U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10K-SB
Annual Report under Section 13 or 15 (d) of the Securities Exchange Act 1934:
Fiscal Year Ended December 31, 2002
Commission File Number: 33-9640-LA
LOGISTICS MANAGEMENT RESOURCES, INC.
(Exact Name of Registrant in its Charter)
Colorado 68-0133692
(State or other (IRS Employer
Jurisdiction of Incorporation) Identification No.)
10602 Timberwood Circle, Suite # 9, Louisville, KY 40223
(Address of Principal executive Offices including Zip Code)
(502) 339-4000
(Registrant's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
Check whether Registrant (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days: Yes [ X ]
No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment thereto. [ ].
Registrant's revenues for its most recent fiscal year: $ - 0 -
Market value of common stock held by non-affiliates at February 28, 2003:
$968,078
Shares of Common Stock outstanding at February 28, 2003: 54,785,438 shares
Documents incorporated by reference: None
Transitional Small Business Disclosure Format (check one): Yes [X] No [ ]
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submissions of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
PART III
Item 9. Directors, Executive Officers, Promoter and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8K
Item 14. Controls and Procedures
SIGNATURES
CERTIFICATIONS
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Logistics Management Resources, Inc. (the "Registrant") was incorporated in
Colorado in January 1987, under the name Northern Dancer, Inc. In September
1998, in a reverse merger business combination, the Registrant acquired all of
the issued and outstanding shares of common stock of U.S. Trucking, Inc., a
privately owned Nevada corporation ("Trucking") solely in consideration for an
aggregate of 15,877,300 shares of the Registrant's common stock, no par value
per share. Through wholly owned subsidiaries, Trucking was engaged in providing
freight transportation services to large corporations and the operation of a
regional truckload carrier specializing in the short to medium haul market
segments.
By late 2000, in the face of substantial losses, the Registrant determined it
was in its best interest to cease operations of its unprofitable transportation
business. Accordingly, on November 30, 2000, four of the Registrant's operating
subsidiaries that collectively comprised substantially all of the unprofitable
business, filed for Chapter 11 protection in the Bankruptcy Court of the
Northern District of Florida. Shortly thereafter, and principally as a result of
the Registrant's failure to successfully implement a plan of reorganization, the
court appointed Trustee in Bankruptcy converted the case to a Chapter 7
liquidation. Notwithstanding the liquidation of its subsidiaries and the
cessation of its transportation business, the Registrant did not seek bankruptcy
protection. Rather, the Registrant's management has been working to resolve,
through negotiations, the settlement or mitigation of the liabilities occasioned
by its failed transportation business. Although there can be no assurance, the
Registrant's management believes that it may be eventually in a position to
favorably restructure the Registrant through a business combination with a
profitable privately owned company.
In February 2001, the Registrant's Board of Directors and shareholders approved
a change of name to Logistics Management Resources, Inc., and a 1 for 100
reverse split of all shares of the Registrant's common stock. The reverse split
became effective on February 12, 2001.
The Registrant's address is 10602 Timberwood Circle, Suite # 9, Louisville, KY
40223, and its telephone and facsimile numbers are (502) 339-4000 and (502)
412-8200, respectively. The Registrant's common stock trades on the NASDAQ OTCBB
under the symbol LMRI.
Recent Developments
Interstate University, Inc. Acquisition
On April 1, 2002, and pursuant to a Stock Purchase Agreement dated
February 21, 2002 (the "Agreement"), the Registrant completed the acquisition of
virtually all of the issued and outstanding common stock of Interstate
University, Inc., a privately owned Kentucky corporation ("Interstate"). Located
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in Evansville, Indiana, Interstate was engaged in the business of educating and
training individuals to drive commercial freight liners. The acquisition was
effected through the purchase of ninety-nine percent (99%) of Interstate's
issued and outstanding shares of common stock (the "Shares") from Midwest Merger
Management, LLC, a Kentucky limited liability company ("Midwest"). In
consideration for the Shares, LMRI gave Midwest a 4%, one year promissory note
in the principal amount of $200,000 secured by a first lien and security
interest in the Shares (the "Note"), and a five year 10% net profit interest in
Interstate (the "Interest").
The Registrant and Midwest subsequently mutually agreed that Interstate
had failed to meet performance criteria set forth in the Agreement, and was
likely to continue to do so. Accordingly, on October 28, 2002, the parties
executed a Rescission and Release Agreement whereby in consideration for the
exchange of general releases and the return of the Note, the Registrant
relinquished the Interest and returned the Shares to Midwest.
Settlement with GE Capital Corporation
GE Capital Corporation ("GE") commenced an action against the
Registrant on October 1, 2001 in the U.S. District Court for the Western
District of Kentucky, Louisville Division, seeking recovery of more than
$22,000,000, and alleging a breach of the Registrant's obligations under a
Restructuring Agreement executed by GE, the Registrant, its subsidiaries and
certain affiliates on November 28, 2000. The agreement between the Registrant
and GE related to the restructuring of certain obligations to GE in connection
with its revolving line of credit and an equipment loan. By agreement dated
September 27, 2002, the parties settled all underlying obligations in
consideration of an $875,000 payment arranged for by the defendants and the
exchange of mutual general releases.
Convertible Financing
On September 27, 2002, and pursuant to a 6% secured, convertible
promissory note due on October 1, 2007 (the "Convertible Note"), the Registrant
consolidated $856,915.70 (including $10,095.70 in legal costs) previously
borrowed from Brentwood Capital Corp., a non-affiliated New York corporation
("Brentwood"), and proceeded to borrow another $875,000 from Brentwood to fund
the settlement with GE. The resulting $1,731,905.70 Convertible Note is payable
in 60 equal installments of $33,287.41 together with interest computed at 6% per
annum on the outstanding balance, on the first day of each month commencing on
December 1, 2002, and terminating on November 1, 2007.
At any time prior to October 1, 2007, and on five days prior written
notice, Brentwood may convert all or any portion of the outstanding principal
and interest due under the Note into 173,190,570 shares of the Registrant's
Common Stock, no par value per share, (the "Conversion Shares"). At December 31,
2002, the Registrant had been unable to make any of the scheduled payments to
Brentwood, and accordingly owed $1,758,951.90 in principal and accrued interest
pursuant to the Convertible Note, Based upon the conversion price of $.01 per
share, which represented 100% of the average closing prices for the Registrant's
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common stock on the OTCBB for the 20 trading days preceding the date of the
Convertible Note, Brentwood would be entitled to convert its note into a maximum
of 175,895,190 shares at December 31, 2002.
As of the date of the Note, only 22,823,267 common shares were
available for conversion requiring the Registrant to file a Certificate of
Amendment to its Certificate of Incorporation with the Secretary of State for
the State of Colorado to make available a sufficient number of shares for all
existing conversion rights and any future capital needs. Pursuant to the terms
of the Convertible Note, the Registrant has covenanted and agreed to promptly
undertake an amendment to its Certificate of Incorporation to increase its
authorized common stock from 75,000,000 to 300,000,000 shares. The Convertible
Note is secured by a first lien and security interest in all of the Registrant's
assets.
Disposition of Transportation Business
In connection with obtaining Brentwood's agreement on September 27, 2002, to
advance the Registrant the $875,000 required by the GE settlement, the
Registrant agreed to convey 100% of its ownership interest in its terminated
freight transportation business to Brentwood in exchange for Brentwood's
forgiveness of all interest accrued and due on the $856,905.70 previously owed
Brentwood by the Registrant. Accordingly, on December 30, 2002, the Registrant
sold and delivered to Brentwood: (i) a certificate representing an aggregate of
200 shares of common stock, no par value, of LMRI Resolution Corp., a New York
corporation wholly owned by the Registrant (the "Resolution Shares"), and (ii)
certificates representing all of the issued and outstanding shares of capital
stock of the following seven wholly owned subsidiaries of Resolution: Prostar,
Inc., Gulf Northern Transport, Inc., Mencor, Inc., UST Logistics, Inc., Maverick
Truck Brokerage, Inc., U.S. Trucking, Inc. and Trans-logistics, Inc.
(collectively the "Resolution Subsidiaries") representing Resolution's principal
holdings. The sale and transfer of the Resolution Shares was made subject to any
adverse claims, judgments or other encumbrances arising out of or attendant upon
the filing by four of the Subsidiaries in the United States Bankruptcy Court for
the Middle District of Florida, Jacksonville Division, Case Nos. 00-0924-3F7
through 00-09227-3F7.
Additional Director
In February 2003, Mr. Pixler appointed Anthony R. Russo to the Registrant's
board of directors in contemplation of Messrs. Pixler's and Russo's joint
efforts to reorganize the Registrant's affairs and prepare it to target and
negotiate a business combination with a profitable, privately-held business.
While both Mr. Pixler and Mr. Russo have considerable business experience with
respect to corporate reorganization and the integration of business operations,
there can be no assurance that their efforts will be effective or successful in
redirecting the Registrant's affairs.
Business of the Registrant
Since ceasing its freight transportation services business on November 30, 2000,
followed by its December 30, 2002, disposition of its ownership interest
therein, the Registrant has not had any revenue from operations. During this
period, the Registrant has principally been engaged in seeking to resolve the
5
claims of its creditors. More recently, the Registrant's management has begun to
explore the possibility of seeking a business combination with a profitable
privately owned company. Accordingly, and despite the fact that management does
not consider the Registrant to be a development stage company, it is possible
that the Registrant could be considered to be a blank check company. As defined
in Section 7(b)(3) of the Securities Act of 1933, as amended (the "Securities
Act"), a "blank check" company is an entity that has no specific business plan
or purpose or has indicated that its business plan is to engage in a merger or
an acquisition with an unidentified company or companies and is issuing "penny
stock" securities as defined in Rule 3(a)(51) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Securities and Exchange Commission
and many states have enacted statutes, rules and regulations limiting the sale
of securities of blank check companies.
