<PAGE>
Registration No. 33-_____________
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM S-1
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
____________________________
AMERTRANZ WORLDWIDE HOLDING CORP.
(Exact name of Registrant as specified in its charter)
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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<S> <C> <C>
DELAWARE 4731 11-3309110
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
____________________________
STUART HETTLEMAN
2001 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
(516) 326-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________________
Copies to:
DAVID I. FERBER, ESQ. DAVID ALAN MILLER, ESQ.
BRUCE E. FOGARTY, ESQ. GRAUBARD MOLLEN & MILLER
FERBER GREILSHEIMER CHAN & ESSNER 600 THIRD AVENUE
530 FIFTH AVENUE NEW YORK, NEW YORK 10016
NEW YORK, NEW YORK 10036 (212) 818-8800
(212) 944-2200
____________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
____________________________
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
<PAGE>
(Continuation of Cover Page)
CALCULATION OF REGISTRATION FEE
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- ---------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of each Class of Amount being Price Per Offering Registration
Security being registered Registered(1) Share(2) Price(2) Fee
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common Stock, $.01 par value
("Common Stock")(3).................... 2,012,500 Shares $ 6.00 $12,075,000 $ 4,164
- ---------------------------------------------------------------------------------------------------------------
Warrants(3)............................. 2,012,500 Warrants 0.10 201,250 69
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock underlying the
Warrants(3)............................ 2,012,500 Shares 6.00 $12,075,000 4,164
- ---------------------------------------------------------------------------------------------------------------
Underwriters' Purchase Option........... 175,000 .00057 100 1
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock included as part
of Underwriter's Purchase Option(4).... 175,000 Shares 6.60 1,155,000 398
- ---------------------------------------------------------------------------------------------------------------
Warrants included as part of
Underwriter's Purchase Option(4)....... 175,000 Warrants 0.11 19,250 7
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock underlying the
Warrants included in the Underwriter's
Purchase Option(4)(6).................. 175,000 Shares 6.00 1,050,000 362
- ---------------------------------------------------------------------------------------------------------------
Warrants issued in connection with
Bridge Financings(5)(6)................ 1,312,500 Warrants - - -
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock underlying
Warrants issued in connection with
Bridge Financings(5)(6)................ 1,312,500 Shares 6.00 7,875,000 2,716
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock issued in
connection with Bridge Financings(5)(6) 656,250 Shares - - -
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock issued in
connection with Interim Financing(7)... 67,606 Shares - - -
- ---------------------------------------------------------------------------------------------------------------
Shares of Common Stock issued to
founders and in other private
financings(7).......................... 372,114 Shares - - -
===============================================================================================================
Total Registration Fee........... $34,389,782 $11,881
===============================================================================================================
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of the anti-dilution
provisions.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Includes 262,500 Shares of Common Stock, 262,500 Warrants and 262,500
shares of Common Stock underlying such Warrants which may be issued upon
exercise of a 45-day option granted to the Underwriter to cover
overallotments, if any. See "Underwriting".
(4) Such shares of Common Stock and Warrants are being registered for sale to
and for re-sale by the Underwriter and its assigns and transferees on a
delayed or continuous basis, pursuant to Rule 415 under the Securities Act
of 1933, as amended.
(5) Such shares of Common Stock and Warrants are being registered for re-sale
by certain securityholders on a delayed or continuous basis, pursuant to
Rule 415 under the Securities Act of 1933, as amended.
(6) The Registrant is registering for resale by certain securityholders shares
of Common Stock and Warrants issued to such securityholders in connection
with the February 1996 and May 1996 bridge financings, and shares of Common
Stock issuable upon exercise of such Warrants.
(7) The Registrant is registering for resale by certain securityholders shares
of Common Stock issued to such securityholders issued in connection with
interim financings and the formation of the Registrant.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CROSS-REFERENCE SHEET
(Pursuant to Item 501(b) of Regulation S-K)
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<CAPTION>
Registration Statement Item and Heading Prospectus Caption
--------------------------------------- ------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus............... Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front Cover Page of Prospectus and
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................ Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Cover Pages of the Prospectus;
Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Selling Securityholders and Plan of Distribution
8. Plan of Distribution................................. Cover Page of Prospectus; Underwriting; Selling
Securityholders and Plan of Distribution
9. Description of Securities to be Registered........... Description of Securities
10. Interests of Named Experts and Counsel............... Legal Matters; Experts
11. Information with Respect to the Registrant........... Outside Front Cover Page; Prospectus Summary;
Business; Risk Factors; Dividend Policy; Summary
Financial and Operating Data; Capitalization;
Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Management; Historical Background; Certain
Transactions; Principal Stockholders; Shares
Eligible for Future Sale; Selling
Securityholders and Plan of Distribution;
Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Description of Securities
</TABLE>
<PAGE>
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY __, 1996
AMERTRANZ WORLDWIDE HOLDING CORP.
1,750,000 SHARES OF COMMON STOCK AND
1,750,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
All of the 1,750,000 shares of common stock ("Common Stock") and 1,750,000
Redeemable Common Stock Purchase Warrants ("IPO Warrants") offered hereby
(collectively, the "Securities") are being sold by Amertranz Worldwide Holding
Corp. ("Company"). Each IPO Warrant entitles the holder to purchase one share
of Common Stock for $[IPO Offering price] during the four-year period commencing
one year from the date of this Prospectus. The Company may redeem the IPO
Warrants at any time after they become exercisable, at a price of $.01 per
Warrant upon not less than 30 days' prior written notice if the last sale price
of the Common Stock has been at least $10.00 for each of the 20 consecutive
trading days ending on the third day prior to the date on which the notice of
redemption is given. See "Description of Securities."
Prior to this offering ("Offering"), there has been no public market for the
Securities and there can be no assurance that any such market will develop. It
is currently estimated that the initial offering price per share will be between
$6.00 and $7.00 and that the initial offering price per IPO Warrant will be
$.10. See "Underwriting" for information relating to the factors considered in
determining the initial public offering price of the Securities and the exercise
price of the IPO Warrants. The Company has applied to have the Common Stock and
the IPO Warrants approved for quotation on the Nasdaq SmallCap Market under the
symbols "AMTZ" and "AMTZW", respectively.
This Prospectus also relates to the future resale (i) by certain persons
("Bridge Holders") of up to 1,312,500 warrants ("Bridge Warrants") and up to
656,250 shares of Common Stock ("Bridge Shares") issued to the Bridge Holders in
connection with the Company's February 1996 bridge financing ("February Bridge
Financing") and May 1996 bridge financings ("May Bridge Financing",
collectively, "Bridge Financings"), (ii) of 67,606 shares of Common Stock
("Interim Financing Shares") issued to certain lenders ("Interim Financing
Holders") in an interim financing between November 1995 and January 1996
("Interim Financing"), and (iii) 372,114 shares of Common Stock ("Insider
Shares") issued to certain other parties ("Insider Holders") in connection with
private financings between June 1995 and February 1996 and in connection with
the founding of the Company. The securities offered by the Bridge Holders, the
Interim Financing Holders and the Insider Holders (collectively, "Selling
Securityholders") are not part of the underwritten Offering. Without the prior
consent of the Underwriter, the Selling Securityholders may not sell such
securities for a period of one year after this Offering.
--------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK AND SUBSTANTIAL DILUTION. SEE "RISK FACTORS" AT PAGE 6, AND
"DILUTION" AT PAGE 11.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
Per IPO Warrant $ $ $
Total(3) $ $ $
=======================================================================
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance which the Company
has agreed to pay to the Underwriter. The Company has also agreed to sell
to the Underwriter an option to purchase 175,000 shares of Common Stock
and an option to purchase 175,000 warrants (collectively "Underwriter's
Purchase Option") and to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting expenses payable by the Company, including the
nonaccountable expense allowance in the amount of $_______ ($_______ if
the Underwriter's over-allotment option is exercised in full), estimated
at ___________.
(3) The Company has granted the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase up to 262,500
additional shares of Common Stock and an option to purchase up to an
additional 262,500 IPO Warrants on the same terms set forth above, solely
to cover over-allotments, if any ("over-allotment option"). If such over-
allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$_____________, $____________ and $________________, respectively. See
"Underwriting".
The Securities are being offered by the Underwriter, subject to prior sale,
when, as and if delivered to and accepted by the Underwriter and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify this Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made against payment therefor
at the offices of the Underwriter in New York City on or about __________, 1996.
GKN SECURITIES CORP.
________________, 1996
<PAGE>
[LOGO OF AMERTRANZ WORLDWIDE]
[MAP OF AMERTRANZ WORLDWIDE HOLDING CORP. NORTH AMERICA NETWORK]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OR
WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and should
be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety.
THE COMPANY
Amertranz Worldwide Holding Corp. ("Company"), through its wholly owned
subsidiaries, Amertranz Worldwide, Inc. ("Amertranz") and Caribbean Air
Services, Inc. ("CAS"), is a provider of freight forwarding services. The
Company also recently began providing logistics services. Since commencement of
its predecessors' operations in 1985, the Company has grown to a network of
offices in 25 cities throughout the United States and Puerto Rico. The Company
believes that it is one of the dominant freight forwarders between the
continental United States and Puerto Rico.
The Company combined the operations of Amertranz and CAS in a transaction
which occurred in February 1996 ("Combination"). On a pro forma basis for the
12 months ended December 31, 1995, the Company had operating revenues of $62.2
million and incurred operating losses of $3.1 million.
The Company's freight forwarding services involve all aspects of the transport
of customers' freight from the shippers' locations to the designated recipient,
including the preparation of shipping documents and the providing of handling,
packing and containerization services. The Company concentrates on cargo
shipments weighing more than 50 pounds and generally requiring second-day
delivery. The Company believes that this segment of the freight forwarding
market will experience continued growth. The Company's logistics services
provide inventory maintenance and shipping logistics for large manufacturing
companies, and consist of providing total transportation requirements for a
customer, including shipment in and out of warehouse, warehousing of customer
inventory, individual order organizing for shipment, and order packing and
shipping.
The Company has approximately 2,000 customers. Its principal customers
include large manufacturers and distributors of pharmaceuticals, computers and
other electronic and high-technology equipment, computer software, and, through
its Fashion Air division, the garment industry.
The Company neither owns nor operates any cargo aircraft or significant
trucking equipment, and relies on independent contractors for the movement of
cargo. In this manner, the Company is able to provide customized service
without the costs associated with equipment ownership, operation and
maintenance.
The Company's objective is to become a leading provider of second-day domestic
freight forwarding services in all of its markets. Since the Combination, the
Company has attracted additional experienced sales personnel and thereby
expanded its sales team by more than 30%. Its strategy is to maximize the
synergies created by the combination of its Amertranz and CAS businesses by (i)
exploiting cross-selling opportunities, and (ii) taking advantage of
underutilized operations infrastructure and purchased freight space. The
Company also intends to maximize its use of its subsidiaries' existing trucking
networks to minimize its reliance on more expensive air freight carriers.
The Company was incorporated in Delaware in January 1996 in connection with
the February 1996 Combination as the successor to operations commenced in 1985.
See "Historical Background". Unless otherwise expressly stated, all references
to the "Company" in this Prospectus include the Company, Amertranz, CAS and
their predecessors-in-operation, Integrity Logistics, Inc. and Amerford
Domestic, Inc., and the freight forwarding business of TIA, Inc. ("TIA"), and
its subsidiary, Caribbean Freight Systems, Inc. ("CFS"). The Company's
executive offices are located at 2001 Marcus Avenue, Lake Success, New York
11042, and its telephone number is (516) 326-9000.
<PAGE>
THE OFFERING
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<S> <C>
Securities Offered............. 1,750,000 shares of Common Stock and 1,750,000
IPO Warrants. Each IPO Warrant entitles the
holder thereof to purchase one share of Common
Stock for $____ during the four-year period
commencing one year from the date of this
Prospectus. The Company may redeem the IPO
Warrants at a price of $.01 per IPO Warrant at
any time after they become exercisable upon not
less than 30 days' prior written notice if the
last sale price of the Common Stock has been at
least $10.00 for each of the 20 consecutive
trading days ending on the third day prior to
the date on which the notice of redemption is
given. See "Description of Securities".
Common Stock Outstanding
Prior to the Offering ........ 3,565,589 shares
Common Stock to be
Outstanding After
the Offering ................. 5,315,589 shares
Warrants to be Outstanding
After the Offering ........... 3,237,500 Warrants (1)
Proposed Nasdaq SmallCap
Market Symbols ............... Common Stock: AMTZ
Warrants: AMTZW
________________________
</TABLE>
(1) Includes the IPO Warrants which constitute part of the Offering, warrants
issued to the Underwriter upon the exercise of the Underwriter's Purchase
Option and the Bridge Warrants.
USE OF PROCEEDS
The Company intends to apply the net proceeds of the Offering approximately as
follows: (i) $4,088,000 for the repayment of principal and accrued interest on
the promissory notes issued in connection with the Bridge Financings; (ii)
$2,000,000 in partial repayment of a promissory note made in connection with the
February 1996 Combination; (iii) $370,000 for the repayment of principal and
accrued interest on the promissory notes issued in connection with the Interim
Financing; (iv) $1,000,000 to repay overdue trade payables; and (v) $1,482,000
for working capital and general corporate purposes. See "Use of Proceeds".
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. See "Risk Factors".
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this Prospectus. This
information should be read in conjunction with such financial statements,
including the notes thereto. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
FREIGHT FORWARDING BUSINESS OF
TIA AND CFS (1) THE COMPANY
YEAR ENDED DECEMBER 31 PRO FORMA
----------------------------- 12 MONTHS ENDED
1993 1994 1995 DECEMBER 31, 1995 (2)
------- -------- -------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................... $32,671 $38,576 $38,211 $62,165
Cost of transportation...................... 24,232 30,254 30,300 47,597
Gross profit................................ 8,439 8,322 7,911 14,568
Selling, general & administrative expense... 6,505 4,634 4,513 17,231
Amortization of goodwill.................... 484
Operating income (loss)..................... 1,934 3,688 3,398 (3,147)
Net income (loss) before taxes.............. $ 869 $ 2,661 $ 2,366 $(4,157)
Pro forma net loss per share(3)(4).......... $ (1.25)
<CAPTION>
THE COMPANY
FEBRUARY 7, 1996
----------------
PRO FORMA
ACTUAL AS ADJUSTED(5)(6)
------- -----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets............................................................. $21,114 $27,762
Working capital (deficit)................................................ (5,340) 3,600
Short-term indebtedness.................................................. 11,100 11,100
Long-term indebtedness................................................... 12,367 10,367
Stockholders' equity (deficit)........................................... $(2,354) $ 6,294
</TABLE>
- ---------------------------
(1) The amounts for the Freight Forwarding Business of TIA and CFS represent
the historical operations associated with the freight forwarding business
of TIA and CFS contributed to the Company in the Combination. The Freight
Forwarding Business of TIA and CFS did not operate as a separate legal or
reporting entity during the periods presented. Although the Company did
not assume any of the historical debt obligations of TIA and CFS in the
Combination, the freight forwarding business constituted the majority of
the operations of TIA and CFS during the periods presented and accordingly
all of the interest expense incurred by TIA and CFS for such periods has
been allocated to the Freight Forwarding Business of TIA and CFS. The
operations data for the fiscal year ended December 31, 1993 and for the
first two months of 1994 include the effect of the operation by TIA of its
aviation assets which it sold in March 1994. Management believes that if
the operations data were restated to exclude the operation of these
aviation assets, costs of sales would be higher but would be more than
offset by a reduction in operating expenses.
(2) Gives effect to the Combination whereby Amertranz and CAS became wholly-
owned subsidiaries of the Company.
(3) Based on the number of shares of Common Stock outstanding prior to the
Offering.
(4) The interest expense for the Freight Forwarding Business of TIA and CFS
has been adjusted to the amount of interest on the Exchange Note.
(5) Gives effect to the conversion by TIA and CFS immediately prior to the
consummation of the Offering of $2,000,000 of long-term debt into the
Company's Class A 10% Cumulative Convertible Preferred Stock (the "Class A
Preferred Stock"). See "Certain Transactions" and "Description of
Securities-Preferred Stock".
(6) Gives effect to the sale of the Securities offered hereby and the
application of the net proceeds (estimated to be $8,940,000) therefrom.
Gives effect to a write-off of (i) approximately $373,210 of deferred
costs incurred in connection with the February Bridge Financing, and (ii)
approximately $2,939,063 of interest discount related to the securities
issued in the Interim Financing and the Bridge Financings.
----------------------------------
Unless otherwise indicated, the information in this Prospectus does not give
effect to the exercise of the Underwriter's over-allotment option, the
Underwriter's Purchase Option or the exercise of the IPO Warrants offered
hereby, and does not include: (i) 402,348 shares of Common Stock reserved for
issuance upon the exercise of options granted or to be granted under the
Company's stock option plan; (ii) 262,178 shares of Common Stock reserved for
issuance upon the exercise of other options; (iii) 1,312,500 shares of Common
Stock reserved for issuance upon exercise of the Bridge Warrants; and (iv)
shares of Common Stock that would be issued upon conversion of the Company's
Class A Preferred Stock. See "Management", "Description of Securities-Preferred
Stock" and "Description of Securities-Warrants".
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider, along with other matters
referred to herein, the following risk factors. No investor should participate
in the Offering unless such investor can afford a complete loss of his or her
investment.
SUBSTANTIAL LOSSES; ACCUMULATED DEFICIT. Although the Amertranz business
generated approximately $24.0 million in operating revenues in the 12 months
ended December 31, 1995, it incurred operating losses of approximately $6.1
million for such period, had an accumulated deficit of approximately $7.2
million as of December 31, 1995. While the CAS business was profitable during
the year ended December 31, 1995, on a combined pro forma basis the Company
incurred operating losses for such period of $3.1 million. As of February 7,
1996 (immediately following the Combination), the Company had, on a consolidated
basis, an accumulated deficit of $10 million. The Company will be unable to
achieve profitability unless it improves its operating results. There can be no
assurance that the Company will be able to increase revenues or achieve
profitability. Management anticipates that losses will continue for the
foreseeable future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations", "Business", and the Financial Statements
and Notes thereto.
WORKING CAPITAL DEFICIT; NEED FOR ADDITIONAL FUNDING. The Company's current
liabilities exceed its current assets. Although the CAS business has generated
positive cash flow from operations, the cash flow from the operations of the
Amertranz business has not been sufficient to finance trade payables, capital
equipment requirements and new office expansion and development. As a result,
Amertranz has engaged in interim borrowing from various sources. In addition to
the proceeds from the Offering and current borrowings, the Company may require
additional financing in the future. The Company currently has no commitments
from any prospective lenders with respect to any such financing. The terms of
the Company's current borrowings substantially limit the Company's flexibility
in obtaining additional financing. There can be no assurance that any
additional financing will be available to the Company upon acceptable terms, if
at all. The inability to obtain additional financing if and when needed, would
have a material adverse effect on the Company's operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources".
PLEDGE OF ASSETS. Substantially all of the Company's assets are pledged to
secure its indebtedness. If one or more of the Company's secured creditors
foreclose upon its security interest in the Company's assets, such action would
result in the inability of the Company to continue in business. TIA and CFS
have agreed that, upon consummation of the Offering, they will forbear any
foreclosure on their security interests in such assets for a period of 12 months
following the consummation of the Offering, except in certain circumstances.
The Company may also be required to obtain the consent of these creditors in
order to complete future financing, and there can be no assurance that these
consents would be forthcoming. See "Control of the Company by TIA and CFS;
Conflicts of Interest", below, "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources"
and "Certain Transactions".
"GOING CONCERN" QUALIFICATION. The report of Arthur Andersen LLP on the
Company's consolidated financial statements as of February 7, 1996, and
Amertranz's financial statements for its fiscal year ended June 30, 1995,
contains their qualification that states that Amertranz "has suffered a loss
from operations, has negative working capital, negative cash flows from
operations and negative stockholders' equity, that raise substantial doubt about
its ability to continue as a going concern." There can be no assurance that the
Company's future financial statements will not include a similar explanatory
paragraph if the Company is unable to raise sufficient funds to cover the cost
of its operations. The factors leading to, and the existence of, the
explanatory paragraph may adversely affect the Company's relationship with
customers and suppliers and its ability to generate revenue and obtain
financing. See Note 3 of Notes to the Company's Consolidated Financial
Statements and Note 3 of Notes to Amertranz Consolidated Financial Statements.
PROCEEDS TO BE USED TO SATISFY CERTAIN INDEBTEDNESS AND OVERDUE PAYABLES;
BROAD DISCRETION IN APPLICATION OF REMAINING PROCEEDS. Approximately
$6,458,000, or 72%, of the net proceeds received by the Company from the
Offering will be used to repay outstanding indebtedness, including interest
thereon. Additionally, $1,000,000, or 11%, of such proceeds will be used to
repay overdue trade payables. Accordingly, such funds will not be
6
<PAGE>
available for use in the Company's business. Furthermore, the Company will have
broad discretion as to the application of the remaining $1,482,000 allocated to
working capital and general corporate purposes. See "Use of Proceeds".
IMMEDIATE AND SUBSTANTIAL DILUTION. The Offering involves an immediate
dilution of $7.09 per share of Common Stock (approximately 118% of the per-share
offering price) between the pro forma net tangible book value per share of the
Common Stock immediately after the completion of the Offering and the offering
price per share. See "Dilution".
CONTROL OF THE COMPANY BY TIA AND CFS; CONFLICTS OF INTEREST. Immediately
following the Offering, TIA and CFS will collectively beneficially own
approximately 41% of the outstanding shares of the Company's Common Stock.
Furthermore, if TIA and CFS would convert the shares of the Company's Class A
Preferred Stock owned by them after the Offering, their collective beneficial
ownership of shares of Common Stock would increase to approximately 45%. In
addition, certain stockholders of the Company have given irrevocable proxies to
TIA and CFS to vote such stockholders' shares of Common Stock for up to five
years for the election of directors, and the proxy granted by one such
stockholder includes all matters submitted to stockholders for a vote. The
stock ownership of TIA and CFS, together with such proxies, allow TIA and CFS to
control in excess of 51% of the issued and outstanding shares of Common Stock.
As a result, TIA and CFS will be in a position to control the Company through
their combined ability to determine the outcome of elections of the Company's
directors and to prevail in matters submitted to a vote of shareholders. In
addition, TIA and CFS are significant secured creditors of the Company. The
terms of these loans require significant ongoing monthly payments to TIA and
CFS. There may be circumstances in which these different relationships create
material conflict to the detriment of other shareholders and to the Company.
See "Management", "Certain Transactions-Conflicts of Interest", "Principal
Stockholders" and "Description of Securities-Preferred Stock".
ABSENCE OF COMBINED OPERATING HISTORY. The combination of the businesses of
Amertranz and CAS occurred in February 1996. There can be no assurance that
management will be able to integrate these businesses profitably or will be
successful in combining and implementing the Company's operating or growth
strategies. Failure to properly integrate these businesses and to implement the
Company's strategies could have a material adverse effect on the Company's
operating results. See "Business".
DEPENDENCE ON TIMELY PAYMENTS BY CUSTOMERS. The Company depends on being paid
by its customers when such payments are due. However, the Company is not able
to ensure timely payment of its accounts receivable. In the past, some of the
Company's customers have delayed payment beyond the date when payment is due,
which has had an adverse effect on the Company's operating results. There can
be no assurance that customers will not delay payments in the future, which
would have a material adverse affect on the Company's operating results. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
DELAY IN PAYMENT OF TRADE CREDITORS. In order to manage its working capital
resources, Amertranz has in the past and is currently paying many of its trade
creditors and service providers at rates slower than provided in their
respective invoices or agreements. While the Offering is intended to generate
working capital, the Company still may be required to delay payments to trade
creditors in the future. The Company's failure to pay these trade creditors in
a timely fashion has in the past adversely affected and in the future could
adversely affect, its relationships with these trade creditors or result in a
default under its agreements with such trade creditors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Overview".
COMPETITION. The Company competes with a large number of firms, many of which
have facilities and financial resources far greater than the Company.
Competition within the freight industry is intense. In the freight forwarding
industry, the Company competes with a large and diverse group of national
freight forwarding concerns, commercial air and ocean carriers and a large
number of locally established companies in geographic areas where the Company
does business or intends to do business in the future. Insofar as inter-city
trucking is a portion of the Company's method of freight transport, the Company
competes with a large number of long-haul, medium-haul, truckload and less than
truckload carriers, and railroads. While the Company does not consider itself
to be competing with traditional small package delivery services such as
Federal Express Corporation, United Parcel Service of America, Inc., Airborne
Freight Corporation and DHL Worldwide Express, Inc., in the event that any of
these established
7
<PAGE>
businesses, with their goodwill, name, resources and trade recognition, decide
to expand into the heavy freight business, such circumstances could have a
material adverse effect upon the business of the Company. See "Business-
Competition".
EXPANSION OF BUSINESS. The Company intends to continue its program of
business expansion after completion of the Offering. There can be no assurance
that its financial condition will be sufficient to support the funding needs of
an expansion program, that acquisitions will be successfully consummated or will
enhance profitability, or that any expansion opportunities will be available
upon reasonable terms. See "Business-Company Strategy".
DEPENDENCE ON KEY PERSONNEL. The Company believes that its future success
will be highly dependent upon its ability to attract and retain skilled
managers, salespersons, and other personnel. The inability to attract and
retain such managers and personnel could have a material adverse effect on the
Company's operating results. In addition, the Company believes that its success
will depend to a significant extent on the efforts and abilities of its senior
management, in particular those of Stuart Hettleman, President of the Company,
and Richard A. Faieta, Executive Vice President of the Company. Although the
Company has entered into a three-year employment agreement with each of Messrs.
Hettleman and Faieta, the loss of the services of either Mr. Hettleman or Mr.
Faieta could have a material adverse effect on the Company's operating results.
See "Business-Company Strategy" and "Management-Executive Compensation."
POTENTIAL REDUCTION OF BUSINESS IN PUERTO RICO. There are significant United
States income tax benefits available to United States mainland companies
engaging in business in Puerto Rico. The CAS business historically has derived
substantial operating revenues from such companies, and, therefore, the
profitability of the Company's CAS business is largely dependent on such
customers. Congress reduced these benefits in 1993, and in recent budget
proposals both Congress and the Clinton Administration have proposed further
reduction of these tax benefits. In the event that there is any modification to
the tax benefits available to United States companies doing business in Puerto
Rico, it could result in those companies cutting back on the business which they
had been doing in Puerto Rico, which would have a material adverse effect upon
the Company's operating results.
DEPENDENCE ON CARRIERS; INABILITY TO CONTROL TRANSPORTATION FACILITIES. The
Company does not own or operate any trucks, nor does it own or operate any
aircraft (although it will have certain exclusive rights to the use of an L-1011
aircraft in connection with its CAS business until March 1998) for the movement
of either domestic or international freight. The Company does not have any
present or anticipated future plans to acquire, by lease or otherwise, or own or
operate any freight transportation equipment. The Company's ability to service
its customers depends on the availability of space on air passenger and cargo
airlines and trucking carriers. The quality and timeliness of the Company's
freight forwarding services will be dependent upon the services of these
independent contractors, over which the Company has no control. Shortages of
freight space are most likely to develop around holidays and on routes upon
which traffic is especially heavy. Furthermore, the Company will be competing
with others for the availability and utilization of freight space. In addition,
available air cargo space on passenger airlines could be reduced as a result of
changes in the types of aircraft or decreases in the number of passenger
airlines serving particular routes at particular times, which could occur as a
result of economic conditions and other factors beyond the control of the
Company. Although the Company does not believe that a lack of freight space has
had a significant impact on its ability to book space to date, significant
shortages of suitable space and associated increases in rates charged by
carriers could have a material adverse affect on the Company's future operating
results. See "Business-Company Operations".
VULNERABILITY TO ECONOMIC CONDITIONS. The Company's future operating results
are dependent upon the economic environments in which it operates. Demand for
the Company's services could be adversely affected by economic conditions in the
industries of the Company's customers. A number of the principal customers of
the Company's Amertranz business are in the fashion, personal computer and
electronics industries. The Company anticipates that CAS will continue to
obtain substantial business from the pharmaceutical industry. Adverse
conditions in any of these industries or loss of the major customers in such
industries could have a material adverse impact upon the Company. The Company
expects the demand for its services (and consequently results of operations) to
continue to be sensitive to domestic and, increasingly, global economic
conditions and other factors beyond its control. In addition, the transport of
freight, both domestically and internationally, is highly competitive and price
sensitive. Changes in the volume of freight transported, shippers preferences
as to the timing of deliveries
8
<PAGE>
as a means to control shipping costs, economic and political conditions, both in
the United States and abroad, work stoppages, United States and foreign laws
relating to tariffs, trade restrictions, foreign investments and taxation may
all have significant impact on the overall business of the Company, its growth
and profitability. See "Business".
LITIGATION. Amertranz has been named as a defendant in a lawsuit initiated by
the trustee in bankruptcy of a company with which Amertranz engaged in
discussions concerning a prospective business combination during early 1994.
The complaint seeks damages in excess of $11 million for various alleged causes
of action. In February 1996, the plaintiff in this action offered to settle the
litigation for $125,000, which offer was rejected by the Company. The Company's
bankruptcy litigation counsel has filed a motion to dismiss the complaint in its
entirety. Management believes that the lawsuit is substantially without merit
and that the probability of any material loss is extremely small. Nevertheless,
the Company will be obligated to expend funds and management time and attention
which are needed elsewhere but which must be diverted to finance legal costs and
provide information requested to conduct a vigorous defense. Additionally,
there can be no assurance that either the cost of defense or the ultimate
outcome of the lawsuit will not result in substantial financial cost to the
Company which will have a material adverse effect on the Company's operating
results. See "Business-Legal Proceedings".
DIVIDENDS UNLIKELY. The Company has never declared or paid dividends on its
Common Stock and does not intend to pay dividends in the foreseeable future.
The payment of dividends in the future will be at the discretion of the Board of
Directors. See "Dividend Policy".
REGULATORY COMPLIANCE. The Company's freight forwarding business as an
indirect air cargo carrier is subject to regulation by the United States
Department of Transportation (DOT) under the Federal Aviation Act. However, air
freight forwarders (including the Company) are exempted from most of such Act's
requirements by the Economic Aviation Regulations promulgated thereunder. The
Company's foreign air freight forwarding operations are subject to regulation by
the regulatory authorities of the respective foreign jurisdictions. The air
freight forwarding industry is subject to regulatory and legislative changes
which can affect the economics of the industry by requiring changes in operating
practices or influencing the demand for, and the costs of providing, services to
customers. The Company does not believe that costs of regulatory compliance
have had a material adverse impact on its operations to date. However, failure
of the Company to comply with any applicable regulations could result in
substantial fines or revocation of the Company's operating permits. There can
be no assurance that the adoption of future regulations would not have a
material adverse effect on the Company's business. See "Business-Regulation".
