| **UNITED STATES**                      |
|----------------------------------------|
| **SECURITIES AND EXCHANGE COMMISSION** |
| **Washington,  D.C. 20549**            |
|                                   |
| **FORM  10-QSB/A**                     |

 

**(Mark One)**

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

**For thequarterly period ended June 30, 2003**

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

** **

**For thetransition period from             to             **

** **

**Commissionfile number: 0-30185**

 

| **Gasel  Transportation Lines, Inc.**                                |
|----------------------------------------------------------------------|
| (Exact name of small  business issuer as specified in its charter)   |
|                                                                 |
| **Ohio**                                                             |   | **31-1239328** |
| (State or other  jurisdiction of incorporation or organization) |   | (IRS Employer  Identification No.) |
|                                                                 |   |   |
| **County  Road 10, Route 4, Box 181A, Marietta, OH**                 |   | **45750** |
| (Address of principal  executive offices)                            |   | (zip code) |
|                                                                 |   |   |
| **(740)  373-6479**                                                  |
| (Issuer’s telephone  number)                                    |
|                                                                 |   |   |

** **

 

Check whether the issuer (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes ý   No o.

 

State the number of shares outstanding of each ofthe issuer's classes of common equity, as of the latest practicable date: as ofAugust 15, 2003, there were 9,877,966 common shares, no par value issued andoutstanding, with 7,900 of them held in the treasury. 

 

Transitional Small Business Disclosure Format (Checkone): Yes o No ý

 

 

----

 

**PART I —FINANCIAL INFORMATION**

**Item 1. Financial Statements.**

 

INDEX

 

 
| Consolidated Balance Sheet at June 30,  2003 (Unaudited)                                                                                                               |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                   |
| Statements of Consolidated  Operations for the Three Months Ended June 30, 2003 and 2002  (Unaudited) and for the Six  Months Ended June 30, 2003 and 2002 (Unaudited) |
|                                                                                                                                                                   |
| Statements of Consolidated  Cash Flows for the Six Months Ended June 30, 2003 and 2002  (Unaudited)                                                               |
|                                                                                                                                                                   |
| Notes to Consolidated Financial Statements                                                                                                                             |

 

----

 

GASELTRANSPORTATION LINES, INC.

(Debtor inPossession)

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

 
|                                                                                                  |   | **June 30,**    |      |
|-------------------------------------------------------------------------------------------------------|--------|-----------------|-----------|
|                                                                                                  |   | **2003**        |      |
|                                                                                                  |   | **(Unaudited)** |      |
| ASSETS                                                                                                |   |            |      |
|                                                                                                  |   |            |      |
| Current Assets                                                                                        |   |            |      |
| Cash and Cash  Equivalents                                                                            |   | $               | 39,781    |   |
| Accounts  Receivable-Trade, Net of Amounts Sold With Recourse of $1,182,198 and  Allowance of $50,000 |   | 425,550         |      |
| Inventory                                                                                             |   | 166,402         |      |
| Prepaid Expenses  and Other Current Assets                                                            |   | 428,080         |      |
|                                                                                                  |   |            |      |
| Total Current  Assets                                                                                 |   | 1,059,813       |      |
|                                                                                                  |   |            |      |
| Property and  Equipment                                                                               |   |            |      |
| Land and  Buildings                                                                                   |   | 770,054         |      |
| Tractors                                                                                              |   | 11,794,086      |      |
| Trailers                                                                                              |   | 4,235,725       |      |
| Shop Equipment                                                                                        |   | 406,785         |      |
| Office Equipment                                                                                      |   | 218,820         |      |
|                                                                                                  |   | 17,425,470      |      |
| Less Accumulated  Depreciation                                                                        |   | 9,981,256       |      |
|                                                                                                  |   |            |      |
| Net Property and  Equipment                                                                           |   | 7,444,214       |      |
|                                                                                                  |   |            |      |
| Trailers   -  Held for Sale                                                                 |   | 488,713         |      |
|                                                                                                  |   |            |      |
| Other Assets                                                                                          |   |            |      |
| Other                                                                                                 |   | 91,718          |      |
|                                                                                                  |   |            |      |
| Total Other  Assets                                                                                   |   | 91,718          |      |
|                                                                                                  |   |            |      |
| TOTAL ASSETS                                                                                          |   | $               | 9,084,458 |   |

 

1

----

 

GASELTRANSPORTATION LINES, INC.

(Debtor inPossession)

AND ITSSUBSIDIARIES

CONSOLIDATED BALANCESHEET

 
|                                                                                                  |   | **June 30,  2003** |      |
|-------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                                                  |   | **(Unaudited)**    |      |
| LIABILITIES AND STOCKHOLDERS’  (DEFICIT)                                                         |   |               |      |
|                                                                                                  |   |               |      |
| Current Liabilities                                                                                   |   |               |      |
| Cash Overdraft                                                                                        |   | $                  | 119,366   |   |
| Notes Payable                                                                                         |   | 62,700             |      |
| Accounts  Payable-Trade                                                                               |   | 476,305            |      |
| Accrued Contract  Labor and Other Expenses                                                            |   | 187,612            |      |
|                                                                                                  |   |               |      |
| Total Current  Liabilities Not Subject to Compromise                                                  |   | 845,983            |      |
|                                                                                                  |   |               |      |
| Liabilities Subject to Compromise                                                                     |   | 10,506,085         |      |
|                                                                                                  |   |               |      |
| Total  Liabilities                                                                                    |   | 11,352,068         |      |
|                                                                                                  |   |               |      |
| Redeemable  Warrants                                                                                  |   | 50,000             |      |
|                                                                                                  |   |               |      |
| Stockholders’  (Deficit)                                                                         |   |               |      |
| Common Stock, no  par value, 10,000,000shares authorized, 9,877,966 issued and 9,870,066  outstanding |   | 2,543,481          |      |
| Additional Paid  in Capital                                                                           |   | 102,786            |      |
| Accumulated  (Deficit)                                                                                |   | (4,946,044         | )         |
| Less: Treasury  Stock, at cost, 7,900 shares                                                          |   | (17,833            | )         |
|                                                                                                  |   |               |      |
| Total  Stockholders’ (Deficit)                                                                   |   | (2,317,610         | )         |
|                                                                                                  |   |               |      |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ (DEFICIT)                                                   |   | $                  | 9,084,458 |   |

 

2

----

 

GASELTRANSPORTATION LINES, INC.

