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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission File Number: 33-9640-LA
U.S. TRUCKING, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Colorado 68-0133692
- - ------------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
3125 Ashley Phosphate Road, Suite 128
North Charleston, South Carolina 29418
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Address of Principal Executive Offices, Including Zip Code
(843) 767-9197
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(Issuer's Telephone Number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 90 days.
Yes -X- No ---
As of November 14, 1998, 16,625,223 shares of Common Stock, no par value per
share, were outstanding.
Transitional Small Business Disclosure Format: Yes --- No -X-
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U.S. TRUCKING, INC.
FORM 10-Q
INDEX
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of Septemer 30,
1998 and December 31, 1997 (Unaudited) ................. 3-4
Consolidated Statements of Operations for the
Three Months Ended September 30, 1998 and
1997 (Unaudited) ....................................... 5
Consolidated Statements of Operations for the
Nine Months Ended September 30, 1998 and
1997 (Unaudited) ....................................... 6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1998 and 1997
(Unaudited) ............................................ 7-8
Notes to Consolidated Financial Statements ............. 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................... 10-15
PART II. OTHER INFORMATION ...................................... 16
ITEM 1. Legal Proceedings ............................. 16
ITEM 2. Changes in Securities ......................... 16
ITEM 3. Defaults Upon Senior Securities ............... 16
ITEM 4. Submission of Matters to a Vote of
Security Holders ............................ 16
ITEM 5. Other Information ............................. 16
ITEM 6. Exhibits and Reports on Form 8-K .............. 16
Signatures ............................................. 17
2
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1998 1997
------------ ------------
ASSETS
Current Assets:
Cash in Banks $ 130,154 $ 60,099
Restricted Cash - Reserves on Deposit
with Factor 240,824 184,210
Restricted Cash - Insurance Premiums 150,000 -
Accounts Receivable - Trade - net of
allowance for doubtful accounts of
$88,000 2,610,900 2,321,180
Accounts Receivable - Other 97,267 60,000
Parts and supply inventory 167,951 152,262
Prepaid Expenses 141,620 57,097
----------- -----------
Total Current Assets 3,538,714 2,834,848
Transportation & Other Equipment
At cost less accumulated depreciation
and amortization of $2,389,205 6,013,068 6,818,517
Other Assets:
Restricted Cash - Owner Operators 6,494 2,894
Restricted Cash - held as collateral
against Letters of Credit 10,000 10,000
Security Deposits and other 14,962 12,653
Loss Reserve on Captive Insurance 104,118 -
Intangible Assets - Net of accumulated
amortization of $252,788 766,119 681,853
----------- -----------
Total Other Assets 901,693 707,400
Total Assets $10,453,475 $10,360,765
=========== ===========
3
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1998 1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable - Trade $ 514,088 $ 756,675
Due to Factor 1,737,167 1,355,291
Accruals & Other Current Liabilities 697,062 665,592
Current Portion - Sellers' Notes 104,000 118,273
Current Portion - Note Payable 42,600 13,962
Current Portion - Acquisition Loan Payable 391,046 366,086
Current Portion - Equipment Notes Payable 706,415 689,432
Current Portion - Obligations under
Capital Leases 323,822 479,093
----------- -----------
Total Current Liabilities 4,516,200 4,444,404
Other Liabilities:
Owner Operator Escrow 35,050 17,100
Seller's Notes - 17,333
Note Payable - net of current portion 25,400 40,694
Acquisition Loan - net of current portion 1,236,797 1,518,818
Equipment Notes - net of current portion 925,893 1,310,964
Obligations under Capital Leases - net
current portion 140,469 228,284
----------- -----------
