As filed with the Securities and Exchange Commission September 9, 1999.
SEC Registration No. 333-71875
- ---------------------------------------------------------------------------

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

U.S. TRUCKING, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

Colorado 4213 68-0133692
- ------------------------- ---------------------------- -------------------
(State or Other Jurisdic- (Primary Standard Industrial (IRS Employer Iden-
tion of Incorporation) Classification Code Number) tification Number)

3125 Ashley Phosphate Road, Suite 128, North Charleston, South Carolina 29418
(843) 767-9197
- -----------------------------------------------------------------------------
(Address and Telephone Number of Principal
Executive Offices and Principal Place of Business)

Danny L. Pixler, President
3125 Ashley Phosphate Road, Suite 128, North Charleston, South Carolina 29418
(843) 767-9197
- -----------------------------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)

Copies to:

Jon D. Sawyer, Esq.
Krys Boyle Freedman & Sawyer, P.C.
600 Seventeenth Street, Suite 2700 South Tower, Denver, Colorado 80202
(303) 893-2300

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

- ----------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM
CLASS OF SECUR- TO BE OFFERING AGGREGATE AMOUNT OF
ITIES TO BE REGIS- PRICE OFFERING REGISTRATION
REGISTERED TERED PER UNIT(1) PRICE FEE
- ----------------------------------------------------------------------------
Common Stock 5,772,230 (3) $4.65625 $26,876,946 $7,471.79 (4)
No Par Value Shares
(2)
- ----------------------------------------------------------------------------

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 by reference to the average of the closing bid and ask
prices of the Registrant's Common Stock on September 8, 1999, as reported on
the OTC Bulletin Board.

(2) To be offered by selling shareholders.

(3) In accordance with Rule 416 under the Securities Act of 1933, this
registration statement also covers an indeterminable number of shares of
common stock, no par value, as may become issuable upon conversion of the
Series B Convertible Preferred Stock and the exercise of common stock purchase
warrants to prevent dilution resulting from stock splits, stock dividends, and
similar transactions in accordance with the terms of the Series B Convertible
Preferred Stock and the common stock purchase warrants.

(4) Because $1,824.38 was paid with the initial filing of this registration
statement, an additional $5,647.41 is being paid in connection with this
filing.

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

PROSPECTUS SUBJECT TO COMPLETION DATED SEPTEMBER 9, 1999
----------------------------------------------------------------

The information in this prospectus is not complete and may be
changed. The securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securi-
ties and the selling shareholders are not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.

U.S. TRUCKING, INC.

5,772,230 Shares of Common Stock

2,505,531 Shares of Common Stock are being offered by certain
selling shareholders. We will not receive any of the proceeds
from the sale of the Shares by the selling shareholders.

400,000 Shares may be issued upon the conversion of a $600,000
convertible debenture which we sold to a private investor earlier
this year and 422,297 Shares may be issued upon the exercise of
warrants which were issued in connection with the sale of the
debenture. Up to 1,544,402 Shares may be issued upon the conversion
of 2,000 shares of Series B Convertible Preferred Stock which we
sold for $2,000,000 in a private placement earlier this year and
up to 800,000 shares may be issued upon the exercise of warrants
which were issued in connection with the sale of the Preferred
Stock. Up to 100,000 Shares may be issued upon the exercise of
warrants issued to a financial public relations firm.

The Common Stock is traded in the over-the-counter market
and is quoted on the OTC Bulletin Board (Symbol: USTK). On
September 8, 1999, the closing bid and ask prices of the Common
Stock were $4-5/8 and $4-11/16.

This investment involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. See
"Risk Factors" starting on page 5 for a discussion of these risks.

Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

_________, 1999

TABLE OF CONTENTS

PAGE

Prospectus Summary .......................................... 3
Risk Factors ................................................ 5
Market Prices and Dividends ................................. 7
Management's Discussion and Analysis ........................ 8
Business .................................................... 15
Management .................................................. 24
Security Ownership of Management, Principal Shareholders
and Selling Shareholders .................................. 28
Transactions With Management and Others ..................... 31
Description of Securities ................................... 33
Plan of Distribution ........................................ 36
Legal Matters ............................................... 37
Experts ..................................................... 37
Additional Information ...................................... 37
Index to Financial Statements ............................... F-1

PROSPECTUS SUMMARY

U.S. TRUCKING, INC.

U.S. Trucking, Inc. provides transportation and freight brokerage
services. We transport full truckloads of both refrigerated and non-
refrigerated commodities over various distances, primarily east of the Rocky
Mountains. We are a preferred carrier for a number of Fortune 500 companies.

Our offices are located at 3125 Ashley Phosphate Road, Suite 128, North
Charleston, South Carolina 29418. Our telephone number is (843) 767-9197.

OFFERING SUMMARY

Securities Offered: 2,505,531 Shares of Common Stock offered by
selling shareholders

Common Stock Presently
Outstanding: 7,008,883 Shares

FINANCIAL SUMMARY

This financial summary does not include all of the information in the
financial statements. You should read the financial summary along with the
financial statements and the notes to the financial statements which are
included in this prospectus.

Balance Sheet Data:
As of As of
December 31, June 30,
1998 1999
(Audited) (Unaudited)
------------ -----------

Current Assets $ 4,031,285 $ 7,676,177
Fixed Assets 9,718,805 7,544,458
Other Assets 2,562,271 4,630,989
----------- -----------
Total Assets $16,312,361 $19,851,624

Current Liabilities $ 5,944,016 $ 8,364,438
Other Liabilities 5,279,966 4,210,296
Stockholders' Equity 5,088,379 7,276,890
----------- -----------
$16,312,361 $19,851,624

Income Statement Data:

Eleven Month Six Months
Period Ended Year Ended Ended
December 31, December 31, June 30,
1997 1998 1999
(Audited) (Audited) (Unaudited)
------------ ------------ -----------
Net Revenues $17,469,281 $21,815,844 $17,824,169
Income from Operations $ 1,034,767 $ 3,328,870 $ 539,878
Net Income (Loss) $(1,531,200) $ 121,767 $ 313,844

RISK FACTORS

Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. Factors that could cause the results to differ include the risk
factors discussed below.

Investing in the Shares is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, among others:

Lack of Profit- We have never earned sufficient profits to pay
ability. dividends to our shareholders. Although U.S. Trucking
was organized in 1987, it never engaged in any
business, other than seeking an acquisition or merger,
until September 1998 when it acquired U.S. Trucking -
Nevada. U.S. Trucking - Nevada incurred a net loss of
($294,602) on revenues of $14,847,335 during the year
ended December 31, 1996, and a net loss of ($1,531,200)
on revenues of $17,469,281 during the eleven month
period ended December 31, 1997. While we earned
$121,767 on revenues of $21,815,844 during 1998, there
are no assurances that we will continue to operate
profitably in the future. Our ability to operate
profitably will depend on our ability to upgrade the
age of our tractors and trailers, to make good
acquisitions and to increase our level of revenues.

Additional We do not generate sufficient funds internally to
financing needed finance acquisitions. While we anticipate paying
for expansion. for acquisitions primarily with our stock, the purchase
price for some or all of such acquisitions may include
cash. If we cannot raise such funds through debt,
equity or seller financing, our plans for growth would
be curtailed.

Dependence on A significant portion of our revenue is generated from
key customers. key customers. The loss of business from any of our
key customers would probably have a material adverse
effect on our business and operating results. During
1998, our top 10 customers accounted for approximately
43% of revenues. Our largest customer, Consolidated
Papers, Inc. accounted for 13.2% of revenues. We do
not have long-term contractual relationships with any
of our customers.

Risks of Penny Because our Shares are not currently listed on Nasdaq
Stocks. or an exchange, they are subject to Rule 15g-9 under
the Exchange Act, which may limit their marketability.
That rule imposes additional sales practice
requirements on broker-dealers that sell low-priced
securities to persons other than established customers
and institutional accredited investors. For
transactions covered by this rule, a broker-dealer must
make a special suitability determination for the
purchaser and have received the purchaser's written

consent to the transaction prior to sale.
Consequently, the rule affects the ability of broker-
dealers to sell our shares and may affect the ability
of shareholders to sell our shares in the secondary
market.

No dividends We intend to retain any future earnings to fund the
anticipated. operation and expansion of our business. We do not
anticipate paying cash dividends on our shares in
the foreseeable future.

Depressive ef- It is likely that market sales of large amounts of the
fect of resale shares described below or other U.S. Trucking shares
of restricted (or the potential for those sales even if they do not
shares. actually occur), will have the effect of depressing
the market price of our shares. We currently have
7,730,955 shares of Common Stock outstanding and the
following is a breakdown of these shares:

We cannot pre- * Free Trading 1,632,701
dict the de- * Restricted: 5,376,182
pressive effect Currently eligible for
of resales. sale under Rule 144 3,334,316 Shares
Being offered in this
Prospectus 2,505,531 Shares

We are unable to predict the effect that sales made
in this offering or under Rule 144 may have on the
then prevailing market price of our shares.

MARKET PRICES AND DIVIDENDS

U.S. Trucking's Common Stock trades in the over-the-counter market, under
the symbol "USTK". There were no quotations for U.S. Trucking's Common Stock
during the last three years until after the closing of the reverse acquisition
of U.S. Trucking-Nevada. Quotations resumed during September 1998. The
following table shows the high and low bid prices for U.S. Trucking's Common
Stock for the periods indicated as reported by the OTC Bulletin Board. These
prices are believed to be inter-dealer quotations and do not include retail
mark-ups, mark-downs, or other fees or commissions, and may not represent
actual transactions.

Quarter Ended High Bid Low Bid
-------------- -------- -------

September 30, 1998 $1.875 $0.002
December 31, 1998 $4.50 $0.75
March 31, 1999 $5.68 $3.00
June 30, 1999 $3.75 $2.31

As of July 14, 1999, we had approximately 154 shareholders of record.
This does not include shareholders who hold stock in their accounts at
broker/dealers.

Holders of Common Stock are entitled to receive dividends declared by
U.S. Trucking's Board of Directors. No dividends have been paid on the Common
Stock and no dividends are anticipated to be paid in the foreseeable future.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements of U.S. Trucking and related footnotes
appearing in this prospectus.

GENERAL

Our revenue producing businesses were established in January of 1997 by
combining under U.S. Trucking, Inc., a Nevada corporation and our predecessor,
the operations of Gulf Northern, a mid- to long-haul truckload carrier,
Mencor, a third party logistics (brokerage) company, selected assets of
another truckload company, and the customer base of a small specialized
truckload air freight company. The latter two divisions were contributed to
U.S. Trucking-Nevada by U.S. Transportation Services, Inc. During 1997, we
consolidated operations, implemented manpower reductions, and blended all
trucking operations under Gulf Northern and all brokerage operations under
Mencor. We had a net loss in 1997 of $1.5 million primarily as a result of
operating the businesses consolidated by U.S. Transportation Services, which
businesses were eventually discontinued or reorganized as part of Gulf
Northern.

Our operating results are primarily driven by the results of the
truckload business. However, future results will be impacted by the recent
acquisition of Prostar, Inc., a freight brokerage business, and the
implementation of a container transportation division. The combined annual
revenues from these additional two businesses is expected to exceed $14
million.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues increased by 17.8% to $21.8 million in 1998 from $18.5 million
in 1997. The increase in revenues were primarily due to the fact that the
addition of the small package delivery division caused company driver and
independent contractor generated revenues to increase. Another factor which
caused revenues to increase was the addition of a captive insurance program
for auto-liability insurance provided to third-party trucking companies. A
division of U.S. Trucking, Inc. in which revenues decreased was the third
party brokerage, which declined because of increased competition in the
brokering of medium to long haul loads in the truck carrier business. Company
driver generated revenue increased by 13.6% to $12.5 million in 1998 from
$11.0 million in 1997. Independent contractor generated revenues increased by
24.3% to $6.6 million in 1998 from 5.3 million in 1997. Third-party brokerage
decreased 13.1% to $1.86 million in 1998 from $2.14 million in 1997 and
insurance captive revenue increased to $810 thousand from zero in 1997.

Operating expenses for 1998 were $18.5 million, or 85% of revenue, as
compared to $17.0 million, or 92% of revenue, for 1997. This decrease as a
percentage of revenues was due primarily from lower fuel costs, company
driver payroll and repair and maintenance costs . Fuel expenses decreased
$323 thousand to $2.11 million (16.8% of revenues generated by company
drivers) in 1998 from $2.43 million ( 21.8% of revenues generated by company
drivers) for 1997.This decrease was the result from lower fuel prices in
general as well as additional use of bulk storage for diesel fuel at two of
our terminals in Wisconsin and New York. Company driver payroll decreased
$122 thousand to $3.07 million (25% of revenues generated by company drivers)

in 1998 from $3.2 million (28.5% of revenues generated by company drivers) in
1997. The reason for this decrease was better management of deadhead mileage
and the lower rate of pay required for drivers in the small package delivery
sector of our business. Repairs and Maintenance costs decreased $66 thousand
to 1.17 million (6.1% of revenues generated by the trucking segment) in 1998
from 1.24 million (7.6% of revenues generated by the trucking segment) in
1997. Lower repair and maintenance costs were the product of better management
in decreasing the outsourcing of major repairs and increased dedication to
preventive maintenance.

Salaries, wages, employee benefits and other administrative expenses for
the year ended 1998 were $2.92 million or 13.4% of revenue, compared to $2.15
million or 11.6% of revenue, for the year ended 1997. The increase was due to
the costs associated with the addition of the captive insurance program, a
slight increase in administrative payroll and additional increases in trucking
insurance expense in general. Expenses related to insurance captive such as
paid losses, reserved losses, reinsurance and administrative fees increased to
$556 thousand in 1998 from zero in 1997. Administrative payroll increased $80
thousand to $1.18 million (5.4 % of all revenues) in 1998 from $1.1 million
(5.9% of all revenues) in 1997. This decrease as a percentage of revenue is a
result of being able to add additional productivity over and above the hiring
of extra employees. All expenses related to insurance in the truckload
division increased $217 thousand to $1.07 million (4.9% of all revenues) in
1998 from $855 thousand (4.6% of all revenues) in 1997. This increase as a
percentage of revenues is a direct result of paying higher premiums as a
result of incurring larger claims in the worker's compensation and auto
liability lines of coverage.

Depreciation and amortization expenses for 1998 were $1.58 million, or
7.2% of revenue, as compared to $1.54 million or 8.3% of revenue, for 1997.
This increase reflects by a $60 thousand increase to depreciation taken on
capitalized repairs. Normal recurring depreciation and amortization remained
unchanged.

Interest expense for 1998 was $727 thousand or 3.3% of revenue, as
compared to $703 thousand or 3.8% of revenue, for the year ended 1997. The
decrease in interest as a percent of revenue is the result of (1) lower cost
of borrowing due to its restructuring of some equipment debt, (2) lower
interest expense on more recent portions of equipment loans, and (3) lower
factoring financing on faster paying customers.

Freight settlements paid to outside carriers decreased $182 thousand to
1.62 million (87.1% of brokerage generated revenues) for the year ended 1998
as compared to $1.8 million or 91.3% of revenues for the prior year. This
decrease resulted from fewer loads being brokered in 1997 because of increased
competition in the industry.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

The amounts for the year ended December 31, 1997, differ from those of
1996 based on the following factors:

On January 30, 1997, U.S. Trucking completed the following acquisitions:

1. Purchased 100% of the common stock of Gulf Northern Transport,
Inc. from its stockholders for cash and 25% of U.S. Trucking's
common stock;

2. Purchased 100% of the common stock of Mencor, Inc. from its stock

holders for cash and 37,500 shares of common stock of U.S.
Trucking's parent company, U.S. Transportation Systems, Inc.;

3. Purchased certain assets and liabilities of Jay & Jay
Transportation, Inc.;

4. Purchased certain assets and liabilities of Translynx Express,
Inc.

Simultaneous to the above transaction, U.S. Trucking was sold by its
parent corporation, U.S. Transportation Systems, Inc. Accordingly, the
operations of the consolidated group began on January 30, 1997. This
registration statement, therefore, includes both the amounts included in the
consolidated financial statements for the period from inception to December
31, 1997 and the pre-acquisition amounts for Gulf Northern Transport, Inc. and
Mencor, Inc. for the period ended January 30, 1997. Further, the amounts for
the period ended December 31, 1997 are on a different accounting basis than
the prior periods due to the purchase transactions recorded on January 30,
1997 and accordingly, the amortization of the resulting goodwill recognized in
the purchase transaction is not comparable to that of the prior period.

Revenues for the year ended 1997 were $18.5 million compared to net
revenues of $14.8 million for the year ended 1996. The increase in revenues
was primarily due to the fact that the 1996 results included only Gulf
Northern and Mencor while 1997 also included the business of the two divisions
of USTS which were combined with Gulf Northern and Mencor when the U.S.
Trucking, Inc. was formed.

Operating expenses for 1997 were $17.0 million, or 92% of revenue, as
compared to $13.0 million, or 88% of revenue, for 1996 (an increase of 31%).
This increase in operating expenses as a percentage of revenue was due
primarily to the increase in business associated with the operations added in
early 1997, yielding higher driver payroll ($1.2 million) and higher fuel
costs and higher repair and maintenance costs ($400,000) as a percentage of
revenue. Fuel expenses increased $766 thousand or 46% to $2.48 million from
$1.72 million for fiscal 1996.

Salaries, wages, employee benefits and other administrative expenses for
the year ended 1997 were $2.15 million or 11.6% of revenue, compared to $2.03
million or 13.7% of revenue, for the year ended 1996. The increase was due to
the addition of the new businesses. The decrease of such costs as a
percentage of revenue was due to decreases in fixed costs, such as
administrative payroll, rents, communications expenses and health insurance
costs.

Depreciation and amortization expenses for 1997 were $1.54 million, or
7.8% of revenue, as compared to $977 thousand or 6.6% of revenue, for 1996.
This increase was due primarily to additional equipment being added to our
fleet yielding $280,000 in additional depreciation charges, and to a lesser
extent increased amortization costs ($120,000 increase) due to the
restructuring of certain loans and increased depreciation ($70,000 increase)
due to certain capitalized repairs.

Interest expense for 1997 was $703 thousand or 3.8% of revenue, as
compared to $649 thousand or 4.4% of revenue, for the year ended 1996. The
decrease in interest as a percent of revenue is the result of lower cost of
borrowing from its restructuring of some equipment debt, and interest expense
being lower on more recent portions of equipment loans, and to a lesser extent
lower factoring financing on faster paying customers.

Freight settlements paid to outside carriers decreased $207 thousand to
$1.8 million or 10.3% (to 91.3% of revenues) for the year ended 1997 as
compared to $2.0 million or 90.2% of revenues in 1997. This decrease resulted
from slightly fewer loads being brokered in 1997.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

Our operating revenue for the six months ended June 30, 1999, increased
by 66.9% to $17.8 million as compared to $10.7 million over the same period in
1998.For the three months ended June 30, 1999, operating revenue increased by
78.1% to $10.1 million from $5.7 million over the same period in 1998. The
increase in operating revenue resulted from increased brokerage revenues,
expansion of our customer base, increased volume from existing customers, and
was facilitated by the continued expansion of our fleet, including
approximately 40 leased owner operators which was part of the expansion into
the container business during the period ended June 30, 1999. Our fleet
increased 18.5% to 294 tractors (including 118 owned by independent
contractors) as of June 30, 1999, from 248 tractors (including 78 owned by
independent contractors) as of June 30, 1998.

Purchased transportation increased as a percentage of operating revenue
to 39.8% for the six months ended June 30, 1999, from 34.2% for the same
period in 1998. For the three months ended June 30, 1999, purchased
transportation as a percentage of operating revenue increased to 43.5% from
37.3% during the same period in 1998. These increases were primarily due to
the increase in the ratio of independent contractors to company drivers, and
the increase in brokerage operating revenue which in turn creates a payable
due to outside carriers that we used to haul our freight at a gross profit
margin of 11% to 16%.

Salaries, wages and benefits decreased as a percentage of operating
revenue to 23.2% for the six months ended June 30, 1999, from 24.9% for the
same period in 1998. For the three months ended June 30, 1999, salaries, wages
and benefits decreased as a percentage of operating revenue to 20.5% from
24.5% for the same period in 1998. These decreases were primarily the result
of our efforts to reduce management overhead when practical, increasing our
percentage of brokerage operating revenues, increasing our independent
contractor base and the continuation of consolidating facilities. For compay
drivers, we record accruals for worker's compensation as a component of claims
accrual and the related expense is reflected in salaries, wages and benefits
expense in our consolidated statements of income.

Fuel expense decreased as a percentage of operating revenue to 8.2% for
the six months ended June 30, 1999, from 10.4% for the same period in 1998.
This decrease was primarily the result of an increase in the purchase of bulk
fuel, along with the increase in the percentage of independent contractors to
company drivers for the 1999 period. For the three months ended June 30, 1999,
fuel expense as a percentage of operating revenue decreased to 7.3% from 9.7%
for the same period in 1998. This decrease was primarily the result of an
increase in the purchase of bulk fuel, along with the increase in the
percentage of independent contractors to company drivers.

Operations and maintenance expense decreased to 3.5% of operating revenue
for the six months ended June 30, 1999, from 5.8% for the same period in 1998.
This decrease was primarily the result of increasing our brokerage operating
revenue and to a lesser extent limiting the use of older, high cost equipment,
trading out of older equipment for newer, increasing the independent
contractor base, and capitalizing engine rebuilds that were necessary during
the period. For the three months ended June 30, 1999, operations and

maintenance expense as a percentage of operating revenue decreased to 3.0%
from 5.6% for the same period in 1998. This decrease was primarily the result
of the increase of brokerage operating revenue, and to a lesser extent the
increase of the independent contractor base and the Company's ongoing control
of not using its older equipment just for revenue sake, while it negotiates
new equipment transactions that it expects to complete in the very near
future.

Our insurance programs for medical, physical damage and cargo are covered
by premium insurance providers with deductibles we have chosen and feel are
manageable while being in our best interest. In addition we provide
auto-liability coverage through our own Auto-Liability Insurance Program which
has become a strong revenue and profit producer. Management considers all of
its coverages adequate. Insurance and claims expense decreased to 2.6% for the
six months ended June 30, 1999, from 3.2% for the same period in 1998. For the
three months ended June 30, 1999, insurance and claims decreased to 2.4% from
3.0% for the same period in 1998. These decreases in percentages were due to
the following factors which are listed in order of impact with the factor
having the most impact first: an increase in brokerage revenue, the increase
of independent contractors, and the decreased values of our owned fleet on an
insurance cost basis.

Operating taxes and licenses decreased as a percentage of operating
revenue to 1.3% for the six months ended June 30, 1999, from 1.9% for the same
period in 1998. For the three months ended June 30, 1999, operating taxes and
licenses as a percentage of operating revenue decreased to 1.2% compared to
1.8% for the same period in 1998. This decrease was primarily due to the
increase in the Company's brokerage operating revenue, the increase in our
Auto-Liability Insurance Program operating revenue and the increase in
independent contractors who are required to pay their own mileage taxes.

Depreciation and amortization expense as a percentage of operating
revenue decreased to 6.4% for the six months ended June 30, 1999, from 7.6%
for the same period in 1998. This decrease was primarily the result of
increasing our operating revenue through our brokerage operations and
increasing the number of independent contractors leased. For the three months
ended June 30, 1999, depreciation and amortization expense decreased to 5.9%
from 6.7% for the same period in 1998 for the reasons listed above.

For both the six months and three months ended June 30, 1999, net
interest expense decreased as a percentage of revenue compared to the same
periods in 1998. These decreases were primarily the result of reducing long
term debt and the converting of some debt to track leases.

Income taxes have been provided at the statutory federal and state rates
adjusted for certain permanent differences between financial statement and
income tax reporting. We have net operating losses available to offset future
income for financial reporting expiring in the year 2012.

Our net income as a percentage of operating revenue was 1.8% for the six
month period ending June 30, 1999, as compared to 1.7% for the same period in
1998. Net income as a percentage of operating revenue was 1.9% for the three
month period ending June 30, 1999, as compared to 0.9% for the same period in
1998.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1999, we had a working capital deficit of $688,261 as
compared to a deficit of $1,912,731 at December 31, 1998. Our working capital

deficit improved primarily as a result of operations, $1,104,114 received
from the sale of transportation equipment in February 1999, $900,000 received
from the issuance of Series B Preferred Stock and $540,000 of proceeds from a
sale of an convertible debenture to a foreign investor. Net cash provided by
operating activities was approximately $202,429 for the first six months of
1999 compared to $701,249 for the corresponding period in 1998. We have
historically funded our working capital requirements through a combination of
funds provided from operations, our working capital facility with GE Capital
and invested capital. In order to continue with our growth plans, we intend
to raise additional funds through private placement of equity and/or debt
securities which will depend upon prevailing market conditions, the market
price of common stock and other factors over which the company has no control.

Since June 30, 1999, we have raised approximately $1,100,000 in gross
proceeds from the sale of Series B Convertible Preferred Stock.

INFLATION

Many of our operating expenses, including fuel costs and fuel taxes, are
sensitive to the effects of inflation, which could result in higher operating
costs. The effects of inflation on our business during the six months ended
June 30, 1999, were negligible.

SEASONALITY

In the transportation industry, results of operations frequently show a
seasonal pattern. Seasonal variations may result from weather or from
customer's reduced shipments after the busy winter holiday season. To date,
our revenues have not shown any significant seasonal pattern. The current
expansion of our operations into the West Coast could expose us to greater
operating variances due to seasonal weather.

YEAR 2000 ISSUE

The "Year 2000 Issue" arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer
programs do not properly recognize a year that begins with "20" instead of the
familiar "19". If not corrected, many computer applications could fail or
create erroneous results.

