** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

 

**Form 10-KSB**

 

| **ý** | **ANNUAL REPORT UNDER SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|-------------------------------------------------------------------------------------|

 

**For the fiscal year ended December 31, 2001.**

 

| **o** | **TRANSITION REPORT UNDER SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------|

 

**For the transition periodfrom               to               **

 

**Commission file number: 0-30185**

 

**Gasel Transportation Lines, Inc.**

(Name of small business issuer in its charter)

 

| **Ohio**                                                       |   | **31-1239328**                       |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| **County Road 10, Route 4, Box 181A,  Marietta, OH**           |   | **45750**                            |
| (Address of principal executive offices)                       |   | (Zip Code)                           |
|                                                           |   |                                 |
| Issuer’s telephone number  **(740) 373 - 6479**      |

 

Securities registered under Section 12(b) of the Exchange Act:

 

| **Title of each class** |   | **Name of each exchange on which registered** |
|-------------------------|--------|-----------------------------------------------|
|                    |   |                                          |
|                    |   |                                          |

 

Securities registered under Section 12(g) of the Exchange Act:

 

Common shares, no par value

**(Title of class)**

 

 

**(Title of class)**

 

 

Check whether the issuer (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. ý  Yes o  No

 

Check if there is no disclosureof delinquent filers in response to Item 405 of Regulation S-B is not containedin this form, and no disclosure will be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.o

 

The issuer’s revenues for itsmost recent fiscal year were $18,380,156.

 

The aggregate market value ofvoting stock held by non-affiliates of the registrant as of March 27, 2002, was$540,912 (based upon $0.65 per share being the closing sale price on that dateas reported by the National Association of Securities Dealers AutomatedQuotation System-Over The Counter Bulletin Board.  In making this calculation, the issuer has assumed, withoutadmitting for any purpose, that all executive officers and directors of thecompany, and no other persons, are affiliates.

 

On March 27, 2002, GaselTransportation Lines, Inc. had outstanding 2,412,966 common shares, without parvalue, which is the issuer’s only class of common equity.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

No documents are incorporatedby reference.

 

Transitional Small BusinessDisclosure Format (Check one): Yes  o;No  ý

 

 

 

**PART I**

 

**Item1. Description of Business.**

 

GENERAL

 

The Company operates primarilyas a truckload contract carrier with various customers which ship truckloadquantities of both refrigerated and non-refrigerated commodities over variousdistances on a nationwide basis.  As acontract carrier, the freight rates are negotiated with the shipper and aredependent upon competition, place of origin and destination, and the type ofcommodity being hauled.  The Companyalso operated a brokerage division out of its offices in the Columbus, Ohioarea last year, and recently formed a subsidiary corporation, GTL Logistics,Inc., to obtain its authority to operate as a freight broker.  As a freight broker, the Company takesshipping orders and selects carriers other than the Company owned equipment orleased owner/operators to transport the freight for a negotiated fee.

 

In addition to its primarybusiness, the Company operates three driver training schools, located inMarietta, Nelsonville, and Lima Ohio through its wholly owned subsidiary, GaselDriver Training Schools, Inc.  Operationof these schools is licensed by the Ohio Department of Highway Patrol.

 

The Company intends to continueto expand its business and operations through internal growth andacquisitions.  It is primarilyinterested in medium to long haul truckload carriers with compatible freightlanes and existing business that can be integrated into the Company’s methodsof operation.

 

HISTORY

 

Gasel Transportation Lines,Inc. (the “Company”) is a corporation that was organized under the laws of theState of Ohio on January 27, 1988.  TheCompany was initially formed for the purpose of becoming a transportationfreight broker hauling freight under the authority of other motor carriers on acommission basis with its sole offices located in Marietta, Ohio.  Shortly after its inception, the Companyevolved its business to obtain licensing with the Interstate CommerceCommission (“ICC”) as a common and contract general commodities motor freightcarrier in the 48 contiguous United States and Canada and to operate its owntractors and trailers.  In September1988, the Company received 

 

2

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licensing from the ICCauthorizing it to transport in interstate commerce both as a common andcontract carrier, and the Company obtained licenses in the 48 contiguous UnitedStates to operate under such licenses. Shortly thereafter, the Company sought approval to operate in Canada,and it was licensed to operate there, too. The Company also obtained its authority to broker freight.  In December, 1995, the ICC ceased operationsand its regulatory functions and jurisdiction over motor carriers wastransferred to the United States Department of Transportation.

 

In July, 1995, the Companyacquired a trucking terminal and offices on County Road 10, Rt. 4, Box 181A,Marietta, Ohio.  This facility is nowthe principal office and main terminal for the Company.  The actual mailing address is P.O. Box 1199,Marietta, Ohio 45750, and the telephone is (740) 373-6479.

 

In July, 1996, the Companyacquired the assets of a Florida based trucking company, Earl W. KerseyTrucking, Inc. that included a terminal and offices located on Highway 301 N,Dade City, Florida.  During 1999, theCompany purchased 5 acres of land adjoining the Dade City, Floridaterminal.  During 2001, the Companyceased its Dade City, Florida operations and currently has these propertieslisted for sale or lease.

 

Effective December 31, 2000,the Company entered into an agreement to purchase certain assets of EagleTransport, Inc. and Eagle Transportation Services, Inc., affiliated companieswith offices in Plain City, Ohio (which is in the greater Columbus, Ohioarea.)  Under the agreement, the Companypurchased the transportation equipment owned by Eagle Transport, Inc. and thefreight transportation business of Eagle Transportation Services, Inc., whichhistorically had approximately $9,000,000 in freight transportation revenuesfrom both the equipment owned by Eagle Transport, Inc. and throughowner/operators and brokered freight. The purchase included the leasing of an office at the former Eagleoffices and the hiring of some of Eagle’s former employees, primarily thoseinvolved in freight dispatching.

 

The Company has had a steadygrowth in revenues and owned equipment over the past several years.  During that time it has increased the numberof owned, either directly or by capital lease, tractors from 23 to its currentnumber as of March 31, 2002, of 117, its dry van box trailers from 31 to 144,and its refrigerated climate control trailers from 11 to 104.  In addition, there are 12 tractors and 9 dryvan box trailers that are owned and used in the driver training schools.  Annual freight revenues went from $3,325,606for calendar year 1994 to $17,574,593 for calendar year 2001.

 

The Company has an ISO 9002certification by American Systems Registrar. This certification means that the Company has been audited and verifiedto have written policies and procedures for everything that the Company does,plus a backup procedure in the event of a failure.

 

OPERATING STRATEGY

 

The Company is in directcompetition with other motor freight carriers, including many companies thatare significantly larger than the Company. Therefore, the Company 

 

3

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focuses on providing a highlevel of transportation services to its customer base with commensurate rates,rather than competing primarily on the basis of price.  Further, the Company has been able tocompete with these other carriers because its main terminal, together with theequipment that is based there, is located in an area where there are fewcompetitors domiciled, because the Columbus, Ohio area has an abundance offreight emanating from there, and by attempting to provide better and moretimely service, by operating new and specialized equipment, and by catering tocertain major shippers.  With theCompany commencing in 2001 its operations in the Columbus, Ohio market wherethere are many carriers located, the competition helped to re-enforce the needfor the Company to concentrate on providing excellence in its services.  The company continues to upgrade itsequipment so that it now operates late model equipment utilizing fullyintegrated computer systems with onboard communications systems.

 

OPERATIONS

 

As a licensed carrier with theU. S. Department of Transportation and the various states and Canada, theCompany business is dependent upon maintaining such operating authority.  One condition of retaining such authority isthat the Company must maintain liability insurance for protection of thepublic.  Another is that the Companymeet the safety fitness regulations as evidenced by a “satisfactory” by the U.S. Department of Transportation.

 

Each of the owned terminals arerequired to comply with various state and federal environmental regulationswith regard to the storage of fuel and oil and the disposal of waste oil andtires.  There is no significant costassociated with operating under these regulations; however, in the event of amajor fuel or oil spillage, the cost of clean up could be significant.

 

DRIVERS

 

The Company does not have anyemployees that work for it directly because it leases all of them from PeopLeaseCorporation.  This includes thedrivers.  All of the drivers must meetspecific guidelines relating primarily to safety record, driving experience andpersonal evaluation, including DOT mandated drug testing and personalbackground checks.  The Company recruitsand retains drivers by offering competitive compensation packages, purchasingquality tractors and equipping them with optimal comfort and safety features,and emphasizing training and retention programs.  Drivers can earn bonuses on a per mile basis for safety,paperwork, compliance and number of miles driven.  All employees, including drivers, are eligible to participate inthe 401(k) plan and health and life insurance plans provided by PeopLease Corporation.

 

Although the Company currentlyhas an adequate number of drivers, there can be no assurance that it will notbe affected by a shortage of qualified drivers in the future.  Some driver shortages were experience during2001.  Significant driver turnover is aproblem within the industry as a whole. In addition, the trucking industry is experiencing a diminishedworkforce of qualified drivers.  As aresult, the Company must compete with other transportation service companiesfor the available drivers.  It isanticipated that the 

 

4

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intense competition forqualified drivers in the trucking industry will continue.  The Company is able to acquire new,inexperienced drivers through its driver training schools and utilize them inconjunction with experienced drivers as teams, which helps with meeting itsdriver needs.

 

In addition to the driveremployees, the Company contracts with a limited select group of independentcontractors who own and operate their own tractors and trailers.  There are currently 6 of them.  Each owner-operator is required to enterinto an owner-operator lease agreement which is cancelable by either party uponthirty days notice.  The owner-operatorsprovide the Company with an additional source of drivers and equipment.

 

**Item2. Description of Property.**

 

The principal offices andterminal for the Company are owned; they are located on 12.5 acres adjacent toState Route 4, approximately 4 miles southwest of Marietta, Ohio.  The property has four buildings on it, the majorone of which is constructed of cement block and steel, is in good condition,and has the corporate offices, a drivers’ lounge, and three maintenance bayslocated therein.  Other buildingsinclude a freight transfer building made out of steel that is in fair to goodcondition, a wood building for the drivers school and lounge that was recentlyremodeled and is in good condition, and a cement block supply storage buildingthat is in good condition.  The lot isused for parking the Company transportation equipment and for operating adriving school practice area.

