SECURITIES AND EXCHANGE COMMISSION
                                          Washington, D.C. 20549

                                                FORM 10-KSB

[x]      Annual Report Pursuant to Section 13 or 15(d) of the
         Securities and Exchange Act of 1934 [Fee Required]

         For the Fiscal Year ended June 30, 1996
 
                                        Commission File No. 0-18729

           CONTINENTAL AMERICAN TRANSPORTATION, INC.    
                               Name of Small Business Issuer in its Charter

         COLORADO                                 84-1099599          
State or Other Jurisdiction of              IRS Employer Identification
Incorporation or Organization               Number

495 Lovers Lane, Calhoun, Georgia                                 30701 
Address of Principal Executive Offices                          Zip Code

           (706) 629-8682                        
Issuer's telephone Number, Including Area Code

Securities Registered Pursuant to Section 12(b) of the Act:
                                                   NONE
Securities Registered Pursuant to Section 12(g) of the Act:
 
Title of Each Class                  Name of Each Exchange on Which Registered
    Common Stock                                     Over the Counter (OTC)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of Securities Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes   X                    No      

Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in
this Form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [ ]

Registrant's' revenues for the fiscal year ended June 30, 1996
                                             were $36,801,423

         The aggregate market value of voting stock held by non-
affiliates of the registrant as of October 4, 1996, was
$8,487,581 (based upon $2.995 per share being the average bid
and asked prices on that date as reported by the Electronic
Bulletin Board of the National Association of Securities
Dealers, Inc.).  In making this calculation, registrant has
assumed, without admitting for any purpose, that all executive
officers, directors, employees of registrant, as well as any
entities they control, and no other persons, are affiliates.
<PAGE>


                                 CONTINENTAL AMERICAN TRANSPORTATION, INC.

                                                 CONTENTS
                                                              

PART I.                                                                  Page

         Item  1.          Business                                        3
         Item  2.          Properties                                      10
         Item  3.          Legal Proceedings                               11
         Item  4.          Submission of Matters to a
                           Vote of Security Holders                        13

PART II.

         Item  5.          Market for Registrant's Common
                           Equity and Related Stockholder
                           Matters                                         14
 
         Item  6           Managements' Discussion and
                           Analysis or Plan  of Operation                  19

         Item  7.          Financial Statements and
                           Supplementary Data                              25

         Item  8.          Changes in and Disagreements with
                           Accountants on Accounting and
                           Financial Disclosure                            25

PART III.

         Item 9.           Directors and Executive Officers
                           of the Registrant                               27

         Item 10.          Executive Compensation                          29

         Item 11.          Security Ownership of Certain
                           Beneficial Owners and Management                33

         Item 12.          Certain Relationships and
                           Related Transactions                            34

PART IV.

         Item 13.          Exhibits, Financial Statement
                           Schedules, and Reports on 8-K                   36
<PAGE>


                                                      PART I
Item  1:  Business

General

         Continental American Transportation, Inc. (the "Company"), a
Colorado corporation organized in 1983, has its principal corporate
offices located in Calhoun, Georgia, which is also the location of
its largest, wholly owned subsidiary, Carpet Transport, Inc.
("CTI").  In addition, the Company has two other wholly owned
operating subsidiaries, Chase Brokerage, Inc. ("Chase"), located in
Palatka, Florida, and Blue Mack Transport, Inc. ("Blue Mack"),
located in Pottstown, Pennsylvania.  Collectively, the Company and
its subsidiaries operate a national non-union full and less than
truckload carrier and freight brokerage and logistics business.
The substantial majority of the Company's business is operated by
CTI which primarily transports carpet goods, textiles, and produce.
CTI utilizes eighteen terminals to consolidate shipments for the
carpet and textile manufacturing industry.  Blue Mack is a short to
medium-haul, dry van and refrigerated full truckload carrier
operating primarily east of the Mississippi River, from the States
of Maine to Florida.  Blue Mack transports general commodities,
including consumer goods, packaged foodstuffs, and paper, plastic,
and beverage products.  Chase operates a freight brokerage and
logistics business from its principal offices located in Palatka,
Florida.

         Historically, the Company has focused on acquisitions to
achieve growth and to provide existing customers of the acquired
entities with a high quality of service with the goal of obtaining
sustained and predictable long term business growth.  The Company's
business expansion strategy is to continue to increase its business
with its existing customer base and to make selective acquisitions.

         The Company's acquisitions record is indicative of its
business growth strategy.  In June, 1995, the Company acquired Blue
Mack of Pottstown, Pennsylvania by means of a reverse merger
acquisition.  Also, in June, 1995, the Company purchased certain
revenue equipment from Herr's Motor Express, Inc., doubling the
size of the Company's then existing revenue equipment.  On April 4,
1996, effective on February 29, 1996 the Company completed its
acquisition of CTI, Chase and the affiliated company, A&P
Transportation, Inc., since merged into CTI.

         This document may contain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.  See "General", "Strategy and Operations", "Revenue
Equipment" and "Competition" in this Item, and "Management's
Discussion and Analysis or Plan of Operation" in Part II, Item 6.

<PAGE>



                                                         

Strategy and Operations

         To serve its customers in the carpet and textile manufacturing
industry, the Company has a network of regional terminals and
offices strategically located throughout the United States.  In the
Western United States, the Company has terminals located in Tulsa,
Oklahoma and in San Antonio, Houston and Dallas, Texas.

         In the Eastern United States, the Company has terminals
located in Canadaigua, New York, Pottstown, Pennsylvania,
Philadelphia and Pittsburgh, Pennsylvania, Baltimore Maryland and
Richmond, Virginia.

         The Company's terminals in the Southern United States are
located in Greensboro, North Carolina, Monroe, Louisiana, Port
Allen Louisiana, Mobile, Alabama, Memphis, Tennessee, Kingsport,
Tennessee, and in Tampa, Orlando, Jacksonville, and Miami, Florida.

         The current network of terminals enables the Company to
respond more rapidly to customers' changing distribution
requirements.  This network also permits the Company to expedite
the maintenance of its equipment on a regional basis and to
purchase fuel in bulk.  All of the Company's terminals have
terminal managers who work and coordinate their activities with the
fleet managers, customer service representatives and dispatchers as
well as oversee the needs of the Company's drivers.

         This network of terminals provides the Company with the
ability to principally serve its carpet manufacturing customers in
accordance with their traditional distribution requirements.  The
Company, however, in an effort to more fully utilize its revenue
generating equipment resources on their return or back-haul trips
from western points such as from the Seattle, Portland, San
Francisco and Los Angeles metropolitan areas, has recently signed
a letter of intent to acquire a California-based transportation
company, Country Wide Transport Services, Inc. ("Country Wide").
Country Wide Truck Service, Inc., based in Corona, California, is
an irregular-route truckload common and contract carrier which
transports temperature-controlled commodities throughout the United
States and Canada from its terminal base in southern Califoronia.
Vertex Logistics, Inc., a subsidiary of Country Wide, based in
Rochester, New York, is a freight brokerage operation providing
logistics management services to producers of consumer and durable
goods.  In the event the Company's acquisition of Country Wide is
successfully completed, the Company will then have integrated a
western terminal center with which to provide customer
transportation needs for routes coming east, resulting in more
productive "round-trip" utilization of the Company's revenue
generating equipment.*


                  
* May contain "forward-looking statements".

<PAGE>
                                                        

         The Company focuses on the marketing of its services to the
large carpet manufacturers located in the southeast region of the
United States.  The Company's services to these customers include
multiple drops; appointment pick-ups and deliveries; assistance in
loading and unloading; dedicated equipment with extra trailers that
can be located for the convenience of customers, and; the
assignment of particular drivers and equipment to prescribed
routes, providing better service to customers while maintaining a
high equipment utilization.

         The Company has signed an agreement to purchase the Innovative
Computer System software and IBM hardware in order to automate the
operational and administrative functions of CTI.  Management
anticipates improved informational resources and internal controls
as a result of this system.  This management information system is
already installed and fully implemented in the Company's
subsidiary, Blue Mack.  Once the system is installed and
implemented in CTI, the Company anticipates integration of the
operations of CTI and Blue Mack in order to improve utilization of
its revenue equipment and a reduction of administrative personnel.*

         The Company is purchasing a fully integrated computer network,
"Qualcomm onboard" with planned installation over the next several
years; this communications system shall include mobile
communications terminals that will be installed on 500 of the
Company's tractors.  This system, together with its specialized
licensed software, will link the tractor drivers with the Company's
headquarters in Calhoun, Georgia, via satellite at any time except
from 10:00 PM to 3:00 AM Pacific Time during the 7 day week.  With
its system of code buttons, this communications equipment will
enable drivers to inform their dispatchers of the status of their
route performance and, in cases of emergency, their need for
immediate assistance.  The Company believes this communications
system will enhance driver retention, improve equipment utilization
and provide for better customer service.*
















                   
** May contain "forward-looking statements".
<PAGE>

                                                        

Revenue Equipment

         The Company acquires premium tractors to assist in the hiring
and retention of qualified drivers, to promote safety and minimize
maintenance and the costs of repair.

         The following table shows the number of units and age of
revenue equipment operated by the Company at June 30, 1996:

                                                          Refrigerated
Model Year             Tractors        Trailers            Trailers   

 1996                      0              55                 0      
 
  1995                    241             160                71      

  1994                    176               0                 0      

  1993                    156              50                 0      
 
  1992                     20             227                55      

  1991                     21             134                77      

  1990                     17             324                20      

  1989                     43             134                 0      

  1988 and
  prior                    59             297                 41     

  Total                   733           1,381                264     

         The Company seeks to minimize its operating costs by
maintaining a relatively new fleet and to replace existing
equipment every 36 months after their respective dates of purchase.
The Company selects and purchases its tractors based upon a number
of factors, including technological engine enhancements, fuel
efficiency, the used equipment market and financing costs.  The
Company maintains a comprehensive maintenance program at its
Calhoun, Georgia headquarters that seeks to minimize down time and
maintain the value of its equipment.  The Company expects to retain
an adequate inventory of specialized trailers in order to continue
to provide specialized services to existing and future customers
requiring such equipment.

         The Company owns and primarily operates Freightliner and
Kenworth Tractors, the majority of which are powered by Detroit
Diesel electronically controlled engines which seek to decrease
fuel consumption and control speed.  The Company utilizes its
refrigerated trailers to service its west coast produce customers
as well as its east coast foodstuff/commodities customers.

<PAGE>

                                                        

Marketing and Customers

         The Company continues to target the large carpet manufacturers
located in the southeast region of the United States as the
principal source of its business.  CTI has been serving these
customers for over 20 years and has been able to retain these
customers based upon its record of quality and responsive service;
timely deliveries; assistance in loading and unloading;
availability of extra equipment to service the needs of these
customers, and; the utilization of Company employee drivers and
Company owned equipment as opposed to significant reliance upon
owner-operators.  The Company intends to continue to rely upon
these well-established service and equipment priorities in order to
expand its market share in the carpet manufacturing industry.

         The Company maintains its strong commitment to customer
relations and marketing and assigns a member of its management team
to each of its largest customers in order to provide the maximum
amount of customer support.  CTI, A&P, and Chase (Collectively, the
"CTI Companies) accounted for $26,587,530 in revenue for the last
four months of fiscal year 1996.  The largest 25, 10, and 5
customers accounted for approximately 46.8%, 31.5%, and 20.8%
respectively, of the CTI Companies' revenues during fiscal year
1996.  No customer accounted for more than 5% of the CTI Companies'
gross revenues during the last four months of fiscal year 1996.

         The Company's Pennsylvania based subsidiary, Blue Mack had
gross revenues of $10,089,264 for the twelve months ending fiscal
year 1996.  The largest 25, 10, and 5 customers accounted for
approximately 77.8%, 52.3% and 36.2%, respectively, of Blue Mack's
revenues during fiscal year 1996.  No customer accounted for more
than 10% of Blue Mack's gross revenues during the last twelve
months of fiscal year 1996.

Drivers and Employees

         The Company maintains a specialized staff at its Calhoun,
Georgia headquarters to recruit, train, support and retain its
employee drivers.  Company drivers are chosen based upon specific
Company guidelines relating pimarily to safety history, driving
experience, road test evaluations, physical examinations as well as
mandatory drug and alcohol testing.  Upon being hired, a Company
driver is trained at the Company's headquarters in Calhoun, Georgia
in all phases of the Company's operational and safety policies as
well as the fuel efficient operation of the Company's equipment.
All Company drivers must pass a safety test and have a current and
valid Commercial Driver's License.

         The Company strives to retain its qualified driver employees
by providing new equipment and comfortable driver lounge/resting
facilities at its Calhoun, Georgia headquarters and at select
terminals across the United States.  In addition, the Company's
driver employees have direct access to Company management and
<PAGE>

                                                        

receive competitive wages and benefits designed to establish a
long-term employment relationship.  For the 12-month period ended
June 30, 1996, the Company's approximate annual driver turnover
rate was 120%.  The Company seeks to recognize its driver employees
who provide loyal and long-term superior service and who maintain
a good driving safety record by rewarding the drivers with semi-
annual pay increases of half of one penny per mile.

         As of June 30, 1996, the Company employed 1,035 persons:  725
are drivers; 42 are in the maintenance department(s), and; 268 are
in the Company's management and administration.  None of the
Company's employees are represented by a labor union.

Safety and Risk Management

         The Company places its safety policy at the forefront of its
driver hiring and retention program.  Drivers are constantly
trained on the operational features of all revenue equipment on an
ongoing basis with the principal emphasis on safety.  The Company's
Director of Safety and his staff constantly communicates with
drivers on such matters as review of applicable laws and
regulations concerning speed, driving hours and equipment
inspections.  If a driver is involved in any accident or emergency,
notwithstanding its scope or gravity, he is subject to a thorough
and routine safety interview and examination as well as to required
testing from which a report is prepared by the Company's Safety
Department.  The Company implements all recommendations received
from its Safety Department based upon its review of trends and
accident reports.

         Claims of loss in the Company's business consist primarily of
cargo loss and damage and auto liability.  The Company maintains
liability insurance policies on its fleet equipment for personal
injury and property damage up to a maximum limit of $1,000,000 per
occurrence with a $5,000 deductible.  The Company is self-insured
for workmen's compensation claims up to a maximum of $250,000 per
occurrence.  Company management closely scrutinizes all claims and
actively participates in all claims adjustment matters.  In the
case of any self-insured claims, Company management estimates the
approximate amount of the potential liability which are accrued as
liabilities on the Company's balance sheet.
 
Fuel

         Increases in fuel prices or taxes could have a direct effect
on the Company's operating results if such increases are not
correspondingly passed on to the customer.  Conversely, any such
increase in fuel prices or fuel taxes has the danger of increasing
the Company's customer billing prices to a point where such prices
could render the Company non competitive with other carriers who
compete for such customers' business.  In such latter cases, the
Company may be forced to absorb most if not all of these increases
in order to maintain competitive customer billing rates.  The
<PAGE>

                                                         

Company stores fuel in underground tanks situated in its Calhoun,
Georgia facility and in aboveground storage tanks at select bulk
fueling terminals.  In addition, the Company negotiates fuel
discounts with certain truck stop operators and other fuel
suppliers and, on occasion, purchases large bulk quantities of
fuel.

