U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-25319
TRANSPORTATION LOGISTICS INT'L, INC.
(Name of Small Business Issuer in its Charter)
COLORADO 84-1191355
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
136 Freeway Drive, East Orange, NJ 07018
(Address of Principal Executive Offices)
Issuer's Telephone Number: (973) 266-7020
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date:
August 20, 2001 Common Voting Stock: 20,902,500
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Balance Sheet
June 30, 2001
Assets
Current Assets
Cash and equivalents $ 275,197
Accounts receivable, net of allowance for
doubtful accounts of $37,497 1,638,928
Prepaid expenses 99,492
Net assets of discontinued operations 186,291
Deferred income taxes 11,270
---------
Total Current Assets 2,211,178
---------
Property and equipment, at cost, less
accumulated depreciation 473,723
---------
Goodwill and customer lists, net of
accumulated amortization 444,542
---------
Other Assets
Security deposits 78,085
Other assets 72,179
Loans receivable - affiliates 348,126
---------
Total Other Assets 498,390
---------
Total Assets $ 3,627,833
=========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 1,542,244
Accrued expenses 155,702
Notes payable to bank 621,905
Income taxes payable 21,700
Loans payable - affiliates 256,254
Convertible debentures 200,000
---------
Total Current Liabilities 2,797,805
---------
Stockholders' Equity
Common stock, no par value; 50,000,000
shares authorized, 20,902,500 shares
issued and outstanding 1,647,122
Additional paid-in capital - stock options 36,748
Retained earnings (374,420)
Accumulated other comprehensive income 4,597
Less: treasury stock, 235,652 shares at cost (456,675)
Consulting services to be provided (27,344)
---------
Total Stockholders' Equity 830,028
---------
Total Liabilities and Stockholders' Equity $ 3,627,833
=========
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Operations
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
- ------------------------------------------------------------------------------
Operating Revenues $ 2,804,437 $ 4,080,315 $ 4,404,557 $ 5,897,394
Direct Operating Expenses 2,140,773 2,306,480 3,331,030 3,597,390
-------------------------------------------------
Gross Profit 663,664 1,773,835 1,073,527 2,300,004
-------------------------------------------------
Operating Expenses
Selling, general and
administrative 789,866 1,838,160 1,424,429 2,248,189
Depreciation and amortization 62,528 44,642 121,955 104,642
-------------------------------------------------
Total Operating Expenses 852,394 1,882,802 1,546,384 2,352,831
-------------------------------------------------
Operating Income (Loss) (188,730) (108,967) (472,857) (52,827)
Other Income (Expense)
Interest expense (7,216) 894 (23,843) (3,447)
-------------------------------------------------
Total Other Income (Expense) (7,216) 894 (23,843) (3,447)
-------------------------------------------------
Income (Loss) Before Income
Taxes (195,946) (108,073) (496,700) (56,274)
(Provision) Benefit for
Income Taxes - 40,300 - 20,300
-------------------------------------------------
Income (Loss) Before
Discontinued Operations (195,946) (67,773) (496,700) (35,974)
Income (Loss) From
Discontinued Operations of
Subsidiary (net of tax
effect of $43,000 and
$22,000, respectively) - 79,563 - 41,569
-------------------------------------------------
Net Income (Loss) $ (195,946) $ 11,790 $ (496,700) $ 5,595
=================================================
Earnings Per Share
Income from continuing
operations $ (0.01) $ (0.02) $ (0.02) $ (0.01)
Discontinued operations - 0.02 - 0.01
-------------------------------------------------
Basic and diluted earnings
per share $ (0.01) $ 0.00 $ (0.02) $ 0.00
=================================================
Weighted Average Number of
Common Shares Outstanding
Basic 20,902,500 3,612,000 20,902,500 3,612,000
Diluted 20,902,500 3,612,000 20,902,500 3,612,000
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Cash Flows
Six Months Ended
June 30,
2001 2000
----------------------------
Cash Provided by (Used in) Operating
Activities $ (592,914) $ 594,613
--------- ----------
Cash Flows From Investing Activities
Purchase of property and equipment (30,720) (119,158)
Investments in joint ventures and subsidiaries (35,244) 125,404
Collection of notes receivable 492,329 -
-------- --------
Net Cash Provided by Investing Activities 426,365 6,246
-------- --------
Cash Flows From Financing Activities
Repayments of loans payable to affiliates
and capital leases (44,609) (6,888)
Proceeds from bank loans 164,655 35,810
Loans to affiliates and shareholders (100,625) (554,553)
Issuance of convertible debentures 200,000 -
Issuance of common stock and options 26,709 -
-------- --------
Net Cash Provided by (Used in) Financing
Activities 246,130 (525,631)
-------- --------
Net Increase in Cash and Equivalents 79,581 75,228
Cash and Equivalents at Beginning of Period 195,616 110,968
-------- --------
Cash and Equivalents at End of Period $ 275,197 $ 186,196
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 23,843 $ 3,447
Income taxes $ - $ -
Transportation Logistics Int'l Inc. and Subsidiaries
Notes to the Consolidated Condensed Interim Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Item 310 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001. The unaudited condensed financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 2000.
