UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2008

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

For the transition period from          to          

Express-1 Expedited Solutions, Inc.

Delaware		03-0450326
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3399 South Lakeshore Drive, Suite 225
Saint Joseph, MI 49085
(Address of Principal Executive Offices)(Zip Code)

(269) 429-9761
(Issuer’s Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant (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 þ No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     The Registrant has 31,839,536 shares of its common stock outstanding as of July 14th, 2008.

 

 

Express-1 Expedited Solutions, Inc.

Form 10-Q
Three and Six Months Ended June 30, 2008 and 2007
(Unaudited)

Part I — Financial Information

Item 1. Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statement of Changes in Stockholders’ Equity

Notes to Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

Part II — Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits

Second Amendment of Employment Agreement

302 Certification of Chief Executive Officer

302 Certification of Chief Financial Officer

906 Certification of Chief Executive Officer

906 Certification of Chief Financial Officer

Part I — Financial Information

Express-1 Expedited Solutions, Inc.

		(Unaudited) June 30,				December 31,
		2008				2007
Assets
Current assets:
Cash and cash equivalents		$	1,348,000			$	800,000
Accounts receivable, net of allowances of $178,000 and $77,000, respectively			17,067,000				5,663,000
Prepaid expenses			367,000				492,000
Other current assets			875,000				149,000
Deferred tax asset, current			1,231,000				1,549,000
Total current assets			20,888,000				8,653,000
Property and equipment, net of $2,034,000 and $1,734,000 in accumulated depreciation, respectively			3,077,000				2,312,000
Goodwill			16,040,000				7,737,000
Identified intangible assets, net of $1,486,000 and $1,279,000 in accumulated amortization,			6,747,000				3,950,000
Loans and advances			84,000				104,000
Deferred tax asset, long term			—				377,000
Other long term assets			1,294,000				591,000
Total assets			48,130,000				23,724,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	7,707,000			$	892,000
Accrued salaries and wages			805,000				660,000
Accrued acquisition earnouts			—				2,210,000
Accrued expenses, other			2,183,000				861,000
Current maturities of long term debt			1,250,000				50,000
Other current liabilities			1,057,000				199,000
Total current liabilities			13,002,000				4,872,000
Line of credit			7,624,000				—
Notes payable and capital leases, net of current maturities			2,010,000				34,000
Deferred tax liability, long term			250,000				—
Other long-term liabilities			564,000				616,000
Total long-term liabilities			10,448,000				650,000
Stockholders’ equity:
Preferred stock, $.001 par value; 10,000,000 shares no shares issued or outstanding			—				—
Common stock, $.001 par value; 100,000,000 shares authorized; 31,999,536 and 27,008,768 shares issued and 31,819,536 and 26,828,768 shares outstanding			32,000				27,000
Additional paid-in capital			26,208,000				21,152,000
Accumulated deficit			(1,453,000	)			(2,870,000	)
Treasury stock, at cost, 180,000 shares held			(107,000	)			(107,000	)
Total stockholders’ equity			24,680,000				18,202,000
		$	48,130,000			$	23,724,000

The accompanying notes are an integral part of the consolidated financial statements.

Express-1 Expedited Solutions, Inc.

		Three Months Ended								Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2008				2007				2008				2007
Revenues
Operating revenue		$	30,925,000			$	13,842,000			$	55,931,000			$	25,335,000
Expenses
Operating expenses			25,985,000				10,328,000				46,565,000				18,801,000
Gross margin			4,940,000				3,514,000				9,366,000				6,534,000
Sales, general and administrative expense			3,524,000				2,242,000				6,804,000				4,492,000
Income from operations			1,416,000				1,272,000				2,562,000				2,042,000
Other expense			12,000				27,000				15,000				34,000
Interest expense			99,000				34,000				179,000				58,000
Income before income tax provision			1,305,000				1,211,000				2,368,000				1,950,000
Income tax provision			531,000				457,000				951,000				735,000
Net income		$	774,000			$	754,000			$	1,417,000			$	1,215,000
Earnings per common share
Basic income per common share			0.02				0.03				0.05				0.05
Diluted income per common share			0.02				0.03				0.05				0.04
Weighted average common shares outstanding
Basic weighted average common shares outstanding			31,723,787				26,706,100				30,883,946				26,574,016
Diluted weighted average common shares outstanding			32,067,972				27,509,728				31,225,376				27,365,538

The accompanying notes are an integral part of the consolidated financial statements.

Express-1 Expedited Solutions, Inc.

		Six Months Ended June 30,
		2008				2007
Operating activities
Net Income		$	1,417,000			$	1,215,000
Adjustments to reconcile net income to net cash from operating activities
Provisions for allowance for doubtful accounts			(22,000	)			(7,000	)
Depreciation & amortization expense			559,000				451,000
Stock compensation expense			90,000				85,000
Loss on disposal of equipment			2,000				27,000
Common stock issued for ESOP			—				123,000
Changes in assets and liabilities, net of effects of acquisition:
Account receivable			(5,141,000	)			(1,337,000	)
Other current assets			(56,000	)			(120,000	)
Prepaid expenses			217,000				118,000
Other long-term assets			292,000				556,000
Accounts payable			1,379,000				76,000
Accrued expenses			870,000				603,000
Other liabilities			1,398,000				223,000
			(412,000	)			798,000
Cash provided by operating activities			1,005,000				2,013,000
Investing activities
Acquisition of business, net of cash acquired			(8,489,000	)			—
Payment of acquisition earn-out			(2,210,000	)			(1,960,000	)
Payment for purchases of property and equipment			(684,000	)			(254,000	)
Proceeds from sale of assets			3,000				23,000
Proceeds from notes receivable			—				18,000
Cash flows used by investing activities			(11,380,000	)			(2,173,000	)
Financing activities
Credit line, net activity			7,624,000				187,000
Proceeds from debt for acquisition			3,600,000				—
Payments of debt			(424,000	)			(69,000	)
Proceeds from issuance of equity, net			123,000				291,000
Cash flows provided by financing activities			10,923,000				409,000
Net increase in cash and cash equivalents			548,000				249,000
Cash and cash equivalents, beginning of period			800,000				79,000
Cash and cash equivalents, end of period of period			1,348,000				328,000
Supplemental disclosure of noncash activities:
Cash paid during the period for interest		$	147,000			$	59,000
Cash paid during the period for income taxes		$	173,000			$	49,000
Acquisition of assets and liabilities of Concert Group Logistics:
Cash			671,000
Accounts receivable purchased			5,856,000
Prepaid expenses			95,000
Property and equipment			415,000
Other assets			872,000
Goodwill and other identified intangibles			11,303,000
Liabilities assumed			(4,704,000	)
Total purchased price			14,508,000
Less equity issued			(4,848,000	)
Less payable issued			(500,000	)
Less cash acquired			(671,000	)
Net cash paid			8,489,000

The accompanying notes are an integral part of the consolidated financial statements.

Express-1 Expedited Solutions, Inc.

																		Additional				Accumulated
		Common Stock								Treasury Stock								Paid In				Earnings
		Shares				Amount				Shares				Amount				Capital				(Deficit)				Total
Balance December 31, 2007			27,008,768			$	27,000				(180,000	)		$	(107,000	)		$	21,152,000			$	(2,870,000	)		$	18,202,000
Issuance of stock for exercise of warrants			190,768																123,000								123,000
Issuance of common stock			4,800,000				5,000												4,843,000								4,848,000
Stock option expense																			90,000								90,000
Net income																							1,417,000				1,417,000
Balance June 30, 2008			31,999,536			$	32,000				(180,000	)		$	(107,000	)		$	26,208,000			$	(1,453,000	)		$	24,680,000

The accompanying notes are an integral part of the consolidated financial statements.

