AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 2004
Registration No. 333-118792
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1 TO THE
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
POWER2SHIP, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 7900 87-0449667
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(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Number) Identification No.)
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James M. Schneider, Esq.
Schneider Weinberger & Beilly LLP
2200 Corporate Boulevard, N.W.
Suite 210
Boca Raton, Florida 33431
Telephone: (561) 362-9595
Facsimile No. (561) 362-9612
Approximate Date of Proposed Sale to the Public: As soon as practicable 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X]
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 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, please 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, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 20, 2004
PROSPECTUS
POWER2SHIP, INC.
36,955,556 Shares of Common Stock
This prospectus relates to the sale of up to 36,955,556 shares of our common stock, which includes up 29,609,816 shares by Cornell Capital Partners, L.P. and certain other persons who are selling security holders of Power2Ship. This prospectus also related to the sale of up to $3.0 million of shares of our common stock which may be sold to Cornell Capital Partners, L.P. under the terms of the Standby Equity Distribution Agreement described elsewhere herein. Please refer to "Selling Security Holders" beginning on page 47. The shares of common stock are being offered for sale by the selling security holders at prices established on the OTC Bulletin Board during the term of this offering. There are no minimum purchase requirements. These prices will fluctuate based on the demand for the shares of common stock.
For a description of the plan of distribution of these shares, please see page 61 of this prospectus.
Our common stock is quoted on the OTC Bulletin Board under the symbol "PWRI." On October 18, 2004 the last reported sale price for our common stock was $ 0.45 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS TO READ ABOUT THE RISKS OF INVESTING IN OUR COMMON STOCK.
PROSPECTUS SUMMARY
We are an application service provider (ASP) that offers an information and communication system for companies shipping full truckloads of goods to or from their facilities and companies transporting this freight. Our MobileMarket(TM) collects and processes current location and other transportation information as the freight is being transported. The information that is relevant to our shipper and carrier customers becomes instantly accessible to them through our website at www.power2ship.com. We believe that the information we provide assists smaller carriers, particularly those with less than 30 trucks, compete more effectively with larger carriers by improving their management and utilization of transportation assets. We currently have approximately 17 shipper customers and approximately 19 carrier customers. In addition, we believe our system assists shippers become more profitable by reducing their transportation, warehouse operations and inventory carrying costs. We are also collaborating with several technology and defense companies that, in response to the Homeland Security Act and Operation Safe Commerce, are collaborating to develop solutions that address global transportation security issues.
For the fiscal year ended June 30, 2004 we reported total revenue of $2,091,965 and a net loss of $4,134,885 and the report of our independent registered public accounting firm on our financial statements for fiscal 2004 contains an explanatory paragraph regarding our ability to continue as a going concern. We estimate that our current funds on hand will only be sufficient to fund our operations through December 31, 2004. As described elsewhere herein, we have included up to $3.0 million SEDA Shares to be sold to Cornell Capital Partners, L.P. following the date of this prospectus to provide additional working capital for our company. If, however, we are unable to secure this funding by December 31, 2004, we may be forced to curtail some or all of our operations. We are constantly evaluating our cash needs and existing burn rate, and we have a strategy whereby certain non-essential personnel and administrative costs will be reduced or eliminated so that we may continue to meet operating obligations until such time as we can raise additional working capital.
Our offices are located at 903 Clint Moore Road, Boca Raton, Florida 33487. Our telephone number is (561) 998-7557. Our fiscal year end is June 30.
THE OFFERING
This offering relates to the sale of common stock by certain persons who are stockholders of Power2Ship. The selling stockholders consist of:
* Cornell Capital Partners, L.P., which intends to sell up to $3.0 million of our shares of common stock (the $3 million SEDA Shares) to be purchased under a Standby Equity Distribution Agreement. See "Selling Security Holders - Standby Equity Distribution Agreement." For each share of common stock purchased under the Standby Equity Distribution Agreement, Cornell Capital Partners, L.P. will pay 98% of the daily volume weighted average priced which is calculated automatically by Bloomberg, LLC, a reporting service, by taking the sum of the value of all the sales of the registrant's common stock for a given day (the total shares sold in each trade times the sales price per share of the common stock for that trade) and then dividing this sum by the total number of shares sold on that day for the five trading days following the notice date. For the purposes of this prospectus, we have used a sales price of $0.[4084] per share which would result in the issuance of 7,345,740 shares of our common stock for the $3.0 million. If the actual sales price is higher, it will result in the issuance of a lesser number of shares of our common stock for the $3.0 million. If the actual sales price is lower, it will result in the issuance of a greater number of shares of our common stock for the $3.0 million. We have included a total of 11,018,610 shares in the registration statement of which this prospectus is a part which is 150% of the shares to be issued for the $3.0 million based upon the sales price of $0.[4084] per share.
* Cornell Capital Partners also intends to sell up to 12,992,255 shares of our common stock including shares which are issuable upon the conversion of our $500,000 principal amount 14.25% secured convertible debentures, $2 million principal amount of our Series B 5% secured convertible debentures, shares of our common stock presently owned by them and shares underlying outstanding warrants,
* Newbridge Securities Corporation and certain of its employees, which collectively intend to sell up to 2,217,007 shares of common stock including shares owned by them and shares underlying warrants owned by that firm and its employees, all of which were received as placement agent fees and business advisory fees, and
* Additional stockholders who are set forth later in this prospectus under "Selling Security Holders" who intend to sell up to 14,440,554 shares of our common stock, including shares issuable upon the conversion of $1,247,000 principal amount 14.25% secured convertible debentures and outstanding options and warrants with exercise prices ranging from $0.31 to $1.51 per share.
Under the terms of the Standby Equity Distribution Agreement, we may, at our discretion, periodically issue and sell to Cornell Capital Partners, L.P. shares of common stock for a total purchase price of $10.0 million. We have included shares in the registration statement, of which this prospectus is a part, for $3.0 million of the Standby Equity Distribution Agreement (the "$3.0 million SEDA Shares"). In the event we wish to sell Cornell Capital Partners any additional shares of our common stock above the $3.0 million SEDA Shares, we will be required to file additional registration statements with the SEC and those registration statements must be declared effective by the SEC.
Cornell Capital Partners, L.P. will purchase the $3.0 million SEDA Shares for a 2% discount to the volume weighted average price of our common stock for the five days immediately following the date that we provide them with notice of our intent to sell all or a portion of the $3.0 million SEDA Shares. Cornell Capital Partners, L.P. may sell any of the $3.0 million SEDA Shares purchased under the Standby Equity Distribution Agreement at the then prevailing market price. Among other things, this prospectus relates to the $3.0 million SEDA Shares to be issued under the Standby Equity Distribution Agreement.
Cornell Capital Partners is an "underwriter" within the meaning of the Securities Act of 1933 in connection with the sale of the $3.0 million SEDA Shares under the Standby Equity Distribution Agreement. We will pay Cornell Capital Partners a fee of 5% of the gross proceeds raised under the Standby Equity Distribution Agreement.
COMMON STOCK OFFERED 29,609,816 shares by selling stockholders. This equals
approximately 50.4% of our outstanding common stock on
the date hereof, giving effect to the issuance of the
shares underlying the 14.25% secured convertible
debentures, Series B 5% secured convertible debentures,
convertible promissory notes, Series B convertible
preferred stock and convertible promissory notes, but
giving no effect to the $3.0 million SEDA Shares.
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING
BEFORE THE OFFERING 38,255,289 shares at September 30, 2004
USE OF PROCEEDS We will not receive any proceeds from the shares
offered by the selling stockholders. Any proceeds we
receive from the sale of common stock under the Standby
Equity Distribution Agreement will be used for general
working capital purposes. See "Use of Proceeds."
RISK FACTORS The securities offered hereby involve a high degree of
risk and immediate substantial dilution. See "Risk
Factors" and "Dilution."
OTC BULLETIN BOARD
SYMBOL PWRI
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SELECTED CONSOLIDATED FINANCIAL DATA
The following summary financial information has been derived from the financial statements that are included elsewhere in this prospectus. In February 2004 we changed our fiscal year end from May 31 to June 30 in order to align our quarterly reporting obligations with calendar quarters. As a result the consolidated financial statements appearing elsewhere in this prospectus include consolidated financial statements for the years ended June 30, 2004 and May 31, 2003.
Income Statement Data:
Fiscal Year Ended
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June 30, 2004 May 31,2003
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Total revenue $ 2,091,965 $ 1,019,883
Total operating expense 5,822,020 2,228,157
Loss from operations ( 3,730,055) ( 1,208,274)
Total other income (expense) ( 404,830) ( 1,027,598)
Net loss ( 4,134,885) ( 2,235,872)
Less preferred stock dividend1 ( 1,347,044) 0
Net loss available to common stockholders $ ( 5,481,929) $ ( 2,235,872)
Loss per share, basic and diluted $( 0.17) $( 0.15)
Weighted average shares outstanding 32,947,559 14,957,590
1 The preferred stock dividend includes a beneficial conversion feature
valued at $941,840 attributable to our Series B Convertible Preferred Stock
and a beneficial conversion feature valued at $317,472 attributable to our
Series C Convertible Preferred Stock. For additional information on how
these beneficial conversion features were calculated, please see
"Management's Discussion and Analysis or Plan of Operations" and Note 11 to
our consolidated financial statement for the year ended June 30, 2004
appearing elsewhere in this prospectus.
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BALANCE SHEET DATA
June 30, 2004
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Cash and cash equivalents $ 832,130
Total current assets $ 1,210,258
Total assets $ 2,437,322
Total current liabilities $ 606,878
Total liabilities $ 3,568,958
Total stockholders' (deficit) $(1,131,636)
Working capital $ 603,380
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When used in this prospectus, the terms "Power2Ship," "we," "our," and "us" refers to Power2Ship, Inc., a Nevada corporation and our subsidiary. The information which appears on our web site at www.power2ship.com is not part of this prospectus.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to implement our business model, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this prospectus in its entirety, including the risks described in "Risk Factors." Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this prospectus, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
RISK FACTORS
Before you invest in our common stock, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this prospectus before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected and you could lose all of your investment in our company.
We have a limited operating history from which an evaluation of our future Prospects can be made. If we are not successful in developing a wide market for Our products, the future viability of our business could be at risk.
We did not begin generating revenues until our fiscal year ended May 31, 2003. There is a limited financial history of operations from which to evaluate our future prospects, including our ability to develop a wide base of customers for our MobileMarket(TM) and to otherwise achieve our business objectives. We are subject to all the risks inherent in the establishment of a new business enterprise, including limited capital, possible delays in the development of our products and services, implementation of our business plan and uncertain markets. We may encounter unanticipated problems, expenses and delays in marketing our services and securing additional customers. If we are not successful in developing a wide market for our products and services, our ability to generate sufficient revenue to sustain our operations would be adversely affected.
We have a history of losses and an accumulated deficit. We expect losses to continue for the foreseeable future and we may be unable to continue as a going concern.
For the fiscal years ended June 30, 2004 and May 31, 2003 we reported total revenue of $2,091,965 and $1,019,883 and a loss available to common stockholders of $5,481,929 and $2,235,872, respectively. At June 30, 2004 we had an accumulated deficit of $12,759,197. Further, during the fiscal year ended June 30, 2004, we reported net cash used in operating activities of $2,598,189. Our revenue has not been sufficient to sustain our operations and we do not expect significant revenue or profitable operations for the foreseeable future. The independent auditor's report for the year ended June 30, 2004 on our financial statements includes an explanatory paragraph to their audit opinion stating that our recurring losses from operations and negative operating cash flows raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. As described below, we will need to raise additional working capital in order to implement our business model and sustain our operations. Because we are subject to all of the business risks inherent in a new company with an unproven market, we cannot guarantee you that we will ever report profitable operations or generate sufficient revenue to sustain our company as a going concern.
Our primary assets serve as collateral under outstanding debentures. If we should default on these debentures, the debenture holders could foreclose on our assets and we would be unable to continue our business and operations.
We have granted the holders of our $1,747,000 principal amount 14.25% secured convertible debentures and our $2,000,000 principal amount Series B 5% secured convertible debentures a blanket security interest in all of our assets and properties. If we should default under the repayment provisions of either of these secured debentures, the debenture holders could seek to foreclose on our primary assets in an effort to seek repayment under the debentures. If the debenture holders were successful, we would be unable to conduct our business as it is presently conducted and our ability to generate revenues and fund our ongoing operations would be materially adversely affected.
We will require additional capital to fund our ongoing operations. If we are unable to raise additional capital, we will not be able to continue operations.
While we are attempting to increase sales, our revenue growth has not been significant enough to generate sufficient gross profits to fund our daily operations. We do not presently have sufficient financial resources and financing commitments to fund our ongoing operations beyond December 2004 and the report of our independent auditors on our financial statements for the fiscal year ended June 30, 2004 contains an explanatory paragraph regarding our ability to continue as a going concern. While we believe in the viability of our strategy to improve sales volume, we cannot accurately predict when, or if, our sales and profits will increase to the level necessary to sustain our operations therefore we believe that we will need to raise additional capital to fully implement our business, operating and development plans and sustain our ongoing operations. A large part of our financing needs are expected to be provided from the Standby Equity Distribution Agreement described elsewhere herein. We have included $3.0 million SEDA Shares in this prospectus for sale to Cornell Capital Partners, L.P. under the terms of the Standby Equity Distribution Agreement following the date of this prospectus. Other than this Standby Equity Distribution Agreement, we do not presently have any additional sources of working capital. If we are unable to secure this funding by December 31, 2004 because the registration statement of which this prospectus forms a part is not declared effective by the SEC prior to that date, and we are unable to obtain additional working capital from alternative sources, we may be required to curtail or discontinue some or all of our business and operations.
Certain contractual limitations of the Standby Equity Distribution Agreement may adversely affect our needs for working capital in future periods. If we are unable to obtain working capital as needed in future periods, our ability to continue our business and operations would be in jeopardy.
We are a party to a Standby Equity Distribution Agreement with Cornell Capital Partners, LP which permits us to sell up to $10,000,000 of our common stock, as described elsewhere in this prospectus. We have included $3.0 million of the SEDA Shares in the registration statement of which this prospectus is a part and we can issue and sell those shares to Cornell Capital Partners commencing upon the effective date of the registration statement. There are restrictions on our ability to request advances under the Standby Equity Distribution Agreement. For example, we may not request advances if the shares to be issued in connection with such advances would result in Cornell Capital Partners, L.P. owning more than 9.9% of our outstanding common stock. Even if we request advances the amount of each advance is limited to a maximum of $500,000 every seven trading days. As a result of these contractual limitations no assurances can be given that such financing will be available in sufficient amounts or at all when needed to sustain our working capital needs.
The Standby Equity Distribution Agreement and our Series B 5% secured convertible debentures contain certain covenants prohibiting us from raising capital at less than the market price. These limitations may hamper our ability to raise working capital in future periods which could result in our ability to continue as a going concern.
The Standby Equity Distribution Agreement and the purchase agreement for our Series B 5% secured convertible debentures contain covenants that restrict us from raising capital from the sale of stock or other securities convertible into stock at a price less than the market price of our common stock on the date of issuance. The existence of these covenants may severely limit our ability to raise capital from the sale of stock or convertible securities because any potential purchasers of our stock or convertible securities may want to pay a discount to the market price of our stock.
Historically we have been dependent on revenue from two customers and a significant portion of our revenue for fiscal 2003 is non-recurring revenue. If we were to be deprived of revenue from these key customers, our future revenues and business operations could be materially and adversely effected.
All of our revenue for the fiscal year ended May 31, 2003 was derived from two customers, The Great Atlantic & Pacific Tea Company and Tire Kingdom, which represented approximately 53% and 47%, respectively of our revenue. For the fiscal year ended June 30, 2004, Tire Kingdom represented approximately 64% of our revenue and The Great Atlantic & Pacific Tea Company represented approximately 15% of our revenue. Nearly all of the revenue from The Great Atlantic & Pacific Tea Company was derived under the terms of a license and customization agreement which was terminated in January 2004 and does not represent recurring revenues to us. We do not have an agreement with Tire Kingdom. We are seeking to reduce our dependence on revenues from Tire Kingdom during fiscal 2005 by expanding our customer base ^in order to eliminate our dependence upon revenues from a limited number of customers. Because of the significant nature of the revenue from Tire Kingdom to our results of operations, however, the loss of this customer, prior to our obtaining additional customers, could have a material adverse effect on our business operations and prospects.
We are dependent on contracts, some of which are short term. If these contracts are terminated, our results of operations would be materially adversely affected.
We have entered into agreements to provide transportation services with some of our shipper customers. These agreements, however, do not commit them to using us for any specific volume of transportation services and the agreements can be terminated on 30 days notice. The termination of any of these contracts could have a material adverse effect on our business operations and prospects.
We rely on third party providers to provide support for our products and services. Failure by our third party providers to deliver services could adversely impact our services to our customers.
We rely on several third party providers for support for our MobileMarket(TM). IBM provides us with dedicated hosting and support for our web site as well as network services. In addition, we purchase GPS locator devices which are included in wireless access packages we offer to carriers from a single-source. Although we do not presently have alternative providers engaged for these products or services, we believe that we could engage other companies to provide these products or services upon substantially the same terms and conditions as our existing third party provides. In the event any of these third party providers are unable to deliver the services or products which we have contracted for, our ability to provide our products and services to our customers would be adversely impacted until such time as we were able to engage alternate sources.
We face risks related to rapidly evolving technologies. If we do not respond to these evolving technologies, we may have difficulty in retaining our customers or expanding our customer base.
Our markets are subject to rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards that may render existing products and services obsolete. Our growth and future operating results will depend, in part, upon our ability to enhance existing applications and develop and introduce new applications or capabilities that:
* meet or exceed technological advances in the marketplace;
* meet changing customer requirements;
* comply with changing industry standards;
* achieve market acceptance;
* integrate third party software effectively; and
* respond to competitive offerings.
We may not possess sufficient resources to continue to make the necessary investments in technology. In addition, we may not successfully identify new software opportunities or develop and bring new software to market in a timely and efficient manner. If we are unable, for technological or other reasons, to develop and introduce new and enhanced software in a timely manner, we may lose existing customers and fail to attract new customers, which may adversely affect our ability to generate revenues sufficient to provide for our ongoing operations.
There is a limited ability to safeguard our proprietary information and we may be unable to prevent a third party from the unauthorized use of our propriety information.
Our success and ability to compete are substantially dependent on our internally developed technologies and trademarks. We seek to protect such intellectual property through a combination of confidentiality procedures, contractual provisions, copyright and trade secret laws and intend to apply for patents. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our software or obtain and use information that it regards as proprietary. Policing unauthorized use of our software is difficult, and software piracy could be a problem. Furthermore, potential competitors may independently develop technology similar to ours. While we have applied for a patent for our propriety software and applied for a trademark on our company name, Power2Ship, and on our brand-name "MobileMarket", we cannot provide any assurance that we will be granted either protection or, if granted, that third parties will not violate these protections. Any such violation of our intellectual property rights could prove costly to defend and funds devoted to these possible efforts would reduce the amount of working capital available to fund our ongoing operations.
Our Chairman and CEO is the sole holder of our Series Y Convertible Preferred Stock which may give him voting control of our company and the ability to solely Influence its business and direction.
Our voting securities consist of shares of our common stock and our Series Y Convertible Preferred Stock. Holders of shares of our common stock are entitled to one vote per share and holders of shares of our Series Y Convertible Preferred Stock are entitled to 200 votes per share on all matters submitted to a vote of our stockholders, and these classes of our voting securities vote together on all matters submitted to a vote of our stockholders. Mr. Hersh, our Chairman and CEO, is the sole holder of our Series Y Convertible Preferred Stock which, together with his common stock holdings, gives him voting rights at September 30, 2004, 2004 over approximately 36.4% of our voting securities. As a result of these voting rights, notwithstanding that our common stockholders are entitled to vote on matters submitted to our stockholders, Mr. Hersh may have the power to strongly influence the election of all of our directors and strongly influence the business and direction of our company.
The exercise of outstanding options and warrants, the conversion of shares of our Series B, C, and Y Convertible Preferred Stock and the conversion of our 14.25% secured convertible debentures and our Series B 5% convertible secured debentures will be dilutive to our existing stockholders.
As of September 30, 2004 we had the following securities which are convertible or exercisable into shares of our common stock outstanding:
* options and warrants to purchase a total of 22,724,788 shares of our common stock at prices ranging between $0.31 to $2.00 per share;
* 198,000 shares of our Series B Convertible Preferred Stock which is convertible into 3,960,000 shares of our common stock;
* 10,832 shares of our Series C Convertible Preferred Stock which is convertible into 1,083,200 shares of our common stock;
* 87,000 shares of our Series Y Convertible Preferred Stock which is convertible into 230,405 shares of our common stock;
* approximately [4,939,214] shares of our common stock underlying our
14.25% secured convertible debentures based upon a conversion price of
[$0.3537] at August 23, 2004; and
* 10,600,000 shares of our common stock underlying our Series B 5% secured convertible debentures.
The exercise of these warrants and options and the conversion of the debentures and shares of our preferred stock may materially adversely affect the market price of our common stock and will have a dilutive effect on our existing stockholders.
We have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited protections against interested director transactions, conflicts of interest and similar matters.
Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and Nasdaq are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Although we recently adopted a Code of Ethics, we have not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange or Nasdaq, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently only have one independent director. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.
Provisions of our articles of incorporation and bylaws may delay or prevent a takeover which may not be in the best interests of our stockholders.
Provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Nevada law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders.
In addition, our articles of incorporation authorize the issuance of up to 1,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Our board of directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion or voting rights that could adversely affect the voting power or other rights of our common stockholders.
If the selling security holders all elect to sell their shares of our common stock at the same time, the market price of our shares may decrease.
It is possible that the selling security holders will offer all of the shares for sale. Further because it is possible that a significant number of shares of our common stock could be sold at the same time hereunder, the sales, or the possibility thereof, may have a depressive effect on the market price for our common stock.
Cornell Capital Partners, L.P. will pay less than the then-prevailing market Price of our common stock. The sale of our stock under our Standby Equity Distribution Agreement could encourage short sales by third parties, which could Contribute to the future decline of our stock price.
