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 March 31, 2002
[ ] 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.
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(Name of Small Business Issuer in its Charter)
COLORADO 84-1191355
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
136 Freeway Drive, East Orange, NJ 07018
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(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:
May 20, 2002
Common Voting Stock: 30,218,338
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Balance Sheet
March 31, 2002
Assets
Current Assets
Cash and equivalents $ -
Accounts receivable, net of allowance for
doubtful accounts of $37,497 1,278,221
Prepaid expenses 46,087
---------
Total Current Assets 1,324,308
---------
Property and equipment, at cost, less
accumulated depreciation 304,194
---------
Goodwill and customer lists, net of
accumulated amortization 102,711
---------
Other Assets
Security deposits 61,500
Other assets 208,807
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Total Other Assets 270,307
---------
Total Assets $ 2,001,520
=========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 918,218
Convertible Debenture 200,000
Notes payable to bank 413,002
Current maturities of long-term debt 145,000
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Total Current Liabilities 1,683,666
Loan payable 789,791
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Total Liabilities 2,473,457
---------
Stockholders Equity
Common stock, no par value; 50,000,000
shares authorized, 31,159,205 shares issued
and outstanding 3,007,892
Additional paid-in capital - stock options 36,748
Retained earnings (2,283,516)
Accumulated other comprehensive income (54,706)
Less: treasury stock, 235,652 shares at cost (456,675)
Consulting services to be provided (721,680)
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Total Stockholders' Equity (471,937)
---------
Total Liabilities and Stockholders' Equity $ 2,001,520
=========
See notes to condensed consolidated financial statements.
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Operations
Three Months Ended
March 31,
2002 2001
---------------------
Operating Revenues $ 3,533,480 $ 1,600,120
Direct Operating Expenses 2,496,468 1,190,257
--------- ---------
Gross Profit 1,037,012 409,863
Operating Expenses
Selling, general and administrative 848,174 634,562
Stock issued for consulting services 24 920 -
Depreciation and amortization 58,272 59,427
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Total Operating Expenses 931,366 693,989
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Operating Income (Loss) 105,646 (284,126)
Other Income (Expense)
Interest expense (11,985) (16,628)
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Total Other Income (Expense) (11,985) (16,628)
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Income (Loss) Before Income Taxes 93,661 (300,754)
(Provision) Benefit for Income Taxes - -
--------- ---------
Income (Loss) Before Minority Interest 93,661 (300,754)
Minority Interest (35,280) -
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Net Income (Loss) $ 58,381 $ (300,754)
========= =========
Earnings Per Share
Income from continuing operations $ - $ (0.01)
Discontinued operations - -
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Basic and diluted earnings per share $ - $ (0.01)
========= =========
Weighted Average Number of Common Shares
Outstanding
Basic 25,412,881 20,902,500
Diluted 25,412,881 20,902,500
See notes to condensed consolidated financial statements.
Transportation Logistics Int'l Inc. and Subsidiaries
Consolidated Condensed Interim Statements of Cash Flows
Three Months Ended
March 31,
2002 2001
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Cash Provided by (Used in) Operating Activities $ 106,675 $(233,497)
Cash Flows From Investing Activities
Purchase of property and equipment - (51,408)
Collection of notes receivable - 408,383
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Net Cash Provided by Investing Activities - 356,975
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Cash Flows From Financing Activities
Loan payable, net (130,342) 127,834
Proceeds from bank loans - 110,626
Loans to affiliates - (117,630)
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Net Cash Provided by (Used in) Financing
Activities (130,342) 120,830
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Net Increase (Decrease) in Cash and Equivalents (23,667) 244,308
Cash and Equivalents at Beginning of Period 23,667 195,616
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Cash and Equivalents at End of Period $ - $ 439,924
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 11,985 $ 16,628
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Income taxes $ - $ -
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See notes to condensed consolidated financial statements.
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 three months ended March 31, 2002
are not necessarily indicative of the results that may be expected for the
year ended December 31, 2002. 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-KSB for
the year ended December 31, 2001.
STOCK ISSUED FOR CONSULTING SERVICES
During the first quarter of 2002 the Company issued 7,730,000 shares of common
stock in consideration of commitments from the recipients to provide consulting
services. The terms of the consulting agreements vary from two to five years.
The market value of the common stock on the date of issuance will be recorded
as an expense - "stock issued for consulting services" over the term of each
consulting agreement.
