UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the Fiscal Year Ended December 31, ~~2006~~2008
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:~~000-49606~~001-32172

EXPRESS-1 EXPEDITED SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)


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

~~429 Post Road~~3399 South Lakeshore Drive, Suite 225,

~~Buchanan,~~Saint Joseph, Michigan ~~49107~~49085

(~~Exact name~~Address of ~~registrant as specified in its charter)~~principal executive offices)


(269) 429-9761 (Registrant’s telephone number)		(269) 695-2700 (Registrant’s former telephone number)

~~Registrant’s telephone number, including area code:~~

~~(269) 695-2700~~

Securities registered under Section 12(b) of the Exchange Act:


Title of Each Class:		Name of Each Exchange on Which Registered:

Common Stock, par value $.001 per share		American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, 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 thisForm10-K or any amendment to thisForm 10-K. þ

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


Large accelerated ~~filer~~ o ~~Accelerated filer~~ o ~~Non-accelerated~~ filero	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule ~~12b-2~~126-2 of the ~~Exchange Act.)~~act): Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately ~~$33.55~~$36.9 million as of June 30, ~~2006~~2008 based upon the closing price of ~~$1.23~~$1.16 per share on the ~~American Stock~~NYSE AMEX Equities Exchange ~~on that date.~~(formerly AMEX).

As of March ~~8, 2007,~~2, 2009, there were ~~25,555,351~~32,035,218 shares of the Registrant’s $0.001 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specified portions of the registrant’s proxy statement, which will be filed with the Commission pursuant to Regulation 14A in connection with the registrant’s ~~2007~~2009 Annual Meeting of Stockholders, to be held on June ~~16, 2007~~11, 2009 (the “Proxy Statement”), are incorporated by reference into Part III of this Report. Except with respect to information specifically incorporated by reference in this Report, the Proxy Statement is not deemed to be filed as part hereof.

PART I

This Annual Report onForm 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company has based these forward-looking statements on the Company’s current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us and the Company’s subsidiaries that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In many cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Factors that might cause or contribute to a material difference include, but are not limited to, those discussed elsewhere in this Annual Report, including the section entitled “Risk Factors” and the risks discussed in the Company’s other Securities and Exchange Commission filings. The following discussion should be read in conjunction with the Company’s audited Consolidated Financial Statements and related Notes thereto included elsewhere in this report.


~~ITEM 1.~~	*~~BUSINESS~~*

ITEM 1. BUSINESS

General

Express-1 Expedited Solutions, Inc. (the “Company,” “we,” “our” and “us”), a Delaware corporation, is a transportation services organization focused upon premium transportation services provided through one of ~~the largest~~three non-asset based operating units. Each of our operations is distinct but complementary to our other logistics services and each is lead by an individual business unit leader, or President. Our services consist of expedited surface transportation, ~~companies~~provided through Express-1, Inc. (“Express-1”), domestic and international freight forwarding services provided through Concert Group Logistics, Inc. (“Concert Group Logistics” or “CGL”) and premium truckload brokerage services provided through Bounce Logistics, Inc. (“Bounce Logistics”, or “Bounce”). We discontinued our Express-1 Dedicated, Inc. (“Express-1 Dedicated” or “Evansville”) operations in December of 2008, with a final business shut-down date of February 28, 2009. Each of our operations is more fully outlined in the ~~United States~~table below wherein we denote the name of each business unit; location of each business unit headquarters office; premium transportation niche served by the unit; and isinitial date the ~~only publicly held transportation company singularly focused upon expedited transportation. Our services are provided to~~unit began business within our consolidated company.


Business Unit	Primary Office Location	Premium Industry Niche	Initial Date(1)

Express-1	Buchanan, Michigan	Expedited Transportation	August-04
Concert Group Logistics	Downers Grove, Illinois	Freight Forwarding	January-08
Bounce Logistics	South Bend, Indiana	Premium Truckload Brokerage	March-08


(1)		Express-1 and Concert Group Logistics were both existing companies acquired as part of two separate acquisitions. Express-1 was formed in 1989, while Concert Group Logistics, LLC was formed in 2001. Bounce Logistics was astart-up operation and formed in the year denoted under the column labeled initial date.

We serve a diverse client base located primarily within the United States and portions of ~~Canada. Predominantly~~Canada and Mexico. Our Concert Group Logistics business unit provides international freight forwarding services to customers within other regions of the world. Our premium services are focused on the ~~surface-based~~ needs of shippers for reliable ~~same day, time critical~~same-day, time-critical, special handling or ~~special needs transportation, we~~customized logistics solutions. We also provide aircraft charter services through third-party providers, in support of our customers’ critical shipments. During ~~2006,~~2008, we ~~handled thousands of expedited shipments~~provided more than 120,000 critical movements for our ~~customer base. Our services are conducted within two unique expedited operations, which we internally refer to as Express-1 and Evansville, comprising approximately 90% and 10% of~~customers through our ~~respective consolidated~~three business volume, as measured by revenues. Our operations are headquartered in the town of Buchanan located in Southwest Michigan and we have additional sites in Evansville, Indiana and Toledo, Ohio. In conjunction with our annual shareholders’ meeting in May 2006, we changed our corporate name from Segmentz, Inc. to Express-1 Expedited Solutions, Inc.units.

Historical Development

~~Our~~The Company changed its name to Segmentz, Inc. (“Segmentz”) in 2001 in conjunction with a reverse merger and remained a Delaware corporation. ~~Segmentz~~Immediately prior to this merger, our Company had no on-going operations. From its headquarters offices in Tampa, Florida, the Company’s management team in place at that time, planned and

executed a series of acquisitions within different ~~segments~~niches of the transportation industry. The goal of Segmentz was to create a multifaceted transportation organization offering transportation services that included freight brokerage, expedited shipments, deferred air freight, local cartage,~~pick-up~~ ~~and delivery, aircraft charters, dedicated delivery, shipment consolidation, warehouse management, fulfillment services and various other forms of transportation.~~ The Company raised capital through a series of private placements ~~and used this capital~~ to acquire five transportation companies operating in different segments of the transportation industry, as well as to support the formation of various transportation operations such as the Tampa based brokerage service and the Evansville based operations. The acquisitions included: Temple Trucking Services, Inc. (Temple) in October 2004, Express-1, Inc. (Express-1) in August 2004, Dasher Express, Inc. (Dasher) in December 2003, Bullet Freight Systems, Inc. (Bullet), together with its affiliates, in October 2003 and certain assets of Murphy Surf Air Trucking, Inc. in October 2003. In addition, the Company purchased certain assets of Frontline Freight in January 2004 and subsequently disposed offund these ~~assets within 2004.~~acquisitions. Our physical presence grew to include ~~locations~~operations in twenty (20) cities, ~~operating across many~~but our Company remained unprofitable on a consolidated basis. One of the acquired companies, Express-1, Inc was highly profitable and engaged within the growing expedited transportation ~~service sectors. Based upon our history of operating losses and the inability to achieve profitability,~~market.

In late 2004, our Board of Directors ~~and management team developed~~approved a restructuring plan ~~(the “Plan”).~~

~~Restructuring~~

~~Implemented in 2004,~~which entailed closing down or otherwise disposing of all unprofitable operations, replacing the ~~Plan called for~~executive management team and relocating the ~~closing of our unprofitable companies, operations and locations. It also refocused our Company on our profitable expedited services businesses. Throughout the fall of 2004, we exited ourairport-to-airport~~ and Dasher businesses. Continuing this restructuring activity in 2005, we exited our Tampa brokerage and our Temple and Bullet operations. During the restructuring period, our board appointed new executive leadership by naming our newly-appointed President, the founder of Express-1, as Chief Executive Officer and hiring a new Chief Financial Officer. With these changes, our corporate executive offices were relocatedCompany’s headquarters from Tampa, Florida to the Buchanan, ~~Michigan.~~

Michigan offices of Express-1, Inc. The ~~Plan called for the elimination of the need for physical facilities in eighteen (18) locations, thereby greatly reducing our overhead burden. Headcount~~restructuring plan was reduced from a high of 475 in August 2004 to 274 at December 31, 2004 and was further reduced to 127 employees in December 2005. The table below outlines the timeline and activities involved in the Plan along with the restructuring charges associated with each activity. The table has been divided into two categories representing charges prior to 2005 and charges incurredcompleted in 2005.

Classification
Pre- 2005 2005 Amount

Writeoff of goodwill and intangibles $ — $ 2,010,000 $ 2,010,000
Writeoff and impairment of assets 550,000 1,378,000 1,928,000
Employee costs and severance 630,000 455,000 1,085,000
Other restructuring expenses 651,000 295,000 946,000
Impairment of leases 737,000 — 737,000
Writeoff of uncollectible accounts — 310,000 310,000

Subtotal restructuring charges $ 2,568,000 $ 4,448,000 $ 7,016,000

~~During the third quarter of 2005, we completed substantially all of our planned restructuring activities.~~ Remaining after the completion of this plan were the ~~Plan were~~Company’s expedited services operations provided by our Express-1 ~~expedited~~and Express-1 Dedicated business units. We discontinued the Express-1 Dedicated operation in late 2008. The Company incurred charges of $4.5 million in 2005 following $2.6 million in 2004 based upon this restructuring activity. To highlight the completion of the restructuring plan and to further differentiate our remaining operations ~~and~~from our ~~Evansville~~ operations ~~which we consider~~in place immediately prior to this restructuring, our ~~core reportable business segments. Our~~ name was changed from Segmentz, Inc. to Express-1 Expedited Solutions, Inc. ~~further supporting~~at the annual shareholders meeting in June 2006.

From 2006 through 2007, our ~~break from~~Company enjoyed a period of strong organic growth and increasing levels of profitability. During this period, substantially all our debt was retired and our executive team and Board of Directors began to evaluate potential acquisitions to complement and diversify the ~~past and focus on~~Company’s expedited transportation services.

~~Expedited Transportation Market~~

Non-asset based providers of premium transportation services were targeted during this process. In January 2008, our Company acquired certain assets, liabilities and operations from Concert Group Logistics, LLC. The ~~trucking industry~~Concert acquisition provided us with (i) entry into the domestic and international freight forwarding market, (ii) cross selling opportunities through Concert’s network of over 20 independent stations, and (iii) the ability to offer our existing customers a more robust package of transportation services. In January 2008, we initiated the development of Bounce Logistics, Inc., our truckload brokerage operation focused upon premium truckload services. Bounce Logistics began operations in March of 2008 and provided our Company with (i) the ~~United States is estimated~~opportunity to ~~exceed $600 billion in annual revenue and is expected to grow at a rate parallel to~~better serve the U.S. economy, according to the American Trucking Association (ATA). The trucking industry is comprised of both private fleets and for-hire carriers. The for-hire market represents approximately 40% of trucking industry volume, according to the ATA. Within this for-hire market is a much smaller subset of freight movements that are time definite~~and/or~~ time sensitive, which makes up the expedited transportation market. The expedited market is further characterized by shipments that are typically completed in the same-day or are high-priority. Expedited freight volume in the U.S. has been defined by various sources to have annual revenues ranging from a few billion dollars to several times this amount and to be growing by annual percentage rates up to the low teens each year. This growth rate is typically greater than thatneeds of the ~~U.S. economy.~~

~~The expedited transportation market developed primarily as a result~~independent freight forwarders within our CGL network, and (ii) the ability to continue to expand the array of ~~the shift towards more tightly managed supply chains, and serves companies of all sizes, which depend on the delivery ofjust-in-time~~ ~~inventory~~services offered to help them control costs and compete more efficiently. As companies manage their inventories, services and production lines in an increasingly leaner fashion, the need for specialized transportation services has increased. The expedited transportation industry has supported this transformation by helping companies reduce overhead and by streamlining the materials management process.our existing customer base.

Expedited transportation providers also service industries that require tightly-staged delivery schedules, such as the financial printing and pharmaceutical industries. In addition, due to the continual shortage of drivers within the transportation industry and the varying levels of capacity, more industries have begun to use expedite transportation services to avoid the interruptions occasionally caused by other forms of transportation such as full-truckload and~~less-than-truckload~~ ~~services. Expedited transportation services can be likened to emergency services for freight shipments. For purposes of this report, we use the terms expedited and expedite synonymously.~~

Express-1 Expedited Solutions, Inc.

Segment Financial Data


	Year		Revenues		Operating Income			Total Assets

*Continuing Operations*
Express-1		2008	$	52,639,000	$	5,115,000			20,025,000
		2007		47,713,000		4,526,000			20,052,000
		2006		37,327,000		3,891,000			17,889,000
Concert Group Logistics		2008		51,136,000		1,711,000			19,026,000
Bounce Logistics		2008		7,011,000		(34,000	)		1,120,000

*Discontinued Operations*
Express-1 Dedicated		2008		4,921,000		589,000			643,000
		2007		5,076,000		591,000			847,000
		2006		4,864,000		230,000			582,000

Express-1

Offering expedited transportation services to ~~over 1,500~~thousands of customers from ~~our~~its Buchanan, Michigan facility, Express-1 has become one of the largest ground expedite companies in North America, handling ~~approximately 48,000~~more than 55,000 shipments during ~~2006.~~2008. Expedite transportation services can be characterized as time-critical, time-sensitive, emergencyand/or high priority freight shipments, many of which have special handling needs. Expedite transportation providers typically manage a fleet of vehicles comprised of several sizes of equipment, ranging from cargo vans to semi tractor trailer units. The dimensions for each shipment dictate the class size of vehicle used to move the freight. Rates are established for each class of vehicle and each shipment is rated based upon a number of criteria including dimension, destination, length of haul and type of commodity transferred. Many semi truckloads and less than truckload transportation companies within the U.S. offer some version of time-sensitive or time-critical service within their operations, while others offer high-priority transportation services or special handling. As defined by the Company, expedited transportation services are unique and can be differentiated since the movements are typically created due to an emergency situation. Shipping emergencies arise due to supply chain interruptions, failure within another mode of transportation or for any number of other reasons. Expedited shipments are predominantly direct transit movements offering door-to-door service within very tightly prescribed time parameters, utilizing a class of equipment that’s appropriate for the dimensions of the load being hauled.

Customers offer loads to Express-1 via telephone, fax,e-mail or the Internet on a daily basis, with only a small percentage of loads being scheduled in future delivery dates. Contracts, as is common within the transportation industry, typically relate to terms and rates, but not committed business volumes. Most customers are free to choose their expedite transportation providers on an at-will basis, which underscores Express-1’s commitment to total customer satisfaction. Express-1 offers an ISO 9001:2000 certified, twenty-four hour, sevenday-a-week call center allowing its customers immediate communication and status of time sensitive shipments while in transit. Customers are further provided with electronic alerts, shipment tracking, proof of delivery, notifications, billing status and customized performance reports.

Express-1 is predominantly a ~~variety of exclusive-use vehicles, providing reliable, same-day or high-priority~~non-asset based service ~~between shipping points within the United States and parts of Canada. Services include expedited surface transportation and aircraft charters. Express-1 can be described as an asset-light~~ provider, meaning the transportation equipment used in its operations is ~~predominantly~~almost exclusively provided by third parties, with less than two percent of the vehicles being owned by the company. ~~Vehicles~~These third-party owned vehicles are ~~owned and~~ driven ~~almost exclusively~~ by independent contract drivers and by drivers employed directly by independent owners of multiple pieces of equipment, commonly referred to as fleet owners. Express-1 ~~makes a~~generates its profit or margin on the difference between the amount charged to customers and the amount it pays the third-party carriers, less applicable insurances, fees and vehicle taxes. ~~Vehicle class sizes include cargo vans, both 12 foot and 24 foot straight trucks and tractor-trailers. Customers offer loads to~~

Express-1 ~~via telephone, fax,~~serves its customers through exclusive-use vehicles, providing reliable,~~e-mail~~same-day or ~~Internet on a daily basis, with only a small percentage of loads being scheduled in advance for longer term delivery schedules. Contracts, as is common~~high-priority freight movements between shipping points within the United States, parts of Canada and Mexico. All ofExpress-1’s freight movements are provided to customers who are U.S. based, including movements that requireExpress-1 to contact international partner carriers for movements outside the U.S. Services include expedited

surface transportation ~~industry, typically relate to terms~~ and rates, but not committed business volumes. Express-1 offers an ISO 9001:2000 certified, twenty-four hour, seven day a week call center allowing the customer immediate communication and status of time sensitive shipments in transit. Customers are also provided with electronic alerts, shipment tracking, proof of delivery notification, billing status and performance reports. We are dedicated to providing premium services that are customized to meet our clients’ individual needs and flexible enough to cope with an ever-changing business environment.aircraft charters. As of December 31, ~~2006,~~2008, we employed 8482 full-time ~~workers in~~associates to support our Express-1 ~~operations, including those in our corporate management team.~~operations.

~~Evansville~~Concert Group Logistics

~~Our Evansville operation~~The Concert Group Logistics operations were acquired in January 2008 in a purchase transaction involving certain assets, liabilities and operations of privately held Concert Group Logistics, LLC. Headquartered in Downers Grove, Illinois, Concert Group Logistics, LLC was founded in 2001 as a non-asset based services company with an operational focus on the freight forwarding niche of the transportation industry. The Concert Group Logistics operating model is designed to attract and reward independent owners of freight forwarding services from various domestic markets. These independent owners operate stations within exclusive geographical regions under long-term contracts with Concert Group Logistics. The founders of Concert Group Logistics along with the management team all support the belief that customers’ needs are best served when “owners deliver” the goods and services for customers. The independent network model allows Concert Group Logistics to offer greater flexibility and reliability than many of its peers in the freight forwarding community, while lowering the total cost of services to customers. We believe the use of the independent station owner network provides some competitive advantages in the market place. As of January 1, 2008, Concert Group Logistics supported its 21 independently owned stations with 20 full-time associates.

Through its network and the expertise of its independent station owners, Concert Group Logistics has the capability to provide logistics services on a global basis. Concert Group Logistics services are not restricted by size, weight, mode or location and can be tailored to meet the transportation requirements of its client base. Below, some of the domestic and international services provided by Concert Group Logistics are outlined by service category.

Domestic Offerings — time critical services including as-soon-as possible, air charter and expedites; time sensitive services including next day, second day and third day deliveries; and cost sensitive services including deferred delivery, less than truckload (LTL) and full truck load (FTL).

International Offerings — time critical services including on-board courier and air charters; time sensitive services including direct transit and consolidation; and cost sensitive services including less-than-container loads, full-container-loads and vessel charters.

Other Service Offerings — value added services including documentation on international loads, customs clearance and banking support services; and customized services including trade show shipment management, time definite and customized product distributions, reverse logistics and on site asset recovery projects, installation coordination, freight optimization and diversity compliance support.

Bounce Logistics

Bounce Logistics began operations in March 2008 and is headquartered in South Bend, Indiana. Led by an experienced management team, Bounce Logistics is a non-asset based transportation company operationally focused on providing premium freight brokerage services to customers in need of greater customer service levels than those typically offered in the market place. Bounce also services other customers in need of non-expedite premium transportation movements. As of December 31, 2008, Bounce Logistics employed 9 full-time associates within its operations.

Express-1 Dedicated — Discontinued Operations

The operations of our Express-1 Dedicated business unit were discontinued during the fourth quarter of 2008, due to the expiration of our dedicated ~~delivery~~services contract through which we provided dedicated expedite transportation services to approximately ~~200~~190 automotive dealerships within a 250 mile radius of ~~our~~ Evansville, ~~Indiana facility. Daily, our team receives, sorts,~~Indiana. During the year ended December 31, 2008, Express-1 Dedicated generated revenues of approximately $4,921,000 and ~~stages~~income of approximately ~~1,000 pieces~~$339,000, net of ~~automotive freight~~tax. All operations were ceased during February 2009 and all employees were released from ~~multiple distribution facilities in the Midwest.~~regular service at that time. The facility ~~dispatches over 20 dedicated routes and manages~~lease was transferred to a ~~stringent on-time delivery schedule. During 2006,~~third party and all equipment was either sold or redeployed for use elsewhere within our ~~Evansville~~operations. Our management team does not anticipate recording a loss from discontinued operations ~~managed approximately 187 routes per day for our primary contract customer. Evansville has been recognized by Ford as the Top Performing Carrier, as chosen by their Customer Service Division,~~ for the ~~fourth quarter~~full year of ~~2005 and again for the fourth quarter of 2006. Our staff strives~~2009, due to ~~consistently provide an exemplary level of service, and have been recognized as the top performing provider in two of the five quarters since Ford began offering~~ this award. Our operations consistently rank at the top of all service categories. Evansville utilizes a fleet of company leased and company owned vehicles to provide its services. The initial four-year contract for the Evansville operation runs through April 2007 and we anticipate completing a renewal in the first half of 2007. In the event of non-renewal, our Company may incur some significant one-time shut down costs associated with this operation. Our Board of Directors and management team has determined that it will not be strategic to continue to support the Evansville operations without renewal of the contract on more favorable terms. As of December 31, 2006, we employed 45 full-time non-union workers in our Evansville operations, including management, office support, dock, and driving personnel.business shutdown activity.

~~expedited market presence and geographic footprint.~~Acquisition Growth — We believe ~~that continued rates of revenue growth, as high as those historically achieved, are possible for our Express-1 operations over~~ the coming years. Our confidence in this strategy is based, in part, upon our successful record of double-digit organic growth within Express-1. Our Evansville operations present more limited growth opportunities, consisting primarily of increases fromtransportation and logistics industries within the ~~local expedite~~U.S. market will continue to experience consolidation for many years to come. Further, we believe the current weakness within the domestic economy has the potential to heighten or accelerate the opportunities to acquire companies and operations that complement our existing business platform. Since the beginning of 2008, we have successfully completed one acquisition and one businessstart-up. Collectively these operations accounted for over 50% of our business activity during 2008. Our current focus on acquisition candidates is limited to companies that contain the following elements, (i) non-asset based operational model, (ii) premium transportation service niche offering the potential for strong rates and margins, and (iii) demand for exceptional customer service. We exclude acquisition candidates that do not demonstrate these elements and have resisted entry into transportation niches where freight services ~~market. Less likely, the Evansville operation could be expanded to additional cities to service the same primary customer under different contractual terms.~~are commoditized. It is our belief that we can continue to grow through acquisitions even during the ~~management team in place in Evansville could be readily expanded to oversee multiple locations with~~recession, provided the ~~same operational footprint.~~

~~Complementing this internal growth, we plan on occasion to entertain selective acquisitions~~debt and~~start-ups.~~ ~~Prior to serious consideration and investment of~~ capital and resources, these activities must be determined strategic by providing a broader geographic footprint; entry within a different niche of the high-priority, time-sensitive expedite market; or, offer lower-risk expansion of our fleet and customer base. New ventures will be consistent with the strategies noted below.

~~Increase Fleet Capacity~~ ~~— We rely on independent contractors and fleet owners~~markets continue to provide ~~most of the operational equipment, which we refer~~access to as our capacity. Most of our drivers are independent business persons who operate one or more of their own units on a contract basis with our Company. These drivers typically sign on with us for periods longer than thirty days and provide services under our operating authority and public liability insurance. In addition, we supplement our independent contractor fleet by obtaining capacity from partner carriers. Usually, partners consist of trucking companies that operate under their own operating authority and public liability insurance that contract with our Company for one or more loads. Although our operating margin is typically less with our partner carriers, this network of carriers enables us to handle peak demands and geographically-diverse shipments throughout the year.

The use of independent contractors and other third parties allows us to maintain a lower level of capital investment, which historically has allowed Express-1 to grow with less capital investment than carriers which use company-owned equipment. We define this less capital-intensive operating model as “asset-light.” In 2006, we continued our strong record of growing our fleet of independent contractors and partner carriers and continue to believe that we will be able to further increase our fleet to meet the demands of our customer base in future periods. Our Evansville operations are not asset-light and utilize a fleet of approximately 25 company-owned or leased vehicles and company-employed drivers to provide services.

~~Expedited Market Presence~~ — Express-1 has an outstanding reputation for high-quality service within the industry, as evidenced by the numerous service awards we have received over the years. We continue to promote our name to new and existing industries by appearances at trade shows as well as promotions utilizing various other mediums, including an expanding external sales force based primarily in the Midwest and Southeastern United States.

Awareness of our company and its services within the expedited market is further enhanced by our internal sales team who are focused on resolving issues for our customers. When expedited services are necessary, customers want to make sure their critical calls go to an organization that understands their urgency and timeline. They generally want a commitment over the phone or within a very short timeframe via an electronic medium, such as the Internet. Once the load is committed, our customers want to receive updates and communications that give them assurance the load will be delivered on time and as agreed. Our internal sales team is structured to provide this coverage and comfort to our customers.

~~Geographic Footprint~~ — We have expanded our geographic footprint within the expedited services market, primarily through the use of external sales personnel. As of December 31, 2006, we had eight field sales representatives and anticipate increasing this level by a significant amount going forward, as we re-invest in our organization to support long-term continued growth. Together with our sales management team and support staff, our company is continually making new contacts and striving to turn leads into sales relationships. Our structure has allowed our routine services to expand beyond their Midwest origins to cover a core region represented by the eastern 30 states in the U.S. as well as Texas and Ontario over the past few years. While the majority of expedite freight shipments within the Country occur within our existing core region, our services are provided beyond

~~this region on an irregular basis, as we cover shipments throughout the lower 48 states within the U.S. and other parts of Canada.~~

Our geographic footprint is also enhanced by our growing capacity. As our capacity increases, our opportunities to expand geographically also increase. Much of the expedited transportation market in the U.S. is controlled by third-party logistics companies. These companies increasingly award freight movements through electronic methods, such as~~e-mail~~ and via the Internet. Our increases in capacity have allowed our company to be awarded loads that cover ever broadening geographical areas. During 2006, we were able to increase our fleet capacity by 23% and anticipate being able to continue this momentum in the future.

~~Complement Organic Growth with Acquisitions~~ — We will search for potential acquisitions to complement our organic growth and increase our size and expedite market share. Future acquisitions will be considered to the extent they complement our focus on the expedited transportation market; can be readily assimilated into the overall operations of the Company; and can become quickly accretive to our earnings. We anticipate acquisition opportunities within the expedited services market to increase in the future and plan to begin more active pursuit of these opportunities, based upon our financial strength.financing capital.

INFORMATION SYSTEMS

The transportation industry increasingly relies upon information technology to link the shipper with its inventory and as an analytical tool to optimize transportation solutions. We utilize satellite tracking and communication units on our fleet of vehicles to continually update the position of equipment in our ~~operations at Express-1. The equipment also allows us~~Express-1 and Bounce Logistics fleets. We have the ability to communicate ~~specifically~~ to an individual ~~driver~~units or to a larger ~~fleet~~group of ~~drivers.~~units, based upon our specific needs. Information received through our satellite ~~communications~~tracking and communication system automatically updates our internal software and provides our customers with real-time electronic updates. ~~Investment in technology including satellite communications equipment, computer networks and the related hardware and~~Within our Concert Group Logistics business unit we utilize a freight forwarding software ~~typically represents~~package with customization exclusive to our largest single capital expenditure. Our Evansville operations can be characterized by regularly scheduled dedicated routes and communications are typically conducted by cellular telephones and voice communication devices.CGL network.

We have invested in what we ~~belive is~~believe are some of the most advanced operational, support and management software systems available for ~~our portion of the transportation industry. Most~~each of our business units, with most of this software isbeing provided by third-party ~~vendors and~~vendors. This software has been designed to support the unique operational characteristics of each industry niche in which it is ~~often~~utilized. We have further customized these systems to more ~~fully support~~readily facilitate the ~~uniqueness~~flow of information from outside sources into our operations centers for use by our personnel and customers. Investments in technology, including; satellite communications equipment, computer networks, software customization and related information technology. Hardware typically represents one of our ~~operations. We operate redundantback-up~~ ~~operating~~largest categories of investment within our annual capital expenditure budget, and ~~communication systems in order to further protect ourselves from service interruptions. Our use~~we believe the continual enhancement of our technology ~~and the daily performance monitoring afforded by various technologies~~platforms is critical to our ~~historical and~~ continued success.

CUSTOMERS, SALES AND MARKETING

~~We have many commercial~~Our business units provide services to a variety of customers ranging in size from small ~~companies~~entrepreneurial organizations to Fortune 500 companies. ~~Express-1 is a leading provider~~Each year, we collectively serve thousands of ~~expedited transportation~~different customers and ~~services a diverse client~~our customer base ~~representing:~~routinely changes from year-to-year. Our customers are engaged within industries such as; major

domestic and ~~U.S. based~~ foreign automotive ~~manufacturers and manufacturers~~manufacturing, production of automotive components and supplies, commercial printing, durable goods manufacturing, pharmaceuticals, food and consumer ~~staples, pharmaceuticals, non-automotive manufacturing~~products production and the high tech ~~sector.~~sector among others. We have hazmat authority ~~which allows us to~~and transport ~~some scheduled but less~~lower risk hazardous materials ~~on occasion,~~ such as automotive paint and ~~auto~~ batteries ~~for our customer base.~~on occasion. In addition, we serve third-party logistics providers ~~airfreight forwarders~~(3PL’s), who themselves serve a multitude of customers and ~~integrated air-cargo carriers.~~industries. Our ~~third-party logistics~~3-PL customers vary in size from small, independent, single facility ~~companies~~organizations to large, global logistics companies. ~~We market~~Within our Express-1 and Bounce Logistics business units, our services are marketed within the United States, ~~and~~ portions of Canada ~~through~~and Mexico. In addition to offering services within these same markets, our Concert Group Logistics unit also provides international services by both air and ocean as well as other value added services.

We maintain a staff of external sales representatives and related support ~~staff. Our executive management team is also actively involved in~~staff within Express-1 and Bounce Logistics. Within Concert Group Logistics services are introduced to customers by our network of independent station owners, who manage the sales relationships within their exclusive markets. We believe our independent station ownership structure enables salespeople to better serve customers by developing a broad knowledge of logistics, local and ~~marketing at~~regional market conditions, and specific logistics issues facing individual customers. Under the ~~national account level.~~guidance of these experienced entrepreneurs independent stations are given significant latitude to pursue opportunities and to commit resources to better serve customers.

~~Our Evansville operations are marketed primarily through ouron-site~~ ~~management team, as~~Each year we seek to establish long-term relationships with new accounts and to increase the ~~primary service activity is exclusive to one customer. Supporting the overhead, in coordination~~amount of business done with our ~~corporate sales organization,~~existing customers. We are committed to the ~~Evansville management team marketed similar~~strategy of providing customers with a full range of logistics services ~~in their local community. These~~and have grown by closely following this strategy. Our ability to offer multiple services ~~for new customers~~through each of our business units represents a competitive advantage. During 2008, no customer accounted for ~~approximately ten percent~~more than 7% of consolidated gross revenues. The 2008 acquisition of Concert Group Logistics and formation of Bounce Logistics have broadened the ~~total revenues billed from~~range of industries and types of customers that comprise our ~~Evansville operations during 2006~~account base. As a result, our customer and ~~accounted for most of~~business concentrations within the ~~recent growth within this operation. Further expansion of services to the local customer base is critical, if Evansville is to continue to grow within its current location.~~automotive industry have been reduced significantly.

COMPETITION AND BUSINESS CONDITIONS

The transportation industry is intensely competitive and ~~should~~we anticipate it will remain so for the ~~near~~foreseeable future. Competition has increased over the past couple of years, as the amount of freight has declined in response to the U.S. economic recession over that time span. The market is also highly fragmented with thousands of ~~surface transportation~~ companies competing for a portion of the domestic ~~market.~~and international freight markets. Our competitors include regional, national and ~~regional expedite transportation~~international companies that specialize in premium transportation services such assame-day or high-priority freight movements, freight brokerage and freight forwarding services. ~~In addition,~~Each of our business units competes with many ~~larger full-truckload~~other transportation providers for the opportunity to serve the same customer base. None of our business units operates from a position of dominance within its market, and~~less-than-truckload~~ motor carriers offer services that compete for our customers’ time-sensitive transportation needs. To a lesser extent, we compete with integrated air cargo carriers and passenger and cargo airlines. Our each unit competes daily to retain the business relationships it has developed.

The competitive landscape is characterized on service, delivery timeframes, flexibility and reliability, as well as rates. We have historically ~~offered services at~~focused upon transportation niches that demand superior service, in return for premium rates. We believe our rates ~~that~~ are in-line with those charged by our competitors, ~~in the expedite industry. We believe we have an advantage over many competitors based upon~~and our reputation for customer service allows us to mitigate occasional rate pressures sometimes faced by many of our competitors. However, in light of the recent U.S. recession, it is possible that our ability to sustain rates at or near historical levels might be compromised. We recognize as a competitive advantage the reputation of our business units to quickly and efficiently ~~covering loads and therefore do not typically attempt to use rates as a sales and marketing strategy.~~cover the transportation needs of our customers.

