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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12 (b) or (g) of The Securities Exchange Act of 1934
International Freight Logistics, Ltd.
(Name of Small Business Issuer in its Charter)
Delaware 22-3302847
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4 William Street, Lynbrook, New York 11563
(Address of principal executive offices)
(516) 593-1010
Issuer's telephone number
Securities to be registered pursuant to Section 12(b) of the Act
Title of Each Class Name of each exchange on which registered
NONE NONE
Securities to be registered pursuant to Section 12(g) of the Act
Common Stock, $.0001 par value
(Title of Class)
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FORM 10-SB
INTERNATIONAL FREIGHT LOGISTICS, LTD.
TABLE OF CONTENTS
Page
PART I
ITEM 1. Description of Business 1
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Description of Property 11
ITEM 4. Security Ownership of Certain Beneficial Owners
and Management 11
ITEM 5. Directors, Executive Officers, Promoters, and
Control Persons 12
ITEM 6. Executive Compensation 13
ITEM 7. Certain Relationships and Related Transactions 13
ITEM 8. Description of Securities 14
PART II
ITEM 1. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters 15
ITEM 2. Legal Proceedings 15
ITEM 3. Changes in and Disagreements with Accountants 15
ITEM 4. Recent Sale Of Unregistered Securities 16
ITEM 5. Indemnification of Directors and Officers 16
PART F/S
Financial Statements F-1 to 21
PART III
ITEM 1. Index to Exhibits 17
ITEM 2. Description of Exhibits 17
SIGNATURE 18
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Unless otherwise indicated or the context requires otherwise, references to
"IFL," "Registrant," "we," "us" and "our" are to International Freight
Logistics, Ltd.
We were duly incorporated under the laws of the state of Delaware on June
29, 1993 as International Transportation Services, Inc. and the corporation name
was changed to International Freight Logistics, Ltd. on June 13, 1994. We have
not been involved in any bankruptcy, receivership or similar proceedings.
IFL is privately owned and is a full service, domestic and international
freight forwarding and warehousing company, with a recognized specialty in
handling fine art and antiques. We are located in Lynbrook, New York, in close
proximity to JFK International Airport. In addition to the United States, we
serve Europe and Central and South America. Based on expertise developed in the
important fine art and antique arena, we have branched out to handle the
transport of all manner of goods by road, rail, sea, and air.
IFL was founded by Piero Prato, Chairman, CEO and President of the Fine Art
and Antique Division and Laura Mischke, corporate President, both of whom have
many years of experience in their industry and a long record of accomplishment.
(b) Business of Issuer
Our business consists of the Fine Art and Antique Division and the general
cargo area. Most of our operations are involved with the importing and handling
of goods from overseas with the balance of activity related to exporting goods
from the United States. The industry in which IFL operates is fragmented,
consisting of many small specialized companies, and is dominated by a few large
companies.
IFL's success has been achieved primarily as a result of the experienced
management provided by its founders, Piero Prato and Laura Mischke, a thorough
knowledge of the industry marketplace and the requirements of our customers.
We provide consistently thorough comprehensive customer service and support by
an experienced and dedicated staff at competitive rates. Our staff consists of
14 employees, with 8 employees in the administrative office and 6 employees in
the warehouse and transportation area.
For international shipping, we offer door-to-door service. For the Fine Art
and Antique Division, we offer complete services, including the pick-up, pre-
packing, crating, insurance, shipping, customs clearance, un-crating, and
delivery and set-up of pieces.
Expertise is playing an increasingly important role in the global
transportation of goods. Knowing what to do at each point in the logistics chain
is a necessity and what makes a freight forwarding and handling company reliable
and trustworthy. Our staff has the experience to find the best solution for each
1
customer so that quicker turnaround is achieved and critical deadlines are met.
Our staff is fluent in several languages, which is crucial for the international
scope of our business.
IFL can manage the worldwide transportation of products and also household
goods and personal effects. We offer our customers distribution, customs
clearance and destination services in whatever country is involved. We strive to
provide immediate shipping capabilities with the shortest transit times. Our
freight services are connected with imports and exports both by air and sea, and
are complemented by efficient land-based systems. Freight services include
planning and developing shipping schedules, charting optimum shipping routes,
and identifying transit times that offer competitive rates. All of our services
are available as separate entities, as a select combination, or as a total
package, and we offer the flexibility of tailoring services to meet the precise
requirements of individual clients.
Fine Art and Antique Division
We provide art dealers, galleries and auction houses with comprehensive
shipping services to leading art fairs and exhibitions throughout the world,
including Palm Beach, Miami, Beverly Hills, New York City, and overseas in
Paris, Maestricht, Basel and Monaco. In addition, we work in cooperation with
the interior design community offering staff for assistance with any work
required to furnish and finish the set up of a client's home.
As specialists in handling estates, antiques and fine art, our staff has
developed a special expertise in the area of custom packaging and shipping
extremely valuable and delicate items. It is not unusual for us to handle
original paintings or sculptures in our warehouse. We are very experienced with
the care and requirements involved in properly and safely shipping these one-of-
a-kind, irreplaceable items.
Our expert professional staff constructs special, custom built crates to
insure that there is no movement, surface rubbing, or disruption of any item
being shipped. This is particularly important in moving antique furniture that
may possess a lacquer finish or highly delicate wood carvings. Regardless of the
specific item, however, special packing skills are always employed to eliminate
any possibility of damage during storage or shipping.
The same expertise we use to handle fine artwork is also available for set-
up and creation of display booths at fairs and trade shows, enabling customers
to display their pieces in the most attractive setting, in the safest manner
possible.
We offer clients the ability to store valuable possessions such as fine art
and antiques, furniture, and personal effects, in our warehouse on a short or
long term basis. Our warehouse has security systems and procedures, is climate
controlled, and clean and dry. Items are stored in segregated areas and
containerized storage is available.
We believe that there are very few competitors in this specialized market
segment. However, the competitors generally do not offer the comprehensive
services that we provide. For example, other companies may only provide
documentation and sub-contract all other services.
2
General Cargo
In addition to fine art and antiques, we provide global shipment of goods
such as the following from any departure to any destination:
. Aircraft spare parts
. Apparel
. Electronics
. Furniture
. Heavy equipment
. Oversized equipment
In regard to the important, accurate, and timely documentation required in
the industry, we will arrange letters of credit, handle customs clearance,
registration, all banking requirements, and surveys and inspections, including
insurance related advice.
Our computer system includes custom software that provides the ability to
track shipments, utilizing bar coding. Also, documents can be emailed, which is
a significant advantage because of the numerous documents involved in the
business, as well as the international scope of operations.
Government Regulation
We are subject to the regulations of the U. S. Fish and Wildlife Commission
in regard to the protection of endangered species. Such regulations prohibit the
importing of any endangered species items, such as Ivory and Crocodile, and
documentation is required to prove that an animal was killed before it was
classified as endangered. Items that are classified as antiques must be over 100
years old and documentation is required. In addition, we are subject to the laws
and regulations of the U. S. Customs Department.
Growth and Expansion
We intend to expand our current operations by increasing our staff,
acquiring special purpose customized trucks, vans, forklifts and various
required warehouse equipment. The additional staff would consist of warehouse,
delivery and installation specialists and administrative personnel.
In order to support our planned growth, we intend to develop a website for
marketing and general information purposes. Also, we intend to further develop
and expand our management information systems through the acquisition of
required hardware and software.