 

The other terminal owned by theCompany is in Dade City, Florida.  Thereis a pre-engineered steel terminal and office building located thereon that hasthree maintenance bays as well as offices and supply storage.  The building is in good condition.  The total area for this facility is 8.5acres.  The Company is no longeroperating this facility, has listed it for sale with a local real estatebroker, and has a contract for sale on the property, subject to financingcontingencies.

 

The Marietta, Ohio terminal hasabove ground fuel storage that is regulated by the EPA.  Additionally, both terminals have waste oilstorage facilities that are also regulated.

 

Both properties are subject tomortgages with the usual conditions that the Company is entitled to use of theproperties for its business needs so long as they are operated in a lawfulmanner and the mortgage notes are paid and not in default.  There are no other operating or userestrictions.

 

The Company also leases officesand parking facilities in Plain City, Ohio. The lease is on a month to month basis.

 

**Item3. Legal Proceedings.**

 

The Company from time to timehas been a party to litigation incidental to its business, primarily involvingclaims for personal injury and property damage incurred in the transportationof freight.  The Company is not party toany litigation which, individually or in the aggregate, management believeswill have a material adverse effect on its financial condition or operations.  The Company maintains insurance thatmanagement 

 

5

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believes is adequate to coverits liability risks.

 

**Item4. Submission of Matters to a Vote of Security Holders.**

 

No matters were submitted to avote of security holders during the fourth quarter of fiscal 2001.

 

**PART II**

 

**Item5. Market for Common Equity and Related Stockholder Matters.**

 

(a)  During the past two years, the common shares of the Company havebeen traded in the over-the-counter market and been included on the OTCBulletin Board under the trading symbol GSEL. The following table sets forth the range of the high and low bid pricesfor the common shares of the Company for each quarter during the past twoyears, as reported by The NASDAQ Stock Market, Inc.  These prices reflect inter-dealer prices, without retail mark-up,mark-down, or commission and may not represent actual transactions.

 
|               |   | **Bid Prices** |   |
|--------------------|--------|----------------|--------|
|               |   | **High**       |   | **Low** |   |
| Calendar Year 2001 |   |           |   |   |   |
|               |   |           |   |   |   |
| First Quarter      |   | $              | 1.5625 |   | $ | 0.6875 |   |
|               |   |           |   |   |   |
| Second Quarter     |   | $              | 1.23   |   | $ | 0.43 |   |
|               |   |           |   |   |   |
| Third Quarter      |   | $              | 1.15   |   | $ | 0.65 |   |
|               |   |           |   |   |   |
| Fourth Quarter     |   | $              | 0.65   |   | $ | 0.31 |   |
|               |   |           |   |   |   |
| Calendar Year 2000 |   |           |   |   |   |
|               |   |           |   |   |   |
| First Quarter(1)   |   | —         |   | — |   |
|               |   |           |   |   |   |
| Second Quarter(1)  |   | —         |   | — |   |
|               |   |           |   |   |   |
| Third Quarter      |   | $              | 2.5625 |   | $ | 1.625 |   |
|               |   |           |   |   |   |
| Fourth Quarter     |   | $              | 2.50   |   | $ | 1.125 |   |

 

----

(1)  There was no bidon the common shares during the first and second quarter of 2000 because theOTC Bulletin Board suspended allowing quotations pending the filing of aregistration statement by the Company. Trading resumed in the third quarter.

 

 

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(b)  On March 31, 2002, there were 70 shareholders of record of thecommon shares.  There are also anestimated 125 beneficial shareholders who hold their shares in street name.

 

(c)  The Company has never declared a cash dividend on its commonshares and no assurance can be given that the Company will declare any cashdividend on its common shares in the future. Payments of dividends are within the discretion of the Company’s Boardof Directors and depend upon the earnings, capital requirements, and operatingand financial condition of the Company, among other factors.  The Company currently expects to retain itsearnings to finance the growth of the Company and does not expect to pay cashdividends in the foreseeable future.

 

**Item6. Management’s Discussion and Analysis or Plan of Operation.**

* *

OVERVIEW.

 

Thefollowing discussion should be read in conjunction with the FinancialStatements, including footnotes, contained herein. The discussion is qualifiedin its entirety by the foregoing. Historical results of operations and thepercentage relationships among any amounts in the Financial Statements, and anytrends that may appear to be inferable therefrom, should not be taken asnecessarily indicative of trends of operations or results of operations for anyfuture periods.

 

Exceptfor certain historical information contained herein, the following discussioncontains forward-looking statements that involve risks, assumptions anduncertainties which are difficult to predict. All statements, other thanstatements of historical fact, are statements that could be deemedforward-looking statements, including any projections of earnings, revenues, orother financial items, any statement of plans, strategies, and objectives ofmanagement for future operations; any statements concerning proposed newservices or developments; any statements regarding future economic conditionsor performance; and any statements of belief and any statement of assumptionsunderlying any of the foregoing. Words such as “believe,” “may,” “could,”“expects,” “hopes,” “anticipates,” and “likely,” and variations of these words,or similar expressions, are intended to identify such forward-lookingstatements.  The Company’s actualresults could differ materially from those discussed here.  Factors that could cause or contribute tosuch differences include, but are not limited to, adverse changes in generaleconomic conditions, including adverse conditions to the companies that are theCompany’s core of shippers, fuel prices, driver costs, the ability to financeequipment, interest rates, the ability to borrow working capital, and otherfactors.  The Company does not assume,and specifically disclaims, any obligation to update any forward-lookingstatement contained in this annual report.

 

RESULTSOF OPERATIONS

 

Freightrevenues for the twelve months ended December 31, 2001, increased $5,077,596(40.6%) to $17,574,593 from $12,516,997 for the year ended 2000.  Training school revenues for the twelvemonths ended December 31, 2001, increased $300,131 to $805,563 (59.4%) from$505,432 for the twelve months period ended December 31, 2000. The increase infreight revenues was basically because the Company had more revenue equipmentin service resulting from its acquisition of the Eagle Transportation Servicesbusiness, which included some owned equipment, some owner/operators and afreight brokerage business, although the Company only operated the brokeragebusiness for a part of the year. Training school revenue increases were due primarily to increasedaverage enrollment per facility and increased revenues per student.

 

Operatingincome for the twelve months ended December 31, 2001 was $226,435, which was anincrease of $907,983 (133.2%) from a loss of ($681,548) for the same period in 

 

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2000.  The gross profit margin increased from 7.6%in 2000 to 13.9% in 2001.  Primaryfactors for the gross margin increase were the reduced cost of diesel fuel,increased equipment productivity and higher profit margins on brokeredfreight.  These factors were offset byan increase of $647,992 in the general and administrative expenses from$1,393,805 in 2000 to $2,041,797 in 2001 and increased interest expense of$377,512 from $898,500 in 2000 to $1,276,012 in 2001.

 

Thenet result was that the Company incurred a net loss after provision for incometaxes for the twelve months period ended December 31, 2001 of ($870,583)compared to a net loss of ($1,045,402) for the same period in 2000, a decreaseof $174,819 (16.7%) from the prior years loss. The Company improved by an additional $533,000 from the prior year whenpre-tax losses are compared.

 

CAPITALAND LIQUIDITY

 

Althoughthe Company’s earnings have historically been positive, it has sustainedsubstantial operating losses in both 2000 and 2001.  This has resulted in the Company having a significant need forworking capital.

 

AtDecember 31, 2001, the Company’s current liabilities exceeded its currentassets by $4,023,552.  A large portionof this deficit relates to the current portion of long term debt, whichmanagement expects the Company to pay from its normal operational cash flow.

 

Managementis working diligently to obtain additional capitalization for the Company inthe form of debt and/or equity to appropriately capitalize the Company in itscurrent position and to provide a solution to this need for workingcapital.  Management believes that ithas adequate contingency plans instituted to offset certain externalconditions, such as diesel fuel price increases, increased insurance costs anda slowdown in the general economy that could adversely affect the Company’sfinancial performance and condition.

 

Strongcorrective actions were installed in 2000 and early in 2001 to generatepositive cash flows for the Company. These actions were mainly designed to increase revenues through rateincreases and decrease costs through equipment productivity improvements and operatingcost reductions.  The Company was seeingthe results of these actions through the first quarter of 2001 as it showed amodest profit for that period.  Theearnings turnaround was not sustained through the last 3 quarters of 2001,largely due to a price decrease from its largest customer on certainroutes.  Although, the Company tookcorrective action by instituting a price increase on these routes, this was notdone until near year end.

 

Thisprice decrease, plus a sharp plunge in freight demand related to the nation’seconomic downturn and the second consecutive year of substantial industry hikesin insurance costs, overcame the Company’s earlier profit recovery.

 

Managementbelieves that, if fuel prices remain low compared to the average prices for thepast year and one half, coupled with its establishment of new, additionalcustomers providing increased outbound and inbound freight rates, its cuts andcontinuing control on general and administrative expenses, and an expectedimproving economy, the Company can be expected to progressively return topositive earnings in 2002.

 

Asstated above, management is actively working with industry specificprofessional firms to facilitate raising a sufficient amount of equity capitalto properly capitalize the Company in order to fund its working capital deficitand to fund its growth plans.

 

 

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**Item7. Financial Statements.**

 

TABLE OF CONTENTS

 
| CONSOLIDATED  FINANCIAL STATEMENTS                                                                    |
|-------------------------------------------------------------------------------------------------------|
|                                                                                                  |
| Independent Auditor's  Report                                                                         |
|                                                                                                  |
| Consolidated Balance Sheet  At December 31, 2001                                                      |
|                                                                                                  |
| Statements of  Consolidated Operations for the Years Ended December 31, 2001 and 2000                 |
|                                                                                                  |
| Statements  of Consolidated Stockholders’ Equity for the Years Ended December 31, 2001  and 2000 |
|                                                                                                  |
| Statements of  Consolidated Cash Flows for the Years Ended December 31, 2001 and 2000                 |
|                                                                                                  |
| Notes to  Consolidated Financial Statements                                                           |

 

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VANKREVEL & COMPANY

CertifiedPublic Accountants

P.O. Box 1432

Dublin,Ohio 43017-6432

614/761-3743

 

To theBoard of Directors and Stockholders

GaselTransportation Lines, Inc.