Regulation

         The Company is regulated by the United States Department of
Transportation ("DOT") and by various state agencies.  These
regulatory agencies have broad powers, generally governing
activities such as the authority to engage in motor carrier
operations, rates and charges, accounting systems, periodic
financial reporting, and certain mergers, consolidations, and
acquisitions.  In addition, the trucking industry is subject to
regulatory and legislative changes such as increasingly stringent
environmental regulations which can affect the economics of the
industry at any time.

         The Motor Carrier Act of 1980 significantly deregulated the
trucking industry and increased competition among motor carriers.
Following enactment of the Motor Carrier Act, applicants have
obtained DOT operating authority more easily, and interstate motor
carriers, such as the Company have been able to change their rates
more freely with less regulatory scrutiny and delay.  In addition,
the Motor Carrier Act has also removed many route and commodity
restrictions on transportation of freight.

         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.  The DOT requires national driver's licenses for
interstate truck drivers.

         The Company's motor carrier operations are also subject to
environmental laws and regulations, including laws and regulations
dealing with underground fuel storage tanks, the transportation of
hazardous materials, and other environmental matters.  The Company
has initiated programs to comply with all applicable environmental
regulations.  As part of its safety and risk management program,
the Company periodically performs an internal environmental review
to assist the Company achieve environmental compliance and avoid
environmental risk.  The Company's main terminal facilities located
in Calhoun, Georgia were designed to contain and properly dispose
of hazardous substances and petroleum products used in connection
with the Company's business.  The Company has rarely transported
environmentally hazardous substances and, to date, has experienced
no claims for hazardous substance shipments.  In the event the
Company should fail to comply with applicable regulations, the
Company could be subject to substantial fines or penalties and to
civil or criminal liability.

<PAGE>

                                                        

Seasonality

         In the transportation industry, results of operations
generally show a seasonal pattern as customers reduce shipments
during and after the winter holiday season.  The Company's
operating expenses also tend to be higher in the winter months
primarily due to increased operating costs in colder weather and
higher fuel consumption due to increased idle time.

Competition

         The Company competes primarily with other regional, medium and
long-haul as well as national truckload carriers.  Railroads and
air freight carriers also provide competition, but to a lesser
extent, to the Company.  Company management believes that the most
significant competitive factors are pricing, service and the
availability of its revenue generating equipment to meet customers'
requirements.  In general, the trucking industry has been
historically fragmented and highly competitive.  A number of the
Company's competitors have greater financial resources, more
revenue generating equipment and transport a higher volume of
freight than the Company.  In addition, the Company also competes
with other motor carriers for the services of drivers.

Item 2:  Properties

         The following table provides information regarding the
Company's regional terminals and offices:

                                     Company Owned       Monthly
Location                                  Leased         Lease Rate

Calhoun, Georgia                           Own
Pottstown, Pennsylvania                    Leased         $5,200
Baltimore, Maryland                        Leased         $9,234
Dallas, Texas                              Leased         $3,378
Greensboro, North Carolina                 Leased         $3,921
Houston, Texas                             Leased         $4,231
Jacksonville, Florida                      Leased         $3,115
Kingsport, Tennessee                       Leased         $1,000
Memphis, Tennessee                         Leased         $2,075
Miami, Florida                             Leased         $8,897
Mobile, Alabama                            Leased         $2,060
Monroe, Louisiana                          Leased         $2,100
Orlando, Florida                           Own
Philadelphia, Pennsylvania                 Leased         $3,781
Pittsburgh, Pennsylvania                   Leased         $1,800
Port Allen, Louisiana                      Own
Richmond, Virginia                         Leased         $7,500
San Antonio, Texas                         Leased         $3,246
Tampa, Florida                             Own
Tulsa, Oklahoma                            Leased         $6,405
<PAGE>

                                                        

         The Company's headquarters, principal place of business and
location of its main terminals are located on approximately 30.28
acres in Calhoun, Georgia.  This property contains 33,015 square
feet of office space, 27,806 square feet of shop, tire and
maintenance facilities, 1,882 square feet for the employee-driver's
training and lounge facilities, and 129-bay loading dock facilities
and a 4-lane fueling center.
 
         Blue Mack, the Company's wholly owned Pennsylvania subsidiary,
leases approximately 4.5 acres containing a building consisting of
4,000 square feet of office space, a 10-bay maintenance facility
and a 2,000 square foot warehouse located in Pottstown,
Pennsylvania from Mr. Timothy Holstein, an officer and director of
the Company, pursuant to a 5-year lease on a triple net basis, with
monthly rental payments of $5,200 per month.

         As a result of its acquisition of certain assets from Wayne
and Robert Herr, the Company assumed a lease for the following
described terminal in New York State upon the terms stated:

                  Description:  18,000 square feet of storage, repair space
         and 1,200 square feet office space located in a prefabricated
         steel and masonry building situate on five (5) acres:
         Location:  Rt. 21, Canadaigua, New York;
         Monthly Rent:  $3,600;
         Term:  July 1, 1995 to June 30, 1997;

Item 3:  Legal Proceedings

         The Company is party to ordinary routine litigation incidental
to its business, primarily involving claims for personal injury or
property damage incurred in the transportation of freight.  The
Company maintains insurance to cover liabilities in amounts in
excess of self-insured retentions.

         The Company has learned that a former shareholder of the
Company filed a complaint with the Securities and Exchange
Commission alleging that the Company illegally canceled his stock
certificate being held in escrow.  Following a thorough internal
audit, the Company has responded to this complaint alleging, among
other things, that this individual made a claim to these shares
without providing any proof of consideration or payment for them.
On the basis of this complaint, the Securities and Exchange
Commission is conducting a preliminary investigation into the
Company's past trading activities.  Company management is fully
cooperating with this preliminary investigation and intends to
vigorously defend against this action.

<PAGE>




         Charles B. Prater, an employee of the Company and one of the
former owners of the Company's wholly owned subsidiaries, Carpet
Transport, Inc., A&P Transportation, Inc. and Chase Brokerage, Inc.
(collectively the "CTI Companies"), is under indictment in a
pending criminal proceeding entitled United States of America v.
Charles B. Prater, et al., United States District Court, Northern
District of Georgia, Atlanta Division, Criminal Indictment No.
1:95-CR-460.  The indictment charges Mr. Prater, along with certain
other parties, including Mr. Lynwood S. Warmack, a former employee
and co-owner of the CTI Companies, with the embezzlement of several
millions of dollars from the CTI Companies in addition to criminal
fraud and criminal tax evasion.  In addition to the criminal
penalties provided by statute if convicted, the indictment seeks to
assess a forfeiture penalty against Mr. Prater and others in the
amount of approximately $363,000.

         As part of the consideration paid to the sellers of the CTI
Companies, the Company issued 500,000 shares of its common stock to
Mr. Prater, rendering him the beneficial owner of record of more
than 5% of the Company's outstanding common stock.  In order to
assist the Company following its acquisition of the CTI Companies,
the Company retained and continues to retain the services of
Charles Prater as an employee at will on a non-contractual basis.

         A&P Transportation, Inc. ("A&P") was sued in a wrongful death
action in Federal Court in West Virginia prior to its acquisition
by the Company.  Other claims have also been made against A&P
arising out of the same accident.  Company management believes that
A&P's liability could exceed the $1,000,000 maximum limit coverage
provided by its current insurance policy.  In the event the claims
arising out of this accident exceed this insurance coverage and A&P
is found liable therefor, the Company intends to seek
indemnification from the previous owners of A&P pursuant to the
provisions of the acquisition agreement that provides for such
relief.

         Blue Mack Transport, Inc. v. Trustee for Mural Transport,
Inc.:  Blue Mack commenced a core proceeding in the U.S. Bankruptcy
Court, Trenton, New Jersey, seeking the return of a $100,000 loan
it made to this debtor.  Company management has recently learned
that the Bankruptcy Court has recognized this claim as valid.

         Mural Transport, Inc. v. GMAC:  The Company and Blue Mack are
defendants in a core proceeding in the U.S. Bankruptcy Court,
Trenton, New Jersey, in which GMAC seeks payment for and/or lease
payments allegedly due it as a result of the alleged utilization of
its revenue-generating equipment by these parties; the Company and
Blue Mack have, and continue to, vigorously prosecute their defense
against these claims.  The Complainant has failed to specify any
specific amount of its claims against the Company and Blue Mack,
and Company has filed a motion for summary judgment in this matter.
<PAGE>



 

         Trustee for Mural Transport, Inc. v. Continental American
Transportation, Inc., et al:  The Company and Blue Mack are
defendants in a core proceeding in the U.S. Bankruptcy Court,
Trenton, New Jersey, in which the Trustee is suing on a $15,000
claim representing the alleged value of a piece of revenue
equipment allegedly in Defendants' possession.

Item 4:  Submission of Matters To A Vote of Security Holders

         No matters were submitted to a vote of the Company's security
holders during the fourth quarter of the fiscal year ended June 30,
1996.

<PAGE>



                                                      PART II


Item 5:  Market for Registrant's Common Equity and Related
         Stockholder Matters

         (a)      The Company's common stock is currently traded on the
Electronic Bulletin Board of the National Association of Securities
Dealers, Inc. under the symbol "COAW".  The following is a summary
of the high and low bid information per share of the Company's
common stock as quoted during the two preceding fiscal years based
on information available to Company management:

            Quarter Ended              High                       Low   
         June 30, 1996           $ 4.75                          $2.25
         March 31, 1996          $ 3.87                          $2.49
         December 31, 1995       $ 6.55                          $1.58
         September 30, 1995      $12.14                          $ .97
         June 30, 1995           $  .375                         $ .25
         March 31, 1995                N/A                         N/A
         December 31, 1994             N/A                         N/A
         September 30, 1994            N/A                         N/A
         June 30, 1994                 N/A                         N/A

         The above quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent
actual transactions.

         (b)  As of June 30, 1996, there were approximately 286 holders
of record of the Company's common shares.

         (c)(1)  The Company has not paid cash dividends on its common
stock in either of the two preceding fiscal years, and it is the
current intention of management to retain earnings to finance the
growth of the Company's business.  Future payment of cash dividends
will depend upon the financial condition, results of operations,
and capital requirements of the Company as well as other factors
deemed relevant by the Board of Directors.

701.  Recent Sales of Unregistered Securities

         On July 10, 1995, the Company sold 90,909 of its common shares
to Potex Trust Reg., a Liechtenstein trust with offices located at
Aeulestrasse 5, FL 9490 Vaduz, for the purchase price of $2.75 per
share, or for an aggregate of $250,000.  The offer and sale was
made pursuant to the exemptions from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Regulation S promulgated thereunder and memorialized in
an Offshore Securities Subscription Agreement between the Company
and Potex, dated July 10, 1995.  The Company paid a commission to
its placement agent, Mr. Arden Brown of Boca Raton, Florida, a
placement fee in the amount of 10% of the gross sales proceeds of
<PAGE>


the placement, or $25,000, and Mr. Erik Bailey, a director and
officer of the Company, transferred 8,000 shares of the Company's
common stock from his own account and which payment Mr. Bailey made
on behalf of the Company.  The Company relied upon the following
facts to claim the exemption available.  Potex represented and
warranted to the Company in its subscription agreement, among other
things, that:  it was not a U.S. person; that Potex was outside the
United States at all times during the transaction; that Potex
purchased the Company's securities for its own account and not for
the account of any U.S. person; that Potex acknowledged and
understood that during the 40 day, restricted period, commencing
upon the date of Closing, July 10, 1995, that any offers and sales
of the Company's securities purchased shall only be made in
compliance with the provisions of Regulation S, and; that the
aforementioned restrictions on resale of the Company's securities
purchased shall be set forth in a legend upon the certificates
representing the Company's securities purchased and that the
Company's stock transfer agent will be instructed to place a stop
transfer order against the transfer of such certificates for the
duration of the 40 day restricted period.

         On October 15, 1995, the Company entered into a Finder's Fee
Agreement with Knobloch Bay Cove Trust, a foreign corporation with
offices located at Splugenstrasse 10, Zurich, Switzerland ("Bay
Cove") pursuant to the principal terms of which the Company
appointed Bay Cove as a non-exclusive agent to seek and identify
potential acquisition candidates in the transportation industry and
introduce any such candidates to the Company.  Bay Cove was
authorized to contact any such potential acquisition candidates,
negotiate the preliminary terms of any transaction and bring the
acquisition terms to the attention of the Company.  In the event
that the Company proceeded to acquire an acquisition candidate
introduced to it by Bay Cove the Company agreed to pay Bay Cove a
finder's fee based upon the traditional Lehman Formula, plus
expenses and costs.

         Thereafter, the Company offered and sold 600,000 of its common
shares to Bay Cove for $1,200,000 on November 29, 1995.  Bay Cove
paid for the Company's securities by delivering its promissory note
in the principal amount of the purchase price, accruing interest at
7% per annum, with accrued interest and the principal balance due
and payable on November 29, 1997.

         The Company relied upon, among other things, the following
facts set forth in a certain Offshore Securities Subscription
Agreement, dated November 29, 1995, by and between the Company and
Bay Cove, to claim the exemption from the registration requirements
of the Securities Act provided by Regulation S promulgated
hereunder:  that Bay Cove was not a U.S. person, was outside of the
U.S. at all times during the subject transaction and was not
purchasing the Company's securities on behalf of nor for the
account of any U.S. person; that Bay Cove acknowledged and
understood that during the applicable 40 day restricted period,
<PAGE>

commencing upon the date of Closing, November 29, 1995, that any
offers and sales of the Company's securities shall only be made in
compliance with the provisions of Regulation S or pursuant to a
registration statement filed under the Securities Act or pursuant
to an exemption therefrom.  The Company did not utilize the
services of a placement agent or underwriter for this Regulation S
placement and, therefore, did not pay any fees or commissions in
connection therewith.

         Subsequently, Bay Cove introduced Carpet Transport, Inc., A&P,
Inc. and Chase Brokerage, Inc. (the "CTI Companies") to the Company
and on April 4, 1996, the Company closed its acquisition of the CTI
Companies.  In accordance with the terms of the Finder's Fee
Agreement with Bay Cove, the Company owed Bay Cove approximately
$910,000, as a finder's fee.  Further, the Company agreed to
reimburse Bay Cove for $290,000 of its costs and expenses incurred
in connection with this transaction.  The Company and Bay Cove
agreed thereafter that the Company would forgive the $1,200,000 Bay
Cove Promissory Note in full and complete payment of the finder's
fee due Bay Cove under the terms of the Finder's Fee Agreement.
 
