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Target Logistics Inc – ‘10-Q’ for 3/31/00

On: Friday, 5/12/00 · For: 3/31/00 · Accession #: 1024739-0-355 · File #s: 0-29754, 1-14474 · Correction: This Filing was Corrected by the SEC on 12/1/00. `®`

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/12/00  Target Logistics Inc              10-Q®       3/31/00    2:38K                                    Global Fin’l … Inc/DC/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     84K 
 2: EX-27       Financial Data Schedule                                1      9K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Submission of Matters to A Vote of Security Holders
1	1st Page - Filing Submission
3	Item 1. Financial Statements
12	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
15	Item 4. Submission of Matters to A Vote of Security Holders
"	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 16 TOC ↑Top Previous Next ↓Bottom Just 1st
 
================================================================================

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-Q

 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934

 For the Quarterly period ended March 31, 2000

OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-29754

TARGET LOGISTICS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

     Delaware                                             11-3309110
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer  
 incorporation or organization)                              Identification No.)

112 East 25th Street                                                            
Baltimore, Maryland                                                 21218       
----------------------------------------                          ----------    
(Address of principal executive offices)                          (Zip Code)    

Registrant's telephone number, including area code: (410) 338-0127              

Inapplicable
--------------------------------------------------------------
(Former name, former address and former fiscal year if changed
from last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 filing         
requirements for the past 90 days. Yes [X] No [ ]                               

At May 14, 2000, the number of shares outstanding of the registrant's common    
stock was 11,879,002.                                                           

================================================================================

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 TABLE OF CONTENTS

Part I - Financial Information                                              Page
                                                                            ----
Item 1.       Financial Statements:                     
-------                                                 

Consolidated Balance Sheets,
  March 31, 2000 (unaudited) and
                         June 30, 1999 (audited)                             3

         Consolidated Statements of Operations
for the Three Months Ended  
                         March 31, 2000 and 1999 (unaudited)                 4

         Consolidated Statements of Operations
for the Nine Months Ended   
                         March 31, 2000 and 1999 (unaudited)                 5

            Consolidated Statements of Shareholders'
           Equity for the Year Ended June 30, 1999
             (audited) and the Nine Months Ended March
                         31, 2000 (unaudited)                                6

         Consolidated Statements of Cash Flows
       for the Nine Months Ended March 31,
                         2000 and 1999 (unaudited)                           7

             Notes to Unaudited Consolidated Financial
                         Statements                                          9

Item 2.       Management's Discussion and Analysis of   
-------       Financial Condition and Results of        
                         Operations                                         12

Part II - Other Information                                                     

           Item 6.       Exhibits and Reports on Form 8-K                   15
-------                                                 

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PART I - FINANCIAL INFORMATION
------------------------------

ITEM 1.  FINANCIAL STATEMENTS                                                   
--------------------                                          

                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                 
                           CONSOLIDATED BALANCE SHEETS                                       


                                                               March 31, 2000   June 30, 1999
                                                               --------------   -------------
                                                                 (unaudited)                 
                                                                                             
                                    ASSETS                                                   
CURRENT ASSETS:                                                                              
Cash and cash equivalents                                        $  5,849,810   $  7,881,595 
Accounts receivable, net of allowance for doubtful                                           
  accounts of $1,587,248 and $1,660,894, respectively              14,377,707     10,853,316 
Deferred income taxes                                               2,322,408      2,080,105 
Prepaid expenses and other current assets                             159,446        152,940 
                                                                 ------------   ------------ 
         Total current assets                                      22,709,371     20,967,956 
PROPERTY AND EQUIPMENT, net                                           546,577        473,398 
OTHER ASSETS                                                          280,382        278,382 
DEFERRED INCOME TAXES                                                 184,895        184,895 
GOODWILL, net of accumulated amortization of                                                 
  $2,374,405 and $1,927,504, respectively                          12,580,619     13,027,520 
                                                                 ------------   ------------ 
         Total assets                                            $ 36,301,844   $ 34,932,151 
                                                                 ============   ============ 

                       LIABILITIES AND SHAREHOLDERS' EQUITY                                  
CURRENT LIABILITIES:                                                                         
Accounts payable                                                 $  5,013,402   $  4,413,792 
Accrued expenses                                                    1,473,225      2,360,211 
Accrued transportation expenses                                     7,439,924      6,745,613 
Taxes payable                                                          64,854         77,245 
Reserve for restructuring                                                  --         21,567 
Note payable to bank                                                3,058,509      1,349,978 
Current portion of long-term debt                                          --         10,500 
Dividends payable                                                      54,894        168,680 
Lease obligation-current portion                                      111,547        103,385 
                                                                 ------------   ------------ 
         Total current liabilities                                 17,216,355     15,250,971 
LEASE OBLIGATION--LONG-TERM                                           107,004         24,116 
                                                                 -------------  ------------ 
         Total liabilities                                       $ 17,323,359   $ 15,275,087 
                                                                 ------------   ------------ 

