SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2000
CONTEX ENTERPRISE GROUP, INC.
(Exact name of Registrant as Specified in its Charter)
Colorado 0-25319 84-1191355
(State of Incorporation) (Commission File (IRS Employer
Number) Identification No.)
136 Freeway Drive, East Orange, NJ 07018
(Address of principal executive offices)
(973) 266-7020
Registrant's Telephone Number
1629 York Street, Suite 101, Denver, CO 80206
(Former Address, if Changed Since Last Report)
Item 2. Acquisition of Transportation Logistics Int'l, Inc.
On November 15, 2000 the Registrant acquired all of the outstanding
capital stock of Transportation Logistics Int'l, Inc., a New York corporation
("TLI"). The Registrant issued 17,760,000 shares of its common stock in
exchange for the TLI shares. The number of shares issued was the result of
arms-length negotiations between management of the Registrant and management
of TLI. Prior to this transaction, there was no relationship of any kind
between the management and affiliates of TLI and the management and affiliates
of the Registrant.
The TLI capital stock was owned by 17 shareholders, and the 17,760,000
shares issued in consideration for the TLI capital stock has been distributed
among those 17 shareholders in proportion to their ownership of TLI shares.
The following shareholders are the only holders of more than five percent of
the 20,360,000 shares of common stock of the Registrant that were outstanding
upon completion of the TLI acquisition:
Shareholder Shares % of Outstanding
------------------------------------------------------------
Michael Margolies 9,216,589 45.3%
Margolies Family Trust 2,618,350 12.9%
Rewico Investment Limited 2,487,432 12.2%
Jim Thorpe 1,314,412 6.5%
Sally Blackman 1,256,808 6.2%
The individuals who were the officers and directors of the Registrant
prior to the acquisition have resigned. The following individuals are now the
officers and directors of the Registrant:
Michael Margolies................. Chairman, Chief Executive Officer,
Secretary, Director
Jim Thorpe........................ President, Chief Operating Officer,
Director
Robert I. Blackman................ Vice President, Director
Rafael Behar..................... Treasurer, Chief Financial Officer
EXHIBITS
1. Agreement and Plan of Reorganization dated October 6, 2000 among Contex
Enterprise Group, Inc., Transportation Logistics Int'l, Inc., and the
stockholders of Transportation Logistics Int'l, Inc.
2. Financial Statements of Transportation Logistics Int'l, Inc. for the year
ended December 31, 1999 and for the period from inception to December 31,
1998 (audited) and for the six months ended June 30, 2000 (unaudited).
3. Pro Forma Financial Information - to be filed by amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONTEX ENTERPRISE GROUP, INC.
Dated: November 15, 2000 By:/s/ Michael Margolies
----------------------
Michael Margolies
Chief Executive Officer
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
EXH. 1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT (the "Agreement") dated October 6, 2000, by, between and among
CONTEX ENTERPRISE GROUP, INC., a company incorporated under the laws of the
State of Colorado (hereinafter referred to as "CTEX"); TRANSPORTATION
LOGISTICS INT'L, INC., a company incorporated under the laws of the state of
New York (hereinafter referred to as "TLI"); and the persons listed on Exhibit
"A" attached hereto and made a part hereof, being all of TLI's stockholders
now and as of the closing date of this Agreement (hereinafter referred to as
the "STOCKHOLDERS"):
WHEREAS, the STOCKHOLDERS own a total of 3,391,450 shares of common stock,
$.001 par value, of TLI, said shares being one hundred (100%) percent of the
issued and outstanding common stock of TLI; and
WHEREAS, the STOCKHOLDERS desire to transfer to CTEX and CTEX desires to
acquire one hundred (100%) percent of such shares;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. Purchase and Sale. The STOCKHOLDERS hereby agree to sell, transfer,
assign and convey to CTEX and CTEX hereby agrees to purchase and acquire
from the STOCKHOLDERS, one hundred (100%) percent of all of TLI's issued
and outstanding common stock (the "TLI Common Shares"), in a reorganization
pursuant to Section 368 (a)(1)(B) of the Internal Revenue Code.
2. Purchase Price. (a) The aggregate purchase price to be paid by CTEX for
the TLI Common Shares shall be 17,760,000 shares of CTEX no par value
voting common stock, (the "CTEX Common Shares"). The CTEX Common Shares
will be issued to the individual STOCKHOLDERS in accordance with Exhibit
"A-1", which is attached hereto. No fractional shares of CTEX Common
Stock will be issued; in lieu thereof, the number of shares of CTEX Common
Stock to be issued to each STOCKHOLDER will be rounded up to the next whole
share. Each of the STOCKHOLDERS hereby agrees to the terms of this
Agreement.
3. Warranties and Representations of TLI and STOCKHOLDERS. In order to
induce CTEX to enter into this Agreement and to complete the transaction
contemplated hereby, TLI and STOCKHOLDERS warrant and represent to CTEX
as of the date hereof and as of the Closing that:
(a) Organization and Standing. TLI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
New York, is qualified to do business as a foreign corporation in every
state or jurisdiction in which it operates to the extent required by the
laws of such states and jurisdictions, and has full power and authority
to carry on its business as now conducted and to own and operate its
assets, properties and business. Attached hereto as Exhibit "B" are
true and correct copies of TLI's Certificate of Incorporation,
amendments thereto and all current By-laws of TLI. No changes thereto
will be made in any of the Exhibit "B" documents before the Closing.
(b) Capitalization. As of the date hereof, TLI's entire authorized equity
capital consists of 25,000,000 shares of Common Stock $.001 par value,
of which 3,391,450 shares of Common Stock are issued and outstanding,
and 10,000,000 shares of preferred stock, $.001 par value, none of
which are now or will be issued and outstanding as of the Closing. As
of the Closing Date, there will be no other voting or equity securities
authorized or issued, nor any authorized or issued securities
convertible into voting stock, and no outstanding subscriptions,
warrants, calls, options, rights, commitments or agreements by which
TLI or the STOCKHOLDERS are bound, calling for the issuance of any
additional shares of common stock or any other voting or equity
security, other than TLI Common Shares issued as described in Section
2(b) herein. All of such TLI Common Shares have been duly authorized
and validly issued and are fully paid and non-assessable and were not
issued in violation of any preemptive rights or any applicable
securities laws. The 3,391,450 issued and outstanding TLI Common
Shares shall constitute one hundred (100%) percent of the equity
capital of TLI, which includes, inter alia, one hundred (100%) percent
of TLI's voting power, right to receive dividends, when, as and if
declared and paid, and the right to receive the proceeds of liquidation
attributable to common stock, if any.
(c) Ownership of TLI Shares. As of the date hereof, the STOCKHOLDERS are
the sole owners of the TLI Common Shares, free and clear of all liens,
encumbrances, and restrictions whatsoever, except that the TLI Common
Shares have not been registered under the Securities Act of 1933, as
amended (the "'33 Act"), or any applicable State Securities laws. By
the transfer of the TLI Common Shares to CTEX pursuant to this
Agreement, CTEX will thereby acquire good and marketable title to 100%
of the capital stock of TLI, free and clear of all liens, encumbrances
and restrictions of any nature whatsoever, except by reason of the fact
that the TLI Common Shares will not have been registered under the '33
Act, or any applicable State Securities laws.
(d) Taxes. TLI has filed all federal, state and local income or other
tax returns and reports that it is required to file with all
governmental agencies, wherever situate, and has paid or accrued for
payment all taxes as shown on such returns, such that a failure to
file, pay or accrue will not have a Material Adverse Effect on TLI.