The $3.0 million SEDA Shares to be issued to Cornell Capital Partners, L.P. under the Standby Equity Distribution Agreement will be issued at a 2% discount to the volume weighted average price for the five days immediately following the notice date of an advance. These discounted sales could cause the price of our common stock to decline. A significant downward pressure on the price of our common stock caused by the sale of material amounts of common stock under the Standby Equity Distribution Agreement could encourage short sales by third parties. In a short sale, a prospective seller borrows stock from a stockholder or broker and sells the borrowed stock. The prospective seller hopes that the stock price will decline, at which time the seller can purchase shares at a lower price to repay the lender. The seller profits when the stock price declines because it is purchasing shares at a price lower than the sale price of the borrowed stock. Such sales could place further downward pressure on the price of our common stock by increasing the number of shares being sold.
Our common stock is currently quoted on the OTCBB, but trading in our stock is Limited. Because our stock currently trades below $5.00 per share, and is quoted on the OTC Bulletin Board, our stock is considered a "penny stock" which can adversely effect its liquidity.
The market for our common stock is extremely limited and there are no assurances an active market for our common stock will ever develop. Accordingly, purchasers of our common stock cannot be assured any liquidity in their investment. In addition, the trading price of our common stock is currently below $5.00 per share and we do not anticipate that it will be above $5.00 per share in the foreseeable future. Because the trading price of our common stock is less than $5.00 per share, our common stock is considered a "penny stock," and trading in our common stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. SEC regulations also require additional disclosure in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of our securities in the secondary market because few broker or dealers are likely to undertake these compliance activities.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the OTC Bulletin Board under the symbol PWRI. The following table sets forth the reported high and low sale prices for our common stock as reported on the OTC Bulletin Board for the periods indicated. The quotations represent inter-dealer prices without retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. The quotations may be rounded for presentation.
High Low
----- -----
Fiscal 2005
-----------
First Quarter $0.45 $0.30
Fiscal 2004
Fourth Quarter $0.45 $0.30
Third Quarter $0.50 $0.27
Second Quarter $0.63 $0.39
First Quarter $0.50 $0.27
Fiscal 2003
Fourth Quarter $1.24 $0.60
Third Quarter $1.00 $0.37
Second Quarter $1.02 $0.54
First Quarter $1.43 $0.75
Fiscal 2002
Fourth Quarter $1.77 $0.61
Third Quarter $1.45 $0.64
Second Quarter $1.01 $0.94
First Quarter $4.05 $1.01
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On October 18, 2004 the last reported sale price of our common stock as reported on the OTC Bulletin Board was $0.45 per share. As of September 30, 2004, we had approximately 356 shareholders of record. Certain of the shares of common stock are held in "street" name and may be held by numerous beneficial owners.
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We intend to keep future earnings, if any, to finance the expansion of our business. We do not anticipate that any cash dividends will be paid in the foreseeable future.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Number of securities Weighted average Number of
to be issued upon exercise price of securities
exercise of outstanding remaining
outstanding options options, warrants for future
warrants, and rights and rights issuance
(excluding
securities
reflected in
column(a))
Plan Category
2001 Employee Stock
Compensation Plan 0 n/a 1,519,000
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2004. This table should be read in conjunction with the financial statements and related notes thereto appearing elsewhere in this prospectus.
June 30, 2004
----------------
Long-term liabilities $ 2,962,080
Stockholders' equity:
Series B Convertible Preferred Stock,
$0.01 par value, 200,000 shares
authorized, 198,000 shares issued and outstanding 1,980
Series C Convertible Preferred Stock,
$0.01 par value, 20,000 share
authorized, 10,832 shares issued and outstanding 108
Series Y Convertible Preferred Stock,
$0.01 par value, 87,000 shares
authorized, 87,000 shares issued and outstanding 870
Common stock, $0.001 par value,
100,000,000 shares authorized,
38,248,146 shares issued and outstanding 38,248
Deferred compensation ( 208,410)
Additional paid-in capital 11,794,765
----------------
Accumulated deficit (12,759,197)
----------------
Total stockholders' deficit ( 1,131,636)
Total capitalization $ 1,830,444
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DILUTION
The net tangible book value of Power2Ship as of June 30, 2004 was $
(1,898,245) or $ (0.0496) per share of common stock. Net tangible book value per
share is determined by dividing the tangible book value of Power2Ship (total
tangible assets less total liabilities) by the number of outstanding shares of
our common stock. For the shares being offered by the selling security holders
none of the proceeds will be paid to Power2Ship therefore our net tangible book
value will be unaffected by this offering. Our net tangible book value, however,
will be impacted by the number of $3.0 million SEDA Shares issued under the
Standby Equity Distribution Agreement. The offering price of the $3.0 million
SEDA shares is not fixed until prior to the sale. The following example shows
the dilution to new investors at an offering price of $[ 0.4084] per share which
represents the price at which we would sell the $3.0 million SEDA Shares to
Cornell Capital if we had noticed them of our intent to sell the shares on
[September 30], 2004
If we assume that we had issued [7,345,740] shares for $3.0 million ^under the Standby Equity Distribution Agreement at an assumed offering price of [$ 0.4084] per share (i.e., the maximum number of shares needed to fully use the $3.0 million SEDA Shares based upon a notice to Cornell Capital on [September 30, 2004], less commitment fees of $150,000, our net tangible book value as of June 30, 2004 would have been $ 951,755 or $ 0.021 per share. This represents an immediate increase in net tangible book value to existing stockholders of $ 0.0286 per share and an immediate dilution to new stockholders of $0.3798 per share. The following table illustrates the per share dilution:
Assumed public offering price per share $ 0.4084 Net tangible book value per share before this offering $(0.0496) Increase attributable to new investors $ 0.4084 Net tangible book value per share after this offering $ 0.0210 Dilution per share to new shareholders $ 0.3798 |
The offering price of the $3.0 million SEDA Shares is based on the then-existing market price. In order to give prospective investors an idea of the dilution per share they may experience, we have prepared the following table showing the dilution per share at various assumed offering prices:
Assumed No. of Shares to Dilution per Share
Offering Price Be Issued (1) to New Investors
-------------- -------------- ----------------
0.3063 9,794,319 $ 0.388
0.4492 6,678,540 $ 0.386
0.4900 6,122,449 $ 0.387
(1) This represents the number of $3.0 million SEDA Shares that are registered
hereunder in connection with the Standby Equity Distribution Agreement.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of any of the shares by the selling security holders. Any proceeds that we receive from the exercise of outstanding warrants or options will be used by us for general working capital. The actual allocation of proceeds realized from the exercise or sale of these securities will depend upon the amount and timing of such exercises, our operating revenues and cash position at such time and our working capital requirements. There can be no assurances that any of the outstanding warrants will be exercised.
Under the terms of the Standby Equity Distribution Agreement, subject to certain limitations as described elsewhere herein, we can issue and sell up to $10.0 million of our common stock. We have included $3.0 million of SEDA Shares in the registration statement which is a part of this prospectus. In the event we wish to issue and sell up to the balance of the $10.0 million under the Standby Equity Distribution Agreement we will be required to file additional registration statements and those registration statements must be declared effective by the SEC. We will use the proceeds from the sale of the $3.0 million SEDA Shares for general working capital.
Pending utilization of the proceeds as described above, the net proceeds of the offering will be deposited in interest bearing accounts or invested in money market instruments, government obligations, certificates of deposits or similar short-term investment grade interest bearing investments.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of financial condition and results of our operations should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this prospectus. For accounting purposes, our merger with Freight Rate, Inc. was treated as a recapitalization of Freight Rate, Inc. and accounted for as a reverse acquisition. Therefore, the financial statements and accompanying notes thereto included elsewhere in this prospectus reflect the assets, liabilities and operations of Freight Rate, Inc. as if it had been the reporting entity since inception. In February 2004 we changed our fiscal year from May 31 to June 30 in order to align our quarterly reporting obligations with calendar quarters. As a result the consolidated financial statements appearing elsewhere in this prospectus include consolidated financial statements for the years ended June 30, 2004and May 31, 2003, and the transition period associated with the changed fiscal year which is the one month period ended June 30, 2003.
OVERVIEW
We operate as an application service provider (ASP) that delivers supply chain, tracking and logistics information to the freight industry. We did not begin reporting revenue until the last part of fiscal 2003 following our March 2003 merger with Freight Rate, Inc. We provide logistics information and services to shippers that need to have truckloads of goods transported to or from their facilities. We also provide logistics information and services to trucking companies (carriers) that operate fleets of trucks which enable these companies to manage the utilization of their transportation assets and personnel. Our mission is to provide our members with easily accessible and useful information that allows them to be more profitable by improving the utilization of transportation assets and optimizing the efficiency of the supply chain.
We began providing our freight transportation and implementation services in October 2002 and we began providing logistics information access services in March 2003. A key component of our business model is building our customer base so that we have a sufficient number of shippers and carriers utilizing our Web-based P2S MobileMarket(TM) system so that when a shipper customer wants to move a load of freight we can offer one or more carriers with available trucks and trailers that meet their criteria. We have been able to increase the number of our shipper customers from whom we generated revenues from approximately five at the end of fiscal 2003 to approximately 17 at the end of fiscal 2004. Our shipper customers include companies such as International Paper, Nestle Waters, Tyco International, Ltd., Tofutti Brands, Luckey Logistics, Gold Coast Freightways, Associated Grocers, Caruso Foods, Compass Roadmaster, Paper Pak and Valmont Industries.
We are presently able to identify available capacity among our carrier customers to move only a very small percentage of these loads. Given the tens of thousand of transportation routes in the U.S., in order to successfully build our company we must substantially increase the number of our carrier customers in order to capture a greater percentage of our shipper customer's inbound and outbound transportation business. During fiscal 2004 we spent $90,134 in the marketing of our company's services to potential carriers in a effort to increase our carrier based as compared with $9,981 spent in fiscal 2003. We currently have approximately 400 carriers who have entered into carrier agreements with us ^as compared with approximately 43 of carriers at May 31, 2003. ^We have used approximately 19 of these carriers to transport freight for our shipper customers based upon the geographical locations of the particular shipper customer. We intend to continue to increase our marketing efforts during fiscal 2005, including utilizing trade publications, transportation industry websites and direct mail as well as company participation in industry trade shows and trade organizations.
We are pursuing opportunities to provide logistics information and services to government agencies responsible for ensuring the safe and secure transportation of goods in containers aboard ships coming to U.S. ports. We believe that our P2S MobileMarket(TM), which was designed to capture and display vast quantities of logistics information, will assist these agencies to accomplish their goals. The information available from our P2S MobileMarket (TM) is also useful to maritime companies, logistics companies, container leasing and manufacturing companies, freight forwarders, warehouse mangers and other companies that provide freight management services.
We also are in discussions with several technology and defense companies that, in response to the Homeland Security Act and Operation Safe Commerce, are collaborating to develop solutions that address global transportation security issues. We believe that our secure, wireless, Internet-based system which uses a combination of global positioning satellite technologies can become a key component in the security solutions being developed by other companies to counteract the threat of terrorism. Our system is capable of capturing and processing data transmitted wirelessly from other technologies that could be part of any comprehensive security system. Examples of these technologies may include radio-frequency identification (RFID) tags fastened to containers and/or trailers, smart tags affixed to the goods inside shipping containers, electronic seals applied at the time the container is loaded and geo fencing to alert a truck's owner or authorities if a vehicle deviates from its designated route. There can be no assurances, however, that we will ever enter into any agreements with the companies we are in discussions with or that we will ever generate any significant revenues.
RESULTS OF OPERATIONS
FISCAL YEAR 2004 COMPARED TO FISCAL YEAR 2003
REVENUE
Total revenue generated during fiscal year 2004 increased by $1,072,082, or approximately 105% as compared with total revenue generated during fiscal year 2003. This increase consisted of the following:
- Freight transportation revenue increased $1,295,203, or approximately 268%, in fiscal year 2004 from fiscal year 2003. Approximately 66%, or $860,738, of this increase was attributable to revenue from Tire Kingdom, our largest customer. The remainder of the revenue increase was attributable to an increase in the number of our shipper customers from approximately five in fiscal 2003 to approximately 17 in fiscal 2004, as well as our having generated revenue for an entire 12 month period during fiscal 2004 as compared to only eight months in fiscal 2003. We anticipate that revenue from freight transportation will increase in fiscal 2005 as discussed below.
- Revenue from access services increased $201,949 in fiscal 2004, or approximately 229%, from fiscal year 2003. This revenue is attributable to a single customer, The Great Atlantic and Pacific Tea Company, Inc., under a contract which was completed, paid in full and thenterminated in January 2004. The increase was attributable to revenue from this contract for approximately eight months during fiscal 2004 (until the date of termination of the contract) versus approximately two months in fiscal 2003. Access services provide unlimited use of the information available through the MobileMarket(TM) for a fixed monthly fee. While we market these services to our existing and potential customer base, we cannot predict if we will report significant revenue from access services in future periods.
- Revenue from implementation services decreased $425,070, or approximately 95%, in fiscal 2004 from fiscal year 2003. This revenue was attributable to a single customer, The Great Atlantic and Pacific Tea Company, Inc., under a contract which was substantially completed by the end of fiscal year 2003. Implementation services include design, programming and testing of custom developed interfaces that permit the MobileMarket(TM) to communicate and share data with a customer's existing computer software. While we market these services to our existing and potential customer base, we cannot predict if we will report significant revenue from implementation services in future periods.
We anticipate that revenue will continue to increase in fiscal 2005. We expect that our increased sales and marketing efforts which were begun in fiscal 2004 will result in additional shipper customers which from whom we will generate increased revenues from freight transportation services. Our business model also includes, subject to the availability of sufficient financing, the acquisition of one or more truck transportation services companies which, if consummated, will also increase our revenue. We are not, however, a party to any acquisition agreements as of the date of this prospectus. Finally, we entered into a letter of intent with L-3 Communications Security and Detection Systems, Inc. in October 2004 and expect to enter into additional research and development or similar agreements related to global transportation security with other technology and/or defense companies that will generate additional revenue during fiscal 2005. The non-binding letter of intent with L-3 Communications relates to joint efforts on projects related to monitoring applications associated with container tracking and security status as well as carrier and shipper logistics. The final terms of our agreement with L-3 are to be set forth in a binding, definitive agreement. There can be no assurances, however, that we will enter into a definitive agreement with L-3 Communications or, if we do, that we will ever generate any significant revenue or profits from such agreement.
OPERATING EXPENSES
Total operating expenses incurred during fiscal year 2004 increased by $3,593,863, or approximately 161%, as compared with total operating expenses incurred during fiscal year 2003. This increase consisted of freight transportation costs rising by almost the same percentage as the increase in freight transportation revenue, as well as to increases in selling, general and administrative expenses and research and development expenses associated with the increase in the number of employees and consultants.
Freight transportation expenses, consist of charges from trucking companies for providing the transportation services we arranged for our shipper customers, increased by $1,107,815 or approximately 234%, in fiscal year 2004 as compared with fiscal year 2003. Freight transportation expenses are variable costs that are expected to increase relatively the same percentage as freight transportation revenue. The percentage increase during fiscal year 2004 was less than the 268% increase in freight transportation revenue due to an increase in our gross margin to approximately 11% in fiscal year 2004 from approximately 2% in fiscal year 2003. We were able to increase our gross margin by obtaining higher prices from our shipper customers in fiscal year 2004 than in fiscal year 2003 when we provided a significant amount of our services at cost to our largest customers while establishing and building our relationships with them. We expect freight transportation expenses to increase proportionately with the increase in freight transportation revenue in fiscal year 2005.
Selling, general and administrative expenses increased by $2,322,133 or approximately 145%, to$3,920,842 in fiscal year 2004 from $1,598,709 in fiscal year 2003. Approximately 75% of this increase was attributable to increases in salaries, benefits and consulting fees and the remainder of the increase was attributable to increases in legal, accounting, rent, sales and marketing expenses.
Salaries, benefits and consulting expenses increased by $1,750,532 or approximately 166% in fiscal year 2004 from fiscal year 2003. Included in this increase were the following:
- Salaries and benefits increased by $814,921, or approximately 117%, in fiscal 2004 to $1,509,909 from $694,988 in fiscal year 2003, accounting for approximately 47% of the increase in total salaries, benefits and consulting expenses. This increase primarily was due to an increase in the number of our non-research and development employees to 23 at the end of fiscal year 2004 from 12 at the end of fiscal year 2003, of which 10 became employees during the fourth quarter of fiscal 2003. This increase was also due to higher compensation levels of many of these employees which was below industry average compensation levels in fiscal year 2003 while we were a development stage company.
- Consulting fees increased by $935,611, or approximately 258%, in fiscal year 2004 to$1,298,396 from $362,785 in fiscal year 2003, accounting for approximately 53% of the increase in consulting fees. This increase was attributed to the larger number of financial advisors and technology and other consultants that we engaged in fiscal year 2004 versus fiscal year 2003. Non-cash compensation in the form of common stock, stock options or warrants valued at $1,053,965 represented approximately 82% of total consulting fees for fiscal year 2004.
We expect salaries, benefits and consulting expenses in fiscal year 2005 to remain relatively constant with fiscal year 2004, with increases in salaries and fringe benefits associated with additional employees are anticipated to be offset in part by a comparable decline in consulting expenses.
The most significant expenses accounting for the remaining $571,601 increase in total selling, general and administrative expenses in fiscal year 2004 as compared with fiscal year 2003 were the following:
- Legal and accounting fees increased by $143,177 or approximately 106% to $277,620 during fiscal year 2004 from $134,443 in fiscal year 2003. This increase resulted from higher legal and accounting fees related to public reporting requirements, litigation and other legal matters incurred in the ordinary course of business in fiscal year 2004 compared with fiscal year 2003. While we do not anticipate any legal expenses related to litigation settlements in fiscal 2005, we do expect overall legal and accounting expenses to continue to increase in fiscal year 2005, but at a lower rate than in fiscal year 2004. The most likely areas attributable to such projected increases are associated with our continued compliance with provisions of the Sarbanes-Oxley Act of 2002, including new provisions which will phase in during fiscal 2005 and beyond, fees and costs related to capital raising transactions, potential mergers and acquisitions, if any and preparation of a greater number of agreements with customers.
- Rent expense increased by $89,230 or approximately 276% to $121,586 in fiscal year 2004 from $26,712 in fiscal year 2003 as we moved to a much larger facility in Boca Raton, Florida in June 2003 to accommodate our growth in personnel and operations. We expect rent expense for fiscal year 2005 to be approximately $190,000.
- Travel, meals and entertainment expenses increased by $92,157 or approximately 103% to $181,791 in fiscal year 2004 from $89,634 in fiscal year 2003 as a result of additional travel to existing and potential shipper customers, trade shows and conventions, vendors and potential investors. We expect travel, meals and entertainment expenses in fiscal year 2005 to increase as we increase the amount of travel to attract and implement our services for new shipper customers, to evaluate non-asset based trucking companies that are potential acquisition candidates and to collaborate with technology and/or defense companies related to global transportation security.
- Advertising and marketing expenses, including convention and trade show expenses, increased by $80,153 or approximately 803% to $90,134 in fiscal year 2004 from $9,981 in fiscal year 2003 as we began advertising and marketing, including participating in national and regional transportation industry conventions and trade shows, to introduce our products and services to our target markets during fiscal year 2004. We did very little marketing and did not participate in any trade shows in fiscal year 2003 as we were not ready for these types of promotional activities during that time period. We expect advertising and marketing expenses in fiscal year 2005 to continue to increase as we increase our advertising to shippers and carriers in trade publications, transportation industry websites and through direct mail, attend more conventions and trade shows and join more industry organization and associations.
Research and development expenses increased $163,915 or approximately 105% in fiscal year 2004 as compared with fiscal year 2003. This increase was primarily due to an increase of two additional employees in this department as well as an increase in the compensation level of many of these employees in fiscal year 2004 which was below industry average compensation levels in fiscal year 2003. These employees design, program and test all of the computer software applications related to our logistics information system. We expect research and development expenses to be higher during fiscal year 2005 than fiscal year 2004 as a result of a full 12 months of higher salaries.
OTHER EXPENSES
Total other income (expense) decreased by $622,768 or approximately 61%, in fiscal year 2004 as compared with fiscal year 2003. This decrease primarily consisted of:
- Litigation settlement expenses decreased by $1,002,098, or 100%, in fiscal year 2004 versus fiscal year 2003. Expenses in fiscal year 2003 represented the value of 1,698,472 shares of our common stock issued to two former consulting firms in settlement of disputed agreements following mediation of the matter. We do not anticipate any further litigation settlement expenses in fiscal year 2005.
- Interest expense increased by $283,519, or approximately 232%, in fiscal year 2004 versus fiscal year 2003. The fiscal year 2004 interest expense primarily consisted of interest of:
- $130,173, including $81,383 of non-cash expense related to the issuance of shares of our common stock associated with $340,000 of short-term promissory notes issued in December 2003 and January 2004 that were repaid in March 2004,
- $175,912 of interest on our $1,747,000 principal amount 14.25% secured convertible debentures issued in March and April 2004; and
- $72,500 associated with a $125,000 short-term convertible promissory note issued in March 2003 that was repaid in September 2003 with shares of our Series B Convertible Preferred Stock.
We expect interest expense to be approximately $850,000 in fiscal year 2005 assuming no conversions or redemptions of our Series B 5% or 14.25% secured convertible debentures and projected additional debt in the form of a revolving credit facility secured primarily by our accounts receivable averaging approximately $500,000 which we may seek to obtain during fiscal 2005. We do not, however, have any commitments for any accounts receivable financing as of the date of this prospectus.
- Income from forgiveness of debt, which was associated with accrued salaries and notes in fiscal year 2003, decreased by $93,074 or 100% in fiscal year 2004. We do not expect to have any income from forgiveness of debt in fiscal year 2005.
LIQUIDITY AND CAPITAL RESOURCES
We have experienced losses and negative cash flows from operations since our inception, and our independent auditors' report on our financial statements for fiscal 2004 contains an explanatory paragraph regarding our ability to continue as a going concern. As of June 30, 2004, we had an accumulated deficit of $12,759,197, a stockholders' deficit of $1,131,636, and cash and cash equivalents of $832,130.