Total Other Liabilities 2,363,609 3,133,193
Total Liabilities 6,879,809 7,577,597
Stockholders' Equity:
Common Stock - No Par Value - 75,000,000
shares authorized 15,381,256 shares
issued and outstanding 756,000 1,000
Preferred Stock - No Par Value - 10,000,000
shares authorized but unissued - -
Additional Paid in Capital 4,138,907 4,313,368
Accumulated Deficit (1,321,241) (1,531,200)
----------- -----------
Total Stockholders' Equity 3,573,666 2,783,168
Total Liabilities & Stockholders' Equity $10,453,475 $10,360,765
=========== ===========
4
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
-------------------- --------------------
Revenue:
Company Vehicles $ 3,000,860 58.7% $ 3,473,937 72.3%
Owner-Operator Vehicles 2,107,354 41.3% 1,327,980 27.7%
----------- ----- ----------- -----
Total Revenue 5,108,214 100.0% 4,801,917 100.0%
Operating Expenses:
Purchased Transportation
& Rentals 1,883,657 36.9% 1,562,578 32.5%
Salaries, Wages & Benefits 1,337,344 26.2% 1,373,743 28.6%
Fuel 449,388 8.8% 674,560 14.0%
Depreciation & Amortization 380,721 7.5% 337,516 7.0%
Operating Supplies &
Maintenance 237,969 4.7% 328,863 6.8%
Insurance & Claims 76,138 1.5% 224,523 4.7%
Miscellaneous Operating
Expenses 123,964 2.4% 160,543 3.3%
Taxes & Licenses 124,475 2.4% 111,184 2.3%
General & Administrative
Expenses 210,506 4.1% 151,225 3.1%
Occupancy Costs 76,349 1.5% 66,819 1.4%
----------- ----- ----------- -----
Total Operating Expenses 4,900,511 95.9% 4,991,556 103.9%
Income (Loss) from Operations 207,703 4.1% (189,638) -3.9%
Other Income (Expense):
Other Income 7,270 0.1% 70,298 1.5%
Interest Income 549 0.0% 349 0.0%
Interest Expense (198,384) -3.9% (179,126) -3.7%
----------- ----- ----------- -----
Total Other Income & Expense (190,564) -3.7% (108,479) -2.3%
Net Income (Loss) before
Taxes 17,138 0.3% (298,117) -6.2%
Taxes - -
----------- ----- ----------- -----
Net Income (Loss) 17,138 0.1% (298,117) -6.2%
5
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997
-------------------- --------------------
Revenue:
Company Vehicles $ 9,492,325 60.0% $10,355,384 73.1%
Owner-Operator Vehicles 6,334,854 40.0% 3,807,359 26.9%
----------- ----- ----------- -----
Total Revenue 15,827,179 100.0% 14,162,743 100.0%
Operating Expenses:
Purchased Transportation
& Rentals 5,551,324 35.1% 4,643,988 32.8%
Salaries, Wages & Benefits 4,004,267 25.3% 4,055,546 28.6%
Fuel 1,562,002 9.9% 1,934,962 13.7%
Depreciation & Amortization 1,194,541 7.5% 1,176,869 8.3%
Operating Supplies &
Maintenance 859,398 5.4% 996,968 7.0%
Insurance & Claims 417,072 2.6% 687,099 4.9%
Miscellaneous Operating
Expenses 417,651 2.6% 420,334 3.0%
Taxes & Licenses 328,037 2.1% 344,740 2.4%
General & Administrative
Expenses 622,071 3.9% 471,212 3.3%
Occupancy Costs 201,657 1.3% 185,988 1.3%
----------- ----- ----------- -----
Total Operating Expenses 15,158,019 95.8% 14,917,706 105.3%
Income from Operations 669,160 4.2% (754,963) -5.3%
Other Income (Expense):
Other Income 52,511 0.3% 202,834 1.4%
Interest Income 1,748 0.0% 1,029 0.0%
Interest Expense (513,459) -3.2% (557,079) -3.9%
----------- ----- ----------- -----
Total Other Income & Expense (459,200) -2.9% (353,216) -2.5%
Net Income (Loss) before
Taxes 209,960 1.3% (1,108,179) -7.8%
Taxes - -
----------- ----- ----------- -----
Net Income (Loss) 209,960 1.3% (1,108,179) -7.8%
Earnings per common and
common equivalent share $0.01
Weighted average number of
shares 15,381,256 2,500
Earnings per common share
assuming full dilution $0.01
Weighted average number of
shares - full dilution 16,881,256 2,500
6
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
September 30, September 30,
1998 1997
------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) 209,960 (1,108,179)
Adjustments to Reconcile Net Loss to Net
Cash Provided by (Used in) Operating
Activities:
Depreciation & Amortization 1,186,542 1,176,869
Expenses related to stock-based
compensation plan 15,000 -
Provision for doubtful amounts receivable - 36,166
Loss on disposal of property and equipment - 12,543
(Increase) Decrease in Assets:
Restricted Cash (314,332) (95,666)
