SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A3
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 [Fee Required]
For the Fiscal Year ended June 30, 1996
Commission File No. 0-18729
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Name of Small Business Issuer in its Charter
COLORADO 84-1099599
State or Other Jurisdiction of IRS Employer Identification
Incorporation or Organization Number
495 Lovers Lane, Calhoun, Georgia 30701
- --------------------------------------- ------
Address of Principal Executive Offices Zip Code
(706) 629-8682
Issuer's telephone Number, Including Area Code
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock Over the Counter (OTC)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of Securities 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]
Registrant's' revenues for the fiscal year ended June 30, 1996
were $36,801,423
The aggregate market value of voting stock held by non-affiliates of
the registrant as of October 4, 1996, was $8,487,581 (based upon $2.995 per
share being the average bid and asked prices on that date as reported by the
Electronic Bulletin Board of the National Association of Securities Dealers,
Inc.). In making this calculation, registrant has assumed, without admitting for
any purpose, that all executive officers, directors, employees of registrant, as
well as any entities they control, and no other persons, are affiliates.
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Liquidity and Capital Resources.
The growth of the Company's business has required a significant
investment in new revenue equipment. The Company's primary source of liquidity
has been funds provided by operations, term borrowings to finance equipment
purchases and from capital raised through the private placements of the
Company's securities. Net cash used in operating activities totaled
approximately negative $1,369,859 for the year ended June 30, 1996.
Capital expenditures for the purchase of revenue equipment, office
equipment and leasehold improvements totaled $26,719 for the year ended June 30,
1996. The Company realized $1,519,963 in proceeds from the sale of property and
equipment for the year ended June 30, 1996. Net cash provided by investing
activities totaled approximately $431,443 for the year ended June 30, 1996. The
Company projects that capital expenditures for property and equipment, will be
approximately $24.5 million for the fiscal year ending June 30, 1997, to be used
primarily to acquire new revenue equipment to expand and replace the Company's
fleet, to upgrade existing facilities, and to make several technological
advancements of the Company's operational and administrative facilities.*
Net cash used in financing activities amounted to $2,278,975 for the
year ended June 30, 1996. The Company's financing activities were primarily the
result of increasing debt, to finance the operational losses, purchase the CTI
Companies, and provide for the growth of the Blue Mack subsidiary. At June 30,
1996, the Company's equipment-related long-term debt totaled $47,242,848 million
and matures in installments over various periods through 2001.
The Company maintains a $5,000,000 line of credit pursuant to a certain
Revolving Credit Agreement with Transport Clearings L.L.C. of St. Paul,
Minnesota ("TC") pursuant to the general terms of which CTI has pledged to TC
its accounts receivable and may borrow funds in an amount equal to 80% of such
receivables to finance working capital for its CTI operations.1 In addition, on
May 6, 1996, the Company executed agreements to provide a separate $500,000 line
of credit to finance the working capital for its subsidiary, Blue Mack
Transport, Inc.'s operations with Foothill Capital
1 The terms of the Company's line of credit with TC have been subsequently
amended on October 15, 1996 and January 17, 1997; currently, the Company may
only borrow funds against this line in an amount equal to 50% of CTI's qualified
accounts receivables and is currently paying annual interest equal to the prime
rate established from time to time by Firstar Bank Milwaukee plus 7.75%; in
addition, TC may terminate this line of credit arrangement on notice in its sole
and absolute discretion; the Company is presently negotiating with several new
lenders in an attempt to replace TC as its accounts receivable lender which has
expressed its intentions to terminate its lender relationship with the Company.
As of June 30, 1997, the Company had an outstanding balance due TC of $
5,033,847.57 and an outstanding balance due Foothill of $533,234.46. * May
contain "forward-looking statements".