The Registrant intends to identify and negotiate with a business target for the
merger of that entity with and into the Registrant. In certain instances, a
target company may wish to become a subsidiary of the Registrant or may wish to
contribute or sell assets to the Registrant rather than to merge. No assurances
can be given that the Registrant will be successful in identifying or
negotiating with any target company. The Registrant seeks to provide a method
for a foreign or domestic private company to become a reporting ("public")
company whose securities are qualified for trading in the United States
secondary market.
A business combination with a target company will normally involve the transfer
to the target company of the majority of the issued and outstanding common stock
of the Registrant, and the substitution by the target company of its own
management and board of directors. No assurances can be given that the
Registrant will be able to enter into a business combination, or, if the
Registrant does enter into such a business combination no assurances can be
given as to the terms of a business combination, or as to the nature of the
target company.
Risk Factors
The Registrant's business is subject to numerous risk factors, including the
following:
No Operating History or Revenue and Minimal Assets. The Registrant has had an
unprofitable operating history and no revenues or earnings from operations for
the last two years. The Registrant has no significant assets or financial
resources. The Registrant will, in all likelihood, incur operating expenses
without corresponding revenues, at least until the consummation of a business
combination. This may result in the Registrant incurring a net operating loss
which will increase continuously until the Registrant can consummate a business
combination with a target company. There can be no assurance that the Registrant
will be able to identify such a target company and consummate such a business
combination on acceptable terms or that it will derive any benefit from the net
operating loss.
Speculative Nature Of The Registrant's Proposed Operations. The success of the
Registrant's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of any identified target company.
While management intends to seek business combinations with entities having
6
established operating histories, there can be no assurance that the Registrant
will be able to identify a candidate satisfying such criteria. In the event the
Registrant completes a business combination, the success of the Registrant's
operations will be dependent upon management of the target company and numerous
other factors beyond the Registrant's control.
Scarcity of and Competition for Business Opportunities and Combinations. The
Registrant is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition candidates for the Registrant. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Registrant and, consequently, the Registrant will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Registrant will
also compete with numerous other small public companies in seeking merger or
acquisition candidates.
Continued Management Control, Limited Time Availability. While seeking a
business combination, management anticipates devoting up to twenty (20) hours
per month to the business of the Registrant. The Registrant's only executive
officer is Danny L. Pixler and its only "outside" director is Anthony R. Russo,
neither of whom have entered into written employment agreements with the
Registrant or are expected to do so in the foreseeable future. The Registrant
has not obtained key man life insurance on its officers and directors.
Notwithstanding the combined limited experience and time commitment of
management, loss of the services of Mr. Pixler would adversely affect
development of the Registrant's business and its likelihood of consummating a
business combination.
Conflicts of Interest - General. Both Messrs. Pixler and Russo, the Registrant's
two Directors, participate in other business ventures which may compete directly
with the Registrant. Although none are anticipated, conflicts of interest and
non-arms length transactions may also arise in the future. Management does not
anticipate that the Registrant will seek a merger with, or acquisition of, any
entity in which any member of management serves as an officer, director or
partner, or in which they or their family members own or hold any ownership
interest. See "ITEM 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
Reporting Requirements May Delay or Preclude Acquisition. Section 13 of the 34
Act requires the Registrant to provide certain information about significant
acquisitions including certified financial statements for the business being
acquired covering one or two years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
companies to prepare such financial statements may significantly delay or
essentially preclude consummation of an otherwise desirable acquisition by the
Registrant. Acquisition prospects that do not have or are unable to obtain the
required audited statements may not be appropriate for acquisition so long as
the reporting requirements of the Exchange Act are applicable.
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Lack of Market Research or Marketing Organization. The Registrant has not
conducted, nor have others made available to it, market research indicating that
demand exists for the transactions contemplated by the Registrant. Even in the
event demand exists for a merger or acquisition of the type contemplated by the
Registrant, there can be no assurance the Registrant will be successful in
completing any such business combination.
Lack of Diversification. The Registrant's proposed operations, even if
successful, will, at least in the short term and in all likelihood in the long
term, result in the Registrant engaging in a business combination with only one
business opportunity. Consequently, the Registrant's activities will be limited
to those engaged in by the business opportunity which the Registrant merges with
or acquires. The Registrant's inability to diversify its activities into a
number of areas may subject the Registrant to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Registrant's operations.
Probable Change in Control and Management. A business combination involving the
issuance of the Registrant's common stock will, in all likelihood, result in
shareholders of a target company obtaining a controlling interest in the
Registrant. Any such business combination may require shareholders of the
Registrant to sell or transfer all or a portion of the Registrant's common stock
held by them. The resulting change in control of the Registrant will likely
result in removal of the present officers and directors of the Registrant and a
corresponding reduction in or elimination of their participation in the future
affairs of the Registrant.
Reduction of Percentage Ownership Following Business Combination. The
Registrant's primary plan of operation is based upon the consummation of a
business combination with a business entity which, in all likelihood, will
result in the Registrant issuing securities to shareholders of such business
entity. The issuance of previously authorized and unissued common stock of the
Registrant would result in a reduction in the percentage of shares owned by the
present shareholders of the Registrant and would most likely result in a change
in control and management of the Registrant.
Aspects of Blank Check Offering. The Registrant may enter into a business
combination with a business entity that desires to establish a public trading
market for its shares. A target company may attempt to avoid what it deems to be
adverse consequences of undertaking its own public offering by seeking a
business combination with the Registrant. Such consequences may include, but are
not limited to, time delays of the registration process, significant expenses to
be incurred in such an offering, loss of voting control to public shareholders
or the inability to obtain an underwriter on terms satisfactory to the
Registrant or the target.
Taxation. Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination the Registrant may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Registrant intends to structure any business combination so as
to minimize the federal and state tax consequences to both the Registrant and
the target company; however, there can be no assurance that such business
combination will meet the statutory requirements of a tax-free reorganization or
8
that the parties will obtain the intended tax-free treatment upon a transfer of
stock or assets. A non-qualifying reorganization could result in the imposition
of both federal and state taxes which may have an adverse effect on both parties
to the transaction or their respective shareholders.
Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Management of the Registrant will request that any potential
business opportunity provide audited financial statements. One or more potential
combination candidates may opt to forego pursuing a business combination with
the Registrant rather than incur the burdens associated with preparing audited
financial statements. In such case, the Registrant may choose to obtain certain
assurances as to the target company's assets, liabilities, revenues and expenses
prior to consummating a business combination, with further assurances that an
audited financial statement would be provided after closing of such a
transaction. Closing documents for such a transaction may include
representations that the audited financial statements will not materially differ
from the representations included in such closing documents.
The Registrant is Economically Dependent upon Its Principal Common and Preferred
Stockholder and its Noteholder. Midwest that is the record and beneficial owner
of approximately 12% of the Registrant's presently issued and outstanding common
stock. Midwest is also the record and beneficial owner of 999,000 shares of the
Registrant's Series A Preferred Stock that have the voting rights of 9,990,000
shares of the Registrant's common stock; and 50,000 shares of the Registrant's
Series C Preferred Stock that have the voting rights of 5,000,000 shares of the
Registrant's common stock. Accordingly, Midwest may be deemed to own and control
19.5% of the Registrant. Brentwood has the right to convert the unpaid principal
and accrued interest of its $1,731,906, 6% secured, convertible promissory note
due on October 1, 2007, into 173,190,570 shares of the Registrant's Common
Stock, no par value per share. Accordingly, the Registrant is entirely dependent
upon:(1) Midwest providing the Registrant with office facilities and management
services on favorable terms; (2) the willingness of Brentwood to fund virtually
all of the Registrant's settlements with its creditors; and (3) the Registrant's
successful business combination with a profitable operating company. The future
of the Registrant is entirely dependent on new management's ability to secure a
business combination partner or establish profitable operations. In the opinion
of management, the Registrant would experience material difficulty in replacing
Midwest and/or Brentwood.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant occupies approximately 600 square feet of office space located at
10602 Timberwood Circle, Suite # 9, Louisville, KY 40223, that is provided rent
free on a month-to-month basis from Midwest Merger Management, a Kentucky
Limited Liability Company and principal stockholder of the Registrant. Effective
January 1, 2003, the Registrant's also occupies 300 square feet of office
facilities at 477 Madison Avenue, Twelfth Floor, New York, NY 10022 pursuant to
an Advisory and Occupancy Services Agreement dated December 30, 2002 with
Brentwood. The Registrant's current office facilities are adequate for its
present needs, and management expects that the Registrant will continue this
arrangement until the completion of an acquisition or merger.
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ITEM 3. LEGAL PROCEEDINGS
The Registrant is a party to the following threatened or pending litigation
matters:
CIT Group/Equipment Financing, Inc. filed suit against the Registrant and
certain other parties in the Superior Court of NJ, Law Division Union County,
Docket No. UNN-L-3556-00 on July 7, 2000, for the return of six tractors
formerly used in the business of American Intermodal Services, Inc., some of the
operations of which Gulf Northern Transport took over in the spring of 2000. The
Registrant denied it ever received the tractors. A default judgment was granted
in November of 2001, against all defendants in the amount of $384,599.89. The
Registrant understands that certain of the tractors have since been recovered by
CIT. The Registrant denies that CIT had jurisdiction over the Registrant in the
New Jersey court wherein the lawsuit was brought, and that the judgment is
therefore invalid. CIT has not pursed collecting the judgment.
