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<S><C>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Amendment No. 1
to
FORM 10-SB
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Gasel Transportation Lines, Inc.
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Ohio 31-1239328
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(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization
County Road 10 , Route 4, Box 181A
Marietta, Ohio 45750
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(Address of principal executive offices) (Zip Code)
(740) 373-6479
-------------------------------
Issuer's Telephone number
Securities to be registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange on which registered
-------------------------- ----------------------------------
-------------------------- ----------------------------------
Securities to be registered pursuant to Section 12(g) of the Act.
Common, no par value
----------------------------------------------------------------
(Title of Class)
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
Gasel Transportation Lines, Inc. (the "Company") is a corporation that was
organized under the laws of the State of Ohio on January 27, 1988. The Company
was initially formed for the purpose of becoming a transportation freight broker
hauling freight under the authority of other motor carriers on a commission
basis with its sole offices located in Marietta, Ohio. Shortly after its
inception, the Company evolved its business to obtain licensing with the
Interstate Commerce Commission ("ICC") as a common and contract general
commodities motor freight carrier in the 48 contiguous United States and Canada
and to operate its own tractors and trailers. In September 1988, the Company
received licensing from the ICC authorizing it to transport in interstate
commerce both as a common and contract carrier, and the Company obtained
licenses in the 48 contiguous United States to operate under such licenses.
Shortly thereafter, the Company sought approval to operate in Canada, and it was
licensed to operate there, too. The Company also maintains its authority to
broker freight. In December, 1995, the ICC ceased operations and its regulatory
functions and jurisdiction over motor carriers was transferred to the United
States Department of Transportation.
In July, 1995, the Company acquired a trucking terminal and offices on County
Road 10, Rt. 4, Box 181A, Marietta, Ohio. This facility is now the principal
office and main terminal for the Company. The actual mailing address is P.O. Box
1199, Marietta, Ohio 45750, and the telephone is (740) 373-6479.
In July, 1996, the Company acquired the assets of a Florida based trucking
company, Earl W. Kersey Trucking, Inc. that included a terminal and offices
located on Highway 301 N, Dade City, Florida. During 1999, the Company purchased
5 acres of land adjoining the Dade City, Florida terminal.
The Company operates primarily as a truckload contract carrier with various
customers which ship truckload quantities of freight from one point to another.
As a contract carrier, the freight rates are negotiated with the shipper and are
dependent upon competition, place of origin and destination, and the type of
commodity being hauled. Most trips start in the area of one of the Company owned
terminals as most of the tractors are based out of these terminals.
Additionally, the Company has small offices in Paulsboro, New Jersey, and until
very recently also had them in Houston, Texas and Peru, Illinois, from where a
few tractors were based. Most of the Company freight lanes are located between
the terminal areas, although the Company regularly operates hauling freight to
the West Coast and back-hauls fruits and vegetables from there to the East
Coast. The Company uses many refrigerated trailers on these trips so that it can
facilitate this part of its business. In addition to its primary business, the
Company operates two driver training schools, one located in Marietta, Ohio and
one in Nelsonville, Ohio. Operation of these schools is licensed by the Ohio
Department of Highway Patrol.
The Company has had a steady growth in revenues and owned equipment over the
past five years. During that time it has increased the number of owned, either
directly or by capital lease, tractors from 23 to its current number of 103, its
dry van box trailers from 31 to 102, and its refrigerated climate control
trailers from 11 to 52. Annual freight revenues went from $3,325,606 for
calendar year 1994 to $11,197,869 for calendar year 1999, which represents
average annual revenue growth of 47%.
The Company recently announced that it has completed its ISO 9002 certification
by American Systems Registrar. This certification means that the Company has
been audited and verified to have written policies and procedures for everything
that the Company does, plus a backup procedure in the event of a failure. The
Company also announced that it will be opening another driver training school in
Sandusky, Ohio, and that school will commence operations in mid March of 2000.
The Company is in direct competition with other motor freight carriers,
including many companies that are significantly larger than the Company. The
Company is able to compete with these other carriers by having its terminals,
together with equipment that is based out of them, located in areas where there
are fewer competitors domiciled, by attempting to provide better and more timely
service, by operating new and specialized equipment, and by catering to certain
major shippers. Although only one shipper accounted for more than 10% of Company
revenues in 1999, the top ten customers accounted for better than 60% of the
Company revenues.
As a licensed carrier with the U. S. Department of Transportation and the
various states and Canada, the Company business is dependent upon maintaining
such operating authority. One condition of retaining such authority is that the
Company must maintain liability insurance for protection of the public. Another
is that
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the Company meet the safety fitness regulations as evidenced by a
"satisfactory" by the U. S. Department of Transportation.
Each of the owned terminals are required to comply with various state and
federal environmental regulations with regard to the storage of fuel and oil and
the disposal of waste oil and tires. There is no significant cost associated
with operating under these regulations; however, in the event of a major fuel or
oil spillage, the cost of clean up could be significant.
The Company does not have any employees that work for it directly because it
leases all of them from PeopLease Corporation. As of February 25, 2000, there
were 105 leased drivers, 12 yard and shop personnel, and 20 office and clerical
personnel, including corporate officers who work in those areas.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
During the past two years, being 1998 and 1999, Company revenues continued to
grow as the result of purchasing and operating additional transportation
equipment. Freight revenues increased 20.8% in 1998 from 1997, and by 45.4% from
1998 through 1999. However, the gross profit margins went from 8.2% in 1998 to
6.7% in 1999, which helped account for the decrease in net income before taxes
from $357,233 in 1998 to $150,697 in 1999. As new tractors were purchased, there
were fuel economies recognized over operating older equipment, but generally the
cost of purchasing new equipment has continued to increase annually, which has
driven up the cost of financing the equipment. However, the Company was able to
purchase 20 new Freightliner tractors in late 1999 for the same price as those
it purchased in 1998. The increase in equipment did result in increased interest
expense of $186,996 from 1998 to 1999.
