FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended: September 30, 1996
Commission file number: 0-18729
Continental American Transportation, Inc.
(Exact name of registrant as specified in its Charter)
Colorado 84-1089599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
495 Lovers Lane Road, Calhoun, Georgia 30701
(Address of principal executive offices)
(Zip Code)
(706) 629-8682
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the 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.....
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 12, 1996, 4,862,635 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format:
Yes..X..No.....
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CONTINENTAL AMERICAN TRANSPORTATION, INC. AND SUBSIDIARIES
CONTENTS
Pages
I. FINANCIAL INFORMATION
Item 1. Financial Statements and Information
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 8
of Financial Condition and Results
of Operations
Part II OTHER INFORMATION
Item 1. Legal Proceedings. 10
Item 2. Changes in Securities. 11
Item 3. Defaults Upon Senior Securities. 15
Item 4. Submission of Matters to a Vote
of Security Holders. 15
Item 5. Other Information. 15
Item 6. Exhibits and Reports on Form 8-K. 15
2
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Continental American Transportation, Inc. and Subsidiaries
Consolidated Balance Sheet
September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets
Current Assets
<S> <C>
Cash and cash equivalents $ 1,116,003
Restricted cash 950,000
Trade accounts receivable, net of allowance for doubtful accounts of $924,958 10,513,973
Installments notes receivable - current portion 622,478
Inventories 309,441
Other current assets 3,022,730
Deferred income tax benefit - current portion 677,059
---------------
Total Current Assets 17,211,684
---------------
Property, plant and equipment 54,760,934
---------------
Other Assets
Note receivable - related party 450,000
Installment notes receivable, excluding current portion 397,978
Excess of purchase price over fair value of net assets acquired, net 4,527,474
Other assets 626,278
Deferred income tax benefits - noncurrent portion 177,387
---------------
Total Other Assets 6,179,117
---------------
Total Assets 78,151,735
===============
Liabilities and Stockholders' Equity
Current Liabilities
Lines of credit 4,619,199
Current maturities of long-term debt 3,149,163
Current maturities of capital lease obligations 10,207,577
Accounts payable 6,259,765
Accrued expenses 3,071,942
Income taxes payable 572,258
---------------
Total Current Liabilities 27,879,904
Long-Term Debt, excluding current maturities 18,043,802
Capital Lease Obligations, excluding current maturities 26,179,209
---------------
Total Liabilities 72,102,915
---------------
Stockholders' Equity
Preferred stock, $1 par value, 10,000,000 shares authorized, 0 shares
issued and outstanding -
Common stock, no par value, 20,000,000 shares authorized, 4,862,635 shares
issued, 4,827,635 shares outstanding 8,419,512
Warrants 351,641
Retained earnings (deficit) (2,372,857)
Demand notes receivable from exercise of stock options and warrants (233,890)
Treasury stock, 35,000 shares, at cost (115,586)
---------------
Total Stockholders' Equity 6,048,820
---------------
Total Liabilities and Stockholders' Equity $ 78,151,735
===============
</TABLE>
See notes to the consolidated financial statements.
3
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Continental American Transportation, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30,
-----------------------------------
1996 1995
--------------- ---------------
Operating Revenues $ 19,658,693 $ 3,044,361
-------------- ---------------
Operating Expenses
Salaries and fringes 6,210,808 1,275,904
Purchased transportation 1,719,951 504,367
Operating supplies and expenses 5,995,718 606,513
Depreciation and amortization 2,244,722 331,674
Claims and insurance 434,917 81,148
Operating taxes and licenses 131,479 88,134
Communication and utilities 354,225 33,998
General and administrative expenses 2,358,301 350,368
Net (gain) loss on sale of equipment 5,667 (34,495)
--------------- ---------------
Total Operating Expenses 19,455,788 3,237,611
-------------- ---------------
Operating Income (Loss) 202,905 (193,250)
--------------- ---------------
Other Income
Interest expense (981,698) (56,745)
Other income 23,784 16,529
--------------- ---------------
(957,914) (40,216)
--------------- ---------------
(Loss) Before Income Taxes (755,009) (233,466)
Provision for income taxes - -
--------------- ---------------
Net (Loss) $ (755,009) $ (233,466)
=============== ===============
(Loss) Per Share $ (.16) $ (.10)
=============== ===============
Weighted Average Common Shares Outstanding 4,623,153 2,312,656
=============== ===============
See notes to the consolidated financial statements.