Marietta,Ohio

 

INDEPENDENTAUDITOR’S REPORT

 

We haveaudited the accompanying consolidated balance sheet of Gasel TransportationLines, Inc., and its subsidiary, as of December 31, 2001, and the relatedstatements of consolidated operations, stockholders’ equity and cash flows forthe years ended December 31, 2001 and 2000. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

Weconducted our audits in accordance with auditing standards generally acceptedin the United States of America.  Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that ouraudits provide a reasonable basis for our opinion.

 

In ouropinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Gasel Transportation Lines, Inc.,and its subsidiary, as of December 31, 2001, and the results of theiroperations and their cash flows for the years ended December 31, 2001 and 2000,in conformity with accounting principles generally accepted in the UnitedStates of America.

 
| /s/ VAN KREVEL &  COMPANY |
|-------------------------------|
|                          |
| Dublin,  Ohio                 |
|                          |
| February  27, 2002            |

 

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

CONSOLIDATEDBALANCE SHEET

December 31, 2001

 
| ASSETS                                     |   |       |       |
|--------------------------------------------|--------|------------|------------|
|                                       |   |       |       |
| Current Assets                             |   |       |       |
| Cash & Cash Equivalents                |   | $          | 20,529     |   |
| Accounts Receivable-Trade                  |   | 2,073,721  |       |
| Inventory                                  |   | 202,873    |       |
| Prepaid Expenses and Other Current  Assets |   | 249,655    |       |
|                                       |   |       |       |
| Total Current Assets                       |   | 2,546,778  |       |
|                                       |   |       |       |
| Property and Equipment                     |   |       |       |
| Land and Buildings                         |   | 1,051,842  |       |
| Tractors                                   |   | 11,975,477 |       |
| Trailers                                   |   | 5,408,240  |       |
| Shop Equipment                             |   | 405,285    |       |
| Office Equipment                           |   | 217,400    |       |
|                                       |   | 19,058,244 |       |
| Less Accumulated Depreciation              |   | 7,592,114  |       |
|                                       |   |       |       |
| Net Property and Equipment                 |   | 11,466,130 |       |
|                                       |   |       |       |
| Other Assets                               |   |       |       |
| Goodwill                                   |   | 353,438    |       |
| Other                                      |   | 145,551    |       |
|                                       |   |       |       |
| Total Other Assets                         |   | 498,989    |       |
|                                       |   |       |       |
| TOTAL ASSETS                               |   | $          | 14,511,897 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

CONSOLIDATEDBALANCE SHEET

December 31, 2001

 
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                           |   |       |       |
|------------------------------------------------------------------------------------------------------|--------|------------|------------|
|                                                                                                 |   |       |       |
| Current Liabilities                                                                                  |   |       |       |
| Cash Overdraft                                                                                       |   | $          | 413,965    |   |
| Notes Payable                                                                                        |   | 1,726,418  |       |
| Accounts Payable-Trade                                                                               |   | 336,683    |       |
| Accrued Broker Settlement,  Contract Labor, Interest and Other Expenses                              |   | 666,535    |       |
| Current Portion of Long Term Debt                                                                    |   | 3,353,708  |       |
|                                                                                                 |   |       |       |
| Total Current Liabilities                                                                            |   | 6,497,309  |       |
|                                                                                                 |   |       |       |
| Long Term Debt, net of  current portion                                                              |   | 7,503,730  |       |
|                                                                                                 |   |       |       |
| Total Liabilities                                                                                    |   | 14,001,039 |       |
|                                                                                                 |   |       |       |
| Stockholders’ Equity                                                                            |   |       |       |
| Common Stock, no par value,  3,000,000 shares authorized, 2,412,966 issued and 2,405,066 outstanding |   | 1,539,640  |       |
| Additional Paid in Capital                                                                           |   | 223,229    |       |
| Accumulated Deficit                                                                                  |   | (1,187,285 | )          |
| Less:  Treasury Stock, at cost, 7,900 shares                                                    |   | (17,833    | )          |
| Less:  Notes Receivable                                                                         |   | (46,893    | )          |
|                                                                                                 |   |       |       |
| Total Stockholders’ Equity                                                                      |   | 510,858    |       |
|                                                                                                 |   |       |       |
| TOTAL LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                     |   | $          | 14,511,897 |   |

 

See accompanying notes to consolidatedfinancial statements.

 

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

STATEMENTS OF CONSOLIDATED OPERATIONS

Years Ended December 31, 2001 and 2000

 
|                                         |   | **2001**   |       | **2000**   |   |
|----------------------------------------------|--------|------------|------------|------------|--------|
| Revenues                                     |   |       |       |       |   |
| Freight Income                               |   | $          | 17,574,593 |       | $      | 12,516,997 |   |
| Training School Revenue                      |   | 805,563    |       | 505,432    |   |
|                                         |   | 18,380,156 |       | 13,022,429 |   |
|                                         |   |       |       |       |   |
| Cost of Revenue                              |   | 15,820,996 |       | 12,037,856 |   |
|                                         |   |       |       |       |   |
| Gross Profit                                 |   | 2,559,160  |       | 984,573    |   |
|                                         |   |       |       |       |   |
| Operating Expenses                           |   |       |       |       |   |
| Garage Expenses                              |   | 290,928    |       | 272,316    |   |
| General and Administrative  Expenses         |   | 2,041,797  |       | 1,393,805  |   |
|                                         |   | 2,332,725  |       | 1,666,121  |   |
|                                         |   |       |       |       |   |
| Operating Income (Loss)                      |   | 226,435    |       | (681,548   | )      |
|                                         |   |       |       |       |   |
| Other Income (Expense)                       |   |       |       |       |   |
| Other Income                                 |   | 187,984    |       | 13,274     |   |
| Interest Income                              |   | 13,709     |       | 19,087     |   |
| Interest Expense                             |   | (1,276,012 | )          | (898,500   | )      |
| (Loss) on Equipment Disposal                 |   | (22,699    | )          | (30,715    | )      |
|                                         |   | (1,097,018 | )          | (896,854   | )      |
|                                         |   |       |       |       |   |
| (Loss) Before Tax Provision                  |   | (870,583   | )          | (1,578,402 | )      |
|                                         |   |       |       |       |   |
| Provision for Income Taxes                   |   | —     |       | (533,000   | )      |
|                                         |   |       |       |       |   |
| Net (Loss)                                   |   | $          | (870,583   | )          | $      | (1,045,402 | ) |
|                                         |   |       |       |       |   |
| Basic Earnings Per Share                     |   | $          | (.362      | )          | $      | (.468 | ) |
|                                         |   |       |       |       |   |
| Diluted Earnings Per Share                   |   | $          | (.362      | )          | $      | (.468 | ) |
|                                         |   |       |       |       |   |
| Weighted Average Common Shares  Outstanding: |   |       |       |       |   |
|                                         |   |       |       |       |   |
| Basic                                        |   | 2,405,066  |       | 2,232,443  |   |
|                                         |   |       |       |       |   |
| Diluted                                      |   | 2,405,066  |       | 2,232,443  |   |

 

See accompanying notes to consolidatedfinancial statements.

 

13

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’EQUITY

Years Ended December 31, 2001 and 2000

 
|                                   |   |             |   | **Additional  Paid in  Capital** |      | **Accumulated  (Deficit)** |   | **Treasury  Stock** |   | **Notes  Receivable** |       |
|----------------------------------------|--------|------------------|--------|----------------------------------|-----------|----------------------------|--------|---------------------|--------|-----------------------|------------|
|                                   |   | **Common Stock** |   |                             |      |                       |   |
|                                   |   | **Shares**       |   | **Amount**                       |      |                       |   |                |   |
| Balances, December 31, 1999            |   | 2,237,966        |   | $                                | 1,277,140 |                       | $      | 227,014             |   | $                     | 728,700    |   | $ | (17,833 | ) | $ | (66,000 | ) |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Net (Loss)                             |   |             |   |                             |      |                       |   | (1,045,402          | )      |                  |       |   |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Issuance of Common Stock Shares        |   | 175,000          |   | 262,500                          |      |                       |   |                |   |                  |       |   |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Cost of increase in authorized  shares |   |             |   |                             |      | (3,785                     | )      |                |   |                  |       |   |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Payment received                       |   |             |   |                             |      |                       |   |                |   |                  |       | 1,081 |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Balances at December 31, 2000          |   | 2,412,966        |   | 1,539,640                        |      | 223,229                    |   | (316,702            | )      | (17,833               | )          | (64,919 | ) |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Net (Loss)                             |   |             |   |                             |      |                       |   | (870,583            | )      |                  |       |   |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Payment Received                       |   |             |   |                             |      |                       |   |                |   |                  |       | 18,026 |   |
|                                   |   |             |   |                             |      |                       |   |                |   |                  |       |   |   |
| Balances at December 31, 2001          |   | 2,412,966        |   | $                                | 1,539,640 |                       | $      | 223,229             |   | $                     | (1,187,285 | ) | $ | (17,833 | ) | $ | (46,893 | ) |

 

See accompanying notes to consolidatedfinancial statements.