To date, the ability of the Company to operate has been dependent on its ability
to finance the purchase of its rolling stock, i.e., its tractors and trailers,
from outside lending sources at approximately 100% of acquisition costs, and to
fund operations through the borrowing of funds from lending institutions
utilizing the accounts receivable as collateral. The Company currently has in
place a line of credit of up to $2,000,000 available for financing its
receivables, which management believes is adequate to handle current and the
immediate future needs.
Because most of the transportation equipment is financed, the Company has very
significant monthly payments that must be made. The result of heavily financing
the equipment is that the cash flow from operating profits of the Company is
required to make the payments. Acquiring additional new equipment is also a cash
requirement because of licensing and other costs that cannot be financed. The
amount of depreciation on the equipment that is taken on the financial
statements correlates to being a significant portion of the principal
amortization on the equipment loans from a cash flow standpoint. However, it
does not totally provide cash for such needs and the Company generally needs to
show operating profits before tax of at least $350,000 per year to make such
payments without having to obtain capital from other sources. To the extent that
operating profits are not available, the Company must obtain such funds through
additional capitalization, sales of equipment, refinancing of equipment or other
borrowings.
For the year 2000, the Company has an even greater need for capital because some
of its loans for equipment had balloon payments coming due during the year. The
Company was able to refinance these loans over more than the current year, so
that capital need has already been satisfied.
The cost of drivers wages and benefits have been steadily increasing over the
past two years as the Company has had to compete with others in the trucking
industry to hire new or retain existing drivers, and these increased costs have
had a negative impact on earnings.
More recently, fuel costs have gone up dramatically from early 1999 and
especially in the beginning of 2000, and have caused the Company to operate at a
loss since October, 1999. These losses have been a cash drain on the Company and
have reduced the Company's available working capital to a minimum. The Company
has tried to combat these fuel cost increases with freight surcharges, but they
have not yet been able to keep up with them. In order to continue operations,
the Company is going to either need to borrow additional working capital, need
to operate at a profit to generate working capital, or need to raise additional
capital. Otherwise, the Company may need to sell off equipment to generate
working capital, which may not be feasible if the market for used equipment is
not good. Because of the fuel price increases,
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the trucking industry is suffering and many companies are going out of
business, which has caused the market for used equipment to be reduced.
If the cost of fuel comes under control and gets reduced, the prospects for
the Company to generate profits and working capital continue to be good. The
shippers for whom the Company hauls have prospects of continuing their
growth, and the Company believes that it has adequate equipment to service
them. With the amount of equipment that the Company now operates, the fixed
operating costs are now believed to be spread over a sufficient number so
that the Company can operate more profitably than in the past years.
ITEM 3. DESCRIPTION OF PROPERTY.
The principal offices and terminal for the Company are Company owned and located
on 12.5 acres adjacent to State Route 4, approximately 4 miles southwest of
Marietta, Ohio. The property has four buildings on it, the major one of which is
constructed of cement block and steel, is in good condition, and has the
corporate offices, a drivers lounge, and three maintenance bays located therein.
Other buildings include a freight transfer building made out of steel that is in
fair to good condition, a wood building for the drivers school and lounge that
was recently remodeled and is in good condition, and a cement block supply
storage building that is in good condition. The lot is used for parking the
Company transportation equipment and for operating a driving school practice
area.
The other major terminal operated by the Company is at the Company owned
facility in Dade City, Florida. There is a pre-engineered steel terminal and
office building located thereon that has three maintenance bays as well as
offices and supply storage. The building is in good condition. The total area
for this facility is 8.5 acres.
The Marietta, Ohio terminal has above ground fuel storage that is regulated by
the EPA. Additionally, both terminals have waste oil storage facilities that are
also regulated.
Both properties are subject to mortgages with the usual conditions that the
Company is entitled to use of the properties for its business needs so long as
they are operated in a lawful manner and the mortgage notes are paid and not in
default. There are no other operating or use restrictions.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a). The following is a table of all persons known to the Company to be the
beneficial owner of more than 5% of the Company's voting securities.
<TABLE>
<CAPTION>
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TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNER
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Common shares Michael J. Post 1,450,544(1) 59.8
118 Merryhill Street
Marietta, Ohio 43750
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
(1) Includes 4,100 shares held by Mrs. Lee Post, the mother of Michael J. Post,
7,900 shares held by the Company and options to acquire 186,000 shares.
(b). The following is a table setting forth for management the beneficial
ownership of the voting securities of the Company as of February 22, 2000.
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- -------------------------- --------------------------
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL OWNER BENEFICIAL OWNER
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Common shares Michael J. Post 1,450,544(1) 59.8
118 Merryhill Street
Marietta, Ohio 43750
- ---------------------------- -------------------------- -------------------------- --------------------------
Common shares Allan M. Blue 110,448(2) 4.8
1130 Berlin Station Rd.
Delaware, Ohio 43015
- ---------------------------- -------------------------- -------------------------- --------------------------
Common shares Ronald K. Bishop 69,272(3) 3.0
305 Ohio Street
Marietta, Ohio 45750
</TABLE>
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<TABLE>
<S> <C> <C> <C>
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Common shares John Jackson 45,780 2.0
Route 2, Box 344
Belpre, Ohio 45714
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Common shares Directors and officers 1,676,044(4) 65.8
as a group
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
(1) Includes 4,100 shares held by Mrs. Lee Post, the mother of Michael J.
Post, 7,900 shares held by the Company and options to acquire 186,000 shares.
(2) Includes 26,420 shares held by Joyce M. Blue, wife of Allan M. Blue, and
options to acquire 62,000 shares.
(3) Includes options to acquire 62,000 shares.
(4) Includes options to acquire 310,000 shares.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Officers and Directors of the Company are as follows:
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<CAPTION>
Name Age Position With Company
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<S> <C> <C>
Michael J. Post 53 Chief Executive Officer, President, Treasurer, and
Director
John Jackson 54 Executive Vice President, Secretary, and General
Manager
Sherman E. Crum 32 Assistant Vice President-Administration
Fred E. Malone 33 Assistant Vice President-Fleet Maintenance
David R. Pierce 49 Assistant Vice President-Safety
Allan M. Blue 58 Director and Assistant Secretary
Ronald K. Bishop 47 Director
</TABLE>
Michael J. Post has been in all of such capacities from the formation of the
Company in January 1988 to date. He also serves as a board member of Selby
General Hospital, Marietta, Ohio.