Allstates World Cargo filed suit against the Registrant and its chairman for
$678,000. The suit claims the Registrant and its chairman defaulted on certain
business guarantees related to the acquisition of Trans-Logistics as of January
1, 2001. The Registrant and the chairman filed an answer in this matter on or
about August 2001. Recently, this action was settled among all of the parties.
The terms of settlement included a judgment by consent as against the Registrant
in the amount of $728,242.23, inclusive of interest and costs and subject to
further offset for payments made on behalf of the defendant officer. The Parties
have restructured their settlement agreement to provide for the satisfaction of
the entire judgment amount in consideration of two (2) payments of $82,500 on or
before March 28 and April 28, 2003 and the delivery to plaintiff of an
assignment of receivables by Translogistics. The Registrant reasonably believes
that it will be able to comply with these terms in a timely fashion so as to
procure a satisfaction of the judgment on or before May 15, 2003.
Southtrust Bank filed suit against the Registrant and numerous other parties in
the U.S. District Court for the Northern District of Alabama, Southern Division
on April 30, 2001 (No. CV-01-AR-1068-S). The suit claimed that the Registrant is
liable as guarantor on approximately $4.7 million of debt owed by Professional
Transportation Group Ltd., Inc. ("PTG") and Timely Transportation, Inc.
("Timley") as primary obligors. PTG and Timely are entities with which we were
engaged in merger negotiations in 2000. Southtrust received a judgment in the
approximate amount of $2.8 million against the Registrant, but has not taken any
actions to collect the judgment to date.
Porter, Levay & Rose, Inc. sued us in Jefferson Circuit Court, Jefferson County
Kentucky in September 2000 to collect $30,000 allegedly due for public relations
services. The Registrant has denied the claim for a lack of consideration and
breach of contract. The suit is in the discovery stage.
Sandra Sherman sued the Registrant in the Iowa District Court, Des Moines County
Iowa for unspecified damages for claims relating to Ms. Sherman's participation
in the Registrant's bankrupt subsidiary, Gulf Northern Transport's health care
plan. The claims relating to unpaid benefits are believed to amount to
approximately $50,000. On November 19, 2002, the parties settled all underlying
10
obligations in consideration of a $7,500 payment arranged for by the Registrant,
and Ms. Sherman executed a release in favor of the Registrant.
Emergent Capital, L.P. filed suit against the Registrant in the U.S. District
Court for the Southern District of New York on September 20, 2000. The complaint
alleged that Emergent Capital was owed $300,000 in contractual penalties for the
failure to register certain shares for resale, which Emergent purchased in
September of 1999. The matter was settled for the sum of $140,000 payable over
several months, and the action discontinued by the order of the court dated May
17, 2001. The Registrant has not met all of its obligations under the settlement
agreement and judgment in the amount of $130,846.54 was entered on September 10,
2001. To date Emergent Capital has made no attempt to enforce the judgment
against the Registrant.
First Insurance Funding Corporation filed suit against the Registrant in Circuit
Court of Cook County Illinois on February 19, 2002 in connection with a
settlement the Registrant had allegedly entered into with respect to payments
allegedly owed First Insurance by the Registrant and certain other parties in an
insurance premium finance arrangement. The amount claimed due under the
promissory note entered into in connection with the agreement is $123,000. The
Registrant is evaluating the claims and has reached a settlement in principle.
The action has been withdrawn without prejudice.
Michael P. Forbes and P/R Strategies International, Inc. filed suit against the
Registrant, its President Dan L. Pixler and several other defendants on May 13,
2002 in the Supreme Court of New York, County of Suffolk. The Plaintiffs allege
that the Registrant had breached a contract for professional services rendered
and that they were damaged in the amount of $11,500. The Registrant and Mr.
Pixler have filed a motion to dismiss the action, which motion was granted by
order dated September 27, 2002.
Mr. Chester Bedell filed an action against the Registrant in the Supreme Court
of the State of New York, County of Suffolk on or about March 28, 2002. The
Registrant filed an answer and affirmative defenses shortly thereafter. On or
about October 2, 2002, the parties entered into an agreement settling the action
for $80,000, payable $10,000 down and $3,125 a month until the unpaid balance is
paid in full. The Registrant is in full compliance with the settlement agreement
and expects that the action will be withdrawn with prejudice pursuant to the
terms thereof.
Boutine Capital, II, LLC and its principal Gary J. Graham have filed a
Third-Party Complaint against the Registrant and several of its officers in an
action commenced by A.B. Goldberg, as plaintiff, in the District Court of the
State of Colorado, Arapahoe County. Boutine and Graham allege that the
Registrant is responsible for their failure to perform under a contract with
A.B. Goldberg in connection with certain fund raising activities, seeking
judgment in the approximate sum of $200,000. The Registrant asserts that there
is no third-party liability and intends to vigorously defend this litigation.
Freightliner of Savannah filed a civil action against U.S. Trucking, Inc. in or
about 2001. The action has since languished and has not been actively pursued.
In February 2002, plaintiff filed a second amended complaint seeking recovery
11
against defendant Chancellor Corporation for a total of $3,806,100 for the
purchase of certain tractors and equipment. The Registrant has filed an Answer
and intends to vigorously defend this litigation should it be actively pursued.
Legion Insurance Company filed an action against the Registrant in the Kentucky
State Court sitting in Louisville seeking to recover payment for insurance
premiums in an undisclosed amount. The action was filed in January 2002, and is
currently in the discovery phase. The Registrant has denied all material
allegations of wrongdoing and intends to vigorously defend this case.
Rice v. the Registrant was filed in the United States District Court for the
Southern District of Florida seeking to recover the sum of $275,000 against the
Registrant pursuant to a promissory note dated July 29,, 2001. The Registrant
has joined issue and the case is currently in discovery.
Prologis Trust, as landlord, filed an action against the Registrant and others
in the Superior Court of New Jersey, Middlesex County, seeking to recover the
sum of $403,146.49 under a purported assignment of lease. The Registrant filed
an answer denying all material allegations in the complaint; and intends to
vigorously defend this action.
John Quackenbush sued the Registrant in Jefferson Circuit Court, Jefferson
County, Kentucky, in August 2002, seeking $50,000 in principal, interest and
collection costs resulting from the Registrant's failure to repay a promissory
note. The Registrant has interposed an answer denying the principal allegations
of the complaint. The suit is in the discovery stage.
The financial statements of the Registrant reflect an estimated liability of
$4,601,504 and $16,960,504 with respect to the above claims at December 31, 2002
and 2001, respectively.
During the first quarter of 2002, the Registrant was notified that the
Securities and Exchange Commission (the "SEC") initiated a private investigation
pertaining to the aborted transaction between the Registrant and Professional
Transportation Group, Ltd., a publicly held corporation. According to the Order
Directing Private Investigation and Designating Officers to Take Testimony, the
SEC is investigating whether there were any violations of the Federal securities
laws, including Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and
Sections 10(b), 13(a), 13(b)(2) and 13(b)(5) of the Securities Exchange Act of
1934. The Registrant has provided documents and members of management have given
testimony in connection with the SEC's investigation. Based upon advice of
counsel, the Registrant does not believe that it committed any violations of the
Federal securities laws, and intends to cooperate fully with the SEC and its
staff.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Neither during the fourth quarter of the fiscal year ended December 31, 2002,
nor at any time since 1997, did the Registrant conduct an Annual Meeting of its
stockholders pursuant to definitive proxy materials under Regulation 14A under
the Exchange Act, or otherwise.
12
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information.
Since approximately December 1999, the Registrant's common stock, its only class
of trading securities, has been quoted in the OTCBB under the symbol LMRI. The
following table sets forth the range of high and low bid price information for
the common stock for each fiscal quarter for the past two fiscal years. High and
low bid quotations represent prices between dealers without adjustment for
retail mark-ups, mark-downs or commissions and may not necessarily represent
actual transactions. The following quotations have been adjusted for a one for
100 reverse split of the Registrant's common stock on February 12, 2001.
Quarter End Low Bid High Bid
December 31, 2002 $0.02 $0.03
September 30, 2002 0.01 0.02
June 30, 2002 0.01 0.03
March 3l, 2002 0.02 0.06
December 31, 2001 0.03 0.11
September 30, 2001 0.03 0.28
June 30, 2001 0.18 1.95
March 3l, 2001 0.07 0.29
Since the Registrant's shares began trading in the OTCBB, the prices for its
shares have fluctuated widely. There may be many factors that may explain these
variations. The Registrant believes that such factors include (a) the demand for
its common stock, (b) the number of shares of the Registrant's common stock
available for sale, (c) developments in the freight transportation services
industry, and (d) changes in the performance of the stock market in general,
among others.
In recent years, the stock market has experienced extreme price and volume
fluctuations that have had a substantial effect on the market prices for many
small and emerging growth companies such as the Registrant, which may be
unrelated to the operating performances of the specific companies. Some
companies that have experienced volatility in the market price of their stock
have been the objects of securities class action litigation. If the Registrant
became the object of securities class action litigation, it could result in
substantial costs and a diversion of its management's attention and resources
and have an adverse effect on the Registrant's ability to consummate a business
combination. In addition, holders of shares of the Registrant's common stock
could suffer substantial losses as a result of fluctuations and declines in the
market price of the Registrant's common stock.
