UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to __________
Commission File No. 33-9640-LA
Logistics Management Resources Inc.
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Name of Small Business Issuer in its Charter
Colorado 68-0133692
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State or Other Jurisdiction I.R.S. Employer Identification
of Incorporation or Organization Number
10602 Timberwood Circle, # 9
Louisville, Kentucky 40223
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Address of Principal Executive Offices, Including Zip Code
Registrant's telephone number, including area code: (502-339-4000)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The Issuer's revenues for the most recent fiscal year were $ 61,853,800.00.
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
As of April 13, 2001 3,263,966 shares of the Registrant's Common Stock were
issued and outstanding, and the aggregate market value of the shares held by
non-affiliates was approximately $3,916,759.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (Check One:) Yes [ ] No [X]
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Logistics Management Resources, Inc. is a holding company that is engaged
in the business of acquiring and managing transportation logistics and employee
leasing companies. The Company's principle business is to provide for the
transportation needs of clients through "Total Logistics Management". This
includes managing a client's domestic and international trucking, load matching,
consolidation and warehousing. We also plan to acquire an Employee Lease
Services business. 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 the Company feels the dual
industry approach will provide better flexibility in overall services provided
and in the revenue streams of the Company.
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, non-asset based transportation companies with revenues
of not less than $5 million and in employee leasing companies that are in
"niche" markets.
HISTORY AND DEVELOPMENT OF LOGISTICS MANAGEMENT RESOURCES INC.
Logistics Management Resources Inc., formerly U.S. Trucking, Inc. was
incorporated in Colorado under the name Northern Dancer, Inc. in January 1987
for the purpose of acquiring an operating company. It completed a small public
offering in 1988. In September 1998 it completed a reverse acquisition of
Logistics Management Resources Inc., formerly U.S. Trucking, Inc. a Nevada
corporation that had two operating subsidiaries which it had acquired in early
1997 just after is was incorporated.
In February of 2001, we changed the Company's name from U.S. Trucking,
Inc. to Logistics Management Resources Incand effected a reverse split of the
Company's common stock on a 1-for-100 basis. In addition the Company received
approval from Nasdaq for a symbol change. The new symbol "LMRI" which was
effective on February 12,.
Formed in 1997, Logistics Management Resources Inc. had operated as a
holding company in the business of acquiring asset based mid to long haul
trucking companies. From 1997 through 2000, the company completed nine separate
acquisitions. During that time period, gross revenues grew from $17 million to
over $61 million.
In May of 2000, the Company sought outside advise from key consulting
firms that were retained to specifically analyze the Company's problems relating
to the integration of past acquisitions and the Company's multiple information
systems. The findings made by the consulting firms, were that during the eleven
months of 2000, the operating subsidiaries of the Company had suffered
substantial losses due to several factors including:
o The overall slowdown in the US economy
o The extraordinary increases in fuel prices
o The more than expected expenses of consolidation resulting from
acquisitions
o The expenses of underutilized equipment resulting from acquisitions
o The inadequate and multitude of non integrated information systems
Facing very substantial losses, the decision was made to close the operating
subsidiaries. On November 30, 2000, the four operating subsidiaries filed for
Chapter 11 protection. The publicly traded holding company did not file.
2
The Company completed the acquisition of Trans-logistics, Inc., a
non-asset based transportation logistics company headquartered in Tampa, Florida
as of January 1, 2001. Trans-logistics is a wholly owned subsidiary of Logistics
Management Resources Inc. and is the first acquisition since the Company's
restructure.
The Company signed a "Letter of Intent" to buy one of the nation's
leading "Employee Leasing Companies", America's PEO, Inc. The Letter of Intent
was signed on April 10, 2001. The intended acquisition is expected to close
during the second quarter of 2001 and includes the purchase of America's
affiliate, Omni Financial Services. Combined projected sales for the two
acquired entities are approximately $155 million.
The Industries
TRANSPORTATION
A report jointly issued by The U.S. Department of Transportation's Bureau
of Transportation Statistics (BTS) and The U.S. Department of Commerce's Bureau
of Economic Analysis (BEA) shows that transportation services contributed $378
billion to the national economy in 1996, the last year for which figures are
available.
Trucking is still the dominant form of freight transportation. More
than 80% of money spent on domestic freight transportation is spent on trucking.
The expression, "if it is in your home, it was on a truck at some point in
time', still holds true. Few other modes of transportation Shipping, Rail or
Air-can complete a shipment without a truck becoming involved at some point in
time. NAFTA and the growth of Canada and Mexico as trading partners have fueled
the trucking industry's entry into International trade.
The current trend of Fortune 500 companies is to outsource functions
that are not core competencies. This means that private fleets are decreasing
and transportation services are being contracted out to specialized firms. As
the trend away from private fleets continues, there is tremendous opportunity
for growth for companies that provide these services on an "out to bid" basis.
Traditionally, trucking has been as asset-based business, which is to
say that the company owned the trucks and employed the drivers.This exposed the
companies to interest rate fluctuations, volatile fuel costs and massive amounts
of equipment debt. The trend is currently moving away from this form of
ownership as even the larger asset-based carriers are relying more and more on
leased equipment and owner operators. Wall Street has looked favorably on
asset-based companies that have expanded their businesses into other areas such
as non-asset based logistic management.
Logistics management companies do not bear many of the risks that
traditional asset-based carriers do, in that they act more as a manager/broker
for their clients. These companies contract to manage the needs of their clients
and then contract out various functions to different specialty firms.
The economic environment for the trucking industry over the last year
has not been good. Truck tonnage year over year is down 10%. Two factors are
mainly to blame; a severe slowdown in the U.S. economy and higher fuel costs.
These factors have resulted in lower earnings per share for many companies and
stock prices have suffered accordingly. Many smaller firms have been unable to
remain profitable and have filed for bankruptcy. This has eased somewhat, a
driver shortage that has plagued the industry in these past years of full
employment and created opportunities for those around to pick up the pieces.
EMPLOYEE LEASING
According to Dun & Bradstreet there are 1,242, both public and private
that provide employee-leasing services. These firms generate approximately $15
billion in annual revenues. These numbers are expected to grow as more and more
companies look to employee leasing as the answer to their staffing problems.
From accounting to high tech to warehouse operations, employee leasing is
becoming an ever more popular solution to staffing needs. Employee leasing firms
3
like Robert Half and Administaff are experiencing annual revenue growth in
excess of 50%. The market continues to expand, as does the opportunity.
o The employee leasing industry generates in excess of $15 billion
dollars a year.
o The recent profit reports from some of the leaders in the field
indicate annual growth rates of top line revenues in excess of 50%.
For example, TTC, Illinois, a private company that serves mainly the
transportation industry was founded in 1988. Ten years later, gross
sales were $625 million.
o The fast changing economy requires companies to be more flexible with
regard to staffing. This creates tremendous opportunity to companies
that can provide interim workers.
o According to a survey commissioned by the industries national
association, 75% of the jobs that existed in 2000 did not exist in
1990.
o Professional Employer Organizations are becoming more and more popular
for a number of reasons:
o They take on many of the administrative duties related to human
resources that can bog down the management of a small to medium
sized business and allow management to focus on providing better
service to clients.
o Economies of scale make insurance and employee benefit plans (an
ever growing portion of business's overhead) much more
affordable.
TRANSPORTATION BROKERAGE SERVICES
We offer transportation brokerage services through our wholly-owned
subsidiary Trans-logistics, Inc. a Tampa, Florida based transportation logistics
provider which was acquired on March 31, 2001. Trans-logistics provides return
hauls for common carriers and corporations transporting their own goods which
have completed their initial delivery as well as providing load matching
services to carriers thru out the United States. For this service the Company
receives the difference between the amount we pay the returning carrier or
shipper to effect the move, and amount we receive from the shipper. In addition
to the margin spread the burden of most of the insurance cost fall upon the user
of our services.