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Corporation of Mechanicsville, Virginia ("Foothill"). Blue Mack Transport, Inc.
has provided a first lien position to Foothill on its accounts receivable,
equipment and other inventory to collateralize the loan agreements. The material
terms of this line of credit required that Blue Mack Transport, Inc. pay
interest on the outstanding balance at the prime rate determined by Norwest Bank
Minnesota, N.A. plus 2.5% and permitted the borrowing of up to 80% of the
aggregate eligible receivables. Following the initial term of this loan
agreement, Foothill has recently notified Blue Mack Transport, Inc. that its
line of credit will continue on a month-to-month basis with Foothill having the
ability to terminate such line of credit any month it determines, in its sole
discretion, that it would not be appropriate to continue the lender
relationship; in addition, Foothill began reducing its commitment to extend
credit based upon 80% of eligible receivables by 0.5% per week to commence on
August 14, 1997. As of June 30, 1996, the Company had borrowed $4,834,378
against these two lines of credit.
The Company has adequate liquidity to meet its current needs. While the
current ratio of the Company is .59, and the debt to equity is 8.87%, the
Company believes that through the refinancing of its revenue equipment debt,
proceeds from the sale of equipment, and a private placement of long-term debt
(5-year notes) of the Company's securities, the Company will be able to meet its
short-term obligations.* Due to the capital intensive nature of the trucking
industry with respect to purchasing revenue equipment, the Company will continue
to have significant capital requirements over the long term, which shall require
the Company to incur additional debt.* If the Company is unable to refinance its
existing equipment debt, finance new revenue equipment, or complete the
aforementioned private placement, the Company may seek to raise additional
equity capital.* The availability of this capital will depend upon prevailing
market conditions,, the market price of the common stock and other factors over
which the Company has no control, as well as the Company's financial condition
and results of operations.*
The Company's subsidiaries, CTI and A&P, may be liable, jointly and
severally to a future Internal Revenue Service claim or claims that they
understated revenues in the approximate amount of $3,400,000 arising out of the
criminal proceedings pending against Messrs. Charles B. Prater and Lynwood S.
Warmack, former owners of these companies. In addition, these subsidiaries may
also be faced with a liability in a wrongful death lawsuit and accompanying
proceedings in West Virginia Federal Court, in amounts not covered by applicable
insurance policies. The Company has an agreement of indemnification from Messrs.
Prater and Warmack to protect against these contingent liabilities and may
set-off the aggregate amount of any liabilities arising against these
subsidiaries against the $7,290,000 Company Note due Messrs. Warmack and Prater.
The Board of Directors has no reason to believe that the aggregate amount of
potential liability under future Internal Revenue Service claims and this
lawsuit would exceed $7,290,000. However, if either one or both of these
liabilities were to attach currently, they would have a material adverse effect
on the financial condition of the Company and its subsidiaries.
* May contain "forward-looking statements".
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PART III
Item 9: Directors, Executive Officers, Promoters and Control
Persons;
Compliance With Section 16(a) of the Exchange Act.
(a)(b) Identification of Directors and Executive Officers.
The directors and officers of the Company are listed in the table below
and brief summaries of their business experience are also set forth.
Name Age Position with Company
Timothy Holstein 38 Director
President
Chief Executive Officer
Erik Bailey 28 Director
Vice President
Chief Financial Officer
Brian Henninger 48 Director
Secretary
Comptroller
Timothy Holstein has been the President, Chief Executive Officer and a
director of the Company since June 21, 1995. Prior to joining the Company, Mr.
Holstein was the majority owner of Blue Mack Transport, Inc., a
Pennsylvania-based private trucking company which he founded in 1986 and which
company was acquired on June 21, 1995 by the Company pursuant to a reverse
merger acquisition. Mr. Holstein was appointed to the Company's Board of
Directors and shall remain a director until the next annual meeting of the
Company's shareholders. Mr. Holstein is also an officer and director of Bio-Dyne
Corporation, a reporting company under the Securities Exchange Act of 1931, as
amended, (the "Exchange Act") and prior to his resignation on May 13, 1997,
devoted approximately 3 hours per week of his time to the business affairs of
this corporation. Mr. Holstein devotes a minimum of 40 hours per week to the
business and affairs of the Company and its subsidiaries.
