UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2001, Commission File No. 0-30880
McCLENDON TRANSPORTATION GROUP, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 22 - 3714235
---------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
121 South LaFayette Street, Lafayette, Alabama 36362
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (334) 864-9311
Not Applicable
(Former name, address or fiscal year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes_____x______________ No _________________
The total number of common shares outstanding of the issuer's common
shares, par value $ .001, as of the date of this report, follow:
18,532,000
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM BALANCE SHEET
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
2001 2000
ASSETS
Cash and cash equivalents $ 230,502 $ 118,108
Restricted investments 76,335 101,548
Accounts receivable - trade 3,580,785 4,104,307
Accounts receivable - other 263,102 97,787
Inventories 167,028 196,467
Income taxes recoverable 30,599 -
Prepaid expenses 2,377,442 1,733,662
--------- ---------
6,725,643 6,351,879
FIXED ASSETS(Net of accumulated depreciation
and amortization) 7,019,826 6,093,021
OTHER ASSETS 190,146 219,515
--------- ----------
$13,935,615 $12,664,415
========== ==========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM BALANCE SHEET
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
2001 2000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 2,693,937 $ 921,773
Short-term borrowings 3,958,383 8,297,599
Accounts payable 1,706,450 1,872,382
Accrued taxes 128,806 146,470
Other accrued charges 1,433,569 2,210,122
Income taxes payable -estimated - 204,388
Current portion of long-term debt 3,047,433 6,183
---------- ----------
12,968,578 13,658,917
LONG TERM DEBT(less: current portion) 9,921,897 7,369,150
DEFERRED INCOME TAXES 1,949,156 2,426,351
---------- ----------
24,839,631 23,454,418
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, par value $ 1 each, authorized
35,000,000 issued and outstanding
- 18,532,000(2000-16,100,000) 18,532 16,100
Additional paid-in capital 3,751,703 138,783
Deficit (14,674,251) (10,944,866)
----------- ----------
(10,904,016) (10,790,003)
----------- ----------
$13,935,615 $12,664,415
=========== ==========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
TOTAL
STOCKHOLDER
NUMBER PAID-IN ACCUMULATED EQUITY
OF SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
Balance - January 1,
2001 16,100,000 $ 16,100$ 251,850 $(11,786,941) $(11,518,991)
Issuance of common
stock 2,432,000 2,432 3,499,853 - 3,502,015
Net loss for the
period - - - (2,616,928) (2,616,928)
---------- ------- --------- ------------ ----------
Balance - September 30,
2001 18,532,000 $ 18,532$3,751,703 $(10,944,886) $(10,790,003)
========== ======= ========= =========== ===========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
2001 2000
REVENUE
Freight $28,502,879 $29,950,176
Other freight related 90,600 184,489
---------- ----------
28,593,479 30,134,665
---------- ----------
OPERATING EXPENSES
Rent and purchased transportation 14,034,554 14,563,557
Salaries, wages and benefits 7,632,920 8,512,185
Operations and maintenance 5,216,514 5,426,372
Insurance and claims 2,435,166 1,824,135
Taxes and licences 483,001 515,819
Communications and utilities 432,332 442,417
Depreciation and amortization 924,774 1,616,684
---------- ----------
31,159,261 32,901,169
---------- ----------
OPERATING INCOME(LOSS) (2,565,782) (2,766,504)
---------- ----------
OTHER ITEMS
Gain (loss) on sale of fixed assets and other (148,815) 213,606
Interest income 173,365 269,746
Interest expense (587,079) 1,494,896
Miscellaneous expenses (103,131) (119,630)
---------- ----------
(665,660) 1,858,618
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEMS (3,231,442) (907,886)
EXTRAORDINARY ITEMS (614,514) -
---------- ----------
NET LOSS FOR THE PERIOD $(2,616,928) $ (907,886)
========== =========
Number of Shares Outstanding 18,532,000 16,100,000
========== ==========
Earnings per Share $ (0.14) $ (0.06)
========= =========
See Notes to Interim Financial Statements
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
INTERIM STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
2001 2000
CASH FLOW FROM OPERATING ACTIVITIES
Net loss for the period $(2,616,928) $ (907,886)
---------- ----------
Adjustments to reconcile net loss to net cash provided
from operating activities:
Depreciation and amortization 1,616,684 1,616,684