NO PRIOR MARKET; POTENTIAL LIMITED TRADING MARKET; POSSIBLE VOLATILITY OF
STOCK PRICE. There has been no prior market for the Common Stock or IPO
Warrants. The Common Stock and IPO Warrants have been approved for trading on
the Nasdaq SmallCap Market although there can be no assurance that an active
trading market in the Company's securities will develop or be maintained. To
continue to be listed on Nasdaq after the Offering, the Company must satisfy
certain maintenance criteria. The public offering prices of the Securities and
the exercise price and other terms of the IPO Warrants being offered hereby were
established by negotiation between the Company and the Underwriter and may not
be indicative of prices that will prevail in the trading market. In the absence
of an active trading market, purchasers of the Common Stock or IPO Warrants may
experience substantial difficulty in selling their securities. The trading
prices of the Common Stock and IPO Warrants are expected to be subject to
significant fluctuations in response to variations in quarterly operating
results, changes in analysts' earnings estimates, announcements of technological
innovations by the Company or its competitors, general conditions in the
forwarding industry and other factors. In addition, the stock market is subject
to price and volume fluctuations that affect the market prices for companies and
that are often unrelated to operating performance. See "Distribution".
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the IPO Warrants only if there is then a current prospectus relating
to such shares of Common Stock and only if such shares of Common Stock are
qualified for sale or exempt from qualification under applicable state
securities laws of the jurisdictions in which the various holders of the IPO
Warrants reside. The Company has undertaken and intends to file and keep
current a prospectus which will permit the purchase and sale of the shares of
Common Stock underlying the IPO Warrants, but there can be no assurance that the
Company will be able to do so. Although the Company intends to seek to qualify
for sale the shares of Common Stock underlying the IPO Warrants in those states
in which the securities are to be offered, no assurance can be given that such
qualification will occur. The IPO Warrants may be deprived of any value and the
market
9
<PAGE>
for the IPO Warrants may be limited if a current prospectus covering the shares
of Common Stock issuable upon exercise of the IPO Warrants is not kept effective
or if such shares of Common Stock are not qualified or exempt from qualification
in the jurisdictions in which the holders of the IPO Warrants then reside. See
"Description of Securities-Warrants".
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF IPO WARRANTS. The IPO Warrants may
be redeemed by the Company at any time after the IPO Warrants become exercisable
at a redemption price of $.01 per Warrant upon not less than 30 days' prior
written notice if the last sale price of the Common Stock has been at least
$10.00 per share for each of the 20 consecutive trading days during a period
ending on the third trading day prior to the date of the notice of redemption.
Notice of redemption of the IPO Warrants could force the holders to exercise the
IPO Warrants and pay the exercise price at a time when it may be disadvantageous
for them to do so, to sell the IPO Warrants at the current market price when
they might otherwise wish to hold the IPO Warrants, or to accept the redemption
price which would be substantially less than the market value of the IPO
Warrants at the time of redemption. See "Description of Securities-Warrants".
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. As of the date of this
Prospectus, there are outstanding stock options to purchase an aggregate of
262,178 shares of Common Stock at per share exercise prices ranging from $.16 to
$1.17. The Company also has outstanding Bridge Warrants to purchase 1,312,500
shares of Common Stock, at an exercise price equal to the exercise price of the
IPO Warrants. The shares of Common Stock underlying the Bridge Warrants are
being registered under the Registration Statement of which this Prospectus forms
a part. The holders thereof have agreed not to sell the Bridge Warrants or the
shares of Common Stock underlying such warrants until one year after the date of
this Prospectus without the Underwriter's consent. Furthermore, outstanding
shares of the Company's Class A Preferred Stock may be converted into shares of
Common Stock at any time. The exercise of such outstanding stock options, the
Bridge Warrants, the Underwriter's Purchase Option (and the Warrants included
therein) and shares of Preferred Stock will dilute the percentage ownership of
the Company's stockholders, and any sales in the public market of shares of
Common Stock underlying such stock options, Bridge Warrants, the Underwriter's
Purchase Option (and the Warrants included therein) and shares of Preferred
Stock may adversely affect prevailing market prices for the Common Stock.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of such outstanding
securities can be expected to exercise their respective rights therein at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company than those provided in such stock
options, warrants and shares of Preferred Stock. In addition, the Company has
granted certain demand and piggyback registration rights to the Underwriter with
respect to the securities issuable upon exercise of the Underwriter's Purchase
Option, and to the holders of the Company's Class A Preferred Stock. See
"Management-Stock Option Plan" and "Other Stock Options", "Certain
Transactions", "Description of Securities" and "Selling Securityholders and Plan
of Distribution".
SHARES ELIGIBLE FOR FUTURE SALE. Sales of the Company's Common Stock in the
public market after the Offering could adversely affect the market price of the
Common Stock or the IPO Warrants. See "Shares Eligible for Future Sale".
LIMITED LIABILITY OF DIRECTORS. The Company's Articles of Incorporation limit
the liability of directors to the maximum extent permitted by Delaware law. See
"Description of Securities-Indemnification of Officers and Directors".
10
<PAGE>
DILUTION
The difference between the initial public offering price per share of Common
Stock and the pro forma net tangible book value per share of Common Stock after
the Offering constitutes the dilution per share of Common Stock to investors in
the Offering. Net tangible book value per share is determined by dividing the
net tangible book value (total tangible assets less total liabilities) by the
number of outstanding shares of Common Stock.
At February 7, 1996, after giving effect to the conversion of $2,000,000 of
long-term debt into the Company's Class A Preferred Stock (see "Certain
Transactions"), the Company had a consolidated negative net tangible book value
of approximately $12.4 million, or approximately $3.49 per share of Common Stock
(based on 3,565,589 shares of Common Stock outstanding). After giving effect to
the sale of Securities offered hereby (less underwriting discounts and estimated
expenses of the Offering), the negative net tangible book value at that date
would have been approximately $5.8 million, or approximately $1.09 per share.
This represents an immediate increase in net tangible book value of $2.40 per
share to the existing stockholders, and an immediate dilution of $7.09 per share
to investors in the Offering.
The following table illustrates the per share dilution, without giving effect
to results of operations of the Company subsequent to February 7, 1996:
<TABLE>
<S> <C> <C>
Public offering price of the Common Stock................................ $ 6.00
Consolidated negative net tangible book value before the Offering... $(3.49)
Increase attributable to new investors in the Offering.............. 2.40
------
Consolidated negative Net tangible book value after the Offering......... (1.09)
------
Dilution to investors in the Offering.................................... $ 7.09
======
</TABLE>
The following table summarizes the number and percentage of shares of Common
Stock purchased from the Company, the amount and percentage of consideration
paid and the average price per share paid by the existing stockholders and by
new investors pursuant to the Offering:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
-------------------- ----------------------
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 3,565,589 67.1% $ 8,666,465 45.2% $2.43
New Investors........... 1,750,000 32.9 10,500,000 54.8 6.00
--------- ----- ----------- -----
Total............... 5,315,589 100.0% $19,166,465 100.0%
========= ===== =========== =====
</TABLE>
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Securities offered hereby
are estimated to be approximately $8,940,000 (approximately $10,326,000 if the
Underwriter's over-allotment option is exercised in full). The Company intends
to apply the net proceeds approximately as follows:
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS AMOUNT PERCENT
----------------------- ---------- -------
<S> <C> <C>
Repayment of the February Bridge Notes(1)........... $2,873,000 32%
Repayment of the May Bridge Notes(2)................ $1,215,000 14
Partial repayment of the Exchange Note(3)........... 2,000,000 22
Repayment of the Interim Notes(4)................... 370,000 4
Payment of Overdue Trade Payables(5)................ 1,000,000 11
Working Capital and General Corporate Purposes(6)... 1,482,000 17
---------- ---
Total.......................................... $8,940,000 100%
========== ===
</TABLE>
- ------------------
(1) The February Bridge Notes were issued in connection with the February Bridge
Financing consummated in February 1996, in which the Company also issued
416,250 shares of Common Stock and 832,500 Bridge Warrants. The February
Bridge Notes consist of 85 notes in the aggregate principal amount of $2.775
million, bearing interest at the rate of 10% per annum through April 30,
1996 and 15% per annum thereafter, and are payable upon the consummation of
the Offering. If the Offering is consummated on or about May 31, 1996, the
interest to be paid on the February Bridge Notes will be approximately
$98,000. The net proceeds from the sale of the February Bridge Notes have
been used primarily for working capital purposes.
(2) The May Bridge Notes were issued in connection with the May Bridge Financing
consummated in May 1996, in which the Company also issued 240,000 shares of
Common Stock and 480,000 Bridge Warrants. The May Bridge Notes consist of
___ notes in the aggregate principal amount of $1.2 million, bearing
interest at the rate of 15% per annum, and are payable upon the consummation
of the Offering. If the Offering is consummated on or about May 31, 1996,
the interest to be paid on the May Bridge Notes will be approximately
$15,000. The net proceeds from the sale of the May Bridge Notes have been
used for working capital purposes.
(3) The Exchange Note was issued to TIA and CFS in connection with the February
1996 Combination, in which the Company also issued to TIA and CFS an
aggregate of 2,100,000 shares of Common Stock. The Exchange Note is in the
original principal amount of $10,000,000, and bears interest at the rate of
8.0% per annum. Immediately prior to the consummation of the Offering, TIA
and CFS exchanged $2,000,000 principal amount of the Exchange Note for
200,000 shares of the Company's Class A Preferred Stock. The terms of the
Exchange Note provide that $2,000,000 of amount due under the Exchange Note
are payable from the proceeds of the Offering, and the balance as follows:
five consecutive monthly payments of principal and interest in the amount of
$80,000 each, commencing March 1, 1996, and, thereafter, monthly payments of
principal and interest in the amount of $166,667 each until the Exchange
Note has been paid in full. TIA and CFS have agreed that, upon consummation
of the Offering and the payment of the $2,000,000 from the proceeds of the
Offering, the balance of payments on the Exchange Note will be deferred as
described later in this Prospectus. See "Certain Transactions" and
"Description of Securities-Preferred Stock".
(4) The Interim Notes were issued in connection with the Interim Financing
consummated between November 1995 and January 1996, in which the Company
also issued 67,606 shares of Common Stock (as adjusted as of February 7,
1996). The Interim Notes consist of four notes in the aggregate principal
amount of $350,000, bearing interest at the rate of 12% per annum, and are
payable upon the consummation of the Offering. If the Offering is
consummated on or about May 31, 1996, the interest to be paid on the Interim
Notes will be approximately $20,000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and
Capital Resources" and "Certain Transactions".
(5) Overdue trade payables are owed to, among others, the Company's freight
carriage vendors. See "Risk Factors-Delay in Payment of Trade Creditors"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations-Overview".
(6) Working capital and general corporate purposes may include, among other
things, the expansion of the Company's office network by the opening of new
offices or the acquisition of smaller freight forwarders, and enhancement of
the Company's management information systems. The remaining portion of the
net proceeds allocated to working capital will be used by the Company to
fund operations as required. The specific uses of the net proceeds
allocated to working capital will be determined from time to time based upon
prevailing industry and market conditions and the future needs of the
Company.
12
<PAGE>
If the Underwriter exercises the over-allotment option in full, the Company
will realize additional net proceeds of $1,188,000 which also will be added
to the Company's working capital. See "Business-Company Strategy".
The Company anticipates, based on current plans and assumptions relating to
its operations, that the proceeds of the Offering, together with existing
resources and cash generated from operations, should be sufficient to satisfy
the Company's contemplated cash requirements for at least 12 months after
completion of the Offering. After that time the Company anticipates that cash
generated from operations will be sufficient to meet its capital requirements,
although there can be no assurance that this will be the case. Proceeds not
immediately required for the purposes described above will be invested in United
States government securities, short-term certificates of deposit, money market
funds or other short-term interest-bearing government obligations.
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
February 7, 1996, and (ii) as adjusted to give effect to the sale of the
Securities offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds".
<TABLE>
<CAPTION>
AS OF FEBRUARY 7, 1996
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)(2)
--------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt.................................................... $ 11,100 $ 11,100
======== ========
Long-term debt, less current portion............................... 12,367 10,367
Stockholders' equity (deficit):
Class A Preferred Stock, $10.00 par value;
500,000 shares authorized pro forma; 200,000 shares issued
and outstanding pro forma, as adjusted..................... -- 2,000
Preferred Stock, no par value; 2,000,000 shares authorized pro
forma; none issued and outstanding.......................... -- --
Common Stock, $.01 par value; 15,000,000 shares authorized;
3,325,589 shares issued and outstanding actual; 5,315,589
shares issued and outstanding, pro forma, as adjusted..... 33 53
Additional paid-in capital.................................... 7,613 17,553
Accumulated deficit .......................................... (10,000) (13,312)
-------- --------
Total stockholders' equity (deficit)..................... (2,354) 6,294
-------- --------
Total capitalization........................................... $ 10,013 $ 16,661
======== ========
</TABLE>
- -----------
(1) Gives effect to the conversion of $2,000,000 of long-term debt owed to TIA
and CFS into the Company's Class A Preferred Stock. See "Certain
Transactions" and "Description of Securities-Preferred Stock".
(2) The application of the estimated net proceeds as adjusted, figure gives
effect to a write-off of (i) approximately $373,210 of deferred costs
incurred in connection with the February Bridge Financing, and (ii)
approximately $2,939,063 of interest discount related to the securities
issued in the Interim Financing and the Bridge Financings.
DIVIDEND POLICY
The Company expects to retain all available earnings generated by its
operations for the development and growth of its business and it does not intend
to pay cash dividends on its Common Stock in the foreseeable future. Any future
declaration of cash dividends will be at the discretion of the Board of
Directors and will depend upon the earnings, capital requirements and financial
position of the Company, general economic conditions and other pertinent
factors.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
As a result of the February 1996 Combination, Amertranz and CAS became wholly-
owned subsidiaries of the Company. The statement of operations data presented
below reflect the historical operations of the air freight business of TIA and
CFS and the pro forma statement of operations data reflect the combined results
of the freight forwarding business of TIA and CFS and the Amertranz business as
if the Combination had been effective as of January 1, 1995, without giving
effect to the Offering. The pro forma data for 1995 represents a period when
TIA and CFS and Amertranz were not under common control or management.
Consequently, the pro forma data presented below may not be comparable to or
indicative of results to be achieved by the Company.
The following selected statement of operations data for each of the years
ended December 31, 1993, 1994 and 1995 have been derived from the statements of
operations of The Freight Forwarding Business of TIA and CFS that have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected statement of operations data for the years ended December 31, 1991 and
1992 are unaudited, and in the opinion of management, include all adjustments
necessary for a fair presentation of such data. The selected balance sheet data
as at February 7, 1996 is derived from a balance sheet of the Company that has
been audited by Arthur Andersen LLP, independent public accountants. Historical
balance sheet data for TIA and CFS has not been included herein, since only
assets of insignificant historical recorded value were transferred to the
Company. The selected financial data should be read in conjunction with the
balance sheet of the Company, the financial statements of The Freight Forwarding
Business of TIA and CFS, the financial statements of Amertranz, and related
notes thereto, the pro forma income statement and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
THE COMPANY
PRO FORMA
FREIGHT FORWARDING BUSINESS OF TIA AND CFS 12 MONTHS
YEARS ENDED DECEMBER 31(1) ENDED
------------------------------------------------------------- DECEMBER 31,
1991 1992 1993 1994 1995 1995(2)
------- ------- ------- ------- ------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................... $32,076 $29,201 $32,671 $38,576 $38,211 $62,165
Cost of transportation...................... 26,353 24,103 24,232 30,254 30,300 47,597
------- ------- ------- ------- ------- -------
Gross profit................................ 5,723 5,098 8,439 8,322 7,911 14,568
Selling, general & administrative expense... 8,726 6,354 6,505 4,634 4,513 17,231
Amortization of goodwill.................... - - - - - 484
------- ------- ------- ------- ------- -------
Operating income (loss)..................... (3,003) (1,256) 1,934 3,688 3,398 (3,147)
Net income (loss) before taxes.............. $(3,799) $(2,149) $ 869 $ 2,661 $ 2,366 $(4,157)
Pro forma net loss per share (3)(4)......... $ (1.25)
OPERATING DATA:
Gross margin................................ 17.8% 17.5% 25.8% 21.6% 20.7% 23.4%
Operating margin............................ (9.4%) (4.3%) 5.9% 9.6% 8.9% (5.1%)
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
FEBRUARY 7, 1996
----------------
PRO FORMA
ACTUAL AS ADJUSTED(5)(6)
------- -----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets................................ $21,114 $27,762
Working capital (deficit)................... (5,340) 3,600
Short-term indebtedness..................... 11,100 11,100
Long-term indebtedness...................... 12,367 10,367
Stockholders' equity (deficit).............. $(2,354) $ 6,294
</TABLE>
- ----------------------
(1) The amounts for the Freight Forwarding Business of TIA and CFS represent the
historical operations associated with the freight forwarding business of TIA
and CFS contributed to the Company in the Combination. The Freight
Forwarding Business of TIA and CFS did not operate as a separate legal or
reporting entity during the periods presented. Although the Company did not
assume any of the historical debt obligations of TIA and CFS in the
Combination, the freight forwarding business constituted the majority of the
operations of TIA and CFS during the periods presented and accordingly all
of the interest expense incurred by TIA and CFS for such periods has been
allocated to the Freight Forwarding Business of TIA and CFS. The operations
data for the fiscal year ended December 31, 1993 and for the first two
months of 1994 include the effect of the operation by TIA of its aviation
assets which it sold in March 1994. Management believes that if the
operations data were restated to exclude the operation of these aviation
assets, costs of sales would be higher but would be more than offset by a
reduction in operating expenses.
(2) Gives effect to the Combination whereby Amertranz and CAS became wholly-
owned subsidiaries of the Company.
(3) Based on the number of shares of Common Stock outstanding prior to the
Offering.
(4) The interest expense for the Freight Forwarding Business of TIA and CFS has
been adjusted to the amount of interest on the Exchange Note.
(5) Gives effect to the conversion of $2,000,000 of long-term debt owed to TIA
and CFS into the Company's Class A Preferred Stock. See "Certain
Transactions" and "Description of Securities-Preferred Stock".
(6) Gives effect to the sale of the Securities offered hereby and the
application of the net proceeds (estimated to be $8,940,000) therefrom.
Gives effect to a write-off of (i) approximately $373,210 of deferred costs
incurred in connection with the February Bridge Financing, and (ii)
approximately $2,939,063 of interest discount related to the securities
issued in the Interim Financing and the Bridge Financings.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in January 1996 to combine the freight forwarding
business of TIA and CFS and Amertranz. The freight forwarding business of TIA
and CFS generated operating revenues of $38.6 million and $38.2 million and had
net income before taxes of $2.7 million and $2.4 million for the years ended
December 31, 1994 and 1995, respectively. For the year ended June 30, 1994, the
Company's Amertranz business generated operating revenues of $11.1 million and
had net income before taxes of $245,000, and for the year ended June 30, 1995,
generated revenues of $25.0 million and incurred net losses before taxes of $2.8
million. For the year ended December 31, 1995 on a pro forma consolidated
basis, the Company generated revenues of $62.2 million and incurred an operating
loss of $3.1 million, such loss resulting solely from the operation of the
Amertranz business.
In February 1994, as a result of the settlement of litigation, Amertranz
obtained a 20-office domestic freight forwarding network. Management believes
that the losses in the Amertranz business were caused primarily from this sudden
expansion without proper planning and without sufficient capital or financing.
During the period from February 1994 through December 1995, despite limited
working capital, Amertranz established a needed operations infrastructure for
its new domestic freight forwarding network, including data processing,
communications, customer service and accounting, and expanded the network with
the addition of several offices. Additionally, in June 1995 Amertranz
established a major new division for international freight forwarding which
further diluted Amertranz's available resources. Amertranz's initial emphasis
was on the development of an operations infrastructure, rather than on hiring
sales and marketing personnel. See "Historical Background".
Due to ensuing cash flow shortages, sufficient sales and marketing personnel
could not be hired and therefore operating revenues did not increase
sufficiently to attain profitability. Furthermore, prior to the closing of the
February Bridge Financing, cash shortages in the Amertranz business caused
delays in payments to Amertranz's trade creditors and transportation service
providers which affected Amertranz's ability to ship freight in a timely manner.
The sudden expansion of the Amertranz business resulted in an existing
domestic operations and administrative infrastructure that can support a much
higher revenue base. Since the closing of the Combination and the February
Bridge Financing, management has attracted and hired additional experienced
sales personnel for the domestic freight forwarding operation and thereby
increased its sales team by more than 30%. In addition, management has begun
maximizing the synergies created by the combination of its Amertranz and CAS
businesses by (i) exploiting cross-selling opportunities, and (ii) taking
advantage of underutilized operations infrastructure and purchased freight
space. The Company has analyzed its operations, decided to maximize use of its
existing domestic operations which can support a higher revenue base with slight
additional cost to achieve profitability, and reduced its international
operations.
RESULTS OF OPERATIONS
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
The following discussion and analysis relates to the freight forwarding
business of TIA and CFS that was transferred to the Company as part of the
February 1996 Combination. The analysis focuses only on the historical results
of operations of the freight forwarding business of TIA and CFS for the years
ended December 31, 1993, 1994 and 1995.
Years Ended December 31, 1994 and 1995
Operating Revenues. Operating revenues decreased 1.0% to $38.2 million in
1995 from $38.6 million in 1994. While TIA and CFS experienced volume increases
from most major customers, there were several major accounts that had
significant decreases in revenues in 1995 compared to 1994 revenues. Sales to
two major customers decreased by an aggregate of approximately $2.0 million in
1995 compared to 1994, which offset the gain in revenues by other accounts.
Furthermore, several major accounts had large volume increases in 1994 due to
unusual situations which
15
<PAGE>
did not recur in 1995. As an example, a major pharmaceutical firm instituted a
recall which necessitated substantial additional air freight needs over normal
business operations. Also, due to market conditions, several major retail
suppliers had to use air freight in substantially greater volume than those used
in normal market conditions. Operating revenues in 1995 show an annual
compounded growth rate of 8% per year for the two years of 1994 and 1995.
Cost of Transportation. Cost of transportation increased to 79.3% of 1995
operating revenues from 78.4% of 1994 operating revenues.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1995 decreased to 20.7%
from 21.6% of operating revenues in the comparable period of 1994.
Selling, General and Administrative Expense. Selling, general and
administrative expenses decreased slightly to 11.8% of operating revenues in the
year ended December 31, 1995 from 12.0% of operating revenues in the comparable
period in 1994.
Years Ended December 31, 1993 and 1994
Operating Revenues. Operating revenues increased 18.1% to $38.6 million in
1994 from $32.7 million in 1993. Most major customers had volume increases in
1994, including several major accounts that had unusually large volume increases
in 1994 due to non-recurring situations.
Cost of Transportation. Cost of transportation increased to 78.4% of 1994
operating revenues from 74.2% of 1993 operating revenues. This increase
occurred because TIA and CFS chartered a fully-staffed and maintained aircraft
during the last ten months of 1994, while TIA operated a leased aircraft during
1993. This increase is more then offset by the corresponding decrease in
selling, general and administrative expense.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the year ended December 31, 1994 decreased to 21.6%
from 25.8% of operating revenues for the comparable period in 1993.
Selling, General and Administrative Expense. Selling, general and
administrative expenses decreased to 12.0% of operating revenues in the year
ended December 31, 1994 from 19.9% of operating revenues in the comparable
period in 1993. This decrease resulted from the cessation of TIA's operation of
its leased aircraft and the elimination of the expenses associated therewith.
THE AMERTRANZ BUSINESS
In February 1994, Amertranz acquired the 20-office domestic air freight
forwarding business of another freight forwarder, and began issuing its own
domestic air waybills. Thereafter, substantially all sales revenues from
Amertranz's operations were recorded as revenue of Amertranz. Prior to that,
Amertranz acted as agent of such other freight forwarder, and recorded as
revenue only Amertranz's share of the gross profits derived from its shipments
(i.e., gross revenues less the costs associated with the pick-up and delivery of
Amertranz's customers' shipments). Therefore, Amertranz's operating revenues
and cost of transportation reported for the periods before and after February
1994 are not comparable. See "Historical Background".
The following selected financial data for each of the years ended December 31,
1993, 1994 and 1995 has been derived from audited income statements of Amertranz
included elsewhere in this Prospectus. The following selected financial data
for each of the six-month periods ended December 31, 1994 and 1995 have been
derived from unaudited income statements of Amertranz included elsewhere in this
Prospectus. The unaudited financial data, in the opinion of management, include
all adjustments necessary for a fair presentation of such data. The selected
financial data should be read in conjunction with the Financial Statements of
Amertranz, and related notes thereto.
16
<PAGE>
<TABLE>
<CAPTION>
AMERTRANZ
AMERTRANZ SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------- -----------------------
1993 1994 1995 1994 1995
------- ------- ------- ------- -------
UNAUDITED UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues.......................... $3,354 $11,122 $24,963 $14,049 $13,040
Cost of transportation...................... 620 6,445 17,514 9,735 9,518
------ ------- ------- ------- -------
Gross profit................................ 2,734 4,677 7,449 4,314 3,522
Selling, general & administrative expense... 2,723 4,857 10,298 5,132 7,552
------ ------- ------- ------- -------
Operating income (loss)..................... 11 (180) (2,849) (818) (4,030)
Other income (expense)...................... (5) 426 91 (166) (156)
Restructuring charge........................ (435)
Income before taxes......................... $ 6 $ 246 $(2,758) $ (984) $(4,621)
OPERATING DATA:
Gross margin................................ 81.5% 42.1% 29.8% 30.7% 27.0%
Operating margin............................ 0.3% (1.6%) (11.4%) (5.8%) (30.9%)
</TABLE>
The following discussion and analysis relates to Amertranz's results of
operation for the years ended June 30, 1993, 1994 and 1995.
Years Ended June 30, 1994 and 1995
Operating Revenues. Operating revenues increased by 124% to $25 million for
the year ended June 30, 1995 from $11.1 million in the year ended June 30, 1994.
This increase was primarily attributable to Amertranz's change in operations in
its domestic air freight forwarding activities in February 1994, as described
above.
Cost of Transportation. Cost of transportation increased to 70.2% of
operating revenues for the year ended June 30, 1995 from 57.9% of operating
revenues for the year ended June 30, 1994. This increase was primarily
attributable to Amertranz's change in operations in its domestic air freight
forwarding activities in February 1994, as described above.
Gross Profit. As a result of the change in domestic operations in February
1994 as described above, gross profit for the year ended June 30, 1995 increased
by 59.3% to $7.4 million from $4.7 million in the year ended June 30, 1994.
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased to $10.3 million or 41.3% of operating
revenues, in the year ended June 30, 1995 from $4.9 million or 43.7% of
operating revenues, in the year ended June 30, 1994. The increase in total
expense was attributable to Amertranz's change in its domestic air freight
forwarding operation described above, the resulting increase in the size of its
office network and the establishment of its independent accounting, data
processing, communications and administrative capabilities.
Years Ended June 30, 1993 and 1994
Operating Revenues. Operating revenues increased by 231.6% to $11.1 million
in the year ended June 30, 1994 from $3.4 million in the year ended June 30,
1993. This increase was attributable to Amertranz's acquisition of the domestic
air freight forwarding business for which it previously acted as agent in
February 1994, as described above.
Cost of Transportation. Cost of transportation increased to 57.9% of
operating revenues for the year ended June 30, 1994 from 18.5% for the year
ended June 30, 1993. This increase was primarily attributable to Amertranz's
change in operations in its domestic air freight forwarding activities in
February 1994, as described above.
Gross Profit. As a result of the change in domestic operations in February
1994 as described above, gross profit for the year ended June 30, 1994 increased
by 71.1% to $4.7 million from $2.7 million in the year ended June 30, 1993.
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<PAGE>
Selling, General and Administrative Expense. Selling, general and
administrative expenses increased in total expense to $4.9 million or 43.7% of
operating revenues in the year ended June 30, 1994 from $2.7 million, or 81.2%
of operating revenues, in the year ended June 30, 1993. The increase in total
amount and the decrease in the amount as a percentage of operating revenues were
attributable to Amertranz's change in its domestic air freight forwarding
operation described above, the resulting increase in the size of its office
network and the establishment of its independent accounting, data processing,
communications and administrative capabilities.
Six Months Ended December 31, 1994 and 1995
Operating Revenues. Operating revenues decreased by 7.2% to $13.0 million for
the six months ended December 31, 1995 from $14.0 million for the comparable
period of 1994. Domestic operating revenues decreased by 14.9% to $10.3 million
for the 1995 period from $12.1 million for the same period in 1994. Amertranz
began its independent international operations during the six-month period ended
December 31, 1995, and generated $2.8 million in international revenues for the
1995 period. Management believes that the start-up of Amertranz's international
division distracted Amertranz from its domestic efforts during the 1995 period.
Cost of Transportation. Cost of transportation increased to 73.0% for
revenues in the six months ended December 31, 1995 from 69.3% in 1994. This
change was primarily due to a major new account obtained by Amertranz in August
1995, as part of its logistics operation, which had lower profit margins than
its regular freight forwarding business.
Gross Profit. As a result of the factors described in the preceding
paragraphs, gross profit for the six months ended December 31,1995 decreased by
18.6% to $3.5 million from $4.3 million for the same period in 1994.
Selling, General & Administrative Expense. Selling, general and
administrative expenses increased to $7.5 million, or 57.9% of operating
revenues, in the six months ended December 31,1995 from $5.1 million, or 36.5%
of operating revenues, for the same period in 1994. This increase in total
amount and percentage of operating revenues was primarily due to the start up of
the international division in June 1995 which accounted for approximately $1.2
million of additional expense for the period.
LIQUIDITY AND CAPITAL RESOURCES
Amertranz's internally generated cash flow has not been sufficient to finance
trade receivables and business expansion, or to support operations. In
addition, Amertranz obtained external financing later than assumed in its
operating plans. As a result, Amertranz experienced severe working capital
shortfalls in the past, which restricted its ability to conduct its business as
anticipated. Amertranz's auditors have included an explanatory paragraph in
their audit opinion with respect to Amertranz's 1995 financial statements which
reflects substantial doubt about Amertranz's ability to continue as a going
concern due to its need to generate cash from operations and to obtain
additional financing. There can be no assurance that the future financial
statements of the Company (as the consolidation of the freight forwarding
businesses of CAS and Amertranz) will not include a similar explanatory
paragraph if the Company is unable to raise sufficient funds to cover the cost
of its operations. The factors leading to, and the existence of, the
explanatory paragraph may adversely affect the Company's relationship with
customers and suppliers, its ability to generate revenues and its ability to
obtain financing.