AGENT PROGRAM
In 1999 the Company instituted an agent program, pursuant to which we
allow small carriers to operate under our authority as an agent. In this program
the agent provides its customers and business. We collect all of the revenue
from the shippers and pay the agent 85-89% of the revenue less certain expenses
we pay such as fuel costs and pallet costs. We provide the agent with liability
insurance coverage and certain administrative services such as billing and
collecting receivables. We also provide the agent with access to our other
insurance coverages such as medical and hospitalization insurance. The agent is
required to establish an escrow account to cover any bad debt cost, and it must
pay all cash expenses including tolls, tractor washes, and any other of its own
operating expenses.
INSURANCE
In January 1998, Transportation Services Company and Roxanne Pixler loaned
the Company a total of $25,000 to establish a captive insurance program. The
Company initiated offering automobile truck liability insurance coverages to
other transportation companies as well as its own, in order to take advantage of
a projected underwriting profit potential of being a member of a captive
insurance program period. This program was discontinued in early December 2000
due to higher risk losses which resulted in program losses much higher than
anticipated.
4
OPERATING STRATEGY
Our operating strategy is to focus on providing a high level of
transportation logistics and employee leasing services to a diverse customer
base ensuring consistent, controlled and profitable growth.
The management of Logistics Management Resources Inc. is dedicated to
building a top provider of Logistics and Employee Solutions. Economies of scale
and successful systems integration will provide higher returns going forward.
Experience has taught management that acquisitions that increase revenue but
hurt the bottom line have no place in our future or in our operations. It is our
commitment that any acquisition will result in a company that is stronger,
better positioned in the market place and ultimately, more profitable.
We believe that our operating strategy positions us to capitalize on
evolving trends in the transportation industry. In particular the increase in
world trade provides unlimited opportunities in the intermodal segment and the
need to provide full logistical services to multi level customers seeking to
reduce cost through outsourcing which affords us unlimited opportunities in the
brokerage logistics segment.
OPERATIONS
Subsequent to the year end 2000 related to the acquisition of
Trans-logistics on March 30, 2001, the Company's transportation operations are
headquartered in Tampa, Florida where all of the transportation sales are
coordinated from, where all of the back-room functions are performed including
customer service, billing, division accounting and collections. In addition the
transportation operations has a facility in Atlanta, Georgia where that groups
driver records, safety and regional marketing are handled. The transportation
group also has several agent locations through out the United States that
operate as exclusive partners with our transportation company.
Upon the completion of the acquisition of America's PEO, it is the
intention of the Company to maintain the employee leasing headquarters in Cherry
Hill, New Jersey where all of the marketing, accounting, billing, collections,
insurance negotiations and other functions relating to that wholly owned
subsidiary will take place from.
DRIVERS
All of the drivers used by our agents must meet specific guidelines
relating primarily to safety record, driving experience and personal evaluation,
including DOT mandated drug testing and personal background checks.
We require that prospective drivers have a minimum of one year of truck
driving experience in order to be considered for a position. In addition, new
drivers are required to meet all DOT requirements. Upon hiring a driver, we
conduct an orientation program covering such topics as our business, policies,
procedures, safety, benefits, maintenance and operation of equipment.
Although we currently have an adequate number of drivers, there can be no
assurance that we will not be affected by a shortage of qualified drivers in the
future. Significant driver turnover is a problem within the industry as a whole.
In addition, the trucking industry is experiencing a diminished workforce of
qualified drivers. As a result, we must compete with other transportation
service companies for the available drivers. We anticipate that the intense
competition for qualified drivers in the trucking industry will continue but are
confident that by growing an agent program we can stay on top of the driver turn
over curve.
5
INSURANCE AND SAFETY
Our safety department is responsible for training and supervising personnel
to keep safety awareness at its highest level. We have implemented an active
safety and loss prevention program at our transportation headquarters which is
implemented at all of the company's agent locations. The emphasis on safety
begins in the hiring and continues in orientation, safety training, and drug
testing.
Our safety and loss prevention program is comprised of the ongoing
education, training and retraining of drivers regarding safe vehicle operation,
loading and unloading procedures, and accident reporting. It also includes
random drug testing. The program is overseen by our Director Safety.
We have implemented a written disciplinary system for all drivers operating
under our operating authority. Pursuant to this system, disciplinary action
ranges from written warnings to immediate termination depending on the frequency
and severity of the offense. The most serious offenses include violations of
local, state or federal regulations while on duty, unauthorized use of
equipment, willful or negligent damage of equipment or property or injury to
another person, carrying, possessing or being under the influence of intoxicants
or narcotics while on duty or on our premises, possession of firearms or other
lethal weapons while on duty or while on our premises and other similar
offenses. Our Director of Safety continuously monitors driver performance and
makes recommendations to our executive officers regarding employment and
retention of drivers.
We are committed to securing appropriate insurance coverage at
cost-effective rates. The primary risks that arise in the trucking industry
consist of cargo loss and damage, personal injury, property damage and workers'
compensation claims. We maintain insurance that we believe is adequate to cover
our potential liabilities and risks.
We also have an insurance policy which covers cargo loss and damage up to
$250,000 per occurrence, and an insurance policy which covers workmen's
compensation claims in amounts from $100,000 to $500,000, depending on the state
where the worker lives.
COMPETITION
The trucking industry is highly competitive and fragmented. We compete
primarily with other brokerage and logistics transportation companies such as CH
Robinson and Landstar for the solicitation, control and management of outsorced
freight. Although the general effect of deregulation of the trucking industry
during the 1980's created substantial downward pressure on the industry's rate
structure, we believe that competition for the freight transported by us is
based primarily on quality of service, such as just-in-time performance, and, to
a lesser degree, on freight rates. There are a number of other logistics
companies which have substantially greater financial resources and may manage
more equipment or carry a larger volume of freight than we do. Our primary
emphasis is service, especially to its core carrier customers, rather than price
alone. However, the industry in which we operate is extremely price sensitive
and we are responsive to competitive price pressures.
6
REGULATORY ISSUES
Transportation
The trucking industry is subject to regulatory oversight and legislative
changes which can affect the economics of the industry by requiring certain
operating practices or influencing the demand for, and the costs of providing,
services to shippers. The Department of Transportation of the United States, as
well as various state agencies that have jurisdiction over us, have broad
powers, generally governing such matters as authority to engage in motor carrier
operations, rates and charges, certain mergers, consolidations and acquisitions,
and periodic financial reporting. Rates and charges are not directly regulated
by these authorities. As primarily a contract carrier, we negotiate competitive
rates directly with customers as opposed to relying on schedule tariffs. State
agencies impose tax, license and bonding requirements.
The Motor Carrier Act of 1980 commenced a program to increase competition
among motor carriers and to diminish regulation in the industry. Following this
deregulation, applicants have more easily been able to obtain DOT operating
authority, and interstate motor carriers have been able to impose certain rate
changes without DOT approval. The Motor Carrier Act also removed many route and
commodity restrictions on transportation of freight. Gulf Northern has held
specific commodity and territory authority from the Illinois Commerce Commission
since 1939. Gulf Northern holds authority to carry general commodities
throughout the 48 contiguous states, as both a common and contract carrier, and
it holds various intrastate authorities.
Under the Negotiated Rates Act of 1993, certain procedures must be followed
for resolving claims involving unfiled, negotiated transportation rates.
Generally, when a claim is made by a motor carrier of property for the
collection of rates and charges in addition to those originally billed and
collected by the carrier, the person against whom the claim is made may elect to
satisfy the claim pursuant to certain provisions specified in the Negotiated
Rates Act. The Negotiated Rates Act specifies the types of disputes to be
resolved by the ICC and allows for the nonpayment of the disputed additional
compensation until the dispute is resolved. We believe that we are in compliance
in all material respects with the provisions of the Negotiated Rates Act.
Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. All of our drivers are required to
obtain national commercial driver's licenses pursuant to regulations promulgated
by the DOT. DOT regulations impose mandatory drug testing of drivers. We have
implemented a random drug-testing program in accordance with these regulations.
In addition, we are required to implement alcohol and drug rules imposed by the
DOT which prohibit any alcohol or drug use prior to and during driving and while
performing safety-sensitive functions such as loading, unloading, inspecting,
waiting for dispatch, resting in a sleeper birth, and other specified times. We
comply with all applicable regulations imposed on our employees and
owner-operators. The DOT's national commercial driver's license, drug testing
requirements and new alcohol and drug-use regulations have not to date and are
not expected to adversely affect the availability to us of qualified drivers.
Our operations are subject to federal, state and local laws and regulations
concerning the environment. We have not received any notices from any regulatory
authority relating to any violation of any environmental law and incur no
material costs specifically related to compliance with such laws.
Employee Leasing
Seventeen states provide for some form of licensing, registration, or regulation
for PEO's. Many states recognize PEO's as the employer or co-employer or
worksite employees for purposes of workers' compensation and state unemployment
insurance taxes.
7
EMPLOYEES
We employ 16 company employees all of which are operations or
administrative responsible for safety, billing, accounting, collections and
dispatch. None of our employees are represented by a collective bargaining unit
and we have never experienced a work stoppage. We believe that our relations
with our employees is good.
ITEM 2. DESCRIPTION OF PROPERTY.
All of our offices are leased. Our executive office is located in
Louisville, Kentucky where the overall management of Logistics Management
Resources Inc. takes place. The lease, which expires during 2002 covers
approximately 1600 square feet of leased space and provides for monthly lease
payment of $2100. We believe that this facility is adequate for our present
needs.
We also maintain the following other office, terminal and warehouse
locations:
Location Description
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Wisconsin Rapids,Wisconsin A 3,000 square foot office, a 9,800
square foot warehouse, and a four bay
repair shop leased to the Company for
$6,500 per month. The Company is
investigating sub-leasing this Property
or of having this property placed on The
market for sale. This facility is owned
by The Huff Grandchildren Trust
and Dan Pixler.
Tampa, Florida A 2,200 square foot facility that is
administrative space for Trans-logistics
is leased for approximately $3,000 per
month and is on a three year lease
expiring during 2004.
We also have agent offices in Georgia, New Jersey and Kentucky.
ITEM 3. LEGAL PROCEEDINGS.
CIT Group/Equipment Financing, Inc. sued us and certain other parties
in the Superior Court of N.J., Law Division Union County, Docket No.
UNN-L-3556-00 on July 17, 2000 for return of six tractors formerly used in the
business of American Intermodal Services, Inc., some of the operations of which
Gulf Northern Transport took over in Spring of 2000. We denied we ever received
the tractors. A default judgement was granted in November 2001 against all
defendants in the amount of $384,599.89. We understand that certain of the
tractors have since been recovered by CIT. We deny that CIT had jurisdiction
over us in the New Jersey court wherein the lawsuit was brought and that the
judgment is therefore invalid.
Emergent Capital, L.P. filed suit against us in U.S. District Ct.,
Southern District of N.Y. on September 20, 2000. The suit claimed that Emergent
was owed $300,000 in penalties for the failure to register certain shares for
resale which Emergent purchased in September 1999. We dispute that the agreement
reached between the parties provides for registration penalties. The suit is
still in the discovery stage. See "BUSINESS-SAFETY AND INSURANCE."
On November 28, 2000 the Company, its subsidiaries and certain
affiliates entered into a Restructure Agreement (the "Agreement") with GE
Capital Corporation ("GECC") restructuring the balance of the Company's
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 a principal balance of $22,235,000, which amount is expected to be
substantially reduced by the sale of subsidiary accounts receivable and
equipment collateralizing the loans. The loan is to be repaid over a three year
term with a five year amortization schedule and a balloon payment on December 1,
2003 of the balance. 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 the Company is required to pay to GECC 1.50% the
gross revenues from its trucking business and 50% the gross revenues from
non-trucking business towards payment of the Note, which amounts will be
applied to the amortization payments. Additionally, 3.50% net income before
taxes from the Company's businesses must be paid on a quarterly basis in
repayment of the Note, along with certain payments in the event of a profitable
sale of a Company owned business. The Note is secured by the Company's assets
and by guarantees of various affiliates of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1999.
PART II
ITEM 5. MARKET PRICES AND DIVIDENDS.
Our common stock trades in the over-the-counter market, under the
symbol "LMRI". There were no quotations for the common stock during the last
three years until after the closing of the reverse acquisition
Quarter Ended High Bid Low Bid
-------------- -------- -------
March 31, 1999 $5.68 $3.00
June 30, 1999 $3.75 $2.31
September 30, 1999 $4.72 $2.625
December 31, 1999 $4.56 $2.50
March 31, 2000 $3.56 $2.06
June 30, 2000 $4.43 $1.37
September 30, 2000 $2.50 $0.27
December 31, 2000 $0.51 $0.03
As of April 16, 2001, we had 325 shareholders of record. This does not
include shareholders who hold stock in their accounts at broker/dealers.
Holders of Common Stock are entitled to receive dividends declared by our
board of directors. No dividends have been paid on our common stock and no
dividends are anticipated to be paid in the foreseeable future.
9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
You should read the following discussion in conjunction with the
Consolidated Financial Statements, including the footnotes, and understand 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 trucking, logistics and intermodal segments of the
transportation industry.
Assumptions relating to forward-looking statements involve judgments
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 Annual 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 Annual Report speak only as of the date of this
Annual 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-KSB, including Notes to the
Consolidated Financial Results of Operations, describe factors, among others,
that could contribute to or cause such differences.
GENERAL
The Company's predecessor, U.S. Trucking, Inc. was established in
January of 1997 by combining under U.S. Trucking-Nevada the operations of Gulf
Northern Transport, a mid-to-long-haul truckload carrier and Mencor, Inc. a
third party logistics (brokerage) company. During 1999, we acquired Prostar,
Inc. (a brokerage company) and merged Mencor, Inc. into Prostar, Inc.
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During 1999 U.S. Trucking, Inc.'s operating results were driven by the
results of the truckload business of its operating subsidiary, Gulf Northern
Transport, Inc., our Captive auto liability insurance program, it's brokerage
operations (ProStar Inc.), implementation of an agent program, and the purchase
of a intermodal line of business. The Company reported substantial losses in
2000 and a profit in 1999.
On January 1, 2000, U.S. Trucking, Inc. had two operating subsidiaries
Gulf Northern Transport, Inc. and Prostar, Inc.. Gulf Northern Transport, Inc.
operated divisions pertaining to long to medium haul truckload, agent truckload,
container (intermodal) and agent container. Prostar, Inc. operated a third party
transportation brokerage division. In addition, U.S. Trucking, Inc. sponsored a
captive insurance program for its own truckload and container divisions as well
as insurance pertaining to third party trucking companies.