Deferred income taxes 20,351 20,351
Gain on sale of fixed assets 148,815 (213,606)
Changes in current assets and liabilities
Accounts receivable 490,112 490,112
Inventories 14,130 14,130
Refundable income taxes 28,000 -
Prepaid expenses (376,909) 1,288,074
Accounts payable 74,187 (270,060)
Other current liabilities (875,422) 187,892
---------- ----------
555,889 3,133,577
---------- ----------
NET CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES (2,061,039) 2,225,691
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (1,292,467) (15,132)
Proceeds from sale of fixed assets 76,814 1,717,776
(Increase) Decrease in other assets (8,296) 12,225
---------- ----------
NET CASH PROVIDED BY(USED IN) INVESTING ACTIVITIES (1,223,949) 1,714,869
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft - net 84,676 (341,112)
Restricted investments - net 25,213 100,000
Short-term borrowings - net (1,094,492) 2,495,737
Increase(Reduction) in long-term debt - net 875,589 (6,203,097)
Issuance of common stock 3,499,853 50,000
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,390,839 (3,898,472)
--------- ---------
NET CHANGE IN CASH 105,851 42,088
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 124,501 76,020
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 230,532 $ 118,108
========= =========
See Notes to Interim Financial Statements.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 1: Nature of Operations
The Company is a medium-haul, irregular route, truckload carrier of
general commodities which transports freight primarily throughout the
Southeastern and Eastern United States. The Company's top five
customers accounted for more than 40% of revenue for 2000. The top two
customers accounted for more than 23% of revenue for 2000.
On November 11, 1999, Glenn McClendon Trucking Company, Inc. (GMTC)
merged into "RDA Services, Inc. (RDA). GMTC was treated as the acquirer
and RDA as the acquiree. The resulting merged entity was them renamed
McClendon Transportation Group, Inc. for accounting purposes, the
acquisition has been treated as an acquisition with all costs in excess
of any cash received charged to expense.
NOTE 2: Summary of Significant Accounting Policies
Accounts Receivable - Trade
Trade receivables represent amounts due from various companies for
shipment services. Bad debts are normally accounted for using the
allowance method, based on the credit worthiness of its customers, as
well as general economic conditions.
Inventories
Inventories consist of fuel, tires, and repair parts and are valued at
the lower of cost or market, with cost being determined using the first-
in, first-out method.
Fixed Assets, Depreciation and Amortization
All fixed assets are stated at cost and are depreciated on the straight-
line method for financial statement purposes. For income tax reporting,
the Company uses accelerated methods. The cost of revenue equipment
includes items such as tires, air deflectors, and and communication
equipment used in or on the tractors and trailers. Maintenance, repairs
and minor renewals are expensed as incurred, while additions and major
renewals are capitalized. Revenue equipment is depreciated to a 20%
salvage value for trailers and a 15% salvage value for tractors. The
useful lives employed for computing depreciation on principal classes of
fixed assets for financial statement purposes are as follows:
Buildings and land improvements 10 - 40 years
Revenue equipment
Tractors 6 years
Trailers 8 years
Furniture and fixtures 5 - 10 years
Other fixed assets 5 - 20 years
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 2: Summary of Significant Accounting Policies(continued)
Revenue Recognition
Revenue is recognized when the shipment is completed and bills of lading
received.
Income Taxes
Deferred income taxes are provided for differences in the timing of
reporting income for financial statement and tax purposes, and results
primarily from differences in depreciation methods.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts reflected in the balance sheet for cash,
receivables and short-term borrowings approximate their values due to
the short maturities. Management is unable to estimate the fair value
of its other financial instruments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and 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.
Loss per Share
Basic loss per common share is calculated by dividing the net loss by
the average number of common shares outstanding during the period.
