UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2001
Commission File Number 000-49606
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
SEGMENTZ, INC.
(Name of Small Business Issuer in Its Charter)
Delaware (I.R.S. Employer Identification No.)
(State or other jurisdiction of 75-2928175
incorporation or organization)
18302 HIGHWOODS PRESERVE PKWY, SUITE 210, TAMPA, FL 33647
(Address of Principal Executive Offices) Zip Code
(813) 989-2232
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12 (b) of the Exchange Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
----------------------------- --------------------------------
None None
Securities registered under Section 12 (g) of the Exchange Act:
Common Stock, $.001 par value
(Title of Class)
The registrant has 6,502,913 shares of its Common Stock issued
and outstanding as of December 31, 2001.
Convertible Preferred Stock $.001 par value
The registrant has 1,200,794 shares of Convertible Preferred Stock
issued and outstanding as of December 31, 2001.
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B and will not be contained to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB________.
Check 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 periods that the Registrant was required to file
such report(s), and (2) has been subject to such filing requirements for the
past ninety (90) days________.
Transitional Small Business Disclosure Format: Yes No X
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State Registrant's revenues for its most recent fiscal year: $9,065,730.00
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State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of April 1, 2002. No active trading market exists for the
Registrant's Capital Stock.
DOCUMENTS INCORPORATED BY REFERENCE - NONE
Traditional Small Business Disclosure Format:
Yes No X
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TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS...........................................1-10
ITEM 2. DESCRIPTION OF PROPERTY............ ..............................10-11
ITEM 3. LEGAL PROCEEDINGS....................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.......................................12
PART II
ITEM 5. MARKET PRICE FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS..............................12-15
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION...................................15-21
ITEM 7. FINANCIAL STATEMENTS.........................................F-1 - F-19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE...................21
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT...........................................21-22
ITEM 10. EXECUTIVE COMPENSATION...........................................22-24
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT................................24
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................25
ITEM 13. EXHIBITS AND REPORTS ON
FORM 8-K..................................................25
SIGNATURES....................................................................26
ITEM 1. DESCRIPTION OF BUSINESS
CURRENT BUSINESS
Segmentz, Inc. (the "Company"), a Delaware corporation, is a Tampa,
Florida based company that provides transportation logistics management services
and support for mid-sized and national corporate clients. The Company serves
direct users of transport, storage, staging, warehouse services and other
logistics services.
The Company and its subsidiary Trans-Logistics, Inc., a Florida
corporation ("Trans-Logistics"), have principal executive offices located at
18302 Highwoods Preserve Parkway, Suite 210, Tampa, Florida 33467. The telephone
number is (813) 989-2232. The Company's internet web addresses are
HTTP://WWW.SEGMENTZ.COM and HTTP://WWW.SEGMENTZ.NET. The Company provides
several niche services within the industry more broadly known as the supply
chain management industry, including transportation logistics, management and
delivery. (See "Description of Business - Products and Services").
The Company serves direct users of transport, storage, staging,
warehouse service and other logistics services, as well as larger companies that
include Bax Global, Quebecor World Logistics, Inc. ("Quebecor"), and CH
Robinson, Inc. The Company offers warehouse locations in two facilities covering
the east coast and is attempting to expand to offer smaller satellite facilities
to enable conduit and direct route trucking solutions on a contracted, dedicated
route basis to larger clients.
Our strategy is to continue to expand through acquisitions and internal
development. We intend to seek, on a selective basis, acquisition of businesses
that have product lines or services which complement and expand our existing
services and product lines, and provide us with strategic distribution locations
or attractive customer bases. Our ability to implement our growth strategy will
be dependent on our ability to identify, consummate and assimilate such
acquisitions on desirable economic terms. There can be no assurance that we will
be successful in implementing our growth strategy. Our ability to implement our
growth strategy will also be dependent upon obtaining adequate financing. We may
not be able to obtain financing on favorable terms.
HISTORY OF SEGMENTZ
The Company's predecessor, WBNI, Inc., a Delaware corporation ("WBNI"),
originally known as Rose Auto Stores-Florida, Inc. ("Rose"), was organized for
the purpose of operating a specialty automotive aftermarket parts and accessory
retail store in South Florida. Rose began experiencing financial difficulties in
1990, following its acquisition by WSR Corporation. By 1997, an involuntary
petition of bankruptcy was filed against Rose. Subsequent thereto, Rose and the
committee of unsecured creditors worked together to develop a plan in
bankruptcy.
Rose emerged from the involuntary bankruptcy proceedings by filing a
Plan under Chapter 11 of the United States Bankruptcy Code on February 10, 1999.
The case was administered by the United States Bankruptcy Court, Southern
District of Florida (Miami Division) (the "court"). The court entered an order
approving the Plan on April 22, 1999.
The Plan provided for the liquidation of Rose's assets and distribution
of the proceeds to secured, priority and unsecured creditors. The Plan further
provided that Rose would remain in existence, although all capital stock
outstanding as of the date of the bankruptcy petition was canceled. Under the
Plan, Rose secured post-petition financing in the amount of $10,000 from Halter
Financial Group, Inc. ("HFG") to meet the cost and expense of the reorganization
effort. In satisfaction of HFG's administrative claim for such amount and for
the services rendered and expenses incurred in connection with the anticipated
acquisition or merger transaction between Rose and a privately held operating
company, HFG received sixty percent (60%) of the newly-issued shares of common
stock of the reorganized Company. Creditors with allowed unsecured claims
received a pro rata distribution of forty percent (40%) of such common stock.
The following is a schematic diagram of the history of Segmentz and its
merger with Trans-Logistics:
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Rose Auto Stores--Florida Inc., ("Rose"} incorporated in
1952
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Rose filed Petition of Bankruptcy Pursuant
to Chapter 11 on February 10, 1999
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-- April 22, 1999 -- Bankruptcy Plan Confirmed -- May 17, 2000 --
Rose reincorporated in Delaware as RAS Acquisition Corp.
-- RAS Acquisition Corp. issues and aggregate
of 500,233 unrestricted shares to unsecured
creditors listed in the Plan of Bankruptcy
pursuant to Section 1145 of the U.S. Bankruptcy Code
----------------------------------------------------------
-- January 31, 2001 -- RAS Acquisition Corp.
completes merger transaction with WBNI and
issues to the stockholders of WBNI 20,000
shares of its common stock pursuant to the
exemption afforded by Section 4(2) of the Act and
changes its name to WBNI
-------------------------------------------------------
-- February 5, 2001 -- RAS Acquisition Corp. files a
Certificate of Compliance with Reverse Acquisition
Requirements with the Bankruptcy Court. WBNI,
a Delaware corporation has approximately 462
stockholders who own 520,233 shares of common stock
---------------------------------------------------------
On October 29, 2001, WBNI exchanged 5,982,680 shares for
100 shares of TRANSL Holdings, Inc., which wholly owns
Trans-Logistics, Inc.
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On November 1, 2001, WBNI changed its name to Segmentz, Inc.
-2-
For accounting purposes, the merger is reflected as a reverse
acquisition and recapitulation of WBNI and WBNI'S historical financial
statements presented elsewhere herein are those of Segmentz and its predecessor
WBNI.
MERGER WITH WBNI On January 31, 2001, Rose completed a merger with
WBNI, a privately held Texas corporation pursuant to which Rose issued an
aggregate of 20,000 shares of its common stock in exchange for all of the issued
and outstanding shares of the private company's capital stock. As a result of
the transaction, Rose changed its name to WBNI, Inc ("WBNI"). Timothy P. Halter
resigned as the sole officer and director of Rose and the private company was
dissolved. The merger was entered into as the private company had an option to
acquire the business operation of WorldByNet.com, Inc., a Delaware corporation
that provided business-to-consumer and business-to-business solutions for the
purpose of connecting affinity groups. On February 22, 2001, it was determined
by management of WBNI that it would be in WBNI's best interest to terminate the
option to acquire WorldByNet as a result of its due diligence inquiry into said
entity.
On October 29, 2001, WBNI exchanged 5,982,680 shares of its common
stock for 100 shares of the common stock of TRANSL Holdings, Inc., a Delaware
corporation ("TRANSL"). WBNI now wholly owns TRANSL, which wholly owns
Trans-Logistics, Inc., a Florida Corporation (Trans-Logistics). Trans-Logistics
agreed to pay Turner Capital Partners, LLC a fee of $75,000 for consulting
services related to the WBNI transaction, among other things, of which $30,000
is due by March 15, 2002.
HISTORY OF TRANS-LOGISTICS
Trans-Logistics is a logistics and brokerage organization serving
irregular route, long haul, and common motor carriers of general commodities.
The Company is a Florida corporation and was formed on April 28, 2000.
Effective January 1, 2001, Trans-Logistics was acquired by Logistics
management Resources, Inc. ("LMRI"). The acquisition was for one hundred (100%)
percent of the issued and outstanding common stock at a price of $80,000, plus,
four times Trans-Logistics' gross brokerage commissions for the period of
October 1, 2001 through December 31, 2001, plus the value of any accounts
receivable immediately prior to the closing date (which amount was agreed to be
not less than $230,000), minus the aggregate value of any liabilities of
Trans-Logistics prior to the closing date, minus cost of Trans-Logistics'
performance of its obligations under an assignment and assumption agreement with
Atech Commercial Corporation which exceeds $120,000. On August 10, 2001,
Trans-Logistics and LMRI agreed to rescind and cancel the terms and conditions
of the acquisition agreement. Under the terms of the rescission agreement,
Trans-Logistics agreed to a reimbursement of 1,500,000 shares of LMRI's common
stock and a note receivable in the amount of $450,000. This rescission agreement
was effective as of July 1, 2001. As part of the above noted rescission
agreement, the Company has recognized consulting revenue and a demand note
receivable in the amount of $450,000 due from LMRI. The terms of this note do
not include interest until demand is made for payment. The balance due under the
terms of this note is $425,000 as of March 31, 2002. Further payments on this
note have been promised to be made during the second quarter of 2002.
