AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON February 17, 2004
Registration No.__________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
SEGMENTZ, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 7372 03-0450326
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
18302 Highwoods Preserve Parkway, Suite 100
Tampa, Florida 33647
(813) 989-2232
(Address and Telephone Number of Principal Executive Offices)
-------------------------
John S. Flynn
18302 Highwoods Preserve Parkway, Suite 100
Tampa, Florida 33647
(813) 989-2232
(Name, Address and Telephone Number of Agent For Service)
------------------------------
Copies of all communications to:
Joel D. Mayersohn, Esq.
Adorno & Yoss, P.A.
350 East Las Olas Boulevard, Suite 1700
Fort Lauderdale, FL 33301
Telephone: (954) 763-1200
Facsimile No. (954) 766-7800
Approximate Date of Proposed Sale to the Public: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum
Class of Securities Amount to be Offering Price Aggregate Amount of
to be Registered Registered Per Security Offering Price Registration Fee
---------------- ------------ ------------ --------------- ----------------
Common Stock, par value 12,577,330 $2.64 $33,204,151 $4,207
$0.001 per share (1)
Common Stock, par value 6,141,248 $2.64 $16,212,894 $2,055
$0.001 per share (2)
Total Registration Fee $6,262
----------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457. Based upon the average of the closing bid and asked prices
for the common stock on February 10, 2004.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457. Shares issuable upon exercise of common stock purchase
warrants. Based upon the average of the closing bid and asked prices for
the common stock on February 10, 2004, which is higher than the weighted
average exercise price of the shares of common stock underlying common
stock purchase warrants.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the securities act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
section 8(a), may determine.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
ii
Subject to Completion
PROSPECTUS
SEGMENTZ, INC.
18,718,578 Shares of Common Stock
This prospectus covers the 12,577,330 shares of common stock of Segmentz,
Inc. being offered for resale by certain selling security holders. We will not
receive any proceeds from the sale of the shares by the selling security
holders. This prospectus also covers 6,141,248 shares of common stock of
Segmentz, Inc. underlying common stock purchase warrants being offered for
resale by certain selling security holders. Upon exercise of the common stock
purchase warrants Segmentz, Inc. will receive proceeds in the amount of the
exercise price, which proceeds will be used for working capital.
Our common stock is traded over-the-counter, on the OTC Bulletin Board,
under the trading symbol "SEGZ". On February 10, 2004, the closing price for our
common stock was $2.64.
-----------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------
The date of this prospectus is February ___, 2004
PROSPECTUS SUMMARY
THE COMPANY
Segmentz, Inc. (the "Company"), is a Delaware corporation based in Tampa,
Florida that provides transportation logistics management services and support
for mid-sized and national corporate clients. The Company serves direct users of
transport, storage, staging, warehouse services and other logistics services.
The Company was initially incorporated in Florida as Rose Auto Stores
Inc., ("Rose"} in 1952. On February 10, 1999, Rose filed a Petition of
Bankruptcy pursuant to Chapter 11 and a Bankruptcy Plan was confirmed on April
22, 1999. On May 17, 2000, Rose reincorporated in Delaware as RAS Acquisition
Corp. ("RAS"), and on January 31, 2001, merged with WBNI and changed its name to
WBNI, Inc. On October 29, 2001, WBNI acquired TRANSL Holdings, Inc., which
wholly owned Trans-Logistics, Inc., a Florida corporation ("Trans-Logistics").
On November 1, 2001, WBNI, Inc. changed its name to Segmentz, Inc.
The Company has principal executive offices located at 18302 Highwoods
Preserve Parkway, Suite 100, Tampa, Florida 33467. The telephone number is (813)
989-2232. The internet web site address is http://www.segmentz.com.
References throughout this prospectus to "we", "us" and "our" are to
Segmentz, Inc. and any subsidiaries it may have.
THE OFFERING
Securities Offered............... 12,577,330 shares of Common Stock and
6,141,248 shares of Common Stock
issuable upon exercise of Common Stock
Purchase Warrants. See "Description of
Securities."
Common Stock Outstanding:
Prior to the Offering ...... 19,724,402 shares
After the Offering ........ 19,724,402 shares, excluding 6,622,498
shares that are issuable upon exercise of
common stock purchase warrants
Common Stock Reserved .......... 6,622,498 shares issuable upon exercise of
common stock purchase warrants that have
been issued.
2
Use of Proceeds by Company....... Proceeds received upon the exercise of
common stock purchase warrants will be
used by the Company for working capital.
Risk Factors...................... This offering involves a high degree of
risk. See "Risk Factors"
OTCBB Symbol...................... Common Stock -- "SEGZ"
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data as of
and for each of the fiscal years ended December 31, 2001 and 2002 which have
been derived from our audited financial statements included elsewhere in this
Prospectus, as well as from our unaudited consolidated financial statements for
the nine month period ended September 30, 2002 and 2003. The information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and related
notes.
Years Ended December 31 9 Months Ended Sept 30
Audited Unaudited
-------------------------- --------------------------
2002 2001 2003 2002
----------- ----------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Operating revenues $ 9,994,506 $ 8,467,230 $10,234,277 $ 6,150,351
Operating expenses $ 9,620,391 $ 9,123,651 $ 9,775,066 $ 5,864,940
Net income (loss) from operations
before taxes $ 374,115 $ (656,421) $ 459,211 $ 285,411
=========== =========== =========== ===========
Basic earnings (loss)
Per common share $ 0.06 $ (0.10) $ 0.04 $ 0.04
=========== =========== =========== ===========
December 31, 2002 September 30, 2003
----------------- ------------------
BALANCE SHEET DATA: (Unaudited)
Working capital ........................ $ 722,531 $2,203,361
Current assets ......................... $3,357,015 $5,300,732
Total assets ........................... $3,593,689 $8,636,562
Current liabilities .................... $2,634,484 $3,097,371
Long-term debt ......................... $ 0 $ 200,770
Total liabilities ...................... $2,634,484 $3,298,141
Shareholders' equity ................... $ 959,205 $5,338,421
3
RISK FACTORS
LOSSES FROM OPERATIONS; NO ASSURANCES OF PROFITABILITY
Although we had net income from operations of $374,115 for the year ended
December 31, 2002, we experienced a net loss in the year ended December 31, 2001
of ($656,421), and there can be no assurance that we will not incur net losses
in the future. Our operating expenses have increased as our business has grown
and can be expected to increase significantly as a result of our expansion
efforts. There can be no assurance that we will be able to generate sufficient
revenue to meet its operating expenditures or to operate profitably.
ECONOMIC RISKS; RISKS ASSOCIATED WITH THE BUSINESS OF TRANSPORTATION LOGISTICS
MANAGEMENT
Our business is dependent upon a number of factors, over which we have
little or no control, that may have a material adverse effect on our business.
These factors include excess capacity in the trucking industry, significant
increases or rapid fluctuations in fuel prices, interest rates, fuel taxes,
government regulations, governmental and law enforcement anti-terrorism actions,
tolls, license and registration fees, insurance premiums and labor costs. It is
difficult at times to attract and retain qualified drivers and owner-operators.
Operations also are affected by recessionary economic cycles and downturns in
our customers' business cycles, particularly in market segments and industries
(such as retail and paper products) in which we have a significant concentration
of customers. Seasonal factors could also adversely effect us. Our customers
tend to reduce shipments after the winter holiday season and operating expenses
tend to be higher in the winter months primarily due to increased operating
costs in colder weather and higher fuel consumption as a result of increased
idle time. Regional or nationwide fuel shortages could also have adverse
effects.
DEPENDENCE ON EQUIPMENT PROVIDED BY THIRD PARTIES; RELIANCE ON INDEPENDENT
CONTRACTORS
The trucking industry is dependent upon transportation equipment such as
chassis, containers and rail, truck and ocean services provided by independent
third parties. Periods of equipment shortages have occurred historically in the
transportation industry, particularly in a strong economy. If we cannot secure
sufficient transportation equipment or transportation services from these third
parties to meet the customers' needs, the business, results of operations and
financial position could be materially adversely effected and customers could
seek to have their transportation and logistics needs met by other third parties
on a temporary or permanent basis. The reliance on agents and independent
contractors could reduce operating control and the strength of relationships
with customers, and we may have trouble attracting and retaining agents and
independent contractors.
4
NEW TRENDS AND TECHNOLOGY; CONSOLIDATION AMONG CUSTOMERS
If, for any reason, our business of providing warehousing and logistic
services ceases to be a preferred method of outsourcing these functions, or if
new technological methods become available and widely utilized, our business
could be adversely effected. Moreover, increasing consolidation among customers
and the resulting ability of such customers to utilize their size to negotiate
lower outsourcing costs has, and may continue in the future to have, a
depressing effect on the pricing of third-party logistic services.
INTERRUPTION OF BUSINESS DUE TO INCREASED SECURITY MEASURES IN RESPONSE TO
TERRORISM
The continued threat of terrorism within the United States and the ongoing
military action and heightened security measures in response to such threat has
and may cause significant disruption to commerce. Our business depends on the
free flow of products and services through these channels of commerce. Recently,
in response to terrorists' activities and threats aimed at the United States,
transportation and other services have been slowed or stopped altogether.
Further delays or stoppages in transportation or other services could have a
material adverse effect on our business, results of operations and financial
condition. Furthermore, we may experience an increase in operating costs, such
as costs for transportation, insurance and security as a result of the
activities and potential activities. We may also face interruption of services
due to increased security measures in response to terrorism. The U.S. economy in
general is being adversely effected by the terrorist activities and potential
activities. Any economic downturn could adversely impact our results of
operations, impair our ability to raise capital or otherwise adversely effect
our ability to grow our business. It is impossible to predict how this may
effect our business or the economy in the U.S. and in the world, generally. In
the event of further threats or acts of terrorism, our business and operations
may be severely and adversely effected or destroyed.
COMPETITION
The transportation services industry is heavily fragmented and intensely
competitive and includes numerous regional, inter-regional and national
competitors, none of which dominates the market.
REGULATION
Our operations are subject to various federal, state and local laws and
regulations. Although compliance with these laws and regulations has not had a
material effect on our operations or financial condition, there is no assurance
that additions or changes to current laws or regulations will not have a
material effect on us, our profitability and our financial condition.
5
SUBSTANTIAL ALTERATION OF OUR CURRENT BUSINESS AND REVENUE MODEL
Our present business and revenue model represents the current view of the
optimal business and revenue structure which is to derive revenues and achieve
profitability in the shortest period of time. There can be no assurance that
current models will not be altered significantly or replaced with an alternative
model that is driven by motivations other than near-term revenues and/or
profitability (for example, building market share before our competitors). Any
such alteration or replacement of the business and revenue model may ultimately
result in the deferring of certain revenues in favor of potentially establishing
larger market share. We cannot assure that any adjustment or change in the
business and revenue model will prove to be successful.
INABILITY TO MANAGE GROWTH AND INTERNAL EXPANSION
We have not yet undergone the significant managerial and internal
expansion that we expect will occur, and our inability to manage growth could
hurt our results of operations. Expansion of our operations will be required to
address anticipated growth of our customer base and market opportunities.
Expansion will place a significant strain on our management, operational and
financial resources. Currently, we have a limited number of employees. We will
need to improve existing procedures and controls as well as implement new
transaction processing, operational and financial systems, procedures and
controls to expand, train and manage our employee base. Our failure to manage
growth effectively could have a damaging effect on our business, results of
operations and financial condition.
DEPENDENCE ON KEY MANAGEMENT; LOSS OF KEY MANAGEMENT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OPERATIONS
We believe that the attraction and retention of qualified personnel is
critical to success. If we lose key personnel or we are unable to recruit
qualified personnel, the ability to manage the day-to- day aspects of the
business will be weakened. Our operations and prospects depend in large part on
the performance of the senior management team. The loss of the services of one
or more members of the senior management team, could have a material adverse
effect on the business, financial condition and results of operation. Because
the senior management team has unique experience with us and within the
transportation industry, it would be difficult to replace them without adversely
effecting our business operations. In addition to their unique experience, the
management team has fostered key relationships with the our suppliers. These
relationships are especially important to a non-asset based company such as
Segmentz and the loss of these relationships could have a material adverse
effect on our profitability.
Our business is dependent on the services of our Chairman and CEO, Allan
Marshall. Loss of Mr. Marshall's services could have material adverse effect on
operations. We have secured "Key- man" life insurance on Mr. Marshall on behalf
of the Company and its shareholders in an amount of three million dollars.
6
NEED FOR SUBSTANTIAL, ADDITIONAL FINANCING
There is no guarantee that we will be able to obtain financing required to
continue to expand our business or that our present funding sources will
continue to extend terms under which we can operate efficiently. If we are
unable to secure financing under favorable terms, we may be materially adversely
effected. We also rely on factors to expedite cash flow. There is no assurance
that we will continue to be able to factor our receivables or to obtain either
replacement or additional financing on acceptable terms.
Our continued viability depends on our ability to raise capital. Changes
in economic, regulatory or competitive conditions may lead to cost increases.
Management may also determine that it is in our best interest to expand more
rapidly than currently intended, to expand marketing activities, to develop new
or enhance existing services or products, to respond to competitive pressures or
to acquire complementary services, businesses or technologies. In any such case
or other change of circumstance, additional financing will be necessary. If any
additional financing is required, there can be no assurances that we will be
able to obtain such additional financing on terms acceptable to us and at times
required by us, if at all. In such event, we may be required to materially alter
our business plan or curtail all or a part of our expansion plans.
VOLATILITY OF THE MARKET PRICE OF OUR STOCK
The market price of our common stock may be volatile, which could cause
the value of your investment to decline. Any of the following factors could
effect the market price of our common stock:
o changes in earnings estimates and outlook by financial analysts;
o our failure to meet financial analysts' and investors' performance
expectations;
o changes in market valuations of other transportation and logistics
companies; and
o general market and economic conditions.
In addition, many of the risks described elsewhere in this "Risk Factors"
section could materially and adversely effect the stock price. The stock markets
have experienced price and volume volatility that have effected many companies'
stock prices. Stock prices for many companies have experienced wide fluctuations
that have often been unrelated to the operating performance of those companies.
These types of fluctuations may effect the market price of our common stock.
APPLICABILITY OF LOW PRICED STOCK RISK DISCLOSURE REQUIREMENTS
Our common stock may be considered a low priced security under rules
promulgated under the Securities Exchange Act of 1934 ("Exchange Act"). Under
these rules, broker-dealers participating in transactions in low priced
securities must first deliver a risk disclosure document which describes that
risks associated with such stock, the broker-dealer's duties, the customer's
rights and remedies, and certain market and other information, and make a
suitability determination approving the customer for low priced stock
transactions based on customer's financial situation,
7
investment experience and objectives. Broker-dealers must also disclose these
restrictions in writing and provide monthly account statements to the customer,
and obtain specific written consent of the customer. With these restrictions,
the likely effect of designation as a low price stock, would be to decrease the
willingness of broker-dealers to make a market for the stock, to decrease the
liquidity of the stock and to increase the transaction costs of sales and
purchase of such stocks compared to other securities.
DILUTION; RESALES UNDER THIS PROSPECTUS MAY SIGNIFICANTLY INCREASE THE NUMBER OF
SHARES IN THE PUBLIC MARKET RESULTING IN MARKET PRESSURE THAT MAY CAUSE THE
PRICE FOR OUR SHARES TO DROP OR REMAIN AT LOW LEVELS
Prior to this offering, approximately 598,000 shares of our common stock
were freely tradeable in the public market. The addition to the public market of
the 12,577,330 shares covered by this prospectus, in addition to the 6,141,248
shares that will become free-trading upon exercise of common stock purchase
warrants, could cause the market price of our shares to fall or remain at lower
levels. The sale, or availability for sale, of a substantial number of shares of
common stock in the public market subsequent to the offering under Rule 144
under the Securities Act of 1933 ("Securities Act") or this prospectus or
otherwise, could have a major negative effect on the market price of our common
stock. It could also limit our ability to raise additional capital from the sale
of our equity securities or debt financing.
NO DIVIDENDS ANTICIPATED
We intend to retain all future earnings for use in the development of our
business and do not anticipate paying any cash dividends on the Common Stock in
the foreseeable future. See "Price Range of Common Stock and Dividend Policy."
FORWARD LOOKING STATEMENTS
Certain statements contained in this prospectus regarding matters that are
not historical facts are forward-looking statements. All statements which
address operating performance, events or developments that management expects or
anticipates to incur in the future, including statements relating to sales and
earnings growth or statements expressing general optimism about future operating
results, are forward-looking statements. Because such forward-looking statements
include risks and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements. The forward-looking
statements are based on management's current views and assumptions regarding
future events and operating performance. Many factors could cause actual results
to differ materially from estimates contained in management's forward-looking
statements. The differences may be caused by a variety of factors, including,
but not limited to, adverse economic conditions, competitive pressures,
inadequate capital, unexpected costs, lower revenues, net income and forecasts,
the possibility of fluctuation and volatility of our operating results and
financial condition, inability to carry out marketing and sales plans and loss
of key executives, among other things. These factors, as well as others, are
discussed under "Risk Factors" and elsewhere in this prospectus.
8
USE OF PROCEEDS
We will not receive any proceeds upon the sale of shares by the selling
security holders. We will receive proceeds in the amount of the exercise price
in the event the selling security holders exercise their common stock purchase
warrants. In the event that the Company receives proceeds consequential to the
exercise of warrants in concert with this registration it will use proceeds to
acquire additional companies, make capital investments to enhance its technology
and support expanding operational requirements, and for general working capital
purposes.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2003. The table should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this prospectus. The table
does not give effect to the issuance of up to 6,622,498 shares of common stock
in the event common stock purchase warrants that have been granted, are
exercised or the issuance of up to 776,896 shares in the event of the conversion
into common stock of shares of our preferred stock that were issued and
outstanding as of September 30, 2003.
SEPT 30, 2003
-------------
(Unaudited)
Total current liabilities .................................. $3,097,371
Long term loan ............................................. $ 200,770
----------
Shareholder's equity (deficit):
Common Stock, $0.001 par value,
40,000,000 shares authorized,
13,609,713 shares issued and
outstanding ................................................ $ 13,610
Preferred stock, $0.001 par value,
10,000,000 shares authorized,
1,188,819 shares issued or outstanding ..................... $1,188,819
Additional paid-in capital ................................. $4,059,495
Stock payable .............................................. $ 20,000
Retained earnings .......................................... $ 56,497
----------
Total shareholder's equity ................................. $5,338,421
==========
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our shares of common stock are traded on the OTC Electronic Bulletin Board
under the symbol "SEGZ". The reported high and low bid prices for the common
stock are shown below. The closing price on February 10, 2004 was $2.64. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commissions, and may not represent actual transactions.
9
Period High Low
------ ---- ---
January 1, 2002 - March 31, 2002 $0.75 $0.10
April 1, 2002 - June 30, 2002 $0.75 $0.50
July 1, 2002 - September 30, 2002 $1.10 $0.75
October 1, 2002 - December 31, 2002 $1.47 $0.91
January 1, 2003 - March 31, 2003 $1.45 $0.76
April 1, 2003 - June 30, 2003 $1.22 $0.76
July 1, 2003 - September 30, 2003 $1.37 $0.90
October 1, 2003 - December 31, 2003 $1.75 $1.12
January 1, 2004 - February 10, 2004 $2.88 $1.10
Our common stock is owned of record by approximately 568 holders. We have
never paid cash dividends on our common stock. We intend to keep future
earnings, if any, to finance the expansion of our business, and we do not
anticipate that any cash dividends will be paid in the foreseeable future. Our
future payment of dividends will depend on our earnings, capital requirements,
expansion plans, financial condition and other relevant factors.