         The Company placed an aggregate of 700,000 of its Series A
Preferred Shares in Regulation S placements with Ageratum Anstalt,
a Liechenstein corporation, having offices c/o Dr. Peter Weibel,
Erlenstrasse 27, CH-4106 Therwil ("Anstalt") and with Seatex AG, a
Swiss corporation, having offices c/o Dr. Peter Weibel,
Erlenstrasse 27, CH-4106 Therwil ("Seatex"), with 400,000 of such
shares being placed with Anstalt and 300,000 of such shares being
placed with Seatex pursuant to seven (7) Offshore Securities
Subscription Agreements dated at various times between the period
commencing on December 21, 1995 through March 15, 1996, for which
the Company received aggregate gross proceeds in the amount of
$700,000.  The Company's Series A Preferred Shares are convertible
into common shares of the Company based upon a conversion price
that is the lesser of (i) the closing price of the Company's common
shares upon the date of conversion, less a 30% discount, or (ii)
$3.50 per share.  The Company utilized the services of Mr. Arden
Brown of Boca Raton, Florida as its placement agent and paid to Mr.
Brown 10% of the gross proceeds received by the Company in this
placement and issued to Mr. Brown warrants to purchase 35,000
Company common shares at $.25 per share and 40,000 Company common
shares at $2.50 per share.

         The Company relied upon the following facts to claim the
exemption from the registration requirements of the Securities Act
provided by Regulation S promulgated hereunder:  that Anstalt and
Seatex were not U.S. persons, were outside of the U.S. at all times
during the subject transactions and were not purchasing the
Company's securities on behalf of nor for the account of any U.S.
person; that Anstalt and Seatex acknowledged and understood that
during the applicable 40 day restricted period, commencing upon the
dates of closings, that any offers and sales of the Company's
securities shall only be made in compliance with the provisions of
<PAGE>

 

Regulation S or pursuant to a registration statement filed under
the Securities Act or pursuant to an exemption therefrom.
 
         On February 22, 1996, the Company retained Meridian Holdings,
Inc., a Florida corporation ("Meridian"), to act as its placement
agent for the placement of up to the face amount of $2,000,000 of
its 5-year convertible debentures pursuant to the provisions of
Regulation S promulgated under the Securities Act.  The Company's
5-year convertible debentures were denominated in increments of
$100,000 each and bore interest at the rate of 10% per annum,
payable in cash after one year, if held by the purchaser during
such period (the "Convertible Debentures").  The Convertible
Debentures are convertible into Company common shares at a price
per share that is (i) 20% less than the closing average bid price
of the Company's common shares for the 5 trading days prior to
conversion, or (ii) at a conversion price per share that is 120% of
the closing average bid price of the Company's shares for the 5
trading days prior to the Closing of the subject Regulation S
placement.

         The Company paid Meridian a placement agent fee equal to 10%
of the gross amount of the Convertible Debentures placed and issued
to Meridian a warrant to purchase 100,000 Company common shares
exercisable at varying times from 6 months to 36 months following
the Closing of the Regulation S placement and at exercise prices
ranging from $2.50 to $7.50 per share.

         Meridian placed 22 Convertible Debentures with a total face
amount of $2,120,000 to non-U.S. persons.  Each of the non-U.S.
persons who subscribed to purchase the Convertible Debentures
represented and warranted to the Company, among other things; that
it was not a U.S. person; that it was outside the United States at
all times during the transaction; that it purchased the Convertible
Debentures for its own account and not for the account of any U.S.
person; that it acknowledged and understood that during the 40 day
restricted period, commencing upon the Closing of the subject
Regulation S placement, that any offers and sales of the
Convertible Debentures shall only be made in compliance with the
provisions of Regulation S, and; that the aforementioned
restrictions on resale of the Convertible Debentures shall be set
forth in a legend upon the certificates representing the
Convertible Debentures and that the Company's stock transfer agent
will be instructed to place a stop transfer order against such
certificates for the duration of the 40 day restricted period.

         The Company placed an aggregate of $2,120,000 of principal
amount of its 10% Convertible Promissory Notes with Rana Investment
Company, Ltd., a company formed under the laws of Saudi Arabia,
with offices at P. O. Box 60148, Riyadh 11545 ("Rana") for the
purchase price equal to the face amount of such notes, $2,120,000.
The placement closed on March 19, 1996, with respect to seven 10%
Convertible Promissory Notes ($700,000) and on April 2, 1996, with
respect to 14.2 10% Convertible Promissory Notes ($1,420,000),
<PAGE>

respectively.  Each of the 10% Convertible Promissory Notes is
convertible into Company common shares up to the limit of 50% of
their face principal amount at any time during the period
commencing 45 days after the closings of the placements, on March
19, 1996 and April 2, 1996, respectively, through the 75th day
following such closings, and; following such 75th day, the holder
may then convert the remaining 50% principal balance of such Notes
into Company common shares; the conversion price of each of the 10%
Convertible Promissory Notes is equal to the lesser of (i) 80% of
the "Market Price" as of the date of conversion, or (ii) 120% of
the "Market Price" as of the dates of the closings and the
issuances of such Notes, on March 19, 1996 and April 2, 1996,
respectively.  "Market Price" is defined in the Notes as the
average closing bid price of the Company's common shares for the
preceding 5 trading days before the conversion date.  The Company
paid Meridian 10% of the gross proceeds of the subject placement
and warrants to purchse 100,000 Company common shares at exercise
prices ranging from $2.50 to $7.50 per share.

         The Company relied (i) upon the representations and warranties
of Rana set forth in the three (3) Offshore Securities Subscription
Agreements executed by Rana, all dated March 31, 1996; (ii) upon
Rana's agent, International Escrow Agents, Inc., and its counsels,
Rossi & Associates, P.A., 140 East Broward Boulevard, Fort
Lauderdale, Florida, to insure strict compliance with all of the
terms and provisions of Regulation S; (iii) the placement of a
restrictive legend upon the 10% Convertible Promissory Notes,
designating them as restricted securities, and; (iv) the placement
of the total offering of the $2,120,000 principal amount of the 10%
Convertible Promissory Notes with one purchaser, Rana, to claim the
exemptions from the registration requirements of the Securities Act
provided by Regulation S and the private placement exemption of
Section 4(2) promulgated under said Act.

         On April 5, 1996, the Company sold 25,000 common shares for
the purchase price of $2.00 per share, or $50,000, to End Run
Investments, Ltd., a corporation organized under the laws of the
Bahamas islands, with offices located at Charlotte House, 2nd
Floor, Charlotte Street, Nassau, Bahamas, pursuant to Regulation S
promulgated under the Securities Act.  The Company relied upon the
representations and warranties made by the offshore purchaser set
forth in a certain Offshore Securities Subscription Agreement,
dated April 5, 1996, by and between the Company and the purchaser,
which affirmed, to wit, that:  purchaser was not a U.S. person, was
outside the United States at all times during the subject
transaction and was not purchasing the Company securities for the
account nor on behalf of any U.S. person; that the purchaser
understood and acknowledged that any offers and sales of the
Company securities made prior to the 40-day restricted period,
commencing on April 5, 1996, shall only be made in compliance with
Regulation S, pursuant to a registration statement filed in
accordance with the Securities Act or pursuant to an exemption
therefrom; that the purchaser agreed not to offer for sale the
<PAGE>

Company securities purchased to any U.S. person during the 90 day
period following April 5, 1996, and that purchaser acknowledged
that the Company placed the appropriate Regulation S restrictive
legend on all of the certificates to be issued representing the
Company securities purchased and directed its stock transfer agent
to place a stop transfer order on such certificates during the 90
day period following the date of April 5, 1996.

Item 6:  Management's Discussion and Analysis or Plan
          of Operation

(a)      Plan of Operation.*

         The Company's plan of operation for the fiscal year ending
June 30, 1997, includes a plan to refinance its debt encumbering
its revenue generating equipment, raising $25 to $30 million of
long-term debt (5-year term) to restructure its balance sheet and
to provide capital for future acquisitions as well as to provide
the financing for the purchase of 300 tractors to expand and
replace the Company's existing fleet.  The Company is in
discussions with various underwriters in an attempt to structure an
offering of its debt securities pursuant to the registration
requirements of the Securities Act of 1933, as amended (the
"Securities Act").  If the Company is successful in reducing its
financing and interest costs, the Company will be able to utilize
these savings to better meet its current cash requirements.  In
addition, the Company anticipates restructuring its existing
liabilities encumbering its revenue equipment.  Absent the
consummation of the planned refinancing of its revenue generating
equipment, the Company will be obligated to meet its future cash
needs through offerings of its equity or debt securities under the
Securities Act or pursuant to offerings exempt from the
registration requirements thereof.

         The Company has signed a purchase order for 300 Freightliner
Tractors for unit prices ranging from $74,200 to $76,100, per
tractor.  Assuming the successful completion of this equipment
transaction, delivery of these units is scheduled to occur
throughout the 1996-1997 fiscal year.










                 
*  May contain "forward-looking statements".
<PAGE>

         The Company has executed a Letter of Intent with Country Wide
Transport Services, Inc., a California-based truckload carrier
("Country Wide") which includes it subsidiary, a New York-based
freight brokerage and logistics concern ("Vertex"), pursuant to the
general terms of which Country Wide will merge with and into a
wholly owned subsidiary of the Company pursuant to (i) a share
exchange on the basis of 1 Company Common share for 5 Country Wide
common shares held of record and (ii) the issuance to Country Wide
common shareholders of 1 Company warrant to purchase 1 Company
common share at the exercise price of $4.25 per share for each 20
Country Wide common shares held of record.  The Letter of Intent is
subject to various conditions, including but not limited to the
parties executing and delivering a definitive agreement and
bilateral due diligence reviews.  In the event that the proposed
transactions are consummated, the Company will have a substantial
operations center in Corona, California, and; significant customer
business going from the west coast eastward that the Company
anticipates will translate into a more efficient utilization of its
revenue equipment which currently at times either returns eastward
from delivery points on the west coast without sufficient cargo, or
on a "dead Head" basis, or which may remain at some western
location for extended periods of time before freight can be located
and shipped eastward.  The Company also anticipates increased
utilization of the Country Wide fleet by providing greater revenue
producing shipments from the southeast to the west coast.  In
addition, the Company anticipates improvement in the utilization of
its revenue equipment on shipments originating from the Northeast
through the use of Vertex's customer base.

















                        

* May contain "forward-looking statements."
<PAGE>


(b)      Management's Discussion and Analysis of Financial
         Condition and Results of Operations

Introduction

         The financial statements of the Company for the fiscal year
ended June 30, 1996, include the financial results of its recently
acquired companies, Carpet Transport, Inc. ("CTI"), A&P
Transportation, Inc. ("A&P") and Chase Brokerage, Inc. ("Chase")
(collectively, the "CTI Companies") for the last four months of the
fiscal year ended June 30, 1996.  Prior to March 1, 1996, the
Company's financial statements reflect only the financial condition
and results of operations of its sole operating subsidiary, Blue
Mack Transport, Inc. ("Blue Mack"), acquired by the Company through
a reverse merger acquisition on June 21, 1995, with an effective
date of June 30, 1995.  Accordingly, these recent Company
acquisitions do not permit a meaningful period to period
comparison.  Prior to its acquisition of Blue Mack, the Company had
no significant operating businesses nor did it own any significant
assets.

         From June 30, 1995 to June 30, 1996, the Company's gross
revenues grew from $0 to $36,801,423, while the net loss increased
from $171,196 to $673,214 during the same period.  From June 30,
1995 to June 30, 1996, the Company's total assets increased from
$7,096,735 to $79,477,950, while shareholder's equity improved from
$2,587,089 to $6,475,587 during this same period.  These results
are primarily attributable to the fact that the Company did not own
any operating companies until its acquisition of Blue Mack and
certain assets of Herr's Motor Express, Inc., effective June 30,
1995, and its subsequent acquisition of the CTI Companies on April
4, 1996, effective as of February 29, 1996.  As a result, a
comprehensive comparative analysis would not be meaningful.

         The Company's revenues were chiefly derived from its carrier
operations and, to a lesser degree, from its freight brokerage
business.  The increase in revenue and asset growth was due
primarily to the Company's acquisition of the CTI Companies.  At
June 30, 1995, the Company operated a fleet comprised of 128
tractors, 76 refrigerated trailers and 463 dry van trailers.  At
June 30, 1996, the Company operated a fleet comprised of 733
tractors, 264 refrigerated trailers, and 1,381 dry van trailers.
<PAGE>

Results of Operations

         The following table sets forth the percentage relationships of
expense items to operating revenues for the periods indicated:


                                        Year ended June 30, 1996

                                           Revenue            Percentage
 

Operating revenue......................... $36,801,423          100.00%

Operating expenses:
  Purchased transportation.................. 3,180,456            8.64%
  Salaries and benefits.....................10,920,292           29.67%
  Operating expenses........................13,541,344           36.80%
  Operating taxes and licenses..............   333,684             .91$
  Claims and insurance...................... 1,654,116            4.49%
  Communications and utilities..............   734,887            2.00%
  General and administrative................ 2,422,063            6.58%
  (Gain)/Loss on sale of equipment..........  (189,934)         ( .52)%
  Depreciation and amortization............. 4,568,109           12.41%

       Total operating expenses............ 37,165,017          100.99%

  (Loss) from operations...................   (363,954)         ( .99)%

  Total other income (expense).............   (787,375)         (2.14)%

  (Loss) before income taxes............... (1,150,969)         (3.13)%

  (Provision for) Benefit from
       income taxes........................    477,755            1.30%

  Net income (loss)........................   (673,214)         (1.83)%

Fiscal 1996

         The Company's operating revenues on a consolidated basis were
$36,801,423 in 1996.  The Company recognized revenue for twelve months from
its subsidiary, Blue Mack, of $10,258,378, and a net loss of $272,291.  The
acquisition of the CTI Companies on April 4, 1996, effective as of February
29, 1996, accounted for a significant increase in revenues.  The Company
recognized revenue for four months from its subsidiary, Carpet Transport
Holdings Corp. (the "CTI Companies"), of $27,772,736, and net income of
$1,512,302, prior to eliminations and adjustments for intercompany revenues
and expenses.  During this period, CTI recorded revenue of $21,959,597, and
net income of $1,424,765, A&P recorded revenue of $2,860,198, and a net loss
of $123,327, and Chase recorded revenue of $2,952,941, and net income of
$210,864.  During this period, management of the Company, merged A&P into CTI
in order to eliminate redundant personnel and administrative functions,
reduce insurance costs, and improve revenue equipment utilization.  The
<PAGE>

Company expects annual savings and benefits in excess of $800,000 from this
internal merger.*  As a result, A&P shall be reported as a discontinued
operation, effective May 1, 1996.

         The Company embarked on a cost cutting program during the last three
months of fiscal 1996 which management believes will decrease operating
expenses without affecting service to its customers.  As a result of the cost
cutting program, 75 administrative, maintenance, and terminal positions were
eliminated from which the Company expects to realize annual savings of
approximately $1,950,000.*

         The Company anticipates improved operating results emanating from these
cost cutting initiatives.  If, however, fuel prices continue to escalate and
excess capacity in the transportation industry continues, it could cause the
continuation of competitive pressures that could adversely affect equipment
utilization and revenue per mile.*




























                  
* May contain "forward-looking statements".
<PAGE>

Liquidity and Capital Resources.