REGULATION

The U.S. Department of Transportation (DOT) regulates ~~our~~the domestic transportation industry. This regulatory authority has broad powers, generally governing matters such as authority to engage in motor carrier operations, safety, hazardous materials transportation, certain mergers, consolidations and acquisitions and periodic financial reporting. The trucking industry is subject to regulatory and legislative changes, which can affect the economics of the industry. We are also regulated by various state agencies and, in Canada, by other regulatory authorities.

Our “satisfactory” safety rating is ~~satisfactory,~~ the highest rating given by the Federal Motor Carrier Safety Administration (FMCSA), a department within the DOT. There are three safety ratings assigned to motor carriers: “satisfactory”, ~~“conditional”~~

“conditional”, meaning that there are deficiencies requiring correction but not so significant to warrant loss of carrier authority, and “unsatisfactory”, which is the result of acute deficiencies that may lead to the revocation of carrier authority.

Our operations are also subject to various federal, state and local environmental laws and regulations dealing with transportation, storage, presence, use, and the disposal and handling of hazardous material. The Code of Federal Regulations regarding the transportation of hazardous material, groups these materials into different classes according to risk. WeThese regulations also require us to maintain minimum levels of insurance. At this time, we transport only low to medium risk hazardous material, representing a very small percentage of our total shipments.

For domestic business, our Concert Group Logistics business unit is also subject to regulation by the DOT in regards to air cargo security for all business, regardless of origin and destination. CGL is regulated as an “indirect air carrier” by the Department of Homeland Security and Transportation Security Administration. These agencies provide requirements, guidance and in some cases licensing to the freight forwarding industry. This ensures that we have satisfactorily completed the security requirements and qualifications, adhered to the economic regulations, ~~also~~and implemented the required policies and procedures. These agencies require uscompanies to ~~maintain minimum levels~~fulfill these qualifications prior to transacting various types of ~~insurance.~~business, failure to do so could result in penalties and fines.

For international business, our Concert Group Logistics business unit is a member of the International Air Transportation Association (IATA), a voluntary association of airlines and forwarders, which outlines operating procedures for freight forwarders acting as agents for its members. A substantial portion of our international air freight business is completed with other IATA members. For international ocean business we are registered as an Ocean Transportation Intermediary (OTI) by the Federal Maritime Commission (FMC), which establishes the qualifications and bonding requirements to operate as an OTI for business originating and terminating in the United States of America, as well as providing economic regulation. The FMC has authority to enforce regulations by assessing penalties and fines.

Our international services performed in foreign countries are provided through qualified local independent agents who hold the necessary authorities to operate and are subject to regulation and foreign jurisdiction in their respective countries.

SEASONALITY

~~Historically, our~~Our revenues and profitability have been subject to some seasonal fluctuations. ~~Our seasonality has changed due to~~In our ~~restructuring efforts and now more fully reflects the~~ historical ~~seasonality~~cycle approximately 45% of our ~~primary business segment, Express-1. During its eighteen-year history, normally Express-1 generated 45% of its annual revenue during~~revenues developed in the first ~~and second quarters~~half of each year, with the ~~remaining 55%~~balance coming in the falling latter half. Over the past few years, we have experienced some variation in this historical cycle with our peak business levels during the second and third ~~and fourth quarters. Income from operations has traditionally increased quarter-by-quarter throughout~~quarters of each year. At this time, it is not possible to determine whether the ~~year, at Express-1, as freight demands normally create tighter capacity and result in increased rates. During 2006,~~historical cycle, the recent cycle or a new cycle will occur, due to ~~a weakening~~the weakness within the U.S. freight market, we did not maintain this historical trend in seasonality and experienced a decline in our growth rates in the third and fourth quarter, as compared to a stronger first-half of the year. Our Evansville operation has not shown the same degree of seasonal fluctuation due to the consistency of its dedicated contract.economy.

EMPLOYEES AND INDEPENDENT CONTRACTORS

At December 31, ~~2006,~~2008, we had ~~129~~150 full-time ~~employees. Of this number, 84 are engaged in our Express-1 operations, including our executive team, while 45~~ employees, ~~provide our services in Evansville, including managers, office personnel, dock employees and drivers. At this time,~~ none of ~~our employees are~~whom were covered by a collective bargaining agreement. Of this number, 82 were employed at Express-1, 20 were employed at Concert Group Logistics, 9 were employed at Bounce Logistics and 5 were employed in our corporate office. Within our discontinued Express-1 Dedicated operations in Evansville, Indiana we employed 34 full-time employees as of December 31, 2008. In addition to our full-time employees, we employed 14 part-time employees as of December 31, 2008. We recognize our trained staff of employees as one of our most critical resources, and acknowledge the recruitment, training and retention of qualified employees as essential to our ongoing success.

In addition to our employees, we support the capacity needs of our Express-1 ~~capacity needs~~and Bounce Logistics business units through the use of independent ~~contractors.~~contract drivers. These individuals operate one or more of their own vehicles and pay for all the operating expenses of their equipment, including: wages, ~~and~~ benefits, fuel, fuel taxes, physical damage insurance, maintenance, highway use taxes,

Within Concert Group Logistics operations, we support customers’ service needs through our network of independently owned stations. Each of these stations is a stand-alone business with its own unique ownership and employee base. These independents provide sales and support for Concert Group Logistics, including negotiating with and maintaining customer relationships, managing transportation services with third-party providers and providing support to the customers of the network. The Concert Group Logistics operating model is designed upon the premise that when owners deliver, superior attention to detail and performance result. The Concert Group Logistics motto is, “owners deliver,” reflecting this belief.

SEC FILINGS

We are classified as a “Smaller Reporting Company” for the purpose of filings with the Securities and Exchange Commission. CertainForm 10-K report sections previously required with “Regular Filer” status are optional to smaller reporting company filers. We have chosen to include those optional disclosures that, in the opinion of management, enhance the understanding of our Company.

In 2006, we became a regular filer for the purpose of ~~status~~filings with the Securities and Exchange Commission (“SEC”). Prior to 2006, we had been a small business ~~filer, since our inception. As a result of the change in status, we~~filer. We have filed ~~this~~Form 10-K for annual reporting purposes andForms 10-Q for interim ~~reports for periods beginning after December 31, 2005.~~period reports. Prior to this reporting change, we filedForms 10-KSB for annual reports andForms 10-QSB for interim reports. We make available on our website, located at www.express-1.com, all materials filed with the SEC.

~~In addition, our~~Our public filings may also be ~~either~~ accessed free of charge on the SEC’s Edgar website, located at www.sec.gov, or read and copied at the SEC’s Public Reference Room at ~~450 Fifth~~100 F Street, ~~N.W.,~~NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330.

Neither the information on our Company website nor the SEC website is incorporated in this report as a result of these references.

CORPORATE INFORMATION

Express-1 Expedited Solutions, Inc is incorporated in Delaware. Our ~~name was changed in conjunction with our annual shareholders meeting in May 2006. Our~~ executive office is located at ~~429 Post Road, Buchanan,~~3399 South Lakeshore Drive, Saint Joseph, Michigan ~~49107.~~49085. Our telephone number is(269) ~~695-2700~~429-9761 and the Internet website address is www.express-1.com. Our stock is listed on the ~~American Stock~~NYSE AMEX Equities Exchange ~~(AMEX)~~ under the symbol “XPO”. The information on our website is not incorporated in this report as a result of this reference.


ITEM 1A.	*RISK FACTORS*

ECONOMIC RECESSION; WORLDWIDE ECONOMIC CONDITIONS COULD NEGATIVELY IMPACT OUR BUSINESS

The general worldwide deterioration of economic conditions and tightening of credit markets beginning in 2008 are contributing to slowdowns in many industries, including industries in which we or our customers operate. This deterioration and tightening affects businesses such as ours in a number of ways, making it difficult to accurately forecast and plan our future business activities. These conditions could negatively impact our businesses by adversely affecting, among other things, our:


	•	Revenues

	•	Profits

	•	Margins

	•	Cash flows

	•	Levels of customers’ orders

	•	Ability to access credit

	•	Customer’s ability to pay amounts due to us.

We cannot predict the duration or severity of these conditions, but if they worsen or continue for an extended time, the negative impact on our business could increase. See MD&A for further discussion of how these conditions have affected our businesses to date and how they might affect them in the future.

ECONOMIC RECESSION; LOSS OF KEY PERSONNEL DUE TO ORGANIZATIONAL RESTRUCTURING AS A RESULT OF WORLDWIDE ECONOMIC CONDITIONS COULD NEGATIVELY IMPACT OUR BUSINESS

We are dependent upon the services of our executive management team. We do not maintain key person life insurance on any member of the management team. The loss of their services could have a material adverse effect on our operations and future profitability. Further, we depend upon the contributions of key managers to ensure long term future profitability. We must continue to develop and retain a core group of managers if we are to realize our goal of expanding our operations, improving our earnings consistency, and positioning the Company for long-term revenue growth. Because the management team has extensive experience within the transportation industry, it would be difficult to replace them without adversely affecting our business operation. In addition to their unique experience, our management team has fostered key relationships with our investors, customers and suppliers. These relationships are especially important to our Company and the loss of these relationships could have a materially adverse effect on our profitability.

ECONOMIC RECESSION; IMPAIRMENT CHARGES COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS

Future events may occur that would adversely affect the reported value of the Company’s assets and require impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the current economic environment on the Company’s customer base, a material adverse change in the Company’s relationship with significant customers or business partners, or a sustained decline in the Company’s stock price. Given the macroeconomic environment and its adverse impact on certain business units in the second half of 2008, the Company evaluated its goodwill for impairment during the third quarter of 2008. The Company determined that no impairment was deemed necessary for 2008.

The Company continues to evaluate the impact on economic and other developments on the Company and its business units to assess whether impairment indicators are present. If the Company’s total market capitalization is below reported consolidated stockholder’s equity at a future reporting date or for a sustained period, the Company considers this as an indicator of potential impairment of goodwill. The Company utilizes market capitalization in corroborating its assessment of the fair value of its reporting units. As a result, the Company may be required to perform additional impairment tests based on changes in the economic environment and other factors and these tests could result in impairment charges in the future.

ECONOMIC RECESSION; OUR GROWTH RATE MAY NOT CONTINUE AT HISTORIC RATES

We have experienced significant and rapid growth in revenue and profits since the completion of our restructuring in 2005, although growth has slowed in the second half of 2008. There can be no assurance that our business will return to its historical growth rate in the future given the current state of the world economy or that we can effectively adapt our management, administrative, and operational systems to respond to any future growth. Further, there can be no assurance that our operating margins will not be adversely affected by future changes in and expansion of our business or by changes in economic conditions.

ECONOMIC RECESSION; WE ARE SUBJECT TO RISKS RELATED TO DEFAULT UNDER OUR CREDIT FACILITY

Our facility credit agreement contains financial covenants that require the Company to maintain a minimum fixed charge coverage ratio and funded debt to earnings before interest, taxes depreciation and amortization ratio. Failure to meet our financial covenants may have a material adverse impact on our operations. In addition, if we fail

to comply with the covenants of our credit facility, and are unable to obtain a waiver or amendment, an event of default would result under that facility.

Our credit facility also contains other events of default customary for such financings. If an event of default were to occur, the lender could declare outstanding borrowings on our credit facility immediately due and payable thereby restricting our cash. We cannot provide assurance that we would have sufficient liquidity to repay or refinance borrowings under our credit facility if such borrowings were accelerated upon an event of default.

CUSTOMER ~~CONCENTRATION;~~CONCENTRATION: RELIANCE ON AUTOMOTIVE INDUSTRY COULD SUBJECT OUR BUSINESS TO NEGATIVE TRENDS OR DEFAULTS ON ACCOUNTS RECEIVABLE

We ~~obtained approximately 50%~~obtain a significant amount of our revenue from our ~~twenty-five~~ largest ~~customers in 2006 and 2005.~~customers. While ~~the~~ individual customer rankings ~~between~~within our top customers often change from~~month-to-month,~~ time-to-time, we rely upon our relationship with each of these ~~customers~~large accounts for a significant portion of our revenues. Any interruption in the business volume awarded by these customers could materially adversely impact our revenues and resulting profitability.

The automotive industry within the U.S. is highly competitive, with increased competition from foreign-based companies. ~~These companies produce automobiles in both the U.S. as well as foreign locations.~~ The Big Three U.S. automakers have seen declining market shares fueling concern ~~among the media and numerous financial analysts~~ over whether they will be able to sufficiently scale their operations to ensure their continuation. In addition to the Big Three automotive manufacturers, our customers include various automotive industry suppliers that have been, and will continue to be, negatively impacted by the changing landscape in the U.S. automotive market. Continuing negative trends or a worsening in the financial condition of the domestic U.S. automotive manufacturers, or within the associated supplier base, could materially adversely impact our ~~company,~~Company, our revenues, and our results of operations.

ECONOMIC RISKS; RISKS ASSOCIATED WITH THE BUSINESS OF TRANSPORTATION AND LOGISTICS MANAGEMENT COULD SUBJECT US TO BUSINESS SWINGS BEYOND OUR CONTROL

Our business is dependent upon a number of factors over which we have little or no control that may have a materially adverse effect on our results of operations. These factors include: capacity swings in the trucking industry, significant increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, government regulations, governmental and law enforcement anti-terrorism actions, tolls, license and registration fees, insurance premiums and labor costs. It is difficult at times to attract and retain qualified drivers and independent contract-drivers.

Operations also are affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries (such as manufacturing, retail and commercial printing) in which we have a significant concentration of customers. Seasonal factors could also adversely affect us. Customers tend to reduce shipments after the winter holiday season and operating expenses tend to be higher in the winter months primarily due to increased operating costs in colder weather and higher fuel consumption as a result of increased idle time. Regional or nationwide fuel shortages could also have adverse effects.

DEPENDENCE ON EQUIPMENT PROVIDED BY THIRD PARTIES; RELIANCE ON INDEPENDENT CONTRACTORS COULD RESULT IN OUR INABILITY TO PROVIDE SERVICES

The trucking industry is dependent upon transportation equipment oftentimes provided by independent third parties. Periods of equipment shortages have occurred periodically in the transportation ~~industry, particularly during a strong economy.~~industry. If we cannot secure sufficient transportation equipment or transportation services from these third parties to meet our customers’ needs, our business, results of operations and financial position could be adversely affected and our customers could seek to have their transportation needs met by other parties on a temporary or permanent basis.

NEW TRENDS AND TECHNOLOGY; CONSOLIDATION AMONG CUSTOMERS COULD ELIMINATE CUSTOMERS

If, for any reason, our business method of providing transportation services ceases to be a preferred ~~method~~option of obtaining ~~these~~transportation services by our customers, or if new supply-chain or technological methods become available and widely utilized, ~~to reduce~~thereby reducing the need for ~~expedite~~our transportation services, our business could be

adversely affected. Moreover, increasing consolidation among customers and the resulting ability of such customers to utilize their size to negotiate lower outsourcing costs has, and may continue in the future to have, a depressing effect on the pricing of ~~third-party logistic~~transportation services. Consolidation is not limited to traditional customers such as manufacturers, but also includes consolidation of ~~expedite~~ volume by third-party logistics companies, which increasingly control more of the ~~expedite market~~transportation markets and influence prices of ~~expedite~~transportation services through the use of ~~technology such as Internet auctions.~~other technologies.

INTERRUPTION OF BUSINESS DUE TO INCREASED SECURITY MEASURES IN RESPONSE TO TERRORISM COULD NEGATIVELY IMPACT OUR BUSINESS

The continued threat of terrorism within the United States and the ongoing military action and heightened security measures in response to such threat has and may cause significant disruption to commerce. Our business ~~depends~~units depend on the free flow of products and services through ~~these~~multiple channels of commerce. In response to terrorists’ activities and threats aimed at the United States, transportation and other services have at times been slowed or stopped altogether. Further delays or stoppages in transportation or other services could have a materially adverse effect on our business, results of operations and financial condition. Furthermore, we may experience an increase in operating costs, such as costs for transportation, insurance and security as a result of ~~the~~these activities and potential activities. We may also face interruption of services due to increased security measures in response to terrorism. The U.S. economy in general can be adversely affected by terrorist activities and potential activities. Any economic downturn could adversely impact our results of operations or otherwise adversely affect our ability to grow our business. ~~It is impossible to predict how this may affect our business or the economy in the U.S. and in the world.~~

~~In the event of further threats or acts of terrorism, our business and operations may be severely and adversely affected.~~

COMPETITION IS INTENSE AND OUR VOLUME OR PROFITS COULD SUFFER AS A RESULT

The transportation and logistics services industry is heavily fragmented and intensely competitive and includes numerous regional, inter-regional and national competitors, none of which dominates the market. There are ~~several~~many larger transportation providers with significantly higher capital resources, which could allow that competitor to position their company as a low-cost provider. We often buy and sell transportation services from and totoo many of our competitors. Increased competition could create downward pressure on freight rates, and continued rate pressure may adversely affect our gross profit and income from ~~operations.~~operations

REGULATION; WE ARE SUBJECT TO REGULATION BEYOND OUR CONTROL, WHICH COULD NEGATIVELY IMPACT THE WAY IN WHICH WE OPERATE

Our operations are regulated and licensed by various U.S. and ~~Canadian~~international agencies. Our ~~drivers~~independent station owners and ~~independent~~ contractors also must comply with the safety and fitness regulations of the United States Department of Transportation (DOT), including those relating to drug and alcohol testing andhours-of-service. Such matters as weight and equipment dimensions are also subject to U.S. and ~~Canadian~~international regulations. We may also ~~may~~ become subject to new or more restrictive regulations relating to fuel emissions, drivers’hours-of-service, ergonomics, or other matters affecting safety or operating methods. Future laws and regulations may be more stringent and require changes in our operating practices, influence the demand for transportation services, or require us to incur significant additional costs. Higher costs incurred by us or by our suppliers who pass the costs onto us through higher prices could adversely affect our results of operations.

~~The Federal Motor Carrier Safety Administration (FMCSA) revised theirHours-of-Service~~ (“HOS”) regulations effective January 2004 to increase the maximum daily drive time from 10 to 11 hours, but no longer allowed for breaks in the on-duty period. The FMCSA further amended the new HOS regulations effective October 2005. In general, the regulations did not reduce the amount of available driving hours, but restricted the sleeper berth provision. The new sleeper berth provision allows the drivers’ required rest period of 10 hours to be split into two parts, but requires one period to be at least 8 consecutive hours. We believe that these changes have caused productivity to decline due to unavoidable wait-time incurred while our equipment is loaded, unloaded or otherwise detained which cannot be recovered with additional drive-time. In certain situations, we have worked with our shippers to try to minimize the loss of productivity. When necessary, we have also billed our shippers for excess wait-time. Due to the time-sensitive nature of expedite shipments in general, the impact of detention on our business, especially at the receiving end of a shipment is typically lower than the trucking industry at large. An additional measure that may be utilized to offset the loss of productivity, is the use of cross-dock facilities that allow us to transfer freight to a truck driver with sufficient available driving hours to complete delivery.

We cannot predict what impact future regulations may have on our business. Our failure to maintain required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our operating permits and licenses.

REVENUE GROWTH MAY SLOW OR CEASE ALTOGETHER, THEREBY HURTING OUR PROFITS

We have achieved significant revenue growth on a historical basis within our Express-1 operations. Our ~~Evansville operation has been relatively flat from a revenue~~CGL operations have achieved rapid growth ~~standpoint and cannot be viewed as a significant source of future company growth.~~throughout their history. Our Bounce operations achieved rapid growth since its founding in 2008. There is no assurance that our revenue growth rate will continue at historical or desired levels, or that we can effectively adapt our management, administrative, and operating systems to respond to ~~any~~ future growth. Our operating margins could be adversely affected by future changes in and expansion of our ~~business or by changes in economic conditions.~~business. Slower or less profitable growth could adversely affect our stock price.

~~Most~~Historically, some of our ~~historical~~ acquisitions have not been successful. If we make acquisitions in the future, there is no assurance that we will be able to negotiate favorable terms or successfully integrate the acquired companies or assets into our business. If we fail to do so, or we experience other risks associated with acquisitions, our financial condition and results of operations could be materially and adversely ~~affected.~~affected

INABILITY TO MANAGE GROWTH AND INTERNAL EXPANSION COULD REDUCE OUR PROFITS

Our inability to manage anticipated future growth could hurt the results of operations. Expansion of operations will be required to address anticipated growth of our customer base and market opportunities. Expansion will place a significant strain on our management, operational and financial resources. Currently, we have a limited number of employees. We will need to continually improve existing procedures and controls as well as implement new transaction processing, operational and financial systems, procedures and controls to expand, train and manage our employee base. Failure to manage growth effectively could have a damaging effect on our business, results of operations and financial condition.

DEPENDENCE ON DRIVERS SUBJECTS US TO WORKFORCE INTERUPTIONS BEYOND OUR CONTROL

Our driver force is primarily made up of independent contract drivers, with only a handful of company drivers in our Express-1 ~~operations and approximately 25 company drivers in our Evansville location.~~operations. At times we have experienced substantial difficulty in attracting and retaining sufficient numbers of qualified drivers. In addition, ~~due in part to current economic conditions, including~~because of the higher cost of fuel, insurance, and equipment, the available pool of independent contract drivers ~~has been declining.~~fluctuates. This ~~decline~~ is especially apparent within the fleet of straight trucks, which serve many of the critical needs of the expedite industry. Because of the shortage of qualified drivers, the availability of alternative jobs ~~due to current economic conditions,~~ and intense recruiting competition from other trucking companies, we expect to continue to face difficulty increasing the number of drivers, who are our principal source of planned fleet expansion and resulting growth. In addition, our industry as a whole suffers from high rates of driver turnover, which requires us to continually recruit a substantial number of drivers in order to maintain our existing fleet. If we are unable to continue to attract a sufficient number of drivers, we could be required to adjust our compensation packages or operate with fewer pieces of equipment and face difficulty meeting shipper demands, all of which would adversely affect our growth and profitability. ~~In addition, the compensation we offer our driver force is subject to market forces, and we may find it necessary to continue to increase their compensation in future periods.~~ Any increase in our operating costs could adversely affect our growth and ~~profitability.~~

~~DEPENDENCE ON KEY MANAGEMENT; LOSS OF KEY MANAGEMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OPERATIONS~~

~~We believe that the attraction and retention of qualified personnel is critical to our success. If we lose key personnel or are unable to recruit qualified personnel, the ability to manage theday-to-day~~ aspects of the business will be weakened. Our operations and prospects depend in large part on the performance of the senior management team. The loss of the services of one or more members of the senior management team could have a materially adverse effect on the business, financial condition and results of operations. Because the management team has extensive experience within the transportation industry, it would be difficult to replace them without adversely effecting our business operations. In addition to their unique experience, our management team has fostered key relationships with our customers and suppliers. These relationships are especially important to our Company and the loss of these relationships could have a materially adverse effect on our profitability.

INSURANCE AND CLAIMS EXPENSE MAY NEGATIVELY IMPACT OUR RESULTS OF OPERATIONS

Our future insurance and claims expenses may exceed historical levels, which could reduce our earnings. We maintain general liability, auto liability, cargo, physical damage, trailer interchange, inland marine, contents, workers’ compensation, excess auto, general liability, errors and omissions and director’s and officer’s insurance policies for certain types

reflect actual experience. However, ultimate results may differ from our estimates, which could result in losses above reserved amounts. Because of our deductibles, we have significant exposure to fluctuations in the number and severity of claims. Our operating results could be adversely affected if we experience an increase in the frequency and severity of claims for which we maintain higher deductible policies, accruals of significant amounts within a given period, or claims proving to be more severe than originally assessed.

We ~~maintain health insurance policies for~~offer all of our employees a self insurance funded health plan that ~~have historically provided first-dollar coverage. Going forward, we plan to self-insure our health~~include a third party claims ~~and have those claims administered by a third-party. We plan to purchase~~administrator. Our stop-loss coverage ~~to limit~~limits our exposures on any specific claim and limits our exposure ~~on any one claim and aggregate coverage~~ to ~~limit~~ the total claims expense within ~~any one~~a year. ~~There can be~~We have no assurance that the levels of specific stop-loss ~~coverage~~ purchased ~~on a claim-by-claim basis~~ or ~~that~~ the ~~specific~~annual aggregate loss coverage purchased will provide a manageable means to control our health ~~costs going forward.~~care insurance costs.

We maintain coverage with insurance carriers that we believe are financially sound. Although we believe our aggregate insurance limits are sufficient to cover reasonably expected claims, it is possible that one or more claims could exceed those limits. ~~Insurance~~It is possible that insurance carriers ~~recently have been raising~~could raise premiums, ~~for many businesses, including transportation companies.~~especially in light of the recent dramatic drop in the worldwide capital markets and respond by replacing expected investment income with higher premiums. As a result, our insurance and claims expense could increase, or we could find it necessary to raise our deductibles or decrease our aggregate coverage limits when our policies are renewed or replaced. Our operating results and financial condition may be adversely affected if these expenses increase, if we experience a claim in excess of our coverage limits, or if we experience a claim for which we do not have coverage.

FLUCTUATIONS IN THE PRICE OR AVAILABILITY OF FUEL MAY CHANGE OUR OPERATIONS STRUCTURE AND RESULTING PROFITABILITY

~~We require large amounts~~Fuel prices constitute one of ~~fuel~~the greatest costs to ~~operate~~ our fleet of contractors and ~~fuel is one~~third parties who complete the physical movement of ~~our contractors largest operating expenses.~~goods we manage. Fuel prices ~~fluctuate greatly, and prices~~are highly volatile with the price and availability of all petroleum products ~~are~~ subject to economic, political and other market ~~factors~~forces beyond our control. Most of our customer contracts ~~contain~~include fuel surcharge provisions to mitigate the ~~effects~~effect of the fuel price ~~increases~~increase over base amounts ~~set~~established in the contract. Significant changes in the price or availability of fuel in future periods or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could materially adversely impact our operations, fleet capacity and ability to generate both revenues and profits.

NEED FOR SUBSTANTIAL, ADDITIONAL FINANCING MAY NOT BE AVAILABLE, IF NEEDED, AND OUR RESULTS COULD BE NEGATIVELY IMPACTED

There is no guarantee that we will be able to obtain financing if required to expand our business or that the present funding sources will continue to extend terms under which we can operate efficiently. If we are unable to secure financing under favorable terms, our Company may be negatively affected. There is no assurance that we will continue to be able to maintain financing on acceptable terms.

VOLATILITY OF THE MARKET PRICE OF THE COMPANY’S STOCK CAN IMPACT OUR ABILITY TO RAISE ADDITIONAL CAPITAL, IF NEEDED, AND IMPACTS OUR COMPENSATION EXPENSE

The market price of our common stock may be volatile, which could cause the value of your investment to decline. Any of the following factors could affect the market price of our common stock:


	•	Changes in earnings estimates and outlook by financial analysts;

	•	Our failure to meet financial analysts’ and investors’ performance expectations;

	•	Changes in market valuations of other transportation and logistics companies;


	•	General market and economic conditions; or

	•	Lower daily trading volume associated with aour less followed ~~stock,~~stocks, and the resulting impact on aour stock’s liquidity.

prices for many companies have experienced wide fluctuations that have often been unrelated to the operating performance of those companies. These types of fluctuations may affect the market price of our common stock.

As a component of the calculations prescribed for use in the calculation of compensation expense to be recorded in Financial Accounting Standard Statements Number 123R (SFAS 123R), volatility within the price of our common stock can impact the amount of compensation expense recorded within our financial statements. We adopted SFAS 123R for periods beginning January 1, 2006 and accordingly recorded compensation expense based in part upon the relative and historic volatility of our Company’s common stock in the statement of income for periods beginning thereafter.

NO DIVIDENDS ANTICIPATED; COULD UNFAVORABLY IMPACT THE VALUE OF OUR STOCK TO INVESTORS

We have no immediate plans to pay ~~dividends, and~~dividends. We currently plan to retain all future earnings and cash flows for use in the development of our business and to enhance shareholder value through growth and continued focus on increasing profitability. Accordingly, we do not anticipate paying any cash dividends on our Common Stock in the near future.


ITEM 1B.	*UNRESOLVED STAFF COMMENTS*

None


ITEM 2.	*PROPERTIES*

Our executive offices are located within in an 880 square-foot leased office ~~is located in a 20,000 square-foot call-center~~suite located at ~~429 Post Road, Buchanan,~~3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan ~~49107. Adjacent,~~49085. Within this same office building are common areas to ~~this property, we operate a 3,000 square foot recruiting and training center at 441 Post Road. The Buchanan facilities are owned by our company.~~

~~Our Company continues to be obligated under a lease for one closed location, at 9025 Boggy Creek Road, Orlando, Florida 32824, on~~ which we have ~~negotiated~~access, including; board and meeting rooms, multimedia facilities and a~~sub-lease~~ ~~agreement. This lease was deemed impaired prior to December 31, 2006~~ lounge for visitors. In addition, the table below identifies other properties we maintain. We believe each of our properties is appropriately specified and ~~at which time we recorded a liability~~sized for the portion of ~~$20,000 representing the difference between the amount we anticipate realizing on the sublease and~~ our ~~lease obligations, as of year-end 2006.~~operations it houses.


			Square	Owned or
Business Unit	Location	Purpose	Feet	Leased

Express-1	429 Post Road Buchanan, MI 49127	Express-1 headquarters and call center	20,000	Owned
Express-1	441 Post Road Buchanan, MI 49127	Express-1 recruiting and training center	3,000	Owned
Concert Group Logistics	1430 Branding Ave. Suite 150, Downers Grove, IL 60515	CGL headquarters and general office	5,000	Leased
Bounce Logistics	5838 W. Brick Road, South Bend, IN 46628	Bounce headquarters and general office	2,500	Leased
Discontinued Operations
Express-1 Dedicated(1)	15000B Highway 41 North, Evansville, IN 47725	Express-1 Dedicated headquarters and cross-dock	15,000	Leased
Closed Location(2)	9025 Boggy Creek Road, Orlando, FL 32824	Location closed in 2004	10,000	Leased

We currently serve our customers through three locations. Our Buchanan facility serves as our primary administrative office and call-center for our Express-1 operations. Our Swanton, Ohio location (Toledo area) supports the Express-1 operations by serving as a centrally located cross-dock facility for some of our Midwest operations. Our Evansville location serves as the primary cross-dock location as well as housing the administrative offices for our Evansville dedicated service operation. We believe the facilities are the correct size and adequately provide for our immediate and foreseeable needs. In the opinion of management, these properties are adequately insured, in good condition and are suitable for our anticipated future use. The addresses of said facilities are as follows:


(1)	•	~~429~~Our Express-1 Dedicated operations were discontinued during the fourth quarter of 2008. The facility lease was subsequently terminated and ~~441 Post Road, Buchanan, MI 49107 (Owned property)~~all remaining lease term obligations were transferred to a third party effective March 1, 2009.

(2)	•	~~1311 W. Airport Service Road, Swanton, OH 43558 (Leased property)~~

	•	~~15000B Highway 41 North, Evansville, IN 47725 (Leased property)~~The Orlando facility was associated with operations closed during the Company’s restructuring activities during 2004 and 2005. The lease matures in July 2009 and the Company has been partially successful subletting the facility.


ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS*

None

PART II


ITEM 5.	*MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES*

The Company’s common stock is traded on the ~~American Stock~~NYSE AMEX Equities Exchange under the symbol “XPO.” The table below sets forth the high and low closing sales prices for the Company’s common stock for the quarters included within ~~2006~~2008 and ~~2005~~2007 and for the first few months of ~~2007.~~2009. Quotations reflect inter-dealer prices, without retailmark-up, mark-down commission, and may not represent actual transactions.