The price of our common stock may be subject to wide fluctuations in
response to the following and other factors:
o quarter-to-quarter variations in our operating results;
o our announcement of material events that effect our business;
o price fluctuations in sympathy to others engaged in our industry;
and
o the effects of coverage of our business or our management by the
press.
If we do not have a substantial market for our shares, a significant
number of shares being sold could greatly effect the market and cause a decline
in the price of our common stock. Moreover, historic market prices may not be
indicative of the prices at which our shares can be bought or sold.
The Securities and Exchange Commission ("SEC") has adopted regulations
which generally define a "penny stock" to be any equity security that has a
market price of less than $5.00 per share, subject to certain exceptions.
Depending on market fluctuations, our common stock could be considered to be a
"penny stock". A penny stock is subject to rules that impose additional sales
practice requirements on broker/dealers who sell these securities to persons
other than established customers and accredited investors. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase of these securities. In addition he must receive
the purchaser's written consent to the transaction prior to the purchase. He
must also provide certain written disclosures to the purchaser. Consequently,
the "penny stock" rules may restrict the ability of broker/dealers to sell our
securities, and may negatively effect the ability of holders of shares of our
common stock to resell them.
10
SELLING SECURITY HOLDERS
The following table sets forth the name of each selling security holder,
the number or shares of common stock beneficially owned by each selling security
holder as of the date of this prospectus, giving effect to the exercise of the
selling security holders' options, if any, into shares of common stock, and the
number of shares being offered by each selling security holder. The shares of
common stock being offered are being registered to permit public sales and the
selling security holders may offer all or part of the shares for resale from
time to time. All expenses of the registration of the common stock on behalf of
the selling security holder are being borne by the Company. We will receive none
of the proceeds of this offering. We will receive proceeds in the amount of the
exercise price in the event the selling security holders exercise their common
stock purchase warrants.
The following table is derived from our books and records, as well as from
those of our transfer agent. No selling security holder is affiliated with us
except John S. Flynn, our President and Chief Financial Officer, and Dennis
McCaffrey, our Chief Operating Officer. All shares listed for resale reflect
currently outstanding shares of our common stock, unless otherwise stated.
Shares Beneficially Shares Beneficially Owned
Owned Prior to the Offering After Completion of the Offering
--------------------------------------------------- --------------------------------
Total Shares Percent of Number of Shares Shares Beneficially Percent of
Beneficially Class Before Offered Pursuant Owned After Class After
Selling Security Holder Owned Offering to this Prospectus Offering Offering
--------------------------------------------------------------------------------------------------------------------
Paul Alberti (1) 30,000 * 30,000 0 *
Aludel Fund, L.P. (24) 199,000 1.0% 199,000 0 *
Aludel Fund, L.P. (38) 100,000 * 100,000 0 *
Kenneth Ball & Lora Ball (1) 60,000 * 60,000 0 *
Barron Partners, LP (19)(21) 3,266,667 15.5% 3,266,667 0 *
Barron Capital
Advisors LLC (22) 770,000 3.9% 770,000 0 *
Dominic Bassani (45) 12,500 * 12,500 0 *
Anthony Beninato &
Johanne Beninato (1) 30,000 * 30,000 0 *
John Bennice (1) 30,000 * 30,000 0 *
Patrick Boyce &
Sonja Boyce (1) 60,000 * 60,000 0 *
Jim Brownell (1) 120,000 * 120,000 0 *
Edward B. II Cloues(15) 119,000 * 119,000 0 *
Dennis Codon (1) 30,000 * 30,000 0 *
Leonard Cohen (1) 30,000 * 30,000 0 *
John E. Cole Jr.(1) 60,000 * 60,000 0 *
Core Fund, L.P. (33) 375,000 1.9% 375,000 0 *
Mathew Crisp 1,500 * 1,500 0 *
Dan Crowther (46) 6,250 * 6,250 0 *
CSL Associates LP (25)(43) 150,000 * 150,000 0 *
Thomas Davison (1) 30,000 * 30,000 0 *
Fred Deoliviera &
Diane Deoliviera (1) 30,000 * 30,000 0 *
11
Shares Beneficially Shares Beneficially Owned
Owned Prior to the Offering After Completion of the Offering
--------------------------------------------------- --------------------------------
Total Shares Percent of Number of Shares Shares Beneficially Percent of
Beneficially Class Before Offered Pursuant Owned After Class After
Selling Security Holder Owned Offering to this Prospectus Offering Offering
--------------------------------------------------------------------------------------------------------------------
Henry E. Dietz Trust UTA(1)(2) 360,000 1.8% 360,000 0 *
Max Dieujuste (1) 30,000 * 30,000 0 *
John Evans &
Jeanne Evans (1) 30,000 * 30,000 0 *
Lawrence Feld (1) 30,000 * 30,000 0 *
John S. Flynn (47) 400,000 2.0% 50,000 350,000 1.8%
Julie Foreman 100,000 * 100,000 0 *
Robert Friess (1) 30,000 * 30,000 0 *
Peter Giroux (1) 60,000 * 60,000 0 *
Global Portal, Inc. (1)(3) 30,000 * 30,000 0 *
Karen S. Goldaber (18) 60,000 * 60,000 0 *
Sharon K. Goldaber (18) 60,000 * 60,000 0 *
Ron Harden &
Kristina Harden (1) 60,000 * 60,000 0 *
Arthur Hawkins (1) 60,000 * 60,000 0 *
Marvin Hoffman (1) 30,000 * 30,000 0 *
Hutchinson Company (1)(4) 60,000 * 60,000 0 *
Insiders Trend Fund, LP(5) 154,500 * 154,500 0 *
Rajamal Jayakumar &
Arumugam Jayakumar (1) 60,000 * 60,000 0 *
Daniel L. Kaufman 330,000 1.7% 330,000 0 *
Kinderhook Partners (25)(34) 2,250,000 11.0% 2,250,000 0 *
Kirlin Securities (48) 50,000 * 50,000 0 *
Alain Krakririan (1) 30,000 * 30,000 0 *
The Larsen Family
2000 Revocable Trust (1)(6) 60,000 * 60,000 0 *
James Lawrence (1) 30,000 * 30,000 0 *
Ned Laybourne &
Lynne Laybourne (1) 200,000 1.0% 200,000 0 *
Paul H LeFevre (1) 60,000 * 60,000 0 *
William A. Lewis IV (25) 150,000 * 150,000 0 *
Robert David Lilienthal(15) 156,331 * 156,331 0 *
Ray Lubojasky (1) 30,000 * 30,000 0 *
Peter S. Lynch Charitable
Remainder Unitrust (26) 307,500 1.6% 307,500 0 *
The Lynch Foundation (27) 408,000 2.1% 408,000 0 *
Peter and Carolyn Lynch
JWROS 540,000 2.7% 540,000 0 *
Lynch Children's Trust
fbo Anne Lynch (28) 49,500 * 49,500 0 *
Lynch Children's Trust
fbo Elizabeth Lynch (29) 49,500 * 49,500 0 *
Lynch Children's Trust
fbo Mary Lynch (30) 49,500 * 49,500 0 *
Peter S. Lynch Charitable
Lead Annuity Trust (31) 45,000 * 45,000 0 *
Peter S. Lynch Charitable
Lead Unitrust (32) 51,000 * 51,000 0 *
Karl C. Malerich (1) 60,000 * 60,000 0 *
12
Shares Beneficially Shares Beneficially Owned
Owned Prior to the Offering After Completion of the Offering
--------------------------------------------------- --------------------------------
Total Shares Percent of Number of Shares Shares Beneficially Percent of
Beneficially Class Before Offered Pursuant Owned After Class After
Selling Security Holder Owned Offering to this Prospectus Offering Offering
--------------------------------------------------------------------------------------------------------------------
Margraf Investments LLC (1)(7) 90,000 * 90,000 0 *
Adam Marshall (49) 150,000 * 150,000 0 *
Max Communications (36) 50,000 * 50,000 0 *
Dennis McCaffrey (50) 200,000 1.0% 50,000 150,000 *
Meadowbrook Capital
Management, LP (25)(42) 375,000 1.9% 375,000 0 *
Milfam I LP (1)(8) 900,000 4.5% 900,000 0 *
Richard Molinsky 100,000 * 100,000 0 *
Monarch Capital Group LLC (39) 7,500 * 7,500 0 *
Michael Morris(15) 252,000 1.3% 252,000 0 *
Leo Mindel NON GST
EXEMPT Family Trust II (9) (16)150,000 * 150,000 0 *
Peter Morton &
Kathleen Morton (1) 60,000 * 60,000 0 *
Colleen Muellner &
Robert Muellner (1) 30,000 * 30,000 0 *
Muller Family Limited
Partnership (18)(20) 60,000 * 60,000 0 *
Richard Neslund (15) 466,662 2.3% 466,662 0 *
Richard Neslund (21) 238,000 1.2% 238,000 0 *
Eric G. Neumann (1) 60,000 * 60,000 0 *
Tolbert Norwood &
Iara Norwood (1) 30,000 * 30,000 0 *
Kevin E. O'Connell (1) 60,000 * 60,000 0 *
Joseph Palermo &
Carol Palermo TTEES
1994 Joseph T Palermo
III & Carol L Palermo
Revocable Trust (1)(10) 30,000 * 30,000 0 *
Jang S. Park (1) 60,000 * 60,000 0 *
Lewis Pell (15) 238,000 1.2% 238,000 0 *
Lewis Pell (21) 238,000 1.2% 238,000 0 *
Joseph M. Perillo (1) 60,000 * 60,000 0 *
Platinum Partners Value
Arbitrage Fund, LP(11)(15) 466,669 2.3% 466,669
Michael Power (1) 30,000 * 30,000 0 *
Puglisi & Co (40) 80,000 * 80,000 0 *
Puglisi Capital
Partners, LP (25)(41) 300,000 1.5% 300,000 0 *
Regina Rager &
Trina Rager (1) 30,000 * 30,000 0 *
Patricia A. Rusk
Revocable Trust
U/A Dated 5/31/91 (1)(12) 30,000 * 30,000 0 *
Alan H. Sample &
Elaine Sample (1) 30,000 * 30,000 0 *
Sandor Capital Master
Fund, L.P. 100,000 * 100,000 0 *
David Schales (1) 60,000 * 60,000 0 *
13
Shares Beneficially Shares Beneficially Owned
Owned Prior to the Offering After Completion of the Offering
--------------------------------------------------- --------------------------------
Total Shares Percent of Number of Shares Shares Beneficially Percent of
Beneficially Class Before Offered Pursuant Owned After Class After
Selling Security Holder Owned Offering to this Prospectus Offering Offering
--------------------------------------------------------------------------------------------------------------------
Alan B. Schriber (1) 90,000 * 90,000 0 *
Schottenfeld Qualified
Associates LP (25)(44) 225,000 1.1% 225,000 0 *
Richard Smailes &
Yong Smailes (1) 30,000 * 30,000 0 *
Greg Small &
Patricia Small (1) 120,000 * 120,000 0 *
Gerald Smallberg (1) 30,000 * 30,000 0 *
Morris Smith &
Devora Smith(16) 198,000 1.0% 198,000 0 *
Spencer Beal Family
Trust(13)(15) 238,000 1.2% 238,000 0 *
Stern & Company (37) 39,999 * 39,999 0 *
Ira Stoler (1) 60,000 * 60,000 0 *
Andrew Suedkamp &
Tara Suedkamp (1) 30,000 * 30,000 0 *
Richard Suedkamp (1) 60,000 * 60,000 0 *
Marc Tormey (1) 30,000 * 30,000 0 *
Anthony Turner (1) 90,000 * 90,000 0 *
Leonard Van Orden &
Laura Van Orden (1) 30,000 * 30,000 0 *
Vestal Venture Capital(14)(15) 350,000 1.8% 350,000 0 *
Michael Weiss(15) 175,000 * 175,000 0 *
Winslow Evans & Crocker
Incorporated (35) 200,000 1.0% 200,000 0 *
Androula Xenophontos (1) 60,000 * 60,000 0 *
Adorno & Yoss, PA (17) 100,000 * 100,000 0 *
TOTAL 18,718,578 500,000 2.5%
=======
----------
* Less than 1.0%
(1) 1 of every 3 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" is issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.25 per share, until July 9, 2008.
(2) Henry E. Dietz has investment and voting control over the shares of common
stock beneficially owned by the Henry E. Dietz Trust UTA.
(3) James Kozlik has investment and voting control over the shares of common
stock beneficially owned by Global Portal, Inc.
(4) James Hutchinson has investment and voting control over the shares of
common stock beneficially owned by Hutchinson Company.
(5) Anthony Marchese has investment and voting control over the shares of
common stock beneficially owned by Insiders Trend Fund, LP. Includes
50,000 shares issuable upon exercise of common stock purchase warrants, at
an exercise price of $1.35 per share, until September 9, 2008.
(6) David and Kristen Larsen have investment and voting control over the
shares of common stock beneficially owned by The Larsen Family 2000
Revocable Trust.
(7) Tim Margraf has investment and voting control over the shares of common
stock beneficially owned by Margraf Investments LLC.
14
(8) Lloyd Miller has investment and voting control over the shares of common
stock beneficially owned by Milfam I LP.
(9) Meg Mindel has investment and voting control over the shares of common
stock beneficially owned by Leo Mindel NON GST EXEMPT Family Trust II.
(10) Joeseph Palermo & Carol Palermo have investment and voting control over
the shares of common stock beneficially owned by 1994 Joseph T Palermo III
& Carol L Palermo Revocable Trust.
(11) Mark Nordlicht has investment and voting control over the shares of common
stock beneficially owned by Platinum Partners Value Arbitrage Fund, LP.
(12) Patricia A. Rusk has investment and voting control over the shares of
common stock beneficially owned by Patricia A. Rusk Revocable Trust U/A
Dated 5/31/91.
(13) Spencer Beal has investment and voting control over the shares of common
stock beneficially owned by Spencer Beal Family Trust.
(14) Alan Lyons has investment and voting control over the shares of common
stock beneficially owned by Vestal Venture Capital.
(15) 3 of every 7 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" are issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.40 per share, until September 9, 2008.
(16) 1 of every 3 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" is issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.35 per share, until September 9, 2008.
(17) Includes 100,000 shares issuable upon exercise of common stock purchase
warrants, at $1.00 per share, until June 9, 2008.
(18) 1 of every 3 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" is issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.35 per share, until October 14, 2008.
(19) Andrew Worden has investment and voting control over the shares of common
stock beneficially owned by Barron Partners, LP.
(20) William Muller has investment and voting control over the shares of common
stock beneficially owned by Muller Family Limited Partnership.
(21) 3 of every 7 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" are issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.40 per share, until September 22, 2008.
(22) Andrew Worden has investment and voting control over the shares of common
stock beneficially owned by Barron Capital Advisors LLC.
(24) Alex Fuchs has investment and voting control over the shares of common
stock beneficially owned by Aludel Fund, L.P.
(25) 1 of every 3 of the shares listed for each shareholder in the column
titled "Number of Shares Offered Pursuant to this Prospectus" is issuable
upon exercise of common stock purchase warrants, at an exercise price of
$1.50 per share, for a period of 5 years.
(26) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Peter S. Lynch Charitable Remainder Unitrust.
(27) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by The Lynch Foundation.
(28) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Lynch Children's Trust fbo Anne Lynch.
(29) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Lynch Children's Trust fbo Elizabeth Lynch.
(30) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Lynch Children's Trust fbo Mary Lynch.
(31) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Peter S. Lynch Charitable Lead Annuity Trust.
15
(32) Peter S. Lynch has investment and voting control over the shares of common
stock beneficially owned by Peter S. Lynch Charitable Lead Unitrust.
(33) David Boker has investment and voting control over the shares of common
stock beneficially owned by Core Fund. L.P.
(34) Steven Clearman has investment and voting control over the shares of
common stock beneficially owned by Kinderhook Partners.
(35) Bob Malone has investment and voting control over the shares of common
stock beneficially owned by Winslow Evans & Crocker Incorporated. Includes
100,000 shares of common stock issuable upon exercise of common stock
purchase warrants, at $1.40 per share, for a period of 5 years, and
100,000 shares of common stock issuable upon exercise of common stock
purchase warrants, at $1.50 per share, for a period of 3 years.
(36) Richard Melinsky has investment and voting control over the shares of
common stock beneficially owned by Max Communications, Inc. Includes
50,000 shares of common stock issuable upon exercise of common stock
purchase warrants, at $1.40 per share, for a period of 3 years.
(37) Shai Stern has investment and voting control over the shares of common
stock beneficially owned by Stern & Company. Includes 13,333 shares of
common stock issuable upon exercise of common stock purchase warrants, at
$1.40 per share, for a period of 3 years.
(38) Alex Fuchs has investment and voting control over the shares of common
stock beneficially owned by Aludel Fund LP. Includes 100,000 shares of
common stock issuable upon exercise of common stock purchase warrants, at
$1.40 per share, for a period of 5 years.
(39) Anthony Marchese has investment and voting control over the shares of
common stock beneficially owned by Monarch Capital Group LLC. Includes
7,500 shares of common stock issuable upon exercise of common stock
purchase warrants, at $1.25 per share, for a period of 5 years.
(40) Jeff Puglisi has investment and voting control over the shares of common
stock beneficially owned by Puglisi & Co. Includes 80,000 shares of common
stock issuable upon exercise of common stock purchase warrants, at $1.50
per share, for a period of 5 years.
(41) Jeff Puglisi has investment and voting control over the shares of common
stock beneficially owned by Puglisi Capital Partners, LP.
(42) Evan Greenberg has investment and voting control over the shares of common
stock beneficially owned by Meadowbrook Capital Management, LP.
(43) Chuck Lipson has investment and voting control over the shares of common
stock beneficially owned by CSL Associates, LP.
(44) Rick Schottenfeld has investment and voting control over the shares of
common stock beneficially owned by Schottenfeld Qualified Associates LP.
(45) Includes 12,500 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.50 per share, until March 24, 2008.
(46) Includes 6,250 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.50 per share, until March 24, 2008.
(47) Includes 100,000 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.25 per share, until October 1, 2008.
(48) Includes 50,000 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.15 per share, until January 1, 2006.
(49) Includes 150,000 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.15 per share, until October 1, 2008.
(50) Includes 100,000 shares of common stock issuable upon exercise of common
stock purchase warrants, at $1.25 per share, until October 1, 2008.
16
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be distributed from time to time
by the selling security holders in one or more transactions that may take place
on the over-the-counter market. These include ordinary broker's transactions,
privately-negotiated transactions or through sales to one or more broker-dealers
for resale of these shares as principals, at market prices existing at the time
of sale, at prices related to existing market prices, through Rule 144
transactions or at negotiated prices. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the selling security
holders in connection with sales of securities.