COMMITMENTS AND CONTINGENCIES                                                                
SHAREHOLDERS' EQUITY:                                                                        
Preferred stock, $10 par value; 2,500,000 shares authorized,                                 
 320,696 shares issued and outstanding,                             3,206,960      4,272,070 
Common stock, $.01 par value; 30,000,000 shares authorized,                                  
 12,613,953 shares issued and 11,879,002 and 9,192,013 shares                                
 outstanding,  respectively                                           126,139        100,318 
Paid-in capital                                                    23,905,248     22,877,209 
Accumulated deficit                                                (7,615,057)    (6,937,598)
Less: Treasury stock, 734,951 and 839,855 shares held at                                     
 cost, respectively                                                  (644,805)      (654,935)
                                                                 ------------   ------------ 
         Total shareholders' equity                                18,978,485     19,657,064 
                                                                 ------------   ------------ 
         Total liabilities and shareholders' equity              $ 36,301,844   $ 34,932,151 
                                                                 ============   ============ 

The accompanying notes are an integral part of these
consolidated balance sheets.

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                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                 
                      CONSOLIDATED STATEMENTS OF OPERATIONS                                  
                                   (unaudited)                                               


                                                                 Three months ended March 31,
                                                                 ----------------------------
                                                                    2000            1999     
                                                                    ----            ----     
                                                                                             
Operating revenues:                                                                          
  Operating revenues - Target subsidiary                      $20,553,649       $13,853,687  
  Operating revenues - CAS subsidiary                                 ---            (3,347) 
                                                              -----------      ------------  
         Operating revenues                                    20,553,649        13,850,340  

Cost of transportation:                                                                      
  Cost of transportation - Target subsidiary                   13,840,277         9,294,695  
  Cost of transportation - CAS subsidiary                             ---               ---  
                                                              -----------      -----------   
         Cost of transportation                                13,840,277         9,294,695  

Gross profit:                                                                                
  Gross profit - Target subsidiary                              6,713,372         4,558,992  
  Gross profit - CAS subsidiary                                       ---            (3,347) 
                                                              -----------      ------------  
         Gross profit                                           6,713,372         4,555,645  

Selling, general and administrative expenses ("SG&A"):                                       
  Exclusive Forwarder Commissions - Target subsidiary           3,143,888         1,891,584  
  SG&A - Target subsidiary                                      3,663,157         3,140,403  
  SG&A - CAS subsidiary                                               ---            61,227  
  SG&A - Corporate                                                148,847           215,553  
  Depreciation and amortization                                   241,809           206,257  
                                                              -----------      ------------  
         Selling, general and administrative expenses           7,197,701         5,515,024  

Operating loss                                                   (484,329)         (959,379) 

Other income (expense):                                                                      
  Interest (expense) income                                       (33,122)           75,883  
  Other income (expense)                                              ---               ---  

  Loss before income taxes                                       (517,451)         (883,496) 
  Benefit for income taxes                                       (186,283)         (318,058) 
                                                              -----------      ------------  
Net Loss                                                      $  (331,168)     $   (565,438) 
                                                              ===========      ============  

Net loss per share:                                                                          
  Basic                                                             $0.03            ($0.07) 
                                                                    =====            ======  
  Diluted(1)                                                        $ ---               ---  
                                                                    =====            ======  

Weighted average shares outstanding:                                                         
  Basic                                                        11,879,002         8,298,624  
                                                              ===========      ============  
  Diluted(1)                                                          ---               ---  
                                                              ===========      ============  

(1) Diluted loss per share for the three months ended March 31, 2000 and March  
31, 1999 are anti-dilutive.                                             

The accompanying notes are an integral part of these
consolidated statements.

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                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                
                      CONSOLIDATED STATEMENTS OF OPERATIONS                                 
                                   (unaudited)                                              


                                                                Nine months ended March 31, 
                                                                --------------------------- 
                                                                    2000            1999    
                                                                    ----            ----    
                                                                                            
Operating revenues:                                                                         
  Operating revenues - Target subsidiary                      $64,488,698       $34,038,634 
  Operating revenues - CAS subsidiary                                 ---         1,565,938 
                                                              -----------       ----------- 
         Operating revenues                                    64,488,698        35,604,572 

Cost of transportation:                                                                     
  Cost of transportation - Target subsidiary                   44,425,904        22,563,954 
  Cost of transportation - CAS subsidiary                             ---         1,356,107 
                                                              -----------       ----------- 
         Cost of transportation                                44,425,904        23,920,061 

Gross profit:                                                                               
  Gross profit - Target subsidiary                             20,062,794        11,474,680 
  Gross profit - CAS subsidiary                                       ---           209,831 
                                                              -----------       ----------- 
         Gross profit                                          20,062,794        11,684,511 

