U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-25319
TRANSPORTATION LOGISTICS INT'L, INC.
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(Name of Small Business Issuer in its Charter)
COLORADO 84-1191355
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
136 Freeway Drive, East Orange, NJ 07018
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(Address of Principal Executive Offices)
Issuer's Telephone Number: (973) 266-7020
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date:
August 19, 2002
Common Voting Stock: 41,159,205
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Balance Sheet
June 30, 2002
Assets
Current Assets
Cash and equivalents $ -
Accounts receivable, net of allowance
for doubtful accounts of $87,497 1,360,103
Prepaid expenses 60,101
Note receivable 35,000
----------
Total Current Assets 1,455,204
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Property and equipment, at cost, less
accumulated depreciation 316,835
Goodwill and customer lists, net of
accumulated amortization 17,221
Other Assets
Note receivable 386,000
Security deposits 61,500
Other assets 141,169
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Total Other Assets 588,669
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Total Assets $ 2,377,929
=========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 1,066,075
Convertible debenture 200,000
Notes payable to bank 545,028
Current maturities of long term debt 85,000
Income taxes payable 7,446
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Total Current Liabilities 1,903,549
Loan payable 789,791
Minority interest payable 77,656
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Total Liabilities 2,770,996
Stockholders' Equity
Common stock, no par value;
50,000,000 shares authorized,
41,159,205 shares issued and outstanding 3,607,892
Additional paid-in capital - stock options 36,748
Retained earnings (2,219,410)
Accumulated other comprehensive income -
Less: treasury stock, 1,176,519 shares at cost (522,537)
Consulting services to be provided (1,295,760)
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Total Stockholders' Equity (393,067)
---------
Total Liabilities and Stockholders' Equity $ 2,377,929
=========
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Operations
Three Months Six Months
Ended Ended
June 30, June 30,
2002 2001 2002 2001
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Operating Revenues $2,646,849 $2,804,437 $6,180,329 $4,404,557
Direct Operating Expenses 1,710,178 2,140,773 4,206,646 3,331,030
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Gross Profit 936,671 663,664 1,973,683 1,073,527
Operating Expenses
Selling, general and
administrative 731,810 789,866 1,579,984 1,424,429
Depreciation and amortization 60,268 62,528 118,540 121,955
Stock issued for consulting
services 25,920 - 50,840 -
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Total Operating Expenses 817,998 852,394 1,749,364 1,546,384
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Operating Income (Loss) 118,673 (188,730) 224,319 (472,857)
Other Income (Expense)
Interest expense (12,191) (7,216) (24,176) (23,843)
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Total Other Income (Expense) (12,191) (7,216) (24,176) (23,843)
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Income (Loss) Before Income Taxes 106,482 (195,946) 200,143 (496,700)
(Provision) Benefit for Income
Taxes - - - -
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Income (Loss) Before Minority
Interest 106,482 (195,946) 200,143 (496,700)
Minority Interest (42,376) - (77,656) -
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Net Income (Loss) $ 64,106 $ (195,946) $ 122,487 $ (496,700)
==============================================
Earnings Per Share
Income from continuing
operations $ 0.01 $ (0.01) $ 0.01 $ (0.02)
Discontinued operations - - - -
Basic and diluted earnings ---------------------------------------------
per share $ 0.01 $ (0.01) $ 0.01 $ (0.02)
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Weighted Average Number of
Common Shares Outstanding
Basic 34,714,761 20,902,500 30,063,281 20,902,500
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Diluted 34,714,761 20,902,500 30,063,281 20,902,500
===============================================
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Cash Flows
Six Months Ended
June 30,
2002 2001
----------------------
Cash Provided by (Used in) Operating
Activities $ 95,558 $ (592,914)
Cash Flows From Investing Activities
Purchase of property and equipment (37,242) (30,720)
Investments in joint ventures and
subsidiaries - (35,244)
Collection of notes receivable - 492,329
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Net Cash Provided by (Used in) Investing
Activities (37,242) 426,365
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Cash Flows From Financing Activities
Repayments of loans payable to affiliates
and capital leases - (44,609)
Proceeds from bank loans 61,684 164,655
Repayment of long-term debt (120,000) -
Loans to affiliates and shareholders - (100,625)
Issuance of convertible debentures - 200,000
Issuance of common stock and options - 26,709
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Net Cash Provided by (Used in) Financing
Activities (58,316) 246,130
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Net Increase (Decrease) in Cash and
Equivalents (23,667) 79,581
Cash and Equivalents at Beginning of Period 23,667 195,616
-------- ---------
Cash and Equivalents at End of Period $ - $ 275,197
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 24,196 $ 23,843
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Income taxes $ - $ -
========= =========
Transportation Logistics Int'l Inc. and Subsidiaries
Notes to the Consolidated Condensed Interim Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 2002 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002. The unaudited condensed
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 2001.