	High		Low		High		Low

2005
2007
1st quarter		1.44		1.02	$	1.58	$	1.24
2nd quarter		1.05		0.50		1.47		1.26
3rd quarter		0.80		0.48		1.39		1.21
4th quarter		0.89		0.59		1.36		1.09
2006
2008
1st quarter		1.04		0.69	$	1.26	$	0.98
2nd quarter		1.23		0.91		1.36		1.10
3rd quarter		1.44		1.09		1.42		1.20
4th quarter		1.34		1.15		1.21		0.85
2007
1st quarter (through March 13, 2007)		1.58		1.24
2009
1st quarter (through March 12, 2009)					$	1.10	$	0.67

~~There are approximately 600~~As of March 11, 2009, there were over 3000 holders of record of the Company’s common stock, based upon data available to us from our proxy solicitor, transfer agent and market maker for our common stock. The Company has never paid cash dividends on its common ~~stock. The Company~~stock and intends to keep future earnings, if any, to retire debt and finance the expansion of its ~~business, and accordingly~~business. Accordingly, the Company does not anticipate that ~~any~~ cash dividends will be paid in the near future. ~~The Company’s future~~Future payment of dividends ~~will~~would depend on ~~its~~the Company’s earnings, capital requirements, expansion plans, financial condition and other relevant factors.

1517

Performance Graph

The following graph is presented to compare the cumulative total return for the Corporation’s Common Stock to the cumulative total returns of the NYSE AMEX ~~Composite Index,~~Equities Exchange, the Russell Micro Cap Index and the NASDAQ Transportation Index for the period from July 26, 2002 (the start of trading for the stock of our Corporation), through the close of the market on December 31, ~~2006,~~2008, assuming an investment of $100 was made in the Corporation’s Common Stock and in each index on July 26, 2002, and that all dividends were reinvested.

COMPARISON OF ~~53 MONTH~~5 YEAR CUMULATIVE TOTAL RETURN*
AmongExpress-1 Expedited Solutions, Inc, The Amex Composite ~~Index,~~Index.
The Russell MicroCap Index And The Nasdaq Transportation Index

* $100 invested on 7/26/02 in stock or on 6/30/02 in index-including reinvestment of dividends.


*		$100 invested on 12/31/03 in stock & index-including reinvestment of dividends.

Fiscal year ending December 31.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information, as of December 31, ~~2006,~~2008, with respect to the Company’s stock option plan under which common stock is authorized for issuance, as well as other compensatory options granted outside of the Company’s stock option plan.

(c)

Number of Securities

(b)

Remaining Available for

(b)

Remaining Available for

(a)

Weighted-Average

Future Issuance under

(a)

Weighted-Average

Future Issuance under

Number of Securities to

Exercise Price of

Equity Compensation

Number of Securities to

Exercise Price of

Equity Compensation

be Issued upon Exercise

Outstanding

Plan (Excluding

be Issued upon Exercise

Outstanding

Plan (Excluding

of Outstanding Options,

Options, Warrants

Securities Reflected in

of Outstanding Options,

Options, Warrants

Securities Reflected in

Plan Category

Warrants and Rights

and Rights

Column (a))

Warrants and Rights

and Rights

Column (a))

Equity compensation plans approved by security holders

5,364,000

1.48

3,594,000

3,609,000

1.18

1,991,000

Warrants issued to raise capital

2,252,000

2.05

N/A

1618


ITEM 6.	*SELECTED FINANCIAL DATA*

The selected consolidated financial data presented below for, and as of the end of, each of the years in the five-year period ended December 31, ~~2006~~2008 is derived from our Consolidated Financial Statements. The Consolidated Financial Statements as of December 31, ~~2006~~2008 and ~~2005,~~2007, and for each of the years in the three-year period ended December 31, ~~2006~~2008 and the independent registered public accountants’ reports thereon, are included in Item 8 of thisForm 10-K. This data should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of thisForm 10-K. All data expressed in the table is expressed in thousands except for earnings per share data.


	Year Ended December 31,
	2006		2005			2004			2003		2002		Year Ended December 31,
	(Dollar amounts in thousands, except per share data)												2008		2007		2006		2005			2004

Consolidated Statements of Earnings Data:
Operating revenue	$	42,191	$	39,848		$	42,481		$	14,688	$	9,995
Earnings (loss) before income taxes	$	2,776	$	(5,815	)	$	(5,159	)	$	177	$	374
Net earnings (loss)	$	3,904	$	(5,815	)	$	(3,238	)	$	377	$	374
Diluted earnings (loss) per share	$	0.15	$	(0.22	)	$	(0.14	)	$	0.04	$	0.05
Operating revenue from continuing operations													$	109,462	$	47,713	$	37,327	$	35,383		$	37,842
Net income (loss) from continuing operations														2,817		1,813		3,583		(5,672	)		(2,686	)
Net income (loss) from continuing operations per common share													$	0.09	$	0.07	$	0.14	$	(0.21	)	$	(0.11	)
Consolidated Balance Sheet Data:
Cash	$	79	$	386		$	854		$	2,029	$	3	$	1,107	$	800	$	79	$	386		$	854
Working capital	$	2,078	$	1,342		$	3,714		$	3,437	$	723		4,708		3,781		2,248		1,342			3,714
Total assets	$	21,609	$	18,454		$	25,065		$	12,982	$	3,593		41,682		23,724		21,609		18,454			25,065
Long-term obligations, less current portion	$	1,401	$	2,787		$	575		$	802	$	1,189
Long-term obligations														4,759		650		1,401		2,787			575

In 2004, the Company implemented a restructuring plan to eliminate previously acquired unprofitable business units and operations. In conjunction with this plan, the Company recorded approximately $4.5 million and $2.6 million in restructuring expenses for the years ended December 31, 2005 and 2004, respectively.

The effects of the restructuring expenses in the aforementioned years also resulted in the following tax provisions: 2004: a tax benefit of $1,921,000; 2005: no tax provision due to the recognition of a valuation allowance on the Company’s deferred taxes; and 2006: a tax benefit of $1,128,000 resulting from the recognition of a net benefit due to the elimination of the previous year’s valuation allowance. As of December 31, 2008 the Company continues to carry a federal net operating loss carry forward of $850,000 relating to the restructuring losses. In 2008, the Company recorded its tax provision at an effective rate of 42.5%. See footnote 14, (Income Taxes) for a complete analysis of the Company’s income tax provision.

In January 2008, the Company purchased substantially all assets and certain liabilities of Concert Group Logistics, LLC (CGL). CGL contributed $51,136,000 in revenue and $1,711,000 to the Company’s operating income from continuing operations in 2008.

Additionally, in March of 2008 the Company initiated Bounce Logistics, LLC (Bounce), a premium truckload brokerage operation, which contributed revenues of $7,011,000 and an operating loss from continuing operations of $34,000 in 2008.

Results of operations from Express-1 Dedicated have not been reflected in the Earnings Data above, but have been included, net of tax in Income from Discontinued Operations in the Company’s Consolidated Statement of Operations. See Item I. “Business” for further details regarding Express-1 Dedicated’s discontinued operation.


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*

This discussion is intended to further the reader’s understanding of our Company’s financial condition and results of operations and should be read in conjunction with our consolidated financial statements and related notes included elsewhere herein. This discussion also contains forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risks and uncertainties set forth elsewhere in this Annual Report and in our other SEC filings. Readers are cautioned not to place undue

reliance on any forward-looking statements, which speak only as of the date hereof. We are not a party to any transactions that would be considered “off balance sheet” pursuant to disclosure requirements under ITEM 303(c).

CRITICAL ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Express-1 Expedited Solutions, Inc. and all of its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. Our Company does not have any variable interest entities whose financial results are not included in the consolidated financial statements.

Revenue Recognition

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

Within its Concert Group Logistics business unit, the Company utilizes an alternative point in time to recognize revenue. Concert Group Logistics revenue and associated operating expenses are recognized on the date the freight is picked up from the shipper. This alternative method of revenue recognition is not the preferred method of revenue recognition as prescribed within Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force IssueNo. 91-9Revenue and Expense Recognition for Freight Services in Progress(“EITF N.91-9”). This alternative method recognizes revenue and associated expenses prior to the point in time that all services are completed. The use of this method does not result in a material difference from one of the more preferred methods as identified in EITFNo. 91-9. The Company has evaluated the impact of this alternative method on its consolidated financial statements and concluded that the impact is immaterial to the financial statements.

Revenue is reported by the Company on a gross basis in accordance with release99-19 from the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB),Reporting Revenue Costs as a Principal versus Net as an Agent. The following facts justify our position of reporting revenue on a gross basis:


	•	The Company is the primary obligor and is responsible for providing the service desired by the customer.

	•	The customer holds the Company responsible for fulfillment including the acceptability of the service. (Requirements may include, for example, on-time delivery, handling freight loss and damage claims, establishingpick-up and delivery times, and tracing shipments in transit.)

	•	The Company has discretion in setting sales prices and as a result, its earnings vary.

	•	The Company has discretion to select its drivers, contractors or other transportation providers (collectively, “service providers”) from among thousands of alternatives, and

	•	The Company bears credit risk for all of its receivables.

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

Use of Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the ~~reporting period.~~periods. Our management reviews these estimates, including but not limited to, purchased transportation, recoverability of long-lived assets, recoverability of prepaid expenses, valuation of investments, valuation allowances for deferred taxes, and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and

existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Our management believes that these estimates are reasonable and have been discussed with our audit committee; however, actual results could differ from these estimates.

Concentration of Risk

Financial instruments, which potentially subject us to concentrations of credit risk, are cash and cash equivalents and account receivables.

The majority of cash is maintained with a ~~Michigan financial~~regionally based institution. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and, therefore, bear minimal risk.

Concentration of credit risk with respect to trade receivables is limited due to our large number of customers and wide range of industries and locations served. ~~Two customers each individually comprised~~One customer compromised more than ten percent of the December 31, ~~2006~~2007 customer accounts receivable balance. As of December 31, 2008, there was no one customer that compromised more than seven percent of our consolidated accounts receivable balance.

We receive a significant portion of our revenue from ~~the~~ customers who operate within the U.S. domestic automotive industry. Accordingly, our accounts receivable are comprised of a ~~large aggregate~~ concentration of accounts from within this industry. Recently, the U.S. automotive industry has been in ~~decline according to various media sources.~~decline. In the event of further financial erosion by any of the “Big Three” domestic automotive manufacturers, the effect on our Company could be materially adverse. Further, the weakening of any of the domestic automotive manufacturers can have an adverse effect on a significant portion of our customer base which is comprised in large-part by manufacturers and suppliers for the automotive industry.

We extend credit to various customers based on an evaluation of the customer’s financial condition and their ability to pay in accordance with our payment terms. We provide for estimated losses on accounts receivable considering a number of factors, including the overall aging of account receivables, customers payment history and

the customer’s current ability to pay its obligation. Based upon our managements’ review of accounts receivable and other receivables, an allowance for doubtful accounts of approximately $133,000 and $77,000 ~~and $732,000 is~~are considered necessary as of December 31, ~~2006~~2008 and ~~2005,~~2007, respectively. The reduction in the reserve balance is related to the write-off of accounts receivable associated with our Tampa based activities. Previously, the entire amount of these receivables was reserved as doubtful. Although we believe our account receivables are recorded at their net realizable value, a decline in our historical collection rate could have a materially adverse effect on our operations and net income. We do not accrue interest on past due receivables.

RESULTS OF OPERATIONS

For financial reporting purposes, we recognize ~~two~~three business ~~segments~~units which represent our ~~two remaining operational activities. Both of these operations are focused on the expedited~~unique service offerings. These units all utilize a non-asset based business model and focus upon premium transportation ~~market. One,~~markets including — Express-1 ~~accepts general expedite freight from a multitude of customers and industries. The other, Evansville, operates under a dedicated~~offering ground expedite services, ~~contract. Express-1, Inc. is a wholly owned subsidiary of~~Concert Group Logistics, offering freight forwarding services and Bounce Logistics offering premium truckload brokerage services. The Concert Group Logistics (CGL) and Bounce Logistics units were new to our Company during 2008 and ~~provides approximately 90%~~therefore not included in results of ~~our revenues by volume. Within~~periods prior to 2008. In addition to adding two business units during 2008 we also discontinued one former business unit, Express-1 ~~we have~~Dedicated, which offered contract dedicated transportation services to one of the domestic big-three automotive companies. The operations of Express-1 Dedicated ceased on February 28, 2009 and more information on this closing can be found elsewhere within this report.

Our Express-1 unit has two ~~differing~~ means of generating revenues and ~~associated expenses. We~~business volume. Express-1 transports shipments through the use aof its fleet of vehicles, approximately 98% of which ~~approximately 98%~~ are owned and operated by independent contract drivers. ~~We refer to this revenue source as~~In addition, Express-1 ~~Contractors. We~~ also routinely ~~broker~~brokers expedite loads to third parties such as other expedited transportation ~~carriers and~~companies or to general truckload carriers. ~~We refer to this revenue source as Express-1 Brokerage. These two activities are integral to~~Within the Express-1 operations, ~~and are managed by~~ the ~~same staff and support team, therefore they can not be further detailed beyond revenue, direct costs and gross margin. Evansville operates as a division~~volume of our Company and provides approximately 10% of our consolidated revenues by volume. We have eliminated numerous operational activities and subsidiaries within our restructuring and refer to those as Closed Locations throughout this report. Additionally, we break out the costs associated with our executive management team, board of directors, legal and other costs of operating as a public company under the caption Corporate Charges. For more background on the expedited transportation market, our segments and our corporate focus, please refer to Item 1 within this report and to the footnotes accompanying the financial statements elsewhere in this report.

We refer to the impact of fuel on our business throughout this discussion and within the annual report. For purposes of these references, we have only considered the impact of fuel surcharge revenues, fuel surcharge payments to contractors and fuel costs associated with our Express-1 contractor operations and Evansville operations and have excluded those associated with our Express-1 brokerage operations as well as those within our closed operations. We feel that this approach most readily conveys the impact of fuel on our business, its revenues and costs. Fuel cost is not frequently negotiated separately within our Express-1 brokerage operations, as is common within the brokerage portion of the transportation industry. For that reason, it’s impossible to accurately separate fuel revenues and costs from other revenues and costs on a~~load-by-load~~ ~~basis, within our brokerage activities.~~

~~Year ended December 31, 2006 compared to year ended December 31, 2005~~

~~Revenues~~

Year Ended December 31,
2006 2005 Change % Change

Express-1 contractor $ 29,921,000 $ 23,951,000 $ 5,970,000 24.9 %
Express-1 brokerage 7,405,000 6,716,000 689,000 10.3 %

Total Express-1 37,326,000 30,667,000 6,659,000 21.7 %
Evansville 4,864,000 4,465,000 399,000 8.9 %
Closed locations 1,000 4,716,000 (4,715,000 ) (100.0 )%

Total revenues $ 42,191,000 $ 39,848,000 $ 2,343,000 5.9 %

~~Consolidated Revenues~~increased 5.9% for the year ended December 31, 2006, as compared to the year ended December 31, 2005. The increase in revenue primarily relates to the strong increase in revenue within our Express-1 business, and was mitigated by revenue recorded in the prior year, from within operations closed in our restructuring

efforts. During 2005, we disposed of our Temple and Bullet operations, as well as ceased activity at our unprofitable Tampa brokerage. These closed locations accounted for $4.72 million of our consolidated revenue during the year ended December 31, 2005. Fuel surcharge revenue was $3.17 million and $2.72 million for the years ended December 31, 2006 and 2005, respectively. Fuel surcharges are billed to our customers, basedloads placed upon ~~a spread above a national index which is published weekly by the Department of Energy.~~

~~Express-1 Revenues~~~~increased 21.7% during 2006 as compared to 2005. Most of the increase in revenue was associated with the contractor portion of our Express-1 operations, which represents the freight hauled on~~ our fleet of independent contractor trucks. Express-1 was successful in increasing its fleet size by approximately 23 percent within 2006, as compared to 2005. With this added capacity, we successfully leveraged our organic growth opportunities and expanded our market share with existing customers as well as acquired new customer accounts. In the second half of 2006, we experienced a decline in the number of loads available to be brokered within the truckload portion (class 8, semi-trucks) of our brokerage operations, as a result of a weakening within the overall U.S. freight economy and excess capacity within the truckload market. Historically the opportunity to broker loads on the full truckload side of the expedited market is cyclical, and our strategy is to be positioned to take advantage of brokerage opportunities when present, but to continue to focus on building our fleet capacity which is core to our continued growth. Fuel surcharge revenue was $2.64 million during 2006 as compared to $2.30 million in 2005, and is included within our revenue figures.

~~Evansville Re~~venues increased 8.9% in the year ended December 31, 2006 as compared the prior year. The revenue increase within Evansville is primarily attributable to an increase of $0.22 million in revenue from new customers within this market. The primary contract customer in Evansville experienced an increase of less than 2% in revenue for the period. The ability to attract new accounts for service at the facility and by the staff in Evansville has greatly contributed to the overall profitability of the segment. Evansville recorded $528,000 in fuel surcharges for the year ended December 31, 2006, as compared to $420,000 in fuel surcharges for the year earlier.

~~Direct Expenses~~

Year Ended December 31,
2006 2005 Change % Change

Express-1 contractor $ 21,371,000 $ 17,498,000 $ 3,873,000 22.1 %
Express-1 brokerage 5,978,000 5,119,000 859,000 16.8 %

Total Express-1 27,349,000 22,617,000 4,732,000 20.9 %
Evansville 3,958,000 4,010,000 (52,000 ) (1.3 )%
Closed locations 89,000 4,225,000 (4,136,000 ) (97.9 )%

Total direct expenses $ 31,396,000 $ 30,852,000 $ 544,000 1.8 %

~~Consolidated Direct Expenses~~, which consist primarily of payment for trucking services, independent contractors, fuel, insurance, cross dock facilities, equipment costs and payroll expenses increased by 1.8% for the year ended December 31, 2006, as compared to the year ended December 31, 2005. As a percentage of revenues, operating expenses amounted to 74.4% of related revenues for the year ended December 31, 2006, as compared with 77.4% for the year ended December 31, 2005. The decrease in operating expenses as a percentage of revenue resulted primarily from the cessation of our unprofitable businesses in conjunction with our restructuring plan during 2005. The impact of fuel costs and fuel surcharge payments to contract drivers also played a part in the improvement in operating expenses as a percentage of revenue during the year ended December 31, 2006, versus the prior year. During 2006, fuel costs and fuel surcharge payments were $3.47 million as compared to $3.25 million in 2005. Exclusive of these fuel costs and payments, direct expenses decreased as a percentage of revenue, during 2006.

~~Express-1 Direct Expenses~~increased by 20.9% during 2006, as compared to the prior year. As a percentage of revenue, direct expenses decreased by less than 1% during the year. Direct expenses within our Express-1 operations are predominantly variable costs and we anticipate the annual change in direct expense to strongly correlate with changes in our Express-1 revenue. Historically, a level of 75% or less for direct expenses as a percentage of consolidated revenue has been considered favorable within our Express-1 operations. Direct expenses

represented 73.3% and 73.8% of revenues for Express-1 for the years ended December 31, 2006 and 2005 respectively. Fuel played a part in our direct expenses in 2006 as compared to 2005. Fuel costs and fuel surcharges passed to our contract drivers represented approximately ~~$2.52 million~~90% of the load volume and ~~$2.47 million~~86% of ~~direct expenses~~the revenue for ~~2006 and 2005 respectively.~~this business unit.

~~Evansville Direct Expenses~~~~decreased~~Our Concert Group Logistics operation generates revenue and business volume by ~~1.3% for~~providing logistics services to its customers. These services fall under the ~~year ended December 31, 2006, as compared to the year ended December 31, 2005. The decrease was due primarily to the implementation~~broad category of ~~more stringent maintenance practices and management policy on equipment utilized within the Evansville operations. Coupled with this was a switch~~freight forwarding, which include everything from the ~~use~~management of ~~outside contract carriers~~multi-modal shipments to ~~provide shipment services to the use~~logistics management for members of ~~company owned or leased trucks. Evansville also enjoyed more favorable margins on the new revenue streams developed within the local market than that realized from its primary~~our customer ~~contract. The addition of this new business and the associated margin helped lower the direct expenses as a percentage of revenue considerably, within the year.~~

~~Gross Margin~~

Year Ended December 31,
2006 2005 Change % Change

Express-1 contractor $ 8,550,000 $ 6,453,000 $ 2,097,000 32.5 %
Express-1 brokerage 1,427,000 1,597,000 (170,000 ) (10.6 )%

Total Express-1 9,977,000 8,050,000 1,927,000 23.9 %
Evansville 906,000 455,000 451,000 99.1 %
Closed locations (88,000 ) 491,000 (579,000 ) (117.9 )%

Total gross margin $ 10,795,000 $ 8,996,000 $ 1,799,000 20.0 %

~~Consolidated Gross Margin~~increased by 20.0% and represented approximately 25.6% of consolidated revenues for the year ended December 31, 2006 as compared to 22.6% of consolidated revenue for the year ended December 31, 2005. The improvement was partially due to the closing of lower-margin locations and operations in conjunction with our restructuring efforts during 2005. Additionally, some changes in the management philosophy and use of equipment within our Evansville operations coupled with the addition of some new local accounts greatly improved the margin derived from the Evansville operations. Fuel costs and surcharges had the effect of lowering the gross margin for the company. Exclusive of the impact of fuel surcharges the gross margin as a percentage of consolidated revenue was 71.6% and 74.4% for the years ended December 31, 2006 and 2005, respectively.

~~Express-1 Gross Margin~~increased by 23.9% and represented 26.7% of revenue for the year ended December 31, 2006, as compared to 26.2% of revenues for the prior year. The improvement in gross margin as a percentage of revenue was primarily due to decreases in fuel costs. Gross margin as a percentage of revenue within the Express-1 brokerage operations declined due to the weakness of the transportation market in the second half of 2006, as compared to the year earlier. During 2005, the transportation market benefited from excess demand, as a result of hurricanes Katrina and Rita. This demand in the general transportation market created the opportunity for greater margins and revenues on the brokerage activities within Express-1. Brokerage activities are somewhat cyclical and Express-1 is focused upon building its own fleet of contractors, as a core growth strategy. During 2006, Express-1 successfully increased its fleet of contractors by approximately 23 percent over 2005 levels.

~~Evansville Gross Margin~~increased by 99.1% and represented 18.6% of revenue for 2006, versus 10.2% for the prior year. The increase in margin within Evansville was principally due to a shift from the use of independent contractor leased units to company owned or leased trucks within the Evansville market, coupled with a reduction in maintenance charges associated with a change in maintaining equipment. Evansville also benefited greatly due to the introduction of additional revenue streams and the stronger gross margin associated with those revenues as compared to the margin available from its primary contract customer. Fuel cost played a part in the change in margin within Evansville.base. Within

~~Sales, General and Administrative Expenses~~CGL, we operate through a network of 26 independently owned locations. Each independent location is operated by a staff of logistics professionals who have specialized knowledge in providing transportation solutions within the geographic regions in which they operate. Many of these stations also offer international freight forwarding services through their many customer contacts.

Year Ended December 31,
2006 2005 Change % Change

Express-1 $ 5,998,000 $ 5,999,000 $ (1,000 ) 0.0 %
Evansville 676,000 598,000 78,000 13.0 %
Closed locations (167,000 ) 1,287,000 (1,454,000 ) (113.0 )%
Corporate 1,512,000 2,479,000 (967,000 ) (39.0 )%

Subtotal sales general and administrative expenses 8,019,000 10,363,000 (2,344,000 ) (22.6 )%
Reorganization cost — 4,448,000 (4,448,000 ) (100.0 )%

Total sales general and administrative expenses $ 8,019,000 $ 14,811,000 $ (6,792,000 ) (45.9 )%

Bounce Logistics generates business volume and resulting revenue in much the same manner as our Express-1 business unit. Bounce accepts loads from its customers and engages transportation companies to handle the physical movement of these loads as a freight brokerage. In addition, Bounce is a licensed motor carrier and maintains a small fleet of independent contractor owned trucks to transport a portion of the loads it manages. Within our Bounce operations, the volume of loads placed upon our fleet of independent contract drivers represented approximately 9% of the load volume and 10% of the revenue for this business unit.


~~Note:~~	For purposes of this schedule and our analysis, interest and other charges have been included in the total SG&A figures. For the years ended December 31, 2006 and 2005, interest and other charges represented approximately $411,000 and $187,000 of expenses, respectively.

~~Consolidated Sales, General~~Fuel impacts our business revenue, direct costs and ~~Administrative Expenses (SG&A)~~~~decreased by 45.9%~~resulting margin. In periods when fuel prices are increasing, our revenue increases as do our direct costs. Conversely, during periods where fuel prices are declining, our revenue decreases as does our direct cost. Within our Express-1 business unit, the impact of fuel prices on revenue and ~~represented 19.0%~~fuel costs can be separately identified and is disclosed within our internal reports. Within our Concert Group Logistics, and Bounce Logistics business units, the impact of ~~revenue during~~fuel prices on our revenues and cost of purchased transportation cannot be separately identified. CGL and Bounce predominantly rely upon third parties to provide the ~~year ended December 31, 2006, as compared 37.2%~~physical movement of ~~revenue~~goods transported for our customers. As is common within the ~~year ended December 31, 2005. Of this decrease, $5.90 million was~~freight forwarding and freight brokerage industries, fuel is not separately negotiated with customers or the third-party transportation companies handling movements. Rates are “all-inclusive” to include everything associated with the ~~operations closed~~transit in ~~our restructuring activities and the charges associated~~most cases. We believe this treatment is consistent with ~~restructuring. Within the remaining expedited operations and corporate activities SG&A expenses declined by 9.8%~~other transportation companies engaged in businesses similar to $8.19 million during 2006, from $9.08 million in 2005. Most of this decline can be associated with the closing of the offices in Tampa Florida and the relocation of those administrative functions to Buchanan, Michigan. We anticipate achieving significant leverage going forward in the areas of SG&A expense as the largest component of these charges, wage expense, should increase at a slower pace than thateach of our revenue. Beginning in 2007, we plan to begin some investment in personnel and other opportunities, that might lessen the operating leverage we achieve within the SG&A expense category. These investments will be announced as implemented.business units.

~~Express-1 Selling, General~~Economic Recession

Our Company provides freight movements for a multitude of customers within various industries. Historically, weakness in one business niche has been more than offset by opportunity within another. Expansion within the U.S. and ~~Administrative Expense~~world economies created increasing levels of demand for transportation services. This historical environment allowed our Company to continue to grow organically at ~~$6.00 million~~rates that were greater than within the overall economy.

Within 2008, it became increasingly difficult to replace business volume from industry niches that were in decline with new industries or from the expansion of our network. During the fourth quarter of 2008, various economic sources pronounced the U.S. economy was ~~essentially flat~~ in ~~2006 as compared~~a recession. The overall economy has continued to ~~2005. During this same period, Express-1 increased it revenue by approximately 21.7%, which underscores~~deteriorate through the ~~significant operating leverage within this business segment. Principle components~~first few months of SG&A expense within Express-1 include wages and benefits, business insurance, bad debts, depreciation, amortization, general supplies and other administrative expenditures. Express-1 successfully grew its revenue while holding its wage and benefit expenses at $4.09 million during 2006, as compared to $4.14 million for 2005. The ability2009, in spite of the ~~personnel~~efforts by our government to ~~manage increases~~introduce stimulus packages that might change this downward trend. Until such time as the overall economy begins to stabilize and show some improvement, it is likely that our Company’s revenues, costs and levels of profitability will be negatively impacted by the economic recession. Within theRisk Factorssection of this report onform 10-K, we outline in ~~revenue, while holding down costs, underscores~~more detail the ~~commitment and strength~~potential impacts of the ~~employees~~U.S. and ~~operating model within this business segment. All employees~~world recession on our Company. Please refer to that section to gain a better understanding of ~~Express-1 are included for participation in bonus plans, employee stock ownership plans and other programs designed to foster a positive committed workforce.~~our business.

~~Evansville Selling, General~~Financial Tables

Within our discussion and ~~Administrative Expenseincreased by 13% as~~analysis of our financial results, we have included tables which better reflect the results within each of our business units for the periods discussed. We believe these tables allow the readers of our reports a means to better visualize our results in a manner more consistent with management. Readers can quickly visualize annual results within some of our major reporting classifications, and annual changes in i) dollars, ii) percentage and iii) the percentage of consolidated revenue ~~during 2006, as compared~~for some of the major captions within our financial reports. The tables are not intended to ~~2005. Principle components~~replace the financial statements, notes thereto or discussion by our management contained within this report. We encourage users to review those items to gain a better understanding of ~~SG&A within Evansville include wages~~our financial position and benefits, depreciation, amortization, office expenses and general supplies. The increase in SG&A was predominantly due to an increase in wages associated with the Evansville personnel. We anticipate Evansville SG&A expense to be relatively flat going forward, based upon the likelihood that the growth rate in revenue will also be relatively flat.results of operations.

~~Net Income (Loss) From Operations~~Fiscal year ended December 31, 2008 compared to fiscal year ended December 31, 2007

Year Ended December 31,
2006 2005 Change % Change

Express-1 $ 3,979,000 $ 2,051,000 $ 1,928,000 94.0 %
Evansville 230,000 (143,000 ) 373,000 (260.8 )%
Closed locations 79,000 (796,000 ) 875,000 (109.9 )%
Corporate (1,512,000 ) (2,479,000 ) 967,000 (39.0 )%

Subtotal income from operations 2,776,000 (1,367,000 ) 4,143,000 (303.1 )%
Reorganization cost — (4,448,000 ) 4,448,000 0.0 %

Total income (loss) from operations $ 2,776,000 $ (5,815,000 ) $ 8,591,000 (147.7 )%

Express-1 Expedited Solutions, Inc.
Summary Financial Table

~~Consolidated Income From Operations~~~~became positive during 2006, as we completed~~For the restructuring of our organization and focused our company on our expedited transportation services. The primary component of the change was the elimination of approximately $5.24 million of charges and expenses associated with our restructuring activity and unprofitable business units. Coupled with this was a significant reduction in Corporate expenses, where the total expense decreased by $0.97 million to $1.51 million in 2006 from $2.48 million in 2005. Most of this reduction was associated with a change in our executive management and the associated relocation of our corporate offices from Tampa, Florida to Buchanan, Michigan. These reductions, along with improvements in margin within the Express-1 and Evansville operations resulted in the improvement within our income from operations.Twelve Months Ended December 31,


							��	Year to Year Change						Percent of Revenue
	2008			2007				In Dollars			In Percentage			2008			2007

Revenues
Express-1	$	52,639,000		$	47,713,000			$	4,926,000			10.3	%		48.1	%		100.0	%
Concert Group Logistics		51,136,000			—				51,136,000			—			46.7	%		—
Bounce Logistics		7,011,000			—				7,011,000			—			6.4	%		—
Intercompany Eliminations		(1,324,000	)		—				(1,324,000	)		—			-1.2	%		—

Total Revenues		109,462,000			47,713,000				61,749,000			129.4	%		100.0	%		100.0	%

Direct Expenses
Express-1		40,408,000			35,951,000				4,457,000			12.4	%		36.9	%		75.3	%
Concert Group Logistics		46,578,000			—				46,578,000			—			42.6	%		—
Bounce Logistics		5,966,000			—				5,966,000			—			5.5	%		—
Intercompany Eliminations		(1,324,000	)		—				(1,324,000	)		—			-1.3	%		—

Total Direct Expenses		91,628,000			35,951,000				55,677,000			154.9	%		83.7	%		75.3	%

Gross Margin
Express-1		12,231,000			11,762,000				469,000			4.0	%		11.2	%		24.7	%
Concert Group Logistics		4,558,000			—				4,558,000			—			4.2	%		—
Bounce Logistics		1,045,000			—				1,045,000			—			0.9	%		—

Total Gross Margin		17,834,000			11,762,000				6,072,000			51.6	%		16.3	%		24.7	%

Selling, General & Administrative
Express-1		7,116,000			7,236,000				(120,000	)		-1.7	%		6.5	%		15.2	%
Concert Group Logistics		2,847,000			—				2,847,000			—			2.6	%		—
Bounce Logistics		1,079,000			—				1,079,000			—			1.0	%		—
Corporate		1,622,000			1,567,000				55,000			3.5	%		1.5	%		3.2	%

Total Selling, General & Administrative		12,664,000			8,803,000				3,861,000			43.9	%		11.6	%		18.4	%

Operating Income from Continuing Operations
Express-1		5,115,000			4,526,000				589,000			13.0	%		4.7	%		9.5	%
Concert Group Logistics		1,711,000			—				1,711,000			—			1.6	%		—
Bounce Logistics		(34,000	)		—				(34,000	)		—			—			—
Corporate		(1,622,000	)		(1,567,000	)			(55,000	)		-3.5	%		-1.6	%		-3.3	%

Operating Income from Continuing Operations		5,170,000			2,959,000				2,211,000			74.7	%		4.7	%		6.2	%

Interest Expense		354,000			65,000				289,000			444.6	%		0.3	%		0.1	%
Other Expense		105,000			14,000				91,000			650.0	%		0.1	%		—

Income from Continuing Opertations Before Tax		4,711,000			2,880,000				1,831,000			63.6	%		4.3	%		6.0	%
Tax Provision		1,894,000			1,067,000				827,000			77.5	%		1.7	%		2.2	%

Income from Continuing Operations		2,817,000			1,813,000				1,004,000			55.4	%		2.6	%		3.8	%
Income from Discontinued Operations, Net of Tax		339,000			358,000				(19,000	)		-5.3	%		0.3	%		0.8	%

Net Income	$	3,156,000		$	2,171,000			$	985,000			45.4	%		2.9	%		4.6	%

~~Express-1 Income from Operations~~improved by 94.0% during 2006, as compared to 2005. The principle factors in this change were the increase in revenues and continued strong margin, coupled with the ability to hold SG&A expenses relatively flat. The significance of operating leverage within Express-1 facilitated this increase in income from operations, and will continue to be a principle factor in future fluctuations in operating profits.

