Exhibit 99.6
Federal Logistics, Inc.
Financial Statements
For the Period from February 28, 2008
(Date of Inception) to June 30, 2008
|
FEDERAL LOGISTICS, INC. |
|
FINANCIAL STATEMENTS |
|
JUNE 30, 2008 |
F-2
| |
CONTENTS |
| |
| |
| |
| Page |
| |
Independent Auditors' Report on the Financial Statements | F-4 |
| |
Balance Sheet | |
Assets | F-5 |
Liabilities and Shareholder's Equity | F-6 |
| |
Statement of Income | F-7 |
| |
Statement of Retained Earnings | F-8 |
| |
Statement of Cash Flows | F-9 |
| |
Notes to Financial Statements | F-10 |
| |
Independent Auditors' Report on the Supplementary Information | F-13 |
| |
Supplementary Information | |
Schedule of Operating Expenses | F-14 |
Schedule of General and Administrative Expenses | F-15 |
F-3
INDEPENDENT AUDITORS’ REPORT
ON THE FINANCIAL STATEMENTS
To the Board of Directors and Shareholder
Federal Logistics, Inc.
Greenville, SC
We have audited the accompanying balance sheet of Federal Logistics, Inc. as of June 30, 2008, and the related statements of income, retained earnings, and cash flows for the period from inception, February 28, 2008, to June 30, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Federal Logistics, Inc. at June 30, 2008, and the results of its operations and its cash flows for the initial period then ended, in conformity with generally accepted accounting principles in the United States of America.
/s/ STEPHANS, KUN & CO., P.C.
STEPHANS, KUN & CO., P.C.
Certified Public Accountants
Bethel Park, PA
November 7, 2008
F-4
FEDERAL LOGISTICS, INC.
BALANCE SHEET
JUNE 30, 2008
| | |
ASSETS |
| | |
| | |
Current Assets | | |
Cash | $ | 1,075 |
Accounts receivable - trade - no allowance | | |
for doubtful accounts deemed necessary | | 11,350 |
Surety bond | | 10,445 |
Intercompany advance receivable | | 350 |
| | |
Total current assets | | 23,220 |
| | |
Total Assets | $ | 23,220 |
See accompanying notes and accountants’ report
F-5
FEDERAL LOGISTICS, INC.
BALANCE SHEET
JUNE 30, 2008
| | |
LIABILITIES |
| | |
| | |
Current Liabilities | | |
Bank overdraft | $ | 11,357 |
Due to factoring company | | 11,350 |
Accounts payable | | 41,366 |
Intercompany advances payable | | 25,726 |
| | |
Total current liabilities | | 89,799 |
| | |
Total liabilities | | 89,799 |
| | |
SHAREHOLDER'S EQUITY |
| | |
Capital Stock | | |
Common stock - no par value, 100 shares | | |
authorized, 1,000 shares issued and outstanding | | 100 |
Retained earnings (deficit) | | (66,679) |
| | |
Total shareholder's equity | | (66,579) |
| | |
Total Liabilities and Shareholder's Equity | $ | 23,220 |
See accompanying notes and accountants’ report
F-6
FEDERAL LOGISTICS, INC.