-3-
On November 1, 2001, WBNI, changed its name to Segmentz, Inc. During May
2001, the Company acquired the assets of Q Logistics for $367,385. Q Logistics
operated warehouse facilities in Atlanta, Georgia; Edison, New Jersey; Orlando,
Florida and Chicago, Illinois. Operations in Orlando and Chicago were
subsequently closed. (See "ITEM 2. DESCRIPTION OF PROPERTIES").
INDUSTRY OVERVIEW
Third Party logistics companies provide customized domestic and
international freight transportation of customers' goods and packages, via
truck, rail, airplane and ship, and provide warehousing and storage of those
goods. Many companies utilize information systems and expertise to reduce
inventories, cut transportation costs, speed delivery and improve customer
service. The third-party logistics services business has been bolstered in
recent years by the competitiveness of the global economy, which causes shippers
to focus on reducing handling costs, operating with lower inventories and
shortening inventory transit times. Using a network of transportation, handling
and storage providers in multiple transportation modes, third-party logistics
services companies seek to improve their customers' operating efficiency by
reducing their inventory levels and related handling costs. Many third-party
logistics service providers are non-asset-based, primarily utilizing physical
assets owned by others in multiple transport modes. The third-party logistics
services business increasingly relies upon advanced information technology to
link the shipper with its inventory and as an analytical tool to optimize
transportation solutions. This trend favors the larger, more professionally
managed companies that have the resources to support a sophisticated information
technology infrastructure.
By outsourcing all non-core business services to third party providers,
companies can help to control costs, eliminate staff and focus on internal
business. Furthermore, this kind of outsourcing is often done in lockstep with
"unit pricing" models that provide for a variable price that is less than the
current pricing available to a company that is calculated on a unit basis,
enabling a company to price logistics, storage, shipping, staging and related
services into their wholesale pricing matrix and providing a scalable solution
that scales downwards in an off economy, as well as upwards as the market
demands. Such models are popular as "risk sharing," a outsourcing concept that
has been adopted in many support and third party service arenas, enabling
outsourced companies to build critical mass, method and pricing efficiencies,
and to pass these to clients in pricing schedules that help these clients build
competitive market positions that are measurably more predictable.
PRODUCTS AND SERVICES
NATIONWIDE TRUCKLOAD AND LESS-THAN-TRUCKLOAD SERVICE
The Company arranges truckload transportation with dedicated Company
equipment, owner operator fleet and extensive agent partners throughout 48
states. The Company provides trailers that are either 48 or 53 feet in length.
-4-
By utilizing volume discounts, the Company can cost effectively
arrange less-than-truckload (LTL) shipments for their customers from
distribution centers or vendor locations. Tracking capabilities are available
via the web site through carrier links.
DEDICATED OR TIME-DEFINITE TRANSPORTATION
The Company offers its customers time-definite ground transportation of
cargo as a cost effective, reliable alternative to air transportation. By
utilizing team drivers the Company provides expedited delivery and shorter
transit times, and efficient pricing.
THIRD-PARTY LOGISTICS SERVICE
The Company's strategic carrier alliances with national pricing
agreements enable them to provide specialized or heavy haul services. Shipment
tracking is available for customers via a custom designed web site and carrier
links. On-time percentage tracking and service failure reports are also
available. Third-party logistics billing is fully electronic and automated. The
Company's warehouse services currently provide on-board barcode scanning devices
and wireless link to legacy inventory and database systems to provide real-time
informational access to clients regarding status of inventory, transportation
and delivery of raw materials and finished goods.
FORWARDING
The Company provides enhanced freight forwarding services designed to
deliver products on time to any location worldwide by whatever means necessary.
REVERSE LOGISTICS
Many logistics solutions providers only offer their services from the
warehouse to the end customer (for example, after the product has been purchased
and received from the vendor). The Company can offer to handle the customer's
product from the vendor all the way to the end customer and even handle any
needs after the product reaches its final destination or dispose of the product.
IN-TRANSIT MERGE
The Company provides In-transit Merge by strategically managing
logistics information in an effort to minimize the handling of product with
complex routing that includes multiple product origins/destinations and/or
multiple vendors. The Company positions itself as a member of the customer's
distribution team, sharing data and interacting virtually with vendors and the
customer.
ASSEMBLY, PACKING AND DISTRIBUTION
The Company customizes its "pick-and-pack" or packaging, labeling and
inventorying services to meet each customer's specific needs. Customers can
utilize the Company's warehouse and distribution facilities that are fully
automated (barcode and UCC compliant) or operate at their own site. The Company
utilizes over 300,000 square feet of floor space with additional multi-tier rack
capacity which is secure and bonded. The Company currently provides commercial
caliber staging, repalletizing and shipping services for commercial print,
carpet and hotel clients. These services include receipt of commercial finished
goods, inventory services and legacy data stream information services, as well
as storage, repalletizing and transport distribution services that can be
provided on a case-by-case basis or turn-key. Additionally, packaging
sanitization and custom branding services are available. This comprehensive
outsourcing service includes trucking as well as tracking services.
-5-
SUPPLY CHAIN MANAGEMENT
The Company provides infrastructure and equipment, integrated with its
customers' existing systems, to handle distribution planning, just-in-time
delivery and automated ordering throughout their operations, and additionally
will provide and manage warehouses, distribution centers and other facilities
for them. The Company also consults on identifying bottlenecks and
inefficiencies and eliminating them by analyzing freight patterns and costs,
optimizing distribution centers and warehouse locations, and
analyzing/developing internal policies and procedures for its customers. The
Company has enterprise-wide technology solutions that enable real-time tracking
and monitoring of various products and offers these and other related solutions
under long term contracts to a host of customers. The third-party service
platform provides guaranteed service level agreements (SLAs) to ensure stable,
predictable delivery and tracking of many products through the supply chain. The
industry should grow in all segments, especially during difficult and
unpredictable economic climates due to the capital-intensive nature of
warehousing, transportation and technology equipment needed to track and monitor
products as they are shipped, staged and delivered.
CONVERSION OF DEBT TO EQUITY
The Company's credit facility, of which $773,896 has been converted
into 773,896 shares of Series A Preferred Stock, par value $.001 per share
("Series A Preferred Stock") which bears interest at six percent (6%) as of
period ending December 31, 2001. The Series A Preferred Stock is convertible
into shares of Common Stock of the Company at market or the last placement price
of the Company's securities at which equity was placed with investors, whichever
is less. Any interest payable under the terms of the Series A Preferred Stock
may be tendered in shares of Common Stock at the market price of the Company, at
the Company's sole discretion.
The Company had $426,898 in demand and term notes payable to the
Company's largest shareholder, (See "ITEM 12 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS") and to a customer of the Company. These notes were converted into
426,898 shares of Series B Preferred Stock par value $.001 per share (" Series B
Preferred Stock") as of the period ending December 31, 2001. Series B Preferred
Stock is convertible into shares of Common Stock of the Company at market price
or at the last placement price of the Company's securities with investors,
whichever is less.
FACTORING
The Company factors substantially all of its accounts receivable.
During the period ended December 31, 2001, the Company utilized the services of
two factoring companies. Accounts receivable are sold to the factoring
companies. The Company may be subject to offset rights from the factoring
company in the event that any trade receivables are not paid within seventy five
(75) days. The most recent agreement provides for the payment of factoring fees
at two and one-half (2.5%) of each invoice factored.
-6-
Accounts receivable transferred to the factoring companies were as
follows:
Factored accounts $6,056,953
Customer payments (charge backs) (5,417,492)
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Amount due to factoring companies $ 639,461
=========
The Company will need to continue to obtain financing, of which there
can be no assurance
GROWTH STRATEGY
The Company acquired certain unencumbered assets of Q Logistics, for a
purchase price of $367,385, out of bankruptcy reorganization in May 2001. In
connection with the acquisition of Q-Logistics, the Company entered into a
demand note for $245,000. The note was subsequently converted to Series B
Preferred Equity, which provides for conversion into Common Shares of Stock in
the Company at a conversion price of market or at the last placement price for
securities, whichever is lesser. (See Note 8 to the Financial Statements). The
rationale behind the transaction was that warehouse management, inventory
staging, shipping management, electronic inventory tracking and management and
other related services would be accretive to the transport brokerage business,
adding levels of captive clients that the Company could offer various support
services to over long-term relationships..
The growth market for third-party logistics support and supply chain
management services continues to expand significantly and the Company intends to
combine its disparate product offerings to customers to create an integrated
suite of management tools, decisioning tools, reporting tools and support
services that will enable sole source and limited source contract opportunities
for existing and new clients. The Company has significant experience, acquired
in its Quebecor relationship, which will provide evidence, to existing and new
clients, of its ability to deliver a managed turnkey solution for staging,
transportation, inventory and distribution of products across the supply chain.
We have acquired businesses in the past and may consider acquiring
businesses in the future that provide complementary services to those we
currently provide or expand our geographic presence. There can be no assurance
that the businesses that we have acquired in the past or any businesses that we
may acquire in the future can be successfully integrated. While we believe that
we have sufficient financial and management resources to successfully conduct
our acquisition activities, there can be no assurance in this regard or that we
will not experience difficulties with customers, personnel or others. Our
acquisition activities involve more difficult integration issues than those of
many other companies because the value of the companies we acquire comes mostly
from their business relationships, rather than their assets.
-7-
The integration of business relationships poses more of a risk than the
integration of tangible assets because relationships may suddenly weaken or
terminate. Further, logistics businesses we have acquired and may acquire in the
future compete with many customers of our wholesale operations and these
customers may shift their business elsewhere if they believe our retail
operations receive favorable treatment from our wholesale operations. In
addition, although we believe that our acquisitions will enhance our competitive
position, business and financial prospects, there can be no assurances that such
benefits will be realized or that any combination will be successful.
SALES AND MARKETING
The Company plans to increase market share by implementing sophisticated
state-of-the-art technology to optimize efficiency, profitability and improve
corporate image. The Company also plans to increase brand awareness through
marketing initiatives such as a newly designed web site, direct mail,
advertising, collateral, trade shows, etc.
The Company plans to increase non-asset based agent development program
in strategic locations and cross train sales staff to expand new services to
existing customers.