At June 30, 2004, we had a working capital surplus of $603,380 as compared with a working capital deficit of $216,783 at June 30, 2003. This $820,163 increase in working capital was attributed to a $742,989 increase in current assets and a $77,174 decrease in current liabilities. The increase in current assets during this period consisted of a $768,812 increase in cash, a $29,220 increase in prepaid insurance and a $55,044 decrease in accounts receivable, net of allowances for doubtful accounts. The decrease in current liabilities during this period consisted of a $308,000 decrease in short-term notes payable and a $21,513 decrease in accrued salaries partially offset by a $159,241 increase in accounts payable, and a $93,098 increase in accrued expenses.
During fiscal year 2004, our cash balance increased by $768,812. This increase was attributed to $2,598,189 used in operating activities and $79,773 used in investing activities offset in part by $3,446,774 provided by financing activities.
During fiscal year 2003, our cash balance decreased by $17,627. This decrease was attributed to $826,368 used in operating activities and $130,663 used in investing activities offset in part by $939,404 provided by financing activities.
Net cash used in operating activities for fiscal 2004 of $2,598,189 consisted of our net loss of $4,134,885 partially offset by $1,373,846 of non-cash expenses and $162,850 provided by the net change in operating assets and liabilities. Non-cash expenses primarily consisted of $1,287,711 of expenses associated with the issuance of our common stock, options and warrants as payment for services, interest, compensation, conversions and litigation settlement.
Net cash used in operating activities of $826,368 in fiscal 2003 consisted of our net loss of $2,235,872 partially offset by $1,356,290 of non-cash expenses and $53,214 of cash provided by the net changes in operating assets and liabilities. Non-cash expenses primarily consisted of $1,402,553 of expenses associated with the issuance of our common stock for services and pursuant to a litigation settlement.
Net cash used in investing activities in fiscal years 2004 and 2003 consisted of $79,773 and $130,663, respectively, and was used to purchase various fixed assets including computers, furniture, fixtures and leasehold improvements.
Net cash provided by financing activities of $3,446,774 in fiscal year 2004 included $2,109,916 received from the issuance of our Series B 5% and 14.25% secured convertible debentures, $1,110,960 received from the issuance of shares of our Series B and Series C Convertible Preferred Stock, $340,000 received from issuance of promissory notes and $285,898 received from the issuance of shares of our common stock which was partially offset by $400,000 in repayments of promissory notes.
Net cash provided by financing activities of $939,404 in fiscal year 2003 included $217,000 received from the issuance of convertible promissory notes, $225,000 received from the exercise of stock options, $195,720 received from the issuance of convertible preferred stock and $328,500 received from the issuance of shares of our common stock which was partially offset by $26,816 in repayments of promissory notes.
We estimate that our cash on hand at June 30, 2004 plus $900,000 in net proceeds we received from Cornell Capital Partners, LP following the filing in September 2004 of the registration statement of which this prospectus is a part will be sufficient to fund our operating activities until approximately December 31, 2004. ^Our anticipated commitments for capital expenditures during fiscal year 2005 is $30,000.^ We will need additional working capital to fund both our current operations and our anticipated growth. As described below, we have included up to $3.0 million SEDA Shares to be sold to Cornell Capital Partners, L.P. following the date of this prospectus to provide additional working capital for our company.
We entered into a Standby Equity Distribution Agreement with Cornell Capital Partners, LP on June 28, 2004 pursuant to which Cornell has agreed to purchase from us, at our option, up to $10,000,000 of our common stock during the two years after the effectiveness of the registration statement of which this prospectus is a part, including the shares to be sold to Cornell, with the Securities and Exchange Commission. We have included $3.0 million SEDA Shares in the registration statement of which this prospectus is a part. We will be required to file additional registration statements with the Securities and Exchange Commission and those registration statements must be declared effective in order for us to issue and sell any additional shares of common stock to Cornell Capital Partners under the Standby Equity Distribution Agreement in excess of the $3.0 million SEDA Shares.
We will have the right to sell up to $500,000 of our shares to Cornell as frequently as every seven trading days. The share price for such sales will be calculated at 98% of the lowest price (using the daily volume weighted average price) of our common stock during the five trading days following the date on which we notify Cornell of our intent to sell them the shares. There are no assurances, however, that the Securities and Exchange Commission will declare our registration statement effective. In the event the registration statement does not become effective, prior to using all of our cash on hand we will be required to seek additional capital through equity and/or debt financing. There are no assurances that we will be able to find such capital on terms acceptable to us, or at all.
Our future capital requirements depend primarily on the rate at which we can decrease our use of cash to fund operations. Cash used for operations will be affected by numerous known and unknown risks and uncertainties including, but not limited to, our ability to successfully market our products and services, the degree to which competitive products and services are introduced to the market, and our ability to attract key personnel as we grow. As long as our cash flow from operations remains insufficient to completely fund operations, we will continue depleting our financial resources and seeking additional capital through equity and/or debt financing. If we raise additional capital through the issuance of debt, this will result in increased interest expense. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of Power2Ship held by existing stockholders will be reduced and those stockholders may experience significant dilution. In addition, new securities may contain certain rights, preferences or privileges that are senior to those of our common stock. There can be no assurance that acceptable financing to fund our ongoing operations and for future acquisitions or for the integration and expansion of existing operations can be obtained on suitable terms, if at all. Our ability to continue our existing operations and to continue to implement our growth and acquisition strategy could suffer if we are unable to raise the additional funds on acceptable terms which will have the effect of adversely affecting our ongoing operations and limiting our ability to increase our revenues or possibly attain profitable operations in the future. We are constantly evaluating our cash needs and existing burn rate, and we have a strategy whereby certain non-essential personnel and administrative costs will be reduced or eliminated so that we may continue to meet operating obligations until such time as we can raise additional working capita. If we are unable, however, to secure the necessary additional working capital as needed, we may be forced to curtail some or all of our operations.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by our annual report on Form 10-KSB, being June 30, 2004, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's Chief Executive Officer. Based upon that evaluation, our company's Chief Executive Officer concluded that our company's disclosure controls and procedures are effective. There have been no significant changes in our company's internal controls or in other factors, which could significantly affect internal control subsequent to the date we carried out our evaluation. Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management including our Chief Executive as appropriate, to allow timely decisions regarding required disclosure.
BUSINESS
We are an application service provider (ASP) that offers a highly accessible, Web-based information and communication system for certain segments of the truck transportation industry. We have developed our P2S MobileMarket(TM) system, which collects, consolidates, processes and presents real-time, transportation-related data that we believe is valuable to logistics personnel working for shippers and carriers. Our customers are both companies shipping full truckloads of goods to or from their facilities, whom we refer to as shippers, and companies transporting this freight, who we refer to as carriers.
THE TRUCKING INDUSTRY
Trucks dominate freight movement in North America. Generally, there are between four and seven separate truck movements required to make a typical finished good. For example, raw materials are transported to component manufacturers, components are shipped to assemblers, assemblers send goods to distributors and distributors transport goods to retailers. Even for imported products, a truck typically is involved at the dock or airport, and for final delivery to the customer.
The trucking industry has been forced to offer specialized services in an effort to accommodate the demands of different products. For example, some products require refrigeration, others require certain delivery guarantees, others are only shipped in small loads, and yet others require a combination of different freight services.
We believe that our P2S MobileMarket(TM) will benefit the following segments of the trucking industry:
- Truckload carriers who use their trucking assets to pick-up and deliver goods only for shippers needing the full capacity of a given truck are the largest and most diverse for-hire segment. These carriers are typically non-union operators that can operate as one driver in the vehicle or they can use driving teams to increase vehicle productivity;
- Owner-operators, often called independent truckers, who own or lease a single truck or very small fleets. These independents play a vital role in the growth of many carriers who use them to expand operations without adding the fixed costs associated with equipment and drivers; and
- Less-Than-Truckload (LTL) carriers which, as the name implies, use their trucking assets to pick-up and deliver goods for several shippers on the same trip. Many of these companies are characterized by networks of consolidation centers and satellite terminals. The average haul for national LTL carriers is about 650 miles and for regional LTL carrier approximately is approximately 250 miles.
Additional carrier segments that could benefit primarily from the real-time tracking feature of our P2S MobileMarket(TM) include:
- Private fleets operated by medium and large shippers who account for more than 50% of all truck movements and 35% of truckload volume, predominately medium to short haul. The visibility of the moving inventory is of substantial value for this type of movement. These carriers are prime targets for our GPS solution with the modified asset tracking tool.
- Dedicated contract carriers that are set up and run according to a specific shipper's needs. In addition, they offer other services such as warehousing and logistics planning. The visibility of the moving inventory is also of substantial value for this type of movement. These carriers are also prime targets for our GPS solution with our modified asset tracking tool.
- Van lines that move household goods, office equipment, trade show and museum displays.
Freight rates increase as shipping requirements become more specialized. Shipping rates are extremely inconsistent across the different market segments based on supply and demand of transportation assets availability. These price variances, as well as operational inefficiencies, contribute to higher transportation costs and lower profit margins for shippers. Shippers have been forced to look for alternatives to remain competitive. We believe that the trucking industry can respond to this need to lower rates through the implementation of a more efficient shipping and communication system.
To compete effectively today, we believe that small and medium sized trucking companies must use computer and wireless communication systems to enhance customer service and productivity and attract as well as to enhance their abilities to retain quality drivers and other personnel by providing competitive compensation, fringe benefits and other incentives. We believe that our MobileMarket(TM) will cost-effectively enable carriers to meet these challenges.
THE P2S MOBILEMARKET(TM)
We designed our P2S MobileMarket(TM) to help smaller motor carriers compete more effectively with large carriers, while also providing valuable logistics services to both small and large shippers. This information, accessed through a password-protected portion of our Web site at www.power2ship.com, helps shippers and carriers by enabling them to minimize excess transportation capacity of carriers, execute freight transactions online and easily track the movement of loads and/or trucking assets online.
The P2S MobileMarket(TM) is a complex data exchange formulated to identify in real-time the current locations of drivers, with tractors and trailers, and their destinations. Rather than just knowing which driver and truck are connected with each shipment, the MobileMarket(TM) determines when and where available capacity will exist. This current and future capacity is captured in our programs and our shipper customers are able to sort capacity data and identify the closest available carrier at the best price. This sorted capacity data is displayed online to the shipper for its selection.
For this software to function, certain information must be collected and maintained in our MobileMarket(TM). We have built a tool for carriers to use, without charge, which extracts the information required to execute the transactions electronically. This tool, which we refer to as our Asset Management Tool, maintains:
- descriptions of carriers' terminal locations and facilities;
- drivers' names, qualification, work schedule, licenses and permits;
- tractor manufacturer, model, type and year;
- trailer manufacturer, model, type and year;
- rates for transportation services; and
- lanes of transportation services.
We believe that this information enables carriers' dispatchers to manage their trucking assets more effectively by tracking these assets, and it also helps them to determine which trucking asset combination is recommended for a given shipment. At the same time, the unused capacity, or future unused capacity, is displayed in the P2S MobileMarket(TM) for our shipper customers to view and select as shipments are input.
In order to complete the marketplace concept for the shipper side of the transaction, we built a shipping tracking and load input screen into the MobileMarket(TM) which provides shippers with a single place to view the location and status of each load booked, en-route and delivered. This screen also consolidates information collected from all carriers currently being used by our shipper customer and, on posted shipments, displays the names and prices of any carriers with available capacity to move the shipment. We believe our product enables our shipper customers to easily track all of their shipments no matter how many carriers they use, as well as being able to identify those carriers with available capacity closest to their pick-up locations for the lowest prices. Some of the information collected to create the shipment tracking and load input screen includes:
- shippers' distribution or pick-up locations, including hours of operation, number of docks, and shipping and receiving hours;
- shippers' preferences/requirements for carriers, such as types of equipment, amount of insurance and historical performance; and
- shipper's payment methods and terms.
Once this information has been collected from shippers and carriers, our MobileMarket(TM) facilitates the execution of transportation transactions by creating:
- scheduled and actual pick-up and delivery times;
- electronic bills of lading;
- alerts upon exception generation which are delays in scheduled pick-ups or deliveries;
- real-time asset/shipment locations; and
- electronic versions of receiver's signatures upon shipment delivery.
We charge the shippers who use our P2S MobileMarket(TM) primarily based upon their actual usage of the system without requiring them to purchase any software or hardware. Carriers who use our system have unlimited access and use of the system for free, although they may choose to purchase vehicle locator and communication devices offered by us to enhance the benefits they derive from the system.
Some of the benefits that we believe shippers may derive from using the P2S MobileMarket(TM) include:
- a single, consolidated online page listing any carriers meeting their pre-defined load, performance and pricing requirements having excess capacity (equipment) to move their loads;
- online access to carriers' profiles and historical performance information prior to selecting the desired carriers;
- reduces the time spent searching for carriers thus enabling logistics personnel to concentrate on other transportation tasks;
- frequently updated location information of inbound loads and, if the shippers have a captive fleet, outbound loads thus enabling shippers to more accurately schedule advertising campaigns, warehouse personnel, etc.;
- receive automatic notification and alerts of probable delivery delays providing more time to develop and implement contingent plans;
- electronic bill of lading and exception management tools permit exact settlements, significantly improving relations with vendors and carriers;
- customized management reporting utilizing historical data is available for an additional charge;
- custom development of interfaces to legacy systems of large shippers; and
- access to logistics experts that will use third-party software to analyze historical data and recommend supply chain optimization strategies.
Some of the benefits that we believe carriers may derive from using the P2S MobileMarket(TM) include:
- free use of an online asset management tool to set-up, store, update and track their trucking assets, such as tractors, trailers and drivers, and provide trucking asset utilization reports;
- frequently updated location information available to constantly track trucking assets;
- receive automatic notification and alerts to pro-actively address possible delays and problems;
- loads offered to qualified carriers with excess capacity without freight brokerage fee or sales commission;
- we pay carriers and assume responsibility for collecting payment from shippers;
- accelerated payment options;
- damaged or improper quantities of goods reported to all parties resulting in faster resolution; and
- access to historical transaction data for reporting and performance metrics.
During fiscal 2004 we spent approximately $320,000 on research and development as compared to approximately $156,000 spent during fiscal 2003. Our research and development expenses are primarily salaries and related to the development and enhancement of our software.
HOW WE GENERATE REVENUE
The majority of our continuing revenue is generated by providing freight transportation services. We provide freight transportation for our shipper customers using various independent carriers located throughout the United States. The price we charge for these freight transportation services depends upon several factors, including the distance the freight is being transported, the type of transportation equipment required to move the freight, the value of the freight and the volume of available loads near the locations where the freight is delivered. Generally, prices range from approximately $1.00 per mile up to $10.00 per mile multiplied by the distance the freight is being transported. The freight rates we charge our shipper customers include all the direct costs of the shipment as negotiated with the carriers transporting the freight and our, gross profit margin that generally ranges from approximately 7.4% to 10.7% .
During fiscal 2003 and fiscal 2004, we also generated revenue from additional services provided pursuant to a contract with one customer, The Great Atlantic and Pacific Tea Company, including:
- access services revenue which included unlimited use of the information available through our P2S Mobile Market(TM) for a fixed monthly fee, as well as a virtual private network (VPN) fee which provided our customer with data encryption and other extra security measures for their data; and ^
- implementation services revenue which were software development fees which provided for the design, programming and testing of a custom developed interface to our P2S Mobile Market(TM).
The fees charged The Great Atlantic and Pacific Tea Company for these services were determined by us based upon the scope of services provided. While we continue to market these access services and implementation services to our existing and potential customer base, we cannot predict if we will have additional revenue from these types of services in future periods.
In the future, as we continue to expand our operations and introduce new services, we may also generate revenue from new product offerings including:
- monthly subscription fees of $99 charged to shippers for unlimited access to the P2S MobileMarket(TM). We do not presently charge subscription fees to any of our shipper customers since a free introductory period is being offered in order to attract more customers to this service. We plan to charge monthly subscription fees during 2005.
- logistics optimization fees charged to shippers seeking to identify and implement strategies to improve the efficiency of their supply chain. In order to support this service we will use sophisticated logistics optimization software to analyze the historical information collected for a particular shipper, identify embedded trends of activity, and recommend methods of improving complete supply chain strategies for them. This service will become available to all shippers once they have sufficient historical information collected in the P2S MobileMarket(TM).
- monthly fees for the use of vehicle locator and communication devices. Our present business model envisions offering our carrier customers three year contracts, with a monthly fee of $79 per truck, which will provide the carrier with wireless access to the P2S MobileMarket(TM) and customer support. Our mobile device consists of a vehicle locator device (GPS) and a handheld personal digital assistant (PDA). The GPS is easily installed in the truck's cab and connected to the truck's battery for power. It uses global positioning system technology to determine specific latitude and longitude coordinates. Next, an internal modem in the GPS wirelessly transmits the location data to the nearest cellular tower. This data is then sent over a terrestrial network to reach the Internet and transmitted to the P2S MobileMarket(TM). The PDA contains our proprietary software that enables communication of location and other transportation-related information between drivers and the P2S MobileMarket(TM) when connected to the GPS. We have negotiated agreements to provide wireless connectivity to carriers at very competitive rates with T-Mobile. We have provided a total of 16 of our vehicle locator and communication devices to six carriers on a no-charge trial basis while we were finalizing this product offering. We recently began offering these devices to our carrier customers at the $79 per truck monthly fee; however, we have not generate any revenue from this product offering as of September 30, 2004.
We also are collaborating with several technology and defense companies that, in response to the Homeland Security Act and Operation Safe Commerce, are working to develop solutions that address global transportation security issues. We believe that our secure, wireless, Internet-based system which uses a combination of global positioning satellite technologies can become a key component in the security solutions being developed by other companies to counteract the threat of terrorism. Our system is capable of capturing and processing data transmitted wirelessly from other technologies that may be part of any comprehensive security system. Examples of these technologies include radio-frequency identification (RFID) tags fastened to the outside of containers and/or trailers, smart tags affixed to the goods inside shipping containers, electronic seals applied at the time the container is loaded and the ability to alert a truck's owner or authorities if a vehicle deviates from its designated route.
In October 2004 we entered into a non-binding letter of intent with L-3 Communications Security and Detection Systems, Inc. which contemplates joint efforts on projects related to monitoring applications associated with container tracking and security status as well as carrier and shipper logistics. The letter of intent also sets forth that the specific roles and responsibilities of both parties will be determined on a project-by-project basis commencing at a meeting to take place no later than October 31, 2004. The collaboration is subject to the execution of a definitive agreement with L-3 Communications. There can be no assurances, however, that we will enter into any definitive agreements with L-3 Communication or any of the other companies we are in discussions with or that we will ever generate any significant revenue or profits from such agreements.
SUPPORT FOR OUR P2S MOBILEMARKET(TM)
In September 2002, we entered into a three-year agreement with BellSouth Corporation to provide a comprehensive communications solution for the P2S MobileMarket(TM) at BellSouth's highly secure-business center in Miami, Florida. In August 2003, International Business Machines Corp. (IBM) assumed BellSouth's obligations under this agreement to provide us with dedicated hosting and support services to us at this facility. Our production web server, which houses all of our front-end web pages or application interfaces, and our production database server, which houses all of the back-end database functionality and information, are backed-up daily and two months of backup tapes are stored by IBM at their location.
In the second quarter of 2003, we entered into a non-exclusive distributor agreement with Wireless Links, Inc., a developer and marketer of GPS locator devices. Under the terms of this agreement we have the right to license and distribute these products to our customers located in North America. This company has agreed to a special pricing arrangement that is based upon quantities ordered, a monthly license fee of $15.00 per device and 10% of any activation commission we receive as a result of activation of the devices on wireless networks. These costs are factored into the 36-month access/service contracts which we enter into with carriers described above. We are obligated to make these monthly licensing fees per device to the company even if our customer is not paying our monthly fees. The agreement provides for termination by either party under certain circumstances, and upon the expiration of the initial three-year term is renewable for successive one-year terms upon the consent of the parties.
KEY CUSTOMERS
All of our revenue for the fiscal year ended May 31, 2003 was derived from two customers, The Great Atlantic & Pacific Tea Company and Tire Kingdom, which represented approximately 53% and 47%, respectively of our revenue. For the fiscal year ended June 30, 2004, Tire Kingdom represented approximately 64% of our revenue and The Great Atlantic & Pacific Tea Company represented approximately 15% of our revenue. Nearly all of the revenue from The Great Atlantic & Pacific Tea Company was derived under the terms of a license and customization agreement which was terminated in January 2004 and does not represent recurring revenues to us.
SALES, MARKETING AND STRATEGIC RELATIONSHIPS
We market our products and services to both shippers and carriers. Our sales and marketing efforts to expand our carrier base are focused on small to mid-sized carriers. We use a combination of direct sales calls and trade show appearances to market our products and services. Our in-house sales organization is currently comprised of three individuals and supported by an implementation manager. We anticipate expanding this organization as our business increases, and we do not anticipate that we will have any difficulty in locating experienced personnel to fill any new sales and marketing positions we may create in the future.
In June 2003, we entered into a strategic alliance with ARL, Inc. ARL, which does business under the name of American Road Line, is a freight brokerage service provided to motor carriers which was established in 1978. Over the years, it has grown from a small, family-owned trucking company into a large competitor with 80 agents nationwide and it maintains a large owner/operator and fleet owner base of equipment. ARL also has a brokerage division that has a carrier base of over 7,000 carriers. Under the terms of our strategic alliance with ARL we have agreed to identify and introduce owner-operators and fleet operators to ARL who may want to sign up with ARL. Any of these new owner-operators and fleet operators who sign up with ARL will become our member-carriers and will be required to install our wireless products in their trucks which electronically provides GPS and PDA information to the MobileMarket(TM).
In September 2003, we entered into an oral agreement with Driver and Equipment Placement Services, a re-marketer of used transportation tractors for multiple financial institutions, to promote our MobileMarket(TM) to owner-operator customers as a tool for them to increase their profitability.
In September 2003, under an oral agreement we formed a strategic alliance with Zethcon Corporation to co-market our track and trace ASP solution, which is part of our ASP software that provides real-time visibility of in-transit inventory. Zethcon Corporation develops and markets warehouse management system and order management system solutions specifically tailored to third party logistics providers and manufacturers with extensive fulfillment requirements. Currently, Zethcon's customers have web-based, real time visibility of the movement of their goods within their "four walls." Our track and trace ASP solution adds real time visibility of shipments after they leave the warehouse. We have agreed to develop the interface between Zethcon's warehouse management system and our ASP software.