We are in the process of reviewing, testing, and implementing various
modifications to ensure that its computer equipment and software will function
properly in the Year 2000 and beyond. We have completed the purchase of a new
hardware system consisting of a Compaq Proliant P2 300 MHz processor; 320 MB
RAM, 2/9.1 GB mirror hard drive, a Server Tower and new Software that enables
us to generate all functions of our operating systems, including, but not
limited to, the initiation of loads, dispatch, billing, accounts payable and
receivable, general ledger functions and preparation of financial statements.
All maintenance records for all of the trucks, inventory records for all parts
and supplies, claim records and accident records as well as fuel and mileage
for taxing bodies will be supplied. Information from our fuel provider,
Comdata, will be downloaded into the system as well. We are also working on
on-line banking services.

All internal and external costs associated with the our Year 2000
compliance activities are expensed as incurred. We believe that the costs of
addressing the Year 2000 issue will be approximately $120,000.

We have reviewed the Year 2000 issue with our major suppliers, vendors
and customers and believe that the Year 2000 issue will not pose significant
problems for us. We have discussed the issue with Comdata, the primary fuel
provider, GE Capital and the other major financial institutions which provide
financing to the Company, and the major customers, and each of these companies
has advised us that they expect to be Year 2000 compliant.

Since all major computerized systems and applications will have been
reviewed and tested as part of the Year 2000 project, we feel that we have
reasonably addressed all material risks that may effect our operations. We
presently believes that the Year 2000 issue will not pose significant
operational problems for us. However, if all Year 2000 issues are not
properly identified and corrected, there can be no assurance that the Year
2000 issues will not materially effect our relationships with vendors,
customers, and others. Also, there can be no assurance that the Year 2000
issues of other entities with whom we deal will not have a material adverse
impact on our operations.

We are in the process of evaluating and developing a contingency plan to
provide for the most reasonably likely worst cast scenarios regarding Year
2000 compliance. This contingency plan will be completed in the second half
of 1999.

BUSINESS

GENERAL

U.S. Trucking provides transportation and freight brokerage services. We
transport full truckloads of both refrigerated and non-refrigerated
commodities over various distances on a nationwide basis.

We are a preferred carrier for a number of Fortune 500 companies,
including (percentage of 1998 revenues in parentheses):

1. Consolidated Papers, Inc. (13.2%
2. The Trane Company (a division of American Standard, Inc.) (5.2%);
3. Excel Corporation (a division of Cargill Incorporated) (5.0%)
4. Emery Worldwide (a division of CNF Transportation, Inc.) (2.2%)
5. The Monfort division of ConAgra, Inc. (1.6%)
6. Eaton Corporation (1.5%)

We are actively seeking other companies which are interested in outsourcing
their transportation service needs.

Our truckload division operates approximately 272 tractors (including
approximately 111 tractors which are owned by contractors) and over 366
trailers.

We intend to expand our business through internal growth and
acquisitions. The transportation industry is highly fragmented, which
provides a large number of acquisition opportunities. We are primarily
interested in medium to long haul truckload carriers, container and freight
brokerage operations, with annual revenues of not less than $5.0 million.

U.S. Trucking, a Colorado corporation, was incorporated in Colorado under
the name Northern Dancer, Inc. in January 1987 for the purpose of acquiring an
operating company. It completed a small public offering in 1988. In
September 1998 it acquired U.S. Trucking, Inc., a Nevada corporation, which is
now a wholly-owned subsidiary. U.S. Trucking-Nevada has two operating
subsidiaries which it acquired in early 1997 just after it was incorporated.
These are Gulf Northern and Mencor.

Our primary operating subsidiary, Gulf Northern, has operated as a
truckload carrier since it was formed in 1991. Current management purchased
Gulf Northern in 1994. Except as discussed below, in the past three years
there have been no material developments in the Gulf Northern business in
terms of reorganizations, management changes or operations. In an effort to
increase the size and scope of its business and to obtain access to expansion
capital, its management sold it to U.S. Trucking-Nevada in early 1997 in
exchange for a 25% ownership interest in U.S. Trucking-Nevada. The remainder
of U.S. Trucking-Nevada was owned by U.S. Transportation Systems, Inc., at the
time, a publicly-traded transportation company. In exchange for its ownership
interest in U.S. Trucking-Nevada, U.S. Transportation Systems had contributed
to U.S. Trucking-Nevada certain assets and liabilities of Jay and Jay
Transportation, Inc. and Translynx Express, Inc. Jay and Jay was a New York
based short-haul truckload carrier operating primarily in the Northeast.
Translynx offered roller-bed truckload services, primarily to UPS between
Florida and Kentucky. The Translynx business was discontinued in early 1998.

As it became clear that the expected benefits from affiliating with U.S.
Transportation Services would not be forthcoming, Messrs. Huff and Pixler

arranged for Logistics Management, LLC to repurchase the majority position
held by U.S. Transportation Systems.

THE TRUCKLOAD SEGMENT OF THE TRANSPORTATION INDUSTRY

We estimate that the for-hire truckload market segment of the
transportation industry accounted for more than $350 billion of revenue in
1997. The truckload transportation industry currently is undergoing changes
that affect both shippers and carriers. Shippers (the customers of trucking
companies) have been focusing their capital resources on their primary
businesses and are outsourcing their transportation and logistics
requirements. Shippers increasingly have been seeking to reduce the number of
authorized carriers they utilize and to establish service-based, long-term
relationships with smaller groups of preferred or "core carriers" who are
often able to provide a wide range of services. In order to compete with
shippers for preferred or core carrier status, a carrier must have sufficient
available equipment and drivers and other logistical capabilities to meet the
shippers' requirements. While the truckload transportation market remains
highly fragmented, there is an emerging trend among carriers toward
consolidation in order to become better positioned with customers as core
carriers. Carriers are also consolidating to take advantage of economies of
scale in purchasing equipment, in purchasing insurance, and in recruiting and
retaining drivers.

The truckload transportation market generally consists of a service-
sensitive segment and a price-sensitive segment. Shippers of high value or
time-sensitive goods tend to be more concerned with the service capability of
the carrier than simply obtaining the lowest priced transportation. In many
cases, carriers choose either to provide premium service and charge rates
consistent with that service or to compete primarily on the basis of price.
The truckload market is further segmented on the basis of length of haul. In
the long haul market, the average length of haul is greater than 1,500 miles.
In this segment, truckload carriers compete with air freight on the basis of
lower prices and with railroads on the basis of time of delivery. In the
medium-to-long haul segment, the average length of haul ranges from 750 miles
to 1,500 miles. U.S. Trucking's average length of haul is approximately 1,000
miles.

TRANSPORTATION BROKERAGE SERVICES

We offer transportation brokerage services through our wholly-owned
subsidiaries Mencor and Prostar, Inc., a recent acquisition. Mencor and
Prostar arrange return hauls for common carriers and corporations transporting
their own goods which have completed their initial delivery. This enables the
carrier to cover the cost of returning to their home location. For this
service we receive the difference between the amount we pay the returning
shipper or carrier to effect the move, and the amount we receive from the
shipper. Mencor was incorporated as an Arkansas corporation in 1994 by
Roxanne Pixler and Michael Menor. They sold Mencor to U.S. Trucking-Nevada in
the transaction discussed above in which Gulf Northern was sold. In the past
three years there have been no other material developments in the Mencor
business in terms of reorganizations, management changes, or operations.

AGENT PROGRAM

We have also recently instituted an agent program, pursuant to which we
allow small carriers to operate under our authority as an agent. In this
program the agent provides its customers and business. We collect all of the
revenue from the shippers and pay the agent 85% of the revenue less certain

expenses we pay such as fuel costs and pallet costs. We provide the agent
with liability insurance coverage and certain administrative services such as
billing and collecting receivables. We also provide the agent with access to
our other insurance coverages such as medical and hospitalization insurance.
The agent is required to deposit one percent (1%) of its revenue in an escrow
to cover any bad debts, and it must pay all cash expenses including tolls,
tractor washes, and any of its own other operating expenses.

INSURANCE

In 1998, we developed a new line of business to take advantage of the
underwriting profit potential of our captive insurance program. U.S. Trucking
has offered its insurance program to selected independent third party trucking
companies, which purchase insurance coverage and pay a premium to us through
Transportation Underwriters Agency, Inc.

OPERATING STRATEGY

Our operating strategy is to provide high quality transportation and
freight brokerage services that position us as a preferred supplier or "core
carrier" to major shippers. We do not compete primarily on a price basis. We
seek to effect this strategy by providing reliable, time-definite pick up and
delivery services. An important factor in our ability to effect this strategy
is the ready availability of drivers. We seek to address the chronic driver
shortage in the trucking industry through a variety of practices. We believe
our driver retention history is significantly better than the industry
average.

We believe that our operating strategy has positioned us to capitalize on
evolving trends in the transportation industry. Shippers are reducing their
number of approved carriers to a small group of core carriers, and often
outsourcing their transportation needs entirely to logistics providers. The
small carriers, without the capacity to adequately service these shippers or
offer logistics service will not benefit from this trend. As a medium size
carrier with the capability to also offer freight brokerage and warehousing
services (which helps in obtaining business from companies utilizing "just-in-
time" distribution methods), we are well-suited to capitalize on this trend.

ACQUISITION STRATEGY

We are actively seeking acquisition candidates in the truckload, freight
brokerage and container segments of the transportation industry. We are
primarily seeking targets with not less than $5.0 million in annual revenues.

We intend to use a combination of cash, stock, debt and equity securities
to facilitate our acquisition and expansion plans. No assurance can be given
that we will be able to effect this strategy.

We are currently holding discussions relating to numerous potential
acquisitions, but do not anticipate making any further acquisitions until
adequate financing is in place.

MARKETING

We market high quality, "just-in-time", temperature-sensitive and dry
freight truckload services in the truckload carrier market.

Our operations are nationwide, with an emphasis on the Midwest, Southeast
and Northeast United States. We believe that we have established a presence

in these regions and have developed a competitive ability for the return
shipment of goods, which reduces the amount of empty truck miles and increases
overall productivity and profitability.

Marketing personnel emphasize our commitment to high levels of service,
flexibility, responsiveness, analytical planning and information management in
order to position us to serve customers' demands for time definite pickup and
delivery. Our marketing personnel seek to strengthen our position with
existing customers and establish ourselves with prospective customers.

Dan L. Pixler, the President & CEO, is directly involved in marketing our
services at the national account level and he also supports local sales
activity. We also have an eastern sales manager.

Our largest 15 customers are: Consolidated Papers, Inc.; The Trane
Company; Excel Corporation; Cadbury Schweppes; United Parcel Service of
America, Inc.; CVS Pharmacy; Tamco Distributors; Emery Air Freight;
Weyerhauser Company; The Monfort Division of ConAgra, Inc.; Eaton Corporation;
Seneca Foods Corporation; OK Grocery; O at KA Milk Product; and Phelps Dodge.
Consolidated Papers, Inc. accounted for 13% of our revenues during the year
ended December 31, 1998.

We maintain a strong commitment to expanding our relationships with
existing customers. Customer shipping patterns are monitored daily, allowing
us flexibility in responding rapidly to the varying service demands of our
customers. We have written motor carrier contracts with approximately 90% of
our customers. The contracts generally specify lanes to be serviced (regions)
and negotiated price agreements; they do not have any provision regarding the
volume to be carried.

OPERATIONS

All of our offices and terminals are leased. Our executive office is
located in North Charleston, South Carolina, where billing, collections,
brokerage, banking and overall management of U.S. Trucking take place. The
lease, which expires November 1, 1999, covers 5,000 square feet of rental
space and provides for monthly rent of $2,800. We believe that this facility
is adequate for its present needs.

We also maintain the following other office, terminal and warehouse
locations:

Location Description
-------- -----------
Los Angeles A 6,200 square foot terminal and office
leased for $4,500 per month

Wisconsin Rapids, Wisconsin A 3,000 square foot office, a
9,800 square foot warehouse, and a
four bay repair shop leased for
$6,500 per month (this facility is
owned by Messrs. Huff and Pixler)

Kansas City, Missouri A 400 square foot office leased for
$400 per month

Charleston, South Carolina Container division office (1,800 square
feet) and drop yard leased for $2,500
per month

Savannah, New York A 2,000 square foot office and two
bay repair shop leased for $2,024
per month (this facility is owned by
Mr. Pixler)

Jacksonville, Florida A 375 square foot office and a
1,125 square foot warehouse leased
for $1,003 per month

Each of our terminals is headed by a terminal manager. Some locations
include maintenance facilities and driver lounges, and all are active in the
recruiting of drivers and all provide local or regional customer service and
dispatch functions.

We utilize various computer systems, which enable order taking, drive
tracking, billing and cash application procedures. We are in the process of
enhancing these systems by adding new servers, new personal computers and new
software, all of which will contribute to Year 2000 readiness. When
completed, this will enable us to track our tractors and trailers more
effectively, and to handle billing and maintenance. We do not anticipate
introducing satellite driver communications in the near future, although our
new computer systems will be compatible with, and able to accommodate, such a
system.

TRACTORS AND TRAILERS

We operates a fleet of approximately 252 tractors, including 78 tractors
that are owned by independent contractors, and 401 trailers, including 15
trailers that are owned by independent contractors. Since the closing in
December 1998 of the financing with General Electric Capital Corporation, we
have traded 18 older tractors for 20 newer tractors. We have also traded 91
aged trailers for 63 new trailers which includes 43 refrigerated trailers and
20 dry vans. We have also recently added 65 tractors which are all 1996 or
newer and 149 refrigerated trailers. The ages of our equipment is as follows:

Age Tractors Trailers
------- -------- --------

0-3 years 28 106
4-6 years 130 187
7-9 years 13 51
9 years + 3 23

Our policy is to purchase quality late-model tractors and refrigerated
and dry trailers that meet our specifications. We have financed our tractor
and trailer purchases through several asset-based finance agreements. We also
contract with owner-operators to provide additional tractors and trailers. We
have established standard specifications for the purchase of equipment
replacements. Each of our tractors is equipped with a sleeper cab to permit
the drivers to comply conveniently and cost effectively with the DOT hours of
service guidelines and to facilitate team operations when necessary.

We are developing a plan to replace our tractors every four years and our
trailers every seven years. We maintain warranties that extend beyond the
four year life of the tractors on all engines, transmissions, drive axles and
running gear.

We have established a maintenance program that tracks service intervals,
repairs, and component history and management believes that this program will
increase the number of miles achieved between engine overhauls. Most of our
maintenance is performed at our Wisconsin Rapids, Wisconsin and Savannah, New
York terminals.

DRIVERS

All of our drivers must meet specific guidelines relating primarily to
safety record, driving experience and personal evaluation, including DOT
mandated drug testing and personal background checks. We recruit and retain
drivers by offering competitive compensation packages, purchasing quality
tractors and equipping them with optimal comfort and safety features (such as
air-conditioning, power steering, engine brakes and sleeper cabs), generating
driver friendly freight, maintaining an open door policy, paying bonuses,
providing a stock ownership program, and emphasizing training and retention
programs. We maintain experienced driver recruiters.

We require that prospective drivers have a minimum of one year of truck
driving experience in order to be considered for a position. In addition, new
drivers are required to meet all DOT requirements. Upon hiring a driver, we
conduct an orientation program covering such topics as our business, policies,
procedures, safety, benefits, maintenance and operation of equipment.

Our drivers and independent contractors are paid a percentage of loaded
revenue, and/or cents per mile. Drivers can earn bonuses on a per mile basis
for safety, paperwork, compliance and number of miles driven each year. All
employees, including drivers, will be eligible to participate in our 401(k)
plan and health and life insurance plans.

Although we currently have an adequate number of drivers, there can be no
assurance that we will not be affected by a shortage of qualified drivers in
the future. Significant driver turnover is a problem within the industry as a
whole. In addition, the trucking industry is experiencing a diminished
workforce of qualified drivers. As a result, we must compete with other
transportation service companies for the available drivers. We anticipate
that the intense competition for qualified drivers in the trucking industry
will continue.

In addition to our driver employees, we contract with a select group of
independent contractors who own and operate their own tractors and trailers.
Our selection process for independent owner-operators is substantially the
same as the process for employees. Each owner-operator is required to enter
into an owner-operator lease agreement which is cancelable by either party
upon thirty days notice. The owner-operators provide us with an additional
source of drivers, particularly during periods of peak demand for
transportation services.

INSURANCE AND SAFETY

Our safety department is responsible for training and supervising
personnel to keep safety awareness at its highest level. We have implemented
an active safety and loss prevention program at our corporate headquarters and
all of our terminals. The emphasis on safety begins in the hiring and
continues in orientation, safety training, and drug testing. Newly hired
drivers, regardless of experience level, must participate in a training
program.

Our safety and loss prevention program is comprised of the ongoing
education, training and retraining of drivers regarding safe vehicle
operation, loading and unloading procedures, and accident reporting. It also
includes random drug testing. The program is overseen by our Director of
Safety. It is our policy to reward drivers who have satisfied safety
performance goals. Safe-driver awards are presented based upon the number of
miles a driver or owner-operator accumulates in service without a "chargeable
accident" as defined by DOT regulations. Awards are presented on an annual
basis and consist of cash payments.

We have implemented a written disciplinary system for our employee
drivers and owner-operators. Pursuant to this system, disciplinary action
ranges from written warnings to immediate termination depending on the
frequency and severity of the offense. The most serious offenses include
violations of local, state or federal regulations while on duty, unauthorized
use of equipment, willful or negligent damage of equipment or property or
injury to another person, carrying, possessing or being under the influence of
intoxicants or narcotics while on duty or on our premises, possession of
firearms or other lethal weapons while on duty or while on our premises and
other similar offenses. Our Director of Safety continuously monitors driver
performance and makes recommendations to our executive officers regarding
employment and retention of drivers.

We are committed to securing appropriate insurance coverage at cost-
effective rates. The primary risks that arise in the trucking industry
consist of cargo loss and damage, personal injury, property damage and
workers' compensation claims. We maintain insurance that we believe is
adequate to cover our potential liabilities and risks.

We have set up captive insurance arrangements with an insurance company
pursuant to which we make monthly payments into a loss reserve fund in
addition to the payments we make to the insurance company. The fund is then
used to pay off claims for liability to third parties for personal injuries
and property damage up to $100,000 per occurrence and up to an aggregate of
$615,000. Any claims in excess of these limits are covered by insurance up to
$1 million per occurrence. To the extent that the annual claims are less than
the amount projected by the insurance company, we receive back a portion of
the reserve fund.

We also have an insurance policy which covers cargo loss and damage up to
$250,000 per occurrence, and an insurance policy which covers workmen's
compensation claims in amounts from $100,000 to $500,000, depending on the
state where the worker lives.

FUEL MANAGEMENT

Motor carrier service is dependent upon the availability of diesel fuel.
We manage fuel purchases by directing our drivers to certain truck stops along
designated routes that give us certain discounts in return for volume
purchases on a recurring basis. Through the use of computerized monitoring
devices imbedded in the engines of our tractors, we monitor fuel usage, miles
per gallon, cost per mile, and cost per gallon. We have not experienced any
difficulty in maintaining fuel supplies sufficient to support our operations.
Historically, we have been able to pass on a portion of fuel price increases
to our customers. Nevertheless, shortages of fuel, increases in fuel prices
or fuel tax rates or rationing of petroleum products could have a material
adverse effect on our operations and profitability.

COMPETITION

The trucking industry is highly competitive and fragmented. We compete
primarily with other medium to long-haul, temperature-controlled and dry
truckload carriers; internal shipping conducted by existing and potential
customers and, to a lesser extent, railroads and air transportation. Although
the general effect of deregulation of the trucking industry during the 1980's
created substantial downward pressure on the industry's rate structure, we
believe that competition for the freight transported by us is based primarily
on quality of service (i.e., just-in-time performance) and, to a lesser
degree, on freight rates. There are a number of other trucking companies
which have substantially greater financial resources, operate more equipment
or carry a larger volume of freight than we do. We also compete with other
motor carriers in hiring qualified drivers. Our primary emphasis is service,
especially to its core carrier customers, rather than price alone. However,
the industry in which we operate is extremely price sensitive and we are
responsive to competitive price pressures.

REGULATION

The trucking industry is subject to regulatory oversight and legislative
changes which can affect the economics of the industry by requiring certain
operating practices or influencing the demand for, and the costs of providing,
services to shippers. The Department of Transportation of the United States
("DOT"), as well as various state agencies that have jurisdiction over us,
have broad powers, generally governing such matters as authority to engage in
motor carrier operations, rates and charges, certain mergers, consolidations
and acquisitions, and periodic financial reporting. Rates and charges are not
directly regulated by these authorities. As primarily a contract carrier, we
negotiate competitive rates directly with customers as opposed to relying on
schedule tariffs. State agencies impose tax, license and bonding
requirements.

The Motor Carrier Act of 1980 commenced a program to increase competition
among motor carriers and to diminish regulation in the industry. Following
this deregulation, applicants have more easily been able to obtain DOT
operating authority, and interstate motor carriers have been able to impose
certain rate changes without DOT approval. The Motor Carrier Act also removed
many route and commodity restrictions on transportation of freight. Gulf
Northern has held specific commodity and territory authority from the Illinois
Commerce Commission since 1939. Gulf Northern holds authority to carry
general commodities throughout the 48 contiguous states, as both a common and
contract carrier, and it holds various intrastate authorities.

Under the Negotiated Rates Act of 1993, certain procedures must be
followed for resolving claims involving unfiled, negotiated transportation
rates. Generally, when a claim is made by a motor carrier of property (other
than a household goods carrier) for the collection of rates and charges in
addition to those originally billed and collected by the carrier, the person
against whom the claim is made may elect to satisfy the claim pursuant to
certain provisions specified in the Negotiated Rates Act. The Negotiated
Rates Act specifies the types of disputes to be resolved by the ICC and allows
for the nonpayment of the disputed additional compensation until the dispute
is resolved. We believe that we are in compliance in all material respects
with the provisions of the Negotiated Rates Act.

Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. All of our drivers are required

to obtain national commercial driver's licenses pursuant to regulations
promulgated by the DOT. DOT regulations impose mandatory drug testing of
drivers. We have implemented a random drug-testing program in accordance with
these regulations. In addition, we are required to implement alcohol and drug
rules imposed by the DOT which prohibit any alcohol or drug use prior to and
during driving and while performing safety-sensitive functions such as
loading, unloading, inspecting, waiting for dispatch, resting in a sleeper
birth, and other specified times. We comply with all applicable regulations
imposed on our employees and owner-operators. The DOT's national commercial
driver's license, drug testing requirements and new alcohol and drug-use
regulations have not to date and are not expected to adversely affect the
availability to us of qualified drivers.

Our operations are subject to federal, state and local laws and
regulations concerning the environment. We have not received any notices from
any regulatory authority relating to any violation of any environmental law
and incur no material costs specifically related to compliance with such laws.

EMPLOYEES

As of the date of this prospectus, we employ approximately 245 persons,
of whom approximately 180 were drivers and 65 were maintenance and
administrative personnel. None of our employees are represented by a
collective bargaining unit and we have never experienced a work stoppage. We
believe that our relations with our employees is good.

LEGAL PROCEEDINGS

We have been from time to time a party to litigation incidental to our
business, primarily involving claims for personal injury and property damage
incurred in the transportation of freight, and litigation relating to
transactions as to which its affiliates have been involved. As of the date of
this prospectus, we are not party to any litigation which, individually or in
the aggregate, management believes will have a material adverse effect on our
financial condition or operations. We maintain insurance that we believe is
adequate to cover our liability risks.

REPORTS TO SECURITY HOLDERS

We are subject to the reporting requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended, and in accordance therewith file
periodic reports with the Commission. Such reports concerning us may be
inspected or copied at the public reference facilities at the Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices in New York, 7 World Trade Center, New York,
New York 10048, and in Chicago, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such documents can be
obtained at the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically.

We do not currently plan on sending to stockholders quarterly or annual
reports.

MANAGEMENT

DIRECTORS AND OFFICERS

Our Directors and Executive Officers are as follows:

NAME AGE POSITIONS HELD
---- --- --------------

Danny L. Pixler 51 President, CEO and Director

W. Anthony Huff 37 Executive Vice President and Chairman
of the Board

John Ragland 34 Chief Financial Officer

There is no family relationship between any Director or Executive Officer
of U.S. Trucking, Inc.

We have audit and compensation committees which both consist of Danny L.
Pixler and W. Anthony Huff.

Set forth below are the names of our directors and executive officers,
all positions and offices with us held by each such person, the period during
which he has served as such, and the principal occupations and employment of
such persons during at least the last five years:

DANNY L. PIXLER has served as the President, CEO and a director of U.S.
Trucking, Inc. since September 8, 1998, when we completed our acquisition of
U.S. Trucking-Nevada. He has served as President, Secretary and Treasurer of
U.S. Trucking-Nevada since February 1997, and as a Director since May 1998.
He served as Vice President and a director of Mencor from March 1994 until
July 1998 when he became President. He has served as President, CEO and
director of Gulf Northern since March 1995. From January 1993 until March
1994, he served as President of Joseph Land Group (a transportation company
with annual sales of approximately $130 million). From 1989 until 1993, he
served as President of Apple Lines, Inc., a truckload refrigerated carrier
with $16 million in revenues. From 1983 until 1989, he was employed by D.F.C.
Transportation, the transportation division of Dean Foods, Inc., where his
final position was Executive Vice President and General Manager responsible
for the company's truckload division with annual sales of $80 million.

W. ANTHONY HUFF has served as our Executive Vice President and Chairman
of the Board since September 8, 1998. He has provided various administrative
services to U.S. Trucking-Nevada since February 1997 and has served as
Executive Vice President and a Director since May 1998. He has also provided
various services to Gulf Northern since March 1995 and he has served as a
Director since February 1996 and as Vice President since June 1998. Mr. Huff
has also served as Vice President and Assistant Secretary of Mencor since June
1998. Mr. Huff manages our offshore captive insurance programs and
investments. From approximately November 1995 until January 1997, he served
as President and a director of United Acquisition Corp. II, a company formed
to acquire companies in the trucking business. From February 1992 until
December 1996, Mr. Huff served as President of the North American Trucking
Association, an association of independent truckers engaged in the business of
providing administrative and financial services to its members. Mr. Huff
spends approximately 60% of his time on our business and the remainder of his
time consulting with various other companies.