STATEMENT OF INCOME
FOR THE PERIOD
FROM INCEPTION, FEBRUARY 28, 2008, TO JUNE 30, 2008
| | |
Brokerage revenue | $ | �� 51,191 |
Operating expenses | | 55,862 |
| | |
Gross profit (loss) | | (4,671) |
General and administrative expenses | | 62,008 |
| | |
Income (loss) before provision for income taxes | | (66,679) |
Provision for income taxes | | - |
| | |
Net income (loss) | $ | (66,679) |
See accompanying notes and accountants’ report
F-7
FEDERAL LOGISTICS, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE PERIOD
FROM INCEPTION, FEBRUARY 28, 2008, TO JUNE 20, 2008
| | |
Retained earnings - beginning of the period | $ | - |
| | |
Net income (loss) for the period | | (66,679) |
| | |
| | |
Retained earnings (deficit) - end of the period | $ | (66,679) |
See accompanying notes and accountants’ report
F-8
FEDERAL LOGISTICS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD
FROM INCEPTION, FEBRUARY 28, 2008 TO JUNE 30, 2008
| | |
Cash Flows From Operating Activities | | |
Net income (loss) | $ | (66,679) |
Adjustment to reconcile net income (loss) to net cash | | |
provided (used) by operating activities | | |
Depreciation | | - |
Change in current assets (increase) decrease | | |
Accounts receivable | | (11,350) |
Surety bond | | (10,445) |
Change in current liabilities increase (decrease) | | |
Accounts payable | | 41,366 |
Other current liabilities | | 22,707 |
| | |
Net cash provided (used) by operating activities | | (24,401) |
| | |
Cash Flows From Investing Activities | | |
Capital expenditures | | - |
Net cash provided (used) by investing activities | | - |
| | |
Cash Flows From Financing Activities | | |
Purchases of common stock | | 100 |
Net borrowings from related parties | | 25,376 |
Principal payments on long-term debt | | - |
Net cash provided (used) by financing activities | | 25,476 |
| | |
Net increase (decrease) in cash | | 1,075 |
Cash at beginning of year | | - |
| | |
Cash at end of year | $ | 1,075 |
| | |
| | |
| | |
Supplemental Disclosures: | | |
Equipment acquired with debt | $ | - |
| | |
Interest paid | $ | - |
See accompanying notes and accountants’ report
F-9
FEDERAL LOGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
The Company was incorporated in the State of Florida on January 29, 2008, and operates on a fiscal year ending June 30. The Company operates as a trucking brokerage business licensed by the U.S. Department of Transportation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts
The Company reviews its accounts receivable on a regular basis to determine collectibility. Accounts are written off when deemed uncollectible, therefore, no allowance has been provided for in these financial statements. Management is of the opinion that the direct write-off method provides a bad debt expense equivalent to that determined under the allowance method.
NOTE 2 - CONCENTRATION OF CREDIT RISK
The Company's cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000. There were no uninsured cash balances at June 30, 2008.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company is a 100% owned subsidiary of World Logistics Services, Inc. The parent company loans money to the subsidiary as working capital advances with no stated terms of repayment. At June 30, 2008, the Company owed $11,745 to the parent.
The Company has received loans as working capital advances from Logistics Software, Inc. which is also a 100% owned subsidiary of World Logistics Services, Inc. The are no stated terms of repayment. At June 30, 2008, the Company owed $13,981 to this company.
F-10
FEDERAL LOGISTICS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 3 - RELATED PARTY TRANSACTIONS - Continued
The Company has made loans as working capital advances to Logistics Distribution and Warehousing, Inc. which is also a 100% owned subsidiary of World Logistics Services, Inc. There are no stated terms of repayment. At June 30, 2008, the Company is due $350 from this company.
NOTE 4 - INCOME TAXES
The Company experienced a net operating loss for federal income tax purposes for the fiscal year ended June 30, 2008. The Company will take part in the filing of a consolidated income tax return and this loss will be utilized by the consolidated group to offset income from the parent and other subsidiaries.
NOTE 5 - VARIABLE INTEREST ENTITY
The Financial Accounting Standards Board issued FASB Interpretation No. 46 that requires the consolidation of certain "variable interest entities" under generally accepted accounting principles.
The Company has determined that the requirement of FIN 46R apply to this entity.
Due to the Company's desire to report financial operations on a separate basis for purposes of providing detailed information to potential buyers, management has elected not to consolidate the financial position and results of operations of all of the related entities in the consolidated group of companies in these financial statements. The effects of this departure from generally accepted accounting principles have not been determined.