Such returns have been prepared in accordance with the applicable tax
laws and rules and regulations thereunder to which TLI is subject and
STOCKHOLDERS have delivered true and complete copies of all such tax
returns to CTEX.
(e) Pending Actions. There are no material legal actions, lawsuits,
proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting TLI, or against TLI's
Officers or Directors or the STOCKHOLDERS that arise out of their
operation of TLI, except as described in Exhibit "C" attached hereto.
TLI is not knowingly in violation of any law, material ordinance or
regulation of any kind whatever, including, but not limited to laws,
rules and regulations governing the sale of its products and/or
services, the '33 Act, the Securities Exchange Act of 1934 (the
"`34 Act") as amended, the Rules and Regulations of the U.S.
Securities and Exchange Commission ("SEC"), or the securities laws
and regulations of any state. Neither TLI nor STOCKHOLDERS are
subject to any order, writ, judgment, injunction, decree,
determination or award of any court, arbitrator or administrative,
governmental or regulatory authority or body.
(f) Governmental Regulation. No approval of any trade or professional
association or agency of government other than as set forth on Exhibit
"D" is required for any of the transactions effected by this Agreement,
and the completion of the transactions contemplated by this Agreement
will not, in and of themselves, affect or jeopardize the validity or
continuation of any of them.
(g) Ownership of Assets. Except as set forth in Exhibit "E", TLI has good,
marketable title, without any liens or encumbrances of any nature
whatever, to all of the following, if any: its assets, properties and
rights of every type and description, including, without limitation,
all cash on hand and in banks, certificates of deposit, stocks, bonds,
and other securities, good will, customer lists, its corporate name and
all variants thereof, trademarks and trade names, copyrights and
interests thereunder, licenses and registrations, pending licenses and
permits and applications therefor, inventions, processes, know-how,
trade secrets, real estate and interests therein and improvements
thereto, machinery, equipment, vehicles, notes and accounts receivable,
fixtures, rights under agreements and leases, franchises, all rights and
claims under insurance policies and other contracts of whatever nature,
rights in funds of whatever nature, books and records and all other
property and rights of every kind and nature owned or held by TLI as of
this date, and will continue to hold such title on and after the
completion of the transactions contemplated by this Agreement; nor,
except in the ordinary course of its business, has TLI disposed of any
such asset since the date of the most recent balance sheet described in
Section 3(o) of this Agreement.
(h) No Interest in Suppliers, Customers, Landlords or Competitors.
Neither the STOCKHOLDERS nor any member of their families have any
interest of any nature whatever in any supplier, customer, landlord
or competitor of TLI.
(i) No Debt Owed by TLI to STOCKHOLDERS. Except as set forth in Exhibit
"F", TLI does not owe any money, securities, or property to either
the STOCKHOLDERS or any member of their families or to any company
controlled by or under common control with such a person, directly or
indirectly.
(j) Corporate Records. All of TLI's books and records, including, without
limitation, its books of account, corporate records, minute book,
stock certificate books and other records of TLI are up-to-date,
complete and reflect accurately and fairly the conduct of its business
in all material respects since its date of incorporation. All reports,
returns and statements currently required to be filed by TLI, with
respect to the business and operations of TLI, with any governmental
agency have been filed or valid extensions have been obtained in
accordance with normal procedures and all governmental reporting
requirements have been complied with.
(k) No Misleading Statements or Omissions. Neither this Agreement nor any
financial statement, exhibit, schedule or document attached hereto or
presented to CTEX in connection herewith, contains any materially
misleading statement, or omits any fact or statement necessary to make
the other statements or facts therein set forth not materially
misleading.
(l) Validity of the Agreement. All corporate and other proceedings
required to be taken by the STOCKHOLDERS and by TLI in order to enter
into and to carry out this Agreement have been duly and properly taken.
This Agreement has been duly executed by the STOCKHOLDERS and by TLI,
and constitutes the valid and binding obligation of each of them,
except to the extent limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or effecting generally
the enforcement of creditors rights. The execution and delivery of this
Agreement and the carrying out of its purposes will not result in the
breach of any of the terms or conditions of, or constitute a default
under or violate, TLI's Certificate of Incorporation or By-Laws, or
any material agreement, lease, mortgage, bond, indenture, license or
other material document or undertaking, oral or written, to which TLI
or the STOCKHOLDERS is a party or is bound or may be affected, nor
will such execution, delivery and carrying out violate any order,
writ, injunction, decree, law, rule or regulation of any court,
regulatory agency or other governmental body; and the business now
conducted by TLI can continue to be so conducted after completion of
the transaction contemplated hereby, with TLI as a wholly-owned
subsidiary of CTEX.
(m) Enforceability of the Agreement. When duly executed and delivered,
this Agreement and the Exhibits hereto which are incorporated herein
and made a part hereof are legal, valid, and enforceable by CTEX
according to their terms, except to the extent limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
relating to or effecting generally the enforcement of creditors rights,
and that at the time of such execution and delivery, CTEX will have
acquired title in and to the TLI Common Shares free and clear of all
claims, liens and encumbrances.
(n) Access to Books and Records. CTEX will have full and free access
to TLI's books during the course of this transaction prior to and at
the Closing, during regular business hours.
(o) TLI Financial Statements. Attached hereto as Exhibit "G-1" are
audited consolidated financial statements of TLI, for the periods
from inception (July 1, 1998) through December 31, 1998 and for the
fiscal year ended December 31, 1999, together with reviewed
consolidated financial statements as of and for the six-month period
ended June 30, 2000. Each of these TLI consolidated financial
statements accurately describes TLI's financial position as of the
dates thereof. TLI's audited, consolidated financial statements have
been prepared by independent auditors in accordance with generally
accepted accounting principles in the United States ("GAAP") (or as
permitted by regulation S-X, S-B, and/or the rules promulgated under
the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act
of 1934); and the audited and the reviewed financial statements cited
herein present fairly in all material respects the financial condition
of TLI as of the dates thereof.
(p) TLI's Offering Circular. TLI's Offering Circular dated October 3,
2000 accurately describes TLI's business, assets, operations and
management as of the date thereof; since the date of the Corporate
Summary, there has been no Material Adverse Change in the Business
Plan and no Material Adverse Change in TLI of any kind or nature
whatsoever.
(q) Compliance with Laws. TLI represents and warrants that it has
complied with, and is not in violation of any applicable federal,
state, or local statutes, laws or regulations as respects the owner-
ship of its property or the operation of its business.
(r) Compliance with Laws; Environmental or other Related Matters. TLI's
operations have been conducted in all material respects in accordance
with all applicable statutes, laws, rules and regulations. TLI is
not in violation of any Federal, state, local or foreign law,
ordinance or regulation or any Governmental Order applicable to TLI
or by which any of its properties is subject, bound or affected.
There is no Governmental Order outstanding against TLI (nor, to the
best knowledge of TLI, threatened to be issued) that will or would
have a Material Adverse Effect. Except as disclosed herein, TLI
currently holds (and at the Closing will hold) all the environmental,
health and safety and other permits, licenses, authorizations,
certificates and approvals of Governmental Authorities, whether
Federal, state, local or foreign (collectively, "Permits"), necessary
or proper for the current use, occupancy or operation of the Business,
and all of the Permits are now and at the Closing will be in full force
and effect.
(s) TLI Financial Condition. On June 30, 2000, TLI had a consolidated
tangible net worth of $1,094,420. At the Closing, CTEX shall receive
a certificate signed by TLI's President and Treasurer, to the effect
that there has been no Material Adverse Change in TLI's tangible net
worth since June 30, 2000.
(t) Public Relations. Within 30 days after the Closing, TLI will hire
an experienced public relations firm to act as CTEX's financial
public relations representative after the Closing.
