UNITED STATES SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C. 20549
FOR 10-QSB
ANNUAL REPORT PURSUANT TO SECTION13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Nine Months Ended September 30, 2001
Commission File Number: 33-9640-LA
Logistics Management Resources, Inc.
(Exact Name of Issuer as Specified in it Charter)
COLORADO 68-0133692
(State or Other Jurisdiction (IRS Employer Identification Number)
incorporation or organization)
10602 Timberwood Circle, Suite #9, Louisville, Kentucky 40223
(Address of Principal Executive (Offices)
502-339-4000
(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) or the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
There were 35,156,013 shares of the Registrant's common stock issued at November
12, 2001 with 15,100,104 restricted with an estimated float of 20,055,909.
U.S. TRUCKING, INC.
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, 2001 AND
DECEMBER 31, 2000
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
To the Board of Directors and Stockholders of
Logistics Management Resources, Inc.
We have reviewed the accompanying balance sheet of Logistics Management
Resources, Inc. as of September 30, 2001 and the related statements of
operations for the nine months then ended, and the cash flows for the nine
months then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The September 30, 2000 financial statements of Logistics Management Resources,
Inc., formerly U.S. Trucking, Inc., were reviewed by other accountants whose
report dated December 21, 2000 stated that they were not aware of any material
modifications that should be made to those statements in order for them to be in
conformity with generally accepted accounting principles.
/s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
November 7, 2001
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Financial Statements
September 30, 2001
1
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Index to the Financial Statements
September 30, 2001
Page
Financial Statements
Balance Sheets................................................ 1
Statements of Operations...................................... 2
Statements of Cash Flows...................................... 3-5
Notes to the Financial Statements............................. 6-12
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Balance Sheets
September 30, December 31,
2001 2000
----------------- -----------------
Assets
Current Assets
Inventory $ - $ 162,000
----------------- -----------------
Total Current Assets - 162,000
Property and equipment, at cost less accumulated depreciation of $1,622 and
$244, respectively 7,237 975
Prepaid expenses 1,266,724 -
Debt issuance costs, net of accumulated amortization of $86,992 and
$43,522, respectively 36,724 80,195
----------------- -----------------
Total Assets $ 1,310,685 $ 243,170
================= =================
Liabilities and Stockholders' Equity
Current Liabilities
Cash overdraft $ - $ 29,688
Accrued expenses 355,227 260,477
Accrued interest 3,252,786 1,728,731
Due to related party 693,666 317,820
Convertible debentures 4,405,000 4,405,000
Loans payable 2,584,015 2,459,599
Net liabilities of discontinued operations 13,267,968 13,422,749
----------------- ------------------
Total Liabilities 24,558,662 22,624,064
----------------- ------------------
Commitments and contingencies
Stockholders' Equity
Preferred stock, no par value; (10,000,000 shares authorized)
Series A (99,000 shares outstanding) 132 132
Series B (2,000 shares outstanding) 2,000,000 2,000,000
Series C (50,000 shares outstanding) 15,000 15,000
Series D (950 shares outstanding) 950,000 950,000
Series E (2,300 shares outstanding) 2,300,000 2,300,000
Common stock, no par value; 75,000,000 shares authorized,
20,055,909 shares issued and outstanding
Additional paid-in capital 15,688,390 12,197,922
Treasury stock (68,401) -
Subscription receivable (906,788) (906,788)
Accumulated (deficit) (43,226,310) (38,937,160)
----------------- ------------------
Total Stockholders' Equity (Impairment) (23,247,977) (22,380,894)
----------------- ------------------
Total Liabilities and Stockholders' Equity $ 1,310,685 $ 243,170
================= ==================
See notes to the financial statements.