Erik Bailey has been the Vice President, Chief Financial Officer and a
director of the Company since June 21, 1995. Prior to his appointment as a
member of the Board of Directors, Mr. Bailey was the Chief Financial Officer of
Blue Mack Transport, Inc., a Pennsylvania-based private trucking company, since
April, 1995. Prior to that time, Mr. Bailey served as a consultant to private
and public companies. Mr. Bailey was appointed to the Company's Board of
Directors and shall remain a director until the next annual meeting of the
Company's shareholders. Mr. Bailey is also an officer and director of Bio-Dyne
Corporation, a reporting company under the Exchange Act. Mr. Bailey also serves
as a consultant to several private and public companies with respect to merger
and acquisition analysis and advice. Mr. Bailey devoted a minimum of 40 hours
per week to the business and affairs of the Company and its subsidiaries.
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Brian Henninger has been the Secretary and a director of the
Company since March 27, 1995. Prior to his appointment, Mr.
Henninger served as a financial consultant to several private
companies. For the approximate ten year period prior to November,
1995, Mr. Henninger served as the comptroller for a nationwide
transportation company. Mr. Henninger also serves as an officer
and director of Bio-Dyne Corporation, a reporting company under the
Exchange Act. Mr. Henninger also serves on the Boards of Directors
for several private companies not engaged in the transportation
industry business. Mr. Henninger devoted a minimum of 40 hours per
week to the business and affairs of the Company and its
subsidiaries.
Significant Employees
Charles B. Prater, 52 year's of age, a former owner of the
Company's subsidiaries, Carpet Transport, Inc., A&P Transportation,
Inc. and Chase Brokerage, Inc., is working in the operations center
for Carpet Transport, Inc. and Chase Brokerage, Inc. and is deemed
an employee at will. Mr. Prater, along with Lynwood S. Warmack,
was a co-founder, director and principal officer of CTI, A&P and
Chase during the five-year period preceding the Company's
acquisition of these subsidiaries in 1996. Mr. Prater is currently
under indictment in a pending criminal proceeding entitled United
States of America v. Charles B. Prater, et al., United States
District Court, Northern District of Georgia, Atlanta Division,
Criminal Indictment No. 1:95-CR-460. The indictment charges Mr.
Prater, along with certain other parties, including Mr. Lynwood S.
Warmack, a former employee and co-owner of the CTI Companies, with
the embezzlement of several millions of dollars principally from
Carpet Transport, Inc. in addition to criminal fraud and criminal
tax evasion.
Lynwood S. Warmack, 71 year's of age, a former owner of the
Company's subsidiaries, Carpet Transport, Inc., A&P Transportation,
Inc. and Chase Brokerage, Inc., worked in the operations center for
Carpet Transport, Inc. and Chase Brokerage, Inc. until September,
1996 and is no longer employed by the Company or any of its
subsidiaries. Mr. Warmack, along with Charles B. Prater, was a co-
founder, director and principal officer of CTI, A&P and Chase
during the five-year period preceding the Company's acquisition of
these subsidiaries in 1996. Mr. Warmack is currently under
indictment in a pending criminal proceeding entitled United States
of America v. Charles B. Prater, et al., United States District
Court, Northern District of Georgia, Atlanta Division, Criminal
Indictment No. 1:95-CR-460. The indictment charges Mr. Warmack,
along with certain other parties, including Mr. Charles B. Prater,
a former co-owner of the CTI Companies, with the embezzlement of
several millions of dollars principally from Carpet Transport, Inc.
in addition to criminal fraud and criminal tax evasion.
Board members are elected by the shareholders to serve until the next
annual meeting; Company officers are appointed by the Board of Directors.
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Item 10: Executive Compensation
The following table sets forth the compensation paid by the Company to
its chief exectutive officer, its two (2) other executive officers and the four
(4) highest paid employees of the Company during the fiscal year ended June 30,
1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name Annual Restricted Under- All Other
and Compen- Stock lying LTIP Compen-
Principal sation Award(s) Options Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Timothy Holstein
CEO 1996 $ 78,800 -- -- -- -- -- --
Erik Bailey
Chief Financial
Officer 1996 $ 56,100 -- -- -- -- -- --
Brian Henninger
Comptroller 1996 $ 17,300 -- -- -- 36,000 -- $30,000*
Charles B. Prater 1996 $300,000 -- -- -- -- -- --
Employee
Lynwood S. Warmack 1996 $300,000 -- -- -- -- -- --
Employee
Robert Herr 1996 $ 75,000 -- -- -- -- -- --
Employee
Wayne S. Herr 1996 $ 75,000 -- -- -- -- -- --
Employee
</TABLE>
There were no grants or exercises of stock options pursuant to the
Company's Stock Incentive Plan during the fiscal year ended June 30,
1996 to the named officers. Stock appreciation rights are not granted
under the Stock Incentive Plan. The Company does not currently have in
effect a Long-Term Incentive Plan ("LTIP") and, consequently, no such
awards were granted to Company executives in fiscal years covered
above.