John Jackson has been involved in such capacities since the formation of the
Company in 1988.
Sherman E. Crum has been with the Company in charge of office administration
since August 8, 1994. In July, 1999 he was promoted to his current executive
position.
Fred E. Malone has been with the Company in charge of fleet maintenance since
July, 1995. In July, 1999, he was promoted to his position as an assistant
vice president.
David R. Pierce has been with the Company in various capacities since September
1988, including being in charge of driver safety and compliance. In July, 1999,
he was elected to his position as Assistant Vice President of Safety.
Allan M. Blue has been a director since 1995 and Assistant Secretary since 1997.
Mr. Blue is a practicing attorney in the Columbus Ohio area where he has been
engaged in private law practice since 1971. In addition to practicing law, Mr.
Blue is actively engaged in several businesses as owner, officer, and director.
These businesses include The Oak Furniture Showroom, Inc., Held Team
Partnership, d/b/a Hold More Self Storage, Capitol Stock Transfer Company and
Team Investors, Ltd.
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Ronald K. Bishop, Director since 1994. Since 1987, he has worked for Bennco
Incorporated as General Manager of 3 radio stations, WDMX, WNUS, and WLTP, in
Parkersburg, West Virginia; recently he also became General Manager of 2
additional stations, WRVB, and WRZZ. He also serves as a board member of Selby
General Hospital, Marietta, Ohio, Ohio Valley Chamber of Commerce, and for the
Marietta Community Foundation, Easter Seals and the American Heart Association
in the Marietta area.
The position of director is for a one year term and until a successor is
elected.
ITEM 6. EXECUTIVE COMPENSATION.
<TABLE>
<CAPTION>
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
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ANNUAL COMPENSATION AWARDS
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Name and Principal Year Salary Securities Underlying Options/SAR
Position
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<S> <C> <C> <C>
Michael J. Post, President 1997 $39,480 126,000(1)
1998 $49,742 60,000(2)
1999 $63,750(3)
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</TABLE>
(1) Adjusted for a 5% stock dividend and two 2 for 1 stock splits.
(2) Adjusted for two 2 for 1 stock splits.
(3) In addition, the Company provides a 1998 Lincoln Navigator sport utility
vehicle for use by Michael J. Post; because he uses the vehicle primarily for
Company business, no value is assigned as compensation for use of the vehicle.
The Company pays its Directors' a fee of $250.00 for each meeting
attended. The Company's Code of Regulations authorizes the Board of Directors
to fix Directors' compensation without shareholder approval.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Until February 1, 2000, the Company had purchased key man life insurance on
Michael J. Post under a reverse split-dollar arrangement with the owner of the
policy, Michael J. Post. Under this arrangement, the Company owned the life
insurance benefit of $1,000,000 for the years in which it paid premiums in an
amount equal to the P.S. 58 costs, which is an approved Internal Revenue Service
schedule, to Michael J. Post. Any cash value accrued in the policy belongs to
the owner of the policy, Michael J. Post. The Company paid Michael J. Post
premiums of $16,880 in 1998 and $18,287 in 1999.
Michael J. Post, Director, CEO, President, Treasurer, and majority shareholder
of the Company, is the sole shareholder of Zip Services, Inc., a corporation
from which the Company formerly leased its employees and had other business
relationships in the past. At year end 1999, Zip Services, Inc. owed the Company
$61,356, and at year end 1998, $64,856.
In October 1998, the Company purchased from Michael J. Post a 1994 GMC Special
Edition Southern Comfort pickup truck for the then fair market value of $12,200.
Allan M. Blue, Director, also acts as legal counsel for the Company.
The Company has retained Capitol Stock Transfer Company as its transfer agent
and registrar. Allan M. Blue, Director, is a 50% shareholder and President of
such company. The terms of the arrangements between the Company and Capitol
Stock Transfer Company were no less favorable to the Company than could have
been obtained from independent third parties.
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capitalization of the Company consists of 3,000,000 common shares
without par value, of which 2,237,966 shares are currently issued and
outstanding. Each holder of common shares is entitled to one vote for each share
held on any matter properly submitted to the shareholders for a vote. The
holders of common shares are entitled to receive dividends as declared by the
Board of Directors. Upon liquidation,
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dissolution or winding up of the Company, shareholders are entitled to share
ratably in all assets remaining after payment of all liabilities. The holders
of the common shares do not have any preemptive, subscription, redemption,
conversion, or cumulative voting rights. All common shares now outstanding
are fully paid and non-assessable.
Each common share entitles the holder thereof to receive cash dividends as the
Board of Directors may declare from funds legally available therefor.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS.
(a) During the past two years, the common shares of the Company have been
traded in the over-the-counter market and been included on the OTC Bulletin
Board under the trading symbol GSEL. The following table sets forth the range
of the high and low bid prices for the common shares of the Company for each
quarter during the past two years, as reported by the The Nasdaq Stock
Market, Inc. These prices reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
Bid Prices
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High Low
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<S> <C> <C>
Calendar Year 1999
First Quarter $4.25 $3
Second Quarter $3.75 $2.5
Third Quarter $5 $3
Fourth Quarter $5 $2.75
Calendar Year 1998
First Quarter $5 $3.625
Second Quarter $6.375 $3.25
Third Quarter $3.5 $1.25
Fourth Quarter $7.75 $1.25
</TABLE>
(b) On February 22, 2000, there were 74 shareholders of record of the common
shares. There are also an estimated 120 shareholders who hold their shares in
street name.