In October 2003, we entered into an agreement with Comdata Corporation(R) which allows us to use the Comdata Express Cash system to settle with our carrier customers. This arrangement allows our carrier customers to access funds from freight transactions processed through the P2S MobileMarket(TM) with a private label Power2Ship Comdata card. Our carriers are able to withdraw funds transferred to them from us at no additional costs with the Comchek(R) convenience card at all locations that support the Comdata Network, or have funds direct deposited to their bank accounts. Our carrier customers can also access their funds from over 400,000 Cirrus(R) ATM locations and through the Maestro(R) network.
In April 2004, we formed a strategic alliance with TruckersB2B, Inc. to offer our services to its fleets. TruckersB2B is a majority owned subsidiary of Celadon Group Inc. and is a leading provider of exclusive services and increased purchasing power to small and mid-sized trucking fleets. Through our logistics technology, TruckersB2B members will be able to enroll as P2S member carriers. In August 2004 we announced that we had completed the development and testing of the tools and infrastructure that will support the marketing campaign to TruckersB2B's 16,500 fleets representing over 435,000 trucks.
COMPETITION
ASP-based businesses such as ours are characterized by rapidly advancing technologies, increasing competition and a strong emphasis on proprietary products. We compete with a number of companies including Elogex, Lean Logistics, NetTrans, Internet Truck Stop, Truck-Load Information Center and Link Logistics. Virtually all of our competitors have significantly greater financial resources, operating history and brand recognition than we do. Smaller companies may also prove to be significant competitors, particularly through the establishment of collaborative arrangements with large, established companies. Although various companies offer software or services to address certain portions of our MobileMarket(TM) solution, we do not believe any of these companies offer the comprehensive, end-to-end solution available to our customers. There is no assurance that we will be able to effectively compete within our market segment.
OUR HISTORY
Power2Ship, formerly known as Jaguar Investments, Inc., was formed in Nevada on October 28, 1987. The company was initially a shell company with no business or operations. In December 2001 we acquired 100% of the issued and outstanding shares of common stock of Premier Sports Media and Entertainment Group, Inc. in exchange for 1,000,000 shares of our common stock in a private transaction exempt from registration under the Securities Act of 1933. The shares of common stock issued by us to the Premier Sports Media and Entertainment Group shareholders in this transaction represented approximately 8% of our issued and outstanding common stock immediately after the transaction. Before this transaction we did not engage in any material business operations.
On March 11, 2003, we consummated a merger with Freight Rate, Inc. d/b/a Power2Ship, under which Freight Rate became our wholly owned subsidiary. At the effective time of the merger, the holders of Freight Rate's common and preferred stock, warrants and options exchanged those securities for the following of our securities:
- 11,869,712 shares of our common stock,
- options to acquire an aggregate of 13,986,679 shares of common stock at exercise prices of $.38 to $.75 per share,
- common stock purchase warrants to acquire 3,913,204 shares of our common stock at exercise prices of $.75 to $1.75 per share,
- 100,000 shares of our Series X Preferred Stock which are convertible on March 11, 2004 into shares of common stock based upon the degree to which a one-year funding schedule of up to $2.5 million is met. If the entire $2.5 million of funding is concluded, the Series X Preferred Stock will be cancelled.
- 87,000 shares of our Series Y Preferred Stock issued to our CEO in exchange for an equal number of Freight Rate's Series C Convertible Preferred Stock owned by him at the time of the merger.
In connection with the merger, R&M Capital Partners, Inc., a principal stockholder of our company prior to the merger with Freight Rate, agreed to cancel 2,650,000 shares of our common stock owned by them for no consideration. R&M Capital Partners, Inc., which was our largest stockholder prior to the merger, agreed to cancel these shares to satisfy a term of the merger agreement which required that the securities to be issued to Freight Rate in the transaction represent 70% of our fully diluted shares after the merger. For accounting purposes, the cancellation of shares was treated as part of the recapitalization.
For accounting purposes, the transaction was treated as a recapitalization of Freight Rate and accounted for as a reverse acquisition.
Under the terms of the merger agreement, we issued an aggregate of 100,000 shares of our Series X Convertible Preferred Stock to holders of Freight Rate's common stock and Series C Convertible Preferred Stock prior to the transaction, including to Mr. Gass, a former member of our board of directors and Mr. Richard Hersh, our Chairman and CEO.
Simultaneous with closing the merger we entered into a stock purchase agreement under which we sold 95% of the issued and outstanding common stock of Premier Sports Media and Entertainment Group to The DAR Group, Inc., an unaffiliated third party, in consideration for the forgiveness by The DAR Group of all of our indebtedness to The DAR Group of approximately $2.0 million and the assumption by The DAR Group of all of our liabilities as of the closing date of the stock purchase agreement.
GOVERNMENT REGULATION
The transportation industry has been subject to legislative and regulatory changes that have affected the economics of the industry by requiring changes in operating practices or influencing the demand for, and cost of providing, transportation services. We cannot predict the effect, if any, that future legislative and regulatory changes may have on the transportation industry.
We are subject to licensing and regulation as a transportation broker and are licensed by the U.S. Department of Transportation ("DOT"). In August 2002, Freight Rate, Inc. obtained a license from the DOT to engage in operations arranging or brokering transportation of freight (except household goods) by motor vehicle. Effective October 20, 2003 that license was transferred to Power2Ship, Inc. This DOT license remains effect so long as we maintain insurance coverage for the protection of the public as well as designation of our agents for service of process. We presently maintain insurance coverage in the amount of $250,000 for contingent cargo and $1,000,000 for contingent auto which we believe is sufficient for the protection of the public.
INTELLECTUAL PROPERTY
To protect our proprietary rights, we rely generally on copyright, trademark and trade secret laws, confidentiality agreements with employees and third parties, and agreements with consultants, vendors and customers, although we have not signed such agreements in every case. Despite such protections, a third party could, without authorization, copy or otherwise obtain and use our intellectual property. We can give no assurance that our agreements with employees, consultants and others who participate in development activities will not be breached, or that we will have adequate remedies for any breach, or that our trade secrets will not otherwise become known or independently developed by competitors.
In June 2004 we filed a provisional patent application with the United States Patent and Trademark Office entitled System and Method for Managing Logistics and Revenue Logistics for the Transportation of Freight. We also have filed applications to register certain of our trademarks and service marks in the United States. In general, there can be no assurance that our efforts to protect our intellectual property rights through copyright, trademark and trade secret laws will be effective, if granted, or if granted that these protections will be sufficient so as to prevent misappropriation of our intellectual property. Our failure or inability to protect our proprietary rights could materially adversely affect our business, financial condition and results of operations.
EMPLOYEES
As of September 30, 2004, we had 27 full-time employees. None of our employees are subject to collective bargaining agreements, and we believe that we have satisfactory relationships with our employees.
PROPERTIES
Our principal executive offices are located in approximately 10,545 square feet of commercial office space at Congress Corporate Plaza, 903 Clint Moore Road, Boca Raton, Florida. We lease these premises from an unaffiliated third party under a lease expiring in May 2007. This lease requires annual payments of base rent during fiscal years 2005 and 2006 of approximately $119,000 and $125,000, respectively, as well as approximately $50,000 per year for our proportionate share of operating costs for the premises. We have provided the landlord with a security deposit of approximately $27,700.
LEGAL PROCEEDINGS
In January 2004, we were named as one of a number of defendants in a civil action filed in the U.S. District Court for the Southern District of New York titled Dale Sobek and Seema Bhagat vs. Joseph Quattrochi, Cardinal Capital Management, Inc., R&M Capital Partners, Inc., Power2Ship, Inc. and Madison Stock Transfer, Inc, case number 03CV10219. The lawsuit was filed by a stockholder of our company who purportedly acquired shares of our common stock from another of our stockholders in May 2002 and received additional shares as collateral from the selling stockholder. Following the transaction, the selling stockholder induced our transfer agent to issue it replacement shares for the shares of our common stock allegedly provided to the plaintiff as collateral. The plaintiff's are alleging breach of contract and racketeering and are seeking punitive damages from all defendants of $5,000,000 and $750,000 for conversion by certain of the defendants, including our company. We believe that the claim is without merit as it pertains to our company, and we have filed a motion to dismiss all claims with prejudice. The motion is pending judicial determination.
In April 2004, we obtained an order for provisional relief from the Supreme Court of the State of New York, County of Kings, against Flow Capital Advisors et al in the matter of Power2Ship, Inc. vs. Flow Capital Advisors, Inc., Douglas F. Gass and Madison Stock Transfer, Inc. restraining Flow Capital from transferring or in any manner encumbering any securities of Power2Ship held by it. Flow Capital received 779,155 shares of our common stock and an option to purchase 200,000 shares of our common stock, in addition to other compensation, pursuant to two consulting agreements between Flow Capital and Power2Ship. In our compliant we alleged that the first consulting agreement represented a wrongful usurping of corporate opportunity by the principal shareholder of Flow Capital and that both consulting agreements were fraudulently obtained through material omissions and misrepresentations made prior to, and after, entering into the consulting agreements. Mr. Douglas F. Gass, a control person of Flow Capital Advisors, is a former member of our board of directors. In May 2004, we initiated an arbitration proceeding under the rules of the American Arbitration Association in Florida to resolve this dispute and discontinued our legal action in the Supreme Court of the State of New York. In July 2004, Mr. Gass and Flow Capital Advisors entered a motion in the Broward County, Florida 17th Judicial Circuit Court to stay the arbitration. We submitted our answer to the complaint and counterclaims to the court on August 12, 2004. The court granted the motion to stay the arbitration and the matter remains pending.
MANAGEMENT
The following table sets forth information on our executive officers and directors. All directors are elected at each annual meeting and serve for one year and until their successors are elected and qualify. Our officers serve at the pleasure of our board of directors.
Name Age Positions Richard Hersh 61 Chief Executive Officer and Chairman of the Board of Directors Michael J. Darden 34 President and Director Brett Kublin 44 Director |
RICHARD HERSH. Mr. Hersh has been Chairman and Chief Executive Officer of our company since March 2003 and served in the same capacities with Freight Rate, Inc. from August 2001 until March 2003. Mr. Hersh served as Chief Operating Officer of Freight Rate, Inc. from 1998 until being elected CEO and Chairman in April 2001. Prior to joining Freight Rate, Inc., he held several management positions including Operations Manager of Express Web, Inc., Chief Executive Officer of TRW, Inc. a start-up recycling company, Vice President of Operations for Book Warehouse, a discount bookstore chain, and Director of Operations for Dollar Time. Also, Mr. Hersh founded and was Chief Executive Officer of Helyn Brown's, a retailer of women's apparel with stores in Florida and Louisiana, which he sold after approximately 16 years.
MICHAEL J. DARDEN. Mr. Darden has served as our president since April 2003 and a member of our board of directors since June 2003. From June 2002 until April 2003, Mr. Darden provided us with various consulting services in the areas of strategic planning, operations and logistics. From 1997 until June 2002, he was president of Darden Distribution & Warehouse Consulting, Inc., a company he founded which designed, developed, implemented and managed warehouse management systems, fulfillment and distribution systems, automated order entry systems and shipping manifest systems for several clients, as well as establishing and managing its own warehousing, manufacturing and distribution operations.
BRETT KUBLIN. Mr. Kublin has been a member of our Board of Directors since January 2004. Since 1982 Mr. Kublin has been Vice President of Simco Recycling Corporation, a Florida corporation engaged in collecting, sorting, bailing and shipping various types of recyclable items.
All directors are elected at each annual meeting and serve for one year and until their successors are elected and qualified. Our officers serve at the pleasure of our board of directors.
JOHN URBANOWICZ. Mr. Urbanowicz, 47, has served as our Vice President of Information Technology since January 2003. From June 2002 until January 2003, he provided us with various consulting services in the areas of technology, logistics and operations. During the approximately 20 years prior to joining our company, Mr. Urbanowicz was involved predominantly in the logistics and distribution fields as a distribution manager, general manager, information technology manager and, most recently, as a software and business consultant. From January 2002 until April 2002 Mr. Urbanowicz was Director Application Development for Independent Read360Network, Inc. where he was responsible for application design and development for content delivery to Palm and wireless devices through radio frequency (RF) and infrared radiation (IR) connectivity. From August 2000 until December 2001 he served as Vice President of Information Technology at Healthtrac Corporation where he was responsible for product definition and development of an online health portal and a health risk assessment tool including content management capability, and from April 1999 until June 2000 Mr. Urbanowicz was Vice President of Information Technology for Furkon, Inc. where he was responsible for overseeing day to day business operations along with overseeing in excess of 40 developers in design, testing and implementation of multi-tier browser based application using Java and Oracle.
ARNOLD J. WERTHER. Mr. Werther, 48, has been employed by us since March 2004, serving as Director of Sales until August 2004 when he was appointed Vice President of Sales and Operations. From June 2003 until January 2004 Mr. Werther was Vice President Supply & Logistics Transportation for The Great Atlantic & Pacific Teach Company, Inc. (NYSE: GAP) where he was responsible for all logistics and transportation for the U.S. operations of that company. From July 2001 until March 2003 he was an Account Executive, America, for MARC Global, a Virginia-based company that is a provider of supply chain execution software and services, where he was responsible for new sales with U.S. third party logistics providers. From April 2000 to July 2001 Mr. Werther was a Strategic Account Executive with EXE Technologies, Inc., a Texas-based provider of fulfillment, warehousing and distribution software for e-commerce and traditional distribution channels. At EXE Technologies Mr. Werther was responsible for both new and existing business development. From 1999 until April 2000 Mr. Werther was Director of Distribution Operations for AEP Industries, Inc., a New Jersey-based worldwide manufacturer of plastic packaging films where he was responsible for directing all logistics functions, including customer service and inventory control operations at all seven domestic manufacturing plan locations and outside distribution centers. From 1997 to 1999 Mr. Werther was General Manger, Northeast Region, for National Distribution Centers, a New Jersey-based nationwide provider of third party logistics services where he was responsible for all aspects of regional sales and operations for 10 sites in the northeastern U.S. Mr. Werther received a B.S. Commerce from Rider University, a Physical Distribution and Transportation Management Degree from the Academy of Advanced Traffic in New York and participated in the Logistics Management Executive Development Program at Michigan State University.
COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors has not established any committees, including an Audit Committee or a Nominating Committee. The functions of those committees are being undertaken by the entire board as a whole. No member of our board is a financial expert. As we expand our board in the future we will seek to add one or more members who independent directors and financial experts.
We have adopted a Code of Ethics and Business Conduct to provide guiding principles to our principal executive officer, principal financial officer, and principal accounting officer or controller of our company in the performance of their duties. Our Code of Ethics and Business Conduct also strongly recommends that all directors and employees of our company comply with the code in the performance of their duties. Our Code of Ethics and Business Conduct provides that the basic principle that governs all of our officers, directors and employees is that our business should be carried on with loyalty to the interest of our stockholders, customers, suppliers, fellow employees, strategic partners and other business associates. We believe that the philosophy and operating style of our management are essential to the establishment of a proper corporate environment for the conduct of our business.
Generally, our Code of Ethics and Business Conduct provides guidelines regarding:
* conflicts of interest,
* financial reporting responsibilities,
* insider trading,
* inappropriate and irregular conduct,
* political contributions, and
* compliance with laws.
EXECUTIVE COMPENSATION
The table below sets forth all cash compensation paid to our executive officers for services they rendered to us in all capacities during the fiscal years presented.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Name and Principal Fiscal Other Annual Restricted Securities Underlying All Other
Position Year Salary Bonus Compensation Stock Awards Options SAR (#) Compensation
--------------------- ---- ------------ ------ -------------- ------------- --------------- --------------
Richard Hersh, 2004 $164,713 (1) $0 $0 $0 0 $0
Chief Executive 2003 $ 59,347 $0 $0 $0 0 $135,000 (2)
Officer 2002 $ 35,192 $0 $0 $0 0 $ 0
Michael J. Darden, 2004 $148,319 $1,083 $19,200 $0 0 $ 0
President 2003 $ 14,450 $7,500 $50,725 $0 1,888,999 $ 0
2002 - - - - - -
Gregory Ricca, 2004 - - - - - -
Former Chief 2003 - - - - - -
Executive Officer (3) 2002 $ 0 $0 $37,500 (4) - - -
-33-
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(1) Includes $44,713 in accrued salary that remains unpaid as of the date of this prospectus. (2) On March 10, 2003, we issued Mr. Hersh a convertible promissory note in the amount of $135,000 in exchange for his forgiveness of $147,520 of accrued salary. The interest rate of the note is 8% per annum and it has a maturity date of June 30, 2006. The outstanding principal balance of the note may be converted at any time into shares of our common stock at a conversion price equal to the lesser of (a) $1.51 per share, or (b) 50% of the average of the closing bid price of the common stock for the five trading days immediately preceding the date of conversion, but not less than $0.75 per share. (3) Mr. Ricca served as our CEO from December 19, 2001 until March 5, 2003. (4) In fiscal 2002, we issued Mr. Ricca 30,000 shares of our common stock, with a fair market value of |
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to our executive officers during fiscal year 2004.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NO. OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED JUNE 30, 2004 JUNE 30, 2004(1)
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------- -------- -------- ----------- ------------- ----------- -------------
Richard Hersh 0 n/a 3,621,761 500,000 0 0
Michael J. Darden 0 n/a 1,738,998 150,000 0 0
Brett Kublin 0 n/a 264,833 0 0 0
(1) Based upon the closing bid price of our common stock as reported on the OTC Bulletin
Board on June 30, 2004 of $0.42.
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DIRECTOR'S COMPENSATION
We do not have any standard arrangements with members of our board of directors which provide them with compensation for any services provided as a director. In August 2003 at the sole discretion of the board of directors we issued Mr. Douglass Gass, who was then a member of our board of directors, 50,000 shares of our common stock which was valued at $31,500 as compensation for services rendered by him. In the future, our board of directors, in its sole discretion, may determine to provide compensation to our independent, non-employee directors for their services on our board. We are unable at this time to estimate the amount of such compensation.
EMPLOYMENT AGREEMENTS
Effective January 1, 2003, we entered into a five-year employment agreement with Richard Hersh to serve as our CEO. Under the terms of this agreement, at such time as we have received funding of at least $2 million or are reporting cash flow of at least $250,000 per month, Mr. Hersh will receive a base salary of not less than $150,000 for the first year of the agreement, with annual increases of at least 20% per year to be negotiated on each anniversary of the commencement date of the agreement. Until such time as we had received the funding Mr. Hersh was to receive a minimum of 75% of his base salary. He began receiving his minimum salary in 2003 and his base salary was increased to $180,000 on January 1, 2004. He had accrued salary of $44,713 as of the end of fiscal year 2004.
Mr. Hersh is eligible to receive a performance-based bonus based on 1% of our earnings before interest, taxes, depreciation and amortization (EBITDA) during each fiscal year but has not earned any performance-based bonuses. Mr. Hersh is also entitled to participate in all benefits we offer our senior executives as well as a monthly car allowance of $600. Under the terms of the agreement we granted Mr. Hersh options to purchase 750,000 shares of our common stock under our Stock Incentive Plan, with an exercise price of $0.50 per share, of which 250,000 shares have vested and the remaining 500,000 shares vest one-half on January 1, 2005 and the balance on January 1, 2006. The term of employment is automatically renewed for successive one year terms beginning on the five-year anniversary of the agreement, unless previously the agreement has been terminated according to its termination provisions or if either we or Mr. Hersh elect to terminate the agreement by written notice at least 90 days prior to the expiration of the then-current term of employment.
Mr. Hersh is subject to customary non-competition and non-disclosure restrictions. The agreement terminates upon his death or disability, or may be terminated with or without cause by us, or by Mr. Hersh with good reason. In the event of a termination upon Mr. Hersh's death or disability, termination for cause as defined in the employment agreement or resignation without reason, we are obligated to pay his salary and benefits through the date of termination. In the event we should terminate Mr. Hersh without cause, we must pay him all compensation that he would have been otherwise entitled to through the end of the term of the agreement in a lump sum within 10 days of the date of termination. If we should terminate Mr. Hersh within one year of a "change of control" of our company as defined in the employment agreement, we are obligated to pay him his base salary through the date of termination, including all benefits and any performance bonus which he may have earned through the date of termination together with severance equal to two times his then current base salary and the vesting of all then unvested stock options will accelerate.
Effective April 15, 2003, we entered into a four-year employment agreement with Michael J. Darden to serve as our President Under the terms of this agreement, at such time as we have received funding of at least $2 million or are reporting cash flow of at least $250,000 per month, Mr. Darden will receive a base salary of not less than $150,000 for the first year of the agreement, with annual increases of at least 15% per year to be negotiated on each anniversary of the commencement date of the agreement. Until such time as we had received the funding Mr. Darden was to receive a minimum of 75% of his base salary. He began receiving his minimum salary in April 2003. His base salary was increased to $172,500 on April 15, 2004.
Mr. Darden is eligible to receive a performance-based bonus based on 1% of our earnings before EBITDA during each fiscal year but has not earned any performance-based bonuses. Mr. Darden is also entitled to participate in all benefits we offer our senior executives as well as a monthly car allowance of $600. Under the terms of the agreement we granted Mr. Darden options to purchase 300,000 shares of our common stock under our Stock Incentive Plan, with an exercise price of $1.01 per share, of which 150,000 shares have vested and the remaining 150,000 shares vest on April 15, 2005. The term of employment is automatically renewed for successive one year terms beginning on the five-year anniversary of the agreement, unless previously the agreement has been terminated according to its termination provisions or if either we or Mr. Darden elect to terminate the agreement by written notice at least 90 days prior to the expiration of the then-current term of employment.
