FORM 10-QSB
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: December 31, 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 August 6, 1997, 5,633,224 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format:
Yes..X..No.....
CONTINENTAL AMERICAN TRANSPORTATION, INC. AND SUBSIDIARIES
CONTENTS
Pages
Part 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 7
of Financial Condition and Results
of Operations
Part II OTHER INFORMATION
Item 1. Legal Proceedings. 10
Item 2. Changes in Securities. 12
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
Continental American Transportation, Inc. and Subsidiaries
Consolidated Balance Sheet
December 31, 1996
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 39,586
Restricted cash 953,308
Trade accounts receivable, net of receivables for doubtful accounts of $852,301 9,245,736
Notes receivable - current portion 695,087
Inventories 266,693
Other current assets 1,544,850
---------------
Total Current Assets 12,745,260
Property and Equipment - at cost less accumulated depreciation 57,151,178
Notes receivable, excluding current portion 282,956
Deferred charges 492,807
Excessive purchase price over fair value of net assets acquired less accumulated amortization 4,892,620
Other assets 932,152
---------------
Total Assets 76,496,973
===============
Liabilities and Stockholders' Equity
Current Liabilities
Lines of credit 4,270,464
Current maturities of long-term debt 10,311,237
Current maturities of capital lease obligations 17,813,730
Accounts payable 6,092,380
Accrued expenses 3,761,094
---------------
Total Current Liabilities 42,248,905
Long Term debt, excluding current maturities 9,696,725
Capital lease obligations, excluding current maturities 22,775,291
---------------
Total Liabilities 74,720,921
---------------
Stockholders' Equity
Convertible preferred stock, $1 par value, 400,000 shares authorized, 200,000
shares issued 200,000
Common stock, no par value, 20,000,000 shares authorized, 5,014,689 shares issued,
4,984,689 shares outstanding 9,835,064
Demand notes receivable from sale of stock and expense of stock options and warrants (325,000)
Retained earnings (deficit) (7,796,204)
Treasury stock, 30,000 shares at cost (137,808)
---------------
Total Stockholders' Equity 1,776,052
---------------
Total Liabilities and Stockholders' Equity $ 76,496,973
===============
See notes to the consolidated financial statements.
3
Continental American Transportation, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------------- ----------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- ---------------
Operating Revenues $ 16,643,182 $ 2,684,538 $ 36,301,875 $ 5,728,899
-------------- --------------- -------------- ---------------
Cost of Operations
Operating Expenses 17,147,560 2,663,116 34,352,959 5,583,548
Depreciation and amortization 3,124,278 307,251 5,369,000 658,925
(Gain) loss on disposal of equipment 17,547 (38,141) 23,214 (73,736)
-------------- --------------- -------------- ---------------
Total Cost of Operations 20,289,385 2,932,226 39,745,173 6,168,737
-------------- --------------- -------------- ---------------
Operating Loss (3,646,203) (247,688) (3,443,298) (439,838)
-------------- --------------- -------------- ---------------
Other Income
Interest expense (1,393,551) (69,211) (2,375,249) (125,956)
Other income 8,053 52,525 31,837 69,054
-------------- --------------- -------------- ---------------
Total Other Income (Expense) (1,385,498) (16,686) (2,343,412) (56,902)
-------------- --------------- -------------- ---------------
(Loss) Before Income Taxes (5,031,701) (264,374) (5,786,710) (496,740)
Provision for income taxes (391,646) - (391,646) -
-------------- --------------- -------------- ---------------
Net (Loss) $ (5,423,347) $ (264,374) $ (6,178,356) $ (496,718)
============== =============== ============== ===============
(Loss) Per Share $ (1.10) $ (.10) $ (1.29) $ (.20)
============== =============== ============== ===============
4,929,225 2,647,575 4,776,137 2,470,041
Weighted Average Common Shares
Outstanding
============== =============== ============== ===============
See notes to the consolidated financial statements.