3
Marketing Strategy
In order to achieve our business objectives and penetrate our target
markets, our planned marketing strategy will consist of utilizing various tools
and resources including the following:
Corporate Identity and Marketing Material- We intend to develop a corporate
identity and awareness campaign, including marketing material such as graphics,
brochures and multimedia. Where possible, marketing material will be made
available on our website in order to provide quick delivery, as well as
minimizing printing and mailing costs.
Advertising- We intend to develop an advertising program utilizing the
services of an advertising agency with experience in our industry. The program
would include such activities as advertising in consumer, trade, and industry
publications related to our target markets. The main thrust of the advertising
would be to establish the identity of IFL, the branding of our services, and to
emphasize the benefits of those services to prospective clients. The agency
would also be involved in the design and development of our website.
Corporate Public Relations- We plan to retain a public relations firm to
develop a public relations campaign, working with our principals and the
advertising agency. The objective of the corporate public relations campaign
will be to develop market visibility and to help establish and position IFL in
its niche in the marketplace. The firm will also be involved with other
activities, such as planning speeches, advance work for conferences and trade
shows, assistance with the creation of marketing materials, and special
announcements.
Sales and Marketing Staff- We intend to employ sales and marketing
personnel as needed to obtain business. We believe that our principals and
planned staff will be able to handle the development of the business. As
activity increases and a broader presence is established, it will be necessary
to support the operations and sales efforts with new and creative marketing
programs and additional staffing.
Website- We intend to design our Internet website with the objective of
providing one of the initial pro-active sales and marketing activities. The
website design will emphasize functionality and ease of use.
Direct Mail- We intend to utilize direct mail marketing campaigns,
utilizing specialized mailing lists for the target markets.
Conferences and Trade Shows- We intend to participate in selected national
and regional industry conferences and trade shows based on market research. In
addition, we intend to sponsor our own events in key markets. This marketing
activity will be an opportunity to create a professional image and increase
awareness of IFL.
4
Risk Factors
Limited Operating Results and Earnings. We are a small organization, and
have had limited revenues and earnings. Most recently, we have been engaged in
the development of a new business plan and the search for funding in order to
develop and expand a niche in our marketplace. Therefore, we must be considered
to be a limited operation and subject to all the risks inherent in such a
business venture, many of which are beyond our control, including the inability
to implement our new business plan and marketing strategy, lack of capital and
failure to achieve market acceptance.
Reliance Upon Management. Presently, we are totally dependent upon the
personal efforts of our current management. The loss of any of our officers or
directors could have a material adverse effect upon our business and future
prospects. We do not presently have key-man life insurance upon the life of any
of our officers or directors. Further, all decisions with respect to management
of our affairs will be made exclusively by our current management. We will also
employ independent consultants to provide business and marketing advice. Such
consultants have no fiduciary duty and may not perform as expected. Our success
will, in significant part, depend upon the efforts and abilities of management,
including such consultants as may be engaged in the future. Additionally, as we
implement our planned marketing strategy and related operations we will require
the services of additional skilled personnel. There can be no assurance that we
can attract persons with the requisite skills and training to meet our future
needs or, even if such persons are available, that they can be hired on terms
favorable to us.
Our Growth is Dependent on the Successful Implementation of Our Business
Plan. It is currently anticipated that our future growth will result from the
development of our market niche, the ability to implement our new business plans
and strategy, development of brand awareness, effectively responding to
competition, future development and upgrading of our technology, the ability to
attract and retain qualified personnel and the ability to obtain necessary
financing on acceptable terms. Additionally, as we implement our business plan,
there can be no assurance that there will not be substantial unanticipated costs
and expenses associated with the implementation of such plan.
Our Financial Statements Contain a "Going Concern Qualification". We may
not be able to operate as a going concern. The independent auditor's report
accompanying our financial statements contains an explanation that our financial
statements have been prepared assuming that we will continue as a going concern.
Note 9 to these financial statements indicates that we need additional funds for
our plan of operations. This condition raises substantial doubt about our
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty. Our
audit report and financial statements are included herein as "PART F/S".
Ability to Fund Business Strategy. Our business strategy will require that
substantial capital investment and adequate financing be available to us for the
development of operations and additional equipment and facilities. Should we be
unable to obtain the amount of capital for anticipated needs, we may be required
to obtain financing through borrowings or the issuance of additional equity or
debt securities, which could have an adverse effect on the value of the existing
common stock.
5
Unproven Acceptance of Our Business and Marketing Plan - No Formal Market
Surveys. Currently we plan to prepare and implement a marketing plan in
connection with our niche market. No formal market studies have been undertaken
by us as of the date of this document. We intend to conduct a marketing survey
in the future, subject to the availability of funds. There can be no assurance
that our planned services will achieve market acceptance (or sufficient market
acceptance to make our operations commercially viable) among our target market.
The failure of our services to achieve market acceptance (or sufficient market
acceptance to operate profitably), would have a material adverse effect on our
business and financial condition and could result in our failure to achieve, or
sustain, viable commercial operations of any kind in the future.
Uncertainty As To Management's Ability To Control Costs And Expenses. With
respect to our planned business operations, management cannot accurately project
or give any assurance, with respect to our ability to control development and
operating costs and/or expenses in the future. Consequently, even if we are
successful in implementing our planned growth (of which there can be no
assurance), if management is not able to adequately control costs and expenses,
such operations may not generate any profit or may result in operating losses.
Possible Adverse Effect of Federal and State Laws. We are subject to the
regulations of the U. S. Fish and Wildlife Commission in regard to the
protection of endangered species. Such regulations prohibit the importing of any
endangered species items, such as Ivory and Crocodile, and documentation is
required to prove that an animal was killed before it was classified as
endangered. Items that are classified as antiques must be over 100 years old and
documentation is required. In addition, we are subject to the laws and
regulations of the U. S. Customs Department. Compliance with such laws and
regulations may have a material adverse effect on our operations, profitability,
and ability to service clients.
Possible Adverse Effect of Government Regulations and Future Regulatory
Changes Regarding the Internet. Although our new business plan and marketing
strategy are not subject to any regulations governing the Internet, services
which are provided via the Internet or the companies which provide such
services, it is likely that, in the future, such regulations will be put in
place. Although it is not possible to predict the extent of any such future
regulations, and although management is not aware of any pending regulations
which would be applicable to our business operations, it is possible that future
or unforeseen changes may have an adverse impact upon our ability to continue or
expand our operations as presently planned. The extent of such regulations is
impossible to predict, as is the potential impact upon our business operations
in accordance with our business plan.
No Dividends. We have not paid any dividends nor, by reason of our present
financial status and contemplated financial requirements, do we anticipate
paying any dividends in the foreseeable future.
Developing Market; New Entrants. Our future growth is dependent to a
significant extent upon our ability to attract new clients. The market for our
products and services is highly competitive, and is characterized by an
increasing number of new market entrants. Demand and market acceptance for such
products and services are subject to a high level of uncertainty, and there can
be no assurance that the commercial acceptance will continue to grow.