13
The trading of shares of the Registrant's common stock is subject to limitations
set forth in Rule 15g-9 of the Exchange Act. This rule imposes sales practice
requirements on broker-dealers who sell so-called "penny stocks" to persons
other than established customers, accredited investors or institutional
investors. For any transaction involving a penny stock, unless exempt, the rules
require that a broker or dealer: (i) approve a person's account for transactions
in penny stocks; and (ii) receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must: (i) obtain financial information and
investment experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule relating to the penny stock market, which, in highlight
form, (i) sets forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure also
has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading, and about commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
(b) Holders
As of December 31, 2002, the approximate number of holders of record of shares
of the Registrant's Common Stock, no par value per share, the Registrant's only
class of trading securities, was believed by management to be as follows:
Title of Class Number of Record Holders
Common Stock, no par value 430
Management believes there are many shareholders whose securities are held in
street name with various brokerage houses. The exact number of shareholders is
unknown to the Registrant.
(c) Dividends.
The Registrant has paid no dividends during the fiscal years ended December 31,
2001 and 2002. Other than the requirements of the General Corporation Law of the
State of Colorado that dividends be paid out of capital surplus only and that
the declaration and payment of a dividend not render the Registrant insolvent,
there are no restrictions on the Registrant's present or future ability to pay
dividends.
The payment by the Registrant of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
14
upon the Registrant's earnings, its capital requirements, and its financial
conditions, as well as other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
On November 30, 2000, the Registrant discontinued its freight transportation
services operations and disposed of 100% of its ownership interest therein on
December 30, 2002. As a result, the Registrant did not report any revenues or
direct expenses in 2001 and 2002. The Registrant's management continued to
dedicate substantial efforts to resolving the claims of its creditors during
2001. By January 1, 2002, the Registrant's general and administrative expenses
had been paired to those attributable to its reporting obligations under the
Exchange Act, its tax and good standing obligations to the States of Colorado
and Kentucky, and the payment of transfer agent fees and incidental overhead
expenses associated with searching for a business combination candidate. During
this period, the Registrant's general and administrative activities and office
facilities were facilitated by Midwest without reimbursement therefore. On
December 30, 2002, the Registrant entered into an Advisory and Occupancy
Services Agreement which provides Registrant with certain business combination
search services, administrative services, and access to 300 square feet of
office facilities by Brentwood at no charge from January 2003 through June 2003,
and at $2,500 per month thereafter.
The Registrant did not conduct any research and development or selling and
marketing activities in the fiscal year ended December 31, 2002. The
Registrant's principal activity is seeking a profitable privately owned business
with which to enter into a business combination with the assistance of
Brentwood.
Loss from Operations
During the fiscal year ended December 31, 2002 ("2002"), the Registrant reported
a loss from operations of $630,425 compared to $6,858,573 for the fiscal year
ended December 31, 2001 ("2001"). The material decrease was principally
attributable to the elimination of substantially all of the Registrant's general
and administrative expenses consistent with the cessation of: (i) the
Registrant's transportation services business; and (ii) all interest accruals by
June 2002, on the Registrant's defaulted obligations. The Registrant does not
anticipate sales of any products or service in the foreseeable future other than
those of a potential merger partner.
Gain (Loss) from Discontinued Operation
The gain from discontinued operations of $10,800,913 for 2002 is almost entirely
attributable to the Registrant's September 27, 2002, settlement with GE, which
resulted in a $10,625,000 gain due to the cancellation of debt. During 2001, the
Registrant was still attempting to resolve the claims of its creditors.
Accordingly, the Registrant provided for the estimated losses associated with
the cessation and disposition of its failed freight transportation services
business. This divestiture left the Registrant without material assets or
15
capital resources. Accordingly, during the fiscal year ended December 31, 2002,
continued economic viability of the Registrant was entirely dependent upon:(1)
Midwest providing the Registrant with office facilities and management services
on favorable terms; (2) the willingness of Brentwood to fund virtually all of
the Registrant's settlements with its creditors; and (3) the Registrant's
successful business combination with a profitable operating company. The future
of the Registrant is entirely dependent on new management's ability to secure a
business combination partner or establish profitable operations.
Financial Condition
In December 2001, the Registrant disposed of 100% of its ownership interest in
the freight transportation services business and changed its direction to
searching for a business combination partner. At December 31, 2002, the
Registrant did not have any significant cash or assets. The Registrant's current
liabilities of $20,606,497 as of December 31, 2002, represented a significant
decrease from its current liabilities as of December 31, 2001. The decrease was
entirely attributable to managements efforts in resolving the claims of the
Registrant's creditors, the single largest of which was GE. These efforts
overshadowed the reduced professional fees and expenses incurred during the
latter part of 2002.
The Registrant is authorized to issue up to 75,000,000 shares of its Common
Stock; and 10,000,000 shares of Preferred Stock, $.001 par value per share. As
of December 31, 2002, there were 54,785,438 shares of the Registrant's Common
Stock and 1,454,250 shares of preferred stock issued and outstanding. In
connection with the convertible note executed in September 2002, the Registrant
has agreed to cause its shareholders to approve an amendment of its Certificate
of Incorporation increasing the Registrant's authorized common stock
capitalization to 300,000,000 shares.
Capital Expenditures
The Registrant did not have any material commitments for capital expenditures at
December 31, 2002 or 2001.
Effects of Inflation
The Registrant believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on the Registrant's financial
position or operating results.
16
Forward Looking Statements
This report includes "Forward-Looking Statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Any statements
that express or involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as "expects" or
"does not expect", "is expected", "anticipates" or "does not anticipate",
"plans", "estimates" or "intends", or stating that certain actions, events or
results "may", "could", "would", "might" or "will" be taken, occur or be
achieved) are not statements of historical fact and may be considered "forward
looking statements". Such statements are included, among other places in this
registration statement, in the sections entitled "Management's Discussion and
Analysis or Plan of Operation," "Description of Business" and "Description of
Property." Forward-looking statements are based on expectations, estimates and
projections at the time the statements are made that involve a number of risks
and uncertainties which could cause actual results or events to differ
materially from those presently anticipated. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, the
Registrant can give no assurance that such expectations will prove to have been
correct.
ITEM 7. FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report .......................................... 12
Financial Statements
Balance Sheets ................................................... 13
Statements of Operations ......................................... 14
Statements of Stockholders' Equity ............................... 15
Statements of Cash Flows ......................................... 16-17
Notes to the Financial Statements ................................ 18-25
17
Independent Auditors' Report
To the Board of Directors and Stockholders of
Logistics Management Resources, Inc.
We have audited the accompanying balance sheets of Logistics Management
Resources, Inc. as of December 31, 2002 and 2001 and the related statements of
operations, stockholders' equity (impairment) and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 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 provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Logistics Management Resources,
Inc. as of December 31, 2002 and 2001 and the results of its operations, cash
flows and changes in stockholders' equity (impairment) for the years ended
December 31, 2002 and 2001 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 9 of the notes to the
financial statements, the Company incurred an accumulated deficit of $40,579,463
through December 31, 2002, and as of December 31, 2002 had a working capital
deficiency of $20,606,497. The Company's ability to generate sufficient proceeds
from prospective operations or debt or equity arrangements is uncertain. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
March 26, 2003
18
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Balance Sheets
December 31,
2002 2001
---- ----
Assets
Equipment
$ 5,367 $ 6,696
------------ ------------
$ 5,367 $ 6,696
============ ============
Total Assets
Liabilities and Stockholders' Equity (Impairment)
Current Liabilities
Accrued expenses $ 63,908 $ 264,825
Accrued interest 5,609,010 4,996,675
Due to related parties 2,589,615 773,835
Loans payable 2,544,000 2,584,015
Convertible debentures 5,198,460 5,198,460
Net liabilities of discontinued operations 4,601,504 16,960,504
------------ ------------
Total Current Liabilities 20,606,497 30,778,314
------------ ------------
Commitments and contingencies
Stockholders' Equity (Impairment)
Preferred stock, no par value; (10,000,000 shares authorized)
Series A (999,000 shares outstanding) 762 762
Series B (2,000 shares outstanding) 2,000,000 2,000,000
Series C (450,000 shares outstanding) 135,000 135,000
Series D (950 shares outstanding) 950,000 950,000
Series E (2,300 shares outstanding) 2,300,000 2,300,000
Common stock, no par value; 75,000,000 shares authorized, -- --
54,785,438 shares issued and outstanding
Additional paid-in capital 14,592,571 14,592,571
Accumulated (deficit) (40,579,463) (50,749,951)
------------ ------------
Total Stockholders' Equity (Impairment) (20,601,130) (30,771,618)
------------ ------------
Total Liabilities and Stockholders' Equity (Impairment) $ 5,367 $ 6,696
============ ============
See notes to the financial statements.
19
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statements of Operations
Year Ended December 31,
2002 2001
------------ ------------
Continuing Operations:
Net Revenue $ -- $ --
------------ ------------
Operating Expenses:
Direct expenses -- --
General and administrative 16,761 2,706,391
Depreciation and amortization 1,329 82,113
Interest expense 612,335 4,070,069
------------ ------------
Total Operating Expenses 630,425 6,858,573
------------ ------------
Operating Loss Before Discontinued Operations (630,425) (6,858,573)
Discontinued Operations:
Gain (loss) on disposal of discontinued
operations, net of income tax provision
(benefit) of $0 and $0, respectively) 10,800,913 (4,954,218)
------------ ------------
Net Profit (Loss) $ 10,170,488 $(11,812,791)
============ ============
Earnings (Loss) Per Common Share
Loss from continuing operations $ (0.01) $ (0.14)
Gain (loss) from discontinued operations 0.20 (0.09)
------------ ------------
Net loss per share $ 0.19 $ (0.23)
============ ============
Weighted Average Number of Common Shares Outstanding 54,785,438 52,218,684
============ ============
See notes to the financial statements.