Accounts Receivable (326,986) (698,523)
Parts and supply inventory (15,689) (12,790)
Prepaid expenses and other current assets (84,523) (47,484)
Increase (decrease) in Liabilities:
Accounts payable 129,257 256,628
Accrued expenses and other current
liabilities 49,420 (96,091)
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Net Cash Provided by (Used in) Operating
Activities 848,649 (576,527)
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Cash Flows from Investing Activities:
Issuance of Common Stock 575,000 -
Purchase of transportation and other
equipment (248,287) (4,128,353)
Security deposits (2,309) (4,194)
Payment for purchase of subsidiaries in
excess of fair market value - -
Acquisition costs (161,228) -
Payment for refinancing of acquisition debt (55,274) (138,016)
Proceeds from additional paid in capital - 3,943,368
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Net Cash Provided by (Used in) Investing
Activities 107,902 (327,195)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from long-term debt financing - 1,545,244
Acquisition indebtedness - -
Note payable - 54,656
Discount on note payable 13,344 -
Principal payments on long-term debt (656,755) (555,393)
Principal payments on short-term note - (12,500)
Principal payments on capital lease
obligations (243,086) (224,265)
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Net Cash Provided by (Used in) Financing
Activities (886,497) 807,742
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7
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
(CONTINUED)
September 30, September 30,
1998 1997
------------ ------------
Net (Decrease) Increase in Cash 70,054 (95,980)
Cash at Beginning of Year 60,099 138,143
Cash at End of Year 130,153 42,163
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Supplemental Disclosure of Cash Flow Information
Cash Paid During the Year:
Interest expense 503,507 557,080
Income taxes - -
8
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U.S. TRUCKING, INC. AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31,1998.
2. SHARE EXCHANGE AGREEMENT
On September 4, 1998, the stockholders of Northern Dancer Corporation, a
publicly traded shell (EBB : NODC) entered into an agreement with U S
Trucking, Inc. whereby U S Trucking, Inc. acquired Northern Dancer in a
reverse acquisition. In terms of the transaction, all of the shareholders of
U S Trucking agreed to exchange all of their stock on the basis of one share
of stock in U S Trucking for one share in Northern Dancer. Northern Dancer
subsequently changed its name to U S Trucking, Inc. As a result, the
shareholders of the former U S Trucking received 96.1% of the outstanding
shares of Northern Dancer. In addition, Northern Dancer assumed the
obligations represented by 1,500,000 options granted under U S Trucking's
stock option plan and the optionees agreed to accept options of a similar
tenor.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements that involve
a number of risks and uncertainties. While this outlook represents the
Company's current judgment in the future direction of the business, such risks
and uncertainties could cause actual results to differ materially from any
future performance suggested herein. Factors that could cause results to
differ materially from those projected in the forward-looking statements
include: the need for additional financing for growth, prior losses,
dependence on key customers, control by management, competition, regulation
and general economic and business factors.
GENERAL
The Company's subsidiary, U.S. Trucking, Inc., a Nevada corporation
(referred to as "U.S. Trucking-Nevada"), was established in March of 1997 by
combining under U.S. Trucking-Nevada the operations of Gulf Northern
Transport, Inc. ("Gulf Northern"), a mid- to long-haul truckload carrier,
Mencor, Inc. ("Mencor"), a third party logistics (brokerage) company, selected
assets of another truckload company, and the customer base of a small
specialized truckload air freight company. The latter two divisions were
contributed to U.S. Trucking-Nevada by U.S. Transportation Services, Inc.