Amertranz has met its capital requirements to date primarily through the
private sales of $2.775 million of equity and debt securities in the February
Bridge Financing, private sales of $1.2 million of equity and debt securities in
the May Bridge Financing, private sales of $350,000 of equity and debt
securities in the Interim Financing, private sales of $1,379,110 of equity and
debt securities to insiders, borrowings of $800,000 from TIA and borrowings
under an accounts receivable financing facility (see below). In addition, CAS
may borrow up to $4,000,000 from TIA and CFS under a revolving credit facility
(see below). At April 30, 1996, the aggregate principal balance outstanding
under all such borrowings was approximately $10,323,000.
FIDELITY FACILITY. In March 1995, Amertranz entered into an accounts
receivable Purchase and Sale Agreement ("Fidelity Facility") with Fidelity
Funding of California, Inc. ("Fidelity"), as amended July 5, 1995, October 25,
1995, and February 7, 1996. The Fidelity Facility expires in March 1997. Under
the agreement, as amended, the Company
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<PAGE>
can borrow the lesser of $3.125 million or 75% of eligible accounts receivable.
Amertranz's borrowings under the Fidelity Facility are secured by a first lien
on all of Amertranz's assets and are guaranteed by the Company. At February 7,
1996, the Company had outstanding borrowings of approximately $1,698,000 under
the Fidelity Facility which represented the full amount available thereunder.
TIA LOAN. In October 1995, Amertranz obtained a $500,000 subordinated secured
loan from TIA, which was increased to $800,000 in January 1996 ("TIA Loan").
The TIA Loan bears interest at the rate of 12% per annum and is repayable in 12
equal, consecutive monthly payments of principal and interest commencing 30 days
after the closing of the Offering. However, TIA has agreed that, upon
consummation of the Offering, repayment of the TIA Loan will be deferred as
described later in this Prospectus. The TIA Loan is secured by a lien on all of
the assets of Amertranz subordinated only to the lien granted to Fidelity in
connection with the Fidelity Facility. See "Certain Transactions".
REVOLVER NOTE. As part of the Combination, TIA and CFS agreed to advance to
CAS, on a revolving loan basis, the net collections of the accounts receivable
of TIA and CFS as of February 7, 1996 and additional amounts in the discretion
of TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding at any
time, pursuant to the terms of a Revolving Credit Promissory Note ("Revolver
Note"). Funds advanced under the Revolver Note with respect to the TIA and CFS
accounts receivable do not bear interest prior to maturity. Discretionary
advances under the Revolver Note bear interest at the greater of (i) 1% per
month, or (ii) a fluctuating rate equal to the prime rate of interest as
published in The Wall Street Journal, plus 4%. Advances under the Revolver Note
may be used only for ordinary, current operating expenses of CAS unless TIA and
CFS consent to another use of such funds. The Revolver Note matures on July 6,
1996; however, TIA and CFS have agreed that, upon consummation of the Offering,
payment of the Revolver Note will be deferred as described later in this
Prospectus. All obligations under the Revolver Note are guaranteed by the
Company and Amertranz. All obligations under the Revolver Note and the
guarantees thereof are secured by a first priority lien on all of the issued and
outstanding shares of CAS, a first priority lien on all of the assets of the
Company and CAS, and a lien on the accounts receivable of Amertranz, subordinate
only to the first priority lien granted to Fidelity in connection with the
Fidelity Facility and the second position lien granted to TIA in connection with
the TIA Loan. As of March 31, 1996, the Company had outstanding borrowings of
approximately $3,484,000 under the Revolver Note. See "Certain Transactions".
EXCHANGE NOTE. In the Combination, TIA and CFS transferred their freight
forwarding business to the Company. In consideration of such transfer, the
Company issued to TIA and CFS the Exchange Note in the original principal amount
of $10,000,000, which bears interest at the rate of 8% per annum, and an
aggregate of 2,100,000 shares of Common Stock. The Exchange Note is payable in
five consecutive monthly payments of principal and interest in the amount of
$80,000 each, commencing March 1, 1996, and, thereafter, monthly payments of
principal and interest in the amount of $166,667 each until the Exchange Note
has been paid in full. Of the proceeds of the Offering, $2,000,000 will be used
to repay a portion of the Exchange Note. Immediately prior to the consummation
of the Offering, TIA and CFS exchanged $2,000,000 principal amount of the
Exchange Note for 200,000 shares of the Company's Class A Preferred Stock. TIA
and CFS have agreed that, upon consummation of the Offering and the payment of
the $2,000,000 from the proceeds of the Offering, the balance of payments on the
Exchange Note will be deferred as described later in this Prospectus. See
"Certain Transactions" and "Description of Securities-Preferred Stock".
INSIDER LOANS. Between June 1995 and January 1996, Amertranz borrowed
$1,379,110 in net aggregate principal amount from persons affiliated with
Amertranz, and issued (i) $1,096,610 in net aggregate principal amount of
promissory notes which bear interest at the rate of 7% per annum, due June 30,
1996, and (ii) $282,500 in aggregate principal amount of promissory notes with
interest at the rate of 9 3/4% per annum, due August 15, 1996. In addition,
certain of these lenders received an aggregate of 3,135,000 options to purchase
shares of Amertranz common stock, some of which options were exercised prior to
the Combination at $.50 per share. As part of the transactions under the
Exchange Agreement, the holders of all of these promissory notes assigned to the
Company their notes and the shares of Amertranz common stock which were issued
upon the exercise of such options, in exchange for an aggregate of 296,669
shares of Common Stock, and the holders of unexercised Amertranz options
exchanged such options for an aggregate of 390,413 options to purchase shares of
the Company's Common Stock. See "Certain Transactions" and "Principal
Stockholders".
19
<PAGE>
INTERIM FINANCING. Between November 1995 and January 1996, Amertranz obtained
the Interim Financing and issued $350,000 in aggregate principal amount of
promissory notes ("Interim Notes") and the Interim Financing Shares. Repayment
of the principal amount of the Interim Notes, together with interest at the rate
of 12% per annum, is due upon the earlier to occur of (i) the closing of the
Offering, (ii) February 7, 1998, or (iii) a sale or merger of the Company. All
amounts due under the Interim Notes will be repaid from the proceeds of the
Offering. See "Use of Proceeds" and "Selling Securityholders and Plan of
Distribution".
BRIDGE FINANCINGS. In February 1996, in connection with the February Bridge
Financing, the Company issued an aggregate of $2.775 million in principal amount
of its secured promissory notes ("February Bridge Notes"), 416,250 Bridge
Shares, and Bridge Warrants to purchase an aggregate of 832,500 shares of the
Company's Common Stock at an exercise price of $5.00 per share. The February
Bridge Notes bear interest at a rate of 10% per annum through April 30, 1996,
and thereafter at a rate of 15% per annum. In May 1996, in connection with the
May Bridge Financing, the Company issued an aggregate of $1.2 million in
principal amount of its secured promissory notes ("May Bridge Notes"), 240,000
Bridge Shares, and Bridge Warrants to purchase an aggregate of 480,000 shares of
the Company's Common Stock at an exercise price of $5.00 per share. The May
Bridge Notes bear interest at a rate of 15% per annum.
Upon consummation of the Offering, the terms of the Bridge Warrants issued in
the Bridge Financings will be identical to the terms of the IPO Warrants being
issued in the Offering. The Bridge Warrants are being registered by the Company
on behalf of the Bridge Holders in the Registration Statement of which this
Prospectus forms a part. All amounts due under the Bridge Notes will be repaid
out of the proceeds of the Offering. The Underwriter acted as Placement Agent
for the February Bridge Financing and received as compensation therefor 10% of
the aggregate proceeds and a nonaccountable expense allowance of 3% of the
aggregate proceeds therefrom. The Underwriter acted as Placement Agent for
$500,000 of the May Bridge Financing and received $50,000 as a commission and
nonaccountable expense allowance. The Company also agreed to pay certain costs
incurred in connection with the Bridge Financings and to indemnify the
Underwriter against certain liabilities in connection therewith. See "Use of
Proceeds" and "Selling Securityholders and Plan of Distribution".
WORKING CAPITAL REQUIREMENTS. The Company may require additional working
capital from additional bank borrowings or through additional debt or equity
financings. The senior liens on the Company's assets granted pursuant to the
Fidelity Facility, TIA Loan, Revolver Note, and Exchange Note limit the
Company's flexibility in obtaining additional financing. The Amertranz business
historically has not generated positive cash flows from operations. However,
the Company believes that funds raised in the Offering, cash flows generated
from operations and available funds under its existing loan facilities will be
sufficient to finance its operations and obligations through June 1997. The
Company's actual working capital needs will depend upon numerous factors,
including the Company's operating results, the cost of increasing the Company's
sales and marketing activities, changes in law which affect doing business in
Puerto Rico and competition, none of which can be predicted with certainty. The
Company anticipates that it will experience periods of significant negative cash
flow through September 1996 as a result of the Company's planned growth in
business. As a result, there can be no assurance that the Company will not
require additional funding prior to June 1997. In addition, in the event the
Company requires additional funding before or after June 1997, there can be no
assurance that such additional financing will be available to the Company on
acceptable terms, if at all, when required by the Company. The inability to
obtain such financing would have a material adverse effect on the Company's
operating results and, as a result, the Company could be required to
significantly reduce or suspend its operations, seek a merger partner or sell
additional securities on terms that could be highly dilutive to investors in the
Offering.
INFLATION
The Company does not believe that the relatively moderate rates of inflation
in the United States in recent years have had a significant effect on its
operations.
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<PAGE>
BUSINESS
COMPANY OVERVIEW
The Company, through its wholly owned subsidiaries, Amertranz and CAS, is a
provider of freight forwarding services, and believes that it is one of the
dominant freight forwarders between the continental United States and Puerto
Rico. On a consolidated pro forma basis, the Company had 1995 operating
revenues of $62.2 million and incurred operating losses of $3.1 million.
The Company's freight forwarding services involve arranging for the total
transport of customers' freight from the shippers' locations to the designated
recipients, including the preparation of shipping documents and the providing of
handling, packing and containerization services. The Company concentrates on
cargo shipments weighing more than 50 pounds and generally requiring second-day
delivery. The Company also assembles bulk cargo and arranges for insurance.
The Company has a network of offices in 25 cities throughout the United States
and Puerto Rico, including exclusive agency relationships in two cities. The
Company has international freight forwarding operations consisting of strategic
relationships in five countries. The Company has recently begun to provide
logistics services to manufacturers for the movement of raw materials and
finished goods.
The Company's objective is to become a leading provider of second-day domestic
freight forwarding services in all of its markets. Since the Combination, the
Company has attracted and hired additional experienced sales personnel thereby
increasing its sales team by more than 30%. Its strategy is to maximize the
synergies created by the combination of its Amertranz and CAS businesses by (i)
exploiting cross-selling opportunities, and (ii) taking advantage of
underutilized administrative operations and purchased freight space. The
Company also intends to maximize its use of its subsidiaries' existing trucking
networks to minimize its reliance on more expensive air freight carriers.
The Company's freight forwarding services are generally divided among
overnight, second-day and three- to five-day deferred service. Overnight
service typically consists of delivering time-sensitive freight, such as
critical pharmaceutical and just-in-time manufacturing goods. Second-day and
deferred service is provided on a recurring and often daily basis to many types
of shippers, including pharmaceutical, manufacturing and other retail suppliers
and, through its Fashion Air division, the garment industry.
The Company strives to provide customized service so that each client's
individual shipping needs are met. Once the requirements of an individual
shipment have been established, the Company actively manages the execution of
the delivery to perform within the customer's requirements. In this way, the
Company seeks to achieve maximum customer satisfaction, which will enable it to
maintain and grow its customer base.
The Company has more than 2,000 customers, although its top 20 customers
accounted for approximately 55% of revenues (on a consolidated pro forma basis)
for the fiscal year ended December 31, 1995. CAS has more than 200 customers
that are not customers of Amertranz's domestic freight forwarding operation.
Consistent with its strategy, the Company intends to actively market Amertranz's
services to these customers.
COMPANY STRATEGY
Prior to the Combination, Amertranz had rapidly increased the number of its
offices and the size of its operations staff. As a result, the Company now has
excess operations and administrative infrastructure, so that with only slight
increases in operating expenses, the Company can generate additional revenues
and profitability.
The Company's objective is to become a leading provider of second-day freight
forwarding services in all of its domestic markets. The Company's strategy is
to increase revenues and market share by expanding its service locations through
a combination of dedicated offices and lower-cost agency relationships.
Specifically, the Company plans to accomplish these objectives by:
. Continuing to increase its existing direct sales force to increase
sales and exploit cross-selling opportunities.
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<PAGE>
. Capitalizing on synergies created by the combination of Amertranz and
CAS to take maximum advantage of underutilized operations infrastructure
and purchased freight space.
. Maximizing the advantage of the Company's dominant market position in
the Puerto Rico market to increase its domestic freight forwarding
revenues. The Company intends to cross-utilize its existing Puerto Rico
sales force to gain market share for its mainland United States freight
forwarding operation.
. Expanding the use of the existing trucking network to minimize the use
of higher cost air transport.
. Continuing to emphasize customized freight forwarding service.
. Enhancing data processing and management information systems.
. Expanding the Company's United States and international network by
acquisition, office expansion and exclusive agency arrangements. The
Company intends to aggressively seek to acquire privately owned freight
forwarders by the issuance of stock, for cash, or a combination of both,
utilizing its potentially higher market valuation as a publicly traded
company.
. Developing international freight forwarding. In addition to shipping
freight from the United States to foreign destinations, the Company will
seek strategic alliances with foreign freight forwarders. Due to recent
consolidations in the United States freight forwarding industry, which
have reduced the number of freight forwarders of the Company's size and
market penetration, foreign freight forwarders are seeking strategic
partners in the United States.
. Expanding the Company's logistics services.
INDUSTRY OVERVIEW
As requirements for efficient and cost effective distribution services have
increased, so has the importance and complexity of effectively managed freight
movement. Businesses increasingly strive to reduce costs and increase profits
by minimizing inventory levels, performing manufacturing and assembly operations
in different locations and distributing their product to numerous locations. As
a result, companies frequently require expedited or time specific delivery
services. Time-sensitive shipments are required to be delivered within a
definite time frame, but not as quickly as expedited shipments, which may result
in lower rates for time-sensitive shipments than those usually generated by
expedited shipments. To assist in meeting their needs in the most efficient
method and at the lowest cost, many companies utilize freight forwarders. A
freight forwarder obtains shipments from customers, makes arrangements for
transportation of the cargo by air, land or sea carrier, and may be required to
arrange for both pick-up from the shipper to the carrier and delivery of the
shipment from the carrier to the consignee.
Companies generally have two principal alternatives to transport freight which
require either expedited or time specific handling: they may use a freight
forwarder or ship via an integrated carrier. Freight forwarders arrange for
movement to the freight's final destination, often scheduling and routing each
shipment to meet price and service requirements of the customer. Fully
integrated carriers provide pick-up and delivery services, primarily through
their own dedicated fleets of trucks and aircraft. Freight forwarders select
from various transportation options available to meet the customer's
requirements and, therefore, are often able to provide service to their
customers less expensively and with greater flexibility than integrated
carriers. In addition to high fixed expenses associated with owning and
maintaining fleets of aircraft, trucks and related equipment, integrated
carriers which operate primarily through central hubs have significant
restrictions on delivery schedules and shipment weight, size and type. Freight
forwarders generally handle shipments of any size and can offer customized
shipping options, providing an attractive alternative for shippers of freight.
According to a survey by Colography Inc., a consulting firm to the air freight
industry, domestic air freight transportation revenues totaled $20.4 billion in
1994, which represented a 13.6% increase over 1993 levels, and $16 billion
through the first three quarters of 1995, which represented a 7.2% increase over
the same period in 1994. Of these revenues, $15.6 billion in 1994 and $12.4
billion during the first three quarters of 1995 were attributable to
22
<PAGE>
integrated carriers, most of which were small parcel shipments, while $4.8
billion in 1994 and $3.6 billion during the first three quarters of 1995 were
attributable to non-integrated carriers, including freight forwarders.
Domestic freight forwarding is made up of many different types of operations.
Most freight forwarders are small, private enterprises specializing in specific
areas of the United States. Therefore, many of these companies are able to
fulfill only part of a customer's transportation needs. Some of the larger
domestic air freight forwarders with a nationwide presence, such as Pilot Air
Freight, Inc., Seko Air Freight and Associated Air Freight, rely on networks of
offices, some of which they own and operate but the majority of which are
operated by franchisees or agents.
Many manufacturing and other customers are increasingly requiring services in
addition to the actual movement of freight. These services include providing
information on the status of shipments throughout a manufacturing process,
including the providing of proof of delivery and performance reports. The
growth of the "just-in-time" manufacturing practice and the desire of retailers
to reduce inventories have also added to the demand for expedited and second-day
shipment of goods that are available through air freight. As a result of these
needs and the variety of methods for shipping goods, many companies are finding
that they cannot perform the freight transportation management functions as
efficiently as third-party providers specializing in this business, and are
therefore relying on partial or total outsourcing of these functions.
Furthermore, due to corporate downsizing and efforts to enhance productivity,
major shippers are seeking to utilize fewer firms to handle their transportation
needs. The Company believes that the trend toward outsourcing will continue and
that customer demands for additional services will offer significant
opportunities to those forwarders with an infrastructure able to fulfill the
increased requirements.
COMPANY OPERATIONS
MOVEMENT OF FREIGHT
In the year ended December 31, 1995, the Company (on a consolidated pro forma
basis) moved approximately 150,000 shipments at an average weight per shipment
of approximately 850 pounds, ranging in size from small packages of documents to
20,000 pound jet engines. Although there are no weight restrictions on the
shipments, the Company generally focuses on shipments weighing more than 50
pounds. As a result, the Company does not directly compete for most of its
business with overnight courier or small parcel companies, such as UPS and
Federal Express. Those companies use their own airplane fleets, which are
sometimes utilized by the Company as a source of cargo space for the Company's
freight forwarding operations.
Due to the high volume of freight controlled by the Company, it is able to
obtain favorable contract rates from airlines and is often able to book freight
space at times when available space is limited. When possible, the Company
consolidates different customers' shipments to reduce its cost of
transportation. The Company offers graduated discounts for shipments with later
scheduled delivery times. Rates are also based on destination and shipment
weight and generally decrease in inverse proportion to the increasing weight of
shipments.
The Company does not own any airplanes or significant trucking equipment and
relies on independent contractors for the movement of its cargo. The Company
utilizes its expertise to provide forwarding services that are tailored to meet
customers' requirements. It arranges for transportation of customers' shipments
via commercial airlines and/or air cargo carriers and, if delivery schedules
permit, the Company makes use of lower cost inter-city truck transportation
services. The Company selects the carrier for a particular shipment on the
basis of cost, delivery time and available cargo capacity. Through the
Company's advanced data processing systems, it can provide, at no additional
cost to the customer, value-added services such as electronic data interchange,
computer based shipping and tracking systems and customized computer generated
reports. Additionally, the Company provides cargo assembly and warehousing
services.
Under the terms of a Cargo Aircraft Charter Agreement dated February 28, 1994,
as amended ("L-1011 Charter"), the Company has exclusive rights, until March 1,
1998, to the use of a Lockheed L-1011 cargo aircraft that is operated on behalf
of Tradewinds Airlines, Inc. between the Company's Borinquen, Puerto Rico
location and its Greensboro, North Carolina and Hartford, Connecticut,
locations. The L-1011 aircraft carries a payload of 110,000 pounds. Under the
terms of the L-1011 Charter, the L-1011 aircraft must be available at all times
(except during scheduled maintenance) for use by the Company, as needed. While
the Company is guaranteed the use of the L-1011 aircraft
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<PAGE>
as needed, the Company pays only for its actual use of the aircraft at market
rates. Freight originating throughout the United States is generally transported
by truck to either Greensboro or Hartford for loading onto the aircraft.
Similarly, freight originating in Puerto Rico is flown on the L-1011 aircraft to
either Greensboro or Hartford, and then transported by truck to its destination.
See "Historical Background" and "Certain Transactions".
INFORMATION SYSTEMS
An important component of the Company's business strategy is to provide
accurate and timely information to its management and customers. Accordingly,
the Company has invested, and will continue to invest, substantial management
and financial resources in developing these information systems.
The Company has recently leased an IBM AS400 mainframe computer and installed
a new customized commercial (i.e., not proprietary to the Company) freight
forwarding software system which the Company has named "Amertrax". Amertrax is
an integrated freight forwarding and financial management data processing
system. It provides the Company with the information needed to manage its
sourcing and distribution activities by providing up-to-date information on the
status of shipments, both internally and to customers, through either printed or
electronic medium. Specifically, the Amertrax system permits the Company to
track the flow of a particular shipment from the point of origin through the
transportation process to the point of delivery. The Company intends to
continuously upgrade the Amertrax system to enhance its ability to maintain a
competitive advantage. The Company believes that this will allow it and its
customers to reduce transportation costs through the automation of many parts of
the shipping process. For example, the Company expects shortly to offer
customers the ability to receive shipping invoices electronically. This will
reduce the Company's cost of issuing invoices and the customer's cost of
processing these invoices and will reduce the time required for transmittal.
INTERNATIONAL OPERATIONS
The Company has recently reduced its international operations to re-focus its
efforts on its domestic markets. The Company's international freight forwarding
accounted for less than 4% of the Company's operating revenue during the six
months ended December 31, 1995. The Company has exclusive agents in European
countries, South Africa, and countries in South America.
LOGISTICS SERVICES
The Company, through its Amertranz Logistics, Inc. subsidiary, recently began
offering logistic services to large manufacturing companies. These services
consist of providing the total transportation requirements for a customer,
including shipment in and out of warehouse, maintenance of warehousing of
customer inventory, individual order organizing for shipment and order packing
and shipment. The Company currently provides these services to a large computer
hardware manufacturer. To properly provide its logistics services to this
customer, the Company has leased a warehouse adjacent to this customer's
manufacturing complex dedicated to the customer and its suppliers. While the
Company's logistics service is not currently a major component of the Company's
business, the Company intends to increase this portion of its business.
CUSTOMERS AND MARKETING
The Company's principal customers include large manufacturers and distributors
of pharmaceuticals, computers and other electronic and high-technology
equipment, computer software and wearing apparel. The Company currently has
more than 2,000 accounts, although its top 20 customers accounted for
approximately 55% of operating revenues for the year ended December 31, 1995.
The Company markets its services through an organization consisting of
approximately 30 full-time salespersons supported by the sales efforts of senior
management, the Company's five regional managers and the operations staff in the
Company's offices. The Company strongly promotes team selling, wherein the
sales person is able to utilize expertise from other departments in the Company
to provide value-added services to gain a specific account. The Company has a
national sales account group that targets high-revenue national accounts with
multiple shipping locations. These industry specialists discern the specific
freight transportation requirements of the customer and are
24
<PAGE>
able to prepare customized shipping programs to meet these specific
requirements. The Company staffs each office with operational employees to
provide support for the sales team, develop frequent contact with the customer's
traffic department, and maintain customer service. The Company believes that it
is important to maintain frequent contact with its customers to assure
satisfaction and to immediately react to resolve any problem as quickly as
possible.
The Company has a specialized Fashion Air division for the garment industry.
This division targets customers from manufacturers to retail establishments and
provides specific expertise in handling fashion-related shipments. Fashion Air
specializes in the movement of wearing apparel for manufacturing customers to
their department store customers located throughout the United States. This
division accounted for approximately 8% of the Company's operating revenues (on
a pro forma basis) in 1995.
Many of the Company's customers utilize more than one air freight
transportation provider. In soliciting new accounts, the Company uses a
strategy of becoming an approved carrier in order to demonstrate the quality and
cost-effectiveness of its services. Using this approach, the Company has
advanced its relationships with several of its major customers, from serving as
a back-up freight service provider to primary freight forwarder.
FACILITIES
The Company leases facilities consisting of office, terminal and warehouse
space in 23 cities located in the United States and Puerto Rico, and also
utilizes two offices operated by exclusive agents. The Company's headquarters
are located in Lake Success, New York, in 7,000 square feet of leased office
space. The Company's 23 facilities range in size from 1,000 square feet to
26,000 square feet and consist of offices and warehouses with loading bays. All
of such properties are leased from third parties. In addition, the Company
leases approximately 25,000 square feet of warehouse space in Fort Worth, Texas,
for its logistics services business.
As of April 22, 1996, the Company's 23 facilities and two exclusive agency
offices were maintained in the following locations:
<TABLE>
<S> <C>
Atlanta, Georgia Houston, Texas
Borinquen, Puerto Rico Kansas City, Missouri
*Boston, Massachusetts Los Angeles, California
Chicago, Illinois Miami, Florida
Cincinnati, Ohio Minneapolis, Minnesota
Cleveland, Ohio Newark, New Jersey
Dallas, Texas New York, New York
Denver, Colorado Philadelphia, Pennsylvania
Detroit, Michigan *Salt Lake City, Utah
Fort Worth, Texas San Diego, California
Greensboro, North Carolina San Francisco, California
Hartford, Connecticut San Juan, Puerto Rico
St. Louis, Missouri
</TABLE>
________________________
*Exclusive Agent Location
COMPETITION
Although there are no weight restrictions on the Company's shipments, the
Company focuses primarily on cargo shipments weighing more than 50 pounds and
requiring second-day delivery. As a result, the Company does not directly
compete for most of its business with overnight couriers and integrated shippers
of principally small parcels, such as United Parcel Service of America, Inc.,
Federal Express Corporation, DHL Worldwide Express, Inc., Airborne Freight
Corporation and the United States Postal Service. However, some integrated
carriers, such as Emery Air Freight Corporation and Burlington Air Express,
Inc., primarily solicit the shipment of heavy cargo in competition with
forwarders. Most air freight forwarders do not generally compete with the major
commercial airlines, which to a certain extent depend on forwarders to procure
shipments and supply freight for the available cargo space on their scheduled
flights.
25
<PAGE>
There is intense competition within the freight forwarding industry. While
the industry is highly fragmented, the Company most often competes with a
relatively small number of forwarders who have nationwide networks and the
capability to provide a full range of service similar to that offered by the
Company. These include Eagle USA Air Freight, Inc., Pilot Air Freight, Inc.,
and LEP Profit International, Inc. There is also competition from passenger and
cargo air carriers and trucking companies. On the international side of the
business, the Company competes with forwarders that have a predominantly
international focus, such as Fritz Companies, Inc., Air Express International
Corporation and Harper Group, Inc. All of these companies, as well as many
other competitors of the Company, have substantially greater financial resources
than the Company. The Company also faces competition from regional and local
air freight forwarders, cargo sales agents and brokers, surface freight
forwarders and carriers and associations of shippers organized for the purpose
of consolidating their members' shipments to obtain lower freight rates from
carriers.
While the Company's logistics service is not currently a major component of
the Company's business, the Company intends to increase this portion of its
business. In logistics services, the Company competes with many well
established transportation and other firms, many of whom have facilities,
resources, and financial capabilities far greater than those of the Company.
REGULATION
The Company's freight forwarding business as an indirect air cargo carrier is
subject to regulation by the DOT under the Federal Aviation Act. However, air
freight forwarders (including the Company) are exempted from most of such Act's
requirements by the Economic Aviation Regulations promulgated thereunder. The
Company's foreign air freight forwarding operations are subject to regulation by
the regulatory authorities of the respective foreign jurisdictions. The air
freight forwarding industry is subject to regulatory and legislative changes
which can affect the economics of the industry by requiring changes in operating
practices or influencing the demand for, and the costs of providing, services to
customers.
LEGAL PROCEEDINGS
Amertranz is a defendant in a lawsuit initiated by the trustee in bankruptcy
of Aeronautics Express, Inc., a company with whom Amertranz engaged in
discussions concerning a prospective business combination during the early
spring of 1994. The complaint was filed in the United States Bankruptcy Court
for the Southern District of New York in December 1995, and seeks damages in
excess of $11 million for various alleged causes of action. In February 1996,
the plaintiff in this action offered to settle the litigation for $125,000,
which offer was rejected by the Company. The Company's bankruptcy litigation
counsel has filed a motion to dismiss the complaint in its entirety. Management
believes that the lawsuit is substantially without merit and the probability of
any material loss is extremely small. Nevertheless, the Company will be
obligated to expend funds and management time and attention which are needed
elsewhere but which must be diverted to finance legal costs and provide
information requested to conduct a vigorous defense. Additionally, there can be
no assurance that either the cost of defense or the ultimate outcome of the
lawsuit will not result in substantial financial cost to the Company which will
have a material adverse effect on the Company's operating results.
The Company is periodically named as a party to routine litigation incidental
to its business, primarily involving claims for personal injury or property
damage incurred in the transportation of freight. As a freight forwarder the
Company assumes responsibility to its customers for the safe delivery of the
cargo, subject to a legal limitation on liability. Other carriers of the
Company's shipments are liable to the Company in the same manner as the Company
is liable to its customers. The Company maintains insurance in amounts which
management believes are customary for the industry and has a deductible of
$1,000 per occurrence for liability resulting from physical damage claims.
EMPLOYEES
The Company and its subsidiaries had approximately 270 full-time employees as
of March 25, 1996. None of the Company's employees are currently covered by a
collective bargaining agreement. The Company has experienced no work stoppages
and considers its relations with its employees to be good.
26
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors, executive officers, and other significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------ --- ---------------------------------------------
<S> <C> <C>
Stuart Hettleman 45 Director, President, Chief Financial Officer
Richard A. Faieta 50 Director, Executive Vice President; President
of CAS; Chief Executive Officer of Amertranz
Michael Barsa 51 Director, Vice President, Secretary
Bruce Brandi 44 President of Amertranz
</TABLE>
Stuart Hettleman has been President, Chief Financial Officer and a director of
the Company since February 7, 1996. He has been a Vice President of TIA since
1990 and is currently the Executive Vice President of TIA and, since 1991,
Executive Vice President of CFS. In addition, Mr. Hettleman serves as a
director and Executive Vice President of each of Amertranz and CAS.
Richard A. Faieta has been Executive Vice President and a director of the
Company since February 7, 1996. He has served as President and Chief Executive
Officer of each of TIA and CFS since 1992. From 1987 through 1991 he served as
Vice President-Operations of LEP Profit International Corporation, a domestic
and international freight forwarder and subsidiary of a corporation the stock of
which is traded on the London (U.K.) Stock Exchange. In addition, Mr. Faieta
serves as a director and President of CAS, and as a director and Chief Executive
Officer of Amertranz.
Michael Barsa has been Vice President, Secretary and a director of the Company
since February 7, 1996. Mr. Barsa served as Executive Vice President and Chief
Financial Officer of Amertranz from September 1994 until February 7, 1996. From
1972 through 1994, Mr. Barsa was employed by Allstate Legal Supply Company, a
privately owned legal stationary and supply company, where he held successive
positions as Controller, Chief Financial Officer and Senior Vice President.