4
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Continental American Transportation, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
ree Months Ended
September 30,
-----------------------------------
1996 1995
--------------- ---------------
Cash Flows From Operating Activities $ 3,280,318 $ (483,866)
--------------- ---------------
Cash Flows From Investing Activities 107,446 226,197
--------------- ---------------
Cash Flows From Financing Activities (2,661,840) 272,279
--------------- ---------------
Net Increase in Cash 725,924 14,610
Cash, Beginning of Period 1,340,079 480
--------------- ---------------
Cash, End of Period $ 2,066,003 $ 15,090
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the three months for
Interest $ 981,698 $ 56,745
=============== ===============
See notes to the consolidated financial statements.
5
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Continental American Transportation, Inc. & Subsidiaries
Notes to the Consolidated Financial Statements
NATURE OF PRESENTATION
The consolidated financial statements reflect all adjustments which are of
a normal recurring nature and, in the opinion of management, necessary for
a fair presentation of the results for the interim periods.
CONVERTIBLE DEBT
On Auust 19, 1996, the Company sold $1,650,000 in aggregate original
principal 7% Convertible Debentures (the "7% Debentures"). The 7%
Debentures mature and are due and payable as to their aggregate principal
$1,640,000, and accrued interest, if any on August 19, 1998; entitle its
holder to receive interest payments at the rate of 7% per annum, payable on
a semi-annual basis, commencing January 19, 1997, and; are convertible into
the Common Shares of the Company on the following basis: one-third of the
principal amount of the 7% Debentures may be convertible at any time from
and after the 40th day following the date of the 7% Debentures; two-thirds
of the principal amount of the 7% Debentures may be convertible at any time
from and after the 70th day following the date of the 7% Debentures, and;
100% of the principal amount of the 7% Debentures may be convertible at any
time from and after the 100th day following the date of the 7% Debentures,
at the conversion price equal to the lesser of (i) the average closing bid
price of the Company's Common Stock for the five (5) consecutive trading
days immediately prior to the date of the 7% Debentures or (ii)
seventh-eight (78%) percent of the average closing bid price of the
Company's Common Stock for the five (5) consecutive trading days
immediately prior to the conversion date.
WARRANTS
The company has granted Common Stock Purchase Warrants to certain
individuals and entities principally for services to be rendered during the
twelve-month period commencing July 1, 1996, entitling such grantees to
purchase an aggregate of 2,068,441 common shares of the Company. Of the
above, such warrants grant a right to purchase 765,625 common shares at a
cost per share less than the fair market value of the Company's common
shares on the date of grant. The aggregate excess fair market value amounts
to $328,516 and is being recognized ratably as a charge to earnings over
the ensuing twelve-month period commencing with the date of grant.
CONTINGENT LIABILITIES
The former shareholders and officers of CTI, A&P and Chase are under
indictment in a pending criminal proceeding. The indictment charges these
individuals, along with certain other parties, with the embezzlement of
approximately $3,700,000 from CTI and A&P in addition to criminal fraud and
criminal tax evasion.