~~Evansville Income from Operations~~became positive during 2006 as compared to a loss from operations during 2005. The principle factors contributing to this increase were the increases in revenue from newly acquired non-contract accounts and the stronger margin attributable to those, coupled with a reduction in the costs of transportation expenses within the contract portion of business. To a lesser extent the ability to hold SG&A increases to a relatively small amount also contributed to this shift in operating income. Going forward it will be critical to the long-term success of the Evansville operations to renew the contract providing services to our primary customer at favorable rates. In the event this contract is not awarded or is offered without an increase, it might not be strategic to continue this operation.

~~Provision for, Benefit from Income Tax~~Consolidated Results

~~During the year ended December 31, 2006, we recorded a benefit~~The composition of ~~$1.12 million for income taxes as opposed to no provision for, nor benefit from, income taxes during 2005. Based upon the fact that~~ our consolidated ~~operations had been unprofitable, the likelihood~~results changed during 2008 compared to 2007. Our acquisition of generating profits and utilizing additional tax benefits against future earnings was determined to be less than assured. Consequently, we did not record a tax benefit associated with the pretax net loss of $5.82 million during 2005. During 2006, based upon the successful completion of the restructuring effortsCGL and the ~~return of profitability to our remaining consolidated operations, we reevaluated~~Bouncestart-up were the valuation allowance associated with the loss during 2005 and reduced the valuation allowance on the tax asset by approximately $2.07 million. The difference between the $2.07 million valuation allowance adjustment and the $1.12 million tax benefit recorded is due to a provision for income taxes on 2006 earnings of approximately $0.95 million. For further discussion on our tax valuation allowance and the impact ofprimary catalysts behind this ~~upon our net earnings, please refer to footnote number 13 accompanying the financial statements elsewhere~~change. We experienced dramatic increases within ~~this report.~~

~~Net Income (Loss)~~

~~Net Income~~became positive during the year ended December 31, 2006 as compared to a net loss during the year ended December 31, 2005. For the year we earned $3.90 million as compared to a net loss of $5.82 million during 2005.

~~Earnings Per Share~~our consolidated revenue and changes in the historical relationship between some of our expenses and our revenues during the year. As our three operations continue to develop, the composition of our results could change even more to reflect the amount of our business volume derived from each unit. Similarly, in the event we complete one or more acquisitions in the future, our revenues and the composition of our revenues could continue to change as a result of the mix of our consolidated business volume derived from each operation.

~~Basic Earnings Per Share~~Approximately 92% of our increase in consolidated revenue during 2008 was ~~$0.15~~due to acquisition growth stemming from our CGL and Bounce operations. Our Express-1 operations contributed 8% to our increase in consolidated revenue during the period. Our intercompany cross selling activities accounted for $1.3 million during 2008, and this revenue has been eliminated from our consolidated numbers for reporting purposes. Cross-selling most commonly arises when Express-1 or Bounce accepts a load on behalf of one of our other business units, thereby becoming a provider of services to its affiliate.

Operating costs within each of our business units was impacted during 2008 by general rate compression from within the domestic transportation markets. Decreases in rates were not entirely passed on to our providers of purchased transportation including our fleet of independent contractors. During this same period, the relative percentage of our revenues derived from or associated with fuel costs increased. Since most of the revenue we receive in the form of fuel surcharges is passed along as payments to providers of transportation services, changes in the proportion of our revenue derived from fuel had the impact of increasing our direct costs as a percentage of revenue.

With the acquisition of CGL and thestart-up of Bounce, our historical relationship between operating costs and associated revenue changed. Both CGL and Bounce have slightly different, but complementary, business models from our Express-1 reporting unit. As a result, our operational cost has changed as a proportion of revenue. During 2008, our operating costs represented 84% of consolidated revenue compared to 75% during 2007. Correspondingly, gross margin also changed as a percentage of revenue. During 2008, gross margin represented 16% of our consolidated revenues compared to 25% during 2007.

Selling, general and administrative expenses increased primarily due to the acquisition of CGL and thestart-up of Bounce during 2008 compared to 2007. Within our Express-1 business unit SG&A expenses were slightly down for the year. In our corporate classification SG&A expenses were slightly increased year-over-year. As a percentage of revenue, SG&A expenses were approximately 12% during 2008, versus 18% during 2007. Our business model typically allows us to hold SG&A expenses to a slower rate of growth than that of our revenue. Within 2008, SG&A expenses increased by 44% from 2007 levels while our revenues increased by 129% during this same period. Our business model is also somewhat scalable and we have the flexibility to reduce some of our overhead costs, during periods of economic decline.

Our consolidated income from continuing operations improved during 2008 primarily due to the rate of growth within our Express-1 business unit and to the inclusion of CGL during 2008. Our Bounce unit which was formulated during 2008 became profitable during the later months of the year.

For the full year ~~ended December 31, 2006 as~~of 2008, we generated income from discontinued operations of $339,000, net of tax, compared to ~~a loss~~income of ~~$0.22 per share~~$358,000, net of tax, for the ~~year ended December 31, 2005. For~~prior year. Our Express-1 Dedicated business unit was discontinued during the ~~year ended December 31, 2006, basic average shares outstanding were 26,297,120, as compared to 26,523,650 for the year ended December 31, 2005.~~

~~Diluted Earnings Per Share~~~~was $0.15 for the year ended December 31, 2006, as compared to a loss~~fourth quarter of $0.22 per share for the year ended December 31, 2005. For purposes of calculating earnings per share, for the year ended December 21, 2006, diluted average shares outstanding were 26,641,012, as compared to 26,523,650 for the year ended December 31, 2005. For purposes of these calculations, diluted shares outstanding were the same as basic shares outstanding during 2005,2008 due to the loss ~~in 2005.~~of its dedicated contract. We have been informed that the loss of the dedicated contract was due to rates. Another provider submitted a bid that would be below breakeven had our Company matched the rates. Our position has been to not provide services at a loss. All operations were ceased effective February 28th, 2009, and all assets have either been sold or transferred to our other operations. The facility lease was absorbed by the new service provider and many of the employees were offered employment within the new operation. We do not anticipate recording a significant level of shutdown expenses related to this closed operation.

~~Year ended~~Our net income increased by 45% during 2008, due to strong growth within our Express-1 and CGL business units. The rate at which we accrue for income taxes increased slightly during 2008, as our operations expended into more states and the tax rates upon many of these jurisdictions continued to rise. Our federal loss carry forward was reduced to approximately $850,000 as of December 31, ~~2005 compared~~2008, and we will begin to ~~year ended December 31, 2004~~

~~Revenues~~

Year Ended December 31,
2005 2004 Change % Change

Express-1 contractor $ 23,951,000 $ 9,079,000 $ 14,872,000 163.8 %
Express-1 brokerage 6,716,000 5,357,000 1,359,000 25.4 %

Total Express-1 30,667,000 14,436,000 16,231,000 112.4 %
Evansville 4,465,000 4,639,000 (174,000 ) (3.8 )%
Closed locations 4,716,000 23,406,000 (18,690,000 ) (79.9 )%

Total revenues $ 39,848,000 $ 42,481,000 $ (2,633,000 ) (6.2 )%

~~Consolidated Revenues~~~~decreased 6.2%~~remit cash for the year ended December 31, 2005, as compared to the year ended December 31, 2004. The decrease in revenue primarily relates to the cessation of unprofitable operations in conjunction with our restructuring plan. During 2005, we disposed of our Temple and Bullet operations, as well as ceased activity at our unprofitable Tampa brokerage. These closed locations accounted for $4.72 million of our consolidated revenue during the year ended December 31, 2005. Mitigating this decrease was an increase in revenue from the Express-1 operations, which were acquired in August 2004. Consequently only five months are represented within the 2004 consolidated financial statements. Fuel surcharge revenue and expense played a partincome taxes beginning in the ~~changes between 2005 and 2004. However, we cannot separately quantify the impact~~first quarter of fuel surcharges upon our results of operations for these two periods, since fuel surcharge revenue and expenses were not separately recorded by previous management. In general, in periods of changing fuel prices, our fuel surcharge revenue and fuel expenses, to include fuel surcharges passed through to our fleet of independent contractors, both change by similar amounts.

~~Express-1 Revenues~~increased by 112.4% in 2005 as compared to 2004. Express-1 was acquired in 2004, with a transaction effective date of August 1, 2004. Consequently, the revenue reflected within our consolidated results of operations during 2004, represented only five months of business activity for this segment. During 2005, Express-1 successfully increased it’s fleet capacity by 21% as compared to the prior year. Approximately, $14.87 million of the total increase in revenue was a result of increases in revenue associated with Express-1’s fleet of independent contract drivers. In the second half of 2005, benefiting from a strong freight environment, Express-1 experienced a sharp increase in the number of loads available to be brokered within the truckload brokerage portion of its operations. This resulted from the strength in the U.S. economy and the related impact upon transportation capacity and was further the result of demand created in the aftermath of hurricanes Katrina and Rita.

~~Evansville Revenues~~decreased by 3.8% in the year ended December 31, 2005 as compared to the prior year. The revenue decrease within Evansville was primarily attributable to a decrease in the number of dedicated lanes serviced to our primary contract customer for this market.2009.

~~Direct Expenses~~Express-1

Year Ended December 31,
2005 2004 Change % Change

Express-1 contractor $ 17,498,000 $ 6,243,000 $ 11,255,000 180.3 %
Express-1 brokerage 5,119,000 4,314,000 805,000 18.7 %

Total Express-1 22,617,000 10,557,000 12,060,000 114.2 %
Evansville 4,010,000 4,403,000 (393,000 ) (8.9 )%
Closed locations 4,225,000 19,360,000 (15,135,000 ) (78.2 )%

Total direct expenses $ 30,852,000 $ 34,320,000 $ (3,468,000 ) (10.1 )%

Our Express-1 unit experienced a 10% increase in revenue during 2008 versus 2007. Of this increase approximately 2% was attributable to revenue growth from our operations, whereas 8% was attributable to revenue growth related to fuel surcharges to our customers. Express-1 experienced erosion within the average size of its fleet of independent contractors during 2008. Average rates charged to customers were also down slightly compared to 2007. These changes were a reflection of the broader economy, with the first half of 2008 being much more robust than the second half in which we witnessed a quick slow down during the fourth quarter. Express-1 successfully mitigated a significant decline in domestic automotive business by replacing over 8000 automotive loads during 2008 with shipments from within other industries. This load volume attributable to domestic automotive business had accounted for as much as 30% of our load volume, as recently as 2007. In spite of the continued softness in rates, and reduction within its fleet, Express-1 was successful in increasing its overall margin dollars during 2008 by 4% or $469,000 compared to the 2007 levels. Express-1 successfully decreased its SG&A expense by strictly enforcing cost controls throughout the year. Operating income increased during 2008 versus 2007, primarily due to the improvement in gross margin dollars and the reduction in SG&A costs. Fuel surcharge revenue within Express-1 was $9.0 million during 2008 versus $4.8 million in 2007.

~~Consolidated Direct Expenses~~Concert Group Logistics~~decreased by 10.1%~~

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

Concert Group Logistics revenue was $51.1 million during 2008 and accounted for 47% of our consolidated revenue for the ~~year ended December 31, 2005, as compared to~~period. CGL successfully increased its penetration within the ~~prior year. As a percentage of revenues, operating expenses amounted to approximately 77.4% of related revenues for~~international freight forwarding market and the ~~year ended December 31, 2005, as compared with approximately 80.8% for the year ended December 31, 2004. The decrease in operating expenses as a percentage~~portion of revenue ~~resulted~~derived from international shipments increased to over 20% of total revenue during 2008. Operating costs, which consist primarily ~~from the cessation~~ of ~~our unprofitable businesses in conjunction with our restructuring plan. The impact of fuel costs~~payments for purchased transportation used to complete CGL network shipments and ~~fuel surcharge~~ payments to ~~contract drivers also played~~independent station owners for commissions (gross profit sharing splits), represented 91% of CGL revenues, resulting in a ~~part in the decline in operating~~gross margin of 9% of revenue. Both these levels are in-line with CGL’s historical averages for these line items. Selling, general and administrative expenses ~~as a percentage~~represented 6% of CGL revenue during 2008. Our management anticipates that income from operations within CGL can continue to increase on a prospective basis when the ~~year ended December 31, 2005, versus~~number of stations and associated CGL revenue increases in future periods. Expansion within the ~~prior year.~~network of independent stations should not require a corresponding percentage increase within back-office costs for this operation.

~~Express-1 Direct Expenses~~Bounce Logistics~~increased by 114.2%~~

Comparisons of year-over-year results within our new Bounce Logistics unit are not possible, since the business grew from initial discussions into an operating business during ~~2005, as compared~~2008. We absorbed some development expenses during 2008, in the form of wages,start-up costs, fleet expenses and commission payments to the ~~prior year. As~~internal sales staff. Based upon adjustments made in the operational model during the third and fourth quarters of 2008, our Bounce unit became profitable on a ~~percentage~~monthly basis during the latter portion of 2008. Bounce’s management team has a clear focus on expansion of its operational footprint and developing customer accounts that result in higher rates of revenue ~~direct expenses increased by less than 1% during the year. Direct expenses represented 73.8%~~ and 73.1% of revenues at Express-1 for the years ended December 31, 2005 and 2004, respectively. The correlation between changes in our revenues and our direct expenses underscores our variable cost model. Fuel played a part in our direct expenses in 2005 as compared to 2004.

~~Evansville Direct Expenses~~decreased by 8.9% for the year ended December 31, 2005, as compared to the year ended December 31, 2004. The decrease was due primarily to the implementation of more stringent maintenance practices and management policy on equipment utilized within the Evansville operations, coupled with a switch from the use of outside contract carriers to provide shipment services to the use of company owned or leased trucks. Fuel costs impacted direct expenses during the period.improving margins.

~~Gross Margin~~Twelve months ended December 31, 2008 compared to the proforma twelve months ended December 31, 2007

Year Ended December 31,
2005 2004 Change % Change

Express-1 contractor $ 6,453,000 $ 2,836,000 $ 3,617,000 127.5 %
Express-1 brokerage 1,597,000 1,043,000 554,000 53.1 %

Total Express-1 8,050,000 3,879,000 4,171,000 107.5 %
Evansville 455,000 236,000 219,000 92.8 %
Closed locations 491,000 4,046,000 (3,555,000 ) (87.9 )%

Total gross margin $ 8,996,000 $ 8,161,000 $ 835,000 10.2 %

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

~~Consolidated Gross Margin~~~~increased by $0.84 million~~Proforma adjustments are limited to ~~22.6% of consolidated revenues for the year ended December 31, 2005 as compared to 19.2% of consolidated revenue for the year ended December 31, 2004. The improvement was partially due~~adjustments that are: i) directly attributable to the ~~closing of lower margin locations and profits within our restructuring efforts~~transaction, ii) factually supportable, iii) expected to have a continuing impact on the Company’s financial results. Adjustments that ~~were completed in 2005. Additionally, the full-year impact of the Express-1 operations upon the consolidated results helped improve margins as a percentage of revenue.~~

~~Express-1 Gross Margin~~~~increased by 107.5% and represented 26.2% of revenue for the year ended December 31, 2005, as compared~~relate to 19.2% of revenues for the prior year. As a percentage of revenue, gross margin decreased by less than 1 percentage point. Gross margin improved within the Express-1 Brokerage operations due to the strength of the market for general capacity expedites. During 2005, the transportation market benefited from excess demand as a result of hurricanes Katrina and Rita. This demand in the general transportation

~~market created~~improvements in operations, cross-selling opportunities and other potential beneficial adjustments have been omitted, based upon the ~~opportunity~~aforementioned criteria for greater margins and revenues on the brokerage activities within Express-1. Margin within the Express-1 contractor fleet decreased by 4.3 percentage points. During 2005, Express-1 successfully increased its fleet of contractors by 21 percent over 2004 levels.proforma adjustments.

~~Evansville Gross Margin~~Proforma Consolidated Resultsincreased by 92.8% and represented 10.2% of revenues during 2005, as compared to 5.1% of revenues in 2004. The increase in margin within Evansville was principally due to a shift from the use of independent contractor leased units to company owned or leased trucks within the Evansville market, coupled with a reduction in maintenance charges associated with a change in focus for maintaining the equipment.

~~Sales, General and Administrative Expenses~~

Year Ended December 31,
2005 2004 Change % Change

Express-1 $ 5,999,000 $ 2,248,000 $ 3,751,000 166.9 %
Evansville 598,000 788,000 (190,000 ) (24.1 )%
Closed locations 1,287,000 5,596,000 (4,309,000 ) (77.0 )%
Corporate 2,479,000 2,120,000 359,000 16.9 %

Subtotal sales general and administrative expenses 10,363,000 10,752,000 (389,000 ) (3.6 )%
Reorganization cost 4,448,000 2,568,000 1,880,000 73.2 %

Total sales general and administrative expenses $ 14,811,000 $ 13,320,000 $ 1,491,000 11.2 %

~~Consolidated Sales, General and Administrative Expenses (SG&A)~~On a pro-forma basis, consolidated revenues increased by ~~11.2%~~$14.5 million or 15% during 2008. Approximately 75% of this growth came from the ~~year ended December 31, 2005, as compared to the year ended December 31, 2004. This increase was offset by a $2.43~~acquisition of CGL andstart-up of Bounce, which contributed $3.8 million ~~reduction in SG&A expense associated with the operations closed in our restructuring activities~~ and ~~the charges associated with restructuring. Within the~~$7.0 million of proforma growth respectively. The remaining ~~expedite operations and corporate activities, SG&A expenses increased by 76.0% to $9.08 million during 2005,~~growth came from ~~$5.16 million in 2004. Most of the increase is attributable to the full-year impact of~~within our Express-1 ~~operations. As a percentage of revenue, SG&A expenses increased to 37.2% of revenue during 2005, versus 31.4% of revenue during 2004.~~

~~Express-1 Selling, General and Administrative Expense~~~~increased by 166.9 % for the year ended December 31, 2005, as compared to the prior year.~~business unit. During this same period, ~~Express-1~~our operating costs increased ~~its revenue~~ by ~~approximately 112.4%. Comparisons~~16% which reflects some of the ~~Express-1~~rate pressures and margin compression we have continued to mention throughout 2008. Gross margin improved by $1.6 million or 9.5% on a proforma basis. SG&A expenses increased $0.6 million or 4.5% during 2008 compared to 2007. Income after tax from continuing operations ~~are difficult~~increased $0.4 million or 17% for ~~this period, as~~ the ~~2004~~year, with income from discontinued operations decreasing slightly. Net income increased by $0.4 million to $3.2 million from $2.8 million in the earlier year.

Our proforma results ~~included~~reflected organic growth within our ~~consolidated results represent only~~Express-1 and Concert Group Logistics operations, in spite of economic conditions, which weakened rapidly towards the ~~last five months~~end of ~~2004. Historically,~~ the ~~last~~year. Our Bounce Logistics operation gained a significant amount of traction in the latter half of 2008 and contributed approximately 48% of the ~~year~~proforma revenue growth during 2008.

Proforma Concert Group Logistics

On a proforma basis, Concert Group Logistics increased revenues by $3.8 million or 8% during 2008 compared to 2007. It is important to note that Concert Group Logistics reduced the ~~strongest within the expedite market, with stronger rates, utilization and margins~~size of its network by four stations during ~~this period. Consequently, SG&A is typically lower as~~December 2007, just prior to our purchase transaction. With their network shrinking from 25 stations to 21, revenue growth was negatively impacted on a ~~percentage~~comparative basis. These four closed stations accounted for approximately $5.0 million or approximately 11% of CGL’s revenue during the ~~second half of each year. Certain SG&A components such as amortization of intangibles related~~2007 period. We have not adjusted the historical proforma numbers to eliminate prior year revenues associated with these former stations, which lessens the ~~acquisition of Express-1 were only partially included within the 2004 results. The Express-1 model has historically allowed for a much slower~~growth rate of ~~growth within the SG&A areas, as the rate~~our combined network for comparative purposes. CGL successfully increased its international freight forwarding presence with international business accounting for 20% of ~~growth~~its revenue during 2008 versus 13% for ~~revenue.~~

~~Evansville~~2007. Concert Group Logistics operating costs increased by $3.8 million or 9% during 2008, resulting in gross margin dollars of $4.6 million which is up slightly from $4.5 million during 2007. Selling, ~~General~~general and ~~Administrative Expense~~administrative expenses decreased by ~~24.1%~~$0.5 million or 14% during ~~2005,~~2008 as compared to ~~2004. Principle components of SG&A within Evansville include wages and benefits, depreciation, amortization, office expenses and general supplies.~~2007. Operating income increased by 36% or $0.4 million during 2008 compared to 2007.

~~Net Income (Loss) From Operations~~

Year Ended December 31,
Income from Operations
2005 2004 Change % Change

Express-1 $ 2,051,000 $ 1,631,000 $ 420,000 25.8 %
Evansville (143,000 ) (552,000 ) 409,000 (74.1 )%
Closed locations (796,000 ) (1,550,000 ) 754,000 (48.6 )%
Corporate (2,479,000 ) (2,120,000 ) (359,000 ) 16.9 %

Subtotal income (loss) from operations (1,367,000 ) (2,591,000 ) 1,224,000 (47.2 )%
Reorganization cost (4,448,000 ) (2,568,000 ) (1,880,000 ) 0.0 %

Total income (loss) from operations $ (5,815,000 ) $ (5,159,000 ) $ (656,000 ) 12.7 %

~~Consolidated Loss From Operations~~~~increased by 12.7% during the~~Fiscal year ended December 31, ~~2005 as~~2007 compared to ~~the~~fiscal year ended December 31, 2004. The increase in loss resulted primarily due to the losses and charges associated with our closed operations and restructuring charges. For 2005, the losses and charges from our closed operations were $5.24 million, as opposed to $4.12 million for 2004. Also contributing to the increase in loss was an increase within the corporate charges associated with operating duplicate administrative locations and increased charges associated with corporate executive management.2006

Express-1 ~~Income from Operations~~~~improved by 25.8% during 2005, as compared to 2004. The principle factors in this increase were~~Expedited Solutions, Inc.
Summary Financial Table
For the increase in revenues, continued strong margins, and the ability to hold SG&A expenses relatively flat. The significance of operating leverage within Express-1 facilitated this increase in income from operations, and will continue to be a principle factor in future fluctuations in operating profits.Twelve Months Ended December 31, 2007


							Year to Year Change						Percent of Revenue
	2007			2006			In Dollars			In Percentage			2007			2006

Revenues — Express-1	$	47,713,000		$	37,327,000		$	10,386,000			27.8	%		100.0	%		100.0	%
Direct Expense — Express-1		35,951,000			27,438,000			8,513,000			31.0	%		75.3	%		73.5	%

Gross Margin — Express-1		11,762,000			9,889,000			1,873,000			18.9	%		24.7	%		26.5	%
Selling, General & Administrative
Express-1		7,236,000			5,998,000			1,238,000			20.6	%		15.2	%		16.1	%
Corporate		1,567,000			972,000			595,000			61.2	%		3.3	%		2.6	%

Total Selling, General & Administrative		8,803,000			6,970,000			1,833,000			26.3	%		18.4	%		18.7	%

Operating Income from Continuing Operations
Express-1		4,526,000			3,891,000			635,000			16.3	%		9.5	%		10.4	%
Corporate		(1,567,000	)		(972,000	)		(595,000	)		61.2	%		-3.3	%		-2.6	%

Operating Income from Continuing Operations		2,959,000			2,919,000			40,000			1.4	%		6.2	%		7.8	%

Interest Expense		65,000			205,000			(140,000	)		-68.3	%		0.1	%		0.5	%
Other Expense		14,000			168,000			(154,000	)		-91.7	%		0.0	%		0.0	%

Income from Continuing Opertations Before Tax		2,880,000			2,546,000			334,000			13.1	%		6.0	%		6.8	%
Tax Provision		1,067,000			(1,037,000	)		2,104,000			202.9	%		2.2	%		-2.8	%

Income from Continuing Operations		1,813,000			3,583,000			(1,770,000	)		-49.4	%		3.8	%		9.6	%
Income from Discontinued Operations, Net of Tax		358,000			321,000			37,000			11.5	%		0.8	%		0.9	%

Net Income	$	2,171,000		$	3,904,000		$	(1,733,000	)		-44.4	%		4.6	%		10.5	%

~~Evansville Loss from Operations~~decreased during 2005 by 74.1% compared to 2004. The principle factors contributing to this reduction in loss were the increases in revenue from newly acquired non-contract accounts and the associated margin attributable to those, coupled with a reduction in the costs of transportation expenses within the contract portion of the business, due to a shift to company provided trucks.

~~Provision for, Benefit from Income Tax~~Consolidated Results

During ~~the year ended December 31, 2005, we did not record a benefit for income taxes due to the magnitude~~2007 and 2006, our operations consisted of our ~~historical losses~~Express-1 business unit and ~~the uncertainty surrounding the completeness~~our now discontinued Express-1 Dedicated business unit. For purposes of this narrative, we will refer to our continuing operations together with our corporate overhead expenses. Since all revenue, direct expense and gross margin was derived from our Express-1 operation, within our continuing operations discussion of our ~~restructuring.~~consolidated results will begin below the gross margin line item.

SG&A expenses increased by 26% to $8.8 million during 2007 compared $7.0 million in 2006. The increases were related to wages, satellite communications, sales and promotional expenses along with various other costs associated with operating a larger fleet and organization. Our income from continuing operations before tax increased by $0.3 million or 13%. During ~~2004,~~2006, we ~~recorded~~reduced a valuation allowance on a tax loss carry forward which resulted in a one-time tax benefit of ~~$1.92 million associated with~~approximately $1.1 million. As a consequence of recording this tax benefit, our ~~losses for that period. For further discussion on our~~income from continuing operations after tax ~~valuation allowance~~ and ~~the impact of this upon~~ our net ~~earnings, please refer to footnote number 13 accompanying the financial statements elsewhere within this report.~~

~~Net Loss~~

~~Net Loss increased~~income were both down in ~~2005, as~~2007 versus 2006. We generated $0.4 million, net of tax, from discontinued operations during 2007 compared to 2004, as we experienced costs and charges associated with unprofitable business units and restructuring charges associated with refocusing our company solely upon its profitable expedited operations. For 2005 we lost $5.82$0.3 million ~~as compared to a loss~~net of ~~$3.24 million~~tax during ~~2004.~~

~~Loss Per Share~~

~~Basic Loss Per Share~~was $0.22 for the year ended December 31, 2005 as compared to a loss of $0.14 per share for the year ended December 31, 2004. For the year ended December 31, 2005, basic average shares outstanding were 26,523,650, as compared to 23,935,768 for the year ended December 31, 2004.

~~Diluted Loss Per Share~~was the same as basic loss per share for 2005 and 2004. For the purpose of calculating loss per share, basic and diluted share counts were the same in 2005 and 2004, due to the losses recorded in each year.

~~Use of GAAP and Non-GAAP Measures~~

In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), we have included in this report “EBITDA”, with EBITDA being defined as earnings before interest, taxes, depreciation2006.

Express-1

Our Express-1 unit experienced a 28% increase in revenue during 2007 versus 2006. Of this increase approximately 20% was attributable to revenue growth from our operations, whereas 8% was attributable to revenue growth related to fuel surcharges to our customers. Express-1 experienced significant gains in the average size of its fleet of independent contractors during 2007. Average rates charged to our customers were also steady compared to 2006. Express-1 successfully introduced its services to an ever broader customer base and ~~amortization~~initiated a concerted effort to begin diversifying away from higher levels of automotive related business volume. Express-1 was successful in increasing its overall margin during 2007 by 19% or $1.9 million compared to the 2006 levels. Express-1 reduced its SG&A expense as a percentage of revenue by enforcing cost controls and ~~excluding~~more productivity from its staff. Operating income increased during 2007 versus 2006, due primarily to the ~~cumulative effect of a change~~improvement in ~~accounting principle, discontinued operations,~~gross margin dollars and the ~~impact~~control of restructuring and other charges. For each non-GAAP financial measure, we have presented the most directly comparable GAAP financial measure and reconciled the non-GAAP financial measure with such comparable GAAP financial measure.

~~These non-GAAP financial measures provide useful information to investors to assist~~SG&A costs. Fuel surcharge revenue within Express-1 was $4.8 during 2007 versus $1.7 in understanding the underlying operational performance of our company. Specifically, EBITDA is a useful measure of operating performance before the impact of investing and financing transactions, making comparisons between companies’ earnings power more meaningful and providing consistent~~period-over-period~~ comparisons of our Company’s performance. In addition, we use these non-GAAP financial measures internally to measure our ongoing business performance and in reports to bankers to permit monitoring of our ability to pay outstanding liabilities.

The table below reconciles EBITDA to Net Income, the most readily comparable GAAP financial measurement for each of the three-month periods ended December 31, 2006, 2005 and 2004, as well as for the years ended on those same dates.

~~Express-1 Expedited Solutions, Inc.~~
~~EBITDA Reconciliation~~

Three Months Ended December 31, Year Ended December 31,
2006 2005 2004 2006 2005 2004

Net income (loss) as reported $ 1,594,000 $ 597,000 $ (2,151,000 ) $ 3,904,000 $ (5,815,000 ) $ (3,238,000 )
Income tax (benefit) provision (1,128,000 ) — (1,320,000 ) (1,128,000 ) — (1,921,000 )
Interest expense 43,000 53,000 32,000 205,000 187,000 126,000
Depreciation and amortization 305,000 260,000 431,000 1,054,000 1,435,000 1,254,000
Restructuring and exit expenses — — 2,568,000 — 4,448,000 2,568,000

EBITDA $ 814,000 $ 910,000 $ (440,000 ) $ 4,035,000 $ 255,000 $ (1,211,000 )

2006.

LIQUIDITY AND CAPITAL RESOURCES

General

In January 2008, we completed the purchase of substantially all assets and certain liabilities of Concert Group Logistics, LLC. Total consideration given in the transaction included $9.0 million in cash and the issuance of 4.8 million shares of Express-1 Expedited Solutions, Inc. common stock. This acquisition was financed with proceeds from our line of credit facility and the issuance of term debt. Our liquidity position changed significantly upon the completion of this purchase transaction. Any analysis of our liquidity and capital resources should take into consideration the impact of this transaction upon our overall cash flows and financial position. For more information on this transaction, please refer to Item 1 and to Item 8, Footnote 13 elsewhere within this report.

The impact of weakened U.S. economy upon our financial performance should also be considered in an analysis of our liquidity and capital resources. Further discussion on the impact on the economy upon our operating results can be found in Item 1A. and Item 7, within this report.

Cash Flow

As of December 31, ~~2006,~~2008, we had ~~approximately $2,078,000~~$4,428,000 of working capital ~~and had~~with associated cash of $1,107,000 compared with working capital of $3,781,000 and cash ~~equivalents~~ of ~~approximately $79,000, compared with approximately $1,342,000 of working capital and cash and cash equivalents of approximately $386,000~~$800,000 at December 31, ~~2005. The improvement~~2007. This represents an increase of 17% or $647,000 in working capital ~~is a result of our return to profitability, due to our focus on expedite operations.~~during the period.