("USTS"). During 1997, the Company consolidated operations, implemented
manpower reductions and blended all trucking operations under Gulf Northern
and all brokerage operations under Mencor.
The Company's operating results are primarily driven by the results of
the truckload business of its primary operating subsidiary, Gulf Northern.
The Company suffered an extraordinary loss in the year ended December 31,
1997, due to expenses associated with combining the two highly unprofitable
operations of the two divisions from USTS with Gulf Northern and Mencor, and
from extraordinary amortization and depreciation charges. The problems
associated with combining these operations were eliminated by the end of the
first quarter of 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Revenues for the quarter ended September 30, 1997 were $5.1 million
compared to net revenues of $4.8 million for the quarter ended September 30,
1997. This increase was the result of internal growth of the Company's long-
haul division and the implementation of the company's small package pick-up
and delivery division in Florida. The relative contribution of the two
components of revenues changed materially as the revenue from owner-operators
increased approximately 59% from the three months ended September 30, 1997,
and the revenues from the Company's vehicles decreased approximately 14%. The
Company has attempted to use more owner-operators to expand its business until
the Company is able to finance the purchase of more tractors.
The Company's operating ratio (operating expenses divided by operating
revenues) decreased from 103.9% for the three months ended September 30, 1997
to 95.9% for the three months ended September 30, 1998. This reduction in the
Company's operating ratio was primarily due to (1) the lower fuel costs
resulting from lower fuel prices and greater usage of owner-operators which
provide their own fuel, (2) lower insurance and claims, and (3) lower
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salaries, wages and benefits resulting from a reduction of driver payroll
caused by greater use of owner-operators and a reduction in the wages paid to
the drivers in one of the divisions acquired from USTS.
Total operating expenses for the three months ended September 30, 1998
decreased $91,044 to $4.9 million, as compared to $5.0 million, for the three
months ended September 30, 1997. The decrease was primarily due to (1) a
$225,172 decrease in fuel costs due to a combination of lower fuel prices and
fewer miles driven by Company vehicles, (2) a $148,385 decrease in insurance
and claims attributable to the Company changing over to a captive insurance
program in early 1998, and (3) a $90,894 decrease in operating supplies and
maintenance. These decreases were offset in part by a $321,078 increase in
purchased transportation costs due to the increased use of owner-operators,
(2) a $59,281 increase in general and administrative expenses due primarily to
an increase in accounting fees related to preparing the Company for its
transaction with a public shell, and (3) a $43,205 increase in depreciation
and amortization expenses.
Salaries, wages and employee benefits decreased $36,399 to $1.34 million
for the three months ended September 30, 1998 as compared to $1.37 million for
the three months ended September 30, 1997 and decreased as a percentage of
total operating revenues from 28.6% for the three months ended September 30,
1997 to 26.2% for the three months ended September 30, 1998. This decrease in
percentage was due primarily to the increased use of owner-operators and the
decrease in the actual dollar amount was due to lower wages paid to some of
the Company's drivers as a result of lower dead-head percentages and the
elimination of some management payroll at the terminals.
Payments to owner-operators increased by $323,000 or 30.9% to $1.37
million for the three months ended September 30, 1998 as compared to $1.04
million for the three months ended September 30, 1997. This is a direct result
of owner-operator revenues increasing by more than 30% for the three months
ended September 30, 1998 as compared to the same period ended September 30,
1997.
Depreciation and amortization expenses for the three months ended
September 30, 1998 increased $43,205 to $380,721 or 7.5% of revenue, as
compared to $337,516 or 7% of revenue for the three months ended September 30,
1997. This increase is due to additional depreciation expense recognized on
older revenue equipment because the Company elected to reduce the residual
value on this equipment to the current value of the equipment, and increased
capitalized repairs and increased amortization costs due to the restructuring
of certain loan and acquisition costs.