Bruce Brandi has been President of Amertranz since October 1994. From 1978
through 1994, Mr. Brandi was employed by LEP Profit International Corporation in
various operations, sales, and marketing capacities, most recently as Executive
Vice President of Sales and Marketing.
The Underwriter is entitled to designate one member of the Board of Directors.
The Underwriter has not yet selected a designee and the Underwriter may
designate different individuals to serve in this capacity from time to time.
The Company intends to invite an additional person to serve as an outside
director in the near future. See "Underwriting".
The Board of Directors will have a Compensation Committee to determine the
salaries and incentive compensation of the Company's executive officers. It is
anticipated that this committee will be composed of Messrs. Hettleman and Faieta
and an outside director to be selected. The Company intends to appoint an Audit
Committee to consist of Mr. Hettleman, Mr. Barsa and an outside director, and a
Stock Option Committee to consist of Messrs Hettleman and Faieta.
The Company's executive officers are appointed annually by, and serve at the
discretion of, the Board of Directors. All directors are elected by the
Company's stockholders and hold office until the next annual meeting of
stockholders or until their successors have been duly elected and qualified.
Pursuant to the terms of the Assets Exchange Agreement entered into as part of
the February 1996 Combination ("Exchange Agreement"), the Company's stockholders
who are parties to the Exchange Agreement have granted a proxy to
representatives of TIA and CFS to vote the 548,591 shares of the Company's
Common Stock owned by such stockholders for the election of two directors
designated by TIA and CFS. TIA and CFS have designated Messrs. Hettleman and
Faieta to serve as directors and for whom all such shares have been voted.
27
<PAGE>
There are no family relationships among any of the Executive Officers and
directors of the Company. See "Principal Stockholders".
The Company will maintain "key person" life insurance policies in the amount
of $1 million on the lives of each of Messrs. Hettleman and Faieta.
DIRECTOR COMPENSATION
The director to be designated by the Underwriter and those directors who are
employed by the Company will not receive any compensation for serving in that
capacity, but will be reimbursed for all reasonable costs incurred in attending
directors' meetings. There is currently no plan to compensate any outside
director for attendance at meetings.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid by
the Company and its predecessors during the year ended December 31, 1995 to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (collectively, the "Named Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS NUMBER OF OPTIONS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Stuart Hettleman.................... $ -- -- --
Chief Executive Officer of the
Company(1)
Richard A. Faieta................... $132,400 -- --
Chief Executive Officer
of CFS(1)
Martin Hoffenberg................... $198,000 -- --
Former Chief Executive Officer
of Amertranz(2)
Michael Barsa....................... $150,000 -- 262,263(4)
Former Chief Financial Officer
of Amertranz(1)
Bruce Brandi........................ $150,000 -- 60,522(4)
President of Amertranz(1)
Philip S. Rosso, Jr................. $198,000 -- --
Senior Vice President Operations
of Amertranz
S. Gary Friedman(3)................. $147,600 -- --
Former President, Fashion Air
Division of Amertranz
- ---------------------------------------------------------------------------
</TABLE>
(1) See "Employment Agreements; Covenants Not-To-Compete", below.
(2) Mr. Hoffenberg resigned as an officer and director and terminated his
employment agreement with Amertranz, effective February 7, 1996. He has
entered into a six month consulting agreement with the Company.
(3) Mr. Friedman resigned as an employee effective October 20, 1995.
(4) As part of the adjustment to the consideration exchanged in the Combination,
Messrs. Barsa and Brandi surrendered 107,786 and 17,932, respectively, of
such options effective February 7, 1996. See "Other Stock Options", below,
and "Certain Transactions".
EMPLOYMENT AGREEMENTS; COVENANTS NOT-TO-COMPETE
Stuart Hettleman and Richard A. Faieta each entered into an employment
agreement with the Company effective upon the consummation of the Offering.
Each such employment agreement provides that the respective officer is
28
<PAGE>
employed for a period of three years, subject to renewal, at an annual salary of
$_____ for Mr. Hettleman and $______ for Mr. Faieta. The respective employment
agreements provide that if the employee resigns voluntarily or is discharged for
cause he may not solicit, directly or indirectly, any existing customer or
employee of the Company for a period of two years. If the Company terminates
either such officer's employment for any other reason, it may enforce these
restrictions if it continues to pay his salary.
Pursuant to the terms of an Employment Agreement dated September 26, 1994, as
amended February 7, 1996, Bruce Brandi is employed by Amertranz for a term of
three years commencing October 10, 1994, subject to renewal. The employment
agreement provides for an annual salary of $150,000, with an increase of $7,500
on the second anniversary date. During 1995, Mr. Brandi deferred $30,250 of his
salary which amount will be paid by February 1999. The employment agreement
provides that if Mr. Brandi is discharged for cause he may not solicit, directly
or indirectly, any existing customer or employee of the Company for a period of
two years. If the Company terminates Mr. Brandi's employment for any other
reason, it may enforce these restrictions if it continues to pay his salary.
Messrs. Barsa and Rosso have signed agreements which provide that upon
termination of their employment they will not solicit any employees of the
Company for a period of one year and also will not solicit any existing customer
for a period of 90 days.
Pursuant to his consulting agreement with the Company, Mr. Hoffenberg has
agreed not to engage in any business which is in competition with the Company
nor to solicit any employee or customer of the Company, for a period of one year
after the termination of the agreement.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan ("Stock Option Plan") was adopted by the
Company's Board of Directors and approved by the stockholders in May 1996. A
total of 402,348 shares of Common Stock have been reserved for issuance under
the Stock Option Plan. Options may be granted under the Stock Option Plan to
employees, officers and directors of the Company and its subsidiaries. Prior to
the consummation of the Offering, options to purchase ______ shares have been
granted under the Stock Option Plan.
The Stock Option Plan will be administered by the Stock Option Committee of
the Company's Board of Directors ("Options Committee"). The Options Committee
has the authority, within limitations as set forth in the Stock Option Plan, to
interpret the terms of the Stock Option Plan and establish rules and regulations
concerning the Stock Option Plan, to determine the persons to whom options may
be granted, the number of shares of Common Stock to be covered by each option,
and the terms and provisions of the option to be granted. In addition, the
Options Committee has the authority, subject to the terms of the Stock Option
Plan, to determine the appropriate adjustments in the terms of each outstanding
option in the event of a change in the Common Stock or the Company's capital
structure.
The President and Executive Vice President of the Company are eligible to
participate in the Stock Option Plan only to the extent of the automatic grants
provided in the Stock Option Plan. Each such officer has been automatically
granted an option ("Senior Executive Option") on _________, 1996 (the "Effective
Grant Date") to purchase _______ shares of Common Stock. The Senior Executive
Option will vest over a period of three years, enabling each such officer to
purchase _______ shares of Common Stock at any time within six months following
the end of each of the Company's fiscal years ending June 30, 1997, 1998 and
1999, if the Company's earnings before interest, taxes, depreciation and
amortization for such fiscal year exceeds $___________, and if such officer is
then employed by the Company or one of its subsidiaries. The exercise price of
the Senior Executive Options will be the fair market value of the shares of
Common Stock on the Effective Grant Date. The Stock Option Plan provides that
the provisions relating to Senior Executive Options may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act (ERISA) or the rules
and regulations promulgated thereunder.
Options granted under the Stock Option Plan may be either incentive stock
options ("ISOs") within the meaning of Section 422 of the Internal Revenue Code,
or non-qualified stock options ("NQSOs"), as the Options Committee may
determine. The exercise price of an option will be fixed by the Options
Committee on the date of grant, except that (i) the exercise price of an ISO
granted to any individual who owns (directly or by attribution) shares of Common
29
<PAGE>
Stock possessing more than 10% of the total combined voting power of all classes
of outstanding stock of the Company (a "10% Owner") must be at least equal to
110% of the fair market value of the Common Stock on the date of grant and (ii)
the exercise price of an ISO granted to any individual other than a 10% Owner
must be at least equal to the fair market value of the Common Stock on the date
of the grant. Any options granted must expire within ten years from the date of
grant (five years in the case of an ISO granted to a 10% Owner). Shares subject
to options granted under the Stock Option Plan which expire, terminate, or are
canceled without having been exercised in full become available again for option
grants. No options shall be granted under the Stock Option Plan more than ten
years after the adoption of the Stock Option Plan.
Options are exercisable by the holder subject to terms fixed by the Options
Committee. No option can be exercised until at least six months after the date
of grant. However, an option will be exercisable immediately upon the happening
of any of the following (but in no event during the six-month period following
the date of grant or subsequent to the expiration of the term of an option): (i)
the holder's retirement on or after attainment of age 65; (ii) the holder's
disability or death; or (iii) the occurrence of such special circumstances or
events as the Options Committee determines merits special consideration. Under
the Stock Option Plan, a holder generally may pay the exercise price in cash, by
check, by delivery to the Company of shares of Common Stock already owned by the
holder or, in certain circumstances, in shares issuable in connection with the
options, or by such other method as the Options Committee may permit from time
to time.
Options granted under the Stock Option Plan will be non-transferable and non-
assignable; provided, however, that the estate of a deceased holder may exercise
any options held by the decedent. If an option holder terminates his employment
or consulting relationship with the Company or service as a director of the
Company while holding an unexercised option, the option will terminate
immediately.
OTHER STOCK OPTIONS
During the year ended December 31, 1995, Amertranz granted to Michael Barsa
options to purchase 1,300,000 shares of Amertranz's common stock in connection
with a loan made by Mr. Barsa to Amertranz pursuant to a convertible
subordinated promissory note (see "Certain Transactions-Insider Loans"). In
addition, during the year ended December 31, 1995, Amertranz granted to Bruce
Brandi options to purchase 300,000 shares of Amertranz's common stock as
compensation. In connection with the Combination, all such options were
exchanged for options to purchase shares of the Company's Common Stock in the
amounts set forth below. See "Option Grants in Last Fiscal Year" and "Option
Exercises and Holdings", below.
30
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
year ended December 31, 1995 to each of the Named Officers by Amertranz, as
exchanged in the Combination for options to purchase shares of Common Stock:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
Potential Realizable Value At Assumed
Individual Grants Annual Rates of Stock Price
Appreciation for Option Term(1)
- ------------------------------------------------------------------------------------------------------------------------------------
% of Total
Options Exercise
No. of Granted to or Base
Options Employees in Price Expiration
Name Granted Fiscal Year ($/Share) Date 0%(2) 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stuart Hettleman........... -- -- -- -- -- -- --
Richard A. Faieta.......... -- -- -- -- -- -- --
Martin Hoffenberg.......... -- -- -- -- -- -- --
Michael Barsa(3)........... 52,453 8.5% $1.17 2/7/00 $ 53,502 $ 59,246 $ 64,989
104,905 17.0% $2.38 2/7/98 -- -- --
104,905 17.0% $.048 2/7/98 $224,707 $236,194 $247,681
Bruce Brandi(4)............ 60,522 9.8% $0.16 10/10/04 $122,860 $129,487 $136,114
Philip S. Rosso, Jr........ -- -- -- -- -- -- --
S. Gary Friedman........... -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(2) Denotes realizable value at the date of grant which reflected a market
value of $2.19 per share, as determined by the Company's Board of
Directors.
(3) As part of the adjustments to the Combination consideration made as of
February 7, 1996, Mr. Barsa surrendered 107,786 of the total 262,263
options granted to him and the exercise price and expiration date of the
balance of his options were adjusted. Accordingly, as of February 7, 1996,
Mr. Barsa holds a total of 154,477 options (59% of all options, as
adjusted, granted to employees), all of which are exercisable at an
exercise price of $.408 per share and expire on February 7, 1999, with
realizable value of (i) on the date of grant, $275,278, (ii) assuming a 5%
rate of appreciation, $292,193, and (iii) assuming a 10% rate of
appreciation, $309,108.
(4) As part of the adjustments to the Combination consideration made as of
February 7, 1996, Mr. Brandi surrendered 17,932 of the total 60,522 options
granted to him. Accordingly, as of February 7, 1996, Mr. Brandi holds a
total of 42,590 options (16.2% of all options, as adjusted, granted to
employees), with realizable value of (i) on the date of grant, $86,458,
(ii) assuming a 5% rate of appreciation, $91,121, and (iii) assuming a 10%
rate of appreciation, $95,785. 14,196 of such options have vested and are
currently exercisable, and an additional 14,197 of such options vest and
become exercisable on each of October 10, 1996 and 1997.
31
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning the number and value of
unexercised options held by each of the Named Officers as of December 31, 1995,
as exchanged in the Combination for options to purchase shares of Common Stock:
<TABLE>
<CAPTION>
AGGREGATED OPTION VALUES FOR FISCAL YEAR ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Options/SARs in-the-Money Options/SARs
Name at December 31, 1995 at December 31, 1995($)(1)
- -------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stuart Hettleman 0 0 -- --
Richard A. Faieta 0 0 -- --
Martin Hoffenberg 0 0 -- --
Michael Barsa(2) 13,114 39,339 $ 13,376 $40,126
104,905 0 -- --
104,905 0 $224,707 --
Bruce Brandi(3) 20,174 40,348 $ 40,953 $81,906
Philip S. Rosso, Jr. 0 0 -- --
S. Gary Friedman 0 0 -- --
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) This amount represents the $2.19 market value of the underlying securities
(as determined by the Company's Board of Directors) relating to "in-the-
money" options at December 31, 1995, minus the exercise price of such
options.
(2) See footnote 2 under previous table ("Option Grants in Last Fiscal Year").
As of February 7, 1996, Mr. Barsa holds a total of 154,477 options, all of
which are exercisable and in-the-money and have a total value of $275,278.
(3) See footnote 3 under previous table ("Option Grants in Last Fiscal Year").
As of February 7, 1996, Mr. Brandi holds a total of 42,590 options, 14,196
of which are exercisable and in-the-money and have a total value of
$28,818, and 28,394 of which are unexercisable and in-the-money and have a
total value of $57,640.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1995, none of TIA, CFS, or Amertranz had a
compensation committee, and all deliberations concerning executive officer
compensation for each entity were had, and all determinations with respect
thereto were made, by the respective entity's board of directors. During such
period, Messrs. Hoffenberg, Barsa, Brandi and Rosso were executive officers and
directors of Amertranz, and Mr. Faieta was an executive officer and director of
CFS. See "Certain Transactions".
HISTORICAL BACKGROUND
AMERTRANZ. Amertranz's business began in February 1985, with the formation of
Integrity Logistics, Inc., a New York corporation ("Integrity"). Integrity
began operations in June 1985 when it acquired from Amerford International
Corporation ("AIC"), a domestic and international air freight forwarder, the
right to open air freight forwarding offices under the "Amerford" name in any
United States city in which AIC did not have an office. Integrity functioned as
an independently-owned exclusive agent of AIC, in exchange for which AIC paid
Integrity a share of the gross profits on shipments for which Integrity provided
services. During the next eight years, Integrity opened nine offices under the
Amerford name and established the Amerford Fashion Air Division of AIC,
specializing in freight forwarding services to the garment industry.
In October 1993, Integrity sued AIC, alleging failure to pay monies due,
breach of contract and other claims. The suit was settled in January 1994,
pursuant to which AIC paid Integrity the sum of $700,000 and Integrity's
affiliate, Amerford Domestic, Inc., a New York corporation formed in January
1994 ("Amerford Domestic"), acquired all of AIC's domestic air freight
forwarding business. Thereafter, AIC's business focused exclusively on
international air freight, and Integrity and AIC entered into an agreement
whereby Integrity acted as AIC's exclusive agent with
32
<PAGE>
respect to international air freight in the markets where Integrity's original
nine offices were located. After acquiring AIC's domestic freight business,
Amerford Domestic owned and operated 20 offices located in the United States
primarily focusing on the movement of domestic freight and in nine of those
offices Integrity continued to act as AIC's agent for international air freight.
As a freight operation independent of AIC, it was necessary for Integrity to
establish an internal operations infrastructure for its 20-office network,
including accounting, data processing and communications departments. The
creation of this infrastructure consumed scarce corporate resources.
In March 1995, Amertranz was organized under Delaware law, as an affiliate of
Integrity. Pursuant to an Agreement of Merger dated March 13, 1995, Amerford
Domestic merged into Amertranz. Effective June 30, 1995, Integrity terminated
its relationship with AIC and ceased doing business. Thereafter, all of
Integrity's and Amerford Domestic's international and domestic freight
forwarding businesses were consolidated into and conducted by Amertranz.
In August 1995, Amertranz formed Amertranz Logistics, Inc., a Delaware
corporation, as a wholly-owned subsidiary to offer inventory movement and
shipping logistics services to large manufacturing companies.
TIA AND CFS. TIA's predecessor was formed in 1970 as an air freight carrier,
trading as the "Wrangler Aviation" division of Blue Bell, Inc., a manufacturer
of jeans and other apparel, to transport raw materials to Blue Bell facilities
in Puerto Rico and return the finished goods to its facilities in Greensboro,
North Carolina. In 1981, Wrangler Aviation obtained a DOT Certificate of
Authority and qualified as an air carrier pursuant to Section 121 of the Federal
Air Regulations. Thereafter, Wrangler Aviation offered fully integrated air
carrier services, providing the door-to-door movement of freight between Puerto
Rico and the continental United States for companies other than Blue Bell, Inc.
By 1986, freight transported for Blue Bell, Inc. represented only a small
portion of the freight carried by Wrangler Aviation.
In 1988, new owners of Blue Bell, Inc. separately incorporated the Wrangler
division in Delaware as Wrangler Aviation, Inc. ("Wrangler"), and sold all of
the issued and outstanding stock of Wrangler to a group experienced in the
freight forwarding business. This purchase was partially financed by the
seller. In 1990, as a result of a default under the financing, the seller
repossessed the Wrangler stock. In October 1990, Wrangler was sold to its
current owners. At that time, CFS was incorporated in Puerto Rico to act as the
marketing arm of Wrangler. From and after 1991, Wrangler operated under the
tradename "Tradewinds", and CFS did business under the name "Caribbean Air
Services".
In December 1991, the current owners of Wrangler installed a new management
team following the discovery of certain improprieties which occurred under the
old management. As a result of investigations by the new management, it was
determined to reorganize both Wrangler and CFS under Chapter 11 of the United
States Bankruptcy Code. As part of this bankruptcy filing, the owners of
Wrangler arranged for an infusion of $3,000,000 into the Wrangler and CFS
business. CFS and Wrangler emerged from the Chapter 11 proceedings in November
1992, and June 1993, respectively, and have operated profitably since that time.
In January 1994, Wrangler Aviation, Inc. changed its name to TIA, Inc. At that
time, TIA owned 51% of the stock of CFS.
As a result of the bankruptcy reorganization, the management of TIA decided to
separate the air carrier and air freight forwarding divisions of TIA's business.
The air carrier division was sold by TIA in February 1994. As part of that
transaction, TIA entered into the L-1011 Charter with the purchaser to provide
all air freight carriage required by TIA and CFS on terms TIA and CFS believe
are favorable. See "Certain Transactions".
TIA has an approximately 30% ownership interest in the parent of the
purchaser, Tradewinds Acquisition Corporation. Pending the approval of the
transfer of TIA's DOT authority and licenses, TIA currently operates the
aircraft chartered under the L-1011 Charter pursuant to the terms of an interim
operating agreement. See "Business-Company Operations".
Following the sale of its air carrier division, TIA and CFS continued to
operate the freight forwarding business, and remained a dominant freight
forwarder in the niche market between Puerto Rico and the continental United
States. TIA and CFS continued to specialize in the movement of large shipments
for manufacturers, with sales and/or full
33
<PAGE>
offices in Philadelphia, New York, Chicago, Los Angeles, Hartford, and
Greensboro, North Carolina, as well as a network of sales persons in Puerto
Rico.
THE ASSETS EXCHANGE AGREEMENT. Pursuant to the terms of the Exchange
Agreement, the Company acquired all of the issued and outstanding stock of
Amertranz and received the freight forwarding business of TIA and CFS, and
contributed the TIA and CFS freight forwarding business to CAS. In
consideration of their transfer to the Company of all of the outstanding
Amertranz shares and convertible promissory notes, the former stockholders and
convertible promissory noteholders of Amertranz received an aggregate of
1,107,343 shares of Common Stock. In consideration of the transfer to the
Company of the freight forwarding business of TIA and CFS, TIA and CFS received
1,950,000 shares of Common Stock, equal to approximately 44% of the issued and
outstanding shares of Common Stock (on a fully diluted basis), and was issued
the $10 million Exchange Note. Prior to the consummation of the Offering, the
former stockholders and convertible promissory noteholders of Amertranz
surrendered, as of February 7, 1996, an aggregate of 298,004 of the 1,107,343
shares of Common Stock issued to them (and options to purchase an additional
153,131 shares of Common Stock), and an additional 150,000 shares of Common
Stock in the aggregate were issued to TIA and CFS. Unless otherwise specified,
the information set forth in this Prospectus gives effect to such adjustments.
See "Certain Transactions".
As a result of the Combination, Amertranz became a wholly-owned subsidiary of
the Company and continues to conduct Amertranz's freight forwarding and
logistics service businesses, and the freight forwarding business of TIA and CFS
was transferred to the Company and is conducted by CAS.
CERTAIN TRANSACTIONS
TIA LOAN
Commencing in October 1995, Amertranz received advances aggregating $800,000
pursuant to the TIA Loan. The TIA Loan is secured by a lien on all of the
assets of Amertranz subordinated only to the lien granted to Fidelity in
connection with the Fidelity Facility. The TIA Loan bears interest at the rate
of 12% per annum and is repayable in 12 equal, consecutive monthly payments of
principal and interest commencing 30 days after the closing of the Offering.
TIA and CFS have agreed that, upon consummation of the Offering, repayment of
the TIA Loan will be deferred as described below (see "Forbearance by TIA and
CFS").
THE COMBINATION AND ASSETS EXCHANGE AGREEMENT
Pursuant to the terms of the Exchange Agreement, all of the stockholders of
Amertranz and the holders of certain convertible promissory notes of Amertranz
exchanged their respective shares and notes for 1,107,343 shares of Common
Stock. Included in this group are Martin Hoffenberg and Philip S. Rosso, Jr.,
who may be deemed to be promoters of the Company, and Michael Barsa and Bruce
Brandi (see "Principal Stockholders"). The terms of such conversions by these
individuals were no more favorable to these individuals than the terms of the
conversions by all other stockholders and convertible promissory noteholders of
Amertranz (a total of 22 persons). See "Insider Loans", below.
In the Combination, TIA and CFS contributed their freight forwarding business
to the Company. In consideration of such transfer, the Company issued to TIA
and CFS 1,950,000 shares of Common Stock (prior to adjustments made as of
February 7, 1996) and the Exchange Note in the original principal amount of
$10,000,000, which bears interest at the rate of 8% per annum. The Exchange
Note is payable in five consecutive monthly payments of principal and interest
in the amount of $80,000 each, commencing March 1, 1996, and, thereafter,
monthly payments of principal and interest in the amount of $166,667 each until
the Exchange Note has been paid in full. Of the proceeds of the Offering,
$2,000,000 will be used to repay a portion of the Exchange Note. Immediately
prior to the consummation of the Offering, TIA and CFS exchanged $2,000,000
principal amount of the Exchange Note for 200,000 shares of the Company's Class
A Preferred Stock. See "Description of Securities-Preferred Stock". TIA and
CFS have agreed that, upon consummation of the Offering and the payment of the
$2,000,000 from the proceeds of the Offering, the balance of payments on the
Exchange Note will be deferred as described below (see "Forbearance by TIA and
CFS").
34
<PAGE>
In the Combination, TIA and CFS also agreed to advance to CAS, on a revolving
loan basis, an amount up to the net collections of TIA's and CFS's accounts
receivable as of February 7, 1996 and additional amounts in the discretion of
TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding at any time,
pursuant to the terms of the Revolver Note. Funds advanced under the Revolver
Note with respect to the TIA and CFS accounts receivable do not bear interest
prior to maturity. Discretionary advances under the Revolver Note bear interest
at the greater of (i) 1% per month, or (ii) a fluctuating rate equal to the
prime rate of interest as published in The Wall Street Journal, plus 4%.
Advances under the Revolver Note may be used only for ordinary, current
operating expenses of CAS unless TIA and CFS consent to another use of such
funds. The Revolver Note matures on July 6, 1996; however, TIA and CFS have
agreed that, upon consummation of the Offering, payment of the Revolver Note
will be deferred as described below. As of March 31, 1996, the outstanding
balance under the Revolver Note was $3,483,558. All obligations under the
Exchange Note are guaranteed by Amertranz and CAS, and all obligations under the
Revolver Note are guaranteed by the Company and Amertranz. All obligations
under the Exchange Note, the Revolver Note and such guarantees are secured by a
first priority lien on all of the issued and outstanding shares of CAS, a first
priority lien on all of the assets of the Company and CAS, and a lien on the
accounts receivable of Amertranz, subordinate only to the first priority lien
granted to Fidelity in connection with the Fidelity Facility and the second
position lien granted to TIA in connection with the TIA Loan.
Subsequent to the closing of the Combination, the Company requested that TIA
and CFS agree to certain modifications of the terms of the Exchange Agreement
relating to the TIA Loan, the Revolver Note and the Exchange Note as described
below (see "Forbearance by TIA and CFS"). As part of such revisions, to be made
as of February 7, 1996, the Company will obtain from the former stockholders and
convertible promissory noteholders of Amertranz prior to the consummation of the
Offering their agreement to surrender to the Company, as of February 7, 1996, an
aggregate of 298,004 shares of Common Stock and options to purchase an aggregate
of 153,131 shares of Common Stock, and an additional 150,000 shares of Common
Stock in the aggregate will be issued to TIA and CFS. Unless otherwise
specified, the information set forth in this Prospectus gives effect to such
adjustments.
Stuart Hettleman and Richard A. Faieta, directors and principal officers of
the Company and its subsidiaries, are principal officers of TIA and CFS, and Mr.
Faieta is a director of each of TIA and CFS. In addition, Mr. Hettleman is a
shareholder in a company which is in control of TIA and of CFS and Mr. Faieta is
a shareholder of TIA.
CONFLICTS OF INTEREST
TIA and CFS have been granted security interests in all of the assets of the
Company and CAS and in the accounts receivable of Amertranz. All of the
security interests are first priority, except for the security interest in
Amertranz's accounts receivable, which is subordinated only to Fidelity's lien
securing the Fidelity Financing. By virtue of their current stock ownership in
the Company and additional shares of Common Stock which may be issued upon
conversion of shares of Class A Preferred Stock, TIA and CFS retain control over
management of the business and affairs of the Company. In addition, pursuant to
the terms of the Exchange Agreement, certain stockholders of the Company have
given irrevocable proxies to TIA and CFS to vote such stockholders' shares of
Common Stock for up to five years, for the election of directors, and the proxy
granted by one such stockholder includes all matters submitted to stockholders
for a vote. The stock ownership of TIA and CFS, together with such proxies,
allow TIA and CFS to control in excess of 51% of the issued and outstanding
shares of Company Stock. There may be circumstances in which these different
relationships create material conflict to the possible detriment of other
shareholders of the Company. See "Principal Stockholders" and "Description of
Securities--Preferred Stock".
FORBEARANCE BY TIA AND CFS
Upon consummation of the Offering, the outstanding principal balances of the
TIA Loan, the Exchange Note, and the Revolver Note will be $800,000, $6,000,000,
and approximately $4,000,000, respectively, plus accrued interest thereon. All
such obligations are secured by virtually all of the assets of the Company,
Amertranz and CAS. Under the terms of these respective obligations, payments on
the TIA Loan are to begin 30 days following consummation of the Offering,
payments on the Exchange Note were due on March 1, 1996, April 1, 1996 and May
1, 1996, and additional payments are due monthly thereafter, and the full
outstanding balance of the Revolver Note is due on July 6, 1996. TIA and CFS
have agreed that, upon consummation of the Offering, they will defer each
payment on the TIA Loan and the Exchange Note to the extent the aggregate of the
payments thereon then due exceeds 80% of the
35
<PAGE>
Company's earnings before interest, taxes, depreciation and amortization
("EBITDA") for the month in respect of which such aggregate payments are due.
During any deferral period, interest will continue to accrue on these
obligations in accordance with their respective terms. Such deferral will
continue until the earlier of (i) the date after which the Company's EBITDA
exceeds the sum of $600,000 for any two consecutive month period, or (ii)
November 1, 1996. Furthermore, TIA and CFS have agreed that, upon consummation
of the Offering, they will defer collection of amounts due under the Revolver
Note until the earlier of (i) refinancing of Amertranz's and CAS's accounts
receivable working capital facilities, or (ii) December 31, 1996. TIA and CFS
have further agreed that, upon consummation of the Offering, they will not take
any action to foreclose on their security interests in the assets of the
Company, Amertranz or CAS until one year following the date of this Prospectus,
unless any other secured creditor of the Company, Amertranz or CAS takes action
to foreclose on its security interest or any creditor obtains a final judgement
against the Company, Amertranz or CAS in an amount of $50,000 or more which
judgement is not stayed.
TRANSFER OF AMERTRANZ SHARES
Prior to the Combination, one of the stockholders of Amertranz, S. Gary
Friedman, sold all of the shares of Amertranz common stock owned by him to
Philip S. Rosso, Jr. In connection with the Combination, the Company purchased
106,304 of such Amertranz shares from Mr. Rosso for an aggregate purchase price
of $11,250.
INSIDER LOANS
Between June 1995 and November 1995 Amertranz borrowed $1,379,110 in net
aggregate principal amount from persons affiliated with Amertranz, including Mr.
Barsa, and issued (i) $1,096,610 in net aggregate principal amount of promissory
notes with interest at the rate of 7% per annum, due June 30, 1996, and (ii)
$282,500 in aggregate principal amount of promissory notes with interest at the
rate of 9 3/4% per annum, due August 15, 1996. In addition, certain of these
lenders received options to purchase shares of Amertranz common stock at $.50
per share, some of which options were exercised prior to the Combination. As
part of the transactions under the Exchange Agreement, the holders of all of
these promissory notes assigned to the Company their notes and the shares of
Amertranz common stock which were issued upon the exercise of such options in
exchange for an aggregate of 296,669 shares of Common Stock, and the holders of
unexercised Amertranz options exchanged such options for an aggregate of 390,413
options to purchase shares of the Company's Common Stock. See "Principal
Stockholders".
