization of $306,000. Amortization of
leased revenue equipment under capital leases is included in depreciation
and amortization expense.

The following is a schedule of future minimum lease payments for operating
leases (with initial or remaining terms in excess of one year) as of June
30, 1996:

OPERATING
YEAR ENDING JUNE 30, LEASES
-------------------- ------------
1997 $ 1,971,000
1998 1,957,000
1999 1,957,000
2000 1,726,000
2001 765,000
Thereafter 178,000
------------

Total minimum lease payments $ 8,554,000
------------
------------

Rental expense for all operating leases of the transportation segment
consisted of the following:

YEAR ENDED JUNE 30,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenue equipment rentals $ 1,884,000 $ 1,584,000 $ 471,000
Terminal, warehouse, and
office rentals 204,000 289,000 207,000
Other equipment rentals 13,000 16,000 20,000
------------ ------------ ------------
$ 2,101,000 $ 1,889,000 $ 698,000
------------ ------------ ------------
------------ ------------ ------------

</TABLE>

On September 1, 1995, the President and CEO of the Company resigned and
effectively forgave the balance owing on his employment contract. Such
officer and the Company entered into a consulting agreement calling for
such former officer to assist the Company through June 30, 1998. For these
services, the Company agreed to pay consulting and advisory fees
aggregating $200,000 through

F-22

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 1998. On November 10, 1995, the consulting agreement was
retroactively terminated effective September 1, 1995.

EMPLOYMENT CONTRACT - The Company and certain of its subsidiaries have
employment contracts with various officers with remaining terms up to three
years. Such agreements provide for minimum salary levels and incentive
bonuses, as well as severance payments upon termination or the non-
extension of employment. The aggregate commitment for future salaries at
June 30, 1996, excluding bonuses, was approximately $1,500,000.

LETTERS OF CREDIT - As of June 30, 1996, the Company had two standby
letters of credit of $100,000 each. These letters of credit expired on
July 2, 1996.

LITIGATION - The nature of the Company's business routinely results in
litigation, primarily claims for personal injury and propery damage
incurred in the transportation of freight. The Company believes that all
pending litigation of this type is adequately covered by insurance and that
adverse results in one or more of these matters would not have a material
adverse effect on its financial position or results of operations.

During September 1995, the Company's transportation subsidiary, CW Truck,
had a cargo claim that approximated $600,000 filed against it by one of its
customers. The insurance carrier, citing certain exceptions in the cargo
policy, declined to pay the claim and referred the issue to litigation on
February 27, 1996. The Company initiated legal action against the
insurance carrier and its agent. The customer additionally filed a cross
claim against the Company. Management feels that the Company's suit will
be successful. Therefore, no contingent liability has been recorded on the
Company's balance sheet as of June 30, 1996.

12. STOCKHOLDER'S EQUITY:

Effective May 9, 1994, the Company effectuated a 1 for 2 reverse stock
split. All shares and earnings per common share have been retroactively
restated for all periods presented.

During the year ended June 30, 1994, the Company completed the sale, in a
private offering, of 1,000,000 units consisting of one share of common
stock and a warrant to purchase one share of common stock. Of the
1,000,000 unites offered, 750,000 units were sold by the Company generated
net proceeds of $1,737,000. The remaining 250,000 units were sold by the
selling shareholders. The warrants, with a $.04 stated value, consist of
1,000,000 warrants issued and outstanding at June 30, 1995 and 1996,
resulting from the private placement. The warrants are exercisable at a
price of $5.00 per share and expire on January 15, 1997.

In April and August 1993, the Company granted to certain officers and key
employees of the Company, options for the purchase of 50,000 shares and
250,000 shares of the Company's common stock, respectively, at an exercise
price of $4.00 per share, which approximated the fair market value at the
date of grant. All options vest at a rate of 20% per year for five years
beginning on the first anniversary date after the options were granted.
Vesting of options are generally conditioned on the employee being

F-23

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

employed by the Company on the vesting dates. All options granted expire
between April 1998 and September 1998. During the years ended June 30,
1996 and 1995, options for 250,000 and 80,000, respectively were canceled.
An option to acquire 20,000 vested shares was exercised in January 1995.
All options for officers and key employees were canceled during the year
ended June 30, 1996.

