<PAGE>
As filed with the Securities and Exchange Commission on October 2, 2000
Registration No. 333-42080
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
Nations Express, Inc.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
North Carolina 4731 56-2077063
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of
incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
1328B Crossbeam Road
Charlotte, North Carolina 28217
(704) 423-9911
(Address and telephone number
of principal executive offices and principal place of business)
----------------
Allen D. Watson
President and Chief Executive Officer
Nations Express, Inc.
1328B Crossbeam Road
Charlotte, North Carolina 28217
(704) 423-9564
(Name, address and telephone number of agent for service)
----------------
Copy to:
<TABLE>
<S> <C>
Brian T. Atkinson, Esq. William M. Prifti, Esq.
Moore & Van Allen PLLC 5 Market Square
100 North Tryon Street, Suite 47 Suite 109
Charlotte, North Carolina 28202-4003 Amesbury, Massachusetts 01913
(704) 331-1000 (978) 388-4942
</TABLE>
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. The prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 2, 2000
PROSPECTUS
[Nations Express, Inc.]
Nations Express, Inc.
1,000,000 Units
Each Consisting of One Share of Common Stock
and One Redeemable Common Stock Purchase Warrant
This is an initial public offering of units of Nations Express, Inc. at an
estimated price of between $9.00 and $11.00 per unit. Prior to this offering,
there has been no public market for the units, the underlying common stock or
the warrants.
See "Risk Factors" beginning on page 4 to read about certain factors you
should consider before buying units.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
------------
<TABLE>
<CAPTION>
Per
Unit Total
---- -----
<S> <C> <C>
Public offering price................................................
Underwriting discount................................................
Proceeds, before expenses, to Nations Express........................
</TABLE>
We have granted the underwriters the right to purchase up to 150,000 units to
cover over-allotments.
The shares of common stock and warrants will be ready for delivery on or
about , 2000.
Schneider Securities, Inc.
Neidiger, Tucker, Bruner, Inc.
Advanced Equities, Inc.
The date of this prospectus is , 2000
<PAGE>
[Logo of Nations Express]
Express Center Locations
[United States Map with Locations]
<PAGE>
PROSPECTUS SUMMARY
This summary does not contain all of the information that may be important
to you. You should read the entire prospectus, including the financial
statements and related notes, before making an investment decision.
Nations Express
Nations Express is a multi-service, expedited transportation company that
arranges on-time and intact delivery of time sensitive cargo.
We arrange both expedited ground freight or expedited air freight services
including:
.Domestic Air
.Expedited Truck
.Trade Show Logistics
.Truck Load Brokerage
.International Shipping
Since our formation in 1998, we have developed our business and operations
by opening additional locations in new markets, expanding our fleet of
independent truck owner-operators and by expanding our services in our existing
markets. We currently operate from 17 locations.
Approximately 110 independent truck owner-operators operate a trucking fleet
under exclusive contract with us. Our exclusive independent contractor
relationship with the independent truck owner-operators in our fleet has
enabled us to minimize capital costs. We do not own or operate any aircraft. We
utilize commercial passenger and freight air carriers to provide expedited air
transport.
Our shipments are centrally managed through our computerized management
information system, Express Alert. Express Alert enables us to trace shipments
and to provide historical data on each shipment. Express Alert also provides an
intranet link between our Express Centers, sales agents and our corporate
office and provides updated account information and sales order entry.
Our principal executive offices are located at 1328B Crossbeam Road,
Charlotte, North Carolina 28217. Our mailing address is P.O. Box 19247,
Charlotte, North Carolina 28219, and our telephone number is (704) 423-9564.
1
<PAGE>
The Offering
Securities................ 1,000,000 units, each consisting of one share of
common stock and one redeemable common stock
purchase warrant to purchase one share of common
stock. Each warrant is exercisable to purchase one
share of common stock at an exercise price equal to
140% of the initial public offering price for a
period of 60 months, commencing 13 months from the
completion of the offering. The warrants are
subject to redemption by Nations Express beginning
13 months after completion of the offering at a
price of $0.20 per warrant, provided that the
average closing bid price of the common stock
equals or exceeds 160% of the initial public
offering price per share for 20 consecutive trading
days.
Shares to be outstanding
after the offering (1)....
3,979,566 shares of common stock, including the
units.
We have applied to list our shares of common stock
American Stock Exchange... and warrants on the American Stock Exchange under
the symbol "NAX."
Use of Proceeds........... We intend to use substantially all of the net
proceeds from the offering for working capital and
expenditures related to geographic expansion.
The preceding table does not include the shares of common stock and warrants
underlying the underwriters' over-allotment option for 150,000 units, the
200,000 shares of common stock underlying the underwriters' compensatory
warrant and 820,500 shares issuable upon exercise of outstanding options to
purchase common stock under our 1998 Incentive Stock Option Plan and 1999 Stock
Option Plan.
2
<PAGE>
SUMMARY FINANCIAL DATA AND OTHER INFORMATION
The following table summarizes the financial data of our business. You
should read this information with the discussion in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
financial statements and notes to those statements included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Period from
March 1998 Year Ended Year Ended
to June 30, 1998* June 30, 1999 June 30, 2000
----------------- ------------- -------------
<S> <C> <C> <C> <C>
Statements of Income Data:
Revenue..................... $533,522 $7,369,373 $19,353,649
Purchased transportation.... 366,493 5,028,050 13,541,537
-------- ---------- -----------
Gross profit................ 167,029 2,341,323 5,812,112
Operating expenses.......... 235,882 2,150,422 5,545,180
-------- ---------- -----------
Income (loss) from
operations................. (68,853) 190,901 266,932
Interest expense, net....... 3,608 20,928 7,878
Income tax expense
(benefit).................. (31,812) 66,289 121,213
-------- ---------- -----------
Net income (loss)........... $(40,649) $ 103,684 $ 137,841
======== ========== ===========
Earnings (loss) per common
share:
Basic..................... $ (0.04) $ 0.04 $ 0.04
Diluted................... $ (0.04) $ 0.04 $ 0.03
Weighted average common
shares outstanding, basic.. 931,157 2,316,618 2,796,988
Weighted average common
shares outstanding,
diluted.................... 931,157 2,316,618 3,118,527
Operating Data:
Company-owned Express
Centers.................... 2 2 6
Agency-owned Express
Centers.................... 1 9 11
Number of Independent Truck
Owner-Operators............ 0 32 110
</TABLE>
--------
* See Note 11 to the financial statements included in this prospectus.
The following table presents a summary of our balance sheet at June 30,
2000:
. on an actual basis;
. on an as adjusted basis to reflect the sale of 1,000,000 units in this
offering at an assumed initial public offering price of $10 per share
after deducting the estimated underwriting discount and offering
expenses.
<TABLE>
<CAPTION>
June 30, 2000
----------------------
Actual As Adjusted
---------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................... $ 50,228 $ 8,300,228
Working capital......................................... 1,395,585 9,645,585
Total assets............................................ 4,118,318 12,368,318
Long-term lease obligations............................. 62,325 62,325
Shareholders' equity.................................... 1,782,294 10,032,294
</TABLE>
3
<PAGE>
RISK FACTORS
The purchase of the units involves a high degree of risk. Accordingly, each
prospective investor, before placing an order for any units, should carefully
read this prospectus in its entirety and should consider the following risks
and speculative features inherent in and affecting this offering and our
business, as well as general investment risks. An investment in the units
should be made only by persons who can afford an investment involving such
risks and is suitable only for persons able to sustain the loss of their entire
investment.
We have limited operating history, which makes it difficult to predict long-
term growth and to define our business strategy.
Nations Express was organized in March 1998. Since that time, we have
experienced rapid growth at a rate that may not be sustainable. In addition, we
have only limited information upon which to base our future projections and
business strategy.
We may not be able to develop our business or gain market share because some
of our competitors have significantly greater financial, technical, marketing
and sales resources than we do.
Although the industry is highly fragmented with a large number of
participants, we compete with a number of domestic firms with nationwide
networks that have the capability to provide the same services offered by us.
Because some of our competitors are larger than we are and have greater
financial resources to draw upon than we do, they may be able to offer lower
prices to our customers. This may force us to lower our prices in the short
term in order to gain market share and compete effectively. Lowering prices
could materially reduce our profitability.
Our growth and acquisition strategy may have a material adverse effect on
working capital.
The net cash proceeds of this offering may not be sufficient to fund our
working capital needs or provide us with the financial resources necessary to
achieve our growth and acquisition goals. Our growth and acquisition strategies
are aggressive in light of our current financial resources. Full implementation
of these strategies could impair our profitability and deplete our working
capital.
In addition, we lack experience in mergers and acquisitions. Because of our
relatively small size when compared to some of our competitors, we may not be
able to implement our acquisition strategy without issuing stock and
significantly diluting the value of the common stock and warrants sold in this
offering. Alternatively, we may be required to incur a material amount of debt
to fund implementation of our growth and acquisition strategies. This could
materially affect our profitability and adversely impact our ability to satisfy
working capital requirements.
Our success depends to a large degree on the continued services of Messrs.
Watson, Dukesherer and McPherson.
These three key employees are responsible for our day-to-day operations. We
have employment contracts with Messrs. Watson, Dukesherer and McPherson. We
maintain "key-man" insurance on the life of our chief executive officer, Allen
D. Watson. Mr. Watson is in charge of sales and marketing and expanding our
operations. The loss of Mr. Watson would adversely affect our national
marketing strategy and impede our sales growth. Mr. Dukesherer operates the
tradeshow transportation and tradeshow logistics segment of our business. The
loss of Mr. Dukesherer would have a material adverse effect on our existing
tradeshow transportation and tradeshow logistics business and our ability to
effectively compete in that industry. Mr. McPherson manages the day-to-day
operations of our facilities and relationships with our fleet of independent
truck-owner operators. The loss of Mr. McPherson would have a material adverse
effect on our ability to manage our daily operations, implement our growth
strategy and assimilate new personnel.
4
<PAGE>
Our air freight services depend on the availability of competitive cargo
space from third parties and shortages or increases in the price of cargo space
would adversely affect our business.
Our air freight services business depends on the availability of air cargo
space, including space on commercial aircraft and cargo airlines. Shortages of
available cargo space occur from time to time, usually around holidays and in
heavy transportation lanes. In addition, available cargo space could be reduced
as a result of decreases in the number of commercial airlines serving
particular locations and flight delays and cancellations of flights or schedule
changes. Moreover, increases in the cost of cargo space, due to shortages in
supply, increases in fuel cost or other factors, would increase our costs and
adversely affect our operating results.
Personal injury and accident claims resulting from our expedited ground
services could materially impact our profitability.
We currently utilize the services of approximately 110 independent truck
owner-operators who are under exclusive contract with us. Our fleet of trucks
occasionally transport hazardous materials such as paint. In addition, we
utilize the services of non-exclusive independent truck owner-operators or
transportation companies from time to time and we may have to depend on the
services of these third parties as our business grows. We may be held liable
for their actions. We carry $10 million of liability insurance on our owner-
operators and their vehicles. Claims may, however, exceed the amount of
liability coverage carried at any one time. The risk that our liability
coverage could be inadequate increases as our fleet of trucks and use of third
parties expands and as we transport more cargo. A material increase in the
frequency or severity of accidents, liability claims or unfavorable resolutions
of claims could materially affect us.
We could incur additional expenses or taxes if the independent truck owner-
operators we use in connection with our expedited ground fleet are found to be
"employees" rather than independent contractors.
The Internal Revenue Service, state tax and regulatory authorities and other
third parties have, from time to time, asserted that independent truck owner-
operators in the transportation industry are "employees" rather than
"independent contractors" for purposes of the Internal Revenue Code or other
state or local tax laws or regulations. The independent truck owner-operators
at issue in these disputes have, in some cases, been similar to the type we use
to operate our ground fleet. Although we believe that the independent truck
owner-operators we use are not "employees," the Internal Revenue Service and
others could challenge this position. If such a challenge were successful, we
could incur additional employee benefit-related expenses and could be liable
for additional taxes, penalties and interest for prior periods and additional
taxes for future periods.
Delays in the final determination of costs of shipment and collections and
our limited operating history make it difficult to accurately estimate the
collectibility of our receivables.
A final accounting of the costs associated with a shipment may not be
available until well after the shipment is delivered. Our invoices to customers
are distributed shortly after the shipment has been delivered. We typically do
not collect our accounts receivable until approximately 58 days after billing.
In addition, we are often required to rebill our customers for shipments, which
furthers the delay between booking accounts receivable and actual payment.
Although we believe our reserve for uncollectible accounts is adequate, these
factors, when combined with our limited operating history, make it difficult to
accurately estimate the collectibility of our receivables.
Our relationships with agency-owned Express Centers may be terminated with
30 to 90 days notice.
The agreements governing the relationship between us and our agency-owned
Express Centers may be terminated upon 30 to 90 days notice by either party.
Our business opportunities in a particular market could be adversely affected
if one of our agency-owned Express Centers terminated their agreement.
5
<PAGE>
Our agency-owned Express Centers, independent truck owner-operators and
employees are not bound by non-competition agreements.
Our agency-owned Express Centers, independent truck owner-operators and
employees, some of whom are integral to our relationships with certain key
customers or locations, may terminate their relationship with Nations Express
with little or no notice and go to work for one of our competitors. These
individuals have an understanding of our business operations and proprietary
approaches to the marketplace. We cannot assure you that certain key agency-
owned Express Centers, independent truck owner-operators or employees will not
go to work for a competitor and exploit the knowledge and training they
received while working for Nations Express.
Our limited operating history and the seasonality of our business may
adversely affect our profitability from quarter to quarter.
Our limited operating results have been subject to quarterly seasonal
trends. The first quarter of the calendar year has traditionally been the
weakest and the third and fourth quarters have traditionally been the
strongest. This pattern is the result of, or is influenced by, numerous factors
that are beyond our control including climate, holidays, consumer demand,
economic conditions and other similar forces. In addition, this historical
quarterly trend has been influenced by the growth and diversification of our
service offerings. A significant portion of our revenues are derived from
customers in industries whose shipping patterns are tied closely to consumer
demand and from customers in industries whose shipping patterns are dependent
upon just-in-time production schedules. Therefore, the timing of our revenues
are, to a large degree, impacted by factors out of our control. Additionally,
many customers ship a significant portion of their goods at or near the end of
a quarter, and therefore, we may not learn of a shortfall all in revenues until
late in a quarter.
Due to our limited operating history and the unpredictability of other
factors, we cannot accurately forecast many of these factors or estimate
accurately the relative influence of any particular factor. Our inability to
accurately predict downward trends or weak operating results increases the risk
that we may not have sufficient revenues to sustain our growth. Insufficient
cash flow may also affect our ability to complete acquisitions or develop new
service offerings.