4
Continental American Transportation, Inc. & Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
-----------------------------------
1996 1995
--------------- ---------------
Cash Flows From Operating Activities $ 3,783,188 $ (666,169)
--------------- ---------------
Cash Flows From Investing Activities (5,289,266) 229,088
--------------- ---------------
Cash Flows From Financing Activities 1,158,893 475,739
--------------- ---------------
Net (Decrease) in Cash, Including Restricted Cash (347,185) 38,658
Cash, Including Restricted Cash, Beginning of Period 1,340,079 480
--------------- ---------------
Cash, Including Restricted Cash, End of Period $ 992,894 $ 39,138
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the six months for
Interest $ 2,375,249 $ 125,956
=============== ===============
SUPPLEMENTAL DISCLOSURES OF NON CASH
FINANCING ACTIVITIES
Conversion of subordinated debt into
convertible preferred stock $ 200,000 $ - 0 -
=============== =============
See notes to the consolidated financial statements.
5
Continental American Transportation, Inc. & Subsidiaries
Notes to the Financial Statements
PREFERRED SHARES
Series A, $1.00 per share, 800,000 shares authorized, issues and
outstanding. These shares are entitled to a dividend at the rate of seven
percent (7%), payable quarterly commencing September 30, 1995 and
continuing for the next ensuing 14 successive quarters. Dividends on Series
A shares are cumulative and rank in priority over dividends on the
Company's Series B preferred shares or its common shares. The Series A
preferred shares are convertible into common shares of the Company at any
time during the period commencing August 1, 1996 through July 21, 2000. The
amount of Company common shares into which Series A preferred shares shall
be converted is based upon the average bid and ask price of the Company's
common shares for the twenty business days prior to the Company receiving
notice of intent to convert. On December 4, 1995, all of the Series A
preferred shares were converted into 217,984 common shares. All rights and
claims to dividends were terminated upon conversion.
Series B, $1.00 per share, 255,000 shares authorized, issued and
outstanding. These shares are entitled to a dividend at the rate of seven
percent (7%) payable quarterly but commencing to accrue only thirty days
after all outstanding Series A shares have been converted to common shares
and shall continue for the next ensuing 14 successive quarters or until
converted into Company common shares, whichever is earlier. Dividends on
Series B preferred shares are convertible into common shares of the Company
after the conversion of all Series A preferred shares into Company common
shares and during the period commencing August 1, 1996 through July 31,
2000. The amount of Company common shares into which Series B preferred
shares shall be converted is based upon the average bid and ask price of
the Company's common shares for the twenty business days prior to the
Company receiving notice of intent to convert. On December 4, 1995, all of
the Series B preferred shares were converted into 69,482 common shares. All
rights and claims to dividends were terminated upon conversion.
COMMON STOCK
Common stock, no par value, 20,000,000 shares authorized and 5,014,689
shares issued and outstanding at December 31, 1996 and 1995, respectively.
Pursuant to a resolution ratified and approved by the Board of Directors, a
reverse split of 1 share for 25 shares held was effected June 30, 1995.
6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The Company reported consolidated revenue of $16,643,182 and a net loss
of $5,500,007, or $1.10 loss per share, compared to $2,684,538 and a net loss of
$264,374, or $.10 per share, for the three months ending December 31, 1996 and
1995 respectively. The Company's operating loss was $3,646,203, for the quarter
ending December 31, 1996, compared to an operating loss of $285,829, for the
quarter ended December 31, 1995. The Company's depreciation and amortization for
the three months ended December 31, 1996 was $3,124,278, compared to $307,251
for the three months ended December 31, 1995.
The revenues of the Company are presented on a consolidated basis and
are the cumulative results from the operations of the Company's three
subsidiaries, Blue Mack Transportation, Inc., Carpet Transport, Inc. and Chase
Brokerage, Inc. Blue Mack reported revenue of $3,056,832 and a net profit of
$2,800, or $.00056 income per share for the three months ended December 31,
1996. Carpet Transport reported revenue of $13,896,724 and a net loss of
$2,730,540, or $.55 loss per share for the three months ended December 31, 1996.