(Debtor inPossession)

AND ITSSUBSIDIARIES

STATEMENTS OF CONSOLIDATED OPERATIONS

 
|                                                                                                                                |   | **Three  Months Ended** |       | **Six Months  Ended** |   |
|-------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|-----------------------|--------|
|                                                                                                                                |   | **June 30,**            |       | **June 30,**          |   | **June 30,** |   | **June 30,** |   |
|                                                                                                                                |   | **2003**                |       | **2002**              |   | **2003** |   | **2002** |   |
|                                                                                                                                |   | **(Unaudited)**         |       | **(Unaudited)**       |   | **(Unaudited)** |   | **(Unaudited)** |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Revenues                                                                                                                            |   |                    |       |                  |   |   |   |   |   |
| Freight Income                                                                                                                      |   | $                       | 3,301,183  |                  | $      | 3,781,703 |   | $ | 6,795,308 |   | $ | 7,472,227 |   |
| Training School  Revenue                                                                                                            |   | 104,876                 |       | 122,873               |   | 245,247 |   | 263,195 |   |
|                                                                                                                                |   | 3,406,059               |       | 3,904,576             |   | 7,040,555 |   | 7,735,422 |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Cost of Revenue                                                                                                                     |   | 3,513,045               |       | 3,258,857             |   | 6,855,162 |   | 6,492,304 |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Gross Profit  (Loss)                                                                                                                |   | (106,986                | )          | 645,719               |   | 185,393 |   | 1,243,118 |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Operating  Expenses                                                                                                                 |   |                    |       |                  |   |   |   |   |   |
| Garage Expenses                                                                                                                     |   | 87,059                  |       | 81,724                |   | 166,453 |   | 153,466 |   |
| General and  Administrative Expenses                                                                                                |   | 435,904                 |       | 461,726               |   | 946,334 |   | 898,563 |   |
| Impairment Loss                                                                                                                     |   | 353,438                 |       | —                |   | 434,583 |   | — |   |
|                                                                                                                                |   | 876,401                 |       | 543,450               |   | 1,547,370 |   | 1,052,029 |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Operating Income  (Deficit)                                                                                                         |   | (983,387                | )          | 102,269               |   | (1,361,977 | ) | 191,089 |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Other Income  (Expense)                                                                                                             |   |                    |       |                  |   |   |   |   |   |
| Interest Income                                                                                                                     |   | 2,921                   |       | 675                   |   | 8,797 |   | 675 |   |
| Other Income                                                                                                                        |   | 11,447                  |       | 9,612                 |   | 18,033 |   | 83,405 |   |
| Gain(Loss) -Sale  of Assets                                                                                                         |   | —                  |       | 12,075                |   | (124,701 | ) | 12,075 |   |
| Interest  Expense, net (Contractual Interest $301,577 and $611,622 for the three and  six months ended June 30, 2003, respectively) |   | (195,981                | )          | (255,790              | )      | (506,026 | ) | (553,690 | ) |
|                                                                                                                                |   | (181,613                | )          | (233,428              | )      | (603,897 | ) | (457,535 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| (Loss) from  Operations Before Reorganization Items and Tax Provision                                                               |   | (1,165,000              | )          | (131,159              | )      | (1,965,874 | ) | (266,466 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Reorganization  Items-                                                                                                              |   |                    |       |                  |   |   |   |   |   |
| Professional  Fees                                                                                                                  |   | (31,330                 | )          | —                |   | (31,330 | ) | — |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| (Loss) from  Operations Before Tax Provision                                                                                        |   | (1,196,330              | )          | (131,159         | )      | (1,997,204 | ) | (266,466 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Provision for  Income Taxes                                                                                                         |   | —                  |       | —                |   | — |   | — |   |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Net Income  (Loss)                                                                                                                  |   | $                       | (1,196,330 | )                     | $      | (131,159 | ) | $ | (1,997,204 | ) | $ | (266,446 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Basic (Loss) Per  Share                                                                                                             |   | $                       | (.121      | )                     | $      | (.055 | ) | $ | (.230 | ) | $ | (.111 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Diluted (Loss)  Per Share                                                                                                           |   | $                       | (.121      | )                     | $      | (.055 | ) | $ | (.230 | ) | $ | (.111 | ) |
|                                                                                                                                |   |                    |       |                  |   |   |   |   |   |
| Weighted Average  Common Shares Outstanding:                                                                                        |   |                    |       |                  |   |   |   |   |   |
| Basic                                                                                                                               |   | 9,861,420               |       | 2,405,066             |   | 8,665,532 |   | 2,405,066 |   |
| Diluted                                                                                                                             |   | 9,861,420               |       | 2,405,066             |   | 8,665,532 |   | 2,405,066 |   |

 

3

----

 

GASELTRANSPORTATION LINES, INC.

(Debtor inPossession)