1
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statements of Operations
Three Nine
Three Months Months
Months Ended Nine Months Ended
Ended September Ended September
September 30, 2000 September 30, 2000
30, 2001 (Restated) 30, 2001 (Restated)
--------------- --------------- -------------- ---------------
Continuing Operations:
Net Revenue $ 160,076 $ - $ 160,076 $ -
Cost of Equipment Sold 162,000 - 162,000 -
--------------- --------------- -------------- ---------------
Gross Profit (1,924) - (1,924) -
--------------- --------------- -------------- ---------------
Operating Expenses
Depreciation and amortization 14,909 667,662 44,848 865,042
Taxes and licenses 7,386 2,096 7,386 3,608
Salaries, wages and benefits 17,280 53,403 30,074 101,442
Occupancy costs - 8,508 4,200 28,400
Administrative expenses 427,647 426,599 2,559,061 1,099,353
--------------- --------------- -------------- ---------------
Total Operating Expenses 467,222 1,158,268 2,645,569 2,097,845
Net Operating Loss before Discontinued
Operations (469,146) (1,158,268) (2,647,493) (2,097,845)
Discontinued Operations:
Loss on disposal of discontinued operations (94,288) (20,000,243) (108,937) (24,820,598)
--------------- --------------- -------------- ---------------
Net (Loss) before Other Income and Expense (563,434) (21,158,511) (2,756,430) (26,918,443)
Interest income - 133,188 - 155,435
Interest expense (210,699) (87,839) (1,532,720) (199,380)
--------------- --------------- -------------- ---------------
Net (Loss) before Income Taxes (774,133) (21,113,162) (4,289,150) (26,962,388)
Provision for (Benefit from) Income Taxes - - - -
--------------- --------------- -------------- ---------------
Net (Loss) $ (774,133) $ (21,113,162) $ (4,289,150) $ (26,962,388)
=============== =============== ============== ===============
Earnings (Loss) Per Common Share
(Loss) from continuing operations $ (0.04) $ (0.06) $ (0.27) $ (0.12)
(Loss) from discontinued operations (0.01) (1.10) (0.01 (1.36)
--------------- --------------- -------------- ---------------
Basic and diluted earnings per share $ (0.05) $ (1.16) $ (0.28) $ (1.48)
=============== =============== ============== ===============
Weighted Average Number of Common Shares 15,279,795 18,229,461 15,279,795 18,229,461
Outstanding
=============== =============== ============== ===============
See notes to the financial statements.
2
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statements of Cash Flows
Nine
Nine Months
Months Ended
Ended September
September 30, 2000
30, 2001 (Restated)
--------------- ---------------
Cash Flows From Operating Activities
Continuing Operations
Loss before income taxes $ (4,180,213) $ (2,141,790)
Adjustments to Reconcile Net (Loss) to Net Cash Used By
Operating Activities
Depreciation and amortization expense 44,848 865,042
Issuance of common stock for services rendered 3,310,469 -
Issuance of common stock for purchase of business 180,000 -
(Increase) decrease in Assets
Inventory 162,000 -
Prepaid expenses (1,266,724) -
Increase (decrease) in Liabilities
Cash overdraft (29,688) -
Accrued expenses 94,750 -
Accrued interest 1,524,055 -
--------------- ---------------
Net Cash Used in Continuing Operations (160,503) (1,276,748)
--------------- ---------------
Discontinued Operations
Loss before income taxes (108,937) (24,820,598)
Adjustments to Reconcile Net (Loss) to Net Cash Used
By Operating Activities
Decrease in net assets of discontinued operations - 14,629,312
(Decrease) in net liability of discontinued operations (154,781) -
--------------- ---------------
Net Cash Used in Discontinued Operations (263,718) (10,191,286)
--------------- ---------------
Net Cash Used in Operating Activities (424,221) (11,468,034)
--------------- ---------------
Cash Flows From Investing Activities
Purchases of equipment (7,640) -
--------------- ---------------
Net Cash (Used in) Investing Activities $ (7,640) $ -
--------------- ---------------
See notes to the financial statements.
3
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Cash Flows (Continued)
Nine Months
Nine Months Ended
Ended September
September 30, 2000
30, 2001 (Restated)
--------------- --------------
Cash Flows from Financing Activities
Net proceeds from related parties $ 375,846 $ 186,023
Purchase of treasury stock (118,401) -
Sale of treasury stock 50,000 -
Proceeds from loans payable 124,416 -
Principal payments on long-term debt - (2,810,916)
Issuance of convertible debentures - 7,435,000
Proceeds from long-term debt financing - 5,600,208
--------------- --------------
Net Cash Provided By Investing Activities 431,861 10,410,315
--------------- --------------
Net Increase (Decrease) in Cash - (1,057,719)
Cash at beginning of period - 1,057,719
--------------- --------------
Cash at end of period $ - $ -
=============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest expense $ - $ 185,930
=============== ===============
Income taxes $ - $ -
=============== ===============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In June, 2000, 9,000,000 shares of common stock were issued for the
retirement of 900,000 shares of Series A preferred stock valued at $630.
During the first quarter of 2000, LMRI acquired the business operations of
Checkmate Truck Brokerage, Inc. and Maverick Truck Brokerage, Inc.
Fair value of assets acquired $ 3,531,347
Fair value of liabilities assumed 4,399,649
Goodwill recognized 2,606,125
Cash paid 534,698
Value of common stock issued 1,026,782
See notes to the financial statements.
4
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Cash Flows (Continued)
During the first quarter of 2001, LMRI acquired the business operations of
Trans-Logistics, Inc.
Fair value of assets acquired $ 271,667
Fair value of liabilities assumed 258,475
Goodwill recognized 256,944
Cash due to sellers 90,137
Value of common stock issued 180,000
During the nine months ended September 30, 2001, the Company issued 15,488,764
shares of common stock for services rendered valued at $3,310,469, of which
$2,043,745 was expensed during the period.
See notes to the financial statements.