         The growth of the Company's business has required a significant
investment in new revenue equipment.  The Company's primary source of
liquidity has been funds provided by operations, term borrowings to finance
equipment purchases and from capital raised through the private placements of
the Company's securities.  Net cash used in operating activities totaled
approximately negative $1,369,859 for the year ended June 30, 1996.

         Capital expenditures for the purchase of revenue equipment, office
equipment and leasehold improvements totaled $26,719 for the year ended June
30, 1996.  The Company realized $1,519,963 in proceeds from the sale of
property and equipment for the year ended June 30, 1996.  Net cash provided
by investing activities totaled approximately $431,443 for the year ended
June 30, 1996.  The Company projects that capital expenditures for property
and equipment, will be approximately $24.5 million for the fiscal year ending
June 30, 1997, to be used primarily to acquire new revenue equipment to
expand and replace the Company's fleet, to upgrade existing facilities, and
to make several technological advancements of the Company's operational and
administrative facilities.*

         Net cash used in financing activities amounted to $2,278,975 for the
year ended June 30, 1996.  The Company's financing activities were primarily
the result of increasing debt, to finance the operational losses, purchase
the CTI Companies, and provide for the growth of the Blue Mack subsidiary.
At June 30, 1996, the Company's equipment-related long-term debt totaled
$47,242,848 million and matures in installments over various periods through
2001.

         The Company maintains a $5,000,000 line of credit to finance working
capital for its CTI operation.  In addition, the Company has a separate
$500,000 line of credit to finance working capital for its Blue Mack
operation.  As of June 30, 1996, the Company had borrowed $4,834,378 against
these two lines of credit.

      The Company has adequate liquidity to meet its current needs.  While the
current ratio of the Company is .59, and the debt to equity is 8.87%, the
Company believes that through the refinancing of its revenue equipment debt,
proceeds from the sale of equipment, and a private placement of long-term
debt (5-year notes) of the Company's securities, the Company will be able to
meet its short-term obligations.*  Due to the capital intensive nature of the
trucking industry with respect to purchasing revenue equipment, the Company
will continue to have significant capital requirements over the long term,
which shall require the Company to incur additional debt.*  If the Company is
unable to refinance its existing equipment debt, finance new revenue
equipment, or complete the aforementioned private placement, the Company may
seek to raise additional equity capital.*  The availability of this capital
will depend upon prevailing market conditions,, the market price of the
common stock and other factors over which the Company has no control, as well
as the Company's financial condition and results of operations.*

                  
* May contain "forward-looking statements".
<PAGE>

Seasonality.

         In the transportation industry, results of operations generally show a
seasonal pattern as customers reduce shipments during and after the winter
holiday season.  The Company's operating expenses also tend to increase in
the winter months primarily due to increased operating costs in colder
weather and higher fuel consumption due to increased idle time.

Inflation.

         Many of the Company's 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 the Company's business
during 1996 and 1995 generally were not significant.

Item 7:  Financial Statements

         The Consolidated Balance Sheets of Continental American Transportation,
Inc. and Subsidiaries as of June 30, 1996 and the related Consolidated
Statements of Operations, Changes in Stockholders' Equity, and Cash Flows for
the years ended June 30, 1996 and 1995, together with the related notes and
report of Rosenberg Rich Baker Berman & Company, independent public
accountants, are set forth at pages 39 through 59 below.

Item 8:  Changes in and Disagreements on Accounting and
         Financial Disclosure.
 
     (a)(1)(i) Prior to the change of control of the Company and the takeover
of its affairs by current Company management, effective on June 21, 1995, by
virtue of the reverse merger acquisition of Blue Mack Transport, Inc., on
July 29, 1994, the former Board of Directors of the Company dismissed the
firm of J. Roger Gregg, CPA as accountants for the Company.  On the same
date, the Company engaged the firm of Rosenberg, Rich, Baker, Berman &
Company ("Rosenberg, Rich"), CPA as accountants for the Company.

     (ii) J. Roger  Gregg's reports on the financial  statements  for the years
ended June 30, 1994,  1992, and 1991 contained  adverse opinions and disclaimers
of opinion and qualification.

     (iii)(A)(B)         The Company's Board of Directors made the decision to
engage Rosenberg, Rich and J. Roger Gregg.  The Company has no audit or
similar committee.

     (iv)    During the Company's two preceding fiscal years and any subsequent
interim period preceding such dismissal, Company is not aware of any
disagreements with J. Roger Gregg on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.

     (v)      J. Roger Gregg's opinion covering the fiscal years ended June 30,
1994, 1992 and 1991 contained an adverse opinion which, in effect, stated
that, based upon the Company's prior management's lack of disclosure,
cooperation, and absence of corporate records relating to its business
activities during these periods, Mr. Gregg was required to issue an adverse
<PAGE>

 

opinion on the subject financial statements corresponding to the periods
indicated.  Mr. Gregg's opinion is contained in the Company's Form 10-K for
the year ended June 30, 1994 (the "1994 Form 10-K").

         (a)(3)            The Company requested J. Roger Gregg, to review the
disclosures contained in the 1994 Form 10-K and that firm was given an
opportunity to furnish the Company with a letter addressed to the Commission
containing any new information, clarification of the Company's expression of
its views, or the respect in which it does not agree with the statements made
by the Company herein.  Mr. Gregg furnished the Company with a letter, dated
February 24, 1995, addressed to the Commission, a copy of which is annexed as
Exhibit G to the 1994 Form 10-K which is herein incorporated by reference,
stating that he has had no disagreements with current management with respect
to accounting principles or as to any completed transactions.  Mr. Gregg
further stated that he performed no services for the Company relating to any
subsidiary of the Company not previously located in Asheville, North Carolina
during his period of engagement, nor did current management make him aware
that the Company had any subsidiaries other than those located in Asheville,
North Carolina, including Mural Transport, Inc. and/or any other company
during the period ending June 30, 1994.

<PAGE>

                                                              PART III

Item 9:  Directors, Executive Officers, Promoters and Control Persons;
         Compliance With Section 16(a) of the Exchange Act.

         (a)(b) Identification of Directors and Executive Officers.

         The directors and officers of the Company are listed in the table below
and brief summaries of their business experience are also set forth.

Name                                Age              Position with Company

Timothy Holstein                    38               Director
                                                     President
                                                     Chief Executive Officer

Erik Bailey                         28               Director
                                                     Vice President
                                                     Chief Financial Officer

Brian Henninger                     48               Director
                                                     Secretary
                                                     Comptroller

         Timothy Holstein has been the President, Chief Executive Officer and a
director of the Company since June 21, 1995.  Prior to joining the Company,
Mr. Holstein was the majority owner of Blue Mack Transport, Inc., a
Pennsylvania-based private trucking company which he founded in 1986 and
which company was acquired on June 21, 1995 by the Company pursuant to a
reverse merger acquisition.  Mr. Holstein was appointed to the Company's
Board of Directors and shall remain a director until the next annual meeting
of the Company's shareholders.  Mr. Holstein is also an officer and director
of Bio-Dyne Corporation, a reporting company under the Securities Exchange
Act of 1931, as amended, (the "Exchange Act").

         Erik Bailey has been the Vice President, Chief Financial Officer and a
director of the Company since June 21, 1995.  Prior to his appointment as a
member of the Board of Directors, Mr. Bailey was the Chief Financial Officer
of Blue Mack Transport, Inc., a Pennsylvania-based private trucking company,
since April, 1995.  Prior to that time, Mr. Bailey served as a consultant to
private and public companies.  Mr. Bailey was appointed to the Company's
Board of Directors and shall remain a director until the next annual meeting
of the Company's shareholders.  Mr. Bailey is also an officer and director of
Bio-Dyne Corporation, a reporting company under the Exchange Act.  Mr. Bailey
also serves as a consultant to several private and public companies with
respect to merger and acquisition analysis and advice.

         Brian Henninger has been the Secretary and a director of the Company
since March 27, 1995.  Prior to his appointment, Mr. Henninger served as a
financial consultant to several private companies.  For the approximate ten
year period prior to November, 1995, Mr. Henninger served as the comptroller
for a nationwide transportation company.  Mr. Henninger also serves as an
officer and director of Bio-Dyne Corporation, a reporting company under the
<PAGE>

 

Exchange Act.  Mr. Henninger also serves on the Boards of Directors for
several private companies not engaged in the transportation industry
business.

         Board members are elected by the shareholders to serve until the next
annual meeting; Company officers are appointed by the Board of Directors.

Compliance with Section 16(a) of the Securities Exchange
Act of 1934

         Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and beneficial owners of more
than 10% of any class of equity securities of the Company registered pursuant
to Section 12 of the 1934 Act to file reports of ownership and changes in
ownership with the Securities and Exchange Commission.  Officers, directors,
and beneficial owners of more than 10 per cent of any class of equity
securities of the Company registered under the 1934 Act are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms
filed.

         Based solely on the review of the certified list of shareholders
provided by the Company's transfer agent and on the review of the Exchange
Act forms furnished to the Company, the Company believes that the following
reporting delinquencies occurred during the Company's fiscal year ended June
30, 1996:

Section 16(a) Reporting Delinquencies

    1.     Form 4, Statement of Changes of Beneficial Ownership of Securities,
due on or about October 10, 1995:  Erik Bailey failed to file this Form when
he sold all of his interest in Explorer Capital, Inc., the holder of record
of 180,000 shares of the Company's Series B Convertible Preferred Shares at
the time of such sale occurring on June 21, 1995.
<PAGE>

Item 10:  Executive Compensation

     The following table sets forth the compensation  paid by the Company to its
chief exectutive officer,  its two (2) other executive officers and the four (4)
highest  paid  employees  of the  Company  during the fiscal year ended June 30,
1996.



                           SUMMARY COMPENSATION TABLE
                                   Long Term Compensation
Annual Compensation
_________________________________________________________________               
 
(a)              b)         (c)      (f)              (i)
 
                                            
Name                               Restricted       All Other
and                                Stock           Compen-
Principal                          Award(s)        sation
Position         Year     Salary     ($)             ($)
                                                   

Timothy Holstein
CEO              1996    $ 78,800    --              --
 
Erik Bailey
Chief Financial
Officer          1996    $ 56,100    --              --

Brian Henninger
Comptroller      1996    $ 17,300  36,000+     $30,000*

     Charles B. Prater1996 $300,000 -- -- Employee

Lynwood S.Warmack1996   $300,000     --              --
Employee

Robert Herr      1996    $ 75,000    --              --
Employee

Wayne S. Herr    1996    $ 75,000    --              --
Employee


 There  were no  grants  or  exercises  of  stock  options  pursuant  to the
Company's Stock Incentive Plan during the fiscal year ended June 30, 1996 to the
named  officers.  Stock  appreciation  rights  are not  granted  under the Stock
Incentive  Plan.  The  Company  does not  currently  have in effect a  Long-Term
Incentive  Plan  ("LTIP")  and,  consequently,  no such awards  were  granted to
Company executives in fiscal years covered above.
<PAGE>

     * The Company loaned Mr. Henninger  $30,000 to cover  relocation  expenses;
pursuant to the terms of Mr. Henninger's agreement with the Company,  $10,000 of
such  principal  balance  shall be forgiven  over the course of each of the next
three years as long as Mr. Henninger  remains in the employ of the Company.  The
loan does not
               require Mr. Henninger to pay interest.

     + Mr. Henniniger  received  non-qualified  stock options to purchase 36,000
Company common shares: see, "Employment Agreements" below.

<PAGE>


The Company's 1994 Stock Incentive Plan

         Under the Company's 1994 Stock Incentive Plan (the "Plan")
options to purchase a maximum of 200,000 shares of the Company's
common stock may be granted to officers and employees of the
Company.  Options may be granted that are deemed "Incentive Stock
Options", as defined in the applicable federal tax laws or non-
qualified stock options.  All of the available 200,000 stock
options under the Plan have been granted.

The Company's 401(k) Plans

         Carpet Transport, Inc. and Blue Mack Transport, Inc., two of
the Company's subsidiaries, maintain and sponsor qualified profit-
sharing plans for the benefit of their respective employees.  Both
plans are qualified under Section 401(k) of the Internal Revenue
Code of 1986, as amended, and allow employees thereof to make tax
deferred contributions under the terms of the Plans.  The 401(k)
Plan for Blue Mack Transport, Inc. provides that the employer shall
match employee contributions equal to 25% of such employee's
contribution to the Plan; the 401(k) Plan for Carpet Transport,
Inc. provides that the employer, in its sole and absolute
discretion, may contribute an amount equal to an employee's
contribution.  No employer contributions were made under either
Plan by these employers during the fiscal year ended June 30, 1996.
 
         The Company had no other executive officers other than Mr.
Holstein, Mr. Bailey and Mr. Henninger at June 30, 1996.

Employment Agreements

         The Company signed an Employment Agreement with Brian
Henninger, dated June 15, 1996, pursuant to the general terms of
which Mr. Henninger was retained for a 3-year period to serve as
Vice President-Finance and Secretary of the Company.  The Agreement
provides for annual salaries of $78,000, $104,000 and $130,000
during the first, second and third years of the Agreement,
respectively.  In addition, the Company agreed to loan to Mr.
Henninger $30,000 for relocation expenses concerning his move to
Calhoun, Georgia, and to forgive $10,000 of such amount at the end
of each year of Mr. Henninger's Agreement provided he is in the
employ of the Company at such times.  The Company, as a further
inducement to Mr. Henninger, included in the Agreement a non-
qualified stock option to purchase 36,000 Company common shares at
an exercise price equal to the lesser amount of (i) the trading
price of the Company's common stock on the date of exercise, less
a 20% discount, or (ii) $2.25 per share.

         On September 1, 1996, the Company and Mr. Timothy Holstein
entered into a 3-year Employment Agreement providing that Mr.
Holstein would be retained as the President and Chief Executive
Officer of the Company.  The Agreement provides that the Company
shall pay Mr. Holstein annual salaries of $200,000, $250,000 and
$300,000 for the first, second and third years of the Agreement,
respectively.  In addition, the Agreement provides that Mr.
Holstein shall receive an incentive bonus during each year of the
Agreement equal to 5% of the first $1,000,000 of pre-tax profits;
6% of the next $500,000 of pre-tax profits, and; 7% of the pre-tax
<PAGE>

profits of the Company over $1,500,000.

         The Company also entered into an Employment Agreement with Mr.
Erik Bailey on September 1, 1996, to retain his services as the
Company's Vice President and Chief Financial Officer for a 3 year
term.  Mr. Bailey will receive annual salaries of $104,000,
$130,000 and $156,000 during the first, second and third years of
the term of the Agreement, respectively.  The Agreement also
provides that the Company will pay Mr. Bailey an incentive bonus
equal to 5% of the first $1,000,000 of the pre-tax profit; 6% of
the next $500,000, and; 7% of the Company's pre-tax profit over
$1,500,000 for each year during the term of the Agreement the
Company earns pre-tax profits.
 