6
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus constitute forward-
looking statements. Words such as "expects," "anticipates," "approximates,"
"believes," "estimates," "intends," and "hopes" and variations of these words
and similar expressions are intended to identify such forward-looking
statements. We based these statements on our current expectations and
projections about future events. These forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties
that could cause actual results to differ materially from those projected in
these statements. The forward-looking statements contained in this prospectus
include, among other issues, statements about the following:
. general economic conditions in our markets, including inflation,
recession, interest rates and other economic factors;
. damage to or other disruption of our facilities and equipment; and
. other factors that generally affect the business of transportation,
including expedited air and expedited ground freight.
We are not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
7
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the units is expected to be approximately
$8,250,000 ($9,555,000 if the underwriters' over-allotment is fully exercised).
The following table sets forth the estimated use of the net proceeds of the
offering.
<TABLE>
<S> <C>
Geographic expansion........................................... $1,500,000
Development of truck and freight tracking system............... 500,000
Improvement of accounting and information systems.............. 500,000
Development of business-to-business website.................... 1,000,000
Repayment of outstanding short-term indebtedness............... 500,000
Working capital and acquisitions............................... 4,250,000
----------
Total...................................................... $8,250,000
==========
</TABLE>
The foregoing represents management's current expectations regarding the use
of proceeds. The actual amount and timing of any of these expenditures will
depend on numerous factors and cannot be predicted with certainty. We have no
present agreements, plans, arrangements or understandings regarding any
acquisitions and management will have broad discretion to allocate the
proceeds. Pending application of proceeds to any specific purpose, we intend to
invest the net proceeds in short-term, highly liquid money market investments.
8
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of Nations Express
as of June 30, 2000 and the capitalization as of June 30, 2000 as adjusted to
reflect the sale of all units being offered, but excluding exercise of the
over-allotment option.
<TABLE>
<CAPTION>
June 30, 2000
----------------------
Actual As Adjusted
---------- -----------
<S> <C> <C>
Lease obligations (including current portion)........... $ 109,129 $ 109,129
Shareholders' Equity:
Preferred stock; no par value: 1,000,000 shares
authorized; no shares outstanding.................... 0 0
Common stock, no par value: 25,000,000 shares
authorized; 2,979,566 shares issued and outstanding,
actual; 3,979,566 shares issued and outstanding, as
adjusted ............................................ 1,562,877 9,722,877
Stock warrants ....................................... 50,390 140,390
Retained earnings..................................... 169,027 169,027
---------- -----------
Total shareholders' equity ........................... 1,782,294 10,032,294
---------- -----------
Total Capitalization ............................... $1,891,423 $10,141,423
========== ===========
</TABLE>
The amount of common stock and warrants in the preceding table does not give
effect to an aggregate of up to 2,220,500 shares of common stock issuable upon
exercise of:
. the warrants being offered hereby;
. the underwriters' over-allotment option, including the shares underlying
the warrants included in the over-allotment option;
. the representative's warrants; or
. the issuance of any of the 820,500 shares issuable upon exercise of
options to purchase common stock under our 1998 Incentive Stock Option
Plan and 1999 Stock Option Plan.
9
<PAGE>
DILUTION
The net tangible book value of our common stock as of June 30, 2000 was
approximately $1,782,294, or $.60 per share. Net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the 2,979,566 shares of common stock outstanding as of June 30,
2000.
Net tangible book value dilution per share represents the difference between
the amount per share paid by new investors who purchase units in this offering
and the pro forma net tangible book value per share of common stock immediately
after completion of this offering. After giving effect to the sale of 1,000,000
units in this offering at an initial public offering price of $10.00 per unit,
after deduction of estimated underwriting discounts and commissions and
offering expenses, the pro forma net tangible book value of Nations Express at
June 30, 2000 would have been approximately $10 million or $2.55 per share.
This represents an immediate increase in net tangible book value of $1.95
per share to existing shareholders, and an immediate dilution in net tangible
book value of $7.45 per share to new investors in the offering, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Total assumed initial public offering price per unit (1)...... $10.00
Net tangible book value per share at June 30, 2000.......... $0.60
Increase per share attributable to new investors............ 1.95
Pro forma net tangible book value per share after the offering
............................................................. 2.55
------
Net tangible book value dilution per share to new investors .. $ 7.45
======
</TABLE>
The pro forma net tangible book value per share does not give effect to an
aggregate of up to 2,220,500 shares of common stock issuable upon exercise of:
. the warrants being offered in this prospectus;
. the underwriters' over-allotment option, including the shares
underlying the warrants included in the over-allotment option;
. the representative's warrants; or
. the 820,500 shares issuable upon the exercise of outstanding
options to purchase our common stock.
The following table summarizes as of June 30, 2000, on a pro forma basis to
reflect the same adjustments described above, the number of shares of common
stock purchased from Nations Express, the total consideration paid and the
average price per share paid by the existing holders of common stock and the
new investors in the offering, assuming the sale of 1,000,000 units hereby at
an initial public offering price of $11 per unit. The calculations are based
upon total consideration given by new and existing shareholders, before any
deduction of estimated underwriting discounts and commissions and offering
expenses.
<TABLE>
<CAPTION>
Shares
Outstanding Total Consideration Average
----------------- ------------------- Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 2,979,566 74.9% $ 1,421,226 12.4% $ .48
New Investors.................. 1,000,000 25.1% $10,000,000 87.6% $10.00
--------- ----- ----------- -----
Total........................ 3,979,566 100.0% $11,421,226 100.0%
========= ===== =========== =====
</TABLE>
These amounts do not give effect to the expenses of the offering, including
the underwriters discounts and commissions. These amounts also do not give
effect to an aggregate of 2,220,500 shares of common stock issuable upon
exercise of:
. the warrants being offered in this prospectus;
. the underwriters over-allotment option, including the shares
underlying the warrants included in the over-allotment option;
. the representative's warrants; or
. the 820,500 shares issuable upon the exercise of outstanding
options to purchase our common stock.
10
<PAGE>
SELECTED FINANCIAL DATA AND OTHER INFORMATION
The following table presents our selected financial data. The information
set forth below should be read together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our historical
financial statements and notes to those statements included in the prospectus.
Our historical financial data set forth below for the period from March 1998 to
June 30, 1998 have been audited by Arthur Andersen LLP, independent public
accountants. Our historical financial data set forth below for the years ended
June 30, 1999 and June 30, 2000 are derived from our audited financial
statements included elsewhere in this prospectus which have been audited by
Arthur Andersen LLP, whose report is also included in this prospectus. The
historical information may not be indicative of our future performance.
<TABLE>
<CAPTION>
Period from
March 1998
to June 30, Year Ended Year Ended
1998* June 30, 1999 June 30, 2000
----------- ------------- -------------
<S> <C> <C> <C>
Statements of Income Data:
Revenue............................... $533,522 $7,369,373 $19,353,648
Purchased transportation.............. 366,493 5,028,050 13,541,537
-------- ---------- -----------
Gross profit.......................... 167,029 2,341,323 5,812,112
Operating expenses.................... 235,882 2,150,422 5,545,180
-------- ---------- -----------
Income (loss) from operations......... (68,853) 190,901 266,932
Interest expense, net................. 3,608 20,928 7,878
Income tax expense (benefit).......... (31,812) 66,289 121,213
-------- ---------- -----------
Net income (loss)..................... $(40,649) $ 103,684 $ 137,841
======== ========== ===========
Earnings (loss) per common share:
Basic............................... $ (0.04) $ 0.04 $ 0.04
Diluted............................. $ (0.04) $ 0.04 $ 0.03
Weighted average common shares
outstanding, basic................... 931,157 2,316,618 2,735,635
Weighted average common shares
outstanding, diluted................. 931,157 2,316,618 3,094,649
--------
* See Note 11 to the financial statements included in this prospectus.
Operating Data:
Company-owned Express Centers......... 2 2 6
Agency-owned Express Centers.......... 1 9 11
Number of Independent Truck Owner-
Operators............................ 0 32 110
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1999 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............. $ 95,471 $ 284,800 $ 50,228
Working capital....................... 164,261 523,636 1,395,585
Total assets.......................... 564,544 2,198,886 4,118,318
Long-term lease obligations........... 27,603 45,955 62,325
Shareholders' equity.................. 200,464 761,931 1,782,294
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial conditions and results of
operations are presented to assist in understanding the financial condition and
results of operations of Nations Express, Inc. for the fiscal years ended June
30, 2000 and June 30, 1999. This discussion and the related financial data
should be read in conjunction with the financial statements and related notes
included elsewhere in this prospectus.
Overview
Historically, we have increased revenues by adding Express Centers into new
markets, expanding our services and increasing sales staff. We plan to continue
to expand our internal sales growth by expanding our existing Express Centers,
developing company-owned Express Centers in primary markets and agency-owned
Express Centers in secondary markets. Opening new company-owned Express Centers
negatively impacts our earnings until revenues for the new Express Center
exceed operating costs. Start-up costs for new Express Centers do not require
significant capital expenditures. Operating expenses are controlled by limiting
payroll expenses for new employees through sales commissions plans and bonuses
based on profitability of the new Express Center. New company-owned Express
Centers generally do not require commitments of more than three years for
office and warehouse space. We plan to open Express Centers in six new markets
by the end of fiscal year 2001.
We operate from two types of locations:
. company-owned Express Centers, and
. agency-owned Express Centers.
Company-owned Express Centers are typically located in primary markets. A
"primary market" is a major transportation hub like Atlanta, Georgia,
Charlotte, North Carolina or Chicago, Illinois. Agency-owned Express Centers
typically are located in secondary markets and owned by independent third
parties who are under exclusive contract with us. "Secondary markets" include
other significant transportation hubs like Columbia, South Carolina, Denver,
Colorado and Phoenix, Arizona. We refer to company-owned Express Centers and
agency-owned Express Centers simply as Express Centers. In addition, we have
independent sales agents that are typically located in secondary markets such
as Nashville, Tennessee.
We intend to expand existing Express Centers and open new Express Centers.
During the twelve months ended June 30, 1999, we added eight new agency-owned
Express Centers. During the twelve months ended June 30, 2000, we added two new
agency-owned Express Centers. We intend to open two new agency-owned Express
Centers during fiscal year 2001.
Although we did not add any company-owned Express Centers during the twelve
months ended June 30, 1999, we added four new company-owned Express Centers
during the twelve months ended June 30, 2000. We intend to open six new
company-owned Express Centers in fiscal year 2001.
Results of Operations
Twelve Months Ended June 30, 2000 versus Twelve Months Ended June 30, 1999.
During the twelve months ended June 30, 2000, our revenues increased to
$19,353,649 from $7,369,373 for the twelve months ended June 30, 1999.
Operating income increased to $266,932 for the twelve months
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<PAGE>
ended June 30, 2000 as compared to operating income of $190,901 for the twelve
months ended June 30, 1999. During the twelve months ending June 30, 2000,
revenues grew at a rate of 163% over the same period in the prior year. Revenue
increases during the period were primarily the result of sales growth within
our existing markets, the addition of four new company-owned Express Centers,
the addition of two new agency-owned Express Centers and the expansion of our
services offerings to include truck load brokerage freight using existing
common carriers.
Gross profit for the twelve months ended June 30, 2000 was $5,812,112
compared to $2,341,323 for the twelve months ended June 30, 1999. Gross profit
as a percentage of sales decreased from 31.8% for the twelve months ended June
30, 1999 to 30.0% for the twelve months ended June 30, 2000. Gross profit as a
percentage of sales declined in the twelve months ended June 30, 2000 due to
expansion costs and increased competition as we expanded our sales presence
beyond our primary markets in North Carolina and Los Angeles and from increased
sales volumes of lower margin freight services such as our truck load brokerage
services.
Operating expenses for the twelve months ended June 30, 2000 were $5,545,180
compared to $2,150,422 for the same period ended June 30, 1999. As a percentage
of revenues, operating expenses decreased from 29.2% for the twelve months
ended June 30, 1999 to 28.7% for the twelve months ended June 30, 2000.
Operating expense increases reflect increases in direct sales and marketing
personnel, service operations personnel, and administrative and accounting
personnel and related expenses in support of our revenue growth.
Federal and state income tax expense increased from $66,289 for the twelve
months ended June 30, 1999 to $121,213 for the twelve months ended June 30,
2000. Income tax as a percentage of pre-tax income was 39.0% for the period
ended June 30, 1999 and 46.8% for the period ended June 30, 2000. Increases in
the effective tax rates for the period ended June 30, 2000 over the same period
one-year ago, results primarily from the expected tax impact of non-employee
stock option expenses.
Net income increased from $103,684 for the twelve months ended June 30, 1999
to $137,841 for the twelve months ended June 30, 2000. Net income as a
percentage of sales decreased from 1.4% for the twelve months ended June 30,
1999 to .07% for the twelve months ended June 30, 2000. Decreases in net income
for the twelve months ended June 30, 2000 reflect lower gross profit margins
and a higher effective tax rate.
Liquidity and Capital Resources
Our primary need for capital resources is to fund working capital
requirements. We have historically relied upon cash flow from sales of equity
securities and borrowings from shareholders and under our credit facility to
meet our capital needs. We believe the net proceeds of this offering will be
sufficient to meet our capital needs over the short term. We have a revolving
line of credit of $1.5 million with a commercial bank that is secured by our
accounts receivable and requires us to maintain certain financial ratios. This
credit facility was obtained in November 1999, and expires on November 30,
2000. Borrowings under this credit facility bear interest at the bank's prime
rate. As of June 30, 2000, the available borrowing under this line of credit
was $1,318,000. We expect to renew our line of credit in November 2000.
Beginning in November 1998, various shareholders loaned us an aggregate
amount of $250,000. We issued 100,000 shares of common stock in lieu of
interest on those notes. In July 1999, $175,000 of these notes was repaid and
$75,000 was converted into 33,333 shares of common stock.
On March 15, 1999, we offered an aggregate of 170,000 units at a price of
$4.50 per unit in a private placement. Each unit consisted of one share of no
par common stock priced at $2.00 per share and one share of Series A
convertible preferred stock priced at $2.50 per share. In May 1999, we sold
95,556 units. We received $392,238 in proceeds net of cash commissions paid to
the securities brokerage firm that acted as placement agent in the offering.
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<PAGE>
In July 1999, we sold 159,227 units consisting of one share of no par common
stock priced at $2 per share and one share of Series A convertible preferred
stock priced at $2.50 per share. We received $621,233 in proceeds, net of cash
commissions paid the securities brokerage firm that acted as placement agent in
the offering.
On June 30, 2000, we had working capital of $1,395,585 compared to $523,636
on June 30, 1999.
We paid cash dividends to our preferred shareholders of $31,849 during the
twelve month period ended June 30, 2000. All outstanding shares of preferred
stock were converted to common stock on January 15, 2000. There are no shares
of preferred stock currently outstanding. We have no plans to issue any shares
of preferred stock or to pay any dividends on our common stock in the
foreseeable future.