STOCK ISSUED FOR CONSULTING SERVICES
During the first quarter of 2002 the Company issued 7,730,000 shares of
common stock in consideration of commitments from the recipients to provide
consulting services. The terms of the consulting agreements vary from two to
five years. The market value of the common stock on the date of issuance will
be recorded as an expense - "stock issued for consulting services" - over the
term of each consulting agreement.
SALE OF TLI(U.K.)
On April 19, 2002 the Company sold all of the capital stock of its
subsidiary, Transportation Logistics Int'l (UK) Ltd. ("TLI(U.K.)").
TLI(U.K.) was sold to four individuals, including James Thorpe, who had been
a member of the Board of Directors and President of the Company. Mr. Thorpe
resigned from those positions on April 19, 2002. The purchase price given
by the purchasers consisted of (a) $35,000 to be paid between November 2002
and April 2003 and (b) 940,867 shares of the Company's common stock, which
were surrendered by Mr. Thorpe. As part of the transaction, TLI(U.K.) and
the purchasers agreed that if within the next two years they participate in
the Translogistics Network or in any similar cooperative global network of
logistics providers, then 50% of the profits they derive from the network
during the next five years will be paid to the Company.
ACQUISITION OF XCALIBUR XPRESS INC.
On May 23, 2002 the Company acquired all of the capital stock of Xcalibur
Xpress Inc. Xcalibur Xpress is based in Charleston, South Carolina. It
performs intermodal trucking and delivery, warehousing and third party
logistics for its clients. The capital stock of Xcalibur Xpress was acquired
by the Company in exchange for (1) the Company's undertaking to provide
financial services to Xcalibur Xpress and (2) the agreement by the Company to
forebear immediate collection of $200,000 owed by Xcalibur Xpress to the
Company.
RESTRICTED STOCK GRANT PROGRAM
On May 28, 2002 the Company granted 10,000,000 shares of its common stock
to Michael Margolies, its Chief Executive Officer, pursuant to the Company's
Restricted Stock Grant Program (the "Program"). The grant represented the
entirety of the 10,000,000 shares included in the Program. The shares issued
under the Program are subject to the following restrictions:
1. After this fiscal year and each of the following four fiscal years (2002
through 2006) one-fifth of the shares granted (the "At-Risk Shares") will be
forfeited if the Company's' revenue during the year does not exceed the
following thresholds:
2002 - $ 4,000,000
2003 - $ 6,000,000
2004 - $ 8,000,000
2005 - $ 10,000,000
2006 - $ 12,000,000
2. All of the restricted shares shall be forfeited if Mr. Margolies'
employment by the Company terminates prior to the date the restrictions lapse.
3. The shares granted under the Program cannot be sold, assigned, pledged,
transferred or hypothecated in any manner, by operation of law or otherwise,
other than by writ or the laws of descent and distribution, and shall not be
subject to execution, attachment or similar process. These restrictions will
lapse with respect to any At-Risk Shares that are not forfeited as described
above. In addition, the restrictions will lapse with respect to all
unforfeited shares if in any year the Company's revenue exceeds $12,000,000.
4. The restrictions shall also lapse as to all restricted shares on the first
to occur of (i) the termination of Mr. Margolies' employment with the Company
by reason of his disability, (ii) Mr. Margolies' death, (iii) termination of
Mr. Margolies'employment by the Company without good reason, or (iv) a change
of control of the Company. The Program defines "Change of Control" as an
acquisition by a person or group of more than 50% of the Company's outstanding
shares, a transfer of the Company's property to an entity of which the Company
does not own at least 50%, or the election of directors constituting a
majority of the Board who have not been approved by the existing Board.