BELGIUM AND BRAZIL AFFILIATES
Prior to the consummation of the Offering, the Company owned a majority
interest in Amertranz Worldwide, a private limited company existing under the
laws of Belgium, and a minority interest in Amertranz do Brasil LTDA, an entity
existing under the laws of Brazil. Both of these entities engaged in
international freight forwarding. As part of the Company's strategy to re-focus
its efforts on its domestic markets, the Company transferred all of its interest
in these two entities to a former employee, officer and convertible promissory
noteholder of Amertranz in exchange for the surrender by such individual of
previously-granted options to purchase 104,905 shares of Common Stock at $.048
per share and options to purchase 95,095 shares of Common Stock at $2.38 per
share.
OTHER TRANSACTIONS
Amertranz has historically engaged Horizon Forwarders, Inc. ("Horizon"), a
company owned by Messrs. Hoffenberg and Rosso, to provide ocean freight
forwarding services as needed by customers of Amertranz, at market rates and
terms. All amounts due to Horizon for its services were paid to Amertranz by
the freight shippers. The payments by Amertranz to Horizon during the year
ended December 31, 1995 totalled $2,640.
Under the terms of the L-1011 Charter, CAS has exclusive rights, until March
1, 1998, to the use of a Lockheed L-1011 freighter aircraft that is operated on
behalf of Tradewinds Airlines, Inc. ("Tradewinds Air") between the Company's
Borinquen, Puerto Rico location and its Greensboro, North Carolina, and
Hartford, Connecticut, locations. Under the terms of the L-1011 Charter, the L-
1011 aircraft must be available at all times for use by the Company, as needed.
While the Company is guaranteed the use of the L-1011 aircraft as needed, the
Company pays only for its actual use of the aircraft at market rates. Under the
terms of the Exchange Agreement, all of the Company's freight between Puerto
Rico and the continental United States must be transported on the L-1011
aircraft pursuant to
36
<PAGE>
the L-1011 Charter unless TIA and CFS consent to other transport, and the L-1011
Charter may not be terminated without the consent of TIA and CFS. The L-1011
aircraft is operated by TIA under its DOT licenses and authority pursuant to an
operating agreement between TIA and Tradewinds Air. Payments to Tradewinds Air
under the L-1011 Charter during the year ended December 31, 1995 totalled $16.7
million. Tradewinds Air is owned by Tradewinds Acquisition Corporation, of which
TIA owns approximately 30%. To date, Tradewinds Acquisition Corporation has not
paid any dividends, but to the extent it ever pays any dividends or makes any
other distributions, TIA will benefit from such dividends and/or distributions.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 15, 1996, and as adjusted to
reflect the sale of the Securities offered hereby, by (i) each person known by
the Company to be the beneficial owner of five percent or more of the
outstanding Common Stock of the Company, (ii) each of the Company's directors,
(iii) each of the Named Officers, and (iv) all directors and executive officers
as a group. In each case, the address of the beneficial owner is the address of
the principal executive offices of the Company.
<TABLE>
<CAPTION>
PERCENTAGE
-----------------------
DIRECTORS, EXECUTIVE OFFICERS AND NUMBER OF SHARES BEFORE AFTER
FIVE PERCENT STOCKHOLDERS BENEFICIALLY OWNED OFFERING OFFERING
- ----------------------------------------------------------------------------- ------------------ --------- -----------
<S> <C> <C> <C>
TIA, Inc.(1)(2)(3)........................................................... 1,780,000 49.9% 33.5%
Caribbean Freight Services, Inc.(1)(2)(3).................................... 420,000 11.8 7.9
Stuart Hettleman(2).......................................................... 0 - -
Richard A. Faieta(2)......................................................... 0 - -
Philip S. Rosso, Jr.(3)...................................................... 198,669 5.6 3.7
Martin Hoffenberg(3)......................................................... 165,541 4.6 3.1
Michael Barsa(3)(4).......................................................... 281,010 7.5 5.1
Bruce Brandi(3)(5)........................................................... 21,564 0.6 0.4
All directors and executive officers as a group (4 persons)(1)(2)(3)(4)(5)... 2,477,574 67.0 45.6
</TABLE>
- --------------------
(1) Does not include 548,591 shares of Common Stock (15.4% of outstanding shares
before the Offering and 10.3% of outstanding shares after the Offering) with
respect to which TIA and CFS have been granted proxies. See footnote 3,
below.
(2) 51% of the issued and outstanding stock of CFS, and voting control of all of
the issued and outstanding shares of CFS, is held by TIA. All of the issued
and outstanding stock of TIA is owned and controlled by Wrexham Aviation,
Inc., a Delaware corporation, a majority of which is owned by Swirnow
Airways Corp., a Delaware corporation, of which Stuart Hettleman, a Director
and President of the Company, is a non-controlling stockholder. Richard A.
Swirnow is, indirectly, the controlling stockholder of Swirnow Airways Corp.
In addition, Richard A. Faieta, a Director and Executive Vice President of
the Company, is a Director, President and non-controlling stockholder of
TIA. Messrs. Hettleman and Faieta disclaim beneficial ownership of all
shares of Common Stock owned by TIA or CFS.
(3) Mr. Hoffenberg has granted to TIA and CFS an irrevocable proxy to vote his
shares of Common Stock until February 6, 2001. In addition, Messrs. Rosso,
Barsa and Brandi and certain other stockholders have granted to TIA and CFS
irrevocable proxies to vote their respective shares of Common Stock for
control of the Company's Board of Directors until the Revolver Note has been
repaid in full and the Exchange Note has been substantially repaid. As a
result, TIA and CFS may retain the right to vote certain of the shares of
Common Stock owned by those shareholders until at least February 6, 2001.
(4) Includes options to purchase 154,477 shares of Common Stock which are or
become exercisable within 60 days of April 15, 1996. See "Management-Other
Stock Options".
(5) Includes options to purchase 14,196 shares of Common Stock which are or
become exercisable within 60 days of April 15, 1996. See "Management-Other
Stock Options".
37
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, $.01 par value per share, and 2,500,000 of Preferred Stock,
500,000 shares of which have been designated Class A Preferred Stock. As of the
date of this Prospectus, 3,565,589 shares of Common Stock and 200,000 shares of
Class A Preferred Stock are outstanding. After the completion of the Offering
there will be 5,315,589 shares of Common Stock and 200,000 shares of Class A
Preferred Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voted can elect all of the directors then
being elected. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available. In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. Holders of shares of Common Stock, as such, have no
redemption, preemptive or other subscription rights, and there are no conversion
provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are, and the shares of Common Stock to be issued upon completion of
the Offering, when issued and paid for as set forth in this Prospectus, will be,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
stockholders, to issue series of preferred stock from time-to-time and to
designate the rights, preferences, limitations and restrictions of and upon
shares of each series, including dividend, voting, redemption and conversion
rights. The Board of Directors also may designate par value, preferences in
liquidation, and the number of shares constituting any series. The Company
believes that the availability of preferred stock issuable in series will
provide increased flexibility for structuring possible future financings and
acquisitions, if any, and in meeting other corporate needs. The rights and
privileges of holders of preferred stock could adversely affect the voting power
of holders of Common Stock, and the authority of the Board of Directors to issue
preferred stock without further stockholder approval could have the effect of
delaying, deferring or preventing a change in control of the Company. Issuance
of preferred stock could also adversely effect the market price of the Common
Stock.
The following is a summary of the terms of the Class A Preferred Stock, par
value $10.00 per share:
Par Value. The shares of Class A Preferred Stock have a par or stated value
of $10.00 per share.
Dividends. Holders of Class A Preferred Stock are entitled to receive, when,
as and if declared by the Board of Directors out of legally available funds,
dividends at an annual rate of $1.00 per share, payable semi-annually in arrears
on June 30 and December 31 of each year, in cash or in shares of Class A
Preferred Stock at the rate of $10.00 per share. Dividends accrue and are
cumulative from the most recent date to which dividends have been paid. The
Class A Preferred Stock has priority as to dividends over the Common Stock and
all other series or classes of the Company's stock that rank junior to the Class
A Preferred Stock ("Junior Dividend Stock"). No dividend (other than dividends
payable solely in Common Stock, Junior Dividend Stock or warrants or other
rights to acquire Common Stock or Junior Dividend Stock) may be paid or set
apart for payment on, and no purchase, redemption or other acquisition may be
made by the Company of, the Common Stock or Junior Dividend Stock unless all
accrued and unpaid dividends on the Class A Preferred Stock, including the full
dividend for the then-current semi-annual dividend period, has been paid.
Preference on Liquidation. In a case of the voluntary or involuntary
liquidation, dissolution or winding up of the Company, holders of shares of
Class A Preferred Stock then outstanding will be entitled to be paid out of the
38
<PAGE>
assets of the Company available for distribution to stockholders an amount in
cash equal to $10.00 per share, plus an amount equal to any accrued and unpaid
dividends, whether or not declared, to the payment date, before any payment or
distribution is made to the holders of Common Stock or any other series or class
of stock that ranks junior as to liquidation rights to the Class A Preferred
Stock.
Voting. The holders of Class A Preferred Stock have no voting rights except
as required by law. In exercising any voting rights, each outstanding share of
Class A Preferred Stock will be entitled to one vote.
Conversion Rights. Each holder of Class A Preferred Stock has the right, at
the holder's option, to convert any or all shares into Common Stock at any time
at a conversion price (subject to adjustment as described below) of the lower of
(i) the price per share of Common Stock in the Offering, or (ii) 80% of the
average of the closing bid and asked price per share of Common Stock on the day
prior to the conversion date. If the Class A Preferred Stock is called for
redemption, the conversion right will terminate at the close of business on the
redemption date fixed by the Board of Directors.
The conversion price is subject to adjustment in certain events, including (i)
the payment of a dividend on any class of the Company's capital stock in shares
of Common Stock or any other securities issued by the Company or any of its
subsidiaries; (ii) subdivisions or combinations of the Common Stock; (iii) the
issuance to all holders of Common Stock of rights or warrants to subscribe for
or purchase Common Stock or securities convertible into or exchangeable for
Common Stock, for a consideration per share of Common Stock less than the
current market price per share on the date of issuance of the securities.
Registration Rights. The Company has agreed to register for resale under the
Securities Act of 1933, as amended ("Securities Act") any shares of Common Stock
issued upon conversion of shares of the Class A Preferred Stock.
Registrar, Transfer Agent, Conversion Agent and Dividend Disbursing Agent.
The Company serves as the transfer agent, conversion agent, conversion agent and
dividend disbursing agent of the Class A Preferred Stock.
WARRANTS
Each Warrant offered hereby, Bridge Warrant, and warrant included in the
Underwriter's Purchase Option (referred to collectively in this section as the
"IPO Warrants") will entitle the registered holder to purchase one share of the
Company's Common Stock at exercise prices of (i) $___ per share with respect to
the Warrants and the Bridge Warrants and (ii) $____ per share with respect to
the warrants included in the Underwriter's Purchase Option, during the four-year
period commencing one year from the date of this Prospectus. No fractional
shares of Common Stock will be issued in connection with the exercise of IPO
Warrants. Upon exercise, the Company will pay the holder the value of any such
fractional shares in cash, based upon the market value of the Common Stock at
such time.
Unless extended by the Company at its discretion, the IPO Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event that a holder of IPO Warrants fails to exercise the
IPO Warrants prior to their expiration, the IPO Warrants will expire and the
holder thereof will have no further rights with respect to the IPO Warrants.
The Company may redeem the IPO Warrants at a price of $.01 per Warrant at any
time once they become exercisable upon not less than 30 days' prior written
notice, provided that the last sales price of the Common Stock has been at least
$10.00 per share on all 20 of the trading days ending on the third day prior to
the day on which the notice is given.
No IPO Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise
of such IPO Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state of residence of the holder
of such IPO Warrants. Although the Company intends to have all shares so
qualified for sale in those states where the Securities are being offered and to
maintain a current prospectus relating thereto until the expiration of the IPO
Warrants, subject to the terms of the Warrant Agreement, there can be no
assurance that it will do so.
39
<PAGE>
A holder of IPO Warrants will not have any rights, privileges or liabilities
as a stockholder of the Company prior to exercise of the IPO Warrants. The
Company is required to keep available a sufficient number of authorized shares
of Common Stock to permit exercise of the IPO Warrants.
The exercise price of the IPO Warrants and the number of shares issuable upon
exercise of the IPO Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions, and reclassifications. No assurance can be given that the market
price of the Common Stock will exceed the exercise price of the IPO Warrants at
any time during the exercise period.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York 10005 and its telephone number is
(212) 936-5100.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation provide that officers and directors
may be indemnified by the Company to the fullest extent permissible under
Delaware law. The General Corporation Law of the State of Delaware limits the
personal liability of a director or officer to the Company for monetary damages
for breach of fiduciary duty or care as a director. Liability is not limited
for (i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock repurchases or redemptions, or (iv) any transaction from
which the director derived an improper personal benefit.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 5,315,589
shares of Common Stock, not including shares of Common Stock issuable upon the
conversion of the Class A Preferred Stock or the exercise of outstanding
options, warrants or the Underwriter's Purchase Option and assuming no exercise
of the over-allotment option granted to the Underwriter. Of these outstanding
shares, the 1,750,000 shares of Common Stock sold to the public in the Offering,
the 656,250 Bridge Shares, the 67,606 Interim Shares and the 372,114 Insider
Shares may be freely traded without restriction or further registration under
the Securities Act, except that any shares that may be held by an "affiliate" of
the Company (as that term is defined in the rules and regulations under the
Securities Act) may be sold only if registered under the Securities Act or
pursuant to an exemption from registration under the Securities Act, including
the exemption provided by Rule 144 adopted thereunder ("Rule 144").
The 3,565,589 shares of Common Stock outstanding prior to the Offering other
than the Bridge Shares, the Interim Shares and the Insider Shares (a total of
2,469,619 shares) are "restricted securities" as that term is defined in Rule
144 ("Restricted Securities") and may not be sold unless such sale is registered
under the Securities Act, or is made pursuant to an exemption from registration
under the Securities Act, including the exemption provided by Rule 144. All of
such shares will be available for sale pursuant to Rule 144 commencing February
7, 1998, two years after the acquisition thereof by the respective stockholders.
TIA, CFS, all of the officers and directors of the Company and certain others
who were stockholders of the Company as of February 7, 1996, have agreed that
for a period of 24 months from the date of this Prospectus, they will not sell
any of such shares (a total of 2,412,832 shares) without the prior written
approval of the Underwriter. In addition, the owners of the Bridge Shares, the
Interim Shares and the Insider Shares have agreed that for a period of 12 months
from the date of this Prospectus, they will not sell any of such shares (a total
of 1,095,970 shares) without the prior written approval of the Underwriter.
Such lock-ups, however, do not apply to any shares purchased by such persons in
the Offering or thereafter in the public market, and such lock-up only extends
for a period of 12 months from the date of this Prospectus with respect to
shares of Common Stock acquired on the conversion by TIA and/or CFS of shares of
Class A Preferred Stock.
In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned any
Restricted Shares for at least two years (including a stockholder who may be
deemed to
40
<PAGE>
be an affiliate of the Company), will be entitled to sell, within any three-
month period, that number of shares that does not exceed the greater of (i) 1%
of the then outstanding shares of Common Stock or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
date on which notice of such sale is given to the Commission, provided certain
public information, manner of sale and notice requirements are satisfied. A
stockholder who is deemed to be an affiliate of the Company, including members
of the Board of Directors and executive officers of the Company, will still need
to comply with the restrictions and requirements of Rule 144, other than the
two-year holding period requirement, in order to sell shares of Common Stock
that are not Restricted Securities, unless such sale is registered under the
Securities Act. A stockholder (or stockholders whose shares are aggregated) who
is deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale by such stockholder, and who has beneficially owned
Restricted Securities for at least three years, will be entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
In addition, any employee, officer or director of or consultant to the Company
who purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701 under the
Securities Act ("Rule 701"). Rule 701 permits affiliates to sell their shares
which are subject to Rule 701 ("Rule 701 shares") under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell Rule 701 shares in reliance on Rule 144
without having to comply with the public information, volume limitation or
notice provisions of Rule 144. In both cases, a holder of Rule 701 shares is
required to wait until 90 days after the date of this Prospectus. All holders
of stock options under the Company's Stock Option Plan will be required to agree
not to dispose of Rule 701 shares for a period of 24 months from the date of
this Prospectus without the consent of the Underwriter.
Prior to the Offering, there has been no public trading market for the Common
Stock of the Company, and no predictions can be made of the effect, if any, that
future sales of shares or the availability of shares for sale will have on the
market price prevailing from time to time. Nevertheless, sales of substantial
amounts of Common Stock in the public market could adversely affect the then-
prevailing market price.
UNDERWRITING
The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company a total of 1,750,000 shares
of Common Stock and 1,750,000 IPO Warrants.
The obligations of the Underwriter under the Underwriting Agreement are
subject to approval of certain legal matters by counsel and various other
conditions precedent, and the Underwriter is obligated to purchase all of the
Securities offered by this Prospectus (other than the Securities covered by the
over-allotment option described below), if any are purchased.
The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the initial offering price set forth on the cover
page of this Prospectus and to certain dealers at that price less a concession
not in excess of $ per share of Common Stock and $ per IPO Warrant. The
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ per share of Common Stock and $ per IPO Warrant to certain other
dealers. After the Offering, the offering price and other selling terms may be
changed by the Underwriter.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriter an expense allowance on a nonaccountable
basis equal to 3% of the gross proceeds derived from the sale of the Securities
underwritten (including the sale of any Securities subject to the Underwriter's
over-allotment option), $50,000 of which has been paid to date. The Company
also has agreed to pay all expenses in connection with qualifying the Securities
offered hereby for sale under the laws of such states as the Underwriter may
designate and registering the Offering with the National Association of
Securities Dealers, Inc., including fees and expenses of counsel retained for
such purposes by the Underwriter.
The Company has granted to the Underwriter an option, exercisable during the
45-day period after the date of this Prospectus, to purchase from the Company at
the initial offering price, less underwriting discounts and the
41
<PAGE>
nonaccountable expense allowance, up to an aggregate of 262,500 additional
shares of Common Stock and 262,500 additional IPO Warrants for the sole purpose
of covering over-allotments, if any.
In connection with the Offering, the Company has agreed to sell to the
Underwriter for an aggregate of $100 the Underwriter's Purchase Option,
consisting of the right to purchase up to an aggregate of 175,000 shares of
Common Stock and 175,000 IPO Warrants. The Underwriter's Purchase Option is
exercisable initially at a price equal to 110% of the initial offering price of
the Securities for a period of four years commencing one year from the date
hereof. The Underwriter's Purchase Option may not be transferred, sold,
assigned or hypothecated during the one-year period following the date of this
Prospectus except to officers of the Underwriter and the selected dealers and
their officers or partners. The Underwriter's Purchase Option grants to the
holders thereof certain "piggyback" and demand rights for periods of seven and
five years, respectively, from the date of this Prospectus with respect to the
registration under the Securities Act of the securities directly and indirectly
issuable upon exercise of the Underwriter's Purchase Option.
Prior to the Offering there has been no public market for any of the Company's
securities. Accordingly, the offering price of the Securities and the terms of
the IPO Warrants have been arbitrarily determined by negotiation between the
Company and the Underwriter and do not necessarily bear any relation to
established valuation criteria. Factors considered in determining such prices
and terms, in addition to prevailing market conditions, include an assessment of
the prospects for the industry in which the Company competes, the Company's
management and the Company's capital structure.
Pursuant to the Underwriting Agreement, all of the officers and directors of
the Company, and TIA and CFS, the principal shareholders of the Company, have
agreed not to sell any of their shares of Common Stock for a period of 24 months
from the date of this Prospectus, subject to certain exceptions, without the
prior written consent of the Underwriter. For a period of three years following
the Offering, the Underwriter has the right, in certain circumstances, to
purchase for its account or to sell for the account of insiders of the Company
any securities sold by such insiders under Rule 144. In addition, the
Underwriting Agreement provides that, for a period of five years from the date
of this Prospectus, the Company will recommend and use its best efforts to elect
a designee of the Underwriter as a member of its Board of Directors. If the
Underwriter does not choose to designate a board member, the Company will permit
the Underwriter to send an individual to observe meetings of the Board of
Directors. Such observer will not be a member of the Board of Directors and
will not be entitled to vote on any matters before the Board. The Underwriter
has not yet selected a designee and the Underwriter may designate different
individuals to serve in this capacity from time to time.
In February 1996, the Underwriter acted as placement agent for the February
Bridge Financing and was paid a commission of $277,500 (10%) and a
nonaccountable expense allowance of $83,250 (3%). In May 1996, the Underwriter
acted as placement agent for $500,000 of the May Bridge Financing and was paid
$50,000 as a commission and nonaccountable expense allowance.
SELLING SECURITYHOLDERS AND PLAN OF DISTRIBUTION
The Company has agreed to register for sale under the Securities Act
concurrently with the Offering, the Bridge Warrants, the shares of Common Stock
underlying the Bridge Warrants, the Bridge Shares the Interim Financing Shares,
and the Insider Shares, and to pay all expenses in connection therewith. An
aggregate of 1,312,500 Bridge Warrants, 1,312,500 shares issuable upon exercise
of the Bridge Warrants, 656,250 Bridge Shares, 67,606 Interim Financing Shares
and 372,114 Insider Shares may be offered and sold pursuant to this Prospectus
by the holders thereof. The securities offered by the Bridge Holders, the
Interim Financing Holders and the Insider Holders (collectively, the "Selling
Securityholders") are not part of the underwritten Offering. The Company will
not receive any of the proceeds from the sale of the Bridge Warrants, the shares
of Common Stock issuable upon exercise of the Bridge Warrants, the Bridge
Shares, the Interim Financing Shares, or the Insider Shares.
The Bridge Holders in the February Bridge Financing made loans to the Company
aggregating $2.775 million and received the February Bridge Notes, 416,250
Bridge Shares and 832,500 Bridge Warrants. The Bridge Holders in the May Bridge
Financing made loans to the Company aggregating $1.2 million and received the
May Bridge Notes, 240,000 Bridge Shares and 480,000 Bridge Warrants. Upon the
consummation of the Offering, each of the
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<PAGE>
Bridge Warrants will be exchanged automatically for a like number of IPO
Warrants. The Interim Financing Holders made loans to Amertranz aggregating
$350,000 in connection with the Interim Financing and received the Interim Notes
and the Interim Financing Shares. The Insider Holders founded one of the
Company's predecessors, made loans to Amertranz at various times aggregating
$1,379,110 and/or arranged for the Combination, and received options to purchase
shares of Amertranz common stock, some of which options were exercised prior to
the Combination. As part of the transactions under the Exchange Agreement, these
loans, options, and shares were assigned by the Insider Holders to the Company
in exchange for an aggregate of 741,733 shares of Common Stock and other
consideration. Of such 741,733 shares, 372,114 shares are being registered under
the Registration Statement of which this Prospectus forms a part. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition on
Results of Operations-Liquidity and Capital Resources" and "Certain
Transactions".
The shares of Common Stock, Warrants and shares of Common Stock underlying
such warrants registered for sale on behalf of the Selling Securityholders under
the Registration Statement of which this Prospectus forms a part may be offered
and sold from time to time as market conditions permit in the over-the-counter
market, or otherwise, at prices and terms then prevailing or at prices related
to the then-current market price, or in negotiated transactions. However, none
of such securities may be sold prior to one year following the consummation of
the Offering without the prior written consent of the Underwriter. Such
securities may be sold by one or more of the following methods, without
limitation: (i) a block trade in which a broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (iv) transactions
between sellers and purchasers without a broker/dealer. In effecting sales,
brokers or dealers engaged by the holders may arrange for other brokers or
dealers to participate. Such brokers or dealers may receive commissions or
discounts from holders in amounts to be negotiated. Such brokers and dealers
and any other participating brokers and dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales.
The following table sets forth the name of each Selling Securityholder and the
number of Warrants and shares of Common Stock beneficially owned prior to sale,
including options exercisable for shares of Common Stock within 60 days of the
date of this Prospectus. Except as indicated, all of such shares and warrants
are being registered for sale under the Registration Statement of which this
Prospectus forms a part, and the Company believes that all such shares and
warrants will be owned by the respective holders thereof following the
consummation of the Offering and prior to resale. Except as indicated, none of
the Selling Securityholders has ever held any position or office with the
Company or had any other material relationship with the Company.
<TABLE>
<CAPTION>
NUMBER NUMBER
SELLING SECURITYHOLDERS OF SHARES OF WARRANTS
----------------------- --------- -----------
<S> <C> <C>
Leon Abramson................................................... 3,750 7,500
John Aletti..................................................... 3,750 7,500
ALSA, Inc....................................................... 7,500 15,000
David Stephen Becker............................................ 3,750 7,500
Neil Bellett.................................................... 3,750 7,500
Robert Bender................................................... 3,750 7,500
Stanley H. Blum................................................. 7,500 15,000
Eliot H. Brown.................................................. 3,750 7,500
Glenn Cadrez.................................................... 3,750 7,500
William C. Clement.............................................. 3,750 7,500
Kenneth D. Cole................................................. 7,500 15,000
Henri Cristini.................................................. 3,750 7,500
William J. Curtis............................................... 7,500 15,000
Dalewood Associates, L.P........................................ 65,000(1) 130,000
Robert Dorskind................................................. 3,750 7,500
Craig Effron.................................................... 7,500 15,000
Drew Effron..................................................... 3,750 7,500
Kenneth M. Endelson............................................. 3,750 7,500
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
SELLING SECURITYHOLDERS OF SHARES OF WARRANTS
----------------------- --------- -----------
<S> <C> <C>
Richard Etra.................................................... 3,750 7,500
Steven Etra..................................................... 3,750 7,500
Melvin Finkelstein.............................................. 3,750 7,500
Gordon M. Freeman............................................... 7,500 15,000
Jack Gold....................................................... 3,750 7,500
Lloyd Goldman................................................... 3,750 7,500
Ernest Gottdiener............................................... 3,750 7,500
Leigh Gove...................................................... 3,750 7,500
Paula Graff..................................................... 3,750 7,500
Anthony S. Graffeo and Angelina Graffeo......................... 3,750 7,500
Bruce Greenberg................................................. 15,000 30,000
Glenda Guttentag................................................ 3,750 7,500
Gary C. & Kathleen R. Hall JTWROS............................... 3,750 7,500
Robert L. Jacobs................................................ 3,750 7,500
Frank and Charlotte Joy JTWROS.................................. 3,750 7,500
Stuart Kahn & Company........................................... 3,750 7,500
Daniel A. Kaplan................................................ 3,750 7,500
Delaware Charter Custodian for C. Daniel Karnes - IRA Account... 3,750 7,500
Rebecca Jane Karpoff and Stefan Shoup JTWROS.................... 3,750 7,500
Richard C. Kaufman and Elaine J. Lenart JTWROS.................. 3,750 7,500
Donald M. Kleban................................................ 7,500 15,000
Michael Kremins................................................. 3,750 7,500
Norman Kurtz.................................................... 3,750 7,500
David Kushner................................................... 3,750 7,500
Steven and Rona Landman JTWROS.................................. 1,875 3,750
Boris and Marina Laskin JTWROS.................................. 3,750 7,500
Alex Lauchlin................................................... 3,750 7,500
Donald R. Levin................................................. 3,750 7,500
William Levin................................................... 3,750 7,500
Paul D. Levitt & Leslie Levitt Revocable Trust.................. 3,750 7,500
Stephen Lewen................................................... 3,750 7,500
Irwin Lieber.................................................... 3,750 7,500
Mariwood Investments............................................ 3,750 7,500
Joseph and Georgia Melnick JTWROS............................... 15,000 30,000
Eli Oxenhorn.................................................... 3,750 7,500
Robert J. Parkes & Carol J. Parkes JTWROS....................... 3,750 7,500
RJB Partners.................................................... 3,750 7,500
Patricia Reyes.................................................. 3,750 7,500
Jonathan Robinson............................................... 7,500 15,000
Andrew Rosen.................................................... 3,750 7,500
Martin Rosenman................................................. 3,750 7,500
William J. Rouhana, Jr.......................................... 3,750 7,500
The Marilyn and Barry Rubenstein Family Foundation.............. 7,500 15,000
Alan J. Rubin................................................... 3,750 7,500
Jeff Rubin...................................................... 3,750 7,500
S.V. Construction Company....................................... 3,750 7,500
Scott G. Sandler................................................ 3,750 7,500
John Sarracco................................................... 3,750 7,500
Curtis Schenker................................................. 3,750 7,500
Sharon Schneider................................................ 3,750 7,500
Carl E. Siegel.................................................. 3,750 7,500
Dean Spellman................................................... 1,875 3,750
Charles Stentiford.............................................. 3,750 7,500
Mitchell Stern.................................................. 3,750 7,500
Craig Swift..................................................... 3,750 7,500
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER
SELLING SECURITYHOLDERS OF SHARES OF WARRANTS
----------------------- --------- -----------
<S> <C> <C>
David Thalheim.................................................. 7,500 15,000
Frank K. Turner................................................. 3,750 7,500
United Growth Fund Profit Sharing, Inc.......................... 3,750 7,500
Marie E. Valdes................................................. 3,750 7,500
Richard Warren.................................................. 3,750 7,500
Charles Warshaw................................................. 3,750 7,500
Weiskopf Silver & Co............................................ 3,750 7,500
Michael Weissman................................................ 7,500 15,000
Lance Wolfson................................................... 3,750 7,500
William Wolfson................................................. 15,000 30,000
Woodland Partners............................................... 65,000(1) 130,000
Leonard Zelin................................................... 7,500 15,000
MH Capital Partners............................................. 8,796 --
155964 Canada, Inc.............................................. 8,796 --
Clinton Company................................................. 8,796 --
Swan Alley Nominees............................................. 41,218 --
Philip S. Rosso, Jr.(2)......................................... 198,667(2) --
Martin Hoffenberg(3)............................................ 165,541(3) --
David R. Pulk(4)................................................ 117,111(4) --
Michael Barsa(5)................................................ 281,010(5) 50,000
Bruce Brandi(6)................................................. 21,564(6) --
Edward R. Reedy(7).............................................. 23,480(7) --
Anil K. Bhandari................................................ 14,363 --
Michael Kilzi................................................... 12,971 --
Allan Rubin Trust............................................... 57,771(8) --
Barrett Fischer................................................. 7,098 --
Jean Barsa...................................................... 40,965 30,000
Truck Net, Inc.................................................. 14,570 --
Brent Burns..................................................... 3,617 --
TIA, Inc.(9).................................................... 1,780,000(9) 200,000
- ---------------------
</TABLE>
(1) Represents 1.2% of the outstanding shares of Common Stock following
consummation of the Offering.
(2) Represents 3.7% of the outstanding shares of Common Stock following
consummation of the Offering. Only 41,460 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. Mr. Rosso serves as Senior Vice President
Operations of Amertranz.
(3) Represents 3.1% of the outstanding shares of Common Stock following
consummation of the Offering. Only 40,000 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. Mr. Hoffenberg is the former Chief Executive
Officer of Amertranz.