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Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
Brian Henninger 0 0 36,000 $ 0
Chief Financial Officer
______________________
*36,000 - exercise price and closing market price at date of grant.
* The Company loaned Mr. Henninger $30,000 to cover relocation
expenses; pursuant to the terms of Mr. Henninger's agreement with the
Company, $10,000 of such principal balance shall be forgiven over the
course of each of the next three years as long as Mr. Henninger remains
in the employ of the Company. The loan does not require Mr. Henninger
to pay interest.
+ Mr. Henniniger received non-qualified stock options to purchase
36,000 Company common shares: see, "Employment Agreements" below.
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Item 12: Certain Relationships and Related Transactions
Except for Mr. Timothy Holstein, the members of the Company's current
Board of Directors did not serve in such capacities at the times the Company
filed its Form 10-KSB for the fiscal year ended June 30, 1996 as well as
Amendment No. 1 and Amendment No. 2 thereto. Accordingly, the current Board of
Directors of the Company is unable to assess whether or not the transactions
described below were, at the time they were entered into, consummated upon terms
that were at least as favorable as the Company would have received in such
transactions with independent parties.
(1) On October 15, 1995, the Company entered into a Finder's Fee
Agreement with Knobloch Bay Cove Trust, an offshore entity. The Trustee and
Director of Knobloch Bay Cove Trust ("Bay Cove") is Herbert Bailey, the father
of Erik Bailey, an officer and director of the Company. Pursuant to the terms of
the Finder's Fee Agreement, the Company authorized Bay Cove to identify
potential acquisition candidates in the transportation industry. In the event
that the Company consummated an acquisition brought to its attention through the
efforts of Bay Cove, the Agreement provided that the Company would pay to Bay
Cove compensation equal to the traditional Lehman Formula, plus various costs
and expenses, at the closing of any such transaction.
On November 29, 1995, Bay Cove executed and submitted an Offshore
Securities Subscription Agreement, which was accepted by the Company on that
date, and pursuant to which the Company sold 600,000 of its common shares to Bay
Cove for $1,200,000. Bay Cove paid the purchase price by delivering its
promissory note in the principal amount of the purchase price, accruing interest
at 7% per annum, with the outstanding principal balance and accrued interest due
on November 29, 1997.
Subsequently, Bay Cove acted as the finder and proposed Carpet
Transport, Inc., A&P Transportation, Inc. and Chase Brokerage, Inc. (the "CTI
Companies") as acquisition candidates to the Company. Pursuant to a certain
Restated Stock and Assets Purchase Agreement, dated February 29, 1996, the
Company acquired the CTI Companies. In accordance with the aforementioned
Finder's Fee Agreement, Bay Cove claimed a finder's fee in the amount of
$910,000 and expenses of $290,000. After negotiations, the Company agreed to
forgive Bay Cove's $1,200,000 promissory note as payment of this finder's fee
and expenses due under the subject Agreement.
(2) On September 15, 1995, the Company entered into an
Investment Advisor Agreement with Explorer Financial Services, Inc.
("Explorer"). Pursuant to the terms of this Agreement, the Company
appointed Explorer as its non-exclusive agent to seek and identify
potential sources of capital as well as potential acquisition
candidates in the transportation industry for the Company. The
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Agreement authorized Explorer, among other things, to negotiate and present to
the Company the proposed terms of any equity or debt financings and/or the terms
of any acquisition proposal. In the event the Company closes any equity or debt
financing proposal or consummates an acquisition identified and provided to it
by Explorer, the Company agreed to pay to Explorer a fee equal to the amount of
2% of the amount of any such financing and/or the value of any such transaction
consummated, at the closing of any such transactions. Mr. Christopher Bailey is
the sole owner of Explorer and is the brother of Erik Bailey, an officer and
director of the Company.