AND ITSSUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

 
|                                                                         |   | **Six Months  Ended** |       |
|------------------------------------------------------------------------------|--------|-----------------------|------------|
|                                                                         |   | **June 30,**          |       | **June 30,** |   |
|                                                                         |   | **2003**              |       | **2002** |   |
|                                                                         |   | **(Unaudited)**       |       | **(Unaudited)** |   |
|                                                                         |   |                  |       |   |   |
| Cash Flows From  Operating Activities                                        |   |                  |       |   |   |
| Net (Loss)                                                                   |   | $                     | (1,997,204 | ) | $ | (266,446 | ) |
| Adjustments to  reconcile net loss to cash provided by operating activities: |   |                  |       |   |   |
| Reorganization  Items                                                        |   | 31,330                |       | — |   |
| Depreciation and  Amortization                                               |   | 983,265               |       | 1,096,065 |   |
| (Gain) Loss on  Disposal of Assets                                           |   | 124,701               |       | (12,075 | ) |
| Impairment Loss                                                              |   | 434,583               |       | — |   |
| Bad Debt                                                                     |   | 45,392                |       | 83,040 |   |
| (Increase)  Decrease in:                                                     |   |                  |       |   |   |
| Accounts  Receivable-Trade                                                   |   | 1,475,325             |       | (562,209 | ) |
| Inventory                                                                    |   | —                |       | (127 | ) |
| Prepaid Expenses  and Other Assets                                           |   | 48,681                |       | (55,121 | ) |
| Increase  (Decrease) in:                                                     |   |                  |       |   |   |
| Accounts Payable  and Accrued Expenses                                       |   | 270,104               |       | 173,604 |   |
|                                                                         |   |                  |       |   |   |
| Net Cash  Provided by Operating Activities Before Reorganization Items       |   | 1,416,177             |       | 456,731 |   |
|                                                                         |   |                  |       |   |   |
| Operating Cash Flows Used  in Reorganization Items:                          |   |                  |       |   |   |
|                                                                         |   |                  |       |   |   |
| Professional  Fees Paid in Connection with Chapter 11 Proceedings            |   | (23,830               | )          | — |   |
| Net Cash Used in  Reorganization Items                                       |   | (23,830               | )          | — |   |
|                                                                         |   |                  |       |   |   |
| Net Cash  Provided by Operating Activities                                   |   | 1,392,347             |       | 456,731 |   |
|                                                                         |   |                  |       |   |   |
| Cash Flows From  Investing Activities                                        |   |                  |       |   |   |
| Proceeds from  Sale of Assets                                                |   | —                |       | 104,357 |   |
| Purchases of  Property and Equipment                                         |   | (1,500                | )          | (190,660 | ) |
|                                                                         |   |                  |       |   |   |
| Net Cash (Used)  by Investing Activities                                     |   | (1,500                | )          | (86,303 | ) |
|                                                                         |   |                  |       |   |   |
| Cash Flows From  Financing Activities                                        |   |                  |       |   |   |
| Line of Credit  (Net)                                                        |   | (1,692,873            | )          | 256,212 |   |
| Proceeds from  Issuance of Common Stock                                      |   | 675,507               |       | — |   |
| Repayment of  Mortgage Receivable                                            |   | 2,782                 |       |   |   |
| Proceeds from  Borrowings-Related Parties                                    |   | 62,700                |       | — |   |
| Payments on  Notes Payable-Related Parties                                   |   | (13,558               | )          | (25,646 | ) |
| Principal  Payments on Long Term Borrowing                                   |   | (299,088              | )          | (808,260 | ) |
| Principal  Payments Under Capital Lease Agreements                           |   | (111,377              | )          | (174,918 | ) |
| Net Cash (Used)  by Financing Activities                                     |   | (1,375,907            | )          | (752,612 | ) |
|                                                                         |   |                  |       |   |   |
| Net Increase  (Decrease) in Cash                                             |   | 14,940                |       | (382,184 | ) |
|                                                                              |        |                       |            |  |  |  |  |

 

4

----

 
|                                                                                          |   | **Six Months  Ended** |          |
|-----------------------------------------------------------------------------------------------|--------|-----------------------|---------------|
|                                                                                          |   | **June 30,**          |          | **June 30,** |   |
|                                                                                          |   | **2003**              |          | **2002** |   |
|                                                                                          |   | **(Unaudited)**       | ** **    | **(Unaudited)** |   |
|                                                                                          |   |                  |          |   |   |
| Net Increase  (Decrease) in Cash                                                              |   | $                     | 14,940        |   | $ | (382,184 | ) |
| Cash & Cash  Equivalents -  (Overdraft) Beginning of Period                               |   | (94,525               | )             | (393,436 | ) |
| Cash & Cash  Equivalents -  (Overdraft) End of Period                                     |   | $                     | (79,585  | ) | $ | (775,620 | ) |
|                                                                                          |   |                  |          |   |   |
| The net cash and cash equivalents (overdraft) are  presented in the balance sheet as follows: |   |                  |          |
|                                                                                          |   |                  |          |   |   |
| Cash and Cash  Equivalents                                                                    |   | $                     | 39,781        |   | $ | 60,298 |   |
| Cash Overdraft                                                                                |   | (119,366              | )             | (835,918 | ) |
|                                                                                          |   |                  |          |   |   |
| Net Cash and  Cash Equivalents (Overdraft)                                                    |   | $                     | (79,585  | ) | $ | (775,620 | ) |
|                                                                                          |   |                  |          |   |   |
| Supplemental  Disclosures:                                                                    |   |                  |          |   |   |
|                                                                                          |   |                  |          |   |   |
| Interest Paid                                                                                 |   | $                     | 522,374       |   | $ | 545,004 |   |
|                                                                                          |   |                  |          |   |   |
| Non-Cash  Investing and Financing Activities:                                                 |   |                  |          |   |   |
|                                                                                          |   |                  |          |   |   |
| Payoff of  Mortgage Receivable by Mortgagee and Payoff of Related Mortgage Payable            |   | $                     | 173,711       |   | $ | — |   |
|                                                                                          |   |                  |          |   |   |
|                                                                                          |   |                  |          |   |   |
| Purchase of  Property and Equipment with Direct Financing                                     |   | $                     | 451,500       |   | $ | — |   |
|                                                                                          |   |                  |          |   |   |
| Payoff Various  Notes with Proceeds from Sale of Fixed Assets                                 |   | $                     | —        |   | $ | 79,836 |   |
|                                                                                          |   |                  |          |   |   |
| Increase in  Mortgage Receivable with Proceeds from Sale of Land and Building                 |   | $                     | —        |   | $ | 179,142 |   |

 

5

----

 

GASELTRANSPORTATION LINES, INC.

(Debtorin Possession)

ANDITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

**NOTE 1 - PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE**

 

On May 19,2003 (“Petition Date”), Gasel Transportation Lines, Inc., filed a voluntarypetition for reorganization under Chapter 11 of the Federal bankruptcy laws(“Bankruptcy Code”) in the United States Bankruptcy Court for the SouthernDistrict of Ohio (“Bankruptcy Court”). Since 2000, the Company has experienceda decline in profitability and liquidity as a result of a general economicdownturn, historically high fuel prices, and sharp declines in overall freightshipment tonnage.  The accumulatedlosses have strained the Company’s ability to meet some of its long termequipment loan obligations.  Althoughthe Company was continuing to work with the majority of its lenders to rectifythe situation, a few equipment lenders recently issued loan defaults to theCompany.  The defaults, plus asignificant lump sum payment demanded by one particular lender, precipitatedthe need to seek protection under Chapter 11 in order to retain the use ofrevenue generating equipment and to reorganize the Company.