Mr. Darden is subject to customary non-competition and non-disclosure restrictions. The agreement terminates upon his death or disability, or may be terminated with or without cause by us, or by Mr. Darden with good reason. In the event of a termination upon Mr. Darden's death or disability, termination for cause as defined in the employment agreement or resignation without reason, we are obligated to pay his salary and benefits through the date of termination. In the event we should terminate Mr. Darden without cause, we must pay him all compensation that he would have been otherwise entitled to through the end of the term of the agreement in a lump sum within 10 days of the date of termination. If we should terminate Mr. Darden within one year of a "change of control" of our company as defined in the employment agreement, we are obligated to pay him his base salary through the date of termination, including all benefits and any performance bonus which he may have earned through the date of termination together with severance equal to two times his then current base salary and the vesting of all then unvested stock options will accelerate.
Effective January 1, 2003, we entered into a four-year employment agreement with John Urbanowicz to serve as our Vice President of Technology and Information. Under the terms of this agreement, at such time as we have received funding of at least $2 million or are reporting cash flow of at least $250,000 per month, Mr. Urbanowicz will receive a base salary of not less than $125,000 for the first year of the agreement, with annual increases of at least 10% per year to be negotiated on each anniversary of the commencement date of the agreement. Until such time as we had received the funding Mr. Urbanowicz was to receive a minimum of 70% of his base salary. He began receiving his minimum salary in January 2003. His base salary was increased to $137,500 on January 1, 2004.
Mr. Urbanowicz is eligible to receive a performance-based bonus as determined by our board of directors but has not earned any performance-based bonuses. Mr. Urbanowicz is also entitled to participate in all benefits we offer our senior executives. Under the terms of the agreement we granted Mr. Urbanowicz options to purchase 993,124 shares of our common stock under our Stock Incentive Plan, with an exercise price of $.38 per share, which have vested. The term of employment is automatically renewed for successive one year terms beginning on the four-year anniversary of the agreement, unless previously the agreement has been terminated according to its termination provisions or if either we or Mr. Urbanowicz elect to terminate the agreement by written notice at least 90 days prior to the expiration of the then-current term of employment.
Mr. Urbanowicz is subject to customary non-competition and non-disclosure restrictions. The agreement terminates upon his death or disability, or may be terminated with or without cause by us, or by Mr. Urbanowicz with good reason. In the event of a termination upon Mr. Urbanowicz's death or disability, termination for cause as defined in the employment agreement or resignation without reason, we are obligated to pay his salary and benefits through the date of termination. In the event we should terminate Mr. Urbanowicz without cause, we must pay him all compensation that he would have been otherwise entitled to through the end of the term of the agreement in a lump sum within 10 days of the date of termination. If we should terminate Mr. Urbanowicz within one year of a "change of control" of our company as defined in the employment agreement, we are obligated to pay him his base salary through the date of termination, including all benefits and any performance bonus which he may have earned through the date of termination together with severance equal to two times his then current base salary and the vesting of all then unvested stock options will accelerate.
2001 EMPLOYEE STOCK COMPENSATION PLAN
In January 2001, we adopted our 2001 Employee Stock Compensation Plan. The plan is intended to further the growth and advance the best interests of our company, by supporting and increasing our ability to attract, retain and compensate persons of experience and ability and whose services are considered valuable, to encourage the sense of proprietorship in such persons, and to stimulate the active interest of such persons in the development and success of Power2Ship. The plan provides for stock compensation through the award of shares of our common stock.
The board of directors may appoint a Compensation Committee of the board of directors to administer the plan. In the absence of such appointment, our board of directors is responsible for the administration of this plan. To date, our board has not appointed a Compensation Committee to administer the plan. The board of directors has the sole power to award shares of common stock under the plan, as well as determining those eligible to receive an award of plan shares. Awards of shares under the plan may be made as compensation for services rendered, directly or in lieu of other compensation payable, as a bonus in recognition of past service or performance or may be sold to an employee.
The maximum number of shares which may be awarded under the plan is 5,000,000. At September 30, 2004, we have granted 3,481,000 shares under the plan. However, no award can be issued that would bring the total of all outstanding awards under the plan to more than 20% of the total number of shares of our common stock at the time outstanding. Awards may generally be granted to:
* executive officers, officers and directors (including advisory and other special directors) of Power2Ship;
* full-time and part-time employees of our company;
* natural persons engaged by us as a consultant, advisor or agent; and
* a lawyer, law firm, accountant or accounting firm, or other professional or professional firm engaged by us.
Grants to employees may be made for cash, property, services rendered or other form of payment constituting lawful consideration under applicable law. Shares awarded other than for services rendered may not be sold at less than the fair value of our common stock on the date of grant.
The plan will terminate on the tenth anniversary of its effective date, unless terminated earlier by the board of directors or unless extended by the board of directors, after which time no incentive award grants can be authorized under the plan. The board of directors has absolute discretion to amend the plan, however, the board has no authority to extend the term of the plan, to increase the number of shares subject to award under the plan or to amend the definition of "Employee" under the plan.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
As authorized by the Nevada Revised Statutes, our articles of incorporation provide that none of our directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability for:
- any breach of the director's duty of loyalty to our company or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock redemptions or
repurchases; and
- any transaction from which the director derived an improper personal
benefit.
This provision limits our rights and the rights of our stockholders to recover monetary damages against a director for breach of the fiduciary duty of care except in the situations described above. This provision does not limit our rights or the rights of any stockholder to seek injunctive relief or rescission if a director breaches his duty of care. These provisions will not alter the liability of directors under federal securities laws. Our by-laws require us to indemnify directors and officers against, to the fullest extent permitted by law, liabilities which they may incur under the circumstances described above.
Our articles of incorporation further provide for the indemnification of any and all persons who serve as our director, officer, employee or agent to the fullest extent permitted under Nevada law.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons according to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 2003, we granted 30,000 shares of our common stock to Mr. Darden, our president, as compensation for services rendered by him which we valued at $23,700. In August 2003, we issued 50,000 shares of our common stock to Mr. Douglas Gass, who was then a member of our board of directors, as compensation for services rendered by him which we valued at $31,500. In January 2004, we issued 25,000 shares of our common stock to Mr. Gass, a former member of our board of directors, as compensation for services rendered by him which we valued at $10,625. In April 2004, we issued 25,000 shares of our common stock to Mr. Urbanowicz, our Vice President of Information Technology, as compensation for services rendered by him which we valued at $9,500. All of the foregoing were issued pursuant to our 2001 Employee Stock Compensation Plan.
On March 10, 2003, we entered into a two-year consulting agreement with Flow Capital Advisors, Inc., a corporate financial advisory firm of which Mr. Douglas Gass, a former member of our board of directors, is president to advise us in our funding and public relations activities. This agreement is now the subject of litigation as described elsewhere in this prospectus.
On March 10, 2003, we issued Mr. Hersh, our CEO, a convertible promissory note in the amount of $135,000 in exchange for his forgiveness $147,520 of accrued salary. The interest rate of the note is 8% per annum and it has a maturity date of June 30, 2006. The outstanding principal balance of the note may be converted at any time into shares of our common stock at a conversion price equal to the lesser of (a) $1.51 per share, or (b) 50% of the average of the closing bid price of the common stock for the five trading days immediately preceding the date of conversion, but not less than $0.75 per share. On September 28, 2003, we forgave a $20,000 short-term note from Mr. Hersh by reducing the outstanding balance of the convertible promissory note to $115,000.
On March 10, 2003, we issued a convertible promissory note in the principal amount of $125,000 to Mr. Michael Garnick, one of our principal stockholders, which bore interest at the rate of 5% per annum and it had a maturity date of April 10, 2004. We had used the funds for working capital. The holder of the note had the right to convert the outstanding principal balance of the note and interest accrued thereon into shares of our common stock at a conversion price of $0.40 per share. On June 5, 2003, we borrowed an additional $100,000 from this stockholder, and we issued the lender a new convertible promissory note in the principal amount of $225,000. The new note bears interest of 5% per annum, has a maturity date of December 5, 2003 and has the same conversion provision as provided for in the original note. Subsequent to its issuance, this conversion provision in the new note was amended to change the conversion price to $0.79 per share which equaled the closing market price of our common stock on the issue date. We used these additional funds for working capital $100,000 of the principal amount of note was repaid on July 22, 2003. We have also granted the note holder warrants to purchase 75,000 shares of common stock at a price of $0.79 per share which expired on June 5, 2004. These warrants were valued at $16,650 and recorded as interest expense. Further, the new note has a prepayment provision requiring certain amounts of principal and interest accrued thereon to be repaid upon our receipt of capital in excess of specified amounts during each month of the term of the note. On August 9, 2003, the stockholder agreed to cancel the prepayment provision of the note in consideration for 125,000 shares of our common stock valued at $72,500. On September 18, 2003, the stockholder purchased 25,800 shares of our Series B preferred stock valued at $129,000 and paid for it by forgiving the $125,000 outstanding balance on the convertible note and accrued interest thereon.
On March 6, 2003, we issued a convertible promissory note in the amount of $175,000 to an unaffiliated stockholder. The interest rate of the note is 8% per annum and it has a maturity date of June 30, 2006. The holder of the note has the right to convert the outstanding principal balance of the note into shares of our common stock at a conversion price equal to the lesser of (i) $1.51 per share, or (ii) 50% of the average of the closing bid price of the common stock for the five trading days immediately preceding the date of conversion, but not less than $0.25 per share.
In November 2002, Freight Rate lent Mr. Richard Hersh, our CEO, $20,000 under the terms of a short-term demand note bearing interest at the rate of 6% per annum. This transaction occurred prior to the reverse merger when Freight Rate was a private company. The note, including interest, has been paid in full.
At May 31, 2002, Freight Rate owed its former Chairman, $83,733 relating to services performed under a consulting agreement which was cancelled on March 15, 2001. On March 6, 2003, the indebtedness was forgiven and converted to fully vested options to purchase 221,755 shares of our common stock at an exercise price of $0.38 per share, resulting in a gain of $79,304. In March 2002, we repurchased 50,000 shares of our common stock owned by Freight Rate's former Chairman for aggregate consideration of $25,000. We issued him a non-interest bearing note that was paid in full by May 2003.
From August 1, 2001 through May 31, 2003, we shared office facilities leased by a company owned by Freight Rate's former Chairman. The amount paid for rent for the year ended May 31, 2003 was $26,712 and for the year ended December 31, 2002 it was $21,783.
Previously, Messrs. Hersh, Darden and Urbanowicz, officers and directors or key employees of our company, each individually owned a 10% interest in all of our intellectual property, including certain trademarks, service marks and patent rights to our ASP software. In July and August 2004 we acquired this 30% interest from Messrs. Hersh, Darden and Urbanowicz in exchange for an aggregate of 600,000 shares of our common stock, valued at $226,000, pursuant to the terms of ^Intellectual Property Assignment Agreements. While all rights to the intellectual property have now been assigned to our company by each of Messrs. Hersh, Darden and Urbanowicz, under the terms of these agreements at the request of the recipients we agreed to defer the issuance of the shares of our common stock until January 4, 2005. We will, however, record an expense of $226,000 during the first quarter of fiscal 2005 for the shares of our common stock to be issued as consideration under this agreement as the number of shares to be issued are fixed and our expense is equal to the fair market value of those shares on the date we reached the agreement to acquire the rights.
Messrs. Hersh and Darden are two of the three members of our board of directors. In our discussions with Messrs. Hersh, Darden and Urbanowicz leading up to the signing of the agreement, we analyzed our business in an attempt to reach a fair value of the intellectual property rights we wished to acquire. As a result of this analysis, we believe that the value of our business is based primarily on our unique intellectual property, including but not limited our trade marks, service marks and ASP software. Our board of directors determined that the value of our company, based upon our market capitalization as calculated using the average closing price of our common stock for the 30 trading days preceding the agreement to acquire the intellectual property rights, was $15 million. In determining the ultimate purchase price of the intellectual property rights, we established an arbitrary amount of $226,000, which represented approximately 1.5% of our market capitalization. We believe that this amount is fair to our stockholders and reasonable consideration to be paid to Messrs. Hersh, Darden and Urbanowicz for the rights we acquired.
Before deciding to use a market capitalization valuation method, alternative valuation methods were considered by our board of directors, but upon analysis were deemed to be inappropriate. Our board of directors considered a valuation based on book value, but determined that book value was not meaningful since we have a negative book value. Our board of directors considered a valuation based on discounted cash flow, but deemed this basis to be unreliable since it requires numerous assumptions, including our projected cash flows, which are difficult to make with any degree of confidence at our current stage of development. Finally, our board of directors considered a valuation based on comparable company analysis, but determined it would not be possible since we are unaware of any comparable companies. ^
In October 2004 we entered into a consulting agreement with Michael Garnick, an attorney and a principal shareholder of our company, to provide business advisory services to us for a period of one year. We issued Mr. Garnick 150,000 shares valued at $55,500 which will be recorded as consulting expense.
PRINCIPAL STOCKHOLDERS
At September 30, 2004, there were 38,255,289 shares of our common stock and 87,000 shares of our Series Y Convertible Preferred Stock issued and outstanding. Our common stock and Series Y Convertible Preferred Stock are our only classes of our voting securities. The following table sets forth, as of September 30, 2004, information known to us relating to the beneficial ownership of these shares by:
- each person who is the beneficial owner of more than 5% of the
outstanding shares of the class of stock;
- each director;
- each executive officer; and
- all executive officers and directors as a group.
Unless otherwise indicated, the business address of each person listed is in care of 903 Clint Moore Road, Boca Raton, Florida 33487. We believe that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them. Under securities laws, a person is considered to be the beneficial owner of securities he owns and that can be acquired by him within 60 days from September 30, 2004 upon the exercise of options, warrants, convertible securities or other understandings. We determine a beneficial owner's percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person and which are exercisable within 60 days of September 30, 2004, have been exercised or converted.
Name of Amount and Nature of Percentage Percent of Beneficial Owner Beneficial Ownership of Class Voting Control (1) ---------------- --------------------- ---------- ----------------- Common Stock ------------ Richard Hersh(2) 4,383,662 10.3% 36.4% Michael J. Darden (3) 1,738,998 4.3% 3.0% Brett Kublin (4) 264,834 * * All officers and directors as a group (three persons)(2)(3)(4) 6,387,494 14.3% 38.4% Michael Garnick (5) 3,960,667 10.2% 7.1% Series Y Convertible Preferred Stock ------------------------------------ Richard Hersh(2) 87,000 100% 36.4% Michael J. Darden (3) 0 - 3.0% Brett Kublin (4) 0 - * All officers and directors as a group (three persons)(2)(3)(4) 87,000 100% 38.4% * represents less than 1% (1) Percentage of Voting Control is based upon the number of issued and outstanding shares of our common stock and shares of our Series Y Convertible Preferred Stock at September 30, 2004. At September 30, 2004 the holders of our outstanding shares of common stock and Series Y Convertible Preferred Stock were entitled to an aggregate of 55,605,289 votes at any meeting of our stockholders, which includes 38,205,289 votes attributable to the outstanding shares of common stock and 17,400,000 votes attributable to the outstanding shares of Series Y Convertible Preferred Stock. Each share of Series Y Convertible Preferred Stock entitles the holder to 200 votes at any meeting of our stockholders and such shares will vote together with our common stockholders. (2) Includes 4,121,761 shares of our common stock issuable upon the exercise of options at an exercise price of $0.38 per share and 153,333 shares of our common stock issuable upon the conversion of a promissory note in the principal amount of $115,000 based upon a conversion price of $0.75 per share. (3) Includes 1,738,998 shares of common stock issuable upon the exercise of options at exercise prices ranging from $0.38 to $1.01 per share. (4) Includes 264,834 shares of common stock issuable upon the exercise of options at an exercise price of $0.38 per share. (5) The amount beneficially owned includes 25,800 shares of our Series B Convertible Preferred Stock which is convertible into 516,000 shares of our common stock. Mr. Garnick's address is 1590 Stockton Road, Meadowbrook, PA 19046. The amount beneficially owned excludes an additional 150,000 shares of our common stock which were issued to Mr. Garnick in October 2004. See "Certain Relationships and Related Transactions" earlier in this prospectus. |
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 250,000,000 shares of common stock, $.001 par value per share, and 1,000,000 shares of preferred stock, par value $.01 per share, of which 200,000 shares have been designated as Series B Convertible Preferred Stock, 20,000 shares have been designated as Series C Convertible Preferred Stock and 87,000 shares have been designated as Series Y Convertible Preferred Stock. The remaining 693,000 shares of our preferred stock remain without designation. As of September 30, 2004, there are 38,255,289 shares of common stock, and 198,000 shares of Series B Convertible Preferred Stock, 10,832 shares of Series C Convertible Preferred Stock and 87,000 shares of Series Y Convertible Preferred Stock issued and outstanding.
COMMON STOCK
Holders of common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of our liquidation, dissolution or winding up, subject to the preferences of any series of preferred stock, each outstanding share entitles its holder to participate in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock.
Holders of common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions for the common stock. The rights of the holders of common stock are subject to any rights that may be fixed for holders of preferred stock, when and if any preferred stock is authorized and issued.
PREFERRED STOCK
Our board of directors, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our board of directors may authorize the issuance of preferred stock which ranks senior to our common stock for the payment of dividends and the distribution of assets on liquidation. In addition, our board of directors can fix limitations and restrictions, if any, upon the payment of dividends on our common stock to be effective while any shares of preferred stock are outstanding.
The rights granted to the holders of any series of preferred stock could adversely affect the voting power of the holders of common stock and issuance of preferred stock may delay, defer or prevent a change in our control.
SERIES B CONVERTIBLE PREFERRED STOCK
In June 2003, our board of directors created a series of 200,000 shares of our preferred stock and designated that series as Series B Convertible Preferred Stock. The designations, rights and preferences of the Series B Convertible Preferred Stock include:
* it has a stated value of $5.00 per share;
* it pays a 10% per annum cumulative dividend, in arrears, commencing on June 30, 2004. The dividend is payable in cash or shares of our common stock, valued at the average closing price for the 10 trading days immediately preceding the date of the dividend, at our option;
* the shares ranks (i) senior to our Series Y Convertible Preferred Stock; (ii) junior to any other class or series of our capital stock hereafter created specifically ranking by its terms senior to the Series B Preferred Stock, (iii) prior to our common stock; and (iii) prior to any other series of preferred stock or any class or series of capital stock of the corporation hereafter created not specifically ranking by its terms senior to or on parity with the Series B Preferred Stock, in each case as to the distribution of assets upon liquidation, dissolution or winding up of Power2Ship;
* the shares have no voting rights, other than as provided under the laws of the State of Nevada;
* each share is convertible at the holder's option, subject to certain limits, at the conversion rate of $0.25 per share, subject to adjustment in the event of stock splits or recapitalizations;
* each share is convertible at our option at $0.25 per share in the event of a merger or acquisition in which we are not the surviving corporation, a change of control involving 50% or more of our voting shares, or after one year if the average closing price of our common stock for any 10 consecutive trading days exceeds $2.00 per share; and
* the shares are not redeemable by us.
SERIES C CONVERTIBLE PREFERRED STOCK
In June 2003, our board of directors also created a series of 20,000 shares of our preferred stock and designated that series as Series C Convertible Preferred Stock. The designations, rights and preferences of the Series C Convertible Preferred Stock include:
* it has a stated value of $30.00 per share;
* it does not pay any dividends;
* the shares ranks (i) senior to our Series Y Convertible Preferred
Stock and pari passu with our Series B Convertible Preferred Stock;
(ii) pari passau with any other class or series of our capital stock
hereafter created and not specifically ranking by its terms senior to
the Series C Preferred Stock, and (iii) prior to our common stock and
to any other series of preferred stock or any class or series of
capital stock of the corporation hereafter created not specifically
ranking by its terms senior to or on parity with the Series C
Preferred Stock, in each case as to the distribution of assets upon
liquidation, dissolution or winding up of Power2Ship;
* the shares have no voting rights, other than as provided under the laws of the State of Nevada;
* each share is convertible at the holder's option, subject to certain limits, at the conversion rate of $0.30 per share, subject to adjustment in the event of stock splits or recapitalizations;
* each share is convertible at our option at $0.30 per share in the event of a merger or acquisition in which we are not the surviving corporation, a change of control involving 50% or more of our voting shares, or after one year if the average closing price of our common stock for any 10 consecutive trading days exceeds $2.00 per share; and
* the shares are not redeemable by us.
SERIES Y CONVERTIBLE PREFERRED STOCK
In March 2003 our board of directors created a series of 87,000 shares of our preferred stock and designated that series as Series Y Convertible Preferred Stock. The designations, rights and preferences of the Series Y Convertible Preferred Stock include:
* it has a stated value of $0.01 per share;
* it does not pay any dividends;
* the shares ranks (i) junior to any other class or series of our capital stock hereafter created specifically ranking by its terms senior to the Series Y Preferred Stock, (ii) prior to our common stock; and (iii) prior to any other series of preferred stock or any class or series of capital stock of the corporation hereafter created not specifically ranking by its terms senior to or on parity with the Series Y Preferred Stock, in each case as to the distribution of assets upon liquidation, dissolution or winding up of Power2Ship;
* in addition to any voting rights provided under the laws of the State of Nevada, the Series Y Preferred Stock votes together with the common stock on all actions to be voted on by our stockholders and each share of Series Y Preferred Stock shall entitles the record holder thereof to 200 votes on each such action;
* each share is convertible into 2.66065 share of common stock, subject to adjustment in the event of stock splits or recapitalizations; and
* the shares are not redeemable by us.
OPTIONS
At September 30, 2004, we had outstanding options which have been granted outside our 2001 Employee Stock Compensation Plan entitling the holders thereof to purchase 14,531,994 shares of common stock at prices ranging from $.31 to $1.01 per share. These options generally provide that the number of shares of our common stock issuable upon the exercise of the option as well as the exercise price of the option are subject to adjustment in the event of mergers, reorganization, recapitalization, reclassification, combination of shares, stock splits and dividends.
WARRANTS
At September 30, 2004, we had outstanding warrants to purchase 8,192,794 shares of common stock at prices ranging from $.75 to $1.50 per share. These warrants generally provide that the number of shares of our common stock issuable upon the exercise of the option as well as the exercise price of the option are subject to adjustment in the event of mergers, reorganization, recapitalization, reclassification, combination of shares, stock splits and dividends.
TRANSFER AGENT
Our transfer agent is Madison Stock Transfer, Inc., 1688 East 16th Street, Brooklyn, New York 11229, and its telephone number is (718) 627-6341.