(c) The Company has never declared a cash dividend on its common shares and no
assurance can be given that the Company will declare any cash dividend on its
common shares in the future. Payments of dividends are within the discretion of
the Company's Board of Directors and depend upon the earnings, capital
requirements, and operating and financial condition of the Company, among other
factors. The Company currently expects to retain its earnings to finance the
growth of the Company and does not expect to pay cash dividends in the
foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its business,
primarily involving claims for personal injury incurred in the transportation
of freight. The amount of the claims are within the policy limits of the
Company liability insurance. The Company is not aware of any claims or
threatened claims that might have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
There have been no changes in Accountants during the past two years, nor have
there been any disagreements with the Accountants in their accounting and
financial presentations regarding the Company.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On October 20, 1998, the Company granted warrants to Merchants Financial for the
right to purchase 25,000 common shares at $5.50 per share. These warrants were
sold to Merchants Financial for $0.50 per warrant, for total compensation of
$12,500. The warrants were purchased for cash without underwriting
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expense. The warrants were issued pursuant to Section 4 (2) of the Securities
Act of 1933, as amended, and Rule 701 promulgated thereunder.
In October, 1998, Merchants Financial exercised warrants to purchase 5,000
shares at $5.50 per share. From January to June, 1999, Merchants Financial
exercised the balance of the warrants and purchased a total of 40,000 common
shares at a price of $2.75 per share, which number of shares and price had been
adjusted to account for a 2 for 1 stock split in December 1998. The shares were
issued pursuant to Regulation D, Rule 504, and a Form D was filed with the
Securities and Exchange Commission. The shares were also registered under Ohio
law.
In June, 1998, Corna Securities, Inc. exercised warrants to purchase 10,749
shares at a price of $4.99 per share. The shares were issued pursuant to
Regulation D, Rule 504, and a Form D was filed with the Securities and Exchange
Commission. The shares were also registered under Ohio law.
In July, 1999, Corna Securities, Inc. exercised warrants to purchase 15,435
shares at a price of $2.27 per share. The shares were issued pursuant to
Regulation D, Rule 504, and a Form D was filed with the Securities and Exchange
Commission. The shares were also registered under Ohio law.
On October 1, 1998, the Company granted options pursuant to the Gasel
Transportation Lines, Inc. 1997 Stock Option Plan for 25,000 common shares to
the directors of the Company at an exercise price of $2.00 per share. Michael
J. Post received options to purchase 15,000 common shares and Allan M. Blue
and Ronald D. Bishop each options to purchase 5,000 common shares. No
consideration was paid for the options. The options were issued pursuant to
the exemption from registration under the Securities Act of 1933, as amended,
set forth in Rule 701 promulgated thereunder.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Code of Regulations for the Company provides that, in accordance with the
provisions of the Ohio statute, directors are indemnified by the Company
against expenses, judgments, decrees, fines or penalties with respect to any
threatened, pending, or completed action, suit or proceeding, whether civil
or criminal, administrative, or investigative, provided that such director
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to a criminal
action or proceeding, he had no reasonable cause to believe his conduct was
unlawful. Such indemnification may not be applicable to suits brought by the
Company against the director if he is adjudicated to be negligent or of
misconduct in the performance of his duties to the Company unless the court
shall determine that such person is fairly and reasonably entitled to
indemnification of expenses as the court shall deem proper.
PART F/S
FINANCIAL STATEMENTS
8
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GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet 2-3
Statements of Consolidated Income 4
Statements of Consolidated Stockholders' Equity 5-6
Statements of Consolidated Cash Flows 7-8
Notes to Consolidated Financial Statements 9-22
</TABLE>
<PAGE>
VAN KREVEL & COMPANY
Certified Public Accountants
P. O. Box 1432
Dublin, Ohio 43017-6432
614/761-3743
To the Board of Directors and Stockholders
Gasel Transportation Lines, Inc.
Marietta, Ohio
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Gasel
Transportation Lines, Inc., and its subsidiary, as of December 31, 1999, and the
related statements of consolidated income, stockholders' equity and cash flows
for the years ended December 31, 1999 and 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gasel Transportation Lines,
Inc., and its subsidiary, as of December 31, 1999, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998,
in conformity with generally accepted accounting principles.
/s/ VAN KREVEL & COMPANY
Dublin, Ohio
January 26, 2000
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 20,612
Accounts Receivable-Trade 1,383,841
Accounts Receivable-Affiliate 61,356
Securities 5,000
Inventory 223,252
Prepaid Licenses 75,808
Prepaid Insurance 58,183
Other Prepaid Expenses 25,077
---------------
Total Current Assets 1,853,129
PROPERTY AND EQUIPMENT
Land and Buildings 983,354
Tractors 8,458,315
Trailers 3,621,918
Shop Equipment 274,149
Office Equipment 141,014
---------------
13,478,750
Less Accumulated Depreciation 4,494,037
---------------
Net Property and Equipment 8,984,713
DEFERRED INCOME TAXES 542,823
OTHER ASSETS
ICC Certificate 4,321
Prepaid Expenses 24,438
Investment 5,000
Deposits 2,712
---------------
Total Other Assets 36,471
---------------
TOTAL ASSETS $ 11,417,136
===============
</TABLE>
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See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Note Payable-Bank $ 967,047
Accounts Payable 99,799
Accrued Contract Labor 165,942
Current Portion of Long Term Debt 2,217,776
------------
Total Current Liabilities 3,450,564
LONG TERM DEBT 4,742,572
DEFERRED INCOME TAXES 1,074,979
------------
Total Liabilities 9,268,115
STOCKHOLDERS' EQUITY
Common Stock, no par value, 3,000,000
shares authorized, 2,237,966 issued
and outstanding 1,277,140
Additional Paid in Capital 227,014