During the year ended December 31, ~~2006, cash decreased by approximately $307,000. During this same time~~2008, we completed payments related to previous acquisitions of approximately $1,710,000, reduced indebtedness by approximately $1,428,000 and reduced the balance owed by us to outside parties for accounts payable and other accrued expenses. For 2006, we generated $7,048,000 in cash from operations compared to $4,043,000 for the prior year. Primary components of ~~$3,637,000~~this increase related to: (i) Net income from operations and (ii) an overall improvement in other current assets and liabilities.

Investing activities used approximately ~~$961,000~~$11,780,000 during the year ended December 31, 2008 compared to our use of $2,293,000 on these activities during the prior year. Most of this cash, $8,489,000 was used to purchase Concert Group Logistics in January of 2008. In addition, final earn-out payments to the former owners of Express-1, Inc. and Dasher Express, Inc. were made totaling $2,210,000 and $1,960,000 during 2008 and 2007, respectively. Cash of $1,109,000 and $473,000 was also used to purchase capital ~~assets~~expenditure items, such as satellite communications equipment for our fleet, computer software and ~~real estate~~related computer hardware, during the 2008 and 2007 periods, respectively.

Financing activities provided approximately $5,039,000 for the year ended December 31, 2008 compared to ~~be used~~a cash utilization of $1,029,000 in 2007. In 2008 the purchase of Concert Group Logistics was financed through borrowings of approximately $9.0 million on the Company’s line of credit facility. As of December 31, 2008 our ~~business. We anticipate funding future revenue growth primarily through operations and~~net draw for the year on our line of credit totaled $2,320,000. In 2007 we reduced our outstanding debt balances by $1,319,000 by paying off our line of credit. Additionally, we also received $168,000 and $290,000 from the exercise of warrants during the 2008 and 2007 periods, respectively.

~~$912,000.~~credit. To fund the Concert Group Logistics, LLC purchase, the Company drew down $3.6 million on the term facility and $5.4 million on the receivables based line of credit. Substantially all the assets of our Company and wholly owned subsidiaries (Express-1, Inc., Concert Group Logistics, Inc. and Bounce Logistics, Inc.) are pledged as collateral securing our performance under the line. The ~~additional $912,000 is available~~line bears interest based upon a spread abovethirty-day LIBOR with an increment of 125 basis points abovethirty-day LIBOR for the ~~granting~~receivables line and 150 basis points abovethirty-day LIBOR for the term portion as of a security interest in our Buchanan, Michigan facilities. All obligations under the agreements are secured by the accounts receivable of Express-1. As further security, Expedited Solutions entered into agreements providing for a guaranty of the obligations of Express-1 under the loan documents. All advances under the agreement are subject to interest at the rate of the Bank’s prime plus an applicable margin that ranges from negative 0.50% to positive 0.25% based upon the performance of our consolidated company in the preceding quarter. Interest is payable monthly.December 31, 2008. The ~~maturity date of the~~term loan is ~~September 30, 2008. The line contains various covenants pertaining to the maintenance~~amortized over a thirty-six month period and requires monthly principal payments of ~~certain financial ratios.~~$100,000 together with accrued interest be paid until retired. As of December 31, ~~2006, we had available borrowing capacity of approximately $3.7 million, and an effective~~2008 the weighted average interest rate ~~of 8.00%. We were in compliance with all terms~~on the credit facility was approximately 2.81%, and ~~conditions of~~rates are adjusted monthly. Available capacity under the ~~Bank agreement,~~line was approximately $6.8 million as of December 31, ~~2006.~~2008. The credit facility carries a maturity date of May 31, 2010 and we anticipate renewing this facility prior to this time.

We had outstanding standby letters of credit at December 31, ~~2006~~2008 of ~~$347,000,~~$335,000, related to insurance policies either continuing in force or recently canceled. Amounts outstanding for letters of credit reduce the amount available under our line of credit,dollar-for-dollar.

Options and Warrants

We may receive proceeds in the future from the exercise of warrants and options outstanding as of December 31, ~~2006~~2008, in accordance with the following schedule:

Approximate

Number of
Approximate

Shares Proceeds

Options 5,364,000 $ 7,935,000
Warrants 7,790,000 11,714,000

Total 13,154,000 $ 19,649,000


	Approximate
	Number of		Approximate
	Shares		Proceeds

Total Outstanding as of December 31, 2008:
Options granted within Stock Compensation Plan		3,609,000	$	4,257,000
Warrants issued		2,252,000		4,622,000

		5,861,000	$	8,879,000

~~Our strategy~~The following table is provided to ~~continue~~allow the users of the financial statements more insight into different groupings of warrants and options. The options and warrants reflected within this table are the same as those above with a different viewpoint. The table is designed to ~~expand organically through our Express-1~~reflect maturity date groupings in rows and Evansville operations. To complement this organic growth, we plan to seek acquisitions, on occasion. Potential acquisitions will be considered to the extent they complement our focus on expedited operations and can become quickly accretive to our earnings. Our ability to implement our growth strategy will depend on a numberranges of ~~things, which may be beyond our control and there can be no assurance we will be successful~~exercise prices in ~~producing growth. Our ability to continue to grow may depend somewhat on our ability to obtain adequate financing. We may not be able to obtain financing on favorable terms.~~columns.


	< $1.00		$1.00-$1.25		$1.26-$1.50		$1.51-$1.75		$1.76-$2.00		Over $2.00		Total

Q1 2009				25,000		660000								685,000
Q2 2009												1,793,000		1,793,000
Q3 2009						75,000								75,000
Q4 2009								23,000						23,000
Thereafter		980,000		1,340,000		965,000								3,285,000

Total		980,000		1,365,000		1,700,000		23,000		0		1,793,000		5,861,000

~~Potential Earn-Out Payments Under Acquisition Agreements~~Contractual Obligations

~~Set forth~~The table below ~~is a table~~reflects all contractual obligations of ~~the possible contingent consideration that~~ our Company ~~may be required to pay over~~as of December 31, 2008.(Included within this table is an earn-out payment on the ~~next two years if certain criteria related to entities that we have acquired is obtained:~~CGL acquisition).

Possible

Year Ending December 31,
Payments*

2007 $ 1,960,000
2008 $ 2,210,000

Total $ 4,170,000


	Payments Due by Period
			Less than 1		1 to 3
Contractual Obligations	Total		Year		Years

Capital lease obligations	$	35,000	$	35,000	$	—
Notes payable		2,600,000		1,200,000		1,400,000
Line of credit		2,320,000		—		2,320,000
Operating leases		17,000		17,000
Earn out obligation**		500,000		500,000
Real estate obligations*		507,000		178,000		329,000

Total contractual obligations	$	5,979,000	$	1,930,000	$	4,049,000


()		~~Payments are listed~~In addition to real estate leases used in the Company’s current operations, included in this number is a real estate lease commitment for property located on Boggy Creek Road in Orlando, Florida, net of estimated sublease proceeds. For further information on this lease, see Item 2 Properties and Footnote 11 Commitments and Contingencies contained elsewhere in this report.

(**)		The earnout obligation relates to the Concert Group Logistics transaction. The Company was required to pay the former owners of Concert Group Logistics LLC, a minimum earnout of $500,000 at the end of 2008, based upon the full year ~~they will be paid and some portions~~performance of the ~~payments can be paid in cash or stock.~~Company’s CGL business unit for 2008 and 2009.

As of December 31, 2006, we had accrued $1,960,000 related to the above contingent consideration as the contractual contingent criteria was achieved, during 2006. Subsequent to December 31, 2006 and prior to the issuance of this report, we satisfied the contractual acquisition earnout payment of $1,960,000 for 2006, with cash available from working capital and our line of credit facility.

We may have to secure additional sources of capital to fund some portion of the contingent consideration payments as they become due. This presents us with certain business risks relative to the availability and pricing of future fund raising, as well as the potential dilution to our stockholders if the fund raising involves the sale of equity.

These contingent consideration amounts are tied directly to the operational performance of Express-1, mitigating some of the risks that might exist for contingent payments tied to other performance indicators. We will examine the annual benchmarks for each contingent consideration payment and will reserve any potential funds due under these agreements at the end of each period when the pro-rated annual benchmark is achieved for that period.

NEW ACCOUNTING PRONOUNCEMENTS

In December ~~2004,~~2007, the ~~Financial Accounting Standards Board (FASB)~~FASB issued Statement of Financial Accounting Standards (SFAS) No. ~~123 (Revised 2004)~~141 (revised 2007), “Share-Based Payment” (SFAS 123R). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the consolidated financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). We adopted SFAS 123R beginning January 1, 2006 using the Modified Prospective Application Method. Under this method, SFAS 123R applies to new awards and to awards modified, repurchased or cancelled after the effective date. Prior to the adoption of SFAS 123R we accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,“Business Combinations” ~~and accordingly, recognized no compensation expense for stock option grants.~~

Compensation cost is also recognized for the unvested portion of awards granted prior to adoption. Prior periods were not restated to reflect the impact of adopting the new standard, and there is no cumulative effect.

As a result of adopting SFAS 123R, compensation cost of $110,000 has been charged against income for the year ended December 31, 2006. The associated income tax benefit recognized in the income statement related to this adoption was $41,400 for the year ended December 31, 2006. There was no impact on cash flows from operating or financing activities or basic or diluted earnings per share.

The value of each grant under SFAS 123R is estimated at the grant date using the Black-Scholes option model with the following weighted average assumptions for options granted in 2006: historical dividend rates of 0%; risk-free rates between 4.0% and 5.0% for the periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant; expected terms of between 5 and 10 years which was calculated based upon the Company’s historical pattern of options granted period those options are expected to be outstanding; and expected volatility of 18% to 35% which was calculated by review of the Company’s historical activity as well as comparable peer companies.

~~During 2006, there was no cash received from the exercise of stock options.~~

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return. FIN 48 sets forth a threshold for financial statement recognition, measurement, and disclosure of tax positions taken or expected to be taken on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006 (January 1, 2007 for calendar year companies), and is to be applied to all open tax years as of the date of effectiveness. Management is currently evaluating the impact, if any, of applying the various provisions of FIN 48.

~~In September 2006, FASB issued Statement of Financial Accounting Standards No. 157~~ (“SFAS ~~157”~~No. 141(R)”). SFAS ~~157, “Fair Value Measurement”, which defines fair value, establishes a framework~~No. 141(R) retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for ~~measuring fair value in generally accepted accounting principles, clarifies~~all business combinations and for an acquirer to be identified for each business combination. In general, the ~~definition~~statement 1) broadens the guidance of ~~fair value within that framework, and expands disclosures about~~SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more other businesses, 2) broadens the use of fair value ~~measurements.~~measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increased required disclosures. The Company is required to apply SFAS ~~157~~No. 141(R) prospectively to business combinations for which the acquisition date is ~~intended~~on or after January 1, 2009. Earlier application is not permitted. It is likely that the adoption of SFAS 141 (R) will have significant impact upon the structure of any future acquisitions and the recording of the assets acquired in those transactions and expenses incurred as a result of these transactions.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to ~~increase consistency and comparability among~~choose to measure eligible items at fair value ~~estimates~~at specified election dates and report unrealized gains or losses on items for which the fair value option has been elected in ~~financial reporting.~~earnings at each subsequent reporting date. SFAS ~~157~~No. 159 is effective for fiscal years beginning after November 15, 2007. ~~Management is currently evaluating~~The Company did not record an adjustment within its financial statements as a result of adopting the ~~impact, if any, of applying the various~~ provisions of SFAS ~~157.~~No. 159, as of December 31, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”, which defines fair value, establishes a framework for consistently measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements and is effective for fiscal years beginning after November 15, 2007. The Company did not record an adjustment within its financial statements as a result of adopting the provisions of SFAS No. 157 as of December 31, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.

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


ITEM 7A.	*QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK*

We are exposed to market risk related to changes in interest rates on our bank line of credit which may adversely affect our results of operations and financial condition. We are also exposed to market risk changes in commodity prices.

Under Financial Accounting Reporting Release Number 48 and SEC rules and regulations, we are required to disclose information concerning market risk with respect to foreign exchange rates, interest rates, and commodity prices. We have elected to make such disclosures, to the extent applicable, using a sensitivity analysis approach, based on hypothetical changes in interest rates and commodity prices.

We do not currently use derivative financial instruments for risk management purposes and do not use them for either speculation or trading. Because our operations are confined to the United States orand are primarily denominated in U.S. currency, we are not currently subject to foreign currency risk.

Market risk generally represents the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates and market prices. We do not currently have any trading derivatives nor do we expect to have any in the future. We have established policies and internal processes related to the management of market risks, which we use in the normal course of our business operations.

Interest Rate Risk

~~We are subject to~~From time-to-time we have interest rate risk, as borrowings under our credit facility are based on variable market interest rates. We completed the acquisition of Concert Group Logistics in January 2008 and financed the transaction with $9.0 million credit facility to fund part of the ~~extent we borrow against our line~~purchase. The credit facility is subject to variable rates of ~~credit or incur debt. We attempt to manage our~~ interest ~~rate risk by managing the amount~~and an adjustment of ~~debt we carry. In the opinion of management, an increase~~1% in ~~short-term interest rates could have a materially adverse effect on our financial condition only if in the future we incur substantial indebtedness and~~ the interest rate ~~increases~~on this facility would result in a corresponding change in our annual pretax earnings of approximately $50,000. At December 31, 2008, our balance on our credit facility was $4,955,000 with a blended interest rate of approximately 3%.

Intangible Asset Risk

We have a substantial amount of intangible assets including goodwill and are required to perform impairment tests whenever events or circumstances indicate that the carrying value may not ~~offset by freight rate increases or other items. Management does not foresee or expect~~be recoverable from estimated future cash flows. As a result of our periodic evaluations, we may determine that the intangible asset values need to be written down to their fair values, which might result in material charges that could be adverse to our operating results and financial position. Although at December 31, 2008, we believed our intangible assets were recoverable, changes in the ~~near future~~economy, the business in which we operate and our own relative performance could change the assumptions used to evaluate intangible asset recoverability. We continue to monitor those assumptions and their effect on the estimated recoverability of our intangible assets.

Equity Price Risk

We do not own any ~~significant changes~~equity investments other than in our ~~exposure~~subsidiaries. As a result, we do not currently have any operating equity price risk. We have used the stock of our Company in transactions involving the purchase of business units and assets, as well as in general fund raising activities. Fluctuations in the price of our own common stock, exposes us to ~~interest rate fluctuations or~~some risk in ~~how that exposure~~future transactions where our stock is ~~managed by us.~~used as a medium of exchange.

Commodity Price Risk

We ~~are also subject to~~do not enter into contracts for the purchase or sale of commodities. As a result, we do not currently have any operating commodity price ~~risk with respect to purchases of fuel. Historically, we have sought to recover a portion of~~risk. Commodity prices do impact our short-term fuel price increases from customers through fuel surcharges. Fuel surcharges that can be collected do not always fully offset an increase in the cost of diesel fuel. Based upon the variable cost structure within our primary business unit, Express-1, we pass effectively all the fuel surcharge revenue we receive to our independent contract driversCompany in the form of prices for fuel ~~surcharge payments. The balance between the amount of fuel surcharges we recover from~~used by our ~~customers~~value providers and the ~~payments we make to our fleet~~resulting impact of ~~independent contractors, protects us from much of~~commodities such as fuel on the ~~commodity price risk associated with fuel costs~~overall economy within the ~~transportation industry.~~United States.


ITEM 8.	*FINANCIAL STATEMENTS*

Consolidated Financial Statements
Express-1 Expedited Solutions, Inc.
Years Ended December 31, ~~2006, 2005~~2008, 2007 and ~~2004~~2006

Report of Independent Registered Public Accounting Firm

Board of Directors

Express-1 Expedited Solutions, Inc.

~~Tampa, Florida~~St. Joseph, Michigan

We have audited the accompanying consolidated balance sheets of Express-1 Expedited Solutions, Inc. as of December 31, ~~2006~~2008, and ~~2005~~2007; and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the ~~three-years~~years ended December 31, 2008, 2007 and 2006. These consolidated financial statements are the responsibility of the management of Express-1 Expedited Solutions, Inc. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Express-1 Expedited Solutions, Inc. as of December 31, ~~2006~~2008 and ~~December 31, 2005~~2007; and the results of its operations and its cash flows for ~~each of~~ the ~~three~~ years ended December 31, 2008, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.

/s/ Pender Newkirk & Company LLP

Pender Newkirk & Company LLP

Certified Public Accountants

Tampa, Florida

March ~~25, 2007~~27, 2009

Express-1 Expedited Solutions, Inc.

Consolidated Balance Sheets


		December 31,							December 31,			December 31,
		2006			2005				2008			2007

ASSETS	ASSETS							ASSETS
Cash and cash equivalents		$	79,000		$	386,000
Accounts receivable, net of allowance of $77,000 and $732,000 for 2006 and 2005, respectively			5,354,000			4,434,000
Current assets:
Cash									$	1,107,000		$	800,000
Accounts receivable, net of allowances of $133,000 and $77,000, respectively										12,202,000			5,663,000
Prepaid expenses			265,000			326,000				372,000			492,000
Other current assets										650,000			149,000
Deferred tax asset, current			1,069,000			500,000				493,000			1,549,000
Other current assets			181,000			77,000

Total current assets			6,948,000			5,723,000				14,824,000			8,653,000

Property and equipment, net of accumulated depreciation			2,488,000			2,229,000
Property and equipment, net of $2,220,000 and $1,734,000 in accumulated depreciation, respectively										3,141,000			2,312,000
Goodwill			5,527,000			3,567,000				14,915,000			7,737,000
Identifiable intangible assets			4,225,000			4,629,000
Identified intangible assets, net of $1,682,000 and $1,279,000 in accumulated amortization, respectively										7,631,000			3,950,000
Loans and advances			143,000			439,000				63,000			104,000
Deferred tax asset, long-term			2,069,000			1,504,000
Deferred tax asset, long term										—			377,000
Other long term assets			209,000			363,000				1,108,000			591,000

Total long term assets			14,661,000			12,731,000

Total Assets		$	21,609,000		$	18,454,000
									$	41,682,000		$	23,724,000

LIABILITIES & STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY								LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	1,034,000		$	924,000			$	6,578,000		$	892,000
Accrued salaries and wages			724,000			397,000				691,000			660,000
Accrued acquisition earnouts			1,960,000			1,710,000				—			2,210,000
Accrued expenses			740,000			1,011,000
Line of credit, current			—			—
Accrued expenses, other										862,000			861,000
Current maturities of long-term debt			117,000			242,000				1,235,000			50,000
Other current liabilities			295,000			97,000				1,030,000			199,000

Total current liabilities			4,870,000			4,381,000				10,396,000			4,872,000

Line of credit, long-term			1,159,000			1,764,000
Notes payable and capital leases, less current maturities			127,000			824,000
Line of credit										2,320,000			—
Notes payable and capital leases, net of current maturities										1,400,000			34,000
Deferred tax liability, long-term										583,000			—
Other long-term liabilities			115,000			199,000				456,000			616,000

Total long-term liabilities			1,401,000			2,787,000				4,759,000			650,000

Stockholders’ equity
Preferred Stock, $.001 par value; 10,000,000 shares no shares issued or outstanding			—			—
Common Stock, $.001 par value; 100,000,000 shares authorized; 26,516,037 and 26,465,034 shares issued, and 26,336,037 and 26,285,034 outstanding at December 31, 2006 and 2005, respectively			27,000			26,000
Stockholders’ equity:
Preferred stock, $.001 par value; 10,000,000 shares, no shares issued or outstanding										—			—
Common stock, $.001 par value; 100,000,000 shares authorized; 32,215,218 and 27,008,768 shares issued and 32,035,218 and 26,828,768 shares outstanding										32,000			27,000
Additional paid-in capital			20,459,000			20,312,000				26,316,000			21,152,000
Accumulated deficit			(5,041,000	)		(8,945,000	)
Treasury stock, at cost, 180,000 shares			(107,000	)		(107,000	)
Accumulated earnings (deficit)										286,000			(2,870,000	)
Treasury stock, at cost, 180,000 shares held										(107,000	)		(107,000	)

Total stockholders’ equity			15,338,000			11,286,000				26,527,000			18,202,000

Total liabilities and equity		$	21,609,000		$	18,454,000
									$	41,682,000		$	23,724,000

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

Express-1 Expedited Solutions, Inc.

Consolidated Statements of Operations

Year Ended December 31,
2006 2005 2004

Revenues

Operating revenues $ 42,191,000 $ 39,848,000 $ 42,481,000
Expenses

Operating expenses 31,396,000 30,852,000 34,320,000

Gross profit 10,795,000 8,996,000 8,161,000

Sales, general and administrative expense 7,608,000 10,176,000 10,714,000
Restructuring, exit and consolidation expense — 4,448,000 2,568,000

Total sales, general and administrative expense 7,608,000 14,624,000 13,282,000
Other expense 206,000 — (88,000 )
Interest expense 205,000 187,000 126,000

Income (loss) before income tax provision
2,776,000 (5,815,000 ) (5,159,000 )
Income tax (benefit) provision (1,128,000 ) — (1,921,000 )

Net income (loss)
$ 3,904,000 $ (5,815,000 ) $ (3,238,000 )

Basic income (loss) per common share $ 0.15 $ (0.22 ) $ (0.14 )

Basic weighted average common shares outstanding 26,297,120 26,523,650 23,935,768

Diluted income (loss) per common share $ 0.15 $ (0.22 ) $ (0.14 )

Diluted weighted average common shares outstanding 26,641,012 26,523,650 23,935,768


			Twelve Months Ended
	December 31,		December 31,		December 31,
	2008		2007		2006

Revenues
Operating revenue	$	109,462,000	$	47,713,000	$	37,327,000
Expenses
Direct expense		91,628,000		35,951,000		27,438,000

Gross margin		17,834,000		11,762,000		9,889,000
Sales, general and administrative expense		12,664,000		8,803,000		6,970,000

Operating income from continuing operations		5,170,000		2,959,000		2,919,000
Other expense		105,000		14,000		168,000
Interest expense		354,000		65,000		205,000

Income from continuing operations before income tax		4,711,000		2,880,000		2,546,000
Income tax provision		1,894,000		1,067,000		(1,037,000	)

Income from continuing operations		2,817,000		1,813,000		3,583,000
Income from discontinued operations, net of tax(1)		339,000		358,000		321,000

Net income	$	3,156,000	$	2,171,000	$	3,904,000

Basic income per share
Income from continuing operations	$	0.09	$	0.07	$	0.14
Income from discontinued operations		0.01		0.01		0.01
Net income		0.10		0.08		0.05
Diluted income per share
Income from continuing operations	$	0.09	$	0.07	$	0.14
Income from discontinued operations		0.01		0.01		0.01
Net income		0.10		0.08		0.15
Weighted average common shares outstanding
Basic weighted average common shares outstanding		31,453,765		26,690,382		26,297,120
Diluted weighted average common shares outstanding		31,757,164		27,326,729		26,641,012


(1)		Within income from discontinued operations are provisions for income tax of $250,000, $233,000 and ($91,000) for the years ended December 31, 2008, 2007 and 2006, respectively

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

Express-1 Expedited Solutions, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Three Years Ended December 31, ~~2006~~

Additional
Accumulated

Preferred Stock Common Stock Paid in
Earnings
Treasury Stock
Shares Amount Shares Amount Capital (Deficit) Shares Amount Total

Balance, January 1, 2004
773,896 $ 774,000 17,087,840 $ 17,000 $ 7,427,000 $ 108,000 $ 8,326,000
Conversion of series A preferred stock (773,896 ) (774,000 ) 763,923 1,000 773,000 —
Issuance of common stock for acquisitions 422,000 1,000 454,000 455,000
Issuance of warrants 158,000 158,000
Issuance of common stock, net 8,453,271 8,000 11,593,000 11,601,000
Net loss (3,238,000 ) (3,238,000 )

Balance, December 31, 2004
— $ — 26,727,034 $ 27,000 $ 20,405,000 $ (3,130,000 ) — $ — $ 17,302,000
Retirement of stock for payment of debt (22,000 ) (29,000 ) (29,000 )
Issuance of stock for consultant services 67,000 67,000
Issuance of ESOP shares 25,000 28,000 28,000
Retirement of stock from
Temple purchase (265,000 ) (1,000 ) (159,000 ) (160,000 )
Purchase of Treasury stock (180,000 ) (107,000 ) (107,000 )
Net loss (5,815,000 ) (5,815,000 )

Balance, December 31, 2005
— — 26,465,034 $ 26,000 $ 20,312,000 $ (8,945,000 ) (180,000 ) $ (107,000 ) $ 11,286,000
Issuance of stock for warrant exercise 1,003 1,000 1,000
Stock option expense 110,000 110,000
Issuance of ESOP shares 50,000 1,000 36,000 37,000
Net income 3,904,000 3,904,000

Balance, December 31, 2006
— — 26,516,037 $ 27,000 $ 20,459,000 $ (5,041,000 ) (180,000 ) $ (107,000 ) $ 15,338,000


											Additional			Accumulated
	Common Stock				Treasury Stock						Paid in			Earnings
	Shares		Amount		Shares			Amount			Capital			(Deficit)			Total

Balance, January 1, 2006		26,465,034	$	26,000		(180,000	)	$	(107,000	)	$	20,312,000		$	(8,945,000	)	$	11,286,000
Issuance of stock for exercise of warrants		1,003										1,000						1,000
Issuance of ESOP shares		50,000		1,000								36,000						37,000
Stock option expense												110,000						110,000
Net income															3,904,000			3,904,000

Balance, December 31, 2006		26,516,037	$	27,000		(180,000	)	$	(107,000	)	$	20,459,000		$	(5,041,000	)	$	15,338,000
Issuance of stock for exercise of warrants		290,500										290,000						290,000
Issuance of common stock		22,231										—						—
Issuance of ESOP shares		180,000										225,000						225,000
Stock option expense												178,000						178,000
Net income															2,171,000			2,171,000

Balance, December 31, 2007		27,008,768	$	27,000		(180,000	)	$	(107,000	)	$	21,152,000		$	(2,870,000	)	$	18,202,000
Issuance of stock for exercise of warrants		406,450		—								168,000						168,000
Stock option expense												198,000						198,000
Issuance of common stock		4,800,000		5,000								4,843,000						4,848,000
AMEX issuance fees												(45,000	)					(45,000	)
Net income															3,156,000			3,156,000

Balance, December 31, 2008		32,215,218	$	32,000		(180,000	)	$	(107,000	)	$	26,316,000		$	286,000		$	26,527,000

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

Express-1 Expedited Solutions, Inc.

Consolidated Statements of Cash Flows

Year Ended December 31,
2006 2005 2004

Operating activities

Net income (loss) $ 3,904,000 $ (5,815,000 ) $ (3,238,000 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Provisions for allowance for doubtful accounts 157,000 (339,000 ) 308,000
Depreciation and amortization 1,054,000 1,435,000 1,254,000
Non-cash impairment of intangible assets 23,000 3,958,000 737,000
Loss on retirement of note receivable 90,000 32,000 —
Realized loss (gain) on market value of trading stock — 88,000 (88,000 )
Loss on disposal of equipment 66,000 12,000 —
Non-cash expenses related to issuance of stock and warrants 110,000 103,000 28,000
Changes in:
Accounts and other trade receivables (1,078,000 ) 3,118,000 (502,000 )
Other current assets (674,000 ) (92,000 ) (1,368,000 )
Prepaid expenses and other assets 62,000 653,000 (26,000 )
Other receivables 56,000 — —
Other assets (535,000 ) (62,000 ) (326,000 )
Accounts payable 110,000 (1,157,000 ) (78,000 )
Accrued expenses (271,000 ) (309,000 ) 63,000
Accrued salaries and wages 364,000 (247,000 ) 189,000
Other liabilities 199,000 (33,000 ) 13,000

Total adjustments (267,000 ) 7,160,000 204,000

Net cash provided by (used in) operating activities 3,637,000 1,345,000 (3,034,000 )

Investing activities

Purchases of equipment (961,000 ) (270,000 ) (1,087,000 )
Acquisition of business, net of cash acquired — — (7,745,000 )
Proceeds from the sale of assets 5,000 388,000 —
Payment on acquisition earn-outs (1,710,000 ) (1,602,000 ) —
Proceeds (payments) from notes receivable 150,000 170,000 (26,000 )

Net cash provide by (used in) investing activities (2,516,000 ) (1,314,000 ) (8,858,000 )

Financing activities

Proceeds (payments) from line of credit, net (1,252,000 ) 581,000 777,000
Net obligations under factoring arrangements — — (1,033,000 )
Issuance of debt 10,000 — 566,000
Payments of debt (186,000 ) (400,000 ) —
Issuance of credit to buyers of Temple and Bullet — (413,000 ) (1,166,000 )
Proceeds (payments) from issuance of equity, net — (160,000 ) 11,573,000
Purchase of Treasury Stock — (107,000 ) —

Net cash provided by (used by) financing activities (1,428,000 ) (499,000 ) 10,717,000

Net decrease in cash and cash equivalents
(307,000 ) (468,000 ) (1,175,000 )
Cash and cash equivalents, beginning of year
386,000 854,000 2,029,000

Cash and cash equivalents, end of period
$ 79,000 $ 386,000 $ 854,000

Supplemental disclosure of cash flow information and non-cash financing activities:

Cash paid during the year for interest $ 205,000 $ 179,000 $ 128,000
Cash paid during the year for income taxes — —
Debt used to finance purchase of building $ 647,000 $ 681,000 —


	Year Ended December 31,
	2008			2007			2006
Operating activities
Net income applicable to stockholders	$	3,156,000		$	2,171,000		$	3,904,000
Adjustments to reconcile net income to net cash from operating activities		—
Provision for allowance for doubtful accounts		(67,000	)		188,000			157,000
Depreciation & amortization expense		1,114,000			843,000			1,054,000
Stock compensation expense		198,000			178,000			110,000
Common stock issued for ESOP					224,000			—
Loss on retirement of note receivable		—			—			90,000
Loss (gain) on disposal of equipment		4,000			(12,000	)		66,000
Non-cash impairment of intangible assets		—			—			23,000
Changes in assets and liabilities, net of effect of acquisition:
Account receivable		(231,000	)		(497,000	)		(1,078,000	)
Other current assets		907,000			(448,000	)		(674,000	)
Prepaid expenses		211,000			(227,000	)		62,000
Other assets		475,000			1,303,000			(479,000	)
Accounts payable		250,000			(142,000	)		110,000
Accrued expenses		(566,000	)		121,000			(271,000	)
Accrued salary and wages		—			(64,000	)		364,000
Other liabilities		1,597,000			405,000			199,000

Cash provided by operating activities		7,048,000			4,043,000			3,637,000

Investing activities
Acquisition of business, net of cash acquired		(8,489,000	)
Payment of acquisition earn-out		(2,210,000	)		(1,960,000	)		(1,710,000	)
Payment of purchases of property and equipment		(1,109,000	)		(473,000	)		(961,000	)
Proceeds from sale of assets		28,000			101,000			5,000
Proceeds from notes receivable		—			39,000			150,000

Cash used by investing activities		(11,780,000	)		(2,293,000	)		(2,516,000	)

Financing activities
Credit line, net activity		2,320,000			(1,159,000	)		(1,252,000	)
Proceeds from debt for acquisition		3,600,000			—			—
Payments of debt		(1,049,000	)		(160,000	)		(176,000	)
Proceeds from exercise of warrants		168,000			290,000			—

Cash flows provided (used) by financing activities		5,039,000			(1,029,000	)		(1,428,000	)

Net increase (decrease) in cash		307,000			721,000			(307,000	)
Cash, beginning of period		800,000			79,000			386,000

Cash, end of period	$	1,107,000		$	800,000		$	79,000

Supplemental disclosures of noncash activities:
Cash paid during the period for interest	$	318,000		$	79,000		$	205,000
Cash paid during the period for income taxes		267,000			49,000			—
Debt used to finance purchase of building		—			—			647,000
Increase of goodwill due to accrual of acquisition earnout	$	—		$	2,210,000		$	1,960,000

Acquisition of assets and liabilities of Concert Group Logistics
Cash	$	671,000
Accounts receivable purchased		5,856,000
Prepaid expenses		95,000
Property and equipment		415,000
Other assets		872,000
Goodwill and other intangible assets		11,303,000
Liabilities assumed		(4,704,000	)

Net assets acquired		14,508,000
Less equity issued, including issuance cost		(4,848,000	)
Less note payable issued		(500,000	)
Less cash acquired		(671,000	)

Net cash paid	$	8,489,000

~~The company received approximately $140,000 and $138,000 of non-cash consideration in 2005 related to the sales of Temple and Bullet.~~

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

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements

Years ended December 31, ~~2006, 2005~~2008, 2007 and ~~2004~~2006


1.	Significant Accounting Principles

Basis of Presentation

For the years ended December 31, 2007 and 2006, Express-1 Expedited Solutions, Inc. ~~and its wholly owned subsidiaries~~ (“the Company”) ~~provide~~provided premium transportation and logistics services to ~~over 1,500 active~~thousands of customers ~~specializing in time definite transportation and offer~~primarily through its wholly owned subsidiary, Express-1, Inc. Most of the services provided were completed through a ~~variety~~fleet of exclusive use vehicles ~~providing reliable same-day~~that were owned and operated by independent contract drivers. The use of non-owned resources to provide services minimizes the amount of capital investment required and is often described with the terms “non-asset” or ~~high-priority service~~“asset-light.”

