UNITED STATES SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C. 20549
FOR 10-QSB
ANNUAL REPORT PURSUANT TO SECTION13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Six Months Ended June 30, 2001
Commission File Number: 33-9640-LA
Logistics Management Resources, Inc.
(Exact Name of Issuer as Specified in it Charter)
COLORADO 68-0133692
(State or Other Jurisdiction (IRS Employer Identification Number)
incorporation or organization)
10602 Timberwood Circle, Suite #9, Louisville, Kentucky 40223
(Address of Principal Executive (Offices)
502-339-4000
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) or the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
There were 35,156,013 shares of the Registrant's common stock issued at August
16, 2001 with 14,034,753 restricted with an estimated float of 21,037,933.
U.S. TRUCKING, INC.
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 2001 AND
DECEMBER 31, 2000
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE SIX MONTHS
ENDED JUNE 30, 2001 AND 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS
ENDED JUNE 30, 2001 AND 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Financial Statements
June 30, 2001
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Index to the Consolidated Financial Statements
June 30, 2001
Page
Accountants' Report on the Financial Statements.................................................. 1
Financial Statements
Consolidated Balance Sheets................................................................. 2-3
Consolidated Statements of Operations....................................................... 4
Consolidated Statements of Cash Flows....................................................... 5-6
Notes to the Consolidated Financial Statements.............................................. 7-14
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Balance Sheets
June 30, December 31,
2001 2000
-------------- ------------
Assets
Current Assets
Cash $ 10,143 $ --
Accounts receivable, net of allowance for doubtful accounts of
$15,287 and $0, respectively 1,393,288 --
Unbilled accounts receivable 105,944 --
Employee advances 49,700 --
Inventory 162,000 162,000
---------- ----------
Total Current Assets 1,721,075 162,000
Property and equipment, at cost less accumulated depreciation of $3,191 and
$244, respectively 83,368 975
Restricted cash 16,418 --
Deposits 51,998 --
Prepaid expenses 2,061,737 --
Goodwill, net of accumulated amortization of $6,421 and $0, respectively 250,523 --
Debt issuance costs, net of accumulated amortization of $72,502 and
$43,522, respectively 51,214 80,195
---------- ----------
Total Assets $4,236,333 $ 243,170
========== ==========
See notes to the consolidated financial statements.
2
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Balance Sheets (Continued)
Liabilities and Stockholders' Equity
Current Liabilities
Cash overdraft $ 86,276 $ 29,688
Accrued expenses 737,157 260,477
Accrued interest 3,042,086 1,728,731
Due to factor 1,018,119 --
Due to related party 693,666 317,820
Convertible debentures 4,405,000 4,405,000
Net liabilities of discontinued operations 13,209,298 13,422,749
------------ ------------
Total Current Liabilities 23,191,602 20,164,465
Long-term debt, net current portion 3,635,959 2,459,599
------------ ------------
Total Liabilities 26,827,561 22,624,064
Commitments and contingencies
Stockholders' Equity
Preferred stock, no par value; (10,000,000 shares authorized)
Series A (99,000 shares outstanding) 132 132
Series B (2,000 shares outstanding) 2,000,000 2,000,000
Series C (50,000 shares outstanding) 15,000 15,000
Series D (950 shares outstanding) 950,000 950,000
Series E (2,300 shares outstanding) 2,300,000 2,300,000
Common stock, no par value; 75,000,000 shares authorized,
31,714,467 shares issued and outstanding -- --
Treasury stock (68,401) --
Subscription receivable (906,788) (906,788)
Additional paid-in capital 15,571,006 12,197,922
Accumulated (deficit) (42,452,177) (38,937,160)
------------ ------------
Total Stockholders' Equity (Impairment) (22,591,228) (22,380,894)
------------ ------------
Total Liabilities and Stockholders' Equity $ 4,236,333 $ 243,170
============ ============
See notes to the consolidated financial statements.
3
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Statements of Operations
Three Months Six Months
Three Months Ended Six Months Ended June
Ended June 30, 2000 Ended June 30, 2000
June 30, 2001 (Restated) 30, 2001 (Restated)
--------------- -------------- -------------- --------------
Continuing Operations:
Net Revenue $ 2,365,232 $ -- $ 4,070,921 $ --
Operating Expenses
Purchased transportation and rentals 2,165,718 -- 3,624,164 --
Other operating costs 48,308 -- 48,813 --
Insurance and claims 43,357 -- 44,091 --
Depreciation and amortization 17,669 123,646 38,349 197,380
Taxes and licenses -- 4 -- 1,512
Salaries, wages and benefits 238,807 51,452 261,832 101,442
Occupancy costs 372 9,320 17,882 19,892
Administrative expenses 1,623,569 395,888 2,214,137 672,754
------------ ------------ ------------ ------------
Total Operating Expenses 4,137,800 580,310 6,249,268 992,980
Net Operating Loss before Discontinued
Operations (1,772,568) (580,310) (2,178,347) (992,980)
Discontinued Operations:
Loss on disposal of discontinued
operations (28,738) (5,266,904) (14,649) (4,766,952)
------------ ------------ ------------ ------------
Net (Loss) before Other Income and Expense (1,801,306) (5,847,214) (2,192,996) (5,759,932)
Interest income -- 944 -- 22,247
Interest expense (694,430) (62,687) (1,322,021) (111,541)
------------ ------------ ------------ ------------
Net (Loss) before Income Taxes (2,495,736) (5,908,957) (3,515,017) (5,849,226)
Provision for (Benefit from) Income Taxes -- (22,300) -- --
------------ ------------ ------------ ------------
Net (Loss) $ (2,495,736) $ (5,886,657) $ (3,515,017) $ (5,849,226)
============ ============ ============ ============
Earnings (Loss) Per Common Share
(Loss) from continuing operations $ (0.39) $ (0.06) $ (0.56) $ (0.11)
(Loss) from discontinued operations (0.01) (0.52) -- (0.47)
------------ ------------ ------------ ------------
Basic and diluted earnings per share $ (0.40) $ (0.58) $ (0.56) $ (0.58)
============ ============ ============ ============
Weighted Average Number of Common Shares Outstanding 6,292,527 10,101,544 6,292,527 10,101,544
============ ============ ============ ============
See notes to the consolidated financial statements.