Express-1 Expedited Solutions, Inc.

1. Significant Accounting Principles

Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements of Express-1 Expedited Solutions, Inc. (“we”, “us”, “our” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.

     The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position at June 30, 2008 and December 31, 2007 and results of operations for the three and six-month periods ended June 30, 2008 and 2007. The preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ materially from those estimates.

     These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2007 included in our Annual Report on Form 10-K as filed with the SEC and available on the SEC’s website (www.sec.gov). Results of operations in interim periods are not necessarily indicative of results to be expected for a full year.

Revenue Recognition

     Within the Company’s Express-1, Express-1 Dedicated and Bounce Logistics business segments, revenue is recognized primarily at the point in time delivery is completed on the freight shipments it handles; with related costs of delivery being accrued as incurred and expensed within the same period in which the associated revenue is recognized. For these business units, the Company uses the following supporting criteria to determine revenue has been earned and should be recognized: i) persuasive evidence that an arrangement exists, ii) services have been rendered, iii) the sales price is fixed and determinable and iv) collectability is reasonably assured.

     Within its Concert Group Logistics business segment, the Company utilizes an alternative point in time to recognize revenue. Concert Group Logistics revenue and associated operating expenses are recognized on the date the freight is picked up from the shipper. This alternative method of revenue recognition is not the preferred method of revenue recognition as prescribed within Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force Issue No. 91-9 Revenue and Expense Recognition for Freight Services in Progress (“EITF N. 91-9”). This alternative method recognizes revenue and associated expenses prior to the point in time that all services are completed. The use of this method does not result in a material difference from one of the more preferred methods as identified in EITF No. 91-9. The Company has evaluated the impact of this alternative method on its consolidated financial statements and concluded that the impact is immaterial to the financial statements.

     Revenue is reported by the Company on a gross basis in accordance with release 99-19 from the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB), Reporting Revenue Costs as a Principal versus Net as an Agent. The following facts justify our position of reporting revenue on a gross basis:

	•		The Company is the primary obligor and is responsible for providing the service desired by the customer.
	•		The customer holds the Company responsible for fulfillment including the acceptability of the service. (Requirements may include, for example, on-time delivery, handling freight loss and damage claims, establishing pick-up and delivery times, and tracing shipments in transit. )
	•		The Company has discretion in setting sales prices and as a result, its earnings vary.
	•		The Company has discretion to select its drivers, contractors or other transportation providers (collectively, “service providers”) from among thousands of alternatives, and
	•		The Company bears credit risk for all of its receivables.

     We believe that these factors support our position of reporting revenue on a gross basis.

Stock-Based Compensation

     The Company accounts for share-based compensation in accordance with Statement of Financial Accounting Standard (SFAS) Number 123R, “Share-Based Payment,” which was adopted January 1, 2006, utilizing the modified prospective method.

     The Company has in place a stock option plan approved by the shareholders for 5,600,000 shares of its common stock. Through the plan, the Company offers stock options to employees and directors which assists in the recruitment of these individuals. Under the plan, the Company may also grant restricted stock awards, subject to the satisfaction by the recipient of certain conditions and enumerated in the specific restricted stock grant.

     Options generally become fully vested three to five years from the date of grant and expire five to ten years from the grant date. During the three and six-month periods ended June 30, 2008, the Company granted 55,000 and 385,000 options to purchase shares of its common stock pursuant to its stock option plan as amended, respectively. As of June 30, 2008, the Company had 2,149,000 shares available for future stock option grants under its existing plan.

     The weighted-average fair value of each stock option recorded in expense for the three and six-month periods ended June 30, 2008 and 2007 was estimated on the date of grant using the Black-Scholes option pricing model and amortized over the vesting period of the underlying options. The Company has used one grouping for the assumptions, as its option grants are primarily basic with similar characteristics. The expected term of options granted has been derived based upon the Company’s history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee terminations. Estimated volatility is based upon the Company’s historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend yield is zero. The assumptions outlined in the table below were utilized in the calculations of compensation expense from option grants in the reporting periods reflected.

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
Risk-free interest rate			2.30	%			5.00	%			2.00	%			5.00	%
Expected life		6.0 years				6.0 years				6.0 Years				6.0 Years
Expected volatility			35	%			35	%			35	%			35	%
Expected dividend yield		none				none				none				none
Grant date fair value		$	0.43			$	0.59			$	0.38			$	0.62

		Options				Weighted				Weighted
		and				Average				Average
		Warrants				Exercise				Remaining
		Outstanding				Price				Contractual Life
Outstanding at beginning of period			11,768,886			$	1.47			2.2 Years
Warrants granted			31,540				1.25
Warrants expired/cancelled			(1,262,857	)			1.73
Warrants exercised			(212,697	)			1.05
Options granted			385,000				1.07
Options expired/cancelled			—
Options exercised			—				—				—
Outstanding at June 30, 2008			10,709,872			$	1.43			2.4 Years
Outstanding exercisable at June 30, 2008			9,810,574			$	1.44			1.9 Years

     As of June 30, 2008, the Company had approximately $327,000 of unrecognized compensation cost related to non-vested share-based compensation that is anticipated to be recognized over a weighted average period of approximately 1.1 years. Estimated remaining compensation expense related to existing share-based plans is $118,000, $155,000, $46,000 and $8,000 for the years ended December 31, 2008, 2009, 2010, 2011 and thereafter, respectively.

     At June 30, 2008, the aggregate intrinsic value of warrants and options outstanding was $15,291,000 and the aggregate intrinsic value of options exercisable was $14,157,000. Holders of warrants in the Company’s stock exercised 212,697 warrants during the six months ended June 30, 2008 and the Company received approximately $123,000 in cash from these transactions. The total fair value of options vested during the same three and six-month period was approximately $75,000.

     Use of Estimates

     The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to, purchased transportation, outstanding insurance claims, other accrued expenses, recoverability of long-lived assets, recoverability of prepaid expenses, and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Management believes that these estimates are reasonable and each has been discussed with the audit committee; however, actual results could differ from these estimates.

Reclassifications

     Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the 2008 presentation. These reclassifications did not have any effect on total assets, total liabilities, total stockholders’ equity or net income.

Cash and Cash Equivalents

     Cash and cash equivalents include cash on hand and, on occasion, short term investments. The Company considers all highly liquid instruments purchased with a remaining maturity of less than three months at the time of purchase as cash equivalents.

Income Taxes

     Taxes on income are provided in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences between the book values and the tax basis of particular assets and liabilities, and the tax effects of net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized as income or expense in the period that included the enactment date. A valuation allowance is provided to offset the net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has evaluated its tax position and concluded no valuation allowance on its deferred tax assets is required, as of June 30, 2008. The Company had gross federal net operating loss carry forwards of approximately $5,400,000 as of December 31, 2007. Based upon the pre-tax income reported in the first six months of 2008, the Company estimates these loss carry forwards have been reduced to approximately $3,000,000 through June 30, 2008.

     Effective January 01, 2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB statement number 109.” The company recognized no adjustments in its tax liability as a result of the adoption of FIN 48.