Diluted loss per common share is calculated by adjusting outstanding
shares, assuming conversion of all potentially dilutive securities. The
Company has a simple capital structure with no potentially dilutive
securities.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 3: Accounts Receivable
Trade accounts receivable are summarized as follows:
2001 2000
---------- ----------
Trade accounts receivable $ 3,693,666 $ 4,217,188
Allowance for doubtful accounts (112,881) (112,881)
---------- ----------
$ 3,580,785 $ 4,104,307
========== ==========
Accounts receivable other than trade are summarized as follows:
Officers and employees(Note 11) $ 182,060 $ 166,288
Insurance premium refunds 32,509 35,361
Miscellaneous 198,084 (103,862)
---------- ----------
$ 263,102 $ 97,787
========== ==========
NOTE 4: Prepaid Expenses
Prepaid expenses are summarized as follows:
2001 2000
---------- ----------
Insurance, including deposits $ 1,546,052 $ 1,076,120
Taxes, licences and permits 423,818 476,170
Other 407,572 181,372
---------- ----------
$ 2,377,442 $ 1,733,662
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 5: Fixed Assets and Depreciation
Major classes of fixed assets and accumulated depreciation are
summarized as follows:
2001 2000
---------- ----------
Land $ 295,944 $ 318,944
Building and land improvements 1,696,967 1,696,967
Revenue equipment 18,488,582 20,075,820
Furniture, fixtures and other 3,357,691 3,340,512
---------- ----------
23,744,684 25,432,243
Accumulated depreciation (16,724,858)(19,339,222)
---------- ----------
$ 7,019,826 $ 6,093,021
========== ==========
NOTE 6: Short-Term Borrowings
Short-term borrowings consists of the following:
2001 2000
---------- ----------
$5,000,000 line of credit from Systran Financial
Services Corporation, with interest at prime
plus 2%, accounts receivable as collateral.
Borrowings on the line of credit are limited by
various restrictions on the above collateral. $ 2,238,366 $ 2,978,730
Demand note from Columbus Bank & Trust with
interest at prime plus 3%, accounts receivable,
contract rights as collateral. 1,513,049 5,018,879
Unsecured note from stockholders, interest at
8.5%, due January 18, 2001. 200,000 250,000
Other notes payable - stockholders 6,968 49,990
---------- ----------
$ 3,958,383 $ 8,297,599
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 7: Other Accrued Expenses
Other accrued expenses are summarized as follows:
2001 2000
---------- ----------
Accrued self-insured liability claims
(see below) $ 710,413 $ 286,440
Accrued workers' compensation 552,478 1,989,503
Other accrued expenses 170,678 (65,821)
---------- ----------
$ 1,433,569 $ 2,210,122
========== ==========
During 1998, the Company negotiated with its previous liability
insurance carrier for forgiveness of $ 1,106,951 of outstanding claims
under its policy. The forgiveness was accepted, subject to certain
contingencies which were not resolved until 1999. Accordingly, this
debt foregiveness income is recognized in the 1999 statement of
operations as an extraordinary item.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 8: Long-Term Debt
Long-term debt consists of the following:
2001 2000
---------- ----------
Notes payable - Columbus Bank & Trust Co.,
interest only through June 2001, thereafter
monthly payments of approximately $ 180,000,
including interest at prime, final payment
due August 2005; equipment other assets and
endorsements as collateral; $ 6,975,317 $ 3,900,000
Note payable - equipment: Navistar Financial
Corporation (see below); 2,100,000 2,100,000
Note payable -equipment:
Financial Federal Credit, Inc. monthly
principal payments of $27,679 plus interest
at prime plus 2%, due October 2005; 1,356,269 779,215
Note payable - equipment
Financial Federal Credit, Inc. monthly
principal payments of $43,083 plus interest
at bank prime, due February 2004 1,249,384 -
Note payable - real estate:
Columbus Bank & Trust Co., interest only to
June 2001,thereafter, monthly blended
payments of $12,174 at prime plus 2%, due
July 2005 480,000 480,000
Note payable - vehicles:
Ford Credit, monthly payments total $ 2,314,
including interest at prime plus 2.0%, due
July 2005. 53,860 79,618
Notes payable - McClendon Enterprises 36,500 36,500
---------- ----------
12,969,330 7,375,333
Less: Current portion (3,047,433) (6,183)
---------- ----------
$ 9,921,897 $ 7,369,150
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 8: Long-Term Debt(continued)
Aggregate maturities under these arrangements for years subsequent to
September 30, 2001 are as follows:
2001 $ 3,047,433
2002 2,881,204
2003 2,694,432
2004 1,464,084
2005 2,882,177
----------
$12,969,330
==========
NOTE 9: Operating Leases
The Company has acquired trailers through operating leases with various
leasing companies with options to purchase at fair market value at the
end of such leases. The leases are for periods of 6 to 7 years;
however, after 3 years the lease may be canceled by the Company upon
meeting specified conditions in the contracts. Under a terminal rental
adjustment clause, the Company guarantees a 15% residual value at the
end of each lease.
During the year the Company also acquired tractors through operating
leases with options to purchase the equipment at their fair market value
at the end of the leases. The leases are for periods of 18 months to 36
months.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 9: Operating Leases
The Company also leases certain real estate properties from McClendon
Enterprises (a related party).