4
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Statements of Cash Flows
Six Months Six Months
Ended
Ended June 30, 2000
June 30, 2001 (Restated)
--------------- --------------
Cash Flows From Operating Activities
Continuing Operations
Loss before income taxes $(3,500,368) $(1,082,274)
Adjustments to Reconcile Net Loss to Net Cash Used By
Operating Activities
Depreciation and amortization expense 38,349 197,380
Provision for doubtful accounts 14,979 7,000
Issuance of common stock for services rendered 3,137,459 --
Issuance of common stock for purchase of business 180,000 --
(Increase) in Assets
Accounts receivable (1,393,288) --
Unbilled accounts receivable (105,944) --
Employee advances (49,700) --
Restricted cash (16,418) --
Prepaid expenses (2,061,737) --
Increase in Liabilities
Cash overdraft 56,588 --
Accrued expenses 622,317 --
Accrued interest 1,313,355 --
Due to factor 1,018,119 --
----------- -----------
Net Cash Used in Continuing Operations (746,289) (877,894)
----------- -----------
Discontinued Operations
Loss (income) before income taxes (14,469) (4,766,952)
Adjustments to Reconcile Net (Loss) to Net Cash Used
By Operating Activities
(Increase) in net assets of discontinued operations -- (1,614,057)
(Decrease) in net liability of discontinued operations (213,451) --
----------- -----------
Net Cash Used in Discontinued Operations (227,920) (6,381,009)
----------- -----------
Net Cash Used in Operating Activities (974,209) (7,258,903)
----------- -----------
Cash Flows From Investing Activities
Purchases of equipment (85,340) --
Acquisition of business (256,944) --
Purchase of treasury stock (118,401) --
Sale of treasury stock 50,000 --
----------- -----------
Net Cash Provided By (Used in) Investing Activities $ (410,685) $ --
----------- -----------
See notes to the consolidated financial statements.
5
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Consolidated Statements of Cash Flows (Continued)
Six Months
Six Months Ended
Ended June 30, 2000
June 30, 2001 (Restated)
--------------- --------------
Cash Flows from Financing Activities
Net proceeds from related parties $ 270,675 $ 186,023
Proceeds from sale of common stock and additional paid in capital (51,998) --
Principal payments on long-term debt -- (2,928,582)
Issuance of convertible debentures -- 6,560,296
Proceeds from long-term debt financing 1,176,360 3,554,671
----------- -----------
Net Cash Provided By Investing Activities 1,395,037 7,372,408
----------- -----------
Net Increase in Cash 10,143 113,505
Cash at beginning of period -- 1,057,719
----------- -----------
Cash at end of period $ 10,143 $ 1,171,224
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for:
Interest expense $ 8,745 $ 1,739
=========== ===========
Income taxes $ -- $ --
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In June, 2000, 9,000,000 shares of common stock were issued for the retirement
of 900,000 shares of Series A preferred stock valued at $630.
During the first quarter of 2000, LMRI acquired the business operations of
Checkmate Truck Brokerage, Inc. and Maverick Truck Brokerage, Inc.
Fair value of assets acquired $ 3,531,347
Fair value of liabilities assumed 4,399,649
Goodwill recognized 2,606,125
Cash paid 534,698
Value of common stock issued 1,026,782
During the first quarter of 2001, LMRI acquired the business operations of
Trans-Logistics, Inc.
Fair value of assets acquired $ 271,667
Fair value of liabilities assumed 258,475
Goodwill recognized 256,944
Cash due to sellers 90,137
Value of common stock issued 180,000
During the six months ended June 30, 2001, LMRI issued 11,950,764 shares of
common stock for services rendered valued at $3,137,459, of which $784,365 was
expensed during the period.
See notes to the consolidated financial statements.
6
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 1 - General and Summary of Significant Accounting Policies
(A) Nature of Business
On September 8, 1998, U. S. Trucking, Inc., a Nevada corporation
( U. S. Trucking - Nevada), was acquired by Northern Dancer
Corporation (Northern Dancer), a non-operating public shell, through
the exchange of 100% of the issued and outstanding shares of Northern
Dancer's common stock for approximately 96% of the outstanding shares
of U. S. Trucking - Nevada's common stock. Northern Dancer's legal
name was changed to U. S. Trucking, Inc. (U. S. Trucking). The
acquisition is considered to be a capital transaction, in substance
equivalent to the issuance of stock by U. S. Trucking - Nevada for the
net monetary assets of Northern Dancer, accompanied by a
recapitalization of U. S. Trucking - Nevada.
U. S. Trucking - Nevada was formed by U. S. Transportation
Systems, Inc. (USTS) as a wholly owned subsidiary. As part of the
transaction to acquire Gulf Northern, Inc., 25% of the U. S. Trucking
- Nevada's common stock was transferred to Gulf Northern's parent
(Logistics Management, LLC). The remaining 75% was conveyed to
Logistics Management, LLC during 1998.