Due to a large judgment awarded against Mr. Huff in 1994 resulting from
Mr. Huff's guaranty of a defaulted bank loan for a company of which he was a
shareholder, Mr. Huff filed for personal bankruptcy under Chapter 7 of the
U.S. Bankruptcy Code in 1994 (discharge granted in 1995). Mr. Huff was a
minority shareholder and provided services to the company (KHW Foods, Inc.)
relating to store location and development, but was not otherwise involved in
management of the company. In the bankruptcy proceeding Mr. Huff reaffirmed
all of his other personal debts.

JOHN RAGLAND has served as our Chief Financial Officer since September 8,
1998. He has served as the Controller of Gulf Northern since June 1996, and
as Secretary-Treasurer since June 1998. He has also served as the Chief
Financial Officer and Treasurer of U.S. Trucking-Nevada since May 1998. From
May 1996 until October 1996, he served as Chief Financial Officer of United
Acquisition Corp. II, a company formed to acquire companies in the trucking
business. From August 1994 until June 1996 he was the Chief Financial Officer
of the North American Trucking Association, a trade group, and he was also the
Chief Financial Officer of All-Risk Services, an insurance agency, during the
same period. From 1991 to July 1994, he was a staff accountant with Watkins,
Buckles & Travis, Certified Public Accountants.

Our executive officers hold office until the next annual meeting of the
Directors. We have agreements with Messrs. Pixler and Huff whereby we are
required to use our best efforts to elect and retain them as members of the
Board of Directors as long as they are guarantors as to any U.S. Trucking or
affiliated debt. There are no other arrangements or understandings between
any director or executive officer and any other person pursuant to which any
of the above-named executive officers or directors or nominees was selected as
an officer or director or nominee for director.

EXECUTIVE COMPENSATION

The following tables set forth information regarding executive
compensation for U.S. Trucking, Inc.'s President and Chief Executive Officer
and each other executive officer who received total annual salary and bonus in
excess of $100,000 for any of the years ended December 31, 1998, 1997 or 1996.

Summary Compensation Table

Long-term Compensation
Awards Payouts
------------------------
Securi-
Annual Compensation ties
--------------------- Re- Underly- All
Other strict- ing Other
Name and Annual ed Options/ LTIP Com-
Principal Compen- Stock SARs Pay- pensa-
Position Year Salary Bonus sation Award(s) (Number) outs tion
- ---------- ---- -------- ----- ------- -------- -------- ----- ------

Danny L. 1998 $105,000 -- $6,000(1) -- 100,000 -- --
Pixler, 1997 $105,000 -- $6,000(1) -- -- -- --
President 1996 $ 47,500 -- $ -- -- -- -- --
______________

(1) Represents $500 per month car allowance.

Aggregated Option Exercises in Year Ended
December 31, 1998 and December 31, 1998 Option Values

Securities Under- Value of Unexer-
Shares lying Unexercised cised in-the
Acquired Options Money Options/
On at 12/31/98 at 12/31/98
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
---- -------- -------- ---------------- ----------------

Danny L. Pixler -0- $ -0- 100,000 / 0 $495,000 / 0

Options / Grants in Last Fiscal Year
Individual Grants

Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date
---- ------------ ------------ ----------- ----------

Danny L. Pixler 100,000 50% $.30 5/22/08

EMPLOYMENT AGREEMENTS

We have entered into a five year employment agreement with Danny L.
Pixler commencing September 9, 1998, which provides for an annual salary of
$105,000 (with annual increases of not less than 3%). The agreement also
provides that Mr. Pixler will receive a new car every three years and all
vehicle expenses incurred on our business or an auto allowance not to exceed
$550 per month.

We have entered into a five year employment agreement with W. Anthony
Huff commencing September 9, 1998, which provides for an annual salary of
$52,000 (with annual increases of not less than 3%).

We have entered into a three year employment agreement with John Ragland
commencing September 9, 1998, which provides for an annual salary of $75,000
(with annual increases of not less than 3%). The agreement also provides that
Mr. Ragland will be provided a company car and reimbursement of his vehicle
expenses incurred on our business.

These employment agreements are terminable by us for certain specified
reasons, including disability, fraud, conviction of a felony and substance
abuse. They also contain covenants not to compete during the term of the
agreements.

STOCK OPTION PLAN

During September 1998, the Board of Directors adopted the Stock Option
Plan of U.S. Trucking-Nevada as our Stock Option Plan (the "Plan"), and we
assumed the obligations represented by 1,500,000 options which were already
outstanding. These options have an exercise price of $0.30. The Plan
authorized the issuance of options to purchase up to 2,500,000 shares of our
Common Stock. An additional 500,000 options have been granted under the plan
at an exercise price of $3.00.

The Plan allows the Board to grant stock options from time to time to
employees, officers, directors and consultants of U.S. Trucking. The Board
has the power to determine at the time that the option is granted whether the
option will be an Incentive Stock Option (an option which qualifies under
Section 422 of the Internal Revenue Code of 1986) or an option which is not an
Incentive Stock Option. Vesting provisions are determined by the Board at the
time options are granted. The option price for any incentive stock option
will be no less than the fair market value of the Common Stock on the date the
option is granted, while other options may be granted at any exercise price.

Options granted under the Plan with an exercise price less than the fair
market value on the date of grant, will require us to record an expense upon
the grant of options equal to the difference between the market value of the
option shares and the exercise price of the options. Generally, there will be
no federal income tax consequences to us in connection with Incentive Stock
Options granted under the Plan. With regard to options that are not Incentive
Stock Options, we will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.

SECURITY OWNERSHIP OF MANAGEMENT,
PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDERS

The following table sets forth, as of August 30, 1999, and as
adjusted for the sale of the shares offered by the selling shareholders, the
stock ownership of each person known by us to be the beneficial owner of five
percent or more of the our Common Stock, all Directors individually and all
Directors and Executive Officers as a group, and the selling shareholders.
Except as noted, each person has sole voting and investment power with respect
to the shares shown.

Per- Per-
centage Number centage
Amount of of Class of of Class
Name and Address of Beneficial Prior Shares After
Beneficial owner Ownership to Sales Offered Sales
- ------------------- ---------- -------- --------- --------

Principal Shareholders
and Management:
- ----------------------

Logistics Management,
L.L.C. (1) 2,084,400 (2) 29.7% 0 29.7%
10602 Timberwood Circle #9
Louisville, KY 40223

Danny L. Pixler 1,392,200 (3) 18.9% 0 18.9%
Suite 216
3125 Ashley Phosphate Road
North Charleston, SC 29418

W. Anthony Huff 1,392,200 (4) 18.9% 0 18.9%
10602 Timberwood Circle #9
Louisville, KY 40223

All Directors and Executive 2,854,275 (3) 36.7% 0 36.7%
Officers as a Group (4)
(3 Persons)

Selling Shareholders:
- --------------------

Mark Weber 40,000 * 40,000 0
3206 162nd Place, SE
Bellevue, WA 98008

Ronald Setzkorn 233,333 3.0% 233,333 0
1211 Willow Bend
Clarksville, TN 37043

Market Edge Inc. 46,668 * 46,668 0
No. 2B
1304 E. Algonavin Road
Schaumburge, IL 60173

Jay W. Bosselman 93,333 1.2% 93,333 0
No. 2B
1304 E. Algonavin Road
Schaumburge, IL 60173

Ralph Brown 33,333 * 33,333 0
P.O. Box 97
Gainesville, MD 65655

B. A. Bates 65,000 * 65,000 0
19 2nd Street East
Kalispell, MT 59901

Sebrite Financial 33,333 * 33,333 0
Suite 1215
600 South Highway 169
St. Louis Park, MN 55426

Stanley Chasen 33,333 * 33,333 0
6711 North Ocean Boulevard
Ocean Ridge, FL 33435

Jud Wagenseller 26,668 * 26,668 0
2107 Bainbridge Row Drive
Louisville, KY 40207

Transportation Services Co. 261,666 3.7% 261,666 0
10602 Timberwood Circle #9
Louisville, KY 40223

Michelle A. Vetrano 26,667 * 26,667 0
10415 North Pecan Place
Tucson, AZ 85737

Paolo Dorigo 33,333 * 33,333 0
3865 Jasmine Avenue
Culver City, CA 90232

George R. Vetrano, Jr. 13,333 * 13,333 0
9255 Doheny Road, No. 2804
Los Angeles, CA 90069

George R. Vetrano, Sr. and
Carol A. Vetrano 26,667 * 26,667 0
10818 North Sand Canyon Road
Oro Valley, AZ 85737

Kevin P. Judge 33,333 * 33,333 0
3417 Clinton Street
West Seneca, NY 14224

Sidney Anderson 33,334 * 33,334 0
1503 Evergreen Road
Louisville, KY 40223

Mid-Cal Express, Inc. 400,000 5.7% 400,000 0
155 Montgomery St., Suite 406
San Francisco, CA 94104-4109

Glenn Bagwell, Jr. 250,000 3.6% 250,000 0
Suite 204
3005 Anderson Drive
Raleigh, NC 27609
________________

* Less than 1%.

(1) Logistics Management, L.L.C. is 50% owned by Roxann Pixler, the wife of
Danny L. Pixler, and 50% owned by Association Services, Inc., which is
100% owned by the Huff Grandchildren's Trust.

(2) Does not include 900,000 shares of our Series A Preferred Stock held by
Logistics Management, L.L.C., which represents 9,000,000 votes and which
is exchangeable for up to 9,000,000 shares of U.S. Trucking Common Stock
when certain revenue targets are achieved. (See "DESCRIPTION OF
SECURITIES.")

(3) Represents a 50% beneficial interest in the shares held by Logistics
Management, L.L.C. and options to purchase 350,000 shares of Common
Stock. Does not include 25,000 shares of Series C Preferred Stock held
by Danny Pixler which carry 2,500,000 votes.

(4) Represents a 50% beneficial interest in the shares held by Logistics
Management, L.L.C. and options to purchase 350,000 shares of Common
Stock. Does not include 25,000 shares of Series C Preferred Stock
held by Huff Grandchildren's Trust which carry 2,500,000 votes, of which
Mr. Huff is co-trustee.

There are no known agreements, the operation of which may at a subsequent
date result in a change in control of U.S. Trucking.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

ACQUISITION OF U.S. TRUCKING-NEVADA

On September 8, 1998, we completed the acquisition of 100% of the
outstanding common stock of U.S. Trucking, Inc., a Nevada corporation ("U.S.
Trucking-Nevada") in exchange for 15,877,300 shares of our common Stock. The
shares were exchanged on the basis of one share of our common stock for one
share of U.S. Trucking-Nevada common stock.

The stock issuances were made pursuant to an Agreement ("Agreement")
between U.S. Trucking, Inc. and U.S. Trucking-Nevada. The terms of the
Agreement were the result of negotiations between the managements of U.S.
Trucking, Inc. and U.S. Trucking-Nevada. However, the Board of Directors did
not obtain any independent "fairness" opinion or other evaluation regarding
the terms of the Agreement, due to the cost of obtaining such opinions or
evaluations.

TRANSACTIONS INVOLVING U.S. TRUCKING-NEVADA AND ITS SUBSIDIARIES

On the formation of U.S. Trucking-Nevada in March 1997, U.S. Trucking-
Nevada issued 1875 shares of its common stock to U.S. Transportation Systems,
Inc. in exchange for the assets and liabilities described below:

1. Certain assets (primarily tractors and trailers) and liabilities
(related to Jay and Jay Transportation, Inc.) were contributed to U.S.
Trucking-Nevada by USTS. The net value of this contribution for accounting
purposes was $2,394,860.

2. Certain assets and liabilities(related to Translynx Express, Inc.)
were contributed to U.S. Trucking-Nevada by U.S. Transportation Systems, Inc.
The net value of these assets and liabilities for accounting purposes was
$100,546.

U.S. Trucking-Nevada also purchased 100% of the common stock of Gulf
Northern from Logistic Management LLC for $225,000 in cash and 625 shares of
the common stock of U.S. Trucking-Nevada and assumed all of the outstanding
debt.

U.S. Trucking-Nevada also purchased 100% of the common stock of Mencor
from its stockholders (Roxanne Pixler, Mike Menor and Dan Pixler) for $70,000
in cash and 37,500 shares of U.S. Transportation Systems common stock.

On December 23, 1996, Gulf-Northern sold its Wisconsin Rapids facility,
which included land, a building and improvements, to its majority stockholders
for $346,141. The stockholders leased the property back to Gulf Northern for
five years commencing January 1, 1997 for $7,350 per month. The majority
stockholders were Danny L. Pixler and The W. Anthony Huff Irrevocable Trust.

In March 1998, Gulf Northern leased three 1995 Volvo tractors from Danny
L. Pixler under a one year lease agreement that specifies monthly payments of
$4,047 and provides for annual renewals. Under the lease agreement, Gulf
Northern is required to pay for all expenses associated with the tractors
including maintenance, insurance, permits, licenses and other operating
expenses.

In September 1998, Gulf Northern leased six 1994 Kenworth tractors from a
company owned by Danny Pixler and Anthony Huff pursuant to a one year lease

agreement which provides for monthly payments of $7,380 and annual renewals.
Under the lease agreement, Gulf Northern is required to pay for all expenses
associated with the tractors including maintenance, insurance, permits,
licenses and other operating expenses.

In December 1998, Danny Pixler purchased the office and repair shop in
Savannah, New York, which Gulf Northern had previously been leasing. He
purchased the property for approximately $158,000, and he is leasing it to
Gulf Northern for approximately $2,024 per month which is equivalent to the
amount of his mortgage payment, taxes and insurance on the property.

During January 1999, three of our shareholders entered into a Stock
Exchange Agreement with us whereby they agreed to exchange a total of
9,990,000 shares of our common stock for 999,000 shares of our Series A
Preferred Stock. Each share of Series A Preferred Stock will have ten votes
and the shares will be voted together with the common stock as a single class.
(See "Description of Securities") Pursuant to the Stock Exchange Agreement,
each share of Series A Preferred Stock will be exchangeable back into ten
shares of common stock as follows: one-fifth of the shares upon reporting
revenues of $31 million or more for any fiscal year or shorter period in a
report on Form 10-KSB, 10-K, 10-QSB, or 10-Q as filed with the Securities and
Exchange Commission; an additional one-fifth if revenues are at or above $41
million; an additional one-fifth if revenues are at or above $51 million; an
additional one-fifth if revenues are at or above $61 million; and the balance
if revenues are at or above $71 million. The shareholders who exchanged
shares are Logistics Management, LLC - 9,000,000 shares; Joff Pollon - 250,000
shares; and Waterways Group - 740,000 shares.

The Board of Directors believes that the above transactions involving
U.S. Trucking-Nevada and its subsidiaries have been on terms no less favorable
to us than those that could have been obtained from unaffiliated parties.
When reviewing transactions with affiliates, the members of the Board attempt
to consider all of their fiduciary duties to shareholders and they consult
with the Company's legal counsel for their opinions on the transactions.

In June 1999, we issued 25,000 shares of Series C Preferred Stock to each
of Danny Pixler and the Huff Grandchildren's Trust in consideration of those
parties' guaranties with respect to in excess of $13,000,000 of our debt
obligations. Each Series C Share carries 100 votes per share on all matters
submitted to a vote of stockholders, but otherwise carries no rights to
dividends or other distributions.

DESCRIPTION OF SECURITIES

COMMON STOCK

Our authorized capital stock includes 75,000,000 shares of Common Stock,
no par value. All shares have equal voting rights, i.e. one vote per share,
and are not assessable. Voting rights are not cumulative, and so the holders
of more than 50% of the Common Stock could, if they chose to do so, elect all
the Directors.

Upon liquidation, dissolution or winding up of U.S. Trucking, Inc., our
assets, after the payment of liabilities and any liquidation preferences on
outstanding preferred stock, will be distributed pro rata to the holders of
the Common Stock. The holders of the Common Stock do not have preemptive
rights to subscribe for any of our securities and have no right to require us
to redeem or purchase their shares. The shares of Common Stock presently
outstanding are fully paid and nonassessable.

Holders of Common Stock are entitled to share equally in dividends when,
as and if declared by the Board of Directors, out of funds legally available
therefor. We have not paid any cash dividends on our Common Stock, and it is
unlikely that any such dividends will be declared in the foreseeable future.

TRANSFER AGENT

Corporate Stock Transfer, Inc., 370 - 17th Street, Suite 2350, Denver,
Colorado 80202, serves as the transfer agent for the U.S. Trucking, Inc.

PREFERRED STOCK

We are authorized to issue 10,000,000 shares of Preferred Stock, no par
value. The Preferred Stock may be issued in series from time to time with
such designation, rights, preferences and limitations as the Board of
Directors may determine by resolution. The rights, preferences and
limitations of separate series of Preferred Stock may differ with respect to
such matters as may be determined by the Board of Directors, including,
without limitation, the rate of dividends, method and nature of payment of
dividends, terms of redemption, amounts payable on liquidation, sinking fund
provisions (if any), conversion rights (if any), and voting rights. The
potential exists, therefore, that preferred stock might be issued which would
grant dividend preferences and liquidation preferences to preferred
shareholders over common shareholders. Unless the nature of a particular
transaction and applicable statutes require such approval, the Board of
Directors has the authority to issue these shares without shareholder
approval. The issuance of Preferred Stock may have the affect of delaying or
preventing a change in control of U.S. Trucking, Inc. without any further
action by shareholders.

We have designated 999,000 shares of our Preferred Stock as Series A
Preferred Stock, all of which are currently outstanding; 2,000 shares of
Series B Convertible Preferred Stock, all of which are outstanding; and 50,000
shares of Series C Preferred Stock, all of which are outstanding. Following
is a summary of the rights and preferences of the outstanding Preferred Stock.

SERIES A PREFERRED STOCK. Each share of Series A Preferred Stock is
entitled to ten votes and will vote together with the holders of the Common
Stock. In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of U.S. Trucking, Inc., the holders of the shares

of Series A Preferred Stock will be entitled to be paid an amount equal to ten
times the amount payable on each share of Common Stock.

The shares of Series A Preferred Stock were issued to the holders of
9,990,000 shares of our Common Stock pursuant to a Stock Exchange Agreement.
Pursuant to this agreement, each share of Series A Preferred Stock will be
exchanged for ten shares of common stock as follows: one-fifth of the shares
upon U.S. Trucking, Inc. reporting revenues of $31 million or more for any
fiscal year or shorter period in a report filed on Form 10-KSB, 10-K, 10-QSB,
or 10-Q as filed with the Securities and Exchange Commission; an additional
one-fifth if revenues are at or above $41 million; an additional one-fifth if
revenues are at or above $51 million; an additional one-fifth if revenues are
at or above $61 million; and the balance if revenues are at or above $71
million.

SERIES B CONVERTIBLE PREFERRED STOCK. Shares of Series B Convertible
Preferred Stock are convertible into shares of Common Stock based on the
stated value of $1,000 per share of preferred stock divided by the conversion
price on the conversion date. Holders of Series B Convertible Preferred Stock
may elect to convert their shares commencing on the earlier of October 28,
1999, or the occurrence of any merger, tender offer, or redemption event
described below. The conversion price is equal to 90% of the average closing
bid price for the ten consecutive trading days immediately preceding the
conversion date, not to exceed $2.59 per share.

Holders of Series B Convertible Preferred Stock are entitled to receive a
premium in cash equal to 12% of the stated value of the preferred stock on the
15th day of each month. However, no dividends are payable on the Series B
Convertible Preferred Stock.

In the event of a voluntary or involuntary dissolution, liquidation or
winding up of the Company, holders of the Series B Convertible Preferred Stock
are entitled to receive out of the assets of the Company legally available for
distribution, before any payment to holders of Common Stock, an amount per
share equal to $1,000 plus any accrued premium on such shares.

Holders of the Series B Convertible Preferred Stock are entitled to
redeem their shares upon the occurrence of certain events, referred to as
redemption events, which include the following:

* In the event that we are unable to issue free trading Common
Stock into which shares of Series B Convertible Preferred Stock
have been converted because the shares have not been registered
under the Securities Act;

* In the event that we notify holders of Series B Convertible
Preferred Stock of our intention not to issue shares of Common
Stock on conversion;

* If we transfer substantially all of our assets, merge or con-
solidate with another entity, or have 50% or more of our voting
power held by a person or group other than Logistics Management
LLC and its affiliates;

* If we breach any material term of the Securities Purchase Agreement
or Registration Rights Agreement with the purchasers of the Series B
Convertible Preferred Stock; or

* If the trading volume for any 20 consecutive trading days does not

equal or exceed $150,000 beginning October 27, 1999.

Upon the occurrence of a redemption event, we may preclude any redemption by
paying, as liquidated damages, an amount equal to 10% of the stated value of
the Series B Convertible Preferred Stock to each holder in cash or in stock at
80% of the conversion rate.

In the event of a redemption, the redemption amount to be paid will be
equal to the number of shares which would have been issued if the shares of
Series B Convertible Preferred Stock were converted multiplied by the current
market value. Alternatively, we may pay an amount equal to 120% of the stated
value of the shares being converted in cash or in stock at 80% of the
conversion rate.

The holders of Series B Convertible Preferred Stock have no voting rights
except as required by Colorado law. In the event that voting is required
under Colorado law, the holders shall have one vote for each share held on
matters to be voted on as a class, and on an as-converted basis on matters
which the Class B Convertible Preferred Stock and Common Stock vote together
as one class.

SERIES C PREFERRED STOCK. Each share of Series C Convertible Preferred
Stock entitles the holder to one hundred votes and votes together with the
holders of Common Stock as a single class. The holders of Series C Preferred
Stock have no liquidation rights and no rights to dividends. The Series C
Preferred Stock is not redeemable.

PLAN OF DISTRIBUTION

The 2,505,531 Shares offered hereby may be offered and sold from time to
time by the selling shareholders, or by pledgees, donees, transferees or other
successors in interest. Such offers and sales may be made from time to time
in the over-the-counter market, or otherwise, at prices and on terms then
prevailing or at prices related to the then-current market price, or in
negotiated transactions. The Shares may be sold by one or more of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account; (c) an exchange distribution in accordance with the rules of such
exchanges; (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (e) privately negotiated transactions; and (f) a
combination of any such methods of sale. In effecting sales, brokers or
dealers engaged by the selling shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or
discounts from selling shareholders or from the purchasers in amounts to be
negotiated immediately prior to the sale. The selling shareholders may also
sell such shares in accordance with Rule 144 under the 1933 Act.

The selling shareholders and any brokers participating in such sales may
be deemed to be underwriters within the meaning of the 1933 Act. There can be
no assurance that the selling shareholders will sell any or all of the shares
of Common Stock offered hereunder.

All proceeds from such sales will be the property of the selling
shareholders who will bear the expense of underwriting discounts and selling
commissions, if any, and their own legal fees. The selling shareholders are
not sharing the costs of the registration of the Shares.

LEGAL MATTERS

The legality of the securities of U.S. Trucking, Inc. offered will be
passed on for us by Krys Boyle Freedman & Sawyer, P.C., 600 17th Street, Suite
2700 South Tower, Denver, Colorado 80202. Jon D. Sawyer, a director of Krys
Boyle Freedman & Sawyer, P.C., owns 95,000 shares of our Common Stock.

EXPERTS

The financial statements included in this prospectus, to the extent and
for the periods indicated in their report, have been audited by Bianculli,
Pascale & Co. P.C., Certified Public Accountants, and are included herein in
reliance on the authority of such firm as experts in accounting and auditing
in giving such reports.

ADDITIONAL INFORMATION

A Registration Statement on Form SB-2, including amendments thereto,
relating to the securities offered hereby has been filed by us with the
Securities and Exchange Commission, Washington, D.C. This prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to U.S.
Trucking, Inc. and the securities offered hereby, reference is made to such
Registration Statement, exhibits and schedules. Statements contained in this
prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal offices in Washington, D.C., and copies
of all or any part thereof may be obtained from the Commission upon the
payment of certain fees prescribed by the Commission. The Registration
Statement has been filed electronically through the Commission's Electronic
Data Gathering, Analysis and Retrieval System and may be obtained through the
Commission's Web site (http://www.sec.gov).

No person is authorized to give any information or to make any
representation other than those contained in this prospectus, and if given or
made such information or representation must not be relied upon as having
been authorized. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the securities
offered by this Prospectus or an offer to sell or a solicitation of an offer
to buy the securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.