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BUSINESS
Nations Express is a multi-service, expedited transportation company that
arranges on-time and intact delivery of customers' goods. We arrange coast-to-
coast expedited air and ground freight forwarding to a wide range of industries
including customers in the printing, automotive, chemical and pharmaceutical
industries.
While many of our competitors arrange either expedited ground or expedited
air freight, we arrange both expedited ground and expedited air freight, as
well as trade show logistics, charter aircraft services, truck load brokerage
and deferred ground freight. During the last year, approximately 60% of our
shipments were delivered by ground transportation and approximately 40% were
delivered through the air. The services we provide include:
.Domestic Air: Air transportation of freight utilizing
commercial and cargo airlines within the United
States and Canada.
.Expedited Truck: Movement of expedited freight using owner
operators who are under exclusive contract with
us or independent trucking firms.
Management and transportation of trade show
.Trade Show Logistics: exhibit materials.
.Truck Load Brokerage: Movement of non-expedited freight via
independent trucking firms and owner-operators.
.International Shipping: Air and ocean transport of freight utilizing
commercial and cargo lines outside of the
United States.
Although we are capable of handling packages and shipments of any size, we
focus primarily on large shipments of equipment or materials weighing over 100
pounds per shipment. As a result of the size of our average shipment, we do not
generally compete with overnight courier or expedited small package companies
such as Federal Express Corporation, United Parcel Service of America, Inc. or
the U.S. Postal Service.
As of June 30, 2000, we had approximately 116 independent truck owner-
operators operating a trucking fleet under exclusive contract with us. We
anticipate this number will increase to approximately 160 by the end of 2001.
Our exclusive independent contractor relationship with the truck owner-
operators in our fleet has enabled us to minimize our capital costs. Each
independent truck owner-operator is responsible for maintaining their truck and
paying their operating expenses. Independent truck owner-operators are
generally compensated based on the mileage traveled to deliver a given
shipment.
We do not own or operate any aircraft. We utilize commercial passenger and
freight air carriers to provide expedited air transport. In situations where
air transport is the chosen mode of transportation, we pick-up a shipment at
the customer's location and deliver it directly to the commercial carrier. The
commercial carrier flies it to the selected destination airport. We then pick-
up the shipment and deliver it to the recipient's location. In the event of a
rerouting or cancellation of the commercial flight, we can deploy an
independent truck owner-operator in our expedited ground fleet to the actual
flight destination or engage an independent trucking firm to pick-up and
deliver the shipment to the recipient's location.
Our shipments are centrally managed from our headquarters in Charlotte,
North Carolina through our computerized management information system, Express
Alert. Express Alert is designed to maximize the
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<PAGE>
efficiency of our services both in terms of timing and load factor. Express
Alert enables us to trace and provide historical data on each shipment. Express
Alert also provides an intranet link between our Express Centers, sales agents
and our corporate office and provides updated account information and sales
order entry.
Our business strategy focuses on establishing new company-owned Express
Centers in primary markets and agency-owned Express Centers in secondary
markets and expanding our expedited ground fleet. We also intend to:
. continue to develop our core freight forwarding business through our
broad menu of value added services;
. expand our Canadian freight forwarding business;
. acquire non-asset based freight forwarding companies;
. leverage our computer based technology to increase sales and expand
operations;
. continue to develop our truck load brokerage business;
. expand our trade show logistics shipment business;
. continue to engage new independent sales agents; and
. expand our operations to include international air and ocean shipments.
Industry Overview
Large multinational companies, as well as businesses of all sizes,
increasingly are examining their supply chain, to achieve competitive
advantages and cost savings. As a result, the most successful transportation
providers will be those carriers that can provide value-added services, speed
and reliability of delivery of both goods and information, global capabilities
and competitive pricing.
The current global airfreight and expedited market is about $82 billion
worldwide according to the Colography Group as reported in Transportation
Topics on January 17, 2000. Airfreight growth is expected to be driven by
several factors, including:
. the expansion of global commerce because of the reduction of regulatory
barriers and the world-wide sourcing of raw materials and product
distribution;
. ""just-in-time" inventory trends aimed at reducing inventory turnover
time and warehousing facilities; and
. fast growth of high-value, short shelf- life technology and electronic
products.
We believe the future success of freight forwarding businesses will depend
on the ability to integrate technological applications with customers to
provide complete global solutions. We also believe the industry will continue
to evolve from a price-based to a service-based industry.
Freight forwarding is traditionally a non-asset based business. Providers
typically do not own aircraft or ocean vessels, although some may maintain
small truck fleets. International air freight forwarders generally focus on the
heavyweight freight market that involve shipments greater than 100 pounds, and
generally do not directly compete with the integrated carriers of small parcels
such as UPS and Fed Ex.
In most cases, a freight forwarder acts as an indirect carrier for its
customers. The forwarder procures shipments from its customers, consolidates
them into a single lot based on common destination and tenders them to the
airline, air charter, ocean carrier or common carrier for transportation to a
distribution point. Consolidation of shipments is commonly carried out on a
door-to-door or airport-airport basis. When providing door-to-door services,
the forwarder usually arranges for local and long-haul surface transportation
in addition to air freight.
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Freight forwarders usually offer customers fee-based services related to the
movement of goods such as preparing all shipment-related documentation,
waybills, commercial invoices and packing lists.
Business Strategy
Nations Express was organized in March 1998 and maintains its administrative
headquarters in Charlotte, North Carolina. We also operate 7 company-owned
Express Centers, and 10 agency-owned Express Centers. We intend to expand our
business principally through the establishment of Express Centers in strategic
locations throughout the United States, Canada and Europe and the use of
independent sales and marketing agents in strategic locations throughout the
world. Agency-owned Express Centers are owned and operated by independent
business owners who enter into an agency agreement with Nations Express. We
plan to operate company-owned Express Centers in approximately twenty-five
primary markets and to use agency-owned Express Centers in secondary markets.
Express Centers are responsible for providing a number of services. Their
primary function is to provide sales and customer service in a specified market
or airport city. Express Centers utilize our billing and accounting software,
which allows each Express Center to transmit customer billing and account
information to our administrative offices for billing to the customer. Customer
invoicing and account collection for all Express Centers and all sales and
marketing agents is handled through our headquarters in Charlotte,
North Carolina. Through this centralized system, we calculate and pay all
commissions owed to agency-owned Express Centers, sales employees and
independent sales and marketing agents. Agency-owned Express Centers are paid a
commission on the gross profit of sales generated by the agency-owned Express
Center. Independent sales and marketing agents are paid a commission based on
the gross profit of their sales.
We enter into commissioned sales contractor agreements with independent
sales and marketing agents at certain locations. Sales and marketing agents,
working either from their home office or from a business office, register a
customer's shipments either through our Express Centers in Charlotte, North
Carolina or Los Angeles, California, or through a designated Express Center.
Each Express Center manages all sales, marketing and operational functions
within a particular region in conjunction with our national marketing
activities and centralized accounting functions.
Through the establishment of agency-owned Express Centers in secondary
markets and the use of independent sales and marketing agents, we can expand
our business without the costs typically associated with the ownership and
maintenance of company-owned Express Centers.
Our Services and Strategy
Our business strategy focuses on establishing company-owned Express Centers
in primary markets, expanding our agency-owned Express Centers in secondary
markets and expanding our existing ground fleet of independent truck owner-
operators. In addition, we intend to focus on the following key services.
Core freight forwarding services
In order to continue our rapid development of our core business of freight
forwarding services, we plan to consistently provide cost-effective and
reliable freight forwarding services. Our competitors tend to be single service
providers offering either expedited ground or expedited air freight forwarding
services. Nations Express, on the other hand, is a multi-service provider
offering expedited air and expedited ground services. Our combination of
services enables us to provide on-time services throughout the United States.
We have a diverse customer base. Our customers' industries include
automotive, computer and electronic equipment, pharmaceuticals, heavy
industrial and construction equipment, motion picture, printed materials,
aerospace products, textiles and apparel. In addition to these industries, we
provide transportation services to trucking lines, steamship lines, brokerage
firms and logistics companies. As a result of our diversity of customer base
and services, no single customer contributes more than 5% to our revenues.
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Market trends demonstrate that many expedited freight customers are
demanding more than basic transportation services. To accommodate these
customers, we offer a variety of services including:
. 24 hour, seven days per week customer service;
. Customs and international documentation;
. Shipment monitoring services;
. Proof of delivery documentation for every shipment; and
. Door-to-door services.
Domestic expedited air and expedited ground freight business
We have focused our development on expedited air and expedited ground
freight services. The mode of transportation depends on the contents of the
shipment, the basis of the route, departure time, available cargo capacity and
cost. In many situations, ground freight expediting offers the most cost-
effective and reliable method for transporting large, heavy shipments in a
short period of time. Through our fleet of independent truck owner-operator, we
are able to provide direct door-to-door expedited service throughout the United
States and most of Canada.
Situations arise when expedited air freight will be the most cost-effective,
if not the only, way to provide on-time service. We do not own, and do not
intend to acquire, any aircraft. To provide air freight services, we engage
commercial passenger and freight air carriers. We also utilize a base of over
250 delivery services throughout the United States and most of Canada in order
to handle door-to-door services.
Due to the volume of shipments we arrange, we can negotiate competitive
pricing for air shipments. While our airfreight purchasing power is based on
volume, we do not have a contractual obligation to meet minimum volume
requirements. Generally, our prices are lower than the price our customers
could negotiate with commercial passenger and freight air carriers. The volume
of shipments we handle also enables us to occasionally obtain additional
discounts from commercial air and air cargo carriers if, for example, we have
already reserved capacity on a particular flight we can negotiate an even
further discount by reserving additional capacity on that flight. As we
continue to grow, we may obtain additional volume discounts with commercial air
lines and air cargo carriers as a result of increased purchased capacity.
Logistics
Our industry expertise enables us to maximize the efficiency and performance
of our freight forwarding and other expedited transportation services for our
customers, such as providing transportation advisory services or staffing or
managing a customer's shipping department.
Canadian freight forwarding services
We plan to continue to expand our presence in Canada. In order to capitalize
on the opportunities in Canada, we intend to establish agency-owned Express
Centers in key Canadian markets. We currently participate in the Canadian
customs pre-arrival review system, which allows our independent truck owner-
operator fleet to cross the U.S.-Canadian border with minimal delay from
customs officials. Avoiding potential delays when crossing the border will
facilitate our expedited service approach.
Strategic acquisitions
We may expedite our expansion through strategic acquisitions. We recognize
that, in some circumstances, the most-efficient way to expand our operations
will be by acquiring an existing company. Prospects would include existing
freight forwarders in certain key markets or companies whose services
compliment our own. We
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believe expansion through acquisition may enable us to increase our market
share more rapidly and allow us to take advantage of opportunities arising from
economies of scale earlier than if we relied exclusively on internal expansion.
Computer based technology
An important component of our business strategy is the development of
advanced information systems. We have invested substantial management and
financial resources in the development of a sophisticated proprietary
information system to provide accurate and timely information to management and
our customers. The ability to provide accurate, up to date information on the
status of shipments is, and will continue to be, essential to our continued
growth.
Our integrated information system, known as Express Alert, includes shipment
tracing information, management information and interfaces with our accounting
software to provide integrated data links to the accounting modules. Express
Alert was specifically designed for the freight forwarding industry by career
professionals with extensive experience in the freight expediting industry.
Express Alert is operated from our headquarters in Charlotte, North Carolina,
and is accessible from personal computers via an internet connection at our
various Express Centers. Access from Express Centers is tightly controlled and
is protected by firewall technology.
Express Alert provides a comprehensive source of information for managing
our tracing services, our expedited freight orders from quote to point of
delivery completion and customer invoicing. Express Alert also provides sales
information on a customer's shipment activity. Express Alert is instrumental to
the productivity of our personnel and the quality of our operations and
services. System efficiencies have resulted in expedited data entry,
processing, retrieval and dissemination of information, both to our management
and customers.
We intend to use a portion of the proceeds of this offering to allow our
customers to have remote access to Express Alert. Remote access would allow our
customers to order our services via the internet, and track the status of a
shipment.
We are currently developing our business-to-business website strategy and
interviewing vendors to implement this strategy. We will finalize a timetable
for implementation once we select a vendor.
Truckload brokerage business
Our truckload brokerage services locate and secure capacity when non-
expedited ground transportation is the most cost-effective means of meeting a
customer's delivery requirements. Our brokerage operations enable us to serve a
large number of customers simultaneously through third-party common carriers.
Third-party common carriers can be engaged on an "as needed" basis.
Trade show business
One of our business segments involves the exhibit handling and transport of
equipment and materials used in trade shows. Expedited freight is often the
only alternative available to trade shows where a brief time period transpires
between trade show events. Our trade show services include scheduling trade
show events, facilities and consolidating shipments to and from trade show
events. We anticipate that this segment of our operations will continue to
grow.
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Marketing
Our principal customers are manufacturers and distributors of products that
typically demand expedited transportation services such as computer and
electronic equipment, pharmaceuticals, heavy industrial and construction
equipment, motion pictures, printed materials, automobile parts, aerospace
products, textiles and apparel.
We market our services through a national sales organization consisting of 7
company-owned Express Centers, 10 agency-owned Express Centers and 38
independent sales and marketing agents. We expect to continue our national
expansion by increasing the number of Express Centers, recruiting additional
independent sales and marketing agents and expanding our fleet of independent
truck owner-operators. Our marketing efforts are directed primarily to
distribution, procurement and marketing managers of potential customers with
substantial requirements for national and international transportation of
cargo.
Through our expansion, we will be able to transport a greater number of
shipments and we believe that the increase in volume will allow us to obtain
lower rates from air and ground service providers. By consolidating freight
shipments, we expect to reduce our costs of transportation.
Competition
We have encountered strong competition from other companies in the expedited
freight industry. Competitive factors include reliability of service, price and
available cargo space capacity. We believe we can continue to effectively
compete based on these factors. Our network of exclusive independent truck
owner-operators and non-exclusive truck owner-operators enable us to provide
reliable on-time deliveries. We believe we offer a unique blend of services
including expedited ground and expedited air freight services, tradeshow
logistics and truck load brokerage. Our primary competitors are Eagle USA
Airfreight, Inc., BAX Global, Inc. and subsidiaries of Emery and Federal
Express Corporation. We also compete with regional and local freight
forwarders.
Government Regulation
Our operations are subject to various federal, state, local and foreign
regulations that require us to maintain permits and licenses. Our failure to
comply with applicable regulations and maintain necessary permits and licenses
could result in a revocation of our operating authority or substantial fines.
We believe we are currently in compliance with all applicable regulations and
that all our required licenses and authorities are current.
We are also subject to federal, state and local laws regulating the
discharge of materials into the environment. Similar laws apply in many of the
foreign jurisdictions in which we operate. Although our operations have not
been significantly affected by compliance issues in the past, we cannot predict
the impact environmental regulations may have in the future. We do not
currently anticipate making any material capital expenditures for environmental
control purposes in the foreseeable future.