 

14

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

STATEMENTSOF CONSOLIDATED CASH FLOWS

Years Ended December 31, 2001 and 2000

 
|                                                                           |   | **2001**   |           | **2000**   |   |
|--------------------------------------------------------------------------------|--------|------------|----------------|------------|--------|
| Cash Flows From Operating  Activities                                          |   |       |           |       |   |
| Net (Loss)                                                                     |   | $          | (870,583  | )          | $      | (1,045,402 | ) |
| Adjustments to reconcile net (loss)  to cash provided by operating activities: |   |       |           |       |   |
| Deferred Taxes                                                                 |   |       |           | (533,000   | )      |
| Depreciation and Amortization                                                  |   | 2,332,991  |           | 1,838,483  |   |
| Loss on Sale of Equipment                                                      |   | 22,699     |           | 30,715     |   |
| Provision for Doubtful Accounts                                                |   | —     |           | 40,000     |   |
| (Increase) Decrease in:                                                        |   |       |           |       |   |
| Accounts Receivable-Trade                                                      |   | (593,081   | )              | (136,799   | )      |
| Inventory                                                                      |   | (33,111    | )              | 53,490     |   |
| Prepaid Expenses and Other Current  Assets                                     |   | (65,679    | )              | (30,050    | )      |
| Other Assets                                                                   |   | (98,094    | )              |       |   |
| Increase (Decrease) in:                                                        |   |       |           |       |   |
| Accounts Payable and Accrued  Expenses                                         |   | 583,720    |           | 153,757    |   |
| Net Cash Provided by Operating  Activities                                     |   | 1,278,862  |           | 371,194    |   |
|                                                                           |   |       |           |       |   |
| Cash Flows From Investing  Activities                                          |   |       |           |       |   |
| Purchases of Property and  Equipment                                           |   | (300,456   | )              | (559,601   | )      |
| Repayment of Accounts  Receivable-Affiliate                                    |   | —     |           | 61,356     |   |
| Purchase of Business                                                           |   | —     |           | (150,000   | )      |
| Proceeds from Sale of Equipment                                                |   | 252,002    |           | 272,000    |   |
| Net Cash Used By Investing  Activities                                         |   | (48,454    | )              | (376,245   | )      |
|                                                                           |   |       |           |       |   |
| Cash Flows From Financing  Activities                                          |   |       |           |       |   |
| Line of Credit, Net                                                            |   | 212,921    |           | 375,246    |   |
| Proceeds from Short Term  Borrowing-Related Party                              |   | 100,000    |           | —     |   |
| Repayment of Notes-Related Party                                               |   | (78,796    | )              | —     |   |
| Proceeds from Long Term Borrowing                                              |   | 715,789    |           | 513,499    |   |
| Decrease in Additional Paid in  Capital                                        |   | —     |           | (3,785     | )      |
| Proceeds from Capital Lease  Obligations                                       |   | 142,136    |           | —     |   |
| Repayment of Note Receivable                                                   |   | 18,026     |           | 1,081      |   |
| Principal Payments on Long Term  Borrowing                                     |   | (1,537,803 | )              | (1,491,631 | )      |
| Principal Payments Under Capital  Lease Agreements                             |   | (460,982   | )              | (145,106   | )      |
|                                                                           |   |       |           |       |   |
| Net Cash Used by Financing  Activities                                         |   | (888,709   | )              | (750,696   | )      |
|                                                                           |   |       |           |       |   |
| Net Increase (Decrease) in Cash                                                |   | 341,699    |           | (755,747   | )      |
| Net Cash & Cash Equivalents  (Overdraft)-January 1                         |   | (735,135   | )              | 20,612     |   |
| Net Cash & Cash Equivalents  (Overdraft)-December 31                       |   | $          | (393,436       | )          | $      | (735,135 | ) |

 

See accompanying notes to consolidatedfinancial statements.

 

15

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The netcash and cash equivalents (overdraft) are presented in the balance sheet asfollows at December 31:

 
| Cash and  Cash Equivalents                                                                                                                 |   | $        | 20,529    |     | $         | 7,736     |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-----------|----------|-----------|-----------|--------|
| Cash Overdraft                                                                                                                             |   | (413,965 | )         | (742,871 | )         |
|                                                                                                                                       |   |     |      |     |      |
| Net Cash & Cash Equivalents  (Overdraft)-December 31                                                                                   |   | $        | (393,436  | )        | $         | (735,135  | )      |
|                                                                                                                                       |   |     |      |     |      |
| Supplemental Disclosures:                                                                                                                  |   |     |      |     |      |
|                                                                                                                                       |   |     |      |     |      |
| Interest Paid                                                                                                                              |   | $        | 1,141,475 |     | $         | 858,604   |   |
|                                                                                                                                       |   |     |      |     |      |
| Non-Cash Investing and Financing  Activities                                                                                               |   |     |      |     |      |
|                                                                                                                                       |   |     |      |     |      |
| Purchases of Property and  Equipment with Direct Financing                                                                                 |   | $        | 1,244,530 |     | $         | 4,024,433 |   |
|                                                                                                                                       |   |     |      |     |      |
| Acquisition of Freight Transport  And Freight Brokerage Business of Eagle Transportation Services, Inc. and  Eagle Transport, Inc. (Eagle) |   |     |      |     |      |
|                                                                                                                                       |   |     |      |     |      |
| Assets Acquired in 2000:                                                                                                                   |   |     |      |     |      |
| Property and Equipment                                                                                                                     |   |     |      | $        | 1,092,225 |      |
| Goodwill                                                                                                                                   |   |     |      | 362,500  |      |
|                                                                                                                                       |   |     |      | $        | 1,454,725 |      |
| Payment for Assets Acquired:                                                                                                               |   |     |      |     |      |
| Cash Paid at Closing                                                                                                                       |   |     |      | $        | 150,000   |      |
| Note Issued to Seller                                                                                                                      |   |     |      | 150,000  |      |
| Obligation Under Agreement to  Indemnify Seller's Debt                                                                                     |   |     |      | 892,225  |      |
| Issuance of 175,000 shares of  Common Stock to Seller                                                                                      |   |     |      | 262,500  |      |
|                                                                                                                                       |   |     |      | $        | 1,454,725 |      |

 

See accompanying notes to consolidatedfinancial statements.

 

16

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GASEL TRANSPORTATION LINES, INC.

AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2001 and 2000

 

**NOTE 1 – SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

Thissummary of significant accounting policies of Gasel Transportation Lines, Inc.,and its subsidiary, Gasel Driver Training Schools, Inc., is presented to assistin understanding the Company’s financial statements. The financial statementsand notes are representations of the Company’s management who is responsiblefor their integrity and objectivity. These accounting policies conform to generally accepted accountingprinciples and have been consistently applied in the preparation of thefinancial statements.

 

Natureof Operations

 

TheCompany is engaged in the interstate trucking industry.  Gasel holds federal authority as a motorfreight common carrier, contract carrier, and freight broker.  Its authority includes the continentalUnited States and Canada.  Principaloffices of the Company are located in Marietta, Ohio.  In addition, the Company has motor terminal and maintenancefacilities in Marietta, Ohio, and a terminal/sales office in Columbus,Ohio.  Gasel’s subsidiary is astate-licensed Class A truck driver training school.

 

Capitaland Liquidity

 

Theaccompanying financial statements have been prepared in conformity withgenerally accepted accounting principles, which contemplate continuation of theCompany as a going concern.  Althoughthe Company’s historical earnings have been consistently positive, itsustained  substantial operating lossesin 2001 and in 2000.

 

AtDecember 31, 2001 and December 31, 2000, current liabilities exceeded currentassets by $3,950,531 and $4,023,552, respectively.  A large portion of this deficit relates to the current portion oflong term debt, which management expects to pay from its normal operationalcash flow.

 

Correctiveactions continue to be taken to generate positive cash flows. These actions aremainly designed to increase revenues through additional customers and rateincreases and decrease costs through equipment productivity improvements andoperating cost reductions.

 

Managementis actively working with industry specific legal and professional firms tofacilitate raising additional capital to fund operations and growth.

 

17

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Principlesof Consolidation

 

Theconsolidated financial statements include the accounts and operations of theCompany and its wholly owned subsidiary. All significant inter-company accounts and transactions have beeneliminated.

 

RevenueRecognition

 

TheCompany recognizes revenue and direct shipment costs upon shipment of therelated freight.  Direct shipment costsgenerally include the leased driver costs. These costs are recorded as an expense and as accrued contract laborupon shipment of the related freight. Driver training school revenues and rental income are recognized whenearned.

 

FairValue of Financial Instruments

 

TheCompany’s financial instruments include cash, cash equivalents, and long termdebt.  The carrying amounts of thesefinancial instruments have been estimated by the Company to approximate fairvalue.

 

Cashand Cash Equivalents

 

Forpurposes of the statement of cash flows, the Company considers all highlyliquid debt instruments purchased with a maturity of three months or less to becash equivalents.

 

Useof Estimates in the Financial Statements

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsthat affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

 

CreditRisk

 

TheCompany maintains cash in demand deposit accounts with federally insuredbanks.  At times, the balances in theaccounts may be in excess of federally insured limits.

 

Financialinstruments that potentially subject the Company to concentrations of creditrisk consist principally of trade receivables. Credit risk is generally diversified due to the large number of entitiescomprising the Company’s customer base and their dispersion across manydifferent industries and geographic regions.

 

18

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AccountsReceivable

 

Accountsreceivable are shown net of an allowance for doubtful accounts of $40,000.

 

Inventory

 

Inventoriesconsist primarily of maintenance supplies and fuel and are stated at the lowerof cost (first-in, first-out) or market value.

 

Propertyand Equipment

 

Propertyand equipment are recorded at cost.  Forfinancial reporting purposes, the cost of such property is depreciatedprincipally by the straight-line method over the estimated useful lives of 3-10years for tractors and trailers, 40 years for buildings and 3-10 years for shopand office equipment.  Amortization ofequipment purchased under capitalized lease obligations is included indepreciation expense.  For tax reportingpurposes, accelerated depreciation or applicable cost recovery methods areused.  Gains and losses are recognizedin the year of disposal.  Tirespurchased with tractors and trailers are capitalized as a part of the cost ofsuch equipment, with replacement tires being inventoried and expensed whenplaced in service.

 

Goodwill

 

During2000, the Company purchased an existing freight transport and freight brokeragebusiness in the Columbus, Ohio area. Goodwill represents the excess of the purchase price over the fairmarket value of the net assets acquired at the date of acquisition.  The amount is shown net of accumulatedamortization of $9,062 at December 31, 2001.