6
Competition; Low Barriers to Entry. There is a very high level of
competition among companies offering similar products and services. We expect
that new competitors that provide similar products and services and are
operationally proficient, will emerge and will be competing with us. As is
often the case, if our plans prove successful it is likely that a number of
other companies, who may have greater financial resources and market recognition
than us, will look to provide services similar to those planned by us. We do
not have proprietary products and services that would preclude or inhibit
competitors from entering our markets. We intend to compete on the basis of
price and the quality of our services. Competitors may better position
themselves to compete in this market as it matures. In addition, we will be
competing with established companies as well as established industry leaders who
seek to expand their marketing efforts. Consequently, We will be competing with
many other companies for a share of the available market and no assurance can be
given that in the future we will be able to achieve an adequate position to
achieve commercial success or that such competition will not materially
adversely affect our business, results of operations and financial condition.
Lack of Public Market For Securities. There currently is no public market
for our securities, nor can there be any assurance that a public market will
develop in the future.
Shares Eligible for Future Sale. A total of 4,673,500 shares of common
stock are presently issued and outstanding, which are "restricted securities" as
that term is defined under the Securities Act. Therefore, all such restricted
shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from registration becomes available. One
exemption, which may be available in the future is Rule 144 adopted under the
Securities Act. Generally, under Rule 144 any person holding restricted
securities for at least one year may publicly sell in ordinary brokerage
transactions, within a 3 month period, the greater of one (1%) percent of the
total number of our shares outstanding or the average weekly reported volume
during the four weeks preceding the sale, if certain conditions of Rule 144 are
satisfied by us and the seller. Furthermore, with respect to sellers who are
"non-affiliates" of IFL, as that term is defined in Rule 144, the volume sale
limitation does not apply and an unlimited number of shares may be sold,
provided the seller meets certain other conditions enumerated in Rule 144
including a holding period of 2 years. Sales under Rule 144 may have a
depressive effect on the market price of our securities, should a public market
develop or continue for our shares.
Additional Financing. We will require additional financing in order to
complete implementation of our proposed business plan and expand our operations.
Further, assuming that we are able to successfully expand our operations, it is
likely that we will require subsequent additional financing in the future. There
can be no assurance that such financing will be available or, if available, that
it can be obtained on terms favorable to us.
Forward-Looking Statements. This document contains forward-looking
statements. Readers are cautioned that all forward-looking statements involve
risk and uncertainty. Although we believe that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this document will prove to be
accurate. In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such information should not
be regarded as a representation by us or any other person that our objectives
and plans will be achieved.
7
Risks of Low-Priced Stocks And Possible Effect of "Penny Stock" Rules on
Liquidity. It is likely that if our stock is eligible to be traded in the future
it will be defined as a "penny stock" under Rule 3a51-1 adopted by the
Securities and Exchange Commission under the Securities Exchange Act of 1934. In
general, a "penny stock" includes securities of companies which are not listed
on the principal stock exchanges or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or National Market System ("NASDAQ
NMS") and have a bid price in the market of less than $5.00; and companies with
net tangible assets of less than $2,000,000 ($5,000,000 if the issuer has been
in continuous operation for less than three years), or which has recorded
revenues of less than $6,000,000 in the last three years. "Penny stocks" are
subject to rule 15g-9, which imposes additional sales practice requirements on
broker-dealers that sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with net worth in
excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together
with their spouses, or individuals who are officers or directors of the issuer
of the securities). For transactions covered by Rule 15g-9, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, this
rule may adversely affect the ability of broker-dealers to sell our stock, and
therefore may adversely affect the ability of our stockholders to sell stock in
the public market.
Reports to Security Holders
Prior to the filing of the registration statement on Form 10-SB, we were
not subject to the reporting requirements of Section 13(a) or 15(d) of the
Exchange Act. Upon effectiveness of the registration statement, we will file
annual reports on Form 10-KSB, which will include audited financial statements,
quarterly reports on Form 10-QSB, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC. Such reports, as well as any other
reports filed, will be available free of charge to our shareholders.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that SEC
internet website is http://www.sec.gov.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For a complete understanding, this Plan of Operation should be read in
conjunction with Part 1, Item 1, Description of Business and PART F/S- Financial
Statements to this Form 10-SB.
For the fiscal year ended December 31, 2003, our total revenue was
$1,932,294 compared to $1,871,657 for the year ended December 31, 2002, an
increase of $60,637. Our general and administrative expenses decreased from
$879,051 for the prior year period to $644,854 for the current year ended
December 31, 2003, a decrease of $234,197. This decrease resulted from
decreased administrative costs in the amount of $174,245, decreased bad debt
expense totaling $70,035, decreased depreciation expense of $769, and increased
salary expense of $10,851.
Our net income for the year ended December 31, 2003 was $28,067 compared to
a net loss for the prior year period totaling $237,382, an increase in net
income of $265,449. This increase resulted from the aforementioned increase in
revenue and decrease in general and administrative expenses compared to the
prior year period.
The audit report accompanying our financial statements for the fiscal years
ended December 31, 2003 and 2002 contains a going concern qualification because
we need additional capital for operations. Refer to "RISK FACTORS" and the audit
report and financial statements contained in "PART F/S".
For the unaudited three month interim period ended March 31, 2004, our
total revenue was $505,092 compared to $613,794 for the prior year period, a
decrease of $108,702. We had net income of $37,692 for the first quarter ended
March 31, 2004 compared to $133,522 for the prior year period, a decrease of
$95,830.
In regard to our capital requirements for the next twelve months,
additional funding will be required and we plan to meet our immediate capital
needs through private equity or debt financing. Issuing additional equity will
result in dilution to the existing shareholders.
In addition to our projected expenses and cash flow, financing requirements
will depend on other factors, such as the progress of our market research, any
changes resulting from continuing research, development of new technology, and
the economic impact of competition. Our future long-term capital requirements
will depend significantly on the rate of our business growth, the introduction
of services, and the success of such services after they are introduced.
Projections of future long-term cash needs are subject to substantial
uncertainty.
Our success in achieving profitability will depend on the ability to
implement our planned marketing strategy and obtain the projected revenues from
the sale of services, while not exceeding budgeted expenses. During the
implementation of our business plan, we will be subject to all of the risks
inherent in a growing business, including the need to provide reliable and
effective services, to develop marketing expertise, and to effectively generate
sales. In the event that our projected market does not develop as anticipated,
our business, financial condition and results of operations would be materially
adversely affected.
9
During the next twelve months, we intend to perform the activities required
to expand our business operations, as described in "ITEM 1 (b) Business of
Issuer". In executing our current plans, our objectives will include the
following:
. Develop brand awareness
. Develop and provide desired services to individual and corporate
clients
. Enhance operations structure to support the business
. Develop a website
. Develop eCommerce business
. Establish strategic relationships
. Develop management information systems to support operations
. Attract and retain qualified personnel
According to our estimates, from $500,000 to $1,000,000 will be needed
through the next twelve months, not including revenues from operations.
Primary to our growth and expansion in the coming year is the sale of
equity in IFL. These funds will be used to manage working capital requirements
and to fund ongoing development costs.
Capital commitments for the next twelve months are minimal, and additional
funds raised through private placements should be sufficient to meet our
obligations for that period and until the various planned activities described
herein are able to create significant cash flow.
During the next twelve months, we intend to acquire basic warehouse
equipment, vehicles and business equipment and plan to consider various
financing alternatives for such equipment acquisition.
We intend to hire additional employees during the next twelve months as
needed, which will be dependent on our ability to raise the required funds. The
failure to attract and retain the required personnel would have a material
adverse effect on our business and results of operations.