Goodwill

     Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment test for goodwill and intangible assets with indefinite lives. Under the provisions of SFAS No. 142, the first step of the impairment test requires that the Company determine the fair value of each reporting unit, and compare the fair value to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company must perform a second more detailed impairment

assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date. During the quarter ended June 30, 2008, the Company did not record any impairments to its goodwill. In the future, the Company will perform the annual test during its fiscal third quarter unless events or circumstances indicate impairment of the goodwill may have occurred before that time.

     The Company added $8,303,000 of Goodwill during the six months ended June 30, 2008, as a result of the acquisition of certain assets from Concert Group Logistics, LLC. The Company is currently awaiting the results of an independent valuation. Based upon the results of this independent valuation, the allocation of goodwill and intangible assets could change. The Company anticipates that the valuation will be completed during the third quarter of 2008.

Identified Intangible Assets

     The Company follows the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. During the three and six-month periods ended June 30, 2008, there was no impairment of intangible assets.

     The Company added $3,000,000 of Identified Intangible Assets during the six months ended June 30, 2008, based upon the acquisition of assets from Concert Group Logistics, LLC. The Company is currently awaiting the results of an independent valuation. Based upon the results of this independent valuation, this amount could change. The Company anticipates that the valuation will be completed during the third quarter of 2008. Pending the completion of the independent valuation, the Company has begun to amortize the intangible assets over a range of lives ranging from 3-15 years. In the quarter ended June 30, 2008, the Company recorded $100,000 of amortization expense related to these intangible assets.

Other Long-Term Assets

     Other long-term assets primarily consist of balances representing various deposits, and the long-term portion of the Company’s non-qualified deferred compensation plan. Also included within this account classification are incentive payments to independent station owners within the Concert Group Logistics network. These payments are made by Concert Group Logistics to certain station owners as an incentive to join the network. These amounts are amortized over the life of each independent station contract and the unamortized portion is recoverable in the event of default under the terms of the agreements.

Estimated Fair Value of Financial Instruments

     The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company’s debt is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of similar maturities.

Earnings Per Share

     Earnings per common share are computed in accordance with SFAS No. 128, “Earnings Per Share,” which requires companies to present basic earnings per share and diluted earnings per share.

     Basic Earnings per Share — Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. The numerators, denominators and basic earnings per share are outlined in the table below.

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2008				2007				2008				2007
Net income		$	774,000			$	754,000			$	1,417,000			$	1,215,000
Basic weighted shares outstanding			31,723,787				26,706,100				30,883,946				26,574,016
Basic earnings per share		$	0.02			$	0.03			$	0.05			$	0.05

     Diluted Earnings per Share — Diluted earnings per common share are computed by dividing net income by the combined weighted average number of shares of common stock outstanding and dilutive options outstanding during the period. The numerators, denominators and diluted earnings per share are outlined in the table below.

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2008				2007				2008				2007
Net income		$	774,000			$	754,000			$	1,417,000			$	1,215,000
Basic weighted shares outstanding			31,723,787				26,706,100				30,883,946				26,574,016
Dilutive options and warrants			344,185				803,628				341,430				791,522
Diluted weighted shares outstanding			32,067,972				27,509,728				31,225,376				27,365,538
Diluted earnings per share		$	0.02			$	0.03			$	0.05			$	0.04

     Stock and Warrants Granted — During the six-month period ended June 30, 2008, the Company issued 4,990,768 shares of its common stock, granted 31,540 warrants to the holders of convertible securities originally issued during 2003, and issued 385,000 options to purchase stock to members of management and the Board of Directors. The warrants issued carry a weighted average exercise price of $1.25 per share and a maturity date of July 2008.

2. Recent Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141 (R)”). SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be indentified for each business combination. In general, the statement 1) broadens the guidance of SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increased required disclosures. The Company is required to apply SFAS No. 141(R) prospectively to business combinations for which the acquisition date is on or after January 1, 2009. Earlier application is not permitted.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains or losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company did not record an adjustment within its financial statements as a result of adopting the provisions of SFAS No. 159, as of June 30, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”, which defines fair value, establishes a framework for consistently measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. The Company did not record an adjustment within its financial statements as a result of adopting the provisions of SFAS No. 157 as of June 30, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

     Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA and the SEC did not or are not believed by the Company’s management to have a material impact on the Company’s current or future financial statements.

3. Acquisitions

     On January 31, 2008, the Company completed the purchase of substantially all assets and certain liabilities of Downers Grove, Illinois based Concert Group Logistics, LLC. (“Concert LLC”). The transaction had an effective date of January 1, 2008 and the Company completed the purchase through a newly formed wholly owned subsidiary Concert Group Logistics, Inc.

     At closing the Company paid the former owners of Concert Group Logistics, LLC total consideration that included $9.0 million in cash and 4.8 million shares of the Company’s common stock. The Company received $3.2 million of assets consisting of cash, receivables, office equipment and other current assets, net of liabilities acquired in the transaction. The transaction was financed through the Company’s new line of credit, a new term note payable and cash available from working capital.

     The transaction provides for additional consideration of up to $2.0 million to be paid at the end of 2008, provided certain performance criteria are met within the Company’s new subsidiary. Of this amount, $500,000 is guaranteed by the Company to the former owners of Concert Group Logistics, LLC, subject to the right of offset by the Company for certain balance sheet and unrecorded liability provisions contained within the agreement. This $500,000 guaranteed amount has been included within the Company’s current liabilities within the consolidated balance sheet as of June 30, 2008. In the event the remaining $1.5 million is not earned in 2008, the balance of additional consideration will be payable at the end of 2009, provided the new subsidiary meets certain cumulative performance provisions for the years of 2008 and 2009.

     The acquisition was accounted for as a purchase and the results of operations of the acquired businesses have been included within the Company’s consolidated financial statements from January 1, 2008 forward.

The following unaudited information presents the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition. The Company is in the process of obtaining an independent third-party final valuation analysis of the assets acquired, and based upon final review of the valuation; these preliminary allocations are subject to change. The valuation is anticipated to be completed during the third quarter of 2008:

Current assets		$	6,622,000
Fixed assets			415,000
Other long-term assets			872,000
Identified intangible assets			3,000,000
Goodwill			8,303,000
Total assets acquired			19,212,000
Current liabilities assumed			4,704,000
Net assets acquired		$	14,508,000

Identifiable intangible assets acquired include: Employment contracts of $500,000, Concert Group Logistics station network $1,500,000, and Concert Group Logistics trade name $1,000,000.

The following unaudited proforma consolidated financial information is presented as if the acquisition of Concert Group Logistics occurred on January 1, 2007.

		Three Months Ended								Six Months Ended
						June 30,								June 30,
		June 30,				2007				June 30,				2007
		2008				(Pro forma)				2008				(Pro forma)
Operating revenues		$	30,925,000			$	26,275,000			$	55,931,000			$	47,750,000
Operating expenses			25,985,000				21,632,000				46,565,000				39,139,000
Gross margin			4,940,000				4,643,000				9,366,000				8,611,000
Selling, general and administrative expenses			3,524,000				2,983,000				6,804,000				5,964,000
Net Income applicable to common stock			774,000				1,095,000				1,417,000				1,745,000
Earnings per share:
Basic			0.02				0.04				0.05				0.06
Diluted			0.02				0.03				0.05				0.05
Weighted Average common shares outstanding
Basic weighted average common shares outstanding			31,723,787				31,506,100				30,883,946				31,374,016
Diluted weighted average common shares outstanding			32,067,972				32,309,728				31,225,376				32,165,538

4. Commitments and Contingencies

Litigation

     In the ordinary course of business, the Company may be a party to a variety of legal actions. The Company does not currently anticipate any of these matters or any matters in the aggregate to have a materially adverse effect on the Company’s business or its financial position or results of operations.