Interest expense for the three months ended September 30, 1998 increased
$19,258 or 11.2% to $198,384 as compared to $179,126 for the three months
ended September 30, 1997. This increase is due primarily to increased finance
charges paid for factoring fees because of changing borrowing arrangements.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues increased $1.7 million or 12.6% to $15.8 million in the first
nine months of 1998 as compared to $14.1 million in the first nine months of
1997. This increase was the result of internal growth of the Company's long-
haul division and the implementation of the Company's small package pick-up
and delivery division in Florida.
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The Company's operating ratio decreased from 105.3% in the first nine
months of 1997 to 95.8% in the first nine months of 1998. This reduction in
the Company's operating ratio was primarily due to (1) the lower fuel cost
resulting from lower fuel prices and greater usage of owner-operators which
provide their own fuel, (2) lower insurance and claims, and (3) lower
salaries, wages and benefits resulting from a reduction of driver payroll
caused by greater use of owner-operators and a reduction in the wages paid to
the drivers in one of the divisions acquired from USTS.
Total operating expenses for the first nine months of 1998 increased
$240,312 to $15.1 million, as compared to $14.9 million, for the first nine
months of 1997 primarily due to the $907,336 increase in purchased
transportation costs as the Company increased its use of owner/operators.
General and administrative expenses increased $150,856 due primarily to an
increase in accounting fees related to preparing the Company for a transaction
with a public shell, and a general increase in a number of other components
due to the increased level of activity. These increases were offset by a
$372,960 decline in fuel costs due to lower fuel prices and fewer miles driven
by the Company's vehicles, a $270,027 decline in insurance and claims
attributable to the Company changing over to a captive insurance program in
early 1998, and a $51,279 decline in salaries, wages and benefits. The rates
of pay of the drivers absorbed from other USTS operations were reduced to
bring them into line with those of the Gulf Northern drivers.
Salaries, wages and employee benefits expenses decreased $51,279 to $4.0
million for the first nine months of 1998 as compared to $4.05 million for the
first nine months of 1997, and decreased as a percentage of total operating
revenues from 28.6% in the first nine months of 1997 to 25.3% for the first
nine months of 1998. This decrease as a percentage of revenue was primarily
due to increased use of owner-operators and the decrease in the actual dollar
amount was due to reduced driver payrolls.
Payments to owner-operators increased $1 million or 32% to $4 million
for the first nine months of 1998 as compared to $3 million for the first nine
months of 1997. This was mainly the result of a growth in sales generated by
owner-operators of more than 27% in the first nine months of 1998 as compared
to the first nine months of 1997.
Depreciation and amortization expense for the first nine months of 1998
increased $17,672 to $1.2 million or 7.5% of revenue, as compared to $1.18
million or 8.3% of revenue, for the first nine months of 1997. The increase
in the actual amount of deprecation and amortization was due primarily to
increased amortization costs due to the restructuring of certain loan costs.
Deprecation and amortization decreased as a percentage of total revenues due
to the increase in revenues from owner-operators which provide their own
tractors.
Interest expense for the first nine months of 1998 decreased $44,000 or
7.8% to $513,000 as compared to $557,000 for the first nine months of 1997.
This decrease was the result of lower cost of borrowing as the result of
restructuring loans on the Company's equipment debt, lower interest rates on
the more recent portions of other equipment loans and lower factoring fees due
to improved collections of the Company's receivables.
CAPITAL RESOURCES AND LIQUIDITY
As of September 30, 1998, the Company had a working capital deficit of
approximately $(977,486) compared to approximately $(1,609,556) at December
31, 1997.
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Effective February 1, 1997, the Company acquired all of the outstanding
capital stock of Gulf Northern and of Mencor, as well as selected assets
(tractors and trailers) of Jay & Jay Transport for the assumption of debt.
The Company has assumed various notes as the schedule below indicates.