Employees
As of September 21, 2000, we had 63 employees, 61 of which were employed on
a full-time basis. We have 13 sales employees, and 38 independent sales agents.
None of our employees are parties to any collective bargaining agreement, and
we consider our relationship with our employees to be good.
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Contractual relationships with agency-owned Express Centers, sales and
marketing agents and independent truck owner-operators
We have an exclusive relationship with our agency-owned Express Centers.
Under our agency agreement, an agency-owned Express Center may not represent
other freight forwarders or other transportation companies. In exchange, we
grant each agency-owned Express Center an exclusive right to operate in a
particular market as long as the agency meets certain sales and profit
projections. Agency-owned Express Centers are compensated on a commission basis
and are independent contractors. They are responsible for all matters relating
to their employees and may not solicit credit on behalf of Nations Express. We
agree to indemnify our agency-owned Express Centers for causes of action
arising from acts or omissions of Nations Express. Similarly, agency-owned
Express Centers are required to indemnify us for causes of action arising from
their acts or omissions. The agency agreement is terminable by either party
upon 30 to 90 days written notice; however, we may terminate the agreement upon
24 hours notice if the agency breaches its agency agreement. The agency
agreement also requires agencies to maintain the confidentiality of proprietary
information both during the term of the agency agreement and after the agency
agreement is terminated.
We have separate agreements with each of our independent sales and marketing
agents. Our commissioned sales contractor agreement requires each independent
sales and marketing agent to use its best efforts to sell our services. A sales
agent's relationship with us is not exclusive. Independent sales and marketing
agents are compensated on a commission basis and are independent contractors.
Independent sales and marketing agents may not may not pledge or extend credit
in the name of Nations Express. Our commission sales contractor agreement is
terminable by either party upon 30 to 90 days written notice; however, we may
terminate the agreement upon 24 hours notice if the sales agent breaches the
agreement. Our agreement also requires independent sales and marketing agents
to maintain the confidentiality of proprietary information both during the term
of the agreement and after the agreement is terminated.
We have a written agreement with each of our independent truck owner-
operators. Our truck owner-operators are independent contractors. They have the
exclusive right to accept or reject any shipment. Their compensation is
generally based on the mileage traveled to deliver a shipment. We may recover a
portion of any losses caused by delays in shipments from the compensation
payable to the independent truck owner-operator. Each truck bears the Nations
Express name and logo while the independent truck owner-operator is
transporting cargo on our behalf. Independent truck owner-operators pay all
operation costs including fuel, maintenance and permitting costs, and fines or
penalties resulting from acts or omissions by the independent truck owner-
operator. We pay a portion of the insurance premiums incurred by the
independent truck owner-operator. Independent truck owner-operators may
purchase certain types of insurance through us. Our independent truck owner-
operators agree to indemnify us for losses that arise from their actions. They
are also required to provide us with maintenance and other records so we can
confirm compliance with governmental regulations. Our agreement is terminable
upon 24 hours written notice and terminates immediately upon a breach by either
party.
Legal Proceedings
From time to time, we may become involved in legal proceedings occurring in
the ordinary course of business. Subject to the uncertainties inherent in any
litigation, we believe that there are currently no pending or threatened
proceedings that are reasonably likely to result in a material adverse change
in our financial condition or operations.
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Properties
Our executive offices are located at 1328B Crossbeam Road, Charlotte, North
Carolina 28217. We do not own any real property. The following is a list of our
facilities as of September 21, 2000.
<TABLE>
<CAPTION>
Company-Lease
Location or Agency
-------- -------------
<S> <C>
Atlanta, GA Company Lease
Charlotte, NC Company Lease
Chicago, IL Company Lease
Cleveland, OH Company Lease
Columbia, SC Agency
Dayton, OH Agency
Denver, CO Agency
Greenville, SC Agency
Indianapolis, IN Company Lease
Jackson, TN Agency
Los Angeles, CA Company Lease
Orlando, FL Agency
Phoenix, AZ Agency
Portland, OR Agency
Raleigh, NC Company Lease
Roanoke, VA Agency
Tampa, FL Agency
</TABLE>
We believe our existing office facilities are in good condition and are
equipped for our purposes.
Intellectual Property
The name "Nations Express" is a registered trademark. We also have domain
rights to the URL site www.nationsexpress.com.
In addition, we own exclusive rights to our Express Alert system, which
operates on the Windows 95/98/NT operating system.
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MANAGEMENT
Directors and Officers
As of September 21, 2000, the positions of the directors and executive
officers of Nations Express and their ages are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Allen D. Watson........... 50 President, Chief Executive Officer, Director
Executive Vice President and Chief Financial
William R. Frazier........ 52 Officer, Director
Daniel H. McPherson, III.. 37 Vice President, Director
Daniel R. Dukesherer...... 49 Vice President Western Region, Director
John P. Manry............. 65 Chairman of the Board of Directors
Thomas E. McChesney....... 54 Director
Jerry N. Carr............. 52 Director
</TABLE>
Allen D. Watson co-founded Nations Express and he has been our president,
chief executive officer and a director since March 1998. Mr. Watson has more
than 20 years experience in the airfreight and expedited transportation
industry. Mr. Watson was co-founder, chief executive officer and a director of
Express America, an expedited shipping company. He served as chief executive
officer of Express America from January 1990 to March 1995, when the company
was sold to Landstar Freight Systems. Mr. Watson was also co-founder, executive
vice-president and later, president, of Jetway Express from January 1983 until
November 1989. Prior to Jetway, Mr. Watson held various sales and marketing
positions with CF Airfreight Division, a division of Consolidated Freightways.
William R. Frazier joined Nations Express in September 1999 as our executive
vice president, chief financial officer and serves as the corporate secretary.
Mr. Frazier earned his BBA in accounting from Texas A&M University at Commerce
and is a licensed CPA in the state of Texas. From September 1995 to September
1999, Mr. Frazier served as the executive vice president, chief financial
officer and corporate secretary for ISI Commercial Refrigeration, Inc., a
wholesale distributor of commercial refrigeration equipment. From March 1989 to
September 1995, Mr. Frazier served as the Vice President of Finance, chief
financial officer and corporate secretary of FM Industries, Inc. a manufacturer
of heavy hydraulic cushioning devices for railcars. From March 1983 to March
1989, Mr. Frazier served one year as the corporate controller and five years as
Vice President of Finance and chief financial officer for Pinetree Computer
Systems, Inc., a manufacturer of hand held computers. From January 1975 through
March 1983, Mr. Frazier held positions as accountant and controller for
companies in the electronic manufacturing industry, plastic injection molding
manufacturing and oil and gas engineering. From June 1970 to October 1994, Mr.
Frazier served as a warrant officer and helicopter pilot in the U.S. Army and
U.S. Army Reserves.
Daniel H. McPherson, III is a co-founder of Nations Express. Mr. McPherson
and has served as our Vice President of Operations and a director since March
1998. He is responsible for day-to-day operations. Prior to joining Nations
Express, Mr. McPherson was employed by Surf Air from April 1986 to March 1998.
Surf Air is one of the leading family-owned air cargo shipping companies in the
United States. While at Surf Air, he held various management positions.
Daniel R. Dukesherer joined Nations Express in June 1998 with the opening of
our Express Center in Los Angeles, California. He has been a director since
December 1998. From July 1995 to June 1998, Mr. Dukesherer was the President of
California Conventions, a trade show shipping division for Landstar Freight
System. From 1992 to 1993, he served as the director of the trade show shipping
division for Express America. From 1988 to 1992, Mr. Dukesherer was the
director of trade shows for Airways Freight Systems. Prior to 1988, Mr.
Dukesherer served in a variety of management positions with Federated Air
Cargo, an air cargo shipping company.
23
<PAGE>
John P. Manry is a co-founder of Nations Express and a director. He is a
member of our compensation committee and our audit committee. Mr. Manry has
been an independent businessman since May 1988 with experience in corporate
finance, mergers, acquisitions and strategic planning. From March 1983 to May
1988, Mr. Manry was the Chief Executive Officer of Pinetree Computers, Inc. He
was employed by IBM from October 1960 to March 1983, serving in a variety of
sales management and corporate management positions. Mr. Manry is a graduate of
Marquette University.
Thomas E. McChesney became a director when Nations Express was organized and
serves on our compensation committee. He is a registered representative with
Blackwell Donaldson & Co., a securities brokerage firm. Previously, Mr.
McChesney was an officer and director of Paulson Investment Co. and Paulson
Capital Corporation from March 1977 to June 1995. Mr. McChesney also serves on
the board of directors of Labor Ready, Inc. and USOL Holdings.
Jerry N. Carr became a director on September 15, 1998 and serves on our
compensation committee and our audit committee. Since December 1984, Mr. Carr
has been the president and chief executive officer of Badger Sportswear. Badger
Sportswear is a national supplier of sports clothing to the apparel industry.
From June 1972 until December 1984, Mr. Carr served as a manufacturing director
with the Milliken Textile Group of Greenville, South Carolina. Mr. Carr is a
graduate of the University of Alabama.
All directors are elected pursuant to our bylaws, which provide for a board
of directors of not more than seven directors. Each of our directors serve
until the next annual meeting of the shareholders or until a successor is
elected and qualified. Directors receive no compensation other than grants of
stock options for their services in that capacity and are entitled to
reimbursement for any expenses incurred in attending meetings. Executive
officers are appointed by the board of directors and serve at the pleasure of
the board.
Committees of the Board
The board of directors has established an audit committee and a compensation
committee. The audit committee is currently comprised of John P. Manry and
Jerry N. Carr. The audit committee recommends the selection of our independent
auditors and consults with the auditors on our internal accounting controls.
The compensation committee currently comprised of John P. Manry, Thomas E.
McChesney and Jerry N. Carr. The compensation committee determines salaries,
bonuses and other compensation for our officers.
24
<PAGE>
BENEFICIAL OWNERS OF COMMON STOCK
The following table describes, as of September 21, 2000, with an adjustment
to reflect the issuance of the units being offered, information on the
ownership of our common stock by (i) each person known by us to own more than
five percent (5%) of the outstanding common stock; (ii) each of our directors
and executive officers; and (iii) all directors and executive officers as a
group.
The address of all of the beneficial owners of our common stock is 1328B
Crossbeam Road, Charlotte, North Carolina 28217 except for Marquette University
and Mr. Ferris. Marquette University's address is P.O. Box 1881, Milwaukee, WI
53201-1881. Mr Ferris's address is 3110 Beverly Drive, Dallas, Texas 75205.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Beneficially
Owned Owned
Before the After the
Name Offering Offering
---- ------------------ -----------------
Number Percent Number Percent
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Allen D. Watson.......................... 555,000 18.3% 555,000 13.8%
Daniel H. McPherson, III................. 222,500 7.4% 222,500 5.6%
Daniel R. Dukesherer..................... 210,000 7.0% 210,000 5.3%
John P. Manry............................ 131,000 4.4% 131,000 3.3%
Thomas E. McChesney...................... 195,000* 6.5% 195,000 4.9%
Jerry N. Carr............................ 190,000 6.3% 190,000 4.7%
William R. Frazier....................... 37,500 1.2% 37,500 .9%
William H. Carr.......................... 165,000 5.5% 165,000 4.2%
Marquette University..................... 200,000 6.7% 200,000 5.0%
John Ferris.............................. 210,000 7.0% 210,000 5.3%
All officers and directors as a group (7
persons)................................ 1,541,000 51.7% 1,541,000 38.2%
</TABLE>
--------
* Includes 50,000 shares held by Elizabeth R. McChesney, wife of Thomas E.
McChesney, and 10,000 shares held in trust for Christina Rose McChesney
Trust.
The amount of shares beneficially owned listed in the preceding table include
shares for which the shareholder has the right to acquire within sixty days
upon the exercise of vested options. The following table identifies the number
of shares underlying vested options exercisable within sixty days and unvested
options not exercisable within sixty days.
<TABLE>
<CAPTION>
Shares underlying Shares underlying
options exercisable options not exercisable
Name of optionholder within 60 days within 60 days
-------------------- ------------------- -----------------------
<S> <C> <C>
Allen D. Watson ................ 55,000 65,000
Daniel H. McPherson, III ....... 22,500 27,500
Daniel R. Dukesherer ........... 10,000 10,000
John P. Manry................... 25,000 25,000
Thomas E. McChesney ............ 25,000 25,000
Jerry N. Carr................... 25,000 25,000
William R. Frazier.............. 37,500 162,500
</TABLE>
These options were issued between May 1998 through January 2000, with
exercise prices ranging from $2.00 per share to $2.50 per share and expire ten
years after issuance.
25
<PAGE>
MANAGEMENT COMPENSATION
Executive Compensation
The following table shows the compensation paid to our executive officers in
fiscal year 2000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
-------------------------- ---------------------
Salary Bonus
------- ------ Number of Shares All Other
Name and Principal Position Fiscal Year ($) ($) Underlying Options(#) Compensation($)
--------------------------- ----------- ------- ------ --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Allen D. Watson ................ 2000 143,250 20,000 20,000 --
President and Chief Executive
Officer
Daniel H. McPherson, III........ 2000 118,509 10,000 10,000 --
Vice President of Operations
William R. Frazier.............. 2000 108,333 -- 200,000 51,547*
Executive Vice President, Chief
Financial Officer and Secretary
</TABLE>
--------
* Includes $40,116, in relocation expenses to move from Texas to North
Carolina and $11,431 in temporary living expenses for Mr. Frazier in North
Carolina.
The following table shows sets forth the options granted to our executive
officers during fiscal year 2000 along with the exercise price and expiration
date of those options.
Option Grants In Last Fiscal Year Individual Grants
<TABLE>
<CAPTION>
Number of Securities % of Total Options
Underlying Options Granted to Employees in Exercise Price
Name Granted Fiscal Year ($/share) Expiration Date
---- -------------------- ----------------------- --------- ---------------
<S> <C> <C> <C> <C>
Allen D. Watson 20,000 7.3 2.25 7/1/09
Daniel H. McPherson, III 10,000 3.6 2.25 7/1/09
William R. Frazier 150,000/50,000 54.7/18.2 2.25/2.50 9/1/09/1/15/10
</TABLE>
The following table sets forth information regard options held by our
executive officers. The dollar values of unexercised in-the-money options
represent the difference between the assumed fair market value of $5.00 per
share at June 30, 2000 and the exercise prices of the options.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options In-the-Money Options
at FY-End(#) at FY-End($)
------------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
<S> <C> <C>
Allen D. Watson 30,000/90,000 90,000/265,000
Daniel H. McPherson, III 15,000/35,000 45,000/102,500
William R. Frazier 0/200,000 0/537,500
</TABLE>
Director Compensation
Our directors do not receive a fee for attending board meetings. Similarly,
members of committees of the board do not receive a fee for attending committee
meetings. The directors are reimbursed for travel expenses incurred in
attending board and committee meetings. No separate fees are paid to employees
for their services as directors. It is presently anticipated that during fiscal
2001, the board will adopt a compensation program for directors who are not
Nations Express employees.