The Company's corporate headquarters are located in Louisville,
Kentucky.
On November 30, 2000, UST Logistics, Inc., Mencor, Inc., Prostar,
Inc. and Gulf Northern Transport, Inc., LMRI's four operating
subsidiaries, filed voluntary petitions for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court, Middle District of Florida, Jacksonville Division.
Prior to December 31, 2000 the Company terminated its auto
liability insurance business.
LMRI's prospective principal business is to provide for the
transportation needs of clients through "Total Logistics Management,"
which includes managing clients' domestic and international trucking,
load matching, consolidation and warehousing requirements.
On January 29, 2001, the Company held a Special Stockholders'
Meeting to vote on a corporate name change and reverse split of the
Company's common stock. The Company's Board of Directors approved the
change of the Company's name to Logistics Resources Management, Inc.
At the Special Stockholders' Meeting, stockholders approved the name
change and reverse split of the shares of the Company's common stock
on a 1 for 100 basis. The record date for the reverse split was
February 12, 2001. The Company also changed its symbol on the Over The
Counter Bulletin Board to "LMRI" to reflect its new name.
Effective January 1, 2001, the Company purchased all of the issued and
outstanding common stock of Trans-Logistics, Inc., a Florida
corporation. The Company purchased one hundred percent of
Trans-Logistics' issued and outstanding common stock at the price of
$80,000, plus, four times Trans-Logistics' gross brokerage commissions
for the period of October 1, 2001 to December 31, 2001, plus, any
accounts receivable (after adjusting for accounts payable) less any
payments by the Company of the assumption of liabilities with Atech
Commercial Corp. in excess of $120,000. The consideration shall be
paid by the transfer of $40,000 in cash, 18,000 shares of the
Company's common stock (which must be registered for sale on or before
June 30, 2001), the transfer of stock of the Company's common stock no
later than April 15, July 15 and October 15, 2001 equal to the gross
brokerage commission
7
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 1 - General and Summary of Significant Accounting Policies (Continued)
(A) for those respective quarters and the balance of the purchase
price shall be paid after an audit of Trans-Logistics for the
2001 fiscal year and paid in shares of the Company's common
stock.
(B) Basis of Presentation
The accompanying balance sheets and related statement of
operations and cash flows for the six months ended June 30, 2001,
include the activities of L.M.R.I. and its wholly owned subsidiary
Trans-Logistics, Inc.
(C) Revenue Recognition
During 2001, the Company changed its revenue recognition
policy to record revenue at the time freight is picked up at the
customer's site.
(D) Earnings Per Share
Basic earnings per share are computed by dividing net income
available to common shareholders by the weighted average number of
common shares outstanding during the year. Diluted earnings per
share are calculated by combining weighted average number of common
shares outstanding and potentially dilutive common share equivalents
unless the effect of doing so is anti-dilutive. Common equivalent
shares have been excluded from the 2000 computation of diluted EPS
since their effect is anti-dilutive.
The weighted average number of shares for the period ending
June 30, 2001 and 2000 was 6,292,527 and 10,101,544, respectively.
(E) Fair Value of Financial Instruments
The fair values of cash, accounts receivable, accounts payable
and other short-term obligations approximate their carrying values
because of the short maturity of these financial instruments. The
carrying values of the Company's long-term obligations at June 30,
2001 and December 31, 2000 consisting of anticipated liabilities
relating to it's discontinued auto insurance business are payable
over approximately 30 months without interest. Accordingly, the
obligation has been subjected to a present value discount applying
an interest rate factor of 10% which represents the rate available
to the Company. In accordance with Statement of Financial Accounting
Standards No. 107, "Disclosure About Fair Value of Financial
Instruments," rates available at balance sheet dates to the Company
are used to estimate the fair value of existing debt.
(F) Cash and Equivalents
Cash and equivalents represent cash and short-term highly
liquid investments with original maturities of six months or less.
The Company places its cash and equivalents with high credit quality
financial institutions which may exceed federally insured amounts at
times.
8
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 1 - General and Summary of Significant Accounting Policies (Continued)
(G) Debt Issuance Costs
Debt issuance costs are recorded at cost and are being
amortized over the term of the related obligations or their
conversion, if sooner, using the effective interest method.
Accumulated amortization was $72,502 at June 30, 2001 and $43,522 at
December 31, 2000.
(H) Income Taxes
The Company utilizes Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes," which requires
an asset and liability approach to financial accounting and
reporting for income taxes. The difference between the financial
statement and tax basis of assets and liabilities is determined
annually. Deferred income tax assets and liabilities are computed
for those temporary differences that have future tax consequences
using the current enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. In some
situations, SFAS 109 permits the recognition of expected benefits of
utilizing net operating loss and tax credit carry forward. Valuation
allowances are established based upon management's estimate, if
necessary. Income tax expense is the current tax payable or
refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
(I) Use of Estimates
The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(J) Reclassifications
Certain reclassifications were made to prior period financial
statement presentations to conform with current period presentations.
(K) Inventory
Inventory consists of transportation equipment held for resale.
(L) Property and Equipment
Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated service
lives. Accelerated methods of depreciation are followed for tax
purposes and the straight-line method is used for financial reporting
purposes.
(M) Intangible Assets
Intangible assets include goodwill which is amortized on a
straight-line basis over ten years. Also included are deferred
financing and debt issuance costs which are amortized on a
straight-line basis over periods ranging from three to five years.