Selling, general and administrative expenses ("SG&A"):                                      
  Exclusive Forwarder Commissions - Target subsidiary           9,318,929         3,582,866 
  SG&A - Target subsidiary                                     10,177,699         8,974,466 
  SG&A - CAS subsidiary                                               ---           575,340 
  SG&A - Corporate                                                492,358         1,247,195 
  Depreciation and amortization                                   722,679           612,219 
                                                              -----------       ----------- 
         Selling, general and administrative expenses          20,711,665        14,992,086 

Operating loss                                                   (648,871)       (3,307,575)

Other income (expense):                                                                     
  Interest (expense) income                                       (24,192)          227,763 
  Other income (expense)                                              ---           119,291 
  Gain on sale of subsidiary                                          ---        24,832,353 
                                                              -----------       ----------- 

 (Loss) income before income taxes                               (673,063)       21,871,832 
 (Benefit) provision for income taxes                            (242,303)        8,281,847 
                                                              -----------       ----------- 
Net (loss) income                                             $  (430,760)      $13,589,985 
                                                              ===========       =========== 

Net (loss) income per share:                                                                
  Basic                                                            $(0.06)            $1.60 
                                                                  =======             ===== 
  Diluted(1)                                                          ---             $0.99 
                                                                  =======             ===== 

Weighted average shares outstanding:                                                        
  Basic                                                        10,729,262         8,335,381 
                                                              ===========       =========== 
  Diluted(1)                                                          ---        13,793,230 
                                                              ===========       =========== 

(1) Diluted loss per share for the nine months ended March 31, 2000 is          
anti-dilutive.                                                          

The accompanying notes are an integral part of these
consolidated statements.

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                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                                                        
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                                                                    
                    FOR THE YEAR ENDED JUNE 30, 1999 AND THE                                                                        
                  NINE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)                                                                      


                               Preferred Stock         Common Stock     Additional      Treasury Stock                              
                               ---------------         ------------      Paid-in        --------------                              
                             Shares     Amount      Shares     Amount    Capital      Shares     Amount      Deficit        Total   
                             ------     ------      ------     ------    -------      ------     ------      -------        -----   
                                                                                                                                    
Balance, June 30, 1998       621,387  $6,213,870   8,419,094  $ 84,190  $22,546,331  (106,304)  ($11,250) ($20,509,373) $ 8,323,768 

Common stock issued in                                                                                                              
  connection with the                                                                                                               
  conversion of Class C                                                                                                             
  Preferred stock            (36,000)   (360,000)    360,000     3,600      356,400         -          -             -            - 

Stock Options exercised            -           -     174,852     1,749       62,256         -          -             -       64,005 

Cash dividends associated                                                                                                           
  with the Class A, C and                                                                                                           
  D Preferred Stock                -           -           -         -            -         -          -      (444,661)    (444,661)

Redemption of Class E                                                                                                               
  Preferred Stock           (158,180) (1,581,800)          -         -            -         -          -             -   (1,581,800)

Purchase of Treasury               -           -           -         -            -  (733,551)  (643,685)            -     (643,685)

Additional Common Stock                                                                                                             
  issued in connection with                                                                                                         
  the acquisition of Target        -           -   1,077,992    10,779      (87,778)        -          -             -      (76,999)

Net income                         -           -           -         -            -         -          -    14,016,436   14,016,436 
                             -------  ----------  ----------  --------  -----------  --------  ---------  ------------  ----------- 

Balance, June 30, 1999       427,207  $4,272,070  10,031,868  $100,318  $22,877,209  (839,855) ($654,935)  ($6,937,598) $19,657,064 

Cash dividends associated                                                                                                           
  with the Class A, C and                                                                                                           
  D Preferred Stock                -           -           -         -            -         -          -      (246,699)    (246,699)

Common Stock issued in                                                                                                              
  connection with the                                                                                                               
  conversion of Class D                                                                                                             
  Preferred Stock           (106,511) (1,065,110)  2,582,085    25,821    1,039,289         -          -             -            - 

Purchase of Treasury Stock                                                                                                          
  at cost                          -           -           -         -            -    (1,400)    (1,120)            -       (1,120)

Treasury Stock retired,                                                                                                             
  at cost                          -           -           -         -      (11,250)  106,304     11,250             -            - 

Net loss                           -           -           -         -            -         -          -      (430,760)    (430,760)
                             -------  ----------  ----------  --------  -----------  --------  ---------  ------------  ----------- 

Balance, March 31, 2000      320,696  $3,206,960  12,613,953  $126,139  $23,905,248  (734,951) ($644,805)  ($7,615,057) $18,978,485 
                             =======  ==========  ==========  ========  ===========  ========  =========  ============  =========== 

 The accompanying notes are an integral part of these consolidated
financial statements. 