INDEX TO FINANCIAL STATEMENTS

PAGE

1) UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF
U.S. TRUCKING, INC. AND SUBSIDIARIES AS OF
JUNE 30, 1999 ................................................... F-3

Consolidated Balance Sheet as of June 30, 1999
(Unaudited) and December 31, 1998 ............................. F-4

Consolidated Statements of Income for the
Six Months Ended June 30, 1999 and 1998
(Unaudited) ................................................... F-6

Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1999 and 1998
(Unaudited) ................................................... F-7

Notes to Consolidated Financial Statements .................... F-9

2) AUDITED FINANCIAL STATEMENTS OF U.S. TRUCKING, INC.
FOR THE YEAR ENDED DECEMBER 31, 1998 AND THE
PERIOD FROM INCEPTION (JANUARY 30, 1997)
TO DECEMBER 31, 1997 ............................................ F-11

Report of Independent Certified Public Accountants ............ F-12

Consolidated Balance Sheets as of December 31, 1998
and 1997 ...................................................... F-13

Consolidated Statement of Operations and Accumulated
Deficit for the year ended December 31, 1998 and
for the period from inception (January 30, 1997)
to December 31, 1997 ......................................... F-15

Consolidated Statement of Stockholders' Equity for the
year ended December 31, 1998 and for the period from
inception (January 30, 1997) to December 31, 1997 ............ F-16

Consolidated Statement of Cash Flows for the year ended
December 31, 1998 and for the period from inception
(January 30, 1997) to December 31, 1997 ...................... F-18

Notes to the Consolidated Financial Statements ................ F-21

3) AUDITED FINANCIAL STATEMENTS OF GULF NORTHERN TRANSPORT, INC.
FOR THE THIRTY DAYS ENDED JANUARY 30, 1997 ...................... F-45

Report of Independent Certified Public Accountants ............ F-46

Balance Sheet as of January 30, 1997 .......................... F-47

Statement of Operations and Accumulated Deficit
for the period from January 1, 1997 to January 30, 1997 ...... F-49

Statement of Cash Flows for the period from January 1, 1997
to January 30, 1997 .......................................... F-50

Notes to Financial Statements ................................. F-52

F-1

4) AUDITED FINANCIAL STATEMENTS OF MENCOR, INC. FOR THE THIRTY
DAYS ENDED JANUARY 30, 1997 ..................................... F-61

Report of Independent Certified Public Accountants ............ F-62

Balance Sheet as of January 30, 1997 .......................... F-63

Statement of Earnings and Retained Earnings for the
period ending January 30, 1997 ............................... F-65

Statement of Cash Flows for the period ending January 30,
1997 ......................................................... F-66

Notes to Financial Statements ................................. F-67

5) AUDITED FINANCIAL STATEMENTS OF MID AMERICA TRANSPORTERS GROUP,
INC. AND SUBSIDIARY FOR THE YEARS ENDED DECEMBER 31,
1996 AND 1995 ................................................... F-73

Report on Independent Certified Public Accountants ............ F-74

Consolidated Balance Sheets as of December 31, 1996 and 1995... F-75

Consolidated Statements of Operations and Retained Earnings
for the years ending December 31, 1996 and 1995 .............. F-77

Consolidated Statements of Cash Flows for the years ending
December 31, 1996 and 1995 ................................... F-78

Notes to the Consolidated Financial Statements ................ F-80

6) AUDITED FINANCIAL STATEMENTS OF MENCOR, INC. FOR THE
YEARS ENDED DECEMBER 31, 1996 AND 1995 .......................... F-90

Report on Independent Certified Public Accountants ............ F-91

Balance Sheet as of December 31, 1996 and 1995 ................ F-92

Statements of Earnings and Retained Earnings for the
periods ending December 31, 1996 and 1995 .................... F-94

Statements of Cash Flows for the periods ending December 31,
1996 and 1995 ................................................ F-95

Notes to Financial Statements ................................. F-96

F-2

1) UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF U.S. TRUCKING, INC.
AND SUBSIDIARIES AS OF JUNE 30, 1999.

F-3

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

June 30, 1999 December 31, 1998
(Unaudited)

Assets
Current Assets
Cash In Bank $ 789,052 $ 22,976
Trade Accounts Receivable - net 5,854,779 3,447,570
Accounts Receivable - Other 204,794 141,673
Parts and Supply Inventory 287,141 257,030
Prepaid Expenses and Other 540,411 162,036
----------- -----------
Total Current Assets 7,676,177 4,031,285
----------- -----------

Transportation & Other Equipment
at cost - Less accumulated
depreciation and amortization 7,544,458 9,718,805

Other Assets
Restricted Cash - Factor 135,706 -
Restricted Cash - Owner Operators 2,320 2,320
Restricted Cash - Letters of Credit 86,354 10,000
Restricted Cash - Captive Insurance 233,376 -
Due from Related Party 100,000 100,000
Due from Captive Insurer 456,732 355,321
Security Deposits 14,007 12,575
Intangible Assets - net of accumulated
amortization 3,602,494 2,082,055
----------- -----------
Total Other Assets 4,630,989 2,562,271
----------- -----------
Total Assets $19,851,624 $16,312,361
=========== ===========

Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable - Trade 1,797,246 1,443,415
Revolving Credit Line 3,193,669 1,795,888
Accruals & Other Current Liabilities 1,144,276 669,957
Current Portion - Long Term Debt 2,229,247 2,034,756
----------- -----------
Total Current Liabilities 8,364,438 5,944,016

Other Liabilities
Owner Operator Escrow 121,588 55,874
Convertible Debentures 540,000 0
Long-Term Notes Payable - net of
current portion 3,548,708 5,224,092
----------- -----------
Total Other Liabilities 4,210,296 5,279,966
----------- -----------

Total Liabilities 12,574,734 11,223,982

F-4

Stockholders' Equity
Preferred Stock (no par value -
20,000,000 shares authorized,
990,000 Series A issued and out-
standing; 900 Series B issued
and outstanding; and 50,000 Series C
issued and outstanding 900,762
Common Stock (no par value - 75,000,000
shares authorized, 6,901,258 issued
and outstanding on June 30, 1999, and
16,074,591 on December 31, 1998) 3,368,238 2,796,000
Additional paid-in Capital 4,223,480 3,821,812
Accumulated Deficit (1,095,590) (1,409,433)
Subscription Receivable (120,000) (120,000)
----------- -----------
Total Stockholders' Equity 7,276,890 5,088,379
----------- -----------
Total Liabilities & Stockholders'
Equity $19,851,624 $16,312,361
=========== ===========

F-5

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

For the Six For the Six
Months Ended Months Ended
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)

Net Revenues $17,824,169 $10,718,964

Operating Expenses
Purchased Transportation & Rentals 7,087,882 39.8% 3,667,666 34.2%
Salaries, Wages & Benefits 4,137,873 23.2% 2,666,923 24.9%
Fuel 1,457,324 8.2% 1,112,614 10.4%
Operating Supplies & Maintenance 625,508 3.5% 621,429 5.8%
Insurance & Claims 469,137 2.6% 340,933 3.2%
Misc. Operating Expenses 300,831 1.7% 293,687 2.7%
Taxes & Licenses 235,013 1.3% 203,562 1.9%
Insurance Captive Expense 582,803 3.3% 0 0.0%
Occupancy Costs 172,032 1.0% 125,308 1.2%
Depreciation and Amortization 1,146,717 6.4% 813,820 7.6%
----------- ----- ----------- -----
Total Operating Expenses 16,215,120 91.0% 9,845,942 91.9%

General Administrative Expenses 1,069,171 6.0% 411,565 3.8%

Operating Income 539,878 3.0% 461,457 4.3%

Interest Expense (378,472) -2.1% (315,076) -2.9%
Gain on Sale of Equipment 124,114 0.7% 0 0.0%
Interest Income 2,425 0.0% 1,200 0.0%
Other Income 25,899 0.1% 45,241 0.4%
----------- ----- ----------- -----
Net Income Before Taxes 313,844 1.8% 192,822 1.8%

Provision for Income Taxes 104,459 0.6% 83,500 0.8%
Tax Benefit of Net Operating
Loss Carryforward (104,459) -0.6% (83,500) -0.8%
----------- ----- ----------- -----
Net Income 313,844 1.8% 192,822 1.8%
=========== ===== =========== =====

Accumulated Deficit - beginning (1,409,434) (1,531,200)

Accumulated Deficit - ending $(1,095,590) $(1,338,378)
----------- -----------

Earnings per Common Share 0.04 0.01

Fully Diluted Earnings per Share 0.02 0.01

Average Number of Shares
Outstanding 8,925,676 13,000,000

F-6

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six For the Six
Months Ended Months Ended
June 30, 1999 June 30, 1998
(Unaudited) (Unaudited)
----------- -----------
Cash Flows from Operating Activities
Net Income $ 313,844 $ 192,822

Adjustments to Reconcile Net Income
to Net Cash Used in Operating
Activities:
Depreciation & Amortization 1,146,717 805,293
Expense related to stock-based
compensation plan - 15,000
Gain on Sale of Equipment (124,114) -
(Increase) Decrease - Assets - -
Restricted Cash (445,436) (220,600)
Accounts Receivable (2,571,741) 78,070
Parts & Supply Inventory (30,111) (9,740)
Prepaid Expenses & Other Current
Assets (378,376) (132,189)
Increase (Decrease) - Liabilities
Accounts Payable & Revolving Credit
Line 1,751,612 (78,983)
Accrued Expenses and Other
Liabilities 540,034 51,576
----------- -----------
Total Adjustments (111,415) 508,427

Net Cash Provided by Operating
Activities 202,429 701,249
----------- -----------
Cash Flows from Investing Activities
Reduction (Increase) in security
deposit (1,433) 50
Purchase of Equipment (244,673) (108,287)
Sale of Transportation and Other
Equipment 1,104,114 -
Payment for Refinancing of
Acquisition Debt - (55,274)
Proceeds from Sale of Common Stock
and Additional Paid In Capital 1,883,732 -
----------- -----------
Net Cash Provided (Used) by Investing
Activities 2,741,740 (163,511)

Subtotal

F-7

Cash Flows from Financing Activities
Discount on note payable - 9,144
Cash paid for acquisitions (340,000) -
Principal Payments on Long-Term Debt (1,838,093) (427,734)
Principal Payments on Capital Lease
Obligations - (160,906)
----------- -----------
Net Cash Used by Financing Activities (2,178,093) (579,496)

Net Increase (Decrease) in Cash 766,076 (41,758)

Cash at Beginning of Year 22,976 60,099
----------- -----------

Cash at End of Period $ 789,052 $ 18,341
=========== ===========

Supplementary Disclosure of Cash
Flow Information
Cash Paid during the period
Interest Expense $ 378,472 $ 305,123
=========== ===========

Income Taxes $ - $ -
=========== ===========

F-8

U.S. TRUCKING, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999

NOTE 1 - Basis of Presentation

The accompanying consolidated financial statements include the parent company,
US Trucking, Inc. and its wholly owned subsidiaries, Gulf Northern Transport,
Inc., ProStar, Inc., Mencor, Inc. and the US Trucking Captive Insurance
Program(hereinafter collectively called the "Company"). All material
inter-company items and transactions have been eliminated in consolidation.

The consolidated financial statements included herein have been prepared in
accordance with generally accepted accounting principles ("GAAP"), pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures have been omitted or condensed pursuant
to such rules and regulations. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Results of operations in interim periods are
not necessarily indicative of results for a full year. These consolidated
financial statements and notes thereto should be read in conjunction with the
Company's consolidated financial statements and notes. The preparation of
financial statements in accordance with GAAP requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities as well as disclosure of contingent assets
and liabilities, at the date of the accompanying consolidated financial
statements, and the reported amounts of the revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

NOTE 2 - Earnings per Share

Earnings per common share amounts are based on the weighted average number of
common shares outstanding and diluted earnings per share amounts are based on
the weighted average number of common shares outstanding plus the incremental
shares that would have been outstanding upon the assumed exercise of all
diluted preferred shares.

NOTE 3 - Segment Information

Description of the types of services from which each reportable segment
derives its revenues. The Company has three major business segments:
long-haul trucking of refrigerated and nonrefrigerated products, interstate
freight brokerage and a captive insurance program for liability insurance for
the trucking industry. During the fourth quarter of 1998, the company adopted
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS 131).

The adoption of SFAS 131 requires the presentation of descriptive information
about reportable segments which is consistent with that made available to the
management of U S Trucking to assess performance. As a result of this change,
the company now reports information on its truck brokerage operation. In
addition, during 1998, the company added the captive liability insurance
program (business) and reports that segment's performance similarly. In
determining that net income of each segment of the company, 100% of the
interest expense is allocated to long-haul trucking and effective tax rates
are determined for each business segment.

F-9

The Company evaluates performance and allocated resources based on net profit
and loss from operations.

The Company's reportable segments are business units that offer different
transportation services. The reportable segments are each managed separately
because of their distinct differences in the operations.

SIX MONTH PERIOD ENDED JUNE 30, 1999

Long Haul Truck Liability Intersegment Total
Trucking Brokerage Insurance

Sales 14,712,520 2,513,413 937,214 (338,978) 17,824,169
Net Income 121,933 90,490 101,421 0 313,844
Assets 17,412,698 949,767 1,489,159 0 19,851,624
Depreciation &
Amortization 1,133,808 12,909 0 0 1,146,717

THREE MONTH PERIOD ENDED JUNE 30, 1999

Long Haul Truck Liability Intersegment Total
Trucking Brokerage Insurance

Sales 7,691,441 2,168,294 458,215 (155,153) 10,162,797
Net Income 26,650 99,807 67,441 0 193,898
Assets 17,412,698 949,767 1,489,159 0 19,851,624
Depreciation &
Amortization 583,473 12,609 0 0 596,082

NOTE 4 - Acquisitions

(A) The Company acquired the stock of a S.Carolina brokerage company during
the quarter ended June 30, 1999. The Company expects to add approximately $7.5
million of annual operating revenue with the acquisition while expecting
significant bottom line enhancement. The Company has relocated the acquired
company to the Company's General Offices in Charleston, S.C. to ensure quick
synergies with the brokerage company (Mencor) already owned by the Company.
The purchase was recorded at the estimated fair value, at the acquisition
date, in accordance with AFB Opinion No. 16. In conjunction with the
acquisition, the Company issued 200,000 shares of common stock and paid
$340,000 in cash. Adjustments, if any, to the purchase price allocations are
not expected to have a material impact on the accompanying consolidated
financial statements.

(B) The Company completed the acquisition of the assets of a container company
located in S. Carolina during the quarter ended June 30, 1999. The Company
expects to add approximately $6.0 million of annual operating revenue with the
acquisition, while meeting on going demands from its customer base. With the
Company's General Offices' located in a city ranked in the Top Ten ports in
the Nation, entering the transportation of containerized freight was a natural
transition and much needed. The purchase was recorded at the estimated fair
value, at the acquisition date, in accordance with AFB Opinion 16. In
conjunction with the acquisition, the Company agreed to issue a total of
188,000 shares of common stock over the next three years based on a vesting
schedule and to pay a total of $300,000 in cash during the third quarter of
the current fiscal year. Adjustments, if any, to the purchase price
allocations are not expected to have a material impact on the accompanying
consolidated financial statements.

F-10

2) AUDITED FINANCIAL STATEMENTS OF U.S. TRUCKING, INC. FOR THE YEAR
ENDED DECEMBER 31, 1998 AND THE PERIOD FROM INCEPTION (JANUARY 30,
1997) TO DECEMBER 31, 1997

F-11

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders
U.S. Trucking, Inc.
and Subsidiaries

We have audited the accompanying consolidated balance sheets of U.S. Trucking,
Inc. and Subsidiaries as of December 31, 1998 and 1997 and the related
consolidated statements of operations and accumulated deficit and cash flows
for year ended December 31, 1998 and the period from inception (January 30,
1997) to December 31, 1997. 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 consolidated balance sheets referred to above, present
fairly, in all material respects, the consolidated financial position of U.S.
Trucking, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the
results of its operations and its cash flows for the year ended December 31,
1998 and the period from inception (January 30, 1997) to December 31, 1997 in
conformity with generally accepted accounting principles.

/s/ Bianculli Pascale & Co. P.C.

Garden City, New York
February 25, 1999

F-12

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

1998 1997
----------- -----------
ASSETS

CURRENT ASSETS
Cash in banks $ 22,976 $ 60,099
Restricted cash-reserves on deposit
with factor - 184,210
Accounts receivable-net of allowance
for doubtful accounts of $200,000
in 1998 and $88,000 in 1997 3,447,570 2,321,180
Accounts receivable - other 141,673 60,000
Parts and supply inventory 257,030 152,262
Prepaid expenses and other 162,036 57,097
----------- -----------

Total Current Assets 4,031,285 2,834,848
----------- -----------
TRANSPORTATION AND OTHER EQUIPMENT -
at cost, less accumulated depreciation
and amortization of $736,221 in 1998
and $1,334,899 in 1997 9,718,805 6,818,517
----------- -----------

OTHER ASSETS
Restricted cash-owner operators 2,320 2,894
Restricted cash-cash held as
collateral against letters of credit 10,000 10,000
Due from related party 100,000 -
Due from captive insurer 355,321 -
Security deposits 12,575 12,653
Intangible assets - net of accumulated
amortization of $273,243 in 1998
and $120,552 in 1997 2,082,055 681,853

Total other assets 2,562,271 707,400
----------- -----------

TOTAL ASSETS $16,312,361 $10,360,765
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-13

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
----------- -----------

CURRENT LIABILITIES
Accounts payable-trade $ 1,443,415 $ 756,675
Revolving loan payable 1,795,888 1,355,291
Accrued expenses and other 669,957 665,592
Current portion - long term debt 2,034,756 1,187,753
Current portion of obligations
under capital leases - 479,093
----------- -----------
Total Current Liabilities 5,944,016 4,444,404
----------- -----------
OTHER LIABILITIES
Owner operator escrow 55,874 17,100
Long term notes payable - net
of current portion 5,224,092 2,887,809
Obligations under capital leases
net of current portion - 228,284
----------- -----------
Total Other Liabilities 5,279,966 3,133,193
----------- -----------

TOTAL LIABILITIES 11,223,982 7,577,597
----------- -----------
COMMITMENTS AND
CONTINGENCIES (Notes 2, 6, 9 10 and 17)

STOCKHOLDERS' EQUITY
Preferred Stock (no par value-
10,000,000 shares authorized,
none issued or outstanding) - -
Common Stock (no par value-
75,000,000 shares authorized,
16,074,591 and 13,000,000 shares
issued and outstanding in 1998
and 1997, respectively) 2,796,000 1,000
Additional paid in capital 3,821,812 4,313,368
Accumulated deficit (1,409,433) (1,531,200)
Subscriptions Receivable ( 120,000) -
----------- -----------
Total Stockholders' Equity 5,088,379 2,783,168
----------- -----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $16,312,361 $10,360,765
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-14

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD FROM
INCEPTION (JANUARY 30, 1997) TO DECEMBER 31, 1997

1998 1997
----------- -----------

Operating revenues $21,815,844 $17,469,281
Operating expenses 18,486,974 16,434,514
----------- -----------
Income from operations 3,328,870 1,034,767
Administrative expenses 2,924,746 1,999,692
----------- -----------
Income (loss) from operations 404,124 ( 964,925)
----------- -----------
Other income and expenses
Interest income 1,648 1,332
Interest expense ( 731,628) ( 656,826)
Other income 447,623 101,762
Net (loss) on disposition of assets - ( 12,543)
----------- -----------
Total other income
and (expenses) ( 282,357) ( 566,275)
----------- -----------
Net income (loss) before taxes 121,767 (1,531,200)

Provision for income taxes 47,600 -

Benefit of net operating
loss carryforward ( 47,600) -
----------- -----------
Net income (loss) 121,767 (1,531,200)

Accumulated deficit - beginning (1,531,200) -
----------- -----------
Accumulated deficit - ending $(1,409,433) $(1,531,200)
=========== ===========

Net income (loss) per common share $ .01 $( .12)
=========== ===========
Weighted average
number of common shares 13,818,272 13,000,000
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-15

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 30, 1997) TO
DECEMBER 31, 1997

Common Stock Additional
No Par Value Paid in Accumulated
Shares Amount Capital Deficit Total
---------- ---------- ---------- ----------- -----------

Sale of 2,500 Shares of
Common Stock - No Par
Value 2,500 $1,000 $ 1,000

Acquisition of 100%
Common Stock of Gulf
Northern Transport, Inc. $ 225,000 225,000

Acquisition of 100% Common
Stock of Mencor, Inc. 145,000 145,000

Capitalization of assets
of Jay and Jay Transportation,
Inc. by U.S. Transportation
Systems, Inc. 2,394,860 2,394,860

Capitalization of assets of
Translynx, Inc. by U.S.
Transportation Systems, Inc. 100,546 100,546

Payment of expenses by
shareholder 46,895 46,895

Capitalization of advances
from U.S. Transportation
Systems, Inc. 1,401,067 1,401,067

Net Loss for the Period (1,531,200) (1,531,200)
----- ------ ---------- ----------- ----------
Total 2,500 $1,000 $4,313,368 $(1,531,200) $2,783,168
===== ====== ========== =========== ==========

F-16

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998

Common Stock Additional
No Par Value Paid in Accumulated Subscriptions
Shares Amount Capital Deficit Receivable Total
---------- ---------- ---------- ----------- ------------- ----------

Opening balance - January 1,
1998 2,500 $ 1,000 $4,313,368 (1,531,200) $2,783,168

Stock dividend declared -
5,199 common shares issued
for each share outstanding 12,997,500 -

Issuance of Common Stock to
Transportation Services,
Inc. 133,333 20,000 (20,000) -

Issuance of Common Stock
to Joff Pollon under the
consulting agreement -
Note 19 1,000,000 180,000 (180,000) -

Subscription of Common
Stock to Joff Pollon -
Note 19 160,000 120,000 (120,000)

Issuance of Common Stock
and costs incurred
to acquire Northern
Dancer Corp. in accor-
dance with the share
exchange agreement -
Note 1 614,590 - (291,556) (291,556)

Proceeds from sale of
Common Stock 766,668 575,000 575,000

Issuance of Common Stock
- Mid-Cal Acquisition -
Note 3 400,000 1,900,000 1,900,000

Net Income for the year
ended December 31, 1998 121,767 121,767
---------- ---------- ---------- ----------- ---------- ----------
Closing balance - December
31, 1998 16,074,591 $2,796,000 $3,821,812 $(1,409,433) (120,000) $5,088,379
========== ========== ========== =========== ========== ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-17

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR END DECEMBER 31, 1998 AND FOR THE PERIOD FROM
INCEPTION (JANUARY 30, 1997) TO DECEMBER 31, 1997

1998 1997
----------- -----------

CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (Loss) $ 121,767 $(1,531,200)

ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH
USED IN OPERATING ACTIVITIES

Depreciation & amortization 1,616,852 1,455,451
Provision for doubtful accounts 112,000 36,166
Loss on disposal of property
and equipment 12,543
(Increase) Decrease-Assets
Restricted cash 184,784 (197,104)
Accounts receivable (1,320,063) (2,361,180)
Parts and supply inventory ( 22,768) ( 152,262)
Prepaid expenses and
other assets ( 652,097) ( 57,097)
Due from captive insurer ( 355,321) -
Increase (Decrease)-Liabilities
Accounts payable - trade 686,740 756,675
Accrued expenses and
other current liabilities 43,138 2,020,883
----------- -----------
Total Adjustments 293,265 1,514,075
----------- -----------

Net cash provided (used) by
operating activities 415,032 ( 17,125)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of transportation and
other equipment (290,177) ( 59,804)
Security deposits 78 -
Net costs incurred in reverse
merger (291,556) -
Proceeds from sale of common stock
and additional paid in capital 575,000 1,304,755
----------- -----------
Net cash provided by (used in)
investing activities $( 6,655) $ 1,244,951
----------- -----------

Sub Total $ 408,377 $ 1,227,826
----------- -----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-18

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD FROM
INCEPTION (JANUARY 30, 1997) TO DECEMBER 31, 1997

1998 1997
----------- -----------

Balance Forward $ 408,377 $ 1,227,826

CASH FLOWS FROM
FINANCING ACTIVITIES

Proceeds from long-term
debt financing 4,296,705 -
Book value of debt restructured (3,838,415) -
Principal payments on long-term debt ( 660,744) ( 877,926)
Principal payment of short-term note - ( 12,500)
Principal payments on
capital lease obligations ( 243,046) ( 277,301)
----------- -----------
Net cash (used) in
financing activities ( 445,500) (1,167,727)
----------- -----------

NET INCREASE (DECREASE)
IN CASH ( 37,123) 60,099

CASH AT BEGINNING OF YEAR 60,099 -
----------- -----------

CASH AT END OF YEAR $ 22,976 $ 60,099
=========== ===========

Supplemental Disclosure of
Cash flow information:

Cash Paid during the year
Interest expense $ 861,076 $ 571,924
=========== ===========
Income taxes $ -0- $ -0-
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-19

U.S. TRUCKING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998 AND FOR THE PERIOD
FROM INCEPTION (JANUARY 30, 1997) TO DECEMBER 31, 1997

Non Cash Investing and Financing Activities

In December, 1998, the company acquired assets and liabilities of Mid-Cal
Express:

Fair value of assets acquired $ 4,918,741
Goodwill recognized 1,078,600
Liabilities assumed 4,097,341
Value of common stock issued 1,900,000

In December, 1998, the company traded in some of its older transportation
vehicles for new ones as part of an overall restructuring of its rolling stock
and corresponding debt. The book value of the equipment traded in was
$914,651 and its trade-in value was $637,000, which amount was offset against
the cost of the new equipment.

Book value of equipment traded-in $ 914,651
Trade-in value ( 637,000)
Deferred loss on sale/leaseback 277,651

In September 1998 Joff Pollon subscribed to 160,000 shares of common stock.
The company recorded the transaction as a credit to common stock with a
corresponding subscription receivable, which is being reflected as a reduction
of stockholders' equity.

As of September 8, 1998 U.S. Trucking issued 614,590 shares of common stock in
connection with a reverse acquisition of Northern Dancer Corp.

During 1998, legal counsel determined that certain non-interest bearing
promissory notes arising from the acquisition of Gulf Northern totaling
$104,000 was not the responsibility of the company. Accordingly the current
balances of the notes were reclassified as a reduction of the goodwill
originally recorded.

On January 30, 1997, U.S. Trucking acquired transportation and other equipment
totaling $8,153,416 as part of the acquisition of Gulf Northern Transport,
Inc. and Mencor, Inc. and the assets of Jay & Jay Transportation, Inc. In the
acquisition of this equipment incurred long term debt totaling $3,561,025.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-20

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 1 - General and Summary of Significant Accounting Policies

(A) - Nature of Business

On September 8, 1998, U.S. Trucking, Inc., a Nevada corporation ("U.S.
Trucking-Nevada"), was acquired by Northern Dancer Corporation ("Northern
Dancer"), a nonoperating public shell corporation, through exchange of
approximately 96% of the issued and outstanding shares of Northern Dancer's
common stock for 100% of the outstanding shares of U.S. Trucking-Nevada's
common stock. Northern Dancer's legal name was changed to U.S. Trucking, Inc.
("U.S. Trucking" or the "Company"). The acquisition is considered to be a
capital transaction, in substance equivalent to the issuance of stock by U.S.
Trucking-Nevada for the net monetary assets of Northern Dancer, accompanied by
a recapitalization of U.S. Trucking-Nevada. Common stock and additional
paid-in capital at January 30, 1997, have been restated to reflect the
recapitalization for all periods presented.

The Company operates through two wholly-owned operating subsidiaries that were
acquired by U.S. Trucking-Nevada on January 30, 1997:

Gulf Northern Transport, Inc., (Gulf Northern) a
Wisconsin corporation, operates as an interstate
and intrastate motor carrier.