(u) Post-Closing Representations. As soon as practicable after the
Closing of the Acquisition, TLI's management, as the new management
of CTEX, will (i) change CTEX's corporate name to Transportation
Logistics Int'l, Inc.; (ii) prepare an application for CTEX's common
stock to trade on the NASDAQ SmallCap, (or the NASDAQ National Market
System, if eligible); and (iii) take the necessary steps to ensure
that CTEX remains current in its SEC filings at all times. For a
period of at least one year after Closing, new management of CTEX
will not reverse split CTEX's common stock except in connection with
a proposed secondary public offering, and only if required by the
terms of the underwriting agreement with a reputable investment
banking firm.
4. Warranties and Representations of CTEX. In order to induce the
STOCKHOLDERS and TLI to enter into this Agreement and to complete the
transaction contemplated hereby, CTEX warrants and represents to TLI and
STOCKHOLDERS that:
(a) Organization and Standing. CTEX is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Colorado, is qualified to do business as a foreign corporation in
every other state in which it operates to the extent required by the
laws of such states, and has full power and authority to carry on its
business as now conducted and to own and operate its assets,
properties and business.
(b) Capitalization. CTEX's entire authorized equity capital currently
consists of 50,000,000 shares of voting common stock, no par value,
and 5,000,000 shares of preferred stock. As of the Closing, after
giving effect to the issuance of 17,760,000 restricted CTEX Common
Shares, CTEX will have 50,000,000 shares of Common Stock, no par value
authorized and 20,360,000 shares of voting common stock, no par value
issued and outstanding, and 5,000,000 shares of $.01 par value
Preferred Stock authorized, 10,000 of which will be issued and
outstanding. Upon issuance, all of the CTEX Common Stock will be
validly issued fully paid and non-assessable. The relative rights and
preferences of CTEX's equity securities are set forth on the Certificate
of Incorporation, as amended and CTEX's By-laws (Exhibit "H" hereto).
There are no other voting or equity securities convertible into voting
stock, and no outstanding subscriptions, warrants, calls, options,
rights, commitments or agreements by which CTEX is bound, calling for
the issuance of any additional shares of common stock or preferred
stock or any other voting or equity security. The By-laws of CTEX
provide that a simple majority of the shares voting at a stockholders'
meeting at which a quorum is present may elect all of the directors of
CTEX. Cumulative voting is not provided for by the By-Laws or
Certificate of Incorporation of CTEX. Accordingly, as of the Closing
the 17,760,000 restricted shares being issued to the STOCKHOLDERS in
exchange for 100% of the shares of TLI will constitute 87.2% of the
20,360,000 shares of CTEX which will then be issued and outstanding,
which includes, inter alia, that same percentage of CTEX's voting power,
right to receive dividends, when, as and if declared and paid, and the
right to receive the proceeds of liquidation attributable to common
stock, if any.
(c) Ownership of Shares. By CTEX's issuance of the CTEX Common Shares to
the STOCKHOLDERS pursuant to this Agreement, the STOCKHOLDERS will
thereby acquire good and marketable title thereto, free and clear of
all liens, encumbrances and restrictions of any nature whatsoever,
except by reason of the fact that such CTEX shares will not have been
registered under the '33 Act.
(d) Significant Agreements. CTEX is not and will not at Closing be bound
by any of the following other than where already disclosed in any
other exhibit, unless specifically listed in Exhibit "I" hereto:
(i) Employment, advisory or consulting contract;
(ii) Plan providing for employee benefits of any nature;
(iii) Lease with respect to any property or equipment;
(iv) Contract or commitment for any future expenditure in excess of
$1,000;
(v) Contract or commitment pursuant to which it has assumed,
guaranteed, endorsed, or otherwise become liable for any obligation
of any other person, firm or organization;
(vi) Contract, agreement, understanding, commitment or arrangement,
other than in the normal course of business, not fully disclosed or
set forth in this Agreement;
(vii) Agreement with any person relating to the dividend, purchase or
sale of securities, that has not been settled by the delivery or
payment of securities when due, and which remains unsettled upon
the date of this Agreement.
(e) Taxes. CTEX has filed all federal, state and local income or other tax
returns and reports that it is required to file with all governmental
agencies, wherever situate, and has paid all taxes as shown on such
returns such that a failure to file, pay or accrue will not have a
Material Adverse Effect on CTEX. Such returns have been prepared in
accordance with the applicable tax laws and rules and regulations
thereunder to which CTEX is subject and CTEX will deliver to TLI true
and complete copies of all such tax returns through the period ended
February 28, 2000.
(f) Absence of Liabilities. At and as of the Closing Date, CTEX will have
no liabilities of any kind or nature, undisclosed fixed or contingent,
except for the costs, including legal and accounting fees and other
expenses, in connection with this transaction, for which CTEX agrees to
be responsible and to pay in full at or before the Closing.
(g) No Pending Actions. There are no material legal actions, lawsuits,
proceedings or investigations, either administrative or judicial,
pending or threatened, against or affecting CTEX, or against any of
CTEX's officers or directors and arising out of their operation of CTEX
that are reasonably likely to have a Material Adverse Effect on CTEX.
CTEX is not knowingly in violation of any law, ordinance or regulation
of any kind whatever, including, but not limited to, the '33 Act, the
1934 Act, as amended, the Rules and Regulations of the SEC, or the
securities laws and regulations of any state. CTEX is not an investment
company as defined in the Securities laws.
(h) Corporate Records. All of CTEX's books and records, including, without
limitation, its books of account, corporate records, minute book, stock
certificate books and other records are up-to-date, complete and reflect
accurately and fairly the conduct of its business in all material
respects since its date of incorporation; all of said books and records
will be delivered to CTEX's new management at the Closing.
(i) No Misleading Statements or Omissions. Neither this Agreement nor any
financial statement, exhibit, schedule or document attached hereto or
presented to TLI in connection herewith contains any materially
misleading statement, or omits any fact or statement necessary to make
the other statements or facts therein set forth not materially
misleading.
(j) Validity of the Agreement. All corporate and other proceedings required
to be taken by CTEX in order to enter into and to carry out this
Agreement have been duly and properly taken. This Agreement has been
duly executed by CTEX, and constitutes a valid and binding obligation of
CTEX except to the extent limited by applicable bankruptcy
reorganization, insolvency, moratorium or other laws relating to or
effecting generally the enforcement of creditors rights. The execution
and delivery of this Agreement and the carrying out of its purposes will
not result in the breach of any of the terms or conditions of, or
constitute a default under or violate, CTEX's Certificate of
Incorporation or By-Laws, or any material agreement, lease, mortgage,
bond, indenture, license or other document or undertaking, oral or
written, to which CTEX is a party or is bound or may be affected, nor
will such execution, delivery and carrying out violate any order, writ,
injunction, decree, law, rule or regulation of any court, regulatory
agency or other governmental body.
(k) Enforceability of the Agreement. When duly executed and delivered,
this Agreement and the Exhibits hereto which are incorporated herein
and made a part hereof are legal, valid, and enforceable by TLI and
the STOCKHOLDERS according to their terms, except to the extent
limited by applicable bankruptcy reorganization, insolvency,
moratorium or other laws relating to or effecting generally the
enforcement of creditors rights; and at the time of such execution
and delivery, the STOCKHOLDERS will have acquired good, marketable
title in and to the CTEX Common Shares acquired pursuant hereto, free
and clear of all liens and encumbrances.
(l) Access to Books and Records. TLI and STOCKHOLDERS will have full and
free access during regular business hours and on reasonable prior
notice to CTEX's books and records during the course of this
transaction prior to and at the Closing.