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                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                                   
                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                    
                                   (unaudited)                                                                 


                                                                                  Nine Months Ended March 31,  
                                                                                  ---------------------------  
                                                                                    2000               1999    
                                                                                    ----               ----    
                                                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                          
Net income                                                                     $   (430,760)     $  13,589,985 
Bad debt expense                                                                    342,785            185,285 
Depreciation and amortization                                                       714,201            612,218 
Gain on CAS sale                                                                        ---        (24,832,353)
Deferred income tax benefit                                                        (242,303)         7,031,367 
Adjustments to reconcile net income to net cash used in operating activities-                                  
   (Increase) decrease in accounts receivable                                    (3,867,176)         4,490,290 
   (Increase) decrease in prepaid expenses and other current assets                  (6,506)           146,886 
   (Increase) in other assets                                                        (2,000)          (115,007)
   Increase (decrease) in accounts payable and accrued expenses                     322,117         (4,070,557)
                                                                               ------------      ------------- 
         Net cash used in operating activities                                   (3,169,642)        (2,961,886)
                                                                               ------------      ------------- 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                          
Purchases of property and equipment                                                (289,618)          (540,205)
Purchase of treasury stock                                                           (1,120)          (595,494)
Proceeds from CAS sale, net of closing costs                                            ---         25,762,397 
                                                                               ------------      ------------- 
         Net cash (used in) provided by investing activities                       (290,738)        24,626,698 
                                                                               ------------      ------------- 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                          
Stock options exercised                                                                 ---             64,005 
Dividends paid                                                                     (360,486)          (339,361)
Net borrowing (repayment) from note payable to bank                               1,708,531         (6,678,822)
(Repayment) of long-term debt due to affiliates                                         ---         (7,332,426)
Repayment of long-term debt                                                         (10,500)           (37,500)
Repayment of revolving loan due to affiliate                                            ---           (905,913)
Payment of lease obligations                                                         91,050            (67,767)
                                                                               ------------      ------------- 
Net cash provided by (used in) financing activities:                              1,428,595        (15,297,484)
                                                                               ------------      ------------- 

         Net (decrease) increase in cash and cash equivalents                   ($2,031,785)        $6,367,328 

CASH AND CASH EQUIVALENTS, beginning of the period                                7,881,595            879,797 
                                                                               ------------      ------------- 

CASH AND CASH EQUIVALENTS, end of the period                                   $  5,849,810          7,247,125 
                                                                               ============      ============= 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                              
Cash payments for:                                                                                             
Interest                                                                       $    253,241      $      73,758 
Income taxes                                                                   $     18,036      $   1,208,429 

 The accompanying notes are an integral part of these consolidated
financial statements. 

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                                                        [Enlarge/Download Table]
                     TARGET LOGISTICS, INC. AND SUBSIDIARIES                                        
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)                                   
                                   (Unaudited)                                                      


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                               

                                                                       Six Months Ended December 31,
                                                                       -----------------------------
                                                                           1999              1998   
                                                                           ----              ----   
                                                                                                    
TIA, Inc. conversion of 106,511 Class D Preferred Shares               $  (1,065,110)           --- 
Issuance of Common Stock for TIA, Inc. Conversion                                                   
of 106,511 Class D Preferred Shares                                    $      25,821            --- 
Redemption of 158,180 Class E Preferred Shares                         $         ---    $(1,581,800)
Conversion of 36,000 Class C Preferred Shares                          $         ---    $  (360,000)
Issuance of Common Stock for Conversion of 36,000                                                   
  Class C Preferred Shares                                             $         ---    $     3,600 
Issuance of Common Stock for Stock Options Exercised                   $         ---    $     1,749 

 The accompanying notes are an integral part of these consolidated
financial statements. 

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 TARGET LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Notes to Unaudited Consolidated Financial Statements                   

The accompanying unaudited consolidated financial statements have been prepared 
in accordance with the instructions for Form 10-Q and Regulation S-X related to 
interim period financial statements and, therefore, do not include all          
information and footnotes required by generally accepted accounting principles. 
However, in the opinion of management, all adjustments (consisting of normal    
recurring adjustments and accruals) considered necessary for a fair presentation
of the consolidated financial position of the Company and its subsidiaries at   
March 31, 2000 and their consolidated results of operations and cash flows for  
the three and nine months ended March 31, 2000 have been included. The results  
of operations for the interim periods are not necessarily indicative of the     
results that may be expected for the entire year. Reference should be made to   
the annual financial statements, including footnotes thereto, included in the   
Target Logistics, Inc. (the "Company") Form 10-K for the year ended June 30,    
1999.                                                                           

Note 2 - Reclassifications                                                      

Exclusive forwarder commission expense (previously referred to as agent         
commission expense) was reported within cost of transportation in the prior     
years' consolidated financial statements. Exclusive forwarder commission expense
is now reported within selling, general and administrative expense. The prior   
year has been reclassified to conform with the current year presentation.       