Inflation
We are unable to accurately predict what effect, if any, inflation will
have on business operations in the future.
10
ITEM 3. DESCRIPTION OF PROPERTY
We are located at 4 William Street, Lynbrook, New York 11563, and the
telephone number is (516) 593-1010. We are currently renting 19,800 square feet
of office and warehouse space at a monthly rental of $8,834.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this registration
statement, information with respect to (1) any person known by us to own
beneficially more than five (5%) percent of our common stock, based on 4,673,500
shares issued and outstanding as of the date of this registration statement,
(2) common stock owned beneficially by each of our officers or directors, and
(3) the total of our common stock owned beneficially, directly or indirectly, by
our officers and directors.
Number of Shares
Name and Address of Beneficial Owner Owned (1) (2) Percent of Class
- ------------------------------------ ---------------- ----------------
Piero Prato* 875,000 18.72 %
4 William Street
Lynbrook, NY 11563
Laura Mischke* 375,000 8.02 %
4 William Street
Lynbrook, NY 11563
Otto Gassner* 30,000 0.64 %
Via Marconi
Missaglia LC Italy
Officers and Directors as a group
(3 persons) (3) 1,280,000 27.38 %
____________________________
* Officer and/or Director
(1) Persons known by us to own beneficially more than five percent (5%) of our
common stock.
(2) Common stock owned beneficially by each of our officers and directors.
(3) The total number of shares of our common stock owned beneficially, directly
or indirectly, by our officers and directors as a group.
11
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth as of the date hereof, with respect to each
of our directors and officers and their positions:
Name Age Position
---- --- --------
Piero Prato 56 Chairman, Chief Executive Officer and
President of Fine Art and Antique Division
Laura Mischke 55 President and Director
Otto Gassner 69 Director
Our Directors will serve until the next annual meeting of stockholders and
until their successors are qualified and elected. Our Officers are also
appointed by, and serve at the will of, the Board of Directors. There are no
family relationships among our officers or directors. There are at present no
committees of the Board of Directors.
Officers and Directors
Piero Prato has been Chairman, CEO, and President of the Fine Art and
Antique Division since 1993, when he founded IFL. In addition to the
international freight forwarding business, Mr. Prato has been responsible for
developing the Fine Art and Antique Division. This division specializes in
transporting, warehousing, and handling fine art and antiques. Comprehensive
services are provided which may include designing custom crates for transporting
delicate works of art or furniture, hanging of paintings in client homes, and
proper storage of such items. Previously, Mr. Prato was President and a Director
of Logistics Distribution Systems, USA, a subsidiary of the Italy based Pirelli
Company.
Laura Mischke has been corporate President and a Director since 1993, when
she founded IFL with Mr. Piero Prato. Ms. Mischke is responsible for
administrative, operational, customer service, and marketing support functions.
She has a broad based business background and is very experienced in all
aspects of the domestic and international freight forwarding business and its
complexities. Previously, Ms. Mischke was Vice president and a Director of
Logistics Distribution Systems, USA, a subsidiary of the Italy based Pirelli
Company.
Otto Gassner has been a Director since 2003 and is a consultant to Sagitair
srl-Novate Milanese assisting with the development of international business.
From 2001-2003, Mr. Gassner was Managing Director for Ventana in Milan, Italy, a
company wholly owned by Fiat, mostly working with Fiat and their suppliers. In
1991, Mr. Gassner became General Manager of Castelletti, whose majority owner
was Swiss Railways, and worked on the development of traffic to Eastern European
countries, as well as a new specialty for the transportation of hanging garments
throughout Italy and other European countries. Mr. Gassner was also a member of
the Board of the International Air Shipping Association.
12
ITEM 6. EXECUTIVE COMPENSATION
The following table provides information regarding the compensation earned
during the fiscal years ended December 31, 2003 and 2002 by our Chief Executive
Officer and corporate President.
Annual
Compensation Long-Term Compensation
--------------------- -----------------------------
Name and
Principal Position Year Salary Other Restricted Stock Award
- ------------------- ---- ------- ----------- -----------------------------
Piero Prato 2003 $34,418 $66,962 (1) -
Chairman and CEO 2002 $29,500 $26,585 (1) -
Laura Mischke 2003 - $80,800 (2) -
Corporate President 2002 - $76,850 (2) -
Otto Gassner 2003 - - 30,000 Shares of Common Stock
Director 2002 - - -
____________________________
(1) Commissions
(2) Consulting fees
No other compensation has been paid to any of our Officers and Directors.
There are no written compensation agreements between us and any of our Officers,
and there are no agreements with Directors for the payment of Director fees. We
do not presently have any pension plan, profit sharing plan, or similar plans
for the benefit of our Directors, Officers or employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal years 2003 and 2002, we gave unsecured advances to the
Chairman and majority shareholder. We imputed interest on the advances at 8.50%
and recorded interest of $16,477 and $14,567 in the statement of operations for
fiscal years 2003 and 2002, respectively.
Our Chairman and President have provided personal guarantees to the bank
loans at no cost to us. (See Note 4 to the Audited Financial Statements as of
December 31, 2003 and December 31, 2002.)
On January 2, 2003, we issued 30,000 shares of our common stock to a
Director as a sign-on bonus in lieu of cash compensation, and for his agreement
to serve as a Director without compensation for a two-year term.
13
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
Our authorized capital stock consists of 20,000,000 shares of common stock,
par value $.0001 per share of which 4,673,500 shares are issued and outstanding
as of the date of this registration statement. The holders of common stock (i)
have equal and ratable rights to dividends from funds legally available
therefore, when, as and if declared by our Board of Directors; (ii) are entitled
to share ratably in all of the assets of IFL available for distribution to
holders of common stock upon liquidation, dissolution or winding up of our
affairs; (iii) do not have pre-emptive, subscription or conversion rights (there
are no redemption or sinking fund provisions applicable thereto); and (iv) are
entitled to one non-cumulative vote per share on all matters which shareholders
may vote at all meetings of shareholders. All shares of common stock now
outstanding are fully paid for and non-assessable. There are no provisions in
the Articles of Incorporation or By-Laws which would have an effect of delaying,
deferring, or preventing a change in control of IFL and that would operate only
with respect to an extraordinary corporate transaction involving IFL, such as a
merger, reorganization, sale, or transfer of all or substantially all of our
assets, or a liquidation.
Non-Cumulative Voting
The holders of shares do not have cumulative voting rights, which means
that the holders of more than 50 percent of such outstanding shares, voting for
the election of directors, can elect all of the directors to be elected, if they
so choose, and in such event, the holders of the remaining shares will not be
able to elect any of our directors. As of the date of this registration
statement, present management own approximately 27.38% of the issued and
outstanding shares of common stock.
14
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
As of the date of this registration statement, there is no public market
for our securities. Upon effectiveness of this registration statement, we intend
to apply for a listing of our common stock on the OTC Bulletin Board. There can
be no assurance that the OTC Bulletin Board will approve the listing application
or, if the application is approved, that a market will develop for our common
stock. In the event that our listing application is approved, our common stock
may be thinly traded, if traded at all, until such time as we achieve increased
operations and have more significant revenue.
As of the date of this registration statement, there were 49 record holders
of our common stock.