SELLING SECURITY HOLDERS
This prospectus relates to periodic offers and sales of up to 36,955,556 shares of common stock by the selling security holders listed below and their pledgees, donees and other successors in interest, which includes:
* 9,909,508 shares of our common stock presently issued or issuable,
* 4,939,214 shares of our common stock issuable upon the conversion of $1,747,000 principal amount 14.25% secured convertible debentures based upon a conversion price of $[0.3537] at August 23, 2004,
* 10,600,000 shares of our common stock issuable upon the conversion of $2,000,000 principal amount of Series B 5% secured convertible debentures,
* 4,126,758 shares of our common stock underlying outstanding options and warrants,
* 853,333 shares of our common stock issuable upon the conversion of outstanding notes in the principal amount of $290,000 and.
* [7,345,740] shares of our common stock underlying the $3 million SEDA Shares.
14.25% SECURED CONVERTIBLE DEBENTURES
In March and April 2004, we issued $1,747,000 of our 14.25% secured convertible debentures to 35 accredited investors in a private transaction exempt from registration under the Securities Act in reliance on exemptions provided by Section 4(20 and Rule 506 of Regulation D. The principal amount of the 14.25% secured convertible debentures is with a first priority lien on all of our tangible and intangible assets, subject to automatic subordination to most traditional asset-based loans. The interest on these debentures is secured with the proceeds of an account established for the benefit of the debenture holders with Newbridge Securities Corporation that has been funded with one six-month interest payment or approximately $125,000. The debentures mature on December 31, 2006, and pay interest of 14.25% per annum payable semi-annually in arrears on June 30 and December 31. The debentures may be converted by the holders at any time into shares of our common stock at a conversion price equal to the lesser of $.80 per share or 90% of the average closing bid price of our common stock for the 10 trading days immediately preceding the date that a registration statement registering the shares of common stock underlying the debentures becomes effective. We have included the shares issuable upon the conversion of the 14.25% secured convertible debentures in the registration statement of which this prospectus is a part. The 14.25% secured convertible debentures will automatically convert into shares of our common stock, providing that we are not in default with any provision of the debenture and the shares underlying the debentures have been registered, if the closing bid price of our common stock for the 20 trading days prior to conversion has been equal to at least 150% of the conversion price as described above. We may redeem the debentures, with 15 days notice at any time, by paying a premium of up to 20% of their original purchase price in a combination of cash and common stock.
The shares issuable upon the conversion or redemption of the 14.25% secured convertible debentures are subject to adjustment in the event of stock splits and combinations, reclassifications and dividends.
In addition, we issued 131,025 shares of our common stock valued at $55,031 to the debenture holders that we have accounted for as additional interest costs. These shares were issued pursuant to the registration rights agreement with the debenture holders as a late filing penalty for not filing the registration statement of which this prospectus is a party by July 31, 2004.
SERIES B 5% SECURED CONVERTIBLE DEBENTURES
On June 28, 2004, we entered into a securities purchase agreement with Cornell Capital Partners, LP for the issuance and sale of $2,000,000 in Series B 5% secured convertible debentures maturing on the second anniversary of their issue dates. In conjunction with the purchase agreement, we also entered into a Standby Equity Distribution Agreement which is described below. We received $1,000,000, less $125,000 in transaction fees, in funding on June 29, 2004, and the remaining $1,000,000, less $100,000 in transaction fees, will be received, at our sole discretion, upon filing this registration statement. These funds are being used for general corporate and working capital purposes and to expand our advertising and marketing campaigns.
The debentures are convertible at the option of the holder at a conversion price equal to the lesser of:
* $0.456 per share, representing 120% of the closing bid price of our common stock as quoted by Bloomberg, LP on June 28, 2004 in the case of the first $1,000,000 of Series B 5% secured convertible debentures and 120% of the closing bid price of our common stock as quoted by Bloomberg, LP on the date of closing the second $1,000,000 of Series B 5% secured convertible debentures, or
* 100% of the average of the three lowest closing bid prices for our common stock, as quoted by Bloomberg, LP, for the 30 trading days immediately preceding any conversion date.
We have the right to redeem, with three business days' advance written notice, all or a portion of the outstanding debentures at a redemption price of 120% of the amount redeemed, plus accrued interest. In connection with any redemption, we are also required to issue a warrant to purchase 35,000 of our common shares for each $100,000 of debentures redeemed. These warrants are exercisable at $0.456 per share on or prior to the second anniversary of the issue date of the debentures being redeemed.
The debentures are secured by all of the assets and property of Power2Ship and our wholly-owned subsidiary, Freight Rate, Inc., although this lien is subordinate to the lien previously granted to the holders of our 14.25% secured convertible debentures and to the lien on accounts receivable and other assets related thereto being proposed for a revolving credit facility.
Under the terms of the purchase agreement and related debentures and warrants, no conversion of the debentures or exercise of the warrants may occur if a conversion or exercise would result in Cornell and any of its affiliates beneficially owning common shares of Power2Ship which exceed 4.99% of our outstanding common shares following such conversion or exercise.
STANDBY EQUITY DISTRIBUTION AGREEMENT
SUMMARY
At the same time we entered into the securities purchase agreement with Cornell Capital Partners, L.P., we also entered into the Standby Equity Distribution Agreement with them. Under the terms of the Standby Equity Distribution Agreement, we may, at our discretion, periodically sell to Cornell Capital Partners, L.P. shares of common stock for a total purchase price of up to $10.0 million. We have included $3.0 million SEDA Shares in the registration statement of which this prospectus is a part. If we wish to issue and sell up to the additional $7.0 million under the Standby Equity Distribution Agreement, we will be required to file additional registration statements with the SEC and those registration statements must be declared effective.
For each share of common stock purchased under the Standby Equity Distribution Agreement, Cornell Capital Partners, L.P. will pay 98% of the volume weighted average price of our common stock as published on the OTC Bulletin Board or other principal market on which our common stock is traded for the five days immediately following the notice date. The volume weighted average priced is calculated automatically by Bloomberg, LLC, a reporting service, by taking the sum of the value of all the sales of the registrant's common stock for a given day (the total shares sold in each trade times the sales price per share of the common stock for that trade) and then dividing this sum by the total number of shares sold on that day. Cornell Capital Partners, L.P. is a private Delaware limited partnership whose business operations are conducted through its general partner, Yorkville Advisors, LLC. In connection with the Standby Equity Distribution Agreement, we have issued to Cornell Capital Partners, L.P. 691,128 shares of our common stock. We are also committed to pay to Cornell Capital Partners, L.P. an amount equal to 5% of each purchase of our common stock made by it under the agreement. We also paid to Yorkville Advisors Management, LLC, the investment manager for Cornell Capital Partners, L.P., a structuring fee of $15,000, and we have paid to Newbridge Securities Corporation, as a placement agent fee in connection with the standby agreement, 25,132 shares of our common stock. The costs associated with this registration will be borne by us. There are no other significant closing conditions to draws under the Standby Equity Distribution Agreement.
THE STANDBY EQUITY DISTRIBUTION AGREEMENT EXPLAINED
Under the terms of the Standby Equity Distribution Agreement, we may periodically sell shares of common stock to Cornell Capital Partners, L.P. to raise capital to fund our working capital needs. The periodic sale of shares is known as an advance. We may request an advance every seven trading days. A closing will be held one trading day after the end of each pricing period at which time we will deliver shares of common stock and Cornell Capital Partners, L.P. will pay the advance amount. There are no closing conditions for any of the draws other than the written notice and associated correspondence. We may request advances under the Standby Equity Distribution Agreement once the underlying shares are registered with the Securities and Exchange Commission. Thereafter, we may continue to request advances until Cornell Capital Partners has advanced $10.0 million or 24 months after the effective date of the accompanying registration statement, whichever occurs first. The amount of each advance is limited to a maximum draw down of $500,000 every seven trading days. The amount available under the Standby Equity Distribution Agreement is not dependent on the price or volume of our common stock. Our ability to request advances is conditioned upon us registering the shares of common stock with the SEC. In addition, we may not request advances if the shares to be issued in connection with such advances would result in Cornell Capital Partners owning more than 9.9% of our outstanding common stock. We do not have any agreements with Cornell Capital Partners regarding the distribution of such stock, although Cornell Capital Partners has indicated that intends to promptly sell any stock received under the Standby Equity Distribution Agreement. There are certain conditions to our right to request an advance. These conditions include:
* maintaining our authorization for quotation on the OTC Bulletin Board,
* having an effective registration statement related to the stock to be
issued,
* the absence of a stop order or other action adversely affecting the
registration statement,
* no events shall have occurred that would require Power2Ship to file a
post-effective amendment to the effective registration statement, and
* the advance will not cause Cornell Capital Partners to beneficially
own more than 9.9% of our outstanding common stock.
Cornell Capital Partners is permitted to terminate the Standby Equity Distribution Agreement if:
* there is a stop order or suspension of the effectiveness of this
registration statement for 50 trading days, or
* we fail to materially comply with certain covenants, which include the
following:
* maintaining a quotation of our common stock on the OTC Bulletin
Board,
* maintaining ours status as public company under Section 12(g) of
the Securities Act of 1934,
* delivering instructions to the transfer agent to issue shares in
connection with an advance notice,
* failing to notify Cornell Capital Partners of events impacting
the registration of the stock to be issued, including the
issuance of a stop order,
* issuing stock or convertible securities at a price less than the
market price of our common stock on the date of issuance, or
* merging or consolidating Power2Ship with another company where
the acquiring entity does not assume our obligations under the
Standby Equity Distribution Agreement.
We cannot predict the actual number of shares of common stock that will be
issued pursuant to the Standby Equity Distribution Agreement, in part, because
the purchase price of the shares will fluctuate based on prevailing market
conditions and we have not determined the total amount of advances we intend to
draw. As set forth above, we have only included $3.0 million SEDA Shares in
this offering. Nonetheless, we can estimate the number of shares of our common
stock that will be issued using certain assumptions. Assuming we issued the
number of shares of common stock being registered in the accompanying
registration statement at a price of $[0.4084] per share, we would issue
[7,345,740]shares of common stock to Cornell Capital Partners, L.P. for gross
proceeds of $3.0 million. These shares would represent approximately [11] % of
our outstanding common stock upon issuance.
Proceeds used under the Standby Equity Distribution Agreement will be used in the manner set forth in the "Use of Proceeds" section of this prospectus. We cannot predict the total amount of proceeds to be raised in this transaction because we have not determined the total amount of the advances we intend to draw.
We have the right to terminate the standby agreement upon three days' prior written notice provided there is no outstanding balance owed to Cornell Capital under the purchase agreement and related debentures, and there are no pending advance notices submitted by us to Cornell Capital.
The following table sets forth
* the name of each selling security holder,
* the number of shares owned, and
* the number of shares being registered for resale by each selling
security holder.
We may amend or supplement this prospectus from time to time to update the disclosure set forth in this prospectus. All of the shares owned by the selling security holders may be offered hereby. Because the selling security holders may sell some or all of the shares owned by them, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, no estimate can be given as to the number of shares that will be held by the selling security holders upon termination of any offering made hereby. If all the shares offered hereby are sold, the selling security holders will not own any shares after the offering.
Number Percentage Shares Shares to Percentage
Name(s) of Selling of shares owned before to be be owned owned after
Security Holders owned offering offered after offering offering
-------------------------------------- ----------- ----------- ---------- -------------- ---------
Cornell Capital Partners, L.P. (1) 20,337,995 35.2% 20,337,995 - *
Newbridge Securities Corporation (2) 1,343,507 3.45% 1,343,507 - *
Jefferson C. Henn (3) 466,192 1.21% 466,192 - *
Garden State Cardiology 153,101 * 153,101 - *
Pension Plan (4)
David Wunder (5) 85,056 * 85,056 - *
William A. and Mary C. Ballay (6) 85,056 * 85,056 - *
John E. Andromidas (7) 68,045 * 68,045 - *
James Cleavinger (8) 221,147 * 221,147 - *
Joseph E. Herndon, Sr. and 85,056 * 85,056 - *
Penny S. Herndon (9)
Norman Hoffberg (10) 85,056 * 85,056 - *
The Humphrey Family 183,749 * 183,749 - *
Revocable Trust (11)
Rosemarie Mangione (12) 40,827 * 40,827 - *
Luca Minna (13) 367,499 * 367,499 - *
Craig Schulze (14) 102,068 * 102,068 - *
Andrew Smith (15) 34,023 * 34,023 - *
Tower Roofing Co., Inc. (16) 34,023 * 36,023 - *
David A. Fisher (17) 68,045 * 68,045 - *
Mitchell Domin (18) 170,113 * 170,113 - *
Trust Company of America 98,816 * 27,052 71,764 *
f/b/o Keith C. Carini (19)
H. Eugene & Barbara D. Agerton (20) 68,046 * 68,046 - *
Andreas P. & Lana J. Kaupert (21) 34,023 * 34,023 - *
William Hoops (22) 72,989 * 60,506 12,483 *
Les and Stacy Steinger (23) 170,113 * 170,113 - *
Thomas Latif (24) 85,056 * 85,056 - *
Wexford Clearing C/F 85,056 * 85,056 - *
Constance Fitzgerlad (25)
Wexford Clearing C/F 68,045 * 68,045 - *
David Wunder (26)
Wexford Clearing C/F 68,045 * 68,045 - *
Thomas P. Basile (27)
Robert Zann (28) 34,023 * 34,023 - *
Frank Giglio (29) 34,023 * 34,023 - *
Kovpak II, LLC (30) 340,225 * 340,225 - *
(Jonathan Kovler)
Laura Daniels (31) 34,023 * 34,023 - *
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George MacLauchlan (32) 170,113 * 170,113 - *
Whitney Wykoff & 102,068 * 102,068 - *
Jeffrey Schmer (33)
Rebecca Paul (34) 34,023 * 34,023 - *
Steven Paul (35) 34,023 * 34,023 - *
Brian and Susan McNamara (36) 170,113 * 170,113 - *
Gary Kanuit (37) 53,935 * 14,127 39,809 *
Daniel M. Barton (38) 11,039 * 5,611 5,428 *
Columbus Internet, LLC (39) 114,526 * 73,323 71,203 *
Brent Anderson (40) 2,250,624 5.69% 931,228 1,319,396 3.33%
Morningside Capital Partners, LLC(41) 90,000 * 90,000 - *
Summit Trading (42) 1,752,936 4.48% 876,468 876,468 2.24%
Investor Relations Services, Inc. (43) 291,336 * 145,668 145,668 *
Richard Hersh (44) 4,814,027 11.18% 353,333 4,660,694 10.82%
Carriers Consolidation, Inc. (45) 679,942 1.75% 220,334 459,608 1.19%
Louis M. Fischler (46) 819,500 2.10% 25,000 794,500 2.03%
Peter T. Stubenvoll (47) 305,000 * 300,000 5,000 *
Lawrence Springer (48) 289,833 * 25,000 264,833 *
G.M.F. Relations (49) 120,000 * 120,000 - *
Lone Star Partnership Holdings, LP(50) 1,575,297 4.00% 1,111,841 463,456 1.18%
John Monteforte (51) 133,333 * 133,333 - *
John F. Loughran (52) 133,333 * 133,333 - *
Joseph Pacillo (53) 133,333 * 133,333 - *
Fusion Capital Fund II, LLC (54) 630,000 1.63% 600,000 30,000 *
H. August Perotti (55) 70,525 * 70,525 - *
Jason Mediate (56) 70,525 * 70,525 - *
Anthony DiTocco (57) 150,000 * 150,000 - *
David Auslander and Paul Nemiroff(58) 316,219 * 144,358 171,933 *
Mary Ellen Misiak-Viola (59) 510,338 1.32% 510,338 - *
Barry and Wendy Goodman (60) 632,582 1.64% 288,715 343,867 *
Joyce O. Perri (61) 426,834 1.11% 216,536 210,298 *
Frank P. and Heather Reilly (62) 468,291 1.22% 144,358 323,933 *
Morton Singerman (63) 158,175 * 72,179 85,996 *
Paul L. Singerman (64) 316,291 * 144,358 171,933 *
Robert A. Stuttler Trust Fund (65) 198,622 * 75,804 122,818 *
Duquette Family Living Trust (66) 618,179 1.61% 303,170 315,009 *
Judy A. Namm (67) 59,550 * 30,200 29,350 *
Margaret M. McCabe (68) 74,387 * 37,735 36,652 *
Maynard L. Dye Family L.P. (69) 397,821 1.04% 151,085 246,736 *
Delone and Eileen Krueger (70) 341,507 * 146,772 194,735 *
James G. Filer (71) 29,724 * 15,066 14,658 *
Kenneth Rightmyer (72) 29,638 * 15,047 14,591 *
Carl Bagnall (73) 59,127 * 29,994 29,133 *
William Grant (74) 84,598 * 42,909 52,689 *
Seppo E. Rapo (75) 180,976 * 58,284 122,692 *
Trust Company of America f/b/o 146,044 * 74,107 71,937 *
Ronald O. Thompson (76)
Carmine J. Esposito (77) 569,796 1.48% 143,721 426,075 1.10%
Michael J. Taylor (78) 172,935 * 74,498 98,437 *
Tony W. Shaw (79) 156,927 * 42,989 113,938 *
Richard M. McCraw (80) 68,028 * 29,451 38,577 *
Trust Company of America f/b/o 256,914 * 130,350 126,564 *
Donald P. Young (81)
Elisha Cheung (82) 142,220 * 72,165 70,055 *
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Rader Trucking Limited (83) 40,272 * 15,355 24,917 *
Trust Company of America f/b/o 28,936 * 14,693 14,243 *
Paul E. Schwanz (84)
Jack Marty (85) 57,999 * 29,432 28,567 *
Ronald R. Woltman (86) 112,769 * 58,934 53,835 *
ACB Limited (87) 290,033 * 147,147 142,886 *
Randall A. and 42,738 * 21,630 21,048 *
Patricia S. Hamerly (88)
Franklin and Cindy Potts (89) 28,297 * 14,687 14,240 *
Patrick R. Hart Living Trust (90) 144,597 * 73,730 71,227 *
Custer Family Limited Partnership (91) 144,436 * 73,323 71,113 *
Caroline F. Bauman Trust f/b/o 143,418 * 72,774 70,644 *
Baldwin Sawyer (92)
Redd Star Fertilizer Company (93) 113,000 * 57,321 55,679 *
Mike's Beach Resort LLC (94) 11,445 * 5,806 5,639 *
Robin Kimel (95) 62,390 * 21,496 40,894 *
Jane Stuttler Trust Fund (96) 187,963 * 42,399 145,564 *
Mac W. Lutz III (97) 40,266 * 17,372 22,894 *
Paul Racine (98) 28,406 * 14,415 13,991 *
David F. Dye (99) 270,960 * 86,727 184,233 *
Thomas P. Ramirez & Fern K. 40,657 * 19,908 20,749 *
Ramirez Revocable Living Trust (100)
William A. Kerrigan 156,781 * 57,232 99,549 *
Revocable Trust (101)
George Driza (102) 81,129 * 41,166 39,963 *
Oscar and Kathleen Campbell (103) 73,007 * 37,043 35,964 *
Toni Odermatt (104) 40,526 * 19,862 20,664 *
Coopers, Inc. (105) 5,681 * 2,875 2,806 *
Kevin P. Petit (106) 42,416 * 21,513 20,903 *
Kurt Karlsson (107) 38,464 * 14,228 24,236 *
Donald Ricketts (108) 22,881 * 11,606 11,275 *
Ronald W. Anderson (109) 5,658 * 2,860 2,798 *
Robert and Gertrude Schultz (110) 11,258 * 5,719 5,539 *
Trust Company of America f/b/o 169,096 * 85,789 83,307 *
Maynard M. Dye Family LP (111)
Ronald and Ethel Rascoe (112) 33,687 * 5,703 27,984 *
Trust Company of America f/b/o 31,947 * 16,206 15,741 *
Paul Thomas Berry (113)
John J. Steward (114) 67,307 * 34,155 33,152 *
Robert F. Green, Jr. (115) 80,207 * 14,220 65,987 *
John J. Matheson (116) 5,574 * 2,842 2,732 *
Rick Hernandez (117) 27,951 * 14,188 13,763 *
Michael J. Darden (118) 1,938,998 4.85% 200,000 1,738,998 4.35%
John Urbanowicz (119) 1,284,332 3.27% 200,000 1,084,332 2.76%
Trust Company of America f/b/o 21,214 * 21,214 - *
Gary M. Duquette (120)
Jeffrey & Regina Spanier (121) 1,818 * 21,818 - *
Carmen L. Amorin (122) 27,274 * 27,274 - *
Eduardo Amorin (123) 54,546 * 54,546 - *
Evergreen Marketing, Inc. (124) 57,143 * 57,143 - *
Guy James Newman (125) 37,500 * 37,500 - *
Joel Steven Ostrow (125) 48,000 * 48,000 - *
Joseph Michael Carrino, Jr. (125) 48,500 * 48,500 - *
Troy Jason Goldberg (125) 48,500 * 48,500 - *
Thomas Richard Fox (125) 30,000 * 30,000 - *
David Kennett Barrus (125) 378,500 * 378,500 - *
David Kristian Evansen (125) 92,500 * 92,500 - *
Jeffrey Allan Paul (125) 147,500 * 147,500 - *
Robin R. Hirschman (125) 42,500 * 42,500 - *
Flow Capital Advisors, Inc. (126) 979,155 2.5% 200,000 779,155 *
----------- --------- ----------
Totals 54,508,983 36,955,556 17,553,427
|
* represents less than 1%.
The actual conversion price of our 14.25% secured convertible debentures is fixed only after the registration statement, of which this prospectus is a part, is declared effective by the SEC. The conversion price will be the lesser of $0.80 per share or 90% of the average closing bid price of our common stock for the 10 trading days immediately preceding the date the registration statement is declared effective by the SEC. For the purposes of this table we have calculated the conversion price to be $0.3537 which is 90% of the average closing price of our common stock for the 10 trading days preceding August 24, 2004.In the instance of certain trusts which own less than 1% of our common stock and which are selling security holders, we have included the name of the trustee of the trust but in some instances we were unable to ascertain the beneficiary of the trust.