CONVERTIBLE DEBENTURES
On June 14,2001, the Company issued $200,000 of Convertible Debentures which
bear interest at the rate of 20% per annum and are due one year from the date
of issue. The Debentures are convertible into the Company's common stock at
the rate of $ .75 per share prior to October 1, 2001 and include warrants to
purchase 20,000 shares of Common Stock at $1.50 that expire on June 30,2003.
OPERATING SEGMENTS
The Company's operations are classified into four principal reportable
segments that provide different products or services. U.S. Logistics Services,
Foreign Logistics Services, Student Transportation, and Commercial Driver
Leasing. Separate management of each segment is required because each
business unit is subject to different marketing, and operating strategies and
different geographic locations.
U.S. Foreign Student Commercial
Logistics Logistics Transport. Driver
Services Services Services Leasing Total
- ------------------------------------------------------------------------------
Reportable Segments Six Months Ended June 30, 2001:
External Revenue $1,146,150 $1,157,221 $1,588,418 $ 512,768 $4,404,557
===========================================================
Depreciation and
Amortization $ 12,537 $ 11,909 $ 89,874 $ 7,635 $ 121,955
===========================================================
Operating Income
(Loss) $ (184,963) $ (416,575) $ 172,104 $ (43,423) $ (472,857)
===========================================================
Assets $ 510,930 $1,095,425 $1,418,693 $ 602,785 $3,627,833
===========================================================
Capital
Expenditures $ 7,026 $ 7,094 $ 13,457 $ 3,143 $ 30,720
===========================================================
U.S. Foreign Student Commercial
Logistics Logistics Transport. Driver
Services Services Services Leasing Total
- ------------------------------------------------------------------------------
Reportable Segments Six Months Ended June 30, 2000:
External Revenue $1,237,549 $3,168,456 $1,491,389 $ - $5,897,394
===========================================================
Depreciation and
Amortization $ 44,642 $ - $ 60,000 $ - $ 104,642
===========================================================
Operating Income
(Loss) $ (345,690) $ (110,053) $ 402,916 $ - $ (52,827)
===========================================================
Assets $1,956,473 $ 913,412 $1,014,134 $ - $3,884,019
===========================================================
Capital
Expenditures $ 46,957 $ - $ 72,201 $ - $ 119,158
===========================================================
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Forward-looking Statements: No Assurances Intended
This Report contains certain forward-looking statements regarding
Transportation Logistics, its business and financial prospects. These
statements represent Management's present intentions and its present belief
regarding the company's future. Nevertheless, there are numerous risks and
uncertainties that could cause actual results to differ from the results
suggested in this Report. Among the more significant risks are:
1. the fact that Transportation Logistics' growth will be limited by its
ability to obtain additional capital;
2. the fact that the industry in which Transportation Logistics operates is
dominated by large logistics companies, against whom Transportation
Logistics must compete;
3. the fact that the Translogistics Network is untested and may not perform
as expected; and
4. the fact that Transportation Logistics may not be able to attract the
skilled managers it will need in order to expand its operations
efficiently.
Because these and other risks may cause the Company's actual results to
differ from those anticipated by Management, the reader should not place
undue reliance on any forward-looking statements that appear in this Report.
Readers should also take note that Transportation Logistics will not
necessarily make any public announcement of changes affecting these forward-
looking statements, which should be considered accurate on this date only.
Results of Operations
In its first 21 months of operations, through December 31, 2000, Transportation
Logistics experienced steady growth and profitable operations, despite the
fact that the core of our business plan, the Translogistics Network, was in
the development stage throughout this period and consumed $1.5 million of our
resources. Our revenue grew consistently from one quarter to the next, as we
expanded our logistics operations.