Mencor, Inc. operates as a licensed broker for
interstate motor carriers. A broker serves
the trucking industry by providing return
hauls for truckers who have completed their
initial delivery.

U.S. Trucking-Nevada was formed by U.S. Transportation Systems, Inc. (USTS) as
a wholly owned subsidiary. As part of the transaction to acquire Gulf
Northern, 25% of U.S. Trucking-Nevada's common stock was transferred to Gulf
Northern's parent (Logistics Management, LLC). The remaining 75% was conveyed
to Logistics Management, LLC during 1998.

The Company's corporate headquarters are located in Charleston, South Carolina
with terminals and drop stations located in various states.

Services are provided to customers located primarily in the central United
States but include locations in virtually all 48 contiguous states.

F-21

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

(B) - Basis of Presentation

The accompanying consolidated balance sheets and related statements of
operations and accumulated deficit and cash flows includes the accounts of
U.S. Trucking, Inc. and its wholly owned subsidiaries, Gulf Northern
Transport, Inc. and Mencor, Inc. as of December 31, 1998 and 1997.
Significant intercompany transactions or balances as of and for the periods
ended December 31, 1998 and 1997 have been eliminated.

Basic net income per share is computed on the basis of the weighted average
number of common shares outstanding during each period. Subscription shares
are only included in diluted earnings per share.

(D) - Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with a
maturity of 90 days or less to be cash equivalents for financial statement
purposes.

(E) - Parts and Supply Inventory

Inventory consists principally of parts and supplies used in maintaining its
motor carrier fleet, skids used in transporting goods, and small tools and are
stated at the lower-of-cost or market, determined on a first-in, first-out
basis.

(F) - Transportation and Other Equipment

Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
Accelerated methods of depreciation are followed for tax purposes and the
straight-line method is used for financial reporting purposes.

Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years.

F-22

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

(G) - Goodwill

Goodwill is amortized on a straight line basis over periods ranging from six
to fifteen years.

(H) - Income Taxes

Taxes are provided on all revenue and expense items included in the
Consolidated Statements of Operations, regardless of the period in which such
items are recognized for income tax purposes, except for items representing a
permanent difference between pretax accounting income and taxable income.

(I) - Revenue Recognition

U.S. Trucking recognizes revenue at the time freight is delivered to
recipients. Liability insurance revenue is recognized on a written premium
basis.

(J) - Organization Costs

Subsidiary companies, Gulf Northern and Mencor incurred organization costs
that are being amortized on a straight-line basis over five years.

(K) - Use of Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-23

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 2 - Earnings (loss) Per Common Share

Basic earnings (loss) per common share was calculated using the weighted
average number of shares outstanding for the periods presented, after giving
effect to the 5,199 to 1 stock dividend declared in June, 1998. The number of
shares outstanding for 1997 was restated to give effect to the stock dividend.
The shares of stock subscribed by Joff Pollon were excluded from the basic
earnings per share calculation, however were treated similar to warrants in
the diluted earnings per share. The resulting weighted average number of
common shares outstanding was 13,818,272 in 1998 and 13,000,000 in 1997.
Subscribed stock, after application of the treasury stock method, resulted in
114,198 incremental shares. The overall effect on basic earnings per share
assuming the issuance of the incremental shares was insignificant.

NOTE 3 - Acquisition of Subsidiaries and other Assets and Liabilities

Gulf Northern Transport, Inc. - U.S. Trucking-Nevada purchased 100% of the
common stock of Gulf Northern Transport, Inc. from its stockholder (Logistics
Management, LLC) for cash of $225,000 and 25% of the Company's common stock
(625 shares). The acquisition was funded by an advance by US
Trucking-Nevada's parent, U.S. Transportation Systems, Inc. which was
subsequently capitalized and included in additional paid in capital. The
transaction was valued at $790,999 and goodwill in the amount of $565,999 was
recognized in the transaction. The goodwill is being amortized over six
years.

Mencor, Inc. - U.S. Trucking-Nevada purchased 100% of the common stock of
Mencor, Inc. from its stockholders for cash of $70,000 and 37,500 shares of
the common stock of U.S. Transportation Systems, Inc. which was valued at
$2.00 per share. The acquisition was funded by a cash and stock contribution
to the Company by USTS. The transaction was valued at $145,000. Goodwill in
the amount of $96,953 was recognized in the transaction and is being amortized
over six years.

The amortization expense is included in administrative expenses.

F-24

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 3 - Acquisition of Subsidiaries and other Assets and Liabilities
(continued)

Jay and Jay Transportation, Inc. - On January 30, 1997 U.S. Trucking-Nevada
acquired certain assets (primarily tractors and trailers) and liabilities from
USTS which were valued at $2,394,860. The transaction was accomplished by way
of a permanent capital contribution by USTS and the net value contributed was
included in additional paid in capital. Jay and Jay's dispatch office and
yard is located in Savannah, New York. Office operations including accounting
and management were moved to Charleston, South Carolina. The transaction was
recorded as an asset purchase and no goodwill was recognized.

Translynx Express, Inc. - On January 30, 1997 U.S. Trucking-Nevada acquired
certain assets and liabilities from USTS that were valued at $100,546. The
transaction was accomplished by way of a permanent capital contribution by
USTS and the net value contributed is included in Additional paid in capital.
Translynx's operating office is located in Orlando, Florida. Office
operations including accounting and management were moved to Charleston, South
Carolina. The transaction was recorded as an asset purchase and no goodwill
was recognized.

Mid-Cal Express, Inc. - Effective December 30, 1998, U.S. Trucking acquired
certain assets and liabilities of Mid-Cal Express, Inc., a California based
transportation company. The purchase price was $1,957,500, which was paid by
the issuance of 400,000 shares of common stock of the company valued at $4.75
per share and the payment of certain expenses to affect the acquisition. The
purchase price was allocated to the assets and liabilities acquired at their
fair market values and $1,078,600 of goodwill was recognized. The goodwill is
being amortized over fifteen years on a straight line basis. No goodwill was
expensed in 1998.

As part of the acquisition agreement, U.S. Trucking assumed the debt on
various notes totaling $4,039,740 encumbering the above described equipment.
The interest rates on these notes varied from 8.36% to 11.9% with maturities
through June, 2003.

F-25

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 3 - Acquisition of Subsidiaries and other Assets and Liabilities
(continued)

An allocation of the purchase price for each of the transactions follow:

Gulf
Northern Jay and Jay Translynx Total
Transport Mencor Transportation Express all
Inc. Inc. Inc. Inc. Companies
---------- -------- -------------- -------- -----------
Assets
Cash and
restricted
cash $ 138,449 $ 40,497 $ - $ - $ 178,946
Accounts
Receivable 1,047,761 189,605 351,301 194,920 1,783,587
Inventory 139,472 - 24,500 - 163,972
Transportation
Equipment 4,099,535 7,300 3,994,588 - 8,101,423
Goodwill 565,999 96,953 - - 662,952
Other assets 174,573 30,898 2,000 - 207,471
---------- -------- ---------- -------- -----------
Total $6,165,789 $365,253 $4,372,389 $194,920 $11,098,351
========== ======== ========== ======== ===========

Liabilities
Assumed and Equity

Liabilities
assumed $5,940,789 $220,253 $1,977,529 $ 94,374 $ 8,232,945
Additional
paid in
capital 225,000 145,000 2,394,860 100,546 2,865,406
---------- -------- ---------- -------- -----------
Total $6,165,789 $365,253 $4,372,389 $194,920 $11,098,351
========== ======== ========== ======== ===========

Fair value was the basis of valuing the net assets acquired. Fair value was
determined by independent appraisals by third parties for transportation
equipment.

F-26

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 3 - Aquisition of Subsidiaries and other Assets and Liabilities
(continued)

Combined Company
Pro Forma Combined Condensed Statement of Income
For the year ended December 31, 1998
(Unaudited)

Historical Historical Pro forma Pro forma
U.S. Trucking Mid-Cal Express Adjustments Combined
------------- --------------- ----------- -----------
Operating revenues $21,815,844 $17,883,034 $(8,883,034) $30,815,844
Operating expenses 18,486,974 16,273,560 10,175,985 24,584,549
----------- ----------- ----------- -----------
Income from
operations 3,328,870 1,609,474 1,292,951 6,231,295
Administrative
expenses 2,924,746 3,926,842 1,006,417 5,845,171
----------- ----------- ----------- -----------
Income (loss) from
operations 404,124 (2,317,368) 2,299,368 386,124
----------- ----------- ----------- -----------
Other income
and expenses
Interest income 1,648 2,071 929 4,648
Interest expense (731,628) (703,785) 203,785 (1,231,628)
Other income 447,623 118,100 24,300 590,023
Net (loss) on
disposition of
assets - (19,528) (19,528)
----------- ----------- ----------- -----------
Total other income
and (expenses) (282,357) (603,142) 229,014 (656,485)
----------- ----------- ----------- -----------
Net income
(loss) before taxes 121,767 (2,920,510) 2,528,382 (270,361)

Provision for
income taxes 47,600 (6,795) - 40,805
Benefit of net
operating loss
carryforward (47,600) - 6,795 (40,805)
----------- ----------- ----------- -----------
Net income (loss) $ 121,767 $(2,927,305) $ 2,535,177 $ 270,361
=========== =========== =========== ===========
Net income (loss)
per common share $ .01 $ (.02)
=========== ===========
Weighted average
number of common
shares 13,818,272 14,254,778
=========== ===========
F-27

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 4 - Income Taxes

U.S. Trucking accounts for income taxes on the liability method, as provided
by Statement of Financial Accounting Standards 109, Accounting for Income
Taxes. No current or deferred income taxes were provided for the period ended
December 31, 1997. At December 31, 1998, the income tax provision was
composed of the following components:

Current - Federal $( 87,400)
State ( 14,000)
---------
Total Current (101,400)

Deferred - Federal 127,300
State 21,700
---------
Total Deferred 149,000

Total $ 47,600
=========

The income tax provision reconciled to the tax computed at the statutory
Federal rate is as follows:

Tax at Statutory Rate $ 41,400 34.0%
Benefit of graduated Rates (10,500) ( 8.7)
State income tax net of
federal tax benefit 5,100 4.2
Non deductible expenses
and other 11,600 9.6
-------- ----
Total $ 47,600 39.1%
======== ====

Differing methods of reporting income for tax purposes as compared to
financial reporting purposes resulted in a net deferred income tax provision
of approximately $149,000 for the year ended December 31, 1998.

F-28

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 4 - Income Taxes (continued)

Deferred tax assets and liabilities consist of the following as of December
31:
1998 1997
---------- ----------
Deferred tax assets-
Allowance for doubtful accounts $ 200,000 $ 88,000
Amortization of Goodwill 139,300 63,000
Net operating loss carryovers 1,997,200 2,327,000
---------- ----------
2,336,500 2,478,000
Valuation allowance 1,562,000 1,723,000
---------- ----------
$ 774,500 $ 755,000
========== ==========

Deferred tax liabilities-
Depreciation of transportation
and other and equipment $ 774,500 $ 755,000
---------- ----------
$ 774,500 $ 755,000
========== ==========

The valuation allowance provided in each of the years is based on management's
valuation of the likelihood of realization.

As required by SFAS 109, deferred taxes are provided based upon the tax rate
at which the items of income and expense are expected to be settled in the
Company's tax return.

U.S. Trucking has net operating losses through December 31, 1998 of
$1,997,200. These losses will be available to offset future income for
financial reporting purposes expiring in 2012.

F-29

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 5 - Long-term Notes Payable
1998 1997
---------- -----------
Consolidation loan described in Note 6 $3,219,108 $ -

Equipment loans secured by tractors and
trailers payable at $59,848 per month
including interest at rates ranging from
9-1/2% to 10-1/2% per annum with the final
installment due April, 2001 - 2,000,396

Equipment loans related to the Mid-Cal
Express acquisition described in Note 2 4,039,740 -

Term loan in settlement with United
Acquisition II Corp. described in Note 13 - 54,656

Acquisition loan described in Note 5 - 1,884,904

Seller notes described in Note 5 - 135,606
---------- ----------

Total 7,258,848 4,075,562

Less: current maturities 2,034,756 1,187,753
---------- ----------
Long-term portion $5,224,092 $2,887,809
========== ==========

The carrying value of the Company's borrowings approximate their fair values.

Aggregate annual scheduled maturities of long-term debt at December 31, 1998
are as follows:

1999 $2,034,756
2000 2,579,894
2001 2,100,707
2002 362,968
2003 180,523
----------
Total $7,258,848
==========

F-30

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 6 - Acquisition Loan and Sellers' Notes

On December 22, 1998, U.S. Trucking entered into an agreement with GECC
whereby the acquisition debt, obligations under capital leases, and the
equipment loans were consolidated into a $5,000,000 three year revolving
credit line. The line bears interest at the rate of 4.5% over GECC's
commercial paper rate which was 5.1% at December 31, 1998. The average rate
through December 31, 1998 was 9.6%. Amounts borrowed under the agreement are
collateralized by a security interest in all of the company's present and
future tangible and intangible assets. There is also a letter of credit
sub-facility of $250,000 which was unused at December 31, 1998.

On March 28, 1995, Gulf Northern was acquired by Mid America Transporters
Group, Inc. The purchase was financed by a loan in the amount of $3,000,000
from ITT Credit Corp. The proceeds of this loan (described as "the
acquisition loan") were used to refinance stockholder loans and certain other
bank and lease obligations. The loan which was subsequently sold to General
Electric Credit Corp., (GECC) and originally was payable in 60 monthly
installments of $66,360 at the rate of 11.75% interest per annum with its
final maturity on March 31, 2000. On May 25, 1997, the Company renegotiated
the loan whereby the monthly payments were reduced to $45,000 with a balloon
payment of $396,836 due on September 1, 2001. The interest rate remained at
11.75%. Additional fees of $138,016 were incurred to restructure the loan
which were capitalized and are being amortized over the remaining life of the
loan.

In addition to the acquisition loan, the agreement called for payments to the
three former stockholders (described as sellers' notes) which included
promissory notes totaling $260,000 due in 36 monthly installments totaling
$8,017 at 7% due on March 1, 1998 secured by letters of credit and non
interest bearing obligations (discounted at 7% per annum) totaling $104,000
payable over a one year period commencing April 1, 1998. Legal counsel
subsequently determined that U.S. Trucking is not responsible for this debt as
the liability remains with Mid America. Accordingly, it has been reclassified
as a credit against the goodwill recognized in the acquisition from Mid
America.

F-31

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 7 - Lease Commitments

U.S. Trucking leased tractors and trailers under various capital lease
agreements as of December 31, 1997. The net book value of the assets included
in these leases amounted to $919,288. Total minimum lease payments were
$772,211 with a present value of $707,377 as of December 31, 1997. During
1998, these underlying assets were refinanced as part of the consolidation
loan described in Note 6. Accordingly, there were no capital lease
obligations as of December 31, 1998.

NOTE 8 - Transportation and Other Equipment

Transportation and other equipment consists of the following as of December
31, 1998:
1998 1997
---------- ----------

Office equipment $ 201,833 $ 79,300
Tractors, trailers and
garage equipment 10,251,924 8,072,847
Transportation equipment 1,269 1,269
----------- ----------
10,455,026 8,153,416

Less: Accumulated depreciation 736,221 1,334,899
----------- ----------

Total $ 9,718,805 $6,818,517
=========== ==========

Depreciation expense amounted to $1,464,161 and $1,334,899 for the period
ended December 31, 1998 and 1997, respectively. $1,351,900 of depreciation
was included in operating expenses and $98,630 of depreciation was included in
administrative expenses. The fair market value of fixed assets approximates
book value.

F-32

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 9 - Related Party Transactions

U.S. Trucking leases ten tractors from three of its officers under net lease
agreements that specify monthly payments of $11,976 per month. See Note 11.

Transportation Services Company, Inc., a related entity, provides insurance
broker services to U.S. Trucking and earns a commission based upon the amount
of business it places for U.S. Trucking. U.S. Trucking also provides
consulting services to Transportation Services Company, Inc. pursuant to a
consulting agreement entered into on December 29, 1998. During 1998, U.S.
Trucking earned $228,000 of consulting income from Transportation Services
Company, Inc., which is included in "Other Income" in the accompanying
financial statements.

NOTE 10 - Retirement Plan

U.S. Trucking maintains a pension plan for eligible employees, which was
established under section 401(k) of the Internal Revenue Code. Under the terms
of the plan, the Company at the discretion of its Board of Directors may match
employee contributions up to 3% of employee compensation. Employee
contributions to the plan amounted to $42,986 and $50,153 for the period ended
December 31, 1998 and 1997, respectively. The Company did not match employee
contributions during the periods ended December 31, 1998 and 1997.

F-33

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 11 - Commitments and Contingencies

Commencing on January 1, 1997, U.S. Trucking agreed to rent its Wisconsin
Rapids facility from certain stockholders for $7,350 per month for a period of
five years under an operating lease.

Commencing October 15, 1997, U.S. Trucking leased its South Carolina corporate
offices for $1,728 per month. The lease was subsequently re-negotiated
whereby the Company took additional office space in the same building at a
total cost of $2,800 per month until June 30, 2002.

Commencing March, 1998 U.S. Trucking leased ten tractors from three of its
officers under net lease agreements that specify monthly payments of $11,976
and extend with renewal options until March, 2003.

During 1998, U.S. Trucking leased tractors and trailers from various lenders
under net lease agreements with total monthly payments of $67,709 with various
expiration dates through July 31, 2002.

Minimum rental payments under such leases follows for the years ending
December 31:
1999 $ 996,660
2000 996,660
2001 695,010
2002 209,905
2003 15,588
----------

Total minimum payments required $2,913,823
==========

Rent expense for the period ended December 31, 1998 and 1997 amounted to
$194,655 and $142,013 respectively and is included in administrative expenses.

F-34

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 12 - Captive Insurance Program

Effective December 31, 1997 U.S. Trucking-Nevada entered into an offshore
insurance program agreement with a Bermudan insurance company (insurance
company) for the company's auto liability insurance, including rolling stock,
on a retrospective rating basis. The company purchased 1 share of non-voting
preferred stock of the insurance company for a purchase price of $1,000. The
insurance company is allowed to redeem the preferred stock for $1,000 on March
1, 2004. U.S. Trucking-Nevada was issued a "Deductible Reimbursement Insurance
Policy" which was reinsured with other insurance carriers "the treaty". The
agreement, the policy and the treaty together constitute the company's single
insurance "program". Under the terms of this program, the company pays
insurance premiums on a written premium underwriting basis.

Commencing on May 31, 2001, and annually thereafter on each succeeding year
through May 31, 2004, U.S. Trucking-Nevada will be eligible to receive a
dividend from the insurance company based upon a predetermined formula. The
formula is intended to dividend to the company the excess of investment income
and premiums paid over losses and expenses and fees incurred, less loss and
premium reserves. Pursuant to this section of the insurance program agreement,
the company recorded in the accompanying financial statements $355,321 of
amounts due from captive insurer which is reflected in other income. This
amount represents the "program-to date profit" at December 31, 1998, less a
valuation reserve.

U.S. Trucking-Nevada has agreed to indemnify and hold harmless the insurance
company against the cumulative sum of investment income, underwriting losses,
expenses and fees (the program-to-date profit) minus the cumulative amount of
dividends paid, being less than zero at any point in time.

A deposit of $100,000 was required at the initiation of the program and was
made through a related company who in turn purchased a Certificate of Deposit.
The deposit is reflected on the balance sheet under non-current assets-Due
from Related Party.

F-35

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 12 - Captive Insurance Program (continued)

U.S. Trucking decided in 1998 to develop a new line of business in order to
expand upon its current transportation business and take advantage of the
underwriting profit potential of the captive insurance program. U.S. Trucking
offered their program to selected independent third party trucking companies
who purchase insurance coverage and pay a premium to the company through
Transportation Underwriters Agency, Inc. U.S. Trucking records the net
premiums billed to third parties as liability insurance revenue, which is
included in net revenue and its premium costs and expenses to operate the
third party program as insurance expense-captive, which is included in
operating expenses in the accompanying financial statements. Liability
insurance revenues amounted to $810,856 and premiums, cost and expenses
incurred, amounted to $555,535.

NOTE 13 - Restricted Cash Accounts Owner Operators and Collateral
Against Letters of Credit

U.S. Trucking maintains cash accounts for owner-operators who perform services
for the Company. These funds are accumulated, with the owner-operators
consent, by withholding part of the payments due to them for services
performed. The funds are used to pay for repairs of equipment, which they own
directly.

Further, U.S. Trucking deposited funds with a financing company to cover over
the road fuel and other operating expenses for drivers in support of a letter
of credit. As of December 31, 1998, the company had letters of credit
outstanding totaling $10,000, which guarantee various operating and insurance
activities.

F-36

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 14 - Stock Acquisition Agreement-United Acquisition II Corp.

During 1996, the shareholders of Gulf Northern's parent company, Mid America
Transporters Group, Inc. entered into an agreement with United Acquisition II
Corp. (the acquirer) whereby they would transfer 100% of their common stock in
Mid America in exchange for common and preferred stock of the acquirer. In
addition, the acquirer agreed to contribute cash and notes at the closing. In
January 1997 however, the acquirer conceded that it was not able to complete
the transaction as agreed and withdrew from the contract. During the period
from the consummation of the contract, the acquirer deposited funds to Gulf
Northern in the amount of $145,000. Mid America and Gulf Northern agreed to
return a total of $100,000 payable in 36 installments beginning April 1, 1998
on a non-interest bearing basis. Legal counsel subsequently determined that
U.S. Trucking is not responsible for this debt as the liability remained with
Mid America. Accordingly, it has been reclassified as a credit against the
goodwill recognized in the acquisition from Mid America.

NOTE 15 - Concentration of Credit Risk - Cash

U.S. Trucking maintains its cash balances in two financial institutions, one
located in Wisconsin Rapids, Wisconsin and the other in Charleston, South
Carolina. At times, the balances may exceed federally insured limits of
$100,000. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash on deposit.
The fair market value of these financial instruments approximates cost.

F-37

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 16 - Accounts Receivable Financing/Revolving Loan Agreement

On December 22, 1998, U.S. Trucking entered into a revolving loan agreement
with GE Capital Corp. The revolving loan agreement allows borrowings of up to
$5,000,000 and has a term of 3 years. Amounts advanced under the loan
agreement are based upon 85% of the borrowing base of eligible accounts
receivable and 65% of unbilled freight that has been delivered. Interest on
amounts borrowed bear interest at the lender's index rate (commercial paper
rate) plus 4.5%.

The loan agreement contains several financial covenants including restrictions
on incurring or assuming debt other than what was in existence, sales of
assets, payments of certain fees, and restrictions on entering into any
lending or borrowing arrangements. At December 31, 1998 there was $1,795,888
of revolving debt outstanding. Interest expense recorded on the revolving
loan agreement amounted to $4,300. In 1998, the weighted average interest
rate was 9.6%.

From April 1995, to December 1998, U.S. Trucking had an agreement with a
factor whereby the factor would accept the company's receivables with full
recourse. Under the agreement, the factor advanced up to 90% of those
receivables submitted by the company. Interest on funds advanced was charged
at an average annual effective rate of 14.9% payable monthly.

In addition, U.S. Trucking was required to maintain funds on deposit with its
factor as a reserve against uncollectible receivables. The amount of such
funds on deposit as of December 31, 1997 amounted to $184,210. The
uncollected balance of such receivables held by the factor amounted to
$1,737,168 as of December 31, 1997. The fair market value of these balances
approximated book value.

F-38

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 17 - Economic Dependency

U.S. Trucking's customers consist primarily of high volume shippers that have
significant time sensitive and high service level traffic needs. The company
provided services to a customer, which accounted for net revenues in excess of
10% of the company's total revenues for the periods ended December 31, 1998
and 1997. One customer accounted for 12.9% and 16.0% of the company's net
revenues for these respective periods. Accounts receivable from this customer
amounted to $242,925 and $176,449 as of December 31, 1998 and 1997
respectively.

Revenues from the U.S. Trucking's five and ten largest customers accounted for
approximately 30.0% and 38.4% respectively of total net revenues for the
period ended December 31, 1998. Accounts receivable as of December 31, 1998
from those customers amounted to $693,018 and $912,803 respectively.

Revenues from U.S. Trucking's five and ten largest customers accounted for
approximately 38.9% and 46.8% respectively of total net revenues for the
period ended December 31, 1997. Accounts Receivable as of December 31, 1997
from those customers amounted to $530,957 and $732,348 respectively.

U.S. Trucking provides services to a number of customers in the meat packing
and distribution industry. Revenues from those customers accounted for
approximately 6.5% of total revenues for the year ended December 31, 1998 and
10.7% of total revenues for the period ended December 31, 1997. Accounts
receivable from those customers amounted to $142,832 and $211,361 as December
31, 1998 and 1997 respectively.

F-39

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 18 - Intangible Assets

Intangible assets consist of the following items as of December 31, 1998:

Original Accumulated Net Book
Cost Amortization Value
---------- ------------ ----------

Goodwill $1,585,853 $216,365 $1,369,488
Debt refinancing
costs 490,357 55,662 434,695
Deferred trade-in 277,651 277,651
Other intangibles 1,437 1,216 221
---------- -------- ----------

Total $2,355,298 $273,243 $2,082,055
========== ======== ==========

Intangible assets consist of the following items as of December 31, 1997:

Original Accumulated Net Book
Cost Amortization Value
---------- ------------ ----------

Goodwill $ 662,952 $103,766 $ 559,186
Debt refinancing
costs 138,016 16,237 121,779
Other intangibles 1,437 549 888
---------- -------- ----------
Total $ 802,405 $120,552 $ 681,853
========== ======== ==========

Amortization expense amounted to $152,691 and $120,552 for the year ended
December 31, 1998 and 1997, respectively, and is included in administrative
expenses.