9
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 2 - Equipment
Equipment at cost, less accumulated depreciation, consists of the
following:
December 31,
June 30, 2001 2000
---------------- ----------------
Office Equipment $ 86,560 $ 1,219
Less accumulated depreciation 3,192 244
---------------- ----------------
Total $ 83,368 $ 975
================ ================
Depreciation expense charged to operations for the six months ended June
30, 2001 and 2000 was $2,948 and $39,476, respectively.
Note 3 - Convertible Debentures
During 2000, the Company issued $4,650,000 of 10% convertible debentures
due May 31, 2002. The Company received proceeds of $4,502,000 , net of
$148,000 of debt issuance costs. The debt issuance costs are being amortized
over the life of the debentures and $28,980 and $0 was amortized during the
six months ended June 30, 2001 and 2000, respectively.
The holders of the debentures are entitled, at their option, to convert
at any time, all or any part of the principal amount of the debentures plus
accrued interest.
The price per share of Common Stock into which the debentures are
convertible is the higher of $1.50 or the lower of 80% of the average
closing bid price of the Common Stock quoted on the OTC Bulletin Board for
three trading days preceding the conversion date or $2.37 per share. In no
event will the conversion price be less than $1.50 per share.
Note 4 - Acquisitions
Effective January 2, 2001, the Company purchased all of the issued and
outstanding common stock of Trans-Logistics, Inc., a Florida corporation.
The Company purchased one hundred percent of Trans-Logistics' issued and
outstanding common stock at the price of $80,000, plus, four times
Trans-Logistics' gross brokerage commissions for the period of October 1,
2001 to December 31, 2001, plus, any accounts receivable (after adjusting
for accounts payable less any payments by the Company of the assumption of
liabilities with Atech Commercial Corp. in excess of $120,000. The
consideration shall be paid by the transfer of $40,000 in cash, 180,000
shares of the Company's common stock (which must be registered for sale on
or before June 30, 2001), the transfer of stock of the Company's common
stock no later than April 15, July 15 and October 15, 2001 equal to the
gross brokerage commission for those respective quarters and the balance of
the purchase price shall be paid after an audit of trans-Logistics for the
2001 fiscal year and paid in shares of the Company's common stock.
Allocation of the purchase price is preliminary and will be finalized upon
resolution of the aforementioned contingencies. Pro-forma financial activity
for six months ended June 30, 2000 is required since Trans-Logistics, Inc.
commenced operations effective April 28, 2000.
10
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 4 - Acquisitions (Continued)
An allocation of the purchase price is as follows:
Trans-Logistics
-----------------
Assets
Cash and other Current Assets $ 3,055
Accounts receivable 268,612
Goodwill 256,945
-----------------
Total $ 525,557
=================
Liabilities Assumed and Equity
Liabilities assumed $ 258,475
Liability to sellers 90,137
Common stock 180,000
-----------------
Total $ 528,612
=================
Note 5 - Discontinued Operations
On November 30, 2000, the Company's four operating subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code. The
Company is liable as a guarantor on certain indebtedness of its former
subsidiaries. The Company is liable for obligations as to which it is a primary
or secondary guarantor relating to its former subsidiaries, which have filed
voluntary petitions for reorganization, and terminated its auto liability
insurance business. Resultant estimated guarantee obligations are comprised of
the following:
General Electric Capital Corporation
On November 27, 2000, Gulf Northern Transport, Inc., Prostar, Inc., U.S.T.
Logistics, Inc. , as borrowers, and LMRI, as a guarantor, entered into a
Restructure Agreement with respect to certain financing arrangements pursuant to
a loan and security agreement dated December 22, 1998 between the borrowers and
General Electric Capital Corporation. Pursuant thereto, the Company estimates
its liability to be $10,440,408. As of May 15, 2001, the Company was in default
as to its obligations under the Restructure Agreement.
Captive Insurance Program
Prior to December 31, 2000, the Company terminated its auto insurance business
and has been advised by counsel that its maximum exposure may be $1,414,492. The
Company contemplates satisfying this liability at the rate of $50,000 per month
commencing in July 2001. The present value of this obligation, applying a 10%
effective interest rate, amounts to $1,203,657.
11
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 5 - Discontinued Operations (Continued)
Equipment Financing Arrangements
The Company is a guarantor as to certain equipment and leases of its former
subsidiaries. The Company estimates its gross liability to be $3,316,915
pursuant to these financing arrangements and the realizable value of the related
collateral to be $2,484,000 resulting in an estimated guarantee obligation of
$832.915.
Other guaranteed obligations ranging from payroll taxes, delinquent rents and
delinquent vendor payables total $732,318.
Note 6 - Preferred Stock
During 2000, the Company exchanged 900,000 shares of its Preferred Series A
shares for 9,000,000 shares of Common Stock. On February 1, 1999, the Company
entered into three stock exchange agreements whereby a total of 9,990,000 shares
of Common Stock were exchanged for 999,000 of Series A Preferred Stock. The
value of the shares was determined to be $762 and such amount was deducted from
additional paid-in capital. Each share of Series A Preferred Stock is entitled
to ten votes and will vote together with the holders of the Common Stock.
Pursuant to this agreement, each share of Series A Preferred Stock may be
exchanged for ten shares of Common Stock as follows: one fifth of the shares
upon he Company's reporting revenues of $31 million or more for any fiscal year
or shorter period in a report filed on Form 10-KSB or any appropriate Securities
and Exchange Commission filing; an additional one-fifth if revenues are at or
above $41 million; an additional one fifth if revenues are at or above $51
million; an additional one-fifth if revenues are at or above $61 million; and
the balance if revenues are at or above $71 million.