SUBSEQUENT EVENT - SALE OF TLI(U.K.)
On April 19, 2002 the Company sold all of the capital stock of its subsidiary,
Transportation Logistics Int'l (UK) Ltd. ("TLI(U.K.)"). TLI(U.K.) was sold
to four individuals, including James Thorpe, who had been a member of the
Board of Directors and President of the Company. Mr. Thorpe resigned from
those positions on April 19, 2002. The purchase price given by the purchasers
consisted of (a) $35,000 to be paid between November 2002 and April 2003 and
(b) 940,867 shares of the Company's common stock, which were surrendered
by Mr. Thorpe. As part of the transaction, TLI(U.K.) and the purchasers
agreed that if within the next two years they participate in the Translogistics
Network or in any similar cooperative global network of logistics providers,
then 50% of the profits they derive from the network during the next five years
will be paid to the Company.
OPERATING SEGMENTS
The Company's operations are classified into five principal reportable segments
that provide different products or services: U.S. Logistics Services, Foreign
Logistics Services, Student transportation, Employee leasing service, and
financial services. Separate management of each segment is required because
each business unit is subject to different marketing and operating strategies
and different geographic locations.
Reportable Segments Three Months Ended March 31, 2002
US Foreign Student Employee
Logistics Logistics Transportation Leasing Financial
Services Services Services Services Services Total
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External Revenue $ 27,807 $858,842 $773,620 $1,227,554 $ 645,657 $3,533,480
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Depreciation and Amortization $ - $ - $ 25,400 $ 10,208 $ 22,664 $ 58,272
====================================================================
Operating Income (Loss) $ (19,024) $ 27,148 $ 35,055 $ 36,709 $ 25,758 $ 105,646
====================================================================
Assets $ 22,001 $ 919 $607,140 $ 342.281 $1,029,179 $2,001,520
====================================================================
Capital Expenditures $ - $ - $ - $ - $ - $ -
====================================================================
Reportable Segments Three Months Ended March 31, 2001
U.S. Foreign Student
Logistics Logistics Transportation
Services Services Services Total
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External Revenue $ 355,162 $ 494,851 $ 750,107 $1,600,120
=================================================
Depreciation and
Amortization $ 22,684 $ - $ 36,764 $ 59,448
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Operating Income (Loss) $ (303,585) $(174,437) $ 193,897 $ (284,125)
=================================================
Assets $2,513,017 $ 849,548 $ 608,539 $3,971,104
=================================================
Capital Expenditures $ 51,408 $ - $ - $ 51,408
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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 our actual results to differ from the results
suggested in this Report. Among the more significant risks are:
* the fact that Transportation Logistics' growth will be limited by its
ability to obtain additional capital;
* the fact that the industry in which Transportation Logistics operates is
dominated by large logistics companies, against whom Transportation
Logistics must compete;
* the fact that the Transportation Logistics has recently begun to
integrate a number of new logistics-related services with its established
consolidation and delivery operations, and does not know yet how efficient
the integration will be or whether this "full service" approach to
logistics will be successful; and
* 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
During 2001 we reoriented our business plan, moving away from a dominant focus
on international logistics operations and moving towards the establishment of
Transportation Logistics as a full-service provider of logistics and logistic-
related services. In the first quarter of 2002 we experienced the first
benefits of that reorientation, as we achieved a return to profitability.
Subsequent to the end of the quarter we sold TLI(U.K.), the subsidiary which
is devoted to international logistics, thus finalizing the reorientation of
our business.
In addition to the influence of our new business plan, the decision to sell
TLI(U.K.) was spurred by the dramatic fall-off in the business of that company.
During 2001, as a result of the worldwide business recession and other factors,
revenue from our foreign logistics operations fell to $2,289,505 from
$2,734,390 in 2000. In the first quarter of 2002, revenue from this segment
increased to $858,842 (compared to $494,851 in the first quarter of 2001), but
the operations were still only marginally profitable, yielding operating income
of $27,148. Based on these results and the continuing distress in the world,
it became apparent that the subsidiary would not in the near term contribute
to the growth of Transportation Logistics. For that reason the decision was
made to sell TLI (U.K.) to its managers in the U.K.
The services we provide to the logistics industry - our personnel services and
our financial services - continued to grow during the first quarter of 2002.