We do not have any outstanding options or warrants to purchase, or
securities convertible into, shares of our common stock. There are currently
4,673,500 shares of our common stock that may be eligible for future sale by
shareholders pursuant to Rule 144 under the Securities Act (See Page 7, "RISK
FACTORS, Shares Eligible for Future Sale"). There are no shares of our common
stock that are currently being publicly offered, or proposed to be publicly
offered.
We have not paid any cash dividends since its inception and does not
anticipate paying dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of our business.
ITEM 2. LEGAL PROCEEDINGS
We, or any officer or director, are not a party to any litigation, nor is
any litigation currently pending or contemplated against us, or any of our
officers or directors in their capacity as such.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
15
ITEM 4. RECENT SALE OF UNREGISTERED SECURITIES
The following transactions describe the sale of unregistered securities by
us during the last three years. All of the shares were sold privately by us and
not offered to the public, and were not registered under the Securities Act of
1933, as amended (the "Act"). All shares were issued as restricted and the
certificates bear the customary restrictive legend under Rule 144 of the Act.
On October 9, 2002, we completed a private placement offering of our common
stock pursuant to the exemption from the registration provisions of the Act,
afforded by Section 4(2) of Rule 506 of Regulation D promulgated thereunder.
Under the terms of that Offering, we issued 393,500 shares of our common stock
at $1.00 per share to 25 investors. These investors were sophisticated
investors who were knowledgeable about our operations and financial condition
at the time of purchasing the shares and were able to evaluate the risks and
merits of purchasing the shares.
On January 2, 2003, we issued 30,000 shares of our common stock at $.0001
per share to a Director as a sign-on bonus in lieu of cash compensation and for
his agreement to serve as a Director without compensation for a two-year term.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation and By-Laws provide that we shall indemnify
our directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware, including circumstances in which indemnification is
otherwise discretionary under Delaware law. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
recession. Section 145 of the General Corporation Law of Delaware provides for
the indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
certain liabilities (including reimbursement of expenses incurred) arising under
the Securities Act of 1933 (the "Securities Act"). These provisions generally
permit indemnification of directors and officers against certain costs,
liabilities and expenses of any threatened, pending, or completed action, suit
or proceeding that any such person may incur by reason of serving in such
positions if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such persons had been adjudged to be liable
to the corporation, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application, that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
16
PART III
ITEM 1. INDEX TO EXHIBITS.
The Exhibits listed and described below in Item 2 are filed herein as part
of this registration statement.
ITEM 2. DESCRIPTION OF EXHIBITS.
The following documents are filed herein as Exhibit Numbers 2, 3, 4, 5 and
6 as required by Part III of Form 1-A:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Certificate of Incorporation filed with Secretary of State of
Delaware on June 29, 1993.
2.2 Certificate of Amendment of the Certificate of Incorporation
filed with Secretary of State of Delaware on June 13, 1994.
2.3 Certificate for Renewal and Revival of Charter filed with
Secretary of State of Delaware on December 28, 2001.
2.4 Certificate of Amendment of the Certificate of Incorporation
filed with Secretary of State of Delaware on December 28, 2001.
2.5 By-Laws
3. NONE Instruments Defining the Rights of Security Holders
4.0 Specimen Stock Certificate
5. NONE Voting Trust Agreement.
6. NONE Material Contracts
17
SIGNATURE
In accordance with Section 12 of the Securities and Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
International Freight Logistics, Ltd.
By: /s/ Piero Prato
------------------------------------
Piero Prato, CEO
June 28, 2004
18
PART F/S
Audited Financial Statements for the years ended December 31, 2003 and 2002
are submitted herein on pages F-1 to F-12 and Unaudited Interim Financial
Statements for the three month period ended March 31, 2004 and 2003 are
submitted herein on pages F-13 to F-21.
INTERNATIONAL FREIGHT LOGISTICS, LTD.
INDEX TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2003 AND DECEMBER 31, 2002
Page
----
Index to Financial Statements F-1
Report of Donahue Associates, LLC,
Independent Certified Public Accountant F-2
Balance Sheet
As of December 31, 2003 and December 31, 2002 F-3
Statement of Operations
For the Years Ended December 31, 2003 and December 31, 2002 F-4
Statement of Cash Flows
For the Years Ended December 31, 2003 and December 31, 2002 F-5
Statement of Shareholders' Equity
From January 1, 2002 to December 31, 2003 F-6
Notes to the Financial Statements F-7
F-1
DONAHUE ASSOCIATES, LLC
Certified Public Accountants
27 Beach Road Suite C05A
Monmouth Beach, NJ 07750
Tel. 732-229-7723
Independent Auditors' Report
----------------------------
Board of Directors and Stockholders
International Freight Logistics, Ltd.
We have audited the accompanying balance sheet of International Freight
Logistics, Ltd. as of December 31, 2003 and December 31, 2002, and the related
statements of income, changes in shareholders' equity, and cash flows for the
years then ended. 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 the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Freight
Logistics, Ltd. as of December 31, 2003 and December 31, 2002, and the results
of its operations, changes in shareholders' equity and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
As more fully discussed in Note 9 to the financial statements, there are
significant matters concerning the Company that raise substantial doubt as to
the ability of the Company to continue as a going concern. Management's plans
with regard to these matters are also described in Note 9 to the financial
statements. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets or the amounts and
classifications of recorded liabilities that might be necessary in the event
that the Company cannot continue in existence.
/s/ Donahue Associates, LLC
Monmouth Beach, New Jersey
June 3, 2004
F-2
International Freight Logistics, Ltd.
Balance Sheet
As of December 31, 2003 and December 31, 2002
ASSETS 2003 2002
---------- ----------
Cash and equivalents $ 9,019 $ 26,778
Accounts receivable (net of allowance for doubtful
accounts of $250,000 at December 31, 2003 and
$225,000 at December 31, 2002) 386,001 386,790
Prepaid expenses 0 7,119
---------- ----------
Total current assets 395,020 420,687
Property and equipment- net 29,590 46,843
Employee advances 39,559 39,111
Shareholder advance 210,320 273,913
---------- ----------
Total Assets $ 674,489 $ 780,554
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $ 325,027 $ 425,906
Bank loans payable (short term) 47,982 45,036
Capital leases payable 0 455
---------- ----------
Total current liabilities 373,009 471,397
Bank loans payable (long term) 120,069 155,813
---------- ----------
Total liabilities 493,078 627,210
Shareholders' Equity:
Common stock: Par value of $0.0001 per share,
20,000,000 shares authorized, issued and
outstanding, 4,673,500 at 12/31/02 and
4,643,500 at 12/31/02 $ 467 $ 464
Additional paid in capital 268,458 238,461
Retained earnings (87,514) (85,581)
---------- ----------
Total shareholders' equity 181,411 153,344
---------- ----------
Total liabilities & shareholders' equity $ 674,489 $ 780,554
========== ==========
See the notes to the financial statements.
F-3
International Freight Logistics, Ltd.