 

Includedin the Consolidated Financial Statements are subsidiaries (Gasel DriverTraining Schools, Inc. and GTL Logistics, Inc.) that have not commenced Chapter11 cases or other similar proceedings, and are not debtors.  The assets and liabilities of the non-filingsubsidiaries are not considered material to the Consolidated FinancialStatements.

 

As aDebtor-in-Possession, Gasel is authorized to continue to operate as an ongoingbusiness but may not engage in transactions outside the ordinary course ofbusiness without the approval of the Court, after notice and an opportunity fora hearing.  Under the Bankruptcy Code,actions to collect pre-petition indebtedness, as well as most other pendinglitigation, are stayed and other contractual obligations against the Companymay not be enforced.  In addition, underthe Bankruptcy Code, the Company may assume or reject executory contracts,including lease obligations.  Partiesaffected by these rejections may file claims with the Court, in accordance withthe reorganization process.  Absent anorder of the Court, substantially all pre-petition liabilities are subject tosettlement under a plan of reorganization to be voted upon by creditors andequity holders and approved by the Court.

 

6

----

 

Followingthe filing, the Company obtained, and received Court approval of the SystranFinancial Services Corporation (“Systran”, a subsidiary of Textron FinancialCorporation) receivable-based post-petition factoring agreement increasing thefinancing of accounts receivable by $1.5 million to $3.5 million and improvingthe terms and costs compared to the replaced receivable financing arrangementand approval of an advance from Systran and Company related parties in theamount of $147,000 to fund the Company’s annual license fees due in May,2003.  Additionally, the Companyreceived approval from several major equipment lenders to accept the Company’sadequate protection payment proposal based on a uniform formula designed tofairly compensate the lender for any loss of value in its collateral for itscontinued use and to fit the Company’s cash flow projections until the plan orreorganization is filed and accepted.

 

TheCompany has retained its insurance coverage at existing premium rates, whichmeet the insurance requirements necessary to operate under the Chapter 11proceedings.

 

Uponemergence from bankruptcy, the amounts reported in subsequent financialstatements may materially change due to the restructuring of the Company’sassets and liabilities as a result of the Plan of Reorganization and theapplication of the provisions of Statement of Position 90-7, “FinancialReporting by Entities in Reorganization under the Bankruptcy Code,” (SOP 90-7),with respect to reporting upon emergence from Chapter 11 (“Fresh-Start”accounting).  Changes in accountingprinciples required under generally accepted accounting principles within 12months of emerging from bankruptcy are required to be adopted at the date ofemergence.  Additionally, the Companymay choose to make changes in accounting practices and policies at that time.For all of these reasons, financial statements for periods subsequent to emergencefrom Chapter 11 may not be comparable with those of prior periods.

 

Theaccompanying Consolidated Financial Statements have been prepared on a goingconcern basis, which assumes continuity of operations and realization of assetsand satisfaction of liabilities in the ordinary course of business, and inaccordance with SOP-7.  Accordingly, allpre-petition liabilities subject to compromise have been segregated in theConsolidated Balance Sheet and classified as Liabilities Subject to Compromise,at the estimated amount of allowable claims. Liabilities not subject to compromise are separately classified ascurrent and non-current.  Revenues,expenses, realized gains and losses, and provisions for losses resulting fromthe reorganization are reported separately as Reorganization Items.  Cash used for reorganization items isdisclosed separately in the Consolidated Statements of Cash Flows.

 

7

----

 

Theability of the Company to continue as a going concern is predicated uponnumerous issues, including its ability to achieve the following:

 

•               having the Plan of Reorganizationconfirmed by the Court in a timely manner;

 

•               being able to successfullyimplement its business plans;

 

•               beingable to obtain additional equity funding and to increase its revenue andequipment productivity, while containing costs.

 

**NOTE 2 – BASIS OFPRESENTATION**

 

The accompanying unauditedconsolidated financial statements of Gasel Transportation Lines, Inc., and itssubsidiaries (the “Company”) have been prepared in accordance with accountingprinciples generally accepted in the United States of America and with theinstructions to form 10-QSB. Accordingly, they do not include all the information and footnotesrequired by generally accepted accounting principles for complete financialstatements.  In the opinion ofmanagement, all adjustments considered necessary for a fair presentation(consisting of normal recurring accruals) have been included.  Operating results for the six month periodended June 30, 2003, are not necessarily indicative of the results that may beexpected for the year ending December 31, 2003.  For further information, refer to the consolidated financialstatements and footnotes thereto included in the Company’s Report on Form10-KSB for the year ended December 31, 2002.

 

#### BankruptcyAccounting

 

As discussed in Note 1, for financialreporting purposes, the consolidated financial statements have been prepared ona going concern basis.  In addition, theDebtor has applied the provisions of the American Institute of Certified PublicAccountants Statement of Position 90-7, “Financial Reporting by Entities inReorganization under the Bankruptcy Code” (“SOP 90-7”).  Accordingly, all pre-petition liabilitiessubject to compromise have been segregated in the Balance Sheet and classifiedas Liabilities Subject to Compromise, at the estimated amount of allowableclaims.  Liabilities not subject tosettlement are classified as current and non-current.  Revenues, expenses, realized gains and losses, and provisions forlosses resulting from the reorganization are reported separately asReorganization Items.  Cash used forreorganization items is disclosed separately in the Statements of ConsolidatedCash Flows.

 

The Company discontinued accruinginterest on their pre-petition debt obligations as of May 19, 2003.  The ultimate adequacy of security for anycollateralized pre-petition debt obligations cannot be determined until a planof reorganization is confirmed.

 

8

----

 

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.

 

The Companyreviews long-lived assets to assess recoverability using undiscounted cashflows.  When necessary, charges forimpairments of long-lived assets are recorded for the amount by which thepresent value of future cash flows is less than the carrying value of theseassets.

 

Impairmentof property and equipment was $81,145 for the six months ended June 30, 2003.

 

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.

 

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 year period.

 

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 amountof goodwill exceeds its 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.

 

At June30, 2003, the Company recorded an impairment of goodwill in the amount of$353,438 due to the effect of increased operating losses on the Company’sintangible valuation model and the lack of retention of the acquired customerbase, including a major customer.

 

9

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ReorganizationItems

 

Includedin Reorganization Items are professional fees and other expenses directlyrelated to Bankruptcy Proceedings.

 

#### Reclassifications

 

Certainreclassifications of prior period amounts have been made to conform to thecurrent period presentation.