Chase Brokerage reported revenue of $779,222 and a net loss of $844,714, or $.17
loss per share for the three months ended December 31, 1996. The parent reported
revenue of $6,950 and a net loss of $1,536,147, or $.31 loss per share for the
three months ended December 31, 1996. In addition, the Company posted a loss of
$291,405 or $.06 per share, attributable to depreciation and amortization of
goodwill resulting from the CTI acquisition.
The Company identified several factors which attributed to the lower
than expected revenues and the corresponding net loss for the quarter ending
December 31, 1996. The revenue reported by Carpet Transport was 21% lower than
anticipated. This was primarily due to under-utilization of this subsidiary's
revenue equipment. The approximately 625 tractor fleet in the Carpet Transport
subsidiary averaged $7412 in revenue per tractor per month during the three
months ending December 31, 1996. This figure represents 78% of the industry
average utilization figures. The major factor for this shortfall is the industry
wide shortage of drivers in the over the road market. Understanding this,
management is pursuing all avenues to increase its driver population while
maintaining its stringent quality standards. The Company's emphasis in this area
is focused in the recruiting and training areas. Carpet Transport maintains an
internal Driver Training School on its premises in Calhoun, Georgia. As a result
of this shortage, Carpet Transport's revenues dropped 9% from the previous
quarter. During the quarter, Carpet Transport did not experience the loss of any
major clients.
7
For the period ending December 31, 1996, Blue Mack's operating
performance improved as the income from operations was $68,803, an operating
ratio of 98% a marked improvement from the prior quarter's operating ratio of
101% and the prior year's operating ratio of 108%. The improvement is
attributable to the fact that the Blue Mack fleet averaged $10,956 per tractor
per month for the Quarter ended December 31, 1996, well over the industry
average of $9,500 per month. The upgraded fleet required less maintenance time
therefore, increasing productivity.
The Company reported total assets of $76,496,973, total liabilities of
$74,920,921, and shareholder's equity $1,576,052. The Company reported total
current assets of $12,745,260 and current liabilities of $42,448,905, and a
current ratio of .30. As of December 31, 1996, the Company reported debt equity
of 2%.
The Company's cash flow from operating activities, investing activities
and financing activities was a positive $3,783,188, a negative $5,289,266 and
$1,158,893 respectively, resulting in a net decrease in cash of $347,185 for the
six months ended December 31, 1996. The Company's cash flow from operating
activities, investing activities and financing activities was a negative
$666,169, a positive $229,088 and $475,739 respectively, resulting in a net
increase in cash of $38,658 for the comparative six months ended December 31,
1995. The Company paid $2,375,249, in interest expense during the six months
ended December 31, 1996, compared to $125,956 in interest expense for the
comparative six months ended December 31, 1995.
The Company's subsidiaries, CTI and A&P, may be liable, jointly and
severally to a future Internal Revenue Service claim or claims that they
understated revenues in the approximate amount of $3,400,000 arising out of the
criminal proceedings pending against Messrs. Charles B. Prater and Lynwood S.
Warmack, former owners of these companies. In addition, these subsidiaries may
also be faced with a liability in a wrongful death lawsuit and accompanying
proceedings in West Virginia Federal Court, in amounts not covered by applicable
insurance policies. The Company has an agreement of indemnification from Messrs.
Prater and Warmack to protect against these contingent liabilities and may
set-off the aggregate amount of any liabilities arising against these
subsidiaries against the $7,290,000 Company Note due Messrs. Warmack and Prater.
The Board of Directors has no reason to believe that the aggregate amount of
potential liability under future Internal Revenue Service claims and this
lawsuit would exceed $7,290,000. However, if either one or both of these
liabilities were to attach currently, they would have a material adverse effect
on the financial condition of the Company and its subsidiaries.
* May contain "forward-looking statements".