Regulatory Compliance

     The Company’s activities are regulated by state and federal agencies under requirements that are subject to broad interpretations. Among these regulations are limitations on the hours-of-service that can be performed by the Company’s drivers, limitations on the types of commodities that can be hauled, limitations on the gross vehicle weight for each class of vehicle utilized by the Company and limitations on the transit authorities within certain regions. The Company cannot predict future changes to be adopted by the regulatory bodies that could require changes to the manner in which the Company operates.

Contingent Commitment

     The Company has entered into an agreement with a third-party transportation equipment leasing company which results in a contingent liability. The Company has accounted for this contingency based upon the guidelines contained within FIN Number 45 and in SFAS Number 5. Accordingly, the Company has estimated the maximum amount of the contingent liability to be $51,000 as of June 30, 2008, and has recorded this amount as a reserve within its balance sheet and as an expense within its statement of earnings. The Company periodically evaluates the contingency amount and adjusts the liability based upon the results of those periodic evaluations. Based upon its analysis, the Company estimates that the range in liability that could be realized is between $25,000 and $51,000, as of June 30, 2008.

     In conjunction with the purchase of Concert Group Logistics, the Company entered into a contingent agreement whereby the Company could be required to remit up to $1.5 million to the former owners of CGL, provided certain performance measures are obtained within the CGL operations during 2008 and 2009. For more discussion on the CGL transaction and this contingent commitment, please refer to footnote numbers 3 and 7.

5. Debt

Notes Payable and Capital Leases

     The Company enters into notes payable and capital leases with various third parties from time to time to finance certain operational equipment, real property and other assets used in its business operations. Generally these loans and capital leases bear interest at market rates, and are collateralized with equipment and certain assets of the Company.

     The table below outlines the Company’s notes payable and capital lease obligations as of June 30, 2008 and December 31, 2007.

		Interest rates				Term (months)				As of June 30,				As of December 31, 2007
Notes payable			4	%			36			$	3,200,000			$	—
Capital leases for equipment			18	%			24 - 60				60,000				84,000
Total notes payable and capital leases											3,260,000				84,000
Less: current maturities of long-term debt											1,250,000				50,000
Non-current maturities of long term-debt										$	2,010,000			$	34,000

     The Company recorded interest expense associated with the above debt of $29,000 and $36,000 for the first and second quarters ended March 31, 2008 and June 30, 2008 respectively. For these same periods, the Company recorded gross payments for the debt of $240,000 and $248,000 respectively.

6. Revolving Credit Facilities

     The Company entered into a new credit facility with National City Bank in January, 2008. This facility provides for a receivables based line of credit of up to $11.0 million and a term note of $3.6 million. The Company may draw upon the receivables based line of credit the lessor of $11.0 million or 80% of eligible accounts receivables, less amounts outstanding under letters of credit. To fund the purchase of Concert Group Logistics, LLC, the Company drew $3.6 million on the term facility and $5.4 million on the receivables based line of credit. Substantially all the assets of the Company and its wholly owned subsidiaries (Express-1, Inc., Express-1 Dedicated, Inc., Concert Group Logistics, Inc. and Bounce Logistics, Inc.) are pledged as collateral securing performance under the terms of the commitment. The line bears interest based upon a spread above thirty-day LIBOR with an initial increment of 125 basis points above thirty-day LIBOR for the receivables line and 150 basis point above thirty-day LIBOR for the term note. Amortizing over a thirty-six month period, the term note requires monthly principal payments of $100,000 together with accrued interest be paid until retired. The weighted average rate of interest on the credit facility was approximately 3.9% as of June 30, 2008 and rates are adjusted daily. Available capacity under the facility was approximately $3.05 million as of June 30, 2008, and the facility carried an initial maturity date of June 30, 2009. The credit facility has been subsequently extended with a revised maturity date of May 31, 2010.

7. Related Party Transaction

     In January 2008, in conjunction with the Company’s purchase of substantially all assets of Concert Group Logistics, LLC (“Concert Transaction”), Daniel Para, was appointed to the Board of Directors of the Company. Prior to the completion of the Concert Transaction, Mr. Para served as the Chief Executive Officer of Concert Group Logistics, LLC, and was its largest stockholder. The Company purchased substantially all the assets of Concert Group Logistics, LLC for $9.0 million in cash, 4,800,000 shares of the Company’s common stock and the assumption of certain liabilities. The transaction contains performance targets, whereby the former owners of Concert Group Logistics, LLC can earn up to $2,000,000 of additional consideration ($500,000 is guaranteed, subject to certain rights of set-off), based upon results. For a more detailed discussion of the contingent earn-out provisions, please refer to footnote number 3, elsewhere within this report. As the largest shareholder of Concert Group Logistics, LLC, Mr. Para received, either directly or through his family trusts and partnerships, approximately 85% of the proceeds transferred in the transaction. Immediately after the transaction, Mr. Para became the largest shareholder of the Company, through holdings attributable to himself and Dan Para Investments, LLC.

     In January 2008, in conjunction with the Concert Group Logistics acquisition, the Company entered into a lease on approximately 6,000 square feet of office space located within an office complex at 1430 Branding Avenue, Downers Grove, Illinois 60515. The lease calls for, among other general provisions, rent payments in the amount of $95,000, $98,000, $101,000, $104,000 and $107,000 to be paid for 2008 and the four subsequent years thereafter. The building is owned by an Illinois Limited Liability Company, which has within its ownership group, Daniel Para, the former CEO of Concert Group Logistics, LLC. Mr. Para was appointed to the Board of Express-1 Expedited Solutions, Inc. in January 2008.

     In August of 2004, the Company acquired Express-1, Inc. and contractually agreed to provide contingent earn-out payments to the former owners of Express-1, provided certain performance goals were achieved. Among the goals were specified revenue growth rates and gross margin requirements. Michael R. Welch and James M. Welch, both Named Executive Officers, were principles in the ownership group of Express-1, Inc. For the years ended December 31, 2005 and 2006, the Company paid $1,500,000 and $1,750,000 respectively to the former owners of Express-1, Inc. under the provisions of the purchase agreement. In each of these periods, the Company accrued the payment within its December 31 balance sheet and made the payment in the subsequent year per the terms of the purchase agreement. For 2007, the Company accrued within its December 31, 2007 balance sheet, $2,000,000 to satisfy the final remaining earnout payment related to the Express-1, Inc. acquisition and subsequently satisfied this obligation through a cash payment during March of 2008.

     The above transactions are not necessarily indicative of amounts, terms and conditions that the Company may have received in transactions with unrelated third parties.

8. Operating Segments

     The Company has four reportable segments based on the types of services it provides, to its customers: Express-1 Dedicated, which provides dedicated expedite services, Express-1, which provides expedited transportation services throughout North America. Concert Group Logistics, which provides domestic and international freight forwarding services through a network of independently owned stations, and Bounce Logistics which provides premium freight brokerage services for truckload shipments needing a high degree of customer service. Concert Group Logistics and Bounce Logistics became part of the Company’s operation during the first quarter of 2008 and will be reflected within the statements and operating results on a prospective basis.