On June 1, 1994, the Company granted options for 200,000 shares with
exercise prices ranging from $3.00 to $4.00 per share to four investment
banking firms, as compensation for investment banking and marketing
services. All options were immediately exercisable and expire from May 31,
1996 through May 31, 1997. The excess of the fair market value over option
price has been treated as compensation to the recipient in the accompanying
consolidated financial statements.

The following table summarizes all stock option activity:
<TABLE>
<CAPTION>
BALANCE
BALANCE AT AT END
BEGINNING OF EXERCISE
YEAR ENDED OF YEAR GRANTED EXERCISED CANCELED PERIOD PRICE
------------- ---------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1996 369,500 - 250,000 119,500 $ 3.00 to 3.50
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
June 30, 1995 500,000 - 50,500 80,000 369,500 $ 3.00 to 4.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
June 30, 1994 50,000 450,000 - - 500,000 $ 3.00 to 4.00
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

At June 30, 1996, 1995 and 1994, 119,500, 219,500 and 210,000 options,
respectively, were fully vested and exercisable.

13. INCOME TAXES:

Income tax benefit (expense) for the years ended June 30, 1996, 1995, and
1994 are comprised of the following:

CURRENT DEFERRED TOTAL
------------ ------------ ------------
Year ended June 30, 1996
Federal $ 20,000 $ (1,959,000) $ (1,939,000)
State (22,000) - (22,000)
------------ ------------ ------------
$ (2,000) $ (1,959,000) $ (1,961,000)
------------ ------------ ------------
------------ ------------ ------------
Year ended June 30, 1995
Federal $ - $ 2,181,000 $ 2,181,000
State - - -
------------ ------------ ------------
$ - $ 2,181,000 $ 2,181,000
------------ ------------ ------------
------------ ------------ ------------

F-24

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CURRENT DEFERRED TOTAL
------------ ------------ ------------
Year ended June 30, 1994
Federal $ 30,000 $ (373,000) $ (343,000)
State (25,000) (50,000) (75,000)
------------ ------------ ------------
$ 5,000 $ (423,000) $ (418,000)
------------ ------------ ------------
------------ ------------ ------------

The actual income tax expense (benefit) differs from the "expected" tax expense
(benefit) (computed by applying the U.S. Federal corporate income tax rate of
34% for each period) as follows:

YEAR ENDED JUNE 30,
-----------------------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- -----------------------
AMOUNT % AMOUNT % AMOUNT %
------------- ----- ------------- ----- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Computed
"expected" tax
expense (benefit) $ 167,000 34.0 $ (2,581,000) (34.0) $ 374,000 34.0

State income
taxes,net of
Federal income
tax benefit 22,000 4.5 - - 43,000 3.9

Temporary
differences
utilized (40,000) (8.1) - - (18,000) (1.6)

Refundable
credits (20,000) (4.1) - - (30,000) (2.7)

Non-deductible
expenses (127,000) (25.8) (111,000) (1.6) 49,000 4.4

Realization of
tax benefits 1,959,000 398.7 - - - -

Limitation on
use of NOL
carryover - 0.0 511,000 6.9 - -
------------- ----- ------------- ----- ------------- -----
$ 1,961,000 399.2 $ (2,181,000) (28.7) $ 418,000 38.0
------------- ----- ------------- ----- ------------- -----
------------- ----- ------------- ----- ------------- -----
</TABLE>

The components of the net deferred tax asset recognized as of June 30, 1996
and 1995, are as follows:

<TABLE>
<CAPTION>
JUNE
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Current Deferred Tax Assets (Liabilities)
Insurance reserve $ 193,000 $ 96,000
Vacation accrual reserve 24,000 50,000

F-25

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<CAPTION>
JUNE
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Bad debt reserve 155,000 170,000
Other reserves 32,000 133,000
Accrued assessment 168,000 -
Prepaid taxes (51,000) (69,000)
Prepaid insurance (88,000) (28,000)
------------ ------------
433,000 352,000
Valuation allowance (433,000) (352,000)
------------ ------------
Net current deferred tax asset - -
------------ ------------
------------ ------------
Long-term Deferred Tax Assets (Liabilities)
Write-down of investment for book not tax $ 218,000 $ -
Depreciation and capital lease (110,000) (958,000)
Amortization 139,000 -
Bad debt reserve - 657,000
Other - (222,000)
Forgiveness of debt (1,640,000) -
Installment sale - (89,000)
AMT tax credit carryforward 23,000 40,000
Net operating loss carryforward 3,526,000 2,690,000
------------ ------------
2,156,000 2,118,000
Valuation allowance (2,156,000) (159,000)
------------ ------------
Net long-term deferred tax asset $ - $ 1,959,000
------------ ------------
------------ ------------
</TABLE>