The selling security holders may sell the securities in one or more of the
following methods, which may include crosses or block transactions:
o through the "pink sheets,"on the over-the-counter Bulletin Board, or
on such exchanges or over-the-counter markets on which our shares
may be listed from time- to-time, in transactions which may include
special offerings, exchange distributions and/or secondary
distributions, pursuant to and in accordance with the rules of such
exchanges, including sales to underwriters who acquire the shares
for their own account and resell them in one or more transactions or
through brokers, acting as principal or agent;
o in transactions other than on such exchanges or in the
over-the-counter market, or a combination of such transactions,
including sales through brokers, acting as principal or agent, sales
in privately negotiated transactions, or dispositions for value by
any selling security holder to its partners or members, subject to
rules relating to sales by affiliates;
o through the issuance of securities by issuers other than us,
convertible into, exchangeable for, or payable in our shares; or
o through the writing of options on our shares, whether or not such
options are listed on an exchange, or other transactions requiring
delivery of our shares, or the delivery of our shares to close out a
short position.
Any such transactions may be effected at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices. In making sales, brokers or dealers used by the
selling security holders may arrange for other brokers or dealers to
participate. The selling security holders and others through whom such
securities are sold may be "underwriters" within the meaning of the Securities
Act for the securities offered, and any profits realized or commission received
may be considered underwriting compensation.
At the time a particular offer of the securities is made by or on behalf
of a selling security holder, to the extent required, a prospectus is to be
delivered. The prospectus will include the
17
number of shares of common stock being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, the purchase
price paid by any underwriter for the shares of common stock purchased from the
selling security holder, and any discounts, commissions or concessions allowed
or reallowed or paid to dealers, and the proposed selling price to the public.
We have informed the selling security holders that the anti-manipulative
rules under the Securities Exchange Act of 1934, including Regulation M, may
apply to their sales in the market. We have also told the selling security
holders of the need for delivery of copies of this prospectus in connection with
any sale of securities that are registered by this prospectus.
Sales of securities by us and the selling security holders or even the
potential of these sales may have a negative effect on the market price for
shares of our common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The following analysis of our financial condition should be read in
conjunction with the Consolidated Financial Statements contained herein,
including footnote disclosures, and it should be understood that this discussion
is qualified in its entirety by the foregoing and other, more detailed financial
information appearing elsewhere in this registration statement.
Historical results of operations and the percentage relationships among
any amounts included in the Statement of Operations and any trends which may
appear to be inferable there from, should not be taken as being necessarily
indicative of trends of operations or results of operations for any future
periods.
OVERVIEW OF ACCOUNTING POLICIES
The accompanying financial statements include our accounts and the
accounts of our wholly- owned subsidiary. All significant intra company accounts
and transactions are eliminated in consolidation. Prior to October 2001, the
financial statements are those of Trans-Logistics, Inc., the only operating
company at that time.
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that effect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
18
Operating revenues for truck brokerage services are recognized on the date
the freight is delivered. Related costs of delivery of shipments in transit are
accrued as incurred. Revenues from warehousing services are recognized as the
services are performed.
Cash equivalents consist of all highly liquid debt instruments purchased
with an original maturity of three months or less.
The majority of cash is maintained with a major financial institution in
the United States. Deposits with this bank may exceed the amount of insurance
provided on such deposits. Generally, these deposits may be redeemed upon
demand, and, therefore, bear minimal risk.
We extend credit to various customers based on the customer's ability to
pay. We provide for estimated losses on accounts receivable based on bad debt
experience and a review of existing receivables.
Equipment is recorded at cost. Depreciation is calculated by the straight
line method over the estimated useful lives of the assets, ranging generally
from 2 to 7 years. Maintenance and repairs are charged to operations when
incurred. Betterments and renewals are capitalized. When property and equipment
are sold or otherwise disposed of, the asset account and related accumulated
depreciation account are relieved, and any gain or loss is included in
operations.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the consolidated
financial statements carrying amounts of existing assets and liabilities and
their respective income tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized as income in the period that included the enactment date.
Basic earnings per share ("EPS") is calculated by dividing earnings (loss)
available to common shareholders by the weighted average number of common shares
outstanding during each period. Diluted EPS is similarly calculated, except that
the denominator includes common shares that may be issued subject to existing
rights with dilutive potential, except when their inclusion would be
antidilutive.
Financial instruments, which potentially subject us to concentrations of
credit risk, include trade receivables. Concentration of credit risk with
respect to trade receivables is limited due to our large number of customers and
wide range of industries and locations served.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management. The respective
carrying value of certain on-balance- sheet financial instruments approximated
their fair values. These financial instruments include cash, notes receivable,
accounts payable, and accrued expenses. Fair values were assumed to approximate
19
carrying values for these financial instruments since they are short-term in
nature and their carrying amounts approximate fair values or they are receivable
or payable on demand. The fair value of our debt is estimated based upon the
quoted market prices for the same or similar issues or on the current rates
offered to us for debt of the same remaining maturities.
On January 1, 2002, we adopted Statements of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS 144 addresses the financial accounting and reporting
for the impairment of long-lived assets, excluding goodwill and intangible
assets, to be held and used or disposed of. The adoption of SFAS 144 did not
have an impact on our financial position or results of operations. In accordance
with SFAS 144, the carrying values of long-lived assets are periodically
reviewed by us and impairments would be recognized if the expected future
operating non-discounted cash flows derived from an asset were less than its
carrying value.
In June 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities,"
which is effective for us for exit or disposal activities that are initiated
after December 31, 2002. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3, a liability for an
exit cost as defined, was recognized at the date of an entity's commitment to an
exit plan. We adopted SFAS 146 for all exit or disposal activities that were
initiated after December 31, 2002, which did not have a material effect on our
financial statements.
The FASB issued SFAS 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure," which is effective for the Company as
of January 1, 2003. This Statement amends FASB Statement No. 123, "Accounting
for Stock-Based Compensation," to provide alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock- based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee.
Certain minor reclassifications have been made in the 2001 financial
statements to conform to the classifications used in 2002. These
reclassifications had no effect on total assets, stockholders' equity, total
cash flows or net income.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 2002
AND DECEMBER 31, 2001
20
Results of Operations
Revenues increased approximately $1,527,800, or 18%, to approximately
$9,995,000 for the year ended December 31, 2001 as compared to approximately
$8,467,200 for the year ended December 31, 2001. This increase was primarily due
to (i) an increase in core service offerings and client acceptance of these
offerings; (ii) enhanced agent services and alliances resulting from these
offerings; and (iii) various expansion into related business lines.
Costs of services provided, which consist primarily of payment for
trucking services, fuel, insurance, sales, marketing and general and
administrative support increased by approximately $271,900 or 4%, to
approximately $7,781,600 for the year ended December 31, 2002, as compared to
approximately $7,509,700 for the year ended December 31, 2001. As a percentage
of revenues, trucking and transport related services of fuel, insurance, sales
and marketing are aggregated as cost of goods sold and amounted to 78% of
related revenues for the year ended December 31, 2002, as compared to 89% for
the year ended December 31, 2001. General and administrative expenses decreased
from 17% for the year ended December 31, 2001, to 12% for the year ended
December 31, 2002.
General and administrative expenses increased by approximately $425,000 or
32%, to approximately $1,743,400 for the year ended December 31, 2002, up from
approximately $1,318,400 for the year ended December 31, 2001. This increase was
a result of (i) bad-debt expenses from a failed merger with Logistics Management
Resources, Inc. in 2001; (ii) increased costs of being a fully reporting public
company; and (iii) an increase in staff and facilities costs through the year to
manage growth.
Gross margin increased by approximately $1,255,356 or 131%, to
approximately $2,212,874 for the year ended December 31, 2002, as compared to
approximately $957,518 for the year ended December 31, 2001. This increase is
primarily attributed to (i) reducing fixed costs; (ii) linking fuel surcharges;
(iii) converting contract based conduit services to term agreements with
customers; and (iv) implementing various control methods that have yielded
favorable results during this fiscal year.
We had no loss in investment value in the fiscal year ended December 31,
2002, when compared with a loss in investment value of $78,999 for the fiscal
year ended December 31, 2001, booked consequential to its settlement for
expenses caused at the time of the recision with a failed merger. This loss
resulted primarily from the value realized by us at the time of sale of the
securities tendered in that settlement and the value of those securities at the
time we received them.
We earned $374,115 for the fiscal year ended December 31, 2002, as opposed
to losses from continuing operations before provisions for income taxes that
approximated ($656,421) for the fiscal year ended December 31, 2001. This was
primarily due to cost cutting, enhanced profit margins and no one-time material
adverse events as occurred in the prior year.
21
Net earnings for the period ended December 31, 2002, were $374,115
compared with a net loss for the period ended December 31, 2001, of
approximately $656,421. Basic EPS from continuing operations for the year ended
December 31, 2002, increased by $.16 to $.06 per share, as compared to net loss
of ($.10) per share for December 31, 2001.
Earnings before interest, taxes and depreciation (EBITD) were $614,992 for
the fiscal year ended December 31, 2002. Revenues for the trucking segment
increased approximately $2,464,800 or 44%, to approximately $8,061,123 for the
year ended December 31, 2002, as compared to approximately $5,596,318 for the
year ended December 31, 2001. This increase was primarily due to (i) increased
sales and marketing efforts in the development of agents and fulfillment
channels; (ii) contract based sales to significant clients that resulted in
increased revenues; and (iii) additional availability of cash and cash
equivalent assets consequential to reduction of requirements for the warehouse
segment.
Revenues for the warehouse segment decreased approximately $959,761 or
34%, to approximately $1,899,687 for the year ended December 31, 2002, as
compared to approximately $2,859,448 for the year ended December 31, 2001. This
decrease was primarily due to (i) a change of focus to reflect management's
desire to provide supply-chain and warehouse services on a contract basis; (ii)
contract focus resulting in efforts to secure smaller, regional staging
warehouse facilities; and (iii) movement of assets to a new facility in
Evansville, Indiana in connection with a contract relationship which resulted in
a reduction of revenues for the same period.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND THE
THREE MONTHS ENDED SEPTEMBER 30, 2002.
Results of Operations
Revenues increased approximately $1,809,000, or 82%, to approximately
$4,026,000 for the three months ended September 30, 2003 as compared to
approximately $2,217,000 for the period ended September 30, 2002. This increase
was primarily due to (i) increase in core service offerings and client
acceptance of these offerings, (ii) enhanced agent services and alliances
resulting from these offerings, (iii) the results of cross-marketing and selling
efforts to capture larger opportunities within our current client base, (iv)
various expansion into related business lines and contract based freight
relationships, specifically the opening of our contract freight facility in
Evansville, IN and our four year relationship with a national logistics company
to provide services for a Fortune 500(TM) manufacturing firm, and (v) sale of
the rights to our software code for $250,000.
Costs of services provided, which consist primarily of payment for
trucking services, fuel, insurance, and other direct costs increased by
approximately $1,123,000 or 65%, to approximately $2,860,000 for the three
months ended September 30, 2003, as compared to approximately $1,737,000 for the
three months ended September 30, 2002. As a percentage of revenues trucking and
transport related services of fuel, insurance, and other direct costs are
aggregated as cost services and amounted to 71% of related revenues for the
three months ended September 30, 2003, as
22
compared to 78% of revenues for the three months ended September 30, 2002. This
increase was primarily based upon (i) corresponding increase in sales, and (ii)
sustained efforts to increase margin, increase of break-point effect (resulting
from increase in revenue in warehouse, L-T-L and expedited transportation
business and lower fixed cost burden spread over greater sales volume) and
technology enabling movement of expenses to specific burden levels that combined
to increase gross profit margins.
Gross profit increased by approximately $686,000, or 143%, to
approximately $1,166,000 for the three months ended September 30, 2003, as
compared to approximately $480,000 for the three months ended September 30,
2002. This increase is primarily attributed to (i) break-point effect (resulting
from increase in revenue in warehouse, L-T-L and expedited transportation
business and lower fixed cost burden spread over greater sales volume) and
technology enabling movement of expenses to specific burden levels that combined
to increase gross profit margins, and (ii) sale of the rights to our software
code for $250,000.
Selling, general and administrative expenses increased by approximately
$738,000, or 208%, to approximately $1,093,000 for the three months ended
September 30, 2003, up from approximately $355,000 for the three months ended
September 30, 2002. This increase was in large part due to: (i) expenses
associated with new technology and customer service initiatives, (ii)
implementation of new technology and reclassification of expenses as support to
a particular line of business, as opposed to cost of services previously (iii)
increase in sales and support costs associated therewith and (iv) enhanced
selling and marketing costs to capture contract based freight revenues.
We realized income from continuing operations before interest, taxes,
depreciation and amortization (EBITDA) of approximately $257,000 for the three
months ended September 30, 2003, compared with income from continuing operations
before interest, taxes, depreciation and amortization (EBITDA) of $221,000 for
the three months ended September 30, 2002.
The income tax provision was approximately $21,200 for the three months
ended September 30, 2003, compared with no provision for income taxes for the
three months ended September 30, 2002. Differences between the effective tax
rate used for 2003 and 2002, as compared to the statutory rate, are primarily
due to a net operating loss carryover, permanent differences and adjustments to
the deferred tax asset valuation allowance.
We earned approximately $52,000 for the three months ended September 30,
2003, compared to approximately $126,000 for three months ended September 30,
2002. This was primarily due to the increased Selling, General and
Administrative costs resulting from our expansion and technology implementation
expenses incurred in preparation for supporting our growth plans.
Basic earnings per share from continuing operations for the three months
ended September 30, 2003 decreased by $.01 to $.01 per share, as compared with
$.02 per share for the three months ended September 30, 2002.
23
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THE NINE
MONTHS ENDED SEPTEMBER 30, 2002.
Results of Operations
Revenues increased approximately $4,084,000, or 66%, to approximately
$10,234,000 for the nine months ended September 30, 2003 as compared to
approximately $6,150,000 for the nine months ended September 30, 2002. This
increase was primarily due to (i) increase in core service offerings and client
acceptance of these offerings, (ii) enhanced agent services and alliances
resulting from these offerings, (iii) various expansion into related business
lines and contract based freight relationships, specifically the opening of our
contract freight facility in Evansville, IN and our four year relationship with
a national logistics company to provide services for a Fortune 500(TM)
manufacturing firm, (iv) continued growth in all sectors, product types and
geography of our business for the first nine months of this year, and (v) sale
of the rights to our software code for $250,000.
Costs of services provided, which consist primarily of payment for
trucking services, fuel, insurance, and other direct costs increased by
approximately $2,751,000 or 59%, to approximately $7,436,000 for the nine months
ended September 30, 2003, as compared to approximately $4,685,000 for the nine
months ended September 30, 2002. As a percentage of revenues trucking and
transport related services of fuel, insurance and other direct costs are
aggregated as cost services and amounted to 73% of related revenues for the nine
months ended September 30, 2003, as compared to 76% for the nine months ended
September 30, 2002. This increase was primarily due to corresponding increase in
sales.
Gross profit increased by approximately $1,333,000, or 91%, to
approximately $2,798,000 for the nine months ended September 30, 2003, as
compared to approximately $1,465,000 for the nine months ended September 30,
2002. This increase is primarily attributed to (i) coincidental increase in
sales, and (ii) sale of the rights to our software code for $250,000.
Selling, general and administrative expenses increased by approximately
$1,159,000, or 98%, to approximately $2,339,000 for nine months ended September
30, 2003, up from approximately $1,180,000 for the nine months ended September
30, 2002. This increase was in large part due to: (i) expenses associated with
new technology and customer service initiatives, (ii) implementation of new
technology and reclassification of expenses as support to a particular line of
business, as opposed to cost of services previously (iii) increase in sales and
support costs associated therewith and (iv) enhanced selling and marketing costs
to capture contract based freight revenues.
The income tax provision was approximately $134,000 for the nine months
ended September 30, 2003, compared with no provision for the nine months ended
September 30, 2002. Differences between the effective tax rate used for 2003 and
2002, as compared to the statutory rate, are primarily due to a net operating
loss carryover, permanent differences and adjustments to the deferred tax asset
valuation allowance.
24
We earned approximately $326,000 for the nine months ended September 30,
2003, compared to approximately $285,000 for nine months ended September 30,
2002. This was primarily due to increased sales, strong margins and offset
increase in Selling, General & Administrative expenses resulting from our
preparation and support of ongoing growth initiatives.
Basic earnings per share from continuing operations for the nine months
ended September 30, 2003 and 2002 were $.04 per share. Diluted earnings per
share from continuing operations for the nine months ended September 30, 2003
increased $.01 per share to $.04 per share, when compared with $.03 per fully
diluted share for the nine months ended September 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of approximately $1,876,000 at September 30, 2003, compared
with cash balances of approximately $4,000 at December 31, 2002. This change of
approximately $1,872,000 was a result of completion of our private placement
offering, reduction of outstanding moneys we owed to vendors and creditors and
deployment of capital in anticipation of the acquisition of the assets of Murphy
Surf Air from bankruptcy, as well as preparation for the acquisition of Bullet
Air Freight. In connection with the anticipated purchase of the assets of Murphy
Surf Air, we advanced approximately $1,427,000 against the purchase as of
September 30, 2003, in addition to accounts receivable which retain offset
rights pursuant to the agency agreement dated September 2002.
We have added Comdata to our financing sources as part of a desire to
reduce costs and enhance services offered for factoring fees. Comdata offers
various credit and collections services as part of its hybrid factoring
facility. We had outstanding balances due Comdata of approximately $1,138,000 as
of September 30, 2003.
We began performing contract based freight services in May 2003 as part of
a long-term contract that provides for dedicated delivery services (DDS) in
Evansville, IN. as part of our continued expansion into contract based freight
opportunities. We are to provide staging, processing, delivery and report
integration from a regional cross-dock hub facility in Evansville, IN to points
in Indiana and surrounding areas on behalf of a national logistics service
company for a Fortune 500(TM) manufacturing firm.
There were significant cash requirements on us related to preparing for a
new dedicated delivery contract. The terms of the agreement provide for the
reimbursement of virtually all costs associated with the contract, including
such expenses as overhead allocation and set-up expenses, however these expenses
are to be reimbursed evenly over the four-year contract, which from a cash- flow
basis has been a significant use of cash in the second quarter.
We have embarked on upgrades to technology and support infrastructure that
we believe will enhance cash flows by providing customers and customer service
representatives with access to delivery information and documentation that will
enable efficient collections of accounts receivable
25
from customers. There is no assurance that we will be able to obtain financing
on terms favorable to us or successfully implement infrastructure upgrades
pursuant to our plans.
Our strategy is to continue to expand through acquisitions and internal
development. We intend to seek, on a selective basis, acquisition of businesses
that have product lines or services which complement and expand our existing
services and product lines, and provide us with strategic distribution locations
or attractive customer bases. Our ability to implement our growth will depend on
a number of things, which may be beyond our control. Successful deployment of
this strategy will be dependent on our ability to identify, consummate and
assimilate such acquisitions on desirable economic terms. There can be no
assurance that we will be successful in implementing our growth strategy. Our
ability to implement our growth strategy will also be dependent upon obtaining
adequate financing. We may not be able to obtain financing on favorable terms.
On July 9, 2003, we closed a private placement pursuant to which we issued
a total of 2,673,334 shares of our common stock, par value $0.001 per share, and
warrants to purchase up to 1,336,667 shares of our common stock, par value
$0.001 per share, for $1.25 per share for a period of 5 years, to 58 accredited
investors. We received $2,005,000 in consideration for the issuance of the
securities, less placement agent fees and other offering costs associated with
the private placement. The securities were issued pursuant to the exemption from
registration provided by Rule 506 of Regulation D, promulgated under the
Securities Act of 1933, as amended. We incurred offering costs of approximately
$310,000 in cash and 267,333 shares of common stock, in addition to 133,667
warrants to purchase stock at a strike price of $1.25 per share, in connection
with this offering. These investors purchased the securities for investment
purposes and the securities they received were marked with the appropriate
restrictive legend.