Below is a schedule of future minimum payments under the above operating
leases:
McClendon Total
Tractor Trailer Enterprises Operating
Leases Leases Leases Leases
Amounts due during:
2001 $ 1,002,240 $760,357 $ 132,000 $ 1,894,597
2002 751,680 48,627 132,000 932,307
2003 288,144 - 132,000 420,144
2004 - - 132,000 132,000
2005 - - 132,000 132,000
---------- ------- -------- ----------
$ 2,042,064 $808,984 $ 660,000 $ 3,511,048
========== ======= ======== ==========
Other rent expense is summarized as follows:
2001 2000
---------- ----------
Tractor leases $ 828,918 $ 199,056
Trailer leases 273,703 629,502
McClendon Enterprises lease 99,000 99,000
Spotting service 205,182 213,263
Other rents 161,253 158,475
---------- ----------
$ 1,568,055 $ 1,299,296
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 10: Income Taxes
The Company's net carry basis of long-term assets exceeded its tax
basis for such assets by approximately $ 3,786,453 at September 30,
2001. See Note 2.
Net deferred tax liabilities in the accompanying balance sheet reflect
the liabilities associated with temporary differences, principally
depreciation of fixed assets.
Provison for income tax benefit is summarized as follows:
2001 2000
---------- ----------
Current tax expense
Federal $ - $ -
State - -
Deferred tax benefit - -
---------- ---------
$ - $ -
========== =========
The income tax benefit differs from the income tax benefit that
would result from applying statutory rates to pretax income.
This is due primarily to the payment of per diems to drivers,
which are only partly tax deductible. As a result of the non-
deductible per diems and other permanent differences, the
Company has no net operating loss carryforward available at
December 31, 2001. Reconciliation of the provision for income tax
benefit to statutory rates are is as follows:
2001 2000
% %
Federal provision for income taxes at
statutory rates (34.0) (34.0)
State provision for income taxes at
statutory rates (5.0) (5.0)
Federal tax benefit from state income
tax deduction - 0.79
Per diems and other permanent
differences 2.74 2.74
Other 7.69 7.69
------ ------
Total (27.23) (27.23)
====== ======
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 11: Related Party Transactions
McClendon Enterprises
The Company leases under operating leases, its present operating
facility and other real estate from McClendon Enterprises, a
partnership comprised of two Company stockholders. Total rent expenses
on these leases was $99,000 for 2001, $99,000 for 2000.
Other
The Company's two stockholders are obligated to a previously redeemed
stockholder on notes executed to acquire the previous stockholder's
stock. The balance of these notes as of September 30, 2000 was
approximately $ 170,000 with quarterly principal and interest payments
due through 2001.
The Company has a note payable outstanding from two stockholders in the
amount of $ 200,000. The Company also has a loan payable outstanding
from a stockholder in the amount of $ 49,990 for September 2001 and
$ 0 for September 2000 respectively. These amounts are included in
short-term borrowings, as discussed in Note 6.
The Company also has various loans and other receivables from certain
officers and stockholders, summarized as follows:
2001 2000
---------- ----------
Stockholder notes receivable, interest at 7% $ 126,400 $ 91,000
Other stockholder receivables 9,778 9,677
Other officer and employee receivables 45,882 65,611
---------- ----------
$ 182,060 $ 166,288
========== ==========
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 12: Profit Sharing Plan
The Company maintains a qualified defined contribution profit sharing
plan with 401(k) provisions covering substantially all employees with
over one year of service.
Contributions based on a percentage of compensation are determined
annually by the board of directors. The Company made contributions
totaling $25,618 for the period ended September 30, 2001 and $ 25,007
for the period ended September 30, 2000.
NOTE 13: Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
2001 2000
---------- ----------
Interest $ 569,579 $ 763,514
Taxes $ 8,461 $ 151,548
NOTE 14: Contingencies
Self-Insurance Plans
The Company is partially self-insured with respect to various risk
areas as follows:
Liability, Cargo and Physical Damage
For automobile liability, the Company is responsible for any claims
less than $100,000 and for claims in excess of the $ 1,000,000 policy
limit. The Company also has a $4,000,000 umbrella policy per
occurrence.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 14: Contingencies(continued)
For general liability, the Company is responsible for any claims less
than $10,000 and for claims in excess of $1,000,000 per occurrence.
The policy has a $2,000,000 annual aggregate limit. The Company also
has a $ 4,000,000 annual aggregate umbrella policy.