For the year ended December 31, 2008, the Company added to ~~customers~~its subsidiaries, through the asset purchase of Concert Group Logistics, LLC. and the creation of Bounce Logistics, Inc. The purchase of Concert Group Logistics, LLC, was completed through a newly formed subsidiary, Concert Group Logistics, Inc. These two subsidiaries engage in premium transportation solutions through freight forwarding and premium freight brokerage solutions, respectively. The Concert Group Logistics, Inc. and Bounce Logistics, Inc. results of operations have been consolidated within the ~~United States~~financial statements and ~~portions~~accompanying footnotes for the year ended December 31, 2008, as presented herein. More detail on the Concert Group Logistics purchase is located in Footnote 13, within these notes to the financial statements.

During 2008, the Company discontinued its Express-1 Dedicated business unit, in anticipation of ~~Canada. Services include expedited surface transportation, aircraft charters and dedicated expedite delivery.~~the cessation of these operations in February 2009. More information on the discontinuance of the Express-1 Dedicated operations can be found in Footnote 3.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Express-1 Expedited Solutions, Inc. and all of its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company does not have any variable interest entities whose financial results are not included in the consolidated financial statements.

Use of Estimates

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

Reclassifications

Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the ~~2006 presentation. In addition, adjustments to estimates and purchase price allocations related to business acquisitions in 2004 have been reclassified for comparable~~2008 presentation. These reclassifications did not have any effect on total assets, total liabilities, total stockholders’ equity or net income.

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

Concentration of credit risk with respect to trade receivables from any one customer is limited due to the Company’s large number of customers and wide range of industries and locations served. One of its customers, a domestic automotive manufacturer, accounted for approximately ~~16%~~7% of the Company’s revenues in fiscal ~~2006.~~2008. This concentration includes approximately, $4.8 million or 4%, which was derived from the operations of Express-1 Dedicated that were discontinued in 2008. The Company has a ~~significant~~ concentration of credit risk

associated with its aggregate of customer account receivables originating from the domestic automotive industry. For the year ended December 31, ~~2006,~~2008, the Company generated approximately ~~35%~~10% of its consolidated revenue from the Big Three U.S. automotive manufacturers. ~~The~~Our concentration risk is comprised not only of domestic automotive manufacturers (the U.S. Big Three), but also extends to major automotive industry suppliers. The Company services many other customers who support and derive their revenues from the automotive industry exclusive of the Big Three and their major suppliers.

The Company extends credit to its various customers based on evaluation of the customer’s financial condition and ability to pay in accordance with the payment terms. The Company provides for estimated losses on accounts receivable considering a number of factors, including the overall aging of ~~accounts~~account receivables, customers payment history and the customer’s current ability to pay its obligation. Based on managements’ review of accounts receivable and other receivables, an allowance for doubtful accounts of approximately ~~$77,000~~$133,000 and ~~$732,000~~$77,000 is considered necessary as of December 31, ~~2006~~2008 and ~~2005,~~2007, respectively. We do not accrue interest on past due receivables.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repair costs are expensed as incurred. Major improvements that increase the estimated useful life of an asset 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 the results of operations. Depreciation is calculated by the straight-line method over the following estimated useful lives of the related assets:


	Years

Land		0
Building and improvements		39
Revenue ~~Equipment~~equipment		2-7
Office equipment		3-10
Warehouse equipment and shelving		3-7
Computer equipment and software		2-5
Leasehold improvements		Lease term

Goodwill

Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment test for goodwill and intangible assets with indefinite lives. Under the provisions of SFAS No. 142, the first step of the impairment test requires that the

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~operation. For the year ended December 31, 2005, the Company wrote-off approximately $922,000 of goodwill related to companies closed in conjunction with its restructuring activities.~~ There was no impairment of goodwill associated with the Company’s remaining operations, for the years ended December 31, ~~2006~~2008, 2007 and ~~2005.~~2006. In the future, the Company will perform the annual test during its fiscal third quarter unless events or circumstances indicate impairment of the goodwill may have occurred before that time.

Identified Intangible Assets

The Company follows the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. The Company reviews long-lived assets to beheld-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. For the years ended December 31, ~~2005~~2008 and ~~2004~~2007, there were no impairments of ~~identified~~ intangible ~~assets of approximately $1,088,000 and $365,000 respectively, primarily related to the Company’s restructuring plan.~~assets. For the year ended December 31, 2006 the Company impaired ~~an additional~~ $23,000 relating to a terminated employment contract.

Other Long-Term Assets

Other long-term assets primarily consist of balances representing various deposits, ~~costs associated with~~ the~~set-up~~ long term portion of ~~the Company’s Evansville operations~~notes receivable, and the long-term portion of the Company’s non-qualified deferred compensation plan.

Estimated Fair Value of Financial Instruments

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

Revenue Recognition

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

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

the freight is ~~delivered. Related costs~~picked up from the shipper. This alternative method of ~~delivery~~revenue recognition is not the preferred method of ~~shipments~~revenue recognition as prescribed within Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force IssueNo. 91-9Revenue and Expense Recognition for Freight Services in Progress(“EITF N.91-9”). This alternative method recognizes revenue and associated expenses prior to the point in time that all services are ~~accrued~~completed. The use of this method does not result in a material difference from one of the more preferred methods as ~~incurred~~identified in EITFNo. 91-9. The Company has evaluated the impact of this alternative method on its consolidated financial statements and ~~expensed when~~concluded that the impact is immaterial to the financial statements.


	•	The Company is the primary obligor and is responsible for providing the service desired by the customer.

	•	The customer holds the Company responsible for fulfillment including the acceptability of the service. (Requirements may include, for example, on-time delivery, handling freight loss and damage claims, establishingpick-up and delivery times, and tracing shipments in transit).

	•	The Company has discretion in setting sales prices and as a result, its earnings vary.

	•	The Company has discretion to select its drivers, contractors or other transportation providers (collectively, “service providers”) from among thousands of alternatives, and

	•	The Company bears credit risk for all of its receivables.

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

Income Taxes

Taxes on income are provided in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences between the book values and the tax basis of particular assets and liabilities in addition to the tax effects of net operating loss and capital loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized as

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

income or expense in the period that included the enactment date. A valuation allowance is provided to offset the net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. ~~See footnote 13 for details regarding the Company’s application of SFAS 109.~~

~~Stock Options~~

~~In December 2004,~~Effective January 01, 2007, the Company adopted Financial Accounting Standards Board (FASB) ~~issued~~Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB statement number 109.” The Company recognized no adjustments in its tax liability as a result of the adoption of FIN 48.

During the fourth quarter of 2008, the Company received notice from the Internal Revenue Service of the United States (the “IRS”) that its tax year 2006 had been selected for examination by the IRS. The Company has been cooperative with the IRS agent assigned to the engagement. Since the audit remains in the preliminary stages, the Company does not anticipate currently anticipate the examination will result in any significant adverse claims against Express-1 Expedited Solutions, Inc.

Stock Options

The Company accounts for share-based compensation in accordance with Statement of Financial Accounting ~~Standards~~Standard (SFAS) ~~No. 123 (Revised 2004),~~Number 123R, “Share-Based Payment” (SFAS 123R). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the consolidated financial statements based on their fair values. That expense will be recognized over the period duringPayment,” which ~~an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). We~~was adopted ~~SFAS 123R beginning~~ January 1, 2006, ~~using~~utilizing the ~~Modified Prospective Application Method. Under this method, SFAS 123R applies to new awards and to awards~~ modified ~~repurchased or cancelled after the effective date.~~prospective method. Prior to the adoption of SFAS 123R we accounted for stock option grants using the

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

intrinsic value method prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and accordingly, recognized no compensation expense for stock option grants.

As a result of adopting SFAS 123R, compensation cost of $198,000, $178,000 and $110,000 has been charged against income for the ~~year~~years ended December 31, ~~2006.~~2008, 2007 and 2006, respectively. The associated income tax benefit recognized in the income statement related to this adoption was ~~$41,400~~approximately $80,000, $72,000 and $41,000 for the ~~year~~years ended December 31, ~~2006.~~2008, 2007 and 2006, respectively. There was no impact on cash flows from operating or financing activities or basic or diluted earnings per ~~share.~~share as a result of these non-cash charges to earnings.

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

Options generally become fully vested three to four years from the date of grant and expire five to ten years from grant date. The Company granted 660,000, 485,000 and 300,000 options to purchase shares of its common stock pursuant to its stock option plan during the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, the Company had 1,991,000 shares available for future stock option grants under its existing plan.

The weighted-average fair value of each ~~grant under SFAS 123R is~~stock option recorded in expense for the years ended December 31, 2008, 2007 and 2006 were estimated aton the date of grant ~~date~~ using the Black-Scholes option pricing model and were amortized over the vesting period of the underlying options. The Company has used one grouping for the assumptions, as its option grants are primarily basic with ~~the following weighted average assumptions for~~similar characteristics. The expected term of options granted has been derived based upon the Company’s history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee terminations. Estimated volatility is based upon the Company’s historical market price at consistent points in ~~2006: historical dividend rates of 0%; risk-free rates between 4.0% and 5.0% for~~a period equal to the ~~periods within the contractual~~expected life of the ~~option~~options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the ~~grant; expected terms~~dividend yield is zero. The assumptions outlined in the table below were utilized in the calculations of ~~between 5 and 10 years which was calculated based upon~~compensation expense from option grants in the ~~Company’s historical pattern~~reporting periods reflected.

Twelve Months Ended December 31,
2008 2007 2006

Risk-free interest rate 3%-4% 5% 4%-5%
Expected life 5.0-6.0 years 6.0 years 5.0 - 10.0 years
Expected volatility 35% 35% 18% - 35%
Expected dividend yield none none none
Grant date fair value $0.37 $0.62 $0.22
As of ~~options granted period those options are expected~~December 31, 2008, the Company had approximately $265,000 of unrecognized compensation cost related to non-vested share-based compensation that is anticipated to be ~~outstanding;~~recognized over a weighted average period of approximately 1.1 years. Remaining estimated compensation expense related to existing share-based plans is $148,000, $72,000 and ~~expected volatility~~$45,000 for the years ending December 31, 2009, 2010 and thereafter, respectively.
At December 31, 2008, the aggregate intrinsic value of ~~18% to 35% which~~warrants and options outstanding was ~~calculated by review~~$359,000. During the year ended December 31, 2008, warrants representing 153,250 shares were exercised and the Company received approximately and $168,000 in cash from these transactions. Also during the year, warrants representing 854,747 shares of the Company’s ~~historical activity as well as comparable peer companies.~~
~~During 2006, there was no~~stock were exercised in a cashless manner, wherein the Company did not receive cash ~~received~~proceeds from the ~~exercise~~transaction. During the years ended December 31, 2008, 2007 and 2006, stock options with a fair value of ~~stock options.~~$261,000, $218,000 and $121,000 vested, respectively.

4142

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123R, to stock-based employee compensation prior to January 1, 2006.

~~For the years ended December 31, 2005 and 2004:~~

2005 2004

Net loss applicable to common stockholders:
As reported $ (5,815,000 ) $ (3,238,000 )
Total stock-based employee compensation expense included in reported net income applicable to common stockholder, net of tax — —
Total stock-based employee compensation determined under fair value based method, net of related tax effects (145,000 ) (299,000 )

Pro forma
Net (loss) income applicable to common stockholders $ (5,960,000 ) $ (3,537,000 )
(Loss) earnings per share
Basic — as reported $ (0.22 ) $ (0.14 )
Basic — pro forma $ (0.22 ) $ (0.15 )
Diluted (loss) earnings per share
Diluted — as reported $ (0.22 ) $ (0.14 )
Diluted — pro forma $ (0.22 ) $ (0.15 )
Weighted average fair value of options granted during the year $ 0.22 $ 0.42

Earnings per Share

Earnings per common share are computed in accordance with SFAS No. 128, “Earnings Per Share,” which requires companies to present basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing ~~net~~ income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share are computed by dividing ~~net~~ income by the weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. The table below identifies the weighted average number of shares ~~was 26,297,120~~outstanding and the associated earnings per share for the year ended December 31, 2006; 26,523,650 for the year ended December 31, 2005;and 23,935,768 for the year ended December 31, 2004. The diluted weighted average number of shares was 26,641,012 for the year ended December 31, 2006; 26,536,412 for the year ended December 31, 2005; and 24,730,411 for the year ended December 31, 2004.periods represented.

For the Year Ended December 31,
2008 2007 2006

Income from continuing operations $ 2,817,000 $ 1,813,000 $ 3,634,000
Income from discontinued operations 339,000 358,000 270,000

Net income $ 3,156,000 $ 2,171,000 $ 3,904,000
Basic shares outstanding 31,453,765 26,690,382 26,297,120
Diluted shares outstanding 31,757,164 27,326,729 26,641,012
Basic earnings per share

Income from continuing operations $ 0.09 $ 0.07 $ 0.14
Income from discontinued operations $ 0.01 $ 0.01 $ 0.01
Net Income $ 0.10 $ 0.08 $ 0.15
Diluted earnings per share

Income from continuing operations $ 0.09 $ 0.07 $ 0.14
Income from discontinued operations $ 0.01 $ 0.01 $ 0.01
Net Income $ 0.10 $ 0.08 $ 0.15

~~Common stock equivalents~~The Company has in place an Employee Stock Ownership Plan (ESOP), which is described in more detail within Footnote 16 within this report. Shares issued to this plan are included in the denominator of the earnings per share calculation. Dilutive shares outstanding from Company’s ESOP were 255,000, 255,000 and 165,000 for the years ended December 31, ~~2005~~2008, 2007 and 2004 were anti-dilutive due to the net losses sustained by the Company during these periods. Therefore, the diluted weighted average common shares outstanding for the dilutive weighted average share calculation in this period excludes approximately 12,762 and 794,643 shares for 2005 and 2004 respectively, that could dilute earnings per share in future periods.2006, respectively.

Recently Issued Financial Accounting Standards

In ~~July 2006,~~December 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return. FIN 48 sets forth a threshold for financial statement recognition, measurement, and disclosure of tax positions taken or expected to be taken on a tax return. FIN 48 is effective for fiscal years beginning after December 15, 2006 (January 1, 2007 for calendar year companies), and is to be applied to all open tax years as of the date of effectiveness. Management is currently evaluating the impact, if any, of applying the various provisions of FIN 48.

42

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

~~In September 2006,~~ FASB issued Statement of Financial Accounting Standards (SFAS) No. ~~157 (SFAS 157)~~141 (revised 2007), ~~“Fair Value Measurement”, which defines fair value, establishes a framework~~“Business Combinations” (“SFAS No. 141(R)”). SFAS No. 141(R) retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for ~~measuring fair value in generally accepted accounting principles, clarifies~~all business combinations and for an acquirer to be identified for each business combination. In general, the ~~definition~~statement 1) broadens the guidance of ~~fair value within that framework, and expands disclosures about~~SFAS No. 141, extending its applicability to all events where one entity obtains control over one or more businesses, 2) broadens the use of fair value ~~measurements.~~measurements used to recognize the assets acquired and liabilities assumed, 3) changes the accounting for acquisition related fees and restructuring costs incurred in connection with an acquisition, and 4) increased required disclosures. The Company is required to apply SFAS ~~157~~No. 141(R) prospectively to business combinations for which the acquisition date is ~~intended~~on or after January 1, 2009. Earlier application is not permitted. It is likely that the adoption of SFAS 141 (R) will have significant impact upon the structure of any future acquisitions and the recording of the assets acquired in those transactions and expenses incurred as a result of these transactions.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to ~~increase consistency and comparability among~~choose to measure eligible items at fair value ~~estimates~~at specified election dates and report unrealized gains or losses on items for which the fair value option has been elected in ~~financial reporting.~~earnings at each subsequent reporting date. SFAS ~~157~~No. 159 is effective for fiscal years beginning after November 15, 2007. ~~Management is currently evaluating the impact, if any, of applying the various provisions of SFAS 157.~~


2.	~~Restructuring~~

In the third quarter of 2004, shortly after the acquisition of Express-1, Inc., the Company’s Board of Directors and management team initiated a restructuring plan (the “Plan”), with the intent of creating a sustainable operating model. The Plan called for the closing of the Company’s unprofitable companies, operations and locations. It also refocused the Company on its profitable expedited transportation businesses. Throughout the fall of 2004, the Company exited its~~airport-to-airport~~ ~~business and its Dasher operations. Continuing this restructuring activity in 2005, the Company exited its Tampa brokerage activities in addition to its Temple and Bullet operations.~~ The Company ~~also relocated~~did not record an adjustment within its ~~executive offices from Tampa, Florida to Buchanan, Michigan. The table below outlines the timeline and activities involved in the Plan.~~financial

~~Express-1 Expedited Solutions Restructuring Charges~~

Year Ending December 31,
2006 2005 2004

Writeoff of goodwill and intangibles $ — $ 2,010,000 $ —
Writeoff and impairment of assets — 1,378,000 550,000
Employee costs and severance — 455,000 630,000
Other restructuring expenses — 295,000 651,000
Impairment of leases — — 737,000
Writeoff of uncollectible accounts — 310,000 —

Total restructuring charges $ — $ 4,448,000 $ 2,568,000

The Company accounted for its restructuring activities in accordance with generally accepted accounting principles and accordingly recognized impairment for assets and leases no longer used in its operations. The Company recorded impairments and subsequent write-offs for goodwill and intangibles as well as established reserves for account receivables that became doubtful in conjunction with the ceased operations. The Company also recorded severance expenses related to payments to employees for positions that were eliminated due to the restructuring.
During the third quarter of 2005, the Company completed substantially all of its restructuring initiatives. Remaining after the completion of the Plan were its Express-1 expedite transportation operations headquartered in Buchanan, Michigan and its dedicated expedited transportation operation located in Evansville, Indiana. These operations are complementary and provide the Company with a core base of focused transportation services.
3. ~~Accounts Receivable~~

2006 2005

Accounts receivable $ 5,431,000 $ 5,166,000
Less: Allowance for doubtful accounts 77,000 732,000

$ 5,354,000 $ 4,434,000

43

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

statements as a result of adopting the provisions of SFAS No. 159, as of December 31, 2008 and does not currently anticipate a material impact upon its financial statements in future periods as a result of this pronouncement.


2.	Subsequent Events

In January 2009, the Company completed the purchase of certain tangible and intangible assets from First Class Expediting Service, Inc. (FCES) of Rochester Hills, Michigan for the sum of $250,000. The Company assumed approximately $50,000 of liabilities related to leases for office equipment in the transaction and entered into a lease with the former owners of FCES for a small trucking terminal which houses the operations. The Company’s subsidiary, Express-1, Inc. completed the transaction, resulting in the establishment of a new First Class division of Express-1, Inc. Management anticipates that an allocation of the purchase price to the assets acquired will be completed during the first quarter of 2009.

In February 2009, the Company ceased all operations at its discontinued Express-1 Dedicated business unit in Evansville, Indiana. The unit was discontinued during the fourth quarter of 2008, in response to the loss of a dedicated service contract which represented approximately 90% of the unit’s business volume. All assets of the business unit were either sold or relocated for use in the Company’s other operations, prior to the close. The Company ceased all its operations, and released all employees on February 28, 2009. More information on the discontinuance and shutdown is included within Footnote 3 below.

In March 2009, the Company completed a settlement for the earnout provisions of the Concert Group Logistics purchase for the amount of $1.1 million. The settlement took the form of a general release between the Company and the former owners of Concert Group Logistics, LLC. Subsequent to this release, the Company has no future obligations related to the earnout or the performance of its Concert Group Logistics business unit. As of December 31, 2008, the Company had accrued $500,000 within its financial statements related to the CGL earnout. The $500,000 represented the amount guaranteed as minimum payment to the former owners of CGL, and reflected the Company’s estimate of the amount to be paid as of that date.


3.	Discontinued Operations

During the fourth quarter of 2008, the Company discontinued its Express-1 Dedicated business unit. The Company had operated this unit under the terms of a dedicated contract to supply transportation services to a domestic automotive manufacturer. The contact had been in-place for five years, and was not renewed by the automotive manufacturer in favor of the Company.

In anticipation of this potential cancellation, the Company had begun a change in its operating model from Company owned equipment to the use of short-term rental power units (Semi-tractors). The Company had also obtained a lease guarantee from the customer which transferred the Evansville facility lease from the Company to a new service provider of the customer. The Company’s position on renewal quotes for the contract business was that its Express-1 Dedicated business unit had to remain profitable and generate a reasonable return, upon the conclusion of any final negotiations. After all rounds of negotiations, the business was awarded to another service provider

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

under terms that would have likely left the Company in a net loss position, had it been matched for renewal purposes.

Due to these changes, the Company did not record any impairment charges on its financial statements during 2008 and its management does not anticipate recording a loss on its discontinued operations within periods subsequent to this discontinuance. The table below reflects the revenues, gross margins, operating expenses and net income of the Company’s discontinued Express-1 Dedicated business unit in each of the previous three years.

Year Ended December
Year Ended December
Year Ended December

31, 2008 31, 2007 31, 2006

Operating revenue $ 4,921,000 $ 5,076,000 $ 4,864,000
Operating expense 3,805,000 3,960,000 3,958,000
Gross margin 1,116,000 1,116,000 906,000
Sales, general, and administrative 527,000 525,000 676,000
Income before tax provision 589,000 591,000 230,000
Tax provision (benefit) 250,000 233,000 (91,000 )

Net income $ 339,000 $ 358,000 $ 321,000

4. Accounts Receivable

2008 2007

Accounts receivable $ 12,335,000 $ 5,740,000
Less: Allowance for doubtful accounts 133,000 77,000

$ 12,202,000 $ 5,663,000

The activity in the Company’s allowance for doubtful accounts during the year ended December 31, ~~2006~~2008 and ~~2005~~2007 is summarized below:

2006 2005 2008 2007

Balance at beginning of year $ 732,000 $ 966,000 $ 77,000 $ 77,000
Additions: Charged to cost and expense 157,000 (339,000 ) 117,000 188,000
Deductions and adjustments (812,000 ) 105,000 (61,000 ) (188,000 )

Balance at end of year $ 77,000 $ 732,000 $ 133,000 $ 77,000

45

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)


4.5.	Property and Equipment


	Years Ending December 31,						Years Ending December 31,
	2006			2005			2008			2007

Buildings	$	1,066,000		$	871,000		$	1,115,000		$	1,066,000
Leasehold improvement		51,000			—
Leasehold improvements								228,000			51,000
Office equipment		166,000			150,000			378,000			223,000
Revenue equipment		1,782,000			1,530,000
Trucks and trailers								1,884,000			1,644,000
Warehouse equipment		78,000			56,000			115,000			79,000
Computer equipment		497,000			273,000			1,066,000			670,000
Computer software		258,000			255,000			575,000			313,000

		3,898,000			3,135,000			5,361,000			4,046,000
Less: accumulated depreciation		(1,410,000	)		(906,000	)		(2,220,000	)		(1,734,000	)

Total property and equipment	$	2,488,000		$	2,229,000		$	3,141,000		$	2,312,000

Included within the caption “Trucks and trailers” are assets financed with capital lease obligations of approximately $225,000 as of December 31, 2008 and 2007. Accumulated depreciation on these assets was $185,000 and $155,000 for 2008 and 2007, respectively.

Depreciation expense of property and equipment totaled approximately ~~$631,000, $933,000~~$664,000, $561,000 and ~~$822,000~~$631,000 for the years ended December 31, 2008, 2007 and 2006, ~~2005~~respectively.

Our “Statement of Operations” included within our financial statements contained depreciation expense in a caption other than “Direct expenses” for the years ended December 31, 2008, 2007 and ~~2004, respectively.~~2006. For those years depreciation expense of $300,000, $320,000 and $415,000 respectively, was included within the line item “Direct expenses,” while depreciation expense of $364,000, $241,000 and $216,000 respectively was included within the line “Sales, general and administrative expense.”


5.6.	Loans and Advances

In conjunction with its restructuring activities and the related disposal of its Temple ~~and Bullet~~ operations, the Company entered into ~~loans~~a loan with the ~~buyers~~buyer of ~~each of these operations.~~this operation in July 2005. The ~~Temple operations were sold~~loan called for the borrower to ~~Temple Trucking Services, Inc (TTSI) and the operations of Bullet were sold~~remit to Bullet Freight Systems (BFS). Both TTSI and BFS were companies newly formed by unrelated third parties specifically to facilitate their individual purchases of the Company’s operations. The Company provided the buyers of each of the two disposed companies with a line of credit, and a loan to finance their purchase of the assets.

~~In July 2005,~~ the Company ~~provided TTSI with~~payments spread equally over a ~~$250,000 line of credit facility bearing interest~~sixty month period beginning in July 2006. Interest on this borrowing accrued at the rate of 6% per ~~annum payable in sixty equal monthly payments~~annum.

As of principal and interest commencing in July 2006. Draws upon this line by TTSI were required to be made before June 30, 2006. The Company also sold certain of its operational assets to TTSI in exchange for a $105,000 note with a term of sixty months bearing interest at the rate of 6% per annum. The $105,000 equipment note was satisfied by TTSI, prior to December 31, ~~2005. The company recognized a loss of approximately $32,000 associated with the satisfaction of this loan.~~

~~In August 2005,~~2008 and 2007, the Company ~~provided BFS with a $200,000 line~~had outstanding balances on this note receivable of ~~credit bearing interest at the rate~~$104,000 and $143,000, respectively, of ~~6% per annum payable in sixty equal monthly payments of principal~~which approximately $41,000 and interest commencing in August 2007. Draws upon this line by BFS were required to be made before July 31, 2006. The Company also sold a portion of its pickup and delivery assets to BFS in exchange for a $33,000 note with a term of sixty months bearing interest at the rate of 6% per annum. On March 27, 2006, the Company executed a settlement agreement with BFS and its owners whereby the Company accepted $150,000 in cash$39,000, respectively was classified as ~~payment in full on the BFS note and credit facility.~~

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

AsIn conjunction with the purchase of ~~December 31, 2006,~~Concert Group Logistics, LLC in January, 2008, the ~~company had accrued $1,960,000~~Company entered into a new contractual arrangement which resulted in the creation of goodwill. In addition to the goodwill created at the time of the transaction, the contract provided for contingent consideration to be paid to the former owners of Concert Group Logistics, LLC in the event certain performance measures were achieved in 2008 and 2009. Subsequent to December 31, 2008, the Company entered into an agreement wherein all earnout and contractual obligations related to the ~~Express-1, Inc. and Dasher Express Inc. acquisitions. Payment was made in the first quarter of 2007 in accordance~~CGL purchase were settled with the ~~terms~~former owners of Concert Group Logistics, LLC for the ~~contracts and will be reflected as a use~~amount of ~~cash in 2007. Exclusive of any future impairment of goodwill related to these acquisitions, there will be no impact on the Company’s earnings.~~$1.1 million.


7.8.	Identified Intangible Assets

Intangible assets consist of the following:

Year Ending December 31,
2006 2005

Intangible not subject to amortization:
Trade name $ 3,346,000 $ 3,346,000
Intangibles, net of amortization
Employee contracts 68,000 156,000
Non-compete agreements 441,000 537,000
Customer relationships 288,000 359,000
Driver independent contractor network — 75,000
Other 82,000 156,000

Total identifiable intangible assets $ 4,225,000 $ 4,629,000

Year Ending December 31,
2008 2007

Intangible not subject to amortization:
Trade name $ 6,420,000 $ 3,346,000
Intangibles subject to amortization:
Employee contracts, net of accumulated amortization of $200,000 and $182,000 respectively — 18,000
Non-compete agreements, net of accumulated amortization of $432,000 and $328,000, respectively 271,000 345,000
Independent Participant Network, net of accumulated amortization of $196,000 and $0, respectively 784,000 —
Customer relationships, net of accumulated amortization of $347,000 and $276,000, respectively 147,000 218,000
Other intangibles, net of accumulated amortization of $507,000 and $493,000, respectively 9,000 23,000

Total identifiable intangible assets $ 7,631,000 $ 3,950,000

45

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

The table below outlines the Company’s notes payable and capital lease obligations as of December 31, ~~2006~~2008 and ~~2005.~~2007.


					Year Ending December 31,									Year Ending December 31,
	Interest rates		Term (months)		2006		2005		Interest rates			Term (months)		2008		2007

Equipment loans		6% - 10%		24 - 36	$	9,000	$	—
Automobile loans		0%		48		8,000		15,000
Mortgage loan (Buchanan building)		6%		60		—		647,000
Capital leases for equipment		0% - 18%		24 - 60		227,000		404,000		18	%		24 - 60	$	35,000	$	84,000
Notes Payables										2.8	%		36		2,600,000		—

Total notes payable and capital leases						244,000		1,066,000							2,635,000		84,000
Less: current maturities of long-term debt						117,000		242,000							1,235,000		50,000

Non-current maturities of long term-debt					$	127,000	$	824,000						$	1,400,000	$	34,000

The Company recorded interest expense associated with capital leases of $4,000, $11,000 and $21,000 for the years ended December 31, 2008, 2007 and 2006, respectively. For these same years, the Company recorded gross payments for capital lease obligations of $53,000, $154,000 and $222,000, respectively. The Company also recorded interest expense for the above note payable of $122,000 for the year ending December 31, 2008. For the same year the Company recorded gross payments for the note payable of $1,122,000.

The following is a schedule by year of future minimum principal payments required under the terms of the above notes payable and capital lease obligations as of December 31, ~~2006:~~2008:


2007	$	117,000
2008		119,000
2009		8,000	$	1,235,000
2010				1,200,000
2011				200,000

Total future principal payments	$	244,000	$	2,635,000

The Company estimates it will incur interest expense associated with capital leases included within the total minimum principal schedule above amounting to approximately ~~$20,000, $9,000 and $2,000~~$1,000 for the next ~~three years (2007, 2008~~year 2009. The Company also estimates it will incur interest expense associated with notes payable included within the total minimum principal schedule above amounting to $58,000, $22,000 and ~~2009, respectively). These~~$1,000, respectively.


10.	Revolving Credit Facilities

The Company entered into a new credit facility with National City Bank in January, 2008. This facility provides for a receivables based line of credit of up to $11.0 million and a term note of $3.6 million. The Company may draw upon the receivables based line of credit the lessor of $11.0 million or 80% of eligible accounts receivables, less amounts outstanding under letters of credit. To fund the purchase of Concert Group Logistics, LLC, the Company drew approximately $3.6 million on the term facility and $5.4 million on the receivables based line of credit. Substantially all the assets of the Company and its wholly owned subsidiaries (Express-1, Inc., Concert Group Logistics, Inc. and Bounce Logistics, Inc.) are pledged as collateral securing performance under the terms of the commitment. The line bears interest based upon a spread abovethirty-day LIBOR with an initial increment of 125 basis points abovethirty-day LIBOR for the receivables line and 150 basis points abovethirty-day LIBOR for the term note. Amortizing over a thirty-six month period, the term note requires monthly principal payments ~~will increase~~of $100,000 together with accrued interest be paid until retired. The Company’s interest rate spread remained LIBOR plus 150 basis points for the ~~minimum amounts paid~~term loan and LIBOR plus 125 basis points for ~~each~~the receivables based line, as of ~~these years.~~December 31, 2008. The weighted average of interest on the credit facility was approximately 2.8% and the rates are adjusted monthly. Available capacity under the line was approximately $6.8 million as of December 31, 2008. The credit facility carries a maturity date of May 31, 2010.