F-40

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 19 - Stock Transactions and Changes in Capital Structure

Effective June 26, 1998, U.S. Trucking-Nevada underwent a change in its
capital structure whereby it is authorized to issue 50,000,000 shares of
common stock and 1,000 shares of preferred stock. In connection with this
change in the capital structure of the company, a stock dividend was declared
by the Board of Directors, whereby 5,199 shares of the company's common stock
was distributed to the stockholders for each share of common stock held.

On May 26, 1998, U.S. Trucking-Nevada entered into an investment consulting
agreement with Joff Pollon & Associates for a period, with extensions, of up
to two years. The compensation payable to the consultants under this
agreement includes fees, reimbursable expenses and options to purchase up to
1,000,000 post dividend shares of the company's common stock. The common
stock was valued at $.01 per share and the consultants are eligible to receive
further fees and bonuses as determined by the Board of Directors. Pursuant to
this agreement and prior to the reverse merger, 1,000,000 shares of stock were
issued and valued at $180,000. Further, Pollon subscribed to purchase an
additional 160,000 shares of common stock for $120,000 which was unpaid as of
December 31, 1998.

NOTE 20 - Stock Option Plan

During 1998, U.S. Trucking-Nevada implemented a stock option plan that is
accounted for under Statement of Financial Accounting Standards, SFAS 123,
Accounting for Stock-Based Compensation. Under SFAS 123, the compensation
cost of the issuance of stock options is measured at the grant date based on
the fair value of the award. Compensation is then is recognized over the
service period that is generally the vesting period.

The plan allows U.S. Trucking-Nevada to grant options to employees for up to a
total of 2,000,000 shares of common stock. Options outstanding become
exercisable at the discretion of the Stock Option Committee which administers
the plan and expire 10 years after the grant date. All options granted during
1998 were exercisable at not less than the fair market value of the stock on
the date of the grant. Accordingly, no compensation cost has been recognized
for the plan.

F-41

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 20 - Stock Option Plan (continued)

The Committee approved the issuance of options to purchase 1,500,000 shares of
the common stock of the Company to various employees for and an exercise price
of .30 per share for a total exercise price of $450,000.

NOTE 21 - Industry Segment Information

U.S. Trucking has three major business segments: long-haul trucking,
interstate truck brokerage and liability insurance for the long haul trucking
industry. During the fourth quarter of 1998, the company adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131).

The adoption of SFAS 131 requires the presentation of descriptive information
about reportable segments which is consistent with that made available to the
management of U.S. Trucking to assess performance. As a result of this
change, the company now reports segment performance on an after-tax basis and
separately reports information on its truck brokerage operation. In addition,
during 1998, the company added the liability insurance business and reports
that segment's performance similarly. In determining the net income of each
segment of the company, 100% of the interest expense is allocated to long-haul
trucking and effective tax rates are determined for each business segment.

F-42

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 21 - Industry Segment Information (continued)

Long-haul Truck Liability
Trucking Brokerage Insurance Intersegment Total
----------- ---------- ---------- ------------ -----------

1998

Sales $19,210,994 $1,857,168 $1,749,263 $(1,001,581) $21,815,844
Operating income 2,834,462 239,087 355,321 (100,000) 3,328,870
Net interest (729,980) (729,980)
Pretax income
(loss) (3,712) (38,696) 355,321 (191,146) 121,767
Net income (loss) (3,712) (38,696) 355,321 (191,146) 121,767
Assets 15,064,076 224,823 1,023,462 16,312,361
Depreciation &
Amortization 1,614,108 2,744 - - 1,616,852
Additions to long-
lived assets 5,220,001 - - - 5,220,001

1997

Sales $15,817,598 $1,853,540 $ - $ (201,857) $17,469,281
Operating
Income (loss) (969,118) 4,193 - - (964,925)
Net interest (655,494) - - - (655,494)
Pretax income
(loss) (1,535,393) 4,193 - - (1,531,200)
Net income (loss) (1,535,393) 4,193 - - (1,531,200)
Assets 9,994,560 366,205 - - 10,360,765
Depreciation &
Amortization 1,452,703 2,748 - - 1,455,451
Additions to long-
lived assets 8,153,416 - - - 8,153,416

F-43

U.S. TRUCKING, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Year Ended December 31, 1998 and for the Period from
Inception (January 30, 1997) to December 31, 1997

NOTE 22 - Equipment Financing and Sale/Leaseback Transaction

On December 21, 1998 U.S. Trucking entered in to a "sale/leaseback"
transaction with a major equipment financing company as part of an overall
program to upgrade its fleet of transportation equipment. As part of the
transaction, the company traded in equipment with a book value of $914,651 for
$637,000 of credit against the new equipment. The transaction resulted in a
book loss of $277,651. For accounting purposes, this loss has been
reclassified as an intangible asset and is being amortized over the life of
the new equipment leased. The average lease term is 33 months.

NOTE 23 - Fair Value of Financial Instruments

Estimated fair values of U.S. Trucking's financial instruments are as follows:

1998 1997
---------------------- ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ---------- ----------

Cash and short-term $ 22,976 $ 22,976 $ 244,309 $ 244,309
investments
Long-term debt 7,258,848 7,258,848 4,075,562 4,075,562

The carrying amount approximates fair value of cash and short-term
instruments. The fair value of long-term debt is based on current rates at
which U.S. Trucking could borrow funds with similar remaining maturities.

NOTE 24 - Year 2000 Compliance

The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
Year 2000 as 1900 or some other date, resulting in possible errors when
information using year 2000 dates is processed. In addition, similar problems
may arise in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue may be
experienced before, on, or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor errors to
significant systems failure which could affect an entities ability to conduct
normal business operations. It is not possible to be certain that all aspects
of the Year 2000 issue affecting U.S. Trucking including those related to the
efforts of customers, suppliers, or other third parties, will be fully
resolved.

Generally, costs associated with the Year 2000 issue are being expensed as
incurred.

F-44

3) AUDITED FINANCIAL STATEMENTS OF GULF NORTHERN TRANSPORT, INC.
FOR THE THIRTY DAYS ENDED JANUARY 30, 1997

F-45

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholder
Gulf Northern Transport, Inc.

We have audited the accompanying balance sheet of Gulf Northern Transport,
Inc. as of January 30, 1997 and the related statement of operations and
accumulated deficit and cash flows for the period from January 1, 1997 to
January 30, 1997. 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 audit.

We conducted our audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the balance sheet referred to above, presents fairly, in all
material respects, the financial position of Gulf Northern Transport, Inc. as
of January 30, 1997 and the results of its operations and its cash flows for
the period then ended in conformity with generally accepted accounting
principles.

/s/ BIANCULLI, PASCALE & CO. P.C.

BIANCULLI, PASCALE & CO. P.C.

Garden City, New York
June 10, 1998

F-46

GULF NORTHERN TRANSPORT, INC.
BALANCE SHEET
JANUARY 30, 1997

ASSETS

CURRENT ASSETS
Cash in banks (Note 14) $ 41,270
Restricted cash-reserves on deposit
with factor (Note 15) 97,179
Accounts receivable-net of allowance for
for doubtful accounts of $40,000
(Notes 1H, 15 and 16) 1,047,761
Accounts receivable - affiliate (Note 18) 19,930
Accounts receivable - other 3,009
Parts and supply inventory (Note 1D) 139,472
Prepaid insurance 54,745
Prepaid expenses and other 40,929
----------

Total Current Assets 1,444,295
----------

PROPERTY, PLANT AND EQUIPMENT-at cost, less
accumulated depreciation and amortization of
$4,206,596 (Notes 1E, 2, 4, 5 and 7) 4,099,535
----------

OTHER ASSETS
Restricted cash-owner operators (Note 12) 1,760
Restricted cash-cash held as collateral
against letters of credit 10,000
Covenants not to compete-net of accumulated
amortization of $76,922 (Notes 1F and 11) 36,666
Security deposits and other 7,534
----------

Total other assets 55,960
----------

TOTAL ASSETS $5,599,790
==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.

F-47

GULF NORTHERN TRANSPORT, INC.
BALANCE SHEET
JANUARY 30, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable-trade $ 266,118
Due to factor (Note 15) 804,601
Accrued expenses and other 698,825
Advances from affiliate (Note 19) 23,994
Note Payable - (Note 4) 70,000
Current portion - seller's notes 112,823
Current portion - acquisition loan payable 517,476
Current portion of equipment notes payable 152,439
Current portion of obligations under
capital leases 275,526
----------
Total Current Liabilities 2,921,802
----------

OTHER LIABILITIES
Owner operator escrow (Note 12) 29,672
Seller's notes (Notes 2 and 4) 127,772
Note payable - (Notes 4 and 17) 49,904
Acquisition loan payable (Notes 2 and 4) 1,617,561
Equipment Notes Payable-net of
current portion (Note 4) 483,978
Obligations under capital leases
net of current portion (Note 6) 710,093
----------
Total Other Liabilities 3,018,987
----------

TOTAL LIABILITIES 5,940,789
----------

COMMITMENTS AND CONTINGENCIES
(Notes 2, 6, 9 10 and 17)

STOCKHOLDERS' EQUITY
Common Stock (no par value-10,000 shares auth-
orized, 1,000 issued and outstanding) (Note 2) 100,000
Additional paid in capital 25,000
Accumulated deficit ( 465,999)
----------
Total Stockholders' Equity ( 340,999)
----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,599,790
==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-48

GULF NORTHERN TRANSPORT, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
PERIOD FROM JANUARY 1, 1997 TO JANUARY 30, 1997

Net Revenues $ 854,016

Operating expenses 695,904

Income from operations 158,112

Administrative expenses 198,564
-----------

( 40,452)

Other expenses
Interest expense ( 49,540)
-----------

Total other expenses ( 49,540)
-----------

Net loss before taxes ( 89,992)

Income tax provision (Notes 1H and 3) -0-
-----------

Net loss ( 89,992)

Accumulated Deficit - January 1 ( 376,007)
-----------

Accumulated deficit - January 30 $( 465,999)
===========

Net loss per share $( 89.99)
============

Weighted Average Number of Shares (Note 1B) 1,000
============

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-49

GULF NORTHERN TRANSPORT, INC.
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1997 TO JANUARY 30, 1997

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss $ ( 89,992)

ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES

Depreciation & Amortization 79,719

(Increase) Decrease-Assets
Restricted Cash 912
Accounts Receivable 261,769
Prepaid expenses and other current assets 6,170
Increase (Decrease)-Liabilities
Accounts payable 82,170
Accrued expenses and other liabilities ( 330,196)
----------

Total Adjustments 100,544

Net Cash Provided by Operations 10,552
----------

CASH FLOWS FROM INVESTING ACTIVITIES

Security deposit ( 200)
----------

Net Cash Used in investing activities ( 200)
----------

Sub Total 10,352
----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-50

GULF NORTHERN TRANSPORT, INC.
STATEMENT OF CASH FLOWS
(continued)
PERIOD FROM JANUARY 1, 1997 TO JANUARY 30, 1997

Balance Forward $ 10,352

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on long-term debt ( 62,682)
Proceeds from short-term note 57,500
Principal payments on capital lease obligations ( 24,059)
-----------

Net Cash (used in) financing activities ( 29,241)
-----------

NET (DECREASE) IN CASH ( 18,889)

CASH AT BEGINNING OF YEAR 60,159
-----------

CASH AT END OF YEAR $ 41,270
===========

Supplemental Disclosure of
Cash flow information:

Cash Paid during the year
Interest expense $ 49,840
===========

Income taxes $ -0-
===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-51

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 1 - General and Summary of Significant Accounting Policies

(A) - Nature of Business

Gulf Northern Transport, Inc. (Gulf Northern) a Wisconsin corporation,
operates as an interstate and intrastate motor carrier. (See Note 2). The
Company's corporate headquarters are located in Charleston, South Carolina
with terminals and drop stations located in various states.

Services are provided to customers located primarily in the central United
States but include locations in virtually all 48 contiguous states.

(B) - Net Loss per Share

Net loss per share is computed on the basis of the weighted average number of
common shares outstanding during each period. Only the weighted average
number of shares of common stock outstanding is used to compute earnings or
loss per share for the period ended January 30, 1997 as there were no stock
options, warrants, or other common stock equivalents during this period.

The Company considers all highly liquid debt instruments purchased with a
maturity of 90 days or less to be cash equivalents for financial statement
purposes.

(D) - Inventory

Inventory consists principally of parts and supplies used in maintaining its
motor carrier fleet, skids used in transporting goods, and small tools. The
items are stated at the lower of cost or market, determined on a first-in,
first-out basis.

(E) - Property, Plant and Equipment

Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
Accelerated methods of depreciation are followed for tax purposes and the
straight line method is used for financial reporting purposes.

Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years.

(F) - Covenants Not to Compete

Covenants not to compete are amortized on a straight line basis over the terms
of the agreements. The covenants cover the period from January, 1994 to
December, 1997.

F-52

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

(G) - Income Taxes

(H) - Revenue Recognition

The Company recognizes revenues at the time freight is delivered to
recipients.

(I) - Use of Estimates

(J) - Basis of Presentation

The accompanying balance sheet and related statements of operations and
retained earnings and cash flows includes only the accounts of Gulf Northern
as of January 30, 1997. Prior to January 1, 1997, the company was a wholly
owned subsidiary of Mid America Transporters Group, Inc. and was included in
that consolidated group. Gulf Northern was sold to Logistics Management, LLC
effective January 1, 1997. On January 30, 1997, Gulf Northern was sold to
U.S. Trucking Company, Inc. and was included in that consolidated group. See
Note 2.

NOTE 2 - Acquisition by Mid America Transporter's Group

Effective January 1, 1995, Gulf Northern was acquired by Mid America
Transporters Group for a total purchase price of $2,683,500. This exceeded
the net asset value of Gulf Northern by approximately $1,182,000.
Accordingly, the basis of certain assets included in property, plant and
equipment were increased by that amount as required by purchase accounting and
is being amortized over five years.

The agreement includes payments to the former stockholders in the form of cash
of $2,232,000 which includes the payoff of shareholder loans described in Note
5A; promissory notes totaling $260,000 due in 36 monthly installments totaling
$8,017 at 7% due on March 1, 1998 secured by letters of credit in the amount
of $150,000; and non interest bearing obligations (discounted at 7% per annum)
totaling $104,000 payable over a one year period commencing April 1, 1998.

The purchase was financed by a loan in the amount of $3,000,000 from ITT
Credit Corp. which is payable in 60 monthly installments of $66,360 and is due
on March 31, 2000. The loan was subsequently sold to General Electric Credit
Corp and is secured by certain items of equipment. See Note 13 for
description of the loan modification agreement.

F-53

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 3 - Income Taxes

The Company accounts for income taxes on the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109).

Differing methods of reporting income for tax purposes as compared to
financial reporting purposes resulted in deferred income taxes of
approximately -0- as of January 30, 1997. Deferred tax assets and liabilities
consist of the following:

Deferred tax assets-
Allowance for doubtful accounts $ 13,600
Net operating loss carryover 158,000
---------
171,600
Valuation allowance 62,600
---------
$ 109,000
=========
Deferred tax liabilities-
Depreciation of property, plant
and equipment $(109,000)
---------
$(109,000)
=========

The valuation allowance provided in each of the years is based on management's
valuation of the likelihood of realization.

As required by SFAS 109, deferred taxes are provided based upon the tax rate
at which the items of income and expense are expected to be settled in the
Company's tax return.

The Company incurred a net operating loss of $910,000 available to offset
future income for financial reporting purposes expiring in 2012.

NOTE 4 - Long-term Notes Payable

Long-term notes payable consist of the following:

Equipment loans secured by ten tractors payable
at $15,824 per month including interest at 10% per
annum with the final installment due November, 2000 $ 636,417

Non interest bearing demand notes 70,000

Term loan in settlement with United Acquisition
II Corp.- $100,000 non interest bearing, discounted
at 8% payable over 36 months beginning April 1, 1998 49,904

Acquisition loan described in Note 5 2,135,037

F-54

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

Seller notes described in Note 2 240,595
----------

Total 3,131,953

Less: current maturities 852,738
----------

Long-term portion $2,279,215
==========

Aggregate annual scheduled maturities of long-term debt at January 30, 1997
are as follows:

January 30,
-----------
1998 $ 852,738
1999 920,804
2000 917,159
2001 441,252
----------

Total $3,131,953
==========

NOTE 5 - Debt Restructure

In addition to being used to finance the acquisition described in Note 2,
proceeds from the $3,000,000 acquisition loan were also used to refinance
stockholder loans and certain other bank and lease obligations. As the
classification of the acquisition loan is long term, those obligations
restructured were also classified as long term. The loan is payable in 60
monthly installments of $66,360 at the rate of 11.75% interest per annum with
its final maturity on March 31, 2000.

NOTE 6 - Lease Commitments

The Company leases tractors and trailers under various capital leases with
interest rates ranging from 8.1% to 9.1%. Property, plant and equipment
includes the following amounts for the tractor and trailer leases which are
capitalized:

Tractors and trailers $1,760,669
Less: accumulated amortization 611,433
----------
Total $1,149,236
==========

Lease amortization is included in depreciation expense.

F-55

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 6 - Lease Commitments (continued)

Future minimum payments, by year and in the aggregate, under the capital
leases are as follows:

Years ended January 30, Amount
----------------------- ----------

1998 $ 405,446
1999 489,233
2000 221,437
----------
Total minimum lease payments 1,116,116
Less: Amount representing interest 130,497
----------
Present value of minimum lease payments 985,619
Less-Current maturities 275,526
----------
Long-term obligations under capital leases $ 710,093
==========

NOTE 7 - Property, Plant and Equipment

Property, plant and equipment consists of the following as of January 30,
1997:

Office equipment $ 63,273
Tractors, trailers and garage equipment 8,238,378
Transportation equipment 4,480
----------
8,306,131
Less: Accumulated Depreciation 4,206,596
----------
Total property, plant and equipment $4,099,535
==========

Depreciation expense amounted to $76,386 for the period ended January 30,
1997. $75,582 of depreciation was included in operating expenses and $804 of
depreciation was included in administrative expenses. The fair market value
of fixed assets approximates book value.

NOTE 8 - Related Party Transaction

On December 23, 1996, the Company sold its Wisconsin Rapids facility which
included land, a building and improvements with a book value of $394,517 to
its majority stockholders for $346,141 resulting in a net loss of $48,376.
The transaction resulted in a gain of $231,000 for income tax purposes.

The stockholders leased the property back to the Company for five years
commencing January 1, 1997. See Note 10.

Management believes the sale was an arms length transaction based on estimated
values of the property on the date of sale.

F-56

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 9 - Retirement Plan

The Company matches employee contributions up to 3% of employee compensation.
Contributions to the plan amounted to $5,918 for the period ended January 30,
1997. 401K matching contributions of $1,283 are included in operating expense
and $365 and of the aforementioned contributions are included in
administrative expenses.

NOTE 10 - Commitments and Contingencies

Commencing on January 1, 1997, the Company agreed to rent its Wisconsin Rapids
facility from certain stockholders for $7,350 per month for a period of five
years under an operating lease.

Commencing October 15, 1997, the Company leased its South Carolina corporate
offices for $1,728 per month. The lease extends for a period of two years.

Minimum rental payments under such operating leases follows:

Year ending January 30,
1998 $ 94,248
1999 108,936
2000 102,888
2001 88,200
2002 80,850
--------
Total minimum payments required $475,122
========

NOTE 11 - Noncompetition Agreements

As of January 3, 1994, the Company entered into a covenant not to compete
agreement with its chief executive officer which extends over four years. The
agreement called for a prepayment of $115,000 in December, 1993, with an
additional $46,000, including interest, payable in (18) monthly installments
of $2,556 commencing with the date of the agreement. Expenses under this
agreement amounted to $3,333. See also Note 2 for a description of the
covenant not to compete related to the stock purchase agreement.

NOTE 12 - Restricted Cash

The Company maintains cash accounts for owner-operators who perform services
for the Company. These funds are accumulated, with the owner-operators
consent, by withholding part of the payments due to them for services
performed. The funds are used to pay for repairs of equipment that they own
directly.

Further, the Company has deposited funds with a financing company to cover
over the road fuel and other operating expenses for drivers in support of a
letter of credit.

As of January 30, 1997, the Company had letters of credit outstanding totaling
$10,000 which guarantee various operating and insurance activities.

F-57

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 13 - Loan Modification Agreement

In connection with the stock purchase agreement described in Note 2, the
purchase was financed by a loan in the amount of $3,000,000 payable in monthly
installments over five years. The original loan agreement required that the
Company hold the common stock of a "small capitalization" company with a
market value of at least $1,000,000. As of January 30, 1997, such stock was
not held by the Company.

On May 25, 1997, the Company agreed to a modification of the original loan
whereby current monthly payments were reduced from $66,360 per month to
$45,000 per month with a balloon payment of $396,836 due at August 31, 2001.

NOTE 14 - Concentration of Credit Risk - Cash

The Company maintains its cash balances in two financial institutions, one
located in Wisconsin Rapids, Wisconsin and the other in Charleston, South
Carolina. At times, the balances may exceed federally insured limits of
$100,000. The Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash on deposit.
The fair market value of these financial instruments approximates cost.

NOTE 15 - Use of Factor

In April, 1995, the Company entered into an agreement with a factor whereby
the factor would accept the Company's receivables with full recourse. Under
the agreement, the factor will advance up to 80% of those receivables
submitted by the Company. Interest on funds advanced is charged at an average
annual effective rate of 14.5% payable monthly.

In addition, the Company must maintain funds on deposit with its factor as a
reserve against uncollectible receivables. The amount of such funds on
deposit as of January 30, 1997 amounted to $97,179.

The uncollected balance of such receivables held by the factor amounted to
$804,601 as of January 30, 1997.

The fair market value of these balances approximate book value.

NOTE 16 - Economic Dependency

Revenues from the Company's five and ten largest customers accounted for
approximately 57% and 69% respectively of total net revenues for the period
ended January 30, 1997.

F-58

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 16 - Economic Dependency (continued)

The Company considers its relationship with those major customers to be
satisfactory and is committed to expanding its relationship with its other
customers.

The Company provides services to a significant number of customers in the meat
packing and distribution industry. Revenues from those customers accounted
for approximately 14.6% of total revenues for the period ended January 30,
1997. Accounts receivable from those customers amounted to $178,700 as of
January 30, 1997.

NOTE 17 - Stock Acquisition Agreement - United Acquisition II
Corp.

On June 3, 1996, the shareholders of Mid America entered into an agreement
with United Acquisition II Corp. (the acquirer) whereby they would transfer
100% of their common stock in Mid America in exchange for 31,366 shares of
convertible preferred stock and 316,666 shares of common stock of the
acquirer. In addition, the acquirer agreed to contribute cash and notes
totaling $500,000 into Mid America at closing.

In January, 1997, the acquirer conceded that it was not able to complete the
transaction as agreed and withdrew from the contract. During the period from
the consummation of the contract, the acquirer deposited funds to the Company
in the amount of $145,000. The Company agreed to return a total of $100,000
payable in 36 installments beginning April 1, 1998 on a non interest bearing
basis.

NOTE 18 - Accounts Receivable - Affiliate

The Company provided freight services on behalf of its affiliate, Mencor, Inc.
amounting to $10,785 for the period ended January 30, 1997. The balance
receivable from this affiliate as of January 30, 1997 amounted to $19,930.
The fair market value of this receivable approximate book value.

NOTE 19 - Advances from Affiliate

The Company received advances from its affiliate, Mencor, Inc. during the
period ended January 30, 1997. Those advances amounted to $23,994 and
remained unpaid as of that date, are non interest bearing and are due on
demand. The fair market value of these advances approximates book value.

NOTE 20 - Subsequent Event - Acquisition Agreement with U.S.
Trucking, Inc.

On January 30, 1997, the Company entered into an agreement with U.S. Trucking,
Inc. (the acquirer) whereby U.S. Trucking would acquire 100% of the common
stock of the Company in exchange for 25% of it's common stock.

F-59

GULF NORTHERN TRANSPORT, INC.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 30, 1997

NOTE 20 - Subsequent Event - Acquisition Agreement with U.S.
Trucking, Inc. (continued)

As part of this agreement, the Company contracted with Dan Pixler (a former
stockholder of the Company) for him to provide services as president and
general manager for the five years commencing from January 30, 1997 to January
30, 2002 at an annual salary of $105,000 per year. Mr. Pixler will receive
annual options to purchase 12,500 shares of the common stock of the acquirer's
parent company, U.S. Transportation Systems, Inc. which will be exercisable
until December 31, 2002. Further, during the period of employment and for a
period of two years after his termination, Mr. Pixler agreed that he will not
participate in an entity which is directly competitive with the Company's
present operations.

F-60

4) AUDITED FINANCIAL STATEMENTS OF
MENCOR, INC.
FOR THE THIRTY DAYS ENDED JANUARY 30, 1997

F-61

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders
Mencor, Inc.

We have audited the accompanying balance sheet of Mencor, Inc. as of January
30, 1997 and the related statements of earnings and retained earnings and cash
flows for the period then ended. 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.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Mencor, Inc. as of January
30, 1997 and the results of its operations and its cash flows for the period
then ended in conformity with generally accepted accounting principles.

/s/ BIANCULLI, PASCALE & CO. P.C.

BIANCULLI, PASCALE & CO. P.C.