(3) On June 30, 1996, the Company entered into a $1,000,000 Revolving
Credit Agreement with Bio-Dyne Corporation, a Georgia corporation havinig its
principal offices located at 5400 Bucknell Drive, S.W., Atlanta, Georgia 30336
("Bio-Dyne"), pursuant to the principal terms of which the Company agreed to
provide a $1,000,000 facility over a two-year period. Interest accrues on any
amount of the outstanding principal balance at the rate of 12%, per annum, with
interest payable monthly and accrued interest, if any, together with the unpaid
principal balance due at the end of the term. As part of this Agreement, the
Company had the right to designate up to three (3) members of Bio-Dyne's five
(5) member Board of Directors and has designated three (3) members to date,
Messrs. Timothy Holstein, Erik Bailey and Brian Henninger, representing all of
the members of the Company's current Board of Directors. As of June 30, 1996,
Bio-Dyne has drawn down an aggregate of $450,000 against this credit facility.
(4) On August 22, 1995, the Company purchsed certain assets of Herr's
Motor Express, Inc. and all of the issued and outstanding shares of HMX, Inc.,
corporations owned and controlled by Robert Herr and Wayne S. Herr, for (i) the
issuance of 200,000 common shares of the Company (ii) the assumption of debt
associated with certain of the assets purchased in the aggregate amount of
$1,103,567 (iii) the delivery of Company promissory notes in the aggregate
principal amount of $1,268,927, and (iv) the assumption of shareholder loans in
the amount of $208,000. The Company granted the sellers certain "piggy-back"
registration rights in connection with the Company's common shares delivered as
practical consideration in the transaction. The aggregate amount of Company
common shares issued to Robert Herr, Wayne S. Herr and Herr's Motor Express,
Inc., a company owned and controlled by the sellers, rendered these persons as a
group, a beneficial owner of more than 5% of the Company's issued and
outstanding common shares at June 30, 1996. In addition, each of Robert Herr and
Wayne S. Herr entered into a two-year term Employment Agreement with the Company
providing for the payment to each of them of an annual salary in the amount of
$75,000 and which provides an incentive bonus in the amount of 1% of the pre-tax
profits of the Company during such term.
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(5) Blue Mack, the Company's wholly owned Pennsylvania subsidiary,
leases approximately 4.5 acres containing a building consisting of 4,000 square
feet of office space, a 10-bay maintenance facility and a 2,000 square foot
warehouse located in Pottstown, Pennsylvania from Mr. Timothy Holstein, an
officer and director of the Company, pursuant to a 5-year lease on a triple net
basis, with monthly rental payments of $5,200 per month.
(6) Current management of the Company has learned that Mrs. Linda
Bailey, the mother of former Company Officer and Director, Erik Bailey,
transferred 50,000 Company Common Shares she owned of record to the former
owners of Carpet Transport, Inc., A&P Transportation, Inc. and Chase Brokerage,
Inc. (the "CTI Companies"), Messrs. Charles B. Prater and Lynwood S. Warmack, on
behalf of the Company and representing the Company's earnest money deposit prior
to the consummation of the acquisition by the Company of the CTI Companies. The
parties agreed that the value of these shares at the time was $150,000.
(7) All Carpet, Inc., a corporation in which Charles B. Prater is a
limited partner, loaned to the Company's subsidiary, Carpet Transport, Inc.,
$149,000 which is a debt currently outstanding. This payable existed on the
books of Carpet Transport, Inc. prior to the acquisition by the Company of the
CTI Companies.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this Amendment No.
3 to Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Dated: August 20, 1997 By: s/Timothy Holstein
--------------------
Timothy Holstein, President and
Director
Dated: August 20, 1997 By: s/Glenn Singleton
-------------------
Glenn Singleton, Principal
Financial and Chief
Accounting Officer
Dated: August 20, 1997 s/William Moses
William Moses, Director
Dated: August 20, 1997 s/Jack DuVall
Jack DuVall, Director
CAT9610K.AM4 (AM3 8/19/97)
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