26
<PAGE>
Employment Agreements
We have employment agreements with Messrs. Watson, Frazier, McPherson and
Dukesherer. The agreements terminate on December 31, 2004, and provide for
automatic twelve month extensions until terminated by either party. Each
agreement entitles the employee to receive a base salary with annual increases
and the right to participate in our executive bonus plan. The agreements
prohibit the employee from divulging trade secrets or other proprietary
information obtained during the course of his employment. Each agreement also
contains a non-competition provision that prohibits the employee from competing
against us for two years after their employment is terminated.
The following table sets forth the material terms of our employment
agreements with Messrs. Watson, Frazier, McPherson and Dukesherer.
<TABLE>
<CAPTION>
Initial
Base
Name Position Salary
---- -------- --------
<C> <S> <C>
President, Chief Executive Officer and
Allen D. Watson Director $150,000
Executive Vice President, Chief Financial
William R. Frazier Officer and Director $130,000
Daniel H. McPherson, III Vice President and Director $110,000
Daniel R. Dukesherer Director $ 96,000
</TABLE>
27
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Nations Express was founded and organized in March 1998 by John P. Manry,
Allen D. Watson and Daniel McPherson, III. Mr. Manry contributed $29,600 in
initial capital in exchange for 26,000 shares of common stock. Mr. Watson
contributed $50,000 in initial capital in exchange for 500,000 shares of common
stock. Mr. McPherson contributed $20,000 in initial capital in exchange for
200,000 shares of common stock. Since its inception, Nations Express has
granted options to purchase 120,000 shares of common stock to Mr. Watson,
25,000 shares of common stock to Mr. Manry and 22,500 shares of common stock to
Mr. McPherson. See "Beneficial Owners of Common Stock" for information
regarding the vesting of these option grants. A description of the employment
agreements entered into with Messrs. Watson and McPherson appears under
"Management Compensation -- Employment Agreements."
In January 1999, certain shareholders loaned us cash in the aggregate amount
of $250,000. We issued promissory notes that provided for the issuance of
shares of common stock in lieu of interest at the rate of 10,000 shares on each
$25,000 increment of principal.
The following is a list of the shareholders who loaned us cash and the
number of shares issued to each shareholder under the notes in lieu of
interest.
<TABLE>
<CAPTION>
Shares
Issued
in lieu
Loan of
Name Amount Interest
---- -------- --------
<S> <C> <C>
John P. Manry.............................................. $ 25,000 10,000
Thomas E. McChesney........................................ 50,000 20,000
Jerry N. Carr.............................................. 37,500 15,000
William Carr............................................... 37,500 15,000
DW Squared Partnership..................................... 50,000 20,000
John Ferris................................................ 25,000 10,000
Craig Weiser............................................... 25,000 10,000
-------- -------
Total.................................................. $250,000 100,000
======== =======
</TABLE>
In July 1999, $175,000 of these loans were repaid. We permitted the holders
of the remaining $75,000, Jerry N. Carr and his brother William Carr, to
convert each of their notes into shares of common stock at a price of $2.25 per
share.
Thomas E. McChesney, one of our directors, is a registered representative
with Blackwell Donaldson & Company. Blackwell Donaldson & Company acted as
placement agent for our private offerings in 1999. Blackwell Donaldson &
Company received a commission of approximately $136,000 in cash and 25,478
warrants with an approximate value of $50,000 as a fee for acting as placement
agent in the offering. Each warrant entitles the holder to purchase two shares
of common stock for $2.70. The warrants issued to the placement agent in
connection with the private offerings were assigned a fair-value on the date of
grant of $50,390, based on a calculation performed using the Black-Scholes
option pricing model.
In September 1999, we sold 33,333 and 33,334 shares of our common stock,
respectively, to Jerry N. Carr and William Carr at a price of $2.25 per share.
28
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the units offered hereby, the
authorized capital stock of Nations Express will consist of 25,000,000 shares
of common stock, no par value, and 1,000,000 shares of preferred stock, no par
value.
Units
Each unit being offered in this offering consists of one share of common
stock and a warrant exercisable for one share of common stock. The common stock
and warrants that comprise the units will not trade as units. Upon completion
of the offering, the common stock and warrants will trade separately.
Common stock
We are authorized to issue 25,000,000 shares of common stock. As of
September 21, 2000, there were 2,979,566 shares of common stock issued and
outstanding held by 76 shareholders. Holders of common stock are entitled to
receive ratably dividends, if any, as they are declared by the Board of
Directors out of legally available funds, subject to the preferences of any
outstanding preferred stock. Holders of common stock are not entitled to any
preemptive rights. In the event of liquidation of Nations Express, holders of
common stock are entitled to share ratably in the net assets remaining after
payment in full of all of our liabilities, including satisfaction of the
liquidation preferences of any preferred stock that may be outstanding. The
rights, privileges and preferences of holders of common stock may become
subject to those of any preferred stock that we may issue in the future.
Holders of common stock are entitled to one vote for each share of common stock
held of record on all matters submitted to a vote of shareholders, including
the election of directors. All outstanding common stock is full paid and
nonassessable.
Preferred stock
We are authorized to issue 1,000,000 shares of preferred stock. As of
September 21, 2000, there were no shares of preferred stock issued and
outstanding. Our articles of incorporation, as amended, allow the board of
directors, without further shareholder approval to establish the preferences,
limitations and rights of the preferred stock.
Warrants
The following is a brief summary of certain provisions of the warrants. This
summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the Warrant Agreement between Nations Express
and First Union National Bank (the "Transfer and Warrant Agent"). A copy of the
warrant agreement has been filed as an exhibit to the registration statement of
which this prospectus is a part.
Each warrant entitles the registered holder thereof to purchase, for a
period of 60 months commencing 13 months after the date of this prospectus, one
share of common stock at a price equal to 140% of offering price. The warrant
exercise price is subject to adjustment under provisions referred to below. The
holder of any warrant may exercise a warrant by surrendering the certificate
representing the warrant to the Transfer and Warrant Agent, with the
subscription form on the reverse side of such certificate properly completed
and executed, together with payment of the exercise price. The warrants may be
exercised in whole or in part at the applicable exercise price until expiration
of the warrants. No fractional shares will be issued upon the exercise of the
warrants.
The exercise price of the warrants bears no relation to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the securities offered hereby.
29
<PAGE>
The exercise price and number of shares of common stock purchasable upon the
exercise of the warrants are subject to adjustment upon the occurrence of
certain events, including, without limitation, stock splits, stock dividends,
recapitalizations and reclassifications.
Beginning thirteen months after this offering, we may redeem the warrants
for $0.20 per warrant if the closing bid price of the common stock as reported
on the American Stock Exchange equals or exceeds 160% of the original offering
price for a period of 20 consecutive trading days. In the event we exercise the
right to redeem the warrants, those warrants will be exercisable until the
close of business on the date of redemption. If any warrant called for
redemption is not exercised by such time, it will cease to be exercisable and
the holder will be entitled only to the redemption price.
The warrants will be in registered form and may be presented to the Transfer
and Warrant Agent for transfer, exchange or exercise at any time on or prior to
their expiration at which time the warrants become wholly void and of no value.
If a market for the warrants develops, holders may sell warrants instead of
exercising them. There can be no assurance, however, that a market for the
warrants will develop or continue.
The warrants do not confer upon holders any voting, dividend or other rights
of our shareholders.
Nations Express and the Transfer and Warrant Agent may modify the warrants
as they deem necessary and desirable provided the modification does not
materially adversely affect the interests of the warrant holders. No other
modifications may be made to the warrants without the consent of the majority
of the warrant holders. Modifications of the number of securities purchasable
upon the exercise of any warrant, the exercise price and the expiration date
with respect to any warrant requires the consent of the holder of the warrant
unless the modification occurs in connection with a stock dividend,
recapitalization, reclassification or similar event.
No gain or loss will be recognized by a holder upon the exercise of a
warrant. The sale of a warrant by a holder or the redemption of a warrant by
Nations Express will result in the recognition of gain or loss in an amount
equal to the difference between the amount realized by the holder and the
warrant's adjusted basis in the hands of the holder. Provided that the holder
is not a dealer in the warrants and that the common stock would have been a
capital asset in the hands of the holder had the warrant been exercised, gain
or loss from the sale or redemption of warrant will be long-term or short-term
capital gain or loss to the holder. Loss on the expiration of the warrant,
equal to the warrant's adjusted basis in the hands of the holder, will be long-
term or short-term capital loss, depending on whether the warrant had been held
for more than one year.
The above discussion does not address all of the tax considerations that may be
relevant to a particular purchaser. Accordingly, all prospective purchasers are
advised to consult their own tax advisors regarding the federal, state, local,
and foreign tax consequences of the purchase of the units and the ownership and
disposition of the warrants and the common stock.
Representative's Warrant
At the closing of this offering, we will issue to Schneider Securities, the
underwriters' representative, warrants to purchase 100,000 units. The
representative's warrants will be exercisable for a four-year period commencing
one year from the date of this prospectus. The exercise price of the
representative's warrants will be 150% of offering price. The representative's
warrants will not be transferable prior to their exercise date except to
officers of the representative and members of the syndicate and officers and
partners thereof. The representative's warrants will contain provisions
providing adjustment in the event of any recapitalization, reclassification,
stock dividend, stock split or similar transactions. The representative's
warrants and the securities issuable upon exercise of the representative's
warrant may not be offered for sale except in compliance with the applicable
provisions of the Securities Act. We have agreed that, for a period of six
years from the date of this prospectus, if we intend to file a registration
statement for the public sale of securities (other than a registration
statement on Form S-4, S-8 or a comparable registration statement), we will
notify all
30
<PAGE>
of the holders of the representative's warrants and securities issued upon
exercise thereof and if so requested, will include therein material to permit a
public offering of the securities underlying the representative's warrants
solely at our expense (excluding fees and expenses of the holder's counsel and
any underwriting or selling commissions). See "Underwriting."
Registration Rights
We will grant registration rights to the holders of the representative's
warrants, which provides the holders with certain rights to register the shares
of common stock underlying the representative's warrants. In addition, for a
period of five years from the date of this prospectus, upon written demand of
the holders of a majority of the representative's warrants, has been, on one
occasion, to promptly register the underlying securities solely at our expense
(excluding fees and expenses of the holder's counsel and any underwriting or
selling commissions). Additionally, for a period of five years from the date of
this prospectus, upon written demand of any holder, we have agreed, on one
occasion, to promptly register the underlying securities for purposes of a
public offering, solely at the expense of such holder.
Limitation of Liability
Our charter provides that no director will be personally liable to Nations
Express or to its shareholders for monetary damages for breach of fiduciary
duty as a director, except that the limitation shall not eliminate or limit
liability (i) for any breach of the director's duty of loyalty to Nations
Express or its shareholders, (ii) for acts of omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
North Carolina law, dealing with liability for unauthorized distributions and
loans to insiders, respectively, or (iv) for any transaction from which the
director derived an improper personal benefit.
Our charter and bylaws further provide for the indemnification of our
directors and officers to the fullest extent permitted by North Carolina law,
including circumstances in which indemnification is otherwise discretionary.
A principal effect of these provisions is to limit or eliminate the
potential liability of our directors for monetary damages arising from breaches
of their duty of care, unless the breach involves one of the four exceptions
described above. These provisions may also shield directors from liability
under federal and state securities laws. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer 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 and is, therefore,
unenforceable.
Shareholder Protection Act
The North Carolina Business Corporation Act (the "NCBCA") includes
provisions that may have the effect of delaying, deterring or preventing a
change in control of Nations Express. Article 9 of the NCBCA sets forth the
North Carolina Shareholder Protection Act (the "Shareholder Protection Act").
The Shareholder Protection Act requires the affirmative vote of the holders of
95% of the voting shares of a corporation, voting as one class, for the
adoption or authorization of a business combination (i) with any other entity
if, as of the record date for the determination of shareholders entitled to
vote on such business combination, the other entity is the beneficial owner,
directly or indirectly, of more than 20% of the voting shares of the
corporation and (ii) with any affiliate of the corporation which at any time
has been a 20% holder of such voting shares. A "business combination" is
defined to include any merger or consolidation of a corporation with or into
any other corporation, or the sale or lease of all or any substantial part of
the corporation's assets to, or any payment, sale or lease to the corporation
or any subsidiary thereof, in exchange for securities of the corporation of any
assets (except assets having an aggregate fair market value of less than
$5,000,000) of any other entity. The 95% voting requirement is not applicable
if fair price and procedural requirements are satisfied. The Shareholder
Protection Act will apply to us since we will not, within 90 days of becoming a
public corporation, adopt a bylaw stating that the provisions of the
Shareholder Protection Act do not apply to Nations Express.
31
<PAGE>
Control Share Acquisition Act
Article 9A of the NCBCA Act sets forth the North Carolina Control Share
Acquisition Act (the "Control Share Acquisition Act"). The Control Share
Acquisition Act generally provides that any person who acquires beneficial
ownership of the shares of a corporation which, when added to all other shares
of the corporation beneficially owned by the person, would increase that
person's voting power in the election of directors to an amount equal to or
greater than one-fifth, one-third or a majority of all voting power, is not
entitled to vote the shares acquired unless the right to vote such shares is
approved by a majority of all the outstanding shares of the corporation
entitled to vote for the election of directors, excluding interested shares.
Interested shares include any shares owned by any person who has acquired or
proposes to acquire a controlling interest, any officer of the corporation and
any employee of the corporation who is also a director. The decision to grant
voting rights to the control shareholder must be voted upon at the next special
or annual shareholders meeting. Unless otherwise provided in the corporation's
articles of incorporation or bylaws, if voting rights are granted to the
control shares and the holders of the control shares have a majority of voting
power for the election of directors, other shareholders may have their shares
redeemed by the corporation at their fair value calculated as of the day prior
to the date the vote was taken to accord the control shares such voting rights,
as long as certain procedural requirements are satisfied. The Control Share
Acquisition Act does not apply to acquisitions of stock pursuant to a merger or
share exchange if effected pursuant to a written agreement to which the
corporation is a party. The Control Share Acquisition Act applies only to
corporations that are public corporations incorporated in and with substantial
ties to North Carolina and that have not opted out of the provisions of the
Control Share Acquisition Act. We have not opted out of the provisions of the
Control Share Acquisition Act.
Transfer Agent and Warrant Agent
The Transfer Agent and Registrar for the common stock and the warrants is
First Union National Bank, Charlotte, North Carolina.
32
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALES
Prior to this offering, there has been no public market for any of our
securities. Future sales of substantial amounts of units or common stock in the
public market could materially adversely affect the market price of such
securities. As described below, only a limited number of shares will be
available for sale shortly after this offering, due to certain contractual and
legal restrictions on resale. Nevertheless, sales of substantial amounts of the
units or common stock in the public market or the perception that such sales
could occur after such restrictions lapse could materially adversely affect the
market price of the units, common stock and warrants and our ability to raise
equity capital in the future.