20
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statement of Shareholders' Equity
Year Ended December 31, 2001
Preferred Shares Preferred Shares Preferred Shares Preferred Shares
Series Series Series Series
A B C D
------------------------ ------------------------- ------------------------- -----------------------
Shs Amt Shs Amt Shs Amt Shs Amt
----------- ----------- ------------ ----------- ------------ ----------- ----------- ----------
Balance,
January 1, 2001 999,000 $762 2,000 $2,000,000 450,000 $135,000 950 $950,000
Issuance of shares
for services rendered -- -- -- -- -- -- -- --
Issuance of shares
in exchange for
rescission -- -- -- -- -- -- -- --
Purchase of
treasury shares -- -- -- -- -- -- -- --
Sale of treasury
shares -- -- -- -- -- -- -- --
Cancellation of
shares -- -- -- -- -- -- -- --
Cancellation of
subscriptions -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
Balance, December
31, 2001 999,000 $762 2,000 $2,000,000 450,000 $135,000 950 $950,000
Net income -- -- -- -- -- -- -- --
------- ---- ----- ---------- ------- -------- --- --------
Balance, December
31, 2002 999,000 $762 2,000 $2,000,000 450,000 $135,000 950 $950,000
======= ==== ===== ========== ======= ======== === ========
(Table Continued)
Preferred Shares
Series
E Common Stock
------------------------ ----------------------------
Shs Amt Shs Amount
----------- ----------- -------------- ------------
Balance,
January 1, 2001 2,300 $2,300,000 61,186,903 $ --
Issuance of shares
for services rendered -- -- 15,488,764 --
Issuance of shares
in exchange for
rescission -- -- 1,500,000 --
Purchase of
treasury shares -- -- (18,000) --
Sale of treasury
shares -- -- 18,000 --
Cancellation of
shares -- -- (23,390,229) --
Cancellation of
subscriptions -- -- -- --
Net loss -- -- --
Balance, December
31, 2001 2,300 $2,300,000 54,785,438 $ --
Net income -- -- -- --
----- ---------- ----------- ---------
Balance, December
31, 2002 2,300 $2,300,000 54,785,438 $ --
===== ========== =========== =========
(Table Continued)
Additional Retained Stockholders'
Subscription Paid in Earnings Equity
Receivable Capital (Deficit) (Deficiency)
----------- ------------- ---------- ------------
Balance,
January 1, 2001 $(906,788) $ 12,077,292 $(38,937,160) $(22,380,894)
Issuance of shares
for services rendered -- 3,310,468 -- 3,310,468
Issuance of shares
in exchange for
rescission -- 180,000 -- 180,000
Purchase of
treasury shares -- (118,401) -- (118,401)
Sale of treasury
shares -- 50,000 -- 50,000
Cancellation of
shares -- -- -- --
Cancellation of
subscriptions 906,788 (906,788) -- --
Net loss -- -- (11,812,791) (11,812,791)
Balance, December
31, 2001 $ -- $ 14,592,571 $(50,749,951) $(30,771,618)
Net income -- -- 10,170,488 10,170,488
--------- ------------ ------------ ------------
Balance, December
31, 2002 $ -- 14,592,571 $(40,579,463) $(20,601,130)
========= ============ ============ ============
See notes to the financial statements.
21
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statements of Cash Flows
Year Ended December 31,
----------------------
2002 2001
---- ----
Cash Flows From Operating Activities
Continuing Operations
Loss before discontinued operations $ (630,425) $(6,858,573)
Adjustments to Reconcile Net Loss to Net Cash Used
By Operating Activities
Depreciation and amortization expense 1,329 82,113
Issuance of common stock for services rendered -- 3,310,468
Issuance of common stock for Rescission Agreement -- 180,000
(Increase) Decrease in Assets
Inventory -- 162,000
Increase (Decrease) in Liabilities
Cash overdraft -- (29,688)
Accrued expenses 411,418 4,065,932
------------ -----------
Net Cash Provided (Used) by Continuing Operations (217,678) 912,252
------------ -----------
Discontinued Operations
Gain (loss) on disposal of discontinued operations 10,800,913 (4,954,218)
Adjustments to Reconcile Gain (Loss) by from
Discontinued Operations to Net Cash Provided (Used)
Increase in net liabilities of discontinued operations (12,359,000) 3,537,575
------------ -----------
Net Cash (Used) by Discontinued Operations (1,558,087) (1,416,643)
------------ -----------
Net Cash (Used) by Operating Activities (1,775,765) (504,391)
------------ -----------
Cash Flows From Investing Activities
Purchases of equipment -- (7,639)
------------ -----------
Net Cash (Used) by Investing Activities -- (7,639)
------------ -----------
See notes to the financial statements.
22
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Statements of Cash Flows (Continued)
Year Ended December 31,
2001 2000
---- ----
Cash Flows from Financing Activities
Net proceeds from related parties 1,815,780 456,015
Purchase of treasury stock -- (118,401)
Sale of treasury stock -- 50,000
Proceeds from (repayments of) loans payable (40,015) 124,416
Net Cash Provided by Financing Activities 1,775,765 512,030
Net Change in Cash -- --
Cash at beginning of year -- --
--------- --------
Cash at end of year $ -- $ --
========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for:
-- --
Interest expense --------- --------
$ -- $ --
Income taxes ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the first quarter of 2001, the Registrant acquired the business of
Trans-Logistics, Inc. This transaction was rescinded several months later. The
Registrant issued 1,500,000 common shares with a value of $180,000 in connection
with this transaction.
During 2001, the Registrant issued 15,488,764 shares of common stock for
services rendered value at $3,310,468.
No shares were issued during the year ended December 31, 2002.
See notes to the financial statements.
23
Logistics Management Resources, Inc.
F.T.A. U.S. Trucking, Inc.
Notes to the Financial Statements
Note 1 - General and Summary of Significant Accounting Policies
(A) Nature of Business. Logistics Management Resources, Inc. (the "Registrant"),
formerly U. S. Trucking, Inc. was incorporated in Colorado under the name
Northern Dancer, Inc. in January, 1987 for the purpose of acquiring an operating
business. It completed a small public offering in 1988. In September, 1998 it
completed a reverse acquisition of Logistics Management Resources, Inc.,
formerly U. S. Trucking, Inc., a Nevada corporation that had two operating
subsidiaries which it had acquired in early 1997 just after it was incorporated.
Corporate headquarters are located in Louisville, Kentucky.
On November 30, 2000 all four of the Registrant's operating subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the U. S. Bankruptcy
Code. These filings were subsequently converted to Chapter 7. The Registrant is
presently attempting to restructure its liabilities, and to identify and enter
into a business combination with a profitable privately owned business.
(B) Basis of Presentation. The accompanying balance sheet and related statements
of operations, stockholders' equity (impairment) and cash flows at and for the
years ended December 31, 2002 and 2001, include the financial activities of the
Registrant. Financial activities of former subsidiaries are included in
discontinued operations.
(C) Earnings Per Share. Basic earnings per share are computed by dividing net
income available to common shareholders by the weighted average number of common
shares outstanding during the year. Diluted earnings per share are calculated by
combining weighted average number of common shares outstanding and potentially
dilutive common share equivalents unless the effect of doing so is
anti-dilutive. Common equivalent shares have been excluded from the 2002 and
2001 computation of diluted earnings per share since their effect is
anti-dilutive.
The weighted average number of shares for 2002 and 2001 was 54,785,438 and
52,218,684, respectively.
(D) Fair Value of Financial Instruments. The fair values of accrued expenses and
other short-term obligations approximate their carrying values because of the
short maturity of these financial instruments. In accordance with Statement of
Financial Accounting Standards No. 107, "Disclosure About Fair Value of
Financial Instruments," rates available at balance sheet dates to the Registrant
are used to estimate the fair value of existing debt.
24
(E) Income Taxes. The Registrant utilizes Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which requires an
asset and liability approach to financial accounting and reporting for income
taxes. The difference between the financial statement and tax basis of assets
and liabilities is determined annually. Deferred income tax assets and
liabilities are computed for those temporary differences that have future tax
consequences using the current enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income. In some situations,
SFAS 109 permits the recognition of expected benefits of utilizing net operating
loss and tax credit carry-forwards. Valuation allowances are established based
upon management's estimate, if necessary. Income tax expense is the current tax
payable or refundable for the period plus or minus the net change in the
deferred tax assets and liabilities.
(F) Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(H) Property and Equipment. The cost of office equipment is depreciated for
financial statement purposes on a straight line basis over 5-7 years. Repairs
and maintenance expenditures which do not extend the useful lives of the related
assets are expensed as incurred.
Note 2 - Equipment
Equipment at cost, less accumulated depreciation, consists of the following at
December 31:
2002 2001
---- ----
Office Equipment $8,859 $8,859
Less accumulated depreciation 3,492 2,163
----- -----
Total $5,367 $6,696
===== ======
Depreciation expense charged to operations was $1,329 and $1,918 in 2002 and
2001, respectively.
Note 3 - Convertible Debentures
During 2000, the Registrant issued $4,650,000 of its 10% - 11.5% convertible
debentures due May 31, 2002. The Registrant received proceeds of $4,502,000, net
of $148,000 of debt issuance costs. Also, during 2000, $50,296 of debentures and
$20,201 of accrued interest were converted into 897,504 and 361,377 common
shares, respectively.