Statement of Operations
For the Years Ended December 31st
2003 2002
------------ ------------
Revenues $ 1,932,294 $ 1,871,657
Cost of revenues (1,255,969) (1,224,916)
------------ ------------
Net revenues 676,325 646,741
General and administrative expenses
Salaries expense 254,363 209,562
Administrative costs 379,685 557,880
Bad debt expense 25,000 95,035
Depreciation expense 15,805 16,574
------------ ------------
Total general and administrative expenses 674,853 879,051
------------ ------------
Net income (loss) from operations 1,472 (232,310)
Other income (expense):
Interest income 16,477 14,567
Interest expense (11,260) (11,267)
------------ ------------
Net income (loss) before tax provision 6,689 (229,010)
Income tax provision (8,622) (8,372)
------------ ------------
Net income (loss) $ (1,933) $ (237,382)
============ ============
Net income (loss) per common share:
Basic and fully diluted $ (0.00) $ (0.05)
Weighted average of common shares:
Basic and fully diluted 4,673,418 4,380,806
See the notes to the financial statements.
F-4
International Freight Logistics, Ltd.
Statement of Cash Flows
For the Years Ended December 31st
2003 2002
------------ ------------
Operating Activities:
Net income (loss) $ (1,933) $ (237,382)
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation expense 23,056 22,098
Bad debt expense 25,000 95,035
Impairment expense 0 1,507
Consulting expense 30,000 5,310
Changes in other operating assets and liabilities:
Accounts receivable (24,211) (149,086)
Prepaid expenses 7,119 (7,119)
Advances to employees (448) 20,022
Accounts payable and accrued expenses (100,879) 58,213
------------ ------------
Net cash provided (used) by operations (42,296) (191,402)
Investing Activities:
Purchase of property and equipment (16,808) (1,424)
------------ ------------
Net cash used by investing activities (16,808) (1,424)
Financing Activities:
Issuance of common stock 0 393,500
Cost of issuing common stock 0 (155,000)
Acquisition of bank loans 0 150,000
Payment of bank loans (32,798) (34,205)
Payment of capital leases (455) (3,235)
Shareholder advances 74,598 (173,009)
------------ ------------
Net cash provided (used) by financing activities 41,345 178,051
------------ ------------
Net decrease in cash during the fiscal year (17,759) (14,775)
Cash balance at beginning of the fiscal year 26,778 41,553
------------ ------------
Cash balance at end of the fiscal year $ 9,019 $ 26,778
============ ============
Supplemental disclosures of cash flow information:
Interest paid during the period $ 11,260 $ 11,267
Income taxes paid during the period $ 0 $ 0
See the notes to the financial statements.
F-5
International Freight Logistics, Ltd.
Statement of Shareholders' Equity
From January 1, 2002 to December 31, 2003
Common Common Paid in Retained
Shares Amount Capital Earnings Total
--------- ------ -------- ---------- ----------
Balance at
January 1, 2002 4,250,000 $ 425 $ 0 $151,801 $ 152,226
Issuance of
common stock 393,500 39 238,461 238,500
Net loss for
fiscal year 2002 (237,382) (237,382)
--------- ------ -------- ---------- ----------
Balance at
December 31, 2002 4,643,500 464 238,461 (85,581) 153,344
Issued shares for
compensation 30,000 3 29,997 30,000
Net income for
fiscal year 2003 (1,933) (1,933)
--------- ------ -------- ---------- ----------
Balance at
December 31, 2003 4,673,500 $ 467 $268,458 $ (87,514) $ 181,411
========= ====== ======== ========== ==========
See the notes to the financial statements.
F-6
International Freight Logistics, Ltd.
Notes to the Financial Statements
For the Years Ended December 31, 2003 and December 31, 2002
1. Organization and Summary of Significant Accounting Policies
International Freight Logistics Ltd. (the Company) is a privately held company
organized under the laws of the state of Delaware in June 1993. The Company is a
full-service international freight forwarding and warehousing company serving
destinations in Europe, Central and South America, and the United States. The
Company maintains a 19,800 square feet warehouse and office space in Lynbrook,
New York.
Use of Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principals requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure, if any, of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results may differ from these
estimates.
Cash & Cash Equivalents: Cash and cash equivalents include deposits at banks
and short term securities with maturity dates of less than three months from the
date of the balance sheets.
Revenue Recognition: Revenues from freight forwarding and warehousing are
recorded when the service has been delivered.
Bad Debt and Allowance for Doubtful Accounts: The allowance for doubtful
accounts is maintained at a level sufficient to provide for estimated credit
losses based on evaluating known and inherent risks in the receivables
portfolio. The Company provides, through charges to income, an allowance for
doubtful accounts which, based upon management's evaluation of numerous factors,
including economic conditions, a predictive analysis of the outcome of the
current portfolio and prior credit loss experience, is deemed adequate to cover
reasonably expected losses inherent in outstanding receivables.
Income Taxes: Effective March 31, 2002, the Company elected to be taxed as a
C Corporation under the Internal Revenue Service Code. Prior to that date, the
Company's taxable income is reported by the individual shareholder; therefore,
no provision for federal income taxes has been included in these financial
statements for the period from January to March, 2002.
The Company accounts for income taxes in accordance with the Statement of
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".
SFAS No. 109 requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between financial statement and income tax
bases of assets and liabilities that will result in taxable income or deductible
expenses in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
F-7
Valuation allowances are established when necessary to reduce deferred tax
assets and liabilities to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period adjusted for the change
during the period in deferred tax assets and liabilities.
Property and Equipment: Property and equipment are stated at cost. Depreciation
of property and equipment is provided using the straight-line method over the
estimated useful life of the asset. Improvements made to leased property are
depreciated on a straight-line basis over the estimated useful life of the
improvement or the period of the lease remaining, whichever is less. The
following is a summary of the estimated useful lives used in computing
depreciation expense:
Equipment 5 years
Leasehold improvements 7 years
Vehicles 5 years
Furniture & fixtures 7 years
Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.
Long Lived Assets: The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
Recent accounting pronouncements- In June 2002, the FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit of Disposal Activities"(SFAS 146).
This Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities. Under SFAS 146 companies will recognize a cost
associated with an exit or disposal activity when a liability has been incurred.
SFAS 146 also introduces discounting the liability associated with the exit or
disposal activity for the time between the cost being incurred and when the
liability is ultimately settled. Management has concluded that the adoption of
SFAS 146 would not have had a material impact on the Company's fiscal 2003
financial position or results of operations.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions"(SFAS 146). The statement provides guidance on the
accounting for the acquisition of a financial institution where the excess of
the fair value of liabilities assumed over the fair value of tangible and
intangible assets acquired represents goodwill. Management has concluded that
the adoption of SFAS 147 would not have had a material impact on the Company's
fiscal 2003 financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure"(SFAS 148). The statement provides
alternative methods of transition for a change to a fair value based method of
accounting for stock-based employee compensation and amends the disclosure
requirements of SFAS 123. Management has concluded that the adoption of SFAS 148
would not have had a material impact on the Company's fiscal 2003 financial
position or results of operations.
F-8
2. Fair Values of Financial Instruments
The carrying amounts of cash, accounts receivable, employee and shareholder
advances, security deposits, bank loans payable, and accounts payable reported
in the balance sheet are estimated by management to approximate fair value.
3. Commitments and Contingencies
The Company's operating leases for warehouse and office space located in
Lynbrook, New York expired in January 2002. The Company elected not to renew
this lease. The Company currently leases the space on a "month to month" basis.
4. Bank Loans
The Company acquired loans from banks of $100,000 in 2002 and $90,000 in 2001.