 

Prior toJanuary 1, 2002, the Company’s effective date for implementation of SFAS No.142, *Goodwill and Other Intangible Assets*,goodwill was amortized using the straight line method over a forty yearperiod.  Amortization expense charged tooperations was $9,062 for the year ended December 31, 2001.

 

Under SFASNo. 142, *Goodwill and Other IntangibleAssets*, goodwill is no longer amortized.  Rather, goodwill is tested at least annually for impairment.  Impairment exists when the carrying amount ofgoodwill exceeds it implied fair value. If the carrying amount exceeds the implied fair value, an impairmentloss is recognized.  Subsequent reversalof previously recognized goodwill impairment loss is prohibited.

 

19

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Advertising

 

Alladvertising costs are expensed as incurred. Advertising expense was $50,873 and $36,243 for the years ended December31, 2001 and 2000, respectively.

 

StockOptions 

 

The Companyhas elected to account for the stock option plan under Accounting PrinciplesBoard Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) andrelated Interpretations in accounting. The alternative fair value accounting provided under FASB Statement No.123, “Accounting for Stock-Based Compensation,” (SFAS No. 123) requires use ofoption valuation models that were not developed for use in valuing employeestock options.  Under APB 25, when theexercise price of the Company’s stock options equals the market price of theunderlying stock on the date of grant, no compensation expense is recognized.

 

IncomeTaxes

 

Deferredincome taxes are reported using the liability method.  Deferred tax assets are recognized for deductible temporarydifferences and deferred tax liabilities are recognized for taxable temporarydifferences.  Temporary differences arethe changes between the reported amounts of assets and liabilities and theirtax basis.  Deferred tax assets arereduced by a valuation allowance, when in the opinion of management, it is morelikely than not that some portion or all of the deferred tax assets will not berealized.  Deferred tax assets andliabilities are adjusted for the effects of changes in tax laws and rates onthe date of enactment.

 

**NOTE 2 – NOTES RECEIVABLE**

 

Notes receivable consists of:

 
|                                                                                 |   | **2001** |   |
|--------------------------------------------------------------------------------------|--------|----------|--------|
| Unsecured note receivable, dated  June, 1999, Merchants Financial, 10% due on demand |   | $        | 17,815 |   |
|                                                                                 |   |     |   |
| Unsecured note receivable, dated  August, 1999, Corna Securities, 10% due on demand  |   | 29,078   |   |
|                                                                                 |   |     |   |
|                                                                                 |   | $        | 46,893 |   |

 

(See Note10.)

 

20

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**NOTE 3 – LONG TERM DEBT**

 

Long-termdebt consists of the following:

 
|                      |   | **2001**   |      |
|---------------------------|--------|------------|-----------|
| Mortgages  Payable        |   | $          | 1,132,247 |   |
| Notes Payable             |   | 7,767,827  |      |
| Capital Lease Obligations |   | 1,957,364  |      |
|                      |   | 10,857,438 |      |
| Less Current Maturities   |   | 3,353,708  |      |
|                      |   |       |      |
|                      |   | $          | 7,503,730 |   |

 

Notespayable and capitalized lease obligations are collateralized by property andequipment with a net book value of $7,426,972 at December 31, 2001. Themortgages payable are collateralized by land and building with a net book valueof $955,942 at December 31, 2001, as well as a first security interest in allshop and office equipment.  One of themortgages is personally guaranteed by Michael J. Post, President, CEO, andmajority stockholder, and by his wife. Certain other notes are personally guaranteed by Mr. Post (see Note12).  Interest rates range from 7.8%****to 10.75% during 2001 for the notes.  Rates for the mortgages ranged from 8.25% to9.0% for 2001.

 

Annualmaturities on long term debt, excluding capital lease obligations, for the fiveyears ending after December 31, 2001, are as follows:

 

| 2002       |   | $         | 2,607,201 |   |
|------------|--------|-----------|-----------|--------|
| 2003       |   | 2,589,919 |      |
| 2004       |   | 1,717,226 |      |
| 2005       |   | 1,424,910 |      |
| 2006       |   | 44,443    |      |
| Thereafter |   | 516,375   |      |
|       |   | $         | 8,900,074 |   |

 

**NOTE 4 – NOTES PAYABLE**

 

TheCompany has available a $2,000,000 line of credit with CitiCapital CommercialCorporation of Irving, Texas at December 31, 2001.  At December 31, 2001, $1,555,214 was outstanding on this line.  Interest rate is variable at prime plus 1%and is due monthly.  This line of creditagreement matures in May 2002, with a one year renewal.  This line of credit is collateralized by accountsreceivable and deposit accounts and is personally guaranteed by the Company’smajority stockholder (see Note 12).

 

21

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Nodividends may be paid, either in cash or in kind, on the Company’s common stockwithout the prior written consent of CitiCapital Commercial Corporation.  No dividends were paid in 2001 or 2000.

 

AtDecember 31, 2001, the company had a demand note (secured by stock of GaselDriver Training School, Inc.) payable to Janet Post, wife of Michael J. Post,in the amount of $100,000.  (See Note12.)  In addition, notes payableincludes a $71,204 unsecured note payable to Eagle Transportation Services.(See Note 17).

 

**NOTE 5 – CAPITAL LEASEOBLIGATIONS**

 

TheCompany leases tractors and trailers under capital leases that expire from 2002through 2006.  These assets are includedin property and equipment as follows:

 
|                          |   | **2001**  |      |
|-------------------------------|--------|-----------|-----------|
| Tractors                      |   | $         | 744,603   |   |
| Trailers                      |   | 1,695,474 |      |
|                          |   |      |      |
|                          |   | 2,440,077 |      |
| Less Accumulated Depreciation |   | (425,487  | )         |
|                          |   |      |      |
|                          |   | $         | 2,014,590 |   |

 

Futureminimum annual lease payments as of December 31, 2001, are as  follows:

 
| 2002                                         |   | $         | 945,607   |   |
|----------------------------------------------|--------|-----------|-----------|--------|
| 2003                                         |   | 678,092   |      |
| 2004                                         |   | 490,071   |      |
| 2005                                         |   | 176,306   |      |
| 2006                                         |   | 21,380    |      |
|                                         |   | 2,311,456 |      |
| Less amount representing interest            |   | (354,092  | )         |
|                                         |   |      |      |
| Present value of net minimum lease  payments |   | 1,957,364 |      |
| Less current portion                         |   | (746,507  | )         |
|                                         |   |      |      |
| Long Term Portion                            |   | $         | 1,210,857 |   |

 

22

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**NOTE 6 – OPERATING LEASES**

 

During2001, the Company leased terminals located in Alta Vista, Virginia andPaulsboro, New Jersey on a month-to-month basis.  In addition, the Company leases school facilities at threeseparate locations in Ohio on a month-to-month basis.  Rent expense paid in 2001 was $56,620 and $35,289 in 2000.

 

During2001, the Company leased a terminal and sales office in Plain City, Ohio, fromETS, a company owned by  Ron Flowers, anofficer of Gasel.  The Company paid rentexpense of $36,000 in 2001 to this related party.

 

TheCompany leases its employees under a one year employee leasing agreement withPeopLease Corporation, a South Carolina Corporation.  PeopLease provides the Company with all of its drivers, mechanicsand office workers.  The Company paid$5,794,176 and $4,764,868 for its leased employees in 2001 and 2000,respectively.

 

TheCompany leases trailers and other equipment under long-term operatingleases.  The Company paid $124,976 and$11,145 for its operating leases in 2001 and 2000, respectively.  Future minimum rental payments requiredunder operating leases that have noncancellable lease terms in excess of oneyear as of December 31, 2001, are:

 

| 2002   |   | $       | 262,080   |   |
|--------|--------|---------|-----------|--------|
| 2003   |   | 262,080 |      |
| 2004   |   | 262,080 |      |
| 2005   |   | 228,600 |      |
| 2006   |   | 128,160 |      |
|   |   | $       | 1,143,000 |   |

 

**NOTE 7 – INCOME TAXES**

 

Income taxexpense (benefit) consists of:

 
|      |   | **December 31,** |   |
|-----------|--------|------------------|--------|
|      |   | **2001**         |   | **2000** |   |
| Current:  |   |             |   |   |   |
| Federal   |   | $                | — |   | $ | — |   |
| State     |   | —           |   | — |   |
|      |   |             |   |   |   |
|      |   | $                | — |   | $ | — |   |
| Deferred: |   |             |   |   |   |
| Federal   |   | $                | — |   | $ | (533,000 | ) |
| State     |   | —           |   | — |   |
|      |   | $                | — |   | $ | (533,000 | ) |

 

23

----

 

Areconciliation of the total provision for income taxes with amounts determinedby applying the statutory U.S. Federal income tax rates to income taxprovisions is as follows:

 
|                            |   | **December 31,** |     |
|---------------------------------|--------|------------------|----------|
|                            |   | **2001**         |     | **2000** |   |
| Income tax at statutory rates   |   | $                | (296,000 | ) | $ | (536,200 | ) |
| Add:  Tax effect of        |   |             |     |   |   |
| permanent differences           |   | —           |     | 3,200 |   |
| Increase in valuation allowance |   | 296,000          |     | — |   |
| Total income tax provision      |   | $                | —   |   | $ | (533,000 | ) |

 

Theeffects of temporary differences that give rise to significant portions of thedeferred tax assets and deferred tax liabilities are presented below:

 
|                                                                    |   | **December 31  2001** |      |
|-------------------------------------------------------------------------|--------|-----------------------|-----------|
| Deferred tax assets:                                                    |   |                  |      |
| Net operating loss carryforward                                         |   | $                     | 1,783,600 |   |
| Contribution carryover                                                  |   | 3,400                 |      |
| Deferred tax asset valuation  allowance                                 |   | (296,000              | )         |
| Total deferred tax assets                                               |   | $                     | 1,491,000 |   |
|                                                                    |   |                  |      |
| Deferred tax liabilities:                                               |   |                  |      |
| Property and equipment,  principally due to differences in depreciation |   | $                     | 1,491,000 |   |
|                                                                    |   |                  |      |   |
| Total deferred tax liabilities                                          |   | $                     | 1,491,000 |   |

 

These amounts are presented in theaccompanying consolidated balance sheet as follows:

 
| Noncurrent deferred tax assets    |   | $          | 1,491,000 |   |
|-----------------------------------|--------|------------|-----------|--------|
| Noncurrent deferred tax liability |   | (1,491,000 | )         |
| Net deferred tax asset            |   | $          | —    |   |

 

AtDecember 31, 2001, the Company has net operating loss carryforwards of $5.2million for income tax purposes that expire in years 2009 through 2021.