(1) All investment decisions of Cornell Capital Partners, L.P. are made by its general partner, Yorkville Advisors, LLC. Mark Angelo, the managing member of Yorkville Advisors, makes the investment decisions on behalf of Yorkville Advisors. The number of shares owned and offered hereby includes :
* 7,345,740 shares of our common stock which represents the $3.0 million SEDA Shares based upon a sales price of $0.4084 per share,
* 728,628 shares of common stock presently issued and outstanding,
* 1,413,627 shares of our common stock issuable upon the conversion of $500,000 principal amount 14.25% secured convertible debentures,
* 250,000 shares issuable upon the exercise of common stock purchase warrants which expire on March 9, 2007 with an exercise price of $0.45 per share, and
* 10,600,000 shares of our common stock issuable upon the conversion of $2 million principal amount Series B 5% secured convertible debentures.
(2) The number of shares owned and offered hereby includes 625,132 shares of common stock presently outstanding, 500,000 shares of our common stock underlying common stock purchase warrants which are exercisable at prices ranging from $0.54 per share to $1.29 per share ^and 218,375 shares of our common stock underlying common stock purchase warrants which are exercisable at the lesser of $0.80 per share or 90% of the average closing bid price of our common stock for the 10 trading days immediately preceding the date the registration statement of which this prospectus is a part is declared effective by the SEC. Newbridge Securities Corporation is a broker-dealer and a member of the NASD.
(3) The number of shares owned and offered hereby includes 50,285 shares of common stock presently outstanding, 353,407 shares of common stock underlying $125,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 62,500 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(4) Dr. Michael Kesselbrenner is the trustee of Garden State Cardiology Pension Plan. The number of shares owned and offered hereby includes 3,375 shares of common stock presently outstanding, 127,226 shares of common stock underlying $45,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 22,500 warrants exercisable at $.45 per share expiring on March 9, 2007.
(5) The number of shares owned and offered hereby includes 1,875 shares of common stock presently outstanding, 70,681 shares of common stock underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(6) The number of shares owned and offered hereby includes 1,875 shares of common stock presently outstanding, 70,681 shares of common stock underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(7) The number of shares owned and offered hereby includes 1,500 shares of common stock presently outstanding, 56,545 shares of common stock underlying $20,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 10,000 shares underlying warrants exercisable at $.45 per share, 5,000 of which expire on March 9, 2007 and 5,000 of which expire on April 30, 2007.
(8) The number of shares owned and offered hereby includes 4,875 shares of common stock presently outstanding, 183,772 shares of common stock underlying $65,000 of our 14.25% secured convertible debentures and 32,500 shares underlying warrants exercisable at $.45 per share 10,000 of which 12,500 expire on March 9, 2007 and 20,000 of which expire on April 30, 2007.
(9) The number of shares owned and offered hereby includes 1,895 shares of common stock presently outstanding, 70,681 shares of common stock underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(10) The number of shares owned and offered hereby includes 1,875 shares of common stock presently outstanding, 70,681 shares underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(11) Richard B. and Julie S. Humphrey are the control persons of The Humphrey Family Revocable Trust. The number of shares owned and offered hereby includes 17,386 shares of common stock presently outstanding, 141,363 shares of common stock underlying $50,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 25,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(12) The number of shares owned and offered hereby includes 900 shares of common stock presently outstanding, 33,927 shares of common stock underlying $12,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 6,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(13) The number of shares owned and offered hereby includes 34,774 shares of common stock presently outstanding, 282,725 shares of common stock underlying $100,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 50,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(14) The number of shares owned and offered herby includes 2,250 shares of common stock presently outstanding, 84,818 shares of common stock underlying $30,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 15,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(15) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 of our 14.25% secured convertible debentures and 5,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(16) Anthony Shenk is a control person of Tower Roofing Co., Inc. The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(17) The number of shares owned and offered hereby includes 1,500 shares of common stock presently outstanding, 56,545 shares of common stock underlying $20,000 principal amount Series B 5% secured convertible debentures based on a conversion price of $.3537 and 10,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(18) The number of shares owned and offered hereby includes 3,750 shares of common stock presently outstanding, 141,363 shares of common stock underlying $50,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 25,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(19) The number of shares owned includes 73,743 shares of common stock presently outstanding, 11,547 shares of common stock underlying options exercisable at $1.13 per share and 13,526 shares of common stock underlying options exercisable at $.75 per share that expire on December 31, 2004. The number of shares offered hereby includes 11,547 shares of common stock underlying options exercisable at $1.13 per share and 13,526 shares of common stock underlying options exercisable at $.75 per share that expire on December 31, 2004. Mr. Carini has voting and investment power over these securities.
(20) The number of shares owned and offered hereby includes 1,500 shares of common stock presently outstanding, 56,546 shares of common stock underlying $20,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 10,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(21) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount Series B5% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(22) The number of shares owned includes 39,716 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007. The number of shares offered hereby includes 27,233 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(23) The number of shares owned and offered hereby includes 3,750 shares of common stock presently outstanding, 141,363 shares of common stock underlying $50,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 25,000 shares underlying warrants exercisable at $.45 per share expiring on March 31, 2007.
(24) The number of shares owned and offered hereby includes 1,875 shares of common stock presently outstanding, 70,681 shares of common stock underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(25) The number of shares owned and offered hereby includes 1,875 shares of common stock presently outstanding, 70,681 shares of common stock underlying $25,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 12,500 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(26) The number of shares owned and offered hereby includes 1,499 shares of common stock presently outstanding, 56,546 shares of common stock underlying $20,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 10,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(27) The number of shares owned and offered hereby includes 1,499 shares of common stock presently outstanding, 56,546 shares of common stock underlying $20,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 10,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(28) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(29) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(30) Jonathan Kovler is a control person of Kovpak II, LLC. The number of shares owned and offered hereby includes 7,500 shares of common stock presently outstanding, 282,725 shares of common stock underlying $100,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 50,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(31) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 of our 14.25% secured convertible debentures and 5,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(32) The number of shares owned and offered hereby includes 3,750 shares of common stock presently outstanding, 141,363 shares of common stock underlying $50,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 25,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(33) The number of shares owned and offered hereby includes 2,250 shares of common stock presently outstanding, 84,818 shares of common stock underlying $30,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 15,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(34) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(35) The number of shares owned and offered hereby includes 750 shares of common stock presently outstanding, 28,273 shares of common stock underlying $10,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 5,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(36) The number of shares owned and offered hereby includes 3,750 shares of common stock presently outstanding, 141,363 shares of common stock underlying $50,000 principal amount 14.25% secured convertible debentures based on a conversion price of $.3537 and 25,000 shares underlying warrants exercisable at $.45 per share expiring on April 30, 2007.
(37) The number of shares owned includes 40,250 shares of common stock presently outstanding, 6,621 shares of common stock underlying warrants exercisable at $1.13 per share and 7,064 shares underlying options exercisable at $.75 per share all of which expire on December 31, 2004. The number of shares offered hereby includes 5,611 shares of common stock presently outstanding.
(38) The number of shares owned includes 2,806 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004.
(39) William Custer is the control person of Columbus Internet, LLC. The number of shares owned includes 107,865 shares of common stock presently outstanding and 36,661 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby 73,323 shares of common stock presently outstanding.
(40) The number of shares owned includes 1,367,848 shares of common stock presently outstanding and 882,776 shares of common stock underlying options exercisable at $.56 per share which expire on July 19,2005. The shares offered hereby includes 931,228 shares of common stock presently outstanding.
(41) Philip A. Orlando is a control person of Morningside Capital Partners,
LLC. The number of shares owned and offered hereby includes 90,000 shares of
common stock presently outstanding.
(42) Mr. Adrian Crosbie-Jones is the controlling person of Summit Trading Limited. The Weast Family Trust is the beneficial owner of Summit Trading Limited. The number of shares owned and offered hereby includes shares of common stock presently outstanding .
(43) Richard Fixaris is a control person of Investor Relations Services, Inc. The number of shares owned and offered hereby includes shares of common stock presently.
(44) Mr. Hersh an executive officer and director of our company. The number of shares owned includes 200,000 shares of common stock, 4,121,761 shares of common stock underlying options exercisable at $.38 per share which expire on January 31, 2008, 153,333 shares issuable upon the conversion of a $115,000 principal amount convertible note and 200,000 shares to be issued on January 1, 2005. The number of shares offered includes the shares underlying the convertible note and the 200,000 shares to be issued in January 2005.
(45) Orin Neiman is the control person of Carriers Consolidation, Inc. The number of shares owned includes 194,775 shares presently outstanding, 264,833 shares of common stock underlying options exercisable at $.38 per share which expire on January 1, 2008 and 220,334 shares of common stock underlying options exercisable at $.31 per share which expire on May 7, 2007. The number of shares offered includes the 220,334 shares underlying the options an exercise price of $.31 per share.
(46) The number of shares owned includes 25,000 shares of common stock presently outstanding, and 794,500 shares of common stock underlying options exercisable at $.38 per share of which 397,250 expire on May 24, 2005, 198,625 expire on May 24, 2006 and 198,625 expire on May 24, 2007. The number of shares offered includes 25,000 shares of common stock presently outstanding.
(47) The number of shares owned includes 5,000 shares of common stock presently outstanding, 250,000 shares of common stock underlying options exercisable at $.31 per share which expire on May 7, 2007 and 5,000 shares of common stock underlying options exercisable at $.40 per share that expire on December 18, 2006. The number of shares offered includes 250,000 shares of common stock underlying options exercisable at $.31 per share.
(48) The number of shares owned includes 25,000 shares of common stock presently outstanding and 264,833 shares of common stock underlying options exercisable at $.38 per share which expire on May 24, 2005. The number of shares offered hereby includes 25,000 shares of common stock presently outstanding.
(49) Gary M. Frank is the control person of G.M.F. Relations, Inc. The number of shares owned and offered hereby includes 120,000 shares of common stock presently outstanding.
(50) William Custer is the control person of Lone Star Partnership Holdings, LP. The number of shares owned includes 411,841 shares of common stock presently outstanding, 700,000 shares of common stock underlying $175,000 of convertible promissory notes and 73,322 shares underlying warrants exercisable at $.37 per share and 196,106 shares of common stock underlying warrants exercisable at $.75 per shares which expire on December 31, 2004. The number of shares offered includes 700,000 shares of common stock underlying the convertible promissory notes.
(51) The number of shares owned and offered hereby includes 67,666 shares of common stock underlying vested warrants and 67,667 shares of common stock underlying warrants that vest on January 1, 2005 exercisable at $.38 per share which expire on April 30, 2007.
(52) The number of shares owned and offered hereby includes 67,666 shares of common stock underlying vested warrants and 67,667 shares of common stock underlying warrants that vest on January 1, 2005 exercisable at $.38 per share which expire on April 30, 2007.
(53) The number of shares owned and offered hereby includes 67,666 shares of common stock underlying vested warrants and 67,667 shares of common stock underlying warrants that vest on January 1, 2005 exercisable at $.38 per share which expire on April 30, 2007.
(54) Steven Martin is a control person of Fusion Capital Fund II, LLC. The number of shares owned includes 330,000 shares of common stock presently outstanding and 300,000 shares of common stock underlying warrants exercisable at $.75 per share which expire on March 1, 2009.
(55) The number of shares owned and offered hereby includes 30,825 shares of common stock underlying warrants exercisable at $.58 per share which expire on September 30, 2006 and 39,700 shares of common stock underlying warrants exercisable at $.48 per share which expire on November 28, 2006.
(56) The number of shares owned and offered hereby includes 30,825 shares of common stock underlying warrants exercisable at $.58 per share which expire on September 30, 2006 and 39,700 shares of common stock underlying warrants exercisable at $.48 per share which expire on November 28, 2006.
(57) The number of shares owned and offered hereby includes 150,000 shares of common stock underlying options exercisable at $.38 per share which expire on April 1, 2007.
(58) The number of shares owned includes 212,539 shares of common stock presently outstanding, 3,242 shares of common stock underlying warrants exercisable at $.75 per share and 18,512 shares of common stock underlying warrants exercisable at $1.51 per share which expire on January 31, 2006 and 72,179 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered includes 144,358 shares of common stock presently outstanding.
(59) The number of shares owned and offered hereby includes 11,250 shares of common stock presently outstanding, 424,088 shares of common stock underlying $150,000 principal amount Series B 5% secured convertible debentures based on a conversion price of $.3537 and 75,000 shares underlying warrants exercisable at $.45 per share expiring on March 9, 2007.
(60) The number of shares owned includes 424,717 shares of common stock presently outstanding, 26,483 shares of common stock underlying warrants exercisable at $.75 per share and 37,024 shares of common stock underlying warrants exercisable at $1.51 per share which expire on January 31, 2006 and 144,358 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 288,715 shares of common stock presently outstanding.
(61) The number of shares owned includes 318,566 shares of common stock presently outstanding, 108,268 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 216,536 shares of common stock presently outstanding.
(62) The number of shares owned includes 318,566 shares of common stock presently outstanding, 152,000 shares of common stock underlying $38,000 principal amount Series B convertible preferred stock and 13,242 shares of common stock underlying warrants exercisable at $.75 per share and 18,512 shares of common stock underlying warrants exercisable at $1.51 per share which expire on January 31, 2006 and 72,179 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 144,358 shares of common stock presently outstanding.
(63) The number of shares owned includes 106,208 shares of common stock presently outstanding, 6,621 shares of common stock underlying warrants exercisable at $.75 per share and 9,256 shares of common stock underlying warrants exercisable at $1.51 per share which expire on January 31, 2006 and 36,090 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 72,179 shares of common stock presently outstanding.
(64) The number of shares owned includes 212,359 shares of common stock presently outstanding, 13,242 shares of common stock underlying warrants exercisable at $.75 per share and 18,512 shares of common stock underlying warrants exercisable at $1.51 per share which expire on January 31, 2006 and 72,179 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 144,358 shares of common stock presently outstanding.
(65) Robert A. Stuttler is a control person of Robert A. Stuttler Trust Fund. The number of shares owned includes 120,720 shares of common stock presently outstanding, 37,902 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 75,804 shares of common stock presently outstanding.
(66) Gary Duquette is a control person of Duquette Family Living Trust. The number of shares owned includes 455,987 shares of common stock presently outstanding, 13,242 shares of common stock underlying warrants exercisable at $1.13 per share and 148,950 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 303,170 shares of common stock presently outstanding.
(67) The number of shares owned includes 44,450 shares of common stock presently outstanding, 15,100 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 30,200 shares of common stock presently outstanding.
(68) The number of shares owned includes 55,519 shares of common stock presently outstanding, 18,868 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 37,735 shares of common stock presently outstanding.
(69) Maynard Dye is a control person of Maynard M. Dye Family Limited Partnership. The number of shares owned includes 222,278 shares of common stock presently outstanding, 75,543 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 100,000 shares of common stock underlying $25,000 principal amount Series B convertible preferred stock. The number of shares offered hereby includes 151,085 shares of common stock presently outstanding.
(70) The number of shares owned includes 228,396 shares of common stock presently outstanding, 13,242 shares of common stock underlying warrants exercisable at $1.13 per share and 73,386 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 146,772 shares of common stock presently outstanding.
(71) The number of shares owned includes 22,191 shares of common stock presently outstanding, 7,533 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 40,000 shares of common stock underlying $10,000 principal amount Series B convertible preferred stock. The number of shares offered hereby includes 15,066 shares of common stock presently outstanding.
(72) The number of shares owned includes 22,115 shares of common stock presently outstanding, 7,533 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 15,047 shares of common stock presently outstanding.
(73) The number of shares owned includes 44,130 shares of common stock presently outstanding, 14,997 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 29,994 shares of common stock presently outstanding.
(74) The number of shares owned includes 63,144 shares of common stock presently outstanding, 21,454 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 42,909 shares of common stock presently outstanding.
(75) The number of shares owned includes 91,971 shares of common stock presently outstanding, 6,621 shares of common stock underlying warrants exercisable at $1.13 per share and 29,142 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 40,000 shares of common stock underlying $10,000 principal amount Series B convertible preferred stock. The number of shares offered hereby includes 58,284 shares of common stock presently outstanding.
(76) The number of shares owned includes 108,991 shares of common stock presently outstanding, 37,053 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. Mr. Thompson has voting and investment power over these securities. The number of shares offered hereby includes 74,107 shares of common stock presently outstanding.
(77) The number of shares owned includes 248,829 shares of common stock presently outstanding, 39,725 shares of common stock underlying warrants exercisable at $1.13 per share and 71,861 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004, 9,931 shares of common stock underlying warrants exercisable at $.75 per share and 120,000 shares of common stock underlying $30,000 principal amount Series B convertible preferred stock. The number of shares offered hereby includes 143,721 shares of common stock presently outstanding.
(78) The number of shares owned includes 115,823 shares of common stock presently outstanding, 6,621 shares of common stock underlying warrants exercisable at $1.13 per share and 37,249 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 74,498 shares of common stock presently outstanding.
(79) The number of shares owned includes 75,707 shares of common stock presently outstanding, 13,242 shares of common stock underlying warrants exercisable at $1.13 per share and 21,495 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 20,000 shares of common stock underlying $5,000 principal amount Series B convertible preferred stock. The number of shares of common stock offered hereby includes 42,989 shares of common stock presently outstanding.
(80) The number of shares owned includes 43,302 shares of common stock presently outstanding, 14,726 shares of common stock underlying warrants exercisable at $.75 share which expire on December 31, 2004. The number of shares offered hereby includes 29,451 shares of common stock presently outstanding.
(81) The number of shares owned includes 191,739 shares of common stock presently outstanding, 65,175 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 130,350 shares of common stock presently outstanding. Mr. Young has voting and investment power over these securities.
(82) The number of shares owned includes 106,137 shares of common stock presently outstanding and 36,083 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The number of shares offered hereby includes 72,165 shares of common stock presently outstanding.
(83) Derek Johnson is a control person of Rader Trucking Limited. The number of shares owned includes 22,594 shares of common stock presently outstanding, 7,678 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 10,000 shares of common stock underlying $2,500 principal amount Series B convertible preferred stock. The number of shares offered hereby includes 15,355 shares of common stock presently outstanding.
(84) The number of shares owned includes 21,590 shares of common stock presently outstanding and 7,346 shares of common stock underlying warrants exercisable at $.75 share which expire on December 31, 2004. The number of shares offered hereby includes 14,693 shares of common stock presently outstanding. Mr. Schwartz has voting and investment power over these securities.
(85) The number of shares owned includes 43,283 shares of common stock presently outstanding and 14,716 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 29,432 shares of common stock presently outstanding.
(86) The number of shares owned includes 92,906 shares of common stock presently outstanding and 6,621 shares of common stock underlying warrants exercisable at $1.13 per share which expire on December 31, 2004. The shares offered hereby includes 58,934 shares of common stock presently outstanding.
(87) Anthony Denazareth is a control person of ACB Limited. The number of shares owned includes 216,459 shares of common stock presently outstanding and 3,574 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 147,147 shares of common stock presently outstanding.
(88) The number of shares owned includes 31,893 shares of common stock presently outstanding and 10,845 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 21,690 shares of common stock presently outstanding.
(89) The number of shares owned includes 21,584 shares of common stock presently outstanding and 7,343 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 14,687 shares of common stock presently outstanding.
(90) Patrick R. Hart is a control person of Patrick R. Hart Living Trust. The number of shares owned includes 107,912 shares of common stock presently outstanding and 36,685 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 73,370 shares of common stock presently outstanding.
(91) William Custer is the general partner of Custer Family L.P. The number of shares owned includes 107,775 shares of common stock presently outstanding and 36,661 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 73,323 shares of common stock presently outstanding.
(92) Alexander S. Taylor II is the trustee of Caroline F. Baumann Trust. The number of shares owned includes 107,031 shares of common stock presently outstanding and 36,387 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 72,774 shares of common stock presently outstanding.
(93) Jack Marty is a control person of Redd Star Fertilizer Company. The number of shares owned includes 84,339 shares of common stock presently outstanding and 28,661 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 57,321 shares of common stock presently outstanding.
(94) Robert M. Schultz is a control person of Mike's Beach Resort, LLC. The number of shares owned includes 8,542 shares of common stock presently outstanding and 2,903 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 5,806 shares of common stock presently outstanding.
(95) The number of shares owned includes 31,642 shares of common stock presently outstanding, 10,748 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004 and 20,000 shares of common stock underlying $5,000 principal amount Series B convertible preferred stock. The shares offered hereby includes 21,496 shares of common stock presently outstanding.
(96) Jane Stuttler is a control person of Jane Stuttler Trust Fund. The number of shares owned includes 87,315 shares of common stock presently outstanding, 26,483 shares of common stock underlying warrants exercisable at $1.13 per share and 21,199 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 42,399 shares of common stock presently outstanding.
(97) The number of shares owned includes 25,580 shares of common stock presently outstanding, 8,686 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004 and 36,000 shares of common stock underlying $9,000 principal amount Series B convertible preferred stock. The shares offered herby includes 17,372 shares of common stock presently outstanding.
(98) The number of shares owned includes 21,198 shares of common stock presently outstanding and 7,208 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 14,415 shares of common stock presently outstanding.
(99) The number of shares owned includes 127,596 shares of common stock presently outstanding, 43,364 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004 and 100,000 shares of common stock underlying $25,000 principal amount Series B convertible preferred stock. The shares offered herby includes 86,727 shares of common stock presently outstanding.
(100) Thomas P. and Fern K. Ramirez are control persons of Thomas O and Fern K. Ramirez Revocable Living Trust. The number of shares owned includes 29,313 shares of common stock presently outstanding, 1,390 shares of common stock underlying warrants exercisable at $.75 which expire on June 30, 2006 and 9,954 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004. The shares offered hereby includes 19,908 shares of common stock presently outstanding.
(101) William A. Kerrigan is a control person of William A. Kerrigan Revocable Trust. The number of shares owned includes 84,193 shares of common stock presently owned, 3,972 shares of common stock underlying warrants exercisable at $.75 which expire on June 30, 2006 and 28,616 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004 and 40,000 shares of common stock underlying $10,000 principal amount Series B convertible preferred stock. The shares offered includes 57,232 shares of common stock presently outstanding.
(102) The number of shares owned includes 60,546 shares of common stock presently outstanding and 20,583 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered includes 41,166 shares of common stock presently outstanding.