 

**NOTE 3 - LIABILITIES SUBJECT TO COMPROMISE**

 

Pursuantto Section 362 of the Bankruptcy Code, the commencement of the Chapter 11 Caseimposed an automatic stay, applicable generally to creditors and other partiesof interest, of : (1) the commencement or continuation of a judicial,administrative or other action or proceeding against the Debtor that was orcould have been commenced prior to commencement of the Chapter 11 Case or torecover for a claim that arose prior to commencement of the Chapter 11 Case;(2) the enforcement against the Debtor or its property of any judgmentsobtained prior to commencement of the Chapter 11 Case; (3) the taking of anyaction to obtain possession of property of the Debtor or to exercise controlover property of the Debtor; (4) the creation, perfection or enforcement of anylien against the property of the Debtor’s bankruptcy estate; (5) any act tocreate, perfect or enforce against property of the Debtor any lien that securesa claim that arose prior to the commencement of the Chapter 11 Case; (6) thetaking of any action to collection, assess or recover claims against the Debtorthat arose before commencement of the Chapter 11 Case; (7) the setoff of anydebt owing to the Debtor that arose prior to commencement of the Chapter 11Case against any claim against the Debtor; or (8) the commencement orcontinuation of a proceeding before the United States Tax Court concerning theDebtor.  Any entity may apply to the BankruptcyCourt, upon an appropriate showing of cause, for relief from the automatic stayto exercise the foregoing remedies. Numerous persons have applied to the Bankruptcy Court for a modificationof the automatic stay to allow their litigations against the Debtor to goforward and, in a limited number of instances, the Bankruptcy Court has agreedto modify the automatic stay to allow such litigants to continue discoveryand/or to liquidate their claims against the Debtor; however, enforcement ofjudgments entered on these claims, if any, is expressly prohibited withoutfurther Bankruptcy Court approval.

 

UnderSection 365 of the Bankruptcy Code, the Debtor may reject executory contracts,including unexpired leases.  Except withrespect to certain lessors who have, from time to time, sought to cause theDebtor to move to assume or reject their leases, the Debtor has through thedate of confirmation of a plan of reorganization to determine whether to assumeor reject a given lease.

 

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TheCompany has not made any payments on its secured debt since filing forReorganization on May 19, 2003, except for monthly payments due on an operatinglease with an officer/stockholder of the Company for 20 trailers financed by anunrelated lending institution.

 

PetitionDate liabilities that are expected to be settled as part of a plan ofreorganization are separately classified in the consolidated balance sheet andinclude the following (all or a portion of which may be disputed by theDebtor):

 

|                                  |   | **June 30,** |       |
|---------------------------------------|--------|--------------|------------|
|                                  |   | **2003**     |       |
|                                  |   |         |       |
| Notes Payable                         |   | $            | 196,736    |   |
| Accounts Payable-Trade                |   | 512,269      |       |
| Accrued Interest                      |   | 277,198      |       |
| Accrued Brokerage and Contract  Labor |   | 172,956      |       |
| Accrued Payroll Taxes                 |   | 297,352      |       |
| Mortgages Payable                     |   | 886,583      |       |
| Notes Payable                         |   | 6,330,629    |       |
| Capital Lease Obligations             |   | 1,832,362    |       |
|                                  |   |         |       |
| Total                                 |   | $            | 10,506,085 |   |

 

**NOTE 4 - FACTORING AGREEMENT**

 

On April10, 2003, the Company entered into a one year factoring agreement with SystranFinancial Services Corporation (Systran) whereby the Company may sell its tradereceivables, with recourse.  Theagreement includes the Company presenting, on a monthly basis, a minimumanticipated volume of bills for financing through Systran in the amount of$1,000,000.  In addition, the Companymay receive an advance rate of 90% of eligible receivables financed with a 10%deposit withheld and subsequently paid to the Company as receivables arecollected.  The credit limit under thefactoring agreement is $3,500,000.  Theagreement also includes a rate of interest equal to 2% over prime and hasreplaced a line of credit arrangement with CitiCapital.

 

On May 1,2003, proceeds of $1,300,000 were used to repay the existing line of creditwith CitiCapital Business Credit, in the amount of $1,200,000 and $100,000 wasdisbursed to one of the Company’s lenders having certain collateral rights tothe Company’s trade receivables.

 

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**NOTE 5 - 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.

 

TheCompany has guaranteed certain financing of trade accounts receivables. Inconnection therewith, the Company was contingently liable for approximately$1,182,198 at June 30, 2003, at which time the value of the underlyingcollateral in the amount of $1,412,313 is, in the opinion of management,adequate to secure the guarantee.

 

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**Item 2.Management’s Discussion and Analysis or Plan of Operation.**

 

Overview.

 

The following discussion should be read inconjunction with the Financial Statements, including footnotes, containedherein.  The discussion is qualified inits entirety by the foregoing. Historical results of operations and the percentage relationships amongany amounts in the Financial Statements, and any trends that may appear to beinferable therefrom, should not be taken as necessarily indicative of trends ofoperations or results of operations for any future periods.  Further, the Company filed Chapter 11proceedings during the second quarter of the year for re-organization under theUnited States Bankruptcy Code, and the effects from filing and operating as aDebtor in Possession will alter how the Company operates and is expected tochange the financial structure and statements for the Company in thefuture.   

 

The discussion contains forward-lookingstatements.  These forward-lookingstatements involve risks and uncertainties, and the cautionary statements setforth below identify important factors that could cause actual results todiffer materially from those predicted in the forward-looking statements.  These factors include, but are not limitedto, adverse changes in general economic conditions, including adverseconditions to the companies that are the Company’s core of shippers, fuelprices, driver costs, the ability to have enough drivers to utilize the Companyequipment, the ability to finance equipment, interest rates, the ability toborrow working capital, and other factors. Also, as Debtor in Possession, the Company must have any transactionsoutside its normal business operations approved by the Bankruptcy Court, andthe outcome of any such proposed transactions is unknown.

 

The interim financial information for thequarters and six months periods ended June 30, 2003, and June 30, 2002, areunaudited.  The statements includedreflect all adjustments that the Company considers necessary for a fair presentationof the results of operations for the interim periods covered and of thefinancial condition of the Company at the date of the interim balancesheet.  The results of the interimperiods are not necessarily indicative of the results for the entire year.