Revenue from these businesses totaled $1,873,211. The personnel services
division generated operating income of $36,709 during the recent quarter, and
the financial services division generated operating income of $25,758 during
the recent quarter. During 2002 we expect both of these divisions to expand
substantially, particularly the financial services division, which was
initiated late in 2001. The expansion of these operations should enable them
to make a more significant contribution to our overall profitability, as they
gain the benefits of economies of scale.
Revenue from Pupil Transportation were 3% greater in the first quarter of 2002
than in the first quarter of 2001, reflecting the increased number of contracts
being serviced. At the same time, operating income at Pupil Transportation
(before the allocation of corporate overhead) increased by 6%. The improvement
in profitability is primarily the result of efficiencies gained in this
division by upgrading our fleet, as well as the positive effects of our ongoing
driver training programs. Since the summer of 2001 our insurance claims in
this division have been reduced by 78%. The reported operating income for this
segment was $35,055, as compared to operating income of $193,897 reported for
the first quarter of 2001. The reduction reflects our new policy regarding
allocation of corporate overhead among our subsidiaries.
Our operating divisions, in aggregate, produced $289,571 in operating income
for the first quarter of 2002, before the allocation of corporate overhead.
That operating income was offset, however, by $195,910 in expenses attributable
to the operations of the corporate parent. These expenses primarily relate to
corporate management, including the professional fees that are attendant to
being a public company. In addition, one of the ways in which we established
the network of significant relationships that facilitate our business
operations was by issuing common stock to consultants and other individuals
and enterprises which committed to assist our development. During the first
quarter of 2002 we recorded $24,920 in expenses attributable to the market
value of that stock. Our expectation is that these non-cash expenses will be
offset by future cash benefits arising from the relationships we are
developing.
Our overall gross profit margin for the first quarter of 2002 was 29%. This
represents an improvement from the 26% margin realized in the first quarter
of 2001. The improvement is attributable to the fact that in the beginning
of 2001 our revenues were primarily transportation revenues, and our gross
margins were dictated by the shipping industry: 12%-18% for ocean freight
and 25% for air freight Our revenues in the first quarter of 2002 were
primarily from our logistics-related services (personnel and finance). The
range within which we can expect the gross margin from our new logistics-
related services has not yet been determined, as those divisions do not have
sufficient operating history to be predictive. Our goal, however, is to
continue to achieve the margin reported for the first quarter of this year.
Selling, general and administrative expenses of $873,094 (including stock
issued for consulting services) during the first quarter of 2002 represented
25% of revenue, compared to a ratio of 40% in the first quarter of 2001. This
dramatic improvement occurred primarily because we have made a concerted
effort to increase the efficiency of our overall operations. In addition,
S,G&A expenses in 2001 included costs attributable to our efforts to acquire
and develop the several subsidiaries which comprise our personnel and
financial services divisions.
Liquidity and Capital Resources
The primary 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 resources. With additional capital
resources, we expect to be able to expand all of our service offerings to
achieve the economies of scale that will facilitate profitability and growth.
Our operations produced positive cash of $106,675 during the first quarter of
2002. The entirety of that sum, and more, was used to satisfy outstanding
debts. As a result, our working capital deficit at March 31, 2002 totaled
$359,358, an improvement of $80,967 compared with the working capital deficit
on $440,325 at December 31, 2001. While the existence of a working capital
deficit remains a impediment to our growth, our ability to whittle away at it
in this manner is evidence of our ability to sustain operations until we
achieve positive working capital.
At the present time the only significant credit available to us is a facility
of up to $2,000,000, based on eligible receivables, which was issued by
Merchant Financial Corp. At March 31, 2002 we had an outstanding balance of
$413,002 due to Merchant Financial. The facility expires on June 1, 2002;
however, we expect Merchant Financial to extend the term of the credit
facility.
Our working capital position is sufficient to sustain our present operations
and to fuel a modest growth rate. Our business plan, however, calls for
dramatic growth. To fund that growth, we will require additional capital
resources. Management, therefore, is actively engaged in exploring
opportunities for equity or debt financing, to obtain the funds needed for
this planned expansion.
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 thereunto duly authorized.
TRANSPORTATION LOGISTICS INT'L, INC.
Date: May 20, 2002 By: /s/ Michael Margolies
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Michael Margolies, Chief Executive Officer,
Chief Financial Officer, Chief Accounting Officer