The loans mature in five (5) years from origination date and are secured by the
personal guarantees of the officers of the Company, as well as a lien on the
company's receivables and other assets. The interest rates on the loans range
from 5.00% to 7.95%. The payment schedule of the loans at December 31, 2003 is
as follows:
2004 $ 56,296
2005 56,463
2006 46,039
2007 19,092
2008 8,727
----------
Total minimum payments $ 186,616
Less amounts representing interest (18,565)
----------
Present value of net minimum payments $ 168,051
==========
F-9
5. Provision for Income Taxes
Provision for income taxes is comprised of the following:
2003 2002
------------ ------------
Net income before provision for income taxes $ 36,689 $ (229,010)
============ ============
Current tax expense:
Federal $ 4,953 $ 4,810
State 3,669 3,563
------------ ------------
Total $ 8,622 $ 8,372
============ ============
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 15% 15%
Statutory state and local income tax 10% 10%
------------ ------------
Effective rate 25% 25%
============ ============
6. Earnings per Share
The Company applies SFAS No. 128, Earnings per Share in determining earnings per
share. In accordance with SFAS No. 128, basic net income per share has been
computed based upon the weighted average of common shares outstanding during the
year. All net income and net losses reported in the financial statements are
available to the common stockholders. The Company has no other financial
instruments outstanding that are convertible into common shares at December 31,
2003 and December 31, 2002.
2003 2002
------------ ------------
Shares outstanding 4,673,500 4,643,500
============ ============
Weighted average 4,673,418 4,380,806
============ ============
F-10
7. Property and Equipment
The property and equipment of the Company at December 31, 2003 and December 31,
2002 is as follows:
2003 2002
------------ ------------
Equipment $ 69,719 $ 52,911
Vehicles 22,717 22,717
Furniture 15,511 15,511
------------ ------------
Total property & equipment 107,947 91,139
Less accumulated depreciation (78,356) (44,296)
------------ ------------
Net property and equipment $ 29,590 $ 46,843
============ ============
The category for equipment includes $20,920 of equipment acquired by capital
lease agreements. The amount of accumulated amortization of capital leases
included in accumulated depreciation is $15,380 in 2003 and is $11,198 in 2002.
During fiscal year 2002, management elected to write off the book value of the
leasehold improvement asset to impairment expense as a result of the expiration
of the operating lease on the warehouse and office space discussed in Note 3.
Consequently, $1,507 was charged to impairment expense in the statement of
operations for fiscal year 2002.
8. Capitalization of the Company and Issuance of Common Stock
In December 2001, the Board of Directors of the Company approved an amendment to
the articles of incorporation that increased the number of authorized shares
from 1,500 to 20,000,000 shares. The par value per share of common stock was
changed to $0.001.
In December 2001, the Board of Directors of the Company approved a resolution
for a forward split of the common stock of the issued and outstanding shares, on
the basis of 17,000 new shares issued for each outstanding share. The forward
split increased the number of shares issued and outstanding from 250 to
4,250,000 shares.
In October 2002, the Company completed a private placement offering of its
common shares. The Company issued 393,500 shares of common stock and received
net proceeds of $238,500.
In fiscal year 2003, the Company issued 30,000 shares of common stock to a
director for services rendered. The Company recorded $30,000 as salary expense
in the statement of operations.
F-11
9. Going Concern
The accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assume the continuity of the
Company as a going concern. However, during the twelve months ending December
31, 2003 and December 31, 2002 the Company has experienced, and continues to
experience, certain liquidity problems.
Management recognizes the need for additional capital for its operations and
plans to sell equity in the Company or arrange for bank financing in order to
manage working capital needs. Capital equipment expenditures will be minimal
during the next twelve months. If equity or bank financing is not available, the
Company will reduce expenses in order to meet its working capital requirements.
10. Related Party Transactions
During the fiscal years 2003 and 2002, the Company gave unsecured advances to
the chairman and majority shareholder. The Company imputed interest on the
advances at 8.50% and recorded interest of $16,477 and $14,567 in the statement
of operations for fiscal years 2003 and 2002, respectively.
The chairman of the board and the president of the Company have provided
personal guarantees to the bank loans discussed in Note 3 at no cost to the
Company.
F-12
INTERNATIONAL FREIGHT LOGISTICS, LTD.
INDEX TO FINANCIAL STATEMENTS
AS OF MARCH 31, 2004 AND MARCH 31, 2003
Page
----
Index to Unaudited Financial Statements F-13
Balance Sheet
As of March 31, 2004 and December 31, 2003 F-14
Unaudited Statement of Operations
For the Quarters Ended March 31, 2004 and March 31, 2003 F-15
Unaudited Statement of Cash Flows
For the Quarters Ended March 31, 2004 and March 31, 2003 F-16
Unaudited Statement of Shareholders' Equity
From January 1, 2003 to March 31, 2003 and
From January 1, 2004 to March 31, 2004 F-17
Notes to the Financial Statements F-18
F-13
International Freight Logistics, Ltd.
Balance Sheet
As of March 31, 2004 and December 31, 2003
Unaudited
31-Mar-04 31-Dec-03
------------ ------------
ASSETS
Cash and equivalents $ 6,935 $ 9,019
Accounts receivable (net of allowance for
doubtful accounts of $275,000 at March 31,
2004 and $250,000 at December 31, 2003) 390,126 386,001
------------ ------------
Total current assets 397,061 395,020
Property and equipment- net 25,289 29,590
Employee advances 38,759 39,559
Shareholder advance 216,420 210,320
------------ ------------
Total Assets $ 677,529 $ 674,489
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable $ 315,936 $ 325,027
Bank loans payable (short term) 48,750 47,982
------------ ------------
Total current liabilities 364,686 373,009
Bank loans payable (long term) 117,005 120,069
------------ ------------
Total liabilities 481,691 493,078
Shareholders' Equity:
Common stock: Par value of $0.0001 per share,
20,000,000 shares authorized,
4,673,500 shares issued and outstanding $ 467 $ 467
Additional paid in capital 268,458 268,458
Retained deficit (73,087) (87,514)
------------ ------------
Total shareholders' equity 195,838 181,411
------------ ------------
Total liabilities & shareholders' equity $ 677,529 $ 674,489
============ ============
See the notes to the financial statements.
F-14
International Freight Logistics, Ltd.
Unaudited Statement of Operations
For the Quarters Ended March 31st
3 Months 3 Months
31-Mar-04 31-Mar-03
------------ ------------
Revenues $ 505,092 $ 613,794
Cost of revenues (322,584) (254,850)
------------ ------------
Net revenues 182,508 358,944
General and administrative expenses
Salaries expense 29,115 40,035
Administrative costs 103,137 132,600
Bad debt expense 25,000 15,000
Depreciation expense 2,151 2,151
------------ ------------
Total general and administrative expenses 159,403 189,786
------------ ------------
Net income from operations 23,105 169,158
Other income (expense):
Interest income 4,314 7,611
Interest expense (1,413) (1,766)
------------ ------------
Net income before tax provision 26,006 175,003
Income tax provision (11,579) (71,481)
------------ ------------
Net income $ 14,427 $ 103,522
============ ============
Net income per common share:
Basic and fully diluted $ 0.00 $ 0.02
Weighted average of common shares:
Basic and fully diluted 4,673,500 4,372,600
See the notes to the financial statements.
F-15
International Freight Logistics, Ltd.