 

Three Months Ended June 30,2003.

 

Freight revenues for the three months endedJune 30, 2003, were $3,301,183, a decrease of $480,520 (12.7%) from the$3,781,703 in revenues for the second quarter of 2002.  The decrease in freight revenues was basicallyattributable to the Company having a decrease in the amount of operatingequipment that has resulted from having approximately 10% of its fleetinoperable as the result of mechanical breakdowns or because of not havingenough drivers available as a result of the significant driver turnover theCompany has been experiencing. In addition, freight tonnage was down in 2003compared to the same period in 2002. Trade receivable write-off's were also significantly higher in 2003, asign of the struggling U.S. economy.

 

Training school revenues for the secondquarter of 2003 were $ 104,876, a decrease of $17,997 (14.6%) from the secondquarter 2002 revenues of $122,873. Training school revenue decreases were primarily due to enrollment inthe schools being down from the prior year as a result of the lack of readilyavailable funding sources.

 

Equipment operating expenses increased in thesecond quarter of 2003 to $3,513,045 from $3,258,857 for the second quarter of2002.   This was an increase of $254,188(7.8%) from the prior year.   Theincrease in expenses was primarily due to the increase in the number ofdeadhead miles being driven because of the distance between where the base offreight is located and where the equipment is located, an increase in fuel pricesfrom the prior year, and an increase in equipment maintenance / tire 

 

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costs related to equipment age, and due tonot capitalizing major equipment repairs this year compared to havingcapitalized them last year.  

 

Operating expenses were also up, going to$876,401 for the second quarter of 2003 compared to $543,450 for the likeperiod of 2002, which is an increase of $332,951 (61.3%).  This increase is entirely attributable to anaccounting entry for impairment of assets resulting from the filing of theChapter 11 proceedings and the commensurate elimination of an asset of goodwilloriginally created in the Company’s acquisition of the assets of EagleTransportation, Inc. and Eagle Transportation Services, Inc.  General and Administrative expense for thequarter actually went down from $461,726 for 2002 to $435,904 for the likeperiod in 2003 and garage expense (Company in-house labor only) went up onlyslightly over $5,000 for the comparable periods.

 

Operating income for the second quarter of2003 was a loss of ($983,397), a decrease of $1,085,666 (1,061.6%) from the$102,269 for the second quarter of 2002.  Operating income as a percentage of total revenues went down to a minus–28.9% in the quarterly period ended June 30, 2003, from 2.6% for the sameperiod in 2002.  This was due to thedecrease in freight revenues while at the same time there was an increase inthe equipment operating expenses and from the impairment losses. 

 

Contributing factors to the decrease wereprimarily an absolute drop in freight volume, a simultaneous decrease inequipment efficiencies and increases in operating costs from external andinternal causes.

 

The net results were that the Company had anet loss after provision for income taxes and before reorganization items of($1,165,000) for the second quarter of 2003 compared to a net loss of($131,159) for the second quarter of 2002, which is an increase in the loss of($1,033,841) (788.2%) from the prior year.

 

Six months Ended June 30,2003.

 

Freight revenues for the six months endedJune 30, 2003, decreased $676,919 (9.1%) to $6,795,308 from $7,472,227 at theend of the six months period ending June 30, 2002.   Training school revenues for the six months ended June 30, 2003,decreased only by $17,948 to 245,247 (6.8%) from $263,195 for the six monthsperiod ended June 30, 2002.   Thedecrease in freight revenues was, as stated for the quarterly results,basically attributable to the reduction in the available equipment and declinein freight volume related to the domestic economy.  Training school revenue decreases were due primarily to the lackof available funding for students to pay for their schooling - a growingnation-wide industry problem for the past two years.

 

Equipment operating expenses increased in thesix months period ended June 30, 2003, by $362,858 (5.6%) to $6,855,162 from$6,492,304 for the same period in 2002. The increase in expenses was, as stated for the 2nd quarter results, primarily due to the increasein deadhead miles and increased maintenance costs associated with operatingolder equipment, plus a difference in fuel price from the prior year.  Operating expenses increased $495,341(47.1%) to $1,547,370 for the six months ended June 30, 2003, compared to$1,052,029 for the same period of 2002.  The increase was primarily due to the impairment losses in the value ofthe Company assets taken as a result of the filing of the Chapter 11reorganization petition.  The generaland administrative expenses and garage expenses (Company in-house labor only)were up only minimally compared to last year, although they went up during aperiod when the revenues for the Company were decreasing.

 

Operating income for the six months endedJune 30, 2003, was a loss of ($1,361,977), a decrease of $1,553,066 (812.7%)from income of $191,089 for the same period in 2002.   Operating income as a percentage of total revenues went downfrom 2.5% for the six months ending June 30, 2002, to a 

 

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minus (19.3%) for the same period in2003.   The factors for the decrease forthis period were basically the same as for the three month quarterly period,being the decrease in available revenue producing equipment together with thechanges in the sales mix that have caused the deadhead to increase verysignificantly, and freight tonnage decreases related to the struggling U. S.economy in the manufacturing and retail sectors.  The net results were that the Company had a net loss fromoperations after provision for income taxes and before the cost ofreorganization items for the six months period ended June 30, 2003, of($1,965,874) compared to a net loss of ($266,446) for the same period of 2002,which is an increase in loss of ($1,699,428) from the prior year.

 

**Capital andLiquidity**

 

Management believes that by reorganizing itcan get the Company's operating expenses in line with operating revenues sothat it will be able to manage its cash flow and, hopefully, with the otherchanges being implemented, reverse its loss trend and get back to operatingprofitably.  However, until the Companycompletes arrangements in the Bankruptcy Court with its secured lenders, therecan be no assurances that it will be able to operate profitably or be able toremain in business.  Because the Companyhas not had to make significant payments on its operating equipment, bothprevious to its filing of the Chapter 11 petition and subsequent thereto, ithas been able to utilize the cash flow that normally would be used to makethose payments to make payments for license plates, insurance and otherexpenses that it would not have been otherwise able to pay.

 

Management continues to adjust its correctiveactions to bring profits and cash flow positive.  Currently, there is a strong push to improve gross revenues andrates with additional Columbus, Ohio-based and Ohio Valley outbound customers,and replacing discounted inbound brokered freight with direct freightbusiness.  There is also a push to keepmore of the Company equipment operable, although it has been costly to maintainas the equipment is reaching the mid to upper portion of its life cycle, and toadd owner/operators to haul freight for the Company using their own equipment.