Our revenue through December 31, 2000 did not, however, include any
significant revenue attributable to the Translogistics Network. Although
intra-network operations commenced in 2000, there has been no significant
revenue from Network operations to date, primarily because we were still
engaged in developing a domestic U.S. presence sufficient to meet the needs
of Network members. We are currently in contract negotiations with a major
U.S. freight carrier with operations in most major U.S. cities which will
enable us to service almost all of the U.S. requirements of the members of
the Translogistics Network. We expect that our revenue by the fourth quarter
of 2001 will include a substantial component of business generated by the
Translogistics Network, which should propel our expected revenue growth.
The first six months of 2001 was a transition period. As a result, our
financial results did not reflect the growth pattern that our Company has
established. The reported operating revenues for the first six months fell
by 25% from the first half of 2000, primarily because of a 66% reduction in
the business of TLI (U.K.), as the efforts of that office were directed toward
initiating the full world-wide operations of the Translogistics Network.
Similarly, our operating expenses continue to reflect our development of the
infrastructure we will need to function within the Translogistics Network,
even though we are not yet realizing revenue from our participation in the
Network. Network development expenses during the period exceeded $200,000,
none of which was capitalized. The overall result of these situations was a
reported operating loss for the first half of 2001 of $472,857, compared to
the operating loss of $52,827 for the same period in 2000.
On June 4, 2001, the Company closed on the acquisition of HumanaForce
Logistics, LLC with annual sales of over $13.8 million in 2000. HumanaForce
Logistics, LLC adapts and installs supply chain management systems, provides
personnel for material handling and distribution, provides intermodal delivery
services and performs warehouse and distribution services. Goodwill and
customer lists increased by $331,670 from the December 31, 2000 balances as a
result of the goodwill recorded on this acquisition. The Company incurred pre-
acquisition costs of over $100,000 that were included in operating expenses
during the second quarter.
The combination of acquisition costs, lost TLI U.K. revenues and network
development costs resulted in an operating loss for the quarter of $188,730
compared to an operating loss of $108,967 for the second quarter of 2000.
However, revenues increased 75% to $2.8 million from $1.6 million and our net
loss decreased by 35% from $300,754 to $195,946 in comparison with the first
quarter of 2001. Thus, our actual business is growing according to our plan
and we expect the reported annual results of Transportation Logistics to be
significantly improved as the Company begins to realize revenues from the
HumanaForce acquisition and Translogistics Network.
Liquidity and Capital Resources
The primary potential roadblock facing our plans for growth is our need for
capital. We are actively seeking additional capital resources, through sale
of equity or debt, and hope to increase our available capital resources in
the near future. We obtained $200,000 of short-term convertible debt during
the second quarter. With additional capital resources, we expect to be able
to expand our international presence, and accelerate domestic transactions
through our Translogistics Network. That development would have a significant
positive effect on our revenue and profits.
At June 30, 2001 we had a working capital deficit of $586,627, which represents
a reduction of $768,629 from our working capital balance of $182,002 at
December 31, 2000. The primary reason for the reduction in our working
capital was that we were required to utilize our cash and credit resources to
offset the loss from operations, including the Network development costs and
acquisition costs associated with HumanaForce Logistics LLC, that were expensed
during the six month period. Overall, our operations consumed $592,914 in
working capital that was primarily offset by $492,329 that was collected
pursuant to the note we received on the sale of CDA North America.
It is important to be aware that in the 27 months of TLI's existence, the
Company has expended almost $2,000,000 in network development costs and needed
proprietary software - all of it expensed and not one penny capitalized.
We view the utilization of working capital that resulted from the first six
months operations as an aberration caused by the transition of our operations
to a Network-focused environment. In general, our operations have historically
consumed little cash, having required only $20,963 in cash during 2000, and
only $17,427 in cash during 1999. Therefore, we expect to be able to sustain
operations for the indefinite future, despite our current working capital
deficit. However, as a new entrant into the logistics industry, much of the
business we obtain requires us to finance orders from our own resources. In
April 2001 the Company acquired a credit facility of up to $2,000,000, based
on eligible receivables to help fund a portion of our projected revenue growth.
PART II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K.
Reports on Form 8-K:
-------------------
None
Exhibits
--------
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRANSPORTATION LOGISTICS INT'L, INC.
Date: August 20, 2001 By: /s/ Michael Margolies
----------------------------
Michael Margolies, Chairman
By: /s/ Ronald P. Sorci
----------------------------------------
Ronald P. Sorci, Chief Executive Officer
By: /s/ Steven Frazier
---------------------------------------
Steven Frazier, Chief Financial Officer,
Chief Accounting Officer