 

24

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**NOTE 8 – EARNINGS PERCOMMON SHARE AND COMMON EQUIVALENT SHARE**

 

Earningsper common and common equivalent share were computed by dividing netincome(loss) by the weighted average number of shares of common stockoutstanding during the year.  AtDecember 31, 2001 and 2000, the number of common shares was increased by thenumber of shares issuable on the exercise of outstanding stock options andwarrants when the market price of the common stock exceeds the exercise priceof the options and warrants.  Thisincrease in the number of common shares was reduced by the number of commonshares that are assumed to have been purchased with the proceeds from theexercise of the options; those purchases were assumed to have been made at theaverage price of the common stock during that part of the year when the marketprice of the common stock exceeded the exercise price of the options.

 

Thefollowing data shows the amounts used in computing earnings per share (EPS) andthe effect on income and the weighted average number of shares of dilutivepotential common stock.

 
|                                                                                              |   | **December 31,** |     |
|---------------------------------------------------------------------------------------------------|--------|------------------|----------|
|                                                                                              |   | **2001**         |     | **2000** |   |
| Income (loss) available to common  stockholders used in basic EPS and diluted EPS                 |   | $                | (870,583 | ) | $ | (1,045,402 | ) |
|                                                                                              |   |             |     |   |   |
| Weighted average number of common  shares used in basic EPS                                       |   | 2,405,066        |     | 2,232,443 |   |
|                                                                                              |   |             |     |   |   |
| Effect of dilutive securities:                                                                    |   |             |     |   |   |
| Stock options and warrants                                                                        |   | —           |     | — |   |
|                                                                                              |   |             |     |   |   |
| Weighted average number of common  shares and dilutive potential common stock used in diluted EPS |   | 2,405,066        |     | 2,232,443 |   |
|                                                                                                   |        |                  |          |  |  |  |  |

 

AtDecember 31, 2001 and 2000, options on 41,176 and 175,512 shares of commonstock, respectively, were not included in computing diluted EPS because theireffects were antidilutive.

 

25

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**NOTE 9 – STOCK OPTIONS**

 

TheCompany has adopted a stock option plan which provides for the granting ofoptions to certain officers, directors and key employees of the Company.  Currently, options for 310,000 shares ofcommon stock have been issued under this plan. The option price, number of shares and grant date are determined at thediscretion of the Company’s board of directors. Grantees vest in the options atthe date of the grant.  The exerciseprice of each option that has been granted under the plan equals 100% of themarket price of the Company’s stock on the date of the grant.  Options under this plan vest on the grantdate and are exercisable for a period not to exceed 10 years from the optiongrant date.  Options are non-transferable.

 

A summaryof the status of the Company’s stock option plan as of December 31, 2001 and2000, and changes during the years then ended is presented below:

 
|                                                            |   | **2001**                        |   | **2000**                        |   |
|-----------------------------------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|
|                                                            |   | **Weighted  Average  Exercise** |   | **Weighted  Average  Exercise** |   |
|                                                            |   | **Options**                     |   | **Price**                       |   | **Options** |   | **Price** |   |
| Outstanding at beginning of year                                |   | 310,000                         |   | $                               | .81    |   | 310,000 |   | $ | .81 |   |
| Granted                                                         |   | —                          |   |                            |   | — |   |   |   |
| Exercised                                                       |   | —                          |   |                            |   | — |   |   |   |
| Forfeited                                                       |   | —                          |   |                            |   | — |   |   |   |
|                                                            |   |                            |   |                            |   |   |   |   |   |
| Outstanding at end of year                                      |   | 310,000                         |   | $                               | .81    |   | 310,000 |   | $ | .81 |   |
|                                                            |   |                            |   |                            |   |   |   |   |   |
| Exercisable at end of year                                      |   | 310,000                         |   |                            |   | 310,000 |   |   |   |
|                                                            |   |                            |   |                            |   |   |   |   |   |
| Weighted average fair value of  options granted during the year |   | $                               | — |                            |   |   | $ | — |   |   |   |
|                                                                 |        |                                 |        |                                 |        |  |  |  |  |  |  |  |  |

 

26

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Thefollowing table summarizes information about stock options outstanding atDecember 31, 2001.

 

| **Range  of  Exercise  Prices** |   | **Number  Outstanding  at  12/31/01** |    | **Weighted  Average  Remaining  Contractual  Life** |   | **Weighted  Average  Exercise  Price** |   | **Number  Exercisable  at  12/31/01** |   |
|---------------------------------|--------|---------------------------------------|---------|-----------------------------------------------------|--------|----------------------------------------|--------|---------------------------------------|--------|
| $                               | .95    |                                  | 210,000 |                                                | 5.42   |                                   | $      | .95                                   |   | 210,000 |   |
| $                               | .50    |                                  | 100,000 |                                                | 6.75   |                                   | $      | .50                                   |   | 100,000 |   |

 

The BlackScholes option valuation model was developed for use in estimating the fairvalue of traded options which have no vesting restrictions and are fullytransferable.  In addition, optionvaluation models require the input of highly subjective assumptions includingthe expected stock price volatility. Because the Company’s stock options have characteristics significantlydifferent from those of traded options, and because changes in the subjectiveinput assumptions may materially affect the fair value estimate, inmanagement’s opinion, the existing models do not necessarily provide a reliablesingle measure of the fair value of its stock options.

 

Forpurposes of pro forma disclosures, the estimated fair value of the options isamortized to expense over the options vesting period.  There were no options granted during the years ended December 31,2001 and 2000; therefore, no pro forma presentations are required.

 

**NOTE 10 – WARRANTS**

 

As part ofthe July, 1996 securities offering, the underwriter was granted a warrant topurchase 30,870 shares of common stock at a purchase price of $1.25 pershare.  This warrant was exercised inAugust, 1999, by executing a 10% cognovit note in the amount of $38,500, ofwhich $29,078 was outstanding at December 31, 2001 and $38,500 at December 31,2000.

 

As part ofa consulting agreement dated October, 1998, Merchants Financial acquired 80,000shares of the Company’s common stock at a purchase price of $1.38 per share byexecuting 10% cognovit demand notes totaling $110,000.  At December 31, 2001, $17,815 of thesecognovit notes were outstanding, as well as $26,419 at December 31, 2000.

 

27

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As part ofthe December 2000 acquisition of the freight transport and freight brokeragebusiness of Eagle Transportation Services, Inc., and Eagle Transport, Inc., theSellers were granted warrants to purchase 100,000 shares of common stock at$2.50 per share and 75,000 shares of common stock at $3.00 per share,exercisable after one year and expiring in 10 years.

 

A summaryof the status of the Company’s warrants as of December 31, 2001 and 2000, andchanges during the years then ended is presented below:

 
|                             |   | **2001**                              |   | **2000**  |   |
|----------------------------------|--------|---------------------------------------|--------|-----------|--------|
|                             |   | **Weighted Average Exercise  Shares** |   | **Price** |   | **Weighted Average  Exercise Shares** |   | **Price** |   |
| Outstanding at beginning of year |   | 175,000                               |   | $         | 2.71   |   | — |   |   |   |
|                             |   |                                  |   |      |   |   |   |   |   |
| Granted                          |   | —                                |   |      |   | 175,000 |   | $ | 2.71 |   |
| Exercised                        |   | —                                |   |      |   | — |   |   |   |
| Expired                          |   | —                                |   |      |   | — |   |   |   |
|                             |   |                                  |   |      |   |   |   |   |   |
| Outstanding at end of year       |   | 175,000                               |   | $         | 2.71   |   | 175,000 |   | $ | 2.71 |   |
|                             |   |                                  |   |      |   |   |   |   |   |
| Warrants Exercisable At Year End |   | 175,000                               |   |      |   | — |   |   |   |

 

**NOTE 11 –RECLASSIFICATIONS**

 

Certainprior year amounts have been reclassified to conform with the currentpresentation.

 

**NOTE 12 – RELATED PARTYTRANSACTIONS**

 

During2001 and 2000, the Company collateralized two loans from local banks withCompany tractors and trailers and 939,408 shares of Gasel’s common stock ownedby Michael J. Post.  Debt associatedwith these loans at December 31, 2001 and 2000 was $2,060,048 and $597,693,respectively.  Certain loans made by theCompany are personally guaranteed by Mr. Post.

(See Notes4 and 6.)

 

28

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**NOTE 13 – MAJOR CUSTOMERS**

 

During2001, the Company had one major customer, sales to which exceeded 10% of theCompany’s total sales. Sales to this customer totaled $4,893,642 for the yearended December 31, 2001.  Accountsreceivable outstanding relating to these sales at December 31, 2001, were$360,479, which amounted to 17% of total trade receivables.

 

During2000, the Company had one major customer, sales to which exceeded 10% of theCompany’s total sales. Sales to this customer totaled $1,573,238 for the yearended December 31, 2000.  Accounts receivableoutstanding relating to these sales at December 31, 2000, were $311,129, whichamounted to 21% of total trade receivables.

 

**NOTE 14 – FUELAVAILABILITY AND COST**

 

TheCompany is dependent upon the availability of diesel fuel.  Increases in the cost of fuel may, in thefuture, adversely affect the profitability of the Company.  There can be no assurance that diesel fuelprices will not increase.  A significantportion of fuel prices above a certain pegged amount are regularly recovered inthe form of fuel surcharges from major customers with whom the Company hascontracts for its freight services.

 

**NOTE 15 – DRIVERS**

 

TheCompany offers a driver training program through its subsidiary’s operationswhich offers incentives to attract and retain qualified drivers.  Although the Company has experienced nosignificant downtime due to inability to secure qualified drivers, no assurancecan be given that a shortage will not adversely affect the Company in thefuture.