COMPETITION
The transportation services industry is highly competitive. Its retail
businesses compete primarily against other domestic non-asset based
transportation and logistics companies, asset-based transportation and logistics
companies, third-party freight brokers, internal shipping departments and other
freight forwarders. Its wholesale business competes primarily with over-the-road
full truckload carriers, conventional intermodal movement of trailers on flat
cars, and containerized intermodal rail services offered directly by railroads.
We also face competition from Internet-based freight exchanges, which
attempt to provide an online marketplace for buying and selling supply chain
services.
Historically, competition has created downward pressure on freight
rates, and continuation of this rate pressure may materially adversely affect
the Company's net revenues and income from operations. In addition, some of the
Company's competitors have substantially greater financial and other resources
than we do.
The Company has identified several direct competitors. These companies
offer each of the individual services that the Company offers. However, the
Company believes these identified competitors offer many of these individual
services merely as ancillary services and tend to focus on one main service
offering (for example, truck leasing, freight forwarding, etc.). These direct
competitors include:
RYDER INTEGRATED LOGISTICS, INC. is a subsidiary of the $4.9 billion
transportation and logistics provider Ryder Systems, Inc. Ryder's primary
business is providing truck leasing services.
-8-
MENLO LOGISTICS, INC. is a subsidiary of $5.5 billion transportation and
logistics services provider CNF. Menlo's primary business is less-than-truckload
(LTL) transportation services.
C.H. ROBINSON WORLDWIDE ("CHR") is one of the largest third-party logistics
providers in North America. CHR's primary business is international freight
forwarding brokerage.
EXEL LOGISTICS, a British logistics company with $5.3 billion in 1999 revenues,
provides global freight management, integrated transportation and warehousing.
Exel's primary business is warehousing services.
SUPPLIERS
The Company utilizes the services of various third party transportation
companies. No significant third party provider results in over 10% of the
Company's revenue.
CUSTOMERS
The Company's largest customer constitutes approximately twenty six
(26%) of the Company's revenue. The top six (6) debtor balances comprised forty
percent (40%) of outstanding accounts receivable balances, and include clients
like Quebecor, Cantex, Inc., Air Ride, Beaulieu, Murphy and Ricoh.
EMPLOYEES
As of April 1, 2002, the Company had seventy three (73) full time
employees. We consider our employee relations to be good, and we have never
experienced a work stoppage.
REGULATORY MATTERS
The Company, its suppliers and its customers are subject to changes in
government regulation, which could result in additional costs and thereby affect
the Company's results of operations.
The transportation industry is subject to legislative or regulatory
changes that can affect its economics. Although the Company operates in the
intermodal segment of the transportation industry, which has been essentially
deregulated, changes in the levels of regulatory activity in the intermodal
segment could potentially affect the Company and its suppliers and customers.
Future laws and regulations may be more stringent and require changes in
operating practices, influence the demand for transportation services or require
the outlay of significant additional costs. Additional expenditures incurred by
the Company, or by its suppliers, who would pass the costs onto the Company
through higher prices, would adversely affect the Company's results of
operation.
If the Company expands its services internationally, the Company may become
subject to international economic and political risks. Doing business outside
the United States subjects the Company to various risks, including changing
economic and political conditions, major work stoppages, exchange controls,
currency fluctuations, armed conflicts and unexpected changes in United States
and foreign laws relating to tariffs, trade restrictions, transportation
regulations, foreign investments and taxation. Significant expansion in foreign
countries will expose the Company to increased risk of loss from foreign
currency fluctuations and exchange controls as well as longer accounts
receivable payment cycles. The Company has no control over most of these risks
and may be unable to anticipate changes in international economic and political
conditions and, therefore, unable to alter business practices in time to avoid
the adverse effect of any of these changes.
-9-
If the Company fails to comply with or lose any required licenses,
governmental regulators could assess penalties or issue a cease and desist order
against the Company's operations that are not in compliance.
There are newly adopted and pending laws regarding transportation, whether
by air, sea, freight or rail, which may have an effect on the Company. At this
time, the Company cannot ascertain the full effects of such laws. Internet
Regulation - Few laws or regulations are currently directly applicable to the
Company's access to the Internet or conducting business on the Internet.
However, because of the Internet's popularity and increasing use, new laws and
regulations may be adopted. Such laws and regulations may cover issues such as:
user privacy, pricing, content, copyrights, distribution, and characteristics
and quality of products and services.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company has developed Broker/Agent and internal Company software that
enables the management, analysis and deployment of transportation and logistics
solutions over Internet connections or via secure dial in access. The Company
maintains all rights to the code, concepts and visual appearance of this
software and is in the process of cataloguing the unique features of these
software products, with the intention of filing for patent or copyright
protection. However, the Company has not filed for any patents, copyrights or
trademarks. The Company name has not been federally trademarked.
REPORTS TO SECURITY HOLDERS
The Company does not currently intend to voluntarily send an annual report
to its security holders of record.
ADDITIONAL INFORMATION
Statements contained in this Annual Report regarding the contents of
any contract or any other document are not necessarily complete and, in each
instance, reference is hereby made to the copy of such contract or other
document filed as an exhibit to the registration statement or herewith. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934 and, consequently, will be required to file annual and quarterly
reports, proxy statements and other information with the SEC. This information,
including exhibits, may be inspected without charge at the SEC's principal
office in Washington, D.C., and copies of all or any part thereof may be
obtained from the Public Reference Section, Securities and Exchange Commission,
450 Fifth Street, NW, Washington, D.C. 20549 upon payment of the prescribed
fees. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1.800.SEC.0330. The SEC maintains a Website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with it. The address of the SEC's Website
is http://www.sec.gov.
-10-
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases office space for its headquarter, located at 18302
Highwood's Preserve Parkway, Suite 210, Tampa, FL 33467, which is 2,073 square
feet, under a lease that expires in April 2006. The Company pays $3,411 per
month and the lease expires May 2006. The initial lease term is for a period of
five years and the lease agreement includes an optional lease period of an
additional three years. The Company also leases certain equipment under
non-cancelable operating leases.
As part of the lease agreement, the Company has issued an unused letter
of credit in the amount of $40,000. The amount required of the letter of credit
is reduced by $8,000 per year and may be drawn if certain lease commitments have
not been met or have been violated.
The following is a schedule by year of future minimum rental payments
required under operating leases that have an initial or remaining non-cancelable
lease term in excess of one year as of December 31, 2001:
Year Ending
DECEMBER 31,
2002 $ 50,979
2003 52,658
2004 49,195
2005 47,292
2006 15,969
-----------
$ 216,093
===========
The Company leases facilities located in Atlanta, Georgia and Edison,
New Jersey on an "at will" basis. Monthly rental payments for these facilities
total approximately $94,000, of which $51,000 is for the Edison, NJ facility and
$43,000 is for the Atlanta, GA facility. The Company is currently engaged in a
dispute with the landlord regarding the Atlanta facility in which the landlord
has asserted that the Company has a prime tenancy terminating in 2006. This
assertion was made during the month of February 2002 when the Company noticed
the landlord of its intent to vacate the premises pursuant to its month-to-month
sublease with LMRI, who the Company believes is the prime leaseholder in this
space, and who should a have letter of credit posted as security to evidence its
prime tenancy. The Company is engaged in ongoing discussions in an effort to
reach amicable settlement of this dispute. The Company cannot ascertain at this
time the extent of liability, if any, it may have with respect to this dispute.
Rent expense amounted to $722,361 for the year ended December 31, 2001.
There was no rent expense during the period ended December 31, 2000.
On December 15, 2001, the Company moved the location of its northeast
regional support and logistics center from 40 Brunswick Avenue in Edison, New
Jersey to 39 Mill Road in Edison, New Jersey. This facility was moved in concert
with expansion needs of the Company's largest logistics support client;
increasing the space from 120,000 square feet to 140,000; the number of trailer
bays for loading and unloading products by over fifty percent; and a location
that offers enhanced accessibility for ground transportation carriers. The
Company continues to provide comparable services for this client and others from
its new facility.
-11-
The Company also has six Sales Agent offices across the United States.
These offices are located at:
- RR 1 Box 385, Clinton, ME 04927
- 11448 Rene Drive, Jacksonville, FL 32218
- 7240 Indiana Avenue, Fort Worth, TX 76137
- 9 Beacon Hill, East Brunswick, NJ 08816
- 2059 S. Hamilton, Dalton, GA 30720
The Company believes that the condition of its facilities is excellent
and that the provided space should be reduced in Atlanta by approximately fifty
percent (50%), at which time the facilities would be sized correctly to
adequately provide for the Company's immediate needs and needs for the
foreseeable future. In the opinion of the Company's management, these properties
are adequately insured, in good condition and suitable for the Company's
anticipated future use.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 29, 2001, a majority of the stockholders of WBNI, now
known as Segmentz, approved the exchange of 92% of the common shares of WBNI for
100 shares of the Common Stock of TRANSL HOLDINGS in a stock for stock exchange.
Allan J. Marshall was elected as the sole Director of the Corporation.
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS.
Market Information
The Company's common stock is listed on the Over-the-Counter Pink Sheets.
Since the Company's common stock only began trading on the Pink Sheets in the
first quarter of 2002, there is limited historical information available to
determine volume, pricing and trading volatility. No assurance can be given that
an active market will exist for the Company's common stock and the Company does
not expect to declare dividends in the foreseeable future since the Company
intends to utilize its earnings, if any, to finance its future growth, including
possible acquisitions.
The Company filed a Registration Statement on January 30, 2002 on Form
10-SB for the purpose of enabling its common stock to commence trading on the
NASD OTC Bulletin Board.
The Company's Registration Statement on Form 10-SB must be declared
effective by the SEC prior to it being approved for trading on the NASD OTC
Bulletin Board, and until such time, the Company's common stock will continue to
be quoted on the "Pink Sheets." The Company's market makers must make an
application to the National Association of Securities Dealers, Inc., or NASD,
following the effective date of the Form 10-SB in order to have the common stock
quoted on the NASD OTC Bulletin Board.