OPERATING SEGMENTS
The Company's operations are classified into five principal reportable
segments that provide different products or services: U.S. Logistics Services,
Foreign Logistics Services, Student Transportation, Employee Leasing Services,
and Financial Services. Separate management of each segment is required
because each business unit is subject to different marketing and operating
strategies and different geographic locations.
Segmental Data
Reportable Segments Six Months Ended June 30, 2002
Student
US Foreign Transpor- Employee
Logistics Logistic tation Leasing Financial
Services Services Services Services Services Total
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External Revenue $ 89,352 $ 858,842 $1,614,057 $2,137,333 $1,480,745 $6,180,329
==============================================================
Depreciation and
Amortization $ - $ - $ 50,800 $ 20,417 $ 47,323 $ 118,540
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Operating Income
(Loss) $(17,981) $ 27,148 $ 46,871 $ 158,462 $ 9,819 $ 224,319
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Assets $ 3,404 $ - $ 610,893 $ 243,779 $1,519,853 $2,377,929
==============================================================
Capital
Expenditures $ - $ - $ 37,242 $ - $ - $ 37,242
==============================================================
Reportable Segments Six Months Ended June 30, 2001
Student
US Foreign Transpor- Employee
Logistics Logistic tation Leasing
Services Services Services Services Total
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External Revenue $ 1,146,150 $ 1,157,221 $ 1,588,418 $ 512,768 $ 4,404,557
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Depreciation and
Amortization $ 12,537 $ 11,909 $ 89,874 $ 7,635 $ 121,955
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Operating Income
(Loss) $ (184,963) $ (416,525) $ 172,104 $ (43,473) $ (472,857)
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Assets $ 510,930 $10,951,425 $ 1,418,693 $ 602,781 $13,483,829
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Capital
Expenditures $ 7,026 $ 7,014 $ 13,457 $ 3,143 $ 30,640
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Forward-looking Statements: No Assurances Intended
This Report contains certain forward-looking statements regarding Transportation
Logistics, its business and financial prospects. These statements represent
Management's present intentions and its present belief regarding the company's
future. Nevertheless, there are numerous risks and uncertainties that could
cause our actual results to differ from the results suggested in this Report.
Among the more significant risks are:
* the fact that Transportation Logistics' growth will be limited by its
ability to obtain additional capital;
* the fact that the industry in which Transportation Logistics operates
is dominated by large logistics companies, against whom Transportation
Logistics must compete;
* the fact that the Transportation Logistics has recently begun to
integrate a number of new logistics-related services with its
established consolidation and delivery operations, and does not know yet
how efficient the integration will be or whether this "full service"
approach to logistics will be successful; and
* the fact that Transportation Logistics may not be able to attract the
skilled managers it will need in order to expand its operations
efficiently.
Because these and other risks may cause the Company's actual results to
differ from those anticipated by Management, the reader should not place
undue reliance on any forward-looking statements that appear in this Report.
Readers should also take note that Transportation Logistics will not
necessarily make any public announcement of changes affecting these forward-
looking statements, which should be considered accurate on this date only.
Results of Operations
During 2001 we reoriented our business plan, moving away from a dominant
focus on international logistics operations and moving towards the establishment
of Transportation Logistics as a full-service provider of logistics and
logistics-related services. Subsequent to the end of the year we sold
TLI(U.K.), the subsidiary which was devoted to international logistics, thus
finalizing the reorientation of our business. In the first six months of 2002
we experienced the first benefits of that reorientation, as we achieved a
return to profitability.
The services we provide to the logistics industry - our personnel services
and our financial services - continued to grow during the first half of 2002.
Revenue from these businesses totaled $3,618,078. The personnel services
division generated operating income of $158,462 during the first six months
of 2002, and the financial services division generated operating income of
$9,819 during the same period. In the second half of 2002 we expect both of
these divisions to expand substantially, particularly the financial services
division, which was initiated late in 2001. The expansion of these operations
should enable them to make a more significant contribution to our overall
profitability, as they gain the benefits of economies of scale.
Revenue from Pupil Transportation were 2% greater in the first half of
2002 than in the first half of 2001, reflecting the increased number of
contracts being serviced. At the same time, operating income at Pupil
Transportation decreased by 8%. The reduction reflects primarily our new
policy regarding allocation of corporate overhead among our subsidiaries.