We entered into discussions with a total of 10 institutional investors,
existing shareholders, and accredited investors that resulted in those 10
investors making an investment in us under an exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as amended. These
investors purchased 3,743,999 shares of common stock, par value $0.001 per
share, and warrants to purchase up to 2,724,499 shares of our common stock, par
value $0.001 per share, for a weighted average of $1.40 per share for a period
of 5 years. We received $2,810,000 in connection with this offering and incurred
offering costs approximating $510,000 in cash and 300,000 options to purchase
common stock at a strike price of $1.40 per share. Securities purchased pursuant
to this offering have been marked with the appropriate restrictive legend.
On October 14, 2003, we raised $90,000 through the issuance of a total of
120,000 shares of our common stock, par value $0.001 per share, and warrants to
purchase up to 60,000 shares of our common stock, par value $0.001 per share,
for $1.35 per share for a period of 5 years, to 3 accredited investors. The
securities were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended. Each investor received
current information about our company and had the opportunity to ask questions
about our company. These investors purchased the securities for investment
purposes and the securities they received were marked with the appropriate
restrictive legend.
26
BUSINESS
Segmentz, Inc. (the "Company"), a Delaware corporation, based in Tampa,
Florida provides transportation logistics management services and support for
mid-sized and national corporate clients. We serve direct users of transport,
storage, staging, warehouse services and other logistics services. Our principal
executive offices are located at 18302 Highwoods Preserve Parkway, Suite 100,
Tampa, Florida 33467. The telephone number is (813) 989-2232. Our internet web
addresses are http://www.segmentz.com and http://www.segmentz.net.
We provide several niche services within the industry, more broadly known
as the supply chain management industry, including transportation logistics,
management and delivery. We serve direct users of transport, storage, staging,
warehouse service and other logistics services, as well as larger companies that
include Bax Global ("Bax"), Quebecor World Logistics, Inc. ("Quebecor"), and CH
Robinson, Inc. (CH Robinson"). We offer 4 core transportation services to over
1,000 clients:
(1) Third Party Logistics Services (3PL)
(2) Truckload & LTL (less-than-truckload)
(3) Expedited freight services
(4) Air-freight forwarding services
Segmentz, Inc. is a third party logistics provider of transportation and
management services to its target client base, ranging from mid-sized to Fortune
100(TM) companies, through its network of terminals in the Southeast and Midwest
United States. The Company's services include:
We arrange truckload and less-than-truckload (L-T-L) transportation
utilizing company equipment, dedicated owner operator fleet, a nationwide agent
network and extensive contract carriers throughout all 48 continental states,
Mexico and Canada. Revenues from Domestic Transportation represented
approximately 42% of total revenues for the nine month period ended September
30, 2003.
We provide local pickup and delivery services on a tight or irregular time
schedule through our agent relationships on an overnight or two day basis.
Revenues from Expediting Services represented approximately 40% of total
revenues for the nine month period ended September 30, 2003.
We provide our customers with a seamless solution for time-definite ground
transportation to become a cost effective and highly reliable extension of the
customers' own distribution system. Revenues from Dedicated Delivery Services
represented approximately 18% of total revenues for the six month period ended
September 30, 2003
27
We have developed a regional presence within the mid United States,
focusing on the Southeast and Midwest regions. We offer cross-dock and small
staging facilities which enable high- velocity movement of freight into local
distribution environments and support national firms with fairly priced delivery
of goods and materials and contract based service levels and pricing.
Our strategy is to continue to expand through acquisitions and internal
development. We intend to seek, on a selective basis, acquisition of businesses
that have product lines or services which complement and expand our existing
services and product lines, and provide us with strategic distribution locations
or attractive customer bases. Our ability to implement our growth strategy will
be dependent on our ability to identify, consummate and assimilate such
acquisitions on desirable economic terms.
INDUSTRY OVERVIEW
Third party logistics companies provide numerous services to clients on an
outsourced basis, by contract and on demand. The continued growth of this
industry has created secondary market opportunities to provide low-cost delivery
to the endpoint, in addition to supply chain services of warehousing, inventory
management and electronic interface with customers and suppliers. Third Party
logistics companies provide customized domestic and international freight
transportation of customers' goods and packages, via truck, rail, airplane and
ship, and provide warehousing and storage of those goods. Many companies utilize
information systems and expertise to reduce inventories, cut transportation
costs, speed delivery and improve customer service. The third-party logistics
services business has been bolstered in recent years by the competitiveness of
the global economy, which causes shippers to focus on reducing handling costs,
operating with lower inventories and shortening inventory transit times. Using a
network of transportation, handling and storage providers in multiple
transportation modes, third-party logistics services companies seek to improve
their customers' operating efficiency by reducing their inventory levels and
related handling costs. Many third-party logistics service providers are
non-asset-based, primarily utilizing physical assets owned by others in multiple
transport modes.
The third-party logistics services business increasingly relies upon
advanced information technology to link the shipper with its inventory and as an
analytical tool to optimize transportation solutions. This trend favors the
larger, more professionally managed companies that have the resources to support
a sophisticated information technology infrastructure. By outsourcing all non-
core business services to third party providers, companies can help to control
costs, eliminate staff and focus on internal business. Furthermore, this kind of
outsourcing is often done in lockstep with "unit pricing" models that provide
for a variable price that is less than the current pricing available to a
company. This method is calculated on a unit basis, enabling a company to price
logistics, storage, shipping, staging and related services into their wholesale
pricing matrix and providing a scalable solution that scales downwards in an off
economy, as well as upwards as the market demands. Such models are popular as
"risk sharing," an outsourcing concept that has been adopted in many support and
third party service arenas, enabling outsourced companies to build critical
mass,
28
method and pricing efficiencies, and to pass these efficiencies on to clients in
pricing schedules that help clients build competitive market positions that are
measurably more predictable.
PRODUCTS AND SERVICES
General
We are a third party logistics provider of transportation and management
services to our target client base, ranging from mid-sized to Fortune 100(TM)
companies, through our network of terminals in the Southeast and Midwest United
States. Our services include:
Domestic Transportation- We arrange truckload and less-than-truckload
(L-T-L) transportation utilizing company equipment, dedicated owner operator
fleet, a nationwide agent network and extensive contract carriers throughout all
48 continental states, Mexico and Canada. Revenues from Domestic Transportation
represented approximately 42% of total revenues for the nine month period ended
September 30, 2003.
Expediting Services- We provide local pickup and delivery services on a
tight or irregular time schedule through our agent relationships on an overnight
or two day basis. Revenues from Expediting Services represented approximately
40% of total revenues for the nine month period ended September 30, 2003.
Dedicated Delivery Services- We provide our customers with a seamless
solution for time- definite ground transportation to become a cost effective and
highly reliable extension of the customers' own distribution system. Revenues
from Dedicated Delivery Services represented approximately 18% of total revenues
for the nine month period ended September 30, 2003
FACTORING
Factoring is the business of buying debts at a discount so as to make a
profit from collecting them. Accounts receivable are sold to the factoring
companies. We factor substantially all of our accounts receivable and during the
period ended December 31, 2002, we engaged the services of 3 factoring
companies. We may be subject to offset rights from the factoring company in the
event that any trade receivables are not paid within 90 days. The most recent
agreement provides for the payment of factoring fees at 2.5% of each invoice
factored. Accounts receivable factored for year ended December 31, 2002, and the
nine months ended September 31, 2003:
Year Ended Nine Months Ended
12/31/02 9/30/03
-------- -------
Factored Accounts $6,903,364 $ 8,561,277
Customer Payments (charge backs) (5,194,267) $(7,423,681)
Amount due to Factoring Companies $1,709,097 $ 1,137,596
29
GROWTH STRATEGY
The growth market for third-party logistics support and supply chain
management services continues to expand significantly and we intend to combine
our disparate product offerings to customers to create an integrated suite of
management tools, decision making tools, reporting tools and support services
that will enable sole source and limited source contract opportunities for
existing and new clients. We have significant experience, acquired in our
Quebecor relationship, which we believe will demonstrate to existing and new
clients, our ability to deliver a managed turnkey solution for staging,
transportation, inventory and distribution of products across the supply chain.
We have acquired businesses in the past and may consider acquiring
businesses in the future that provide complementary services to those we
currently provide or to expand our geographic presence. There can be no
assurance that the businesses that we have acquired in the past or any
businesses that we may acquire in the future can be successfully integrated.
While we believe that we have sufficient financial and management resources to
successfully conduct our acquisition activities, there can be no assurance in
this regard or that we will not experience difficulties with customers,
personnel or others. Our acquisition activities involve more difficult
integration issues than those of many other companies because the value of the
companies we acquire comes mostly from their business relationships, rather than
their assets.
The integration of business relationships poses more of a risk than the
integration of tangible assets because relationships may suddenly weaken or
terminate. Further, logistics businesses we have acquired, and may acquire in
the future, compete with many customers of our wholesale operations and these
customers may shift their business elsewhere if they believe our retail
operations receive favorable treatment from our wholesale operations. In
addition, although we believe that our acquisitions will enhance our competitive
position and business and financial prospects, there can be no assurances that
such benefits will be realized or that any combination will be successful.
RECENT ACQUISITIONS
On October 1, 2003, we closed a transaction in which we acquired all the
outstanding capital stock of Bullet Freight Systems of Miami, Inc., Bullet
Freight Systems of Palm Beach, Inc., Bullet Courier Services, Inc., Bullet
Freight Systems, Inc. in consideration for the payment of $225,000 in cash,
200,000 shares of common stock of Segmentz, Inc., and conditional payments that
could total $400,000 over a four year period. Bullet is a company that provides
local pickup, delivery, warehouse and expedited freight services in Miami and
Palm Beach, FL.
On December 31, 2003, we closed a transaction in which we acquired all of
the outstanding capital stock of Dasher Express, Inc. in consideration for the
payment of $1,300,000 cash, conditional payments that could total up to $800,000
over a four year period, and the issuance of 538,462 share of Segmentz, Inc.
common stock. Dasher is in the business of providing expedited trucking,
schedule line haul movements, trade show transportation and integrated third
party logistics services. We intend to continue to operate Dasher's business as
a wholly owned subsidiary.
SALES AND MARKETING
We plan to increase market share by implementing sophisticated
state-of-the-art technology to optimize efficiency, increase profitability and
to improve our corporate image. We also plan to
30
increase brand awareness through marketing initiatives such as a newly designed
web site, direct mail, advertising, collateral, trade shows, etc. We plan to
increase non-asset based agent development programs in strategic locations and
cross train sales staff to expand new services to existing customers.
COMPETITION
The transportation services industry is highly competitive. Retail
businesses compete primarily against other domestic non-asset based
transportation and logistics companies, asset-based transportation and logistics
companies, third-party freight brokers, internal shipping departments and other
freight forwarders. Our wholesale business competes primarily with over-the-road
full truckload carriers, conventional intermodal movement of trailers on flat
cars, and containerized intermodal rail services offered directly by railroads.
We do not separate revenues for retail and wholesale service channels as all
marketing and selling efforts, as well as assets and support for both channels
are common. In accordance with SFAS 131, no allocation of resources or
assessment of performance is considered by management in connection with the
servicing of these channels. We also face competition from Internet-based
freight exchanges, which attempt to provide an online marketplace for buying and
selling supply chain services. Historically, competition has created downward
pressure on freight rates, and continuation of this rate pressure may materially
and adversely effect our net revenues and income from operations. In addition,
some of our competitors have substantially greater financial and other
resources. We have identified several direct competitors that offer each of the
individual services that we offer. However, we believe these identified
competitors offer many of these individual services merely as ancillary services
and tend to focus on one main service offering (for example, truck leasing,
freight forwarding, etc.). These direct competitors include:
o Ryder Integrated Logistics, Inc. ("Ryder") is a subsidiary of the
$4.9 billion transportation and logistics provider Ryder Systems,
Inc. Ryder's primary business is providing truck leasing services.
o Stonepath Group ("Stonepath") is a $140 million company that is
building a global logistics services organization that integrates
established logistics companies with innovative technologies.
Through our subsidiaries, Stonepath is a non-asset based provider of
domestic and international third-party logistics services, offering
a full-range of time-definite transportation and distribution
solutions.
o Forward Air. ("FWRD") operates the largest and most comprehensive
network of surface transportation for deferred air freight. The
Company provides scheduled surface transportation through an
expansive network of 80 terminals located on or near airports in the
United States and Canada, including a central sorting facility in
Columbus, Ohio, several regional hubs and direct shuttles. The
Company provides these services as a cost effective
31
alternative to air transportation of shipments that must be
delivered at a specific time but are relatively less time-sensitive
than traditional air freight or when air transportation is not
economical. The Company has experienced rapid growth in revenue from
$63.6 million in 1995 to $214.9 million in 2000, a 28% compounded
annual rate, and in operating income from $6.4 million to $37.2
million over the same period, a 42% compounded annual rate. This
growth has resulted from increased business with existing customers,
the addition of new customers, expansion of the Company's terminal
network and expansion of its service offerings.
o Menlo Logistics, Inc. ("Menlo") is a subsidiary of $5.5 billion
transportation and logistics services provider CNF. Menlo's primary
business is less-than- truckload (LTL) transportation services.
o C.H. Robinson Worldwide ("CH Robinson") is one of the largest
third-party logistics providers in North America. CH Robinson's
primary business is international freight forwarding brokerage.
o EXEL Logistics ("Excel"), a British logistics company with $5.3
billion in revenues in 1999, provides global freight management,
integrated transportation and warehousing. Exel's primary business
is warehousing services.
SUPPLIERS
We use the services of various third party transportation companies. No
significant third party provider results in over 10% of our revenue.
CUSTOMERS
Our largest customer comprised approximately 6% of our revenue for the
year ended December 31, 2002, and 16% for the nine months ended September 30,
2003. The top 4 debtor balances comprised 18.6% of outstanding accounts
receivable balances as of September 30, 2003, and include clients Schneider
Logistics/Ford Quebecor, KIK, Inc., CH Robinson, XMT and Associates and Spice
World.
EMPLOYEES
As of September 30, 2003, we employed 120 full time employees and utilized
the services of 30 independent contract drivers. We consider our employee
relations to be good, and have never experienced a work stoppage.
32
REGULATION
Our suppliers and our customers are subject to changes in government
regulation, which could result in additional costs and thereby effect results of
our operations.
The transportation industry is subject to legislative or regulatory
changes that can effect its economics. We operate in the intermodal segment of
the transportation industry, which has been essentially deregulated. However,
changes in the levels of regulatory activity in the intermodal segment could
potentially effect us and our suppliers and customers. Future laws and
regulations may be more stringent and require changes in operating practices,
influence the demand for transportation services or require the outlay of
significant additional costs. Additional expenditures incurred by us, or by our
suppliers or vendors who would pass the costs on to us through higher prices,
would adversely effect results of our operations.
If we fail to comply with, or lose, any required licenses, governmental
regulators could assess penalties or issue a cease and desist order against our
operations that are not in compliance. If we expand our services
internationally, we may become subject to international economic and political
risks. Doing business outside the United States subjects us to various risks,
including changing economic and political conditions, major work stoppages,
exchange controls, currency fluctuations, armed conflicts and unexpected changes
in United States and foreign laws relating to tariffs, trade restrictions,
transportation regulations, foreign investments and taxation. Significant
expansion in foreign countries will expose us to increased risk of loss from
foreign currency fluctuations and exchange controls as well as longer accounts
receivable payment cycles. We have no control over most of these risks and may
be unable to anticipate changes in international economic and political
conditions or alter business practices in time to avoid the adverse effect of
any of these changes.
PROPERTIES
We are headquartered in 8,500 square feet of leased office space located
at 18302 Highwood's Preserve Parkway, Suite 100, Tampa, FL 33467. Monthly rent
expense is $7,819 per month under a lease that expires August 2005. The initial
lease term is for a period of 5 years and the lease agreement includes an
optional lease period of an additional 3 years. As part of the lease agreement,
we have issued an unused letter of credit in the amount of $40,000. The amount
required of the letter of credit is reduced by $8,000 per year and may be drawn
if certain lease commitments have not been met or have been violated. We also
lease certain equipment under non-cancellable operating leases.
The following is an annual schedule of future minimum rental payments
required under operating leases that have an initial or remaining
non-cancellable lease term in excess of 1 year as of December 31, 2003. This
includes the sublease agreement we entered into on March 17, 2003, with R.W.
Baird & Company that provided us with approximately 8,000 square feet of
additional space at 18302 Highwoods Preserve Parkway through August 2006:
33
Year Ending Minimum
December 31 Rental Payments
----------- ---------------
2004 $147,338
2005 $143,875
2006 $140,972
2006 $79,089
--------
Total $511,274
========
We currently service fourteen locations in the Midwest and Southeast,
offering pickup, delivery, truckload, less-than-truckload and expedited services
in facilities that range in size between 7,000-30,000 square feet. We have
regional services that support supply chain requirements of various
manufacturers, importers, freight forwarders and distributors, throughout these
regions, including the following locations:
o 820 Supreme Drive, Bensenville, IL
o 1488 Cox Avenue, Cincinnati, OH
o 951 Air Freight Drive, Louisville, KY
o 865 Sparta Court, Lexington, KY
o 2320 Sterchi Street, Knoxville, TN
o 5300 Kennedy Road, Atlanta, GA
o 7270 NW 35th Terrace, Miami, FL
o 1520 Latham Road, West Palm Beach, FL
o 9210 Boggy Creek Road, Orlando, FL
o 15000B Highway 41 North, Evansville, IN
We also operate 4 sales agent offices across the United States in Maine,
New Jersey, Georgia, Florida and Texas. These offices are located at:
o 9 Beacon Hill, East Brunswick, NJ 08816
o 2059 S. Hamilton, Dalton, GA 30720
o 11448 Rene Drive, Jacksonville, FL 32218
o 7240 Indiana Avenue, Fort Worth, TX 76137
We believe the facilities are sized correctly and adequately provide for
our immediate and foreseeable needs in the future. In the opinion of Management,
these properties are adequately insured, in good condition and are suitable for
our anticipated future use.
LITIGATION
We are not a party to any material legal actions.
34
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth information concerning the officers and
directors, including their ages, present principal occupations, other business
experience during the last 5 years, membership on committees of the board of
directors and directorships in other publicly-held companies.
Name Age Position with Segmentz
---- --- ----------------------
Allan Marshall 36 Chairman, Chief Executive Officer, Director
John S. Flynn 38 President, Chief Financial Officer, Director
Dennis M. McCaffrey 35 Chief Operating Officer, Director
David Hare 56 Director
Robert Gries 49 Director
Allan Marshall was a director of Trans-Logistics from November 2000 to
November 2001, when Trans-Logistics was acquired by TL Holdings, a wholly owned
subsidiary of Segmentz. He has served as Director and the Chief Executive
Officer of Segmentz since its acquisition on November 1, 2001. Prior to
Trans-Logistics and Segmentz, Mr. Marshall founded U.S. Transportation Services,
Inc. ("UST") in 1995, which focused on third party logistics. UST was sold to
Professional Transportation Group, Inc. in January of 2000, and Professional
Transportation Group ceased business in November of 2000. Prior to 1995, Mr.
Marshall served as Vice President of U.S. Traffic Ltd. where he founded their
USA Logistics division.