(m) CTEX Financial Statements. Upon signing this Agreement, CTEX will
provide TLI with three years of audited financial statements (through
February 28, 2000), which will be audited in accordance with GAAP by
independent certified public accountants.
(n) CTEX Financial Condition. After consummation of all of the
transactions contemplated hereby, CTEX will have no assets or
liabilities of any kind or nature whatsoever.
(o) CTEX Shareholders' List. Immediately upon signing this Agreement,
CTEX will provide TLI with a current shareholders' list, for CTEX's
approval.
(p) Trading Status. CTEX's common stock is now and as of the Closing will
be publicly traded on the OTC Bulletin Board, with the symbol CTEX.
(q) SEC Status. CTEX is now and as of Closing will be a reporting
issuer under the '34 Act. As of the date hereof and as of the
Closing, CTEX has and will have filed all reports with the SEC that
CTEX will have been required to file.
(r) Directors' Approval. Promptly upon the signing of this Agreement,
CTEX'S Board of Directors, by unanimous consent or meeting, will
authorize the matters described in section 7(b)(i) herein.
5. Term. All representations, warranties, covenants and agreements made by
any party herein and in the exhibits attached hereto shall survive the
execution and delivery of this Agreement and payment pursuant thereto.
6. The CTEX Shares and TLI Shares. All of the CTEX and the TLI Common
Shares shall be validly issued, fully-paid and non-assessable shares of
CTEX and TLI Common Stock respectively, with full voting rights, dividend
rights, and right to receive the proceeds of liquidation, if any, as set
forth in the respective Articles of Incorporation.
7. Conditions Precedent to Closing.
(a) The obligations of TLI and STOCKHOLDERS under this Agreement shall be
and are subject to fulfillment, prior to or at the Closing, of each of
the following conditions:
(i) That CTEX's representations and warranties contained herein
shall be true and correct at the time of Closing, as if such
representations and warranties were made at such time and that
there shall have been no Material Adverse Change with respect to
CTEX; and TLI shall have received a Certificate to such effect
signed by a duly authorized officer of CTEX;
(ii) That CTEX in all material respects shall have performed or
complied with all agreements, terms and conditions required by
this Agreement to be performed or complied with by it prior to or
at the time of the Closing;
(iii) That CTEX's directors shall have properly approved all of the
matters described in Section 7(b)(i) herein including, without
limitation, their resignations and the appointment of TLI's
designees;
(iv) That CTEX shall have filed a Rule 14f-1 notice with the SEC and
mailed such notice to its stockholders at least 10 days before
the Closing and shall not have received any comments thereto from
the SEC; and
(v) That CTEX's common stock will continue to be listed for trading
on the OTC Bulletin Board (Current Symbol: CTEX).
(b) The obligations of CTEX under this Agreement shall be and are subject
to fulfillment, prior to or at the Closing of each of the following
conditions:
(i) That CTEX's Board of Directors, by proper and sufficient vote,
shall have approved this Agreement and the transactions
contemplated hereby; approved the resignation of all of CTEX'S
current directors and officers and the election of up to three
designees of TLI to serve as directors in place of CTEX's current
directors; and will have approved such other changes as are
consistent with this Agreement and approved by TLI for submission
to CTEX stockholders after the Closing;
(ii) That TLI's and STOCKHOLDERS' representations and warranties
contained herein shall be true and correct at the time of Closing
as if such representations and warranties were made at such time
and that there shall have been no Material Adverse Change with
respect to TLI; and CTEX shall have received a certificate of TLI;
and effect signed by a duly authorized officer of TLI; and
(iii) That TLI and STOCKHOLDERS shall have performed or complied with
all agreements, terms and conditions required by this Agreement to
be performed or complied with by them prior to or at the time of
Closing Date and CTEX shall have received a Certificate of TLI and
STOCKHOLDERS to such effect signed by or duly authorized officer
of TLI and by each of the STOCKHOLDERS.
8. Termination. This Agreement may be terminated at any time before or at
Closing, by:
(a) The mutual agreement of the parties;
(b) Any party if:
(i) Any provision of this Agreement applicable to a party shall be
materially untrue or fail to be accomplished.
(ii) Any legal proceeding shall have been instituted or shall be
imminently threatening to delay, restrain or prevent the
consummation of this Agreement or any material component thereof.
Upon termination of this Agreement for any reason, in accordance with the
terms and conditions set forth in this paragraph, each said party shall
bear all costs and expenses as each party has incurred and no party shall
be liable to the other for such costs and expenses.
9. Exhibits. All Exhibits attached hereto are incorporated herein by this
reference as if they were set forth in their entirety.
10. Miscellaneous Provisions. This Agreement is the entire agreement between
the parties in respect of the subject matter hereof, and there are no
other agreements, written or oral, nor may this Agreement be modified
except in writing and executed by all of the parties hereto. The failure
to insist upon strict compliance with any of the terms, covenants or
conditions of this Agreement shall not be deemed a waiver or relinquish-
ment of such right or power at any other time or times.
11. Closing. The Closing of the transactions contemplated by this Agreement
("Closing") shall take place at 1:00 P.M. on the first business day after
the latter of (a) TLI and STOCKHOLDERS owning at least 90% of TLI's
outstanding common stock approving this Agreement, which approval must
take place on or before November 1, 2000 or else CTEX may terminate this
transaction; or (b) 10 days after the 14f-1 notice has been filed with
the SEC and mailed to CTEX shareholders, provided the SEC has not
commented with respect thereto; or (c) such other date as the parties
hereto shall agree upon. At the Closing, all of the documents and items
referred to herein shall be exchanged.
12. No Third Party Beneficiaries. The provisions of this Agreement are for
the exclusive benefit of the parties who are signatories hereto and their
permitted successors and assigns, and no third party shall be a beneficiary
of, or have any rights by virtue of, this Agreement.
13. Assignment; Binding Effect. This Agreement, including both its obligations
and benefits, shall inure to the benefit of, and be binding on the
respective permitted assigns, transferees and successors of the parties.
This Agreement may not be assigned or transferred in whole or in part by
either party without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
14. Material Adverse Effect; Material Adverse Change. As used in this
Agreement, "Material Adverse Effect" or "Material Adverse Change" with
respect to a party means any change in, or effect on, the business
conducted by such party that is, or is reasonably likely to be, materially
adverse to (i) the business results of operations, prospects or condition
(financial or otherwise) of such party and its Subsidiaries, taken as a
whole, or (ii) the assets and properties used or useful in the conduct of
the business of such party and its Subsidiaries, taken as a whole.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
16. Counterparts. This Agreement may be executed in duplicate facsimile
counterparts, each of which shall be deemed an original and together shall
constitute one and the same binding Agreement, with one counterpart being
delivered to each party hereto.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the date and year above first written.
CONTEX ENTERPRISE GROUP, INC.
By: ____________________________________
Gary C. Clark, President
TRANSPORTATION LOGISTICS INT'L, INC.
By: ____________________________________
Michael Margolies, CEO & Chairman
STOCKHOLDERS:
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.
______________________________ ________________________________
Michael Margolies Elaine Margolies, Trustee of the
Margolies Family Trust
______________________________ ________________________________
Rewico Investment Limited James Thorpe
______________________________ _________________________________
Sally Blackman Kevin Whitmore
______________________________ _________________________________
David L. Ganz David Paul Parson
______________________________ _________________________________
Lisa Marie Thorpe Mohammed Rezaul Karim
______________________________ _________________________________
Mohammed Abu Baker Sarker Khondaker Azizur Rahaman
______________________________ _________________________________
Mohammed Saiful Islam Bhuiyan Wahidur Rahman
______________________________ _________________________________
Alan Cole Kathleen McArthur
______________________________
Robert Murphy
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
EXH. 2
TRANSPORTATION LOGISTICS INT'L. INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND JUNE 30, 2000 (UNAUDITED)
CONTENTS
PAGE
Independent Auditor's Report 1.