5
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 Northern Dancer Corporation
(Northern Dancer), a non-operating public shell, through the exchange
of 100% of the issued and outstanding shares of Northern Dancer's
common stock for approximately 96% of the outstanding shares of U. S.
Trucking - Nevada's common stock. Northern Dancer's legal name was
changed to U. S. Trucking, Inc. (U. S. Trucking). The acquisition is
considered to be a capital transaction, in substance equivalent to the
issuance of stock by U. S. Trucking - Nevada for the net monetary
assets of Northern Dancer, accompanied by a recapitalization of U. S.
Trucking - Nevada.
U. S. Trucking - Nevada was formed by U. S. Transportation Systems,
Inc. (USTS) as a wholly owned subsidiary. As part of the transaction
to acquire Gulf Northern, Inc., 25% of the U. S. Trucking - Nevada's
common stock was transferred to Gulf Northern's parent (Logistics
Management, LLC). The remaining 75% was conveyed to Logistics
Management, LLC during 1998.
The Company's corporate headquarters are located in Louisville,
Kentucky.
On November 30, 2000, UST Logistics, Inc., Mencor, Inc., Prostar, Inc.
and Gulf Northern Transport, Inc., LMRI's four operating subsidiaries,
filed voluntary petitions for reorganization under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court, Middle District
of Florida, Jacksonville Division. During the nine months ended
September 30, 2001, the subsidiaries converted their petition from
reorganization under Chapter 11 to liquidation under Chapter 7 of the
Bankruptcy Code.
Prior to December 31, 2000 the Company terminated its auto liability
insurance business.
LMRI's prospective principal business is to provide for the
transportation needs of clients through "Total Logistics Management,"
which includes managing clients' domestic and international trucking,
load matching, consolidation and warehousing requirements.
On January 29, 2001, the Company held a Special Stockholders' Meeting
to vote on a corporate name change and reverse split of the Company's
common stock. The Company's Board of Directors approved the change of
the Company's name to Logistics Resources Management, Inc. At the
Special Stockholders' Meeting, stockholders approved the name change
and reverse split of the shares of the Company's common stock on a 100
for 1 basis. The record date for the reverse split was February 12,
2001. The Company also changed its symbol on the Over The Counter
Bulletin Board to "LMRI" to reflect its new name.
Effective January 1, 2001, the Company purchased all of the issued and
outstanding common stock of Trans-Logistics, Inc., a Florida
corporation. The Company purchased one hundred percent of Trans-
Logistics' issued and outstanding common stock at the price of
$80,000, plus, four times Trans- Logistics' gross brokerage
commissions for the period of October 1, 2001 to December 31, 2001,
plus, any accounts receivable (after adjusting for accounts payable)
less any payments by the Company of the assumption of liabilities with
Atech Commercial Corp. in excess of $120,000. On August 10, 2001 the
Company and Trans-Logistics, Inc. agreed to rescind and cancel the
terms and conditions of the acquisition agreement. Under the terms of
the rescission agreement, the Company agreed to reimburse
Trans-Logistics, Inc. 1,500,000 shares of the Company's common stock.
The rescission agreement was effective as of July 1, 2001.
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)
(B) Revenue Recognition
During 2001, the Company changed its revenue recognition policy to
record revenue at the time freight is picked up at the customer's
site.
(C) Earnings Per Share
Basic earnings per share are computed by dividing net income available
to common shareholders by the weighted average number of common shares
outstanding during the year. Diluted earnings per share are calculated
by combining weighted average number of common shares outstanding and
potentially dilutive common share equivalents unless the effect of
doing so is anti-dilutive. Common equivalent shares have been excluded
from the 2000 computation of diluted EPS since their effect is
anti-dilutive.
(D) Fair Value of Financial Instruments
The fair values of accounts payable and other short-term obligations
approximate their carrying values because of the short maturity of
these financial instruments.
(E) Securities Issued for Services
The Company accounts for common stock issued for services by reference
to the fair market value of Company's common stock on the date of
issuance less a discount for volatility and marketability. The
issuances are accounted for as a prepaid expense and amortized over
four quarters commencing with the quarter in which they are issued.
(F) Debt Issuance Costs
Debt issuance costs are recorded at cost and are being amortized over
the term of the related obligations or their conversion, if sooner,
using the effective interest method. Accumulated amortization was
$86,992 at September 30, 2001 and $43,522 at December 31, 2000.
(G) Income Taxes
The Company utilizes Statement of Financial Accounting Standards No.
109 ("SFAS 109"), "Accounting for Income Taxes," which requires an
asset and liability approach to financial accounting and reporting for
income taxes. The difference between the financial statement and tax
basis of assets and liabilities is determined annually. Deferred
income tax assets and liabilities are computed for those temporary
differences that have future tax consequences using the current
enacted tax laws and rates that apply to the periods in which they are
expected to affect taxable income. In some situations, SFAS 109
permits the recognition of expected benefits of utilizing net
operating loss and tax credit carry forward. Valuation allowances are
established based upon management's estimate, if necessary. Income tax
expense is the current tax payable or refundable for the period plus
or minus the net change in the deferred tax assets and liabilities.