     The costs of the Company’s Board of Directors, executive team and certain corporate costs associated with operating as a public company are referred to as “corporate” charges. In addition to the aforementioned items, the Company also commonly records items such as its income tax provision and other charges that are reported on a consolidated basis within the corporate classification item.

     The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Substantially all intersegment sales prices are market based. The Company evaluates performance based on operating income of the respective business units.

     The schedule below identifies select financial data for each of the business segments.

Express-1 Expedited Solutions, Inc
Segment Data

						Express-1				Concert Group				Bounce				Corporate and
		Express-1				Dedicated				Logistics				Logistics				Other				Eliminations				Consolidated
Three Months Ended June 30, 2008
Revenues		$	14,609,000			$	1,250,000			$	14,492,000			$	1,045,000			$	—			$	(471,000	)		$	30,925,000
Operating income (loss)			1,440,000				55,000				395,000				(67,000	)			(407,000	)			—				1,416,000
Depreciation and amortization			178,000				23,000				114,000				2,000				—				—				317,000
Interest expense			—				—				92,000				—				7,000				—				99,000
Tax provision			—				—				117,000				(26,000	)			440,000				—				531,000
Goodwill			7,737,000				—				8,303,000				—				—				—				16,040,000
Total Assets			23,783,000				922,000				21,419,000				718,000				1,474,000				(186,000	)			48,130,000
Three Months Ended June 30, 2007
Revenues		$	12,575,000			$	1,267,000			$	—			$	—			$	—			$	—			$	13,842,000
Operating income (loss)			1,556,000				102,000				—				—				(386,000	)			—				1,272,000
Depreciation and amortization			188,000				32,000				—				—				—				—				220,000
Interest expense			—				—				—				—				34,000				—				34,000
Tax provision			—				—				—				—				457,000				—				457,000
Goodwill			5,527,000				—				—				—				—				—				5,527,000
Total Assets			18,490,000				820,000				—				—				3,076,000				—				22,386,000
Six Months Ended June 30, 2008
Revenues		$	27,777,000			$	2,540,000			$	24,963,000			$	1,228,000			$	—			$	(577,000	)		$	55,931,000
Operating income (loss)			2,694,000				241,000				639,000				(193,000	)			(819,000	)			—				2,562,000
Depreciation and amortization			345,000				47,000				165,000				2,000				—				—				559,000
Interest expense			—				—				168,000				—				11,000				—				179,000
Tax provision			—				—				182,000				(76,000	)			845,000				—				951,000
Goodwill			7,737,000				—				8,303,000				—				—				—				16,040,000
Total Assets			23,783,000				922,000				21,419,000				718,000				1,474,000				(186,000	)			48,130,000
Six Months Ended June 30, 2007
Revenues		$	22,850,000			$	2,485,000			$	—			$	—			$	—			$	—			$	25,335,000
Operating income (loss)			2,540,000				237,000				—				—				(735,000	)			—				2,042,000
Depreciation and amortization			376,000				75,000				—				—				—				—				451,000
Interest expense			—				—				—				—				58,000				—				58,000
Tax provision			—				—				—				—				735,000				—				735,000
Goodwill			5,527,000				—				—				—				—				—				5,527,000
Total Assets			18,490,000				820,000				—				—				3,076,000				—				22,386,000

9. Subsequent Events

          During July 2008, the Company canceled approximately 1.6 million unexercised warrants to purchase shares of its common stock. The warrants were initially issued in conjunction with a private placement completed in July 2003.

          During August 2008, one holder of 759,300 warrants of the Company’s stock exercised its option to convert the warrants into shares of the Company’s common stock in a cashless exercise, according to provisions of a warrant certificate originally issued in 2003. Upon completion of this conversion, the Company issued 179,682 shares of its common stock to the warrant holder to complete this transaction.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Forward-Looking Statements. This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth of the Company’s business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances.

     Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Factors that could adversely affect actual results and performance include, among others, the Company’s limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technology change and competition. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

Critical Accounting Policies

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements. We have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts will be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2007, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. Following is a brief discussion of the changes that occurred during 2008 to the significant accounting policies and estimates disclosed in Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2007.

Revenue Recognition

     We primarily recognize revenue at the time of delivery based upon the following criteria: i) persuasive evidence of an arrangement exists, ii) services have been rendered, iii) the sales price is fixed and determinable and iv) collectability is reasonably assured. We report revenue on a gross basis in accordance with EITF 99-19, Reporting Revenue Costs as a Principal versus Net as an Agent. We are the primary obligor and are responsible for providing the service desired by the customer and we are responsible for fulfillment including the acceptability of the service. We have discretion in setting sales prices and as a result, our earnings vary. In addition we have discretion to select our drivers, contractors or other transportation providers (collectively, “service providers”) from among thousands of alternatives. Finally, we have credit risk for our receivables. These three factors, discretion in setting sales prices, discretion in selecting service provider and credit risk further support reporting revenue on the gross basis.

     Within one of our segments, Concert Group Logistics, we utilize an alternative point in time to recognize revenue. Within this segment, revenue is recognized and associated direct operating expenses are recognized on the date the freight is picked up from the shipper. Recognition of revenue prior to the completion of services is not a preferred method of revenue recognition as prescribed in Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force Issue No. 91-9 Revenue and Expense Recognition for Freight Services in Progress (“EITF No. 91-9”). We believe this practice is common within the freight forwarding industry as well as within other areas of the transportation industry. We have analyzed the impact of this alternative method on the financial statements taken as a whole and determined the difference is immaterial.

New Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141 (R)”). SFAS No. 141(R) retains the fundamental requirements in Statement No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be indentified for each business combination. In general, the statement 1) broadens the guidance of SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increased required disclosures. The Company is required to apply SFAS No. 141(R) prospectively to business combinations for which the acquisition date is on or after January 1, 2009. Earlier application is not permitted.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains or losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company did not record an adjustment within its financial statements as a result of adopting the provisions of SFAS No. 159, as June 30, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”, which defines fair value, establishes a framework for consistently measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. The Company did not record an adjustment within its financial statements as a result of adopting the provisions of SFAS No. 157 as of June 30, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

Executive Summary

     Express-1 Expedited Solutions, Inc. (the “Company,” “we,” “our” and “us”), a Delaware corporation, is a transportation services organization focused upon premium logistics solutions provided through one of its non-asset based or asset-light operating units. The Company’s operations are provided through four distinct but complementary reporting segments, each with its own business unit leader — President. Our wholly owned subsidiaries include, Express-1, Inc. (“Express-1”), Express-1 Dedicated, Inc. (“Express-1 Dedicated” or “Evansville”), Concert Group Logistics, Inc. (“Concert Group Logistics” or “CGL”) and Bounce Logistics, Inc. (“Bounce Logistics”, or “Bounce”). These segment operations are more fully outlined in the table below, which reflects the business unit; location of the business unit headquarters office; premium transportation niche served by the unit; and initial date the unit began business within our consolidated company.