Consolidated Balance Sheet 2.
Consolidated Statements of Operations 3.
Consolidated Statement of Changes in Shareholder's
Equity 4.
Consolidated Statements of Cash Flows 5.
Notes to the financial statements 6.-18.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders' of
Transportation Logistics Int'l, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Transportation
Logistics Int'l Inc. as of December 31, 1999 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year
ended December 31, 1999 and the period from inception from July 1, 1998 to
December 31, 1998. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Transportation Logistics Int'l, Inc. and subsidiaries as of December 31,
1999, and the results of its operations and cash flows for the year ended
December 31, 1999 and for the period from inception July 1, 1998 to December
31, 1998, in conformity with generally accepted accounting principles.
Schuhalter, Coughlin & Suozzo, LLC
Raritan, New Jersey
August 6, 2000
TRANSPORTATION LOGISTICS INT'L INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 31, JUNE 30,
1999 2000
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 224,540 $ 186,196
Accounts receivable, net of allowance for
doubtful accounts of $44,900 and $111,397
respectively 1,105,681 2,719,451
Prepaid expenses 110,464 28,287
Deferred income taxes 21,860 21,860
--------- ---------
TOTAL CURRENT ASSETS 1,462,545 2,955,794
--------- ---------
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation of $138,915 and $505,169
respectively 438,051 593,186
OTHER ASSETS
Goodwill and Customer lists, net of accumulated
amortization of $30,615 and $47,397 respectively 182,586 205,870
Loan receivable stockholders 102,098 102,098
Security deposits and deferred lease payment 34,256 88,891
Deferred income taxes 405 405
Loan receivable affiliates 39,364 378,054
--------- ---------
TOTAL OTHER ASSETS 358,709 775,318
--------- ---------
TOTAL ASSETS $2,259,305 $4,324,298
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 853,844 $2,582,988
Accrued expenses 147,442 190,089
Note payable to bank 141,652 177,462
Income taxes payable 1,052 1,052
Current portion of capitalized lease
obligations 15,008 9,340
Due to related party 90,000 -
--------- ---------
TOTAL CURRENT LIABILITIES 1,248,998 2,960,931
--------- ---------
Capitalized lease obligations, net of current
portion 4,330 3,110
Deferred taxes 7,215 9,415
--------- ---------
TOTAL LIABILITIES 1,260,543 2,973,456
--------- ---------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 10,000,000
shares authorized, and 2,600,000 shares
issued and outstanding 2,600 2,600
Common stock, $.001 par value; 25,000,000
shares authorized, and 175,000 and 657,290
shares issued and outstanding respectively 175 657
Paid-in capital 958,308 1,328,767
Accumulated other comprehensive income 3,455 (21,001)
Retained earnings 34,224 39,819
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 998,762 1,350,842
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,259,305 $4,324,298
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
TRANSPORTATION LOGISTICS INT'L INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Period From
July 1,
1998 For the
(Date of Six
Inception) Year Months
to Ended Ended
December 31, December 31, June 30,
1998 1999 2000
(Unaudited)
Operating Revenues $ 776,225 $6,968,719 $6,702,764
Direct Operating Expenses 452,286 5,367,216 4,395,061
-------- --------- ---------
Gross Profit 323,939 1,601,503 2,307,703
-------- --------- ---------
Operating Expenses
Selling, general and administrative 274,322 1,017,192 1,920,617
Depreciation and amortization 18,775 136,750 120,744
Start up costs (International
Agency Network) - 456,125 255,100
-------- --------- ---------
Total Operating Expenses 293,097 1,610,067 2,296,461
-------- --------- ---------
Operating Income (Loss) 30,842 (8,564) 11,242
Other Income (Expense):
Interest (expense) - (3,809) (3,447)
Sale of fixed assets - 1,787 -
other income (expense) - - -
-------- --------- ---------
Income (loss) before income taxes 30,842 (10,586) 7,795
Benefit (provision) for income taxes (7,177) 21,145 (2,200)
-------- --------- ---------
Net Income $ 23,665 $ 10,559 $ 5,595
======== ========= ========
Net income per share:
Basic and diluted $ .316 $ .060 $ .010
========= ========= ========
Weighted average shares
Basic and diluted 75,000 175,000 657,290
========= ========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
TRANSPORTATION LOGISTICS INT'L INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1999 AND THE PERIOD
FROM JULY 1, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998
AND SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE> Accumulated
Additional Other
Preferred Stock Common Stock Paid-in Retained Comprehensive
Shares Amount Shares Amount Capital Earnings Income Total
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
July 1, 1998 - $ - - $ - $ - $ - $ - $ -
Stock issued for
the period 2,600,000 2,600 75,000 75 695,290 697,965
Net income for the
period from July 1,
1998 (date of
inception) to
December 31, 1998 - - - - - 23,665 - 23,665
Balance,
December 31, 1998 2,600,000 2,600 75,000 75 695,290 23,665 - 721,630
Stock issued for
the period - - 100,000 100 263,018 - - 263,118
Foreign currency
translation
adjustment - - - - - - 3,455 3,455
Net income for the
year - - - - - 10,559 - 10,559
----------------------------------------------------------------------------------------
Balance,
December 31, 1999 2,600,000 2,600 175,000 175 958,308 34,224 3,455 998,762
Issuance of common
stock in
consideration for
100% of common
stock of Rewico
America, Inc. - - 475,000 475 370,459 - - 370,934
Issuance of common
stock in
consideration for
100% of TLI
Bangladesh - - 7,290 7 - - - 7
Foreign currency
translation
adjustment - - - - - - (24,456) (24,456)
Period June 30, 2000
(unaudited) - - - - - 5,595 - 5,595
----------------------------------------------------------------------------------------
Balance
June 30 2000 2,600,000 $ 2,600 657,290 $ 657 $ 1,328,767 $ 39,819 $(21,001) $1,350,842
========= ===== ======= ==== ========= ====== ======= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
TRANSPORTATION LOGISTICS INT'L INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period From
July 1,
1998
Date of
Inception) Year Six Months
to Ended Ended
December 31, December 31, June 30,
1998 1999 2000
(Unaudited)
Cash Flows From Operating Activities:
Net income (loss) $ 23,665 $ 10,559 $ 5,595
Bad debt expense 1,457 146,419 22,256
Depreciation and amortization 18,775 136,750 120,744
Gain on sale of fixed assets - (1,787) -
Deferred income tax 4,530 (21,145) 2,200
Adjustments to reconcile net loss to net cash
used in operating activities
Decrease (increase) in accounts
receivable (288,150) (574,903) (229,384)
Decrease (increase) in prepaid
expenses (44,147) (66,317) 87,689
Decrease (increase) in prepaid income
taxes - - 113,173
Decrease (increase) in security
deposits (3,000) (31,256) (40,738)
(Decrease) increase in accounts
payable and accrued expenses 105,453 554,927 399,506
(Decrease) increase in income taxes
payable 2,677 - -
Increase in due to related party 90,000 - -
-------- -------- --------
Net cash provided by (used in) operating
activities (89,100) 153,247 481,041
-------- -------- --------
Cash Flows From Investing Activities:
Purchase of property and equipment (155,395) (389,387) (119,158)
Acquisition of business (68,000) - -
Advances to associates - (16,170) -
Cash from Rewico acquisition - - 125,404
-------- -------- --------
Net cash (used in) investing
activities (223,395) (405,557) 6,246
-------- -------- --------
Cash Flows From Financing Activities:
Issuance of capital stock 603,827 139,118 -
Shareholder loans, net - (95,093) (83,504)
Repayment of capitalized leases - (149) (6,888)
Proceeds from bank loans - 141,642 35,810
Loans to affiliates - - (471,049)
-------- -------- --------
Net cash provided by financing
activities 603,827 185,518 (525,631)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 291,332 (66,792) (38,344)
Cash and cash equivalents -
beginning of period - 291,332 224,540
-------- -------- --------
Cash and cash equivalents -
end of period $ 291,332 $ 224,540 $ 186,196
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
TRANSPORTATION LOGISTICS INT'L, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED FOR THE PERIOD ENDED JUNE 30, 2000)
NOTE 1 - NATURE OF BUSINESS
Transportation Logistics Int'l, Inc. (TLI or the Company) was incorporated
March 23, 1999 in the State of New York. The Company is an international
logistics management company which owns and operates several subsidiaries,
each of which does business within the various facets of transportation.