-12-
Holders. As of April 1, 2002, there were a total of 6,502,913 shares of
the Company's common stock outstanding, held by approximately 464 shareholders
of record, 773,896 shares of the Company's Series B Preferred Stock outstanding,
held by one shareholder of record, and 426,898 shares of the Company's Series A
Preferred Stock outstanding, held by two shareholders of record.
Dividends. The Company has not declared any dividends on its common
stock during the last two fiscal years.
The Company's authorized capital stock consists of 40,000,000 shares of
common stock, par value $.001 and 10,000,000 shares of preferred stock, par
value $.001. Each share of common stock entitles a shareholder to one vote on
all matters upon which shareholders are permitted to vote. No shareholder has
any preemptive right or other similar right to purchase or subscribe for any
additional securities issued by the Company, and no shareholder has any right to
convert the common stock into other securities. No shares of common stock are
subject to redemption or any sinking fund provisions. All the outstanding shares
of the Company's common stock are fully paid and non-assessable. Subject to the
rights of the holders of the preferred stock, if any, the Company's shareholders
of common stock are entitled to dividends when, as and if declared by the Board
from funds legally available therefore and, upon liquidation, to a pro-rata
share in any distribution to shareholders.
The Company does not anticipate declaring or paying any cash dividends
on the common stock in the year 2001 or in the foreseeable future.
Pursuant to the Company's Articles of Incorporation, the Board has the
authority, without further shareholder approval, to provide for the issuance of
up to 10,000,000 shares of the Company's preferred stock in one or more series
and to determine the dividend rights, conversion rights, voting rights, rights
in terms of redemption, liquidation preferences, the number of shares
constituting any such series and the designation of such series. The Company's
Board has the power to afford preferences, powers and rights (including voting
rights) to the holders of any preferred stock preferences, such rights and
preferences being senior to the rights of holders of common stock. No shares of
the Company's preferred stock are currently outstanding. Although the Company
has no present intention to issue any shares of preferred stock, the issuance of
shares of preferred stock, or the issuance of rights to purchase such shares,
may have the effect of delaying, deferring or preventing a change in control of
the Company.
As a WBNI successor, the Company is prohibited from issuing non-equity
voting securities under Section 1123(a)(6) of the United States Bankruptcy Code.
If there are to be any classes of securities issued in the future, all shall
possess voting power, an appropriate distribution of such voting power among
such classes, including, in the case of any class of equity securities having a
preference over another class of equity securities with respect to dividends,
and adequate provision for the election of directors representing such preferred
class in the event of default in the payment of such dividends.
-13-
PROVISIONS HAVING A POSSIBLE ANTI-TAKEOVER EFFECT
The Company's Articles of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Company's Board and in the policies
formulated by the Board and to discourage certain types of transactions which
may involve an actual or threatened change of control of the Company. In
addition, the Board has the authority, without further action by the Company's
shareholders, to issue up to 10,000,000 shares of its preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof. The issuance of the Company's preferred stock or additional shares of
common stock could adversely affect the voting power of the holders of common
stock and could have the effect of delaying, deferring or preventing a change in
the Company's control.
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 2001, the Company issued 773,896 shares of Series A
Preferred Stock for the conversion of a $773,896 note payable to Bryant
Plastics, Inc.
Each share of the Series A Preferred Stock is convertible, at the option
of the holder, at any time into shares of common stock of the Company at a
conversion price equal to the trading price of the shares or at the price of the
last placement of shares by the Company, whichever is less. Interest on the
shares of the Series B Preferred Stock is cumulative at an interest of six
percent (6%) per annum.
The Series A Preferred Stock is redeemable at the option of the Company
for cash at a rate of $1.00 per share and shares of common stock as payment for
any accrued interest pursuant to the fixed interest rate of six percent (6%)
through the date of the retirement, in the event that a notice to convert such
shares of Series B Preferred Stock into common stock has not been made prior to
such election to retire said shares.
The holders of the preferred stock are entitled to vote, together with
the holders of common stock, on all matters submitted to stockholders for a
vote. Each preferred stockholder is entitled to the number of votes equal to the
number of shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of
the then outstanding Series A Preferred Stock shall receive a pro-rata
distribution to be determined by performing a fictional conversion into common
stock, and determining the pro-rata distribution of such proceeds on the basis
"as-if converted" which is subordinate in classification to any debt classes
which may be outstanding at the time of such events.
-14-
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
Effective December 31, 2001, the Company issued 426,898 shares of Series
B Preferred Stock for the conversion of two notes payable totaling $426,898, one
to Allan Marshall, the majority Stockholder, Director and Chief Executive
Officer of the Company, with a balance due of $180,898 and the other to Bryant
Plastics with a balance due of $245,000.
Each share of the Series B Preferred Stock is convertible, at the option
of the holder, at any time into shares of common stock of the Company at a
conversion price equal to the trading price of the shares or at the price of the
last placement of shares by the Company, whichever is less.
The holders of the preferred stock are entitled to vote, together with
the holders of common stock, on all matters submitted to stockholders for a
vote. Each preferred stockholder is entitled to the number of votes equal to the
number of shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of
the then outstanding Series B Preferred Stock shall receive a pro-rata
distribution to be determined by performing a fictional conversion into common
stock, and determining the pro-rata distribution of such proceeds on the basis
"as-if converted," which is subordinate in classification to any debt classes
and preferred stock, Series A, which may be outstanding at the time of such
events.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following analysis of the financial condition of Company as of
December 31, 2001 and the results of operation for the period ended December 31,
2001, should be read in conjunction with the Financial Statements referred to in
Item 7 hereof including footnote disclosures, 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. The Company acquired
all outstanding capital stock of TRANSL Holdings on October 29, 2001, which owns
Trans-Logistics, Inc.
Historical results of operations and the percentage relationships among
any amounts included in the Statement of Operations of Trans-Logistics and any
trends which may appear to be inferable there from, 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 integration of third party brokers and
agents into our back office, contact and support resources.
-15-
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 of 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 Report speak only as of the date of this Report,
and we do not have any obligation to publicly update or revise any of these
forward-looking statements.
Such statements may include, but are not limited to, projections of
revenues, income, or loss, capital expenditures, plans for future operations,
financing needs or plans, the impact of inflation and plans relating to the
foregoing. Statements in the Company's Form 10-KSB, including Notes to the
Financial Results of Operations, which may describe factors, among others, that
could contribute to or cause such differences.
Description of Business
Overview:
The Company operates a regional presence headquartered in Tampa,
Florida, with offices in Atlanta, Georgia, and Edison, New Jersey and broker and
agent offices located throughout the United States. From its headquarters and
remote warehouse, office and support locations, the Company provides Third Party
Logistics ("3PL") services for mid-sized and large clients.
Results of Operations
For the year ended December 31, 2001 compared to the period ended
December 31, 2000.
Revenues increased approximately $8,695,098, or 2,346%, to
approximately $9,065,730 for the year ended December 31, 2001 as compared to
approximately $370,632 for the period December 31, 2000. This increase was
primarily due to (i) twelve complete months to realize revenues in 2001,
compared to two in 2000, (ii) growth resulting from new client acquisition,
(iii) growth resulting from the acquisition of the assets of Q Logistics from
Bankruptcy (and clients that elected to utilize the Company's services as a
consequent) and (iv) various expansion into related business lines.
-16-
Costs of services provided, which consist primarily of payment for
trucking services, fuel, insurance, sales, marketing and general and
administrative support increased by approximately $ 7,174,506, or 2,140%, to
approximately $7,509,712 for the year ended December 31, 2001, as compared to
approximately $335,206 for the period ended December 31, 2000. As a percentage
of revenues Trucking and transport related services of fuel, insurance, sales
and marketing are aggregated as cost of goods sold and amounted to 83% of
related revenues for the year ended December 31, 2001, as compared to 92% for
the period ended December 31, 2000, and general and administrative expenses
increased from 5% for the period ended December 31, 2000 to 19% for the year
ended December 31, 2001.
Gross margin increased by approximately $1,556,018, or 4,292%, to
approximately $1,556,019 for the period ended December 31, 2001, as compared to
approximately $35,426 for the period ended December 31, 2000. This increase is
primarily attributed to having a full year of operations and to expansion of
business lines.
Selling, general and administrative expenses increased by
approximately $1,672,475, or 8613%, to approximately $1,691,892 for the year
ended December 31, 2001, up from approximately $19,417 for the period ended
December 31, 2000. This increase was in large part due to: (i) having a full
year of operations, (ii) expenses related to the acquisition and consolidation
of Q Logistics assets and some personnel, (ii) over $200,000 in direct and
indirect costs resulting from the failed merger with LMRI, (iii) over $300,000
of direct and indirect costs resulting from the acquisition of WBNI and expenses
relating thereto and (iv) expansion of the Company into various business lines.
The Company experienced a loss in investment value of $78,999,
booked consequential to its settlement for expenses caused at the time of the
recission with LMRI, resulting primarily from the value realized by the Company
at the time of sale of the securities tendered in that settlement and the value
of those securities at the time the Company received them, as compared with no
such losses in the prior period ended December 31, 2000.
The Company experienced losses from continuing operations before
provisions for income taxes that approximated $431,421 for the fiscal year ended
December 31, 2001, compared with income from continuing operations after
provisions for income taxes of approximately $13,092 for the period ended
December 31, 2000.
Loss from non-recurrent events was approximately $460,988 directly
attributable to consulting, credit loss, legal and professional expenses
associated with the failed merger and transactional recission associated with
the January merger of the Company with LMRI and the successful merger of the
Company with WBNI, compared with no such expenses in the prior operating period
ended December 31, 2000. Additionally, the Company experienced extensive losses
during the months following its acquisition of Q Logistics assets from
bankruptcy that resulted from various operational issues that occurred as the
Company rescinded its transaction to merge with LMRI, and from subsequent
terrorist events involving the bombing of the World Trade Center on September
11, 2001, the quantum of which are difficult, if not impossible to determine.
-17-
Net Loss for the period ended December 31, 2001 was approximately
$431,421, as compared to profit of approximately $13,092 at December 31, 2000.
Diluted loss per share from continuing operations for the year ended December
31, 2001 increased by $.07 to $.07 per share, as compared to $.00 per share for
December 31, 2000.