Following is a schedule of the Company's existing long-term debt as of
September 30, 1998:
Monthly
Creditor Balance Payments
-------- ------- --------
Associates Leasing Corp. $ 464,000 $ 31,497
(Milwaukee)
Associates Leasing Corp. 520,000 26,597
(Buffalo & Philadelphia)
ITC (Indianapolis) 373,000 16,000
GECC 1,630,000 45,000
Navistar Financial 318,000 12,933
GECC (Columbus) 421,000 14,528
---------- --------
Total $3,726,000 $146,555
At times, the Company enters into leasing agreements for short- or
long-term equipment needs. The Company currently has three leasing agreements
in place for tractors and trailers. The expenses are booked as straight
operating expenses on a month-to-month basis.
During August and September 1998, the Company raised $575,000 in a
private offering of common stock. The proceeds from the private offering were
used for the retirement of debt related to receivables financing, payment of
fees incurred in connection with the acquisition of U.S. Trucking - Nevada by
the Company and working capital.
The Company anticipates that the proceeds of the recent offering,
together with projected cash flow from operations, will be sufficient to fund
the Company's operations for at least 12 months. In order to expand, the
Company intends to raise additional funds through private placements of equity
and/or debt securities.
The Company is currently negotiating two financing transactions with
General Electric Capital Corporation ("GE Capital"). One transaction involves
a revolving credit facility in an amount up to $3,500,000 which would replace
the existing accounts receivable factoring facility. The other transaction
includes an equipment refinance loan in an amount of approximately $3,332,000,
an equipment lease for approximately $1,120,000, and an equipment lease for
approximately $2,944,150. The Company has received two proposals from GE
Capital for these transactions, and the Company has paid a total of $50,000
for the proposal fees. These proposals do not constitute commitments or
binding obligations of GE Capital, and they are subject to a number of
conditions including the satisfactory completion of due diligence by GE which
is in process at this time, and therefore there is no assurance that the
Company will receive any new financing from GE Capital.
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The proposal for the revolving credit facility provides that the lender
would loan up to 85% on the Company's eligible accounts receivable at an
interest rate equal to a defined rate which is the 30-day dealer commercial
paper rate plus 4.5 percent. The loan would have a three year term and it
would be secured by all existing and after-acquired assets of the Company
other than encumbered rolling stock. Various fees must be paid and this
facility must be personally guaranteed by Dan Pixler and Huff Irrevocable
Trust.
The other proposal includes one loan and two lease transactions. The
loan for approximately $3,332,000 would be used to refinance two existing GE
Capital loans and the payoff of loans with Navistar, ITC and Associates. This
loan would have a three year term and it would be secured by the tractors and
trailers which collateralize the existing loans less the collateral which GE
Capital agrees may be sold. The first lease transaction in the amount of
approximately $1,120,000 would be used to acquire twenty-five (25) 1996 or
1997 tractors. This lease would have a four year term. The second lease in
the amount of approximately $2,944,150 would be used to acquire forty-three
(43) new Wabash 53' air ride refrigerated trailers and forty-five (45) new
Wabash 53' air ride dry vans with logistics systems. This lease would have a
seven year term. The loan and the two leases would be personally guaranteed
by Dan Pixler and Huff Irrevocable Trust.
Under these proposals, the Company's monthly debt service will virtually
remain the same, but management believes that cash flows should increase due
to reduced repair and maintenance costs, lower receivables financing expenses
and increased productivity from the additional power units.
There can be no assurance that such financing would be available or, if
available, could be obtained on terms satisfactory to the Company.
YEAR 2000 COMPLIANCE
The Company has recently purchased and is in the process of installing
new software and hardware which will be used for all of the Company's computer
needs. The vendor has represented that this software and hardware is year
2000 compliant. This computer system will handle everything from the
initiation of a new load through shipping, billing, payables and preparation
of financial statements. The system will include maintenance records for all
of the trucks, inventory records for all parts and supplies, claim records and
accident records. Information from the Company's fuel providers will be
downloaded into the system over the internet on a daily basis and the system
will generate fuel and mileage reports.