7
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)
(H) 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.
(I) Reclassifications
Certain reclassifications were made to prior period financial
statement presentations to conform with current period presentations.
(J) Inventory
Inventory consists of transportation equipment held for resale.
(K) Property and Equipment
Depreciation is provided for in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service
lives. Accelerated methods of depreciation are followed for tax
purposes and the straight-line method is used for financial reporting
purposes.
Note 2 - Equipment
Equipment at cost, less accumulated depreciation, consists of the
following:
September 30, December 31,
2001 2000
---------------- ----------------
Office Equipment $ 8,859 $ 1,219
Less accumulated depreciation 1,622 244
---------------- ----------------
Total $ 7,237 $ 975
================ ================
Depreciation expense charged to operations for the nine months ended
September 30, 2001 and 2000 was $1,378 and $244, respectively.
Note 3 - Convertible Debentures
During 2000, the Company issued $4,650,000 of 10% convertible
debentures due May 31, 2002. The Company received proceeds of
$4,502,000 , net of $148,000 of debt issuance costs. The debt issuance
costs are being amortized over the life of the debentures. $43,470 and
$21,761 was amortized during the nine months ended September 30, 2001
and 2000, respectively.
The holders of the debentures are entitled, at their option, to convert
at any time, all or any part of the principal amount of the debentures
plus accrued interest.
8
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.
Note 4 - Acquisitions
Effective January 2, 2001, the Company purchased all of the issued and
outstanding common stock of Trans- Logistics, Inc., a Florida corporation. On
August 10, 2001 the Company and Trans-Logistics, Inc. agreed to rescind and
cancel the terms of conditions of the acquisition agreement. Under the terms
of the rescission agreement, the Company agreed to reimburse trans-Logistics,
Inc. 1,500,000 shares of the Company's common stock. The rescission agreement
was effective as of July 1, 2001.
Note 5 - Discontinued Operations
On November 30, 2000, the Company's four operating subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the Bankruptcy
Code. The Company is liable as a guarantor on certain indebtedness of its
former subsidiaries. The Company is liable for obligations as to which it is a
primary or secondary guarantor relating to its former subsidiaries, which have
filed voluntary petitions for reorganization, and terminated its auto
liability insurance business. Resultant estimated guarantee obligations are
comprised of the following:
General Electric Capital Corporation
On November 27, 2000, Gulf Northern Transport, Inc., Prostar, Inc., U.S.T.
Logistics, Inc. , as borrowers, and LMRI, as a guarantor, entered into a
Restructure Agreement with respect to certain financing arrangements pursuant
to a loan and security agreement dated December 22, 1998 between the borrowers
and General Electric Capital Corporation. Pursuant thereto, the Company
estimates its liability to be $10,440,408. As of May 15, 2001, the Company was
in default as to its obligations under the Restructure Agreement. October 1,
2001, General Electric Capital Corporation filed suit against the Company.
Captive Insurance Program
Prior to December 31, 2000, the Company terminated its auto insurance business
and has been advised by counsel that its maximum exposure may be $1,414,492.
The Company contemplates satisfying this liability at the rate of $50,000 per
month commencing in January 2002. The present value of this obligation,
applying a 10% effective interest rate, amounts to $1,203,657.
Equipment Financing Arrangements
The Company is a guarantor as to certain equipment notes and leases of its
former subsidiaries. The Company estimates its gross liability to be
$3,316,915 pursuant to these financing arrangements and the realizable value
of the related collateral to be $2,484,000 resulting in an estimated guarantee
obligation of $832,915.
Other guaranteed obligations ranging from payroll taxes, delinquent rents and
delinquent vendor payables total $790,988.
9
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 6 - Preferred Stock
During 2000, the Company exchanged 900,000 shares of its Preferred Series A
shares for 9,000,000 shares of Common Stock. On February 1, 1999, the Company
entered into three stock exchange agreements whereby a total of 9,990,000
shares of Common Stock were exchanged for 999,000 of Series A Preferred Stock.
The value of the shares was determined to be $762 and such amount was deducted
from additional paid-in capital. Each share of Series A Preferred Stock is
entitled to ten votes and will vote together with the holders of the Common
Stock. Pursuant to this agreement, each share of Series A Preferred Stock may
be exchanged for ten shares of Common Stock as follows: one fifth of the
shares upon he Company's reporting revenues of $31 million or more for any
fiscal year or shorter period in a report filed on Form 10-KSB or any
appropriate Securities and Exchange Commission filing; an additional one-fifth
if revenues are at or above $41 million; an additional one fifth if revenues
are at or above $51 million; an additional one-fifth if revenues are at or
above $61 million; and the balance if revenues are at or above $71 million.