Director's Compensation

         None of the Company's directors receive any compensation for
participation in Board of Directors meetings.
<PAGE>

Item 11:  Security Ownership of Certain Beneficial Owners and
          Management

     Set forth  below is  information  concerning  stock  ownership  obtained by
Company management from the certified list of Company  stockholders  provided by
its transfer  agent,  United Stock  Transfer,  as of the record date of June 30,
1996,  of (1) each  person  known by Company to own  beneficially  5% or more of
Company's  common  stock,  (2) each named  director  and  officer  and (iii) all
directors  and  officers of Company as a group,  based upon the number of common
shares outstanding on June 30, 1996.

Title of   Name and Address of    Amount and Nature of  Percent of
 Class     Beneficial Owner                   Beneficial Ownership        Class
Common
Stock
           Timothy Holstein                         739,521             16.93%
           c/o Continental American
           Transportation, Inc.
           Chief Executive Officer
           President and Director
           175 Hammon Road
           Calhoun, GA 30701

           Erik Bailey                              519,897             11.90%
           Chief Financial Officer
           and Director
           1039 Legacy Walk
           Woodstock, GA 30189
 
           Brian Henninger                          46,300*             1.06%
           Vice President-Secretary
           and Director
           275 Saddlebrook Drive
           Calhoun, GA 30701
 
           Charles B. Prater                        500,000            11.45%
           877 Plainville Road
           Plainville, GA 30733

           Robert Herr                              257,500+            5.89%
           349 Buck Road
           Quarryville, PA 17566

           Wayne S. Herr                            257,500+            5.89%
           349 Buck Road
           Quarryville, PA 30733

           All directors and
           officers as a group                1,805,718                41.34%

         * Includes non-qualified stock options to purchase 36,000 common
         shares, see, "Employment Agreements" above.

         + Includes 51,500 common shares held of record by each of Robert
         Herr and Wayne S. Herr as well as 154,500 common shares held by
         Herr's Motor Express, Inc., a company owned and controlled by these
         persons.
<PAGE>

Item 12:  Certain Relationships and Related Transactions
 
         (1)  On October 15, 1995, the Company entered into a Finder's Fee
Agreement with Knobloch Bay Cove Trust, an offshore entity.  The Trustee
and Director of Knobloch Bay Cove Trust ("Bay Cove") is Herbert Bailey,
the father of Erik Bailey, an officer and director of the Company.
Pursuant to the terms of the Finder's Fee Agreement, the Company
authorized Bay Cove to identify potential acquisition candidates in the
transportation industry.  In the event that the Company consummated an
acquisition brought to its attention through the efforts of Bay Cove,
the Agreement provided that the Company would pay to Bay Cove
compensation equal to the traditional Lehman Formula, plus various costs
and expenses, at the closing of any such transaction.

         On November 29, 1995, Bay Cove executed and submitted an Offshore
Securities Subscription Agreement, which was accepted by the Company on
that date, and pursuant to which the Company sold 600,000 of its common
shares to Bay Cove for $1,200,000.  Bay Cove paid the purchase price by
delivering its promissory note in the principal amount of the purchase
price, accruing interest at 7% per annum, with the outstanding principal
balance and accrued interest due on November 29, 1997.

         Subsequently, Bay Cove acted as the finder and proposed Carpet
Transport, Inc., A&P Transportation, Inc. and Chase Brokerage, Inc. (the
"CTI Companies") as acquisition candidates to the Company.  Pursuant to
a certain Restated Stock and Assets Purchase Agreement, dated February
29, 1996, the Company acquired the CTI Companies.  In accordance with
the aforementioned Finder's Fee Agreement, Bay Cove claimed a finder's
fee in the amount of $910,000 and expenses of $290,000.  After
negotiations, the Company agreed to forgive Bay Cove's $1,200,000
promissory note as payment of this finder's fee and expenses due under
the subject Agreement.

         (2)  On September 15, 1995, the Company entered into an Investment
Advisor Agreement with Explorer Financial Services, Inc. ("Explorer").
Pursuant to the terms of this Agreement, the Company appointed Explorer
as its non-exclusive agent to seek and identify potential sources of
capital as well as potential acquisition candidates in the
transportation industry for the Company.  The Agreement authorized
Explorer, among other things, to negotiate and present to the Company
the proposed terms of any equity or debt financings and/or the terms of
any acquisition proposal.  In the event the Company closes any equity or
debt financing proposal or consummates an acquisition identified and
provided to it by Explorer, the Company agreed to pay to Explorer a fee
equal to the amount of 2% of the amount of any such financing and/or the
value of any such transaction consummated, at the closing of any such
transactions.  Mr. Christopher Bailey is the sole owner of Explorer and
is the brother of Erik Bailey, an officer and director of the Company.
<PAGE>


         (3)  On June 30, 1996, the Company entered into a $1,000,000
Revolving Credit Agreement with Bio-Dyne Corporation, a Georgia
corporation havinig its principal offices located at 5400 Bucknell
Drive, S.W., Atlanta, Georgia 30336 ("Bio-Dyne"), pursuant to the
principal terms of which the Company agreed to provide a $1,000,000
facility over a two-year period.  Interest accrues on any amount of the
outstanding principal balance at the rate of 12%, per annum, with
interest payable monthly and accrued interest, if any, together with the
unpaid principal balance due at the end of the term.  As part of this
Agreement, the Company had the right to designate up to three (3)
members of Bio-Dyne's five (5) member Board of Directors and has
designated three (3) members to date, Messrs. Timothy Holstein, Erik
Bailey and Brian Henninger, representing all of the members of the
Company's current Board of Directors.  As of June 30, 1996, Bio-Dyne has
drawn down an aggregate of $450,000 against this credit facility.

         (4)  On August 22, 1995, the Company purchsed certain assets of
Herr's Motor Express, Inc. and all of the issued and outstanding shares
of HMX, Inc., corporations owned and controlled by Robert Herr and Wayne
S. Herr, for (i) the issuance of 200,000 common shares of the Company
(ii) the assumption of debt associated with certain of the assets
purchased in the aggregate amount of $1,103,567 (iii) the delivery of
Company promissory notes in the aggregate principal amount of
$1,268,927, and (iv) the assumption of shareholder loans in the amount
of $208,000.  The Company granted the sellers certain "piggy-back"
registration rights in connection with the Company's common shares
delivered as practical consideration in the transaction.  The aggregate
amount of Company common shares issued to Robert Herr, Wayne S. Herr and
Herr's Motor Express, Inc., a company owned and controlled by the
sellers, rendered these persons as a group, a beneficial owner of more
than 5% of the Company's issued and outstanding common shares at June
30, 1996.  In addition, each of Robert Herr and Wayne S. Herr entered
into a two-year term Employment Agreement with the Company providing for
the payment to each of them of an annual salary in the amount of $75,000
and which provides an incentive bonus in the amount of 1% of the pre-tax
profits of the Company during such term.

         (5)  Blue Mack, the Company's wholly owned Pennsylvania subsidiary,
leases approximately 4.5 acres containing a building consisting of 4,000
square feet of office space, a 10-bay maintenance facility and a 2,000
square foot warehouse located in Pottstown, Pennsylvania from Mr.
Timothy Holstein, an officer and director of the Company, pursuant to a
5-year lease on a triple net basis, with monthly rental payments of
$5,200 per month.

         (6)  Mrs. Linda Bailey paid and or loaned certain funds and
securities to and/or on behalf of the Company and Blue Mack Transport,
Inc. in the aggregate amount of $150,000 as of June 30, 1996.
<PAGE>

         (7)  Carpet Transport, Inc. has a receivable due from All Carpet,
Inc., a corporation in which employee Charles Prater has an ownership
interest, in the amount of $149,000.  This receivable existed on the
books of Carpet Transport, Inc. prior to the acquisition by the Company
of the CTI Companies.

 
ITEM 13:  Exhibits, Financial Statement Schedules, and Reports
          on Form 8-K:  See Exhibit Index on page 38

<PAGE>
                                                        SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly
authorized.


                              CONTINENTAL AMERICAN TRANSPORTATION, INC.



                              By:       s/Timothy Holstein
                                       Timothy Holstein, President and Director

ated:  October 15, 1996




                              By:       s/Erik Bailey                         
                                           Erik Bailey, Vice President,
                                          Chief Financial Officer and Director


Dated:  October 15, 1996



 
                              By:      s/Brian Henninger                      
                                       Brian Henninger, Secretary and Director



Dated:  October 15, 1996


 















CAT9610.KSB upd. 10/15/96
<PAGE>


                                                       EXHIBIT INDEX


















































cat9610.KSB upd 10/15/96
<PAGE>



                                           Independent Auditors' Consent



                  We consent to the incorporation by reference in this
                  Annual Report (Form 10-KSB) of Continental American
                  Transportation, Inc. of our report dated October 11,
                  1996.









                   s/Rosenber Rich Baker Berman & Co.

                  Bridgewater, New Jersey
                  October 15, 1996



<PAGE>

                                  Independent Auditors' Report

To the Board of Directors and Stockholders of
Continental American Transportation, Inc. and Subsidiaries


We have audited the  accompanying  consolidated  balance  sheets of  Continental
American  Transportation,  Inc.  and  Subsidiaries  as of June 30,  1996 and the
related consolidated  statements of operations,  changes in stockholders' equity
and cash flows for the years  ended June 30, 1996 and 1995.  These  consolidated
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  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  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Continental American  Transportation,  Inc. and Subsidiaries as of June 30, 1996
and the  results of its  operations,  changes in  stockholders'  equity and cash
flows for the years ended June 30, 1996 and 1995 in  conformity  with  generally
accepted accounting principles.



Bridgewater, New Jersey
October 11, 1996

                                       


<PAGE>

           Continental American Transportation, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                                  June 30, 1996
                                                  
     

                                                             

       Assets
Current Assets
     Cash and cash equivalents                                $        640,079
     Restricted cash                                                   700,000
     Trade accounts receivable, net of allowance for
      doubtful accounts of $924,958                                 11,120,874
     Installments notes receivable - current portion                   695,087
     Inventories                                                       335,612
     Other current assets                                            2,161,918
     Deferred income tax benefit - current portion                     677,059
                                                               ---------------
         Total Current Assets                                       16,330,629
                                                               ---------------
Property, plant and equipment                                       57,008,832
                                                               ---------------
Other Assets
     Note receivable - related party                                   450,000
     Installment notes receivable, excluding
       current portion                                                 435,306
     Excess of purchase price over fair value
      of net assets acquired, net                                    4,535,564
     Other assets                                                      540,232
     Deferred income tax benefits - noncurrent portion                 177,387
                                                               ---------------
         Total Other Assets                                          6,138,489
                                                               ---------------
         Total Assets                                               79,477,950
                                                               ===============
       Liabilities and Stockholders' Equity
Current Liabilities
     Lines of credit                                                 4,834,378
     Current maturities of long-term debt                            3,822,762
     Current maturities of capital lease obligations                10,768,645
     Accounts payable                                                5,417,982
     Accrued expenses                                                2,146,138
     Income taxes payable                                              572,258
                                                               ---------------
         Total Current Liabilities                                  27,562,163
Long-Term Debt, excluding current maturities                        17,364,622
Capital Lease Obligations, excluding current maturities             28,075,578
                                                               ---------------
         Total Liabilities                                          73,002,363
                                                               ---------------
Stockholders' Equity
     Preferred stock, $1 par value, 10,000,000 shares
       authorized, 0 shares issued and                       
       outstanding                                                  -
     Common stock, no par value, 20,000,000 shares
       authorized, 4,407,544 shares issued,                  
       4,377,544 shares outstanding                                  8,428,106
     Retained earnings (deficit)                                   (1,617,848)
     Demand notes receivable from exercise of stock
        options and warrants                                         (233,890)
     Treasury stock, 30,000 shares, at cost                          (100,781)
                                                               ---------------
         Total Stockholders' Equity                                  6,475,587
                                                               ---------------
         Total Liabilities and Stockholders' Equity           $     79,477,950
                                                               ===============


See notes to the consolidated financial statements.

                                       

<PAGE>

           Continental American Transportation, Inc. and Subsidiaries
                      Consolidated Statements of Operations







                                                   Year Ended June 30,
                                           -----------------------------------
                                                1996                1995
                                           ---------------     ---------------

                                                                               
            
Operating Revenues                        $     36,801,423    $              -
                                           ---------------     ---------------
                                                                               
Operating Expenses                                                             
     Salaries and benefits                      10,920,292                   -
     Purchased transportation                    3,180,456                   -
     Operating supplies and expenses            13,541,344                   -
     Depreciation and amortization               4,568,109                   -
     Claims and insurance                        1,654,116                   -
     Operating taxes and licenses                  333,684                   -
     Communications and utilities                  734,887                   -
     General and administrative                  2,422,063             171,196
     Net gain on disposal of equipment           (189,934)                   -
                                           ---------------     ---------------
       Total Operating Expenses                 37,165,017             171,196
                                           ---------------     ---------------
(Loss) from operations                           (363,594)           (171,196)
                                           ---------------     ---------------
Other Income (Expenses)
     Interest and other income                     828,743                   -
     Interest expense                            (500,920)                   -
     Interest expense - TRAC leases            (1,115,198)                   -
                                           ---------------     ---------------
       Total Other Income (Expense)              (787,375)                   -
                                           ---------------     ---------------
                                                                               
         (Loss) Before Income Taxes            (1,150,969)           (171,196)
Benefit from income taxes                          477,755                   -
                                           ---------------     ---------------
                                                                               
         Net (Loss)                              (673,214)           (171,196)
                                           ===============     ===============
                                                                               
         Net (Loss) Per Share             $          (.21)    $          (.21)
                                           ===============     ===============
                                                 
Weighted Average Common Shares Outstanding       3,228,717             825,668
                                           ===============     ===============






See notes to the consolidated financial statements.