All of our operating divisions, therefore, produced operating income
during the first six months of 2002. That operating income was offset,
however, by expenses attributable to the operations of the corporate parent.
These expenses primarily relate to corporate management, including the
professional fees that are attendant to being a public company. In addition,
one of the ways in which we established the network of significant
relationships that facilitate our business operations was by issuing common
stock to consultants and other individuals and enterprises which committed
to assist our development. During the first half of 2002 we recorded $50,840
in expenses attributable to the market value of that stock. Our expectation
is that these non-cash expenses will be offset by future cash benefits arising
from the relationships we are developing.
Our overall gross profit margin for the first six months of 2002 was 32%
(29% in the first quarter of 2002 and 35% in the second quarter). This
represents an improvement from the 24% margin realized in the first half of
2001. The improvement is attributable to the fact that in the beginning of
2001 our revenues were primarily transportation revenues, and our gross margins
were dictated by the shipping industry: 12%-18% for ocean freight and 25% for
air freight. Our revenues in the first half of 2002 were primarily from our
logistics-related services (personnel and finance). The range within which
we can expect the gross margin from our new logistics-related services has
not yet been determined, as those divisions do not have sufficient operating
history to be predictive. Our goal, however, is to continue to achieve the
margin reported for the second quarter of this year.
Selling, general and administrative expenses of $1,630,824 (including
stock issued for consulting services) during the first six months of 2002
represented 26% of revenue, compared to a ratio of 32% in the first six months
of 2001. This improvement occurred primarily because we have made a concerted
effort to increase the efficiency of our overall operations. In addition,
S,G&A expenses in 2001 included costs attributable to our efforts to acquire
and develop the several subsidiaries which comprise our personnel and
financial services divisions.
Liquidity and Capital Resources
The primary roadblock facing our plans for growth is our need for
capital. We are actively seeking additional capital resources, through sale
of equity or debt, and hope to increase our available resources. With
additional capital resources, we expect to be able to expand all of our
service offerings to achieve the economies of scale that will facilitate
profitability and growth.
Our operations produced positive cash of $95,558 during the first six
months of 2002. The majority of that sum was used to satisfy outstanding
debts. As a result, our working capital deficit at June 30, 2002 totaled
$448,345, a decline of $8,020 compared with the working capital deficit on
$440,325 at December 31, 2001. While the existence of a working capital
deficit remains a impediment to our growth, our ability to stabilize it in
this manner is evidence of our ability to sustain operations until we achieve
positive working capital.
At the present time the only significant credit available to us is a
facility of up to $2,000,000, based on eligible receivables, which was issued
by Merchant Financial Corp. At June 30, 2002 we had an outstanding balance
of $545,028 due to Merchant Financial. The facility expires in March 2003.
Our working capital position is sufficient to sustain our present
operations and to fuel a modest growth rate. Our business plan, however,
calls for dramatic growth. To fund that growth, we will require additional
capital resources. Management, therefore, is actively engaged in exploring
opportunities for equity or debt financing, to obtain the funds needed for
this planned expansion.
PART II - OTHER INFORMATION
Items 1/3. Legal Proceedings/Defaults in Senior Securities
Michael Seeley, the holder of a Convertible Debenture issued by the
Company in the principal amount of $200,000, has commenced action in the
District Court for the City and County of Denver, State of Colorado, against
the Company. The action alleges that the Company has defaulted in payment of
the principal and $40,000 in interest accrued on the debenture.
Item 6. Exhibits and reports on Form 8-K.
Reports on Form 8-K.
Report dated April 19, 2002 concerning the sale of TLI (UK).
Report dated May 23, 2002 concerning the acquisition of Xcalibur
Xpress Inc.
Exhibits. None
SIGNATURES AND CERTIFICATION
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
The undersigned officer certifies that this Report fully complies with
the requirements of Section 13(a) of the Securities Exchange Act or 1934, and
that the information contained in this report fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant.
TRANSPORTATION LOGISTICS INT'L, INC.
Date: August 19, 2002 By: /s/ Michael Margolies
-----------------------------------
Michael Margolies, Chief Executive Officer,
Chief Financial Officer,
Chief Accounting Officer