Note 3 - Per Share Data                                                         

In accordance with the requirements of SFAS No. 128 "Earnings per Share", net   
earnings per common share amounts ("basic EPS") were computed by dividing net   
earnings after deducting preferred stock dividend requirements, by the weighted 
average number of common shares outstanding and contingently issuable shares    
(which satisfy certain conditions) and excluding any potential dilution. Net    
earnings per common share amounts - assuming dilution ("diluted EPS") were      
computed by reflecting potential dilution from the exercise of stock options.   
SFAS No. 128 requires the presentation of both basic EPS and diluted EPS on the 
face of the income statement.                                                   

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 TARGET LOGISTICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation between the numerators and denominators of the basic and       
diluted EPS computations for net earnings for the three and nine months ended   
March 31, 2000 and 1999 is as follows:                                          

                                                        [Enlarge/Download Table]

                                                     Three Months Ended                      Nine Months Ended   
                                                       March 31, 2000                         March 31, 2000     
                                                       --------------                         --------------     
                                                                             Income                              
                                       Income       Shares       Per Share   ------        Shares       Per Share
                                     (Numerator) (Denominator)    Amounts  (Numerator)  (Denominator)    Amounts 
                                     ----------- -------------    -------  -----------  -------------    ------- 
                                                                                                                 
Net earnings                        ($331,168)                             ($430,760)                            
Preferred stock dividends             (49,302)                              (246,700)                            
                                      --------                              ---------                            
BASIC EPS                                                                                                        
Net earnings attributable to                                                                                     
common stock                        ($380,470)      11,879,002   ($0.03)   ($677,460)      10,729,262    ($0.06) 
                                                                 ======                                  ======  

EFFECT OF DILUTIVE SECURITIES(1)                                                                                 
Convertible Preferred Stock                          4,376,454                              5,376,333            
Stock options                                            6,426                                  6,426            
Stock warrants                                               0                                      0            
                                                     ---------                              ---------            

DILUTED EPS(1)                                                                                                   
Net earnings attributable to common                                                                              
stock and assumed preferred                                                                                      
conversions and option exercies     ($380,470)      11,879,002   ($0.03)   ($677,460)      10,729,262    ($0.06) 
                                     ========       ==========   ======    =========       ==========    ======  


                                                     Three Months Ended                      Nine Months Ended   
                                                       March 31, 1999                         March 31, 1999     
                                                       --------------                         --------------     
                                                                             Income                              
                                       Income       Shares       Per Share   ------        Shares       Per Share
                                     (Numerator) (Denominator)    Amounts  (Numerator)  (Denominator)    Amounts 
                                     ----------- -------------    -------  -----------  -------------    ------- 
                                                                                                                 
Net earnings                        ($565,438)                           $13,589,985                             
Preferred stock dividends             (48,760)                              (281,573)                            
BASIC EPS                                                                                                        
Net earnings attributable to                                                                                     
common stock                        ($614,198)       8,298,624   ($0.07) $13,308,412        8,335,381     $1.60  
                                                                 ------                                   =====  

EFFECT OF DILUTIVE SECURITIES(1)                                                                                 
Convertible Preferred Stock                          4,562,255                              5,304,886            
Stock options                                           93,989                                152,963            
Stock warrants                                               0                                      0            
                                                     ---------                              ---------            

DILUTED EPS(1)                                                                                                   
Net earnings attributable to common                                                                              
stock and assumed preferred                                                                                      
conversions and option exercises    ($614,198)       8,298,624   ($0.07) $13,589,985       13,793,230     $0.99  
                                    ==========       =========   ======  ===========       ==========     =====  

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Options to purchase 450,000 and 470,000 shares of common stock for the three and
nine months ended March 31, 2000 and 1999, respectively, were not included in   
the computation of diluted EPS because the exercise price of those options were 
greater than the average market price of the common shares, thus they are       
anti-dilutive. The options were still outstanding at the end of the period.     

(1) No diluted EPS is presented for the three and nine months ended March 31,   
2000 and the three months ended March 31, 1999, as the effect of dilutive       
securities would be anti-dilutive on loss per common share.                     

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                      
CONDITION  AND  RESULTS OF OPERATIONS                         
-------------------------------------------------             

     This Quarterly Report on Form 10-Q contains certain forward-looking
statements reflecting the Company's current expectations with respect to its    
operations, performance, financial condition, and other developments. Such      
statements are necessarily estimates reflecting the Company's best judgement    
based upon current information and involve a number of risks and uncertainties. 
While it is impossible to identify all such factors, factors which could cause  
actual results to differ materially from expectations are: (i) the Company's    
historic losses and ability to achieve profitability following the July 1998    
sale by the Company of the assets of its Caribbean Air Services, Inc. ("CAS")   
subsidiary (the "CAS Sale"), (ii) the Company's ability to increase operating   
revenue, improve gross profit margins and reduce selling, general and           
administrative costs, (iii) competitive practices in the industries in which the
Company competes, (iv) the Company's dependence on current management, (v) the  
impact of current and future laws and governmental regulations affecting the    
transportation industry in general and the Company's operations in particular,  
(vi) general economic conditions, and (vii) other factors which may be          
identified from time to time in the Company's Securities and Exchange Commission
filings and other public announcements. There can be no assurance that these and
other factors will not affect the accuracy of such forward-looking statements.  
Forward-looking statements are preceded by an asterisk (*).                     