Based upon the revenues reported in the accompanying consolidated financial
statements, 40% of the Series A Preferred Stock are eligible to be exchanged for
Common Stock.
Note 7 - Related Party Transactions
Amounts due to related party amount to $693,666 as of June 30, 2001 and $317,820
at December 31, 2000 consist of amounts borrowed by the Company from entities
with similar ownership interests. Amounts outstanding bear no interest and
repayment is expected on the short term, if cash flows are available.
Note 8 - Going Concern
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Company incurred a net
loss of $(3,515,017) for the six months ended June 30, 2001 and, as of that
date, had a working capital deficiency of $(21,470,527) and a net worth
deficiency of $(22,591,228). Also, as discussed at Note 1, on November 30, 2000,
the Company's four operating subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the Bankruptcy Code and, as described at Note
6, the Company is liable as a guarantor on certain indebtedness of it's former
subsidiaries.
The Company's ability to generate sufficient proceeds from prospective
operations, debt or equity placements is uncertain. The financial statements do
not include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
12
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 8 - Going Concern (Continued
Management's plans for prospective operations are described at Note 1.
Management is continuing its efforts to arrange for the placement of sufficient
debt or equity to alleviate the above described conditions.
Note 9 - Commitments and Contingencies
Stock Activity:
During 2000, LMRI issued a total of 7,800,000 shares of common stock to several
companies and individuals as collateral in connection with contingent
transactions. In 2000, the 7,800,000 shares were issued to a majority
stockholder for its guaranty as to the Company's Restructure Agreement with
General Electric as discussed in Note 6.
During 2000, 1,500,000 shares of common stock were issued as collateral to a
preferred stockholder but not considered issued and outstanding.
Operating Leases:
In February, 2000, the Company leased 4,000 square feet of space in Mt.
Pleasant, South Carolina to house its corporate office and brokerage operations.
The lease calls for monthly payments of $6,380 and is for a term of 12 months.
Upon the Chapter 11 filing of its former subsidiaries, the corporate offices
were moved to Louisville, Kentucky. The South Carolina lease expires in
February, 2001.
Employment Agreements:
Commencing September 9, 1998, the Company entered into an employment agreement
with its President and Chief Executive Officer, for a term of five years. The
agreement provides for an annual salary of $105,000 with annual increases of not
less than 3%, as well as an automobile allowance for business travel.
The above employment agreement is terminable by the Company for certain
specified reasons including disability, fraud, felony conviction or substance
abuse. There are also certain noncompete covenants to be maintained during the
contract period. Breach of such covenants could lead to dismissal.
Indemnity Agreements:
The Company's President, Vice President and another guarantor of the Company's
obligations have provided guarantees of certain obligations of the Company and
its former subsidiaries. As a result, on January 30, 1997, and as renewed on May
3, 1999, the Company entered into an Indemnity Agreement with these parties, to
hold them harmless against any loss or liability related to or arising from the
Company and its former subsidiaries.
13
Logistics Management Resources, Inc. and Subsidiary
F.T.A. U.S. Trucking, Inc.
Notes to the Consolidated Financial Statements
Note 9 - Commitments and Contingencies (Continued)
Payroll Obligation:
The Company is contingently liable for $223,107 relating to its former
subsidiaries in bankruptcy. The outstanding obligations arise from insufficient
funds that were not provided to a payroll service for the subsidiaries'
employees' payroll and expenses paid. The Company is responsible as a guarantor
of these obligations if subsidiary assets are not sufficient to pay creditors.
Health Claims:
The Company is contingently liable for $247,327 of former subsidiaries'
employees health insurance claims no longer financed by the subsidiaries. It is
uncertain if the claims will be pursued for payment, and as a result, the
potential claims have not been accrued within the accompanying financial
statements.
Legal Proceedings:
Stock Registration Rights Dispute - In September 2000, an entity filed legal
action against the Company alleging a breach of obligation under a stock
registration rights agreement. The Company has responded stating it has
performed its best efforts to uphold the agreement and has committed no
wrongdoing. The stockholder is seeking damages of $300,000. The Company has
provided a $135,000 reserve in its estimated liabilities although final outcome
of this litigation is uncertain and undeterminable at this time.
Southtrust Bank filed suit against the Company and certain affiliates for $2.8
million. The suit, claims the Company and certain affiliates defaulted on
certain guarantees relating to the purchase of 66% of Professional
Transportation Group by Logistics Management LLC. the Company contends that it
was improperly served and a judgment was granted against the Company and certain
affiliates. The Company has filed a Supplement To Motion To Set Aside Entry of
Default in this matter and intends to aggressively defend against this action.
In addition the Company believes it has counterclaims in this matter.
AllStates World Cargo filed suit against the Company and its chairman for
$678,000. The suit claims the Company and the chairman defaulted on certain
business guarantees related to the acquisition of Trans-Logistics as of January
1, 2001. The Company and the chairman have filed an answer in this matter and
intend to defend these matters vigorously. The Company and the chairman believe
they have significant counterclaims in this matter.