Retained Earnings 728,700
Less: Treasury Stock, at cost, 7,900 shares (17,833)
Less: Notes Receivable (66,000)
------------
Total Stockholders' Equity 2,149,021
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,417,136
============
</TABLE>
-3-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
REVENUES
Freight Income $ 11,197,869 $ 8,735,239
Rental Income 14,400 21,000
Training School Revenue 287,603 156,473
------------- -------------
11,499,872 8,912,712
Cost of Revenue 9,255,161 7,136,384
------------- -------------
Gross Profit 2,244,711 1,776,328
OPERATING EXPENSES
Garage Expenses 364,485 205,632
General and
Administrative Expenses 1,107,351 856,823
------------- -------------
1,471,836 1,062,455
Operating Income 772,875 713,873
OTHER INCOME (EXPENSE)
Other Income 40,534 92,192
Interest Income 11,136 15,120
Interest Expense (708,684) (521,688)
Gain on Sale of Equipment 34,836 57,736
------------- -------------
(622,178) 356,640
Income Before Tax Provision 150,697 357,233
Provision for Income Taxes 50,000 127,216
------------- -------------
Net Income $ 100,697 $ 230,017
============= =============
Basic Earnings Per Share $ .046 $ .110
============= =============
Diluted Earnings Per Share $ .042 $ .103
============= =============
</TABLE>
-4-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid in Retained Treasury Notes
Shares Amount Capital Earnings Stock Receivable
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997 1,965,308 $ 924,025 $ 200,062 $ 523,505 $ $
Net Income 230,017
Stock Issuance Cost (2,535)
Stock Dividends 100,344 125,430 (125,430)
Dividends Paid (89)
Stock Repurchased (1,552) (1,940)
Issuance of Warrant, Oct 1998 12,500
Exercise of Nov 1994 Warrant 42,996 53,625
Exercise of Oct 1998 Warrant 20,000 27,500
Purchase of 44,128 Shares
Of Treasury Stock (48,013)
Sale of 25,060 Shares of
Treasury Stock 6,368 19,774
------------ ------------ ------------ ------------ ------------ ------------
Balances, December 31, 1998 2,127,096 $ 1,128,640 $ 216,395 $ 628,003 $ (28,239) $ --
============ ============ ============ ============ ============ ============
</TABLE>
-5-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional
Common Stock Paid in Retained Treasury Notes
Shares Amount Capital Earnings Stock Receivable
---------- ---------- ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998 2,127,096 $1,128,640 $ 216,394 $ 628,003 $ (28,239) $
Net Income 100,697
Exercise of Nov 1996 Warrant 30,870 38,500 (38,500)
Exercise of Oct 1998 Warrant 80,000 110,000 (27,500)
Purchase of 22,914 Shares
of Treasury Stock (46,526)
Sale of 34,082 Shares of
Treasury Stock 10,620 56,932
Balances, December 31, 1999 2,237,966 $1,277,140 $ 227,014 $ 728,700 $ (17,833) $ (66,000)
========== ========== ============= ============= ========== =============
</TABLE>
-6-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 100,697 $ 230,017
Adjustments to reconcile net income to
cash provided by operating activities:
Deferred Taxes 50,000 127,216
Depreciation 1,615,219 1,172,393
Gain on Sale of Equipment (34,836) (57,736)
(Increase) Decrease in:
Accounts Receivable-Trade (228,984) (354,337)
Accounts Receivable-Affiliate 3,500 (13,099)
Inventory (85,037) (39,491)
Prepaid Expenses 15,187 (79,510)
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses 181,415 21,360
--------------- ---------------
Net Cash Provided
by Operating Activities 1,617,161 1,006,813
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (259,479) (347,262)
Decrease in Certificates of Deposit -- 67,585
Proceeds from Sale of Equipment 118,132 703,414
Purchase of Securities (5,000)
--------------- ---------------
Net Cash Provided (Used)
by Investing Activities (146,347) 423,737
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under Line of Credit 11,256,164 6,250,021
Proceeds from Long Term Borrowing -- 225,000
Common Stock Repurchased -- (1,940)
Proceeds from Warrant Exercise
and Sale of Treasury Stock 185,052 77,230
Purchase of Treasury Shares (46,526) (48,013)
Principal Payments on Long
Term Borrowing (1,446,120) (706,630)
Principal Payments on
Line of Credit (10,987,873) (6,038,265)
</TABLE>
-7-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS (continued)
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Principal Payments Under
Capital Lease Agreements (572,435) (1,072,846)
Dividends Paid -- (89)
------------ ------------
Net Cash Used by
Financing Activities (1,611,738) (1,315,532)
------------ ------------
Net Increase (Decrease) in Cash (140,924) 115,018
Cash & Cash Equivalents-January 1 161,536 46,518
------------ ------------
Cash & Cash Equivalents-December 31 $ 20,612 $ 161,536
============ ============
Supplemental Disclosures:
Interest Paid $ 708,684 $ 521,688
============ ============
Non-Cash Investing
and Financing Activities
Purchases of Property
and Equipment with
Proceeds of Notes Payable $ 2,211,898 $ 4,334,613
============ ============
Issuance of Stock Warrants
and Common Stock with
Proceeds of Notes Receivable $ 148,500 $ 40,000
============ ============
</TABLE>
-8-
See accompanying notes to consolidated financial statements.
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Gasel Transportation Lines,
Inc., and its subsidiary, Gasel Driver Training Schools, Inc., is presented to
assist in understanding the Company's financial statements. The financial
statements and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
NATURE OF OPERATIONS
The Company is engaged in the trucking industry, acting as a licensed common and
contract general commodities motor freight carrier, handling freight throughout
the continental United States and Canada. The principal offices of the Company
are located in Marietta, Ohio. In addition, the Company has motor terminal and
maintenance facilities located in Marietta, Ohio and Dade City, Florida, and
motor terminals located in Paulsboro, New Jersey, and Peru, Illinois. The
subsidiary is a state-licensed Class A truck driver training school.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and operations of the
Company and its subsidiary. All significant inter company accounts and
transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue and direct shipment costs upon delivery of the
related freight. Direct shipment costs generally include the leased driver
costs. These costs are recorded as an expense and as accrued contract labor upon
delivery of the related freight. Driver training school revenues and rental
income are recognized when earned.
-9-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
ACCOUNTS RECEIVABLE
No provision for doubtful accounts has been made since all receivables were
considered collectible.
