10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED: MARCH 31, 2001 COMMISSION FILE NUMBER: 33-29985-NY THE FREIGHT CONNECTION, INC. -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 11-2994672 -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 9870 Highway 92, Suite 110 Woodstock, GA 30188 -------------------------------------------------------------------------------- (Address, including zip code, of principal executive offices) (770) 517-7744 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ________________________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings for the past 90 days. YES X NO ___ --- APPLICABLE ONLY TO CORPORATE ISSUERS: As of May 17, 2001, the number of the Company's shares of par value $.001 common stock outstanding was 4,825,630. THE FREIGHT CONNECTION, INC. FORM 10-Q MARCH 31, 2001 INDEX Part I - FINANCIAL INFORMATION Item 1 - Financial Statements Balance Sheets............................................................. 3 Statements of Operation.................................................... 4 Statements of Stockholders' Equity......................................... 5 Statements of Cash Flow.................................................... 6 Notes to Financial Statements.............................................. 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations............................................ 8 PART II - OTHER INFORMATION ............................................... 12 SIGNATURES................................................................. 13

-2- THE FREIGHT CONNECTION, INC. BALANCE SHEETS March 31, December 31, 2001 2000 (unaudited) (audited) ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 676,042 $ 680,627 Accounts receivable - trade net of allowance for uncollectible accounts of $239,566 and $199,510 3,527,121 3,637,801 Accounts receivable - affiliates 36,017 3,134 Accounts receivable - income taxes 201,947 93,158 Deferred tax asset 60,856 60,856 Prepaid expenses and other receivables 89,932 63,569 ---------- ---------- Total Current Assets 4,591,915 4,539,145 ---------- ---------- Property and equipment (net of accumulated depreciation) 192,967 204,999 Deposits and Other Assets 56,366 55,877 ---------- ---------- $4,841,248 $4,800,021 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $2,641,394 $2,615,906 Accounts payable - affiliates 178,920 - ---------- ---------- Total current liabilities 2,820,314 2,615,906 ---------- ---------- Stockholders' equity Common stock, $.001 par value; authorized 20,000,000 shares; 4,825,630 shares issued and outstanding 4,826 4,826 Additional paid-in capital 918,982 918,982 Retained earnings 1,097,126 1,260,307 ---------- ---------- Total stockholders' equity 2,020,934 2,184,115 ---------- ---------- $4,841,248 $4,800,021 ========== ========== -3- THE FREIGHT CONNECTION, INC. STATEMENTS OF OPERATION Three Months Three Months Ended Ended March 31, March 31, 2001 2000 (unaudited) (unaudited) ----------- ----------- Freight income $ 5,069,517 $ 5,168,414 Freight expense 4,561,540 4,671,804 ----------- ----------- Gross profit 507,977 496,610 Selling, general and administrative expenses 768,546 561,152 Depreciation & amortization 18,300 22,845 ----------- ----------- Loss from operations (278,869) (87,387) Other income (expenses): Interest income 6,899 16,950 ----------- ----------- Total Other Income 6,899 16,950 Income (loss) before income taxes $ (271,970) $ (70,437) Income tax expense (recoverable) (108,789) (28,400) ----------- ----------- Net income (loss) $ (163,181) $ (42,037) =========== =========== Net income (loss) per common share (Basic and Diluted) $ (0.03) $ (0.01) =========== =========== Weighted average shares outstanding $ 4,825,630 $ 4,825,630 =========== =========== -4- THE FREIGHT CONNECTION, INC. STATEMENTS OF STOCKHOLDERS' EQUITY

-5- THE FREIGHT CONNECTION INC. STATEMENTS OF CASH FLOW

-6- THE FREIGHT CONNECTION, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001 NOTE 1: FINANCIAL STATEMENTS The balance sheet as of March 31, 2001, the statements of operation for the three months ended March 31, 2001 and 2000, the statements of stockholders' equity as of March 31, 2001, and the statements of cash flows for the three months ended March 31, 2001, and 2000, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2001, and for all periods presented, have been made. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto as of December 31, 2000. NOTE 2: NET INCOME PER SHARE Net income per share is computed by dividing net income by the average number of common shares outstanding, increased by common stock equivalents determined using the treasury stock method. NOTE 3: COMMITMENTS On December 20, 2000, the Company obtained a line of credit with a commercial bank for $500,000, that expired on April 1, 2001. Interest was at the monthly Libor rate plus 300 basis points or the bank's base rate. The Company's accounts receivable and fixed assets secured the line. No amounts were drawn on the line of credit and no amounts are outstanding. -7- THE FREIGHT CONNECTION, INC. FORM 10-Q MARCH 31, 2001 PART I - FINANCIAL INFORMATION Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- The following discussion and analysis should be read in conjunction with the Financial Statements appearing elsewhere in this Report. It includes an analysis of the three months ended March 31, 2001, and 2000, respectively. Forward-Looking Statements -------------------------- Except for the historical statements and discussions contained herein, statements contained in this report constitute "forward-looking statements" as defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of risks and uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. Readers are cautioned not to put undue reliance on such forward-looking statements, each of which speaks only as of the date hereof. Factors and uncertainties that could affect the outcome of such forward-looking statements include, among others, market and industry conditions, increased competition, changes in governmental regulations, general economic conditions, pricing pressures, and the Company's ability to continue its growth and expand successfully into new markets and services. The Company disclaims any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Liquidity and Capital Resources ------------------------------- The Company had working capital of $1,771,601 at March 31, 2001, compared to working capital of $1,923,239 at December 31, 2000, and $2,080,454 at March 31, 2000. The Company intends to use its working capital to fund its operations. The Company's cash position at March 31, 2001, was $676,042 compared to $680,627 at December 31, 2000, and $616,022 at March 31, 2000. In these periods, cash balances have been consistent. Most of our customers require supporting documentation before remitting payment of an invoice. We continue to emphasize and refine the invoicing procedure to bill and collect payment in a timely manner. -8- The accounts receivable balance at March 31, 2001, was $3,527,121 compared to $3,637,801 at December 31, 2000, a decrease of 3.1%. The accounts payable balance was $2,641,394 at March 31, 2001, a rise of 1.0% from $2,615,906 at December 31, 2000. The decrease in accounts receivable is attributed to the continued emphasis placed on billing and collections. The net accounts receivable and payable - affiliates balance increased to a net payable balance of $146,037 primarily consisting of a $150,000 short term advance from an affiliate at March 31, 2001, compared to December 31, 2000. Accounts receivable - income taxes increased $108,789 from the December 31, 2000 balance due to the taxes recoverable generated by the loss for the quarter. The prepaid expenses balance at March 31, 2001 was $26,363 greater than the balance at December 31, 2000 and was primarily due to annual insurance premiums and expenses paid during the quarter that will be amortized over the covered period throughout the year. Stockholders' equity was $2,020,314 at March 31, 2001, compared to $2,184,115 at December 31, 2000. The decrease is due to the Company's net loss of $163,181 for the first quarter of 2001. The Company had net cash provided by operations of $1,683 for the three months ended March 31, 2001, compared to net cash used in operations of $100,672 for the comparable period in 2000. The cash provided by operations for the period ended March 31, 2001, was primarily due to the decrease in the accounts receivable of $110,680 and net increase due to affiliate of $146,037 balances offset by the increase in income tax receivable of $108,789 and the net loss for the first quarter 2001. Cash used in operations for the period ended March 31, 2000, was primarily due to the large increase in the accounts receivable balance compared to the accounts payable increase and the loss for the first quarter of 2000. The Company continues to purchase fixed assets when appropriate. During the quarter ended March 31, 2001, the Company purchased fixed assets in the amount of $6,268 for computer equipment compared to expenditures of $29,659 in the first quarter of 2000 for a new phone system in conjunction with the move of the Corporate office from Tampa, Florida to Atlanta, Georgia. In compliance with provisions in the Company's contracts