Liquidity and Capital Resources
Cash and cash equivalents and marketable securities were
approximately $39,489 at December 31, 2001, compared with $1,709 at December 31,
2000. This increase of approximately $37,780 was primarily a result of the
Company increasing in size and having greater average cash balances as a
consequent of such growth.
During the period ended December 31, 2001, the Company entered into
a $1,000,000 factoring facility with Yankton Factors Inc. that provides for
97.5% advance rate against eligible receivables defined as those receivables
which are likely to be paid to the Company within ninety days from the invoicing
for services, this facility bears interest of 2.5% for up to 75 days of credit
and is estimated to have an annual cost of approximately prime rate plus
eighteen percent to the Company. The facility is currently unsecured and has
outstanding balances due of $639,461 at December 31, 2001.
The Company has subsequently entered into a Factoring relationship
with Riviera Finance that provides for 80% advance against eligible receivables
at a rate of 1% per 10 days, which is intended to be utilized as a cash flow
enhancement for large credit clients of the Company that have historically paid
within twenty days to enable expansion within these clients, to provide
significant revenue increases with minimal capital requirements. This facility
provides for the non-recourse sale of approved Trade receivables to Riviera and
has no outstanding balances due at December 31, 2001.
The Company has embarked upon an aggressive campaign to manage cash
that has resulted in greater anticipated levels of cash available for operations
which it believes will be adequate to fund operations and financial requirements
in the next fiscal year. The Company arranged for the conversion of debt due to
related parties to preferred equities.
-18-
Revenue for the fourth quarter of 2001 was approximately 2,383,031,
compared with $370,632 for the fourth quarter of 2000. The Company has
experienced numerous one-time, non-recurrent expenses in connection with two
events in the past year; a failed merger with LMRI, which resulted in
approximately $200,000 of losses, primarily from credit extended to a party
related to LMRI, and $260,998 in legal, consulting and accounting expenses
related to its merger with WBNI, a company that traded on the pink sheets prior
to its merger with the Company, which resulted in the Company's being listed for
quotation on the NASDAQ Bulletin Board quotation system in the second quarter of
2002. The Company has written off significant assets in the fourth quarter
related to the credit exposure from a business affiliation that resulted from
the Company's failed merger with LMRI, and expensed approximately $200,000 in
direct expenses in connection with its merger with WBNI. These expenses were not
directly related to the core operations of the Company and are one-time,
non-recurrent expenses that will not continue to inure to the detriment of
operations in subsequent fiscal periods. Prior to one-time non-recurrent direct
expenses of $464,210, Earnings before interest, depreciation, amortization and
one-time non-recurrent expenses was $193,955, or $.03 per share of Common Stock
outstanding, a difference of $.10 per share vs. the results reported.
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 our company as a leader and a
preferred provider of high-quality, cost-effective transportation, logistics and
support services for Brokers and Agents in the transportation and third party
logistics marketplaces on a national basis while building brand name
recognition.
AGENT PROGRAM
We have operated an agency program since our inception. We expect to
see renewed profitable growth in the segment through our wholly owned
subsidiary, Trans-logistics, Inc. The agency program is essentially a
co-operative for smaller truckload carriers whereby Trans-logistics permits
these carriers to operate under its authority as an exclusive agent. The agent
provides its customers and business. Trans-logistics bills the agent carriers'
customers and collects the revenues for these shipments. Trans-logistics acts as
an application service provider for its agents by affording access to
Trans-logistics' information technologies and services. In addition, agents
receive economies of scale by participating in the purchase of certain overhead
and other items, such as lower cost of fuel and insurance. Trans-logistics also
provides agents with liability insurance coverage and certain administrative
services such as human resource administration, safety and risk management, DOT
compliance, billing and collecting receivables. Trans-logistics has signed on
several agents over the past several months. We anticipate exciting and
profitable growth in the segment.
Continuing Operations:
OPERATING REVENUES
Total operating revenues increased approximately $8,716,884, or 2,350%,
to approximately $9,065,730 for the period ended December 31, 2001 as compared
to approximately $370,632 for the period ended December 31, 2000. This increase
was primarily due to (i) twelve complete months to realize revenues in 2001,
compared to two in 2000, (ii) growth resulting from new client acquisition,
(iii) growth resulting from the acquisition of the assets of Q Logistics from
Bankruptcy (and clients that elected to utilize the Company's services as a
consequent), and (iv) various expansion into related business lines.
-19-
SALARIES, WAGES AND BENEFITS
Salaries, wages and benefits increased from approximately $200,000 for
the period ended December 31, 2000 to $1,904,977 for the period ended December
31, 2001. The reason for the increase was increased activity for the quarter.
The consolidation of operational staff resulting from reduction in management in
the warehouse division, Q Logistics is expected to impact the fourth quarter.
Total salaries, wages and benefits for the period ended December 31, 2001 was
$1,904,977.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased from $0 for the period ended
December 31, 2000 to $53,335 for the period ended December 31, 2001. The reason
for this increase was the placing of service those assets acquired in the
purchase of Q logistics out of bankruptcy.
GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased by approximately
$1,672,475, or 8,613%, to approximately $1,691,892 for the period ended December
31, 2001, up from approximately $19,417 for the period ended December 31, 2000.
This increase was in large part due to: (i) having a full year of operations,
(ii) expenses related to the acquisition and consolidation of Q Logistics assets
and some personnel, (ii) over $200,000 in direct and indirect costs resulting
from the failed merger with LMRI, (iii) over $300,000 of direct and indirect
costs resulting from the acquisition of WBNI and expenses relating thereto and
(iv) expansion of the Company into various business lines.
OPERATIONS
INTEREST
Interest expense increased to $216,548 for the fiscal year ended
December 31, 2001 from $0 for the period ended December 31, 2000. The primary
reason for the increase was that the Company continues to undergo significant
expansion and, in spite of conversion of some related party debt to equity,
still needs to obtain credit from its factoring facility or needs to sell trade
receivables to maintain cash flows necessary to provide competitively priced
transportation services to its clients. The Company continues to seek
alternative financing in the form of a term instrument that provides for
availability against eligible assets on a rolling basis that is priced
competitively.
-20-
LIQUIDITY AND CAPITAL RESOURCES
Our working capital position has decreased since the inception of the
Company to ($85,926). This decrease is primarily due to the increased resources
consumed by the growth of the Company, specifically related to the acquisition
of Q-Logistics. The Company experienced significant one-time losses in
consolidation of the Q-Logistics acquisition into current operations and would
have significantly more working capital and retained earnings if not for
approximately $500,000 in one-time non-recurring losses experienced in reduction
in staff, facilities and streamlining of the Q-logistics operations. The
reduction in working capital has also resulted from lack of cash flow management
and borrowings, specifically in the prompt payment to suppliers and lack of
corresponding payment from clients for services rendered. (See Financial
Statements)
Since embarking on an aggressive cash flow management campaign, the
Company has built positive working capital levels of approximately $630,000 by
conversion of related party debt to equity and by selling accounts receivable to
its factor to increase cash flow, for the first quarter period ending March 31,
2002, while managing expenses to enhance profitability. The Company will require
significant capital to continue to meet its expansion goals over the next twelve
months. There can be no assurance that the Company will be able to obtain the
capital necessary to continue operations.
-21-
ITEM 7. FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
SEGMENTZ, INC.
YEAR ENDED DECEMBER 31, 2001 AND THE PERIOD
APRIL 28, 2000 (DATE OF INCEPTION) THROUGH DECEMBER 31, 2000
INDEPENDENT AUDITORS' REPORT
Segmentz, Inc.
Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
CONTENTS
Independent Auditors' Reports on Financial Statements......................F-1-2
Financial Statements:
Balance Sheet............................................................F-3
Statements of Operations.................................................F-4
Statements of Changes in Stockholders' Equity............................F-5
Statements of Cash Flows...............................................F-6-7
Notes to Financial Statements.........................................F-8-19
Independent Auditors' Report
Board of Directors
Segmentz, Inc.
Tampa, Florida
We have audited the accompanying balance sheet of Segmentz, Inc. as of December
31, 2001 and the related statements of operations, changes in stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the management of Segmentz, Inc. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Segmentz, Inc. as of December
31, 2001 and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
March 19, 2002
F-1
Independent Auditors' Report
Board of Directors
Segmentz, Inc.
Tampa, Florida
We have audited the accompanying statements of operations, changes in
stockholders' equity, and cash flows of Segmentz, Inc. (f/k/a Trans-Logistics,
Inc.) for the period April 28, 2000 (date of inception) through December 31,
2000. These financial statements are the responsibility of the management of
Segmentz, Inc. (f/k/a Trans-Logistics, Inc.). Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. These standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Segmentz,
Inc. (f/k/a Trans-Logistics, Inc.) for the period April 28, 2000 (date of
inception) through December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
Valiente Hernandez, P.A.
Certified Public Accountants
Tampa, Florida
May 8, 2001
F-2
Segmentz, Inc.
Balance Sheet
December 31, 2001
ASSETS
Current assets:
Cash and cash equivalents $ 39,489
Accounts receivable, net of allowance of $45,000 1,008,576
Other receivables 108,421
Prepaid expenses and other current assets 167,840
-----------
Total current assets 1,324,326
-----------
Equipment, net of accumulated depreciation 321,808
-----------
Other assets:
Note receivable 450,000
Other receivables, net of allowance of $200,000 64,833
Loans and advances 31,850
-----------
Total other assets 546,683
-----------
$ 2,192,817
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 623,677
Accrued salaries and wages 66,962
Accrued expenses, other 80,152
Obligation due under factoring arrangement 639,461
-----------
Total current liabilities 1,410,252
-----------
Stockholders' equity:
Convertible preferred stock; 10,000,000 shares authorized;
1,200,794 shares issued and outstanding 1,200,794
Common stock; $.001 par value; 40,000,000 shares authorized;
6,502,913 shares issued and outstanding 6,503
Accumulated deficit (424,732)
-----------
Total stockholders' equity 782,565
-----------
$ 2,192,817
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-3
Segmentz, Inc.