F-11
SUPPLEMENTARY INFORMATION
F-12
INDEPENDENT AUDITORS’ REPORT
ON THE SUPPLEMENTARY INFORMATION
To the Board of Directors and Shareholder
Federal Logistics, Inc.
Greenville, SC
Our report on our audit of the basic financial statements of Federal Logistics, Inc. for June 30, 2008 appears on page one. The audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The following schedules of costs of revenues and general and administrative expenses are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ STEPHANS, KUN & CO., P.C.
STEPHANS, KUN & CO., P.C.
Certified Public Accountants
Bethel Park, PA
November 7, 2008
F-13
FEDERAL LOGISTICS, INC.
SCHEDULE OF EXPENSES
FOR THE PERIOD
FROM INCEPTION, FEBRUARY 28, 2008, TO JUNE 30, 2008
| | |
Operating Expenses | | |
Carrier costs | $ | 48,955 |
Agent expense | | 3,604 |
Commission expense | | 1,756 |
Brokerage expense | | 1,547 |
| | |
Total Operating Expenses | $ | 55,862 |
See accountants’ report
F-14
FEDERAL LOGISTICS, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE PERIOD
FROM INCEPTION, FEBRUARY 28, 2008, TO JUNE 30, 2008
| | |
General and Administrative Expenses | | |
Travel and entertainment | $ | 5,310 |
Bank charges | | 481 |
Sales commissions | | 39,702 |
Bad debt expense | | 3,410 |
Factoring fees | | 10,586 |
Postage | | 208 |
Telephone | | 174 |
Website expense | | 2,137 |
| | |
Total General and Administrative Expenses | $ | 62,008 |
See accountants’ report
F-15
Logistics Software, Inc.
Financial Statements
For the Period from October 30, 2007
(Date of Inception) to June 30, 2008
F-16
|
LOGISTICS SOFTWARE, INC. |
|
FINANCIAL STATEMENTS |
|
JUNE 30, 2008 |
F-17
| |
CONTENTS |
| |
| |
| |
| Page |
| |
Independent Auditors' Report on the Financial Statements | F-19 |
| |
Balance Sheet | |
Assets | F-20 |
Liabilities and Shareholder's Equity | F-21 |
| |
Statement of Income | F-22 |
| |
Statement of Retained Earnings | F-23 |
| |
Statement of Cash Flows | F-24 |
| |
Notes to Financial Statements | F-25 |
| |
Independent Auditors' Report on the Supplementary Information | F-28 |
| |
Supplementary Information | |
Schedule of Operating Expenses | F-29 |
Schedule of General and Administrative Expenses | F-30 |
F-18
INDEPENDENT AUDITORS’ REPORT
ON THE FINANCIAL STATEMENTS
To the Board of Directors and Shareholder
Logistics Software, Inc.
Greenville, SC
We have audited the accompanying balance sheet of Logistics Software, Inc. as of June 30, 2008, and the related statements of income, retained earnings, and cash flows for the period from inception, October 16, 2007, to June 30, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Logistics Software, Inc. at June 30, 2008, and the results of its operations and its cash flows for the initial period then ended, in conformity with generally accepted accounting principles in the United States of America.
/s/ STEPHANS, KUN & CO., P.C.
STEPHANS, KUN & CO., P.C.
Certified Public Accountants
Bethel Park, PA
November 12, 2008
F-19
LOGISTICS SOFTWARE, INC.
BALANCE SHEET
JUNE 30, 2008
| | |
ASSETS |
| | |
| | |
Current Assets | | |
Cash | $ | 3,472 |
Accounts receivable - trade - no allowance | | |
for doubtful accounts deemed necessary | | 33,075 |
Advances receivable - related parties | | 73,795 |
| | |
Total current assets | | 110,342 |
| | |
Total Assets | $ | 110,342 |
See accompanying notes and accountants’ report
F-20
LOGISTICS SOFTWARE, INC.