On February 7, 2000, U.S. Trucking, Inc. entered into a merger agreement to
acquire Checkmate Truck Brokerage, Inc. and Maverick truck Brokerage, Inc. for a
purchase price of $6,137,472. Under the terms of the agreement, the purchase
price consisted of 385,000 shares of common stock that were values at $1,203,125
and $500,000 payable to principals. In addition, $500,000 was to be placed in
escrow pending the outcome of an acquisition review of the assets and
liabilities. Further the contract included a stock adjustment agreement whereby
the issuance of the common stock included in the agreement was to be adjusted
pending the outcome of certain performance parameters. Upon review of this
transaction, no additional shares were issued to the principals. $2,606,125 of
goodwill was recorded from the transaction. An allocation of the purchase price
follows:
Assets
Accounts receivable $3,311,143
Transportation and other equipment 220,204
Goodwill 2,606,125
Total $6,137,472
Liabilities assumed and equity
Liabilities assumed $3,962,688
Liabilities to sellers 971,659
Common Stock 1,203,125
Total $6,137,472
On January 1, 2000, U.S. Trucking effected an agreement with Carolina Global
Services Inc. to be the master agent for the container division of Gulf Northern
Transport Inc., Carolina Global was to be a related party in that 90% was to be
owned by Logistics Management LLC and 10% by Rick Kelly. Logistics Management is
owned 50% by Danny Pixler and 50% by the Huff Grandchildren's Trust. Mr. Kelly
was a former officer of the company. Even though a master agent agreement was
executed the ownership of Carolina Global was never finalized. The required
documents were never signed or executed. Carolina Global Services ceased
operations when Mr. Kelly left the company as an employee in September 2000.
On January 1, 2000, U.S. trucking also effected an agreement with One-Way
Logistics, Inc. to be the master agent for the truckload division and to be the
payroll administrator for Gulf Northern Transport, Inc. One-Way Logistics was
also to be a related party in the same manner as Carolina Global Services, Inc..
Similar to that transaction, a master agency agreement was signed but the
ownership was never completed because the proper documents were never executed.
One-Way Logistics ceased operations when Mr. Kelly left the company as an
employee in September 2000.
11
On December 31, 1999, all revenue producing depreciable assets were sold to
One-Way Logistics, Inc. By doing this, U.S. trucking, Inc. converted the
truckload division into a variable margin operation in that fixed costs
obligations related to equipment were transferred to One-Way Logistics. But
because of interference related to an interim management agreement between U.S.
Trucking and Professional Transportation Group and negotiations related to a
forthcoming merger between the two companies, the operations of the truckload
division suffered substantially. By June 2000, management determined that
One-Way Logistics would not be able to satisfy its obligations related to the
equipment and the transaction was rescinded. In addition, the decision was also
made to discontinue operations related to the agency agreement with One-Way
Logistics and the truckload division.
Due to cash flow problems related to delinquent carrier payables, Prostar, Inc.
suffered a significant loss of its customer base by mid year 2000. Because of
the inability to obtain third party trucking companies to transport freight,
substantial damage was done to the Company's operations. Also, compounding the
problem was the resignation of a principal in September 2000. By mid October
management decided to discontinue this operation.
In regards to UST Logistics, Inc. d/b/a Checkmate Truck Brokerage Inc. and
Maverick Truck Brokerage Inc., conflicting management issues between the parent
company's officers and the operating company's principals caused U.S. Trucking,
Inc. to suffer substantial loss of reputation with third party truck lines and
customers. Because of this situation significant losses were generated by the
third quarter of 2000. Management was forced to discontinue the operations on
October 22, 2000.
On November 30, 2000, four of the Registrants operating subsidiaries, Gulf
Northern Transport, Inc., Prostar, Inc., UST Logistics, Inc. and Mencor, Inc.
(the "petitioning subsidiaries") filed a Voluntary Petition under Chapter 11 of
the Bankruptcy Code (the "petition") 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, U.S. Trucking, Inc. issued a
press release in which it 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 the Company's 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.
RESULTS OF OPERATIONS
During the year 2000, U.S. Trucking, Inc. suffered substantial losses due
to operating losses and discontinued operations. The company was unable to
obtain enough adequate information from the bankrupt operating subsidiaries to
prepare a true comparison of the operating results for the year ended December
31, 2000 and December 31, 1999. The company was able to have financial
statements generated for the parent company. The Statement of Operations
prepared for the year ended December 31, 2000 is primarily parent company
transactions. Included in the parent company financial statements is a loss
provision of approximately $9.6 million related to debt incurred by the
subsidiaries and guaranteed by the parent.
Net income decreased fro a net income of $107 thousand for the year
ended December 31, 1999 to a net loss of $38.2 million for the year ended 2000.
The primary reasons for the decrease were the losses generated fro discontinued
operations of the four bankrupt operating subsidiaries and losses generated from
the parent company from the discontinuance of the captive insurance program and
an increase in general and administrative expenses as well as an increase in
interest and penalties related to debt obligations.
Liquidity and Capital Resources
The Company's working capital position has deteriorated from a positive
$1,367,418 as of December 31, 1999 to a negative amount approximately equal to
($17,125,218) as of December 31, 2000. This reversal has been primarily caused
by the discontinued operations of all four subsidiaries and loses at the parent
level primarily caused by losses in the captive insurance company and selling
general & administrative expenses combined with interest and fees related to the
Company's debt.
12
In addition, there is a liability in the amount of $8,681,000.00 shown
on the balance sheet, which represents the Company's estimated liability to the
primary lender to the Company's subsidiaries. The shortfall could be more or
less than the $8,681,000.00 estimate depending on the success of the Bankruptcy
Trustee handling the collection of subsidiary assets.
The Company's net worth has decreased from $13,095,102 as of December
31, 1999 to a negative ($17,174,243) as of December 31, 2000. The primary
reasons for this reversal being the same as the reasons mentioned above related
to the decrease in working capital.
In summary, the Company's lack of liquidity and the lack of profitable
operating assets means that the Company will be required 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.
FINAL PARAGRAPH IN ITEM 6
DUE TO TIMING ISSUES AND THE LIMITED ACCESS TO DOCUMENTS AND RECORDS OR THE
BANKRUPT SUBSIDIARIES MANAGEMENT FEELS THAT SOME DISCLOSURE ISSUES MAY HAVE BEEN
INADVERTENTLY OMITED. THEREFORE, IT MAY BECOME NECESSARY FOR THE COMPANY TO
AMEND THIS FILING AT A FUTURE DATE.
ITEM 7. FINANCIAL STATEMENTS.
The Report of Independent Public Accountants appears at page F-1 and the
Financial Statements and Notes to Financial Statements appear at pages F-2
through F-10 hereof.
13
Logistics Resource Management, Inc.
F.T.A. U.S. Trucking, Inc.
Financial Statements
December 31, 2000
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Index to the Financial Statements
December 31, 2000
Page
Independent Auditors' Report............................ F-1
Financial Statements
Balance Sheet...................................... F-2
Statement of Operations............................ F-3
Statement of Stockholders' Equity.................. F-4
Statement of Cash Flows............................ F-5
Notes to the Financial Statements.................. F-6 - F-10
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Logistics Management Resources, Inc.
We were engaged to audit the accompanying balance sheet of Logistics Management
Resources, Inc. as of December 31, 2000 and the related statements of income,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management.
We were unable to obtain sufficient financial information relating to the
Company and its former subsidiaries during the brief tenure of our appointment
as auditors and associated time constraints. We were unable to satisfy ourselves
about the completeness of the transactions recorded within the financial
statements by means of other auditing procedures.
Because of the constraints described in the preceding paragraph, we were unable
to satisfy ourselves that all appropriate transactions have been properly
accounted for in the accompanying financial statements. The scope of our work
was not sufficient to enable us to express, and we do not express, an opinion on
the financial statements referred to in the first paragraph.
ROSENBERG RICH BAKER BERMAN & COMPANY, CPAS P.C.
/s/ Rosenberg Rich Baker Berman & Company, CPAS P.C.
Bridgewater, New Jersey
April 14, 2001
F-1
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Balance Sheet
December 31, 2000
Assets
Property and equipment, at cost, less accumulated depreciation of $244 $ 975
Total Assets 975
=============
Liabilities and Stockholders' Equity
Current Liabilities
Cash overdraft 29,688
Accrued expenses 228,930
Accrued interest 1,474,100
Loans payable 2,356,500
Convertible debentures 4,405,000
Estimated guarantee obligations 9,681,000
Total Current Liabilities 18,175,218
Stockholders' Equity
Preferred stock, no par value; (10,000,000 shares authorized)
Series A (199,000 shares outstanding) 76
Series B (2,000 shares outstanding) 2,000,000
Series C (50,000 shares outstanding) 15,000
Series D (950 shares outstanding) 950,000
Series E (2,300 shares outstanding) 2,300,000
Common stock, no par value; 75,000,000 shares authorized, 12,462,991
31,839,039 shares issued and outstanding
Additional paid-in capital 3,605,580
Retained (deficit) (39,507,890)
Total Stockholders' Equity (Impairment) (18,174,243)
Total Liabilities and Stockholders' Equity $ 975
=============
F-2
See notes to the financial statements.