                                      

<PAGE>


           Continental American Transportation, Inc. and Subsidiaries
            Consolidated Statement of Changes in Stockholders' Equity
                    From June 30, 1994 Through June 30, 1996

 
<TABLE>

<CAPTION>
                                                                                 Preferred Stock
                                                    --------------------------------------------------------------------------
                                                                 Series A                                Series B
                                                    ----------------------------------      ----------------------------------
                                                       Number of                              Number of                        
                                                        Shares              Amount              Shares             Amount
                                                    ---------------     --------------      --------------     ---------------
                 
<S>                                                <C>                <C>                   <C>               <C>             
    Balance, June 30, 1994                                        -   $              -                   -    $              -
Issuance of shares to related party                                                                                            
     creditor of blue Mack Transport, Inc.                        -                  -                   -                   -
Reverse stock split, 1 for 25 shares                              -                  -                   -                   -
Exchange of shares to acquire 100% of                                                                                           
     Buckhead Transport, Inc. and                                                                                              
     Subsidiary                                             800,000            800,000             255,000             255,000
Exchange of shares to acquire 100% of                                                                                          
     HMX, Inc.                                                    -                  -                   -                   -
Issuance of shares relating to acquisition                                                                                     
     of Herr's Mortor Express, Inc. fixed                                                                                      
      assets                                                      -                  -                   -                   -
Exercise of stock options                                         -                  -                   -                   -
Net Loss, Year Ended June 30, 1995                                -                  -                   -                   -
                                                    ---------------     --------------      --------------     ---------------
     Balance, June 30, 1995                                 800,000            800,000             255,000             255,000
Prior period adjustments                                          -                  -                   -                   -
                                                    ---------------     --------------      --------------     ---------------
     Balance June 30, 1995, as adjusted                     800,000            800,000             255,000             255,000
Issuance of common stock to various                                                                                            
     shareholders                                                 -                  -                   -                   -
Cancellation of various shareholder's                                                                                          
     common stock                                                 -                  -                   -                   -
Payments received on demand notes                                                                                              
     receivable from exercise of stock                                                                                         
     options                                                      -                  -                   -                   -
Exercise of stock options                                         -                  -                   -                   -
Exercise of stock warrants                                        -                  -                   -                   -
Issuance of preferred stock - Series A                      700,000            700,000                   -                   -
Conversion of preferred stock -                                                                                                
       Series A&B                                       (1,500,000)        (1,500,000)           (255,000)           (255,000)
Issuance of common stock to employees                             -                  -                   -                   -
Issuance for common stock relating to                                                                                          
     acquisition of CTI, A&P and Chase                            -                  -                   -                   -
Issuance of 3% common stock dividend                              -                  -                   -                   -
Conversion of a convertible promissory                                                                                         
     note                                                         -                  -                   -                   -
Acquisition of 30,000 shares of treasury                                                                                       
     stock                                                        -                  -                   -                   -
Net Loss, Year Ended June 30, 1996                                -                  -                   -                   -
                                                    ---------------     --------------      --------------     ---------------
     Balance, June 30, 1996                                       -   $              -                   -    $              -
                                                    ===============     ==============      ==============     ===============
</TABLE>

See notes to the consolidated financial statements.
                                       

<PAGE>
<TABLE>

                                                                                                                         
               


<CAPTION>

                                                                                                     Demand                         
                                                                                                      Notes                         
                                                                                                   Receivable                       
                                                                                                      From                          
                                                                                                   Exercise of          Demand
                                                                                                      Stock              Notes
                                                             Retained                                Options          Receivable
                                                             Earnings            Treasury              and           From Sale of
                              Common Stock                   (Deficit)             Stock            Warrants             Stock
                   ----------------------------------     ---------------     ---------------     -------------     ---------------
                     Number of                                                                                                      
                       Shares              Amount                                                                                   
                   --------------      --------------     ---------------     ---------------     -------------     ---------------
<S>                    <C>           <C>                 <C>                 <C>                 <C>               <C>             
                       20,100,000    $        384,620    $      (488,559)    $              -    $            -    $              -
                                                                                                                                    
                          750,000              52,000                   -                   -                 -                   -
                     (20,015,990)                   -                   -                   -                 -                   -
                                                                                                                                    
                                                                                                                                    
                        1,075,000              17,266                   -                   -                 -                   -
                                                                                                                                    
                           50,000             208,000                   -                   -                 -                   -
                                                                                                                                    
                                                                                                                                    
                          150,000           1,529,958                   -                   -                 -                   -
                          120,000             206,250                   -                   -         (206,250)                   -
                                -                   -           (171,196)                   -                 -                   -
                   --------------      --------------     ---------------     ---------------     -------------     ---------------
                        2,229,010           2,398,094           (659,755)                   -         (206,250)                   -
                                -                   -              66,010                   -                 -                   -
                   --------------      --------------     ---------------     ---------------     -------------     ---------------
                        2,229,010           2,398,094           (593,745)                   -         (206,250)                   -
                                                                                                                                    
                          801,937           1,642,023                   -                   -         (125,000)         (1,200,000)
                                                                                                                                    
                        (136,460)                   -                   -                   -                 -                   -
                                                                                                                                    
                                                                                                                                    
                                -                   -                   -                   -           193,750                   -
                           44,000             100,000                   -                   -          (60,000)                   -
                          160,000             400,000                   -                   -          (36,390)                   -
                                   - - - - - -
                                                                                                                                    
                          635,757           1,755,000                   -                   -                 -                   -
                           30,000             182,100                   -                   -                 -                   -
                                                                                                                                    
                          500,000           1,500,000                   -                   -                 -           1,200,000
                          100,254             350,889           (350,889)                   -                 -                   -
                                                                                                                                    
                           43,046             100,000                   -                   -                 -                   -
                                                                                                                                    
                                -                   -                   -           (100,781)                 -                   -
                                -                   -           (673,214)                   -                 -                   -
                   --------------      --------------     ---------------     ---------------     -------------     ---------------
                        4,407,544    $      8,428,106    $    (1,617,848)    $      (100,781)    $    (233,890)    $              -
                   ==============      ==============     ===============     ===============     =============     ===============
</TABLE>


                                       
<PAGE>


           Continental American Transportation, Inc. and Subsidiaries
                      Consolidated Statements 1f Cash Flows

<TABLE>




<CAPTION>
                                                                                                  Year Ended June 30,
                                                                                          -----------------------------------
                                                                                               1996                1995
                                                                                          ---------------     ---------------
Cash Flows From Operating Activities:
<S>                                                                                      <C>                 <C>             
     Net (Loss)                                                                          $      (673,214)    $      (171,196)
                                                                                          ---------------     ---------------
     Adjustments to Reconcile Net Income to Net Cash (Used in) Operating                                                      
     Activities                                                                                                               
       Depreciation and amortization                                                            4,568,109                   -
       Gain on sale of equipment                                                                (189,934)                   -
       Deferred income taxes                                                                    (477,755)                   -
       Increase in accounts receivable and other assets                                       (7,374,579)                   -
       Increase in accounts payable and other liabilities                                       2,826,627              32,000
       Increase in taxes payable                                                                 (49,113)                   -
                                                                                          ---------------     ---------------
           Total Adjustments                                                                    (696,645)              32,000
                                                                                          ---------------     ---------------
           Net Cash (Used in) Operating Activities                                            (1,369,859)           (139,196)
                                                                                          ---------------     ---------------
Cash Flows From Investing Activities:
     Cash received in purchase of subsidiaries                                                    324,285                 480
     Cash paid in purchase of subsidiaries                                                    (1,300,000)                   -
     Principal payments received on notes receivable                                              310,476                   -
     Proceeds from sale of property and equipment                                               1,519,963                   -
     Purchases of equipment                                                                        26,719                   -
     Loans made to related party                                                                (450,000)                   -
                                                                                          ---------------     ---------------
           Net Cash Provided by (Used in) Investing Activities                                    431,443                 480
                                                                                          ---------------     ---------------
Cash Flows From Financing Activities:
     Proceeds from new borrowings                                                               6,486,581             139,196
     Principal payments on notes payable                                                      (1,739,104)                   -
     Principal payments on obligations under capital leases                                   (3,568,502)                   -
     Proceeds from issuance of preferred and common stock                                       1,100,000                   -
                                                                                          ---------------     ---------------
           Net Cash Provided by Financing Activities                                            2,278,975             139,196
                                                                                          ---------------     ---------------
Net Increase in Cash and Cash Equivalents, Including Restricted Cash                            1,340,559                 480
Cash and Cash Equivalents, Including Restricted Cash - Beginning of Year                              480                   -
                                                                                          ---------------     ---------------
Cash and Cash Equivalents, Including Restricted Cash - End of Year                       $      1,340,079    $            480
                                                                                          ===============     ===============
                                                                                                                              
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                                             
     Cash paid during the year for:
         Interest                                                                        $      1,616,118    $              -
                           Income taxes $ 225,100 $ -

</TABLE>




See notes to the consolidated financial statements.


<PAGE>

           Continental American Transportation, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows







SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING

The Company acquired  equipment  aggregating  $267,767 and $0 in satisfaction of
defaulted  notes  receivable  for the  years  ended  June  30,  1996  and  1995,
respectively.

On February 29, 1996, the Company  purchased  CTI, A&P and Chase.  In 
connection with the  acquisition,  the  Company  assumed  long-term
debt and issued  notes payable and common stock, and paid cash.

       Fair value of assets acquired                   $     75,644,048         
       Long-term debt assumed                              (58,654,048)
       Notes payable issued                                (14,190,000)
       Fair value of common stock issued                    (1,500,000)
                                                        ---------------
           Cash Paid                                   $      1,300,000
                                                        ===============

On June 30, 1995, the Company purchased Buckhead Transport,  Inc. and its wholly
owned subsidiary,  Blue Mack Transport, Inc. In connection with the acquisition,
the Company assumed long-term debt and issued preferred and common stock.
                                                                                
       Fair Value of assets acquired                   $      3,031,185       
       Liabilities assumed                                   (2,251,634)
                                                        ---------------
       Fair value of assets in excess of liabilities
        assumed                                                 779,551
       Fair value of preferred stock - Series A,
         Series B, and common stock    
       issued to shareholders of Buckhead Transport, Inc.      (779,551)      
                                                        ---------------
                                                        $              -
                                                        ===============

On June 30, 1995, the Company  acquired  property and equipment.  In conjunction
with the acquisition,  the Company assumed  long-term debt, issued notes payable
and issued common stock.
                                                                                
       Fair value of property and equipment acquired    $     3,841,525         
       Long-term debt assumed                                (1,103,567)
       Notes payable issued                                  (1,208,000)
       Fair value of common stock issued                     (1,529,958)
                                                         ---------------
                                                        $              -
                                                         ===============
 
 



See notes to the consolidated financial statements.

<PAGE>
                                                                        

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

SUMMARY OF ACCOUNTING POLICIES

Nature of  Organization
     Continental  American  Transportation,  Inc. (CAT) (the
     Company), was incorporated in the State of Colorado in 1983. The Company is
     engaged,  through its wholly  owned  subsidiaries  consisting  of Blue Mack
     Transport,  Inc. (Blue Mack), HMX, Inc. (HMX), Carpet Transport, Inc. (CTI)
     and A&P  Transportation,  Inc. (A&P), in the  transportation  industry as a
     full truckload carrier  operating  throughout the contiguous United States.
     The Company is also engaged in the common  carrier  freight  brokerage  and
     logistics  business through its wholly owned  subsidiary,  Chase Brokerage,
     Inc.

Principles of Consolidation
     The accompanying  consolidated  financial statements
     include the accounts of CAT and those of its wholly owned  subsidiaries  as
     of and  from  the  effective  date of their  acquisition.  All  significant
     intercompany   accounts   and   transactions   have  been   eliminated   in
     consolidation.

Cash and  Equivalents
     The Company  considers all highly liquid debt  instruments
     purchased  with an  original  maturity  of three  months or less to be cash
     equivalents.

Credit  Risk
     The  Company   maintains  cash  balances  in  numerous   financial
     institutions.  Amounts  at each  institution  are  insured  by the  Federal
     Deposit  Insurance  Corporation  up to  $100,000.  At June  30,  1996,  the
     Companys uninsured cash balances total $402,903.

The  Company  extends credit in the form of equipment  financing notes and trade
     accounts  receivable.  Such  amounts due the Company are subject to ongoing
     credit  evaluations  and allowances  are  maintained for doubtful  accounts
     based on factors  surrounding  the  credit  risk of  specific  obligations,
     adequacy of collateral and other pertinent information.

Inventories
     Inventories for transportation  operations,  consisting primarily of
     spare and replacement  parts and supplies,  are valued at the lower of cost
     (first-in, first-out) or market.

Property 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.  Leased  property under capital leases is
     amortized over the lives of the respective leases or over the service lives
     of the assets for those leases which substantially transfer ownership.  The
     straight-line  method  of  depreciation  is  followed  for all  assets  for
     financial  reporting  purposes,  but  accelerated  methods are used for tax
     purposes.

     Tireson new revenue equipment are capitalized as a component of the related
     equipment. The cost of replacement tires is expensed as incurred.

     Maintenance and repairs are charged to operations  currently;  replacements
     and improvements are capitalized in the property and equipment accounts.

Intangible Assets
     Intangible assets primarily  represent the excess of the
     purchase  price of  acquired  companies  over the fair  value of the assets
     acquired.  Such excess costs are being amortized on a  straight-line  basis
     over 15 to 40 years.

<PAGE>

     The  realizability of such intangible  assets is evaluated  periodically as
     events or  circumstances  indicate a possible  inability  to recover  their
     carrying value.  Such evaluation,  which necessarily  involves  significant
     management 46 judgment,  is based upon the estimated economic benefit to be
     derived in future periods as a result of such acquisitions.


<PAGE>


           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements





SUMMARY OF ACCOUNTING POLICIES, Continued

Income Taxes The Company and its  wholly-owned  subsidiaries  file  consolidated
       Federal corporation income tax returns.

          The Company  accounts for income taxes in accordance with Statement of
          Financial  Standards  No. 109,  Accounting  for Income  Taxes which
          requires the use of the  liability  method of accounting  for income
          taxes. Accordingly, deferred tax liabilities and assets are determined
          based on the difference between the financial  statement and tax bases
          of assets and  liabilities,  using  enacted  tax rates for the year in
          which the differences are expected to reverse.

Claims and Insurance  Accruals
          The Company  provides for the estimated
          cost of claims incurred but not paid for which it retains a portion of
          the risk under  workmens  compensation,  health care,  liability  and
          property damage programs.

Earnings  Per  Share
          Earnings  per  share  amounts  are  based on the
          weighted average number of shares  outstanding.  Prior years have been
          restated  giving  effect  to a reverse  stock  split of 1 to 25 shares
          which occurred as of June 30, 1995.

          Primary  and fully  diluted  earnings  per share are the same.  Common
          share  equivalents are not considered in computing  earnings per share
          as such inclusion would have an anti-dilutive effect.

     Revenue  Recognition  Revenues  consist  principally  of freight  revenues.
Freight  revenues are  recognized  as earned when  freight is received  from the
shipper.  Estimated costs,  consisting of all direct costs necessary to complete
delivery,  are accrued at the end of each reporting  period.  This method is not
materially  different from either  recognizing all revenues and expenses at time
of delivery or recognizing revenues and expenses on a pro rata basis.
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.
Accounting for Long-Lived Assets.

     The  Company  has  considered   Financial   Accounting  Standards  No.  121
Accounting for the Impairment of Long-Lived  Assets which requires the Company
to compare the net carrying value of long-lived  assets to the related estimates
of future cash  flows,  and other  criteria,  to  determine  if  impairment  has
occurred.  The Company has determined  that no such impairment has occurred and,
accordingly,  the  adoption  of SFAS  No.  121 has no  effect  on its  financial
statements.

<PAGE>



           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements




BUSINESS ACQUISITIONS

Blue Mack and HMX

On June 30, 1995, the Company acquired Buckhead Transport, Inc.
(Buckhead) and its wholly-owned subsidiary, Blue Mack. Buckhead was
incorporated on April 14, 1994 and formed specifically to acquire Blue
Mack, a nationwide common carrier. On November 1, 1994, Buckhead
entered into a stock exchange agreement with Blue Mack whereby the
Blue Mack shareholder exchanged all his Blue Mack common shares for
1,000,000 common shares of Buckhead and $800,000 principal amount of
Buckhead preferred shares. Pursuant to the agreement, certain property
and equipment with a net book value of $285,257 as well as the
corresponding debt on such property and equipment in the amount of
$242,089 was excluded from the transaction and retained by the seller.
The Company exchanged 1,075,000 common shares, 800,000 Series A
preferred shares and 255,000 Series B preferred shares for all of the
issued and outstanding common and preferred stock of Buckhead in a
business combination accounted for as a purchase. Subsequent to the
business combination, Buckhead was dissolved and Blue Mack became a
direct subsidiary of the Company.