Note 10 - Subsequent Events
Effective July 1, 2001 the Company and Trans-Logistics, Inc. agreed to rescind
and cancel the terms of conditions of the acquisition agreement for all of the
issued and outstanding common stock of Trans-Logistics, Inc. entered into as of
January 1, 2001. In connection thereto, the Company has agreed to reimburse
Trans-Logistics, Inc. $150,000 and/or to deliver 1,000,000 of its common shares.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Company's financial condition as of June
30, 2001 and the Company's results of operation for the six month periods ended
June 30, 2001 and 2000 should be read in conjunction with the Consolidated
Financial Statements, including the footnotes, and it should be understood that
this discussion is qualified in its entirety by the foregoing and other, more
detailed financial information appearing elsewhere herein.
Historical results of operations and the percentage relationships among any
amounts included in the Consolidated Statement of Operations, and any trends
which may appear to be inferable therefrom, should not be taken as being
necessarily indicative of trends of operations or results of operations for any
future periods.
These and other statements, which are not historical facts, are based
largely on current expectations and assumptions of management and are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements.
Assumptions and risks related to forward-looking statements, include that we are
pursuing a growth strategy that relies in part on the completion of acquisitions
of companies in the non-asset based logistics segment of the transportation
industry, as well as the completion of acquisitions of companies in the employee
leasing industry.
Assumptions relating to forward-looking statements involve judgements
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many which are beyond our control. When
used in this Quarterly Report, the words "estimates", "projects", and "expect"
and similar expressions are intended to identify forward-looking statements.
Although we believe that assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in the forward-looking
information will be realized.
Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impacts of which may cause us to alter our business strategy,
which may in turn, affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as our representation that
statements contained in this Quarterly Report speak only as of the date of this
Quarterly Report, and we do not have any obligation to publicly update or revise
any of these forward-looking statements.
Such statements may include, but are not limited to, projections of
revenues, income, or loss, capital expenditures, plans for future operations,
financing needs or plans, the impact of inflation and plans relating to the
foregoing. Statements in the Company's Form 10-QSB, including Notes to the
Consolidated Financial Results of Operations, describe factors, among others,
that could contribute to or cause such differences.
15
DESCRIPTION OF BUSINESS
General:
Logistics Management Resources, Inc. is a holding company engaged in
the business of acquiring and managing employee leasing and transportation
logistics companies. Our principal business is providing for the transportation
needs of clients through total logistics management, which includes managing
clients' domestic and international transportation, load matching, consolidation
and warehousing. We also intend to engage in a series of acquisitions in the
field of employee leasing services. These services include supplying temporary
workers possessing a wide variety of skills to both large and small businesses,
while assuming many of the costs and functions of an employer for a fee.
Employee lease services are widely used in the transportation industry and we
feel the dual industry approach will provide increased flexibility in the
overall services we intend to provide as well as enhancing our revenue stream.
We intend to expand our business through internal growth and
acquisitions. The transportation and employee leasing industries are highly
fragmented, which provides unique acquisition opportunities. We are primarily
interested in profitable, well managed, non-asset based companies that can bring
positive growth with profits to the bottom line.
Overview:
Logistics Management Resources, Inc., formerly U.S. Trucking, Inc., was
established in January of 1997 by combining under US Trucking-Nevada the
operations of Gulf Northern Transport, Inc., a mid-to-long-haul truckload
carrier and Mencor, Inc. a third party logistics (brokerage) company.
On November 30, 2000, the Registrants' operating subsidiaries, Gulf
Northern Transport, Inc., Prostar, Inc., UST Logistics, Inc. and Mencor, Inc.,
filed a Voluntary Petition under Chapter 11 of the Bankruptcy Code with the
United States Bankruptcy Court, Middle District of Florida, Jacksonville
Division. As of this date, no plan of reorganization has been filed by the
registrant's subsidiaries. However, a trustee has been appointed. On December 1,
2000 we issued a press release in which it was announced: (i) the filing of the
Petition, and (ii) the signing of an agreement with its primary lender for
repayment of any deficiencies, which may be left after liquidation of the
collateral. The agreement provides for payment of the deficiency over three
years, including payments based upon a fixed percentage of our ongoing revenue.
The accompanying financial statements contain adjustments resulting from the
bankruptcies based upon management's best estimates as to the recoverability of
assets and obligations for liabilities incurred.
Effective as of January 1, 2001, we purchased all of the issued and
outstanding shares of common stock of Trans-Logistics, Inc., a Florida
corporation. We purchased one hundred percent of Trans-Logistics issued and
outstanding common stock at the price of $80,000, plus, four times
Trans-logistics' gross brokerage commissions for the period of October 1, 2001
to December 31, 2001, plus, any accounts receivable (after adjusting for
accounts payable) less any payments by us for the assumption of liabilities with
Atech Commercial Corp. in excess of $120,000. The consideration shall be paid by
the transfer of $40,000 in cash, 18,000 shares of our common stock (which must
be registered for sale on or before June 30, 2001), the transfer of stock no
later than April 15, July 15 and October 15, 2001 equal to the gross brokerage
commission for those respective quarters and the balance of the purchase price
shall be paid after an audit of Trans-Logistics for the 2001 fiscal year and
paid in shares of our common stock. Trans-logistics is a wholly owned subsidiary
of Logistics Management Resources Inc. with annual revenues expected to exceed
$10 million.
The Company and Trans-Logistics agreed to rescind and cancel the terms and
conditions of the acquisition agreement for all of the issued and outstanding
common stock of Trans-Logistics, Inc., which the Company entered into as of
January 1, 2001. In connection with this rescission the Company has agreed to
reimburse Trans-Logistics, Inc. $150,000 in cash or to deliver 1,000,000 shares
of its common shares.