John S. Flynn, is a Senior Managing Member of Aspen Rhodes Capital
Corporation, LLC ("Aspen Rhodes"). Prior to co-founding Aspen Rhodes, Mr. Flynn
was an entrepreneur, developing a nationwide computer service company, a
regional environmental service firm and a management consulting firm. Mr. Flynn
has completed over $500 million of funding in his career, including asset based
capital market products, below investment grade bonds and private equities. He
has completed numerous merger transactions and consulting related to
acquisitions for small and micro cap public companies, including Westbury Metals
Group, US Automotive and RT Industries during his career.
Dennis McCaffrey served as the Chief Operations Officer of UST from 1996
before joining the Company in November 2000. He was responsible for creating and
implementing strategic business plans, supervising operations staff, designing
and managing all sales and marketing programs, assisting in the design and
implementation of internal software program and forming strategic alliances with
contract carriers including U.S. Express, MS Carriers, Heartland Express, and
Swift Transportation. When UST was sold to Professional Transportation Group in
2000, Mr. McCaffrey served as an Operations Manager for the Florida division.
Mr. McCaffrey also worked as the Operations Manager for the U.S. operations of
U.S. Traffic Ltd. from 1992 to 1996. Previously, Mr. McCaffrey served in the
United States Marine Corps from 1988 to 1992. Mr. McCaffrey, as Chief Operating
Officer, is directly responsible for the management, growth and success of
Trans-Logistics transportation, brokerage, and logistics operations.
35
David J. Hare accepted an invitation to the Company's Board of Directors
in October, 2003 and formally joined the Board of Directors in January 2004
after the Company had met conditions agreed upon. He was the Group President,
Polo Ralph Lauren Stores from 1997 through 2001 and was, prior to such time,
President and Chief Executive Officer of PRC since 1993. Mr. Hare assumed
responsibility for PRC's operations when Polo merged certain of its Polo store
operations with Perkins Shearer, Inc. to form PRC in 1993. Prior to that, he had
been President and Chief Executive Officer of Perkins Shearer, Inc. since 1969.
their USA Logistics division.
Robert Gries joined the Company's Board of Directors in January 2004. He
is a principal investor in Sports Funding Inc., a company that provided term
capital to Segmentz in February 2003. Mr. Gries is the largest shareholder of
the Orlando Predators, a founding team in the Arena Football League and was
previously general partner of the Tampa Bay Storm, also a founding team of the
Arena Football League.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission ("SEC") and any securities
exchanges on which the equities of the Company trade, initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than 10% shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. No filings of such persons have been made to date.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
As authorized by the Delaware General Corporation Law, our certificate of
incorporation and bylaws provide that none of our directors shall be personally
liable to us or our shareholders for monetary damages for breach of fiduciary
duty as a director, except for:
o any breach of the director's duty of loyalty to the Company or its
shareholders;
o acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o unlawful payments of dividends or unlawful stock redemptions or
repurchases; or
o any transaction from which the director derived an improper personal
benefit.
These provisions limit our rights and the rights of our shareholders to
recover monetary damages against a director for breach of the fiduciary duty of
care except in the situations described
36
above. These provisions do not limit our rights or the rights of any shareholder
to seek injunctive relief or rescission if a director breaches his duty of care.
These provisions will not alter the liability of directors under federal
securities laws.
Our certificate of incorporation and bylaws further provide for the
indemnification of any and all persons who serve as our director, officer,
employee or agent to the fullest extent permitted under Delaware law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC, this indemnification is against public policy as expressed in the
securities laws, and is, therefore unenforceable.
DIRECTOR COMPENSATION
Our Board appoints the executive officers to serve at the discretion of
the Board. Directors who are also employees receive no compensation for serving
on the Board. Our non-employee directors receive options to purchase shares of
common stock at the market price on the date they agree to serve on the Board,
reimbursement of expenses incurred consequential to their service and additional
options at each anniversary of service. We intend to reimburse non-employee
directors for travel and other expenses incurred in connection with attending
the Board meetings.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Allan Marshall, our
Chief Executive Officer, which terminates on November 15, 2006. The agreement
shall be automatically extended for an additional one-year period after the
initial term unless at least 30 days prior to the termination date either the
Company or Mr. Marshall give written notice to the other that the employment
agreement will not be renewed. In addition to auto, cellular and other expense
allowances, Mr. Marshall will receive an annual base salary of $150,000 which
may be increased at the discretion of the Board. Mr. Marshall may also be
eligible to receive an annual bonus based on the Company's financial performance
in the form of stock options and cash not to exceed 15% of his base salary.
In January 2004, the Board of Directors entered into an employment
agreement with John S. Flynn, our President, which terminates December 31, 2006,
replacing the agreement that had been agreed to in December 2002. In addition to
auto, health and cellular phone reimbursement, this agreement provides for an
initial annual base salary of $110,000, and an annual bonus at the discretion of
the Board of Directors.
In September, 2003, the Board of Directors entered into an employment
agreement with Dennis M. McCaffrey, our Chief Operating Officer, which
terminates December 31, 2006. In addition to auto, health, cellular phone
reimbursement, this agreement will provide for an annual base salary of $96,250
and bonus at the discretion of the Board of Directors.
37
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information relating to the compensation we
paid during the past 3 fiscal years to our President and Chief Executive Officer
and to each of our executive officers who earned more than $100,000 during the
fiscal years ended December 31, 2000, 2001 and 2002:
Long Term
Compensation Awards
Annual Compensation ----------------------------------------
----------------------------- Other Annual Securities Underlying
Name/Principal Position Year Salary Bonus Compensation Options # of Shares
----------------------------------------------------------------------------------------------------
Allan Marshall 2002 $150,000 -- -- -- --
CEO 2001 -- -- -- -- --
2000 -- -- -- -- --
John S. Flynn 2002 $138,000 -- -- -- --
President, CFO 2001 -- -- -- -- --
2000 -- -- -- -- --
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning our grant of options
to purchase shares of our common stock and stock appreciation rights ("SARs")
during the fiscal year ended December 31, 2002, to our President and Chief
Executive Officer and to each of our executive officers who earned more than
$100,000 during the fiscal year ended December 31, 2002:
Percent of
Number of Total Options/
Securities SARs Granted
Underlying To Employees Exercise Or
Options/SARs In Fiscal Base Price
Name/Position Granted (#) Year ($/Sh) Expiration Date
------------- ----------- ------------ -------------- ---------------
Allan Marshall -- -- -- --
CEO
John S. Flynn 100,000 -- -- 1.25
President, CFO 9/4/2008
Dennis McCaffrey 100,000 -- -- 1.25
COO 9/4/2008
STOCK OPTION PLAN
On November 1, 2001, our majority stockholders approved the 2001 Stock
Compensation Plan ("2001 Plan"). The number of shares of common stock which may
be issued under the 2001
38
Plan shall initially be 600,000 shares which amount may, at the discretion of
the Board, be increased from time to time to a number of shares of common stock
equal to 5% of the total outstanding shares of common stock, provided that the
aggregate number of shares of common stock which may be granted under the 2001
Plan shall not exceed 600,000 shares. We may also grant options under the 2001
Plan to attract qualified individuals to become employees and non-employee
directors, as well as to ensure the retention of management of any acquired
business operations. Under the 2001 Plan, we may also grant restricted stock
awards. Restricted stock represents shares of common stock issued to eligible
participants under the 2001 Plan subject to the satisfaction by the recipient of
certain conditions and enumerated in the specific restricted stock grant.
Conditions which may be imposed include, but are not limited to, specified
periods of employment, attainment of personal performance standards or our
overall financial performance. The granting of restricted stock represents an
additional incentive for eligible participants under the 2001 Plan to promote
our development and growth and may be used by Management as another means of
attracting and retaining qualified individuals to serve as our employees and
directors. Currently, the Company has granted the 600,000 options as provided
for in its 2001 Plan.
OPTION EXERCISES AND HOLDINGS
The following table contains information with respect to the exercise of
options to purchase shares of common stock during the fiscal year ended December
31, 2003, to our President and Chief Executive Officer and to each of our
executive officers who earned more than $100,000 during the fiscal year ended
December 31, 2002:
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
Number of
Securities
Value of Underlying
In-The-Money Shares Unexercised
Options/SARs Acquired Options/SARs
At FY-End ($) on Value At FY-End(#)
Exercisable/ Exercise Realized Exercisable/
Name/Position (#) ($) Unexercisable Unexercisable
------------------------------------------------------------------------------------------------------------
Allan Marshall -- -- -- --
CEO
John S. Flynn -- -- -- --
President, CFO
Dennis McCaffrey -- -- -- --
COO
39
Long-Term Incentive Plans Awards in Last Fiscal Year
Performance
Number or Other
Estimated Future Payouts Under of Shares Period Until
Non-Stock Price-Based Plans Units or Maturation Threshold Target Maximum
------------------------------ Other Rights ------------------------------------
Name (#) or Payout ($or #) ($or #) ($ or #)
------------------------------------------------------------------------------------------------------
Allan Marshall, CEO -- -- -- -- --
John S. Flynn, President and CFO -- -- -- -- --
President, CFO
Dennis McCaffrey, COO -- -- -- -- --
40
PRINCIPAL SHAREHOLDERS
The following table sets forth information known to us, as of the date of
this prospectus, relating to the beneficial ownership of shares of common stock
by:
o each person who is known by us to be the beneficial owner of more
than 5% of our outstanding common stock;
o each director;
o each executive officer; and
o all executive officers and directors as a group
Under securities laws, a person is considered to be the beneficial owner
of securities owned by him (or certain persons whose ownership is attributed to
him) and that can be acquired by him within 60 days from the date of this
prospectus, including upon the exercise of options, warrants or convertible
securities. We determine a beneficial owner's percentage ownership by assuming
that options, warrants or convertible securities that are held by him, but not
those held by any other person, and which are exercisable within 60 days of the
date of this prospectus, have been exercised or converted.
Except with respect to beneficial ownership of shares attributed to the
named person, the following table does not give effect to the issuance of shares
in the event outstanding common stock purchase warrants are exercised.
We believe that all persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as being owned
by them. Unless otherwise indicated, the address of each beneficial owner in the
table set forth below is care of Segmentz, Inc., 18302 Highwoods Preserve
Parkway, Suite 100 Tampa, Florida 33647.
Name/Address of Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership of Class
---------------- -------------------- ----------
Allan Marshall (1) 3,196,161 16.1%
John S. Flynn (2) 400,000 2.0%
Dennis M. McCaffrey (3) 200,000 1.0%
Robert Gries (6) 275,000 1.4%
David J. Hare (7) 50,000 *
Barron Partners, LP (4) 3,266,667 15.5%
Kinderhook Partners (5) 2,250,000 11.0%
Executive Officers and
Directors (as a group of 5) 4,121,161 20.5%
----------
* Less than one percent
(1) Mr. Marshall is our Chairman, Chief Executive Officer and a Director.
Includes 100,000 shares underlying common stock purchase warrants
exercisable at $1.25 per share, and 8,285 shares of common stock held by
Mr. Marshall's wife Christine Otten. Mr. Marshall disclaims any beneficial
interest in the shares owned by his wife Christine Otten.
41
(2) Mr. Flynn is our President, Chief Financial Officer and a Director.
Includes 100,000 shares underlying common stock purchase warrants
exercisable at $1.25 per share.
(3) Mr. McCaffrey is our Chief Operating Officer and a Director. Includes
100,000 shares underlying common stock purchase warrants exercisable at
$1.25 per share.
(4) Andrew Worden has investment and voting control over the shares of common
stock beneficially owned by Barron Partners, LP. Includes 1,404,999 shares
underlying common stock purchase warrants exercisable at $1.40 per share
until September 22, 2008.
(5) Steven Clearman has investment and voting control over the shares of
common stock beneficially owned by Kinderhook Partners. Includes 750,000
shares underlying common stock purchase warrants exercisable at $1.50 per
share until December 31, 2008.
(6) Mr. Gries is a Director. Includes 50,000 warrants to purchase shares at
$2.75, expiring February 10, 2009.
(7) Mr. Hare is a Director. Includes 50,000 shares underlying common stock
purchase warrants exercisable at $1.30 per share until October 30, 2008.
CERTAIN TRANSACTIONS
We continue to use the services of tractor owner-operators that are
employed by Bryant Plastics ("Bryant"), an investor. Our agreement with Bryant
is identical to its agreement with any independent owner-operators and Bryant
receives payment terms and percentages that are identical to other agreements
with unrelated entities. We believe these terms to be equitable and fair and
believe that these transactions are treated in the normal course of business as
if Bryant had no relationship with us other than that of an owner-operator.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 40,000,000 shares of common
stock, $.001 par value per share and 10,000,000 shares of preferred stock, $1.00
par value per share. As of the date of this prospectus, there are 19,724,402
shares of common stock issued and outstanding, which are held of record by
approximately 568 holders. As of the date of this prospectus, all shares of
preferred stock have been either redeemed by the Company or converted into
common stock.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a shareholder vote. Holders of common stock do not have
cumulative voting rights. Therefore, holders of a majority of the shares of
common stock voting for the election of directors can elect all of the
directors. Holders of common stock are entitled to share in all dividends that
the board of directors, in its discretion, declares from legally available
funds. In the event of our liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate in all assets that remain
after payment of liabilities and after providing for each class of stock, if
any, having preference over the common stock.
Holders of our common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions for the common
stock. The rights of the holders of common
42
stock are subject to any rights that may be fixed for holders of preferred
stock, when and if any preferred stock is authorized and issued. All outstanding
shares of common stock and the shares underlying all option and warrants will be
duly authorized, validly issued, fully paid and non- assessable upon our
issuance of these shares.
PREFERRED STOCK
As of the date of the this prospectus we have the following series of
preferred stock designated:
Series A-1 Preferred Stock. The series A-1 preferred stock (i) does not
accrue dividends, (ii) votes on an as converted basis with the common stock on
all matters to be voted upon by the holders of the common stock, (iii) is
convertible into common stock at the greater of $1.00 per share or a 30%
discount to the average closing bid price of the common stock for the 5 trading
days prior to the date of conversion, and (iv) is not redeemable by us. All
Series A-1 preferred stock has been converted into common stock.
Series B-1 Preferred Stock. All Series B-1 preferred stock was retired on
December 17, 2003.
Series C Preferred Stock. The series C preferred stock (i) accrues
dividends at a rate of 10% of the stated value ($100 per share) per year, (ii)
has no voting rights, (iii) is not convertible, and (iv) is redeemable by the
Company for $60,000 on the 6 month anniversary of the date of issuance. If the
Company does not redeem the shares of series C preferred stock on the 6 month
anniversary, we are required to issue to the holders of the series C preferred
stock 5 shares of common stock for every 1 share of series C preferred stock
held on each of the 7, 8, and 9 month anniversaries (or 3,000 shares of common
stock per month in the aggregate). If we do not redeem the series C preferred
stock on the 9 month anniversary, the series C preferred stock is automatically
converted into debt, payable upon demand, accruing interest at a rate of 12% per
year. All series C preferred Stock has been redeemed.
We may issue additional series of preferred stock from time to time, with
such designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions as are determined by our Board of
Directors. We have no present intention of issuing shares of preferred stock.
COMMON STOCK PURCHASE WARRANTS
As of February 10, 2004, we had 6,622,498 common stock purchase warrants
outstanding entitling the holders to purchase 6,622,498 shares of our common
stock for a weighted average exercise price of $1.36 per share.
43
TRANSFER AGENT AND REGISTRAR
The transfer agent for our common stock is Securities Transfer
Corporation. Its address is 2591 Dallas Parkway, Suite 102, Frisco, TX 75034.
SHARES ELIGIBLE FOR FUTURE SALE
On February 10, 2004 we had 19,724,402 shares of common stock issued and
outstanding. Of those shares approximately 598,000 shares are freely tradeable
without restriction or further registration under the Securities Act, except for
any shares purchased by an affiliate of ours. This does not include shares being
registered under this Prospectus or shares that may be issued upon exercise of
options or warrants.
The remaining 6,549,072 shares of common stock outstanding as of February
10, 2004 (not including the 12,577,330 shares of common stock being registered
under this Prospectus and 6,622,498 shares underlying issued and outstanding
warrants) are restricted securities, and will become eligible for public sale at
various times, provided the investors comply with the requirements of Rule 144.
In general, Rule 144 permits a shareholder who has owned restricted shares for
at least 1 year, to sell without registration, within a 3 month period, up to 1%
of our then outstanding common stock. We must be current in our reporting
obligations in order for a shareholder to sell shares under Rule 144. In
addition, shareholders other than our officers, directors or 5% or greater
shareholders who have owned their shares for at least 2 years, may sell them
without volume limitation or the need for our reports to be current.
We cannot predict the effect, if any, that market sales of common stock or
the availability of these shares for sale will have on the market price of our
shares from time to time. Nevertheless, the possibility that substantial amounts
of common stock may be sold in the public market could negatively damage effect
market prices for the common stock and could damage our ability to raise capital
through the sale of our equity securities.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed
upon for us by Adorno & Yoss, P.A., 350 East Las Olas Boulevard, Suite 1700,
Fort Lauderdale, FL 33301. Adorno & Yoss, P.A. owns 100,000 common stock
purchase warrants, exercisable at $1.40 per share until January 8, 2006.
44
EXPERTS
The consolidated audited financial statements as of December 31, 2002, and
December 31, 2001, and for each of the 2 years in the period ended December 31,
2002, appearing in this prospectus and registration statement have been audited
by Pender Newkirk & Company, independent auditors, as set forth in their report
thereon appearing elsewhere in this prospectus, and are included in reliance
upon this report given on the authority of Pender Newkirk & Company as experts
in auditing and accounting.
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act for the common stock offered by this prospectus. This prospectus,
which is a part of the registration statement, does not contain all of the
information in the registration statement and the exhibits filed with it,
portions of which have been omitted as permitted by SEC rules and regulations.
For further information concerning us and the securities offered by this
prospectus, we refer to the registration statement and to the exhibits filed
with it. Statements contained in this prospectus as to the content of any
contract or other document referred to are not necessarily complete. In each
instance, we refer you to the copy of the contracts and/or other documents filed
as exhibits to the registration statement, and these statements are qualified in
their entirety by reference to the contract or document.
The registration statement, including all exhibits, may be inspected
without charge at the SEC's Public Reference Room at 450 Fifth Street, N.W.
Washington, D.C. 20549, and at the SEC's regional offices located at the
Woolworth Building, 233 Broadway, New York, New York 10279 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of these
materials may also be obtained from the SEC's Public Reference at 450 Fifth
Street, N.W., Room 1024, Washington D.C. 20549, upon the payment of prescribed
fees. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.
The registration statement, including all exhibits and schedules and
amendments, has been filed with the SEC through the Electronic Data Gathering,
Analysis and Retrieval system, and is publicly available through the SEC's Web
site located at http://www.sec.gov.
45
SEGMENTZ, INC.
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
SEGMENTZ, INC.
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
F-
Segmentz, Inc.
Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
CONTENTS
Financial Statements:
Balance Sheet..................................................F-2
Statements of Operations.......................................F-3
Statement of Changes in Stockholders' Equity...................F-4
Statements of Cash Flows.......................................F-5
Notes to Financial Statements...............................F-6 - F-12
F-1
Segmentz, Inc.