While CTI and A&P were not included as named defendants in the indictment,
the indictment states among other things that the Grand Jury believes CTI
and A&P failed to report gross income as follows:
Alleged
Understated
Revenue
---------------
Year Ending June 30,
1991 $ 308,123
1992 669,897
1993 1,748,561
1994 963,838
1995 23,909
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Continental American Transportation, Inc. & Subsidiaries
Notes to the Consolidated Financial Statements
CONTINGENT LIABILITIES, Continued
The former shareholders and officers of CTI and A&P have advised present
management of the Company that expenses exist to fully offset any revenues
not included in gross revenue of CTI and A&P for the periods reflected
above. Should this be determined not to be the case, the Company could
potentially be assessed taxes, penalties and interest which could amount to
approximately $3,400,000.
On February 29, 1996, the two former stockholders of the Company sold their
shares to CAT (see Business Acquisitions). As a component of this
transaction, the two former shareholders have agreed to be responsible for
and satisfy any and all tax related liabilities that might arise as a
result of the allegations described above. Further, CAT has the right to
deduct from the principal amount of 7,290,000 promissory note payable to
such former shareholders any such liabilities paid by the Company.
On March 18, 1996, litigation against A&P was instituted relating to a
motor vehicle accident which occurred on August 24, 1995 resulting in the
death of one individual and personal injury to two others. Counsel
representing A&P in this matter has opined that A&P may be liable for
compensatory damages in excess of liability insurance coverage as well as
punitive damages. Should A&P be found liable, and be obligated to pay any
such damages, CAT has the right to deduct such sums from the $7,290,000
promissory note describe above.
The Company has learned that one of its former shareholders filed a
complaint with the Securities and Exchange Commission alleging the Company
illegally canceled his stock certificate being held in escrow. The Company
has responded to this complaint alleging, among other things, that this
individual made a claim to these shares without paying any consideration
for them. On the basis of this complaint the Securities and Exchange
Commission is conducting a preliminary investigation into the Company's
stock trading activities. Company management is fully cooperating with this
preliminary investigation and intends to vigorously defend against this
action.
7
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Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company reported consolidated revenue of $19,658.693 and a net loss
of $755,009, or $.16 loss per share, compared to $3,044,361 and a net loss of
$233,466, or $.10 loss per share for the three months ending September 30, 1996
and 1995, respectively. The comparative results indicate while revenue increased
546%, the net loss increased 223%. The Company's operating income was $202,905,
an operating ratio of 99%, for the quarter ending September 30, 1996, compared
to an operating loss of $193,250, an operating ratio of 106% for the quarter
ending September 30, 1995. The Company's depreciation and amortization for the
three months ended September 30, 1996 was $2,244,722, compared to $331,674 for
the three months ended September 30, 1995.
The revenues of the Company are presented on a consolidated basis and
are the cumulative results from operations of the Company's three subsidiaries,
Blue Mack Transport, Inc., Carpet Transport, Inc. and Chase Brokerage, Inc. Blue
Mack reported revenue of $2,534,932 and a net loss of $76,948, or $.02 loss per
share for the three months ending September 30, 1996. Carpet Transport reported
revenue of $15,388,615, and a net loss of $191,550, or $.04 loss per share for
the three months ending September 30, 1996. Chase Brokerage reported revenue of
$1,713,934, and net income of $356,123, or $.07 income per share. The parent
reported revenue of $21,212, and a net loss of $544,925, or $.11 loss per share.
In addition, the Company posted a loss of $297,709, or $.06 loss per share,
attributable to depreciation of the excess value of the equipment and
amortization of goodwill resulting from the CTI acquisition.
The Company identified several factors that attributed to the lower
than expected revenues and the corresponding net loss for the quarter ending
September 30, 1996. The revenue reported by Carpet Transport was 18% lower than
anticipated. This was primarily attributable to poor utilization of this
subsidiary's revenue equipment. The 650 tractor fleet in the Carpet Transport
subsidiary averaged $7,870 in revenue per tractor per month during the three
months ending September 30, 1996. The industry average for revenue per tractor
per month is approximately $9,500, and management of the Company expected
revenue per tractor per month to be $9,300 for the quarter ending September 30,
1996. As a result, Carpet Transport's income from operations as a percentage of
revenue fell to 5% for the quarter ending September 30, 1996, compared to
approximately 10% for the previous quarter. During the quarter, Carpet Transport
did not experience the loss of any major customers and revenue generated by its
carpet consolidation held firm during the quarter. The decrease in operational
results is directly attributable to a reduction in the utilization of the
revenue equipment based on the quantitative information collected by management.