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Operations
Year Ended December 31, 2000
Discontinued Operations: $ (38,205,215)
Loss from operations disposed of (net of income tax effect of $0)
Estimated loss on disposal of discontinued operations,
including provision for operating losses
(net of income tax benefit of $0 ) 0
Net Loss $ (38,205,215)
Net Loss Per Share $ (1.83)
F-3
See notes to the financial statements.
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Shareholders' Equity
Year Ended December 31, 2000
Total Common Stock Preferred Shares Series A
-------------- ---------------------------- ----------------------------
No Par
Value Number of
Shares Amount Shares Amount
------------ ------------- ------------ -------------
Opening Balances at
January 1, 2000 $ 13,095,102 8,844,461 $ 6,445,199 999,000 $ 762
Issuance of Common Stock
Checkmate Acquisition 1,203,125 385,000 1,203,125 - -
Series A Preferred Stock
exchanged for common stock - 9,000,000 686 (900,000) (686)
Conversion of debentures for
common stock 4,695,000 13,097,724 4,695,000 - -
Issuance of common stock for
convertible debenture interest 118,981 511,854 118,981 - -
Default of Subscription
Receivable 906,788 - - - -
Net change in other
comprehensive income 11,976 - - - -
Net loss (38,205,215) - - - -
-------------- ------------ ------------- ------------ -------------
Ending Balances at $ (18,174,243) 31,839,039 $ 12,462,991 99,000 $ 76
December 31, 2000
============== ============ ============= ============ =============
Preferred Shares Series B Preferred Shares Series C Preferred Shares Series D
-------------------------- -------------------------- --------------------------
Number Number Number
of Shares Amount of Shares Amount of Shares Amount
Opening Balances at ---------- ------------- ----------- ------------- ----------- --------------
January 1, 2000
2,000 $ 2,000,000 50,000 $ 15,000 950 $ 950,000
Issuance of Common Stock
Checkmate Acquisition
- - - - - -
Series A Preferred Stock
exchanged for common stock
- - - - - -
Conversion of debentures for
common stock
- - - - - -
Issuance of common stock for
convertible debenture interest
- - - - - -
Default of Subscription
Receivable
- - - - - -
Net change in other
comprehensive income
- - - - - -
Net loss
- - - - - -
Ending Balances at ---------- ------------- ----------- ------------- ---------- -------------
December 31, 2000 2,000 $ 2,000,000 50,000 $ 15,000 950 $ 950,000
========== ============= =========== ============= ========== =============
Preferred Shares Series E
--------------------------- Additional Compre-
Number of Paid in Accumulated hensive Subscription
Shares Amount Capital Deficit Income Receivable
Opening Balances at ------------- ------------- ------------- ------------- --------------- --------------
January 1, 2000
2,300 $ 2,300,000 $ 3,605,580 $ (1,302,675) $ (11,976) $ (906,788)
Issuance of Common Stock
Checkmate Acquisition
- - - - - -
Series A Preferred Stock
exchanged for common stock
- - - - - -
Conversion of debentures for
common stock
- - - - - -
Issuance of common stock for
convertible debenture interest
- - - - - -
Default of Subscription
Receivable
- - - - - 906,788
Net change in other
comprehensive income
- - - - 11,976 -
Net loss
- - - (37,205,215) - -
Ending Balances at ------------ ------------- ------------- ------------- --------------- --------------
December 31, 2000 2,300 $ 2,300,000 $ 3,605,580 $ (38,507,890) $ - $ -
============ ============= ============= ============= =============== ==============
F-4
See notes to the financial statements.
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Cash Flows
Year Ended December 31, 2000
Cash Flows From Operating Activities
Net (Loss) $ (38,205,215)
Adjustments to Reconcile Net (Loss) to Net Cash Used in Operating Activities
Issuance of common stock for Checkmate acquisition 1,203,125
Conversion of debentures for common stock 4,695,000
Issuance of common stock for convertible debenture interest 118,981
Default of subscription receivable 906,788
Net change in other comprehensive income 11,976
----------------
Net Cash Used By Operating Activities (31,269,345)
----------------
Cash Flows From Investing Activities
Disposition of assets resulting from bankruptcy of subsidiaries and termination of
auto insurance business, net of associated indebtedness 17,575,626
----------------
Net Cash Provided by Investing Activities 17,575,626
----------------
Cash flows from financing activities
Increase in convertible debentures 2,955,000
Increase in estimated guarantee obligations 9,681,000
----------------
Net cash provided by investing activities 12,636,000
----------------
Net decrease in cash (1,057,719)
Cash at beginning of year 1,057,719
----------------
Cash at end of year $ 0
================
F-5
See notes to the financial statements.
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the 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 North Dancer Corporation (Northern Dancer), a
nonoperating public shell corporation, 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, 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.
On February 1, 2001 the Company changed its name to Logistics Management
Resources, Inc. (LMRI).
Corporate headquarters are located in Louisville, Kentucky.
On November 29, 2000, UST Logistics, Inc., Mencor, Inc., Prostar, Inc. and Gulf
Northern Transport, Inc., LMRI's four operating subsidiaries, filed a petition
for dissolution under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court, Middle District of Florida, Jacksonville Division. The cases
have been consolidated by the court. The lead case is In The Matter of Gulf
Northern Transport, Inc.; docket number 99- 9224-3F1.
Prior to December 31, 2000 the Company terminated it's auto liability insurance
business.
(B) Basis of Presentation
The accompanying balance sheet and related statements of operations,
stockholders' equity and cash flows include the financial activities of LMRI.
Financial activities of former subsidiaries and the Company's terminated auto
liability insurance business are included in discontinued operations.
(C) Net Income per Common Share
Basic net income per share is computed on the basis of the weighted average
number of common shares outstanding during each period. Diluted net income per
share is calculated by combining weighted average number of common shares
outstanding and potentially dilutive common shares equivalents.
(D) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with
maturities of six months or less to be cash equivalents for financial statement
purposes.
F-6
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 1 - General and Summary of Significant Accounting Policies (Continued)
(E) Depreciation
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives.
(F) Income Taxes
The Company files a consolidated Federal income tax return with its wholly owned
subsidiaries.
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the assets and liabilities for
financial and income tax reporting. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred taxes also are recognized for operating losses that are
available to offset future federal income taxes.
(G) 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.
(H) Concentrations of Business and Credit Risk
At times throughout the year, the Company may maintain certain bank accounts in
excess of FDIC insured limits.
Note 2 - Equipment at cost, less accumulated depreciation consists of the
following:
December 31,
2000
-----------------
Equipment $ 1,219
Less accumulated depreciation and amortization (244)
-----------------
Total $ 975
=================
Depreciation expense charged to operations was $244 in 2000.
Note 3 - Convertible Debentures
During 1999 and 2000, the Company issued $9,100,000 of 10% convertible
debentures due May 31, 2002.
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.
F-7
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 3 - Convertible Debentures (Continued)
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.
The Company has retired $4,695,000 of debentures through December 31, 2000 and
has issued 13,097,724 shares in connection therewith. The Company is in default
as to its obligations pursuant to the convertible debentures at December 31,
2000.
Note 4 - Preferred Stock
Series A Preferred Stock/Stock Exchange Agreement - 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 LMRI 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 previously reported by the Company 40%, of the Series A
Preferred Stock are eligible to be exchanged for Common Stock.