Balance Sheet
September 30, 2003 (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,875,739
Accounts receivable, net of allowance of $245,489 2,516,284
Prepaid expenses 908,709
---------------
Total current assets 5,300,732
Equipment, net of accumulated depreciation 607,807
Advances to Murphy Surf Air 2,213,230
Other assets 475,479
Loans and advances 39,314
---------------
$ 8,636,562
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 613,241
Accrued salaries and wages 128,500
Accrued expenses, other 333,400
Obligation due under factoring arrangement 1,137,596
Short term portion of long term debt and other short term debt 718,636
Advances from shareholder 165,998
---------------
Total current liabilities 3,097,371
---------------
Long term liabilities 200,770
Stockholders' equity:
Convertible preferred stock, 10,000,000 shares
Authorized, 1,188,819 shares issued and outstanding 1,188,819
Common stock, $.001 par value; 40,000,000 shares
authorized; 13,609,713 shares issued and
outstanding, 13,610
Additional paid-in capital 4,059,495
Stock payable 20,000
Retained earnings 56,497
---------------
Total stockholders' equity 5,338,421
---------------
$ 8,636,562
===============
The accompanying notes are an integral part of the financial statements.
F-2
Segmentz, Inc.
Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2003 2002 2003 2002
-----------------------------------------------------------------------
Revenues:
Operating revenue $ 3,776,245 $ 2,207,782 $ 9,976,636 $ 6,077,057
Consulting and other revenue 250,000 9,648 257,641 73,294
-----------------------------------------------------------------------
4,026,245 2,217,430 10,234,277 6,150,351
-----------------------------------------------------------------------
Expenses:
Cost of services 2,860,157 1,736,559 7,435,884 4,685,204
General and administrative
expenses 1,092,846 354,785 2,339,182 1,179,736
-----------------------------------------------------------------------
3,953,003 2,091,344 9,775,066 5,864,940
-----------------------------------------------------------------------
Income before taxes 73,242 126,086 459,211 285,411
Income tax expense 21,200 0 133,500 0
-----------------------------------------------------------------------
Net income $ 52,042 $ 126,086 $ 325,711 $ 285,411
=======================================================================
Basic earnings per
common share $ .01 $ .02 $ .04 $ .04
=======================================================================
Basic weighted average common
shares outstanding 9,912,511 6,502,913 7,878,469 6,502,913
=======================================================================
Diluted earnings per
common share $ .00 $ .01 $ .04 $.03
=======================================================================
Diluted weighted average
common shares outstanding 11,113,950 8,905,417 9,077,939 8,936,892
=======================================================================
The accompanying notes are an integral part of the financial statements.
F-3
Segmentz, Inc.
Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2003 (Unaudited)
Preferred Stock
-----------------------------------
Shares Amount
-----------------------------------
--------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002 1,188,819 $ 1,188,819
Series C redeemable convertible preferred and common stock
Issuance of stock
Net income
--------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2003 1,188,819 $ 1,188,819
==========================================================================================================================
The accompanying notes are an integral part of the financial statements.
F-4
Common Stock Stock Payable Additional Retained Earnings
------------ -------------- Paid-In (Accumulated
Shares Amount Preferred Common Capital Deficit) Total
-------------------------------------------------------------------------------------------------
6,752,913 $ 6,753 $ 13,820 $ 16,180 $ 2,847 $ (269,214) $ 959,205
18,000 18 6,180 (6,180) 37,427 37,445
6,838,800 6,839 (10,000) 4,019,221 4,016,060
325,711 325,711
-------------------------------------------------------------------------------------------------
13,609,713 $ 13,610 $ 20,000 $ 0 $ 4,059,495 $ 56,497 $5,338,421
=================================================================================================
F-5
Segmentz, Inc.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
------------------------------
2003 2002
------------------------------
OPERATING ACTIVITIES
Net income $ 325,711 $ 285,411
------------------------------
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Change in allowance for doubtful accounts 108,845 107,687
Depreciation and amortization 105,789 67,680
Non-cash expense relating to
issuance of stock and warrants 37,935
Valuation on deferred tax asset (38,700)
Changes in:
Accounts and other trade receivables (393,838) (739,978)
Prepaid expenses and other current assets (548,166) 54,340
Other assets (450,915)
Accounts payable (93,166) 392,860
Accrued expenses 172,367 (126,197)
Accrued salaries 121,730
------------------------------
Total adjustments (978,119) (243,608)
-------------------------------
Net cash provided by operating activities (652,408) 41,803
------------------------------
INVESTING ACTIVITIES
Purchases of equipment (488,397) 11,215
Loans, advances, and other receivables (13,703) (35,333)
-------------------------------
Net cash used in investing activities (502,100) (24,118)
-------------------------------
FINANCING ACTIVITIES
Decrease in net obligations incurred under
factoring arrangements (571,501) (299,975)
Advances to Murphy Surf Air (1,427,430)
Proceeds and payments on debt, net 1,034,227 263,902
Proceeds from issuance of note payable 50,000
Proceeds from sale of common stock 10,000
Redemption of preferred stock (10,127)
Net proceeds from the issuance of equity 3,991,193
------------------------------
Net cash provided by financing activities 3,026,489 13,800
------------------------------
NET INCREASE IN CASH 1,871,981 31,485
CASH, BEGINNING OF PERIOD 3,758 39,489
------------------------------
CASH, END OF PERIOD $ 1,875,739 $ 70,974
==============================
The accompanying notes are an integral part of the financial statements.
F-6
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES
BASIS OF PRESENTATION
In the opinion of management, all adjustments consisting of normal recurring
adjustments necessary for a fair statement of (a) the financial position at
September 30, 2003, (b) the results of operations for the three month and nine
month periods ended September 30, 2003 and 2002, and (c) cash flows for the nine
month periods ended September 30, 2003 and 2002, have been made.
The unaudited financial statements and notes are presented as permitted by Form
10-QSB. Accordingly, certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been omitted. The
accompanying financial statements and notes should be read in conjunction with
the audited financial statements and notes of the Company for the fiscal year
ended December 31, 2002. The results of operations for the nine-month period
ended September 30, 2003 are not necessarily indicative of those to be expected
for the entire year.
In April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities". SFAS No. 149 clarifies under what circumstances a contract with an
initial net investment meets the characteristics of a derivative as discussed in
Statement No. 133. It also specifies when a derivative contains a financing
component that warrants special reporting in the Statement of Cash Flows. SFAS
No. 149 amends certain other existing pronouncements in order to improve
consistency in reporting these types of transactions. The new guidance is
effective for contracts entered into or modified after June 30, 2003, and for
hedging relationships designated after June 30, 2003. SFAS No. 149 did not have
a material effect on the Financial Statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". It
establishes classification and measurement standards for three types of
freestanding financial instruments that have characteristics of both liabilities
and equity. Instruments within the scope of SFAS 150 must be classified as
liabilities within the company's Financial Statements and be reported at
settlement date value. The provisions of SFAS 150 are effective for (1)
instruments entered into or modified after May 31, 2003 and (2) pre-existing
instruments as of July 1, 2003. On October 29, 2003, the FASB voted to
indefinitely defer the effective date of SFAS 150 for mandatorily redeemable
instruments as they relate to minority interests in consolidated finite-lived
entities through the issuance of FASB Staff Position (FSP) 150-3. The adoption
of SFAS 150, as modified by FSP 150-3, is not expected to have a material effect
on the Financial Statements.
F-7
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
STOCK BASED COMPENSATION
In December 2002, FASB issued Statement of Financial Accounting Standards No.
148 (SFAS 148"), Accounting for Stock-Based Compensation-Transition and
Disclosure. SFAS 148 amends current disclosure requirements and requires
prominent disclosures on both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. This statement is effective for financial
reports containing financials statements for interim periods beginning after
December 15, 2002. The Company currently intends to continue to account for its
stock-based compensation awards to employees and directors under the accounting
prescribed by Accounting Principles Board No. 25.
The Company accounts for its stock option plan under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based employee compensation
cost is reflected in net income. During the nine months ended September 30, 2003
and 2002 there were options granted to two certain officers. The impact of the
provisions of APB 25 and FASB 123 were not material in the period ended
September 30, 2003, in which each officer received 250,000 options to purchase
shares of the Company's common stock at a strike price of $1.20 for a period of
five years from the date of the agreement, September 4, 2003. The pro forma net
income resulting from application of the fair value based method prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," appears below:
Three months ended September 30, Nine months ended September 30,
--------------------- --------------- ---------------- ------------------
2003 2002 2003 2002
--------------------- --------------- ---------------- ------------------
Net income, as reported $ 52,042 $ 126,086 $ 325,711 $ 285,411
Total stock-based employee compensation expense
determined
under fair value based method, net of related
tax effects 1,200 - 1,200 -
--------------------- --------------- ---------------- ------------------
Pro forma net income $ 50,842 $ 126,086 $ 324,511 $ 285,411
F-8
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
1. SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Three months ended September 30, 2003 Nine Months ended September 30, 2003
--------------------- -------------------- ------------------- -------------------
Earnings per common share:
Basic - as reported $ .01 $ .02 $ .04 $ .04
--------------------- -------------------- ------------------- -------------------
Basic - pro forma $ .01 $ .02 $ .04 $ .04
--------------------- -------------------- ------------------- -------------------
Diluted - as reported $ .00 $ .01 $ .04 $ .03
--------------------- -------------------- ------------------- -------------------
Diluted - pro forma $ .00 $ .01 $ .04 $ .03
2. SALE OF ACCOUNTS RECEIVABLE
During the second quarter of 2002, the Company entered into an agreement with a
factoring company to provide for the borrowing against eligible receivables of
up to eighty percent (80%) of the face value of such receivables. The Company
maintains any advances under this agreement as liabilities in its balance sheet
and any receivables, net of allowances for losses, as assets. The borrowing
against eligible receivables is not a true sale and the company keeps all
balances due from customers net of allowances for doubtful accounts as assets,
and all amounts advanced by its factoring company that are due as liabilities,
pursuant to Statements of Financial Accounting Standards ("SFAS") No. 140
"Accounting for transfers and servicing of financial assets and extinguishment
of liabilities," such amounts are not sold without recourse and therefore
reported in accordance with provisions of applicable rules and guidelines.
F-9
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
3. ADVANCES TO MURPHY SURF AIR
In September 2002, the Company entered into an Agency agreement with Murphy Surf
Air, a fifty plus year old airfreight forwarder, to provide local pickup and
delivery for the Company to support its expansion to Midwestern and Southeastern
markets in Chicago, Louisville and Lexington KY, Cincinnati, Nashville and
Knoxville TN and Atlanta. Murphy Surf Air filed for protection under Chapter 11
USC in March 2003 and the Company provided advances to Murphy in excess of
amounts due under the agency agreement to ensure continued services to customers
in those markets, including certain account receivable that provide for offset
rights.
The Company made an offer during this period to purchase certain assets of
Murphy Surf Air, primarily those assets that were held as chattel by the secured
lender, Fifth Third bank, including accounts receivable, equipment, leasehold
improvements and supporting assets that are currently utilized to deliver
services through our organization. The Company believes that the purchase of
these assets does not represent a "significant subsidiary" as defined in
Regulation S-B, Regulation 210.01. Although there may be risks associated with
the purchase of these assets, the Company has not reserved specifically for
losses that may occur consequential to this purchase. The Company will continue
to examine the value of assets to be purchased to determine what reserves, if
any, are needed to adequately mitigate any potential losses that might result
from such asset purchase, including accounts receivable associated with this
relationship.
4. INCOME TAXES
Income tax expense for the nine months ended September 30, 2003 and 2002 is
based on the Company's estimate of the effective tax rate expected to be
applicable for the full year. The effective tax rate of 29.0 percent for the
nine months ended September 30, 2003 differs from the statutory rate because of
the effects of utilizing a net operating loss carryover, permanent differences,
and adjustments to the valuation allowance on deferred tax assets.
5. EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing earnings available to
common shareholders by the weighted average number of common shares outstanding
or payable during each period. Diluted EPS is similarly calculated, except that
the denominator includes common shares that may be issued subject to existing
rights with dilutive potential.
F-10
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
6. STOCKHOLDERS' NOTE
The Company has agreed to provide a stockholder up to $100,000, secured by
preferred shares of the Company, $21,000 of which has been drawn at period end.
This note bears interest at six percent annually and is payable upon demand. As
of September 30, 2003 no demand for payment has been made on the outstanding
balance
7. TERM NOTE
The Company currently owes $350,000 to a Corporation, due on August 20, 2004,
bearing interest at twelve percent, plus warrants that provide for the purchase
of shares of the Company's common stock at a price of $1.01 per share, such
warrants being callable at par if the Company's shares trade at $1.66 for twenty
consecutive trading days. This term note provides for payment of interest
monthly, with a balloon payment of principal on the due date. The Company's
Chief Executive Officer and the Company's President have personally guaranteed
the Company's performance under this obligation.
8. SEGMENT INFORMATION
Historically the Company has had two reportable segments; truck hauling and
warehouse operations, although the Company continues to provide these two
services, the warehousing segment has become an immaterial component of
providing overall third party logistical support to our customers and no longer
meets the criteria for a reportable segment. Therefore, for the nine months
ended September 30, 2003 the Company has only one reportable segment.
9. EQUITY FUNDING
On July 9, 2003, the Company closed a private placement pursuant to which the
Company issued a total of 2,673,334 shares of its' common stock, par value
$0.001 per share, and warrants to purchase up to 1,336,667 shares of its' common
stock, par value $0.001 per share, for $1.25 per share for a period of 5 years,
to 58 accredited investors. The Company received $2,005,000 in consideration for
the issuance of the securities, less placement agent fees and other offering
costs associated with the private placement. The securities were issued pursuant
to the exemption from registration provided by Rule 506 of Regulation D,
promulgated under the Securities Act of 1933, as amended. The Company incurred
offering costs of approximately $310,000 in cash and 267,333 shares of common
stock, in addition to 133,667 warrants to purchase stock at a strike price of
$1.25 per share, in connection with this offering These investors purchased the
securities for investment purposes and the securities they received were marked
with the appropriate restrictive legend.
F-11
Segmentz, Inc.
Notes to Financial Statements
Three Months and Nine Months Ended September 30, 2003 and 2002 (Unaudited)
9. EQUITY FUNDING (CONTINUED)
The Company entered into discussions with several institutional investors that
resulted in those investors making an investment in the Company under an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended. These investors purchased 3,743,999 shares of common stock,
par value $0.001 per share, and warrants to purchase up to 2,724,499 shares of
our common stock, par value $0.001 per share, for $1.40 per share for a period
of 5 years, to several institutional investors. The Company received $2,810,000
in connection with this offering and incurred offering costs approximating
$510,000 in cash and 300,000 options to purchase common stock at a strike price
of $1.40 per share. Any securities purchased pursuant to this offering will be
marked with the appropriate restrictive legend.
10. SOFTWARE SALE
The Company sold rights to its operational software package, "TRUCKS," providing
the buyer with code, books and information to enable development of a marketable
software product or service that may be sold to transportation companies. The
Company received $250,000 in connection with this rights sale, in addition to
potential royalty revenues that may result from sales of any products developed
utilizing this software and rights to free upgrades, in the Company's sole
discretion that allow the Company to continue to utilize the software code and
methods in operational capacities. Any costs incurred pursuant to the
development of this software have been expensed in prior periods.
11. SUBSEQUENT EVENTS
On October 1, 2003, Segmentz, Inc. completed the acquisition of 100% of the
capital stock of Bullet Freight Systems of Miami, Inc., Bullet Freight Systems
of Palm Beach, Inc., Bullet Freight System, Inc., Bullet Courier Service, Inc.,
Bullet Freight Systems of Orlando, Inc. and B.C.S. Transportation Systems, Inc.
(collectively, the "Acquired Companies") for cash consideration of $225,000,
225,000 shares of Segmentz, Inc. restricted common stock and conditional
payments that could total $400,000 over a five (5) year period (the
"Consideration"), pursuant to terms and conditions of a Stock Purchase Agreement
dated September 30, 2003 (the "Stock Purchase Agreement"). The Consideration was
paid for out of existing cash on hand. This transaction was not considered the
purchase of a "Significant Subsidiary," as defined in Regulation S-B Rule
210.01.
Upon Completion of the Company's private placement offerings, it entered into
negotiations with its Chief Executive Officer to repurchase all outstanding
shares of preferred stock owned by him at a price of $.58 per share. This
transaction resulted in a reduction of the possible number of outstanding shares
of common stock by 440,000 shares based on the conversion rate of 1:1 of this
series of preferred stock. The Company has paid $240,000 to date in connection
with this transaction, and expects to close on November 17, 2003.
F-12
CONSOLIDATED FINANCIAL STATEMENTS
SEGMENTZ, INC.
Years Ended December 31, 2002 and 2001
Independent Auditors' Report
F-13
Segmentz, Inc.
Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
CONTENTS
Independent Auditors' Reports on Consolidated Financial Statements........ F-15
Consolidated Financial Statements:
Consolidated Balance Sheets.............................................F-16
Consolidated Statements of Operations...................................F-17
Consolidated Statements of Changes in Stockholders' Equity..............F-18 - F-19
Consolidated Statements of Cash Flows...................................F-20 - F-21
Notes to Consolidated Financial Statements..............................F-22 - F-36
F-14
Independent Auditors' Report
Board of Directors
Segmentz, Inc.
Tampa, Florida
We have audited the accompanying consolidated balance sheets of Segmentz, Inc.
as of December 31, 2002 and 2001 and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
management of Segmentz, Inc. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. These standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
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
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Segmentz, Inc. as of
December 31, 2002 and 2001 and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
Pender Newkirk & Company
Certified Public Accountants
Tampa, Florida
March 19, 2003
F-15
Segmentz, Inc.
Consolidated Balance Sheets
December 31,
--------------------------
2002 2001
--------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,758 $ 39,489
Accounts receivable, net of allowances of $136,644
and $45,000 at December 31, 2002 and 2001, respectively 3,017,091 1,008,576
Other receivables 40,741 108,421
Prepaid expenses and other current assets 295,425 167,840
--------------------------
Total current assets 3,357,015 1,324,326
--------------------------
Equipment, net of accumulated depreciation 211,063 321,808
--------------------------
Other assets:
Note receivable, net of allowance, at December 31, 2001, of $225,000 0 225,000
Other receivables, net of allowance, at December 31, 2001 of $200,000 0 64,833
Loans and advances 25,611 31,850
--------------------------
Total other assets 25,611 321,683
--------------------------
$ 3,593,689 $ 1,967,817
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 706,407 $ 623,677
Accrued salaries and wages 6,770 66,962
Accrued expenses, other 161,033 80,152
Obligation due under factoring arrangement 1,709,097 639,461
Advance from shareholder 51,177 0
--------------------------
Total current liabilities 2,634,484 1,410,252
--------------------------
Stockholders' equity:
Convertible preferred stock; $.001 par value; 10,000,000 shares authorized;
1,188,819 and 1,200,794 shares issued and outstanding at December 31,
2002 and 2001, respectively 1,188,819 1,200,794
Common stock; $.001 par value; 40,000,000 shares
authorized; 6,752,913 and 6,502,913 shares issued
and outstanding at December 31, 2002 and 2001, respectively 6,753 6,503
Stock Payable 30,000
Additional paid-in capital 2,847 (6,403)
Accumulated deficit (269,214) (643,329)
--------------------------
Total stockholders' equity 959,205 557,565
--------------------------
$ 3,593,689 $ 1,967,817
==========================
The accompanying notes are an integral part of the financial statements.
F-16
Segmentz, Inc.