Upon completion of this offering, we will have 3,979,566 shares of common
stock outstanding, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. The units consisting of
1,000,000 shares of common stock and the warrants to purchase 1,000,000 shares
of common stock that are to be sold to the public in this offering will be
freely tradeable without restriction under the Securities Act, unless purchased
by affiliates of Nations Express as that term is defined in Rule 144 under the
Securities Act.
The remaining 2,979,566 shares of common stock outstanding upon completion
of this offering will be restricted securities as that term is defined in Rule
144 under the Securities Act ("Restricted Shares"). Restricted Shares may be
sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or 701 promulgated under the
Securities Act, which are summarized below. Sales of the restricted shares in
the public market, or the availability of such shares for sale, could
materially adversely affect the market price of the common stock and warrants.
In general, under Rule 144 as currently in effect, beginning 90 days after the
date of this prospectus, a person (or persons whose shares are aggregated) who
has beneficially owned restricted shares for at least one year (including the
holding period of any owner other than an affiliate of Nations Express) would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of (i) one percent of the number of shares of common
stock then outstanding or (ii) the average weekly trading volume of the common
stock during the four calendar weeks preceding the filing of notice of such
sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about Nations Express.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
Nations Express at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any owner other than an affiliate of Nations
Express), is entitled to sell such shares without complying with the manner of
sale, public information volume limitations or notice provisions of Rule 144.
Any employee, officer or director of or consultant to Nations Express who
purchased shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates of Nations Express to sell their Rule 701 shares under Rule 701
without complying with the holding period requirements of Rule 144. Rule 701
further provides that non-affiliates may sell such shares in reliance on Rule
144 without having to comply with the public information, volume limitation or
notice requirements 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 before selling
such shares.
Nations Express, its officers, directors and shareholders holding 5% or more
of the outstanding stock have agreed that for a period of 13 months from the
completion of this offering they will not sell or otherwise dispose of any
securities. All other shareholders have been asked to agree to a 13-month lock-
up of their shares and warrants except that such shareholders will be permitted
to register and sell to the public, on a pro rata basis, up to 300,000 shares
of common stock six months after the completion of this offering.
After completion of the offering, there will be outstanding options to
purchase approximately 2,220,500 shares of our common stock. We may, however,
issue options to purchase an additional 318,500 shares of common stock under
our 1998 Incentive Stock Option Plan, 92,000 shares under our 1999 Stock Option
Plan and 839,500 under our Omnibus Stock Plan.
33
<PAGE>
UNDERWRITING
The underwriters named below have agreed, subject to the terms and
conditions of the firm commitment Underwriting Agreement between Nations
Express and the underwriters, to purchase from Nations Express the number of
units set forth opposite their names. The representative of the underwriters is
Schneider Securities, Inc.
A 10% underwriting discount will be allowed to the underwriters at the time
of delivery to the underwriters of the units so purchased.
<TABLE>
<CAPTION>
Number of
Names of Underwriters Units
--------------------- ---------
<S> <C>
Schneider Securities, Inc.......................................
Neidiger, Tucker, Bruner, Inc...................................
Advanced Equities, Inc..........................................
---------
Total ........................................................ 1,000,000
=========
</TABLE>
The underwriters have advised us that they propose to offer the units to the
public at an offering price of between $9-11 per unit and that the underwriters
may allow to certain dealers who are members of the National Association of
Securities Dealers, Inc, a concession not in excess of $ per unit.
The following table summarizes the compensation to be paid to the
underwriters by Nations Express.
<TABLE>
<CAPTION>
Total
-----------------------------
Per Without With
Share Over-allotment Over-allotment
----- -------------- --------------
<S> <C> <C> <C>
Underwriting Discounts paid by Nations Express.. $ $ $
</TABLE>
We have granted to the underwriters an over-allotment option exercisable
during the 45-day period following the date of this prospectus to purchase up
to a maximum of 150,000 additional units at the public offering price, less the
underwriting discount. The underwriters may exercise such option only to
satisfy over-allotments in the sale of the units.
We have agreed to pay to the representative a non-accountable expense
allowance equal to 3% of the total proceeds of this offering, or $ if the
underwriters exercise the over-allotment option in full, of which $50,000 has
already been paid. The underwriters do not intend to offer or sell units to
accounts over which they exercise discretionary authority.
At the closing of this offering, Nations Express will issue to the
representative, for nominal consideration the representative's warrants to
purchase 100,000 units exercisable at 150% of the initial public offering price
for these securities. The representative's warrants will not be transferable
prior to their exercise date except to officers of the representative and
members of the syndicate and officers and partners thereof. The
representative's warrants will contain provisions providing adjustment in the
event of any recapitalization, reclassification, stock dividend, stock split or
similar transactions. The representative's warrants and the securities issuable
upon exercise of the representative's warrant may not be offered for sale
except in compliance with the applicable provisions of the Securities Act. We
have agreed that, for a period of six years from the date of this prospectus,
if we intend to file a registration statement for the public sale of securities
(other than a registration statement on Form S-4, S-8 or a comparable
registration statement), we will notify all
of the holders of the representative's warrants and securities issued upon
exercise thereof and if so requested,
34
<PAGE>
will include therein material to permit a public offering of the securities
underlying the representative's warrants solely at our expense (excluding fees
and expenses of the holder's counsel and any underwriting or selling
commissions). For the period during which the representative's warrants are
exercisable, the holder(s) will have the opportunity to profit from a rise in
the market value of the Nations Express' common stock, with a resulting
dilution in the interests of the other shareholders of Nations Express. The
holder(s) of the Representative's Warrants can be expected to exercise them at
a time which Nations Express would, in all likelihood, be able to obtain any
needed capital from an offering of unissued common stock on terms more
favorable to Nations Express than those provided for in the representative's
warrants. Such facts may adversely affect the terms on which we can obtain
additional financing. To the extent that the Representative realizes any gain
from the resale of the representative's warrants or the securities issuable
thereunder, such gain may be deemed additional underwriting compensation under
the Securities Act of 1933, as amended.
We have agreed to enter into a three year non-exclusive consulting agreement
with the Representative, pursuant to which the Representative will act as a
financial consultant to Nations Express, commencing on the closing date of this
offering. The total consulting fee of $108,000 will be payable, in full, on the
closing date of this offering.
Nations Express, its officers, directors and shareholders holding 5% or more
of the outstanding stock have agreed that for a period of 13 months from the
completion of this offering they will not sell or otherwise dispose of any
securities. All other shareholders have been asked to agree to a 13-month lock-
up of their shares and warrants except that such shareholders will be permitted
to register and sell to the public, on a pro rata basis, up to 300,000 shares
of common stock six months after the completion of this offering.
The underwriting agreement provides for reciprocal indemnification between
Nations Express and the underwriters against certain liabilities in connection
with the registration statement, including liabilities under the Securities
Act.
Nations Express has agreed with the representative that for a period of 24
months from the closing date of this offering, the representative may designate
an observer to the board of directors who will be entitled to attend and
receive notice of all meetings of the board. The observer, who has not been
determined, will be reimbursed for out-of-pocket travel expenses incurred in
attending such meetings but will otherwise not be compensated by Nations
Express.
The representative has advised Nations Express that, pursuant to Regulation
M under the Securities Act, some persons participating in this offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the common stock at a level
above that which might otherwise prevail in the open market. A "stabilizing
bid" is a bid for or the purchase of common stock on behalf of the underwriters
for the purpose of fixing or maintaining the price of the common stock. A
"syndicate covering transaction" is a bid for or the purchase of common stock
on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with this offer. A "penalty bid" is an arrangement
permitting the representative to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with this offering
if the common stock originally sold by such underwriter or syndicate member is
purchased by the representative in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representative has advised Nations Express that such transactions may be
effected on the American Stock Exchange or otherwise and, if commenced, may be
discontinued at any time.
35
<PAGE>
OFFERING PRICE
The price per unit in this offering will be the result of negotiations
between our management and the underwriters. It will be determined using
financial projections and multiples derived from a study of other companies
with operating businesses comparable to ours. It was not based on any formal
valuation of our assets, our earnings, book value or other objective criteria.
LEGAL MATTERS
The validity of the shares of units, including the common stock and
redeemable common stock purchase warrants, offered hereby has been passed upon
for Nations Express by Moore & Van Allen PLLC, Charlotte, North Carolina.
Certain matters related to this offering will be passed upon for the
underwriters by the law offices of William M. Prifti, Esq. Amesbury,
Massachusetts.
EXPERTS
The audited financial statements of Nations Express, Inc. 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 report.
AVAILABLE INFORMATION
This prospectus constitutes a part of a Registration Statement on Form SB-2
(together with all exhibits thereto, the "Registration Statement") filed by
Nations Express with the Commission under the Securities Act. This prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, and reference is hereby made to the Registration Statement
for further information with respect to Nations Express and the units.
Following this offering, we will be subject to the informational reporting
requirements of the Securities Exchange Act and will therefore be required to
file reports, proxy and informational statements and other information with the
SEC. You may read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. The SEC also maintains a website www.sec.gov that
contains these reports, proxy and information statements, and other information
regarding issuers like us that file electronically with the SEC.
36
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Financial Statements
Report of Independent Public Accountants.................................. F-2
Balance Sheets as of June 30, 1999 and 2000............................... F-3
Statements of Income for the Years Ended June 30, 1999 and 2000........... F-4
Statements of Changes in Shareholders' Equity for the Years Ended June 30,
1999 and 2000............................................................ F-5
Statements of Cash Flows for the Years Ended June 30, 1999 and 2000....... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Nations Express, Inc.
We have audited the accompanying balance sheets of Nations Express, Inc. (a
North Carolina corporation) as of June 30, 2000 and 1999, and the related
statements of income, changes in shareholders' equity and cash flows for the
years then ended (1999 as restated--see Note 11). These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 Nations Express, Inc. as of
June 30, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
Charlotte, North Carolina,
September 15, 2000
F-2
<PAGE>
NATIONS EXPRESS, INC.
BALANCE SHEETS -- June 30, 1999 and 2000
<TABLE>
<CAPTION>
1999 2000
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 284,800 $ 50,228
Accounts receivable, net of allowance for
uncollectible accounts of $78,655 and $178,878 in
1999 and 2000, respectively......................... 1,585,906 3,341,853
Deferred tax asset................................... 29,535 67,169
Other current assets................................. 7,290 173,830
---------- ----------
1,907,531 3,633,080
---------- ----------
Property and equipment:
Furniture and fixtures............................... 26,164 55,100
Office equipment..................................... 52,535 69,179
Information systems equipment........................ 187,615 299,554
Vehicles............................................. 25,699 96,211
Accumulated depreciation............................. (27,981) (91,423)
---------- ----------
264,032 428,621
---------- ----------
Non-current deferred tax asset......................... 9,323 7,198
---------- ----------
Other assets........................................... 18,000 49,419
---------- ----------
$2,198,886 $4,118,318
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term lease obligations....... $ 29,330 $ 46,804
Note payable......................................... 0 182,000
Loans from shareholders.............................. 250,000 0
Accounts payable..................................... 766,405 1,218,554
Accrued income taxes................................. 58,205 80,463
Accrued expenses..................................... 279,955 709,674
---------- ----------
1,383,895 2,237,495
Long-term lease obligations............................ 45,955 62,325
Other long-term liabilities............................ 7,105 36,204
---------- ----------
1,436,955 2,336,024
---------- ----------
Shareholders' equity:
Preferred stock-Series A, no par value; authorized
1,000,000 shares; 95,556 and 0 shares issued and
outstanding in 1999 and 2000, respectively.......... 187,458 0
Common stock, no par value; authorized 25,000,000
shares; 2,465,556 and 2,979,566 shares issued and
outstanding in 1999 and 2000, respectively.......... 461,048 1,562,877
Stock warrants....................................... 50,390 50,390
Retained earnings.................................... 63,035 169,027
---------- ----------
761,931 1,782,294
---------- ----------
$2,198,886 $4,118,318
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE>
NATIONS EXPRESS, INC.