 

**NOTE 16 – CONTINGENCIES**

 

TheCompany is subject to various other claims, legal proceedings andinvestigations covering a wide range of matters that may arise in the ordinarycourse of business.  Management believesthe resolutions of claims and pending litigation will not have a materialeffect, individually or in the aggregate, to the financial position, results ofoperations and cash flows prior to contemplating potential insurance recoveriesor accruals.

 

29

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**NOTE 17 – ACQUISITIONS ANDCOMMITMENTS**

 

During2000, the Company entered into an agreement to acquire the freight transportand freight business of Eagle Transportation Services, Inc. and EagleTransport, Inc., together with certain transportation equipment.  The transaction was accounted for as apurchase with an effective date of January 1, 2001.

 

Thepurchase price of the acquisition was a total of $1,454,725.  Of that amount $892,225 was the amount ofdebt that encumbered the tractors and trailers and which Gasel TransportationLines, Inc., refinanced in 2001.  Thebalance of the purchase price ($562,500) was paid by delivering at closing$150,000 in cash, a promissory note payable to the Sellers in the amount of$150,000 and bearing interest at 10% per annum, a warrant to purchase 100,000common shares of Gasel Transportation Lines, Inc. at an exercise price of $2.50per share, a warrant to purchase 75,000 common shares of Gasel TransportationLines, Inc. at an exercise price of $3.00 per share, and a certificate for175,000 common shares of Gasel Transportation Lines, Inc. valued at $1.50 pershare.

 

Under thepurchase method, the underlying assets acquired and liabilities assumed fromthe purchased corporation are recorded by the Company at their fair value.  The excess of the amount paid over the fairvalue of Eagle’s identifiable net assets was $362,500, which has been reflectedin the balance sheet as goodwill.  Thesupplemental disclosures reported in the cash flow statement present additionalinformation about the assets acquired and liabilities recorded in 2000 as aresult of this acquisition.

 

Thebalance on the note payable to Eagle was $71,204 at December 31, 2001.  (See Note 4.)  No warrants were exercised in 2001.

 

Thefollowing summarized pro forma (unaudited) information assumes the acquisitionhad occurred on January 1, 2000.

 
|                |   | **2000** |       |
|---------------------|--------|----------|------------|
| Net  Revenues       |   | $        | 21,593,725 |   |
| Net (Loss)          |   | (776,553 | )          |
| Earnings Per Share: |   |     |       |
| Basic               |   | (.323    | )          |
| Diluted             |   | (.323    | )          |
|                     |        |          |            |  |

 

The aboveamounts reflect adjustments for interest on notes payable issued as part of thepurchase price, amortization of goodwill and depreciation on revalued propertyand equipment.

 

30

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**NOTE 18 – RESTATEMENT OFQUARTERLY FINANCIAL STATEMENTS**

 

During thesecond and third quarters of 2001, the Company failed to estimate a portion oftheir brokered freight expenses.  Duringthe second quarter, the Company made personnel changes as a result of theiracquisition of Eagle.  In the transitionperiod, control procedures related to recording portions of brokered freightexpenses were disrupted causing a lack of recognition of brokered freightexpenses.  The Company became aware ofthe problem during the fourth quarter, revised their control structures andreported the unrecorded freight expenses. This resulted in a significant cost of $306,317 being recorded in thefourth quarter.

 

Thefollowing represents the corrected financial statements.

 
|                |   | **AS RESTATED** |      |
|---------------------|--------|-----------------|-----------|
|                |   | **1st Quarter** |      | **2nd  Quarter** |   | **3rd  Quarter** |   | **4th  Quarter** |   | **Year** |   |
| Revenues            |   | $               | 5,175,559 |   | $ | 5,212,807 |   | $ | 4,167,515 |   | $ | 3,824,275 |   | $ | 18,380,156 |   |
|                |   |            |      |   |   |   |   |   |   |   |   |
| Costs of Revenues   |   | 4,284,937       |      | 4,407,978 |   | 3,816,873 |   | 3,311,208 |   | 15,820,996 |   |
|                |   |            |      |   |   |   |   |   |   |   |   |
| Gross Profit        |   | 890,622         |      | 804,829 |   | 350,642 |   | 513,067 |   | 2,559,160 |   |
|                |   |            |      |   |   |   |   |   |   |   |   |
| Net Income (Loss)   |   | $               | 46,055    |   | $ | (89,414 | ) | $ | (538,575 | ) | $ | (288,649 | ) | $ | (870,583 | ) |
|                |   |            |      |   |   |   |   |   |   |   |   |
| Earnings Per Share: |   |            |      |   |   |   |   |   |   |   |   |
| Basic               |   | $               | .019      |   | $ | (.037 | ) | $ | (.224 | ) | $ | (.120 | ) | $ | (.362 | ) |
|                |   |            |      |   |   |   |   |   |   |   |   |
| Diluted             |   | $               | .019      |   | $ | (.037 | ) | $ | (.224 | ) | $ | (.120 | ) | $ | (.362 | ) |

 
|                |   | **AS ORIGINALLY REPORTED** |      |
|---------------------|--------|----------------------------|-----------|
|                |   | **1****st Quarter**        |      | **2****nd Quarter** |   | **3****rd Quarter** |   | **4****th Quarter** |   | **Year** |   |
| Revenues            |   | $                          | 5,175,559 |   | $ | 5,212,807 |   | $ | 4,167,515 |   | $ | 3,824,275 |   | $ | 18,380,156 |   |
|                |   |                       |      |   |   |   |   |   |   |   |   |
| Costs of Revenues   |   | 4,284,937                  |      | 4,222,765 |   | 3,695,769 |   | 3,617,525 |   | 15,820,996 |   |
|                |   |                       |      |   |   |   |   |   |   |   |   |
| Gross Profit        |   | 890,622                    |      | 990,042 |   | 471,746 |   | 206,750 |   | 2,559,160 |   |
|                |   |                       |      |   |   |   |   |   |   |   |   |
| Net Income (Loss)   |   | $                          | 46,055    |   | $ | 47,799 |   | $ | (369,471 | ) | $ | (594,966 | ) | $ | (870,583 | ) |
|                |   |                       |      |   |   |   |   |   |   |   |   |
| Earnings Per Share: |   |                       |      |   |   |   |   |   |   |   |   |
| Basic               |   | $                          | .019      |   | $ | .020 |   | $ | (.154 | ) | $ | (.247 | ) | $ | (.362 | ) |
|                |   |                       |      |   |   |   |   |   |   |   |   |
| Diluted             |   | $                          | .019      |   | $ | .019 |   | $ | (.154 | ) | $ | (.247 | ) | $ | (.362 | ) |

 

31

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**Item8. Changes In and Disagreements With Accountants on Accounting and FinancialDisclosure.**

 

There have been no changes inAccountants during the past two years, nor have there been any disagreementswith the Accountants in their accounting and financial presentations regardingthe Company.

 

**PART III**

 

**Item9. Directors, Executive Officers, Promoters and Control Persons; ComplianceWith Section 16(a) of the Exchange Act.**

** **

The Officers and Directors ofthe Company are as follows:

** **
| **Name**           |   | **Age** |   | **Position With Company**                                    |   |
|--------------------|--------|---------|--------|--------------------------------------------------------------|--------|
| Michael J.  Post   |   | 55      |   | Chief  Executive Officer, President, Treasurer, and Director |   |
|               |   |    |   |                                                         |   |
| John Jackson       |   | 56      |   | Vice  President-Operations Marietta Division, and Secretary  |   |
|               |   |    |   |                                                         |   |
| S. Gene  Thompson  |   | 53      |   | Vice  President and Chief Financial Officer                  |   |
|               |   |    |   |                                                         |   |
| Allan M.  Blue     |   | 60      |   | Director and  Assistant Secretary                            |   |
|               |   |    |   |                                                         |   |
| Ronald K.  Bishop  |   | 49      |   | Director                                                     |   |
|               |   |    |   |                                                         |   |
| Ronald E.  Flowers |   | 53      |   | Vice  President of Sales                                     |   |

 

32

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Michael J. Post has been in allof such capacities from the formation of the Company in January 1988 todate.  He also serves as a board memberof Selby General Hospital, Marietta, Ohio.

 

John Jackson has been involvedin various executive capacities with the Company since its formation in 1988.

 

S. Gene Thompson, has been VicePresident and Chief Financial Officer since May, 2001.  From early in 2000 until his election tooffice with the Company, he acted as a financial consultant to theCompany.  In the year before that, hewas a financial consultant to Sunland Distribution, a transportation companywith its offices in Florida.  Beforecommencing his financial consulting positions, he spent three years as GeneralManager at Holiday Island Resort, a 5,000 acre resort community.  He has a MBA from the University ofArkansas.

 

Allan M. Blue has been adirector since 1995 and Assistant Secretary since 1997.  Mr. Blue is a practicing attorney in theColumbus Ohio area where he has been engaged in private law practice since1971.  In addition to practicing law,Mr. Blue is actively engaged in several businesses as owner, officer, anddirector.  These businesses includeAlden’s Furniture Company, Held-Team Partnership, d/b/a Hold More Self Storage,Capitol Stock Transfer Company, M. B. Liquidators, Inc., and Team Investors,Ltd.

 

Ronald K. Bishop, Directorsince 1994.  From 1987 until 2002, hehas worked for Bennco Incorporated as General Manager of 3 radio stations,WDMX, WNUS, and WLTP, in Parkersburg, West Virginia; and he also became GeneralManager of 2 additional stations, WRVB, and WRZZ in 2000.  The stations were recently sold and Mr.Bishop is currently retired.  He alsoserves as a board member of Selby General Hospital, Marietta, Ohio, Ohio ValleyChamber of Commerce, and for the Marietta Community Foundation, Easter Seals andthe American Heart Association in the Marietta area.