Note 7 - Related Party Transactions
Amounts due to related party of $693,666 as of September 30, 2001 and $317,820
at December 31, 2000 consist of amounts borrowed by the Company from entities
with similar ownership interests. Amounts outstanding bear no interest and
repayment is expected as cash flows are available.
Note 8 - Going Concern
The Company's financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Company incurred a net
loss of $(4,180,213) for the nine months ended September 30, 2001 and, as of
that date, had a working capital deficiency of $(24,558,662) and a net worth
deficiency of $(23,247,977). Also, as discussed at Note 1, the Company's four
operating subsidiaries filed voluntary petitions for liquidation under Chapter
7 of the Bankruptcy Code and, as described at Note 5, the Company is liable as
a guarantor on certain indebtedness of it's former subsidiaries.
The Company's ability to generate sufficient proceeds from prospective
operations, debt or equity placements is uncertain. The financial statements
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Management's plans for prospective operations are described at Note 1.
Management is continuing its efforts to arrange for the placement of
sufficient debt or equity to alleviate the above described conditions.
Note 9 - Commitments and Contingencies
Stock Activity:
During 2000, LMRI issued a total of 7,800,000 shares of common stock to
several companies and individuals as collateral in connection with contingent
transactions. In 2000, the 7,800,000 shares were issued to a majority
stockholder for its guaranty as to the Company's Restructure Agreement with
General Electric as discussed in Note 5.
During 2000, 1,500,000 shares of common stock were issued as collateral to a
preferred stockholder but not considered issued and outstanding.
10
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 9 - Commitments and Contingencies, Continued
During the nine months ended September 30, 2001, the Company issued 19,738,764
shares of common stock. Of such shares 14,388,764 were issued for future
advisory and consulting services, 2,500,000 shares were issued as collateral
for a line of credit and 2,850,000 shares were issued pursuant to the
rescission agreement with Translogistics, Inc.
Operating Leases:
In February, 2000, the Company leased 4,000 square feet of space in Mt.
Pleasant, South Carolina to house its corporate office and brokerage
operations. The lease calls for monthly payments of $6,380 and is for a term
of 12 months. Upon the Chapter 11 filing of its former subsidiaries, the
corporate offices were moved to Louisville, Kentucky. The South Carolina lease
expired in February, 2001.
Employment Agreements:
Commencing September 9, 1998, the Company entered into an employment agreement
with its President and Chief Executive Officer, for a term of five years. The
agreement provides for an annual salary of $105,000 with annual increases of
not less than 3%, as well as an automobile allowance for business travel.
The above employment agreement is terminable by the Company for certain
specified reasons including disability, fraud, felony conviction or substance
abuse. There are also certain noncompete covenants to be maintained during the
contract period. Breach of such covenants could lead to dismissal.
Indemnity Agreements:
The Company's President, Vice President and another guarantor of the Company's
obligations have provided guarantees of certain obligations of the Company and
its former subsidiaries. As a result, on January 30, 1997, and as renewed on
May 3, 1999, the Company entered into an Indemnity Agreement with these
parties, to hold them harmless against any loss or liability related to or
arising from the Company and its former subsidiaries.
Payroll Obligation:
The Company is contingently liable for $223,107 relating to its former
subsidiaries in bankruptcy. The outstanding obligations arise from
insufficient funds that were not provided to a payroll service for the
subsidiaries' employees' payroll and expenses paid. The Company is responsible
as a guarantor of these obligations if subsidiary assets are not sufficient to
pay creditors.
Health Claims:
The Company is contingently liable for $247,327 of former subsidiaries'
employees health insurance claims no longer financed by the subsidiaries. It
is uncertain if the claims will be pursued for payment, and as a result, the
potential claims have not been accrued within the accompanying financial
statements.
Legal Proceedings:
Stock Registration Rights Dispute - In September 2000, an entity filed legal
action against the Company alleging a breach of obligation under a stock
registration rights agreement. The Company has responded stating it has
performed its best efforts to uphold the agreement and has committed no
wrongdoing. The stockholder is seeking damages of $300,000. The Company has
provided a $135,000 reserve in its estimated liabilities although final
outcome of this litigation is uncertain and undeterminable at this time.
11
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 9 - Commitments and Contingencies, Continued
Southtrust Bank filed suit against the Company and certain affiliates for $2.8
million. The suit claims the Company and certain affiliates defaulted on
certain guarantees relating to the purchase of 66% of Professional
Transportation Group by Logistics Management LLC. The Company contends that it
was improperly served. A judgment was granted against the Company and certain
affiliates. The Company has filed a Supplement To Motion To Set Aside Entry of
Default in this matter and intends to aggressively defend against this action.