(4) Includes options to purchase 43,816 shares of Common Stock, and represents
2.2% of the outstanding shares of Common Stock following consummation of the
Offering. 73,295 of such shares are being registered for sale under the
Registration Statement of which this Prospectus forms a part. Mr. Pulk is
the former President, International Division of Amertranz.
(5) Includes options to purchase 154,477 shares of Common Stock, and represents
5.1% of the outstanding shares of Common Stock following consummation of the
Offering. Only 96,451 of such shares are being registered for sale under
the Registration Statement of which this Prospectus forms a part. Mr. Barsa
is the former Chief Financial Officer of Amertranz and is a director, Vice
President and Secretary of the Company.
(6) Includes options to purchase 14,196 shares of Common Stock. 7,368 of such
shares are being registered for sale under the Registration Statement of
which this Prospectus forms a part. Mr. Brandi serves as the President of
Amertranz.
(7) Includes options to purchase 21,295 shares of Common Stock. 2,185 of such
shares are being registered for sale under the Registration Statement of
which this Prospectus forms a part. Mr. Reedy is the former Senior Vice
President, International Division of Amertranz.
(8) Represents 1.1% of the outstanding shares of Common Stock following
consummation of the Offering.
(9) Represents 33.5% of the outstanding shares of Common Stock following
consummation of the Offering. Only 100,000 of such shares are being
registered for sale under the Registration Statement of which this
Prospectus forms a part. See footnote (2) under "Principal Stockholders".
45
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Ferber Greilsheimer Chan & Essner, New York, New York. Graubard
Mollen & Miller, New York, New York, has acted as counsel for the Underwriter in
connection with the Offering.
EXPERTS
The consolidated financial statements and schedules included in this
prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
The financial statements of The Freight Forwarding Business of TIA and CFS
(the Air Freight Business of TIA, Inc. and Subsidiary) for each of the years in
the three-year period ended December 31, 1995, have been included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits thereto, certain portions having been omitted from this
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, the securities offered by this
Prospectus and such omitted information, reference is made to the Registration
Statement, including any and all exhibits and amendments thereto. Statements
contained in this Prospectus concerning the provisions of any document filed as
an exhibit are of necessity brief descriptions thereof and are not necessarily
complete, and in each instance reference is made to the copy of the document
filed as an exhibit to the Registration Statement, each such statement being
qualified in its entirety by this reference.
Following the effectiveness of the Registration Statement, the Company will be
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith the Company will file reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
such material, including the Registration Statement, can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
The Company's fiscal year ends on June 30 in each year. The Company intends
to furnish its stockholders with annual reports containing financial statements
which will be audited and reported on by its independent public accounting firm,
and such other periodic reports as the Company may determine to be appropriate
or as may be required by law.
46
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AMERTRANZ WORLDWIDE HOLDING CORP.
Report of Independent Public Accountants.............................. F-2
Consolidated Balance Sheet as of February 7, 1996..................... F-3
Notes to Consolidated Balance Sheet................................... F-4
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS (THE AIR FREIGHT BUSINESS
OF TIA, INC. AND SUBSIDIARY)
Independent Auditors' Report.......................................... F-13
Statements of Operations for the Years Ended December 31, 1993,
1994 and 1995.................................................... F-14
Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995.................................................... F-15
Notes to Financial Statements......................................... F-17
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
Report of Independent Public Accountants............................. F-23
Consolidated Balance Sheets as of December 31, 1995 (unaudited)
and June 30, 1994 and 1995...................................... F-24
Consolidated Statements of Operations for the Years
Ended June 30, 1993, 1994 and 1995 and for the Six Months
Ended December 31, 1994 and 1995 (unaudited).................... F-25
Consolidated Statements of Stockholders' Equity (Deficit) for the
for the Years Ended June 30, 1994 and 1995 and for the
Six Months Ended December 31, 1995 (unaudited).................. F-26
Consolidated Statements of Cash Flows for the Years Ended June 30,
1993, 1994 and 1995 and for the Six Months Ended December
31, 1995 (unaudited)............................................ F-27
Notes to Consolidated Financial Statements...................... F-28
PRO FORMA FINANCIAL INFORMATION
Amertranz Worldwide Holding Corp. Pro Forma Consolidated Statement
of Operations for the Year Ended December 31, 1995 (unaudited).. F-37
Notes to Management's Assumptions to Pro Forma Consolidated Statement
of Operations (unaudited)....................................... F-38
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide Holding Corp.:
We have audited the accompanying consolidated balance sheet of Amertranz
Worldwide Holding Corp., a Delaware corporation, as of February 7, 1996. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Amertranz Worldwide Holding Corp.
as of February 7, 1996, in conformity with generally accepted accounting
principles.
The accompanying consolidated balance sheet has been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated balance sheet, the Company has negative working capital and
negative tangible net worth at February 7, 1996. A subsidiary of the Company
has incurred significant losses that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to these
matters are also discussed in Note 3. The consolidated balance sheet does not
include any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
New York, New York
April 12, 1996, except with respect
to the matters discussed in Note 12 for
which the date is May 1, 1996
F-2
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
CONSOLIDATED BALANCE SHEET
FEBRUARY 7, 1996
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
Cash $ 2,420,926
Accounts receivable 2,804,896
Prepaid expenses and other current assets 475,026
Due from affiliates 5,729
Taxes receivable 53,579
-----------
Total current assets 5,760,156
PROPERTY AND EQUIPMENT, net (Note 6) 812,963
OTHER ASSETS 156,610
DEBT ISSUANCE COST (Note 7) 2,292,273
GOODWILL (Notes 1 and 5) 12,092,195
-----------
Total assets $21,114,197
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 6,001,366
Accrued expenses 1,796,016
Current portion of long-term debt (Note 7) 3,282,798
Lease obligation - current portion (Note 9) 20,143
-----------
Total current liabilities 11,100,323
LONG-TERM DEBT (Note 7) 12,340,064
LEASE OBLIGATION -- LONG-TERM (Note 9) 27,345
-----------
Total liabilities 23,467,732
-----------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value; 15,000,000 shares authorized,
3,325,589 shares issued and outstanding 33,256
Paid in capital 7,613,209
Accumulated deficit (10,000,000)
-----------
Total stockholders' equity (deficit) (2,353,535)
-----------
Total liabilities and stockholders' equity (deficit) $21,114,197
===========
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET
FEBRUARY 7, 1996
1. COMPANY BACKGROUND:
-------------------
In January 1996, Amertranz Worldwide Holding Corp. ("Holding" or the "Company")
was incorporated in the state of Delaware. Effective February 7, 1996, Holding
concluded an Asset Exchange Agreement with TIA, Inc. ("TIA"), Caribbean Freight
Systems, Inc. ("CFS"), Amertranz Worldwide, Inc. ("Amertranz") and the
stockholders and convertible note holders of Amertranz. As part of this
transaction, Holding received (i) all of the issued and outstanding stock of
Amertranz, (ii) $1,379,110 in convertible notes of Amertranz, (iii) the air
freight forwarding business of TIA and CFS and (iv) 99% of the issued and
outstanding stock of Amertranz Belgium. Holding then contributed the air
freight forwarding business of TIA and CFS to Caribbean Air Services, Inc.
("CAS") in return for all of the issued and outstanding shares of CAS. TIA and
CFS received a $10,000,000 promissory note, as discussed in Note 7, in addition
to stock in the Company.
CAS and Amertranz are wholly-owned consolidated subsidiaries. The transaction
stated above has been accounted for as a purchase of Amertranz in exchange for
stock in Holdings. CFS and TIA are treated as predecessors and accordingly
their assets and liabilities are reflected in Holdings at their historical
carrying values. CAS was incorporated in the state of Delaware in January 1996,
to continue the air freight forwarding business of TIA and CFS.
Holding provides air freight forwarding services both internationally and
domestically.
On November 20, 1995, the Company entered into a letter of intent with an
underwriter, as revised on January 23, 1996, to pursue an Initial Public
Offering of its common stock (the "IPO"). The offering contemplates the sale of
1,750,000 shares of common stock and 1,750,000 redeemable common stock purchase
warrants ("IPO Warrants"), exclusive of a 45-day option granted to the
underwriter to purchase an additional 15% of total common stock and IPO Warrants
at the initial public offering price. The securities in the offering may be
purchased only together, on the basis of one share of common stock and one IPO
Warrant. Each IPO Warrant entitles the holder to purchase one share of common
stock at the initial public offering price (subject to adjustment for anti-
dilution in the event of stock dividends, stock splits, combinations, sub
divisions and reclassifications) and is exercisable commencing one year from the
effective date of the Company's Registration Statement ("Effective Date"). The
IPO Warrants are redeemable by the Company for $.01 per warrant, in the event
that the last sale price of the Company's common stock has been at least $10.00
per share for each of the 20 consecutive trading days ending on the third day
prior to the date on which notice of redemption is given.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Significant accounting policies of the Company, as summarized below, are in
conformity with generally accepted accounting principles. 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.
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of Holdings,
Amertranz and CAS. All significant intercompany accounts and transactions have
been eliminated.
F-4
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
Revenue Recognition
- -------------------
Revenue from freight forwarding is recognized upon delivery of goods and
expenses associated with the cost of transportation are accrued concurrently.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is computed under the
straight-line method over estimated useful lives ranging from 3 to 8 years.
Assets under capital leases are depreciated over the shorter of the estimated
useful life of the asset or the lease term. The Company utilizes a half-year
convention for assets in the year of acquisition and disposal.
Goodwill
- --------
Goodwill represents the excess of cost over the net assets acquired and is
amortized on a straight-line basis over 25 years.
Recently Issued Accounting Standards
- ------------------------------------
During March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This
statement establishes financial accounting and reporting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. This statement is effective
for financial statements for fiscal years beginning after December 15, 1995,
although earlier application is encouraged. The Company does not expect that
the adoption of SFAS No. 121 will have a material adverse effect on its
consolidated financial statements.
Income Taxes
- ------------
For income tax purposes, the Company follows the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires an asset and liability approach for financial
accounting and reporting for income taxes. Under SFAS 109, deferred taxes are
provided for temporary differences between the carrying value of assets and
liabilities for financial reporting and tax purposes at the enacted rate at
which these differences are expected to reverse.
Stock Options
- -------------
The Company grants stock options to certain officers and related parties.
Compensation expense is recognized based upon the aggregate difference between
the fair market value of the Company's stock at date of grant and the option
price. Compensation expense is recognized equally over the vesting period.
3. GOING CONCERN AND RISK FACTORS:
-------------------------------
As reflected in the consolidated balance sheet, the Company has negative working
capital and negative tangible net worth at February 7, 1996. The Company's
continued existence is dependent upon its ability to achieve and maintain
profitable operations. The Company plans on capitalizing on the synergies
created by the combination of Amertranz and CAS to take advantage of under
utilized operations, infrastructure and purchased freight space. Accordingly,
with
F-5
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
slight increases in operating expenses, the Company can operate additional
revenue and profitability. Furthermore, the Company has signed a letter of
intent with underwriters to provide an Initial Public Offering in calendar 1996
which should provide the Company with approximately $8,940,000 of which
approximately $2,500,000 will be available to pay past due trade payables and be
used for working capital. The Company believes that its cash resources augmented
by the IPO will be sufficient to fund the Company's operations through April
1997.
Risk Factors
- ------------
Substantial Losses; Accumulated Deficit; Working Capital Deficit
----------------------------------------------------------------
Although Amertranz generated approximately $24.0 million in revenues in the 12
months ended December 31, 1995, it incurred operating losses of approximately
$6.1 million for such period, had an accumulated deficit of approximately $7.2
million as of December 31, 1995, and its current liabilities exceed its current
assets. While the freight forwarding business of TIA and CFS was profitable
during the year ended December 31, 1995, on a combined pro forma basis the
Company incurred operating losses for such period of $3.1 million. As of
February 7, 1996, the Company, on a consolidated basis, had an accumulated
deficit of $10.0 million. The Company will be unable to achieve profitability
unless it improves its operating results. There can be no assurance that the
Company will be able to increase revenues or achieve profitability. Management
anticipates that losses will continue for the foreseeable future.
Limited Working Capital; Need for Additional Funding
----------------------------------------------------
Although the TIA/CFS freight forwarding business has generated positive cash
flow from operations, the cash flow from the operations of the Amertranz
business has not been sufficient to finance trade payables, capital equipment
requirements and new office expansion and development. As a result, Amertranz
has engaged in interim borrowing from various sources. In addition to the
proceeds from the IPO and current borrowings, the Company may require additional
financing in the future. The Company currently has no commitments from any
prospective lenders with respect to any such financing. The terms of the
Company's current borrowings substantially limit the Company's flexibility in
obtaining additional financing. There can be no assurance that any additional
financing will be available to the Company and, if available, upon acceptable
terms, if and when needed, would have a material adverse effect on the Company's
operations results.
Substantially all of Proceeds to be Used to Satisfy Certain Indebtedness
------------------------------------------------------------------------
and Overdue Payables; Broad Discretion in Application of Remaining Proceeds
---------------------------------------------------------------------------
Approximately $6,458,000, or 72%, of the net proceeds to be received by the
Company from the IPO will be used to repay outstanding indebtedness, including
interest thereon. Additionally, $1,000,000, or 13%, of such proceeds will be
used to repay overdue trade payables. Accordingly, such funds will not be
available for use in the Company's business. Furthermore, the Company will have
broad discretion as to the application of the remaining $1,482,000 allocated to
working capital and general corporate purposes.
4. CONCENTRATION OF RISKS:
-----------------------
Current Vulnerability Due to Certain Concentrations
- ---------------------------------------------------
The Company's ability to service its customers depends on the availability of
space on air passenger and cargo airlines and trucking carriers. Although the
Company does not believe the lack of freight space has had a significant impact
F-6
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
FEBRUARY 7, 1996
on its ability to book space to date, significant shortages of suitable space
and associated increases in rates charged by carriers could have a material
adverse effect on the Company's future operating results.
The Company's future operating results are dependent upon the economic
environments in which it operates. Demand for the Company's services could be
adversely affected by economic conditions in the industries of the Company's
customers. A number of Amertranz's principal customers are in the fashion,
personal computer and electronics industries. Adverse conditions in any of
these industries or loss of the major customers in such industries could have a
material adverse impact upon the Company. The Company expects the demand for
its services (and consequently results of operations) to continue to be
sensitive to domestic and, increasingly, global economic conditions and other
factors beyond its control.
In addition, the transport of freight, both domestically and internationally, is
highly competitive and price sensitive. Changes in the volume of freight
transported, shippers preferences as to the timing of deliveries as a means to
control shipping costs, economic and political conditions, both in the United
States and abroad, work stoppages, United States and foreign laws relating to
tariffs, trade restrictions, foreign investments and taxation may all have a
significant impact on the overall business of the Company, its growth and
profitability.
Supplier and Credit Concentration
- ---------------------------------
CAS charters the flight operations of an L-1011 from one supplier. Although
there are a limited number of companies that charter or lease L-1011 aircraft,
management believes that other suppliers could provide similar services on
comparable terms. A change in suppliers, however, could cause a delay in the
air cargo operations and a possible loss of sales, which would affect operating
results adversely.
The air cargo industry is impacted by the general economy. Changes in the
marketplace of this industry may significantly affect management's estimates and
the Company's performance.
5. ACQUISITION:
------------
Pursuant to an Asset Exchange Agreement (the "Agreement") dated February 7,
1996, Amertranz Worldwide Holding Corp., a newly created corporation, combined
the freight forwarding business of TIA and CFS with Amertranz. In exchange TIA
and CFS received 2,100,000 shares of common stock of the Company and a
promissory note in the original principal amount of $10,000,000 as described in
Note 7. Holding then contributed the acquired TIA and CFS freight forwarding
business to CAS. Holding also acquired all of the issued and outstanding stock
of Amertranz and the former stockholders of Amertranz received 809,339 shares of
Holding's common stock. The Amertranz transaction has been accounted for as a
purchase and resulted in goodwill of approximately $12.1 million which
represents the excess of the cost over the fair value of the assets acquired.
6. PROPERTY AND EQUIPMENT:
-----------------------
Property and equipment, net consist of the following:
Furniture, fixtures and equipment $ 993,339
Less - Accumulated depreciation and amortization (180,376)
---------
$ 812,963
=========
F-7
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
7. DEBT:
-----
As of February 7, 1996, long-term and short-term debt consisted of the
following:
<TABLE>
<S> <C>
Holding - Promissory note to TIA and CFS (a) $10,000,000
- Bridge loan (b) 2,775,000
Amertranz - Asset-based financing (c) 1,697,862
- Notes payable to TIA (d) 800,000
- Interim financing (e) 350,000
-----------
Total debt 15,622,862
Less: Current portion (3,282,798)
-----------
Long-term debt $12,340,064
===========
</TABLE>
Holding
- -------
Notes Payable
-------------
(a) On February 7, 1996, as part of the Agreement, Holding issued to TIA and
CFS a $10,000,000 promissory note which bears interest at the rate of 8.0%
per annum. The note is payable in five consecutive monthly payments of
principal and interest in the amount of $80,000 each, commencing March 1,
1996, and thereafter monthly payments of principal and interest in the
amount of $166,667 each until the note is paid in full. Upon the conclusion
of the IPO by Holding, $2,000,000 will be due and payable on the note. The
Company intends to convert $2,000,000 of the note into Class A preferred
stock as discussed in Note 8. The note is secured by a first lien on all of
the present and future assets of Holding and is guaranteed by CAS and
Amertranz.
(b) On February 7, 1996, Holding entered into a loan agreement pursuant to a
private placement memorandum with a group of lenders ("Bridge Lenders")
whereby Holding borrowed $2,775,000 and issued promissory notes. The loan
is due at the earlier of (i) the closing of the IPO by Holding or (ii)
February 7, 1998 or (iii) the sale or merger of Holding. The Bridge Lenders
also received 416,250 shares of common stock of Holding, as well as 832,500
warrants to purchase shares of common stock of Holding for five years at
$5.00 per share. These warrants convert into IPO warrants upon the
completion of the IPO by Holding and will be exercisable at the IPO price.
The loan accrues interest at 10% per annum until April 30, 1996 and
thereafter at 15% per annum. The loan is secured by a junior lien on all of
the assets of Holding. The Company has recorded deferred financing costs of
approximately $1,770,000 in connection with the above mentioned Bridge loan
and will amortize the amount over the life of the debt.
Amertranz
- ---------
Asset-Based Financing
---------------------
(c) On March 16, 1995, Amertranz entered into a Purchase and Sale Agreement (as
amended July 5, 1995, October 25, 1995 and February 7, 1996) with a lender
whereby it receives advances of up to 75% of the net amounts of eligible
accounts receivable outstanding to a maximum amount of $3,125,000. The loan
is subject to interest at a rate of 4% per annum over the prevailing prime
rate (12.25%). At February 7, 1996, the outstanding
F-8
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
balance on the credit line was $1,697,862, which represented the full amount
available thereunder. The lender has a security interest in all present and
future accounts receivable, machinery and equipment and other assets of
Amertranz and the loan is guaranteed by Holding.
Notes Payable
-------------
(d) In October 1995, Amertranz obtained a $500,000 subordinated secured loan
from TIA, which was increased to $800,000 in January 1996 ("TIA Loan"). The
original TIA Loan bears interest at the rate of 12% per annum and is
repayable in 12 equal, consecutive monthly payments of principal and
interest commencing 30 days after the closing of the IPO. However, TIA has
agreed that, upon consummation of the IPO, repayment of the TIA Loan will be
deferred. The TIA Loan is secured by a lien on all of the assets of
Amertranz subordinated only to the lien granted to the asset-based financing
lender described above.
(e) Between November 1995 and January 1996, Amertranz obtained financing of
$350,000 ("Interim Financing") and issued $350,000 in aggregate principal
amount of promissory notes. Repayment of the principal amount due under
these notes, together with interest at the rate of 12% per annum is due upon
the earlier of (i) the closing of the IPO by Holding or (ii) February 7,
1998 or (iii) the sale or merger of Holding. The holders of these notes also
received shares of Amertranz common stock that were converted into 67,606
shares of Holding common stock. The Company has recorded a deferred
financing charge of $150,000 in connection with the issuance of the stock
and will amortize the amount over the life of the debt.
Between June 1995 and November 1995, Amertranz borrowed $1,379,110 in
aggregate principal amount from persons affiliated with Amertranz and other
non-affiliated lenders and issued convertible notes therefore. All of
these notes were assigned to Holding as part of the Asset Exchange
Agreement.
CAS
- ---
Asset-Based Financing
---------------------
As part of the Agreement, TIA and CFS have agreed to lend to CAS on a revolving
loan basis, an amount up to the net cash collections of TIA and CFS's accounts
receivable as of February 7, 1996 and additional amounts at the discretion of
TIA and CFS, up to an aggregate maximum of $4,000,000 outstanding at any time,
pursuant to the terms of a Revolving Credit Promissory Note. Only funds
advanced at the discretion of TIA and CFS bear interest, at the greater of (i)
1% per month or (ii) at a rate of 4% over prime. The note is due July 6, 1996.
The note is secured by all of the assets of CAS and is guaranteed by Holding and
Amertranz. As of March 31, 1996, CAS has drawn $3,483,558 on this available
line.
8. STOCKHOLDERS' EQUITY (DEFICIT):
-------------------------------
Stock Options and Warrants
- --------------------------
As of February 7, 1996, the Company had options outstanding to purchase a total
of 615,309 shares of common stock at exercise prices ranging from $.16 to $1.17.
These options replaced outstanding options of Amertranz. The Company also had
warrants outstanding to purchase 832,500 shares of common stock at an exercise
price equal to the exercise price of the IPO Warrants.
F-9
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
Subsequent to the closing Asset Exchange Agreement, the Company requested that
TIA and CFS agree to certain modifications of the terms of the Asset Exchange
Agreement relating to the TIA Loan, the Revolver Note and the Exchange Note. As
part of such revisions, made as of February 7, 1996, the former stockholders and
convertible promissory noteholders of Amertranz agreed to surrender to the
Company, as of February 7, 1996, an aggregate of 298,004 shares of Common Stock
and options to purchase an aggregate of 153,131 shares of Common Stock, and an
additional 150,000 shares of Common Stock in the aggregate were issued to TIA
and CFS. All share amounts have been adjusted to give effect to this
transaction.
Preferred Stock
- ---------------
As of February 7, 1996, the Company does not have any preferred stock authorized
or issued. However, the Board of Directors is authorized without further action
by the stockholders, to issue series of preferred stock. The Company intends to
authorize a total of 2,000 shares of Class A, non-voting, cumulative,
convertible preferred stock with a par value of $10.00 ("Preferred Stock") upon
successful completion of the IPO in exchange for a paydown of $2,000,000 on the
$10,0000,000 promissory note.
The Preferred Stock will pay cumulative cash dividends at an annual rate of
$1.00 per share. The Company is prohibited from paying any dividends on common
stock unless all required preferred dividends have been paid. Each share of
Preferred Stock may be converted at the option of the holder into common stock
at a conversion price of the lower of (i) the IPO price per share of common
stock or (ii) 80% of the average of the closing price per share of common stock
on the day prior to the conversion date. Preferred Stock holders are entitled
to a liquidation preference of $10.00 per share plus all accrued and unpaid
dividends.
Additional Paid in Capital
- --------------------------
As of February 7, 1996, the Company had additional paid in capital ("APIC")
which was made up of the following:
<TABLE>
<S> <C>
Investment in Amertranz Worldwide $4,414,767
Assigned notes 1,379,110
Deferred financing costs 1,769,063
Investment in CAS 83,525
----------
7,646,465
Less: O/S Common stock at par (33,256)
----------
Total APIC $7,613,209
</TABLE>
9. COMMITMENTS AND CONTINGENCIES:
------------------------------
Leases
- ------
Future minimum lease payments for capital leases and operating leases relating
to equipment and rental premises are as follows:
F-10
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
<TABLE>
<CAPTION>
Capital Leases Operating Leases
--------------- ----------------
Year ending
<S> <C> <C>
1997 $24,053 $ 918,518
1998 18,642 699,490
1999 11,067 261,642
2000 - 193,626
2001 - 16,135
------- ----------
Total minimum lease payments 53,762 $2,089,411
==========
Less - Amount representing interest (6,274)
-------
$47,488
=======
</TABLE>
Employment Agreements
- ---------------------
Amertranz has employment agreements with certain employees expiring at various
times through July 2000. Such agreements provide for minimum salary levels and
for incentive bonuses which are payable if specified management goals are
attained. The aggregate commitment for future salaries at February 7, 1996,
excluding bonuses, was approximately $1,233,000.
Litigation
- ----------
Amertranz has been named as a defendant in a lawsuit initiated by a trustee in
bankruptcy of a company with whom Amertranz engaged in discussions concerning a
prospective business combination during 1994. The complaint seeks charges in
excess of $11 million for various alleged causes of action. Amertranz has
retained bankruptcy litigation counsel to review the substance of the complaint.
In the opinion of management, the lawsuit is substantially without merit and the
probability of any material loss is extremely small.
10. INCOME TAXES
------------
At February 7, 1996, the Company had a tax net operating loss carryforward of
approximately $7,757,000, available within statutory limits, to offset future
regular federal taxable income. In accordance with certain provisions of the
Tax Reform Act of 1986, a change in ownership of a corporation of greater than
50 percentage points within a three-year period places an annual limitation on
the corporation's ability to utilize its existing net operating loss
carryforwards. Such a change in ownership was deemed to have occurred in
connection with the Asset Exchange Agreement in which Amertranz became part of
Holding, at which time the Company's net operating loss carryforwards amounted
to approximately $7,757,000. The annual limitation of the utilization of such
tax attributes is approximately $206,000. To the extent the annual limitation
is not utilized, it may be carried forward for utilization in future years.
This limitation could affect the Company's future provisions for or payment of
federal income tax should the Company's operations produce increased amounts of
taxable income in the future.
Deferred tax benefits at February 7, 1996, which are fully offset by a valuation
allowance, primarily represent the estimated future tax effects of federal net
operating losses aggregating approximately $917,583.
11. RELATED PARTY TRANSACTIONS:
---------------------------
Under the terms of a cargo aircraft charter agreement with Tradewinds Airlines,
Inc. ("Tradewinds Air"), a subsidiary of Tradewinds Acquisition Corporation, of
which TIA owns approximately 30% of the outstanding common stock,
F-11
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES TO CONSOLIDATED BALANCE SHEET -- (Continued)
FEBRUARY 7, 1996
CAS has exclusive rights until March 1, 1998 to the use of a leased L-1011
freighter aircraft. While CAS is guaranteed the use of the L-1011 aircraft as
needed, it pays only for actual use of the aircraft at market rates.
At February 7, 1996, Amertranz owes approximately $124,000 to TIA for air
freight forwarding services.
12. SUBSEQUENT EVENT:
-----------------
On May ___, 1996, Holding entered into a loan agreement pursuant to a private
placement memorandum with a group of lenders ("May Bridge Lenders") whereby
Holding borrowed $1,200,000 and issued promissory notes. The loan is due at the
earlier of (i) the closing of the IPO by Holding or (ii) February 7, 1998 or
(iii) the sale or merger of Holding. The May Bridge Lenders also received
240,000 shares of common stock of Holding, as well as 480,000 warrants to
purchase shares of common stock of Holding for five years at $5.00 per share.
These warrants convert into IPO warrants upon the completion of the IPO by
Holding and will be exercisable at the IPO price. The loan accrues interest at
15% per annum. The loan is secured by a lien on all of the assets of Holding
and its subsidiaries. The Company has recorded deferred financing costs of
approximately $1,020,000 in connection with the above mentioned Bridge loan and
will amortize the amount over the life of the debt.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TIA, Inc.:
We have audited the accompanying statements of operations and cash flows of The
Freight Forwarding Business of TIA and CFS (the Air Freight Business of TIA,
Inc. and Subsidiary) (note 1) for each of the years in the three-year period
ended December 31, 1995. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and the cash flows of The
Freight Forwarding Business of TIA and CFS (the Air Freight Business of TIA,
Inc. and Subsidiary) for each of the years in the three-year period ended
December 31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Greensboro, North Carolina
March 8, 1996, except with respect
to the last paragraph under Asset
Exchange Agreement under note 2
for which the date is May 1, 1996
F-13
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS (THE AIR FREIGHT BUSINESS OF TIA,
INC. AND SUBSIDIARY)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenue $ 32,670,727 38,576,285 38,211,306
Cost of transportation (note 6) 24,231,379 30,254,733 30,300,476
---------- ---------- ----------
Gross profit 8,439,348 8,321,552 7,910,830
Selling, general and administrative expenses 6,504,897 4,633,676 4,513,154
---------- ---------- ----------
Operating income 1,934,451 3,687,876 3,397,676
Other income (expense):
Interest expense (note 3) (1,107,520) (1,143,787) (1,155,215)
Other, net 41,928 117,214 123,668
---------- ---------- ----------
Total other expense (1,065,592) (1,026,573) (1,031,547)
---------- ---------- ----------
Income before income taxes 868,859 2,661,303 2,366,129
Income taxes (note 4) - 108,201 -
---------- ---------- ----------
Net income $ 868,859 2,553,102 2,366,129
========== ========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-14
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS (THE AIR FREIGHT BUSINESS OF TIA,
INC. AND SUBSIDIARY)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 868,859 2,553,102 2,366,129
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 416,830 377,569 367,111
Net disposals of property and equipment - 46,978 -
Bad debt expense 153,574 70,000 41,000
Changes in assets and liabilities:
Increase in accounts receivable (771,087) (949,027) (224,790)
Increase in income taxes receivable - - (65,000)
Increase in inventory (11,309) - -
(Increase) decrease in prepaid expenses (140,608) 581,376 26,961
Increase (decrease) in accounts payable 487,518 (274,010) (9,167)
Decrease in accrued liabilities (706,398) (165,264) (243,925)
Increase (decrease) in income taxes payable - 68,201 (108,201)
---------- --------- ----------
Total adjustments ( 571,480) (244,177) (216,011)
---------- --------- ----------
Net cash provided by
operating activities 297,379 2,308,925 2,150,118
Cash flows from investing activities:
Purchases of furniture, fixtures and equipment (95,567) (42,280) (102,829)
Increase (decrease) in other assets (7,393) (9,405) -
---------- --------- ----------
Net cash used in investing activities (102,960) (51,685) (102,829)
Cash flows from financing activities:
Repayments from CASD 128,814 225,406 69,782
Cash advances to CASD (486,803) (37,811) (175,799)
Proceeds from Parent cash advance 400,000 - -
Repayments on Parent cash advance (161,199) (238,801) -
Payments on note payable to affiliate - - (1,200,000)
Repayments on notes payable (274,162) (231,264) (25,000)
---------- --------- ----------
Net cash used in financing
activities (393,350) (282,470) (1,331,017)
---------- --------- ----------
Net increase (decrease) in cash (198,931) 1,974,770 716,276
Cash at beginning of year 194,814 (4,117) 1,970,653
---------- --------- ----------
Cash at end of year $ (4,117) 1,970,653 2,686,925
========== ========= ==========
</TABLE>
F-15
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS (THE AIR FREIGHT BUSINESS OF TIA,
INC. AND SUBSIDIARY)
STATEMENTS OF CASH FLOWS - (CONTINUED)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- -------
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $586,056 1,666,950 946,155
======== ========= =======
Cash paid during the year for income taxes $ - - 173,200
======== ========= =======
</TABLE>
See accompanying notes to the financial statements.