Business Unit		Primary Office Location		Premium Industry Niche		Initial Date(1)
Express-1 Dedicated		Evansville, Indiana		Dedicated Expedite Movements		April 2003
Express-1		Buchanan, Michigan		Expedited Transportation		August 2004
Concert Group Logistics		Downers Grove, Illinois		Freight Forwarding		January 2008
Bounce Logistics		South Bend, Indiana		Premium Truckload Brokerage		March 2008

     Our business segments serve a diverse client base within North America. Our Concert Group Logistics business unit also provides international freight forwarding services to customers within other regions of the world. Our premium services are focused on the needs of shippers for reliable same-day, time-critical, special handling, premium truckload brokerage or customized logistics solutions. We also provide aircraft charter services through third-party providers, in support of our customers’ critical shipments.

     Background

     Our operational model generates revenue growth through two primary means. Growth attributable to business volume expansion within our existing operating segments is referred to as “organic” growth. We include within our organic classification only growth from our operations that were part of our consolidated company prior to the start of the current year. For this report, the revenue growth of our Express-1 and Express-1 Dedicated operations are classified as organic. We classify growth from mergers, acquisitions and start-up activities as “acquisition” growth. For growth classification purposes we refer to investments in new businesses and business operations in a similar manner since both activities require some economic investment on the part of the Company. Within this report, the revenue growth from our Concert Group Logistics and Bounce Logistics operations are classified as acquisition growth.

     Throughout our reports, we refer to the impact of fuel on our business. For purposes of these references, we have only considered the impact of fuel surcharge revenues, fuel surcharge payments to contractors and fuel costs associated with two of our business segments, Express-1 and Express-1 Dedicated. We feel that this approach, most readily conveys the impact of fuel on the revenues, operating costs and resulting gross margin within our two business units that are most directly impacted by changes in the price of

fuel. Within our other two units, Concert Group Logistics and Bounce Logistics, fuel charges to our customers are not commonly negotiated and identified separate and apart from total revenue and the associated cost of transportation resulting from each shipment. We believe this is a common practice within the freight forwarding and freight brokerage business sectors.

     We often refer to the costs of our Board of Directors, our executive team and certain operating costs associated with operating as a public company as “corporate” charges. In addition to the aforementioned items, we also record items such as our income tax provision and other charges that are reported on a consolidated basis within the corporate line item.

     For the three months ended June 30, 2008 compared to the three months ended June 30, 2007

     The table below is provided to allow users of our reports a means to quickly visualize quarterly results within some of our major reporting classifications, and quarter-to-quarter changes i) in dollars, ii) in percentage and iii) the percentage of consolidated revenue for some of the major captions within our financial reports. The table is not intended to replace the financial statements, notes thereto or discussion by our management contained within this report on Form 10-Q and users are encouraged to review those items to gain a better understanding of our financial position and results of operations.

Express-1 Expedited Solutions, Inc.
Summary Financial Table

																		Percent of Total
		Three Months Ended June 30,								Quarter to Quarter Change								Segment Revenues
		2008				2007				In Dollars				In Percentage				2008				2007
Revenues
Express-1		$	14,609,000			$	12,575,000			$	2,034,000				16.2	%			47.2	%			90.8	%
Express-1 Dedicated			1,250,000				1,267,000				(17,000	)			-1.3	%			4.0	%			9.2	%
Concert Group Logistics			14,492,000				—				14,492,000				—				46.9	%			—
Bounce Logistics			1,045,000				—				1,045,000				—				3.4	%			—
Intercompany Eliminations			(471,000	)			—				(471,000	)			—				-1.5	%			—
Total Revenues			30,925,000				13,842,000				17,083,000				123.4	%			100.0	%			100.0	%
Operating Expenses
Express-1			11,250,000				9,290,000				1,960,000				21.1	%			36.3	%			67.1	%
Express-1 Dedicated			1,060,000				1,038,000				22,000				2.1	%			3.4	%			7.5	%
Concert Group Logistics			13,232,000				—				13,232,000				—				42.8	%			—
Bounce Logistics			914,000				—				914,000				—				3.0	%			—
Intercompany Eliminations			(471,000	)			—				(471,000	)			—				-1.5	%			—
Total Operating Expenses			25,985,000				10,328,000				15,657,000				151.6	%			84.0	%			74.6	%
Gross Margin
Express-1			3,359,000				3,285,000				74,000				2.3	%			10.9	%			23.7	%
Express-1 Dedicated			190,000				229,000				(39,000	)			-17.0	%			0.6	%			1.7	%
Concert Group Logistics			1,260,000				—				1,260,000				—				4.1	%			—
Bounce Logistics			131,000				—				131,000				—				0.4	%			—
Total Gross Margin			4,940,000				3,514,000				1,426,000				40.6	%			16.0	%			25.4	%
Selling, General & Administrative
Express-1			1,919,000				1,729,000				190,000				11.0	%			6.3	%			12.5	%
Express-1 Dedicated			135,000				127,000				8,000				6.3	%			0.4	%			0.9	%
Concert Group Logistics			865,000				—				865,000				—				2.8	%			—
Bounce Logistics			198,000				—				198,000				—				0.6	%			—
Corporate			407,000				386,000				21,000				5.4	%			1.3	%			2.8	%
Total Selling, General & Administrative			3,524,000				2,242,000				1,282,000				57.2	%			11.4	%			16.2	%
Income From Operations
Express-1			1,440,000				1,556,000				(116,000	)			-7.5	%			4.6	%			11.2	%
Express-1 Dedicated			55,000				102,000				(47,000	)			-46.1	%			0.2	%			0.7	%
Concert Group Logistics			395,000				—				395,000				—				1.3	%			—
Bounce Logistics			(67,000	)			—				(67,000	)			—				-0.2	%			—
Corporate			(407,000	)			(386,000	)			(21,000	)			5.4	%			-1.3	%			-2.8	%
Total Income From Operations			1,416,000				1,272,000				144,000				11.3	%			4.6	%			9.2	%
Interest Expense			99,000				34,000				65,000				191.2	%			0.3	%			—
Other Expense			12,000				27,000				(15,000	)			-55.6	%			0.0	%			0.2	%
Income Before Tax			1,305,000				1,211,000				94,000				7.8	%			4.2	%			8.7	%
Tax Provision			531,000				457,000				74,000				16.2	%			1.7	%			3.3	%
Total Net Income		$	774,000			$	754,000			$	20,000				2.7	%			2.5	%			5.4	%

Consolidated Results

     The composition of our consolidated results continued to change during the second quarter of 2008 compared to the same period in 2007. The impact of our CGL acquisition is the primary catalyst behind this evolution that started at the beginning of 2008. We anticipate our Express-1, CGL and Bounce operations to grow significantly in future periods, which will continue to change the historical relationship between operating revenue, direct expenses, gross margin and selling, general and administrative expenses, based upon the mix of business generated from each of our business units on a prospective basis.

     Approximately 91% of our increase in consolidated revenue during the second quarter of 2008 was due to acquisition growth stemming from our CGL and Bounce operations. Our Express-1 operations contributed 12% to our increase in consolidated revenue during the period, while our Express-1 Dedicated operations experienced a slight decline in revenue. Charges related to cross-selling between each of our units accounted for 3% of total revenue growth for the period and were eliminated from the consolidated revenue growth numbers. Cross-selling most commonly arises when Express-1 or Bounce accepts a load on behalf of one of our other business segments, thereby becoming a provider of services to its affiliate.

     Operating costs within each of our business units continued to be impacted during the second quarter of 2008 by general rate compression from within the domestic transportation markets compared to the same period in 2007. Decreases in rates charged to some of our customer accounts were not completely passed on to our providers of purchased transportation and to our fleet of independent contractors. In addition to this rate compression and its impact on our businesses, the relative percentage of our revenues derived from fuel surcharges increased. Since most of the revenue we receive as fuel surcharges is passed along as payments to providers of transportation services including our fleet of independent contractors, changes in the proportion of our revenue derived from fuel has the impact of increasing our direct costs as a percentage of revenue.