 

Key strategic actions required to put theCompany in a profitable formula would include increasing its power units by20%, which it still hopes to accomplish by adding owner operators, with acommensurate increase in its trailer pool, as well as replacing its shorter 48'trailers with the longer, now industry-preferred, 53' trailers.

 

In early May, the Company entered into a newreceivables-based line of credit agreement with Systran Financial Services, adivision of Textron Financial Corporation, which significantly increased its cashflow through higher advance rates with lower financing costs, and expanded itsavailable credit by $1.5 million.  Thiscredit facility has continued after the filing of the Chapter 11 petition withonly a slight increase in the rate paid by the Company.

 

In April 2003, the Company returned to thecost advantages of outsourcing its payroll and related tax processing.  Additional cost decreases were expected tocontinue with the relocation of the Columbus offices to less expensive rentalfacilities, which the Company completed in late 2002.  The Company also had expected to have equipment productivityimprove by making a strategic shift of the majority of its revenue equipmentfrom its Marietta, Ohio home base to its Columbus, Ohio, office, where there aresignificantly more freight opportunities. However, the Company has not been able to fully accomplish this shift,and therefore is still experiencing increased expenses from operating themajority of its equipment in a location that is far from its freight base.

 

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Management continues to seek growthopportunities to expand the number of power units and trailers it is operatingin order to reach a revenue level that will generate sufficient margins to supportits fixed costs and generate a net profit. The Company was near completing an asset acquisition in late April 2003that would have increased the number of power units by approximately 65, butthe problems with cash flow that surfaced at that time caused that transactionto be put off at least temporarily until the sellers see how the Companyperforms in reorganization.  

 

In the meantime, the Company needs to be ableto operate more of its already owned equipment that has been inoperable becauseof either a lack of drivers or a lack of funds to fix equipment breakdowns, andit is hopeful that this can be accomplished with the reorganization.   The Company is also still making aconcerted effort to hire additional owner/operators, and is currently workingon getting a group of ten.

 

Management hopes to be able to emerge fromthe judicial reorganization in a timely manner with a stronger balance sheet,increased liquidity, and a scale of operations that will foster sustainedearnings and growth.

 

The Company continues to seek outside equityand quasi-equity funding, and believes there is interest from outside fundingsources that would appropriately recapitalize the Company at its current size,or alternatively, in conjunction with an acquisition increasing its scale ofoperations and profit potential significantly.

 

 

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**Item 3.Controls and Procedures.**

** **

At the end of the period covered by thisreport, the Company carried out an evaluation, under the supervision and withthe participation of the Company’s management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, of the Company’s disclosurecontrols and procedures pursuant to Exchange Act Rule 13a-15(e).  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective. During the second quarter of2003, there were no changes in the Company’s internal control over financialreporting that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

 

**PART II — OTHER INFORMATION**

 

**Item 1.Legal Proceedings.**

 

On May 19, 2003, the Company filed a Petitionfor Reorganization under Chapter 11of the United States Bankruptcy Code in theUnited States Bankruptcy Court, Southern District of Ohio, EasternDivision.  Only Gasel TransportationLines, Inc. filed the Petition; its subsidiaries, Gasel Driver TrainingSchools, Inc. and GTL Logistics, Inc. are not a part of the filing.  The Company has been appointed as Debtor inPossession by the Bankruptcy Court.  Inaccordance with the Bankruptcy Code, all lawsuits that had been previouslyfiled against the Company were stayed and any creditors are prohibited fromcommencing any suits against the Company except in the Bankruptcy Court, andthen not to seek judgment against the Company for debts owing by the Company.

 

**Item 2.Changes in Securities.**

 

(A) The following table sets forth information relating to sales ofunregistered securities made by the Company during the second quarter of 2003,as well as sales made during the preceding quarters, which were all part of onesecurities offering.  All of the sales were for cash.  There were nounderwriting commissions paid.  The securities were sold to StarzInvestments Limited, a Belize corporation, pursuant to a contract entitled

 

 

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Regulation S Stock Purchase Agreement, underwhich it was to purchase the shares at a discount of 65% of the closing bidprice on the day prior to a sale. The offering was made in reliance uponRegulation S adopted under The Securities Act of 1933, as amended (the “Act”),and resale of the shares is restricted in accordance with the provisions ofRegulation S, which restricts resale for a period of one year after thepurchase dates in the United States or to any person who is not a U.S. Personas defined in Regulation S.

 

 
| **Date of Sale**  |   | **Class of  Securities**     |   | **Number of  Shares  Sold** |   | **Price per  share** |   | **Total  Amount  Received** |         |
|-------------------|--------|------------------------------|--------|-----------------------------|--------|----------------------|--------|-----------------------------|--------------|
| December 3, 2002  |   | Common shares, no par value  |   | 800,840                     |   | $                    | 0.1225 |                        | $            | 98,077.90 |   |
| December 6, 2002  |   | Common  shares, no par value |   | 647,971                     |   | $                    | 0.1225 |                        | $            | 79,351.45 |   |
| December 19, 2002 |   | Common  shares, no par value |   | 300,709                     |   | $                    | 0.1225 |                        | $            | 36,836.85 |   |
| December 19,2002  |   | Common  shares, no par value |   | 674,903                     |   | $                    | 0.1050 |                        | $            | 70,864.82 |   |
| January 10, 2003  |   | Common  shares, no par value |   | 452,458                     |   | $                    | 0.1050 |                        | $            | 47,483.09 |   |
| January 31, 2003  |   | Common  shares, no par value |   | 2,091,373                   |   | $                    | 0.1482 |                        | $            | 309,980.00 |   |
| February 18, 2003 |   | Common  shares, no par value |   | 371,052                     |   | $                    | 0.1482 |                        | $            | 55,000.00 |   |
| February 18, 2003 |   | Common  shares, no par value |   | 115,793                     |   | $                    | 0.1750 |                        | $            | 20,238.78 |   |
| March 5, 2003     |   | Common  shares, no par value |   | 715,229                     |   | $                    | 0.1995 |                        | $            | 142,688.19 |   |
| March 19, 2003    |   | Common  shares, no par value |   | 482,912                     |   | $                    | 0.1995 |                        | $            | 96,340.94 |   |
| April 02, 2003    |   | Common  shares, no par value |   | 63,218                      |   | $                    | 0.1995 |                        | $            | 12,611.99 |   |
| April 02, 2003    |   | Common  shares, no par value |   | 283,542                     |   | $                    | 0.1995 |                        | $            | 56,566.63 |   |
| Total             |   | Common  shares, no par value |   | 7,000,000                   |   |                 |   | $                           | 1,026,153.58 |   |