STATEMENTS OF INCOME
For the Years Ended June 30, 1999 and 2000
<TABLE>
<CAPTION>
1999 2000
---------- -----------
<S> <C> <C>
Revenues................................................ $7,369,373 $19,353,649
Purchased transportation................................ 5,028,050 13,541,537
---------- -----------
Gross profit........................................ 2,341,323 5,812,112
---------- -----------
Operating expenses:
Sales and marketing................................... 773,799 1,944,023
General and administrative............................ 1,353,477 3,531,259
Depreciation.......................................... 23,146 69,898
---------- -----------
2,150,422 5,545,180
---------- -----------
Income from operations.................................. 190,901 266,932
Interest expense, net................................... 20,928 7,878
---------- -----------
Income before income taxes.............................. 169,973 259,054
Income tax expense...................................... 66,289 121,213
---------- -----------
Net income.............................................. $ 103,684 $ 137,841
========== ===========
Earnings per common share:
Basic................................................. $ 0.04 $ 0.04
Diluted............................................... $ 0.04 $ 0.03
========== ===========
Weighted average common shares outstanding:
Basic................................................. 2,316,618 2,796,988
Diluted............................................... 2,316,618 3,118,527
========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
NATIONS EXPRESS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended June 30, 1999, and 2000
<TABLE>
<CAPTION>
Common Stock Preferred Stock Stock Warrants
-------------------- ------------------ -------------- Retained
Shares Amount Shares Amount Shares Amount Earnings Total
--------- ---------- -------- -------- ------ ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998,
as originally
reported............... 2,270,000 $ 241,113 0 $ 0 0 $ 0 $ 47,116 $ 288,229
Restatement (see Note
11).................... 0 0 0 0 0 0 (87,765) (87,765)
--------- ---------- -------- -------- ------ ------- -------- ----------
Balance, June 30, 1998,
as restated............ 2,270,000 241,113 0 0 0 0 (40,649) 200,464
Shares issued for
capital
contributions......... 95,556 154,390 95,556 187,458 0 0 0 341,848
Shares issued in lieu
of interest payments.. 100,000 10,000 0 0 0 0 0 10,000
Fair value of stock
options issued to
nonemployees.......... 0 55,545 0 0 0 0 0 55,545
Fair value of stock
warrants issued to
nonemployees.......... 0 0 0 0 25,478 50,390 0 50,390
Net income............. 0 0 0 0 0 0 103,684 103,684
--------- ---------- -------- -------- ------ ------- -------- ----------
Balance, June 30, 1999.. 2,465,556 461,048 95,556 187,458 25,478 50,390 63,035 761,931
Shares issued for
capital
contributions......... 225,894 422,249 159,227 345,129 0 0 0 767,378
Fair value of stock
options issued to
nonemployees.......... 0 71,993 0 0 0 0 0 71,993
Shares issued for
conversion of
shareholder loan...... 33,333 75,000 0 0 0 0 0 75,000
Preferred shares
converted to common
stock................. 254,783 532,587 (254,783) (532,587) 0 0 0 0
Dividends on preferred
stock................. 0 0 0 0 0 0 (31,849) (31,849)
Net income............. 0 0 0 0 0 0 137,841 137,841
--------- ---------- -------- -------- ------ ------- -------- ----------
Balance, June 30, 2000.. 2,979,566 $1,562,877 0 $ 0 25,478 $50,390 $169,027 $1,782,294
========= ========== ======== ======== ====== ======= ======== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
NATIONS EXPRESS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 1999 and 2000
<TABLE>
<CAPTION>
1999 2000
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 103,684 $ 137,841
Adjustments to reconcile net income to net cash used
in operating activities--
Depreciation...................................... 23,146 69,898
Provision for uncollectible accounts.............. 97,529 128,575
Interest expense on notes to shareholders......... 10,000 0
Compensation expense for stock options issued to
nonemployees..................................... 55,545 71,993
Deferred income taxes............................. (7,498) (35,509)
Increase in accounts receivable, net.............. (1,310,357) (1,890,978)
Increase in accounts payable...................... 582,566 452,149
Increase in accrued liabilities................... 137,027 429,719
Increase in accrued income taxes.................. 58,205 22,258
Change in other operating assets and liabilities.. (5,134) (170,985)
----------- ----------
Net cash used in operating activities........... (255,287) (785,039)
----------- ----------
Cash flows from investing activities--Capital
expenditures......................................... (176,773) (154,128)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock and stock warrants,
net................................................ 392,238 767,378
Dividends paid to preferred shareholders............ 0 (31,849)
Proceeds from note payable.......................... 0 182,000
Repayments of capital lease obligations............. (20,849) (37,934)
Proceeds of loans from shareholders................. 250,000 0
Repayment of loans from shareholders................ 0 (175,000)
----------- ----------
Net cash provided by financing activities....... 621,389 704,595
----------- ----------
Net increase (decrease) in cash and cash equivalents.. 189,329 (234,572)
Cash and cash equivalents, beginning of period........ 95,471 284,800
----------- ----------
Cash and cash equivalents, end of period.............. $ 284,800 $ 50,228
=========== ==========
Supplemental cash flow disclosures:
Cash paid for interest.............................. $ 12,704 $ 12,665
Cash paid for income taxes.......................... $ 15,130 $ 137,382
=========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 2000
1. The Company:
Organization
Nations Express, Inc. (the Company) is a North Carolina corporation that
commenced operations on March 1, 1998, and is in the business of arranging air
cargo, expedited truck, truck load and aircraft charter freight services on a
timely and cost-effective basis for commercial and industrial customers
throughout the United States and parts of Canada.
Risks and Uncertainties
The Company's future results of operations may be affected by risks and
difficulties frequently encountered by early stage companies. Factors that
could affect the Company's future operating results include, but are not
limited to, a decrease in the demand for transportation services, the Company's
dependence on relationships with service providers, competition, availability
of cargo space from third parties to serve its customers, the Company's ability
to manage growth and dependence on key personnel.
2. Summary of Significant Accounting Policies:
Revenues and Transportation Costs
Revenues from the transportation of freight are recognized on the day
freight departs the terminal of origin. Transportation costs and destination
delivery costs are recognized concurrently with revenues.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from these estimates.
Property and Equipment
The Company provides for depreciation using the straight-line method over
estimated useful lives of the related assets which range from 5 to 10 years.
Maintenance and repairs are charged to expense as incurred.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Deferred
income taxes are recognized for the tax consequences of "temporary differences"
by applying enacted statutory rates to differences between financial statement
carrying amounts and tax basis of existing assets and liabilities.
F-7
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Loans From Shareholders:
Commencing in November 1998, loans were received from various shareholders
in increments of $25,000. In lieu of interest, the Company agreed to issue
10,000 shares of common stock upon execution of each $25,000 note. In total,
interest expense related to these notes amounted to $10,000 and was recorded
during the 12 months ended June 30, 1999. The entire principal balance of the
notes was due and payable upon the earlier of one year from the date of the
notes or such time as the Company realized proceeds of not less than $350,000
from the sale of its equity securities.
During July 2000, all loans from shareholders were satisfied. Shareholder
loans totaling $175,000 were repaid with a portion of the proceeds from the
private placement offering. Additional shareholder loans of $75,000 were
satisfied with the issuance of 33,333 shares of common stock.
4. Income Taxes:
The provisions for income taxes applying the U.S. statutory rate to income
before taxes as reconciled to the actual provisions were as follows:
<TABLE>
<CAPTION>
1999 2000
---------------- ----------------
Amount Percent Amount Percent
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Income before income taxes................ $169,973 100% $259,054 100%
======== === ======== ===
Tax expense at U.S. statutory rate........ $ 57,790 34% $ 88,078 34%
State taxes, net of federal benefit....... 5,846 3% 8,496 3%
Nondeductible expenses.................... 2,582 1% 11,701 5%
Other, net................................ 71 1% 12,938 6%
-------- --- -------- ---
Taxes at effective rate................... $ 66,289 39% $121,213 48%
======== === ======== ===
</TABLE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1999 2000
-------- --------
<S> <C> <C>
Current.................................................. $ 73,787 $156,722
Deferred................................................. (7,498) (35,509)
-------- --------
$ 66,289 $121,213
======== ========
</TABLE>
The tax effect of temporary differences that give rise to the Company's
deferred tax asset (liability) are as follows as of June 30, 1999 and 2000:
<TABLE>
<CAPTION>
1999 2000
------- -------
<S> <C> <C>
Current:
Allowance for uncollectible accounts...................... $29,535 $67,169
======= =======
Noncurrent:
Stock option expenses..................................... $26,157 $39,892
Depreciation.............................................. (16,834) (32,694)
------- -------
Total Noncurrent......................................... $ 9,323 $ 7,198
======= =======
</TABLE>
F-8
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Shareholders' Equity:
On March 15, 1999, the Company issued a Private Offering Memorandum whereby
it offered an aggregate of 170,000 units. In July 2000, the Board of Directors
agreed to offer an additional 84,783 units under the Private Offering
Memorandum. Each unit consisted of one share of no par value common stock
priced at $2 per share and one share of Series A Convertible Preferred Stock
priced at $2.50 per share. In May 1999, 95,556 units were sold. Proceeds
received by the Company including amounts assigned to stock warrants, net of
cash commissions paid to the securities brokerage firm that provided placement
services, totaled $392,238. In July 2000, the remaining 159,227 units were
sold. Proceeds received by the Company, net of cash commissions paid to the
securities brokerage firm that provided placement services, totaled $621,233.
Preferred Stock--Series A
The Series A Preferred Stock entitled the shareholder to convert each
preferred share into one share of the Company's common stock, at the option of
the shareholder, at a price of $2.50 per share. This conversion price increased
to $3.00 per share six months after the close of the private placement offering
and to $3.50 per share 12 months after the close of the private placement
offering. Holders of the Series A Preferred Stock were entitled to receive
cumulative annual dividends of $0.25 per share, payable quarterly, before any
dividends could be paid to the holders of the Company's common stock. Dividends
paid to holders of the Series A Preferred Stock during fiscal 2000 were
$31,849. On January 15, 2000, all outstanding shares of Series A Preferred
Stock were converted to common stock.
Stock Options
The Company's stockholders have approved three different stock option plans
which provide that qualified and nonqualified options may be granted to
employees, directors, and agents at exercise prices not less than market value
on the date of grant. The 1998 Incentive Stock Option Plan (for which 1,000,000
shares of common stock are reserved) is a qualified plan for employees and
directors under which the options vest 25% one year from the date of grant and
then proportionately over a three-year period and are exercisable for 10 years
from the grant date. The 1999 Stock Option Plan (for which 200,000 shares of
common stock are reserved) is a nonqualified plan primarily for non-employee
sales agents and consultants under which the options vest 25% on the date of
grant and then proportionately over a three-year period and are exercisable for
five years from the grant date. By approval of the Board of Directors, all
options outstanding as of June 30, 2000 under the 1999 Stock Option Plan were
fully vested. In September 2000, the Company adopted the Omnibus Stock Plan.
Under the Omnibus Stock Plan, 839,500 shares of our common stock have been
reserved for issuance of stock options, stock appreciation rights, restricted
stock, performance awards or other stock-based awards. Options granted under
the Omnibus Stock Plan are to be at exercise prices as determined by the
Compensation Committee of the Board of Directors. A summary of outstanding
options and the related weighted average exercise price per share is shown in
the following table:
<TABLE>
<CAPTION>
1999 2000
------------------------------ ------------------------------
Shares Shares
Under Shares Under Under Shares Under
Qualified Nonqualified Average Qualified Nonqualified Average
Plan Plan Price Plan Plan Price
--------- ------------ ------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of
period................. 140,000 40,000 $2.00 410,000 120,000 $2.00
Granted during period... 270,000 80,000 $2.00 274,000 39,000 $2.33
Cancelled during
period................. 0 0 $ 0 (2,500) (20,000) $2.00
------- ------- ------- -------
Balance, end of period.. 410,000 120,000 $2.00 681,500 139,000 $2.13
======= ======= ===== ======= ======= =====
Exercisable at end of
period................. 35,000 40,000 $2.00 137,500 139,000 $2.08
======= ======= ===== ======= ======= =====
</TABLE>
The weighted average fair value of options granted during 1999 and 2000 was
$0.76 and $0.98, respectively.
F-9
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Options outstanding as of June 30, 2000 have exercise prices which range
from $2.00 to $2.75 and a weighted average remaining contractual life of 7.6
years. Options exercisable as of June 30, 2000 have exercise prices which range
from $2.00 to $2.75 and a weighted average remaining contractual life of 5.7
years.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." In accordance with the provisions of SFAS No. 123, the Company
has elected to apply APB Opinion 25 and related Interpretations in accounting
for stock options issued to employees. The option price of stock options issued
to employees during 1999 and 2000 either equaled or exceeded the fair market
value of the Company's common stock at the date of grant, and accordingly, no
compensation cost was recognized under APB Opinion 25. If the Company had
elected to recognize compensation cost for employee stock options based on the
fair value at the grant date as prescribed by SFAS No. 123, net income would
have been reduced by approximately $33,000 and $72,000 in 1999 and 2000,
respectively. Basic and diluted earnings per share would have been $0.03 and
$0.01 in 1999 and 2000, respectively.
The fair value of options granted to employees in 1999 and 2000 is estimated
on the date of grant using the Black-Scholes option-pricing model based on the
following assumptions:
<TABLE>
<CAPTION>
1999 2000
---- ----
<S> <C> <C>
Dividend yield................................................... 0% 0%
Volatility....................................................... 35% 50%
Risk-free interest rate.......................................... 5.01% 5.50%
Expected life in years........................................... 5 5
==== ====
</TABLE>
Compensation cost for stock options issued to nonemployees is recognized in
accordance with SFAS No. 123 and totaled $55,545 and $71,993 in 1999 and 2000,
respectively.
Stock Warrants
In May 1999, the placement agent for the Company's 1999 private placement
offering received 25,478 stock warrants as a component of the placement
commission. Each warrant represents the right to purchase two shares of the
Company's common stock at an exercise price of $2.70 per share and expires five
years from the date of issuance. The fair-value of these warrants was $50,390
and was calculated using the Black-Scholes option-pricing model.
6. Earnings Per Share:
The Company has adopted SFAS No. 128, "Earnings Per Share." This statement
establishes standards for computing and presenting earnings per share. It
requires presentation of basic and diluted earnings per share on the face of
the income statement for all entities with complex capital structures and
requires reconciliation of the computation of basic earnings per share to
diluted earnings per share. Basic earnings per share is computed by dividing
income available to common shareholders (the numerator) by the weighted average
number of shares outstanding for the period (the denominator). The computation
of diluted earnings per share is similar to basic earnings per share, except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if potentially dilutive common
securities had been converted into common stock.
F-10
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The differences between the numerator and denominator for purposes of the
basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
1999 2000
-------------------------------- --------------------------------
Per Per
Income Shares share Income Shares share
(numerator) (denominator) amount (numerator) (denominator) amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Net income.............. $103,684 $137,841
Preferred stock
dividends.............. 0 (31,849)
-------- --------
Income available to
common shareholders.... 103,684 2,316,618 $0.04 105,992 2,796,988 $0.04
===== =====
Effect of dilutive
securities:
Warrants............... 0 0 0 11,647
Stock options.......... 0 0 0 309,892
-------- --------- -------- ---------
Income available to
common shareholders
and assumed
conversion............ $103,684 2,316,618 $0.04 $105,992 3,118,527 $0.03
======== ========= ===== ======== ========= =====
</TABLE>
The diluted earnings per share calculation for 1999 does not include stock
options (530,000) and stock warrants (25,478) outstanding as of June 30, 1999,
because the exercise price of these options and warrants was greater than the
average price of the common shares. The diluted earnings per share calculation
for 2000 does not assume conversion of the Series A Preferred Stock at July 1,
1999, since the conversion of the shares and inclusion of the dividend would be
anti-dilutive.
7. Commitments and Contingencies:
Property and equipment at June 30, 1999 and 2000, includes $98,038 and
$170,183, respectively, of furniture and fixtures, office equipment and
information systems equipment under capital leases. Capital lease obligations
for these items at June 30, 2000, consist of the following:
<TABLE>
<S> <C> <C>
Capitalized lease obligations for furniture and fixtures,
office equipment and
information systems equipment, interest from 2.9% to 21%,
payable in 1999 2000
installments ranging from $117.45 to $1,056.35 monthly
from June 2000
to March 2004............................................ $ 75,285 $109,129
Less--Current installments................................ (29,330) (46,804)
-------- --------
Capital lease obligations, excluding current
installments............................................. $ 45,955 $ 62,325
======== ========
</TABLE>
The following is a schedule by year of future minimum lease payments under
capital leases at June 30, 2000:
<TABLE>
<CAPTION>
Principal Interest Total
--------- -------- --------
<S> <C> <C> <C>
2001............................................. $ 46,804 $ 6,633 $ 53,437
2002............................................. 29,329 2,514 31,843
2003............................................. 21,421 888 22,309
2004............................................. 11,575 133 11,708
-------- ------- --------
$109,129 $10,168 $119,297
======== ======= ========
</TABLE>
F-11
<PAGE>
NATIONS EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company leases office space and office equipment under operating leases.
Rental expense relating to these leases was $47,647 in 1999 and $98,700 in
2000. Future minimum payment obligations for noncancelable operating leases
exceeding one year are as follows at June 30, 2000:
<TABLE>
<S> <C>
2001................................................................ $126,851
2002................................................................ 107,891
2003................................................................ 96,378
2004................................................................ 40,320
--------
$371,440
========
</TABLE>
The Company experiences routine litigation in the normal course of its
business. Based on discussions with legal counsel, management is of the opinion
that none of this routine litigation will have a material adverse impact on the
Company's financial position, results of operations or cash flows.