with certain railroads, the Company has obtained an unsecured surety bond in the amount of $150,000. In addition, the Federal Highway Administration requires the Company to maintain a surety bond in the amount of $10,000, which is secured by a certificate of deposit. The Company renewed an unsecured surety bond in the amount of $500,000 as a requirement of one of its major customers. -9- The Company does not have any outstanding bank debt as of the date of this Report, nor did it have any bank debt at March 31, 2000. The Company had a line of credit for $500,000 which expired on April 1, 2001. At March 31, 2001, the Company did not have any capital lease obligations nor did it have any long-term debt. Results of Operations --------------------- Revenues for the three months ended March 31, 2001, were $5,069,517 compared to $5,168,414 for the three months ended March 31, 2000, a decrease of 1.9%. Revenues have been negatively impacted in the first quarter 2001 by the economic downturn, especially in February and March. The Company is targeting existing and new customers through its marketing efforts to replace the lost revenues. Gross profit for the three months ended March 31, 2001, was $507,977 or 10.0% of revenues, compared to $496,610 or 9.6% of revenues for the comparable period in 2000. Although the industry is extremely competitive, the Company is working to improve its margins. The gross profit margin percentage for the three months ended March 31, 2001 increased by 0.9% from the year ended December 31, 2000. Selling, general and administrative "SG&A" expenses for the three months ended March 31, 2001, and 2000, were 15.2% and 10.9% of revenues, respectively. The increased SG&A for the quarter ended March 31, 2001 compared to the quarter ended March 31, 2000, was primarily due to increased salaries, wages, sales incentives and benefits totaling $162,314 reflecting the new operations and administrative staff in Atlanta versus the old Tampa headquarters, and sales incentive programs. The Company merged its Tampa office with the Atlanta office in February 2000, incurring certain non-recurring expense totaling $29,000 associated with closing the Tampa office. Management expects the current infrastructure will be sufficient to process a significant revenue increase without additional overhead cost. Additionally, management believes that certain expenses will be eliminated at the completion of the ongoing current upgrades to the operating and financial computer systems. Also, the Nebraska office was closed in April 2001, which may reduce revenue, but management expects SG&A savings to offset lost gross profit. Interest income was $6,899 for the quarter ended March 31, 2001, compared to $16,950 for the quarter ended March 31, 2000. The decrease was due primarily to a decrease in the average daily balance of available funds during the quarter ended March 31, 2001 at a reduced interest rate. -10- The pretax loss was $271,970 for the quarter ended March 31, 2001, compared to a pretax loss of $70,437 for the quarter ended March 31, 2000. The decrease in the Company's revenues and the percentage increase in SG&A resulted in the loss for the period. The net loss was $163,181 or $.03 per share for the three months ended March 31, 2001, as compared to net loss of $42,037 or $.01 per share for the three months ended March 31, 2000. Earnings per share are based on 4,825,630 weighted average shares outstanding. The Company will continue to market its services and strive to obtain sales representation in the major geographic areas of North America to increase revenues and gross profit while containing SG&A expenses. -11- THE FREIGHT CONNECTION, INC. FORM 10-Q MARCH 31, 2001 PART II - OTHER INFORMATION Item 1 - Legal Proceedings ----------------- None Item 2 - Changes in Securities --------------------- None Item 3 - Defaults upon Senior securities ------------------------------- None Item 4 - Submission of Matters to Vote of Security Holders ------------------------------------------------- None Item 5 - Other information ----------------- None Item 6 - Exhibits and reports on Form 8-K -------------------------------- a)None b)There were no reports filed on Form 8-K during the quarter ended March 31, 2001. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE FREIGHT CONNECTION, INC. ---------------------------- Registrant Date: May 21, 2001 /s/ Richard E. Gaetz ----------------- ----------------------------------------- Richard E. Gaetz, Chief Executive Officer Date: May 21, 2001 /s/ Geoff Duncan ----------------- ----------------------------------------- Geoff Duncan, President -13-

FREIGHT CONNECTION INC 10-Q