 

 
| **USE OF PROCEEDS**                                                                                        |   |   |    |
|------------------------------------------------------------------------------------------------------------|--------|--------|---------|
| Consulting fee to 1st SB Partners, Ltd. for  preparation of offering document and arranging sale of shares |   | $      | 92,354  |   |
| Balance of amounts due to State of Ohio for license tags for tractors  and trailers                        |   | $      | 135,000 |   |
| Reimburse PeopLease Corporation for payroll paid by it during 2002                                         |   | $      | 113,000 |   |
| Past due payroll taxes                                                                                     |   | $      | 100,000 |   |
| Settle past due vendor and insurance payables                                                              |   | $      | 52,200  |   |
| Working capital                                                                                            |   | $      | 533,599 |   |

 

 

(B) The following table sets forth information regarding issuance of sharesmade by the Company during the second quarter of 2003, without use of anunderwriter to persons in exchange for services:

 
| **Date of Sale** |   | **Class of  Securities**     |   | **Number of  Shares  Issued** |   | **To Whom  Issued**        |   |
|------------------|--------|------------------------------|--------|-------------------------------|--------|----------------------------|--------|
| April 21, 2003   |   | Common shares, no par value  |   | 100,000                       |   | Sarah R. Speno, Trustee(1) |   |
| April 25, 2003   |   | Common shares, no par value  |   | 10,000                        |   | Douglas A. Rogers (2       | )      |
| Total            |   | Common  shares, no par value |   | 110,000                       |   |                       |   |

 

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(1)           Sarah R. Speno, Trustee of The SRSTrust, received these shares as the nominee for 1st SB Partners, Ltd., acompany that performed consulting services for the Company in the preparationof the offering of its shares under Regulation S and in negotiating theRegulation S Stock Purchase Agreement that the Company executed with StarzInvestments, Ltd..  The shares were not registered in reliance uponSection 4(2) of the Act in that they were not made available for sale to the publicand are restricted against resale until they are registered under the Act orsold under an exemption from registration.

 

(2)           Rogers Consulting Group/ManageSource,Douglas A. Rogers, proprietor,  providedmarket research and a report for use by the Company in providing information tothe business and broker/dealer community and as part of its compensation, Mr.Rogers received the shares in a non-public offering.  The shares were notregistered in reliance upon Section 4(2) of the Act in that they were not madeavailable for sale to the public and are restricted against resale until theyare registered under the Act or sold under an exemption from registration.

 

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**Item 5.Other Information.**

 

(a)           The Company filed a Petition forReorganization under Chapter 11of the United States Bankruptcy Code in theUnited States Bankruptcy Court, Southern District of Ohio, Eastern Division onMay 19, 2003.  It did not include itssubsidiaries, Gasel Driver Training Schools, Inc. and GTL Logistics, Inc. inthe filing.

 

The Company asked thebankruptcy court to allow it to oversee its operations as debtor in possession,subject to approval of matters outside the ordinary course of business, andthis was approved.  While in Chapter 11,the Company will attempt to restructure its debt, particularly the secured debtwhich finances its tractors and trailers, so that the payments are reduced tobe in line with the current market values of that equipment.  Additionally, the Debtor hopes to be able toreach agreements with regard to lower payments on its leased equipment.  It will also be examining all of itsagreements, leases and contracts to determine if it wants to keep them inforce.

 

The Company has been workingwith its secured creditors to reach agreement on payments for its equipmentwhile under the Chapter 11 proceeding so that they have adequate protectionpending the filing and approval of a reorganization plan.

 

(b)           On May 1, 2003, the Company and itssubsidiary corporation, GTL Logistics, Inc. entered into a factoring agreementwith Systran Financial Services Corporation for the sale of their accountsreceivable.  The agreement is for a termof one year with automatic annual renewal unless otherwise terminated, providesfor borrowing amounts up to $3.5 million, provides for the sale of the accountsreceivable with full recourse, and provides the Company with a loan equal to90% of its qualified accounts receivable. The terms of the agreement are guaranteed individually by Michael J.Post and also by Gasel Driver Training Schools, Inc.  This credit facility replaces one with CitiCapital that had a $2million borrowing limit and advanced only 85% of the accounts receivable.

 

The agreement commenced onMay 1, 2003, when the Company accepted its first funding.  The agreement was modified upon the Companyfiling its Chapter 11 Petition in only a minor way to increase the fees payableby the Company, and the modified agreement was approved by the BankruptcyCourt.

 

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The agreement, as modified,is filed as Exhibit 99.1 to this 10-QSB.

 

**Item 6.Exhibits and Reports on Form 8-K.**

 

(a) Exhibits:

31.1 - Rule13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company.

31.2 - Rule13a-15(a)/15d-14(a) Certification of Chief Financial Officer of the Company.

32.1 - Section 1350Certification by Chief Executive Officer of the Company.

32.2 - Section 1350Certification by Chief Financial Officer of the Company.

99.1—Systran FinancialServices Corporation Factoring Agreement dated as of May 20, 2003.

 

(b) Reports on Form 8-K.  There was one report on Form 8-K filedduring the quarter for which this report is filed.  The report was filed on June 5, 2003, setting forth in Item 9, FDDisclosure, a copy of a press release relating to the Company having filed aChapter 11 Petition under the United States Bankruptcy Code.

 

 

**SIGNATURES**

 

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                 | Gasel Transportation  Lines, Inc.                                            |
|----------------------|------------------------------------------------------------------------------|
|                 | (Registrant)                                                                 |
| Date August 19, 2002 |                                                                         | /s/   Michael J.  Post |
|                 | (Signature)*Michael J.  Post, President                                      |
|                 |                                                                         |
| Date August 19, 2002 |                                                                         | /s/   S. Gene  Thompson |
|                 | (Signature)* S. Gene  Thompson, Vice President and   Chief Financial Officer |
|                 |                                                                         |

 

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