The Company through its subsidiary CDA North America, Inc. also leases
commercial drivers and warehouse personnel to broad line, specialty, food
service and general merchandise distributors on a straight lease or temporary
to permanent basis. Through its subsidiary Pupil Transportation, Inc. provides
student transportation services.
Effective April 1, 1999 the Company was assigned all of the issued and
outstanding capital stock of Transportation Logistics Int'l (UK), a United
Kingdom corporation, Pupil Transportation, Inc., a New Jersey corporation and
CDA North America, Inc., a New York corporation (the subsidiaries) from
Transportation Equities, Inc. (assignor) in exchange for $10 and all of the
issued shares of the Company.
As of November 13, 1998 the Company purchased the equipment, goodwill and
customer lists of Commercial Driver Alternatives, Inc. through its subsidiary
CDA North America, Inc., a commercial driver leasing company with an effective
date of November 13, 1998. The Company issued 75,000 shares of common stock
and the balance of the purchase price of $68,000 was paid in cash.
On March 26, 1999 the Company acquired all the shares and assets of
Transportation Logistics Int'l UK (TLIUK) formerly Avair Freight Services Ltd.
(UK), an international freight brokerage company, deemed to be effective March
26, 1999. The Company issued 100,000 shares of common stock to the former
shareholders of Avair Freight Services (UK) Ltd.
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries from their respective dates of
acquisition or inception. Inter-company transactions and balances have been
eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial information at June 30, 2000 and for the six months ended
June 30, 2000 is unaudited but, in the opinion of management, has been prepared
on the same basis as the annual financial statements and includes all
adjustments (consisting of normal recurring adjustments) that Transportation
Logistics Int'l, Inc. and subsidiaries considers necessary for a fair
presentation of its financial position at such date and its operating results
and cash flows for those periods. Results for the interim period are not
necessarily indicative of the results to be expected for the entire year, or
any future period.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from these estimates.
Principles of Consolidation
The accompanying consolidated balance sheet at December 31, 1999 includes the
accounts of the Company and its wholly owned subsidiaries Transportation
Logistics Int'l (UK), CDA North America Inc. and Pupil Transportation, Inc.
with results of operations included for the period since the effective date of
acquisition, March 26, 1999 for Transportation Logistics Int'l (UK) Ltd.,
November 13, 1998, for CDA North America, Inc., and from the date of inception
July 1, 1998 for Pupil Transportation, Inc. All material inter-company
accounts and transactions have been eliminated.
Property and Equipment
Property and equipment are valued at cost. Gains and losses on disposition of
property are reflected in income. Depreciation is computed using the straight-
line method over three to five year estimated useful lives of the assets.
Repairs and maintenance which do not extend the useful life of the related
assets are expensed as incurred. Depreciation expense charged to operations
in 1999 and 1998 was $108,570 and $15,630, respectively.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments with
original maturities of three months or less.
Earnings Per Common Share
For the period ended December 31, 1998, and all periods presented thereafter,
the Company adopted FASB 128 to compute earnings per share. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity.
Goodwill
Goodwill represents the cost of acquired businesses in excess of fair value
of the related net assets at acquisition and is amortized on a straight-line
basis over 10 to 15 years. Amortization expense charged to operations for
1999 and 1998 was $28,080 and $3,145, respectively.
Income Taxes
The Company and its wholly owned subsidiaries file a consolidated Federal
income tax return. Transportation Logistics Int'l, Inc. uses the asset and
liability method in providing income taxes on all transactions that have been
recognized in the consolidated financial statements. The asset and liability
method requires that deferred taxes be adjusted to reflect the tax rates at
which future taxable amounts will be settled or realized. The effects of tax
rate changes on future deferred tax liabilities and deferred tax assets, as
well as other changes in income tax laws, are recognized in net earnings in
the period such changes are enacted. Valuation allowances are established
when necessary to reduce deferred tax assets to amounts expected to be realized.
Intangible Assets
Intangible assets are being amortized as follows:
Goodwill 10 - 15 years
Customer Lists 5 years
Financial Instruments
The following methods and assumptions were used by the Company to estimate the
fair values of financial instruments as disclosed herein:
Cash and Cash Equivalents: The carrying amount approximates fair value
because of the short period to maturity of the instruments.
Notes Receivable: The fair value of notes receivable is estimated based on
discounted cash flows using the current risk weighted interest rate.
Accounts Receivable/Payable: The carrying amount approximated fair value.
Revenue Recognition
Revenue from freight brokerage is recognized upon delivery of goods, and
direct expenses associated with the cost of transportation are accrued
concurrently. Revenue from driver leasing is recognized when earned based
upon standard billing rates charged by the hours worked. Direct expenses
associated with the cost of driver leasing are accrued concurrently. Revenue
from subcontracted transportation services is recognized upon completion of
each trip. Direct expenses associated with the cost of transportation are
accrued concurrently. Monthly provision is made for doubtful receivables,
discounts, returns and allowances.
Long-lived Assets
In March, 1995 the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets for Long-Lived Assets to
be Disposed of". SFAS 121 required that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable and long-lived assets and
certain identifiable intangibles to be disposed of to be reported at the
lower of carrying amount of fair value less cost to sell. SFAS No. 121 also
establishes the procedures for review of recoverability and measurement of
impairment, if necessary, of long-lived assets and certain identifiable
intangibles to be held and used by an entity. Management has determined that
no impairment of the respective carrying value has occurred as of December
31, 1999.
Schedule of Non Cash Investing and Financing Activities
1999
Assets acquired under capital lease $ 6,500
Acquisition of Transportation Logistics Int'l (UK) Ltd.
On March 26, 1999 the Company acquired all of the issued and outstanding
common stock of Transportation Logistics Int'l (UK), an international freight
brokerage company, through an acquisition through the issuance of 100,000
shares of Transportation Logistics Int'l, Inc. common stock. The total value
of the acquisition is approximately $124,000 (exclusive of acquisition costs).
The effective date for the purchase is March 26, 1999. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The excess (approximately $77,000) of the total acquisition
cost over the recorded value of assets acquired was allocated to goodwill and
is being amortized over 15 years. The sellers are entitled to additional shares
based upon obtaining future profitable operations in excess of $500,000 and
$600,000 over the next two years respectively. The accompanying balance
sheet includes the assets and liabilities of TLIUK at December 31 1999.
Acquisition of Selected Assets of Commercial Driver Alternatives, Inc.