Unaudited Statement of Cash Flows
For the Quarters Ended March 31st
3 Months 3 Months
31-Mar-04 31-Mar-03
------------ ------------
Operating Activities:
Net income $ 14,427 $ 103,522
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation expense 4,301 4,301
Bad debt expense 25,000 15,000
Interest income (4,314) (7,611)
Consulting fees 0 30,000
Changes in other operating assets
and liabilities:
Accounts receivable (29,125) (116,771)
Advances to employees 800 0
Accounts payable and accrued expenses (9,091) (15,781)
------------ ------------
Net cash provided (used) by operations 1,998 12,660
Investing Activities:
Purchase of property and equipment 0 0
------------ ------------
Net cash used by investing activities 0 0
Financing Activities:
Acquisition of bank loans 0 0
Payment of bank loans (2,296) 0
Shareholder (advances) receipts (1,786) 1,098
------------ ------------
Net cash provided (used) by financing activities (4,082) 1,098
------------ ------------
Net decrease in cash during the period (2,084) 13,758
Cash balance at beginning of year 9,019 26,778
------------ ------------
Cash balance at end of the period $ 6,935 $ 40,536
============ ============
Supplemental disclosures of cash flow information:
Interest paid during the period $ 1,413 $ 1,766
Income taxes paid during the period $ 0 $ 0
See the notes to the financial statements.
F-16
International Freight Logistics, Ltd.
Unaudited Statement of Shareholders' Equity
From January 1, 2003 to March 31, 2003
And From January 1, 2004 to March 31, 2004
Common Common Paid in Retained
Shares Amount Capital Earnings Total
--------- ------ -------- ---------- ----------
Balance at
December 31, 2002 4,643,500 $ 464 $238,461 $ (85,581) $ 153,344
Issued shares
for compensation 30,000 3 29,997 30,000
Net income
for the period 103,522 103,522
--------- ------ -------- ---------- ----------
Balance at
March 31, 2003 4,673,500 $ 467 $268,458 $ 17,941 $ 286,866
========= ====== ======== ========== ==========
Common Common Paid in Retained
Shares Amount Capital Earnings Total
--------- ------ -------- ---------- ----------
Balance at
December 31, 2003 4,673,500 $ 467 $268,458 $ (87,514) $ 181,411
Net income
for the period 14,427 14,427
--------- ------ -------- ---------- ----------
Balance at
March 31, 2004 4,673,500 $ 467 $268,458 $ (73,087) $ 195,838
========= ====== ======== ========== ==========
See the notes to the financial statements.
F-17
International Freight Logistics, Ltd.
Notes to the Financial Statements
For the Quarter Ended March 31, 2004
1. Organization and Summary of Significant Accounting Policies
International Freight Logistics Ltd. (the Company) is a privately held company
organized under the laws of the state of Delaware in June 1993. The Company is a
full-service international freight forwarding and warehousing company serving
destinations in Europe, Central and South America, and the United States. The
Company maintains an 19,800 square foot warehouse and office space in Lynbrook,
New York.
Use of Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principals requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure, if any, of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results may differ from these
estimates.
Cash & Cash Equivalents: Cash and cash equivalents include deposits at banks
and short term securities with maturity dates of less than three months from the
date of the balance sheets.
Revenue Recognition: Revenues from freight forwarding and warehousing are
recorded when the service has been delivered.
Bad Debt and Allowance for Doubtful Accounts: The allowance for doubtful
accounts is maintained at a level sufficient to provide for estimated credit
losses based on evaluating known and inherent risks in the receivables
portfolio. The Company provides, through charges to income, an allowance for
doubtful accounts which, based upon management's evaluation of numerous factors,
including economic conditions, a predictive analysis of the outcome of the
current portfolio and prior credit loss experience, is deemed adequate to cover
reasonably expected losses inherent in outstanding receivables.
Income Taxes: Effective March 31, 2002, the Company elected to be taxed as a
C Corporation under the Internal Revenue Service Code. Prior to that date, the
Company's taxable income is reported by the individual shareholder; therefore,
no provision for federal income taxes has been included in these financial
statements for the period from January to March, 2002.
The Company accounts for income taxes in accordance with the Statement of
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes".
SFAS No. 109 requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between financial statement and income tax
bases of assets and liabilities that will result in taxable income or deductible
expenses in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
F-18
Valuation allowances are established when necessary to reduce deferred tax
assets and liabilities to the amount expected to be realized. Income tax
expense is the tax payable or refundable for the period adjusted for the change
during the period in deferred tax assets and liabilities.
Property and Equipment: Property and equipment are stated at cost. Depreciation
of property and equipment is provided using the straight-line method over the
estimated useful life of the asset. Improvements made to leased property are
depreciated on a straight-line basis over the estimated useful life of the
improvement or the period of the lease remaining, whichever is less. The
following is a summary of the estimated useful lives used in computing
depreciation expense:
Equipment 5 years
Leasehold improvements 7 years
Vehicles 5 years
Furniture & fixtures 7 years
Expenditures for major repairs and renewals that extend the useful life of the
asset are capitalized. Minor repair expenditures are charged to expense as
incurred.
Long Lived Assets: The Company reviews for the impairment of long-lived assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount.
2. Bank Loans
The Company acquired loans from banks of $100,000 in 2002 and $90,000 in 2001.
The loans mature in five (5) years from origination date and are secured by the
personal guarantees of the officers of the Company, as well as a lien on the
company's receivables and other assets. The interest rates on the loans range
from 5.00% to 7.95%. The payment schedule of the loans at is as follows:
2005 $ 56,296
2006 57,641
2007 61,251
2008 3,774
----------
Total minimum payments $ 178,963
Less amounts representing interest (13,207)
----------
Present value of net minimum payments $ 165,755
==========
F-19
3. Provision for Income Taxes
31-Mar-04 31-Mar-03
------------ ------------
Net income before provision for income taxes $ 49,271 $ 205,003
============ ============
Current tax expense:
Federal $ 6,652 $ 50,981
State 4,927 20,500
------------ ------------
Total $ 11,579 $ 71,481
============ ============
A reconciliation of provision for income taxes at the statutory rate to
provision for income taxes at the Company's effective tax rate is as follows:
Statutory U.S. federal rate 15% 34%
Statutory state and local income tax 10% 10%
------------ ------------
Effective rate 25% 44%
============ ============
4. Earnings per Share
The Company applies SFAS No. 128, Earnings per Share in determining earnings per
share. In accordance with SFAS No. 128, basic net income per share has been
computed based upon the weighted average of common shares outstanding during the
year. All net income and net losses reported in the financial statements are
available to the common stockholders. The Company has no other financial
instruments outstanding that are convertible into common shares at March 31,
2004.
Shares outstanding 4,673,500
============
Weighted average 4,673,500
============
F-20
5. Property and Equipment
The property and equipment of the Company is as follows:
31-Mar-04 31-Dec-03
------------ ------------
Equipment $ 69,718 $ 69,719
Vehicles 22,717 22,717
Furniture 15,511 15,511
------------ ------------
Total property & equipment 107,946 107,947
Less accumulated depreciation (82,657) (78,356)
------------ ------------
Net property and equipment $ 25,289 $ 29,590
============ ============
6. Related Party Transactions
The Company gave unsecured advances to the chairman and majority shareholder.
The Company imputed interest on the advances at 8.50% and recorded interest of
$14,705 for the quarter ended March 31, 2004.
The chairman of the board and the president of the Company have provided
personal guarantees to the bank loans discussed in Note 2 at no cost to the
Company.
F-21