Consolidated Statements of Operations
Year Ended December 31,
--------------------------
2002 2001
--------------------------
Revenues:
Operating revenue $ 9,960,810 $ 8,455,766
Consulting and other revenue 33,696 11,464
--------------------------
9,994,506 8,467,230
--------------------------
Expenses:
Cost of Sales 7,781,632 7,509,712
General and administrative expenses 1,743,476 1,318,392
Loss in investment 0 78,999
Gain on sale of fixed assets (43,830)
Interest expense 139,113 216,548
--------------------------
9,620,391 9,123,651
Income (Loss) before taxes 374,115 (656,421)
Income tax expense 0 0
--------------------------
Net income (loss) $ 374,115 $ (656,421)
==========================
Basic earnings (loss) per common share $ .06 $ (.10)
==========================
Weighted average common shares outstanding 6,565,242 6,502,913
==========================
Diluted earnings (loss) per common share $ .05 $ (.10)
==========================
Weighted average common shares outstanding 7,956,009 6,502,913
==========================
The accompanying notes are an integral part of the financial statements.
F-17
Segmentz, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 2002 and 2001
Preferred Stock
------------------------
Shares Amount
------------------------
Balance, December 31, 2000
Acquisition of company
Recapitalization of company
Issuance of Series B redeemable convertible preferred stock 426,898 $ 426,898
Issuance of Series A convertible preferred stock 773,896 $ 773,896
Net loss for the year
-----------------------------------------------------------------------------------------------
Balance, December 31, 2001 1,200,794 1,200,794
Redemption of Series B redeemable convertible preferred stock (11,975) (11,975)
Series C Redeemable convertible preferred and common stock payable
Issuance of common stock
Issuance of warrants for services
Net income for the year
-----------------------------------------------------------------------------------------------
Balance, December 31, 2002 1,188,819 $ 1,188,819
===============================================================================================
The accompanying notes are an integral part of the financial statements.
F-18
Retained
Common Stock Stock Payable Additional Earnings
--------------------------- Paid-In (Accumulated
Shares Amount Preferred Common Capital Deficit) Total
----------------------------------------------------------------------------------------------------------
500 $ 50 $ 0 $ 0 $ 50 $ 13,092 $ 13,192
6,502,913 6,503 4,480 (4,153) 6,830
(500) (50) 0 0 (10,933) 4,153 (6,830)
426,898
773,896
(656,421) (656,421)
----------------------------------------------------------------------------------------------------------
6,502,913 6,503 0 0 (6,403) (643,329) 557,565
(11,975)
13,820 16,180 30,000
250,000 250 2,250 2,500
7,000 7,000
374,115 374,115
----------------------------------------------------------------------------------------------------------
6,752,913 $ 6,753 $ 13,820 $ 16,180 $ 2,847 ($ 269,214) $ 959,205
==========================================================================================================
F-19
Segmentz, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
--------------------------
2002 2001
--------------------------
OPERATING ACTIVITIES
Net (loss) income $ 374,115 $ (656,421)
--------------------------
Adjustments to reconcile net (loss) income to net cash
and cash equivalents (used) provided by operating
activities:
Securities received as payment for services (148,500)
Warrants issued for service 7,000
Loss on sale of securities 78,999
Provision for doubtful accounts and other receivables 210,279 483,365
Note receivable received to offset general and
administrative expenses (450,000)
Depreciation 101,764 53,335
Gain on Sale of Equipment (43,830)
Increase in:
Accounts and other trade receivables (2,218,794) (905,404)
Prepaid expenses and other assets (69,428) (92,840)
Increase (decrease) in:
Accounts payable 82,730 427,464
Accounts payable to related party (126,845)
Accrued expenses 20,689 139,614
Income taxes payable (2,917)
--------------------------
Total adjustments (1,909,590) (543,729)
--------------------------
Net cash and cash equivalents (used) provided by
operating activities (1,535,475) (1,200,150)
--------------------------
INVESTING ACTIVITIES
Purchase of equipment (42,339) (375,143)
Proceeds from sale of Equipment 95,150
Proceeds from sale of securities 32,500 69,501
Loans, advances, and other receivables (5,736) (296,683)
--------------------------
Net cash and cash equivalents used (provided) by investing activities 79,575 (602,325)
--------------------------
FINANCING ACTIVITIES
Net obligations incurred under factoring arrangements 1,069,636 639,461
Advance from stockholders 350,533
Proceeds from issuance of debt 1,200,794
--------------------------
Net cash and cash equivalents provided by financing activities 1,420,169 1,840,255
--------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (35,731) 37,780
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR/PERIOD 39,489 1,709
--------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR/PERIOD $ 3,758 $ 39,489
==========================
The accompanying notes are an integral part of the financial statements.
F-20
Segmentz, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
-----------------------
2002 2001
-----------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
AND NONCASH FINANCING ACTIVITIES:
Cash paid during the year for interest $ 155,192 $ 201,469
=======================
During the year ended December 31, 2002, a stockholder offset $299,356 of
amounts due him against receivables which were deemed to be uncollectable
in accordance with a guarantee from the stockholder.
During the year ended December 31, 2002, the majority stockholder
satisfied $11,975 of proceeds he owed to Company by redeemed 11,795 shares
of his preferred stock.
During the year ended December 31, 2001, the holders of debt amounting
to $1,200,794 received 1,200,794 shares of preferred stock in
satisfaction of this liability.
The accompanying notes are an integral part of the financial statements.
F-21
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
1. ACQUISITION
In October 2001, Segmentz, Inc., formerly known as WBNI, Inc., merged with
TransL Holdings, Inc., the sole stockholder of Trans-Logistics, Inc. This
consolidated entity is hereinafter referred to as the "Company." Prior to
acquisition, Segmentz, Inc. was an inactive public shell with approximately 460
stockholders who owned 520,233 shares of common stock.
Pursuant to the agreement, the stockholders of TransL Holdings, Inc. ("TransL")
received in return for all of their shares in TransL, 5,982,680 unregistered
shares of Segmentz, Inc., which represented approximately 92 percent of its
total shares outstanding.
The acquisition has been accounted for as a reverse acquisition in which TransL
is treated as the acquirer and Segmentz, Inc. as the acquiree. All references in
the accompanying consolidated financial statements to the number of common
shares and the per share amounts have been restated to reflect the subsequent
change in the common stock as if the acquisition had occurred on April 28, 2000.
2. BACKGROUND INFORMATION
WBNI, Inc., a Texas corporation incorporated in 2000, is the surviving
corporation of a sequence of mergers and reverse mergers of inactive companies.
In November 2001, WBNI, Inc. changed its name to Segmentz, Inc.
TransL Holdings, a Delaware corporation incorporated in October 2001, is the 100
percent stockholder of Trans-Logistics, Inc., a Florida corporation incorporated
in April 2000. In 2002, it was determined by the Board of Directors that it was
best to market all services under one name and all operations of
Trans-Logistics, Inc., ceased. Segmentz, Inc. ("Segmentz") holds all required
licenses, permits and insurance policies necessary to provide transportation and
logistics services to its client base. Segmentz is a logistics and brokerage
organization that offers four core transportation services to its' client base;
Truckload, Less-than-truckload (LTL), Expedited services and Air-freight
forwarding within a network of cross dock facilities situated in Chicago,
Illinois, Evansville, Indiana, Louisville and Lexington, Kentucky, Cincinnati,
Ohio, Nashville and Knoxville, Tennessee and Atlanta, Georgia. Segmentz'
headquarters are in Tampa, FL.
During May 2001, Trans-Logistics Inc. acquired the assets of Q Logistics
Solutions, Inc. ("QLS") for approximately $367,000. This transaction was
accounted for using the purchase method of accounting. QLS operated warehouse
facilities in Atlanta, GA., Edison, NJ, Orlando, FL., and Chicago, IL.
Operations in Orlando and Chicago were subsequently discontinued and those in
Atlanta and Edison were relocated to Evansville, IN.
F-22
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
2. BACKGROUND INFORMATION (CONTINUED)
Effective January 1, 2001, Trans-Logistics was acquired by Logistics Management
Resources, Inc. ("LMR") in August 2001. This acquisition was rescinded and
cancelled. It is the Company's assertion that this transaction was never
consummated and, therefore, never occurred. No consideration was ever tendered
and control was never transferred. The purchase price was to be determined based
on results of future revenues plus $80,000, less certain liabilities assumed. A
portion of the consideration was to be paid at closing with the balance to be
paid in installments. The delivery of shares by either party to the other never
occurred and, therefore, the Company has not recorded this acquisition under
applicable pushdown accounting rules. Under the terms of the rescission
agreement, the Company agreed to a reimbursement of 1,500,000 shares of LMR's
common stock and a note receivable in the amount of $450,000, which the Company
had an allowance of $225,000 recorded for estimated, uncollectible amounts as of
December 31, 2001. LMR tendered a certificate for 1.5 million shares pursuant to
the rescission agreement, which was received by Trans-Logistics on August 10,
2001. The shares closed at $.99, which resulted in a reduction of general and
administrative expenses of $148,500 and extinguishment of the first part of
rescission obligation due to Trans-Logistics under the terms of that agreement.
The shares were sold to the market as soon as conditions permitted with the
intention of maximizing cash value received while ensuring that shares were sold
as quickly as was practical. The Company incurred a loss of approximately
$79,000 on the sale of these shares during the year ended December 31, 2001.
There are no current liabilities to LMR pursuant to the rescission agreement.
Any liabilities to Trans-Logistics that might have existed were extinguished
pursuant to mutual conditional general releases executed simultaneously with the
rescission agreement, except for $390,000 remaining under the settlement terms,
which has been expensed as uncollectible during the year ended December 31, 2002
and 2001.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are as follows:
The accompanying consolidated financial statements include the accounts
of the Company and all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
Prior to October 2001, the date of the merger, the financial statements
are those of Trans-Logistics, Inc., the only operating company at that
time.
F-23
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Operating revenues for truck brokerage services are recognized on the
date the freight is delivered. Related costs of delivery of shipments in
transit are accrued as incurred. Revenues from warehousing services are
recognized as the services are performed.
Cash equivalents consist of all highly liquid debt instruments purchased
with an original maturity of three months or less.
The majority of cash is maintained with a major financial institution in
the United States. Deposits with this bank may exceed the amount of
insurance provided on such deposits. Generally, these deposits may be
redeemed upon demand, and, therefore, bear minimal risk.
The Company extends credit to its various customers based on the
customer's ability to pay. The Company provides for estimated losses on
accounts receivable based on bad debt experience and a review of
existing receivables. Based on management's review of accounts
receivable and other receivables, an allowance for doubtful accounts of
approximately $136,600 and $45,000 is considered necessary as of
December 31, 2002 and 2001, respectively.
Equipment is recorded at cost. Depreciation is calculated by the
straight-line method over the estimated useful lives of the assets,
ranging generally from two to seven years. Maintenance and repairs are
charged to operations when incurred. Betterments and renewals are
capitalized. When property and equipment are sold or otherwise disposed
of, the asset account and related accumulated depreciation account are
relieved, and any gain or loss is included in operations.
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the
consolidated financial statements carrying amounts of existing assets
and liabilities and their respective income tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized as income in the period that included the enactment date.
F-24
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic earnings per share (EPS) is calculated by dividing earnings (loss)
available to common shareholders by the weighted average number of
common shares outstanding during each period. Diluted EPS is similarly
calculated, except that the denominator includes common shares that may
be issued subject to existing rights with dilutive potential, except
when their inclusion would be antidilutive.
Financial instruments, which potentially subject the Company to
concentrations of credit risk, include trade receivables. Concentration
of credit risk with respect to trade receivables is limited due to the
Company's large number of customers and wide range of industries and
locations served. One customer comprised approximately 18 and 21 percent
of the December 31, 2002 and 2001 customer accounts receivable balance,
respectively. Sales to this customer comprised approximately 6 and 26
percent of the Company's sales for the year ended December 31, 2002 and
2001, respectively.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management. The
respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments
include cash, notes receivable, accounts payable, and accrued expenses.
Fair values were assumed to approximate carrying values for these
financial instruments since they are short-term in nature and their
carrying amounts approximate fair values or they are receivable or
payable on demand. The fair value of the Company's debt is estimated
based upon the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same remaining
maturities.
On January 1, 2002, the Company adopted SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 addresses the
financial accounting and reporting for the impairment of long-lived
assets, excluding goodwill and intangible assets, to be held and used or
disposed of. The adoption of SFAS 144 did not have an impact on the
Company's financial position or results of operations. In accordance
with SFAS 144, the carrying values of long-lived assets are periodically
reviewed by the Company and impairments would be recognized if the
expected future operating non-discounted cash flows derived from an
asset were less than its carrying value.
In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities", which is effective for the Company
for exit or disposal activities that are initiated after December 31,
2002. This Statement addresses financial accounting and
F-25
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring)."
This Statement requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred.
Under Issue 94-3 a liability for an exit cost as defined, was recognized
at the date of an entity's commitment to an exit plan. The Company will
adopt SFAS 146 for all exit or disposal activities that are initiated
after December 31, 2002 and does not expect this statement to have a
material effect on its financial statements.
The FASB issued SFAS 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure", which is effective for the
Company as of January 1, 2003. This Statement amends FASB Statement No.
123, "Accounting for Stock-Based Compensation", to provide alternative
methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of Statement 123 to
require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
Certain minor reclassifications have been made in the 2001 financial
statements to conform to the classifications used in 2002. These
reclassifications had no effect on total assets, stockholders' equity,
total cash flows, or net income.
4. EQUIPMENT
Equipment consists of :
2002 2001
-------------------
Leasehold improvements $ 4,462 $ 3,685
Office equipment 56,620 56,621
Warehouse equipment 148,760 148,760
Warehouse shelving 51,947 67,000
Computer equipment 61,000 61,000
Computer software 41,140 38,077
-------------------
363,929 375,143
Less accumulated depreciation 152,866 53,335
-------------------
$211,063 $321,808
===================
F-26
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
5. NOTE RECEIVABLE
As disclosed in Note 2, during the year ended December 31, 2001, the Company and
LMRI mutually rescinded an acquisition agreement. This agreement did not rescind
an amount that was due to the Company as part of the purchase price. As a
result, the Company has recognized a reduction of G&A expenses and a demand note
receivable of an equal amount of $450,000 due from LMRI during the year ended
December 31, 2001. The terms of this note exclude interest until demand is made
for payment. During the year ended December 31, 2001, $225,000 was expensed in
connection with this receivable as uncollectible. During the year ended December
31, 2002, $60,000 was received on this note, and the balance due of $165,000 was
determined to be uncollectible and was expensed.
6. OBLIGATION DUE UNDER FACTORING ARRANGEMENT
The Company factors substantially all of its accounts receivable. During the
years ended December 31, 2002 and 2001, the Company utilized the services of
three factoring companies. Accounts receivable are factored to companies with
full recourse for unpaid invoices in excess of 90 days old. The most recent
agreement provides for the payment of factoring fees at 2.5 percent of each
invoice factored.
7. INCOME TAXES
The provision for income taxes is different from that which would be obtained by
applying the statutory federal income tax rate to income (loss) before income
taxes. The items causing this difference are as follows:
2002 2001
----------------------
Tax expense (benefit) at U.S. statutory rate $ 129,600 ($223,100)
State income tax expense (benefit), net of
federal benefit 13,800 (23,900)
Effect of non-deductible expenses 4,300 1,700
Change in valuation allowance (147,700) 245,300
----------------------
$ 0 $ 0
======================
F-27
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 31, 2002 are as follows:
Deferred tax assets: 2002 2001
----------------------
Accounts and loan receivables due
to bad debts $ 51,400 $ 176,900
Capital loss carryforward 29,700 29,700
Depreciation Variance 600 0
Net operating loss carryforward 15,900 38,700
----------------------
Total gross deferred tax assets 97,600 245,300
Less valuation allowance (97,600) (245,300)
----------------------
Net deferred tax assets $ 0 $ 0
======================
Based on an assessment of all available evidence, including 2002 and 2001
operating results, management does not consider realization of the deferred tax
assets generated from operations to be more likely than not, and has established
a valuation allowance against the gross deferred tax asset.
As of December 31, 2002, the Company had federal and state net operating loss
carry-forwards totaling approximately $42,300, which expire in 2022.
8. ADVANCE FROM STOCKHOLDER
Bryant Plastics, Inc., a stockholder of the Company, advanced $51,177 of cash,
which is payable upon demand with 60 days prior written notice. This advance
does not bear interest.
9. EQUITY
COMMON STOCK
Each share of common stock is entitled to one vote. The holders of common stock
are also entitled to receive dividends whenever funds are legally available and
when declared by the Board of Directors (the "Board"), subject to the prior
rights of the holders of all classes of stock outstanding.
F-28
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
9. EQUITY (CONTINUED)
CONVERTIBLE PREFERRED STOCK
The authorized preferred stock of the Company consists of 10,000,000 shares at
$.001 par value, of which 773,896 shares of Series A convertible preferred stock
("Series A Preferred Stock") outstanding as of December 31, 2002 and 2001, and
414,923 and 426,898 shares of Series B convertible preferred stock ("Series B
Preferred Stock") were outstanding as of December 31, 2002 and 2001,
respectively. Subsequent to December 31, 2002, the Company authorized the
issuance of up to 250,000 shares of Series C Redeemable Convertible Preferred
Stock ("Series C Preferred Stock").
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 2001, the Company issued 773,896 shares of Series A
Preferred Stock for the conversion of a $773,896 note payable to Bryant
Plastics, Inc.
Each share of the Series A Preferred Stock is convertible, at the option
of the holder, at any time into shares of common stock of the Company at a
conversion price equal to the trading price of the shares or at the price of the
last placement of shares by the Company, whichever is less. Interest on the
shares of the Series A Preferred Stock is cumulative at an interest of six
percent (6%) per annum through December 31, 2001. The Series A Preferred Stock
does not accrue interest subsequent to December 31, 2001.
The Series A Preferred Stock is redeemable at the option of the Company
for cash at a rate of $1.00 per share and shares of common stock as payment for
any accrued interest pursuant to the fixed interest rate of six percent (6%),
such interest which has been reduced to zero pursuant to an agreement between
the parties.
The holders of the preferred stock are entitled to vote, together with
the holders of common stock, on all matters submitted to stockholders for a
vote. Each preferred stockholder is entitled to the number of votes equal to the
number of shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of
the then outstanding Series A Preferred Stock shall receive a pro-rata
distribution to be determined by performing a fictional conversion into common
stock, and determining the pro-rata distribution of such proceeds on the basis
"as-if converted" which is subordinate in classification to any debt classes
which may be outstanding at the time of such events.
F-29
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
9. EQUITY (CONTINUED)
SERIES B CONVERTIBLE PREFERRED SHARES
On December 31, 2001, the Company issued 426,898 shares of Series B
Preferred Stock for the conversion of two notes payable totaling $426,898, one
to the majority stockholder, with a balance due of $181,898, and the other to a
secured lender, with a balance due of $245,000. The Company elected to retire
11,975 shares of Series B Stock prior to year-end based upon a then-favorable
conversion when compared with the potential floor conversion price of $.50 per
share, reducing the number of shares outstanding to 414,923. The Company
subsequently renegotiated a revision in the floor of the conversion price to
$1.00 per share.