8. Related Party:
A director of the Company is a registered representative of the securities
brokerage firm used as the placement agent for the private placement offering.
As compensation for services performed, this brokerage firm received 25,478
stock warrants (see Note 5) and cash of $51,114 in May 1999, and $84,761 in
July 1999.
9. Note Payable:
On November 5, 1999, the Company entered into a revolving loan agreement
with First Union National Bank (FUNB). Borrowings under this revolving loan
agreement are secured by the Company's accounts receivable and may not exceed
$1,500,000. Interest is payable on a monthly basis at FUNB's prime rate (9.5%
at June 30, 2000). The Company is subject to certain financial and nonfinancial
covenants under the revolving loan agreement.
10. Effect of Recently Issued Accounting Pronouncements:
In June 1998, June 1999 and June 2000, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and hedging
Activities" and SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133"
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities--an amendment of SFAS No. 133". These statements outline the
accounting treatment for all derivative activity. Since the Company does not
use derivative instruments, these accounting statements will not have an effect
on the Company's financial position or results of operations.
11. Restatement:
The originally issued financial statements as of and for the years ended
June 30, 1999 and 1998, did not properly reflect an accrual, as of June 30,
1998, for purchased transportation costs. The effect of properly recording this
accrual resulted in an increase in purchased transportation costs and accrued
liabilities of $132,344 and a decrease in retained earnings of $87,765 for the
year ended June 30, 1998. As a result, the balance sheet amounts for accrued
liabilities, accrued taxes and retained earnings as of June 30, 1999 were
revised accordingly.
F-12
<PAGE>
[Nations Express Logo]
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
You should rely only on the information contained in the prospectus or
information we have referred you to. We have not authorized anyone to provide
you with information that is different. This prospectus may only be used where
it is legal to sell these securities. The information in this prospectus may
only be accurate as of the date of this prospectus.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY....................................................... 1
SUMMARY FINANCIAL DATA AND OTHER INFORMATION............................. 3
RISK FACTORS............................................................. 4
USE OF PROCEEDS.......................................................... 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 12
BUSINESS................................................................. 15
MANAGEMENT............................................................... 23
BENEFICIAL OWNERS OF COMMON STOCK........................................ 25
MANAGEMENT COMPENSATION.................................................. 26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................... 28
DESCRIPTION OF CAPITAL STOCK............................................. 29
LEGAL MATTERS............................................................ 36
EXPERTS.................................................................. 36
AVAILABLE INFORMATION.................................................... 36
</TABLE>
Until , 2000 (25 days after the effective date of the registration
statement) all dealers that effect transactions in these securities, whether
or not participating in this offering, 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.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$
[Nations express logo]
Nations Express, Inc.
1,000,000 Units
Each Consisting of One Share of Common Stock and One Redeemable Common Stock
Purchase Warrant
----------------
PROSPECTUS
----------------
Schneider Securities, Inc.
Neidiger, Tucker, Bruner, Inc.
Advanced Equities, Inc.
, 2000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Permissible Indemnification. The North Carolina Business Corporation Act
(the "NCBCA") allows a corporation, by charter, bylaw, contract or resolution,
to indemnify or agree to indemnify its officers, directors, employees and
agents and any person who is or was serving at the corporation's request as a
director, officer, employee or agent of another entity or enterprise or as a
trustee or administrator under an employee benefit plan, against liability and
expenses, including reasonable attorneys' fees, in any proceeding (including
without limitation a proceeding brought by or on behalf of the corporation
itself) arising out of their status as such or their activities in any of the
foregoing capacities as summarized herein. Any provision in a corporation's
charter or bylaws or in a contract or resolution may include provisions for
recovery from the corporation of reasonable costs, expenses and attorneys' fees
in connection with the enforcement of rights to indemnification granted therein
and may further include provisions establishing reasonable procedures for
determining and enforcing such rights.
The corporation may indemnify such person against liability expenses
incurred only where such person conducted himself or herself in good faith and
reasonably believed (i) in the case of conduct in his or her official corporate
capacity, that his or her conduct was in the corporation's best interests, and
(ii) in all other cases, that his or her conduct was at least not opposite to
the corporation's best interests; and, in the case of a criminal proceeding, he
or she had no reasonable cause to believe his or her conduct was unlawful;
provided, however, that a corporation may not indemnify such person either in
connection with a proceeding by or in the right of the corporation in which
such person was adjudged liable to the corporation, or in connection with any
other proceeding charging improper personal benefit to such person (whether or
not involving action in an official capacity) in which such person was adjudged
liable on the basis that personal benefit was improperly received.
Mandatory Indemnification. Unless limited by the corporation's charter, the
NCBCA requires a corporation to indemnify a director or officer of the
corporation who is wholly successful, on the merits or otherwise, in the
defense of any proceeding to which such person was a party because he or she is
or was a director or officer of the corporation against reasonable expenses
incurred in connection with the proceeding.
Advance for Expenses. Expenses incurred by a director, officer, employee or
agent of the corporation in defending a proceeding may be paid by the
corporation in advance of the final disposition of the proceeding as authorized
by the board of directors in the specific case, or as authorized by the charter
or bylaws or by any applicable resolution or contract, upon receipt of an
undertaking by or on behalf of such person to repay amounts advanced unless it
ultimately is determined that such person is entitled to be indemnified by the
corporation against such expenses.
Court-Ordered Indemnification. Unless otherwise provided in the
corporation's charter, a director or officer of the corporation who is a party
to a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court deems necessary, may
order indemnification if it determines either (i) that the director or officer
is entitled to mandatory indemnification as described above, in which case the
court also will order the corporation to pay the reasonable expenses incurred
to obtain the court-ordered indemnification, or (ii) that the director or
officer is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not such person met the requisite standard
of conduct or was adjudged liable to the corporation in connection with a
proceeding by or in the right of the corporation or on the basis that personal
benefit was improperly received in connection with any other proceeding so
charging (but if adjudged so liable, indemnification is limited to reasonable
expenses incurred).
Parties Entitled to Indemnification. The NCBCA defines "director" to include
ex-directors and the estate or personal representative of a director. Unless
its charter provides otherwise, a corporation may
II-1
<PAGE>
indemnify and advance expenses to an officer, employee or agent of the
corporation to the same extent as to a director and also may indemnify and
advance expenses to an officer, employee or agent who is not a director to the
extent, consistent with public policy, as may be provided in its charter or
bylaws, by general or specific action of its board of directors, or by
contract.
Indemnification by Registrant. Registrant's bylaws provide for
indemnification of its directors and officers to the fullest extent permitted
by North Carolina law, and require its board of directors to take all actions
necessary and appropriate to authorize such indemnification.
Under North Carolina law, a corporation also may purchase insurance on
behalf of any person who is or was a director or officer against any liability
arising out of his status as such. Registrant currently maintains a directors'
and officers' liability insurance policy.
SEC Position on Indemnification. Insofar as indemnification for liabilities
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance and distribution of
the securities covered by this Registration Statement, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<S> <C>
Printing fees and expenses......................................... $100,000
Legal fees and expenses............................................ 150,000
Accounting fees and expenses....................................... 150,000
NASD filing fee.................................................... 4,155
SEC filing fee..................................................... 9,161
Other.............................................................. 18,684
--------
Total............................................................ $450,000
========
</TABLE>
Item 26. Recent Sales of Unregistered Securities
In connection with the formation of Nations Express in March 1998, the
company issued 500,000, 296,000 and 200,000 shares of common stock to Allen D.
Watson, John P. Manry, and Daniel H. McPherson, III, respectively (the
"Founders"), in exchange for capital contributions of $0.10 per share. All
three individuals were promoters (as such term is defined by Rule 1-02(s) of
Regulation S-X), initial directors and executive officers of Nations Express.
These transactions were not registered under the Securities Act pursuant to the
exemption provided by Section 4(2) thereof for transactions not involving any
public offering.
The table below provides information regarding shares of common stock issued
in May 1998 to directors of Nations Express:
<TABLE>
<CAPTION>
Capital
Name No. of Shares Contribution
---- ------------- ------------
<S> <C> <C>
Thomas E. McChesney 150,000 $15,000
Jerry N. Carr 100,000 10,000
Daniel R. Dukesherer 50,000 5,000
Daniel R. Dukesherer 150,000 Assets
</TABLE>
II-2
<PAGE>
Each of the directors listed on the table above had pre-existing
relationships with one or more of the Founders and were named to the board of
directors in connection with their decision to invest in the company. Each was
provided with or had access to financial and other information concerning
Nations Express and had the opportunity to ask questions of and receive answers
from the Founders concerning the company's business plan. These transactions
were not registered under the Securities Act pursuant to the exemption provided
by Section 4(2) thereof for transaction not involving any public offering.
In May and June 1998, the Nations Express sold 824,000 shares of common
stock to 13 persons, each of whom was an accredited investor with a pre-
existing personal, family or business relationships with one or more of the
directors. Each investor was provided with or had access to financial and other
information concerning Nations Express and had the opportunity to ask questions
of and receive answers from the directors concerning the company's business
plan. These transactions were not registered under the Securities Act pursuant
to the exemption provided by Section 4(2) thereof for transactions not
involving any public offering.
In July 1999, we issued 100,000 shares to six existing shareholders in
payment of $10,000 in interest that had accrued on loans to the Company. Also
in July 1999, Nations Express permitted Jerry N. Carr, a director, and his
brother, William Carr, to convert notes payable to each of them in the amount
of $37,500 into 33,333 shares of common stock. These transactions were not
registered under the Securities Act pursuant to the exemption provided by
Section 4(2) thereof for transactions not involving any public offering.
In May 1999 and July 1999, we sold 254,783 units, each consisting of one
share of common stock and one share of convertible preferred stock, at a price
of $4.50 per unit in a private offering to 57 persons. As compensation for
serving as placement agent in the offering, Blackwell Donaldson & Company, a
registered broker-dealer, received a sales commission in the amount of
approximately $136,000 and 25,478 warrants with an approximate value of
$50,000. Each warrant entitles the holder to purchase two shares of common
stock for nominal consideration. The offering was limited to accredited
investors with whom Blackwell Donaldson & Company or directors of Nations
Express had a pre-existing relationship. Each purchaser received a private
placement memorandum containing a detailed description of the company's
business plan and management and financial statements compiled by an
independent accounting firm. This transaction was not registered pursuant to
Section 4(6) and Section 4(2) of the Securities Act and Rule 506 promulgated
thereunder. A Form D for this transaction was filed with the Commission on July
2, 1999.
In September 1999, we sold 33,333 and 33,334 shares of common stock,
respectively, to Jerry N. Carr and his brother, William Carr, at a price of
$2.25 per share. This transaction was not registered under the Securities Act
pursuant to the exemption provided by Section 4(2) thereof for transactions not
involving any public offering.
Since its inception, Nations Express has issued options to purchase 681,500
shares of common stock (net of forfeitures) to its employees. These options
were issued pursuant a written compensatory benefit plan, a copy of which was
provided to each optionee. Each option was granted pursuant to a written
agreement. Nations Express did not register the options granted to employees or
the underlying shares in reliance upon the exemptions provided by (i) Section
3(b) of the Securities Act and Rule 701 promulgated thereunder for certain
compensatory benefit plan transactions and (ii) and Section 4(2) of the
Securities Act for transactions not involving any public offering.
Since its inception, Nations Express has issued options purchase 108,000
shares of common stock (net of forfeitures) to agents operating Express Centers
and independent sales agents. Each agent optionee was generally familiar with
the operations of freight forwarders and had the opportunity to ask questions
of and receive answers from management regarding the company and its
operations. These transactions were not registered under the Securities Act
pursuant to the exemption provided by Section 4(2) thereof for transactions not
involving any public offering.
II-3
<PAGE>
Item 27. Exhibits.
An index of exhibits appears at page II-6 of this Registration Statement and
is incorporated herein by reference.
Item 28. Undertakings.
(A) The undersigned Registrant hereby undertakes:
1. to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective 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.
2. that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
3. to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of this offering.
(B) to provide the underwriter at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
(C) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
(D) for determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Nations Express under Rule 424(b)(1), or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Comission declared it effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has duly caused
this Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlotte, State of
North Carolina, on October 2, 2000.
Nations Express, Inc.
/s/ William R. Frazier
By: _________________________________
William R. Frazier
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form SB-2 has been signed by the following persons in
the capacity and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
* President, Chief Executive October 2, 2000
______________________________________ Officer and Director
Allen D. Watson (principal executive
officer)
* Executive Vice President, October 2, 2000
______________________________________ Chief Financial Officer
William R. Frazier (principal financial and
accounting officer) and
Corporate Secretary and
Director
* Chairman of Board of October 2, 2000
______________________________________ Directors
John P. Manry
* Vice President, October 2, 2000
______________________________________ Western Region and
Daniel R. Dukesherer Director
* Director October 2, 2000
______________________________________
Jerry N. Carr
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
* Vice President of October 2, 2000
______________________________________ Operations and Director
Daniel H. McPherson, III
* Director October 2, 2000
______________________________________
Thomas E. McChesney
</TABLE>
*By: /s/ William R. Frazier
William R. Frazier
(Attorney-in-fact for
each of the persons
indicated)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------- ---
<C> <S> <C>
1.1 Form of Agreement among Underwriters*
1.2 Form of Underwriting Agreement*
1.3 Form of Selected Dealers Agreement*
1.4 Form of Underwriters' Warrant Agreement*
1.5 Form of Consulting Agreement*
3.1 Articles of Incorporation of Nations Express, Inc.*
Articles of Amendment of Nations Express, Inc. amending Articles
3.1a of Incorporation
3.2 Amended and Restated Bylaws of Nations Express**
4.1 Form of Stock Certificate**
4.2 Form of Placement Agent Warrant
4.3 Form of Warrant Certificate**
4.4 Form of Shareholder Lock-Up Agreement**
4.5 Form of Management and 5% Shareholder Lock-Up Agreement**
4.6 Form of Warrant Agreement**
5.1 Opinion of Moore & Van Allen PLLC**
10.1 1998 Incentive Stock Option Plan*
10.2 1999 Stock Option Plan*
10.3 Nations Express, Inc. Omnibus Stock Plan
Employment Agreement by and between Nations Express, Inc. and
10.4 Allen D. Watson
Employment Agreement by and between Nations Express, Inc. and
10.5 William R. Frazier
Employment Agreement by and between Nations Express, Inc. and
10.6 Daniel H. McPherson, III
Employment Agreement by and between Nations Express, Inc. and
10.7 Daniel Dukesherer
23.1 Consent of Arthur Andersen LLP
Powers of Attorney (included on signature page of Registration
24.1 Statement)*
</TABLE>
--------
* Filed previously.
** To be filed by amendment.
II-7