In addition, the Company believes it has counterclaims in this matter.
AllStates World Cargo filed suit against the Company and its chairman for
$678,000. The suit claims the Company and the chairman defaulted on certain
business guarantees related to the acquisition of Trans-Logistics as of
January 1, 2001. The Company and the chairman have filed an answer in this
matter and intend to defend these matters vigorously. The Company and the
chairman believe they have significant counterclaims in this matter.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Company's financial condition as of
September 30, 2001 and the Company's results of operation for the nine month
periods ended September 30, 2001 and 2000 should be read in conjunction with the
Consolidated Financial Statements, including the footnotes, and it should be
understood that this discussion is qualified in its entirety by the foregoing
and other, more detailed financial information appearing elsewhere herein.
Historical results of operations and the percentage relationships among any
amounts included in the Consolidated Statement of Operations, and any trends
which may appear to be inferable therefrom, should not be taken as being
necessarily indicative of trends of operations or results of operations for any
future periods.
These and other statements, which are not historical facts, are based
largely on current expectations and assumptions of management and are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements.
Assumptions and risks related to forward-looking statements, include that we are
pursuing a growth strategy that relies in part on the completion of acquisitions
of companies in the non-asset based logistics segment of the transportation
industry, as well as the completion of acquisitions of companies in the employee
leasing industry.
Assumptions relating to forward-looking statements involve 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 Quarterly Report, the words "estimates", "projects", and "expect"
and similar expressions are intended to identify forward-looking statements.
Although we believe that assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in the forward-looking
information will be realized.
Management decisions are subjective in many respects and susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impacts of which may cause us to alter our business strategy,
which may in turn, affect our results of operations. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as our representation that
statements contained in this Quarterly Report speak only as of the date of this
Quarterly Report, and we do not have any obligation to publicly update or revise
any of these forward-looking statements.
Such statements may include, but are not limited to, projections of
revenues, income, or loss, capital expenditures, plans for future operations,
financing needs or plans, the impact of inflation and plans relating to the
foregoing. Statements in the Company's Form 10-QSB, including Notes to the
Consolidated Financial Results of Operations, describe factors, among others,
that could contribute to or cause such differences.
DESCRIPTION OF BUSINESS
General:
Logistics Management Resources, Inc. is a holding company that currently
has no operating entities or revenues. The company is currently restructuring
and intends to expand its business through acquisition and internal growth.
Overview:
Logistics Management Resources, Inc., formerly U.S. Trucking, Inc., was
established in January of 1997 by combining under US Trucking-Nevada the
operations of Gulf Northern Transport, Inc., a mid-to-long-haul truckload
carrier and Mencor, Inc. a third party logistics (brokerage) company.
On November 30, 2000, the Registrants' operating subsidiaries, Gulf
Northern Transport, Inc., Prostar, Inc., UST Logistics, Inc. and Mencor, Inc.,
filed a Voluntary Petition under Chapter 11 of the Bankruptcy Code with the
United States Bankruptcy Court, Middle District of Florida, Jacksonville
Division. As of this date, no plan of reorganization has been filed by the
registrant's subsidiaries. However, a trustee has been appointed. On December 1,
2000 we issued a press release in which it was announced: (i) the filing of the
Petition, and (ii) the signing of an agreement with its primary lender for
repayment of any deficiencies, which may be left after liquidation of the
collateral. The agreement provides for payment of the deficiency over three
years, including payments based upon a fixed percentage of our ongoing revenue.
The accompanying financial statements contain adjustments resulting from the
bankruptcies based upon management's best estimates as to the recoverability of
assets and obligations for liabilities incurred.
Effective as of January 1, 2001, we purchased all of the issued and
outstanding shares of common stock of Trans-Logistics, Inc., a Florida
corporation. We purchased one hundred percent of Trans-Logistics issued and
outstanding common stock at the price of $80,000, plus, four times
Trans-logistics' gross brokerage commissions for the period of October 1, 2001
to December 31, 2001, plus, any accounts receivable (after adjusting for
accounts payable) less any payments by us for the assumption of liabilities with
Atech Commercial Corp. in excess of $120,000. The consideration shall be paid by
the transfer of $40,000 in cash, 18,000 shares of our common stock (which must
be registered for sale on or before June 30, 2001), the transfer of stock no
later than April 15, July 15 and October 15, 2001 equal to the gross brokerage
commission for those respective quarters and the balance of the purchase price
shall be paid after an audit of Trans-Logistics for the 2001 fiscal year and
paid in shares of our common stock. Trans-logistics is a wholly owned subsidiary
of Logistics Management Resources Inc. with annual revenues expected to exceed
$10 million.
The Company and Trans-Logistics agreed to rescind and cancel the terms and
conditions of the acquisition agreement for all of the issued and outstanding
common stock of Trans-Logistics, Inc., which the Company entered into as of
January 1, 2001. In connection with this rescission the Company has agreed to
reimburse Trans-Logistics, Inc. $150,000 in cash or to deliver 1,000,000 shares
of its common shares.