 

Ronald E. Flowers, President ofEagle Division, commencing January 1, 2001and Vice President of Salescommencing May 2001.  Mr. Flowers,together with his wife Cynthia K. Flowers, are the owners of Eagle Transport, Inc.and Eagle Transportation Services, Inc., and as such he was the CEO for thebusiness operations that the Company acquired from those companies effectiveJanuary 1, 2001.  In order to maintaincontinuity in the relationships and as part of the terms of the acquisition,Mr. Flowers was retained as President of those operations and the operationswere designated by the Company as the Eagle Division.  Mr. Flowers continues to own the warehousing operation where theEagle Division rented office and terminal space until April 2002.  For the past 12 years, he has been engagedin the transportation and warehousing business.

 

The position of director is fora one year term and until a successor is elected.

 

SECTION 16(A) BENEFICIALOWNERSHIP REPORTING COMPLIANCE

 

Michael J. Post, President,CEO, Treasurer, Director and beneficial owner of more than 10% of the equitysecurities of the Company failed to timely file reports required on Form 4during the most recent fiscal year. There were 3 reports that were filed late covering a total of 5transactions.  There were no knownfailures to file a required report.

 

Ronald K. Bishop, Director,failed to file a timely report on Form 4 on one (1) occasion covering 1transaction.  There were no knownfailures to file a required report.

 

33

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**Item10. Executive Compensation.**

 
| **SUMMARY  COMPENSATION TABLE**                    |     |
|----------------------------------------------------|----------|
|                                               |     |   |   | **Long Term  Compensation** |   |
| **Name and Principal  Position**                   |     | **Annual  Compensation** |   | **Awards** |   |
|                                               | **Year** |   | **Salary** |   | **Securities  Underlying Options/SAR** |   |
| Michael J. Post,  President                        |     | 1999 |   | $ | 63,750 |   | 60,000 | (1) |
|                                               |     | 2000 |   | $ | 64,995 | (2) |   |   |
|                                               |     | 2001 |   | $ | 125,440 | (3) |   |   |
| Ronald  E.  Flowers,  Vice President of Sales |     | 2001 |   | $ | 115,123 | (4) |   |   |

 

----

(1) Adjusted for two 2 for 1 stock splits.

 

(2) In addition, the Company provided a 2001Ford Expedition sport utility vehicle for use by Michael J. Post; because heused the vehicle primarily for Company business, no value was assigned ascompensation for use of the vehicle.

 

(3) Includes $10,200 paid by the Company forthe 2001 Ford Expedition and $1,630 for insurance premiums.

 

(4) Includes $7,200 paid by the Company foran auto allowance and $2,923 for insurance premiums.

 

The Companypays its Directors’ a fee of $1,000.00 for each meeting attended.  The Company’s Code of Regulations authorizesthe Board of Directors to fix Directors’ compensation without shareholderapproval.

 

**Item11. Security Ownership of Certain Beneficial Owners and Management.**

 

(a).  The following is a table of all persons known to the Company tobe the beneficial owner of more than 5% of the Company’s voting securities.

 

34

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| **Title of Class** |   | **Name and  Address of  Beneficial Owner** |   | **Amount and  Nature of  Beneficial  Owner** |   | **Percent of  Class** |
|--------------------|--------|--------------------------------------------|--------|----------------------------------------------|--------|-----------------------|
| Common  shares     |   | Michael J.  Post                           |   | 1,485,794                                    | (1)    | 51.3             |
|               |   | 118  Merryhill Street                      |   |                                         |   |                  |
|               |   | Marietta,  Ohio 43750                      |   |                                         |   |                  |
|               |   |                                       |   |                                         |   |                  |
| Common  shares     |   | Ronald E.  Flowers and                     |   | 350,000                                      | (2)    | 12.1                  |
|               |   | Cynthia K.  Flowers,                       |   |                                         |   |                  |
|               |   | husband and  wife                          |   |                                         |   |                  |
|               |   | 5703 Southby  Ct.                          |   |                                         |   |                  |
|               |   | Dublin, Ohio  43017                        |   |                                         |   |                  |

 

----

(1) Includes 4,100 shares held by the Estateof Mrs. Lee Post, the mother of Michael J. Post, 7,900 shares held by theCompany that is treated as treasury stock for accounting purposes, 35,250shares held by his wife, Janet Post, and options to acquire 186,000.

 

(2) Includes 175,000 shares held by EagleTransportation Services, Inc. and options held by Eagle TransportationServices, Inc to acquire an additional 175,000 shares.

 

(b).  The following is a table setting forth for management thebeneficial ownership of the voting securities of the Company as of December 31,2001.

35

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| **Title of Class** |   | **Name and  Address  of Beneficial  Owner** |   | **Amount and  Nature of  Beneficial Owner** |   | **Percent of  Class** |
|--------------------|--------|---------------------------------------------|--------|---------------------------------------------|--------|-----------------------|
| Common  shares     |   | Michael J.  Post                            |   | 1,485,794                                   | (1)    | 51.3                  |
|               |   | 118  Merryhill Street                       |   |                                        |   |                  |
|               |   | Marietta,  Ohio                             |   |                                        |   |                  |
|               |   | 43750                                       |   |                                        |   |                  |
|               |   |                                        |   |                                        |   |                  |
| Common  shares     |   | Allan M.  Blue                              |   | 110,448                                     | (2)    | 3.8                   |
|               |   | 1130 Berlin  Station Rd.                    |   |                                        |   |                  |
|               |   | Delaware,  Ohio                             |   |                                        |   |                  |
|               |   | 43015                                       |   |                                        |   |                  |
|               |   |                                        |   |                                        |   |                  |
| Common  shares     |   | Ronald K.  Bishop                           |   | 73,772                                      | (3)    | 2.5                   |
|               |   | 305 Ohio  Street                            |   |                                        |   |                  |
|               |   | Marietta,  Ohio                             |   |                                        |   |                  |
|               |   | 45750                                       |   |                                        |   |                  |
|               |   |                                        |   |                                        |   |                  |
| Common  shares     |   | John Jackson                                |   | 45,780                                      |   | 1.6                   |
|               |   | Route 2, Box  344                           |   |                                        |   |                  |
|               |   | Belpre, Ohio  45714                         |   |                                        |   |                  |
|               |   |                                        |   |                                        |   |                  |
| Common  shares     |   | Ronald E.  Flowers                          |   | 350,000                                     | (4)    | 12.1                  |
|               |   | 5703 Southby  Ct.                           |   |                                        |   |                  |
|               |   | Dublin, Ohio  43017                         |   |                                        |   |                  |
|               |   |                                        |   |                                        |   |                  |
| Common  shares     |   | Directors  and                              |   | 2,065,794                                   | (5)    | 71.3                  |
|               |   | officers as  a group                        |   |                                        |   |                  |

 

----

(1) Includes 4,100 shares held by the Estate of Mrs. Lee Post, themother of Michael J. Post, 7,900 shares held by the Company, 35,250 shares heldby his wife, Janet Post, and options to acquire 186,000.

 

(2) Includes 26,420 shares held by Joyce M. Blue, wife of Allan M.Blue, and options to acquire 62,000 shares.

 

(3) Includes options to acquire 62,000 shares.

 

(4) Includes 175,000 shares held by Eagle Transportation Services, Inc.and options to acquire 175,000 shares held by Eagle Transportation Services,Inc.

 

(5) Includes options to acquire 485,000 shares.

 

**Item12. Certain Relationships and Related Transactions.**

 

Michael J. Post, Director, CEO,President, Treasurer, and majority shareholder of the Company, made a loan of$100,000 during 2001 to Gasel Driver Training Schools, Inc.  As security for repayment of the loan, theCompany pledged all of the stock in Gasel Driver Training Schools, Inc. to Mr. Post.

 

Allan M. Blue, Director, alsoacts as legal counsel for the Company. Payment for his services is at a rate that he represents is a standardhourly rate for his services to his clients. Mr. Blue is a 50% shareholder in Capitol Stock Transfer Company whichacts as stock transfer agent for the Company.

 

 

36

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Until April 2002, the Companyleased from ETS Leasing, Ltd. an approximately 3,000 square foot office,including furniture and equipment, in Plain City, Ohio for its EagleDivision.  The lease term was for fiveyears, with two options to renew for five year terms, with a monthly rental of$3,000 during the initial term.  RonaldFlowers and Cynthia Flowers are the owner of ETS Leasing, Ltd.  The lease terms were negotiated as part ofthe acquisition of the equipment and book of business from Eagle Transport,Inc. and Eagle Transportation Services, Inc. By agreement of the parties, the Company was allowed to terminate thelease early and its future liability thereunder.

 

**Item13. Exhibits and Reports on Form 8-K.**

 

(a) Index to Exhibits.

 

21.      List of SubsidiaryCorporations.

 

23.      Independent AccountantsConsent Letter

 

(b) The Company filed one report on Form 8-Kduring the last quarter of the year 2001.

 

37

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**SIGNATURES**

 

In accordance with Section 13or 15(d) of the Exchange Act, the registrant caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. 

 
| Gasel  Transportation Lines, Inc.  (Registrant)            |
|------------------------------------------------------------|
|                                                       |
| By                                                         | /s/ Michael  J. Post |   |
| (Signature  and Title) President, Treasurer, and Director* |
|                                                       |
|                                                       |
| Date April  15, 2002                                       |

 

In accordancewith the Exchange Act, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 
| By                                                                         | /s/ | Michael J.  Post |   |
|----------------------------------------------------------------------------|-----|------------------|--------|
| (Signature  and Title) Michael J. Post, President, Treasurer, and Director |

 

 
| Date April  15, 2002                                                             |
|----------------------------------------------------------------------------------|
|                                                                             |
|                                                                             |
| By                                                                               | /s/ | Allan M.  Blue |   |
| (Signature  and Title)Allan M. Blue, Director and Assistant Secretary*           |
|                                                                             |
|                                                                             |
| Date April  15, 2002                                                             |   |   |
|                                                                             |   |   |
| By                                                                               | /s/ | Gene  Thompson |   |
| (Signature  and Title)Gene Thompson, Vice President and Chief Financial Officer* |
|                                                                             |
|                                                                             |
| Date April  15, 2002                                                             |   |   |
|                                                                                  |  |  |  |  |

 

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