8
Subsequent Events:
At a special meeting of the Board of Directors held on February 11,
1997 the Board voted to change the fiscal year for the Company and its
subsidiaries from June 30th to December 31st. At a subsequent meeting held on
July 11, 1997 the Board unanimously voted to rescind this decision and return
the fiscal year to June 30th.
On March 6, 1997, the Company, as a result of its due diligence, was
notified that a Foreign Government Bond deposited with the Company by an outside
investor was deemed to be fraudulent. The Company immediately notified the
appropriate federal and local authorities. The subsequent investigation is
continuing at this time.
On April 6, 1997, Mr. Erik Bailey, Director and Chief
Financial Officer of the Company resigned citing personal
reasons. He was replaced as Chief Financial Officer by Mr.
Brian Henninger.
On July 21, 1997, Mr. Brian Henninger resigned as Chief
Financial Officer of the Company. Mr. Henninger was replaced
on the Board by Mr. Donald Conord, Vice President of Terminal
operations for Carpet Transport, Inc., for the past eleven
years.
On July 22, 1997, the Company reinstated the services of
Mr. Charles Prater, a former owner of Carpet Transport, Inc.
Mr. Prater was retained to lend his expertise in the
recruitment of drivers, the retention of the existing customer
base and in the operations area Mr. Prater is paid at the rate
of $1250 per week.
9
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. Other
lawsuits or proceedings arising during the subject period or which were
previously disclosed but which had a material development during this subject
period are disclosed below.
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. The
case, Elizabeth Crawley, Administratrix of the Estate of William Crawley v.
Lionel Robertson, A&P Transportation, Inc., Carpet Transport, Inc., Charles B.
Prater and Lynwood S. Warmack is pending in the Circuit Court of McDowell
County, West Virginia and was commenced on March 18, 1996. In addition, other
claims have also been made against A&P arising out of the same accident. Company
management believes that A&P's liability, which under its applicable insurance
policy has a $1,000,000 maximum limit coverage, and Carpet Transport Inc.'s
liability, which has a under its applicable insurance policy a $1,000,000
maximum limit coverage, could exceed these insurance coverage limits. 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.
The Board of Directors of the Company recently learned that Mr. Timothy
Holstein, the President and Chief Executive Officer of the Company, delivered a
letter, dated September 27, 1996, to Messrs. Charles B. Prater and Lynwood S.
Warmack, the former owners of Carpet Transport, Inc., Chase Brokerage, Inc. and
A&P, allegedly on behalf of Carpet Transport Holdings Corp, a wholly owned
subsidiary of the Company which was formed to purchase Carpet Transport, Inc.,
Chase Brokerage, Inc. and A&P and which subsidiary currently owns all of the
issued and outstanding shares of these companies. Pursuant to the general terms
of this letter delivered by Mr. Holstein, the Company agreed to indemnify
Messrs. Prater and Warmack from and against any liability or claims against them
personally that may arise out of or in connection with this lawsuit. The Board
of Directors did not authorize the execution or delivery of this letter by Mr.
Holstein and will vigorously defend against any and all claims made by either or
both Messrs. Prater and Warmack that may be made against the
10
Company or its subsidiaries under any indemnification claim arising from this
letter.
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. This case
has been settled with no liability to the Company or its
subsidiaries.
Mural Transport, Inc. v. GMAC: The Company and Blue Mack are defendants
in a core proceeding in the U.S. Bankruptcy Court, Trenton, New Jersey, in which
GMAC 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; the
Company 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 the Company and Blue Mack, and the Company intends to file
a motion for summary judgment in this matter.
Trustee for Mural Transport, Inc. v. Continental American
Transportation, Inc., et al: The Company and Blue Mack are
defendants in a core proceeding in the U.S. Bankruptcy Court,
Trenton, New Jersey, in which the Trustee is suing on a
$15,000 claim representing the alleged value of a piece of
revenue equipment allegedly in Defendants' possession. This
case has been settled and concluded.
On June 3, 1997, a complaint was filed in the U.S.