Statements of Operations
Period April 28,
2000 (Date of
Year Ended Inception) to
December 31, December 31,
2001 2000
-------------------------------
Revenues:
Operating revenue $ 8,455,766 $ 364,898
Consulting and other revenue 609,964 5,734
----------------------------
9,065,730 370,632
----------------------------
Expenses:
Operating expenses 7,509,712 335,206
General and administrative expenses 1,691,892 19,417
Loss in investment 78,999
Interest expense 216,548
----------------------------
9,497,151 354,623
----------------------------
(Loss) income before taxes (431,421) 16,009
Income tax expense 2,917
----------------------------
Net (loss) income $ (431,421) $ 13,092
============================
Net (loss) income per common share $ (.07) $ .00
============================
Weighted average common shares outstanding 6,502,913 6,502,913
============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-4
Segmentz, Inc.
Statements of Changes in Stockholders' Equity
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
RETAINED
PREFERRED STOCK COMMON STOCK ADDITIONAL EARNINGS
------------------------------------------------------- PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) TOTAL
------------------------------------------------------------------------------------------------
Inception, April 28, 2000 500 $ 50 $ 50 $ 100
Net income for the year $ 13,092 13,092
-----------------------------------------------------------------------------------------------
Balance, December 31, 2000 500 50 50 13,092 13,192
Acquisition of company 6,502,913 6,503 4,480 (4,153) 6,830
Recapitalization of company (500) (50) (4,530) (2,250) (6,830)
Issuance of Series B redeemable
convertible preferred stock 426,898 $ 426,898 426,898
Issuance of Series A convertible
preferred stock 773,896 773,896 773,896
Net loss for the year (431,421) (431,421)
-----------------------------------------------------------------------------------------------
Balance, December 31, 2001 1,200,794 $ 1,200,794 6,502,913 $ 6,503 $ 0 $ (424,732) $782,565
===============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-6
Segmentz, Inc.
Statements of Cash Flows
Period April 28,
2000 (Date of
Year Ended Inception) to
December 31, December 31,
2001 2000
---------------------------------
OPERATING ACTIVITIES
Net (loss) income $ (431,421) $ 13,092
--------------------------
Adjustments to reconcile net (loss) income to net cash
and cash equivalents (used) provided by operating
activities:
Securities received as payment for services (148,500)
Loss on sale of securities 78,999
Provision for doubtful accounts and other receivables 258,365
Note receivable received in connection with other
revenue (450,000)
Depreciation 53,335
Increase in:
Accounts and other trade receivables (905,404) (269,958)
Prepaid expenses and other assets (92,840)
Increase (decrease) in:
Accounts payable 427,464 121,213
Accounts payable to related party (126,845) 126,845
Accrued expenses 139,614 7,500
Income taxes payable (2,917) 2,917
--------------------------
Total adjustments (768,729) (11,483)
--------------------------
Net cash and cash equivalents (used) provided by
operating activities (1,200,150) 1,609
--------------------------
INVESTING ACTIVITIES
Purchase of equipment (375,143)
Proceeds from sale of securities 69,501
Loans, advances, and other receivables (296,683)
--------------------------
Net cash and cash equivalents used by investing activities (602,325)
--------------------------
FINANCING ACTIVITIES
Issuance of common stock 100
Net obligations incurred under factoring arrangements 639,461
Proceeds from issuance of debt 1,200,794
--------------------------
Net cash and cash equivalents provided by financing activities 1,840,255 100
--------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 37,780 1,709
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR/PERIOD 1,709
--------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR/PERIOD $ 39,489 $ 1,709
==========================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-7
Segmentz, Inc.
Statements of Cash Flows
Period April 28,
2000 (Date of
Year Ended Inception) to
December 31, December 31,
2001 2000
--------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
AND NONCASH FINANCING ACTIVITIES:
Cash paid during the year for interest $ 201,469 $ 0
======================================
During the year ended December 31, 2001, the holders of debt amounting
to $1,200,794 received 1,200,794 shares of preferred stock in
satisfaction of this liability.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-8
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
1. ACQUISITION
In October 2001, Segmentz, Inc., formerly known as WBNI, Inc., merged with
TransL Holdings, Inc., the sole stockholder of Trans-Logistics, Inc. This
consolidated entity is hereinafter referred to as the "Company." Prior to
acquisition, Segmentz, Inc. was an inactive public shell with approximately 460
stockholders who owned 520,233 shares of common stock.
Pursuant to the agreement, the stockholders of TransL Holdings, Inc. ("TransL")
received in return for all of their shares in TransL, 5,982,680 unregistered
shares of Segmentz, Inc., which represented approximately 92 percent of its
total shares outstanding.
The acquisition has been accounted for as a reverse acquisition in which TransL
is treated as the acquiror and Segmentz, Inc. as the acquiree. All references in
the accompanying financial statements to the number of common shares and the per
share amounts have been restated to reflect the subsequent change in the common
stock as if the acquisition had occurred on April 28, 2000.
2. BACKGROUND INFORMATION
WBNI, Inc., a Texas corporation incorporated in 2000, is the surviving
corporation of a sequence of mergers and reverse mergers of inactive companies.
In November 2001, WBNI, Inc. changed its name to Segmentz, Inc.
TransL Holdings, Inc., a Delaware corporation incorporated in October 2001, is
the 100 percent stockholder of Trans-Logistics, Inc., a Florida corporation
incorporated in April 2000. This parent and subsidiary are hereinafter referred
to as "Trans-Logistics." Trans-Logistics is a logistics and brokerage
organization serving irregular route, long haul, and common motor carriers of
general commodities throughout the southeastern United States. It was
incorporated on April 28, 2000, however, it began its operations during
September 2000. Trans-Logistic's corporate headquarters is located in Tampa,
Florida.
During May 2001, Trans-Logistics acquired the assets of Q Logistic Solutions,
Inc. ("QLS") for approximately $367,000. QLS operated warehouse facilities in
Atlanta, Georgia; Edison, New Jersey; Orlando, Florida; and Chicago, Illinois.
Operations in Orlando and Chicago were subsequently discontinued. This
acquisition was accounted for using the purchase method of accounting.
F-9
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
2. BACKGROUND INFORMATION (CONTINUED)
Effective January 1, 2001, Trans-Logistics was acquired by Logistics Management
Resources, Inc. ("LMR") in August 2001. This acquisition was rescinded and
cancelled. Under the terms of the rescission agreement, the Company agreed to a
reimbursement of 1,500,000 shares of LMR's common stock and a note receivable in
the amount of $450,000. The Company incurred a loss of approximately $79,000 on
the sale of these shares.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are as follows:
The financial statements reflect the accounts of Segmentz, Inc.,
Trans-Logistics, Inc., and TransL, Inc. Prior to October 2001, the date of the
merger, the financial statements are those of Trans-Logistics, the only
operating company at that time.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.
Operating revenues for truck brokerage services are recognized on the date the
freight is delivered. Related costs of delivery of shipments in transit are
accrued as incurred. Revenues from warehousing services are recognized as the
services are performed.
Cash equivalents consist of all highly liquid debt instruments purchased with an
original maturity of three months or less.
The Company extends credit to its various customers based on the customer's
ability to pay. The Company provides for estimated losses on accounts receivable
based on bad debt experience and a review of existing receivables. Based on
management's review of accounts receivable and other receivables, an allowance
for doubtful accounts of $245,000 is considered necessary as of December 31,
2001.
F-10
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment is recorded at cost. Depreciation is calculated by the straight-line
method over the estimated useful lives of the assets, ranging generally from two
to seven years. Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When property and equipment are sold
or otherwise disposed of, the asset account and related accumulated depreciation
account are relieved, and any gain or loss is included in operations.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective income
tax bases. 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 tax rates is recognized as income in the
period that included the enactment date.
Basic loss per share has been computed using the weighted average number of
shares of common stock outstanding for the period. The Company's diluted loss
per share includes the effect, if any, of unissued shares under options,
warrants, and stock award computed using the treasury method. In all periods
presented, there were no differences between basic and diluted loss per common
share because the assumed exercise of common share equivalents, if any, was
anti-dilutive. The assumed exercise of warrants, as well as conversion of
preferred stock, could potentially dilute basic earnings per share.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, include trade receivables. Concentration of credit risk with
respect to trade receivables is limited due to the Company's large number of
customers and wide range of industries and locations served. One customer
comprised approximately 21 percent of the December 31, 2001 customer accounts
receivable balance. Sales to this customer comprised approximately 26 percent of
the Company's sales for the year ended December 31, 2001.
The Company maintains its cash accounts with substantially one financial
institution located in Tampa, Florida. The balances are insured by the Federal
Deposit Insurance Corporation's insured limit of $100,000.
F-11
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company believes the carrying amount of cash, cash equivalents, accounts
receivable (net of allowance), notes receivable, accounts payable, and accrued
expenses approximates fair value due to their short maturity.
The Company follows Statement of Financial Accounting Standards Board No. 121
(SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or circumstances indicate that the
carrying amount of these assets may not be recoverable. In performing the review
of recoverability, the Company estimates the future undiscounted cash flows that
are expected to result from the use of the assets and their eventual
disposition. Because events and circumstances frequently do not occur as
expected, there will usually be differences between the estimated and actual
future undiscounted cash flows, and these differences may be material. If an
asset is determined to be impaired, the Company recognizes a loss for the
difference between the carrying amount and the fair value of the asset. The fair
value of the asset is measured using quoted market prices or, in the absence of
quoted market prices, fair value is based on an estimate of discounted cash flow
analysis. During the periods presented, the Company determined that its
long-lived assets were not impaired.
Certain minor reclassifications have been made in the 2000 financial statements
to conform to the classifications used in 2001. These reclassifications had no
effect on total assets, stockholders' equity, total cash flows, or net income.