The line bears interest based upon a spread abovethirty-day LIBOR with an initial increment of 125 basis points abovethirty-day LIBOR for the receivables line and 150 basis points abovethirty-day LIBOR for the term

4648

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

9. ~~Revolving Credit Facilities~~

~~In November 2005,~~note. Amortizing over a thirty-six month period, the term note requires monthly principal payments of $100,000 together with accrued interest be paid until retired. The Company’s interest rate spread remained LIBOR plus 150 basis points for the term loan and LIBOR plus 125 basis points for the receivables based line, as of December 31, 2008. The weighted average of interest on the credit facility was approximately 2.8% and the rates are adjusted monthly.

The line carries certain covenants related to the Company’s financial performance. Adherence by the Company ~~entered into an agreement with a Michigan banking corporation (the “Bank”), under which the Bank extended an asset-based line of credit~~ to the covenants and specific performance by the Company ~~through its wholly owned subsidiary, Express-1, Inc~~under the covenants directly impacts the Company’s compliance with ~~Express-1 Expedited Solutions, Inc. acting as guarantor. Under~~ the terms and conditions of the ~~agreement, Express-1 may draw down amounts under~~agreement. In the ~~facility not~~event the Company fails to ~~exceed $6.0 million~~meet one or more financial covenants, the Company could be deemed in default of its credit agreement. Included among the ~~aggregate, at~~covenants are a fixed charge coverage ratio and a total funded debt to earnings before interest ~~rates that are based upon the Bank’s prime lending rate. The amount that may be drawn at any time is limited to the lesser of the $6.0 million limit or 80% of eligible accounts receivable,~~and taxes, plus ~~$912,000. Express-1 assets pledged as collateral for the borrowing base include trade accounts receivable~~depreciation and ~~two parcels of real property located at Post Road in Buchanan, Michigan.~~amortization ratio. As of December 31, 2006, availability under the facility was approximately $3.7 million. The rate of interest charged on this facility as of December 31, 2006 was 8.0%. Rates vary, based upon the Company’s financial results. The facility matures on September 30, 2008. The credit facility contains certain financial covenants and provisions, all of which2008, the Company was in compliance with all terms under the credit facility and no events of default existed under the terms of this agreement. Available capacity in excess of outstanding borrowings under the line was approximately $6.8 million as of December 31, ~~2006.~~2008. The credit facility carries a maturity date of May 31, 2010.

The Company had outstanding standby letters of credit at December 31, 2008 of $335,000 related to insurance policies. Amounts outstanding for letters of credit reduce the amount available under the Company’s line of credit facilities, dollar-for-dollar.


~~10.~~11.	Commitments and Contingencies

Lease Commitments

The following is a schedule by year of future minimum payments required under operating leases for various transportation and office equipment and real estate lease commitments that have an initial or remaining non-cancelable lease term ~~in excess of one year~~ as of December 31, ~~2006. The~~2008. In addition to real estate leases ~~have been further classified into categories depending upon whether the lease relates to a location currently~~ used ~~within~~in the Company’s current operations, ~~or relates to~~included in this number is a ~~closed location. The future minimum~~commitment for property located on Boggy Creek Road in Orlando, Florida, net of estimated sublease proceeds. This Florida real estate lease ~~payments for all closed locations have been recorded as a liability on the Company’s balance sheet as of December 31, 2006.~~commitment will expire in July 2009.


	Current		Closed		Current		Closed
	Operations		Locations		Operations		Locations

For the Year Ended December 31,
2007	$	92,000	$	16,000
2008		25,000		5,000
2009		2,000		1,000	$	150,000	$	45,000
2010						115,000		0
2011						107,000		0
2012						107,000		0

Total	$	119,000	$	22,000	$	479,000	$	45,000

In addition, the Company continues to lease real property in Orlando, Florida which formerly housed one of the Company’s closed operations. This property has been sublet to a third-party for the remainder of the lease period which expires in 2008. The sublease terms, including the cost, are consistent with the original lease, and therefore we have not been included as a liability for future rent payments related to this real property.

Rent expense including the above items in addition to short term vehicle rentals amounted to approximately $360,000, $474,000 and $735,000 for the years ended December 31, 2006, 2005 and 2004, respectively.

Contingent Commitment

~~The~~During 2006, the Company ~~has~~ entered into an agreement with a ~~third party~~third-party transportation equipment leasing company which results in a contingent ~~liability as defined by Financial Accounting Standards Board Interpretation~~liability. The Company has accounted for this contingency based upon the guidelines contained within FIN Number 45 and in ~~Statement of Financial Accounting Standards~~SFAS Number 5. Accordingly the Company has estimated ~~and recorded a~~the maximum amount of the contingent liability ~~of $25,000~~to be $51,000 as of December 31, ~~2006.~~2008 and 2007, and has recorded this amount as a reserve within its balance sheet. The Company ~~will continue~~periodically evaluates the contingency amount to ~~evaluate this contingent~~determine whether or not its reserve is sufficient to cover the exposure within the program. Based upon its analysis, the Company estimates that the range in liability ~~in the future~~that could be recognized is between $25,000 and ~~adjust if deemed appropriate.~~

~~The contingent liability originated from the Company’s agreement to pay a portion~~$51,000, as of ~~the interest carrying cost of equipment offered for lease to its independent contractors, should such equipment become unleased during the~~December 31, 2008.

4749

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

four-year term of a lease program. The Company has agreed to pay interest carrying charges for a period not to exceed 90 days at the rate of six percent. In addition to the equipment inventory carrying charges, the Company has agreed to absorb up to 50% of any loss on the sale of the non-leased equipment, should the parties determine it is in their interest to sell such equipment and terminate the leasing program. Offsetting the amount of the contingent liability the Company could pay, will be deposits and escrowed funds deposited by each individual independent contractor lessee with the unaffiliated third-party leasing company. The Company has not guaranteed the performance of the contractor lessee, nor does it have an interest in or liability for the lease arrangement between the leasing company and the independent contractor lessee. The Company provided its guarantee solely to encourage the leasing company to offer high-quality equipment to contractor lessees at lower prices, lower interest rates and more favorable terms than those generally available in the open market for similarly situated independent contractors.

The Company negotiated in good faith with the leasing company to specify and order a group of trucks for lease to qualified applicants, with minimal initial investment on the part of the independent contractor. Credit risk and ownership of the equipment remains with the leasing company, as does the sole right to qualify and select individual lessees. The anticipated risk associated with the contingent guarantee coupled with the opportunity to help its independent contractors locate and operate more affordable higher quality equipment is in keeping with the Company’s business strategy of trying to ensure the success of it’s independent contractors.

In the event the Company’s estimates of the marketability of the leasing program, the turnover percentage of lessees or the general market for used equipment are later determined to be incorrect, then the maximum amount of the contingent liability could exceed the amount disclosed herein. Due to the lack of comparable programs within the industry, it’s not currently possible to estimate the maximum contingent liability, under all potential variations in program assumptions.

Litigation

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

The Company carries liability and excess umbrella insurance policies that it deems sufficient to cover potential legal claims arising in the normal course of conducting its operations as a transportation company. In the event the Company is required to satisfy a legal claim in excess of this insurance, the cash flows and earnings of the Company could be negatively impacted.

Regulatory Compliance

The Company’s activities are regulated by state and federal regulatory agencies under requirements that are subject to broad interpretations. The Company cannot predict ~~the position~~positions that may be taken by these third parties that could require changes to the manner in which the Company operates.


~~11.~~12.	Equity

Convertible Preferred Stock

The authorized preferred stock of the Company consists of 10,000,000 shares at ~~$.001~~$0.001 par value, of which no shares were issued and outstanding as of December 31, ~~2006, 2005~~2008, 2007 and ~~2004.~~2006. The authorized preferred stock is comprised of three classes: Series A — Redeemable, Series B — Convertible and Series C — Redeemable, each of with differing terms, rates of interest and conversion rights.

Common Stock

Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive ~~dividends~~dividend payments whenever funds are legally available and ~~when~~dividends are declared by the Board of Directors (the “Board”), subject to the prior rights of the holders of all classes of stock outstanding. The ~~company~~Company records stock as issued when the consideration is received or the obligation is incurred.

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

Treasury Stock

In 2005, the Company received 180,000 shares of its Common Stock from the holders thereof in settlement of certain loans and deposits between the Company and these shareholders. The shares were recorded at market price on the dates on which they were acquired by the Company.

Options and Warrants

The Company has in place a stock option plan initially approved by the shareholders for 600,000 shares of stock in November 2001 and later increased by the shareholders to 5,600,000 shares in June 2005. Through the plan the Company offers shares to employees and ~~to assist~~assists in the recruitment of qualified employees and non-employee directors. Under the plan, the Company may also grant restricted stock awards. Restricted stock represents shares of common stock issued to eligible participants under the stock option plan subject to the satisfaction by the recipient of certain conditions and enumerated in the specific restricted stock grant. Conditions that 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 Company’s practice is to issue new shares of its common stock upon the exercise of warrants and options. Accordingly, the Company issued 406,450 shares of its common stock during the year ended December 31, 2008 upon the exercise of common stock warrants. In addition to the shares issued in connection with the exercise of common stock purchase warrants during the year ended December 31, 2008, the Company also issued

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

4,800,000 shares of its common stock to the former owners of Concert Group Logistics, LLC in conjunction with the asset purchase of that business unit in January 2008.

The following summarizes the Company’s stock option and warrant activity and related information:

Range of Exercise
Weighted Average

Shares Prices Exercise Price

Outstanding at January 1, 2004 7,386,498 $ 1.01 - 1.50 $ 1.35
Warrants granted 2,126,714 $ 1.50 - 2.20 $ 2.09
Warrants cancelled
Warrants exercised (1,238,000 ) $ 1.00 - 1.50 $ 1.27
Options granted 5,178,238 $ 1.10 - 2.75 $ 1.68
Options cancelled
Options exercised (350,000 ) $ 1.15 - 1.31 $ 1.22

Outstanding at December 31, 2004 13,103,450 $ 1.00 - 2.50 $ 1.57
Warrants granted
Warrants cancelled
Warrants exercised
Options granted 860,000 $ 0.57 - 1.25 $ 0.93
Options cancelled (766,500 ) $ 1.10 - 2.75 $ 1.75
Options expired (70,000 ) $ 1.75 $ 1.75

Outstanding at December 31, 2005 13,126,950 $ 0.57 - 2.75 $ 1.52
Warrants granted
Warrants cancelled
Warrants exercised
Options granted 852,502 $ 0.74 - 1.29 $ 0.94
Options cancelled (370,000 ) $ 1.15 - 1.75 $ 1.48
Options expired (455,714 ) $ 1.40 - 1.75 $ 1.67

Outstanding at December 31, 2006 13,153,738 $ 0.57 - 2.75 $ 1.49

Range of Exercise
Weighted Average

Shares Prices Exercise Price

Outstanding at December 31, 2005
13,126,950 $ 0.57 - 2.75 $ 1.52
Warrants issued
Warrants exercised/cancelled
Options granted 852,502 0.74 - 1.29 0.94
Options expired/cancelled (825,714 ) 1.15 - 1.75 1.58

Outstanding at December 31, 2006
13,153,738 0.57 - 2.75 1.49
Warrants issued 10,173 1.25 1.25
Warrants exercised/cancelled (310,500 ) 1.00 - 1.35 1.02
Options granted 485,475 1.11 - 1.48 1.41
Options expired/cancelled (1,570,000 ) 1.75 1.75

Outstanding at December 31, 2007
11,768,886 0.57 - 2.75 1.47
Warrants issued 31,540 1.25 1.25
Warrants exercised (1,007,997 ) 1.00 - 1.50 1.04
Warrants cancelled/expiring (4,261,382 ) 1.15 - 1.40 1.36
Options granted 660,000 0.92 - 1.20 1.41
Options expired/cancelled (1,330,357 ) 1.25 - 1.75 1.71

Outstanding at December 31, 2008
5,860,690 $ 0.57 - 2.75 $ 1.52

49

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~

The following table summarizes information about options and warrants outstanding and exercisable as of December 31, ~~2006:~~2008:

Outstanding Warrants and Options Exercisable Warrants and Options
Weighted
Weighted

Average
Weighted
Average
Weighted

Number
Remaining
Average
Remaining
Number
Average

Outstanding Life Price Life Exercisable Price

Range of Exercise

$0.50 - 1.00 1,725,000 3.8 $ 0.91 3.8 1,621,005 $ 0.92
$1.01 - 1.25 2,955,167 3.5 1.24 3.5 2,470,692 1.25
$1.26 - 1.50 3,857,999 2.1 1.44 2.2 3,644,825 1.44
$1.51 - 2.00 2,822,857 0.9 1.75 0.9 2,366,689 1.75
$2.20 - 2.75 1,792,715 2.3 2.20 2.3 1,792,101 2.20

13,153,738 2.5 $ 1.49 2.5 11,895,312 $ 1.50

Outstanding Warrants and Options Exercisable Warrants and Options
Weighted
Weighted

Average
Weighted
Average
Weighted

Number
Remaining
Average
Number
Remaining
Average

Outstanding Life Price Exercisable Life Price

Range of Exercise

$0.57 - $2.75 3,608,975 6.2 $ 1.18 2,270,279 5.7 $ 1.19
$1.25 - $2.20 2,251,715 0.3 2.05 2,251,715 0.3 2.05

$0.57 - $2.75 5,860,690 4.1 $ 1.52 4,521,994 3.4 $ 1.58

Equity Funding

~~In January of 2004,~~During 2008, the Company ~~received approximately $1,737,500 in gross proceeds from a private placement offering~~issued 5,206,450 shares of its common stock, with 4,800,000 of these shares being issued to the sellers of Concert Group Logistics, LLC to fund the Express-1 Expedited Solutions’ purchase of certain assets of the ~~Company’s~~company. The remaining 406,450 shares of common stock ~~that was made~~were issued in ~~accordance~~conjunction with ~~exemption under Regulation D, Rule 506~~the exercise of warrants by the holders thereof.
All of the securities issued by the Company to holders of warrants were issued in reliance on the exemptions from registration provided by Section 4(2) of the Securities ~~and Exchange~~ Act of 1933, as amended ~~in which~~(the “Securities Act”) or Rule 506 of Regulation D as promulgated under the ~~Company sold approximately 400,000 units to accredited investors at a price~~Securities Act of ~~$2.00 per unit, each unit consisting of two shares of common stock and one warrant to purchase a share of common stock~~1933. Each of the Company at an exercise price of $1.50 per share, and two investors exercised purchase rights under the terms of options issued in connection with this placement, buying 625,000 shares for $1.50 per share.
~~In April 2004, the Company received approximately $10,672,500 in gross proceeds from a private placement offering~~recipients of the Company’s ~~stock that was made in accordance with exemption under regulation D, Rule 506 of the Securities and Exchange Act of 1933, as amended, in which~~securities represented to the Company ~~sold 6,098,571 units to~~that they were an accredited investors (each of which was a qualified institutional buyer) at a price of $1.75 per unit, each unit consisting of one share of common stock and two tenths of a warrant to purchase a share of common stock for an exercise price of $2.20 per share. The Company incurred offering costs of approximately $1,250,000.
In July 2004, approximately 250,000 options were exercised at an exercise price of $1.00 per share. In addition, the exercise price of the remaining 1,000,000 options held by the same stockholder were reduced from $1.40 to $1.00 in consideration for the Company not returning equity that was contractually obligated to be returned due to common shares not being registered timely. In addition the company returned approximately $120,000 of equity as contractually obligated due to related common shares not being registered timely.
~~In August 2004, 50,000 shares were issued related to the acquisition of Express-1, Inc.~~
~~In October of 2004, 295,000 shares were issued related to the acquisition of certain assets from Temple Trucking Inc.~~
~~The Company incurred total offering costs of approximately $1,420,000 during the year ended December 31, 2004.~~
~~Each~~or sophisticated investor, ~~received current information about the Company and~~ had the opportunity to ask questions about the Company. These investors purchased the securities for investment purposes and the securities they received were marked with the appropriate restrictive legend.sufficient liquid

50

~~Express-1 Expedited Solutions, Inc.~~

~~Notes to Consolidated Financial Statements — (Continued)~~


~~12.~~	~~Acquisitions~~

The Company has completed five business acquisitions since its inception. In addition, in January 2004, the Company purchased certain assets of Frontline Freight and subsequently disposed of these assets prior to the end of 2004. These acquisitions have been completed through various terms and arrangements and represent both stock purchases as well as asset purchases.

In September 2004, the Company amended the Dasher purchase agreement to alter the tax treatment and align the conditional consideration payments with the recently purchased Express-1, Inc’s conditional consideration payments. The Company paid approximately $265,000 to the former owners of Dasher Express Inc. and incurred approximately $35,000 of additional acquisition costs. The total purchase price includes acquisition costs of approximately $85,000, but excludes the contingent consideration, which was $2,350,000.

In August 2004, the Company acquired all of the issued and outstanding stock of Express-1, Inc. (Express-1), a privately owned provider of expedited transportation services. The stock of Express-1 was acquired from 5 nonaffiliated individual shareholders. Prior to the closing of the transaction, the Company had no material relationship with any of the selling shareholders.

The purchase price for the stock of Express-1, included a $6,000,000 cash payment, the issuance of 50,000 shares of restricted common stock of the Company, and the issuance of warrants to purchase 500,000 shares of common stock of the Company at an exercise price of $1.75 per share and 2,428,571 warrants at an exercise price of $1.75 per share and becoming exercisable during various periods over the subsequent four years. The consideration also included a provision under which the Company could be required to make conditional payments of up to an additional $6,500,000 in cash and restricted common stock to the selling shareholders over the following 3 years, depending on the performance of the acquired company. The estimated purchase price was approximately $6,713,000, which includes acquisition costs of approximately $378,000 and additional tax payments to the former owners of approximately $200,000 but excludes the contingent consideration. The table following in this footnote summarizes the allocation of the approximate purchase price based on management’s estimate of the fair value of assets acquired and liabilities assumed.

In October 2004, the Company purchased certain assets and assumed certain liabilities of Temple Trucking, Inc., a privately owned provider of third party logistics services. The purchase price of Temple Trucking Inc. included the issuance of 295,000 common shares of restricted common stock of the Company and the assumption of $820,000 of debt owed to the Company. The consideration also included contingent consideration provisions under which the Company could pay up to an additional $500,000 in cash or restricted common stock over the following 3 years, depending on the performance of the acquired company. The table following in this footnote summarizes the allocation of the approximate purchase price based on management’s estimate of the fair value of assets acquired and liabilities assumed.

~~The following unaudited pro forma information is presented as if the purchase of the stock of Express-1 had occurred on January 1, 2004:~~

December 31,

2004

Total revenues $ 55,740,000
Net income applicable to common stock (2,602,000 )
Loss per share:

Basic $ (.11 )
Diluted $ (.11 )

51

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

~~Earnings (loss) per share is calculated~~

assets to sustain a loss of their investment in the Company, had consulted with such independent legal counsel or other advisers as they deemed appropriate to evaluate their investment in the Company, had been afforded the right to ask questions of the Company, and were acquiring the Company’s securities solely for their own account as a personal investment.


13.	Acquisitions

On January 31, 2008, the Company completed the purchase of substantially all assets and certain liabilities of Downers Grove, Illinois based ~~on approximately 3,500,000 additional shares being outstanding as~~Concert Group Logistics, LLC. (“Concert LLC”). The transaction had an effective date of ~~December 31, 2004 to account for~~January 1, 2008 and the ~~shares issued to raise capital to pay~~Company completed the ~~initial~~ purchase ~~price of Express-1,~~through a newly formed wholly owned subsidiary Concert Group Logistics, Inc.

~~Supplemental table~~The Company purchased Concert Group Logistics in order to i) enhance its geographic footprint, ii) diversify its non-asset transportation service offerings, and iii) compliment its expedited operations through cross-selling activities.

At closing the Company paid the former owners of Concert LLC total consideration including $9.0 million in cash and 4.8 million shares of the Company’s common stock. The Company received $3.2 million of assets consisting of cash, ~~used in business~~receivables, office equipment and ~~asset acquisitions,~~other current assets, net of liabilities acquired in the transaction. The transaction was financed through the Company’s line of credit and with cash ~~as follows:~~available from the Company’s working capital.

Years Ended December 31,
2005 2004

Dasher $ 0 $ 265,000
Bullet 0 82,000
Express-1 0 6,578,000
Temple 0 820,000

0 7,745,000
Accrued contingent payments 1,710,000 1,450,000

$ 1,710,000 $ 9,195,000

The transaction provided for additional consideration of up to $2.0 million to be paid at the end of 2008 and 2009 provided certain performance criteria were met within the Company’s new subsidiary over this time frame. In March 2009, the Company settled all earnout obligations with the former owners of Concert Group Logistics, LLC. for the sum of $1.1 million in cash. Discussion on this settlement is contained within footnote 2 under the caption subsequent events.
The acquisition was accounted for as a purchase and the results of operations of the acquired businesses have been included in the consolidated financial statements from the effective date of the acquisition forward. The Company allocated the cost of the acquisition to the assets acquired and the liabilities assumed based upon estimated fair values. The Company relied upon third party analysis in the formulation of its allocations and estimates for this valuation.

The following table ~~outlines~~sets forth the ~~Company’s classification~~components of intangible assets ~~in each of~~associated with the ~~acquisitions.~~acquisition:

Express-1
Temple

Acquisition Date
August 2004 October 2004

Purchase allocation:
Current assets $ 3,225,000
Fixed assets 805,000 $ 252,000
Other long term assets
Intangible assets:
Trade name 3,346,000 294,000
Employment contracts 125,000 36,000
Non-compete agreements 673,000 80,000
Customer relationships 74,000 200,000
Customer list 25,000
Drivers and contractors 256,000
Other intangibles 260,000
Goodwill 154,000 438,000

Total assets acquired 8,918,000 1,325,000
Current liabilities (1,942,000 ) (112,000 )
Long-term liabilities (263,000 ) (92,000 )

Net assets acquired $ 6,713,000 $ 1,121,000

Intangibles (weighted life) 5.3 years 6.3 years
Purchase type Stock Asset

Fair Value Useful Life

Trademark/Name $ 3,070,000 Indefinite
Independent participant network 980,000 5 years
Non-compete agreements 30,000 4 years

Total intangible assets $ 4,080,000

52

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

~~13. Income Taxes~~

The following unaudited proforma consolidated information presents the results of operations of the Company for the years ended December 31, 2007 and 2006 as if the acquisition of Concert Group Logistics, LLC had taken place at the beginning of each period presented. Proforma results presented within the table, do not include adjustments for amortization and depreciation of intangibles, fixed assets as a result of the Concert purchase and the Company’s discontinued operations.

Proforma Consolidated Results (Unaudited)
2007 2006

Revenues $ 95,006,000 $ 74,055,000
Income from continuing operations before income tax 3,885,000 3,759,000
Income from continuing operations 2,416,000 4,796,000
Basic income from continuing operations per share $ 0.08 $ 0.15
Diluted income from continuing operations per share 0.08 0.15
14. Income Taxes

The provision for income taxes is as follows:

Year Ended December 31, Year Ended December 31,
2006 2005 2004 2008 2007 2006

Current

Federal $ 5,000 $ — $ 52,000 $ 109,000 $ 80,000 $ 5,000
State 1,000 — 5,000 19,000 8,000 1,000

6,000 — 57,000 128,000 88,000 6,000

Deferred

Federal (1,025,000 ) — (1,787,000 ) 1,712,000 1,047,000 (1,025,000 )
State (109,000 ) — (191,000 ) 304,000 165,000 (109,000 )

(1,134,000 ) — (1,978,000 ) 2,016,000 1,212,000 (1,134,000 )
Total income tax provision 2,144,000 1,300,000 (1,128,000 )
Income tax provision included in discontinued operations 250,000 233,000 (91,000 )

Total provision $ (1,128,000 ) $ — $ (1,921,000 )
Income tax provision included in continuing operations $ 1,894,000 $ 1,067,000 $ 1,037,000

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows:

Year Ending December 31, Year Ending December 31,
2006 2005 2004 2008 2007 2006

Provision For Income Tax

Income tax provision at statutory rate $ 954,000 $ (1,977,000 ) $ (1,754,000 ) $ 1,832,000 $ 1,129,000 $ 970,000
Increase (decrease in income tax due to:
Meals and entertainment 9,000
Officers life insurance 7,000
Increase (decrease) in income tax due to:
State tax provision 104,000 (210,000 ) 18,000 326,000 181,000 104,000
Change in valuation allowance (2,073,000 ) 2,073,000 — (2,073,000 )
All other non-deductibles items (129,000 ) 114,000 (185,000 ) (14,000 ) (10,000 ) (129,000 )

Total provision for income tax $ (1,128,000 ) $ — $ (1,921,000 ) $ 2,144,000 $ 1,300,000 $ (1,128,000 )

53

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

The tax effects of temporary differences that give rise to significant portions of the current and non-current deferred tax asset at December 31, ~~2006~~2008 and ~~2005~~2007 are as follows:


	Year Ending December 31,						Year Ending December 31,
	2006			2005			2008			2007

Current deferred tax items
Allowance for doubtful accounts	$	29,000		$	275,000		$	56,000		$	30,000
Prepaid expenses		(92,000	)		(19,000	)		(149,000	)		(194,000	)
Excess capital loss		—			15,000
Adverse lease accrual		6,000			—			20,000			23,000
Accrued deferred comp		109,000			80,000
Charitable contributions		17,000			6,000			10,000			—
Lease accrual											20,000
Accrued expenses								103,000			170,000
Accrued insurance claims								69,000			—
Unrealized currency loss (CGL)								22,000
Net operating loss		1,000,000			143,000			362,000			1,500,000
Unrealized gain		—			—

Total current deferred tax asset	$	1,069,000		$	500,000
							$	493,000		$	1,549,000

Non-current deferred tax items
Property plant and equipment	$	(90,000	)	$	(121,000	)	$	(107,000	)	$	(95,000	)
Set-up costs		(3,000	)		—
Amortization expense		(30,000	)		548,000			(999,000	)		(294,000	)
Adverse lease accrual		10,000			—			—			19,000
Accrued deferred compensation								130,000
Stock option expense		41,000			—			206,000			112,000
AMT credit		37,000			—			187,000			20,000
Net operating loss		2,104,000			3,150,000			—			615,000
Valuation allowance		—			(2,073,000	)

Total non-current deferred tax asset	$	2,069,000		$	1,504,000
							$	(583,000	)	$	377,000
Total deferred asset	$	3,138,000		$	2,004,000

Total deferred asset (liability)							$	(90,000	)	$	1,926,000

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized. During 2005 the Company had significant cumulative losses, and based on the above guidance established a valuation allowance of $2,073,000 to provide for that uncertainty. Subsequently in 2006, based upon the income generated, the Company eliminated its valuation allowance to recognize its anticipated future use of the benefits of its accumulated deferred tax benefits, as of December 31, 2006.

As of December 31, ~~2006,~~2008, the Company had both federal and state net operating loss carry forwards. The federal loss carry forward totaled approximately ~~$8,250,000~~$850,000 and begins expiring in 2021.


~~14.~~15.	Related Party Transactions

~~In August~~The Company’s Chief Executive Officer is a member of ~~2004,~~ the ~~Company acquired~~former ownership group of Express-1, Inc. ~~and agreed to purchase the building located at 429 Post Road, Buchanan, Michigan for $850,000. The Company also agreed to rent the building on amonth-to-month~~ ~~basis with monthly rental payments of ten thousand ($10,000) dollars on a triple net basis until the purchase was completed. For~~During the years ended December 31, ~~2005~~2007 and ~~2004 rent~~2006, the Company recorded $2,210,000 and $1,750,000, respectively as additional acquisition consideration for subsequent payment to this group. The Company’s CEO received approximately 41% of these distributions. The transaction was treated as an increase in goodwill within the ~~amounts~~Company’s financial statements during the period it was determined to have been earned and thereby due and payable. Other family members of ~~approximately $40,000~~the Company’s Chief Executive Officer are also members of the former ownership group of Express-1, Inc. and ~~$50,000 respectively was paid for~~received a portion of this distribution.

One member of the ~~building~~Board of Directors is a member of the former ownership group of Concert Group Logistics, LLC. The Company made a $1,100,000 payment to the group in 2009 to satisfy all remaining claims between the Company and the former owners of ~~Express-1, including certain officers~~Concert Group Logistics, LLC. The Board member received approximately 85% of the ~~Company. In May~~payment. $600,000 of ~~2005, the Company finalized the purchase the Buchanan facility, located~~this transaction will be treated as an increase in goodwill during 2009. The remaining $500,000 was accrued as a guaranteed payment in 2008 and included in goodwill at ~~429 Post Road, for approximately $850,000 and ceased paying monthly rent to the former owners of Express-1.~~December 31, 2008.

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

~~During 2005,~~Other members of the former ownership group include the President and the Executive Vice President of Concert Group Logistics, Inc. Details of this earn out payment are included in the Subsequent Events footnote.

In January 2008, in conjunction with the Concert Group Logistics acquisition, the Company ~~transferred~~entered into a lease on approximately 6,000 square feet of office space located within an office complex at 1430 Branding Avenue, Downers Grove, Illinois 60515. The lease calls for, among other general provisions, future rent payments in the amount of $98,000, $101,000, $104,000, and $107,000 to be paid in 2009 and the three subsequent years thereafter. The building is owned by an Illinois Limited Liability Company, which has within its ownership ~~in stock and marketable securities valued at $200,000 to its~~group, Daniel Para, the former CEO ~~as part~~ of ~~his severance agreement. In 2006,~~Concert Group Logistics, LLC. Mr. Para was appointed to the Board of Express-1 Expedited Solutions, Inc. in further and final settlement with its former CEO, the Company issued stock options for 125,000 shares of its common stock at the then current market price of $1.04 per share with a five-year maturity date.January 2008.


~~15.~~16.	Employee Benefit Plans

The Company has a defined contribution 401(k) salary reduction plan intended to qualify under section 401(a) of the Internal Revenue Code of 1986 (“Salary Savings Plan”). The Salary Savings Plan allows eligible employees, as defined in the plan document, to defer up to fifteen percent of their eligible compensation, with the Company contributing an amount determined at the discretion of the Company’s Board of Directors. The Company contributed approximately ~~$32,000, $27,000~~$173,000, $81,000 and ~~$127,000~~$32,000 to the Salary Savings Plan for the years ended December 31, ~~2006, 2005~~2008, 2007 and ~~2004,~~2006, respectively.

The Company also maintains a Non-qualified Deferred Compensation Plan for certain employees. This plan allows participants to defer a portion of their salary on a pretax basis and accumulate tax-deferred earnings plus interest. The Company provides a matching contribution of 25 percent of the employee contribution, subject to a maximum Company contribution of $2,500 per employee. These deferrals are in addition to those allowed in the Company’s 401(k) plans. The Company’s matching contribution expense for such plans was approximately ~~$1,000, $5,000~~$0, $0 and ~~$4,000~~$1,000 for the years ended December 31, 2008, 2007 and 2006, ~~2005 and 2004.~~respectively. In addition, the Company contributed ~~$120,000~~$30,000, $83,000 and $120,000 for the years ended December 31, 2008, 2007 and 2006, ~~and 2005~~respectively to the plan to fulfill contractual obligations related to the acquisition of Express-1 to the former executives ofExpress-1, all of ~~which~~whom were employed within the Company at December 31, ~~2006.~~2008.

~~In 2004, the~~The Company ~~established~~has in place an Employee Stock Ownership Plan (“ESOP”) for all employees. The plan ~~only~~ allows employer contributions, ~~which is~~ at the sole discretion of the board of directors. To be eligible to receive contributions the employee must complete one year of full time service and be employed on the last day of the year. Contributions to the plan vest over a five-year period. The Company did not contribute to the ESOP in 2008.


	ESOP Shares		Stock			Expense		ESOP Shares		Stock				Expense
	Awarded		Valuation		Issuance Date	Recognized		Awarded		Valuation		Issuance Date		Recognized

2004		25,000	$	1.12	03/31/05	$	28,000
Outstanding prior to 2005									25,000	$	1.20		3/31/2005	$	30,000
2005		50,000		0.74	10/06/06		37,000		50,000		0.74		10/6/2006		124,000
2006		90,000		1.38	To be issued in 2007		124,000		90,000		1.38		4/10/2007		101,000
2007									90,000		1.12		12/11/2007		101,000
2008									—		—		—		—

Total		165,000				$	189,000		255,000					$	292,000

In addition to stock contributions in the ESOP Plan, the Company has on occasion contributed cash to provide for general plan expenses. The company contributed cash of $2,000 and $1,000 to the plan in the years ended December 31, 2008 and 2007, respectively.