25
The holders of the debentures are entitled, at their option, to convert at any
time, all or any part of the principal amount of the debentures plus accrued
interest.
During 2001, a debenture in the amount of $3,000,000 was amended and restated to
a new principal balance of $3,793,460, which included penalties and interest
accrued through the date of the amendment and restatement.
The price per share of Common Stock into which the debentures are convertible is
the higher of $1.50 or the lower of 80% of the average closing bid price of the
Common Stock quoted on the NASDAQ OTCBB Market for three trading days preceding
the conversion date or $2.37 per share. In no event will the conversion price be
less than $1.50 per share.
Note 4 - Discontinued Operations and Estimated Guarantee Obligations
On November 30, 2000, the Registrant's four operating subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code.
The Registrant is liable as a guarantor on certain indebtedness of its former
subsidiaries.
The estimated gain (loss) on the disposal of the discontinued operations is
$10,800,913 and $(4,954,218) in 2002 and 2001, respectively, (net of income tax
benefit of $0 in both years), and represents the estimated gain (loss) to the
Registrant as a result of the bankruptcy filings of its former subsidiaries, and
subsequent settlement of estimated guarantee obligations.
The Registrant is liable for obligations as to which it is a primary or
secondary guarantor relating to its former subsidiaries which have been
discontinued. Resultant estimated guarantee obligations amount to $4,601,504 at
December 31, 2002.
Note 5 - Income Taxes
For the years ended December 31, 2002 and 2001 the Registrant has no income tax
provision or benefit.
The Registrant's total deferred tax asset and valuation allowance are as follows
at December 31, 2002:
2002 2001
Total deferred tax asset $ 17,000,000 $ 21,000,000
Less valuation allowance (17,000,000) (21,000,000)
------------ ------------
Net deferred tax asset $ -- $ --
============ ============
The valuation allowance account has decreased by $4,000,000 as of December 31,
2002.
26
At December 31, 2002, the Registrant has available approximately $23,000,000 of
net operating loss carryforwards which may be used to reduce future federal and
state taxable income and expire between December 31, 2008 and December 31, 2021.
Note 6 - Preferred Stock
Series A Preferred Stock - On February 1, 1999, the Registrant entered into
three stock exchange agreements whereby a total of 9,990,000 shares of Common
Stock were exchanged for 999,000 shares of Series A Preferred Stock. The value
of the shares was determined to be $762 and such amount was deducted from
additional paid-in capital. Each share of Series A Preferred Stock is entitled
to ten votes and will vote together with the holders of the Common Stock.
Pursuant to this agreement, each share of Series A Preferred Stock may be
exchanged for ten shares of Common Stock as follows: one fifth of the shares
upon the Registrant reporting revenues of $31 million or more for any fiscal
year or shorter period in a report filed on Form 10-KSB or any appropriate
Securities and Exchange Commission filing; an additional one-fifth if revenues
are at or above $41 million; an additional one fifth if revenues are at or above
$51 million; an additional one-fifth if revenues are at or above $61 million;
and the balance if revenues are at or above $71 million. Based upon the revenues
reported in the accompanying consolidated financial statements, none of the
Series A Preferred Stock are eligible to be exchanged for Common Stock.
Series B Convertible Preferred Stock - During 1999, the Registrant sold
$2,000,000 of Series B Convertible Preferred Stock and issued 2,000 shares. The
Registrant incurred $185,000 of issuance costs that were deducted from
additional paid-in capital. Shares of Series B Convertible Preferred Stock are
convertible into shares of Common Stock based upon the stated value of $1,000
per share of Preferred Stock divided by the conversion price on the date of
conversion. Holders of Series B Convertible Preferred Stock may elect to convert
their shares commencing on the earlier of October 28, 1999 or the occurrence of
any merger, tender offer, or redemption event. The conversion price is equal to
90% of the average closing bid price for the ten consecutive trading days
immediately preceding the conversion date, not to exceed $2.59 per share.
Holders of Series B Preferred Stock are entitled to receive a dividend of 12%
annually. No dividends have been declared from issuance through December 31,
2002. There are also provisions in the security which allow the holders to
redeem their shares upon the occurrence of certain events including the
inability of the Registrant to issue free trading common stock to the holders
because the shares have not been registered under the Securities Act. The Series
B shareholders have no voting rights.
Series C Convertible Preferred Stock - During 1999, the Registrant issued 50,000
shares of Series C Convertible Preferred Stock to existing related party
shareholders in exchange for their guaranteeing the Registrant's debt incurred
under the revolving credit agreement. The shares were valued for financial
statement purposes at $.30 per share. During June 2000 the Registrant also
issued 200,000 shares of Series C Preferred Stock to each of Danny L. Pixler,
the Registrant's Chief Executive and Financial Officer, and the Huff
Grandchildrens' Trust in consideration of those parties' guaranties with respect
27
to in excess of $13,000,000 of debt obligations of the Registrant or its
affiliates. Each Series C share carries 100 votes per share on all matters
submitted to a vote of stockholders, but otherwise carries no rights to
dividends or other distributions. The holders of Series C Preferred Stock have
no liquidation rights and no rights to dividends. The Series C Preferred Stock
is not redeemable.
Series D Convertible Preferred Stock - During 1999, the Registrant sold $950,000
of Series D Convertible Preferred shares and issued 950 shares. The Registrant
incurred $150,000 of issuance costs that were deducted from additional paid-in
capital. Shares of Series D Convertible Preferred Stock are convertible into
shares of common stock based on the stated value of $1,000 per share of
preferred stock divided by the conversion price on the conversion date. Holders
of the Series D Convertible Preferred Stock may elect to convert their shares
commencing the earlier of January 8, 2000 or the occurrence of a merger, tender
offer, or redemption event. Holders of Series D Convertible Preferred Stock are
entitled to receive a dividend of 12% annually. No dividends have been declared
from issuance through December 31, 2002. In addition, the holders of Series D
Convertible Preferred Stock have no voting rights.
Series E Convertible Preferred Stock - During 1999, the Registrant sold
$2,300,000 of Series E Convertible Preferred Stock and issued 2,300 shares. The
Registrant incurred $282,900 of issuance costs that were deducted from
additional paid-in capital. Shares of Series E Convertible Preferred Stock are
convertible into shares of Common Stock based upon the stated value of $1,000
per share of preferred stock divided by the conversion price on the conversion
date. Holders of the Series E Convertible Preferred Stock may elect to convert
their shares commencing on the earlier of March 9, 2000, or the occurrence of a
merger, tender offer, or redemption event. The conversion price is $3.18 per
share. Series E Convertible Preferred Stock has no voting rights and are
entitled to receive a dividend of 12% annually. No dividends have been declared
to date.
Note 7 - Common Stock
The Registrant is authorized to issue 75,000,000 common shares, no par value.
Effective February 12, 2001, the Registrant's stockholders approved a 100 for 1
reverse split of its shares. Per share calculations for the year ended December
31, 2001 have been restated to reflect the above split for the entire period.
On September 27, 2002, the Registrant executed a 6% Secured Convertible Note in
the amount of $1,731,905.70 the entire balance of which is convertible into
common shares at $.01 per share. Pursuant to the terms of the note, the
Registrant has agreed to amend its Certificate of Incorporation to increase the
common shares authorized for issuance to 300,000,000 as soon as possible. At
December 31, 2002, the principal and accrued interest owed by the Registrant
pursuant to the terms of the Secured Convertible Note was $1,758,951.90, which
if converted by Brentwood, would result in the issuance of 175,895,190
additional common shares.
28
Note 8 -Related Party Transactions
On September 27, 2002, pursuant to a 6% secured, convertible promissory note
(the "Convertible Note"), the Company consolidated $856,916 (including $10,096
in legal costs) previously due Brentwood Capital Corp., a New York merchant bank
with which Midwest has a long-term client relationship ("Brentwood"), and
borrowed another $875,000 from Brentwood to fund the settlement with GE. The
resulting $1,731,906 Convertible Note is payable in 60 equal monthly
installments of $33,287 together with 6% interest on the first day of each month
commencing December 2002 through November 2007. The combined obligation of the
Company is secured by all of the Company's assets.
All or any portion of the balance due under the Convertible Note may be
converted into common shares at any time prior to October 1, 2007 at $.01 per
share (100% of the closing prices for the Company's common stock on the NASDAQ
OTCBB Market for the 20 trading days preceeding September 27, 2002). At December
31, 2002, the Company had made no payments pursuant to the Convertible Note
resulting in a balance due, including interest and principal, of $1,758,952,
which would convert into a maximum of 175,895,190 common shares at Brentwood's
option. The Company has committed to file a Certificate of Amendment to its
Certificate of Incorporation as soon as possible to provide for the additional
authorized common shares that may be required.
Amounts due to related party at December 31, 2001, consist of amounts borrowed
by the Registrant from certain stockholders and their affiliates. Amounts
outstanding bear no interest and repayment is expected in the short term, if
cash flows are available. During 1999 and 2000, the Registrant issued 450,000
shares of Series C Preferred Stock to certain related parties in exchange for
their guarantees of certain lines of credit of the Registrant. The guaranties
were valued at $135,000 or $.30 per share of Series C Preferred Stock.