     With the acquisition of CGL and the start-up of Bounce, our historical relationship between operating costs and associated revenue has changed. Both CGL and Bounce have slightly different, but complementary, business models from our traditional reporting segments, Express-1 and Express-1 Dedicated. As a result, our operational cost is anticipated to range between 80% and 85% of associated revenue on a prospective basis. During the second quarter of 2008, our operating costs represented 84% of consolidated revenue, which is in line with our anticipated shift in the ratio of these costs to our revenue.

     We anticipate gross margin will range between 15% and 20% in subsequent periods during 2008, based upon the proportion of consolidated revenue derived from each of our operating segments in those periods. Changes in the mix of business volume and associated costs derived from each of our business units will impact this range of estimated gross margin. During the second quarter of 2008, gross margin represented 16% of our consolidated revenues, which is also in line with our anticipated shift in the ratio of gross margin as a percentage of revenue.

     Selling, general and administrative expenses increased primarily due to the acquisition of CGL and the start-up of Bounce Logistics, with 83% of the increase in SG&A during the second quarter of 2008 being derived from these two business units. Within our Express-1 and Express-1 Dedicated business units and within our Corporate classification, the combined SG&A increase accounted for 17% of the increase within our consolidated SG&A. Our non-asset business model typically allows us to hold SG&A expenses, the largest of which are wages and associated costs, to a slower rate of growth than that of our revenue. Within the second quarter of 2008, SG&A expenses increased by 57% from levels of the second quarter of 2007. This rate of increase is significantly slower than the 123% rate of growth within revenue and contributes to the operating leverage within our business model.

     Our consolidated income from operations improved in the second quarter of 2008 due to the inclusion of CGL in the current period. Within our other business units, income from operations declined for the period. The decrease in income within our operating units was primarily due to the softness within the domestic economy and the resulting impact on rates charged to our customers. Within our Bounce operations, we incurred some additional start-up expenses associated with ramping up this business unit. These costs were primarily related to wages and other back office costs associated with building the organization. Start-up costs within the Bounce operation and some annual expenses associated with the CGL operations unfavorably impacted income from operations, and are not anticipated to continue for the remainder of 2008.

     The rate of increase within our net income was lower than the rate of increase within our operating income, due in part to our interest expense and also to increases within our effective income tax rates. Our interest charges have increased primarily due to the borrowings created to fund the CGL transaction. The weighted average rate of interest charged on our debt obligations was 3.9% as of the end of the second quarter of 2008 and our management team anticipates retiring a significant amount of debt during the

balance of 2008. We plan to continue using our tax net operating loss carry forwards to reduce the amount of taxes paid in cash. We paid $173,000 in in estimated taxes in the second quarter.

Express-1

     Our Express-1 segment experienced a 16% increase in revenue, primarily due to the increase in fuel surcharge revenues charged to its customers during the second quarter of 2008 compared to the second quarter of 2007. To a lesser extent, revenue within Express-1 increased due to expansion within its fleet of independent contract drivers, which increased by 18% during the second quarter of 2008 versus the same period in 2007. The positive impact of fleet expansion was mitigated by decreases within the rates of revenue charged for expedited services. Express-1 continued to experience weakness within the automotive portion of its business during the second quarter of 2008. Offsetting this were strong increases from within Express-1’s international business and expansion of its services into some alternative business sectors, such as agricultural products and third-party logistics support. Due primarily to the continued softness in rates, gross margin declined as a percentage of revenue within the second quarter of 2008 versus the same period in 2007. Gross margin dollars increased during the period, which is attributable to the overall increase in revenue. Express-1 experienced an increase within its SG&A expense due to expansion within its headcount and associated wages during the second quarter of 2008, versus the same period in 2007. Express-1’s headcount, the cost of which represents the largest component of SG&A within Express-1, increased by approximately 7% on a sequential basis from the end of 2007. Operating income declined during the second quarter of 2008 versus the second quarter of 2007, due primarily to the aforementioned rate compression and its impact on gross margin as well as to the increase within SG&A expenses within the period. Fuel surcharge revenue within Express-1 was $2,699,000 during the second quarter of 2008 versus $1,147,000 in the second quarter of 2007.

Express-1 Dedicated

     Express-1 Dedicated revenues decreased slightly during the second quarter of 2008 compared to the same period of the prior year. This primarily resulted from a decrease in the number of routes covered by Express-1 Dedicated for its largest customer. The routes were reduced in cooperation with the customer, in an attempt to reduce overall cost of managing the contract. Fuel surcharge increased by 51% during the period and mitigated the impact of this reduction in dedicated routes. Operating expenses increased primarily due to increases within the cost of rental equipment and fuel costs associated with operating the fleet. Due to the lack of a long term agreement with the contract customer, the management of Express-1 Dedicated has shifted to the use of shorter term rental equipment to mitigate some risk associated with the continuity of service. The management team remains focused on controlling its SG&A expenses in the face of an inflationary economy, which is anticipated to help Express-1 Dedicated remain profitable even with some reduction in overall services. While SG&A has increased within the quarter, it has been relatively flat for the full year and is not expected to continue to rise significantly throughout the balance of 2008. Fuel surcharges accounted for $227,000 of Express-1 Dedicated revenues in the second quarter of 2008 compared to $150,000 in the second quarter of 2007.

Concert Group Logistics

     Comparisons of quarter-over-quarter results within our Concert Group Logistics segment are difficult, due to the purchase of CGL during the first quarter of 2008 and the previous operation of CGL as a private company. Specific pro-forma results of Concert Group Logistics are provided elsewhere in this report, and should be considered together with these comments.

     Concert Group Logistics revenue was $14.5 million during the second quarter of 2008 and accounted for 47% of our consolidated revenue for the period. CGL successfully increased its penetration of the international freight forwarding market and the portion of revenue derived from international shipments increased from to over 23% of total revenue during the second quarter of 2008. Operating costs, which consists primarily of payments for purchased transportation used to complete the CGL network shipments and payments to independent station owners for commissions (gross profit sharing or splits), represented 91% of CGL revenues, which is in line with the historic performance of this business. The resulting gross margin level of 9% of revenue is also in the range of historical levels for this operation. Selling, general and administrative expenses represented 6% of CGL revenue during the period, which is close to the levels we anticipate on a prospective basis. CGL did incur some large expenses within the quarter that are not anticipated to be ongoing during the balance of 2008. Among these were charges associated with an annual customer appreciation meeting and charges associated with an annual station owners meeting. Combined, these charges were approximately $150,000 during

the second quarter. Our management anticipates the income from operations within CGL to increase on a prospective basis, as these charges are no longer being absorbed.

Bounce Logistics

     Comparisons of year-over-year results within our new Bounce Logistics segment are not meaningful, since the business originated from conceptual discussion to an operating business during the first quarter of 2008. We absorbed approximately $100,000 of start-up costs associated with staffing and building our Bounce operation, during the second quarter. The Bounce management team has been successful in expanding its operational footprint and developing customer accounts that have resulted in higher rates of revenue than initially anticipated. On a prospective basis, we believe Bounce will become profitable sometime during the last six months of 2008, as the revenue run rate eclipses the point that gross margin exceeds SG&A expenses. The Bounce start-up is viewed by our management team as an investment for future results. We anticipate Bounce results will be much greater beyond 2008 than during this initial year.