BALANCE SHEET
JUNE 30, 2008
| | |
LIABILITIES |
| | |
| | |
Current Liabilities | | |
Accounts payable | $ | 8,594 |
Payroll withholdings and accrued taxes | | 24,123 |
| | |
Total current liabilities | | 32,717 |
| | |
Total liabilities | | 32,717 |
| | |
SHAREHOLDER'S EQUITY |
| | |
Capital Stock | | |
Common stock - no par value, 100 shares | | |
authorized, 100 shares issued and outstanding | | 100 |
Retained earnings | | 77,525 |
| | |
Total shareholder's equity | | 77,625 |
| | |
Total Liabilities and Shareholder's Equity | $ | 110,342 |
See accompanying notes and accountants’ report
F-21
LOGISTICS SOFTWARE, INC.
STATEMENT OF INCOME
FOR THE PERIOD
FROM INCEPTION, OCTOBER 16, 2007, TO JUNE 30, 2008
| | |
Software support revenues | $ | 374,451 |
Programming revenues | | 7,277 |
Referral revenues | | 6,680 |
| | |
Total revenues | | 388,408 |
Operating expenses | | 178,071 |
| | |
Gross profit | | 210,337 |
General and administrative expenses | | 132,812 |
| | |
Income from operations | | 77,525 |
| | |
Income before provision for income taxes | | 77,525 |
Provision for income taxes | | - |
| | |
Net income | $ | 77,525 |
See accompanying notes and accountants’ report
F-22
LOGISTICS SOFTWARE, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE PERIOD
FROM INCEPTION, OCTOBER 16, 2007, TO JUNE 30, 2008
| | |
Retained earnings - beginning of the period | $ | - |
| | |
Net income for the period | | 77,525 |
| | |
| | |
Retained earnings - end of the period | $ | 77,525 |
See accompanying notes and accountants’ report
F-23
LOGISTICS SOFTWARE, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD
FROM INCEPTION, OCTOBER 16, 2007, TO JUNE 30, 2008
| | |
Cash Flows From Operating Activities | | |
Net income | $ | 77,525 |
Adjustment to reconcile net income to net cash | | |
provided (used) by operating activities | | |
Depreciation | | - |
Change in current assets (increase) decrease | | |
Accounts receivable | | (33,075) |
Change in current liabilities increase (decrease) | | |
Accounts payable | | 8,594 |
Payroll withholdings and accrued taxes | | 24,123 |
| | |
Net cash provided (used) by operating activities | | 77,167 |
| | |
Cash Flows From Investing Activities | | |
Capital expenditures | | - |
Net cash provided (used) by investing activities | | - |
| | |
Cash Flows From Financing Activities | | |
Purchases of common stock | | 100 |
Net advances to related parties | | (73,795) |
Net cash provided (used) by financing activities | | (73,695) |
| | |
Net increase (decrease) in cash | | 3,472 |
Cash at beginning of year | | - |
| | |
Cash at end of year | $ | 3,472 |
| | |
| | |
| | |
Supplemental Disclosures: | | |
Equipment acquired with debt | $ | - |
| | |
Interest paid | $ | - |
See accompanying notes and accountants’ report
F-24
LOGISTICS SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
The Company was incorporated in the State of Florida on October 16, 2007, and operates on a fiscal year ending June 30. The Company markets and supports proprietary software for a transportation management system.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Allowance for Doubtful Accounts
The Company reviews its accounts receivable on a regular basis to determine collectibility. Accounts are written off when deemed uncollectible, therefore, no allowance has been provided for in these financial statements. Management is of the opinion that the direct write-off method provides a bad debt expense equivalent to that determined under the allowance method.
NOTE 2 - CONCENTRATION OF CREDIT RISK
The Company's cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000. There were no uninsured cash balances at June 30, 2008.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company is a 100% owned subsidiary of World Logistics Services, Inc. The Company loans money to the parent as working capital advances with no stated terms of repayment. At June 30, 2008, the parent owed $37,241 to the subsidiary.