The Company signed a letter of intent on April, 2001 to acquire America's
PEO, Inc. ("APEO"), a premier employee leasing company, headquartered in Cherry
Hill, New Jersey. Effective November 1, 2001, the Company and America's PEO
Holdings, Inc., APEO's parent and successor in interest, terminated the letter
of intent and obligations thereunder.
We incurred an operating loss in the last fiscal year and the loss was
material. The parent company incurred losses in the most recent quarter, due
mostly to interest and accrued penalties associated with debt and the cost of
issuing stock to cover certain consulting expenses related to our restructuring
efforts.
Our losses are expected to continue at the parent level until such time as
we are able to negotiate improved terms with debt instrument holders regards the
interest and accrued penalties on outstanding notes. In addition to raising
capital, the restructuring of existing debt will make it possible to cover the
expenses associated in restructuring a company.
We continue to be subject to the risks normally associated with any
business activity, including unforeseeable expenses, delays, and complications.
Accordingly, there is no guarantee that we can or will report operating profits
in the future.
We are in negotiations with several prospective acquisition candidates at
this time.
Operating Strategy
Our business strategy is to establish the company as an industry leader
in the employee leasing industry while remaining in the non-asset based
transportation industry on a minor scale.
RESULTS OF OPERATIONS:
Nine months ended September 30, 2000 compared to September 30, 2001
Continuing Operations:
Operating Revenues
Total operating revenues increased from zero for the nine months ended
September 30, 2000 to $106,076 for the nine months ended September 30, 2001. The
reasons for this increase was the disposal of discontinued operations and the
filing for protection under Chapter 11 of the U.S. Bankruptcy code for U.S.
Trucking, Inc's operating subsidiaries Gulf Northern Transport, Inc., Prostar,
Inc. and U.S.T. Logistics, Inc. on November 30, 2000 and the termination of the
Company's captive insurance program. The current period revenue was generated
from the operations of Trans-Logistics, Inc.
Salaries, Wages and Benefits
Salaries, wages and benefits decreased from $101,442 for the nine
months ended September 30, 2000 to $30,074 for the nine months ended September
30, 2001. The reason for the decrease was the recision and discontinued
operations of Trans-Logistics, Inc.
Depreciation and Amortization
Depreciation and amortization decreased from $865,042 for the nine
months ended September 30, 2000 to $44,848 for the nine months ended September
30, 2001. The reason for this decrease was the write off of over-valued goodwill
and fixed assets as well as a lack of assets the Company is able to depreciate
and amortize.
General and Administrative
General and administrative expenses increased from $1,099,353 for the
nine months ended September 30, 2000 to $2,559,061 for the nine months ended
September 30, 2001. The main reason for this was the increase in consulting
costs related to the restructuring of the company.
Discontinued Operations
Income from discontinued operations decreased from a loss of
($24,820,598) for the nine months ended September 30, 2000 to a loss of
($108,937) for the nine
months September 30, 2001. All operating subsidiaries filed bankruptcy on
November 30, 2000 and the disposal of discontinued operations was recorded
accordingly. All financial statements for the year 1999 and 2000 have been
restated. Thus the reason for the decrease in income from discontinued
operations is the fact that all operations that were active during the first
quarter of 2000 are included in the discontinued operations caption.
Interest
Interest expense increased from $199,380 for the nine months ended
September 30, 2000 to $1,532,720 for the nine months ended September 30, 2001.
The primary reason for the increase was accrued late registration filing
penalties related to convertible debentures and preferred stock.
Net income decreased from a loss of ($26,962,358) for the nine months
ended September 30, 2000 to a net loss of ($4,125,226) for the nine months ended
September 30, 2001. The primary reason for the decrease in net operating loss
was that the company has limited its expenses in its restructuring efforts and
rescinded its acquisition of Trans-Logistics, Inc., which had reported losses
for the second quarter.
Liquidity and Capital Resources
Our stockholders' equity impairment has increased from ($22,380,894) as
of December 31, 2000 to ($23,247,977) for the nine months ending September 30,
2001. Total liabilities and stockholders' equity has increased from $243,170 for
the period ending December 31, 2000 to $1,310,685 for the nine months ended
September 30, 2001.
In addition, there is a liability in the amount of $11,273,323 shown on
the balance sheet which represents the company's estimated liability to the
primary lender of the four bankrupt operating subsidiaries. The shortfall could
be more or less than the $11,273,323 estimate depending on the success of the
bankruptcy trustee handling the collection of subsidiary assets.
The lack of liquidity suggests that we will have to raise capital in
order to remain a going concern. There can be no assurance that the company will
be able to obtain the capital necessary to continue operations.