INVENTORY
Inventories consist primarily of maintenance supplies and fuel and are stated at
the lower of cost (first-in, first-out) or market value.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line method
over the estimated useful lives of 3-10 years for tractors and trailers, 40
years for buildings and 3-10 years for shop and office equipment. Amortization
of equipment purchased under capitalized lease obligations is included in
depreciation expense. For tax reporting purposes, accelerated depreciation or
applicable cost recovery methods are used. Gains and losses are recognized in
the year of disposal. Tires purchased with tractors and trailers are capitalized
as a part of the cost of such equipment, with replacement tires being
inventoried and expensed when placed in service.
STOCK OPTIONS
The Company has elected to account for the stock option plan under Statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation." This standard encourages the adoption of the fair value-based
method of accounting for employee stock options or similar equity instruments.
Under the fair value-based method, compensation cost is measured at the grant
date based on the value of the award.
-10-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK SPLIT
In December, 1998 outstanding shares of common stock were split two-for-one. In
December, 1999 outstanding shares of common stock were again split two-for one.
All share and per share amounts have been restated.
INCOME TAXES
Deferred income taxes are reported using the liability method. Deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance, when in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
CREDIT RISK
The Company maintains cash in demand deposit accounts with federally insured
banks. At times, the balances in the accounts may be in excess of federally
insured limits.
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Credit risk is generally
diversified due to the large number of entities comprising the Company's
customer base and their dispersion across many different industries and
geographic regions.
-11-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 2 - NOTES RECEIVABLE
Notes receivable consists of:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Unsecured notes receivable, dated
October, 1998, Merchants Financial,
10% due on demand $ -- $ 40,000
Unsecured note receivable, dated
June, 1999, Merchants Financial,
10% due on demand 27,500
Unsecured note receivable, dated
August, 1999, Corna Securities,
10% due on demand 38,500
------------ ------------
$ 66,000 $ 40,000
============ ============
</TABLE>
(See Note 10.)
NOTE 3 - LONG TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Mortgages Payable $ 737,418 $ 759,522
Notes Payable 5,180,986 4,393,103
Capital Lease Obligations 1,041,944 1,614,379
------------ ------------
6,960,348 6,767,004
Less Current Maturities 2,217,776 1,670,650
------------ ------------
$ 4,742,572 $ 5,096,354
============ ============
</TABLE>
-12-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 3 - LONG TERM DEBT (continued)
Notes payable and capitalized lease obligations are collateralized by property
and equipment with a net book value of $7,237,886 at December 31, 1999 and
$6,739,141 at December 31, 1998. The mortgages payable are collateralized by
land and building with a net book value of $831,192 at December 31, 1999, and
$872,205 at December 31, 1998, as well as a first security interest in all shop
and office equipment. One of the mortgages is personally guaranteed by Michael
J. Post, President, CEO, and majority stockholder, and by his wife. Interest
rates range from 7.25 to 10.6% during 1999 and 7.5 to 12.5% during 1998 for the
notes. Rates for the mortgages ranged from 8.25% to 9.0% for 1999 and 8.5% to
1.5% over prime (9.0% at December 31, 1998) in 1998.
Annual maturities on long term debt, excluding capital lease obligations, for
the five years ending after December 31, 1999, are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $1,482,745
2001 1,485,546
2002 1,746,568
2003 556,639
Thereafter 646,906
----------
$5,918,404
==========
</TABLE>
NOTE 4 - LINE OF CREDIT AGREEMENT
The Company has available a $2,000,000 line of credit with Associates
Transcapital Services of Irving, Texas at December 31, 1999 and $1,000,000 at
December 31, 1998. At December 31, 1999, $967,047 was outstanding on this line,
with an interest rate of 9.5%. At December 31, 1998, $698,756 was outstanding on
this line, with an interest rate of 9.0%. Interest is charged at 1% over prime
and is due monthly. This line of credit agreement matures in May, 2002, with a
one year renewal. This line of credit is collateralized by accounts receivable
and deposit accounts and is personally guaranteed by the Company's majority
stockholder (see Note 12).
-13-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 5 - LEASES
The Company leases tractors and trailers under leases that expire from 1999
through 2001. These assets are included in property and equipment as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Tractors $ 2,072,268 $ 2,072,268
Trailers 530,756 545,543
------------ ------------
2,603,024 2,617,811
Less Accumulated Depreciation (1,211,145) (840,682)
------------ ------------
$ 1,391,879 $ 1,777,129
============ ============
</TABLE>
Future minimum annual lease payments as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Capital
Leases
-------------
<S> <C>
2000 $ 792,270
2001 325,135
-------------
1,117,405
Less amount representing interest
at rates ranging from 6.5 to 9.8% (75,461)
-------------
Present value of net minimum
lease payments 1,041,944
Less current portion (735,030)
-------------
Total $ 306,914
=============
</TABLE>
During 1999, the Company leased terminals located in Peru, Illinois and
Paulsboro, New Jersey on a month to month basis. Rent expense paid in 1999 was
$42,251 and $32,248 in 1998. In addition, during 1998, the Company leased
terminals in Laredo and Houston, Texas.
-14-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 5 - LEASES (continued)
In August, 1998, the Company entered into a one year employee leasing agreement
with Employee Solutions, Inc., (ESI), an Arizona corporation. ESI provides the
Company with all of its drivers, mechanics and office workers. In 1998, the
Company paid ESI $1,101,722 for its leased employees. In 1999, the Company paid
ESI $4,212,736 for its leased employees.
In December, 1999, the Company entered into a one year employee leasing
agreement with PeopLease Corporation, a South Carolina Corporation. PeopLease
will provide the Company with all of its drivers, mechanics and office workers.
In 1999, the Company made no payments to PeopLease.