Note 9 - Going Concern
The Registrant's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, the Registrant has incurred
an accumulated deficit of $40,579,463 through December 31, 2002. In addition, at
December 31, 2002, the Registrant had a working capital deficiency of
$20,606,497. As discussed at Note 1, on November 30, 2000, the Registrant's
operating subsidiaries filed voluntary petitions for reorganization under
Chapter 11 and currently converted to Chapter 7 of the Bankruptcy Code and, as
described at Note 4, the Registrant is liable as a guarantor on certain
indebtedness of it's former subsidiaries.
29
The Registrant's ability to generate sufficient proceeds from prospective
operations, debt or equity placements is uncertain. The financial statements do
not include any adjustments that might be necessary if the Registrant is unable
to continue as a going concern. Management is continuing its efforts to arrange
for the placement of sufficient debt or equity to alleviate the above described
conditions.
Note 10 - Commitments and Contingencies
Stock Activity: During 2000, the Registrant issued a total of 7,800,000 shares
of common stock to several companies and individuals as collateral in connection
with contingent transactions. Subsequently, the 7,800,000 shares were
transferred to related parties for their guaranty as to the Registrant's
Restructure Agreement with General Electric.
During 2000, 1,500,000 shares of common stock were issued as collateral to a
preferred stockholder but not considered issued and outstanding. During 2001,
the Registrant issued 16,988,764 shares of common stock. Of such shares
15,488,764 were issued for future advisory and consulting services and 1,500,000
shares were issued pursuant to the rescission agreement with Translogistics,
Inc.
Operating Leases: In February, 2000, the Registrant leased 4,000 square feet of
space in Mt. Pleasant, South Carolina to house its corporate office and
brokerage operations. The lease called for monthly payments of $6,380 and is for
a term of 12 months. Upon the Chapter 11 filing of its former subsidiaries, the
corporate offices were moved to Louisville, Kentucky. The South Carolina lease
expired in February, 2001.
The corporate headquarters lease in Louisville, Kentucky covers a 1,600 square
foot office space for $2,100 a month through 2002. This obligation has been
assumed, pursuant to a subleasing arrangement, with a related party.
Indemnity Agreements: The Registrant's President and two other guarantors of the
Registrant's obligations have provided guarantees of certain obligations of the
Registrant and its former subsidiaries. As a result, on January 30, 1997, and as
renewed on May 3, 1999, the Registrant entered into an Indemnity Agreement with
these three parties, to hold them harmless against any loss or liability related
to or arising from the Registrant and its former subsidiaries.
Note 11 -Stock Option Plan
The Registrant's stock option plan, implemented in 1998, is accounted for under
Statement of Financial Accounting Standards, SFAS 123, Accounting for
Stock-Based Compensation. Under SFAS 123, the compensation cost of the issuance
of stock options is measured at the grant date based on the fair value of the
award. Compensation is then recognized over the service period that is generally
the vesting period.
30
The plan allows the Registrant to grant options to employees for up to a total
of 2,500,000 shares of common stock. Options outstanding become exercisable at
the discretion of the Stock Option Committee, which administers the plan, and
expire 10 years after the grant date. All options granted during 1999 were
exercisable at not less than the fair market value of the stock on the date of
the grant. Accordingly, no compensation cost has been recognized for the plan.
The Committee approved the issuance of options to purchase 2,000,000 shares of
the common stock of the Registrant to various employees and advisors for and an
exercise price of $.30 per share for a total exercise price of $600,000.
Included below are options granted to the President and other key employees to
purchase a total of 500,000 shares of common stock at $3.00 per share.
Weighted Weighted
Options Average Warrants Average
------- ------- -------- -------
Securities Outstanding January 1, 1999 2,000,000 $ 0.30 1,622,298 $ --
Securities Granted 500,000 3.00 -- 2.72
Securities Exercised (1,759,870) 0.26 -- --
Securities Cancelled -- -- -- --
Securities Outstanding December 31, 1999 740,130 $ 2.12 1,622,298 $ 2.72
========== ======== =========== ======
There was no stock option plan activity for 2002, 2001 or 2000.
Note 12 - Rescinded Transaction
On April 1, 2002, the Registrant completed the acquisition from Midwest
Merger Management, LLC, a Kentucky limited liability company ("Midwest") of 99%
of the issued and outstanding common stock of Interstate University, Inc., a
privately owned Kentucky corporation then engaged in the business of educating
and training individuals to drive commercial freight liners ("Interstate"). The
Registrant gave Midwest a 4%, one year promissory note in the principal amount
of $200,000 secured by a first lien and security interest in the shares and a
five year 10% net profit interest in Interstate.
The Registrant and Midwest subsequently mutually agreed that Interstate
had failed to meet performance criteria set forth in the Agreement, and was
likely to continue to do so. Accordingly, on October 28, 2002, the parties
executed a Rescission and Release Agreement whereby in consideration for the
exchange of general releases and the return of the Note, the Registrant
relinquished the Interest and returned the Shares to Midwest.
31
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) Identify Directors and Executive Officers.
The following table sets forth: (1) names and ages of all persons who presently
are and who have been selected as directors of the Registrant; (2) all positions
and offices with the Registrant held by each such person; (3) the term or office
of each person named as a director; and 4) any period during which he or she has
served a such:
----------------------------------------------------------------------------------------------------------
Duration and Date of Position and Office Age and
Name Expiration of Present Term with Registrant Director Since
----------------------------------------------------------------------------------------------------------
Danny L. Pixler One year Chief Executive and
June 30, 2003 Financial Officer, and 54
Director September 1998
Anthony R. Russo One year Director 60
June 30, 2003 March 2002
There is no understanding or arrangement between any directors or any other
person or persons pursuant to which such individual, was or is to be, selected
as a director or nominee of the Registrant.
Business Experience
Danny L. Pixler has served as the Registrant's Chief Executive and Financial
Officer and has been a director of the Registrant since September 1998.
Simultaneously therewith and since November 2002, Mr. Pixler has been the
President, Chief Operating Officer and a member of the Board of Directors of
Certified Services, Inc. a publicly owned and traded Nevada corporation with a
class of securities registered pursuant to Section 12(g) of the Exchange Act.
Certified Services, Inc. is a New York City based holding company engaged in the
acquisition and management of professional employer organizations.
Simultaneously therewith and since March 2002, Mr. Pixler has served as a
director of Momentum Holdings Corporation, a publicly owned and traded Delaware
corporation with a class of securities registered pursuant to Section 12(g) of
the Exchange Act. Prior thereto from 1993 to 1994, Mr. Pixler served as
President of Joseph Land Group, a South Carolina based transportation company
with annual sales of approximately $130 million. Prior thereto from 1989 through
1992, Mr. Pixler served as President of Apple Lines, Inc., a South Dakota based
truckload refrigerated carrier with annual revenues exceeding $16 million. Prior
thereto from 1983 until 1988, Mr. Pixler served as Executive Vice President and
General Manager of DFC Transportation, a wholly owned subsidiary of Dean Foods,
Inc. with annualized sales of approximately $60 million.
Anthony R. Russo, has served as a director of the Registrant since March 2003.
Simultaneously therewith since September 1999, Mr. Russo has served as the
President, Chief Financial Officer and director of Amici Ventures, Inc., an
inactive publicly owned New York corporation with a class of securities
registered pursuant to Section 15(d) of the Exchange Act. Simultaneously
therewith and since March 2000, Mr. Russo has served as the Chief Financial
32
Officer a director of Momentum Holdings Corporation, a publicly owned and traded
Delaware corporation with a class of securities registered pursuant to Section
12(g) of the Exchange Act. In March 2002, Mr. Russo was elected as the President
of Momentum Holdings Corporation. Simultaneously therewith since August 2002,
Mr. Russo has served as President, Chief Financial Officer and director of Edgar
Filing.net, Inc., an inactive publicly owned and traded Nevada corporation with
a class of securities registered pursuant to Section 12(g) of the Exchange Act.
Simultaneously therewith since August 2002, Mr. Russo served as President and
director of Certified Services, Inc. a publicly owned and traded Nevada
corporation with a class of securities registered pursuant to Section 12(g) of
the Exchange Act . Certified Services, Inc. is a New York City based holding
company engaged in the acquisition and management of professional employer
organizations. Prior thereto since 1990, Mr. Russo served as President and Chief
Executive of Cartilage Technologies, Inc., a privately owned manufacturer and
marketer of dietary supplements headquartered in Elmsford, New York. Prior
thereto since 1971, he served as President and Chief Executive of Sherwood
Corporation, a publicly owned financial services firm in New York City. In his
capacity as President, Mr. Russo often served as a member of the board of
directors of several small and emerging companies including Lloyds Electronics,
Inc. (AMEX: LLYD) where he chaired the Audit Committee and served on the
Executive Committee from 1980 to 1985. Prior thereto since 1966, he was a member
of the audit staff of Arthur Andersen LLP in New York City. Mr. Russo received a
Bachelor of Business Administration degree in accountancy practice from Pace
University in 1967, was licensed as a certified public accountant by the State
of New York in 1969, and received a Masters degree in Business and Policy from
the Empire State College of the State University of New York at Saratoga Springs
in 2001. Mr. Russo has been a member of the American and New York Associations
of CPA's since 1969; and a member of the National Association of Corporate
Directors since 1998.
Directorship
Except as disclosed in this Item, each director of the Registrant has indicated
to the Registrant that he is not presently a director in any other Registrant
with a class of securities registered pursuant to Section 12 of the 34 Act or
subject to the requirements of Section 15(d) of such act or any investment
company registered under the Investment Company Act of 1940.
(b) Identification of Certain Significant Employees
The Registrant does not presently employ any person as a significant employee
who is not an executive officer but who makes or is expected to make a
significant contribution to the business of the Registrant.