8
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For the period ending September 30, 1996, Blue Mack operating
performance improved as the loss from operations was $31,093, an operating ratio
of 101% an improvement from last year's performance of an $800,000 loss from
operations for the year, an operating ratio of 108%. The improvement is
attributable to two factors, the Blue Mack fleet averaged a better than expected
$9,800 revenue per tractor per month during the quarter ending September 30,
1996, and the 95 tractor fleet is comprised of more late model equipment,
lowering maintenance costs, during the quarter ending September 30, 1996
compared to the quarter ending September 30, 1995.
The Company reported total assets of $78,151,735, total liabilities of
$72,102,915, and shareholders equity of $6,048,820. The Company reported total
current assets of $17,211,684 and total current liabilities of $27,879,904, a
current ratio of .62. As of September 30, 1996, the Company reported debt equity
of 8%.
The Company's cash flow from operating activities, investing
activities, and financing activities was a positive $3,280,318, $107,446, and a
negative $2,661,840 respectively, resulting in a net increase in cash of
$725,924 for the quarter ended September 30, 1996. The Company's cash flow from
operating activities, investing activities, and financing activities was a
negative $483,866, a positive $226,197, and $272,279 respectively, resulting in
a net increase in cash of $14,610 for the comparative three months ended
September 30, 1995. The Company paid $981,698 in interest expense during the
three months ended September 30, 1996 quarter, compared to $56,745 in interest
expense during the comparative three months ended September 30, 1995 period.
9
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to ordinary routine litigation incidental to its
business, primarily involving claims for personal injury or property damage
incurred in the transportation of freight. The Company maintains insurance to
cover liabilities in amounts in excess of self-insured retentions.
The Company has learned that a former shareholder of the Company filed
a complaint with the Securities and Exchange Commission alleging that the
Company illegally canceled his stock certificate being held in escrow. Following
a thorough internal audit, the Company has responded to this complaint alleging,
among other things, that this individual made a claim to these shares without
providing any proof of consideration or payment for them. On the basis of this
complaint, the Securities and Exchange Commission is conducting a preliminary
investigation into the Company's past stock trading activities. Company
management is fully cooperating with this preliminary investigation and intends
to vigorously defend against this action. Moreover, the Company has retained
independent counsel and has filed a lawsuit against this former shareholder, Mr.
William T. Denman, III, in the United States District Court, Northern District
of Georgia, seeking a declaratory judgment that its actions in canceling Mr.
Denman's shares were legal and justifiable under law. The foregoing is sometimes
referred to below as the "Denman Investigation".
Charles B. Prater, an employee of the Company and one of the former
owners of the Company's wholly owned subsidiaries, Carpet Transport, Inc. and
Chase Brokerage, Inc. (collectively the "CTI Companies"), is 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 from the CTI Companies in addition to criminal fraud
and criminal tax evasion. In addition to the criminal penalties provided by
statute if convicted, the indictment seeks to assess a forfeiture penalty
against Mr. Prater and others in the amount of approximately $363,000.
As part of the consideration paid to the sellers of the CTI Companies,
the Company issued 500,000 shares of its common stock to Mr. Prater, rendering
him the beneficial owner of record of more than 5% of the Company's outstanding
common stock. In order to assist the Company following its acquisition of the
CTI Companies, the Company retained and continues to retain the services of
Charles Prater as an employee at will on a non-contractual basis.