District Court for the Northern District of Georgia, Rome
Division, styled RANA Investment Company and RIC Investment
Fund, Ltd. (fka Reg-S Investment Fund Ltd.) v. Continental
American Transportation, Inc., Case No. 4:97-CV-0165-HLM. In
this action, the plaintiffs sought injunctive relief and
damages for the Company's allegedly improper refusal to
convert several convertible debentures owned by the plaintiffs
into the Company's common stock. On July 3, 1997, the court
denied a motion for preliminary injunction sought by the
plaintiffs. This action is currently in the discovery phase.
On June 3, 1997, a complaint was filed with the American
Arbitration Association in Atlanta, Georgia styled RIC
Investment Fund, Ltd. (formerly known as REG-S Investment
Fund, Ltd.) v. Continental American Transportation, Inc., Case
No. 30 168 00201 97. In this action, the plaintiff sought
damages of approximately $701,000 and/or an award of specific
performance based on the Company's allegedly improper refusal
to abide by a Redemption and Escrow Agreement dated January
28, 1997. The matter has not yet been scheduled for an
arbitration hearing.
11
On June 17, 1997, the Company filed a complaint in the
U.S. District Court for the Northern District of Georgia,
Atlanta Division, styled Continental American Transportation,
Inc. and Carpet Transport, Inc. v. Charles B. Prater, Sr.,
Case No. 1:97-CV-1743. In this action, the Company is seeking
to recover damages from Mr. Prater based on two schemes in
which Mr. Prater was allegedly involved. In the complaint,
the Company contends that Mr. Prater converted hundreds of
thousands of dollars from the Company by (1) illegally cashing
checks for his benefit by taking advantage of the ComData wire
system and (2) obtaining fraudulent expense reimbursements.
The complaint contends that Mr. Prater violated the Racketeer
Influenced and Corrupt Organizations (RICO) statute and
committed various torts including fraud, conversion, breach of
fiduciary duty, and money had and received. Mr. Prater has
not yet been served with the complaint.
Item 2. Changes in Securities
(a) & (b)
Not applicable.
(c) Recent Sales of Unregistered Securities
I. On December 10, 1996, the Company issued 4 common stock purchase
warrants for services rendered to the Company. The names of the grantees, the
amount of Company Common Shares purchasable and the exercise prices are as
follows:
Name of Grantee Exercise Price Number of Shares
a. Global Financial Group, Inc. $5.00 40,625
$2.50 152,191
$0.25 45,625
b. Scott Sieck $2.50 175,000
$0.25 175,000
c. BCR Media, Inc. $2.50 150,000
$0.25 150,005
d. Arden Brown $2.50 5,000
$0.25 10,000
Previously, during the month of July, 1996, the Company had issued 16
common stock purchase warrants, dated June 28, 1996, to 16 persons or entities.
The Company canceled 9 Warrants of these 16 Warrants that had been isued to
Messrs. Ken Lucas, Craig Scott, Glenn Kennedy, Kevin Miller, Novoya, Vicbor,
Russell J. Kennedy, Edward C. Vavreck and Thomas J. Cloutier and exchanged 4 of
the July, 1996 Warrants for the 4 new Warrants issued to the above identified
persons and entities.
The Company filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, registering the common shares underlying the
subject Warrants and was notified by the Securities and Exchange Commission
("SEC") that it would conduct a full-review of the
12
Company's Post-Effective Amendment No. 1 to this Form S-3 Registration
Statement. Accordingly, the Company contacted all Warrant Holders and informed
them that the Company would not permit any exercise under these Warrants until
completion of the full-review by the SEC. The Company's current Board of
Directors has authorized the filing of a Post-Effective Amendment to this S-3
Registration Statement, deregistering all of the Company Common Shares
underlying the subject Warrants.1
The Company issued and distributed the above-described four 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:
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.
d. The Company had agreed to register all of the Common Shares
underlying all of the subject Warrants under the Securities Act of 1933,
as amended1
e. The Company did not pay any commissions or finder's fees to
any party in connection with the issuance of the subject Warrants.