The deferred tax asset includes the future benefit of the CWTS pre-
acquisition net operating losses of $843,000, which has been fully reserved
through a valuation allowance. During the year ended June 30, 1994,
goodwill was reduced by $423,000, resulting from the utilization of the
CWTS pre-acquisition net operation losses that were previously fully
reserved through a valuation allowance. Any portion of the valuation
allowance for this net operating loss carryforward recognized as a tax
benefit in the future will first reduce goodwill attributable to the
CWTS/Yellowstone merger.

The Company was able to realize a portion of its current year net operating
loss against the future income it will recognize in fiscal 1996 as a result
of certain debt forgiveness (See Note 10). Such realization resulted in a
tax benefit of $2,181,000 for the year ended June 30, 1995.

Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and
as measured by tax laws and regulations, principally related to
depreciation and expense accruals and reserves for financial reporting
purposes not deductible for tax purposes.

F-26

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 1996, the Company has available net operating loss
carryforwards for income tax purposes of $9,700,000 which expire in the
years 2003 through 2010. This net operating loss may be increase by a
remaining "built in gain" of $1,200,000 to the extent this gain is
recognized within five years on the sale of CWTS fixed assets acquired in
the merger. The benefit of the operating loss to offset future taxable
income is subject to reduction or limitation of use as a result of certain
consolidated return filing regulations and additional limitations relating
to a 50% change in ownership which occurred during 1992.

14. RELATED PARTY TRANSACTIONS:

Transactions with related parties and stockholders consist of the
following:

OVERHEAD EXPENSE ALLOCATIONS - For the year ended June 30, 1994, Martrade
Ltd. and other entities related by common control performed various
management and accounting services for the Company. The Company was
charged $42,000 for these services for the years ended June 30, 1994 which
has been recognized as an expense in the accompanying consolidated
statement of operations. No such services were provided for the years
ended June 30, 1996 and 1995.

TRANSACTIONS WITH AFFILIATE - At June 30, 1995 and 1994, the Company was
owed $669,000 and $787,000, respectively, by Martrade Ltd. The balance of
$669,000 is evidenced by a secured promissory note bearing interest at
prime plus 1%. The note requires quarterly principal payments of
approximately $100,000 commencing on September 30, 1994, plus interest with
any remaining balance due on June 30, 1996. The note is personally
guaranteed by William A. Martindale, former Chairman and CEO of the
Company, and collateralized by a stock pledge agreement covering 88,845
shares of the Company's common stock. Martrade Ltd. defaulted on the
payments due March 31, and June 30, 1995. For and in consideration of a
consulting agreement (See Note 11) through June 30, 1998, transfer and
assignment of the stock collateral to the Company by Martrade Ltd., and the
cancellation of Mr. Martindale's employment agreement, the Company released
Martrade Ltd. from its obligation under the promissory note. Accordingly,
such note was fully reserved as of June 30, 1995.

Additionally, see Note 3.

OTHER TRANSACTIONS - In connection with the Company's discontinuance of the
product sales segment, the Company discovered, on or about September 13,
1995, a potential irregularity relative to misapplication of cash receipts
totaling approximately $497,000 by a former officer/director. Current
management and the other members of the board of directors have performed
a review of the method of misapplication which consisted of depositing
customer checks into a bank account of an entity owned by the former
officer/director. Management has notified corporate as well as outside
legal counsel, Credit Manager's Association of California which is the
trustee of Nationwide Produce Co. pursuant to the filing of a General
Assignment for the Benefit of Creditors, and Nationwide's secured lender
whose collateral is the subject of the potential irregularity. As a result
of the foregoing, the Company has established a reserve as of June 30, 1995
of $497,000 against the trade receivables of the discontinued segment.

F-27

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended June 30, 1996, 1995 and 1994, the Company incurred
expenses to various law firms in which a director of the Company was a
partner. Such legal expenses amounted to $53,000, $172,000 and $97,000,
respectively.