~~16.~~17.	Employment Agreements

The Company has in place with certain of its ~~executives~~managers and executive’s employment agreements calling for base compensation payments totaling ~~$602,000~~$1,200,000, $1,111,000, $573,000 and ~~$216,000~~$250,000 for the years ending ~~December 31, 2007 and 2008. These contracts vary in length and terms, but provide for continuity of employment pending termination “for cause” for the covered employees.~~


~~17.~~	~~Subsequent Events~~

On February 28, 2007, the Company determined that approximately $175,000 of revenue earned in Fiscal 2007 with a customer was uncollectible. The Company has reserved the entire $175,000 as additional allowance for uncollectible accounts in Fiscal 2007. The Company is pursuing all options to recover the $175,000 adjustment.

During the first quarter of 2007, the Company received approximately $200,000 in exchange for the exercise of warrants related to the Company’s former private placements. In exchange for these warrants, the Company issued 219,343 shares of its common stock.

Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

December 31, 2009, 2010, 2011, and 2012, respectively. These agreements expire on various dates within the listed periods and also provide for performance based bonus and stock awards, provided the Company’s performance meets certain clearly defined performance objectives. These employment contracts vary in length and provide for continuity of employment pending termination “for cause” for the covered individuals.


18.	Quarterly Financial Data

Express-1 Expedited Solutions, Inc.

Quarterly Financial Data (Unaudited)

March 31,
June 30,
September 30,
December 31,

2006 2006 2006 2006

Operating Revenues $ 9,555,000 $ 11,120,000 $ 10,851,000 $ 10,665,000
Direct Expenses 7,129,000 8,257,000 8,005,000 8,005,000

2,426,000 2,863,000 2,846,000 2,660,000

Sales General and Admin. 1,721,000 1,923,000 1,861,000 2,103,000
Other Expense 103,000 29,000 26,000 48,000
Interest Expense 45,000 63,000 54,000 43,000

Income (loss) before Income Taxes 557,000 848,000 905,000 466,000
Income Tax Provision — — — (1,128,000 )

Net Income $ 557,000 $ 848,000 $ 905,000 $ 1,594,000

Basic income (loss) per common share(*) $ 0.02 $ 0.03 $ 0.03 $ 0.06
Diluted income (loss) per common share(*) $ 0.02 $ 0.03 $ 0.03 $ 0.06

March 31,
June 30,
September 30,
December 31,

2007 2007 2007 2007

Operating revenues $ 10,275,000 $ 12,575,000 $ 12,052,000 $ 12,811,000
Direct expenses 7,550,000 9,290,000 9,298,000 9,813,000

Gross margin 2,725,000 3,285,000 2,754,000 2,998,000

Sales, General and Administrative 2,096,000 2,124,000 2,154,000 2,429,000
Other expense 1,000 18,000 (2,000 ) (3,000 )
Interest expense 24,000 34,000 13,000 (6,000 )

Income from continuing operations before tax 604,000 1,109,000 589,000 578,000
Income tax provision 224,000 417,000 217,000 209,000

Income from continuing operations 380,000 692,000 372,000 369,000
Income from discontinued operations, net of tax 81,000 62,000 127,000 88,000

Net income $ 461,000 $ 754,000 $ 499,000 $ 457,000

Basic income per share

Income from continuing operations $ 0.01 $ 0.03 $ 0.01 $ 0.01
Income from discontinued operations — — — —
Net income 0.02 0.03 0.02 0.02
Diluted income per share

Income from continuing operations $ 0.01 $ 0.02 $ 0.02 $ 0.02
Income from discontinued operations — — — —
Net income 0.02 0.03 0.02 0.02

March 31,
June 30,
September 30,
December 31,

2005 2005 2005 2005

Operating Revenues $ 10,349,000 $ 10,290,000 $ 9,512,000 $ 9,697,000
Direct Expenses 8,378,000 8,057,000 7,448,000 6,969,000

1,971,000 2,233,000 2,064,000 2,728,000

Sales General and Admin. 3,009,000 2,903,000 2,069,000 2,076,000
Restructuring 3,583,000 375,000 490,000 —

Total SG&A 6,592,000 3,278,000 2,559,000 2,076,000

Other Expense 5,000 114,000 — —
Interest Expense 24,000 52,000 56,000 55,000

Income (loss) before Income Taxes (4,650,000 ) (1,211,000 ) (551,000 ) 597,000
Income Tax Provision — — — —

Net Income $ (4,650,000 ) $ (1,211,000 ) $ (551,000 ) $ 597,000

Basic income (loss) per common share(*) $ (0.17 ) $ (0.05 ) $ (0.02 ) $ 0.02
Diluted income (loss) per common share(*) $ (0.17 ) $ (0.05 ) $ 0.02 $ 0.02
* ~~The sum of Quarterly Financial Data presented for earnings per share differs from full-year results, due to rounding.~~

56

~~19. Operating Segments~~Express-1 Expedited Solutions, Inc.

Notes to Consolidated Financial Statements — (Continued)

March 31,
June 30,
September 30,
December 31,

2008 2008 2008 2008

Operating revenues $ 23,716,000 $ 29,675,000 $ 31,117,000 $ 24,954,000
Direct expenses 19,606,000 24,925,000 26,164,000 20,933,000

Gross margin 4,110,000 4,750,000 4,953,000 4,021,000

Sales, General and Administrative 3,150,000 3,389,000 3,148,000 2,977,000
Other expense 3,000 12,000 21,000 69,000
Interest expense 80,000 99,000 94,000 81,000

Income from continuing operations before tax 877,000 1,250,000 1,690,000 894,000
Income tax provision 341,000 508,000 665,000 380,000

Income from continuing operations 536,000 742,000 1,025,000 514,000
Income from discontinued operations, net of tax 107,000 32,000 127,000 73,000

Net income $ 643,000 $ 774,000 $ 1,152,000 $ 587,000

Basic income per share
$ 0.02 $ 0.02 $ 0.03 $ 0.02
Income from continuing operations — — — —
Income from discontinued operations 0.02 0.02 0.04 0.02
Net income
Diluted income per share

Income from continuing operations $ 0.01 $ 0.02 $ 0.04 $ 0.02
Income from discontinued operations — — — —
Net income 0.02 0.02 0.04 0.02
19. Operating Segments

The Company has ~~two~~three reportable segments included in its continuing operations. The Company refers to these segments as “business units” to help differentiate between individual business components and the Company’s former name Segmentz Inc. These operations have been identified based on ~~the types of~~their unique services ~~it provides,~~provided to ~~its~~their customers:Express-1, ~~which~~ provides expedited transportation services throughout the continental United States, ~~and~~ parts of Canada and ~~Evansville,~~Mexico, Concert Group Logistics, provides domestic and international freight forwarding services through a network of independently owned stations, and Bounce Logistics provides freight brokerage services targeted at shipments needing a greater degree of customer service. During 2008, Express-1 Dedicated, which ~~provides~~provided dedicated ~~expedite transportation~~expediting services ~~primarily through~~to one ~~stand alone~~primary contract customer, was discontinued for purposes of financial reporting. Current year and historical data is included in the following table for comparability purposes.
Additionally, costs associated with being a public company, as well as, the overall executive management of the consolidated entity, have been separately identified in the table as Corporate.
For the years ended December 31, 2007 and 2006, the Company’s operating segments consisted of Express-1 and Express-1 Dedicated. Concert Group Logistics and Bounce Logistics became part of the Company’s operation in 2008 and have been reflected within the statements and operating results in 2008.
57

Express-1 Expedited Solutions, Inc.

Notes to ~~service Ford Motor Company dealerships within a 250 mile radius of Evansville, Indiana.~~Consolidated Financial Statements — (Continued)

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

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

Express-1 Expedited Solutions, Inc
~~Segment~~Business Unit Data


Year Ended December 31, 2006	Express-1		Evansville			Corporate and Other			Consolidated
																									Total			Discontinued
														Concert Group											Continuing			Operations
Year Ended December 31, 2008												Express-1		Logistics		Bounce			Corporate			Eliminations			Operations			E-1 Dedicated

Revenues	$	37,327,000	$	4,864,000		$	0		$	42,191,000		$	52,639,000	$	51,136,000	$	7,011,000		$	—		$	(1,324,000	)	$	109,462,000		$	4,921,000
Operating income (loss)		3,980,000		230,000			(1,434,000	)		2,776,000
Operating income (loss) from continuing operations													5,115,000		1,711,000		(34,000	)		(1,622,000	)					5,170,000			589,000
Depreciation and amortization		801,000		253,000			—			1,054,000			697,000		339,000		14,000			—						1,050,000			64,000
Interest expense		—		—			205,000			205,000			—		332,000		—			22,000						354,000			—
Tax provision (benefit)		—		—			(1,128,000	)		(1,128,000	)		—		—		—			1,894,000						1,894,000			250,000
Restructuring expenses		—		—			—			—
Goodwill		5,527,000		—			—			5,527,000			7,737,000		7,178,000		—			—						14,915,000			—
Total assets	$	17,889,000	$	582,000		$	3,138,000		$	21,609,000			20,025,000		19,026,000		1,120,000			13,678,000			(12,810,000	)		41,039,000			643,000	(1)
Year Ended December 31, 2005

Year Ended December 31, 2007
Revenues		30,667,000		4,465,000			4,716,000		$	39,848,000		$	47,713,000		—		—		$	—					$	47,713,000		$	5,076,000
Operating income (loss)		2,051,000		(143,000	)		(7,723,000	)		(5,815,000	)
Operating income (loss) from continuing operations													4,526,000		—		—			(1,567,000	)					2,959,000			577,000
Depreciation and amortization		792,000		358,000			285,000			1,435,000			715,000		—		—			—						715,000			128,000
Interest expense		—		—			187,000			187,000			—		—		—			65,000						65,000			—
Tax provision (benefit)		—		—			—			—			—		—		—			1,067,000						1,067,000			233,000
Restructuring expenses		—		—			4,448,000			4,448,000
Goodwill		3,567,000		—			—			3,567,000			7,737,000		—		—			—						7,737,000			—
Total assets	$	15,854,000	$	596,000		$	2,004,000		$	18,454,000			20,052,000		—		—			2,825,000						22,877,000			847,000
Year Ended December 31, 2004

Year Ended December 31, 2006
Revenues	$	14,436,000	$	4,639,000		$	23,406,000		$	42,481,000		$	37,327,000		—		—			—						37,327,000			4,864,000
Operating income		1,631,000		(552,000	)		(6,238,000	)		(5,159,000	)
Operating income (loss) from continuing operations													3,983,000		—		—			(1,064,000	)					2,919,000			268,000
Depreciation and amortization		174,000		360,000			720,000			1,254,000			801,000		—		—			—						801,000			253,000
Interest expense		—		—			126,000			126,000			—		—		—			205,000						205,000			—
Tax provision (benefit)		—		—			(1,921,000	)		(1,921,000	)		—		—		—			(1,037,000	)					(1,037,000	)		(91,000	)
Restructuring expenses		—		—			2,568,000			2,568,000
Goodwill		1,857,000		—			777,000			2,634,000			5,527,000		—		—			—						5,527,000			—
Total assets	$	13,919,000	$	600,000		$	10,546,000		$	25,065,000		$	17,889,000	$	—	$	—		$	3,138,000		$	—		$	21,027,000		$	582,000

(1) The total assets of the Express-1 Dedicated business unit were either transferred to the Company’s other operations or have been or are in the process of being collected from the customer base.

58

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

~~The Company’s~~We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, ~~have evaluated~~of the ~~Company’s~~effectiveness of the design and operation of our disclosure controls and procedures, ~~(as~~as defined in ~~Exchange Act~~Rules ~~13a-14~~13a-15(e) and~~15d-14)~~15d-15(e) ~~as of December 31, 2006,~~under the ~~end of the period covered by this report.~~Exchange Act. Based upon that evaluation, ~~the Company’s~~our Chief Executive Officer and Chief Financial Officer concluded that ~~the Company’s~~our disclosure controls and procedures ~~were~~are effective in enabling us to record, process, summarize and report information required to be included in our periodic SEC filings as of December 31, 2008.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed ~~by the Company~~ in ~~the~~our reports ~~that it files or submits~~filed under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and ~~forms.~~forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal accounting and financial officer) as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~Changes in~~Management’s Annual Report on Internal ~~Controls Over~~Control over Financial ~~Reporting~~Reporting.

~~There have not been any changes~~We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined inRule 13a-15(f) andRule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal accounting and financial officer), and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the ~~company’s~~reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting ~~during~~includes those policies and procedures that:
Pertain to the ~~fourth quarter~~maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the ~~fiscal year to which~~Company’s internal control over financial reporting as of December 31, 2008. In making this ~~report relates,~~assessment, management used the criteria set forth in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

59

(COSO). Based on management’s assessment, we believe that, ~~have~~as of December 31, 2008, our internal control over financial reporting is effective at a reasonable assurance level based on these criteria.

Changes in Internal Controls

During the quarter ended December 31, 2008, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, ~~the company’s~~our internal control over financial reporting.

Report of the Company’s Independent Registered Public Accounting Firm
This annual report onForm 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

ITEM 9B.   OTHER INFORMATION

Not Applicable

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this ~~Item concerning our directors and executive officers~~item is incorporated by reference tofrom the ~~sections~~information under the captions “Election of ~~our Definitive~~Directors” and “Executive Officers” contained in the Company’s Proxy Statement to be filed with the ~~SEC pursuant to Regulation 14A~~Securities and Exchange Commission in connection with ~~our 2007~~the solicitation of proxies for the Company’s 2009 Annual Meeting of Stockholders to be held on June 11, 2009 (the ~~“Definitive~~“Proxy Statement”).
Item 405 ofRegulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16(a) of the Exchange Act. This information is contained in the section titled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy ~~Statement”)~~Statement and is incorporated herein by reference.
The Company has a separately designated standing Audit Committee established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Jennifer H. Dorris (Chairperson), John Affleck-Graves, and Jay Taylor. All of such members qualify as an “independent director” under applicable NYSE AMEX Equity Exchange standards and meet the standards established by The NYSE AMEX Equity Exchange for serving on an audit committee. The Company’s Board of Directors has determined that Ms. Dorris qualifies as an “audit committee financial expert” under the ~~headings “Nominees,” “Executive Officers,”~~definition outlined by the Securities and ~~“Beneficial Ownership of Management and Certain Beneficial Owners.”~~Exchange Commission.

~~We have~~The Company has adopted a ~~written~~ Code of Business Conduct and Ethics ~~which applies to~~for all ~~our~~of its directors, officers and ~~employees, including our executive officers.~~employees. The Company’s Code of Business Conduct and Ethics ~~is filed as an exhibit to this Report and~~ is available on ~~our~~the Company’s website at ~~www.express-1.com,~~www.express-1.com.To date, there have been no waivers under the ~~caption “Corporate Governance”. Changes to or waivers of the~~Company’s Code of Business Conduct and Ethics. The Company will disclose future amendments to its Code of Business Conduct and Ethics and will ~~be disclosed~~post any waivers, if and when granted, under its Code of Business Conduct and Ethics on the ~~same website.~~Company’s website atwww.express-1.com.

ITEM 11.   EXECUTIVE COMPENSATION

The information required by this ~~Item~~item is incorporated by reference tofrom the ~~sections of our Definitive Proxy Statement~~information under the ~~headings~~captions “Compensation ~~Discussion and Analysis.~~of Directors,” “Executive ~~Compensation,”~~Compensation”, “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” ~~and “Compensation Committee Report.”~~contained in the Proxy Statement.

60

The following table ~~summarizes share and exercise price~~sets forth information, ~~about our equity compensation plans~~ as of December 31, ~~2006:~~2008, with respect to the Company’s stock option plan under which common stock is authorized for issuance, as well as other compensatory options granted outside of the Company’s stock option plan.

Number of Securities

(a)

(c)

Number of

Remaining Available

Number of

Number of Securities

Securities to

for Future Issuance

Securities to

(b)

Remaining Available

be Issued Upon

Weighted Average

Under Equity

be Issued

Weighted-Average

for Future Issuance

Exercise of

Exercise Price of

Compensation Plans

Upon Exercise

Exercise Price of

Under Equity

Outstanding

(Excluding Securities

of Outstanding

Outstanding

Compensation Plan

Options, Warrants

Reflected in

Options, Warrants

(Excluding Securities

Plan Category

and Rights

the First Column)

and Rights

Reflected in Column (a))

Equity compensation plans approved by security holders

5,364,000

1.48

3,594,000

3,600,000

1.18

1,991,000

Warrants issued to raise capital

2,252,000

2.05

N/A

(b) Security Ownership

The information contained under the heading “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated in thisForm 10-K by reference.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference to the sections of our Definitive Proxy Statement under the heading “Related Party Transactions” and “Director Independence.”

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to the sections of our Definitive Proxy Statement under the heading “Principal Accountant Fees and Services.”

59


			Page No.

PART I
	Item 1	Business		3
	Item 1A	Risk Factors		910
	Item 1B	Unresolved Staff Comments		1416
	Item 2	Properties		1416
	Item 3	Legal Proceedings		1417
	Item 4	Submission of Matters to a Vote of Security Holders		1517

PART II
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		1517
	Item 6	Selected Financial Data		1719
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1819
	Item 7A	Quantitative and Qualitative Disclosure About Market Risk		31
	Item 8	Financial Statements and Supplementary Data		3233
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		5759
	Item 9A	Controls and Procedures		5859
	Item 9B	Other Information		5860

PART III
	Item 10	Directors, Executive Officers and Corporate Governance		5860
	Item 11	Executive Compensation		5860
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		5861
	Item 13	Certain Relationships and Related Transactions, and Director Independence		5961
	Item 14	Principal Accounting Fees and Services		5961

PART IV
	Item 15	Exhibits and Financial Statement Schedules		6061
Signatures				61
~~Exhibit Index~~ 63
~~List of Subsidiaries~~EX-10.6
~~Consent of Auditors, Pender Newkirk & Company LLP~~EX-21.1
~~Certification of Chief Executive Officer Pursuant to Section 302~~EX-23.1
~~Certification of Chief Financial Officer Pursuant to Section 302~~EX-31.1
~~Certification of Chief Executive Officer Pursuant to Section 906~~EX-31.2
~~Certification of Chief Financial Officer Pursuant to Section 906~~EX-32.1
EX-32.2


Classification	Pre- 2005		2005		Amount

Writeoff of goodwill and intangibles	$	—	$	2,010,000	$	2,010,000
Writeoff and impairment of assets		550,000		1,378,000		1,928,000
Employee costs and severance		630,000		455,000		1,085,000
Other restructuring expenses		651,000		295,000		946,000
Impairment of leases		737,000		—		737,000
Writeoff of uncollectible accounts		—		310,000		310,000

Subtotal restructuring charges	$	2,568,000	$	4,448,000	$	7,016,000


	Year Ended December 31,
Income from Operations	2005			2004			Change			% Change

Express-1	$	2,051,000		$	1,631,000		$	420,000			25.8	%
Evansville		(143,000	)		(552,000	)		409,000			(74.1	)%
Closed locations		(796,000	)		(1,550,000	)		754,000			(48.6	)%
Corporate		(2,479,000	)		(2,120,000	)		(359,000	)		16.9	%

Subtotal income (loss) from operations		(1,367,000	)		(2,591,000	)		1,224,000			(47.2	)%
Reorganization cost		(4,448,000	)		(2,568,000	)		(1,880,000	)		0.0	%

Total income (loss) from operations	$	(5,815,000	)	$	(5,159,000	)	$	(656,000	)		12.7	%


	Three Months Ended December 31,								Year Ended December 31,
	2006			2005		2004			2006			2005			2004

Net income (loss) as reported	$	1,594,000		$	597,000	$	(2,151,000	)	$	3,904,000		$	(5,815,000	)	$	(3,238,000	)
Income tax (benefit) provision		(1,128,000	)		—		(1,320,000	)		(1,128,000	)		—			(1,921,000	)
Interest expense		43,000			53,000		32,000			205,000			187,000			126,000
Depreciation and amortization		305,000			260,000		431,000			1,054,000			1,435,000			1,254,000
Restructuring and exit expenses		—			—		2,568,000			—			4,448,000			2,568,000

EBITDA	$	814,000		$	910,000	$	(440,000	)	$	4,035,000		$	255,000		$	(1,211,000	)


	Possible
Year Ending December 31,	Payments*

2007	$	1,960,000
2008	$	2,210,000

Total	$	4,170,000


Report of Independent Registered Public Accounting Firm			33
Financial Statements:
Consolidated Balance Sheets			34
Consolidated Statements of Operations			35
Consolidated Statements of Changes in Stockholders’ Equity			36
Consolidated Statements of Cash Flows			37
Notes to Consolidated Financial Statements			38


													Additional			Accumulated
	Preferred Stock						Common Stock						Paid in			Earnings			Treasury Stock
	Shares			Amount			Shares			Amount			Capital			(Deficit)			Shares			Amount			Total

Balance, January 1, 2004		773,896		$	774,000			17,087,840		$	17,000		$	7,427,000		$	108,000								$	8,326,000
Conversion of series A preferred stock		(773,896	)		(774,000	)		763,923			1,000			773,000												—
Issuance of common stock for acquisitions								422,000			1,000			454,000												455,000
Issuance of warrants														158,000												158,000
Issuance of common stock, net								8,453,271			8,000			11,593,000												11,601,000
Net loss																	(3,238,000	)								(3,238,000	)

Balance, December 31, 2004		—		$	—			26,727,034		$	27,000		$	20,405,000		$	(3,130,000	)		—		$	—		$	17,302,000
Retirement of stock for payment of debt								(22,000	)					(29,000	)											(29,000	)
Issuance of stock for consultant services														67,000												67,000
Issuance of ESOP shares								25,000						28,000												28,000
Retirement of stock from
Temple purchase								(265,000	)		(1,000	)		(159,000	)											(160,000	)
Purchase of Treasury stock																				(180,000	)		(107,000	)		(107,000	)
Net loss																	(5,815,000	)								(5,815,000	)

Balance, December 31, 2005		—			—			26,465,034		$	26,000		$	20,312,000		$	(8,945,000	)		(180,000	)	$	(107,000	)	$	11,286,000
Issuance of stock for warrant exercise								1,003						1,000												1,000
Stock option expense														110,000												110,000
Issuance of ESOP shares								50,000			1,000			36,000												37,000
Net income																	3,904,000									3,904,000

Balance, December 31, 2006		—			—			26,516,037		$	27,000		$	20,459,000		$	(5,041,000	)		(180,000	)	$	(107,000	)	$	15,338,000


	Twelve Months Ended December 31,
	2008	2007	2006

Risk-free interest rate	3%-4%	5%	4%-5%
Expected life	5.0-6.0 years	6.0 years	5.0 - 10.0 years
Expected volatility	35%	35%	18% - 35%
Expected dividend yield	none	none	none
Grant date fair value	$0.37	$0.62	$0.22


	2005			2004

Net loss applicable to common stockholders:
As reported	$	(5,815,000	)	$	(3,238,000	)
Total stock-based employee compensation expense included in reported net income applicable to common stockholder, net of tax		—			—
Total stock-based employee compensation determined under fair value based method, net of related tax effects		(145,000	)		(299,000	)

Pro forma
Net (loss) income applicable to common stockholders	$	(5,960,000	)	$	(3,537,000	)
(Loss) earnings per share
Basic — as reported	$	(0.22	)	$	(0.14	)
Basic — pro forma	$	(0.22	)	$	(0.15	)
Diluted (loss) earnings per share
Diluted — as reported	$	(0.22	)	$	(0.14	)
Diluted — pro forma	$	(0.22	)	$	(0.15	)
Weighted average fair value of options granted during the year	$	0.22		$	0.42


	2006		2005

Accounts receivable	$	5,431,000	$	5,166,000
Less: Allowance for doubtful accounts		77,000		732,000

	$	5,354,000	$	4,434,000


	Year Ended December		Year Ended December		Year Ended December
	31, 2008		31, 2007		31, 2006

Operating revenue	$	4,921,000	$	5,076,000	$	4,864,000
Operating expense		3,805,000		3,960,000		3,958,000
Gross margin		1,116,000		1,116,000		906,000
Sales, general, and administrative		527,000		525,000		676,000
Income before tax provision		589,000		591,000		230,000
Tax provision (benefit)		250,000		233,000		(91,000	)

Net income	$	339,000	$	358,000	$	321,000


ITEM 3.	*LEGAL PROCEEDINGS*


Balance at December 31, 2004		2,634,000
Restructuring Impairment		(922,000	)
Balance at December 31, 2006				$	5,527,000
Contingent contractually earned payments		1,855,000			2,210,000

Balance at December 31, 2005		3,567,000
Balance at December 31, 2007				$	7,737,000
CGL Purchase					6,678,000
Contingent contractually earned payments		1,960,000			500,000

Balance at December 31, 2006	$	5,527,000
Balance at December 31, 2008				$	14,915,000


2007	$	276,000
2008		200,000
2009		173,000	$	378,000
2010		160,000		363,000
2011		60,000		263,000
2012				200,000
2013				4,000
Thereafter		10,000		3,000

Total future expected amortization expense	$	879,000	$	1,211,000


				Range of Exercise		Weighted Average
	Shares			Prices		Exercise Price

Outstanding at January 1, 2004		7,386,498		$	1.01 - 1.50	$	1.35
Warrants granted		2,126,714		$	1.50 - 2.20	$	2.09
Warrants cancelled
Warrants exercised		(1,238,000	)	$	1.00 - 1.50	$	1.27
Options granted		5,178,238		$	1.10 - 2.75	$	1.68
Options cancelled
Options exercised		(350,000	)	$	1.15 - 1.31	$	1.22

Outstanding at December 31, 2004		13,103,450		$	1.00 - 2.50	$	1.57
Warrants granted
Warrants cancelled
Warrants exercised
Options granted		860,000		$	0.57 - 1.25	$	0.93
Options cancelled		(766,500	)	$	1.10 - 2.75	$	1.75
Options expired		(70,000	)	$	1.75	$	1.75

Outstanding at December 31, 2005		13,126,950		$	0.57 - 2.75	$	1.52
Warrants granted
Warrants cancelled
Warrants exercised
Options granted		852,502		$	0.74 - 1.29	$	0.94
Options cancelled		(370,000	)	$	1.15 - 1.75	$	1.48
Options expired		(455,714	)	$	1.40 - 1.75	$	1.67

Outstanding at December 31, 2006		13,153,738		$	0.57 - 2.75	$	1.49


	Outstanding Warrants and Options						Exercisable Warrants and Options
			Weighted				Weighted
			Average		Weighted		Average				Weighted
	Number		Remaining		Average		Remaining		Number		Average
	Outstanding		Life		Price		Life		Exercisable		Price

Range of Exercise
$0.50 - 1.00		1,725,000		3.8	$	0.91		3.8		1,621,005	$	0.92
$1.01 - 1.25		2,955,167		3.5		1.24		3.5		2,470,692		1.25
$1.26 - 1.50		3,857,999		2.1		1.44		2.2		3,644,825		1.44
$1.51 - 2.00		2,822,857		0.9		1.75		0.9		2,366,689		1.75
$2.20 - 2.75		1,792,715		2.3		2.20		2.3		1,792,101		2.20

		13,153,738		2.5	$	1.49		2.5		11,895,312	$	1.50


	December 31,
	2004

Total revenues	$	55,740,000
Net income applicable to common stock		(2,602,000	)
Loss per share:
Basic	$	(.11	)
Diluted	$	(.11	)


	Years Ended December 31,
	2005		2004

Dasher	$	0	$	265,000
Bullet		0		82,000
Express-1		0		6,578,000
Temple		0		820,000

		0		7,745,000
Accrued contingent payments		1,710,000		1,450,000

	$	1,710,000	$	9,195,000


	Express-1			Temple
Acquisition Date	August 2004			October 2004

Purchase allocation:
Current assets	$	3,225,000
Fixed assets		805,000		$	252,000
Other long term assets
Intangible assets:
Trade name		3,346,000			294,000
Employment contracts		125,000			36,000
Non-compete agreements		673,000			80,000
Customer relationships		74,000			200,000
Customer list					25,000
Drivers and contractors		256,000
Other intangibles		260,000
Goodwill		154,000			438,000

Total assets acquired		8,918,000			1,325,000
Current liabilities		(1,942,000	)		(112,000	)
Long-term liabilities		(263,000	)		(92,000	)

Net assets acquired	$	6,713,000		$	1,121,000

Intangibles (weighted life)		5.3 years			6.3 years
Purchase type		Stock			Asset


	Fair Value		Useful Life

Trademark/Name	$	3,070,000	Indefinite
Independent participant network		980,000	5 years
Non-compete agreements		30,000	4 years

Total intangible assets	$	4,080,000


	March 31,		June 30,		September 30,		December 31,
	2006		2006		2006		2006

Operating Revenues	$	9,555,000	$	11,120,000	$	10,851,000	$	10,665,000
Direct Expenses		7,129,000		8,257,000		8,005,000		8,005,000

		2,426,000		2,863,000		2,846,000		2,660,000

Sales General and Admin.		1,721,000		1,923,000		1,861,000		2,103,000
Other Expense		103,000		29,000		26,000		48,000
Interest Expense		45,000		63,000		54,000		43,000

Income (loss) before Income Taxes		557,000		848,000		905,000		466,000
Income Tax Provision		—		—		—		(1,128,000	)

Net Income	$	557,000	$	848,000	$	905,000	$	1,594,000

Basic income (loss) per common share(*)	$	0.02	$	0.03	$	0.03	$	0.06
Diluted income (loss) per common share(*)	$	0.02	$	0.03	$	0.03	$	0.06


*		~~The sum of Quarterly Financial Data presented for earnings per share differs from full-year results, due to rounding.~~


(1)		The total assets of the Express-1 Dedicated business unit were either transferred to the Company’s other operations or have been or are in the process of being collected from the customer base.


ITEM 9.	*CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE*


ITEM 10.	*DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE*


ITEM 12.	*SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS*


ITEM 13.	*CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE*


ITEM 15.	*EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ONFORM 8-K*


Index to Financial Statements			32
Reports of Independent Registered Public Accounting Firms			3233
Consolidated Balance Sheets As of December 31, ~~2006~~2007 and ~~2005~~2006			34
Consolidated Statements of Operations For The Years Ended December 31, 2007, 2006 ~~2005~~ and ~~2004~~2005			35
Consolidated Statements of Stockholders’ Equity For The Years Ended December 31, 2007, 2006 and 2005			36
Consolidated Statements of Cash Flows For The Years Ended December 31, 2007, 2006 ~~2005~~ and ~~2004~~			36
~~Consolidated Statements of Stockholders’ Equity For The Years Ended December 31, 2006,~~ 2005 ~~and 2004~~			37
Notes to Consolidated Financial Statements			38


3	.1	Amended and Restated Certificate of Incorporation, filed as Exhibit to Form on . and incorporated herein by reference.
3	.2	Certificate of Amendment to the Certificate of Incorporation of Express-1 Expedited Solutions, Inc., filed as Exhibit 3.1 to Form 8-K filed on June 7, 2006 and incorporated herein by reference.
3	.3	Bylaws of Express-1 Expedited Solutions, Inc. files as Exhibit 3.7 to Form 10-SB on January 30, 2002, and incorporated herein by reference.
14		Code of Ethics, filed as Exhibit 14 to Form 10-QSB on March 13, 2005, and incorporated herein by reference.
21		Subsidiaries of the Registrant.
23		Consent of Auditors, Pender Newkirk & Company LLP
31	.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)
32	.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 as amended or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)


Signature	Title	Date


/s/ Jim Martell Jim Martell	Chairman of the Board of Directors	March ~~29, 2007~~27, 2009

/s/ Michael R. Welch Michael R. Welch	Chief Executive Officer ~~President~~ and Director	March ~~29, 2007~~27, 2009

/s/ Mark K. Patterson Mark K. Patterson	Chief Financial Officer and Director	March ~~29, 2007~~27, 2009

/s/ Jennifer Dorris Jennifer Dorris	Director and Chairperson of Audit Committee	March ~~29, 2007~~27, 2009

/s/ Jay Taylor Jay Taylor	Director	March ~~29, 2007~~27, 2009

/s/ John Affleck-Graves John Affleck-Graves	Director	March ~~29, 2007~~27, 2009

/s/ Calvin (Pete) Whitehead Pete Whitehead	Director	March ~~29, 2007~~27, 2009

/s/ Dan Para Dan Para	Director	March 27, 2009