Garden City, New York
June 8, 1998

F-62

MENCOR, INC.
BALANCE SHEET
January 30, 1997

ASSETS

CURRENT ASSETS
Cash and cash equivalents (Notes 1C and 2) $ 40,497
Accounts receivable-net of allowance
for doubtful accounts of $11,834 (Notes 1F & 12) 189,605
Advances to affiliate (Note 7) 23,994
Refundable income taxes (Note 6) 860
Prepaid expenses 1,002
--------
Total Current Assets 255,958
--------

PROPERTY, PLANT AND EQUIPMENT - at cost, less
accumulated depreciation of $3,950 as of
January 30, 1997 (Notes 1D and 3) 7,300
--------

OTHER ASSETS
Intangible asset - Net of accumulated
amortization of $1,067 as of January
30, 1997 (Note 1H) 933
Security deposits 1,125
Deferred tax asset (Notes 1E and 6) 1,920
Organization costs - net of
accumulated amortization of $445 at January
30, 1997 (Note 1G) 444
--------
Total other assets 4,422
--------

TOTAL ASSETS $267,680
========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-63

MENCOR, INC.
BALANCE SHEET
January 30, 1997

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

CURRENT LIABILITIES
Accounts payable-trade $160,618
Accounts payable-affiliate (Note 8) 19,930
Advances from related party (Note 9) 33,970
Payroll taxes withheld and payable 518
Accrued expenses 2,039
Other taxes payable 1,462
Income taxes payable (Notes 1E and 6) 25
Current Portion of Equipment Notes Payable
(Notes 3 and 4) 1,164
--------

Total Current Liabilities 219,726
--------
COMMITMENTS AND CONTINGENCIES (Note 5)

OTHER LIABILITIES
Equipment Notes Payable-net of current maturities
(Notes 3 and 4) 527
--------

TOTAL LIABILITIES 220,253
--------
STOCKHOLDERS' EQUITY
Common Stock (no par value-1,000 shares authorized,
300 issued and outstanding (Note 1B) 6,604
Retained Earnings 40,823
--------
Total Stockholders' Equity 47,427
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $267,680
========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-64

MENCOR, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
Period Ending January 30, 1997

Net Revenues $115,564

Freight settlements 102,649
--------

Income from operations 12,915

General and administrative expenses 13,983
--------

Net (loss) from operations (1,068)

Other income and expense -0-
--------

Loss before income taxes (1,068)

Income taxes (Notes 1E and 6) -0-
--------

Net (loss) (1,068)

Retained Earnings-Beginning of Period 41,891
--------

Retained Earnings-End of Period $ 40,823
========

Net (loss) per Share $ (3.56)
========

Weighted Average Number of Shares (Note 1B) 300

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-65

MENCOR, INC.
STATEMENT OF CASH FLOWS
Period Ending January 30, 1997

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) for the period $ (1,068)

ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH USED IN OPERATING ACTIVITIES

(Increase) Decrease-Assets
Accounts Receivable-trade 38,502
Advances to affiliate 3,359
Increase (Decrease)-Liabilities
Accounts payable-trade (20,391)
Accounts payable-affiliate (5,951)
Payroll taxes withheld and payable (3,400)
Other taxes payable 1,462
--------
Total Adjustments 13,581

Net Cash provided by Operations 12,513
--------

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments to related party (50,000)
--------
Net Cash (used in) financing activities (50,000)
--------

NET (DECREASE) IN CASH (37,487)
--------

CASH AT BEGINNING OF PERIOD 77,984
--------

CASH AT END OF PERIOD $ 40,497
========

Supplemental Disclosure of Cash flow information:

Cash paid during the year
Interest expense $ -0-
Income taxes $ -0-

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-66

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 1 - General and Summary of Significant Accounting Policies

(A) - Nature of Operations

Mencor, Inc. was incorporated in the State of Arkansas on July 6, 1994. The
Company operates as a broker for interstate motor carriers. An interstate
motor carrier broker serves the trucking industry by providing return hauls
for truckers who have completed their initial delivery. By providing this
service, trucking companies and independent operators are able to cover the
cost of returning to their home location. The Company's corporate
headquarters are located in Charleston, South Carolina. As a broker, the
Company is required to acquire a license which provides the authority to
engage in interstate commerce. This license was acquired in April, 1994.

Services are provided to customers located primarily in the central United
States but include locations in virtually all 48 contiguous states.

(B) - Net Loss per Share

Net loss per share is computed on the basis of the weighted average number of
common and common equivalent shares outstanding during each period. Only the
weighted average number of shares of common stock outstanding is used to
compute income per share for the period ended January 30, 1997 as there are no
stock options, warrants, or other common stock equivalents in this period.

The Company considers all highly liquid debt instruments purchased with a
maturity of 90 days or less to be cash equivalents for financial statement
purposes.

(D) - Property, Plant and Equipment

Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service
lives principally on an accelerated basis. Accelerated methods of
depreciation are followed for substantially all assets for both financial
reporting and tax purposes.

Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years.

(E) - Income Taxes

Income taxes are provided on all revenue and expense items included in the
statement of earnings, regardless of the period in which such items are
recognized for income tax purposes, except for items representing a permanent
difference between pretax accounting income and taxable income.
Non current deferred income taxes result from the use of accelerated methods
of depreciation for income tax purposes and from the establishment of an
allowance for doubtful accounts for financial reporting purposes.

F-67

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 1 - General and Summary of Significant Accounting Policies (continued)

(F) - Revenue Recognition

The Company recognizes revenues at the time the shipment is delivered to
recipients.

(G) - Organization expense

As part of its initial incorporation, the company incurred organization costs
amounting to $889 which is being amortized on a straight-line basis over five
years.

(H) - Intangible Asset

As discussed in Note 1A, the Company acquired a license from the Interstate
Commerce Commission which is required to allow the Company to do business as
an interstate carrier broker. This license, which cost $2,000 is being
amortized on a straight-line basis over five years.

(I) - Concentration of Credit Risk

Virtually all of the Company's customers are in the long haul trucking
industry. Further, accounts receivable are uncollateralized and consist of
amounts due from that industry.

(J) - Offering Costs

During 1996, the Company incurred certain expenses related to an equity
offering in connection with its affiliate, Mid America Transporters Group,
Inc. and Subsidiary. The offering was unsuccessful and, accordingly, the
expense was amortized in full during 1996.

(K) - Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.

NOTE 2 - Cash and Cash Equivalents

The Company maintains its cash balances in one financial institution located
in Charleston, South Carolina that at times, may exceed federally insured
limits. The Company has not experienced any losses in such account and
believed it is not exposed to any significant credit risk on cash and cash
equivalents.

F-68

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 3 - Property, Plant and Equipment

Property, plant and equipment consists of the following as of January 30,
1997:

Office equipment $ 12,656
Furniture and fixtures 1,406
--------
11,250
Less: Accumulated Depreciation 3,950
--------
Total property, plant and equipment $ 7,300
========

No depreciation expense was recorded for the period ended January 30, 1997.

NOTE 4 - Notes Payable

During 1995, the Company acquired office equipment in the amount of $2,946
which was financed payable in 36 installments of $110 per month including
interest at 14% per annum due June, 1998.

Total principal $ 1,691
Less: current maturities 1,164
--------
Long-term portion $ 527
========

Aggregate annual maturities of long-term debt for the five years following
January 30, 1997 are as follows:

January 30, 1998 $ 1,164
January 30, 1999 527
--------
Total $ 1,691
========

NOTE 5 - Commitments and Contingencies

The Company leases office space for its operating facility in Charleston,
South Carolina. The current lease term commenced on May 1, 1995 and concludes
on April 30, 1997. Commitments under this lease agreement amounted to $2,757
for the period ended January 30, 1998.

Rent expense amounted to $919 for the period ended January 30, 1997 and is
included in general and administrative expenses.

F-69

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 6 - Income Taxes

The Company accounts for income taxes on the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109). Differing methods of reporting income for tax purposes as
compared to financial reporting purposes resulted in net deferred income taxes
of $1,920 as of January 31, 1997.

Deferred tax assets and liabilities at January 30, 1997 consists of the
following:

Deferred tax assets
Allowance for doubtful accounts $11,834
Valuation Allowance (4,759)
-------
$ 7,075
=======
Deferred tax liabilities
Depreciation of property &
equipment $(5,155)
=======

The valuation allowance provided is based on management's valuation of the
likelihood of realization.

Net operating loss carryovers amounting to $1,068 for federal income tax
purposes are available through December 31, 2012.

NOTE 7 - Advances to Affiliate

The Company advanced funds and provided services to its affiliate, Gulf
Northern Transport, Inc. during the years prior to the period ended January
30, 1997. Gulf Northern is related to the Company through common ownership
and management. No revenues were generated by services provided during the
period ended January 30, 1997. The amount of such advances which remained
unpaid as of January 30, 1997 amounted to $23,994. These advances represent
allocations of rent and other administrative costs and freight settlements,
are non interest bearing and are due on demand. The fair market value of
these advances approximate book value.

F-70

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 8 - Accounts Payable-Affiliate

The Company incurred expenses for freight settlements from its affiliate, Gulf
Northern Transport, Inc. which amounted to $10,785 for the period ended
January 30, 1997. The remaining balance payable to the affiliate for such
expenses as of January 30, 1997 amounted to $19,930.

NOTE 9 - Advances from Related Party

During 1996, a shareholder advanced funds totaling $123,397 to the Company.
Repayments through January 30, 1997 amounted to $89,427 with the remaining
balance remitted during February, 1997. The advances were payable on demand
with no stated interest.

NOTE 10 - Economic Dependency

Accounts receivable from those customers amounted to $104,311 as of January
30, 1997.

Revenues from the Company's five and ten largest customers accounted for
approximately 83% and 91% respectively of total net revenues for the period
ended January 30, 1997.

NOTE 11 - Definitive stock sale to U.S. Trucking, Inc.

On January 30, 1997, the stockholders sold their interests in Mencor, Inc. to
U.S. Trucking, Inc. (the buyer) for $75,000. The transaction was in
conjunction with the sale of Gulf Northern Transport, Inc. Also in connection
with the sale, the Company agreed to continue the employment of Michael Menor
(a former shareholder of Mencor, Inc.) as the president of the Company for the
period from the date of enactment to January 30, 2000 at an annual salary of
$60,000 per year. Further, during the period of employment and a period of
two (2) years after his termination, Mr. Menor agreed that he will not
participate in an entity which directly performs truck brokerage services for
those customers currently serviced by the Company.

F-71

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
January 30, 1997

NOTE 11 - Definitive stock sale to U.S. Trucking, Inc. (Continued)

Also on the date of enactment, the buyer contracted with Roxanne Pixler, (a
former shareholder of Mencor, Inc.) for her to provide consulting services to
the Company. Pixler will receive 18,750 shares of U.S. Transportation
Systems, Inc. as compensation for her services. The contracted obligation
will commence from the date of enactment to December 31, 1998.

F-72

5) AUDITED FINANCIAL STATEMENTS OF
MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

F-73

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders
Mid America Transporters Group, Inc.
and Subsidiary

We have audited the accompanying consolidated balance sheets of Mid America
Transporters Group, Inc. and Subsidiary as of December 31, 1996 and 1995 and
the related consolidated statements of operations and retained earnings and
cash flows for the years then ended. 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.

In our opinion, the consolidated balance sheets referred to above, present
fairly, in all material respects, the consolidated financial position of Mid
America Transporters Group, Inc. and Subsidiary as of December 31, 1996 and
1995 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

/s/ BIANCULLI, PASCALE & CO. P.C.

BIANCULLI, PASCALE & CO. P.C.

Garden City, New York
November 7, 1997

F-74

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

1996 1995
---------- ----------
ASSETS

CURRENT ASSETS
Cash in banks (Note 14) $ 60,159 $ 311,842
Restricted cash-reserves on deposit
with factor (Note 15) 97,179 179,615
Accounts receivable-net of allowance
for doubtful accounts of $40,000
and $12,000 as of December 31, 1996
and 1995 respectively (Notes 1H, 15
and 16) 1,309,529 1,295,451
Accounts receivable - affiliate
(Note 18) 25,881 14,150
Accounts receivable - other 3,068 34,613
Parts and supply inventory (Note 1D) 139,472 112,464
Prepaid insurance 54,745 53,412
Prepaid expenses and other 41,089 49,106
---------- ----------
Total Current Assets 1,731,122 2,050,653
---------- ----------

PROPERTY, PLANT AND EQUIPMENT - at
cost, less accumulated depreciation
and amortization of $4,130,210 and
$3,313,632 as of December 31, 1996
and 1995, respectively
(Notes 1E, 2, 4, 5 and 7) 4,175,921 4,697,569
---------- ----------

OTHER ASSETS
Restricted cash-owner operators
(Note 12) 2,672 46,332
Restricted cash-cash held as
collateral against letters of credit 10,000 88,000
Covenants not to compete-net of accum-
ulated amortization of $73,589 and
$33,590 as of December 31, 1996 and
1995, respectively (Notes 1F and 11) 39,999 79,998
Security deposits and other 7,334 6,260
Organization costs - net of accumu-
lated amortization of $5,000 and
$4,000 as of December 31, 1996
and 1995, respectively (Note 1I) - 1,000
---------- ----------
Total other assets 60,005 221,590
---------- ----------
TOTAL ASSETS $5,967,048 $6,969,812
========== ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-75

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
---------- ----------
CURRENT LIABILITIES
Accounts payable-trade $ 207,941 $ 424,283
Due to factor (Note 15) 1,133,731 950,390
Accrued expenses and other 672,545 445,216
Advances from affiliate (Note 19) 27,353 17,910
Note Payable - (Note 4) 12,500 -
Current portion - seller's notes 112,823 84,393
Acquisition loan payable (Note 2) 569,329 551,445
Current portion of equipment notes
payable (Notes 2 and 4) 163,268 37,973
Current portion of obligations under
capital leases (Note 6) 299,585 263,907
---------- ----------
Total Current Liabilities 3,199,075 2,775,517
---------- ----------
OTHER LIABILITIES
Deferred taxes (Notes 2 and 3) - 388,000
Owner operator escrow (Note 12) 29,672 82,936
Seller's notes (Notes 2 and 4) 127,772 226,117
Note payable - (Notes 4 and 17) 49,904 -
Acquisition loan payable
(Notes 2 and 4) 1,617,561 2,141,947
Equipment Notes Payable-net of
current portion (Note 4) 483,978 319,564
Obligations under capital leases
net of current portion (Note 6) 710,093 998,816
---------- ----------
Total Other Liabilities 3,018,980 4,157,380
---------- ----------
TOTAL LIABILITIES 6,218,055 6,932,897
---------- ----------
COMMITMENTS AND CONTINGENCIES
(Notes 2, 6, 9 10 and 17)

STOCKHOLDERS' EQUITY
Common Stock (no par value-10,000
shares authorized, 1,000 issued
and outstanding) (Note 2) 100,000 100,000
Additional paid in capital 25,000 -
Accumulated deficit ( 376,007) ( 63,085)
---------- ----------
Total Stockholders' Equity ( 251,007) 36,915
---------- ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,967,048 $6,969,812
========== ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-76

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
YEARS ENDING DECEMBER 31, 1996 AND 1995

1996 1995
----------- -----------

Net Revenues $12,620,435 $12,374,563
Operating expenses 10,966,125 10,505,303
----------- -----------

Income from operations 1,654,310 1,869,260

Administrative expenses 1,807,186 1,290,716
----------- -----------

Other income and expenses
Interest income 7,046 10,507

Interest expense ( 648,993) ( 665,515)
Other income 141,498 4,673
Net gain (loss) on disposition of
assets ( 47,597) 9,104
----------- -----------
Total other income
and (expenses) ( 548,046) ( 641,231)
----------- -----------

Net loss before taxes ( 700,922) ( 62,687)

Income tax (benefit)
provision (Notes 1H and 3) ( 388,000) 398
----------- -----------
Net loss ( 312,922) ( 63,085)

Accumulated Deficit - January 1 ( 63,085) -
----------- -----------

Accumulated deficit - December 31 $( 376,007) $( 63,085)
=========== ===========

Net loss per share $( 312.92) $( 63.09)
=========== ===========

Weighted Average Number of Shares
(Note 1B) 1,000 1,000
=========== ===========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-77

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDING DECEMBER 31, 1996 AND 1995

1996 1995
----------- -----------
CASH FLOWS FROM
OPERATING ACTIVITIES

Net Earnings (Loss) $ (312,922) $ ( 63,085)

ADJUSTMENTS TO RECONCILE NET
EARNINGS (LOSS) TO NET CASH
USED IN OPERATING ACTIVITIES

Depreciation & Amortization 956,717 794,756
Deferred income taxes (388,000) -
Loss(Gain) on disposal of property
and equipment 47,597 ( 9,104)
(Increase) Decrease-Assets
Restricted Cash 204,096 -
Accounts Receivable ( 22,264) (295,267)
Parts and supply inventory ( 27,008) ( 43,955)
Prepaid expenses and
other current assets 6,610 (255,111)
Increase (Decrease)-Liabilities
Accounts payable ( 33,001) 27,984
Accrued expenses and
other current liabilities 183,508 129,375
----------- -----------
Total Adjustments 928,255 348,678

Net Cash Provided by Operations 615,333 285,593
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of equipment (787,407) (567,372)
Proceeds from disposal of equipment 372,740 81,500
Proceeds from additional paid in
capital 25,000 -
----------- -----------

Net Cash Used in investing activities (389,667) (485,872)
----------- -----------

Sub Total 225,666 (200,279)
----------- -----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-78

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS (continued)
YEARS ENDING DECEMBER 31, 1996 AND 1995

1996 1995
----------- -----------

Balance Forward $ 225,666 $( 200,279)

CASH FLOWS FROM
FINANCING ACTIVITIES

Principal payments on long-term debt (1,007,286) (4,707,108)
Proceeds from short-term note 12,500 -
Proceeds from long-term debt financing 770,482 5,527,017
Principal payments on capital lease
obligations (253,045) ( 307,788)
----------- -----------

Net Cash provided by (used in)
financing activities (477,349) 512,121
----------- -----------

NET INCREASE (DECREASE) IN CASH (251,683) 311,842

CASH AT BEGINNING OF YEAR 311,842 -
----------- -----------

CASH AT END OF YEAR $ 60,159 $ 311,842
=========== ===========

Supplemental Disclosure of
Cash flow information:

Cash Paid during the year
Interest expense $ 650,158 $ 690,813
=========== ===========

Income taxes $ -0- $ 1,845
=========== ===========

Capital lease obligations totaling $508,800 for the year ended December 31,
1995 were incurred when the Company entered into leases for new tractors and
trailers.

Long-term debt totaling $720,578 was incurred by the Company during 1996 when
the Company acquired 10 tractors with a total cost of $745,578.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-79

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 1 - General and Summary of Significant Accounting Policies

(A) - Nature of Business

Mid America Transporters Group, Inc. (Mid America or, "the Company") was
incorporated in the State of Arkansas on February 14, 1994. The Company,
through its wholly-owned subsidiary, Gulf Northern Transport, Inc., (Gulf
Northern) a Wisconsin corporation, operates as an interstate and intrastate
motor carrier. (See Note 2). The Company's corporate headquarters are
located in Charleston, South Carolina with terminals and drop stations located
in various states.

Services are provided to customers located primarily in the central United
States but include locations in virtually all 48 contiguous states.

(B) - Net Earnings (Loss) per Share

Net earnings (loss) per share is computed on the basis of the weighted average
number of common shares outstanding during each period. Only the weighted
average number of shares of common stock outstanding is used to compute
earnings or loss per share in 1996 and 1995, as there were no stock options,
warrants, or other common stock equivalents in those years.

The Company considers all highly liquid debt instruments purchased with a
maturity of 90 days or less to be cash equivalents for financial statement
purposes.

(D) - Inventory

(E) - Property, Plant and Equipment

Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
Accelerated methods of depreciation are followed for tax purposes and the
straight line method is used for financial reporting purposes.

Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years. The
building is depreciated over a thirty year period. A provision has been made
for deferred income taxes relating to depreciation temporary differences. See
Note 2.

(F) - Covenants Not to Compete

Covenants not to compete are amortized on a straight line basis over the terms
of the agreements. The covenants cover the period from January, 1994 to
December, 1997.
F-80

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

(G) - Income Taxes

(H) - Revenue Recognition

The Company recognizes revenues at the time freight is delivered to
recipients.

(I) - Organization Costs

Gulf Northern incurred organization costs of $5,000 in 1992 which is being
amortized on a straight line basis over five years.

(J) - Use of Estimates

(K) - Basis of Presentation

The accompanying consolidated balance sheets and related statements of
operations and retained earnings and cash flows includes the accounts of Mid
America Transporters Group, Inc. and its wholly owned subsidiary, Gulf
Northern Transport, Inc. as of December 31, 1996 and 1995 and gives effect to
the acquisition of Gulf Northern by Mid America effective January 1, 1995
pursuant to an agreement dated March 28, 1995, and reflects the acquisition as
a purchase as more fully described in Note 2. There were no intercompany
transactions or balances as of and for the years ended December 31, 1996 and
1995.

NOTE 2 - Definitive Stock Purchase Agreement

Effective January 1, 1995 to an agreement dated March 28, 1995, Mid America
signed a definitive stock purchase agreement with Gulf Northern and its
individual shareholders. Under the terms of the agreement, Mid America
purchased all shares of Gulf Northern's common stock for a total purchase
price, as finally determined, of $2,683,500 which exceeded the net asset value
of Gulf Northern by approximately $1,182,000. The transaction has been
accounted for as a purchase effective on December 31, 1994. Note (1K).

As discussed in Note 1G and 3, prior to the implementation of this agreement,
the Company elected to be an S Corporation for tax purposes. Due to
differences in the computation of depreciation for book purposes as compared
to tax purposes, taxes were deferred in the amount of $388,000. On the date
of this agreement, the Company no longer qualified to file its tax returns as
an S Corporation, therefore, deferred taxes were established as an increase to
the acquisition cost.
F-81

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 2 - Definitive Stock Purchase Agreement (continued)

As noted above, the acquisition has been accounted for as a purchase.
Purchase accounting requires that the cost of the acquisition be allocated to
the net assets acquired up to their fair market value. Accordingly, property,
plant and equipment was increased by $1,162,184 to $5,390,503 which is less
than its appraised value. No goodwill was recorded by this transaction. In
addition, the stockholder's equity section as reported prior to the purchase
is eliminated.

NOTE 3 - Income Taxes

The Company accounts for income taxes on the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109). At December 31, 1996 a recovery of prior years deferred taxes of
$388,000 was provided. No federal income taxes were provided for the year
ended December 31, 1995.

Differing methods of reporting income for tax purposes as compared to
financial reporting purposes resulted in deferred income taxes of
approximately -0- and $388,000 as of December 31, 1996 and 1995, respectively.
Deferred tax assets and liabilities consist of the following:

1996 1995
--------- ---------
Deferred tax assets-
Allowance for doubtful accounts $ 15,600 $ 4,680
Net operating loss carryover 196,000 -
--------- ---------
211,600 4,680
Valuation allowance 16,600 -
--------- ---------
$ 195,000 $ 4,680
========= =========

Deferred tax liabilities-
Depreciation of property, plant
and equipment $(195,000) $(392,680)
--------- ---------
$(195,000) $(392,680)
========= =========
F-82

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 3 - Income Taxes (continued)

The valuation allowance provided in each of the years is based on management's
valuation of the likelihood of realization.

As required by SFAS 109, deferred taxes are provided based upon the tax rate
at which the items of income and expense are expected to be settled in the
Company's tax return.

The Company incurred a net operating loss of $503,000 available to offset
future income for financial reporting purposes expiring in 2011.

NOTE 4 - Long-term Notes Payable 1996 1995
---------- ----------

Long-term notes payable as of December 31,
1996 and 1995 consists of the following:

Equipment loans secured by ten tractors
payable at $15,824 per month including
interest at 10% per annum with the final
installment due November, 2000 $ 647,246 -

Mortgage note, Prime + .5%; (9.0% at
December 31, 1995 secured by real estate,
payable at $5,000 per month including
interest, due March 7, 1995. The bank
has committed to renew this note beyond
December 31, 1995. - 357,537

Demand note - Sebrite Agency, Inc. -
non interest bearing 12,500 -

Term loan in settlement with United
Acquisition II Corp.- $100,000 non
interest bearing, discounted at 8%
payable over 36 months beginning
April 1, 1998 49,904 -

Acquisition loan described in Note 5 2,186,890 2,693,392

Seller notes described in Note 2 240,595 310,510
---------- ----------

Total 3,137,135 3,361,439

Less: current maturities 857,920 673,811
---------- ----------

Long-term portion $2,279,215 $2,687,628
========== ==========

F-83

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 4 - Long-term Notes Payable (continued)

Aggregate annual scheduled maturities of long-term debt at December 31, 1996
are as follows:

1997 $ 857,920
1998 910,804
1999 917,159
2000 441,791
2001 9,461
----------
Total $3,137,135
==========

NOTE 5 - Debt Restructure

NOTE 6 - Lease Commitments

Tractors and trailers $1,760,669 $1,760,669
Less: accumulated amortization 589,913 331,673
---------- ----------

Total $1,170,756 $1,428,996
========== ==========

F-84

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 6 - Lease Commitments (continued)

Lease amortization is included in depreciation expense. Future minimum
payments, by year and in the aggregate, under the capital leases are as
follows:

Years ended December 31, Amount
------------------------ ------

1997 $ 394,791
1998 522,657
1999 241,568
2000 -
----------
Total minimum lease payments 1,159,016
Less: Amount representing interest 149,338
----------
Present value of minimum
lease payments 1,009,678
Less-Current maturities 299,585
----------

Long-term obligations under
capital leases $ 710,093
==========
NOTE 7 - Property, Plant and Equipment

Property, plant and equipment consists of the following as of December 31:

1996 1995
---------- ----------

Land $ - $ 127,719
Building - 303,350
Office equipment 63,273 58,576
Tractors, trailers and
garage equipment 8,238,378 7,517,076
Transportation equipment 4,480 4,480
---------- ----------
8,306,131 8,011,201
Less: Accumulated
Depreciation 4,130,210 3,313,632
---------- ----------
Total property, plant
and equipment $4,175,921 $4,697,569
========== ==========

Depreciation expense amounted to $882,797 and $754,130 for the years ended
December 31, 1996 and 1995, respectively. $873,148 and $732,921 of
depreciation was included in operating expenses for 1996 and 1995,
respectively and $9,649 and $21,209 of depreciation was included in
administrative expenses for 1996 and 1995, respectively. The fair market
value of fixed assets approximates book value.

F-85

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 8 - Related Party Transaction

On December 23, 1996, the Company sold its Wisconsin Rapids facility which
included land, a building and improvements with a book value of $394,517 to
its majority stockholders for $346,141 resulting in a net loss of $48,376.
The loss is included in other income and expenses. The transaction resulted
in a gain of $231,000 for income tax purposes.