OVERVIEW                                                                        

      The Company was incorporated in January 1996 to continue the freight
forwarding business of TIA, Inc. ("TIA") and Caribbean Freight System, Inc. and 
acquire Amertranz Worldwide, Inc. ("Amertranz"). The Company generated operating
revenues of $51.7 million, $97.8 million, and $75.4 million, and had a net      
profit of $14.0 million and $7.4 million, and a net loss of $10.5 million for   
the fiscal years ended June 30, 1999, 1998 and 1997, respectively. The fiscal   
year 1999 profit includes a $16.6 million gain (net of tax) arising from the CAS
Sale which closed on July 13, 1998, the fiscal year 1998 profit includes a $7.6 
million net income tax benefit arising from the CAS Sale, and the fiscal year   
1997 loss included a charge of $3.4 million attributed to restructuring costs in
connection with the closing of the Company's Amertranz subsidiary. The Company  
had consolidated earnings (losses) before interest, taxes, depreciation and     
amortization (EBITDA) of approximately $22.0 million, $2.6 million, and ($8.3   
million), for the fiscal years ended June 30, 1999, 1998 and 1997, respectively.

       * Following the closing of the Amertranz subsidiary in June 1997, the
Company determined that it would be in the best interests of the Company and its
shareholders to deleverage the Company's balance sheet and create the cash      
resources needed to grow the Company's freight forwarding and logistics         
businesses. While the Company's CAS subsidiary has been historically profitable,
management determined that this strategy can best be accomplished by the sale of
the operations of its CAS subsidiary. On July 13, 1998, the Company's CAS       
subsidiary sold substantially all of its operating assets to a subsidiary of    
Geologistics Corporation for $27 million in cash pursuant to the terms of an    
Asset Purchase Agreement dated June 15, 1998. As a result of the CAS Sale, the  
Company deleveraged its balance sheet by repaying approximately $15 million in  
outstanding liabilities and obtained required working capital to take advantage 
of growth opportunities available to the Company's Target Logistic Services,    
Inc. subsidiary ("Target"). These opportunities include improved vendor pricing 
and attracting quality personnel and agents on a world-wide basis, which the    
Company believes will drive its future profitability. In addition, the Company  
may consider strategic acquisitions. There can be no assurance that this        
strategy to increase profitability will be successful.                          

        * Management believes that the results of the Company's operations for
the nine months ended March 31, 2000 indicate that management's concentrated    
focus on Target's business together with the Company's available resources will 
enable the Company to achieve the intended growth. For the three and nine months
ended March 31, 2000, Target's revenue increased by 48.4% and 89.5% to          
$20,553,649 and $64,488,698, respectively, over the prior year's corresponding  
periods. While gross profit margin (i.e., gross operating revenues less cost of 
transportation expressed as a percentage of gross operating revenue) decreased  
to 32.7% and 31.1% from 32.9% and 33.7% from the three and nine months ended    
March 31, 2000, respectively, the decrease is primarily a result of lower gross 
profit margins for Target's international air import freight movement.          
Management intends to continue to work on improving Target's gross profit       
margins while focusing on increasing operating revenue by adding quality sales  
personnel and                                                                   

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exclusive forwarders (previously referred to as independent agents) and reducing
fixed selling, general and administrative costs to improve the Company's net    
income.                                                                         

RESULTS OF OPERATIONS                                                           

     The following discussion relates to the results of operation of the
Company for the three and nine month periods ended March 31, 2000, compared to  
results of operation for the three and nine month periods ended March 31, 2000. 

Three Months ended March 31, 2000 and 1999                                      
------------------------------------------                                      

         Operating Revenue. Operating revenue increased to $20.6 million for the
three months ended March 31, 2000 from $13.9 million for the three months ended 
March 31, 1999, a 48.4% increase, due to increased freight volume.              