The purchase price of $779,551  equaled the fair value of the  identifiable
assets acquired and liabilities assumed and therefore there was no excess of the
cost of the acquired  company over the sum of amounts  assigned to  identifiable
assets and liabilities.

The  results of  operations  of Blue Mack and HMX are not  included  in the
accompanying financial statements effective July 1, 1994.

The following  summarized pro forma information assumes the acquisition had
occurred on July 1, 1994:


                                                   Year Ended
                                                 June 30, 1995
                                               ------------------
          Operating revenues                  $         6,696,981
          Net Income (Loss)                   $         (104,316)
          (Loss) per share                    $             (.13)


Also on June 30, 1995, the Company acquired HMX, a vehicle service company,
through the exchange of 50,000 CAT common shares for all the  outstanding  stock
of HMX in a business combination accounted for as a purchase.

The  purchase  price of  $208,000  was  greater  than the fair value of the
identifiable assets acquired and liabilities assumed and therefore the excess of
the  cost  of  the  acquired  company  over  the  sum  of  amounts  assigned  to
identifiable assets and liabilities of $208,000 will be amortized over a life of
15 years.

<PAGE>




           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements


BUSINESS ACQUISITIONS, Continued

   CTI, A&P and Chase

On April 4, 1996 CAT purchased all the issued and outstanding  common stock
of CTI, A&P and Chase from their two  stockholders  effective as of February 29,
1996. CTI and A&P are nationwide common carriers,  while Chase is engaged in the
common  carrier  freight broker and logistics  business.  This  transaction  was
accounted for as a business combination using the purchase method of accounting.

The total consideration was comprised thusly:

<TABLE>

<S>                                                                                <C>                 
Cash payments                                                                      $          1,300,000
Non interest bearing unsecured demand promissory note to a former                                       
   shareholder                                                                                4,080,000
Non interest bearing unsecured demand promissory note to a former                                       
   shareholder                                                                                2,820,000
Promissory note due March 1, 2001 secured by a pledge of all common                                     
   shares of CTI Properties, Inc. (a wholly owned subsidiary of CAT                                     
   formed incidental to the above described transaction which owns real                                 
   property formerly owned by CTI) and bearing interest at 8% per                                       
   annum, payable monthly                                                                     7,290,000
Issuance to a former shareholder of 500,000 CAT common shares with                                      
a                                                                                                       
   fair market value at date of issuance of $3 per share                                      1,500,000
Transfer of certain CTI, A&P and Chase assets, consisting primarily of                                  
   cash surrender value of certain life insurance policies, notes and                                   
   loans receivable and an aircraft to former shareholders                                    1,448,854
Payment of a finders fee amounting to $910,000 and a non-accountable                                    
   expense allowance of $290,000 by way of the issuance of 600,000                                      
   CAT common shares with a fair market value at the date that the                                      
   agreement was entered into of $2 per share (see Related Party                                        
   Transactions)                                                                              1,200,000
Capitalized acquisition costs consisting primarily of legal, accounting                                 
and                                                                                                     
   other professional fees                                                                      479,167
                                                                                     ------------------
                                                                                   $         20,118,021
     ==================
</TABLE>

On August 21, 1996 CAT and the former  shareholders  of CTI,  A&P and Chase
entered into a Debt Restructure and Waiver Agreements whereby the parties agreed
that:

a.        The  $2,820,000  promissory  note  referred  to above  would  bear
          interest  at 8% per annum and become due and payable on  September  1,
     1997.
b.        The $4,080,000  promissory  note referred to above (which had
          been reduced to  $2,005,000)  would bear  interest at 8% per annum and
          become due and payable on  September  1, 1997.
c.        One-half  (50%) of interest due on the $7,290,000  promissory  note
          referred  to above  would be payable on an annual  basis to one former
          shareholder  in CAT common shares rather than monthly cash payments of
          interest.

     <PAGE>



The  purchase  price  of  $20,118,021   exceeded  the  fair  value  of  the
identifiable assets acquired and liabilities assumed and therefore the excess of
costs  over  the  acquired  companies  over  the  sum  of  amounts  assigned  to
identifiable  assets and liabilities of $4,437,876 will be amortized over a life
of 40 years. Continental American Transportation, Inc. and Subsidiaries Notes to
the Consolidated Financial Statements


BUSINESS ACQUISITIONS, Continued

   CTI, A&P and Chase

The  results  of  operations  of CTI,  A&P and  Chase are  included  in the
accompanying financial statements effective February 29, 1996.

     The  following  summarized  proforma  information  assumed the acquisition
occurred on July 1, 1994:


                                        Year Ended             Year Ended
                                      June 30, 1996           June 30, 1995
                                    ------------------     -------------------
          Operating revenues       $        86,752,507    $         95,183,893
          Net Income (Loss)        $         (419,025)    $          1,415,789
          Income (Loss) per share  $             (.13)    $               1.71

For the year ended June 30,  1996  amortization  of the excess  cost of the
acquired   companies  (HMX,  CTI,  A&P  and  Chase)  amounted  to  $110,312 and
accumulated amortization at June 30, 1996 amounted to $110,312.

ACQUISITION OF ASSETS

On June 30,  1995,  the  Company  purchased  revenue  generating  equipment
consisting of tractors and trailers with an aggregate  value of $3,841,525  from
Herrs Motor Express, Inc. (Herrs).  In exchange,  the Company assumed the debt
associated with the equipment of $1,103,567,  issued  promissory notes amounting
to  $1,000,000,  assumed  future  payment  for  shareholder  loans to  Herrs of
$208,000 and issued 150,000 shares of the Companys common stock.

Details of promissory notes at June 30, 1996 are as follows:


        Note payable, non-interest bearing, which was due August 28, 1995.
           Subsequent to due date, interest shall accrue at 12% per annum on    
          the outstanding principal balance until paid.  $         164,927

        Note payable, non-interest bearing, which was  due September 11,        
        1995.                                                                   
           Subsequent to due date, interest shall accrue at 12% per annum on    
          the outstanding principal balance until paid.            104,000
                                                            ---------------
                                                         $         268,927
                                                            ===============

As of October 11,  1996,  the above  obligations  have not been paid by the
Company and payment has not been demanded by the payees.



<PAGE>
 
RESTRICTED CASH

CTI has entered into an agreement with the Georgia State Board of Workmens
Compensation  whereby CTI pays workers  compensation  claims as a self insurer.
The  agreement  is  collateralized  by  certificates  of  deposit  amounting  to
$500,000.  On July 17, 1996 such  collateral was increased to $750,000 and CTIs
specific excess insurance self retention was reduced from $500,000 to $250,000  
per occurrence.

Additionally at June 30, 1996, CTI had two certificates of deposit, each in
the amount of  $100,000,  collateralizing  purchasing  agreements  with Com Data
Network and Harold Ives Trucking Company.
 
<PAGE>

                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements



INSTALLMENT NOTES RECEIVABLE

The Company  finances the sale of revenue  equipment to  independent  owner
operators. These notes require monthly payments of principal and interest over a
period  ranging  from  twelve  to  forty-eight   months  with  interest  ranging
principally  from 15% to 20% per annum.  These  notes  mature on  various  dates
within the next five years.  Title to such revenue  equipment is retained by the
Company until the note is paid in full.


Total notes receivable                         $      1,130,393
Less: current portion                                  (695,087)
                                                ---------------
Long-Term Portion                              $        435,306
                                                ===============

NOTE RECEIVABLE - RELATED PARTY

On May 23, 1996 CTI granted to Bio-Dyne  Corporation,  a two year unsecured
revolving  credit  facility  in  the  maximum  aggregate   principal  amount  of
$1,000,000  with interest to be computed at the rate of twelve  percent (12%) on
outstanding principal balances,  payable quarterly.  CTI is obligated to advance
funds five business days after a request is made by the borrower, which advances
amounted to $450,000  at June 30,  1996.  Incidental  to the  execution  of this
agreement,  three directors of CTI were elected to Bio-Dyne  Corporations  five
member  board of  directors  and these  three same  individuals  were  appointed
officers thereof.

PROPERTY, PLANT AND EQUIPMENT

Property,  plant and  equipment,  including  assets under  capital  leases,
consist of the following:


Land                                             $      3,045,000
Buildings                                               2,928,713
Leasehold improvements                                  2,320,505
Revenue equipment                                      76,298,418
Other operating equipment                               1,287,122
Shop, furniture and office equipment                    1,180,245
                                                  ---------------
   Total                                               87,060,003
Accumulated depreciation and amortization              30,051,171
                                                  ---------------
   Net Book Value                                $     57,008,832
                                                  ===============

Depreciatin  charged to expense  for the years ended June 30, 1996 and June
30, 1995 was $2,843,704 and $0, respectively.

LINES OF CREDIT

On April 8,  1996,  CTI,  A&P and Chase  entered  into a  revolving  credit
agreement,  as to which CAT and two of its officers are  guarantors.  The credit
facility  provides  for  advances  not  to  exceed  80%  of  qualified  accounts
receivable to a maximum amount of $5,000,000.  This obligation is collateralized
by a  security  interest  in all  accounts  receivable  of CTI,  A&P and  Chase.
Interest is calculated  based upon prime rate as defined in the  agreement  plus
4.75%. Additionally,  CTI, A&P and Chase are assessed certain administrative and
service fees by the lender. At June 30, 1996,  borrowings under the above credit
facility amounted to $4,384,625.

 
<PAGE>

                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements



LINES OF CREDIT, Continued

On May 6, 1996, Blue Mack entered into a revolving  credit  agreement as to
which CAT and two of its officers are guarantors.  The credit facility provides
for advances not to exceed 80% of qualified accounts receivable up to a maximum
amount of $500,000.  This obligation is collateralized by a security interestin
all accounts  receivable of Blue Mack.  Interest is calculated based upon prime
rate as defined in the agreement plus 2.5%.  Additionally,  Blue Mack is
assessed certain  administrative  and  service  fees by the  lender.  At 
June  30,  1996, borrowings under the above credit facility amounted to
$449,753.

LONG-TERM DEBT

   Long-term debt consists of the following:


     Convertible  promissory  notes  bearing  interest  at 10%  per  annum  with
          scheduled  maturities in 1999. The notes are  convertible  into common
          stock of the Company at a conversion price of either 20% less than the

          days prior to conversion  or 120% of the closing  average bid price of
          the  Companys  shares for the five  trading  days prior to issuance .
          Interest is payable to the  noteholder  only if the note has been held
          one calendar year. If any of the notes are converted prior to one year
          from  the  date of  issuance,  the  Company  is not  obligated  to pay
          interest on the note.  As of June 30, 1996,  $2,120,000  of notes were
          issued with $100,000 having been converted into 43,046 shares of
<TABLE>
<S>                                                                                               <C>        
          common stock                                                                            $ 2,020,000
Promissory note payable due August 28, 1995 (see                                                              
   Acquisition of Assets)                                                                             164,927
Promissory note payable due September 11, 1995 (see Acquisition of Assets).                           104,000
Note payable to a former shareholder of CTI, A&P and Chase (see Business                                      
   Acquisitions).                                                                                   2,495,000
Note payable to a former shareholder of CTI, A&P and Chase (see Business                                      
   Acquisitions).                                                                                   3,755,000
Various notes payable to financial institutions and other credit providers with                               
   combined monthly payments of $166,051 including interest at rates ranging                                  
   principally from 7.5% to 14% per annum.  These notes mature from                                           
   September, 1996 through April, 2001 and are collateralized by specific                                     
   equipment having a net book value of $7,223,630.                                                 5,069,165
Note payable to the former shareholders of CTI, A&P and Chase. (see Business                                  
Acquisitions).                                                                                      7,290,000
Unsecured non-interest bearing demand notes payable to related parties                                289,292
                                                                                              ---------------
                                                                                                   21,187,384
Less: current maturities                                                                            3,822,762
                                                                                              ---------------
Long-Term Debt, Net of Current Maturities                                                    $     17,364,622
                                                                                              ===============
</TABLE>
<PAGE>



                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements
 

LONG-TERM DEBT, Continued

   Total maturities of long-term debt are as follows:


Year Ending June 30,
      1997                      $      3,822,762
      1998                             6,719,067
      1999                             2,620,287
      2000                               571,495
      2001                             7,453,773
                                 ---------------
                                $     21,187,384
                                 ===============

CAPITALIZED LEASE OBLIGATIONS

Leases  meeting  certain  criteria are  considered  capital  leases and the
related asset and lease  obligations  are recorded at their present value in the
financial   statements.   The  interest  rates  of  capital  leases  range  from

incremental  borrowing  rate at the inception  date of the lease or the lessors
implicit rate of return.  Minimum  future  obligations  on all capital leases in
effect as of June 30, 1996 are as follows:


Year Ending June 30,
      1997                                             $     13,290,336
      1998                                                   16,416,253
      1999                                                   10,054,800
      2000                                                    6,502,326
      2001                                                      846,823
      Thereafter                                              2,240,361
                                                        ---------------
Net Minimum Lease Payments                                   49,350,899
Less: Amount representing interest                           10,506,676
                                                        ---------------
Present Value of Net Minimum Lease Payments                  38,844,223
Current maturities of capital lease obligations              10,768,645
                                                        ---------------
      Total Long-Term Lease Obligation                 $     28,075,578
                                                        ===============

Following is a summary of property  held under capital  leases  included in
property, plant and equipment:


     Office Equipment                                  $       214,702
     Revenue Equipment                                      58,644,106
                                                        ---------------
       Subtotal                                             58,858,808
      Less: Accumulated Amortization                       (19,951,268)
                                                        ---------------
                                                       $    38,907,540
                                                        ===============

     Amortization  on assets  under  capital  leases  charged to expense for the
years ended June 30, 1996 and 1995 was $1,724,405 and $0, respectively.

<PAGE>


                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

OPERATING LEASES

The Company leases warehouse  terminal  facilities and equipment in various
states under noncancelable operating leases with lease terms ranging from two to
five years.  Certain of these  leases have  specific  options,  or if no renewal
option,  certain of these  leases give the  Company a right of first  refusal to
renegotiate the lease terms. Total rent expense for the year ended June 30, 1996
and 1995 amounted to $309,429 and $0, respectively.

The  following is a schedule of future  minimum  rental  payments  required
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of June 30, 1996.


Year Ending June 30,
      1997                                   $      1,421,383
      1998                                            872,430
      1999                                            540,299
      2000                                            375,586
      2001                                            119,762
                                              ---------------
          Total                              $      3,329,460
                                              ===============

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  methods  and  assumptions  were  used  by  the  Company  in
estimating fair value disclosures for financial instruments.

Cash and  equivalents and restricted cash - the carrying amount reported in
the balance sheet approximates fair value.