4. EQUIPMENT
Equipment as of December 31, 2001 consists of :
Leasehold improvements $ 3,685
Office equipment 56,621
Warehouse equipment 148,760
Warehouse shelving 67,000
Computer equipment 61,000
Computer software 38,077
-----------
375,143
Less accumulated depreciation 53,335
-----------
$ 321,808
F-12
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
5. NOTE RECEIVABLE
As disclosed in Note 2, during the year ended December 31, 2001, the Company and
LMR mutually rescinded an acquisition agreement. This agreement did not rescind
an amount that was due to the Company as part of the purchase price. As a
result, the Company has recognized revenue and a demand note receivable of an
equal amount of $450,000 due from LMR. The terms of this note exclude interest
until demand is made for payment. As of the date of these financial statements,
no demand has been made. Subsequent to year-end, $25,000 has been received on
this note.
6. OBLIGATION DUE UNDER FACTORING ARRANGEMENT
The Company factors substantially all of its accounts receivable. During the
year ended December 31, 2001, the Company utilized the services of two factoring
companies. Accounts receivable are factored to companies with full recourse for
unpaid invoices in excess of 75 days old. The most recent agreement provides for
the payment of factoring fees at 2.5 percent of each invoice factored.
7. INCOME TAXES
The provision for income taxes is different from that which would be obtained by
applying the statutory federal income tax rate to income (loss) before income
taxes. The items causing this difference are as follows:
2001 2000
----------------------------
Tax expense at U.S. statutory rate $ 189,000 $ 5,400
State income taxes, net of federal benefit 20,200 600
Effect of non-deductible expenses (1,700)
Change in valuation allowance (207,500)
Effect of using surtax exemption (3,083)
----------------------------
$ 0 $ 2,917
============================
F-13
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
7. INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 2001 are as follows:
Deferred tax assets:
Accounts and loan receivables due to bad debts $ 92,100
Capital loss carryforward 29,700
Net operating loss carryforward 85,700
-----------
Total gross deferred tax assets 207,500
Less valuation allowance 207,500
-----------
Net deferred tax assets $ 0
===========
Based on an assessment of all available evidence, including 2001 and 2000
operating results, management does not consider realization of the deferred tax
assets generated from operations to be more likely than not, and has established
a valuation allowance against the gross deferred tax asset.
As of December 31, 2001, the Company had federal and state net operating loss
carryforwards totaling approximately $228,000, which expire in 2022.
8. EQUITY
COMMON STOCK
Each share of common stock is entitled to one vote. The holders of common stock
are also entitled to receive dividends whenever funds are legally available and
when declared by the Board of Directors (the "Board"), subject to the prior
rights of the holders of all classes of stock outstanding.
CONVERTIBLE PREFERRED STOCK
The authorized preferred stock of the Company consists of 10,000,000 shares at
$.001 par value, of which 773,896 shares of Series A convertible preferred stock
("Series A Preferred Stock") and 426,898 shares of Series B convertible
preferred stock ("Series B Preferred Stock") were outstanding as of December 31,
2001.
F-14
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
8. EQUITY (CONTINUED)
SERIES A CONVERTIBLE PREFERRED STOCK
In December 2001, the Company issued 773,896 shares of Series A Preferred Stock
for the conversion of a $773,896 note payable.
Each share of the Series A Preferred Stock is convertible, at the option of the
holder, at any time into shares of common stock of the Company at a conversion
price equal to the trading price of the shares or at the price of the last
placement of shares by the Company, whichever is less.
The holders of the preferred stock are entitled to vote, together with the
holders of common stock, on all matters submitted to stockholders for a vote.
Each preferred stockholder is entitled to the number of votes equal to the
number of shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of the then
outstanding Series A Preferred Stock shall receive a pro-rata distribution to be
determined by performing a fictional conversion into common stock, and
determining the pro-rata distribution of such proceeds on the basis "as-if
converted," which is subordinate in classification to any debt classes and
preferred stock, Series B, which may be outstanding at the time of such events.
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 2001, the Company issued 426,898 shares of Series B Preferred Stock
for the conversion of two notes payable totaling $426,898. Interest on the
shares of the Series B Preferred Stock is cumulative at an interest of six
percent per annum.
Each share of the Series B Preferred Stock is convertible, at the option of the
holder, at any time into shares of common stock of the Company at a conversion
price equal to the trading price of the shares or at the price of the last
placement of shares by the Company, whichever is less.
The Series B Preferred Stock is redeemable at the option of the Company for cash
at a rate of $1.00 per share and shares of common stock as payment for any
accrued interest pursuant to the fixed interest rate of six percent through the
date of the retirement, in the event that a notice to convert such shares of
Series B Preferred Stock into common stock has not been made prior to such
election to retire said shares.
F-15
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
8. EQUITY (CONTINUED)
The holders of the preferred stock are entitled to vote, together with the
holders of common stock, on all matters submitted to stockholders for a vote.
Each preferred stockholder is entitled to the number of votes equal to the
number of shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of the then
outstanding Series B Preferred Stock shall receive a pro-rata distribution to be
determined by performing a fictional conversion into common stock, and
determining the pro-rata distribution of such proceeds on the basis "as-if
converted" which is subordinate in classification to any debt classes which may
be outstanding at the time of such events.
9. WARRANTS
In connection with the merger of Segmentz, Inc. and Trans-Logistics, Inc., the
Company is required to issue 78,035 warrants to purchase common stock in the
Company at a per share price of $.01, exercisable immediately, and expiring
three years from the date of grant. The warrants are to be issued five days
after the release of this report.
10. STOCK OPTION PLAN
In October 2001, the Company adopted the 2001 Stock Option Plan (the "Plan"),
under which it authorizes options to be granted to purchase 600,000 shares of
common stock. The Plan entitles the holder to receive options to purchase common
stock of the Company at a specified price in the future. The Board may grant
options at its discretion and is responsible for determining the price to be
paid for the shares upon exercise of each option, the period within which each
option may be exercised, and any additional terms and conditions of each option.
The Company granted no options under the Plan during the year ended December 31,
2001.
11. RELATED PARTY TRANSACTIONS
The Company utilizes the trucking services of an entity related through common
ownership. Expenses incurred during the periods ended December 31, 2001 and 2000
amounted to approximately $206,000 and $174,000, respectively. The expenses
incurred for these services are not necessarily indicative of the amounts that
may have been incurred had these services been provided by independent third
parties.
F-16
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
11. RELATED PARTY TRANSACTIONS (CONTINUED)
In December 2001, the majority stockholder of the Company converted $181,898 of
debt to 181,898 shares of Series B Preferred Stock.
12. LEASE COMMITMENTS
The Company leases office space for its headquarters under a lease that expires
in April 2006. The initial lease term is for a period of five years and the
lease agreement includes an optional lease period of an additional three years.
The Company also leases certain equipment under non-cancelable operating leases.
As part of the lease agreement, the Company has issued an unused letter of
credit in the amount of $40,000. The amount required of the letter of credit is
reduced by $8,000 per year and may be drawn if certain lease commitments have
not been met or have been violated.
The following is a schedule by year of future minimum rental payments required
under operating leases that have an initial or remaining non-cancelable lease
term in excess of one year as of December 31, 2001:
Year Ending
DECEMBER 31,
2002 $ 50,979
2003 52,658
2004 49,195
2005 47,292
2006 15,969
-----------
$ 216,093
The Company leases facilities located in Atlanta, Georgia and Edison, New Jersey
on an "at will" basis. Monthly rental payments for these facilities total
approximately $94,000.
Rent expense amounted to $722,361 for the year ended December 31, 2001. There
was no rent expense during the period ended December 31, 2000.
F-17
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
13. OTHER COMMITMENTS
The Company has an employment agreement with an officer of the Company that
entitles the officer to receive a severance payment equal to the remaining
salary owed under the employment agreement, plus the base salary for the next
five years after the term of the employment agreement, including certain other
benefits to be paid for following termination.
As previously disclosed, the Company has a stand by letter of credit amounting
to $40,000.
14. CONTINGENT LIABILITIES
The Company has been party to a lease in its Atlanta facility that it believed
to be month-to-month pursuant to data provided by LMR, which was in operational
control of the Company at the time the Company purchased the assets of QLS from
bankruptcy and began utilizing the space in Forest Park, Georgia pursuant to
providing logistic services for clients. The Company notified the landlord, IDI
Services, Inc. ("IDI"), of its intentions to find smaller space and offered IDI
an opportunity to provide a lesser facility size within the facility currently
occupied by the Company. IDI informed the Company at that time that the Company
was party to a lease arrangement that had previously not been disclosed or
evidenced. As of February 28, 2002, IDI and the Company were engaged in
discussions to resolve this misunderstanding in which the Company asserts that
IDI accepted a letter of credit provided by LMR as inducement to enter into the
lease with LMR with whom the Company had an arrangement to vacate the premises
of its month-to-month sublease on 30 days written notice. IDI's assertion
included a variety of material issues, including a representation that the
Company was a prime lease holder with an obligation through May 2006. The
Company has subsequently secured legal counsel and continues to assert that any
lease documents that exist suggesting the Company's prime tenancy are not
authorized by the Company, its board, or officers as provided for in the
Company's bylaws. The Company continues to defend its position in this matter
and believes that it will reach an amicable settlement pursuant to this issue.
15. SEGMENT INFORMATION
Segment information has been prepared in accordance with SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." The
Company has two reportable segments: truck hauling brokering and warehouse
operations. The segments were determined based on the types of services provided
by each segment. The Company had only one reportable segment until the purchase
of QLS in 2001.
F-18
Segmentz, Inc.
Notes to Financial Statements
Year Ended December 31, 2001 and the Period
April 28, 2000 (Date of Inception) through December 31, 2000
15. SEGMENT INFORMATION (CONTINUED)
The brokering operations arrange truckload transportation with dedicated Company
equipment, owner operator fleet, and extensive agent partners throughout 48
states.
The warehousing operation, acquired in 2001, offers warehouse locations in two
facilities covering the east coast. The Company is attempting to expand to offer
smaller satellite facilities to enable conduit and direct route trucking
solutions on a contracted, dedicated route basis to larger clients.