     Three months ended June 30, 2008 compared to the proforma three months ended June 30, 2007

     The information presented below is intended only to reflect the proforma results of our Company on a consolidated basis as if the transaction with Concert Group Logistics occurred on January 1, 2007. It should be used in conjunction with the financial statements and footnotes thereto contained elsewhere within this report.

     Proforma adjustments are limited to only those adjustments that are: i) directly attributable to the transaction, ii) factually supportable, iii) expected to have a continuing impact on the Company’s financial results. Adjustments that relate to improvements in operations, cross-selling opportunities and other potential beneficial adjustments have been omitted, based upon the aforementioned criteria for pro-forma adjustments.

Proforma Consolidated Results

     On a pro-forma basis, consolidated revenues increased by $4.7 million or 18% during the second quarter of 2008 compared to the second quarter of 2007. Most of this increase was due to the strong rate of organic growth within our business units, led by growth rates of approximately 16% within the Express-1 and 17% within the CGL operations. Operating costs increased by $4.4 million or

20% during the period. Operating costs consist of payments for purchased transportation, commissions to our independent station network and other costs associated with the generation of our revenues. Operating costs are primarily variable and fluctuate in accordance with changes in our revenues. During the second quarter of 2008, general transportation rates within our transportation markets were down slightly over the prior year. The result of this reduction in non-fuel rates continued to compress of our gross margin. We are not able to generate margins on fuel that are equivalent to those we receive on our general transportation revenue. Consequently, our revenue increase, which was largely comprised of fuel surcharge revenue, did not generate margins similar to those from the prior year. Selling, general and administrative expenses increased by $541,000 or 18% during the second quarter of 2008 versus the same period in 2007. Most of the increase was associated with increases within our Express-1, CGL and Bounce business units. We continue to be focused on maintaining a slower rate of growth within our SG&A expenses than those within our revenues. Pre-tax income decreased by $274,000 or 16% during the period. Net income decreased by $321,000 or 29% during the quarter.

Proforma Concert Group Logistics

     On a proforma basis, our Concert Group Logistics unit increased revenues by $2,059,000 or 17% during the second quarter of 2008 compared to the same period in 2007. It is important to note that Concert Group Logistics reduced the size of its network by four stations in December 2007. With this shrinking from 25 stations to 21 just prior to the completion of the purchase transaction, revenue growth has been negatively impacted on a comparative basis. We have not adjusted the historical proforma numbers to eliminate the prior year revenues associated with these former stations, as we believe such adjustment would not be in keeping with the guidelines for proforma adjustments. CGL has successfully increased its international freight forwarding presence with international business accounting for over 20% of its revenue in the second quarter of 2008, versus approximately 10% in the second quarter of 2007. Concert Group Logistics operating costs increased by $1.9 million or 17% during the first quarter, resulting in an improvement in gross margin of $131,000 or 12% for the period. Selling, general and administrative expenses increased by $124,000 or 17%, principally as a result of the change of operating the business as a private company versus a subsidiary of a our consolidated company. Operating income increased by 16% or $54,000 during the second quarter of 2008 compared to the same period in 2007.

     For the six months ended June 30, 2008 compared to the six months ended June 30, 2007

     The table below is provided to allow users of our reports a means to quickly visualize quarterly actual results within some of our major reporting classifications, and quarter-to-quarter changes i) in dollars, ii) in percentage and iii) the percentage of consolidated

revenue for some of the major captions within our financial reports. The table is not intended to replace the financial statements, notes thereto or discussion by our management contained within this report on Form 10-Q and users are encouraged to review those items to gain a better understanding of our financial position and results of operations.

Express-1 Expedited Solutions, Inc.
Summary Financial Table

																		Percent of Total
		Six Months Ended June 30,								Year to Year Change								Segment Revenues
		2008				2007				Change				% Change				2008				2007
Revenues
Express-1		$	27,777,000			$	22,850,000			$	4,927,000				21.6	%			49.7	%			90.2	%
Express-1 Dedicated			2,540,000				2,485,000				55,000				2.2	%			4.5	%			9.8	%
Concert Group Logistics			24,963,000				—				24,963,000				—				44.6	%			—
Bounce Logistics			1,228,000				—				1,228,000				—				2.2	%			—
Intercompany Eliminations			(577,000	)			—				(577,000	)			—				-1.0	%			—
Total Revenues			55,931,000				25,335,000				30,596,000				120.8	%			100.0	%			100.0	%
Operating Expenses
Express-1			21,305,000				16,840,000				4,465,000				26.5	%			38.2	%			66.5	%
Express-1 Dedicated			2,034,000				1,961,000				73,000				3.7	%			3.6	%			7.7	%
Concert Group Logistics			22,716,000				—				22,716,000				—				40.6	%			—
Bounce Logistics			1,087,000				—				1,087,000				—				1.9	%			—
Intercompany Eliminations			(577,000	)			—				(577,000	)			—				-1.0	%			—
Total Operating Expenses			46,565,000				18,801,000				27,764,000				147.7	%			83.3	%			74.2	%
Gross Margin
Express-1			6,472,000				6,010,000				462,000				7.7	%			11.5	%			23.7	%
Express-1 Dedicated			506,000				524,000				(18,000	)			-3.4	%			0.9	%			2.1	%
Concert Group Logistics			2,247,000				—				2,247,000				—				4.0	%			—
Bounce Logistics			141,000				—				141,000				—				0.3	%			—
Total Gross Margin			9,366,000				6,534,000				2,832,000				43.3	%			16.7	%			25.8	%
Selling, General & Administrative
Express-1			3,778,000				3,470,000				308,000				8.9	%			6.7	%			13.7	%
Express-1 Dedicated			265,000				287,000				(22,000	)			-7.7	%			0.5	%			1.1	%
Concert Group Logistics			1,608,000				—				1,608,000				—				2.9	%			—
Bounce Logistics			334,000				—				334,000				—				0.6	%			—
Corporate			819,000				735,000				84,000				11.4	%			1.5	%			2.9	%
Total Selling, General & Administrative			6,804,000				4,492,000				2,312,000				51.5	%			12.2	%			17.7	%
Income From Operations
Express-1			2,694,000				2,540,000				154,000				6.1	%			4.9	%			10.0	%
Express-1 Dedicated			241,000				237,000				4,000				1.7	%			0.4	%			0.9	%
Concert Group Logistics			639,000				—				639,000				—				1.1	%			—
Bounce Logistics			(193,000	)			—				(193,000	)			—				-0.3	%			—
Corporate			(819,000	)			(735,000	)			(84,000	)			11.4	%			-1.5	%			-2.9	%
Total Income From Operations			2,562,000				2,042,000				520,000				25.5	%			4.6	%			8.1	%
Interest Expense			179,000				58,000				121,000				208.6	%			0.3	%			0.2	%
Other Expense			15,000				34,000				(19,000	)			-55.9	%			0.0	%			0.1	%
Income Before Tax			2,368,000				1,950,000				418,000				21.4	%			4.2	%			7.7	%
Tax Provision			951,000				735,000				216,000				29.4	%			1.7	%			2.9	%
Total Net Income		$	1,417,000			$	1,215,000			$	202,000				16.6	%			2.5	%			4.8	%