16
The Company signed a letter of intent on April, 2001 to acquire America's
PEO, Inc., a premier employee leasing company, headquartered in Cherry Hill, New
Jersey. The intended acquisition is expected to close during the third quarter
of 2001. The purchase will include America's affiliates Omni Financial Services,
Inc. National Labor Force, Inc., Western America Labor Force, Inc., National
Labor Force I, Inc., American Labor Force, Inc. and American Labor Services,
Inc. Projected annual sales of the combined entities is expected to exceed $170
million and add more than 157 clients to the companies client base.
We incurred an operating loss in the last fiscal year and the loss was
material. The parent company incurred losses in the most recent quarter, due
mostly to interest and accrued penalties associated with debt and the cost of
issuing stock to cover certain consulting expenses related to our restructuring
efforts. Our wholly-owned subsidiary, Trans-logistics reported second quarter
revenues of $2,365,231 million with a net loss of ($348,074).The company is
re-thinking its plans to stay in the transportation industry and is focusing all
of its resources at completing its employee leasing acquisition and striving to
be a predominant player in that industry segment.
Our losses are expected to continue at the parent level until such time as
we are able to negotiate improved terms with debt instrument holders regards the
interest and accrued penalties on outstanding notes. In addition to raising
capital, the restructuring of existing debt will make it possible to cover the
expenses associated in restructuring a company.
We continue to be subject to the risks normally associated with any
business activity, including unforeseeable expenses, delays, and complications.
Accordingly, there is no guarantee that we can or will report operating profits
in the future.
We are in negotiations with several prospective acquisition candidates at
this time.
Operating Strategy
Our business strategy is to establish the company as an industry leader
in the employee leasing industry while remaining in the non-asset based
transportation industry on a minor scale.
17
RESULTS OF OPERATIONS:
Six months ended June 30, 2000 compared to June 30, 2001
Continuing Operations:
Operating Revenues
Total operating revenues increased from zero for the six months ended
June 30, 2000 to $4.1 million for the six months ended June 30, 2001.The
reasons for this increase was the disposal of discontinued operations and the
filing for protection under Chapter 11 of the U.S. Bankruptcy code for U.S.
Trucking, Inc's operating subsidiaries Gulf Northern Transport, Inc., Prostar,
Inc. and U.S.T. Logistics, Inc. on November 30, 2000 and the termination of the
Company's captive insurance program. The current period revenue was generated
from the operations of Trans-Logistics, Inc.
Purchased Transportation and Rentals
Purchased transportation and rentals increased from zero for the six
months ended June 30, 2000 to $3.6 million for the six months ended June 30,
2001. The reason for the increase was the disposal of discontinued operations
and the filing for bankruptcy of the three operating subsidiaries mentioned in
the previous paragraph. In addition, all purchased transportation costs
generated during the period came from Trans-logistics, Inc.
Salaries, Wages and Benefits
Salaries, wages and benefits increased from $101 thousand for the six
months ended June 30, 2000 to $261 thousand for the six months ended June 30,
2001. The reason for the increase was the result of the company rebuilding its
management team.
Depreciation and Amortization
Depreciation and amortization decreased from $197 thousand for the six
months ended June 30, 2000 to $38 thousand for the six months ended June 30,
2001. The reason for this decrease was the write off of over-valued goodwill and
fixed assets. The current period expense is primarily derived from the
amortization of goodwill created from the January 1, 2001 acquisition of
Trans-Logistics, Inc.
General and Administrative
General and administrative expenses increased from $673 thousand for
the six months ended June 30, 2000 to $2.2 million for the six months ended June
30, 2001. The main reason for this was the increase in consulting costs related
to the restructuring of the company.
Discontinued Operations
Income from discontinued operations decreased from $4.8 million for the
six months ended June 30, 2000 to $14 thousand for the six months ended June 30,
2001. All operating subsidiaries filed bankruptcy on November 30, 2000 and the
disposal of discontinued operations was recorded accordingly. All financial
statements for the year 1999 and 2000 have been restated. Thus the reason for
the decrease in income from discontinued operations is the fact that all
operations that were active during the first quarter of 2000 are included in the
discontinued operations caption.
18
Interest
Interest expense increased from $111 thousand for the six months ended
June 30, 2000 to $1.3 million for the six months ended June 30, 2001. The
primary reason for the increase was accrued late registration filing penalties
related to convertible debentures and preferred stock.
Net income decreased from a loss of $5.8 million for the six months
ended June 30, 2000 to a net loss of $3.5 million for the six months ended June
30, 2001. The primary reason for the decrease in net operating loss was that the
company is moving forward on its restructuring efforts, and the operating
revenues are having a positive impact.
Liquidity and Capital Resources
Our working capital position has decreased from a deficit of
($20,002,465) to a deficit of ($21,470,257). The reason for the negative
position was primarily caused by the discontinued operations of all four
operating subsidiaries during the fourth quarter of 2000. In addition, the
discontinuance of the captive insurance program during November 2000 also
contributed. In regards to the first six months of 2001, additional accruals for
accrued interest and registration penalties contributed to the decrease from
December 31, 2000 to June 30, 2001.
In addition, there is a liability in the amount of $11,273,323 shown on
the balance sheet which represents the company's estimated liability to the
primary lender of the four bankrupt operating subsidiaries. The shortfall could
be more or less than the $11,273,323 estimate depending on the success of the
bankruptcy trustee handling the collection of subsidiary assets.
Our net worth has decreased from a negative ($22,380,894) as of
December 31, 2000 to a negative ($22,591,228) as of June 30, 2001. The reason
was losses generated primarily from excessive administrative and interest costs.