The stockholders leased the property back to the Company for five years
commencing January 1, 1997. See Note 10.

Management believes the sale was an arms length transaction based on estimated
values of the property on the date of sale.

Interest expense at December 31, 1995 includes $6,857 attributable to
stockholder loans. The loans were repaid during 1995.

NOTE 9 - Retirement Plan

The Company matches employee contributions up to 3% of employee compensation.
Contributions to the plan amounted to $65,123 and $41,264 for the years ended
December 31, 1996 and 1995, respectively. 401K matching contributions of
$23,100 and $29,710 are included in operating expenses for 1996 and 1995,
respectively and $8,589 and $21,209 of the aforementioned contributions are
included in administrative expenses for 1996 and 1995, respectively.

NOTE 10 - Commitments and Contingencies

Commencing on January 1, 1997, the Company agreed to rent its Wisconsin Rapids
facility from certain stockholders for $7,350 per month for a period of five
years under an operating lease.

Commencing October 15, 1997, the Company leased its South Carolina corporate
offices for $1,728 per month. The lease extends for a period of two years.

Minimum rental payments under such operating leases follows:

Year ending December 31,
1997 $ 92,520
1998 108,936
1999 104,616
2000 88,200
2001 88,200
--------
Total minimum payments required $482,472
========

F-86

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 11 - Noncompetition Agreements

As of January 3, 1994, the Company entered into a covenant not to compete
agreement with its chief executive officer which extends over four years. The
agreement called for a prepayment of $115,000 in December, 1993, with an
additional $46,000, including interest, payable in (18) monthly installments
of $2,556 commencing with the date of the agreement. Expenses under this
agreement amounted to $39,999 and $39,698 for 1996 and 1995, respectively.
See also Note 2 for a description of the covenant not to compete related to
the stock purchase agreement.

NOTE 12 - Restricted Cash

Further, the Company has deposited funds with a financing company to cover
over the road fuel and other operating expenses for drivers in support of a
letter of credit.

As of December 31, 1996 and 1995, the Company had letters of credit
outstanding totaling $10,000 and $88,000 respectively which guarantee various
operating and insurance activities.

NOTE 13 - Loan Modification Agreement

In connection with the stock purchase agreement described in Note 2, the
purchase was financed by a loan in the amount of $3,000,000 payable in monthly
installments over five years. The original loan agreement required that the
Company hold the common stock of a "small capitalization" company with a
market value of at least $1,000,000. As of December 31, 1996 and 1995, such
stock was not held by the Company.

NOTE 14 - Concentration of Credit Risk - Cash

F-87

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 15 - Use of Factor

In addition, the Company must maintain funds on deposit with its factor as a
reserve against uncollectible receivables. The amount of such funds on
deposit as of December 31, 1996 and 1995 amounted to $97,179 and $179,615
respectively.

The uncollected balance of such receivables held by the factor amounted to
$1,133,731 and $950,390 as of December 31, 1996 and 1995 respectively. The
fair market value of these balances approximate book value.

NOTE 16 - Economic Dependency

The Company's customers consist primarily of high volume shippers that have
significant time sensitive and high service level traffic needs. The Company
provided services to three and four customers, respectively which accounted
for net revenues in excess of 10% of the Company's total revenues for the
years ended December 31, 1996 and 1995. Consolidated Paper, Inc.,
Land-0-Lakes, Inc., Excel Corporation and Trane Company accounted for 24.6%,
13.8%, and 10.7% of the Company's net revenues for the year ended December 31,
1996. Consolidated Paper, Inc., Land-O-Lakes, Inc., Excel Corporation and
Trane Company accounted for 17.8%, 13.5%, 10.7% and 10.2% of the Company's net
revenues for the year ended December 31, 1995. Accounts receivable from those
customers amounted to $486,873 and $358,319 as of December 31, 1996 and 1995
respectively.

Revenues from the Company's five and ten largest customers accounted for
approximately 57% and 69% respectively of total net revenues for the year
ended December 31, 1996. Revenues from the Company's five and ten largest
customers accounted for approximately 57% and 73% respectively of total net
revenues for the year ended December 31, 1995.

The Company considers its relationship with those major customers to be
satisfactory and is committed to expanding its relationship with its other
customers.

The Company provides services to a significant number of customers in the meat
packing and distribution industry. Revenues from those customers accounted
for approximately 16.3% of total revenues for the year ended December 31, 1996
and 30% of total revenues for the year ended December 31, 1995. Accounts
receivable from those customers amounted to $117,600 and $375,000 as of
December 31, 1996 and 1995 respectively.

F-88

MID AMERICA TRANSPORTERS GROUP, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 17 - Stock Acquisition Agreement - United Acquisition II Corp.

The settlement resulted in a gain to the company of $105,096 which is included
in other income.

NOTE 18 - Accounts Receivable - Affiliate

The Company provided freight services on behalf of its affiliate, Mencor, Inc.
amounting to $340,822 and $119,045 for the years ended December 31, 1996 and
1995 respectively. The balance receivable from this affiliate as of December
31, 1996 and 1995 amounted to $25,881 and $14,150. The fair market value of
this receivable approximate book value.

NOTE 19 - Advances from Affiliate

The Company received advances from its affiliate, Mencor, Inc. during 1996 and
1995. Those advances which amounted to $27,353 and $17,910 remained unpaid as
of December 31, 1996 and 1995, are non interest bearing and are due on demand.
The fair market value of these advances approximates book value.

NOTE 20 - Subsequent Event - Acquisition Agreement with U.S. Trucking, Inc.

F-89

6) AUDITED FINANCIAL STATEMENTS OF
MENCOR, INC.
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

F-90

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Stockholders
Mencor, Inc.

We have audited the accompanying balance sheets of Mencor, Inc. as of December
31, 1996 and 1995 and the related statements of earnings and retained earnings
and cash flows for the years then ended. 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.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Mencor, Inc. as of December
31, 1996 and 1995 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

/s/ BIANCULLI, PASCALE & CO. P.C.

BIANCULLI, PASCALE & CO. P.C.

Farmingdale, New York
November 3, 1997

F-91

MENCOR, INC.
BALANCE SHEETS

December 31,
1996 1995
---------- ----------
ASSETS

CURRENT ASSETS
Cash and cash equivalents
(Notes 1C and 2) $ 77,984 $ 34,726
Accounts receivable-net of allowance
for doubtful accounts of $11,834 as
of December 31, 1996 and 1995
(Notes 1F & 12) 228,107 218,219
Advances to affiliate (Note 7) 27,353 17,910
Refundable income taxes (Note 6) 860
Prepaid expenses 1,002 1,078
---------- ----------
Total Current Assets 335,306 271,933
---------- ----------

PROPERTY, PLANT AND EQUIPMENT - at
cost, less accumulated depreciation
of $3,950 and $2,025 as of December
31, 1996 and 1995, respectively
(Notes 1D and 3) 7,300 6,552
---------- ----------

OTHER ASSETS
Intangible asset - Net of accumulated
amortization of $1,067 and $667 as of
December 31, 1996 and 1995,
respectively. (Note 1H) 933 1,333
Security deposits 1,125 1,125
Deferred tax asset (Notes 1E and 6) 1,920 1,000
Organization costs - net of
accumulated amortization of $445 and
$267 at December 31, 1996 and 1995,
respectively (Note 1G) 444 622
---------- ----------

Total other assets 4,422 4,080
---------- ----------

TOTAL ASSETS $ 347,028 $ 282,565
========== ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-92

MENCOR, INC.
BALANCE SHEETS

December 31,
1996 1995
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

CURRENT LIABILITIES
Accounts payable-trade $ 181,009 $ 197,015
Accounts payable-affiliate (Note 8) 25,881 14,150
Advances from related party (Note 9) 83,970
Payroll taxes withheld and payable 3,918
Accrued expenses 2,039
Income taxes payable (Notes 1E and 6) 25 14,840
Current Portion of Equipment
Notes Payable (Notes 3 and 4) 1,071 878
---------- ----------
Total Current Liabilities 297,913 226,883
---------- ----------

COMMITMENTS AND CONTINGENCIES (Note 5)

OTHER LIABILITIES
Equipment Notes Payable-net of
current maturities (Notes 3 and 4) 620 1,691
---------- ----------
TOTAL LIABILITIES 298,533 228,574
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock (no par value-1,000
shares authorized, 300 issued and
outstanding (Note 1B) 6,604 6,604
Retained Earnings 41,891 47,387
---------- ----------
Total Stockholders' Equity 48,495 53,991
---------- ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 347,028 $ 282,565
========== ==========

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-93

MENCOR, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS

Periods Ending December 31,
1996 1995
----------- ----------

Net Revenues $ 2,226,900 $1,486,293
Freight settlements 2,007,651 1,294,550
----------- ----------

Income from operations 219,249 191,743

General and administrative expenses 225,685 167,598
----------- ----------

Net income (loss) from operations ( 6,436) 24,145

Other expense
Interest expense ( 1,815) ( 279)
----------- ----------

Earnings (loss) before income taxes ( 8,251) 23,866

Income taxes (Notes 1E and 6) 2,755 ( 6,035)
----------- ----------

Net earnings (loss) ( 5,496) 17,831

Retained Earnings-Beginning of Year 47,387 29,556
----------- ----------

Retained Earnings-End of Year $ 41,891 $ 47,387
=========== ==========

Net income (loss) per Share $( 18.32) $ 57.94
=========== ==========

Weighted Average
Number of Shares 300 300
(Note 1B)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-94

MENCOR, INC.
STATEMENTS OF CASH FLOWS

Periods Ending December 31,
1996 1995
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $( 5,496) $ 17,831

ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH USED IN OPERATING ACTIVITIES
Depreciation & amortization 5,850 1,911
Allowance for doubtful accounts 7,610
Deferred tax benefit ( 920) ( 1,000)

(Increase) Decrease-Assets
Accounts Receivable-trade ( 9,888) (109,343)
Advances to affiliate ( 9,443) ( 17,910)
Refundable income taxes ( 860)
Prepaid expenses 76 22

Increase (Decrease)-Liabilities
Accounts payable-trade ( 16,006) 11,569
Accounts payable-affiliate 11,731 14,150
Payroll taxes withheld and payable 3,918
Accrued expenses 2,039
Income taxes payable ( 14,815) 7,035
----------- ----------

Total Adjustments ( 28,318) ( 85,956)

Net Cash Provided (used) by Operations ( 33,814) ( 68,125)
----------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Offering costs ( 3,346)
Purchases of equipment ( 2,674) ( 620)
Security deposits ( 1,125)
----------- ----------

Net Cash Used in Investing Activities ( 6,020) ( 1,745)
----------- ----------

Subtotal $ ( 39,834) $ ( 69,870)
----------- ----------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-95

MENCOR, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)

Periods Ending December 31,
1996 1995
----------- ----------

Balance brought forward $ ( 39,834) $ ( 69,870)
----------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related party 123,397
Repayments to related party ( 39,427)
Principal payments on equipment loan ( 878) ( 377)
----------- ----------

Net Cash provides by (used in)
financing activities 83,092 ( 377)
----------- ----------

NET INCREASE (DECREASE) IN CASH 43,258 ( 70,247)
----------- ----------

CASH AT BEGINNING OF PERIOD 34,726 104,973
----------- ----------

CASH AT END OF PERIOD $ 77,984 $ 34,726
=========== ==========

Supplemental Disclosure of
Cash flow information:

Cash Paid during the year
Interest expense $ 1,815 $ 279

Income taxes $ 14,840 $ -0-

The Company purchased office equipment during the year ended December 31,
1995. The purchase price of the equipment amounted to $2,946 and was financed
through the vendor. See Note 4.

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS

F-96

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 1 - General and Summary of Significant Accounting Policies

(A) - Nature of Operations

Services are provided to customers located primarily in the central United
States but include locations in virtually all 48 contiguous states.

(B) - Net Earnings (Loss) per Share

Net earnings per share is computed on the basis of the weighted average number
of common and common equivalent shares outstanding during each period. Only
the weighted average number of shares of common stock outstanding is used to
compute income per share in 1996 and 1995 as there are no stock options,
warrants, or other common stock equivalents in these years.

The Company considers all highly liquid debt instruments purchased with a
maturity of 90 days or less to be cash equivalents for financial statement
purposes.

(D) - Property, Plant and Equipment

Transportation equipment, furniture and fixtures, and other equipment are
generally depreciated over periods ranging from two to seven years.

(E) - Income Taxes

Non current deferred income taxes result from the use of accelerated methods
of depreciation for income tax purposes and from the establishment of an
allowance for doubtful accounts for financial reporting purposes.

F-97

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 1 - General and Summary of Significant Accounting Policies (continued)

(F) - Revenue Recognition

The Company recognizes revenues at the time the shipment is delivered to
recipients.

(G) - Organization expense

As part of its initial incorporation, the company incurred organization costs
amounting to $889 which is being amortized on a straight-line basis over five
years.

(H) - Intangible Asset

(I) - Concentration of Credit Risk

Virtually all of the Company's customers are in the long haul trucking
industry. Further, accounts receivable are uncollateralized and consist of
amounts due from that industry.

(J) - Offering Costs

(K) - Use of Estimates

NOTE 2 - Cash and Cash Equivalents

The Company maintains its cash balances in one financial institution located
in Charleston, South Carolina which at times, may exceed federally insured
limits. The Company has not experienced any losses in such account and
believed it is not exposed to any significant credit risk on cash and cash
equivalents.

F-98

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 3 - Property, Plant and Equipment

Property, plant and equipment consists of the following as of December 31,:

1996 1995
-------- --------

Office equipment $ 12,656 $ 7,171
Furniture and fixtures 1,406 1,406
-------- --------
11,250 8,577
Less: Accumulated Depreciation 3,950 2,025
-------- --------
Total property, plant and equipment $ 7,300 $ 6,552
======== ========

Depreciation expense amounted to $1,925 and $1,333 for the years ended
December 31, 1996 and 1995, respectively and is included in general and
administrative expenses.

NOTE 4 - Notes Payable

During 1995, the Company acquired office equipment in the amount of $2,946
which was financed payable in 36 installments of $110 per month including
interest at 14% per annum due June, 1998.

Total principal $ 1,691
Less: current maturities 1,071
--------

Long-term portion $ 620
========

Aggregate annual maturities of long-term debt for the five years following
December 31, 1996 are as follows:

1997 $ 1,071
1998 620
--------

Total $ 1,691
========

NOTE 5 - Commitments and Contingencies

Rent expense amounted to $6,000 and $9,440 for the periods ended December 31,
1996 and 1995, respectively and is included in general and administrative
expenses.

F-99

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 6 - Income Taxes

The Company accounts for income taxes on the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109). The provision for income taxes was comprised of the following
components as of December 31. 1996 and 1995:

1996 1995
-------- --------

Federal-current $( 860) $ 5,276
Federal-deferred ( 1,586) (1,000)
State-current 25 1,759
State-deferred ( 334) -0-
-------- --------

Total $( 2,755) $ 6,035
======== ========

The income tax provision reconciled to the tax computed at the statutory
Federal rate was:

1996 1995
---------------- ----------------

Tax at Statutory Rate $( 3,218) (39)% $ 9,308 39 %
State income taxes 1,759 7
Benefit of graduated brackets 463 6 ( 5,728) (24)
Other 696 3
-------- -- -------- --
$( 2,755) (33)% $ 6,035 25 %
======== == ======== ==

Deferred tax assets and liabilities at December 31, 1996 and 1995 consist of
the following:

1996 1995
-------- --------
Deferred tax assets
Allowance for doubtful accounts $ 11,834 $ 11,834
Valuation allowance ( 4,759) ( 4,289)
Deferred tax liabilities
Depreciation of property & equipment ( 5,155) ( 6,545)
-------- --------

Net Total $ 1,920 $ 1,000
======== ========

Net operating loss carryovers amounting to $5,733 for state income tax
purposes are available through December 31, 2011.

F-100

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 7 - Advances to Affiliate

The Company advanced funds and provided services to its affiliate, Gulf
Northern Transport, Inc. during 1996 and 1995. Gulf Northern is related to
the Company through common ownership and management. Total revenues generated
by services provided during 1996 and 1995, respectively amounted to $6,465 and
$2,601. The amount of such advances which remained unpaid as of December 31,
1996 and 1995 amounted to $27,353 and $17,910, respectively. These advances
represent allocations of rent and other administrative costs and freight
settlements, are non interest bearing and are due on demand. The fair market
value of these advances approximate book value.

NOTE 8 - Accounts Payable-Affiliate

The Company incurred expenses for freight settlements from its affiliate, Gulf
Northern Transport, Inc. which amounted to $340,822 and $119,045 for the years
ended December 31, 1996 and 1995. The remaining balance payable to the
affiliate for such expenses as of December 31, 1996 and 1995 amounted to
$25,881 and $14,150, respectively.

NOTE 9 - Advances from Related Party

During August and September 1996, a shareholder advanced funds totaling
$123,397 to the Company. Repayments during the year amounted to $39,427 with
the remaining balance remitted by February, 1997. The advances were payable
on demand with no stated interest.

NOTE 10 - Economic Dependency

The Company's customers consist primarily of high volume shippers that have
significant time sensitive and high service level traffic needs. The Company
provided services to three and two customers respectively which accounted for
net revenues in excess of 10% of the Company's total revenues for the years
ended December 31, 1996 and 1995 respectively. Tamco Distributors, OK Grocery
and McCrory Stores accounted for 24.8%, 17.1% and 13.8% of the Company's net
revenues for the year ended December 31, 1996. Tamco Distributors and OK
Grocery accounted for 30.1% and 22.8% of the Company's net revenues for the
year ended December 31, 1995.

Accounts receivable from those customers amounted to $82,926 and $94,594 as of
December 31, 1996 and 1995 respectively.

Revenues from the Company's five and ten largest customers accounted for
approximately 66% and 81% respectively of total net revenues for the year
ended December 31, 1996. Revenues from the Company's five and ten largest
customers accounted for approximately 71% and 87% respectively of total net
revenues for the year ended December 31, 1995.

F-101

MENCOR, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996 and 1995

NOTE 11 - Subsequent Event

F-102

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The only statute, charter provision, bylaw, contract, or other
arrangement under which any controlling person, Director or Officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such, is as follows:

(a) The Company has the power under the Colorado Business Corporation
Act to indemnify any person who was or is a party or is threatened to be made
a party to any action, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a Director,
Officer, employee, fiduciary, or agent of the Company or was serving at its
request in a similar capacity for another entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection therewith if he acted in good faith
and in a manner he reasonably believed to be in the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In case of an action
brought by or in the right of the Company such persons are similarly entitled
to indemnification if they acted in good faith and in a manner reasonably
believed to be in the best interests of the Company but no indemnification
shall be made if such person was adjudged to be liable to the Company for
negligence or misconduct in the performance of his duty to the Company unless
and to the extent the court in which such action or suit was brought
determines upon application that despite the adjudication of liability, in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification. In such event, indemnification is limited to
reasonable expenses. Such indemnification is not deemed exclusive of any
other rights to which those indemnified may be entitled under the Articles of
Incorporation, Bylaws, agreement, vote of shareholders or disinterested
directors, or otherwise.

(b) The Articles of Incorporation and Bylaws of the Company generally
require indemnification of Officers and Directors to the fullest extent
allowed by law.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses of the offering, all of which are to be borne by
the Selling Shareholders, are as follows:

SEC Filing Fee ................................ $ 7,471.79
Printing Expenses ............................. 1,000.00
Accounting Fees and Expenses .................. 2,500.00
Legal Fees and Expenses ....................... 25,000.00
Blue Sky Fees and Expenses .................... 500.00
Miscellaneous ................................. 3,528.21
----------
Total .................................... $40,000.00

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

During its past three years, the Registrant issued securities which were
not registered under the Securities Act of 1933, as amended (the "Act"), as
follows.
II-1

Effective September 8, 1998, the Company effected a 1 for 160 reverse
split of the outstanding Common Stock. All numbers of shares stated below
give retroactive effect to this stock split.

On September 8, 1998, the Company completed the acquisition of 100% of
the outstanding common stock of U.S. Trucking-Nevada in exchange for
15,877,300 shares of the Company's Common Stock. The shares were exchanged on
the basis of one share of the Company's Common Stock for one share of U.S.
Trucking-Nevada common stock. The stock issuances were made to the 29
shareholders of U.S. Trucking-Nevada pursuant to an Agreement ("Agreement")
between the Company and U.S. Trucking-Nevada.

During October 1998, the Company issued an additional 133,333 shares of
common stock to five accredited investors who had invested $100,000 in U.S.
Trucking-Nevada and who exchanged their shares in U.S. Trucking-Nevada for
shares of the Company's common stock on a one-for-one basis.

During November 1998, the Company issued 33,334 shares to an accredited
investor who invested $25,000 in a private placement.

Effective December 31, 1998, the Company issued 400,000 shares of common
stock to Mid-Cal Express, Inc. as partial payment for the assets which were
acquired from Mid-Cal Express, Inc.

During January 1999, the Company issued 999,000 shares of its Series A
Preferred Stock to three existing shareholders in exchange for a total of
9,990,000 shares of the Company's common stock.

During April 1999, the Company issued 2,000 shares of its Series B
Convertible Preferred Stock and 400,000 warrants to five investors in a
private placement which raised $2 million in gross proceeds.

During May 1999, the Company issued 50,000 shares of Series C Preferred
Stock to two shareholders in consideration of their guarantees with respect to
in excess of $13 million of the Company's debt.

During June 1999, the Company issued 200,000 shares of common stock to
two persons in connection with the acquisition of ProStar, Inc.

During July 1999, the Company issued 50,000 shares of its common stock to
one investor who paid $50,000.

The sales described above were made in reliance on the exemption from
registration offered by Section 4(2) of the Securities Act of 1933. The
Company had reasonable grounds to believe that these persons (1) were
acquiring the shares for investment and not with a view to distribution, and
(2) had such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of their investment and
were able to bear those risks. Such persons had access to pertinent
information enabling them to ask informed questions. An appropriate
restrictive legend is noted on the certificates representing such shares, and
stop-transfer instructions have been noted in the Company's transfer records.

II-2

ITEM 27. EXHIBITS.

The following Exhibits are filed as part of this Registration Statement
pursuant to Item 601 of Regulation S-B:

EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------

3.1 Articles of Incorporation, Filed herewith electronically
as amended

3.2 Bylaws, as amended Filed herewith electronically

3.3 Articles of Amendment to Previously filed
Articles of Incorporation
effective September 8, 1998

3.4 Articles of Amendment to Previously filed
Articles of Incorporation
dated January 20, 1999
regarding Series A Pre-
ferred Stock

3.5 Articles of Amendment to Filed herewith electronically
Articles of Incorporation
dated April 29, 1999
regarding Series B Pre-
ferred Stock

3.6 Articles of Amendment to Filed herewith electronically
Articles of Incorporation
dated June 10, 1999
regarding Series C Pre-
ferred Stock

5 Opinion of Krys Boyle Previously filed
Freedman & Sawyer, P.C.
regarding the legality
of the securities being
registered

10.1 1998 Stock Option Plan Incorporated herein by reference to
Exhibit No. 4.3 to the Company's
Registration Statement on Form S-8
(SEC File No. 333-70353)

10.2 Share Exchange Agreement Incorporated herein by reference to
with U.S. Trucking, Inc. Exhibit No. 10 to the Company's
Form 8-K dated September 8, 1998

II-3

10.3 Employment Agreement with Previously filed
Danny L. Pixler

10.4 Employment Agreement with Previously filed
Anthony Huff

10.5 Employment Agreement with Previously filed
John Ragland

10.6 Lease Agreement dated Previously filed
January 1, 1997, between
Gulf Northern Transport,
Inc., Dan L. Pixler, and
Sebrite Insurance Services,
Inc.

10.7 Lease Agreement dated Previously filed
March 5, 1998, between
Gulf Northern Transport,
Inc. and Dan Pixler for
three tractors

10.8 Lease Agreement dated Previously filed
September 23, 1998,
between Gulf Northern
Transport, Inc. and
Thomas Financial Services

10.9 Stock Exchange Agreements Previously filed
between U.S. Trucking and
three shareholders dated
January 29, 1999.

10.10 Loan and Security Agreement Previously filed
dated as of December 22,
1998 between General Electric
Capital Corporation and
U.S. Trucking, Inc., et al.

10.11 Management Services Agree- Previously filed
ment dated December 30,
1998, between Mid-Cal
Express, Inc. and Gulf
Northern Transport, Inc.

10.12 10% Convertible Debenture Incorporated by reference to
due May 31, 2002 for Exhibit 10.12 to the Company's
$600,000 Form 10-QSB for the quarter
ended June 30, 1999

10.13 1998 Stock Option Plan, Filed herewith electronically
as amended

21 Subsidiaries of the Previously filed
Registrant

23.1 Consent of Krys Boyle Contained in Exhibit 5
Freedman & Sawyer, P.C.
II-4

23.2 Consent of Bianculli, Filed herewith electronically
Pascale & Co. P.C.

ITEM 28. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

The undersigned small business issuer will:

(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and

(iii) Include any additional or changed material information on the
plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2, and authorized this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of North Charleston, State
of South Carolina, on the 9th day of September 1999.

U.S. TRUCKING, INC.

By:/s/ Danny L. Pixler
Danny L. Pixler, President

Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/s/ Danny L. Pixler President (Chief Executive September 9, 1999
Danny L. Pixler Officer) and Director

/s/ W. Anthony Huff Executive Vice President September 9, 1999
W. Anthony Huff and Director

/s/ John Ragland Chief Financial and September 9, 1999
John Ragland Accounting Officer

U.S. TRUCKING, INC.
AMENDMENT NO. 1 TO
FORM SB-2 REGISTRATION STATEMENT

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 Articles of Incorporation, as amended

3.2 Bylaws, as amended

3.5 Articles of Amendment to Articles of Incorporation
dated April 29, 1999 regarding Series B Preferred Stock

3.6 Articles of Amendment to Articles of Incorporation
dated June 10, 1999 regarding Series C Preferred Stock

10.13 1998 Stock Option Plan

23.2 Consent of Bianculli, Pascale & Co. P.C.