During 2000, 900,000 of Series A preferred shares were exchanged for 9,000,000
common shares.
Series B Convertible Preferred Stock - During 1999 LMRI sold $2,000,000 of
Series B Convertible Preferred Stock and issued 2,000 shares. The Company
incurred $185,000 of issuance costs that were deducted from additional paid-in
capital. Shares of Series B Convertible Preferred Stock are convertible into
shares of Common Stock based upon the stated value of $1,000 per share of
Preferred Stock divided by the conversion price on the date of conversion.
Holders of Series B Convertible Preferred Stock may elect to convert their
shares commencing on the earlier of October 28, 1999 or the occurrence of any
merger, tender offer, or redemption event.
The conversion price is equal to 90% of the average closing bid price for the
ten consecutive trading days immediately preceding the conversion date, not to
exceed $2.59 per share. Holders of Series B Preferred Stock are entitled to
receive a dividend of 12% annually. No dividends were declared as of December
31, 2000.
There are also provisions in the security, which allow the holders to redeem
their shares upon the occurrence of certain events including the inability of
LMRI to issue free trading common stock to the holders because the shares have
not been registered under the Securities Act.
The Series B shareholders have no voting rights.
Series C Convertible Preferred Stock - During 1999, LMRI issued 50,000 shares of
Series C Convertible Preferred Stock to existing related party shareholders in
exchange for their guaranteeing LMRI's debt incurred under the revolving credit
agreement. The shares were valued for financial statement purposes at $.30 per
share. Logistics Management Resources, Inc. F.T.A. U.S. Trucking, Inc. Notes to
the Financial Statements
Note 4 - Preferred Stock (Continued)
Each share of Series C Convertible Preferred Stock entitles the holder to one
hundred votes and votes together with
8
the holders of Common Stock. The holders of Series C Preferred Stock have no
liquidation rights and no rights to dividends. The Series C Preferred Stock is
not redeemable.
Series D Convertible Preferred Stock - During 1999, LMRI sold $950,000 of Series
D Convertible Preferred shares and issued 950 shares. The Company incurred
$150,000 of issuance costs that were deducted from additional paid-in capital.
Shares of Series D Convertible Preferred Stock are convertible into shares of
common stock based on the stated value of $1,000 per share of preferred stock
dividend by the conversion price on the conversion date. Holders of the Series D
Convertible Preferred Stock may elect to convert their shares commencing the
earlier of January 8, 2000 or the occurrence of a merger, tender offer, or
redemption event.
Holders of Series D Convertible Preferred Stock are entitled to receive a
dividend of 12% annually. No dividends have been declared. In addition, the
holders of Series D Convertible Preferred Stock have no voting rights.
Series E Convertible Preferred Stock -During 1999, LMRI sold $2,300,000 of
Series E Convertible Preferred Stock and issued 2,300 shares. The Company
incurred $282,900 of issuance costs that were deducted from additional paid-in
capital. Shares of Series E Convertible Preferred Stock are convertible into
shares of Common Stock based upon the stated value of $1,000 per share of
preferred stock divided by the conversion price on the conversion date. Holders
of the Series E Convertible Preferred Stock may elect to convert their shares
commencing on the earlier of March 9, 2000, or the occurrence of a merger,
tender offer, or redemption event. The conversion price is $3.18 per share.
Series E Convertible Preferred Stock has no voting rights and are entitled to
receive a dividend of 12% annually. No dividends have been declared.
The Company has not been able to determine the adverse consequences, if any,
flowing from the rights of preferred stockholders as a result of the bankruptcy
filings of its subsidiaries.
Note 5 - Estimated Guarantee Obligations
The Company remains liable as a guarantor on certain notes, capital leases,
operating leases, payroll tax obligations, employee medical benefits, and other
expenses, as well as unfunded liabilities to its terminated auto insurance
business which, net of amounts to be realized, is estimated by management to be
$9,681,000.
There is no assurance that this liability will not be greater or that the
Company will be able to negotiate satisfactory repayment terms with these (and
possibly other) creditors.
Note 6 - Contingent Liability
On November 28, 2000 the Company, its subsidiaries and certain affiliates
entered into a Restructure Agreement (the "Agreement") with GE Capital
Corporation ("GECC") restructuring the balance of the Company's 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 a
principal balance of $22,235,000, which amount is expected to be substantially
reduced by the sale of subsidiary accounts receivable and equipment
collateralizing the loans. The loan is to be repaid over a three year term with
a five year amortization schedule and a balloon payment on December 1, 2003 of
the balance. 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.
F-9
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 6 - Contingent Liability (Continued)
Under the Agreement the Company is required to pay to GECC 1.50% the gross
revenues from its trucking business and 50% the gross revenues from non-trucking
business towards payment of the Note, which amounts will be applied to the
amortization payments. Additionally, 3.50% net income before taxes from the
Company's businesses must be paid on a quarterly basis in repayment of the Note,
along with certain payments in the event of a profitable sale of a Company owned
business.
The Note is secured by the Company's assets and by guarantees of various
affiliates of the Company.
Management has provided for a liability, net of proceeds from accounts
receivable and collateralized equipment of, $5,300,000 in Estimated Guarantee
Obligations.
There is no assurance that the Company will not be engaged in future litigation
incidental to its ownership of its bankrupt subsidiaries and terminated auto
liability insurance business.
Note 7 - Subsequent Events
On February 1, 2001 the Company's shareholders voted in favor of a reverse stock
split of the Company's issued and outstanding shares of stock on a 1 for 100
basis. The record date for the reverse split was February 12, 2001.
On March 14, 2001 the Company obtained a written formal commitment from
Hutchinson Investments Ltd. to provide financing in the amount of $20,000,000.
On March 30, 2001 the Company secured a working capital facility in the amount
of $1,000,000 as well as a $1,000,000 equity investment.
On March 30, 2001 the Company completed its acquisition of Trans-Logistics,
Inc., based in Tampa, Florida. The transaction is valued at approximately
$1,000,000 including cash, stock and earn-out provisions.
F-10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company engaged Rosenberg Rich Baker Berman & Company of
Bridgewater, New Jersey as its auditors effective March 19, 2001replacing the
firm of PRA & Co., PLLC of Garden City, New York. There were no disagreements
with the previous accounting firm.
There were no changes in or disagreements with accountants on accounting
and financial disclosure required to be reported.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS AND OFFICERS
Our Directors and Executive Officers are as follows:
NAME AGE POSITIONS HELD
---- --- --------------
Danny L. Pixler 52 President, CEO and Director
John Ragland 35 Chief Financial Officer
Michele Brown 35 Secretary
There is no family relationship between any Director or Executive Officer
of U.S. Trucking, Inc.
Set forth below, the names of our directors are as follows:
NAME AGE
Danny L. Pixler 52 Chairman of the Board
DANNY L. PIXLER has served as the President, CEO and a director of U.S.
Trucking, Inc. since September 8, 1998, when we completed our acquisition of
U.S. Trucking-Nevada. He has served as President, Secretary and Treasurer of
U.S. Trucking-Nevada since February 1997, and as a Director since May 1998. He
served as Vice President and a director of Mencor from March 1994 until July
1998 when he became President. He has served as President, CEO and director of
Gulf Northern since March 1995. From January 1993 until March 1994, he served as
President of Joseph Land Group, a transportation company with annual sales of
approximately $130 million. From 1989 until 1993, he served as President of
Apple Lines, Inc., a truckload refrigerated carrier with $16 million in
revenues. From 1983 until 1989, he was employed by D.F.C. Transportation, the
transportation division of Dean Foods, Inc., where his final position was
Executive Vice President and General Manager responsible for the company's
truckload division with annual sales of $80 million.