The Company expects that the system will be operational for the Company's
agent program and for the brokerage business by the first week of November,
1998. The target date for the complete system to be operational is the first
week of January, 1999. The Company has spent approximately $50,000 for the
software and will spend an additional $65,000 for necessary Year 2000 hardware
upgrades.
The Company may also be vulnerable to the failure of other companies to be
year 2000 compliant. The Company has just recently commenced its assessment
of whether third parties with whom the Company has material relationships are
year 2000 compliant. The Company is evaluating its vendors and suppliers to
determine if there would be a material effect on the Company's business if
they do not timely become year 2000 compliant. The same analysis is being
made for significant customers. The Company intends to initiate formal
14
<PAGE>
<PAGE>
communications with all of its significant vendors and customers with respect
to such persons' year 2000 compliance programs and status in the fourth
quarter of 1998. The Company has not yet initiated formal contingency
planning processes to mitigate the risk to the Company if any vendors or
customers are not prepared for the year 2000, but the Company intends to
complete this process by June 30, 1999.
Although the Company expects its internal systems to be year 2000
compliant, the failure of any of its significant vendors or customers to
correct a material year 2000 problem could result in an interruption in
certain normal business activities and operations. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third parties which the Company
relies on, the Company is unable to determine at this time whether the
consequences of year 2000 failures will have a material adverse impact on the
Company's results of operations, but the Company believes that with the
implementation of its new computer system and completion of its assessment of
its vendors and customers, the possibility of significant interruptions of
normal operations should be reduced.
15
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
On September 8, 1998, the Company issued 15,877,500 shares (post-split)
of its common stock to the shareholders of U.S. Trucking, Inc. ("U.S.
Trucking-Nevada"), in connection with the acquisition of 100% of the
outstanding shares of U.S. Trucking-Nevada. Each U.S. Trucking-Nevada
shareholder was provided with information on the Company and the Company
complied with the other applicable requirements of Section 4(2). Each U.S.
Trucking-Nevada shareholder signed a Letter of Acceptance in which he
represented that he was purchasing the shares for investment only and not for
the purpose of resale or distribution. The appropriate restrictive legend was
placed on the certificates and stop transfer orders were issued to the
transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of shareholders of the Company was held on September 4,
1998, to approve the following: (1) a proposed reverse split of the
outstanding shares of the Company's Common Stock of 1 for 160; (2) an
amendment to the Company's Articles of Incorporation to change the name to
U.S. Trucking, Inc.; and (3) an amendment to the Company's Articles of
Incorporation to reduce the number of authorized shares of Common Stock to 75
million.
The following table sets forth the number of votes cast for each matter.
There were no abstentions or broker non-votes.
Votes For Votes Against
--------- -------------
1. Approval of reverse split 56,943,500 100,000
2. Approval of name change 57,043,500 0
3. Approval of reduction of
authorized common stock 56,943,500 100,000
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits have been filed with this report:
Exhibit 27 - Financial Data Schedule
(b) The Company filed a Current Report on Form 8-K dated September 8,
1998, which reported on Items 1, 2 and 7.
16
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
U.S. TRUCKING, INC.
Dated: November 16, 1998 By:/s/ Danny L. Pixler
Danny L. Pixler, President
By:/s/ John Ragland
John Ragland, Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3 through 6 of the
Company's Form 10-QSB for the year to date, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 130,154
<SECURITIES> 0
<RECEIVABLES> 2,708,167
<ALLOWANCES> 0
<INVENTORY> 167,951
<CURRENT-ASSETS> 3,538,714
<PP&E> 6,013,068
<DEPRECIATION> (2,389,205)
<TOTAL-ASSETS> 10,453,475
<CURRENT-LIABILITIES> 4,516,200
<BONDS> 0
<COMMON> 756,000
0
0
<OTHER-SE> 2,817,666
<TOTAL-LIABILITY-AND-EQUITY> 10,453,475
<SALES> 0
<TOTAL-REVENUES> 15,827,179
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,158,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 209,960
<INCOME-TAX> 0
<INCOME-CONTINUING> 209,960
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,960
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