The lack of liquidity suggests that we will have to raise capital in
order to remain a going concern. There can be no assurance that the company will
be able to obtain the capital necessary to continue operations.
19
PART II
Other Information
LEGAL PROCEEDINGS
CIT Group/Equipment Financing, Inc. filed suit against us and certain
other parties in the Superior Court of NJ, Law Division Union County, docket No.
UNN-L-3556-00 on July 7, 2000 for the return of six tractors formerly used in
the business of American Intermodal Services, Inc., some of which Gulf Northern
Transport took over in the spring of 2000. We denied ever receiving the
tractors. A default judgment was granted in November of 2001 against all
defendants in the amount of $384,599.89. We believe that certain of these
tractors have since been recovered. We believe the court in the action had no
jurisdiction over LMRI and that the judgment is therefore invalid.
Emergent Capital, L.P. filed suit against us in U.S. District Court,
Southern District of New York on September 20, 2000. The suit claimed that
Emergent Capital was owed $300,000 in penalties for the failure to register
certain shares for resale, which Emergent purchased in September of 1999. We
dispute that the agreement reached between the parties provides for registration
penalties. The suit is still in the discovery stage.
GE Capital Corporation, the Company, its subsidiaries and certain
affiliates entered into a Restructure Agreement on November 28, 2000. The
agreement between our company and G.E. Capital Corporation relates to the
balance of our obligations to GECC in connection with its accounts receivable
line of credit and with GE Capital Commercial Equipment Funding in connection
with an equipment loan. The respective loan balances have been consolidated into
a single Term Note with an estimated principal balance of $11,273,324 as of
March 31, 2001. This estimated balance is expected to be reduced by the
collection of accounts receivable, the possible sale of subsidiary accounts
receivable and the sale of equipment held as collateral on the equipment loan
portion. The loan is to be repaid over a three-year term with a five-year
amortization schedule and a balloon payment of the balance on December 1, 2003.
The note bears interest at the 30-day dealer placed commercial paper rate (as
published in the Wall Street Journal), plus 4.5%. Interest for the first year
will be accrued and applied to the principal balance.
Under the agreement, we are required to pay GECC 1.5% of the gross
revenues from our trucking business segment and 5% of the gross revenues from
its non-trucking segment to be applied toward payment of the note, which amounts
will be applied to the amortization payments. Additionally, 35% of the net
income before taxes from our businesses must be paid on a quarterly basis in
repayment of the note, along with certain payment in the event of a profitable
sale of a Company owned business. The Note is secured by our assets, various
affiliate assets and certain personal guarantees.
Southtrust Bank, filed suit against the company and certain affiliates
for $2.8 million. The suit, case number CV-01-AR-1068-S claims the company and
certain affiliates defaulted on certain guarantees relating to the purchase of
56% of Professional Transportation Group by Logistics Management LLC. The
company was improperly served and a judgement was granted against the company
and certain affiliates. The company has filed a Supplement To Motion to Set
Aside Entry of Default in this matter and intends to agressively defend against
this action. In addition the company believes it has counterclaims in this
matter.
AllStates World Cargo, filed suit against the company and its chairman
for $678 thousand. The suit (Docket )OCN-1822-01) claims the company and the
chairman defaulted on certain business guarantees related to the acquisition of
Trans-Logisitcs as of Jan. 1, 2001. The company and the chairman have filed an
answer in this matter and intend to defend these matters vigorously. The company
and the chairman believe they have significant counterclaims in this matter.
20
Defaults Upon Senior Securities
As of June 30, 2001 we were in default with two senior debt holders in the
amount of $2,002,915 which has been accrued on our balance sheets. The reason
for the defaults is that we have been unable to satisfy the payment of
delinquent interest and late penalty fees with regard to these matters. We
intend to renegotiate the terms of these agreements to more favorable terms for
the senior debt holders, the company and our shareholders.
Submission of Matters to a Vote of Security Holders
A special meeting of shareholders was held on February 12, 2001. At the
meeting 16,908,150 shares, representing 53% of the shares entitled to vote, were
present at the meeting in person or by proxy. Votes were taken on three matters.
They included changing the name of the company to Logistics Management
Resources, Inc., effecting a 1 for 100 reverse stock split and amending the
terms of the blank check preferred stock to allow amendments to the terms of
outstanding shares of preferred stock without the approval of the holders of
common stock, provided the amendment effected a change which the Board would
have had authority to include in the original terms of the preferred so amended.
All three matters were unanimously approved by the shareholders.
Insurance
We are committed to securing appropriate insurance coverage at cost
effective rates. Since discontinuing our captive auto liability insurance
program we have through our wholly owned subsidiary, Trans-logistics, Inc.,
retained insurance coverage that we believe is adequate to cover our liabilities
and risks. The coverage includes auto liability coverage up to $1 million for
each claim, $200 thousand for each claim for cargo damage or loss and general
liability up to $1 million for each occurrence. Insurers affording the
coverage's are, General Security Insurance Co., Lexington Insurance Co., and St.
Paul Surplus Lines Co.
Other Information
NONE
Exhibits and Reports
A NONE
B Current Report on Form 8-K reporting on Item III(a) Special Meeting of
Shareholders approving the Company's name change and reverse split of
common stock.
21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LOGISTICS MANAGEMENT RESOURCES, INC.
---------------------------------------------
Registrant
August 20, 2001 By /s/ Danny L. Pixler
------------------------------------------
Danny L. Pixler-Chairman & Chief Executive
22