On November 13, 1999, CDA North America, Inc., acquired selected assets of
Commercial Driver Alternatives, Inc., a commercial driver leasing company
based in Frederick, MD through the issuance of 75,000 shares of TLI common
stock and $68,000 valued at $161,000. The acquisition was accounted for as a
purchase in accordance with Accounting Principles Board Opinion No. 16. The
excess (approximately $135,000) of the total acquisition cost over the recorded
value of assets acquired was allocated to goodwill and customer lists, and is
being amortized over 10 and 5 years respectively. The sellers are entitled to
additional shares based upon obtaining future profitable operations in excess
of $1,000,000 and $2,000,000 over the next two years respectively.
Acquisition of Rewico America, Inc. (Unaudited)
On March 21, 2000 the Company acquired all of the issued and outstanding
common stock of Rewico America, Inc., an international freight brokerage
company, through an acquisition through the issuance of 475,000 shares of
Transportation Logistics Int'l, Inc. common stock. The total value of the
acquisition is approximately $589,000 (exclusive of acquisition costs). The
effective date for the purchase is March 31, 2000. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. The excess (approximately $38,500) of the acquisition cost
over the recorded value of assets acquired was allocated to goodwill and is
being amortized over 15 years. The accompanying balance sheet includes the
assets and liabilities of Rewico America, Inc. at June 30, 2000.
Acquisition of TLI Bangladesh - (Unaudited)
On March 31, 2000 the Company acquired all of the issued and outstanding
common stock of TLI Bangladesh, an international freight brokerage company,
through an acquisition through the issuance of 7,290 shares of Transportation
Logistics Int'l, Inc. common stock. The total value of the acquisition is
approximately $9,000 (exclusive of acquisition costs). The effective date
for the purchase is March 31, 2000. The acquisition was accounted for as a
purchase in accordance with Accounting Principles Board Opinion No. 16. The
accompanying balance sheet includes the assets and liabilities of TLI
Bangladesh at June 30, 2000.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising costs
during the periods ended December 31, 1999 and 1998 amounted to $46,811 and
$7,928, respectively.
Foreign Currency Transactions
In the normal course of business the Company has accounts receivable and
accounts payable that are transacted in foreign currencies. The Company
accounts for transaction differences, in accordance with Statement of
Financial Standard No. 52, "Foreign Currency Translation", and accounts for
the gains or losses in operations. For all periods presented, these amounts
were immaterial to the Company's operations.
Comprehensive Income
For foreign operations outside the United States that prepare financial
statements in currencies other than the U.S. dollar, results of operations
and cash flows are translated at average exchange rates during the period and
assets and liabilities are translated at end-of-period exchange rates.
Translation adjustments are included as a separate component of accumulated
other comprehensive income (loss) in shareholders' equity. For the year
ended December 31, 1999 the foreign currency translation was $3,455. There
were no items of comprehensive income in 1998.
Earnings (Loss) Per Share
The Company plans to compute earnings per share in accordance with Statements
of Financial Accounting Standard ("SFAS") No. 128. Basic EPS excludes
dilution and is computed by dividing income available to common stockholders
by the weighted average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared in
the earnings of the entity. Common equivalent shares have been excluded
from the computation of diluted EPS since their affect is antidilutive.
Network Start-Up Costs
Pursuant to Statement of Position 98-5, the Company expenses start-up costs
associated with its international logistic network. The Statement of Position
broadly defines start-up activities as activities related to organizing a new
business, as well as one-time activities associated with, opening a new
facility, introducing new products or services, conducting business with a
new class of customers or in a new territory, and starting a new process in
an existing facility or starting a new operation. The company is developing a
network of logistics agents which agree to use each others services
exclusively per agreed upon terms within specified territories around the
world.
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost,
less accumulated depreciation.
December 31,
1999
Furniture and fixtures $ 10,450
Equipment 547,996
Leasehold improvements 18,520
Less: accumulated
depreciation (138,915)
-------
Net fixed assets $ 438,051
========
NOTE 4 - INTEREST EXPENSE
Interest expense totaled $3,809 for the year ended December 31, 1999.
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
1999
Payroll and payroll tax liabilities $ 147,442
NOTE 6 - INCOME TAXES
Deferred income taxes arise from temporary differences resulting from income
and expense items reported or financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not
related to an asset or liability are classified as current or noncurrent
depending on the periods in which the temporary differences are expected to
reverse.
Temporary differences giving rise to the deferred tax liability consist
primarily of the excess of depreciation for tax purposes over the amount for
financial reporting purposes.
The deferred tax assets are attributable to timing differences of state tax
deductions and net operating loss carry back. No valuation allowance has been
calculated due to the reasonable expectation that they will be utilized.
Deferred taxes consist of the following at:
December 31,
1999
Total deferred tax assets $ 22,265
Deferred tax liability (7,215)
------
Net deferred tax assets (liability) $ (15,050)
=======
During 1999 and 1998, a benefit (provision) for taxes was recorded as computed
below:
1999 1998
Current Income Tax (Expense)
Federal $ (1,595) $ 1,595
State - 1,052
----- -----
Total (1,595) 2,647
Deferred Tax (Expense)
Foreign tax benefit (21,860) -
Federal 1,392 2,730
State 918 1,800
------- ------
Total income tax expense $(21,145) $ 7,177
====== ======
The reconciliation of income tax computed at the U.S. Federal statutory rates
to income tax expense is as follows:
Percentage of Pretax Income
1999 1998
Tax at US statutory rates 34.0% 34.0%
State income taxes, net of federal benefit 6.0% 6.0%
Foreign taxes (21.0%) 21.0%
Other reconciling items (21.0%) (38.0%)
----- ----
Income tax provision .-% 23.0%
===== ====
As of December 31, 1999, the Company has no available operating loss carry
forwards which may be used to reduce Federal and State taxable income and tax
liabilities in future years.
NOTE 7 - TRANSACTIONS WITH RELATED PARTIES
Stockholder Loans
From time to time the Company has advanced loans to several of its stockholders.
At December 31, 1999, these loans amounted to $102,098 and have no stated
interest rate and no specific repayment terms.
The Company purchases a portion of transportation services from various
entities that are controlled by the Company's president and major stockholder.
In addition sales are made to these entities. The Company's president and
major stockholder also controls other companies whose operations were similar
to those of the Company. Per management these Company's operations have been
discontinued during the year 2000. The following is a summary of transactions
and balances with affiliates for 1999 and 1998.
1999 1998
Sales to affiliates $ 27,663 $ -
Due from affiliates (included in
accounts receivable) $ 27,663 $ -
Purchases from affiliates $ 24,843 $ -
Due to affiliates (included in
accounts payable) $ 24,843 $ -
Management fees and administrative
reimbursements (included in due
to related party) $ - $ 90,000
Due to affiliate represents amounts due to a related company owned by the
Company's president for management and administrative fees.
NOTE 8 - CAPITAL STOCK
Preferred Stock
As of December 31, 1999, the authorized preferred stock of the Company is
10,000,000 shares. As of December 31, 1999 2,600,000 shares of preferred
stock are outstanding.
Common Stock
As of December 31, 1999, the authorized common stock of the Company is
25,000,000 shares. As of December 31, 1999 75,000 shares of common stock are
outstanding.
NOTE 9 - EMPLOYMENT AND CONSULTANT AGREEMENTS
The Company has employment and consultant agreements with certain employees
and consultants expiring at various times through April 2004. Such agreements
provide for minimum compensation levels and for incentive bonuses which are
payable if specified management goals are attained. The aggregate commitment
for future salaries at December 31, 1999 excluding bonuses, was approximately
$520,000.
NOTE 10 - COMMITMENTS
Leases
The Company leases land, buildings and equipment under agreements that expire
in various years through October 2002. Rental expense under operating leases
was $104,364 and $7,712 for the periods then ended December 31, 1999 and 1998,
respectively.