10
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A&P Transportation, Inc. ("A&P") was sued in a wrongful death action in
Federal Court in West Virginia prior to its acquisition by the Company. Other
claims have also been made against A&P arising out of the same accident. Company
management believes that A&P's liability could exceed the $1,000,000 maximum
limit coverage provided by its current insurance policy. In the event the claims
arising out of this accident exceed this insurance coverage and A&P is found
liable therefor, the Company intends to seek indemnification from the previous
owners of A&P pursuant to the provisions of the acquisition agreement that
provides for such relief.
Blue Mack Transport, Inc. v. Trustee for Mural Transport,
Inc.: Blue Mack commenced a core proceeding in the U.S. Bankruptcy
Court, Trenton, New Jersey, seeking the return of a $100,000 loan
it made to this debtor. The Bankruptcy Court recently recognized
this claim as valid and the proceeding has settled pending the
Court's approval on the basis of Blue Mack's agreement to accept a
payment in the amount of $60,000.
Trustee of Lands End Leasing v. Blue Mack, et al.: Continental and Blue
Mack are defendants in a core proceeding in the U.S. Bankruptcy Court, Trenton,
New Jersey, in which the Lands Lend Leasing Trustee seeks payment for and/or
lease payments allegedly due it as a result of the alleged utilization of its
revenue-generating equipment by these parties; Continental and Blue Mack have,
and continue to, vigorously prosecute their defense against these claims. The
Complainant has failed to specify any specific amount of its claims against
Continental and Blue Mack, and this proceeding is in the discovery stage.
Trustee for Mural Transport, Inc. v. Blue Mack, et al.: Blue Mack is a
defendant in a core proceeding in the U.S. Bankruptcy Court, Trenton, New
Jersey, in which the Trustee sued on a $15,000 claim representing the alleged
value of a piece of revenue equipment allegedly in Defendant's possession. This
proceeding has been settled with no liability assessed against Blue Mack.
Item 2. Changes in Securities
(a) & (b)
Not applicable.
(c) Recent Sales of Unregistered Securities
I. During the month of July, 1996, the Company delivered common stock
purchase warrants to 16 persons or entities for services to be rendered to the
Company during fiscal year ending June 30, 1997, entitling such grantees to
purchase an aggregate 1,810,000 Common Shares at exercise prices ranging from
$.25 to $7.50 per Common Share. The Company thereafter, on July 26, 1996, filed
a registration statement on Form S-3 with the Securities and Exchange
Commission, seeking to register the 1,810,000 common
11
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shares underlying the 16 Warrants as well as an additional 750,000 common shares
on behalf of certain Selling Securityholders (the foregoing Form S-3
registration statement and all subsequent amendments thereto are hereinafter
collectively referred to as the "Registration Statement"). In response to the
filing of the Registration Statement, the Security and Exchange Commission
notified the Company that because of the pending Denman Investigation, it would
not review the Registration Statement. Accordingly, and as it has certified, the
Company's Board of Directors agreed to proceed to finalize the Registration
Statement and confirmed its obligation under applicable securities law to
provide full and complete disclosure of all material facts in the Registration
Statement.
Subsequent Event. During October, 1996, the Company issued additional warrants
to certain individuals and modified certain other outstanding warrants, the net
effect of which was to increase Common Shares underlying outstanding warrants by
an aggregate 158,441 shares. The new warrants, issued for services rendered
during the Company's fiscal year ending June 30, 1997, entitle their grantees to
purchase Company Common Shares at exercise prices ranging from $0.25 to $5.00
per Common Share.
On November 25, 1996, the Company filed a Pre-effective Amendment to
the Registration Statement, registering the additional 158,441 Common Shares
underlying the then outstanding warrants. The Registration Statement was ordered
effective by the Securities and Exchange Commission on November 29, 1996.