Installment  notes receivable - The carrying amount reported in the balance
sheet  approximates  fair market value  inasmuch as such  instruments  both bear
interest  rates  and  repayment  terms  consistent  with the  Companys  present
financing  practices and such terms are  consistent  with  comparable  equipment
financing transactions in the commercial marketplace.

Note  receivable - related party - Given the proximity of this  transaction
(May 23, 1996) to the balance sheet date,  the carrying  amount  reported in the
balance sheet is believed to approximate fair value.

Lines of credit - Given the proximity of these transactions  (April 8, 1996
and May 6, 1996) to the balance sheet date, the carrying  amount reported in the
balance sheet is believed to approximate fair value.

   Long-term debt

          Convertible promissory notes - Given the proximity of this transaction
          (March and April, 1996) to the balance sheet date, the carrying amount
          reported in the balance sheet is believed to approximate fair value.

          Notes payable to former shareholders of CTI, A&P and Chase - Given the
          proximity  of this  transaction  (April 4, 1996) to the balance  sheet
          date, the carrying amount reported in the balance sheet is believed to
          approximate fair value.

          Equipment  notes - a  reasonable  estimate  of fair value could not be
          made without  incurring  excessive costs. Such obligations are carried
          in the aggregate  amount of  $5,069,165,  with interest  rates ranging
          from 7.5% to 14% and maturities from September,  1996 through April 1,
          2001.

      Capitalized lease obligations - A reasonable estimate of fair value
      could not be made without incurring excessive costs. Such obligations
      are carried in the aggregate amount of $38,844,223, with effective
      interest rates of 5% to 15% and maturities at various dates through 1999.

      Promissory note - Herrs - the carrying amount reported in the balance 
      sheet approximates fair value.

      Related party note - Given the non-arms length nature of this
      transaction, a reasonable estimate of fair value could not be made.
<PAGE>


                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements



PREFERRED STOCK

Preferred stock, 10,000,000 shares authorized, is as follows:

Series A, $1.00 per share,  0 shares issued and  outstanding.  These shares
are entitled to a dividend at the rate of seven percent (7%), payable quarterly.
Dividends on Series A shares are  cumulative and rank in priority over dividends
on the Companys  Series B preferred  shares or its common shares.  The Series A
preferred  shares are convertible  into common shares of the Company at any time
during the period commencing August 1, 1996 through July 21, 2000. The amount of
Company common shares into which Series A preferred shares shall be converted is
based upon the average bid and ask price of the Companys  common shares for the
twenty business days prior to the Company receiving notice of intent to convert.
The Board of Directors has the authority to issue preferred stock in one or more
series  and  to  fix  the  rights,  terms  of  redemption,   redemption  prices,
liquidation  preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the stockholders.

Series B, $1.00 per shares,  0 shares  authorized,  issued and outstanding.
These  shares are  entitled  to a  dividend  at the rate of seven  percent  (7%)
payable   quarterly  but  commencing  to  accrue  only  thirty  days  after  all
outstanding  Series A shares have been  converted to common shares  Dividends on
Series B preferred shares are cumulative and rank in priority over the Companys
common shares.  The Series B preferred shares are convertible into common shares
of the  Company  after the  conversion  of all Series A  preferred  shares  into
Company  common shares and during the period  commencing  August 1, 1996 through
July 31, 2000. The amount of Company common shares into which Series B preferred
shares  shall be  converted  is  based  upon the  average  bid ask  price of the
Companys  common  shares for the  twenty  business  days  prior to the  Company
receiving notice of intent to convert.  The Board of Directors has the authority
to issue  preferred  stock in one or more series and to fix the  rights,  voting
rights, terms of redemption,  redemption prices, liquidation preferences and the
number of shares  constituting  any series or the  designation  of such  series,
without further vote or action by the stockholders.

WARRANTS

The Company  issued  seven common  stock  purchase  warrants on Septmber 1,
1995.  Each warrant may be exercised in whole or part and entitles the holder to
purchase  120,000  common  shares at $2.50 per share and  expires on October 27,
1996.  As of October  11,  1996,  warrant  holders of 630,000 of 840,000  common
shares have exercised their warrants.

In  addition,  the Company  issued one  warrant to its  Placing  Agent (the
Agent) of the Convertible  Promissory  Notes.  The warrant entitles the Agent to
purchase 100,000 shares of the Companys common stock as follows:

                       Exercise                                                 
      No. of             Price
      Shares           Per Share                       Exercise Term
------------------  ---------------     --------------------------------------
                                             Start             Expiration
                                        _______________     __________________
  60,000             $        2.50     September 19, 1996    March 19, 1998
  20,000             $        5.00     March 19, 1997        September 19, 1998
  20,000             $        7.50     June 19, 1997         March 19, 1999


<PAGE>

                                                                                
           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements







STOCK OPTION PLAN

     On April 11,  1994,  the  Company  adopted  its Stock  Incentive  Plan (the
Plan).  The Plan provides that certain options granted thereunder are intended
to qualify as incentive  stock  options  within the meaning of Section 422A of
the United States Internal Revenue Code of 1986, while non-qualified options may
also be granted  under the Plan.  The plan provides for  authorization  of up to
200,000  (post-split)  shares.  The option price per share of Stock  purchasable
under an Incentive  Stock Option  shall be  determined  at the time of grant but
shall be not less than 100% of the Fair Market  Value of the Stock on such date,
or, in the case of a 10%  Stockholder,  the option  price per share  shall be no
less than 110% of the Fair  Market  Value of the Stock on the date an  Incentive
Stock Option is granted to such 10% Stockholder.

The following is a summary of transaction:


                                                                     
                                                                 
                                                              1996      1995
                                                           ---------------------
                                                                          
 Outstanding, beginning of year                              44,000         -
 Granted during the year                                     36,000   164,000
 Exercised during the year (at prices ranging from $.25 to                    
   $3.13 per share)                                         (44,000)  120,000
                                                            --------  ---------
 Outstanding, end of year (at prices ranging from $.25 to                       
   $3.13 per share                                            36,000   44,000
                                                            ========  =========
 Eligible, end of year for exercise currently (at prices      36,000   44,000
 ranging
   from $.25 to $3.13 per share)
                                                           ========    ========


 At June 30, 1996 and 1995, there were 0 and 80,000 shares, respectively,
 reserved for future grants.

DEMAND NOTES RECEIVABLE FROM EXERCISE OF STOCK OPTIONS

   In conjunction with the exercise of the non-qualified stock options,
   the Company received notes amounting to $233,890 which are non-interest
   bearing and payable upon demand.

<PAGE>


                                                                                

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements



INCOME TAXES

   The benefit from income taxes consists of the following:



                                                 Year Ended June 30,
                                         ------------------------------------
                                              1996                 1995
                                         ---------------      ---------------
      Current provision                 $              -    $               -
      Deferred provision                         477,755                    -
                                         ---------------      ---------------
                                        $        477,755    $               -
                                         ===============      ===============


The net current  deferred tax and net  long-term  deferred tax liability as
presented in the  accompanying  balance  sheet at June 30, 1996,  consist of
the following amounts of deferred tax assets and liabilities:


      Deferred Tax - Current
        Deferred tax asset                               $        677,059
        Deferred tax liability                                          -
                                                          ---------------
          Net Current Deferred Tax Asset                          677,059
                                                          ---------------
      Deferred Tax - Long-Term
        Deferred tax asset                                        423,178
        Deferred tax liability                                   (245,791)
                                                          ---------------
          Net Long-Term Deferred Tax Asset               $        177,387
                                                          ===============


The components which give rise to deferred income tax benefit are temporary
differences in accumulated depreciation, net operating loss carryforwards,
allowance for losses on accounts receivable, installment sales and TRAC
leases as follows:


                               Year Ended June 30,
                                       ------------------------------------
                                            1996                 1995
                                       ---------------      ---------------
Depreciation                       $      1,103,927    $               -
Net operating loss carryforwards            284,567                    -
Allowance for losses on accounts
receivable                                   91,254                    -
Installment sales                             2,657                    -
TRAC leases                              (1,004,650)                   -
                                        ---------------      ---------------
                                    $        477,755    $               -
                                        ===============      ===============

The Company has a net operating loss carryforward of approximately $748,861
for Federal purposes expiring June 30, 2010.
<PAGE>




           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

RELATED PARTY TRANSACTIONS

On October  15,  1995 the  Company  entered  into a finders  fee  agreement
pursuant  to  which  it  appointed  Knoblock  Bay  Cove  Trust  (Bay  Cove) as a
non-exclusive agent to seek and identify potential acquisition candidates in the
transportation  industry.  On November 29, 1995 Bay Cove acquired 600,000 shares
of CAT common stock by issuance to CAT of its  promissory  note in the principal
amount of $1,200,000.  Upon Bay Coves introduction of CAT, A&P and Chase to CTI
culminating with CATs acquisition of these companies on April 4, 1996 a finders
fee of $910,000  and a  non-accountable  expense  allowance  of $290,000  became
payable to Bay Cove. The Company and Bay Cove agreed thereafter that the Company
would forgive the $1,200,000  promissory note in full and complete  satisfaction
of its obligation under the finders fee agreement.

Blue Mack leases its  facilities  and office space under  operating  leases
from a certain  shareholder  of the  Company who owns  approximately  17% of the
Companys issued and outstanding shares.

The  following is a schedule of future  minimum  rental  payments  required
under operating leases that have initial or remaining non-cancelable lease terms
in excess of one year as of June 30, 1996.


Year Ending June 30,
      1997                                 $        129,600
      1998                                           86,400
      1999                                           86,400
      2000                                           28,800
                                            ---------------
                                           $        331,200
                                            ===============

The leases  also  contain  provisions  for taxes,  insurance  and  building
maintenance expense.

EMPLOYMENT AGREEMENTS

  On June 30, 1995, the Company entered into  employment  agreements with the
two  shareholders  of Herrs which  provides a minimum  annual salary of $75,000
each and incentives based on the Companys attainment of specified earnings.  At
June 30, 1995, the total commitment, was $150,000. As part of the agreement, the
shareholders shall not directly or indirectly engaged in direct competition with
the Company in the freight transportation business for a period of two years.

The Company entered into three year  employment  agreements with two of its
officers effective September 1, 1996 providing for annual aggregate compensation
of  $304,000,  $380,000  and  $456,000  for  each of the  ensuing  three  years,
respectively.  Further,  such officers are each entitled to an annual  incentive
bonus equal to five  percent (5%) of the first  $1,000,000,  six percent (6%) of
the  net  $500,000  and 7% of net  income  before  income  taxes  in  excess  of
$1,500,000.

The Company entered into an agreement with an additional  officer effective
June 15,  1996  providing  for annual  compensation  of  $78,000,  $104,000  and
$130,000  for each of the  ensuing  three  years,  respectively.  Further,  this
officer was granted non-qualified stock options to purchase 36,000 shares of CAT
common  stock and a $30,000  relocation  advance to be reduced by $10,000 at the
end of each of the three years of the contract term.

EMPLOYEE BENEFIT PLANS

Two of the Companys subsidiaries sponsor qualified profit sharings for the
benefit of  substantially  all  full-time  employees.  The plans  qualify  under
Section 401(k) of the Internal Revenue Code,  thereby allowing such employees to
make tax  deferred  contributions  to the plan.  One such plan  provides  for an
employer match in contribution equal to 25% of the participants  contribution to
the plan while the other provides for a discretionary matching contribution.
 
The total  expense  for the above  plans  amounted to $5,652 and $0 for the
years ended June 30, 1996 and 1995, respectively.
<PAGE>

           Continental American Transportation, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements



CONTINGENT LIABILITIES

The  former  shareholders  and  officers  of CTI,  A&P and  Chase are under
indictment  in a pending  criminal  proceeding.  The  indictment  charges  these
individuals,  along  with  certain  other  parties,  with  the  embezzlement  of
approximately  $3,700,000  from CTI and A&P in addition  to  criminal  fraud and
criminal tax evasion.

While CTI and A&P were not included as named  defendants in the indictment,
the  indictment  states among other things that the Grand Jury  believes CTI and
A&P failed to report gross income as follows:


                                          Alleged
                                        Understated
                                          Revenue
                                      ---------------
      Year Ending June 30,
          1991                       $        308,123
          1992                                669,897
          1993                              1,748,561
          1994                                963,838
          1995                                 23,909

The former  shareholders  and officers of CTI and A&P have advised  present
management of the Company that  expenses  exist to fully offset any revenues not
included in gross revenue of CTI and A&P for the periods reflected above. Should
this be determined not to be the case, the Company could potentially be assessed
taxes, penalties and interest which could amount to approximately $3,400,000.

On February 29, 1996, the two former stockholders of the Company sold their
shares to CAT (see Business  Acquisitions).  As a component of this transaction,
the two former  shareholders  have agreed to be responsible  for and satisfy any
and all tax related  liabilities that might arise as a result of the allegations
described above.  Further, CAT has the right to deduct from the principal amount
of  7,290,000  promissory  note  payable to such  former  shareholders  any such
liabilities paid by the Company.

On March 18,  1996,  litigation  against A&P was  instituted  relating to a
motor vehicle  accident which occurred on August 24, 1995 resulting in the death
of one individual and personal injury to two others. Counsel representing A&P in
this matter has opined that A&P may be liable for compensatory damages in excess
of liability insurance coverage as well as punitive damages. Should A&P be found
liable,  and be obligated to pay any such  damages,  CAT has the right to deduct
such sums from the $7,290,000 promissory note describe above.

The  Company  has  learned  that  one of its  former  shareholders  filed a
complaint  with the  Securities  and  Exchange  Commission  alleging the Company
illegally  canceled his stock certificate being held in escrow.  The Company has
responded to this complaint  alleging,  among other things, that this individual
made a claim to these shares without paying any  consideration  for them. On the
basis of this complaint the  Securities and Exchange  Commission is conducting a
preliminary  investigation into the Companys stock trading activities.  Company
management is fully cooperating with this preliminary  investigation and intends
to vigorously defend against this action.
<PAGE>

Certain other claims,  suits and complaints  have been filed or are pending
against the Company.  In the opinion of  management,  all matters are adequately
covered by insurance,  or if not covered, are without merit or are of such kind,
or involved such amounts, as would not have a material effect of the results 
of operations or the financial position of the Company if disposed of 
unfavorably.

PRIOR PERIOD ADJUSTMENTS

The  Company  incurred  $66,010  in  prior  period   adjustments   relating
substantially to accrued interest on a prior year loan,  extinguishment  of debt
and the recapture of amortization on the excess purchase price recognized on one
of its subsidiaries prior to its acquisition.

SUBSEQUENT EVENT

On or about July 23, 1996 the Company  filed Form S-3 with the Security and
Exchange  Commission to effect the registration of an aggregate of 1,810,000 CAT
common shares  underlying 16 warrants with exercise  prices ranging from $.25 to
$7.50  per  share  exercisable  at any time  through  the  twelve  month  period
commencing upon the effective date of the aforementioned  registration statement
and from November 28, 1996 through the thirty six month period  beginning on the
date that the aforementioned registration statement is declared effective by the
SEC.
<PAGE>