NOTE 6 - INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Current:
Federal $ -- $ --
State -- --
-------- --------
$ -- $ --
======== --------
Deferred:
Federal $ 50,000 $127,216
State -- --
-------- --------
$ 50,000 $127,216
======== ========
</TABLE>
A reconciliation of the total provision for income taxes with amounts determined
by applying the statutory U S Federal income tax rates to income tax provisions
is as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Income tax at statutory rates $ 43,900 $121,516
Add: Tax effect of
permanent differences 6,100 5,700
-------- --------
Total income tax provision $ 50,000 $127,216
======== ========
</TABLE>
-15-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 6 - INCOME TAXES (continued)
The effects of temporary differences that give rise to significant portions of
the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
December 31
1999
-----------
<S> <C>
Deferred tax assets:
Net operating loss carryforward $ 538,645
Contribution carryover 4,178
-----------
Total deferred tax assets $ 542,823
===========
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation $ 1,074,979
Other --
-----------
Total deferred tax liabilities $ 1,074,979
===========
</TABLE>
These amounts are presented in the accompanying consolidated balance sheet as
follows:
<TABLE>
<S> <C>
Noncurrent deferred tax assets $ 542,823
Noncurrent deferred tax liability (1,074,979)
Net deferred tax liability $ (532,156)
===========
</TABLE>
NOTE 7 - EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share were computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. At December 31, 1999 and 1998, the number of common shares was
increased by the number of shares issuable on the exercise of outstanding stock
options and warrants when the market price of the common stock exceeds the
exercise price of the options and warrants. This increase in the number of
common shares was reduced by the number of common shares that are assumed to
have been purchased with the proceeds from the exercise of the options; those
purchases were assumed to have been made at the average price of the common
stock during that part of the year when the market price of the common stock
exceeded the exercise price of the options.
-16-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 7 - EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE
(continued)
The following data shows the amounts used in computing earnings per share (EPS)
and the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
December 31,
1999 1998
-------- --------
<S> <C> <C>
Income available to common
stockholders used in basic
EPS and diluted EPS $100,697 $230,017
======== ========
Weighted average number of
common shares used in basic EPS 2,190,877 2,088,850
========= =========
Effect of dilutive securities:
Stock options and warrants 198,889 155,203
======= =======
Weighted number of common shares
and dilutive potential common
stock used in diluted EPS 2,389,768 2,244,053
========= =========
</TABLE>
NOTE 8 - STOCKHOLDERS' EQUITY
On April 23, 1998, a 5% stock dividend was declared to stockholders of record as
of May 31, 1998 and payable on June 15, 1998. No fractional shares were issued
in connection with this transaction. Cash of $89 was paid to those stockholders
who would otherwise have received fractional shares. The dividends were deducted
from retained earnings based on an estimated fair value of $1.25 per share. As a
result of the stock dividend, 100,344 shares were issued in 1998.
On October 1, 1998, the Company authorized a 2 for 1 stock split for
stockholders of record at November 1, 1998, and payable December 1, 1998. (See
Note 1.)
On November 26, 1999, the Company authorized a 2 for 1 stock split for
stockholders of record at December 10, 1999 and delivered the split shares on
December 20, 1999. (See Note 1.)
-17-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 9 - STOCK OPTIONS
The Company has adopted a stock option plan which provides for the granting of
options to certain officers, directors and key employees of the Company.
Currently, options for 310,000 shares of common stock have been issued under
this plan. The option price, number of shares and grant date are determined at
the discretion of the Company's board of directors. Grantees vest in the options
at the date of the grant. The exercise price of each option that has been
granted under the plan equals 100% of the market price of the Company's stock on
the date of the grant. Options under this plan vest on the grant date and are
exercisable for a period not to exceed 10 years from the option grant date.
Options are non-transferable.
A summary of the status of the Company's stock option plan as of December 31,
1999 and 1998, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 310,000 $.81 210,000 $.95
Granted -- 100,000 $.50
Exercised -- --
Forfeited -- --
------- -------
Outstanding at
end of year 310,000 $.81 310,000 $.81
======= ==== ======= ====
Options exercisable
at year end 310,000 310,000
======= =======
Weighted average fair
value of options
granted during the year $ -- $ .50
======= =====
</TABLE>
-18-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 9 - STOCK OPTIONS (continued)
The following table summarizes information about stock options outstanding at
December 31, 1999.
<TABLE>
<CAPTION>
Weighted
Range Number Average Weighted Number
of Outstanding Remaining Average Exercisable
Exercise at Contractual Exercise at
Prices 12/31/99 Life Price 12/31/99
------ -------- ---- ----- --------
<S> <C> <C> <C> <C>
$.95 210,000 7.42 $.95 210,000
$.50 100,000 8.75 $.50 100,000
</TABLE>
NOTE 10 - WARRANTS
As part of the November, 1994 securities offering, the underwriter was granted a
warrant to purchase 42,996 shares of common stock at $1.25 per share. This
warrant was exercised in June, 1998, for a total of $53,625.
As part of the July, 1996 securities offering, the underwriter was granted a
warrant to purchase 30,870 shares of common stock at a purchase price of $1.25
per share. This warrant was exercised in August, 1999, by executing a 10%
cognovit note in the amount of $38,500, of which $38,500 was outstanding at
December 31, 1999.
As part of a consulting agreement dated October, 1998, Merchants Financial
purchased a warrant at $.125 per share for the right to purchase 100,000 shares
of the Company's common stock at a purchase price of $1.38 per share, such
warrant to be exercisable within one year of the issuance of the warrant. A 10%
cognovit demand note in the amount of $12,500 was executed on October 20, 1998.
In addition, Merchants Financial exercised the option to acquire 20,000 shares
of common stock on October 28, 1998, by executing a 10% cognovit demand note in
the amount of $27,500. Under this agreement, cognovit notes totaling $40,000
were outstanding at December 31, 1998.
During 1999, Merchants Financial acquired 80,000 shares of the Company's common
stock by executing 10% cognovit demand notes totaling $110,000. At December 31,
1999, $27,500 of these cognovit notes were outstanding.
-19-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 10 - WARRANTS (continued)
There were no outstanding warrants at December 31, 1999.