1 On August 20, 1997, the Company filed Post Effective Amendment No. 2 to its
Registration Statement filed on Form S-3, deregistering all of the common shares
underlying all of the Warrants that were issued and outstanding as well as the
common shares underlying the 10% Convertible Preferred Shares issued to Seatex
AG and those Common Shares registered on behalf of certain Selling
Securityholders.
13
II. On October 22, 1996, the Company sold $200,000 in aggregate
original principal amount of its 10% Convertible Preferred Shares (the "10%
Convertible Preferred") to Seatex AG, a corporation organized under the laws of
the Country of Switzerland and having its principal offices located at
Gellerstrasse 18, CH-4020 Basel, Switzerland, pursuant to a certain Regulation S
Offshore Securities Subscription Agreement between the parties and dated October
22, 1996. The 10% Convertible Preferred Shares are convertible into the common
shares of the Company at a conversion ratio equal to 75% of the average closing
bid price of the Company's common stock for any two consecutive trading days
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, to issue to Seatex AG the 200,000 10%
Convertible Preferred Shares based upon the following facts:
1. The Regulation S Offshore Securities Subscription Agreement, dated
October 22, 1996, executed by and between the Company and Seatex AG (the
"Offshore Subscriber") contained, among other covenants, the following
representations and warranties made by the Offshore Subscriber: (a) the Offshore
Subscriber, was not "U.S. person(s)" as that term is defined in Rule 902(o) of
Regulation S and that its true and correct principal office, address and
telephone number is Gellerstrasse 18, CH-4020 Basel, Switzerland,
011-41-61-722-0022; (b) the Offshore Subscriber was not and will not be
officer(s), director(s) or affiliate(s) of the Company; (c) the Offshore
Subscriber agreed that all offers and sales of the 10%% Convertible Preferred
Shares, and shares of the Company's Common Stock issuable upon conversion
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 is not a 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 prearranged by the Offshore
Subscriber with a purchaser located in the United States or a purchaser which is
a U.S. person, and; (f) the Offshore Subscriber has not engaged nor will it
engage in any activity for the purpose of, or that could reasonably be expected
to have the effect of, conditioning the market in the United States for any of
the 10% Convertible Preferred Shares, or any of the Common Shares issuable upon
the conversion thereof.
2. The Company utilized the services of a Mr. Arden Brown of Boca
Raton, Florida as its placement agent in this Regulation S offering and paid to
Mr. Brown as a placement agent fee (1) $10,000 in cash payments and (2) 2
Warrants to purchase an aggregate of 30,000 shares of the Company's common
stock. The Company's officers and directors made such investigation and
performed a due diligence review of the subject transaction, the Offshore
Subscriber 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
14
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) (3)(i) Articles of Incorporation: Incorporated by
reference to Item 13 (a)(3.1) of Company's
Amendment No. 2 to Form 10-KSB for the Year Ended
June 30, 1996.
(3)(ii) Bylaws: Incorporated by reference to Item 13
(a)(3.2) of Company's Amendment No. 2 to Form 10-
KSB for the Year Ended June 30, 1996
(3)(10) Material Contracts:
(i) Consulting Agreements, dated December 10, 1996 by
and between American Transportation, Inc. and
Universal Solutions, Inc., Pyramid Holdings, Inc.,
Affiliated Services, Inc., Ocean Marketing Corp.,
Explorer Financial Services, Inc., Christie &
Company, Global Financial Group, Inc., Mr. Arden
Brown, Mr. Scott Sieck and BCR Media, Inc.:
Incorporated by reference to Item 16 4(d)(2) of the
Company's Post-Effective Amendment No. 1 to the
Company's Form S-3 filed with the Securities and
Exchange Commission on February 6, 1997.