During the years ended June 30, 1996 and 1995, the Company paid rents to a
company controlled by two officers of the Company totaling $93,000 and
$90,000, respectively. The basic lease term is for 60 months thru July
1999.

During the years ended June 30, 1996, 1995 and 1994, the Company paid rents
to an officer and employee of a Company subsidiary of $14,000, $25,000 and
$6,000, respectively.

During the years ended June 30, 1996 and 1995, the Company received
management fees from a company controlled and 49% owned by two officers of
the Company totaling $58,000 and $63,000, respectively.

Additionally, see Note 11.

15. EMPLOYEE DEFINED CONTRIBUTION PLAN AND TRUST:

Effective April 1, 1993, the Company adopted a Deferred Compensation 401(k)
Plan ("the Plan") covering all full-time employees. To be eligible to
participate in the Plan, employees, with the exception of drivers, must
have been employed by the Company for 90 days; drivers are eligible to
participate following one year of service. Employees involved in the Plan
may contribute up to 20% of their compensation, on a pre-tax basis, subject
to statutory and Internal Revenue Service guidelines. Contributions to the
Plan are invested, at the direction of the participant. Under one
investment option, the Company makes matching contributions to the Plan.
Insignificant contributions were made by the Company to this plan during
the years ended June 30, 1996, 1995 and 1994.

16. MAJOR CUSTOMERS:

The Company had sales to one unaffiliated customer, which operated in the
transportation segment, which individually represented 12%, 12%, and 23% of
the Company's total transportation sales for the years ended June 30, 1996,
1995 and 1994 and amounted to approximately, $5,895,000, $6,818,000, and
$7,710,000, respectively, and sales to another unaffiliated transportation
customer, which individually represented 19% and 15% of the Company's total
transportation sales for the years ended June 30, 1996 and 1995 and
amounted to approximately $9,080,000 and $8,402,000, respectively.

F-28

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. SUBSEQUENT EVENT:

On September 10, 1996 the Company signed a letter of intent to be acquired
by Continental American Transporation, Inc ("Continental"). The
acquisition will be affected through an exchange of common stock (five
shares of the Company's for one share of Continental). The letter of
intent is subject to the execution of a definitive agreement, approval of
both the Companies' boards of directors and shareholders, confirmation that
the transaction can be treated as a pooling of interests, and approval of
all applicable regulatory agencies.

F-29

<PAGE>

COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II

ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
CLASSIFICATION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
For the year ended
June 30, 1996:

Accumulated amortization -
Goodwill $ 392,000 $ 207,000 $ - $ 599,000
Accumulated amortization -
Covenants 39,000 14,000 53,000 -
Allowance for doubtful
accounts 198,000 110,000 186,000 122,000

For the year ended
June 30, 1995:

Accumulated amortization -
Goodwill $ 207,000 $ 198,000 $ 13,000 $ 392,000
Accumulated amortization -
Covenants 82,000 17,000 60,000 39,000
Allowance for doubtful
accounts 273,000 234,000 309,000 198,000

For the year ended
June 30, 1994:

Accumulated amortization -
Goodwill $ 105,000 $ 102,000 $ - $ 207,000
Accumulated amortization -
Covenants 60,000 55,000 33,000 82,000
Allowance for doubtful
accounts 111,000 274,000 112,000 * 273,000

</TABLE>

*Amounts represent accounts receivable directly written off during the year.

S-1

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM YEAR ENDED
JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 37
<SECURITIES> 0
<RECEIVABLES> 5,406
<ALLOWANCES> 122
<INVENTORY> 29
<CURRENT-ASSETS> 5,933
<PP&E> 4,516
<DEPRECIATION> 936
<TOTAL-ASSETS> 14,608
<CURRENT-LIABILITIES> 9,913
<BONDS> 2,616
0
0
<COMMON> 96
<OTHER-SE> 1,806
<TOTAL-LIABILITY-AND-EQUITY> 14,608
<SALES> 0
<TOTAL-REVENUES> 47,356
<CGS> 0
<TOTAL-COSTS> 48,959
<OTHER-EXPENSES> 947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 741
<INCOME-PRETAX> (2,550)
<INCOME-TAX> 2
<INCOME-CONTINUING> (2,552)
<DISCONTINUED> (1,288)
<EXTRAORDINARY> 2,370
<CHANGES> 0
<NET-INCOME> (1,470)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> (0.31)

</TABLE>