JOHN RAGLAND has served as our Chief Financial Officer since September 8,
1998. He has served as the Controller of Gulf Northern since June 1996, and as
Secretary-Treasurer since June 1998. He has also served as the Chief Financial
Officer and Treasurer of U.S. Trucking-Nevada since May 1998. From May 1996
until October 1996, he served as Chief Financial Officer of United Acquisition
Corp. II, a company formed to acquire companies in the trucking business. From
August 1994 until June 1996 he was the Controller of the North
American Trucking Association, a trade group, and he was also the Controller of
All-Risk Services, an insurance agency, during the same period. From 1991 to
July 1994, he was a staff accountant with Watkins, Buckles & Travis, Certified
Public Accountants.
MICELE BROWN has served as the Company's Executive Administrator and
Assistant to the Chairman since June 1996.
Our executive officers hold office until the next annual meeting of the
Directors. We have agreements with Messrs. Pixler and Huff whereby we are
required to use our best efforts to elect and retain them as members of the
Board of Directors as long as they are guarantors as to any U.S. Trucking or
affiliated debt. There are no other arrangements or understandings between any
director or executive officer and any other person pursuant to which any of the
above-named executive officers or directors or nominees was selected as an
officer or director or nominee for director.
14
ITEM 10. EXECUTIVE COMPENSATION.
The following tables set forth information regarding executive compensation
for U.S. Trucking, Inc.'s President and Chief Executive Officer and each other
executive officer who received total annual salary and bonus in excess of
$100,000 for any of the years ended December 31, 1999, 1998 or 1997.
Summary Compensation Table
Long-term Compensation
Awards Payouts
------------------------
Securi-
Annual Compensation ties
--------------------- Re- Underly- All
Other strict- ing Other
Name and Annual ed Options/ LTIP Com-
Principal Compen- Stock SARs Pay- pensa-
Position Year Salary Bonus sation Award(s) (Number) outs tion
---------- ---- -------- ----- ------- -------- -------- ----- ------
Danny L. 200,000 $111,394(1)-- $6,000(2) -- -- -- -- Pixler, 1999 $105,000 -- $6,000(2) --
250,000 -- --
President 1998 $105,000 -- $6,000(2) -- 100,000 -- --
1997 $105,000 -- $6,000(2) -- -- -- --
--------------
(1) Since the filing of the bankruptcies of the Company's four operating
subsidiaries on November 29, 2000, Mr. Pixler has deferred all salaries and has
accrued $38,556.00 from the Company. (2) Represents $500 per month car
allowance.
Aggregated Option Exercises in Year Ended
December 31, 1998 and December 31, 1998 Option Values
Securities Under- Value of Unexer-
Shares lying Unexercised cised in-the
Acquired Options Money Options/
On at 12/31/99 at 12/31/99
Exercise Value Exercisable/ Exercisable/
Name (Number) Realized Unexercisable Unexercisable
---- -------- -------- ---------------- ----------------
Danny L. Pixler -0- $ -0- 100,000 / 250,000 $245,000 / 0
Options / Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date
---- ------------ ------------ ----------- ----------
Danny L. Pixler 250,000 50% $3.00 4/27/04
15
EMPLOYMENT AGREEMENTS
We have entered into a five year employment agreement with Danny L.
Pixler commencing September 9, 1998, which provides for an annual salary of
$105,000 with annual increases of not less than 3%. The agreement also provides
that Mr. Pixler will receive a new car every three years and all vehicle
expenses incurred on our business or an auto allowance not to exceed $550 per
month.
We have entered into a three year employment agreement with John
Ragland commencing September 9, 1998, which provides for an annual salary of
$75,000 with annual increases of not less than 3%. The agreement also provides
that Mr. Ragland will be provided a company car and reimbursement of his vehicle
expenses incurred on our business.
These employment agreements are terminable by us for certain specified
reasons, including disability, fraud, conviction of a felony and substance
abuse. They also contain covenants not to compete during the term of the
agreements.
STOCK OPTION PLAN
The Stock Option Plan allows the Board to grant stock options from time
to time to employees, officers, directors and consultants of U.S. Trucking. The
board has the power to determine at the time that the option is granted whether
the option will be an incentive stock option, an option which qualifies under
Section 422 of the Internal Revenue Code of 1986, or an option which is not an
incentive stock option. Vesting provisions are determined by the board at the
time options are granted. The option price for any incentive stock option will
be no less than the fair market value of the common stock on the date the option
is granted, while other options may be granted at any exercise price.
Options granted under the plan with an exercise price less than the
fair market value on the date of grant, will require us to record an expense
upon the grant of options equal to the difference between the market value of
the option shares and the exercise price of the options. Generally, there will
be no federal income tax consequences to us in connection with incentive stock
options granted under the plan. With regard to options that are not incentive
stock options, we will ordinarily be entitled to deductions for income tax
purposes of the amount that option holders report as ordinary income upon the
exercise of such options, in the year such income is reported.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of April 13, 2001, the stock
ownership of each person known by us to be the beneficial owner of five percent
or more of the our common stock, all directors individually and all directors
and executive officers as a group. Except as noted, each person has sole voting
and investment power with respect to the shares shown.
16
Per-
centage
Amount of of Class
Name and Address of Beneficial Prior
Beneficial owner Ownership to Sales
------------------- ---------- --------
Principal Shareholders
and Management:
----------------------
Logistics Management,
L.L.C. (1) (2) 91,058 2.8%
10602 Timberwood Circle #9
Louisville, KY 40223
Danny L. Pixler 3,225,000(2) 1.4%
1004 Crooked Oak Road
Summerville SC 29485
The Huff Grandchildren
Trust (2)(4) 45,529(2) 1.4%
10602 Timberwood Circle #9
Louisville, KY 40223
W. Anthony Huff 78,000 32.3%
10602 Timberwood Circle #9
Louisville, KY 40223
All Directors and Executive 6,450,000(3) 60.3%
Officers as a Group (4)
(3 Persons)
----------------
* Less than 1%.
(1) Logistics Management, L.L.C. is 50% owned jointly by Danny and Roxanne
Pixler, the wife of Danny L. Pixler, and 50% owned by Association Services,
Inc., which is 100% owned by the Huff Grandchildren's Trust.
(3) Represents a 50% beneficial interest in the shares held by Logistics
Management, LLC and options to purchase 350,000 shares of Common Stock.
Does not include 25,000 shares of Series C Preferred Stock held by Danny
Pixler which carry 2,500,000 votes and represents 30.2% of the shares
entitled to vote..
(4) Represents a 50% beneficial interest in the shares held by Logistics
Management, L.L.C. and options to purchase 350,000 shares of Common Stock.
Does not include 25,000 shares of Series C Preferred Stock held by Huff
Grandchildren's Trust which carry 2,500,000 votes, of which Mr. Huff is
co-trustee and represents 30.2% of the shares entitled to vote..
There are no known agreements, the operation of which may at a subsequent
date result in a change in control of U.S. Trucking.
17
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During January 1999, three of our shareholders entered into a stock
exchange agreement with us whereby they agreed to exchange a total of 9,990,000
shares of our common stock for 999,000 shares of our Series A Preferred Stock.
Each share of Series A Preferred Stock will have ten votes and the shares will
be voted together with the common stock as a single class. See "DESCRIPTION OF
SECURITIES." Pursuant to the stock exchange agreement, each share of Series A
Preferred Stock will be exchangeable back into ten shares of common stock as
follows: one-fifth of the shares upon reporting revenues of $31 million or more
for any fiscal year or shorter period in a report on Form 10-KSB, 10-K, 10-QSB,
or 10-Q as filed with the Securities and Exchange Commission; 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.
The shareholders who exchanged shares are Logistics Management, LLC - 9,000,000
shares; Joff Pollon - 250,000 shares; and Waterways Group - 740,000 shares.