       Cost of Transportation. Cost of transportation was 67.3% of operating
revenue for the three months ended March 31, 2000, and 67.1% of operating       
revenue for the three months ended March 31, 1999. This increase is due to an   
increase in the Target subsidiary's cost of transportation as a percentage of   
sales, primarily a result of higher cost of transportation for Target's         
international air import freight movement.                                      

    Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the three months ended March 31, 2000 decreased to  
32.7% of operating revenue from 32.9% of operating revenue for the three months 
ended March 31, 1999.                                                           

    Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 35.0% of operating revenue for the three   
months ended March 31, 2000, from 39.8% of operating revenue for the three      
months ended March 31, 1999. This decrease was primarily due to (i) lower       
selling, general and administrative expenses as a percentage of sales within the
Company's Target subsidiary partially offset by an increase in exclusive        
forwarder commission expense due to the Company's addition of new exclusive     
forwarders; and (ii) the elimination of CAS expenses as a result of the CAS     
Sale.                                                                           

Within the Company's Target subsidiary, selling, general and  
administrative expenses (excluding exclusive forwarder commission expense) were 
17.8% of operating revenue for the three months ended March 31, 2000 and 22.7%  
for the period ended March 31, 1999, a 21.6% decrease. This decrease was        
primarily due to operating revenue growth without a corresponding increase in   
fixed selling, general and administrative expenses. Exclusive forwarder         
commission expense was 15.3% of operating revenue for the three months ended    
March 31, 2000 and 13.7% for the period ended March 31, 1999. This increase is  
due to the Company's addition of new exclusive forwarders.                      

         Net Income. The Company realized a net loss of ($331,168) for the three
months ended March 31, 2000, compared to a net loss of ($565,438) for the three 
months ended March 31, 1999.                                                    

Nine months ended March 31, 2000 and 1999                                       
-----------------------------------------                                       

         Operating Revenue. Operating revenue increased to $64.5 million for the
nine months ended March 31, 2000 from $35.6 million for the nine months ended   
March 31, 1999, a 81.1% increase. The prior year includes 12 days of CAS        
operating revenues due to the CAS Sale on July 13, 1998. Within the operations  
of the Company's Target subsidiary operating revenue increased by 89.5% to      
$64,488,698 for the nine months ended March 31, 2000 from $34,038,634 for the   
corresponding 1999 period, a $30,450,064 increase due to increased freight      
volume.                                                                         

       Cost of Transportation. Cost of transportation was 68.9% of operating
revenue for the nine months ended March 31, 2000, and 67.2% of operating revenue
for the nine months ended March 31, 1999. This increase is due to an increase in
the Target subsidiary's cost of transportation as a percentage of sales. The    
Company's Target subsidiary's cost of transportation as a percentage of sales   
has increased to 68.9% for the current period from 66.3% for the prior year,    
primarily a result of higher cost of transportation for Target's international  
air import freight movement.                                                    

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    Gross Profit. As a result of the factors described in the previous
paragraph, gross profit for the nine months ended March 31, 2000 decreased to   
31.1% of operating revenue from 32.8% of operating revenue for the nine months  
ended March 31, 1999. Within the Company's Target subsidiary, gross profit      
margin decreased to 31.1% from 33.7% for the nine months ended March 31, 2000   
and 1999, respectively.                                                         

    Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 32.1% of operating revenue for the nine    
months ended March 31, 2000, from 42.1% of operating revenue for the nine months
ended March 31, 1999. This decrease was primarily due to (i) lower selling,     
general and administrative expenses as a percentage of sales within the         
Company's Target subsidiary partially offset by an increase in exclusive        
forwarder commission expense due to the Company's addition of new exclusive     
forwarders; and (ii) the elimination of CAS expenses as a result of the CAS     
Sale.                                                                           

Within the Company's Target subsidiary, selling, general and  
administrative expenses (excluding exclusive forwarder commission expense) were 
15.8% of operating revenue for the nine months ended March 31, 2000 and 26.4%   
for the period ended March 31, 1999, a 40.2% decrease. This decrease was        
primarily due to operating revenue growth without a corresponding increase in   
fixed selling, general and administrative expenses. Exclusive forwarder         
commission expense was 14.5% of operating revenue for the nine months ended     
March 31, 2000 and 10.5% for the period ended March 31, 1999. This increase is  
due to the Company's addition of new exclusive forwarders.                      

        Net Income. The Company realized a net loss of ($430,760) for the nine
months ended March 31, 2000, compared to a net income of $13,589,985 for the    
nine months ended March 31, 1999. The 1999 results included a $16.6 million gain
(net of tax) arising from the CAS Sale, which closed on July 13, 1998.          

LIQUIDITY AND CAPITAL RESOURCES                                                 

        General. During the nine months ended March 31, 2000, net cash used in
operating activities was $3,170,000. Cash used in investing activities was      
$291,000. Cash provided by financing activities was $1,429,000, which primarily 
consisted of borrowings under the Company's accounts receivable financing       
facility.                                                                       

    Currently, approximately $1.7 million of the Company's outstanding
accounts payable represent unsecured trade payables of the Company's closed     
Amertranz subsidiary.                                                           

      Capital expenditures. Capital expenditures for the nine months ended
March 31, 2000 were $289,618.                                                   