Each share of the Series B Preferred Stock is convertible, at the option
of the holder, at any time into shares of common stock of the Company at a
conversion price equal to the trading price of the shares or at the price of the
last placement of shares by the Company, or at $1.00, whichever is greater. The
holders of the preferred stock are entitled to vote, together with the holders
of common stock, on all matters submitted to stockholders for a vote. Each
preferred stockholder is entitled to the number of votes equal to the number of
shares of preferred stock convertible at the time of such vote.
In the event of any distribution or liquidation event, the holders of
the then outstanding Series B Preferred Stock shall receive a pro-rata
distribution to be determined by performing a fictional conversion into common
stock, and determining the pro-rata distribution of such proceeds on the basis
"as-if converted," which is subordinate in classification to any debt classes
and preferred stock, Series A, which may be outstanding at the time of such
events.
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
Each share of the Series C Preferred Stock is redeemable for $100 within six
months of their date of issuance, in addition to interest of ten percent per
annum; or bears penalty interest of 5 shares of Common Stock of the Company for
each month the Company fails to redeem after the six month period has expired,
or can convert, at the Holders option, after failure to redeem within nine
months into Senior Debt of the Company, subordinate in nature to any Senior Debt
that is in place at the time of the conversion, bearing interest at 12% per
annum on the face value of $100 per share. As of December 31, 2002, the Company
has an undeclared dividend of approximately $300. The Company has valued the
Series C Preferred Stock and the Common Stock by determining fair pricing for
the Common Stock based on public trading history and allocated the remaining
unit value to the Preferred Shares on a pro-rata basis. The Shares were not
issued as of December 31, 2002 and are reflected as of December 31, 2002 as a
Stock Payable.
F-30
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
10. WARRANTS
The Company entered into a relationship in September, 2002 that provided for the
issuance of up to 100,000 warrants to purchase shares of the Company's common
stock at an exercise price of $1.15 per share for a period of three years from
their date of issuance. In addition, Halter Financial Group, an investment
banking group and shareholder in WBNI, held 78,500 warrants issued in 2001 to
purchase shares of Common Stock of the Company at an exercise price of $.01 per
share. These warrants were issued prior to the merger of Segmentz, Inc. with
TRANSL Holdings when the trading price of the Company's securities was not
quoted and trading of the Company's securities took place on the pink sheets.
These warrants were exercised in January 2003.
On September 30, 2002, the Company entered into a consulting agreement in which
we agreed to issue five year warrants to purchase up to 100,000 shares of the
Company's common stock at an exercise price of $1.15 per share in exchange for
financial advisory services. These warrants vest ratably over a twelve-month
period ending September 30, 2003. The fair value of these warrants expensed in
the year ended December 31, 2002, was calculated at $7,000, on a pro-rata basis.
The Company estimates the fair value of each warrant to purchase common stock as
detailed above, at the grant date by using the Black-Scholes option-pricing
model with the following assumptions:
2002 2001
---- ----
Dividend yield 0% 0%
Expected volatility 22% 0%
Risk-free interest rate 2.77% 5%
Expected life - years 5 5
Weighted average fair value of options granted $0.23 $0.00
11. STOCK OPTION PLAN
In October 2001, the Company adopted the 2001 Stock Option Plan (the "Plan"),
under which it authorizes options to be granted to purchase 600,000 shares of
common stock. The Plan entitles the holder to receive options to purchase common
stock of the Company at a specified price in the future. The Board may grant
options at its discretion and is responsible for determining the price to be
paid for the shares upon exercise of each option, the period within which each
option may be exercised, and any additional terms and conditions of each option.
The Company granted no options under the Plan during the year ended December 31,
2002.
F-31
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
12. RELATED PARTY TRANSACTIONS
The Company utilized the trucking services of an entity related through common
ownership. Expenses incurred during the periods ended December 31, 2001 amounted
to approximately $206,000 . The expenses incurred for these services are not
necessarily indicative of the amounts that may have been incurred had these
services been provided by independent third parties. The Company did not utilize
services of this related entity during the year ended December 31, 2002.
In December 2001, the majority stockholder of the Company converted $181,898 of
debt into 181,898 shares of Series B Preferred Stock. In the year ended December
31, 2002, there was a redemption of 11,975 shares of Series B Preferred Stock.
During the year ended December 31, 2002, a stockholder of the Company consented
to a reduction in balance due to it from the Company pursuant to an agreement to
offset credit losses in connection with Huff Timber Company, a former customer,
and Logistics Management Resources, Inc., and the receivable losses experienced
by the Company in the year ended December 31, 2002. The amount of offset was
approximately $299,300 and is reflected as a reduction to G&A expenses in the
consolidated financial statements for the year ended December 31, 2002.
The Company utilizes the services of tractor owner-operators that are employed
by Bryant Plastics, a stockholder in the Company. The Company's agreement with
Bryant Plastics is identical to its agreement with any independent
owner-operators, and Bryant receives payment terms and percentages that are
identical to other agreements with unrelated entities. The Company believes
these terms to be equitable and fair and believes that these transactions are
treated in the normal course of business as if Bryant had no relationship with
the Company other than that of an owner-operator.
13. LEASE COMMITMENTS
The Company leases office space for its headquarters under a lease that expires
in April 2006. The initial lease term is for a period of five years and the
lease agreement includes an optional lease period of an additional three years.
The Company also leases certain equipment under non-cancelable operating leases.
As part of the lease agreement, the Company has issued an unused letter of
credit in the amount of $40,000. The amount required of the letter of credit is
reduced by $8,000 per year and may be drawn if certain lease commitments have
not been met or have been violated.
F-32
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
13. LEASE COMMITMENTS (CONTINUED)
On March 17, 2003, the Company entered into a sublease agreement that provided
the Company with approximately 8,000 square feet of additional space through
August 2006. The Company will begin to tender rent payments under this sublease
as of April 1, 2003.
The following is a schedule by year of future minimum rental payments required
under operating leases, including the sublease entered into subsequent to the
year ended December 31, 2002, that have an initial or remaining non-cancelable
lease term in excess of one year as of December 31, 2002:
Year Ending
December 31,
------------
2004 147,338
2005 143,875
2006 140,972
2006 79,089
--------
$511,274
--------
The Company leased facilities located in Atlanta, Georgia and Edison, New Jersey
on an "at will" basis. Monthly rental payments for these facilities totaled
approximately $94,000. The Company has vacated these facilities as of December
31, 2002.
Rent expense amounted to $265,816 and $776,195 for the years ended December 31,
2002 and 2001, respectively.
14. OTHER COMMITMENTS
The Company has an employment agreement with an officer of the Company that
entitles the officer to receive a severance payment equal to the remaining
salary owed under the employment agreement, plus the base salary for the next
five years after the term of the employment agreement, including certain other
benefits to be paid for following termination.
As previously disclosed in Note 13, the Company has a stand by letter of credit
amounting to $40,000.
F-33
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
15. CONTINGENT LIABILITIES
The Company has been party to a lease in its Atlanta facility that was believed
to be month-to-month pursuant to data provided by LMR, which was in operational
control of the Company at the time the Company purchased the assets of QLS from
bankruptcy and began utilizing the space in Forest Park, Georgia pursuant to
providing logistic services for clients. The Company notified the landlord, IDI
Services, Inc. ("IDI"), of its intentions to find smaller space and offered IDI
an opportunity to provide a lesser facility size within the facility currently
occupied by the Company. IDI informed the Company at that time that the Company
was party to a lease arrangement that had previously not been disclosed or
evidenced.
During February 2002, IDI and the Company were engaged in discussions to resolve
this misunderstanding in which the Company asserts that IDI accepted a letter of
credit provided by LMR as inducement to enter into the lease with LMR, with whom
the Company had an arrangement to vacate the premises of its month-to-month
sublease on 30 days written notice. IDI's assertion included a variety of
material issues, including a representation that the Company was a prime lease
holder with an obligation through May 2006. The Company had subsequently secured
legal counsel and continued to assert that any lease documents that existed
suggesting the Company's prime tenancy was not authorized by the Company, its
board, or officers as provided for in the Company's bylaws. The Company
continued to defend its position in this matter and believed that it would reach
an amicable settlement pursuant to this issue.
On June 17, 2002, the Company received a summons from Industrial Property Fund
I, LP that named the Company as a co-defendant in a civil action pursuant to the
Company's tenancy in Forest Park, Georgia, which the Company continues to assert
and claim is a month-to-month tenancy under which the Company has no obligation
other than payment of rent when due. In July 2002, the action was dismissed with
regards to monetary damages against the Company. No financial remedies are
currently sought in connection with this action, and the Company has vacated the
premises in accordance with its agreement to do so.
The Company is involved in certain legal actions which arise in the ordinary
course of business. The Company is defending these proceedings. While it is not
feasible to predict or determine the outcome of these matters, the Company does
not anticipate any of these matters or these matters in the aggregate will have
a material adverse effect on the Company's business or its consolidated
financial position or results of operations.
F-34
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
16. SEGMENT INFORMATION
Segment information has been prepared in accordance with SFAS No. 131,
"Disclosure About Segments of an Enterprise and Related Information." The
Company has two reportable segments: truck hauling brokering and warehouse
operations. The segments were determined based on the types of services provided
by each segment. The Company had only one reportable segment until the purchase
of QLS in 2001.
The brokering operations arrange truckload transportation with dedicated Company
equipment, owner operator fleet, and extensive agent partners throughout 48
states.
The Company relocated its warehouse locations in the third quarter of 2002,
closing both locations to mitigate carrying costs until new facilities were
located. The first new facility opens in May 2003 in Evansville, IN and the
segment will resume ongoing operations as of that date as part of a long-term
contract to provide dedicated delivery services to an international auto company
as part of an agreement with Schneider Logistics.
Revenues for the trucking segment increased approximately $959,761, or 34%, to
approximately $1,899,687 for the year ended December 31, 2002 as compared to
approximately $ 2,859,448 for the year ended December 31, 2001. This decrease
was primarily due to (i) change of focus in segment to reflect management desire
to provide supply-chain and warehouse services on a contract basis; (ii)
contract focus resulting in efforts to secure smaller, regional staging
warehouse facilities; and (iii) movement of assets to new facility in
Evansville, IN. in connection with contract relationship, resulting in reduction
of revenues for the move period.
For the year ended December 31, 2001, information regarding operations by
segment was as follows:
Trucking Warehouse Total
-------------- ------------- -------------
Revenue $ 5,596,318 $ 2,859,448 $ 8,455,766
Other $ 11,464 $ 11,464
Interest expense $ 216,548 $ 216,548
Depreciation $ 9,759 $ 43,576 $ 53,335
Net loss $ (827,433) $ 171,012 $ (656,421)
Equipment, net of accumulated
depreciation $ 46,258 $ 275,550 $ 321,808
Segment assets $ 1,302,117 $ 665,700 $ 1,967,817
For the year ended December 31, 2002, information regarding operations by
segment was as follows:
Trucking Warehouse Total
-------------- ------------- -------------
Revenue $ 8,061,123 $ 1,899,687 $ 9,960,810
Other 33,696 $ 0 $ 33,696
Interest expense $ 139,113 $ 139,113
Depreciation $ 11,734 $ 90,030 $ 101,764
Net Income (loss) $ 295,521 $ 78,594 $ 374,115
Equipment, net of accumulated
depreciation $ 34,524 $ 176,539 $ 211,064
Segment assets $ 3,214,150 $ 379,539 $ 3,593,689
F-35
Segmentz, Inc.
Notes to Consolidated Financial Statements
Years Ended December 31, 2002 and 2001
17. EARNINGS PER SHARE (EPS)
Basic earnings per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during each year. Shares
issued during the year are weighed for the portion of the year that they were
outstanding. Diluted earnings per share is computed in a manner consistent with
that of basic earnings per share while giving effect to all potentially dilutive
common shares that were outstanding during the period.
The following is a reconciliation from basic earnings per share to diluted
earnings per share for the year ended December 31, 2002:
Net Income Weighted Average Earnings Per Share
Shares Outstanding
--------------------------------------------------------------------------------
Basic 374,115 6,690,584 $.06
Effect of dilution:
Stock options 1,265,425
--------------------------------------------------------------------------------
Diluted 374,115 7,956,009 $.05
--------------------------------------------------------------------------------
As of December 31, 2001, all warrants and convertible preferred stock were
excluded from the computation of diluted EPS because 2001 was a year in which
the Company experienced a loss, therefore having no earnings per share to
compute, during which time such warrants and preferred shares would have been
anti-dilutive.
18. SUBSEQUENT EVENTS
The 78,035 warrants issued in connection with the merger between Trans-Logistics
and Segmentz, Inc. were exercised in January 2003, resulting in 78,035 shares of
restricted common stock of the Company being issued to the Halter Financial
Group for $.01 per share.
On March 17, 2003, the Company entered into a sublease agreement with R.W. Baird
& Company that provided the Company with approximately 8,000 square feet of
additional space at 18302 Highwoods Preserve Parkway through August 2006. The
Company will begin to tender rent payments under this sublease as of April 1,
2003.
F-36
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations other than those contained
in this prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by the Company or any of the
underwriters. This prospectus does not constitute an offer of any securities
other than those to which it relates or an offer to sell, or a solicitation of
any offer to buy, to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
the information set forth herein is correct as of any time subsequent to the
date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary....................
Risk Factors..........................
Use of Proceeds.......................
Capitalization........................ 18,718,578 SHARES
Price Range of Common Stock
and Dividend Policy................ SEGMENTZ, INC.
Selling Security Holders..............
Plan of Distribution ................. PROSPECTUS
Management's Discussion and
Analysis of Financial Condition __________, 2004
and Results of Operations............
Business..............................
Management............................
Executive Compensation................
Principal Shareholders................
Certain Transactions..................
Description of Securities.............
Shares Eligible for Future Sale.......
Legal Matters.........................
Experts...............................
Available Information.................
Financial Statements..................
Until _____________, 90 days after the date of this Prospectus, all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligations of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Business Law (the "Corporation Act") permits the
indemnification of directors, employees, officers and agents of Delaware
corporations. The Company's Certificate of Incorporation (the "Certificate") and
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by the Corporation Act.
The provisions of the Corporation Act that authorize indemnification do
not eliminate the duty of care of a director, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for (a) violations of criminal laws, unless the director
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for the best
interests of the Company in a proceeding by or in the right of a shareholder.
The statute does not effect a director's responsibilities under any other law,
such as the federal securities laws.
The effect of the foregoing is to require the Company to indemnify the
officers and directors of the Company for any claim arising against such persons
in their official capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the act and is therefore unenforceable.
II-1
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses payable by the Company in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee..................................... $ 6,262
Legal Fees and Expenses*............................................ 15,000
Accounting Fees and Expenses*....................................... 7,500
Financial Printing*................................................. 3,000
Transfer Agent Fees*................................................ 1,250
Blue Sky Fees and Expenses*......................................... 750
Miscellaneous*...................................................... 1,238
-------
TOTAL............................................................... $35,000
=======
----------
* Estimated
None of the foregoing expenses are being paid by the selling security
holders.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On July 9, 2003, we closed a private placement pursuant to which we issued
a total of 2,673,333 shares of our common stock, par value $0.001 per share, and
warrants to purchase up to 1,336,667 shares of our common stock, par value
$0.001 per share, for $1.25 per share for a period of 5 years, to 58 accredited
investors. We received $2,005,000 in consideration for the issuance of the
securities, less placement agent fees and other expenses associated with the
private placement. The securities were issued pursuant to the exemption from
registration provided by Rule 506 of Regulation D, promulgated under the
Securities Act of 1933, as amended. Each investor received current information
about our company and had the opportunity to ask questions about our company.
These investors purchased the securities for investment purposes and the
securities they received were marked with the appropriate restrictive legend.
In September 2003, we entered into discussions with a total of 10
institutional investors, existing shareholders, and accredited investors that
resulted in those 10 investors making an investment in the Company under an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended. These investors purchased 3,743,999 shares of common stock,
par value $0.001 per share, and warrants to purchase up to 2,724,999 shares of
our common stock, par value $0.001 per share, for a weighted average of $1.40
per share for a period of 5 years. We received $2,810,000 in connection with
this offering and incurred offering costs approximating $510,000 in cash and
300,000 options to purchase common stock at a strike price of $1.40 per share.
Securities purchased pursuant to this offering were marked with the appropriate
restrictive legend.
II-2
On October 14, 2003, we raised $90,000 through the issuance of a total of
120,000 shares of our common stock, par value $0.001 per share, and warrants to
purchase up to 60,000 shares of our common stock, par value $0.001 per share,
for $1.35 per share for a period of 5 years, to 3 accredited investors. The
securities were issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended. Each investor received
current information about our company and had the opportunity to ask questions
about our company. These investors purchased the securities for investment
purposes and the securities they received were marked with the appropriate
restrictive legend.
In January 2004, we raised $3,550,000 (less placement agent fees and other
expenses associated with the issuance) through the issuance of a total of
3,550,000 shares of our common stock, par value $0.001 per share, and warrants
to purchase up to a total of 1,775,000 shares of our common stock, par value
$0.001 per share, for $1.50 per share for a period of 5 years, to 15 accredited
investors. The securities were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
Each investor received current information about our company and had the
opportunity to ask questions about our company. These investors purchased the
securities for investment purposes and the securities they received were marked
with the appropriate restrictive legend.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. Description of Document
----------- -----------------------
3.1(a) Certificate of Incorporation dated May 8, 2000 (1)
3.1(b) Articles of Merger dated May 17, 2000 (1)
3.1(c) Certificate of Merger dated May 17, 2000 (1)
3.1(d) Certificate of Merger dated February 1, 2001 (1)
3.1(e) Certificate of Merger dated February 1, 2001 (1)
3.1(f) Certificate of Amendment dated November 1, 2001 (1)
3.1(g) Designation of Preferences of Series A filed June 11, 2003 (2)
3.1(h) Designation of Preferences of Series B June 11, 2003 (2)
3.1(i) Designation of Preferences of Series C June 11, 2003 (2)
3.1(j) Designation of Preferences of Series A-1 June 18, 2003 (2)
3.1(k) Designation of Preferences of Series B-1 June 18, 2003 (2)
3.2 Bylaws dated May 10, 2000 (1)
5 Opinion and Consent of Adorno & Yoss, P.A.(2)
10.1 Stock Option Plan (1)
23(i) Consent of Adorno & Yoss, P.A. (see Exhibit 5)(2)
23(ii) Consent of Pender Newkirk & Company (2)
21 Subsidiaries of Registrant (1)
----------
(1) Incorporated by reference to exhibits with the corresponding numbers filed
with our registration statement on Form 10SB (File No. 000-49606).
(2) Filed herewith.
II-3
ITEM 28. UNDERTAKINGS
The undersigned Registrant undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or preceding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such
II-4
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Tampa, Florida on February 17, 2004.
SEGMENTZ, INC.
By: /s/ Allan Marshall
-------------------------------------
Allan Marshall
Chairman, Chief Executive
Officer, and Director (Principal
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Form SB-2
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Allan Marshall Chairman of the Board, Chief February 17, 2004
----------------------------------- Executive Officer, and Director
Allan Marshall (Principal Executive Officer)
/s/ John S. Flynn President, Chief Financial Officer February 17, 2004
----------------------------------- and Director (Principal Financial
John S. Flynn & Accounting Officer)
/s/ Dennis M. McCaffrey Chief Operating Officer February 17, 2004
----------------------------------- and Director
Dennis M. McCaffrey
/s/ David J. Hare Director February 17, 2004
-----------------------------------
David J. Hare
/s/ Robert Gries Director February 17, 2004
-----------------------------------
Robert Gries