The Company has made loans as working capital advances to Logistics Distribution and Warehousing, Inc. which is also a 100% owned subsidiary of World Logistics Services, Inc. The are no stated terms of repayment. At June 30, 2008, Logistics Distribution and Warehousing, Inc. owed $22,573 to the Company.
F-25
LOGISTICS SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2008
NOTE 3 - RELATED PARTY TRANSACTIONS - Continued
The Company has made loans as working capital advances to Federal Logistics, Inc. which is also a 100% owned subsidiary of World Logistics Services, Inc. The are no stated terms of repayment. At June 30, 2008, Federal Logistics, Inc. owed $13,981 to the Company.
NOTE 4 - INCOME TAXES
The Company is a subsidiary in a group of corporations eligible to file a consolidated income tax return. This member of the consolidated group shows taxable net income for its stand alone operations. The entire group, in completing a consolidated income tax return, will record a net operating loss for income tax reporting purposes. Therefore, no provision for income taxes has been recorded in these financial statements.
NOTE 5 - LEASES
The Company is obligated under a lease agreement for office space located in Burr Ridge, IL under terms to expire on November 30, 2008. The lease expense reflected in these financial statements amounted to $20,036. The terms of the lease call for remaining payments payments of $1,600 per month to November 30, 2008.
NOTE 6 - VARIABLE INTEREST ENTITY
The Financial Accounting Standards Board issued FASB Interpretation No. 46 that requires the consolidation of certain "variable interest entities" under generally accepted accounting principles.
The Company has determined that the requirement of FIN 46R apply to this entity.
Due to the Company's desire to report financial operations on a separate basis for purposes of providing detailed information to potential buyers, management has elected not to consolidate the financial position and results of operations of all of the related entities in the consolidated group of companies in these financial statements. The effects of this departure from generally accepted accounting principles have not been determined
F-26
SUPPLEMENTAL INFORMATION
F-27
INDEPENDENT AUDITORS’ REPORT
ON THE SUPPLEMENTARY INFORMATION
To the Board of Directors and Shareholder
Logistics Software, Inc.
Greenville, SC
Our report on our audit of the basic financial statements of Logistics Software, Inc. for June 30, 2008 appears on page one. The audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The following schedules of costs of revenues and general and administrative expenses are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ STEPHANS, KUN & CO., P.C.
STEPHANS, KUN & CO., P.C.
Certified Public Accountants
Bethel Park, PA
November 12, 2008
F-28
LOGISTICS SOFTWARE, INC.
SCHEDULE OF OPERATING EXPENSES
FOR THE PERIOD
FROM INCEPTION, OCTOBER 16, 2007, TO JUNE 30, 2008
| | |
Operating Expenses | | |
Salaries and wages | $ | 138,579 |
Payroll taxes | | 12,452 |
Employee benefits | | 15,559 |
Licenses expense | | 11,481 |
| | |
Total Operating Expenses | $ | 178,071 |
See accountants’ report
F-29
LOGISTICS SOFTWARE, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE PERIOD
FROM INCEPTION, OCTOBER 16, 2007, TO JUNE 30, 2008
| | |
General and Administrative Expenses | | |
Advertising | $ | 50 |
Bad debt expense | | 30,963 |
Bank charges | | 1,482 |
Management and bookkeeping | | 35,600 |
Other administrative services | | 28,635 |
Dues and subscriptions | | 808 |
Repairs and maintenance | | 90 |
Meals and entertainment | | 772 |
Office expenses | | 2,573 |
Postage | | 2,066 |
Rent | | 20,036 |
Telephone | | 9,471 |
Travel | | 200 |
Utilities | | 66 |
| | |
Total General and Administrative Expenses | $ | 132,812 |
See accountants’ report
F-30