TRUCKING WAREHOUSE TOTAL
-----------------------------------------------------
Revenue $ 5,596,318 $ 2,859,448 $ 8,455,766
Other $ 609,964 $ 609,964
Interest expense $ 216,548 $ 216,548
Depreciation $ 9,759 $ 43,576 $ 53,335
Net loss $ (1,111,667) $ 680,246 $ (431,421)
Equipment $ 50,097 $ 325,046 $ 375,143
Segment assets $ 1,521,197 $ 671,620 $ 2,192,817
F-19
ITEM 8. CHANGES IN OR DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company changed its audit accounting firm from Valiente Hernandez, P.A. to
Pender, Newkirk & Company on March 8, 2002 as detailed in Form 8-K, filed with
the Securities and Exchange Commission on March 8, 2002.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Directors and Executive Officers
The following sets forth information concerning the officers and
directors, including their ages, present principal occupations, other business
experience during the last five years, membership on committees of the board of
directors and directorships in other publicly-held companies.
NAME AGE POSITION WITH SEGMENTZ
Allan Marshall 34 Chairman & Chief Executive Officer
John S. Flynn 36 President & Chief Financial Officer
Dennis M. McCaffrey 33 Chief Operating Officer
Allan Marshall was a director of Trans-Logistics from November 2000 to
November 2001, when Trans-Logistics changed its name to Segmentz. He has served
as Director and the Chief Executive Officer of Segmentz since its acquisition on
November 1, 2001. Prior to Trans-Logistics and Segmentz, Mr. Marshall founded
U.S. Transportation Services, Inc. ("UST") in 1995, whose main focus was third
party logistics. UST was sold to Professional Transportation Group, Inc. in
January of 2000 and Professional Transportation Group ceased business in
November of 2000. Prior to 1995, Mr. Marshall served as Vice President of U.S.
Traffic Ltd, where he founded their USA Logistics division.
John S. Flynn, is a Senior Managing Member of Aspen Rhodes Capital
Corporation, LLC ("Aspen Rhodes"). Prior to co-founding Aspen Rhodes, Mr. Flynn
was an entrepreneur, developing a nationwide computer service company, a
regional environmental service firm and a management consulting firm. Mr. Flynn
has completed over $500 million of funding in his career, including asset based
capital market products, below investment grade bonds and private equities. He
has completed numerous merger transactions and consulting related to
acquisitions for Small and Micro cap public companies, including Westbury Metals
Group, US Automotive and RT Industries during his career.
Dennis McCaffrey served as the Chief Operations Officer of UST since
1996, before joining the Company in November 2000. He was responsible for
creating and implementing strategic business plans; supervising operations
staff; designing and managing all sales and marketing programs; assisting in the
design and implementation of their internal software program; and forming
strategic alliances with contract carriers including U.S. Express, MS Carriers,
Heartland Express, and Swift Transportation. When UST was sold to Professional
Transportation Group in 2000, Mr. McCaffrey served as an Operations Manager for
the Florida division. Mr. McCaffrey also worked as the Operations Manager for
U.S. Traffic Ltd's U.S. operations from 1992 to 1996. Previously, Mr. McCaffrey
served in the United States Marine Corps from 1988 to 1992. Mr. McCaffrey, as
Chief Operating Officer, is directly responsible for the management, growth and
success of Trans-Logistics transportation, brokerage, and logistics operations.
-21-
Compliance with Section 16(a) of the Securities and Exchange Act of 1934
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent (10%) of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC") and any
securities exchanges on which the equities of the Company trade, initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. No filings of such persons have
been made to date.
ITEM 10. EXECUTIVE COMPENSATION
Executive Officers
The Company's Board appoints the executive officers to serve at the
discretion of the Board. Directors who are also employees receive no
compensation for serving on the Board. The Company's non-employee directors
receive no compensation for serving on the Board. The Company intends to
reimburse non-employee directors for travel and other expenses incurred in
connection with attending the Board meetings.
Allan Marshall, the Company's Chief Executive Officer, received
approximately $75,000 in compensation for the year ended December 31, 2001.
EMPLOYMENT AGREEMENTS
The Company has entered into an Employment Agreements with Allan Marshall,
the Company's Chief Executive Officer, which terminates on November 15, 2006.
The agreement shall be automatically extended for an additional one-year period
after the initial term unless at least 30 days prior to the termination date
either the Company or Mr. Marshall give written notice to the other that the
Employment Agreement will not be renewed. Mr. Marshall will receive an annual
base salary of $150,000 plus a non-accountable expenses allowance of $35,000 per
year, which may be increased at the discretion of the Board. Additionally, Mr.
Marshall may be eligible to receive an annual bonus based on the Company's
financial performance in the form of stock options and cash not to exceed 15% of
his base salary.
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The Company has offered an Employment Agreement to John S. Flynn, the
Company's President which terminates December 31, 2005. This Agreements provides
for an annual base salary of $120,000.00, a non-accountable expense allowances
of $1,000 per month, auto, health and cellular phone reimbursement and bonus of
$30,000.00 payable in warrant value or cash, at the discretion of the Board of
Directors. As of March 31, 2002, the Employment Agreement has not been executed.
KEY MAN INSURANCE
The Company intends to obtain a life insurance policy in the amount of
$1,000,000 on the life of Allan Marshall, the Company's Chief Executive Officer.
The proceeds of the policy would be payable to the Company.
STOCK OPTION PLAN
On November 1, 2001, the majority stockholders of the Company approved
the 2001 Stock Compensation Plan. The number of shares of common stock which may
be issued under the 2001 Plan shall initially be 600,000 shares which amount
may, at the discretion of the Board, be increased from time to time to a number
of shares of common stock equal to 5% of the total outstanding shares of common
stock, provided that the aggregate number of shares of common stock which may be
granted under the 2001 Plan shall not exceed 600,000 shares. The Company may
also utilize the granting of options under the 2001 Plan to attract qualified
individuals to become its employees and non-employee directors, as well as to
ensure the retention of management of any acquired business operations. Under
the 2001 Plan the Company may also grant restricted stock awards. Restricted
stock represents shares of common stock issued to eligible participants under
the 2001 Plan subject to the satisfaction by the recipient of certain conditions
and enumerated in the specific restricted stock grant. Conditions which may be
imposed include, but are not limited to, specified periods of employment,
attainment of personal performance standards or the Company's overall financial
performance. The granting of restricted stock represents an additional incentive
for eligible participants under the 2001 Plan to promote the Company's
development and growth, and may be used by the management as another means of
attracting and retaining qualified individuals to serve as the Company's
employees and directors. Currently, no options have been granted to employees,
consultants, officers or directors.
COMPENSATION TABLE
The information set forth below concerns the cash and non-cash
compensation to certain of the Company's executive officers for each of the past
two fiscal years ended December 31, 2001 and 2000. In each case, the
compensation listed was paid by Trans-Logistics.
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Summary Compensation Table
Name Year Annual Compensation Long-term Compensation
Position
Other Awards Payouts Other
Salary Bonus Annual Compensation Compensation
Restricted Securities LTIP ($$$)
Stock Underlying Payouts/
SARS
Allan J. Marshall 2001 $75,000 $0 $0 $0 $0 $0 $0
CEO
2000 $0 $0 $0 $0 $0 $0 $0
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of April 1, 2002, certain information
with respect to the beneficial ownership of the Common Stock of the Company by
each person who the Company knows to be a beneficial owner of more than 5% of
any class or series of the Company's capital stock, each of the directors and
executive officers individually, and all directors and executive officers as a
group.
(1) Allan Marshall and Christine Often are husband and wife.
Name Shares Beneficially Percentage of
Owned Shares
Allan Marshall(1) 4,187,876 64.4
Christine Otten (1) 1,794,804 27.6
--------- -----
5,982,680 92.0%
Ownership of Preferred Stock if Converted*
Name Shares Beneficially Percentage of
Owned Shares
Allan Marshall(1) 4,187,876 54.4%
Christine Otten (1) 1,794,804 23.3%
---------
5,982,680
Bryant Plastics 773,896 10.0%
(Series B)
Bryant Plastics 245,000 3.2%
(Series A)
Allan J. Marshall 181,898 2.4%
------- ----
(Series A) Total: 7,703,707 93.3%
As of April 1, 2002, there were a total of 6,502,913 shares of the
Company's common stock outstanding, of which 520,233 shares are held by
approximately 464 shareholders of record, 5,982,680 shares are held by the
principal shareholder, 773,896 shares of the Company's Series B Preferred Stock
outstanding, held by one shareholder of record as disclosed in the above table,
and 426,898 shares of the Company's Series A Preferred Stock outstanding, held
by two shareholders of record as disclosed in the above table.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has as of December 31, 2001, no outstanding balances due to
Allan Marshall or to ATECH, a company owned solely by Mr. Marshall, both having
numerous transactions completed with the Company during the fiscal year ending
December 31, 2001. In December 2001, Allan Marshall converted $181,898 of debt
due from the Company to him, to 181,898 shares of Series B Preferred Stock.
The Company utilized facilities, equipment, and employees of this
related company in return for a commission paid equal to 85% of operating
revenues less direct expenses. As of January 1, 2002, the Company does not
intend to conduct any business with ATECH, without obtaining approval of the
Board of Directors. Expenses incurred during the periods ended December 31, 2001
and 2000 amounted to approximately $206,000 and $174,000, respectively. The
expenses incurred for these services are not necessarily indicative of the
amounts that may have been incurred had these services been provided by
independent third parties. (See ITEM 5 and ITEM 7 of this Form 10-KSB).
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The list of Financial Statements and Notes required by Item 7 are included
as Item 7.
(b) On March 8, 2002, the Company filed Form 8-K to evidence the change in
audit accounting firms from Valiente, Hernandez, P.A. to Pender, Newkirk
and Company.
(c) Exhibits:
a. None
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SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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, in the City of Tampa,
State of Florida, on April 12, 2002.
SEGMENTZ, INC.
DATE: April 12, 2002 By: /s/ Allan Marshall
--------------------
Allan Marshall, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities indicated on April 12, 2002.
Signature Title
/s/ Allan J. Marshall
-------------------------------- Chairman of the Board of Directors
Allan J. Marshall and Chief Executive Officer
/s/ John S. Flynn
--------------------------------
John S. Flynn President and Chief Financial Officer
/s/ Dennis McCaffrey
--------------------------------
Dennis McCaffrey Chief Operating Officer
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