PART II
Other Information
LEGAL PROCEEDINGS
CIT Group/Equipment Financing, Inc. filed suit against us and certain
other parties in the Superior Court of NJ, Law Division Union County, docket No.
UNN-L-3556-00 on July 7, 2000 for the return of six tractors formerly used in
the business of American Intermodal Services, Inc., some of which Gulf Northern
Transport took over in the spring of 2000. We denied ever receiving the
tractors. A default judgment was granted in November of 2001 against all
defendants in the amount of $384,599.89. We believe that certain of these
tractors have since been recovered. We believe the court in the action had no
jurisdiction over LMRI and that the judgment is therefore invalid.
Emergent Capital, L.P. filed suit against us in U.S. District Court,
Southern District of New York on September 20, 2000. The suit claimed that
Emergent Capital was owed $300,000 in penalties for the failure to register
certain shares for resale, which Emergent purchased in September of 1999. We
dispute that the agreement reached between the parties provides for registration
penalties. The suit is still in the discovery stage.
GE Capital Corporation commenced an action against the company on
October 1, 2001 allegedly as a result of the company's obligations under a
Restructure Agreement. GE Capital Corporation, the Company, its subsidiaries and
certain affiliates entered into a Restructure Agreement on November 28, 2000.
The agreement between our company and G.E. Capital Corporation relates to the
balance of our obligations to GECC in connection with its accounts receivable
line of credit and with GE Capital Commercial Equipment Funding in connection
with an equipment loan. The respective loan balances have been consolidated into
a single Term Note with an estimated principal balance of $11,273,324 as of
March 31, 2001. This estimated balance is expected to be reduced by the
collection of accounts receivable, the possible sale of subsidiary accounts
receivable and the sale of equipment held as collateral on the equipment loan
portion. The loan is to be repaid over a three-year term with a five-year
amortization schedule and a balloon payment of the balance on December 1, 2003.
The note bears interest at the 30-day dealer placed commercial paper rate (as
published in the Wall Street Journal), plus 4.5%. Interest for the first year
will be accrued and applied to the principal balance.
Under the agreement, we are required to pay GECC 1.5% of the gross
revenues from our trucking business segment and 5% of the gross revenues from
its non-trucking segment to be applied toward payment of the note, which amounts
will be applied to the amortization payments. Additionally, 35% of the net
income before taxes from our businesses must be paid on a quarterly basis in
repayment of the note, along with certain payment in the event of a profitable
sale of a Company owned business. The Note is secured by our assets, various
affiliate assets and certain personal guarantees.
Southtrust Bank, filed suit against the company and certain affiliates
for $2.8 million. The suit, case number CV-01-AR-1068-S claims the company and
certain affiliates defaulted on certain guarantees relating to the purchase of
56% of Professional Transportation Group by Logistics Management LLC. The
company was improperly served and a judgement was granted against the company
and certain affiliates. The company has filed a Supplement To Motion to Set
Aside Entry of Default in this matter and intends to agressively defend against
this action. In addition the company believes it has counterclaims in this
matter.
AllStates World Cargo, filed suit against the company and its chairman
for $678 thousand. The suit (Docket )OCN-1822-01) claims the company and the
chairman defaulted on certain business guarantees related to the acquisition of
Trans-Logisitcs as of Jan. 1, 2001. The company and the chairman have filed an
answer in this matter and intend to defend these matters vigorously. The company
and the chairman believe they have significant counterclaims in this matter.
Defaults Upon Senior Securities
As of September 30, 2001 we were in default with two senior debt holders in
the amount of $2,002,915 which has been accrued on our balance sheets. The
reason for the defaults is that we have been unable to satisfy the payment of
delinquent interest and late penalty fees with regard to these matters. We
intend to renegotiate the terms of these agreements to more favorable terms for
the senior debt holders, the company and our shareholders.
Submission of Matters to a Vote of Security Holders
A special meeting of shareholders was held on February 12, 2001. At the
meeting 16,908,150 shares, representing 53% of the shares entitled to vote, were
present at the meeting in person or by proxy. Votes were taken on three matters.
They included changing the name of the company to Logistics Management
Resources, Inc., effecting a 1 for 100 reverse stock split and amending the
terms of the blank check preferred stock to allow amendments to the terms of
outstanding shares of preferred stock without the approval of the holders of
common stock, provided the amendment effected a change which the Board would
have had authority to include in the original terms of the preferred so amended.
All three matters were unanimously approved by the shareholders.
Other Information
NONE
Exhibits and Reports
A NONE
B Current Report on Form 8-K reporting on Item III(a) Special Meeting of
Shareholders approving the Company's name change and reverse split of
common stock.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LOGISTICS MANAGEMENT RESOURCES, INC.
---------------------------------------------
Registrant
November 14, 2001 By /s/ Danny L. Pixler
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Danny L. Pixler-Chairman & Chief Executive