A summary of the status of the Company's warrants as of December 31, 1999 and
1998, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1999 1998
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 110,870 $1.34 73,866 $1.25
Granted -- 100,000 $1.38
Exercised (110,870) $1.34 (62,996) $1.29
Expired -- --
-------- -------
Outstanding at
end of year -- 110,870 $1.34
======== ======= =====
</TABLE>
NOTE 11 - 401(k) PLAN
The Company terminated its 401(k) profit sharing plan in 1998. The Company made
no contributions to the Plan for the year ended December 31, 1998.
NOTE 12 - RELATED PARTY TRANSACTIONS
In 1999, the Company paid $18,287 in life insurance premiums on a
key man life insurance policy on the president, Michael J. Post.
This policy is owned by Michael J. Post. Premiums for 1998 totaled
$16,880.
Michael J. Post, President and majority stockholder of the Company, is the sole
stockholder of Zip Services, Inc., a West Virginia Corporation from which the
Company leased its tractor drivers. Zip Services, Inc., charged the Company for
the leased drivers approximately the same amount as its costs for such drivers.
-20-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 12 - RELATED PARTY TRANSACTIONS (continued)
At December 31, 1999 and 1998, the Company had accounts receivable due from Zip
Services in the amounts of $61,356 and $64,856, respectively.
In September, 1998, the Company discontinued its leasing
arrangement with Zip Services, Inc. (See Note 5.)
During 1998, the Company paid Zip Services, Inc., $1,700,925 for the leasing of
drivers.
NOTE 13 - MAJOR CUSTOMERS
During 1999, the Company had one major customer, sales to which exceeded 10% of
the Company's total sales. Sales to this customer totaled $1,639,082 for the
year ended December 31, 1999.
During 1998, the Company had two major customers, sales to each of which
exceeded 10% of the Company's total sales. Sales to these customers totaled
$3,412,785, for the year ended December 31, 1998.
NOTE 14 - FUEL AVAILABILITY AND COST
The Company is dependent upon the availability of diesel fuel. Increases in the
cost of fuel may, in the future, adversely affect the profitability of the
Company. There can be no assurance that diesel fuel prices will not increase.
There also can be no assurance that the Company will be able to recover any
future increase in fuel costs and fuel taxes through increased freight rates.
NOTE 15 - DRIVERS
The Company offers a driver training program through its subsidiary's operations
which offers incentives to attract and retain qualified drivers. Although the
Company has experienced no significant downtime due to inability to secure
qualified drivers, no assurance can be given that a shortage will not adversely
affect the Company in the future.
-21-
<PAGE>
GASEL TRANSPORTATION LINES, INC.
AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999 and 1998
NOTE 16 - CONTINGENCIES
The Company is subject to various other claims, legal proceedings and
investigations covering a wide range of matters that may arise in the ordinary
course of business. Management believes the resolutions of claims and pending
litigation will not have a material effect, individually or in the aggregate, to
the financial position, results of operations and cash flows prior to
contemplating potential insurance recoveries or accruals.
NOTE 17 - SUBSEQUENT EVENT
The Company had commitments outstanding to acquire (20) 2000 Freightliner
tractors for approximately $1.8 million at December 31, 1999. These purchases
were financed by acquiring debt in the amount of $1,787,500 from Wesbanco
Bank, Parkersburg, West Virginia on January 3, 2000 at a rate of 8.19%.
Annual maturities on this debt for the five years are as follows:
<TABLE>
<S> <C>
2000 $ 286,864
2001 338,214
2002 366,967
2003 398,165
2004 397,290
----------
$1,787,500
==========
</TABLE>
-22-
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
3(a). Articles of Incorporation as Amended.*
3(b). Code of Regulations as Amended.*
10(a) Employee Lease Agreement with PeopLease Corporation.*
10(b) Transportation Accounts Financing and Security Agreement with
Associates Transcapital Services.*
10(c) Company Stock Option Plan.*
10(d) Standard Form of Director Stock Option.*
10(e) Agreement with Merchants Financial for the promotion of Company and
its common shares.*
11 See Note 7 to the Financial Statements.*
21 List of Subsidiary Corporations.*
27. Financial Data Schedule
* These exhibits previously filed as part of Form 10-SB
ITEM 2. DESCRIPTION OF EXHIBITS.
9
<PAGE>
3(a). Articles of Incorporation as Amended.
3(b). Code of Regulations as Amended.
10(a) Employee Lease Agreement with PeopLease Corporation.
10(b) Transportation Accounts Financing and Security Agreement with
Associates Transcapital Services.
10(c) Company Stock Option Plan.
10(d) Standard Form of Director Stock Option.
10(e) Agreement with Merchants Financial for the promotion of Company and its
common shares.
11 See Note 7 to the Financial Statements.
21 List of Subsidiary Corporations.
27. Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto authorized.
Gasel Transportation Lines, Inc.
-----------------------------------------
(Registrant)
Date: May 5, 2000 By: /s/ Michael J. Post
------------------------------ --------------------------------------
Print name and title of person signing
Michael J. Post, President
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS OF GASEL TRANSPORTATION LINES, INC AND ITS SUBSIDIARY AS OF
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,612
<SECURITIES> 0
<RECEIVABLES> 1,383,841
<ALLOWANCES> 0
<INVENTORY> 223,252
<CURRENT-ASSETS> 1,853,129
<PP&E> 13,478,750
<DEPRECIATION> 4,494,037
<TOTAL-ASSETS> 11,417,136
<CURRENT-LIABILITIES> 3,450,564
<BONDS> 4,742,572
0
0
<COMMON> 1,277,140
<OTHER-SE> 871,881
<TOTAL-LIABILITY-AND-EQUITY> 11,417,136
<SALES> 11,499,872
<TOTAL-REVENUES> 11,499,872
<CGS> 9,255,161
<TOTAL-COSTS> 9,255,161
<OTHER-EXPENSES> 1,471,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,684
<INCOME-PRETAX> 150,697
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 100,697
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,697
<EPS-BASIC> .046
<EPS-DILUTED> .042
</TABLE>