The table below shows the future minimum lease payments due under non-
cancelable leases at December 31, 1999. Such payments total $203,614 for
operating leases.
The net present value of such payments on capital leases was $15,008 after
deducting imputed interest of $1,466.
2004 and
2000 2001 2002 2003 Later
Operating leases $ 86,484 $ 73,389 $ 24,594 $ 4,594 $ 14,553
Capital leases 5,782 5,564 5,128 - -
------ ------ ------ ------ ------
Minimum lease payments $ 92,266 $ 78,953 $ 29,722 $ 4,594 $ 14,553
====== ====== ====== ====== ======
The Company is the lessee of office equipment under capital leases expiring
in 2002. The assets and liabilities under capital leases are recorded at the
lower of the present value of the minimum lease payments or the fair value of
the asset. The assets are amortized over their estimated productive lives.
Amortization of assets under capital leases is included in depreciation
expense for 1999.
NOTE 11 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of non-interest bearing cash deposits,
accounts receivable, and notes receivable.
Pupil transportation, Inc. provides school transportation services to Essex
County, New Jersey and the City of East Orange, New Jersey. CDA North America,
Inc. provides employment services for transportation companies in various
locations in the United States. Transportation Logistics Int'l Inc. is an
international freight broker providing transportation services in various
locations across the United States. Transportation Logistics Int'l (UK) LTD
is an international freight broker providing transportation services in the
United Kingdom, and elsewhere throughout the world.
The Company grants credit to customers substantially all of whom are located
in the United States and United Kingdom. The Company has 2 major customer's
in the Pupil Transportation subsidiary which account for 25% of consolidated
sales in 1999 and 70% in 1998. Sales to these customers were $1,745,153 and
$551,577 for 1999 and 1998 respectively. Accounts receivable from these
customers totaled $289,587 and $137,280 at December 31, 1999 and 1998
respectively.
The Company expects that a significant portion of its future revenues will
continue to be generated by a limited number of customers. The loss of any
of these customers could materially and adversely affect its operating results.
From time to time, the Company places its temporary cash investments and non-
interest bearing deposits with financial institutions with balances in excess
of the FDIC insured limits. Management has attempted to reduce its credit
risk by placing its deposits in various financial institutions. Consequently,
in managements opinion, no significant concentrations of credit risk exist for
the companies. On December 31, 1999 $60,150 of cash exceeded FDIC insured
limits.
Management has attempted to reduce its credit risk by demanding payment prior
to the delivery of goods on most freight transactions, and by reviewing credit
worthiness of driver leasing customers.
Substantially all employees of the Pupil Transportation subsidiary are covered
by a collective bargaining agreement. These agreements continue in force
until August 2002.
NOTE 12 - LEASES
Following is a summary of property held under capital leases:
1999
Office Equipment $ 15,008
Less: accumulated amortization (1,175)
------
$ 13,833
======
The interest rate on the capitalized lease is 10% and is imputed based on the
lower of the Company's incremental borrowing rate at the inception of the
lease or the lessor's implied rate of return.
NOTE 13 - PENSION PLANS
Transportation logistics Int'l (UK) ltd sponsors a defined contribution
pension plan for all management employees. Contributions are 5% of salaries.
Contributions to the plan for 1999 was $12,185.
NOTE 14 - OPERATING SEGMENTS
The Company's operations are classified into four principal reportable segments
that provide different products or services. Logistics Services U.S.,
Logistics Services UK, Student transportation, commercial driver leasing.
Separate management of each segment is required because each business unit is
subject to different marketing, and operating strategies and different
geographic locations.
Segmental Data
Reportable Segments
Year Ended 12/31/99
TLI US TLI UK PUPIL CDA TOTAL
===============================================================================
External Revenues $ 376,644 $2,229,198 $1,745,153 $2,710,030 $7,061,025
Intersegment Revenues (2,979) (49,327) - - (92,306)
Total Revenues $ 333,665 $2,179,871 $1,745,153 $2,710,030 $6,968,719
Depreciation &
Amortization $ - $ 26,263 $ 83,477 $ 27,010 $ 136,750
Operating Income
(loss) $ 16,368 $ (25,330) $ 973 $ (575) $ (8,564)
Assets $ 287,670 $ 494,521 $ 864,546 $ 612,568 $2,259,305
Capital Expenditures $ - $ 45,685 $ 315,054 $ 10,280 $ 371,019
Reportable Segments
Period from July 1, 1998 (Date of Inception through 12/31/98
TLI US TLI UK PUPIL CDA TOTAL
===============================================================================
Revenues $ - $ - $ 551,578 $ 224,647 $ 776,225
Intersegment Revenues - - - - -
Total Revenues $ - $ - $ 551,578 $ 224,647 $ 776,225
Depreciation &
Amortization $ - $ - $ 14,998 $ 3,777 $ 18,775
Operating Income
(loss) $ - $ - $ 31,588 $ (746) $ 30,842
Assets $ - $ - $ 572,477 $ 352,053 $ 924,530
Capital Expenditures $ - $ - $ 154,425 $ 26,654 $ 181,079
Measurement of Segment Profit and Assets
There are no differences in the basis of measuring segment profit and assets.
Intersegment transactions that occur are based on current market prices and
all intersegment profit is eliminated in consolidation. The Company employs
shared service concepts to realize economies of scale and efficient use of
resources. The costs of shared services and other corporate center operations
managed on a common basis are allocated to the segments based on usage, where
possible or other factors based on the nature of the activity. The accounting
policies of the reportable operating segments are the same as those described
in the summary of significant accounting policies.
NOTE 15 - NON CASH INVESTING ACTIVITIES
1999 1998
Property acquired under capital lease $ 15,500 $ -
Investment of net assets of subsidiaries $ 124,000 $ 135,201
Liabilities assumed $ 202,413 $ -
NOTE 16 - NOTES PAYABLE BANK
The Company's UK subsidiary has the following short term notes payable.
Note Payable to Bank $ 65,000
Overdraft Facility 76,652
-------
$ 141,652
=======
Note payable to the bank and the overdraft facility bear interest at 3% above
the L.I.B.O.R. rate and are secured by substantially all of the companies
assets and are personally guaranteed by the subsidiary's president and the
parent company.
NOTE 17 - LITIGATION
The Company, several related companies, its president and certain employees
are defendants in a lawsuit filed by an alleged acquisition candidate for
alleged breach of contract. The complaint does not specify an amount for
damages. The Company believes the suit is completely without merit and
intends to vigorously defend its position.
The Company, several related companies, its president and its subsidiaries
are defendants in a lawsuit filed by one of its former vendors. At this
stage in the proceedings the probable outcome is unknown. The Company has a
counter claim based upon defective services provided by the vendor. The
Company believes the settlement of the lawsuit will not exceed amounts already
recorded in the financial statements.
NOTE 18 - EVENTS SUBSEQUENT TO THE DATE OF THE AUDIT REPORT
Purchase of Rewico America, Inc.
On March 21, 2000 the Company agreed to purchase all of the outstanding common
stock of Rewico America, Inc., an international freight broker in exchange for
475,000 shares of its common stock, in a business combination anticipated to
be accounted for as a purchase.
Investment Banking Agreement
The Company's board of directors has authorized management to retain the
services of an investment banking firm to help in the location of a potential
merger candidate whereby the Company would complete a business combination for
controlling shares of a publicly traded company in exchange for 100% of the
company's issued and outstanding shares. Additionally, management has been
authorized to raise additional capital by the sale of its common stock under
agreements that provide for fees of up to 15% of any funds raised by investment
banking firms.