F-16
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
(1) Significant Accounting Policies
-------------------------------
Basis of Statements of Operations and Cash Flows Presentation
-------------------------------------------------------------
The accompanying statements of operations and cash flows include the
accounts of the air freight business of TIA, Inc. (a wholly-owned
subsidiary of Wrexham Aviation Corporation) and its 51% owned subsidiary,
Caribbean Freight System, Inc. (CFS), which have been combined for
reporting purposes as The Freight Forwarding Business of TIA and CFS (the
Air Freight Business of TIA, Inc. and Subsidiary) (the Business). The
Business is not a separate legal or historical reporting entity.
All significant intrabusiness balances and transactions have been
eliminated in the financial statements.
Description of Business
-----------------------
The Business operates an air freight forwarding business primarily serving
the eastern half of the United States, Puerto Rico and the Dominican
Republic.
Revenue Recognition
-------------------
The Business is involved in brokering air cargo services for freight flown
between the United States, Puerto Rico and the Dominican Republic. Revenues
are recognized when cargo is shipped and invoiced to customers. Monthly
provision is made for doubtful receivables, discounts, returns and
allowances.
Cash and Cash Equivalents
-------------------------
Cash at December 31, 1995 includes $2,290,000 of overnight repurchase
agreements.
Property and Equipment
----------------------
Furniture, fixtures and equipment are depreciated using the straight-line
method over the estimated useful lives of the assets.
Income Taxes
------------
The operations of the Business are included in the federal and state income
tax returns of TIA, Inc. and CFS. Income taxes allocated to the Business
are based on the actual income taxes of TIA, Inc. and CFS for the periods
presented.
Deferred tax assets and liabilities are recognized under the asset and
liability method for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Reclassifications
-----------------
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform with the 1995 presentation.
F-17
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1993, 1994 AND 1995
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(2) Asset Exchange Agreement
------------------------
In anticipation of a public offering of securities, in February 1996 TIA,
Inc. and CFS entered into an asset exchange agreement in which the air
freight business of TIA, Inc. and CFS was acquired by Amertranz Worldwide
Holding Corp. (Holding), which contributed the acquired business to a
wholly-owned subsidiary.
The air freight business is defined by the agreement to include customer
lists and related business and marketing records; CFS's rights under the
freight handling agreement described in sale of subsidiary below; the use
of the names "Caribbean Air Services" and "Tradewinds International
Airlines;" the operating leases for the Puerto Rico, Greensboro, North
Carolina, and Hartford Connecticut business facilities; furniture and
fixtures of $86,830 as of December 31, 1995; and all assignable customer
and sales representative contracts of TIA, Inc. and CFS in connection with
their air freight businesses. The air freight business does not include any
other assets of TIA, Inc. and CFS, including cash, accounts receivable,
notes receivable, securities, equipment, aircraft, parts or tools, nor any
liabilities of TIA, Inc. or CFS.
In exchange for the transfer of the air freight operating assets described
above, TIA, Inc. and CFS received a promissory note of $10,000,000 and
2,100,000 shares of Holding (allocated to TIA, Inc. and CFS as notes
receivable of $8,000,000 and $2,000,000, respectively, and 1,680,000 and
420,000 shares, respectively). The promissory note bears interest at 8%,
and is due from March 1, 1996 through July 1, 1996 in monthly payments of
$80,000 and from August 1, 1996 in monthly payments of $166,667. In
addition, Holding intends to apply $2,000,000 of the net proceeds from the
proposed public offering of securities discussed in the first paragraph
above against the promissory note.
Pursuant to the asset exchange agreement, TIA, Inc. and CFS agreed to
advance to the aforementioned subsidiary of Holding, on a revolving loan
basis, the net collections of TIA, Inc.'s and CFS's accounts receivable as
of February 7, 1996 and additional amounts in the discretion of TIA, Inc.
and CFS, up to an aggregate maximum of $4,000,000 outstanding at any time.
Funds advanced under the revolving loan with respect to TIA, Inc.'s and
CFS's accounts receivable do not bear interest and discretionary advances
bear interest at the greater of 1% per month or the prime rate plus 4%. The
revolving loan matures on July 6, 1996.
The promissory note and revolving loan are secured by a first priority lien
on all of the issued and outstanding shares of the aforementioned
subsidiary of Holding, a first priority lien on all of the assets of
Holding and the subsidiary of Holding, and a second lien on the accounts
receivable of another subsidiary of Holding.
TIA, Inc. and CFS have agreed that upon consummation of the public offering
of securities discussed above, they will defer repayment of the promissory
note and revolving loan if, among other things, Holding does not meet
certain financial thresholds or obtain additional financing. TIA, Inc. and
CFS have further agreed that except upon the occurrence of certain events
they will not take any action to foreclose on their security interests in
the assets of Holding or its subsidiaries for one year.
F-18
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1993, 1994 AND 1995
Sale of Subsidiary
------------------
On January 1, 1996, CFS entered into an agreement whereby it will transfer
its 51% ownership in Caribbean Air Services Dominicana, Inc. (CASD) to
CASD's minority stockholders and settle the amount due from CASD of
$1,421,827 at December 31, 1995 in exchange for a freight handling
agreement and a note in the amount of $1,260,000.
The freight handling agreement provides for CASD to carry through freight;
meaning air cargo shipments with an origin or destination in the Dominican
Republic and a destination or origin, respectively, in the mainland United
States; between Puerto Rico and the Dominican Republic at rates that
approximate or are slightly higher than market. The agreement also provides
for CASD to pay CFS a commission of 5% of the gross air cargo revenues
generated by CASD for shipments between Puerto Rico and the Dominican
Republic, but not less than $3,750 per month.
(3) Interest Expense
----------------
Substantially all of TIA, Inc.'s and CFS's activities in 1993, 1994 and
1995 are related to their air freight business and, accordingly, all of the
historical interest expense related to the interest-bearing debt of TIA,
Inc. and CFS has been included in the accompanying financial statements.
Interest expense relates primarily to two notes payable as follows:
A note payable to Harborview Corporation Ltd. No. 1, a company affiliated
through common ownership to TIA, Inc., has a balance outstanding at
December 31, 1994 and 1995 of $3,387,808 and $2,187,808, respectively,
bears interest at a rate of 10%, is secured by a senior lien on all of the
assets of TIA, Inc. and is due on demand. Interest expense on this note
amounted to approximately $327,000, $343,000 and $252,000 in 1993, 1994 and
1995, respectively.
A note payable to Wrexham Aviation Corporation, Parent of TIA, Inc., has a
balance outstanding at both December 31, 1994 and 1995 of $8,940,336, bears
interest at prime plus 1% (9.5% at December 31, 1995), is secured by a
second lien on all assets of TIA, Inc. and is due on June 16, 1997.
Interest expense on this note amounted to approximately $740,000, $783,000
and $903,000 in 1993, 1994 and 1995, respectively.
(4) Income Taxes
------------
The operations of the Business are included in the federal and state income
tax returns of TIA, Inc. and CFS. Income taxes allocated to the Business
are based on the actual income taxes of TIA, Inc. and CFS for the periods
presented.
F-19
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1993, 1994 AND 1995
Income tax expense for 1993, 1994 and 1995 consists of:
<TABLE>
<CAPTION>
1993
----------------------------------
Current Deferred Total
<S> <C> <C> <C>
Federal $ -- -- --
State -- -- --
------- ------- -------
$ -- -- --
======= ======= =======
<CAPTION>
1994
---------------------------------
Current Deferred Total
<S> <C> <C> <C>
Federal $ 79,494 -- 79,494
State 28,707 -- 28,707
------- ------- -------
$ 108,201 -- 108,201
======= ======= =======
<CAPTION>
1995
---------------------------------
Current Deferred Total
<S> <C> <C> <C>
Federal $ -- -- --
State -- -- --
------- ------- -------
$ -- -- --
======= ======= =======
</TABLE>
Income tax expense for 1993, 1994 and 1995 differed from the "expected"
amount for those years (computed by applying the federal corporate rate of
34% to income before income taxes) for the following reasons:
<TABLE>
<CAPTION>
1993 1994 1995
--------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense $ 295,412 904,843 804,484
State income taxes, net of federal
benefit -- 18,947 --
Change in valuation allowance for
deferred tax assets allocated to
income tax expense (295,412) (861,672) (817,928)
Other -- 46,083 13,444
--------- -------- --------
$ -- 108,201 --
========= ======== ========
</TABLE>
The changes in the valuation allowance for 1993, 1994 and 1995 results from
the utilization of net operating loss carryforwards allocated to the
Business.
At December 31, 1995, TIA, Inc. had federal and state net operating loss
carryforwards of approximately $11,235,000. The carryforwards expire in
2005 through 2008 for federal income tax purposes and 1996 through 1997 for
state income tax purposes. Due to the statutory limitation on net operating
loss carryforwards following an ownership change, the availability of
approximately $2,456,000 of these net operating loss carryforwards to reduce
future taxable income is substantially limited.
The excess of alternative minimum tax over regular tax is a credit which can
be carried forward to reduce regular tax liabilities in future years. At
December 31, 1995, the Company had approximately $78,000 available for
carryforward.
F-20
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1993, 1994 AND 1995
(5) Leases
------
The Business leases certain equipment under various noncancellable
operating leases expiring at various dates through 1997. Future minimum
lease payments are as follows:
1996 $43,332
1997 20,865
Rent expense for cancelable and noncancelable operating leases for the
years ended December 31, 1993, 1994 and 1995 was approximately $2,012,000,
$675,000 and $330,000, respectively.
(6) Related Party Transactions
--------------------------
During the years ended December 31, 1993, 1994 and 1995, the Business
incurred purchased transportation costs of approximately $541,000, $848,000
and $1,622,000, respectively, from companies partially owned by minority
stockholders of CASD.
Under the terms of a cargo aircraft charter agreement with Tradewinds
Airlines, Inc. (Tradewinds Air), a subsidiary of Tradewinds Acquisition
Corporation, of which TIA, Inc. owns approximately 30% of the outstanding
common stock, TIA, Inc. has exclusive rights until March 1, 1998 to the use
of a leased L-1011 freighter aircraft. While TIA, Inc. is guaranteed the
use of the L-1011 aircraft as needed, it pays only for actual use of the
aircraft at market rates.
TIA, Inc. currently holds the United States Department of Transportation
licenses and certificates required for the operation of the L-1011 and is
operating the L-1011 aircraft on behalf of Tradewinds Air under an interim
operating agreement. Upon approval by the United States Department of
Transportation of the transfer of the licenses and certificates, TIA, Inc.
intends to assign the aircraft lease to Tradewinds Air.
The leased L-1011, along with assignment of the aforementioned cargo
aircraft charter agreement and interim operating agreement, was acquired in
late November 1995 by Tradewinds Air from Florida West Airlines, Inc. (FWA)
upon confirmation by the Bankruptcy Court of FWA's plan of reorganization.
FWA had acquired the leased L-1011 from and entered into the aforementioned
cargo aircraft charter agreement and interim operating agreement with TIA,
Inc. in March 1994. Prior to March 1994, TIA, Inc. had operated the L-1011.
Accordingly, the accompanying financial statements for the year ended
December 31, 1993 and for the first two months of 1994 include the
operations of the aircraft.
Total transportation costs purchased from Tradewinds Air and FWA related to
these agreements amounted to approximately $14,959,000 and $16,691,000 in
1994 and 1995, respectively.
The Company provides accounting services to Tradewinds Air for $5,720 per
month.
(7) Supplier and Credit Concentration
---------------------------------
The Business charters the flight operations of an L-1011 from one supplier.
Although there are a limited number of companies that charter or lease L-
1011 aircraft, management believes that other suppliers could provide
similar services on comparable terms. A change in suppliers, however, could
cause a delay in the air cargo operations and a possible loss of sales,
which would affect operating results adversely.
F-21
<PAGE>
THE FREIGHT FORWARDING BUSINESS OF TIA AND CFS
(THE AIR FREIGHT BUSINESS OF TIA, INC. AND SUBSIDIARY)
NOTES TO FINANCIAL STATEMENTS -- (Continued)
DECEMBER 31, 1993, 1994 AND 1995
The air cargo industry is impacted by the general economy. Changes in the
marketplace of this industry may significantly affect management's
estimates and the Business's performance.
Most of the Business's customers are located primarily in the eastern half
of the United States, Puerto Rico, and the Dominican Republic. No single
customer accounted for more than 10% of the Company's sales in 1993, 1994
and 1995. The Business estimates an allowance for doubtful accounts based
on the credit worthiness of its customers as well as general economic
conditions. Consequently, an adverse change in those factor could affect
the Business's estimate of its bad debts.
(8) Contingencies
-------------
TIA, Inc. is responsible for the clean-up of contaminated soil associated
with the removal of an underground storage tank in Greensboro, North
Carolina. TIA, Inc. removed the waste oil tank during 1994 and has
performed a substantial portion of the remediation procedures on the site.
TIA, Inc., along with Tradewinds Air, is responsible for any remaining soil
clean-up required and the State of North Carolina has a trust fund
available to reimburse companies for voluntary remediation expenses in
excess of certain deductibles. Accordingly, management believes that any
remaining remediation costs will not have a material effect on the
financial statements.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Amertranz Worldwide, Inc.:
We have audited the accompanying consolidated balance sheets of Amertranz
Worldwide, Inc. (a Delaware corporation) and subsidiaries as of June 30, 1994
and 1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
June 30, 1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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 Amertranz Worldwide, Inc. and
subsidiaries as of June 30, 1994 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1995 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has suffered a loss from
operations, has negative working capital, negative cash flows from operations
and negative stockholders' equity, that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
New York, New York
December 12, 1995, except with respect
to the matters discussed in Note 12 for
which the date is April 12, 1996
F-23
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
------------------------- --------------------------
(Unaudited)
1994 1995 1994 1995
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash $ 42,442 $ 91,778 $ 7,394 $ -
Accounts receivable, less allowance for doubtful accounts of
$53,617 and $139,196 for June 30, 1994 and 1995, respectively 3,411,556 2,525,106 3,461,650 3,482,451
Claim receivable, less allowance of $108,524 for 1994 (Note 8) 170,392 - - -
Prepaid expenses and other current assets 102,885 283,557 549,865 490,818
Due from affiliates 24,632 8,430 46,710 8,430
Taxes receivable - 52,448 - 53,579
---------- ----------- ---------- -----------
Total current assets 3,751,907 2,961,319 4,065,619 4,035,278
PROPERTY AND EQUIPMENT, net (Note 4) 243,307 490,196 352,014 645,764
OTHER ASSETS 49,572 192,424 47,160 155,885
---------- ----------- ---------- -----------
Total assets $4,044,786 $ 3,643,939 $4,464,793 $ 4,836,927
========== =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Accounts payable $2,928,613 $ 4,575,736 $4,389,337 $ 6,156,446
Loan payable (Note 5) 690,857 1,291,849 682,956 2,692,254
Notes payable to stockholders (Note 5) - 140,000 - 1,279,110
Bridge loan (Note 12) - - - 300,000
Income tax payable 101,254 - - -
Lease obligation - current portion (Note 6) 7,423 22,337 13,699 17,990
Accrued expenses 127,108 174,592 173,246 1,180,155
Due to affiliate - - 43,799 -
---------- ----------- ---------- -----------
Total current liabilities 3,855,255 6,204,514 5,303,037 11,625,955
LEASE OBLIGATION -- LONG-TERM (Note 6) 33,368 35,967 527,583 1,084
---------- ----------- ---------- -----------
Total liabilities 3,888,623 6,240,481 5,355,795 11,657,039
---------- ----------- ---------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value; 2,500,000 shares authorized,
no shares issued and outstanding - - - -
Common stock, $.01 par value; 17,500,000 shares authorized,
2,200 and 774,114 issued and outstanding for June 30, 1994
and June 30, 1995, respectively (Note 1) 1,010 7,741 7,741 7,664
Additional paid in capital - - - 397,577
Retained earnings (deficit) 155,153 (2,604,283) (898,743) (7,225,353)
---------- ----------- ---------- -----------
Total stockholders' equity (deficit) 156,163 (2,596,542) (891,002) (6,820,112)
---------- ----------- ---------- -----------
Total liabilities and stockholders' equity (deficit) $4,044,786 $ 3,643,939 $4,464,793 $ 4,836,927
========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-24
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended June 30, 6 Months Ended December 31,
---------------------------------------- ---------------------------
(Unaudited)
---------
1993 1994 1995 1994 1995
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUE $3,354,090 $11,122,297 $24,963,342 $14,049,283 $13,040,332
COST OF TRANSPORTATION 619,734 6,445,292 17,513,757 9,735,026 9,518,033
---------- ----------- ----------- ----------- -----------
Gross profit 2,734,356 4,677,005 7,449,585 4,314,257 3,522,299
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,723,090 4,856,553 10,297,850 5,132,305 7,552,686
---------- ----------- ----------- ----------- -----------
Operating income (loss) 11,266 (179,548) (2,848,265) (818,048) (4,030,387)
---------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Start-up expense (Note 2) -- (321,268) -- -- --
Interest expense, net -- -- (172,682) (74,783) (157,363)
Other (expense) income, net (Note 9) (5,031) 746,621 263,242 (91,540) 1,732
Restructuring charge (Note 12) -- -- -- -- (435,052)
---------- ----------- ----------- ----------- -----------
Income (loss) before (provision for)
benefit from income taxes 6,235 245,805 (2,757,705) (984,371) (4,621,070)
(PROVISION FOR) BENEFIT FROM INCOME
TAXES (Note 7) -- (113,860) 65,000 (2,727) --
---------- ----------- ----------- ----------- -----------
Net income (loss) $ 6,235 $ 131,945 $(2,692,705) $ (987,098) $(4,621,070)
========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-25
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1994 AND 1995 AND FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional Retained Total
----------------------- Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity (Deficit)
----------- --------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, June 30, 1993 1,200 $ 1,000 $ - $ 103,208 $ 104,208
Issuance of Amerford Domestic, Inc. shares 1,000 10 - - 10
Distributions to stockholders - - - (80,000) (80,000)
Net income - - - 131,945 131,945
---------- -------- ---------- ----------- -----------
BALANCE, June 30, 1994 2,200 1,010 - 155,153 156,163
Conversion of Amerford Domestic, Inc. shares (1,000) (10) - - (10)
Issuance of Amertranz shares related to the Merger
(Notes 1 and 11) 5,400,000 54,000 - (53,990) 10
Conversion of Integrity Logistics and Amerford De Caribe
shares (1,200) (1,000) - - (1,000)
Issuance of shares to Amerford De Caribe stockholders
(Notes 1 and 11) 300,000 3,000 - (2,000) 1,000
Issuance of shares to Integrity Logistics stockholders
(Notes 1 and 11) 300,000 3,000 - (3,000) -
Reverse stock split - 1 for 2 (Note 11) (3,000,000) (30,000) - 30,000 -
Reverse stock split - 1 for 3.8754 (Note 12) (2,225,886) (22,259) - 22,259 -
Distributions to stockholders - - - (60,000) (60,000)
Net loss - - - (2,692,705) (2,692,705)
---------- -------- ---------- ----------- -----------
BALANCE, June 30, 1995 774,114 7,741 - (2,604,283) (2,596,542)
Sale of common stock 12,902 129 49,871 - 50,000
Common stock issued upon exercise of stock options 86,443 864 166,636 - 167,500
Reverse stock split - 1 for 1.27906 (Note 12) (190,568) (1,906) 1,906 - -
Common stock issued in connection with Interim
Bridge Financing 83,571 836 179,164 - 180,000
Net loss - - - (4,621,070) (4,621,070)
---------- -------- ---------- ----------- -----------
BALANCE, December 31, 1995 (unaudited) 766,462 $ 7,664 $397,577 $(7,225,353) $(6,820,112)
========== ======== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended June 30, 6 Months Ended December 31,
--------------------------------------- ---------------------------
1993 1994 1995 1994 1995
--------- ----------- ----------- ---------- -----------
(Unaudited)
---------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,235 $ 131,945 $(2,692,705) $ (987,098) $(4,621,070)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Bad debt expense - 53,336 136,001 155,676 301,791
Depreciation and amortization 14,403 19,446 82,948 33,388 83,637
Restructuring expense - - - - 435,052
Non cash charge for stock options - - - - 30,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (148,583) (3,209,318) 750,449 (205,770) (1,259,136)
Decrease (increase) in prepaid expenses and
other current assets 15,351 (70,772) (233,120) (446,980) (58,392)
(Increase) decrease in other assets (4,362) (42,710) (142,852) 2,412 36,539
(Increase) decrease in claim receivable - (170,392) 170,392 170,392 -
(Increase) decrease in due from affiliates - (24,632) 16,202 (22,078) -
Increase in accounts payable, accrued
expenses and income tax payable 148,538 2,998,697 1,593,353 1,405,608 2,151,221
Increase (decrease) in deferred income 116,851 (306,967) - - -
Increase in due to affiliates - - - 43,799 -
--------- ----------- ----------- ---------- -----------
Net cash provided by (used in) operating
activities 148,433 (621,367) (319,332) 149,349 (2,900,358)
--------- ----------- ----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,459) (201,204) (296,778) (109,103) (239,205)
--------- ----------- ----------- ---------- -----------
Net cash used in investing activities (13,459) (201,204) (296,778) (109,103) (239,205)
--------- ----------- ----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders (85,000) (80,000) (60,000) (60,000) -
Net borrowings from loan payable - 690,857 600,992 (7,901) 1,400,405
Payment of loan payable (5,309) (2,906) - - -
Proceeds from shareholder loan - - 140,000 - 1,139,110
Proceeds from interim bridge loan - - - - 300,000
Payment of lease obligations - - (15,546) (7,393) (9,230)
Proceeds from sale of common stock - - - - 50,000
Proceeds from exercise of stock options - - - - 167,500
--------- ----------- ----------- ---------- -----------
Net cash provided by (used in)
financing activities (90,309) 607,951 665,446 (75,294) 3,047,785
--------- ----------- ----------- ---------- -----------
Net increase (decrease) in cash
and cash equivalents 44,665 (214,620) 49,336 (35,048) (91,778)
CASH, beginning of the year 212,397 257,062 42,442 42,442 91,778
--------- ----------- ----------- ---------- -----------
CASH, end of the year $ 257,062 $ 42,442 $ 91,778 $ 7,394 $ -
========= =========== =========== ========== ===========
SUPPLEMENTAL DATA
CASH PAYMENTS FOR:
Interest $ 483 $ 1,726 $ 172,682 $ 74,783 $ 164,890
Income taxes $ 21,037 $ 6,178 $ 91,332 $ 2,727 $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital lease
obligation $ - $ - $ 33,059 $ 33,059 $ -
Deferred financing costs associated with the
Interim Bridge Financing $ - $ - $ - $ - $ 150,000
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995
1. BUSINESS AND ORGANIZATION:
--------------------------
Company Background
- ------------------
On January 13, 1995, Amertranz Worldwide, Inc. ("Amertranz") was incorporated in
the state of Delaware. Effective January 25, 1995, Amerford Domestic Inc. was
merged into Amertranz. On March 3, 1995, Amertranz issued stock for all of the
outstanding shares of Amerford De Caribe Inc. and Integrity Logistics, Inc.
Accordingly, the two entities are presented as wholly-owned consolidated
subsidiaries, and due to the common ownership, are accounted for similar to a
pooling of interests.
Amertranz, along with its consolidated subsidiaries (collectively, the
"Company"), provides air freight forwarding services both internationally and
domestically.
Integrity Logistics, Inc. ("Integrity" or "IL") was incorporated on February 22,
1985, under the laws of the State of New York, to engage principally in the
business of air freight forwarding as an authorized agent for Amerford
International Corp. ("AIC"), an unrelated, wholly-owned subsidiary of Thyssen
Haniel Logistic GmbH.
Amerford De Caribe Inc. ("De Caribe" or "ADC") was incorporated on July 15,
1988, pursuant to the laws of the Commonwealth of Puerto Rico, to engage
principally in the business of air freight forwarding.
In October 1993 Integrity brought a legal action against AIC wherein it sought
damages of $14 million for breach of contract. In January 1994, this legal
action was settled. As part of the settlement agreement, AIC paid IL $700,000
and granted it a license to use the name "Amerford" solely in connection with
the domestic air freight business and acquired all of AIC's domestic air freight
forwarding business, including a 20 station network. AIC further agreed that it
would cease its domestic business as of January 31, 1994, in all cities with the
exception of New York, Newark and Chicago. As a result, a domestic entity
called Amerford Domestic Inc. ("Amerford" or "ADI") was created. This new
company was incorporated in the state of New York on February 1, 1994. This
entity was formed to engage principally in the air freight forwarding business
domestically.
Prior to the formation of ADI, Integrity had been providing freight service to
both domestic and international customers. Subsequent to the formation of ADI,
Integrity provided international freight service solely to AIC. On June 1,
1995, Integrity and AIC terminated the agreement to provide international
freight service for AIC.
Equity Structure
- ----------------
As of June 30, 1994, the equity of the Company consisted of 1,000 shares
authorized, issued and outstanding of Amerford common stock with a $.01 par
value, 200 shares authorized, issued and outstanding of Integrity common stock
with no par value and 250,000 shares authorized and 1,000 shares issued and
outstanding of De Caribe common stock with a $1.00 par value. Effective January
15, 1995, Amerford merged into Amertranz and the equity structure was changed as
discussed in Note 11.
Current Vulnerability Due to Certain Concentrations
- ---------------------------------------------------
The Company's ability to service its customers depends on the availability of
space on air passenger and cargo airlines and trucking carriers. Although the
Company does not believe the lack of freight space has had a significant impact
on its ability to book space to date, significant shortages of suitable space
and associated increases in rates charged by carriers could have a material
adverse impact on the Company's future operating results.
F-28
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
The Company's future operating results are dependent upon the economic
environments in which it operates. Demand for the Company's services could be
adversely affected by economic conditions in the industries of the Company's
customers. A number of Amertranz's principal customers are in the fashion,
personal computer and electronics industries. Adverse conditions in any of
these industries or loss of the major customers in such industries could have a
material adverse impact upon the Company. The Company expects the demand for
its services (and consequently results of operations) to continue to be
sensitive to domestic and, increasingly, global economic conditions and other
factors beyond its control.
In addition, the transport of freight, both domestically and internationally, is
highly competitive and price sensitive. Changes in the volume of freight
transported, shippers preferences as to the timing of deliveries as a means to
control shipping costs, economic and political conditions, both in the United
States and abroad, work stoppages, United States and foreign laws relating to
tariffs, trade restrictions, foreign investments and taxation may all have a
significant impact on the overall business of the Company, its growth and
profitability.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Significant accounting policies of the Company, as summarized below, are in
conformity with generally accepted accounting principles. 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.
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Amertranz
Worldwide, Inc., Integrity Logistics, Inc. and Amerford De Caribe Inc. as of
June 30, 1995. All significant intercompany accounts and transactions have been
eliminated.
As of June 30, 1994, the financial statements combine the accounts of Integrity,
Amerford and De Caribe (collectively "the Companies"). The companies are wholly
owned by the same three shareholders. All significant intercompany accounts and
transactions have been eliminated.
For the year ended June 30, 1993, the financial statements combine the accounts
of Integrity and De Caribe. All significant intercompany accounts and
transactions have been eliminated.
Revenue Recognition
- -------------------
Revenue from freight forwarding is recognized upon delivery of goods and
expenses associated with the cost of transportation are accrued upon shipment.
Deferred revenue is comprised of advances received prior to the rendering of the
service.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is computed under the
straight-line method over estimated useful lives ranging from 3 to 8 years.
Assets under capital leases are depreciated over the shorter of the estimated
useful life of the asset or the lease term. The Company utilizes a half-year
convention for assets in the year of acquisition and disposal.
F-29
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
Certain computer software costs related to a substantial revision of the
Company's pre-existing computer system, totaling approximately $111,250 and
$83,450 as of June 30, 1995 and 1994, respectively, have been capitalized and
are being amortized over five years.
Start-up Expenses
- -----------------
Start-up expenses include the costs related to the establishment of the various
offices and locations for ADI and are expensed as incurred.
Recently Issued Accounting Standards
- ------------------------------------
During March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of". This
statement establishes financial accounting and reporting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. This statement is effective
for financial statements for fiscal years beginning after December 15, 1995,
although earlier application is encouraged. The Company does not expect that
the adoption of SFAS No. 121 will have a material adverse effect on its
consolidated financial statements.
Income Taxes
- ------------
As of June 30, 1993 and 1994, Integrity had elected to have its income taxed
under the provisions of Subchapter S of the Internal Revenue Code (the "Code").
Under the provisions of the Code, the Company is not subject to Federal
corporate income taxes on its taxable income. The stockholders include their
pro rata share of the Company's income in their personal income tax returns.
The Company is, however, subject to certain corporate level state income taxes.
No pro-forma presentation has been presented as the effect would not be
material.
For income tax purposes, the Company follows the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". SFAS 109
requires an asset and liability approach for financial accounting and reporting
for income taxes. Under SFAS 109, deferred taxes are provided for temporary
differences between the carrying value of assets and liabilities for financial
reporting and tax purposes at the enacted rate at which these differences are
expected to reverse.
Stock Options
- -------------
The Company grants stock options to certain officers and related parties.
Compensation expense is recognized based on the aggregate difference between the
fair market value of the Company's stock at the date of issuance and the option
price. Compensation expense is recognized equally over the vesting period.
Reclassification
- ----------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
Unaudited Interim Financial Information
- ---------------------------------------
The financial statements as of and for the six months ended December 31, 1995
and 1994 are unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of the financial statements, which are of
F-30
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
a normal recurring nature, for these interim periods have been included. The
results for the interim periods are not necessarily indicative of the results to
be obtained for the full fiscal year.
3. GOING CONCERN:
--------------
As reflected in the consolidated financial statements, the Company has
experienced a loss, negative cash flows from operations, and negative
stockholders' equity. The Company's continued existence is dependent upon its
ability to achieve and maintain profitable operations. Furthermore, the Company
has signed a letter of intent with underwriters to provide a bridge loan in the
amount of $2,400,000 to be followed by an Initial Public Offering "IPO" in
calendar 1996. The Company believes that its cash resources, augmented by these
financings, at year-end will be sufficient to fund the Company's operations
through June 30, 1996 (Note 12).