Thereafter, the Company and certain Warrantholders exchanged and, in certain
instances, canceled some of the outstanding warrants. As a result of these
transactions and the consolidation of certain of the outstanding warrants, as of
December 10, 1996, there were 11 outstanding warrants issued pursuant to
consulting agreements between the Company and all but one of the warrantholders
who received warrants to purchase 30,000 Company Common Shares for services
rendered as a placement agent in a capital investment transaction. The Company
intends to file a post-effective amendment to the Registration Statement that
reflects the December 10, 1996 warrant consolidation and transactional warrant
modifications mentioned above.
In the event any of the grantees exercise their Warrants, the proceeds
shall be utilized by the Company for working capital.
The Company issued and distributed the above Warrants pursuant to the
private placement exemption from the registration requirements of the Securities
Act of 1933, as amended, provided by Section 4(2) promulgated thereunder on the
basis of the following facts:
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a. The issuance of the Warrants was to a limited number of grantees;
each of the transactions pursuant to which a Warrant was issued was negotiated
individually between the grantee and the Company and each grantee had a prior
existing business relationship with the Company.
b. All of the grantees received copies of the Company's most recent
reports filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended.
c. Each of the Common Stock Purchase Warrants issued to the
grantees is non-transferable and bears the following restrictive
legend:
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON THE
EXERCISE HEREOF CAN ONLY BE TRANSFERRED IN COMPLIANCE
WITH THE SECURITIES ACT OF 1933, AS AMENDED AND
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY
NOT BE SOLD, TRANSFERRED, OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS, IN
THE OPINION OF COUNSEL TO THE COMPANY, SUCH
REGISTRATION IS NOT THEN REQUIRED.
e. The Company has agreed to register all of the Common
Shares underlying all of the subject Warrants under the Securities
Act of 1933, as amended.
f. The Company did not pay any commissions or finder's fees
to any party in connection with the issuance of the subject
Warrants.
II. On August 19, 1996, the Company sold $1,650,000 in aggregate
original principal amount of its 7% Convertible Debentures (the "7% Debentures")
to Cameron Capital Ltd., a corporation organized under the laws of the Country
of Bermuda and having its principal offices located at 10 Cavendish Road,
Hamilton HM 19, Bermuda, pursuant to a certain Regulation S Offshore Securities
Subscription Agreement between the parties and dated the date of the placement.
The Company utilized the services of Cameron Capital Management Ltd. as the
placement agent for the 7% Debentures and paid a commission by issuing to this
placement agent a Common Stock Purchase Warrant to purchase 200,000 shares of
the Company's Common Stock, no par value per share, at the exercise price of
$3.50 per share, exercisable at any time, in part or in whole, during the period
from August 19, 1996 through August 19, 2001, pursuant to a certain Offshore
Warrant Subscription Agreement, dated August 19, 1996, by and between the
Company and the placement agent. The 7% Debentures: mature and are due and
payable as to their aggregate principal $1,650,000, and accrued interest, if any
on, August 19, 1998; entitle its holder to receive interest payments at the rate
of 7% per annum, payable on a semi-annual basis, commencing January 19, 1997,
and; are convertible
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into the Common Shares of the Company on the following basis: one-third of the
principal amount of the 7% Debentures may be convertible at any time from and
after the 40th day following the date of Closing, August 19, 1996; two-thirds of
the principal amount of the 7% Debentures may be convertible at any time from
and after the 70th day following the date of Closing, August 19, 1996, and; 100%
of the principal amount of the 7% Debentures may be convertible at any time from
and after the 100th day following the date of Closing, August 19, 1996, at the
conversion price equal to the lesser of (i) the average closing bid price of the
Company's Common Stock for the five (5) consecutive trading days immediately
prior to the date of Closing, August 19, 1996 or, (ii) seventy-eight (78%)
percent of the average closing bid price of the Company's Common Stock for the
five (5) consecutive trading days period immediately prior to the conversion
date.