(27) Financial Data Schedule
(b) The Registrant filed the following Current Reports on
Forms 8-K during the subject period:
Date Filed
Date Signed: with the SEC:
Denman Lawsuit November 19, 1996 November 19, 1996
Transport Clearings Notice December 30, 1996 December 30, 1996
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Form 10-QSB for the period ending
December 31, 1996, to be signed on its behalf by the undersigned thereunto duly
authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Timothy Holstein
Timothy Holstein, President and
Chief Executive Officer
By: s/Glenn Singleton
Glenn Singleton, Principal Financial
and Chief Accounting Officer
Dated: August 20, 1997
cat10Q96.dec
16
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 19, 1996
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Exact name of Registrant as specified in charter)
Colorado 0-18729 84-1089599
(State or other (Commission (IRS employee
jurisdiction of file number) identification
incorporation no.)
495 Lovers Lane Road, Calhoun, Georgia 30701
- --------------------------------------------------------
(Address of principal executive office) Zip Code
Registration telephone number, including area code: (706) 629-8682
Item 5. Other Events.
The Board of Directors of Registrant has authorized
an Atlanta based law firm to commence an action in
United States District Court, Northern District of
Georgia, against William T. Denman, III, a former
shareholder of the Registrant, seeking a declaratory
judgment that Registrant's actions in cancelling Mr.
Denman's shares in 1995 for non payment of any
consideration for the issuance of the canceled
shares. Following the cancellation of his 5,320
common shares, Mr. Denman wrote several letters to
the Securities and Exchange Commission (the "SEC")
alleging, among other things, that the cancellation
was illegal. On the basis of these Denman letters,
the SEC commenced a preliminary investigation into
the Company's past trading activities.
By authorizing the declaratory judgment action,
Registrant's Board of Directors is confident that the
Federal District Court will confirm the legality of
its actions in cancelling Denman's shares especially
under the circumstances where there is no record that
Mr. Denman paid any consideration for them.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Timothy Holstein
Timothy Holstein, President
Dated: November 19, 1996
catform5.8-k Denman
2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 17, 1996
CONTINENTAL AMERICAN TRANSPORTATION, INC.
Exact name of Registrant as specified in charter)
Colorado 0-18729 84-1089599
(State or other (Commission (IRS employee
jurisdiction of file number) identification
incorporation no.)
495 Lovers Lane Road, Calhoun, Georgia 30701
- --------------------------------------------------------
(Address of principal executive office) Zip Code
Registration telephone number, including area code: (706) 629-8682
Item 5. Other Events.
On December 17, 1996, Registrant received written notice from
Transport Clearings, L.L.C. of St. Paul, Minnesota, one of its
lenders, that it was giving Carpet Transport, Inc.,
Registrant's subsidiary, a 30-day notice that it would cease
to continue its contract pursuant to which it advanced payment
on Carpet Transport, Inc.'s accounts receivable because of a
lien filed by the Internal Revenue Service against Carpet
Transport, Inc., a subsidiary of Registrant. Registrant's
management had been and continues to be in negotiations with
the Internal Revenue Service to remove the lien.
The subject lien was filed against Carpet Transport, Inc.
based upon corporate income tax liability arising out of
earnings generated during Carpet Transport, Inc.'s fiscal year
ended June 30, 1995. However, Carpet Transport, Inc.'s
corporate income tax return for the period July 1, 1995
through February 29, 1996, the short year immediately
preceding Registrant's acquisition of Carpet Transport, Inc.,
reflected a loss of almost $6.0 million. Accordingly,
Registrant has filed income tax refund claims for Carpet
Transport, Inc.'s fiscal years ended June 30, 1993, 1994 and
1995 which aggregate refund claims offset the approximate
$1,800,000 of income tax liability arising from the subject
fiscal year ended June 30, 1995.
The Internal Revenue Service has held in abeyance any
collection activity on the subject corporate income tax
liability pending further review. Registrant's management
believes that any attempt by the IRS to institute collection
is wholly unwarranted in veiw of the pending refund claims.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CONTINENTAL AMERICAN TRANSPORTATION, INC.
By: s/Timothy Holstein
Timothy Holstein, President
Dated: December 30, 1996
catform6.8-k
2