4. PROPERTY AND EQUIPMENT
----------------------
Property and equipment, net consist of the following:
<TABLE>
<CAPTION>
As of June 30,
-------------------
1994 1995
-------- --------
<S> <C> <C>
Furniture, fixtures and equipment $277,990 $603,331
Less - Accumulated depreciation and amortization 34,683 113,135
-------- --------
$243,307 $490,196
======== ========
</TABLE>
5. DEBT:
-----
Asset-Based Financing
- ---------------------
On March 16, 1995, Amertranz entered into a Purchase and Sale Agreement as
amended July 5, 1995 and October 25, 1995, with a lender whereby it receives
advances of up to 75% of the net amounts of eligible accounts receivable
outstanding to a maximum line of credit of $3,125,000. This loan is subject to
interest at a rate of 4% per annum over the prevailing prime rate (13% at June
30, 1995). At June 30, 1995, the outstanding balance on the line of credit was
$1,291,849, and the interest expense in 1995 was $173,060. In consideration of
the loan, the lender has a security interest in all present and future accounts
receivable, machinery and equipment and other assets.
On April 1, 1994, Amerford Domestic Inc. entered into a security agreement with
a lender whereby it receives advances of up to 65% of the net amounts of
eligible accounts receivable outstanding to a maximum line of credit of
$1,250,000. As of June 30, 1994, the Company had $690,857 outstanding under
this facility. This loan was subject to interest at a rate of 4% per annum over
the prevailing prime rate. In consideration of the loan, the lender had a
security interest in all present and future accounts receivable, machinery and
equipment and other assets. In March 1995, the outstanding balance on this line
was repaid and the Company entered into the Purchase and Sale Agreement
described above.
Notes Payable to Stockholders
- -----------------------------
In June 1995, the Company received cash and issued notes payable to an officer
of the Company and that officer's brother totaling $140,000. These notes are
due on June 30, 1996 and accrue interest at 7% annually. These notes are
convertible into common stock of Amertranz at a conversion rate of one share for
each $4.96 (after giving retroactive effect to all reverse stock splits) in
principal and interest.
F-31
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
6. COMMITMENTS AND CONTINGENCIES:
------------------------------
Leases
- ------
Future minimum lease payments for capital leases and operating leases relating
to equipment and rental premises are as follows:
<TABLE>
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
Year ending
1996 $24,053 $ 641,418
1997 24,053 608,473
1998 13,232 401,677
1999 6,456 246,117
2000 - 106,096
------- ----------
Total minimum lease payments 67,794 $2,003,781
==========
Less - Amount representing interest 9,490
-------
$58,304
=======
</TABLE>
Rent expense for the years ended June 30, 1993, 1994 and 1995 was $162,055,
$311,222 and $609,850, respectively.
Employment Agreements
- ---------------------
The Company has employment agreements with certain employees expiring at various
times through July 2000. Such agreements provide for minimum salary levels and
for incentive bonuses which are payable if specified management goals are
attained. The aggregate commitment for future salaries at June 30, 1995,
excluding bonuses, was approximately $1,503,000.
Litigation
- ----------
The Company has been named as a defendant in a lawsuit initiated by a trustee in
bankruptcy of a company with whom the Company engaged in discussions concerning
a prospective business combination during 1994. The complaint seeks damages in
excess of $11 million for various alleged causes of action. The Company has
retained bankruptcy litigation counsel to review the substance of the complaint.
In the opinion of management, the lawsuit is substantially without merit and the
probability of any material loss is extremely small.
7. INCOME TAXES:
-------------
State and city minimum and capital taxes were immaterial for the year ended June
30, 1995.
The Company has a net operating loss ("NOL") carryforward for income tax
purposes which is available to offset future taxable income through 2010. At
June 30, 1995, this NOL carryforward was $2,218,711. A valuation allowance of
$754,362 has been recorded by the Company for the deferred tax asset generated
by the NOL.
The provision for Amerford income taxes consisted of $76,435 for federal taxes
and $25,347 for state and city income taxes for the year ended June 30, 1994.
In addition, Integrity had elected S Corporation status and remained liable for
New York State Subchapter S taxes which were approximately $12,078 for the year
ended June 30, 1994.
F-32
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
No pro-forma presentation has been presented for the year ended June 30, 1993 as
the effect would not be material.
The components of the provision for (benefit from) income taxes are as follows:
<TABLE>
<CAPTION>
As of June 30,
--------------------
1994 1995
-------- ---------
<S> <C> <C>
Federal:
Current $ 76,435 $(65,000)
Deferred - -
State:
Current 37,425 -
Deferred - -
-------- --------
Provision for (benefit from) income taxes $113,860 $(65,000)
======== ========
</TABLE>
The differences in income taxes provided and the amounts determined by applying
the federal statutory tax rate to income before income taxes result from the
following:
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------
1994 1995
-------- ----------
<S> <C> <C>
Tax at statutory rate $ 20,138 $(841,194)
Add (deduct) the effect of:
State income taxes net of federal benefit 29,314 -
Non-deductible expenses and other, net 3,344 57,310
Valuation allowance 61,064 718,884
-------- ---------
$113,860 $ (65,000)
======== =========
</TABLE>
Deferred income taxes arise from temporary differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements.
Deferred income tax liability components are as follows:
<TABLE>
<CAPTION>
June 30,
----------------------
1994 1995
--------- ----------
<S> <C> <C>
Deferred tax assets:
Tax benefit of net operating loss carryforwards $ - $ 754,362
Allowances and certain accrued expenses 61,064 47,327
Other - 34,186
-------- ---------
Total deferred tax assets 61,064 835,875
Valuation allowance (61,064) (835,875)
-------- ---------
Net deferred taxes $ - $ -
======== =========
</TABLE>
8. CLAIM RECEIVABLE:
-----------------
In 1994, ADI had recorded a receivable for funds which were paid to the
Company's lender but were erroneously applied to another company's account and
an allowance against the receivable in the amount of $108,524 related to
F-33
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
potential legal expenses. During fiscal year 1995, the Company collected this
amount and has included it in other income.
9. INCOME FROM SETTLEMENT:
-----------------------
In October 1993, Integrity (as discussed in Note 1) brought a legal action
against AIC, wherein it sought damages of $14 million for breach of contract.
In January 1994, this legal action was settled. As part of the settlement
agreement, AIC paid IL $700,000. This amount is included, net of legal
expenses, in other income (expense), net.
10. OTHER RELATED PARTY TRANSACTIONS:
---------------------------------
The Company enters into transactions in the normal course of business with
another corporation whose officer is also an officer of the Company. As of June
30, 1995 and 1994, amounts due from this other related party totaled $28,735 and
$16,203, respectively.
11. STOCKHOLDERS' EQUITY:
---------------------
Merger and Share Exchange
- -------------------------
Effective January 25, 1995, Amerford merged into Amertranz. Each one of the
1,000 outstanding shares of Amerford (which represented all shares authorized)
was converted into 5,400 common shares of Amertranz, for a total of 5,400,000
common shares.
On March 3, 1995, the Company issued 600,000 shares of common stock (300,000 for
each entity) to the three shareholders of Integrity and De Caribe, in exchange
for all the outstanding stock of these companies.
As a result of the merger and share exchange described above, there is a charge
to the accumulated deficit of $58,990 at June 30, 1995. These transactions were
accounted for similar to a pooling of interests because of the common ownership,
and accordingly, are presented as if they were a consolidated group as of July
1, 1994.
Reverse Stock Split
- -------------------
On June 29, 1995, the Board of Directors of the Company declared a 2 for 1
reverse stock split for all issued and outstanding shares. The split became
effective upon the Company's receipt of proceeds of borrowings aggregating
$1,500,000 from officers and directors of the Company and other lenders (Note
12). The consolidated financial statements have been prepared giving
retroactive effect to the stock split.
Stock Options
- -------------
In June 1995, the Company granted options to purchase common stock to certain
key officers of the Company pursuant to board resolutions at exercise prices
ranging from $1.94 to $3.87. The vesting period of the options varies from 2 to
4 years. The exercise price with respect to all of the options granted was at
least equal to the fair market value of the underlying common stock on the grant
date.
F-34
<PAGE>
AMERTRANZ WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1993, 1994 AND 1995 -- (Continued)
12. SUBSEQUENT EVENTS:
------------------
Debt
- ----
Amertranz signed a letter of intent on May 10, 1995 to combine its business with
the air freight forwarding business and specific assets of Caribbean Freight
Systems, Inc. and TIA, Inc. ("CFS") and finalized an agreement. Subsequent to
year-end, TIA, Inc. has lent the Company an aggregate of $800,000 bearing an
interest rate of 12% per annum and repayable in 12 equal, consecutive monthly
payments of principal and interest commencing 30 days subsequent to the IPO.
The $800,000 aggregate TIA, Inc. loan is secured by a lien on all of the
Amertranz assets subordinated only to the lien granted in connection with the
asset-based financing.
On November 20, 1995, Amertranz entered into a letter of intent with
underwriters to provide a bridge loan in the amount of $2,775,000 to be followed
by an IPO expected to take place in the second quarter of 1996. Furthermore,
subsequent to June 30, 1995, the Company received approximately $1,900,000 from
officers and directors of the Company and other unaffiliated lenders, to be
repaid within one year at interest rates varying from 7% to 12%.
Between November 1995 and January 1996 the Company obtained interim financing
and issued $350,000 in aggregate principal amount of promissory notes ("Interim
Notes") as well as 96,071 shares of common stock (effected for all reverse
splits). Repayment of the principal amount due under the Interim Notes,
together with interest at the rate of 12% per annum, is due upon the earlier to
occur of (i) the closing of an initial public offering, (ii) February 7, 1998,
or (iii) a sale or merger of the Company. As of December 31, 1995, the Company
had received $300,000 in proceeds from the Interim Notes and had issued 83,571
in common stock. The Company has recorded a deferred financing charge of
$150,000 in connection with the issuance of the stock, and will amortize the
amount over the life of the related debt.
Stockholder's Equity
- --------------------
An officer and member of the Board of Directors purchased, as a nominee for
Amertranz, substantially all of the outstanding shares of Concord Express, BVBA,
a Belgium company. Upon completion of the merger of the Company with CFS, these
shares will be contributed to the Company.
On December 5, 1995, the Board of Directors resolved to further reduce the
number of shares of its common stock presently issued and outstanding and the
number of shares issuable upon exercise of options, by means of a reverse stock
split, whereby each 3.8754 share of common stock is exchanged for one share of
common stock. In addition, on February 6, 1996, the Company declared a 1.27906
reverse stock split for all issued and outstanding shares.
In December 1995, the Company granted 800,000 options to purchase common stock
to parties that served as finders on behalf of the Company in the transaction
with CFS at an exercise price of $.01 par value. The options after giving
effect to all reverse splits total 80,696 options. The Company has recorded a
non cash charge of $30,000 in connection with the granting of the options.
Restructuring Charge
- --------------------
Due to the reduction of international operations, the Company has written off
advances which were made as start-up funds for a Brazilian affiliate as part of
the international operations. The Company does not expect to realize such
advances and has accordingly recorded a charge of $435,052 for the six months
ended December 31, 1995.
F-35
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1995 has been prepared to reflect the combined results of The
Freight Forwarding Business of TIA and CFS and Amertranz Worldwide, Inc.
("Amertranz") business as if the Combination had been effective as of January 1,
1995, without giving effect to the Offering. The pro forma data for 1995
represents a period when The Freight Forwarding Business of TIA and CFS and
Amertranz were not under common control or management. The pro forma financial
information is unaudited and not necessarily indicative of the consolidated
results which actually would have occurred if the Combination had been
consummated at the beginning of the period presented, nor does it purport to
represent the future financial position and results of operations for future
periods.
F-36
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma
The Freight Amertranz Amertranz
Forwarding Business Worldwide, Inc. Pro Forma Worldwide
of TIA and CFS and subsidiaries Adjustments Holding, Corp.
-------------------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue $38,211,306 $23,954,391 $ - $62,165,697
Cost of transportation 30,300,476 17,296,764 - 47,597,240
----------- ----------- --------- ----------
Gross profit 7,910,830 6,657,627 - 14,568,457
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,513,154 12,718,231 - 17,231,385
AMORTIZATION OF GOODWILL - - 483,688 (a) 483,688
----------- ----------- --------- -----------
Operating income 3,397,676 (6,060,604) (483,688) (3,146,616)
RESTRUCTURING CHARGE - (435,052) - (435,052)
INTEREST EXPENSE (1,155,215) (255,262) 355,215 (b) (1,055,262)
OTHER INCOME 123,668 356,514 - 480,182
----------- ----------- --------- -----------
NET INCOME $ 2,366,129 $(6,394,404) $(128,473) $(4,156,748)
=========== =========== ========= ===========
NET LOSS PER SHARE $ (1.25)
</TABLE>
The accompanying notes and management's assumptions to the
pro forma consolidated statement of operations are an integral part of this
statement.
F-37
<PAGE>
AMERTRANZ WORLDWIDE HOLDING CORP.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION:
----------------------
As a result of the February 1996 combination, Amertranz Worldwide, Inc. and
Subsidiaries and Caribbean Air Services, Inc. became wholly-owned subsidiaries
of Amertranz Worldwide Holding Corp. (the "Company").
The accompanying unaudited pro forma statement of operations data reflects the
combined results of The Freight Forwarding Business of TIA and CFS and the
Amertranz business as if the Combination had been effective as of January 1,
1995, without giving effect to the Offering.
This pro forma financial statement should be read in conjunction with the
historical financial statements and notes thereto of The Freight Forwarding
Business of TIA and CFS and Amertranz Worldwide, Inc. and subsidiaries as of
December 31, 1995. In management's opinion, all material adjustments necessary
to reflect the effects of the Combination have been made.
The unaudited pro forma consolidated statement of operations is not necessarily
indicative of what actual results of operations of the Company would have been
assuming the Combination had been completed as of January 1, 1995, nor is it
necessarily indicative of the results of operations for future periods.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS:
--------------------------------------------------------------
(a) To reflect amortization expense for goodwill over a 25 year useful life.
(b) To reflect a reduction in interest expense to the amount of interest due on
the exchange note had it been outstanding for the full year.
F-38
<PAGE>
==============================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS
SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary..................................................
Risk Factors........................................................
Dilution............................................................
Use of Proceeds.....................................................
Capitalization......................................................
Dividend Policy.....................................................
Selected Consolidated Financial Data................................
Management's Discussion and Analysis................................
of Financial Condition and Results of Operations....................
Business............................................................
Management..........................................................
Historical Background...............................................
Certain Transactions................................................
Principal Stockholders..............................................
Description of Securities...........................................
Shares Eligible for Future Sale.....................................
Underwriting........................................................
Selling Securityholders and Plan of Distribution....................
Legal Matters.......................................................
Experts.............................................................
Available Information...............................................
Index to Financial Statements.......................................
</TABLE>
----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
-----------
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
==============================================================================
==============================================================================
[LOGO]
AMERTRANZ
WORLDWIDE HOLDING CORP.
1,750,000 SHARES OF
COMMON STOCK
AND
1,750,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
----------------
PROSPECTUS
----------------
GKN SECURITIES CORP.
1996
------
==============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by the Company in
connection with the offering described in this Registration Statement. All of
such amounts (except the SEC Registration Fee, the NASD Filing Fee and the
Nasdaq SmallCap Listing Fee) are estimated.
<TABLE>
<S> <C>
SEC Registration Fee................................. $
NASD Filing Fee......................................
Nasdaq SmallCap Listing Fee..........................
Printing Expense.....................................
Legal Fees and Expenses..............................
Accounting Fees and Expenses.........................
Blue Sky Fees and Expenses...........................
Stock Certificates and Transfer Agent Fees...........
Miscellaneous........................................ -----
Total........................................... $
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws provide that the Company shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all person whom it may
indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware permits a
corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by them in connection with any action, suit or proceeding brought by third
parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Seventh of the Company's Certificate of Incorporation provides that
the Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to the
Company or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of the State of Delaware, which makes
directors liable for unlawful dividends or unlawful stock repurchases or
redemptions, or (d) for transactions from which directors derive improper
personal benefit.
Section ___ of the Underwriting Agreement filed as Exhibit 1.1 provides that
the Underwriter named therein will indemnify and hold harmless the Company and
each director, officer or controlling person of the Company from and against
certain liabilities, including liabilities under the Securities Act. Section __
of such Underwriting
II-1
<PAGE>
Agreement also provides that such Underwriter will contribute to certain
liabilities of such persons under the Securities Act. The Company also expects
to obtain director and officer insurance coverage concurrently with the
consummation of the Offering.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or sold
within the past three years which were not registered under the Securities Act.
Martin Hoffenberg, Philip S. Rosso, Jr. and S. Gary Friedman were the founders
and sole shareholders of Integrity Logistics, Inc., Amertranz Worldwide de
Caribe, Inc. and Amerford Domestic, Inc. In March, 1995, each of Messrs.
Hoffenberg, Rosso and Friedman exchanged all of their shares in Integrity
Logistics, Inc., Amertranz Worldwide de Caribe, Inc. and Amerford Domestic,
Inc., for 6,000,000 shares of Amertranz. Subsequently, Mr. Friedman transferred
all of his shares of Amertranz to Mr. Rosso. On February 7, 1996, as part of
the Combination, these shares were exchanged for 605,220 shares of Common Stock
which were subsequently adjusted as of such date to 425,904 shares of Common
Stock. These transactions were effected without registration of the Common
Stock under the Securities Act in reliance upon the exemptions provided by
Section 4(2) of the Securities Act. Each of Messrs. Hoffenberg and Rosso made
representations to the Company with respect to his purchase to the effect that
it was made (i) for his or her own account and (ii) without a view to
distribution.
In August 1995 Amertranz sold 100,000 shares of its common stock, par value
$.01 per share, to Barrett Fisher, an accredited investor, for $50,000. On
February 7, 1996, those shares were exchanged for 10,087 shares of Common Stock
which were subsequently adjusted as of such date to 7,098 shares of Common
Stock. This transaction was effected without registration of the Common Stock
under the Securities Act in reliance upon the exemptions provided by Section
4(2) of the Securities Act. Mr. Fisher made representations to the Company with
respect to his purchase (pursuant to the exchange of shares) to the effect that
it was made (i) for his or her own account and (ii) without a view to
distribution.
Between June 1995 and January 1996, Amertranz borrowed $1,379,110 in net
aggregate principal amount from accredited investors in a private offering in
return for notes convertible into Amertranz common stock. In addition, certain
of these lenders received options to purchase shares of Amertranz common stock
at $.50 per share. In October and November 1995 Amertranz sold 335,000 shares
of its common stock to those accredited investors who exercised their options.
Thereafter, on February 7, 1996 the holders of all such convertible promissory
notes assigned their notes and the 335,000 shares of Amertranz common stock
which were issued upon their exercise of such options to the Company, in
exchange for an aggregate of 421,572 shares of Common Stock, which were
subsequently adjusted as of February 7, 1996 to 296,669 shares of Common Stock.
The exchange of such convertible promissory notes and shares of Amertranz common
stock for shares of Common Stock was effected without registration under the
Securities Act in reliance upon the exemption provided by Section 4(2) of the
Securities Act. Each of the accredited investors made representations to the
Company with respect to such person's purchase to the effect that is was made
(i) for his own account and (ii) without a view to distribution.
Between November 1995 and and January 1996, Amertranz issued 96,071 shares of
its common stock, par value $.01 per share, to accredited investors from whom it
had borrowed $350,000. These Amertranz shares were exchanged for 96,071 shares
of Common Stock of the Company on February 7, 1996, which were subsequently
adjusted as of such date to 67,606 shares of Common Stock. This issuance of
shares of Common Stock was effected without registration under the Securities
Act in reliance upon the exemptions provided by Section 4(2) of the Securities
Act. Each of such accredited investors made representations to the Company with
respect to such person's purchase to the effect that it was made (i) for his or
her own account and (ii) without a view to distribution.
In February 1996, the Company issued an aggregate of $2.775 million in
principal amount of its secured promissory notes, 416,250 shares of Common
Stock, and warrants to purchase an aggregate of 832,500 shares of Common Stock.
Such notes bear interest at a rate of 10% per annum through April 30, 1996, and
thereafter at a rate of 15% per annum. In May 1996, the Company issued an
aggregate of $1.2 million in principal amount of its
II-2
<PAGE>
secured promissory notes, 240,000 shares of Common Stock, and warrants to
purchase an aggregate of 480,000 shares of Common Stock. Such notes bear
interest at a rate of 15% per annum. Pursuant to the terms of the subscription
agreements used in connection with these issuances, the warrants which were
issued are identical to the IPO Warrants and are being registered hereby by the
Company on behalf of the holders thereof. The Underwriter acted as Placement
Agent for the February Bridge Financing and received as compensation therefor
10% of the aggregate proceeds and a nonaccountable expense allowance of 3% of
the aggregate proceeds therefrom. The Underwriter acted as Placement Agent for
$500,000 of the May Bridge Financing and received $50,000 as a commission and
nonaccountable expense allowance. These transactions were effected without
registration under the Securities Act in reliance upon the exemptions provided
by Section 4(2) of the Securities Act and Regulation D promulgated thereunder.
As part of the Combination, the Company issued an aggregate of 1,950,000
shares of Common Stock to TIA and CFS on February 7, 1996, which were
subsequently adjusted as of such date to 2,100,000 shares of Common Stock. As
part of the Combination, the Company also issued to TIA and CFS the Exchange
Note in original principal amount of $10,000,000, of which $2,000,000 in
principal amount was exchanged as of such date for 200,000 shares of the
Company's Class A Preferred Stock. These transactions were effected without
registration under the Securities Act in reliance upon the exemption provided by
Section 4(2) of the Securities Act. Each of ITA and CFS made representations to
the Company with respect to each such purchase to the effect that it was made
(i) for its own account and (ii) without a view to distribution.
In December 1995 Amertranz issued to three accredited investors options to
purchase 400,000 shares of Amertranz common stock at an exercise price of $.01
per share in consideration for services rendered in connection with the
Combination. On February 7, 1996 the investors exchanged these options for an
aggregate of 80,696 options to purchase shares of Common Stock at $.01 per
share. The investors immediately exercised their options on such date and the
Company issued to them an aggregate of 80,696 shares of its Common Stock which
were subsequently adjusted as of February 7, 1996 to 56,787 shares of Common
Stock. The issuance of shares of Common Stock of the Company to such investors
was effected without registration under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act. Each of the
accredited investors made representations to the Company with respect to his
purchase to the effect that it was made (i) for his own account and (ii) without
a view to distribution.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
(To be filed by amendment)
1.1 Form of Underwriting Agreement between Amertranz Worldwide Holding Corp.
and GKN Securities Corp.
3.1 Certificate of Incorporation of AmerTranz Worldwide Holding Corp.
3.2 By-Laws of Amertranz Worldwide Holding Corp.
4.1 Specimen Common Stock certificate
4.2 Specimen Warrant certificate
4.3 Form of Warrant Agent Agreement
5.1 Opinion of Ferber Greilsheimer Chan & Essner as to legality of Common
Stock
10.1 1996 Stock Option Plan of Amertranz Worldwide Holding Corp.
10.2 Purchase and Sale Agreement dated March 16, 1995, between Amertranz
Worldwide, Inc. and Fidelity Funding of California, Inc., as amended July
5, 1995, October 25, 1995, and February 7, 1996
10.3 Form of 7% Convertible Subordinated Promissory Notes of Amertranz
Worldwide, Inc. and form of document evidencing the exchange thereof for
shares of Common Stock, $.01 par value, of Amertranz Worldwide Holding
Corp.
II-3
<PAGE>
10.4 Form of 9-3/4% Convertible Subordinated Promissory Notes of Amertranz
Worldwide, Inc. and form of document evidencing the exchange thereof for
shares of Common Stock, $.01 par value, of Amertranz Worldwide Holding
Corp.
10.5 Subordination Agreement dated June 15, 1995 among Amertranz Worldwide,
Inc., Amerford Domestic, Inc., Fidelity Funding of California, Inc. and
the Subordinated Creditors who are parties thereto, as amended
February 7, 1996
10.6 Loan and Security Agreement dated October 25, 1995 between Amertranz
Worldwide, Inc. and TIA, Inc., as amended January 24, 1996
10.7 Promissory Note dated October 25, 1995 of Amertranz Worldwide, Inc.
payable to TIA, Inc. in principal amount of $250,000
10.8 Promissory Note dated November 10, 1995 of Amertranz Worldwide, Inc.
payable to TIA, Inc. in principal amount of $100,000
10.9 Promissory Note dated November 21, 1995 of Amertranz Worldwide, Inc.
payable to TIA, Inc. in principal amount of $150,000
10.10 Promissory Note dated January 24, 1996, of Amertranz Worldwide, Inc.,
payable to TIA, Inc. in principal amount of $300,000
10.11 First Restated Subordination Agreement dated February 7, 1996 among
Amertranz Worldwide, Inc., Amerford Domestic, Inc., TIA, Inc. and
Fidelity Funding of California, Inc.
10.12 Form of Subordination Agreement among Amertranz Worldwide, Inc., TIA,
Inc., and the Subordinated Creditors who are parties thereto
10.13 Form of 12% Subordinated Promissory Notes of Amertranz Worldwide, Inc.
and form of document evidencing the exchange thereof for Notes of
Amertranz Worldwide Holding Corp. on the same terms and conditions
10.14 Assets Exchange Agreement dated February 7, 1996 among Amertranz
Worldwide Holding Corp., Caribbean Air Services, Inc., Amertranz
Worldwide, Inc., Caribbean Freight Systems, Inc. and TIA, Inc.
10.15 Revolving Credit Promissory Note dated February 7, 1996 of Caribbean Air
Services, Inc. payable to TIA, Inc. and Caribbean Freight Systems, Inc.
in the principal amount of $4,000,000
10.16 Guarantee Agreement (for Item 10.15) dated February 7, 1996 by Amertranz
Worldwide Holding Corp. in favor of TIA, Inc. and Caribbean Freight
Systems, Inc.
10.17 Promissory Note dated February 7, 1996 of Amertranz Worldwide Holding
Corp. payable to TIA, Inc. and Caribbean Freight Systems, Inc. in the
principal amount of $10,000,000
10.18 Guarantee Agreement (for Item 10.17) dated February 7, 1996 by Caribbean
Air Services, Inc. in favor of TIA, Inc. and Caribbean Freight Systems,
Inc.
10.19 Guarantee Agreement (for Items 10.15 and 10.17) dated February 7, 1996
by Amertranz Worldwide, Inc. in favor of TIA, Inc. and Caribbean Freight
Systems, Inc.
10.20 Security Agreement dated February 7, 1996 by Amertranz Worldwide Holding
Corp., Caribbean Air Services, Inc., and Amertranz Worldwide, Inc. in
favor of TIA, Inc. and Caribbean Freight Systems, Inc.
10.21 Stock Pledge Agreement dated February 7, 1996 by Amertranz Worldwide
Holding Corp. in favor of Caribbean Freight Systems, Inc. and TIA, Inc.
10.22 Agency Agreement dated February 7, 1996 between Amertranz Worldwide
Holding Corp. and GKN Securities Corp.
10.23 Security Agreement dated February 7, 1996 between Amertranz Worldwide
Holding Corp. and GKN Securities Corp., as agent
10.24 Form of Promissory Note with respect to Item 10.23
10.25 Form of Common Stock Purchase Warrant with respect to Item 10.23
10.26 Subordination Agreement dated February 7, 1996 among Amertranz
Worldwide, Inc., Caribbean Freight Systems, Inc. and Fidelity Funding of
California, Inc.
II-4
<PAGE>
10.27 Subordination Agreement dated February 7, 1996 among Amertranz Worldwide
Holding Corp., Amertranz Worldwide, Inc. and Fidelity Funding of
California, Inc.
10.28 Agency Agreement dated May , 1996 between Amertranz Worldwide Holding
--
Corp. and GKN Securities Corp.
10.29 Security Agreement dated May , 1996 between Amertranz Worldwide
--
Holding Corp. and GKN Securities Corp., as agent
10.30 Intercreditor Agreement dated May , 1996 between TIA, Inc., Caribbean
--
Freight Systems, Inc. and GKN Securities Corp., as agent, with respect
to Item 10.29
10.31 Form of Promissory Note with respect to Item 10.29
10.32 Form of Common Stock Purchase Warrant with respect to Item 10.29
10.33 Consulting Agreement dated February 7, 1996 among Amertranz Worldwide
Holding Corp., Amertranz Worldwide, Inc. and Martin Hoffenberg
10.34 Employment Agreement dated September 27, 1994 between Amerford Domestic,
Inc. and Bruce Brandi, as modified February 7, 1996
10.35 Employment Agreement dated , 1996 between Amertranz Worldwide
---------
Holding Corp. and Stuart Hettleman
10.36 Employment Agreement dated , 1996 between Amertranz Worldwide
---------
Holding Corp. and Richard A. Faieta
10.37 Cargo Aircraft Charter Agreement dated February 28, 1994 between TIA,
Inc. and Florida West Airlines, Inc., as amended and assigned
November 29, 1995
10.38 Lease Agreement dated March 31, 1994 between The Equitable Life
Assurance Society of the U.S. and Integrity Logistics, Inc. for the
premises at 2001 Marcus Avenue, Lake Success, New York
10.39 Lease Agreement dated August 7, 1990 between S Partners and Caribbean
Freight Systems, Inc. for the premises at 7001 Cessna Drive, Greensboro,
North Carolina, as amended and extended April 9, 1994
11. Statement re computation of Per Share Earnings
12. Statement re computation of ratios
13. Letter re Unaudited Interim Financial Information
21. Subsidiaries of Amertranz Worldwide Holding Corp.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Ferber Greilsheimer Chan & Essner (Contained in Exhibit 5.1)
24. Power of Attorney (included in the signature page of this Registration
Statement)
(b) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
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<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 14, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(2) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(3) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(4) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, New York, on
the day of , 1996.
--- ----------
AMERTRANZ WORLDWIDE HOLDING CORP.
By:
------------------------
Stuart Hettleman
President
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
does hereby constitute and appoint Stuart Hettleman and Michael Barsa, with full
power of substitution and full power to act without the other, his true and
lawful attorney-in-fact and agent for him in his name, place and stead, in any
and all capacities, to sign any or all pre-effective amendments or post-
effective amendments to this Registration Statement and to file the same, with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully, to all intents and purposes, as they
or he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signature Title Date
- --------- ----- ----
________________________ Director, President, Chief Executive _________, 1996
Stuart Hettleman Officer, Chief Financial Officer and
Principal Accounting Officer
________________________ Director and Executive Vice President _________, 1996
Richard Faieta
________________________ Director and Vice President _________, 1996
Michael Barsa
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