The Company relied upon the exemptions from the registration
requirements of the Securities Act of 1933, as amended (the "1933 Act") provided
by Regulation S promulgated thereunder, based upon the following facts:
1. The Regulation S Offshore Securities Subscription Agreement, dated
August 19, 1996, executed by and between the Company and Cameron Capital Ltd.
(the "Offshore Subscriber") as well as the Offshore Warrant Subscription
Agreement, dated August 19, 1996, executed by and between the Company and
Cameron Capital Management Ltd. (the "Offshore Placement Agent") contained,
among other covenants, the following representations and warranties made by the
Offshore Subscriber and the Offshore Placement Agent, respectively: (a) the
Offshore Subscriber and the Offshore Placement Agent, were not "U.S. person(s)"
as that term is defined in Rule 902(o) of Regulation S and that their true and
correct principal office, address and telephone number is 10 Cavendish Road,
Hamilton HM 19, Bermuda, (441)295-5455; (b) the Offshore Subscriber and the
Offshore Placement Agent were and will not be officer(s), director(s) or
affiliate(s) of the Company; (c) the Offshore Subscriber and the Offshore
Placement Agent agreed that all offers and sales of the 7% Debentures, the
Warrants and shares of the Company's Common Stock issuable upon conversion
and/or exercise thereof shall not be made to a U.S. person or for the account or
benefit of U.S. persons and shall otherwise be made in compliance with the
provisions of Regulation S; (d) the Offshore Subscriber and the Offshore
Placement Agent are not distributor(s) as that term is defined in Rule 902(c) of
Regulation S; (e) the offers and sales of the subject securities have not been
and will not be pre-arranged by the Offshore Subscriber or by the Offshore
Placement Agent with a purchaser located in the United States or a purchaser
which is a U.S. person, and; (f) neither the Offshore Subscriber nor the
Offshore Placement Agent had engaged nor will they engage in any activity for
the purpose of, or that could reasonably be expected to have the effective of,
conditioning the market in the United States for any of the 7% Debentures,
Warrants
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or any of the Common Shares issuable upon the conversion and/or
exercise thereof.
2. The Company's officers and directors at all times during the
negotiation and the subsequent consummation of the subject transaction with the
Offshore Subscriber and the Offshore Placement Agent conducted these activities
directly with such entities' representatives who were at all times located in
Bermuda; the Company's officers and directors made such investigation and
performed a due diligence review of the subject transaction, the Offshore
Subscriber and the Offshore Placement Agent so as to provide it with a
reasonable basis to conclude that the subject transaction was conducted in full
compliance with all of the provisions of Regulation S promulgated under the 1933
Act.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) not applicable.
(b) Registrant did not file any Current Reports during the
subject period.
(c) Exhibit No. 27, Financial Data Summary
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Amendment No. 1 to its Form 10-QSB
for the period ending September 30, 1996, to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Erik Bailey
Erik Bailey, Vice President
Chief Financial Officer
Dated: January 24, 1997
catformA-10Q
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS OF CONTINENTAL AMERICAN TRANSPORTATION, INC. AND
SUBSIDIARIES AT AND FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000866457
<NAME> Joseph J. Tomasek
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,116,003
<SECURITIES> 0
<RECEIVABLES> 11,534,429
<ALLOWANCES> 924,958
<INVENTORY> 309,441
<CURRENT-ASSETS> 17,211,684
<PP&E> 59,014,512
<DEPRECIATION> 4,253,577
<TOTAL-ASSETS> 78,151,735
<CURRENT-LIABILITIES> 27,879,904
<BONDS> 57,579,751
0
0
<COMMON> 8,419,512
<OTHER-SE> (2,370,692)
<TOTAL-LIABILITY-AND-EQUITY> 78,151,735
<SALES> 0
<TOTAL-REVENUES> 19,658,693
<CGS> 0
<TOTAL-COSTS> 17,097,487
<OTHER-EXPENSES> 2,358,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 981,698
<INCOME-PRETAX> (755,009)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (755,009)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
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