         * Working Capital Requirements. Cash needs of the Company are currently
met by funds generated from operations, the Company's accounts receivable       
financing facility, and cash on hand. As of March 31, 2000, the Company had     
$1,629,000 available under its $10 million accounts receivable financing        
facility and approximately $5,849,810 from operations and cash on hand. The     
Company believes that its current financial resources will be sufficient to     
finance its operations and obligations for the long and short term. However, the
Company's actual working capital needs for the long and short terms will depend 
upon numerous factors, including the Company's operating results, the cost of   
increasing the Company's sales and marketing activities, and competition, none  
of which can be predicted with certainty.                                       

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 PART II - OTHER INFORMATION
 ---------------------------

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    
---------------------------------------------------           

None.                                                         

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       
--------------------------------                              

(a)      Exhibits:                                                              

Exhibit No.                                                                     
-----------                                                                     

3.1      Certificate of Incorporation of Registrant, as amended (incorporated by
         reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K
dated November 30, 1998, File No. 0-29754)                    
3.2      By-Laws of Registrant, as amended (incorporated by reference to Exhibit
       3.2 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended December 31, 1998, File No. 0-29754)                    
4.1      Warrant Agent Agreement (incorporated by reference to Exhibit 4.3 to   
       the Registrant's Registration Statement on Form S-1, Registration No.
333-03613)                                                    
4.2      Form of Amendment No. 1 to Warrant Agent Agreement dated June 13, 1997 
(incorporated by reference to Exhibit 4.7 to the Registrant's 
 Registration Statement on Form S-1, Registration No. 333-30351)
4.3      Certificate of Designations with respect to the Registrant's Class A   
Preferred Stock (contained in Exhibit 3.1)                    
4.4      Certificate of Designations with respect to the Registrant's Class B   
Preferred Stock (contained in Exhibit 3.1)                    
4.5      Certificate of Designations with respect to the Registrant's Class C   
Preferred Stock (contained in Exhibit 3.1)                    
4.6      Certificate of Designations with respect to the Registrant's Class D   
Preferred Stock (contained in Exhibit 3.1)                    
4.7      Certificate of Designations with respect to the Registrant's Class E   
Preferred Stock (contained in Exhibit 3.1)                    
10.1     1996 Stock Option Plan (incorporated by reference to Exhibit 10.1 to   
      the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
December 31, 1997, File No. 0-29754)                          
10.2     Restated and Amended Accounts Receivable Management and Security       
     Agreement, dated as of July 13, 1998 by and between GMAC Commercial
         Credit LLC (successor by merger to BNY Financial Corp.), as Lender, and
    Target Logistic Services, Inc., as Borrower, and guaranteed by the
      Registrant ("GMAC Facility Agreement") (incorporated by reference to
     Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1999, File No. 0-29754)                   
10.3     Shadow Warrant entered into in connection with the GMAC Facility       
Agreement (incorporated by reference to Exhibit 10.3 to the   
        Registrant's Quarterly Report on Form 10-Q for the Quarter Ended March
31, 1997, File No.0-29754)                                    
10.4     Employment Agreement dated June 24, 1996 between Amertranz Worldwide   
  Holding Corp. and Stuart Hettleman (incorporated by reference to
      Exhibit 10.13 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1996, File No. 0-29754)            
10.5(P)  Lease Agreement for Los Angeles Facility (incorporated by reference to 
      Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
Year Ended June 30, 1997, File No. 0-29754)                   
27       Financial Data Schedule                                                

(b)      Reports on Form 8-K:                                                   

None.                                       

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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.                                          

Dated: May 12, 2000                      TARGET LOGISTICS, INC.                 
                              Registrant

                                       /s/  Stuart Hettleman
                                         ---------------------------------------
                                    President, Chief Executive Officer

                                       /s/  Philip J. Dubato
                                         ---------------------------------------
                                         Vice President, Chief Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

Corrected on:	12/1/00			DEF 14A
	5/14/00	1
Filed on:	5/12/00	16
For Period End:	3/31/00	1	14
	6/30/99	2	15	10-K, 4
	3/31/99	2	14	10-Q
	12/31/98	15		10-Q
	11/30/98	15		8-K, DEF 14A, PRE 14A
	7/13/98	12	15	8-K
	6/30/98	12		10-K, NT 10-K, SC 13D/A
	6/15/98	12		8-K
	12/31/97	15		10-Q
	6/30/97	12	15	10-K, 4, NT 10-K, S-3
	6/13/97	15
	3/31/97	15		10-Q, 10-Q/A
	6/30/96	15		10-K, 10-K/A
	6/24/96	15
				List all Filings

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Target Logistics Inc – ‘10-Q’ for 3/31/00

On: Friday, 5/12/00 · For: 3/31/00 · Accession #: 1024739-0-355 · File #s: 0-29754, 1-14474 · Correction: This Filing was Corrected by the SEC on 12/1/00. ®

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On: Friday, 5/12/00 · For: 3/31/00 · Accession #: 1024739-0-355 · File #s: 0-29754, 1-14474 · Correction: This Filing was Corrected by the SEC on 12/1/00. `®`

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