For cargo damage, the Company is responsible for any claims less than
$100,000 and for any claims in excess of the $300,000 policy limit.
For physical damage to the revenue equipment, the Company is
responsible for any claims less than $1,000.
Workers' Compensation
The Company is also self-insured with respect to workers' compensation.
Claims in excess of $300,000 are covered by an insurance policy. The
Company is responsible for any claims less than $300,000. As a result
of state requirements, an actuarial valuation was obtained during the
year which estimated the expected future claims. Accordingly, the
Company accrued the estimated present value of claims outstanding and
those incurred but not reported.
Group Health
The Company has elected to self-insure for its group health insurance
coverage. Blue Cross-Blue Shield acts as administrator for the plan
whereby the Company is responsible for all health claims, not to exceed
$50,000 annually, per insured individual. The claims under this plan
are accounted for on a cash basis.
Credit Risks
The Company extends credit across different industries and geographic
areas and requires no collateral from its customers.
McCLENDON TRANSPORTATION GROUP, INC.
LAFAYETTE, ALABAMA
NOTES TO INTERIM FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 2001
(UNAUDITED)
NOTE 15: Going Concern
As shown in the accompanying financial statements, the Company has
experienced significant operating losses and has deficits in working
capital and net worth. These factors raise substantial doubt about the
Company's ability to continue as a going concern.
Management is working with its primary lenders to monitor the status of
its indebtedness and is currently evaluating methods to reduce costs
and improve operating results. In addition, as reflected in Note 8,
the Company has renegotiated certain debt obligations with Navistar
Financial Corporation and "Columbus Bank & Trust Company, that are
expected to further reduce its outstanding indebtedness through a
combination of foregiveness and equity conversion. During 1999, the
Company signed certain agreements to effect a reorganization plan as
more fully described in Note 17.
If the Company is unsuccessful in its efforts, it may be necessary to
undertake such other actions as may be appropriate to preserve asset
value. The financial statements do not include any adjustments, other
than the classification of long-term debt as disclosed in Note 8, that
might result from the outcome of this uncertainty.
NOTE 16: Reorganization
During June, 1999, the Company initiated a plan of reorganization. As
a result the Company entered into a reverse merger transaction with RDA
Services, Inc. in November, 1999 whereby RDA Services, Inc. purchased
Glenn McClendon Trucking Company, Inc. ("GMTC") through issuance of its
stock. RDA Services, Inc. then changed its name to McClendon
Transportation Group, Inc. The principal shareholders of GMTC retained
90% of the stock of the newly merged Company. The transaction also
included refinancing certain portions of the line-of-credit agreement,
as well as other long-term debt obligations as discussed in Note 8.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" may
constitute forward-looking statements for purposes of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended, and as such may involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied
by such forward-looking statements. Important factors that could cause the
actual results, performance or achievement of the Company to differ materially
from the Company's expectations include, without limitation, the following: 1)
the Company is unable to reduce transportation costs or pass on the increased
costs of fuel to its existing customers; 2) the Company is unable to attract new
customers; 3) the Company is unable to retain existing personnel or hire
additional personnel; 4) the industries the Company serves experience a downturn
in business or have less rapid growth than anticipated; 5) new competitors enter
the markets the Company serves or existing competitors increase their marketing
efforts; and 6) the Company is unable to obtain additional debt or equity
financing on favorable terms, if at all, to satisfy cash requirements. All
written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by such factors.
Working Capital and Cash Flow
The Company's working capital deficiency decreased from a negative $7,944,886
as at December 31, 2000 to a negative $6,242,935 for the nine months ended
September 30, 2001. The current ratio was .46 and .52 at December 31, 2000 and
September 30, 2001 respectively. The change in working capital was due
primarily to the restructuring of certain long-term debt and foregiveness of
such debt.
The Company continues to experience cash flow problems as current liabilities
exceed current assets. Much of this is due to the current maturities of long-
term debt which the Company is in the process of restructuring. The Company
periodically seeks additional working capital through debt and equity financing
from public and private sources when opportunities become available, but to date
has been unable to obtain additional financing from any source although it is
able to meet its current cash flow needs for operations.
Item 6: Exhibits and Reports on Form 8-K
Exhibit 11 - Computation of earnings per common share - See Statement
of Operations
Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
McCLENDON TRANSPORTATION GROUP, INC.
By: /s/ JAMES McCLENDON
----------------------
James McClendon
President
Dated: November 13, 2001