(c) Family Relationships
No family relationship exists between any director or executive officer of the
Registrant.
33
(d) Involvement in Certain Legal Proceedings
No event listed in Sub-paragraphs (1) through (4) of Subparagraph (d) of Item
401 of Regulation S-B, has occurred with respect to any present executive
officer or director of the Registrant or any nominee for director during the
past five years which is material to an evaluation of the ability or integrity
of such director or officer.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act, as amended, requires the Registrant's
executive officers and directors and persons who own more than 10% of a
registered class of the Registrant's equity securities, to file with the SEC
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Registrant on Forms 3, 4, and 5, respectively. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Registrant with copies of all Section 16(a) reports
they file. To the Registrant's knowledge, Danny L. Pixler and Anthony R. Russo
the Registrant's executive officer and directors, have complied with all Section
16(a) filing requirements applicable to them during the Registrant's most recent
fiscal year.
ITEM 10. EXECUTIVE COMPENSATION.
(a) General
(1) through (7) All Compensation Covered. During the three fiscal years ended
December 31, 2002, the aggregate compensation paid to, accrued or set aside for
any executive officer or director of the Registrant was $234,788.
(b) Summary Compensation Table.
--------------------------
-------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payments
- ------------------------ ------ ---------
Name and Position Year Salary Bonuses Other Stock Options LTIP Other
------------------------------------------------------------------------------------------------
Danny L. Pixler, 2000 $111,394 - $6,000(3) - - - -
President, CEO, 2001 111,394 - - - - - -
and Director 2002 - - - - - - -
Total 2000 $111,394 - $6,000(3) - - - -
2001 $111,394 - - - - - -
2002 - - - - - - -
(1) Mr. Pixler, co-founder of the Registrant, has options to purchase 250,000
common shares at an exercise price of $0.30 which expire in April 2004.
(2) No additional payments were made to our officers and directors for the two
years ending December 31, 2002.
(3) Represents a $500 per month car allowance.
34
(c) Option/SAR Grant Table.
----------------------
During the fiscal year ended December 31, 2002, the Registrant made no grants of
stock options or freestanding SAR's to any executive officer or director of the
Registrant. (d) Aggregate Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table. During the fiscal year ended December 31, 2002, no stock options or
freestanding SAR's were exercised by any executive officer or director of the
Registrant.
(e) Long-Term Incentive Plan ("LTIP") Awards Table. During the three fiscal
years ended December 31, 2002, the Registrant made no LTIP awards.
(f) Compensation of Directors. (1) and (2). During the three fiscal years ended
December 31, 2002, no director of the Registrant received any compensation
pursuant to any standard or other arrangement.
(g) Employment Contracts and Termination of Employment, and Change in Control
Arrangements. (1) and (2). On September 2, 1998, the Registrant entered
into a five year employment with Danny L. Pixler as the Registrant's Chief
Executive and Financial Officer. The agreement provides for an annual base
salary of $105,000 with annual increases of not less than 3% per year
together with health insurance coverage for Mr. Pixler and his dependents.
On October 1, 2002, the Registrant and Mr. Pixler agreed to terminate his
employment agreement. Except for the foregoing, no executive officer of the
Registrant was employed pursuant to the terms of an employment agreement
with the Registrant. No changes in control of the Registrant took place
during the fiscal year ended December 31, 2002.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owner. The information is furnished
as of December 31, 2002, as to the number of shares of the Registrant's Common
Stock, no par value per share, owned beneficially, or known by the Registrant to
own beneficially, more than 5% of any class of such security:
--------------------------------------------------------------------------------------------------
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percentage of Class(2)
--------------------------------------------------------------------------------------------------
Danny L. Pixler
5101 NW 21st Ave. - Suite 350
Ft. Lauderdale, FL 33309 20,000,000 15.1%
Huff Grandchildrens' Trust
10602 Timberwood Circle #9
Louisville, KY 40223 20,000,000 15.1%
35
Midwest Merger Management, LLC
10602 Timberwood Circle #9
Louisville, KY 40223 21,371,558 (1) 16.1%
Brentwood Capital Corp.
477 Madison Ave. 12th Floor
New York, NY 10022 22,823,267 (3)(4) 17.2%
------------------------
(1) Comprised of an aggregate of 6,381,558 shares of the Registrant's common
stock, plus the 9,990,000 common vote equivalent of 999,000 shares of the
Registrant's Series A preferred stock which are entitled to ten common
votes each, and the 5,000,000 common vote equivalent of 50,000 shares of
the Registrant's Series C preferred stock which are entitled to 100 common
votes each.
(2) Based upon an aggregate of 132,598,705 common shares as follows: (i)
54,785,438 common shares outstanding; (ii) 9,990,000 common shares issuable
upon conversion of outstanding shares of Series A preferred stock; (iii)
45,000,000 common shares issuable upon conversion of outstanding shares of
Series C preferred stock; and (iv) 22,823,267 shares of common issuable
upon conversion of the $1,731,905.70 promissory note described in footnote
(3) below.
(3) Comprised of the right to convert an aggregate of $1,731,905.70 in
principal and interest under a September 27, 2002 secured promissory note
into an aggregate of 173,1290,570 shares of the Registrant's common stock.
As of December 31, 2002, only an aggregate of 22,823,267 shares of common
stock were available for conversion of the note. See Item 1 under the sub
caption "Convertible Financing".
(4) Does not include an aggregate of 150,367,303 shares of the Registrant's
common stock issuable to Brentwood upon its complete conversion of the
$1,731,905.70 promissory note described in footnote (3) above. Brentwood's
conversion right is conditioned upon an increase in the Registrant's
authorized common stock capitalization. See Item 1 under the sub caption
"Convertible Financing".
(b) Security Ownership of Management. The following information is furnished as
of December 31, 2002, as to the number of shares of the Registrant's Common
Stock, $.001 par value per share owned beneficially by each executive
officer and director of the Registrant and by all executive officers and
directors as a group:
------------------------------------------------------------------------------------------
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percentage of Class
------------------------------------------------------------------------------------------
Anthony R. Russo
477 Madison Ave. - 12th Floor
New York, NY 10022 - -
Danny L. Pixler
5101 NW 21st Ave. - Suite 350
Ft. Lauderdale, FL 33309 20,000,000 18.2%
All Officers and Directors as
a Group of two persons 20,000,000 18.2%
-------------------
36
(c) Changes in Control. The: (i) exercise by Midwest Merger Management, LLC of
its right to convert its 9,845,750 shares of the Registrant's Preferred Stock
into shares of the Registrant's common stock; and (ii) the conversion by
Brentwood of the Registrant's $1,731,905.70 secured convertible promissory note
into shares of the Registrant's common stock would result in a change of control
of the Registrant.
(d) Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of December 31, 2002, with respect
to compensation plans (including individual compensation arrangements) under
which the Registrant's common stock is authorized for issuance, aggregated as
follows: (i) all compensation plans previously approved by security holders; and
(i) all compensation plans not previously approved by security holders.
-------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
remaining available for
future issuance under
equity compensation Number of securities to Number of securities to
plans [excluding be issued upon exercise be issued upon exercise
securities reflected of outstanding options, of outstanding options,
in column (a)(c)] warrants and rights (a) warrants and rights (a)
------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders -- -- --
Equity compensation plans
not approved by security holders -- -- --
Total -- -- --
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant's issuance of the $1,731,905.70 secured convertible promissory
note to Brentwood as described in Item 1 under the sub caption "Convertible
Financing" may be deemed to be a related party transaction.
The Huff Grandchildren's Trust is the record owner of controlling membership
interests in Midwest Merger Management, LLC, a principal stockholder of the
Registrant.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits:
10 (a) 6% Secured Convertible Promissory Note dated September 27, 2002.
(b) Reports on Form 8K: During the last quarter of the fiscal year ended
December 31, 2002, the Registrant filed the following Reports on Form 8-K and
incorporates by reference these Reports: Form 8-K filed October 10, 2002 and
Form 8-K filed November 12, 2002.
37
ITEM 14. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Registrant maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Registrant files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. Based upon an evaluation of those controls and procedures
performed within 90 days of the filing date of this report, the Chief Executive
and Chief Financial officer of the Registrant concluded that the Registrant's
disclosure controls and procedures were adequate.
(b) Changes in Internal Controls
The Registrant made no significant changes in its internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation of those controls by the Chief Executive and Chief Financial
officer.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Dated: March 31, 2002
Logistics Management Resources, Inc.
By: ____________________________
Danny L Pixler
President, Chief Executive and
Financial Officer, and Director
By: ____________________________
Anthony R. Russo
Director
38
CERTIFICATIONS
I, Danny L. Pixler, the Registrant's Chief Executive Officer, certify that:
1. I have reviewed this annual report on Form 10-KSB of Logistics Management
Resources, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a)
designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; b) evaluated the
effectiveness of the Registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report (the
"Evaluation Date"); and c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and b) any fraud, whether
or not material, that involves management or other employees who have a
significant role in the Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Danny L. Pixler__
------------------------------
Chief Executive Officer
39
I, Danny L. Pixler, the Registrant's Chief Financial Officer, certify that:
1. I have reviewed this annual report on Form 10-KSB of Logistics Management
Resources, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I am responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a)
designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared; b) evaluated the
effectiveness of the Registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report (the
"Evaluation Date"); and c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and b) any fraud, whether
or not material, that involves management or other employees who have a
significant role in the Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Danny L. Pixler__
------------------------------
Chief Financial Officer
40