In June 2000 Logistics Management, LLC was allowed to convert its 900,000 shares
of Series A Preferred Stock into 9.0 million shares of common stock in
consideration of various guarantees it had made on the our debt obligation of
various guarantees it had made on our debt obligations.
In January 2000 we guaranteed certain monetary obligations of
Professional Transportation Group Ltd., Inc. to Southtrust Bank, N.A. under a
$9.0 million accounts receivable credit facility. At April 30, 2000
approximately $7.0 million was owed on the loan. The loan is also guaranteed by
Logistics Management, LLC. It is also anticipated that we (along with Logistics)
will guaranty a term loan with a remaining balance of $195,000 from Southtrust
to Professional in May, 2000.
The board of directors believes that the above transactions involving
U.S. Trucking-Nevada and its subsidiaries have been on terms no less favorable
to us than those that could have been obtained from unaffiliated parties. When
reviewing transactions with affiliates, the members of the board attempt to
consider all of their fiduciary duties to shareholders and they consult with the
our legal counsel for their opinions on the transactions.
18
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ----------- --------
3.1 Articles of Incorporation, Incorporated by reference to Exhibit
as amended 3.1 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
3.2 Bylaws, as amended Incorporated by reference to Exhibit
3.2 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
3.3 Articles of Amendment to Incorporated by reference to Exhibit
Articles of Incorporation 3.3 to the Registrant's Registration
effective September 8, 1998 Statement on Form SB-2
(SEC File No. 333-71875)
3.4 Articles of Amendment to Incorporated by reference to Exhibit
Articles of Incorporation 3.4 to the Registrant's Registration
dated January 20, 1999 Statement on Form SB-2 (SEC File No.
regarding Series A Pre- 333-71875)
ferred Stock
3.5 Articles of Amendment to Incorporated by reference to Exhibit
Articles of Incorporation 3.5 to the Registrant's Registration
dated April 29, 1999, Statement on Form SB-2 (SEC File No.
regarding Series B Pre- 333-71875)
ferred Stock
3.6 Articles of Amendment to Incorporated by reference to Exhibit
Articles of Incorporation 3.6 to the Registrant's Registration
dated June 10, 1999, Statement on Form SB-2 (SEC File No.
regarding Series C Pre- 333-71875)
ferred Stock
3.7 Articles of Amendment to Incorporated herein by reference
Articles of Incorporation to Exhibit 3.7 to the Company's
dated September 10, 1999 Form 10-Q for the quarter ended
regarding Series D September 30, 1999 (SEC File
Preferred Stock 333-70353)
3.8 Articles of Amendment to Filed herewith electronically
Articles of Incorporation
dated November 8, 1999
regarding Series E
Preferred Stock
10.1 1998 Stock Option Plan Incorporated herein by reference to
Exhibit No. 4.3 to the Company's
Registration Statement on Form S-8
(SEC File No. 333-70353)
10.2 Share Exchange Agreement Incorporated herein by reference to
with U.S. Trucking, Inc. Exhibit No. 10 to the Company's
Form 8-K dated September 8, 1998
10.3 Employment Agreement with Incorporated by reference to Exhibit
Danny L. Pixler 10.3 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
19
10.4 Employment Agreement with Incorporated by reference to Exhibit
Anthony Huff 10.4 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
10.5 Employment Agreement with Incorporated by reference to Exhibit
John Ragland 10.5 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
10.6 Lease Agreement dated Incorporated by reference to Exhibit January 1,
1997, between 10.6 to the Registrant's Registration Gulf Northern
Transport, Statement on Form SB-2 (SEC File No.
Inc., Dan L. Pixler, and 333-71875)
Sebrite Insurance Services,
Inc.
10.7 Lease Agreement dated Incorporated by reference to Exhibit
March 5, 1998, between 10.7 to the Registrant's Registration
Gulf Northern Transport, Statement on Form SB-2 (SEC File No.
Inc. and Dan Pixler for 333-71875)
three tractors
10.8 Lease Agreement dated Incorporated by reference to Exhibit
September 23, 1998, 10.8 to the Registrant's Registration
between Gulf Northern Statement on Form SB-2 (SEC File No.
Transport, Inc. and 333-71875)
Thomas Financial Services
10.9 Stock Exchange Agreement Incorporated by reference to Exhibit
between U.S. Trucking and 10.9 to the Registrant's Registration
three shareholders dated Statement on Form SB-2 (SEC File No.
January 29, 1999 333-71875)
10.10 Loan and Security Agreement Incorporated by reference to Exhibit
dated as of December 22, 10.10 to the Registrant's Registration
1998 between General Statement on Form SB-2 (SEC File No.
Electric Capital Corporation 333-71875)
and U.S. Trucking, Inc.,
et al.
10.12 10% Convertible Debenture Incorporated by reference to
due May 31, 2002 for Exhibit 10.12 to the Company's
$600,000 Form 10-QSB for the quarter
ended June 30, 1999
10.13 1998 Stock Option Plan, Incorporated by reference to Exhibit
as amended 10.13 to the Registrant's Registration
Statement on Form SB-2 (SEC File No.
333-71875)
10.14 Purchase and Sale Agreement Incorporated by reference to
by and among Mid-Cal the Company's Form 8-K dated
Express, Inc., Prime April 14, 1999
Companies, Inc. and U.S.
Trucking, Inc.
10.15 Merger Agreement and Plan of Incorporated by reference to
Reorganization dated Exhibit 10.1 to the Company's
February 2, 2000, by and Form 8-K dated February 7, 2000
between U.S. Trucking, Inc.,
Checkmate Acquisition Corp.,
Tommy Chambers, Marylou
Chambers and Timothy O'Bannon
and Checkmate Truck Brokerage,
Inc.
10.16 Merger Agreement and Plan of Incorporated by reference to
Reorganization dated Exhibit 10.2 to the Company's
February 2, 2000, by and Form 8-K dated February 7,
between U.S. Trucking, Inc., 2000
Checkmate Acquisition Corp.,
Tommy Chambers, Timothy
O'Bannon, Marylou Chambers
and Sharion O'Bannon and
Maverick Truck Brokerage,
Inc.
10.17 Price Adjustment Agreement Incorporated
by reference to Exhibit 10.3 to the
Company's Form 8-K dated February 7,
2000
10.18 Guaranty Agreement Incorporated herein by reference
with Southtrust Bank, N.A. to Exhibit 3.8 to the Company's
Form 10-KSB for the year ended
December 31, 2000.
10.19 Bill of Sale, Promissory Incorporated herein by reference
Note & Security Agreement to Exhibit 3.8 to the Company's
with One-Way Logistics Form 10-KSB for the year ended
10.20 Promissory Notes from Incorporated herein by reference
Transit Financial Services, to Exhibit 3.8 to the Company's
Inc. Form 10-KSB for the year ended
10.21 Restructure Agreement Incorporated by reference to
with General Electric Exhibit 99.2 to the Company's
Capital Corporation Form 8-K filed December 5, 2000
21 Subsidiaries of the Incorporated herein by reference
Registrant to Exhibit 3.8 to the Company's
Form 10-KSB for the year ended
10.23 Amendment No. 2 1998 Filed herewith electronically
Stock Option Plan
23.2 Consent of Bianculli, Incorporated herein by reference
Pascale & Co. P.C. to Exhibit 3.8 to the Company's
Form 10-KSB for the year ended
(b) REPORTS ON FORM 8-K. None
21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
U.S. TRUCKING, INC.
Dated: April 18, 2001 By: /s/ Danny Pixler
------------ ----------------------------------------
Danny Pixler, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Danny L. Pixler
----------------------- President (Chief Executive April 18, 2001
Danny L. Pixler Officer) and Director
/s/ W. Anthony Huff
----------------------- Executive Vice President April 18, 2001
W. Anthony Huff and Director
/s/ John Ragland
----------------------- Chief Financial and April 18, 2001
John Ragland Accounting Officer
22