(103) The number of shares owned includes 54,485 shares of common stock which are presently outstanding and 18,522 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered includes 37,043 shares of common stock which are presently outstanding.
(104) The number of shares owned includes 29,210 shares of common stock presently outstanding, 1,385 shares of common stock underlying warrants exercisable at $.75 which expire on June 30, 2006 and 9,931 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004. The shares offered hereby includes 19,862 shares of common stock presently outstanding.
(105) Gary Cooper is a control person of Cooper's, Inc. The number of shares owned includes 4,243 shares of common stock presently outstanding and 1,438 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered herby includes 2,875 shares of common stock presently outstanding.
(106) The number of shares owned includes 31,659 shares of common stock presently outstanding and 10,757 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 21,513 shares of common stock presently outstanding.
(107) The number of shares owned includes 23,405 shares of common stock presently outstanding, 2,648 shares of common stock underlying warrants exercisable at $1.13 and 7,114 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004 and 8,000 shares of common stock underlying $2,000 principal amount Series B convertible preferred stock. The shares offered herby includes 14,228 shares of common stock presently outstanding.
(108) The number of shares owned includes 17,078 shares of common stock presently outstanding and 5,803 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 11,606 shares of common stock presently outstanding.
(109) The number of shares owned includes 4,228 shares of common stock presently outstanding and 1,430 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered herby includes 2,860 shares of common stock presently outstanding.
(110) The number of shares owned includes 8,398 shares of common stock presently outstanding and 2,860 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 5,719 shares of common stock presently outstanding.
(111) The number of shares owned includes 126,202 shares of common stock presently outstanding and 42,894 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 85,789 shares of common stock presently outstanding. Mr. Dye has voting and investment power over these securities.
(112) The number of shares owned includes 10,890 shares of common stock presently outstanding, 2,648 shares of common stock underlying warrants exercisable at $1.13 and 2,852 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004 and 12,000 shares of common stock underlying $3,000 principal amount Series B convertible preferred stock. The shares offered hereby includes 5,703 shares of common stock presently outstanding.
(113) The number of shares owned includes 23,844 shares of common stock presently outstanding and 8,103 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 16,206 shares of common stock presently outstanding. Mr. Berry has voting and investment power over these securities.
(114) The number of shares owned includes 50,229 shares of common stock presently outstanding and 17,078 shares of common stock underlying warrants exercisable at $.75 per share which expire on December 31, 2004. The shares offered hereby includes 34,155 shares of common stock presently outstanding.
(115) The number of shares owned includes 33,372 shares of common stock presently outstanding, 13,242 shares of common stock underlying warrants exercisable at $1.13 and 7,110 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004. The shares offered hereby includes 14,220 shares of common stock presently outstanding.
(116) The number of shares owned includes 4,153 shares of common stock presently outstanding an d1,421 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004. The shares offered hereby includes 2,842 shares of common stock presently outstanding.
(117) The number of shares owned includes 20,857 shares of common stock presently outstanding and 7,094 shares of common stock underlying warrants exercisable at $.75 which expire on December 31, 2004. The shares offered hereby includes 14,188 shares of common stock presently outstanding.
(118) Mr. Darden an executive officer and director of our company. The number of shares owned includes 200,000 shares of our common stock , 66,208 shares of common stock underlying options exercisable at $.38 per share which expire on June 17, 2005, 66,208 shares of common stock underlying options exercisable at $.38 per share which expire on June 17, 2006, 662,083 shares of common stock underlying options exercisable at $.38 per share which expire on January 1, 2006, 794,499 shares of common stock underlying options exercisable at $.38 per share which expire on January 1, 2007, 150,000 shares of common stock underlying options exercisable at $.38 per share which expire on April 15, 2007 and 200,000 shares of common stock to be issued on January 1, 2005. The shares offered hereby includes 200,000 shares of common stock.
(119) Mr. Urbanowicz is our Vice President of Information Technology. The number of shares owned includes 200,000 shares of common stock, 33,104 shares of common stock underlying options exercisable at $.38 per share which expire on July 1, 2005, 33,104 shares of common stock underlying options exercisable at $.38 per share which expire on July 1, 2006, 463,458 shares of common stock underlying options exercisable at $.38 per share which expire on January 1, 2006, 529,666 shares of common stock underlying options exercisable at $.38 per share which expire on January 1, 2007 and 200,000 shares of common stock to be issued on January 1, 2005. The shares offered herby includes 200,000 shares of common stock.
(120) The number of shares owned and offered hereby includes 21,214 shares of common stock presently outstanding. Mr. Duquette has voting and investment power over these securities.
(121) The number of shares owned and offered hereby includes 21,818 shares of common stock presently outstanding.
(122) The number of shares owned and offered hereby includes 27,274 shares of common stock presently outstanding.
(123) The number of shares owned and offered hereby includes 54,546 shares of common stock presently outstanding.
(124) The number of shares owned and offered hereby includes 57,143 shares of common stock presently outstanding. Mr. Ed Miller is the control person of Evergreen Marketing, Inc.
(125) The number of shares owned and offered hereby includes shares of our common stock underlying common stock purchase warrants which are exercisable at $0.45 per share. The selling security holder is an employee of Newbridge Securities Corporation, a broker-dealer. We originally issued Newbridge Securities Corporation a warrant representing an aggregate of 873,500 shares of our common stock exercisable at $0.45 per share as compensation for its placement agent services to us. Under the terms of this warrant, Newbridge Securities Corporation transferred its rights to these employees.
(126) Mr. Douglas F. Gass is the control person of Flow Capital Advisors, Inc. The number of shares owned and offered hereby includes 779,155 shares of our common stock presently outstanding and 200,000 shares of our common stock underlying common stock purchase warrants exercisable at $0.50 per share, of which warrants to purchase 100,000 shares of common stock expire on March 11, 2006 and warrants to purchase the remaining 100,000 shares of common stock expire on September 11, 2006. The shares offered hereby includes the 200,000 shares of common stock underlying those common stock purchase warrants.
None of the selling security holders are broker-dealers or affiliates of broker-dealers, other than:
* Newbridge Securities Corporation, an NASD member firm, acted as placement agent for us in the sale of our 14.25% secured convertible debentures and the Standby Equity Distribution Agreement. We are also a party to a business advisory agreement with Newbridge Securities Corporation,
* Messrs. Newman, Ostrow, Carrino, Goldberg, Fox, Barrus, Evansen, Paul and Hirschman, who are employees of Newbridge Securities Corporation as described in footnote 125 above,
* Messrs. John Monteforte, John F. Loughran and Joseph Pacillio are licensed securities salespersons employed by Clayton, Dunning & Company, Inc., an NASD member firm. Messrs. Monteforte, Loughran and Pacillio received warrants as compensation for business advisory services rendered to our company.
* Mr. Jason Mediate is a licensed securities salesperson employed by National Securities Corporation. Mr. Mediate received warrants as compensation for business advisory services rendered to our company.
Newbridge Securities Corporation received the warrants listed in the foregoing table as compensation for placement agent and business advisory services rendered to us in the ordinary course of their business. To our knowledge none of these firms or individuals have any arrangement with any person to participate in the distribution of such securities.
None of the selling security holders has, or within the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates, other than as described previously in this section.
We have agreed to pay full costs and expenses, incentives to the issuance, offer, sale and delivery of the shares, including all fees and expenses in preparing, filing and printing the registration statement and prospectus and related exhibits, amendments and supplements thereto and mailing of those items. We will not pay selling commissions and expenses associated with any sale by the selling security holders.
PLAN OF DISTRIBUTION
The shares offered hereby by the selling security holders may be sold from time to time by the selling security holders, or by pledgees, donees, transferees or other successors in interest. These sales may be made on one or more exchanges or in the over-the-counter market, or otherwise at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The shares may be sold by one or more of the following methods, including, without limitation:
* ordinary brokerage transactions and transactions in which the broker-dealer solicits the purchaser;
* block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
* an exchange distribution in accordance with the rules of the applicable exchange;
* privately-negotiated transactions;
* broker-dealers may agree with the selling security holders to sell a specified number of such shares at a stipulated price per share;
* through the writing of options on the shares;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
The selling security holders shall have the sole and absolute discretion not to accept any purchase offer or make any sale of shares if they deem the purchase price to be unsatisfactory at any particular time.
The selling stockholders or their respective pledgees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling security holders will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling security holders cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling security holders. Cornell Capital Partners, L.P. and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, are deemed "underwriters" as that term is defined under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
The selling security holders, alternatively, may sell all or any part of the shares offered in this prospectus through an underwriter. To our knowledge no selling security holder has entered into any agreement with a prospective underwriter, and there is no assurance that any such agreement will be entered into. If a selling security holder notifies us that they have a material arrangement with a broker-dealer for the resale of the common stock, then we would be required to amend the registration statement of which this prospectus is a part, and file a prospectus supplement to describe the agreements between the selling security holder and the broker-dealer.
The selling security holders should be aware that the anti-manipulation provisions of Regulation M under the Exchange Act will apply to purchases and sales of shares of common stock by the selling security holders, and that there are restrictions on market-making activities by persons engaged in the distribution of the shares. Under Registration M, the selling security holders or their agents may not bid for, purchase, or attempt to induce any person to bid for or purchase, shares of our common stock while such selling security holders are distributing shares covered by this prospectus. The selling security holders are not permitted to cover short sales by purchasing shares while the distribution is taking place. The selling security holders are advised that if a particular offer of common stock is to be made on terms constituting a material change from the information set forth above with respect to the Plan of Distribution, then, to the extent required, a post-effective amendment to the accompanying registration statement must be filed with the Securities and Exchange Commission.
Statutory Underwriter
Cornell Capital Partners is an "underwriter" within the meaning of the Securities Act of 1933 in connection with the sale of common stock under the Standby Equity Distribution Agreement. For so long as Cornell Capital is an "underwriter," Cornell Capital may not sell shares by relying on Rule 144. Cornell Capital Partners will pay us 98% of the volume weighted average price of our common stock for the five days immediately following the advance date. In addition, Cornell Capital Partners will retain 5% of the gross proceeds under the Standby Equity Distribution Agreement, and received a one-time commitment fee of 691,128 shares of our common stock. We also paid Yorkville Advisors Management, Inc., the investment manager for Cornell Capital Partners, a structuring fee of $15,000 in connection with the Standby Equity Distribution Agreement. The 2% discount, the 5% retention, the one-time commitment fee and the structuring fee are underwriting discounts. In addition, we engaged Newbridge Securities Corporation, a registered broker-dealer, to advise us in connection with the Standby Equity Distribution Agreement. For its services, Newbridge Securities Corporation received 25,132 shares of our common stock. Cornell Capital Partners, L.P. was formed in February 2000 as a Delaware limited partnership. Cornell Capital Partners is a domestic hedge fund in the business of investing in and financing public companies. Cornell Capital Partners does not intend to make a market in our stock or to otherwise engage in stabilizing or other transactions intended to help support the stock price. Prospective investors should take these factors into consideration before purchasing our common stock.
Special Considerations Related to Penny Stock Rules
Shares of our common stock may be subject to rules adopted by the SEC that regulate broker-dealer practices in connection with transactions in "penny stocks". Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document which contains the following:
* a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
* a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to violation to these duties or other requirements of securities laws;
* a brief, clear, narrative description of a dealer market, including "bid" and "ask" prices for penny stocks and the significance of the spread between the "bid" and "ask" price;
* a toll-free telephone number for inquiries on disciplinary actions;
* definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
* other information as the SEC may require by rule or regulation.
Prior to effecting any transaction in a penny stock, the broker-dealer also must provide the customer the following:
* the bid and offer quotations for the penny stock;
* the compensation of the broker-dealer and its salesperson in the transaction;
* the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
* monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock may be subject to the penny stock rules.
SHARES ELIGIBLE FOR FUTURE SALE
At September 30, 2004, we had 38,255,289 shares of common stock issued and outstanding, of which 25,313,280 are restricted securities. In general, Rule 144 permits a shareholder who has owned restricted shares for at least one year, to sell without registration, within a three-month period, up to one percent of our then outstanding common stock. In addition, shareholders other than our officers, directors or 5% or greater shareholders who have owned their shares for at least two years may sell them without volume limitation or the need for our reports to be current.
We cannot predict the effect, if any, that market sales of common stock or the availability of these shares for sale will have on the market price of the shares from time to time. Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market could adversely affect market prices for the common stock and could damage our ability to raise capital through the sale of our equity securities.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be passed upon for us by Schneider Weinberger & Beilly LLP, 2200 Corporate Boulevard, N.W., Suite 210, Boca Raton, Florida 33431. Members and employees of the firm own an aggregate of 174,000 shares of our common stock.
EXPERTS
Our financial statements as of and for the years ended June 30, 2004 and May 31, 2003 and the one month ended June 30, 2003 included in this prospectus have been audited by Sherb & Co., LLP, independent registered public accounting firm, as indicated in their report with respect thereto, and have been so included in reliance upon the report of such firm given on their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the SEC the registration statement on Form SB-2 under the Securities Act for the common stock offered by this prospectus. This prospectus, which is a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with it, portions of which have been omitted as permitted by SEC rules and regulations. For further information concerning us and the securities offered by this prospectus, we refer to the registration statement and to the exhibits filed with it. Statements contained in this prospectus as to the content of any contract or other document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as exhibits to the registration statement.
We file annual and special reports and other information with the SEC. Certain of our SEC filings are available over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities:
Public Reference Room Office
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Callers in the United States can also call 1-800-732-0330 for further information on the operations of the public reference facilities.
No dealer, sales representative or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the company or any of the underwriters. This prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of any offer to buy, to any person in any jurisdiction where such an offer or solicitation would be unlawful. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create an implication that the information set forth herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Risk Factors
Market for Common Equity and Related
Stockholder Matters
Capitalization
Dilution
Use of Proceeds
Management's Discussion and
Analysis or Plan of Operation POWER2SHIP, INC.
Our Business
Management
Certain Relationships and
Related Transactions PROSPECTUS
Principal Shareholders ----------
Description of Securities
Selling Security Holders
Plan of Distribution , 2004
Shares Eligible for Future Sale -----------
Legal Matters
Experts
Additional Information 36,955,556 SHARES
|
Financial Statements F-1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Nevada Revised Statues allows us to indemnify each of our officers and directors who are made a party to a proceeding if:
(a) the officer or director conducted himself or herself in good faith;
(b) his or her conduct was in our best interests, or if the conduct was not in an official capacity, that the conduct was not opposed to our best interests; and
(c) in the case of a criminal proceeding, he or she had no reasonable cause to believe that his or her conduct was unlawful. We may not indemnify our officers or directors in connection with a proceeding by or in our right, where the officer or director was adjudged liable to us, or in any other proceeding, where our officer or director are found to have derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, this indemnification is against public policy as expressed in the securities laws, and is, therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by Power2Ship in connection with the distribution of the securities being registered are as follows:
SEC Registration and Filing Fee $ 1,847
Legal Fees and Expenses* 20,000
Accounting Fees and Expenses*. 5,000
Financial Printing*. 7,500
Transfer Agent Fees*. 1,250
Blue Sky Fees and Expenses*. 500
Miscellaneous*. 403
---
TOTAL $36,500
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* Estimated
None of the foregoing expenses are being paid by the selling security holder.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On March 11, 2003, we consummated an agreement and plan of merger with Freight Rate, Inc. Pursuant to the merger agreement, Freight Rate, Inc. became a wholly-owned subsidiary of our company. At the effective time of the merger, the holders of the Freight Rate common and preferred stock, warrants and options exchanged their securities for an aggregate of (i) 11,869,712 shares of our common stock, (ii) options and warrants to purchase shares 17,717,075 shares of our common stock, (iii) 100,000 shares of our Series X Preferred Stock and (iv) 87,000 shares of our Series Y Preferred Stock. The merger was exempt from registration under the Securities Act of 1933, as amended (the "Securities Act") in reliance on an exemption available under Rule 506 of Regulation D. The existing shareholders of the operating company were either accredited investors or non-accredited investors who had such knowledge and experience in financial, investment and business matters that they were capable of evaluating the merits and risks of the prospective investment in our securities. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. The participants had access to business and financial information concerning our company and they each represented to us that they were acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws.
II-1
In March and April 2003, we sold an aggregate of 657,000 shares of our
common stock to 17 accredited investors at $0.50 per share in a private
transaction exempt from registration under the Securities Act in reliance on
Section 4(2) and Regulation D thereof. We received proceeds of $328,500.
Cardinal Capital Management, Inc. acted as selling agent for us in this
transaction and we paid that firm a 10% cash commission and issued it common
stock purchase warrants to purchase an aggregate of 65,700 shares of our common
stock with an exercise price of $2.00 per share. No general solicitation or
advertising was used in connection with this transaction, and the certificates
evidencing the shares that were issued contained a legend restricting their
transferability absent registration under the Securities Act or the availability
of an applicable exemption therefrom. The purchasers had access to business and
financial information concerning our company. Each purchaser represented that
he or she was acquiring the shares for investment purposes only, and not with a
view towards distribution or resale except in compliance with applicable
securities laws.
Between June 2002 and May 2003 we issued an aggregate of 2,101,027 shares of our common stock for services valued at $1,402,553 to seven accredited investors, all of whom were either consultants who provided business advisory services to our company or a member of our board of directors for his services to us in that capacity. The principal control person for one of these consultants was Douglas Gass, a former member of our board of directors. Included in these issuances were 1,698,472 shares of our common stock valued at $1,002,098 issued by us to two consultants as a settlement for claims in arbitration. These issuances were exempt from registration under the Securities Act in reliance on Section 4(2) thereof. The recipients each represented that they were acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with these transactions, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
Between June and November 2003 we sold an aggregate of 172,200 shares of our Series B convertible preferred stock at $5.00 per share to 66 investors in private transactions exempt from registration under the Securities Act in reliance on Rule 506 of Regulation D which resulted in gross proceeds of $861,000. No commissions were paid with respect to this offering. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. The purchasers had access to business and financial information concerning our company. Each purchaser represented that he or she was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws.
II-2
In September 2003, we issued 25,800 shares of our Series B convertible preferred stock valued at $129,000 in satisfaction of a promissory note in the principal amount of $125,000 and accrued interest thereon to Michael Garnick. The issuance was exempt from registration under the Securities Act in reliance on Section 4(2) thereof. The recipient was an accredited investor and represented that he was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with this transaction, and the certificate evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. This issuance was exempt from registration under the Securities Act in reliance on Section 4(2) thereof.
Between July and December 2003, we sold an aggregate of 10,832 shares of our Series C convertible preferred stock at $30.00 per share to four investors in a private transaction exempt from registration under the Securities Act in reliance on Section 4(2) which resulted in gross proceeds of $324,960. We paid no commissions in connection with this transaction. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. The purchasers had access to business and financial information concerning our company. Each purchaser represented that he or she was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws.
Between August and November 2003, we sold an aggregate of 1,128,400 shares of our common stock at prices between $.47 and $.74 per share to 78 non-U.S. purchasers in a private offering exempt from registration under the Securities Act in reliance on Regulation S thereof resulting in proceeds to us of $285,898, net of discounts. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. The purchasers had access to business and financial information concerning our company. Each purchaser represented that he or she was a non-U.S. person as that term is defined in Regulation S, and agreed to customary Regulation S legends and restrictions as to transferability of such shares applicable to Regulation S.
During fiscal year 2004, we issued an aggregate of 1,085,208 shares of our common stock valued at $300,642 as compensation for services to an aggregate of 15 recipients including 105,208 shares to two vendors valued at $51,717, 175,000 shares to five employees valued at $82,500 and 805,000 shares to eight consultants valued at $166,425. The recipients were all accredited investors. The issuances were exempt from registration under the Securities Act in reliance on Section 4(2) thereof. The recipients were either accredited or sophisticated investors and each represented that they were acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with these transactions, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
In June 2004 we issued 131,025 shares of our common stock valued at $55,031 to the holders of our 14.25% secured convertible debentures pursuant to our registration rights agreement with them. In January 2004 we issued an aggregate of 185,458 shares of our common stock valued at $81,383 as loan fees to five private investors that loaned us $340,000. In August 2003 we issued 125,000 shares of our common stock valued at $72,500 to Michael Garnick for canceling the prepayment provision of our note with him. The issuances were exempt from registration under the Securities Act in reliance on Rule 506 of Regulation D. The recipients were either accredited or sophisticated investors and each represented that they were acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with these transactions, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
II-3
In March 2004 we issued 600,000 shares of our common stock valued at $300,000 and warrants to purchase an additional 600,000 shares with an exercise price of $.75 per share valued at $116,820 to a consultant. One-half of the shares and warrants were expensed during fiscal 2004 as compensation for services and the remainder was recorded as deferred compensation. The issuance was exempt from registration under the Securities Act in reliance on Section 4(2) thereof. The recipient was an accredited investor. No general solicitation or advertising was used in connection with this transaction, and the certificates evidencing the shares and warrants that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
In June 2004 we issued an aggregate of 816,260 shares of our common stock valued at $310,179to Cornell Capital Partners, LP and Newbridge Securities Corporation related to the SEDA transaction. The issuances were exempt from registration under the Securities Act in reliance on Rule 506 of Regulation D. The recipients were accredited investors and each represented that they were acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with these transactions, and the certificates evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
Between August and October 2004, we issued 507,143 shares of common stock valued at $184,800 to five consultants as compensation for consulting services provided to us. The issuance was exempt from registration under the Securities Act in reliance on Section 4(2) thereof. Each recipient was a sophisticated investor and represented that he was acquiring the shares for investment purposes only, and not with a view towards distribution or resale except in compliance with applicable securities laws. No general solicitation or advertising was used in connection with the transaction, and the certificate evidencing the shares that were issued contained a legend restricting their transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom.
II-4
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibit No. Description of Document
2.1 Merger Agreement between Jaguar Investments, Inc., Freight Rate, Inc.,
and Jag2 Corporation, dated March 10, 2003. (1)
3.1 Articles of Incorporation (2)
3.2 Certificate of Amendment to Articles of Incorporation (3)
3.3 Certificate of Amendment to the Articles of Incorporation (4)
3.4 Certificate of Voting Powers, Designations, Preferences and Right to
Series B Convertible Preferred Stock *
3.5 Certificate of Voting Powers, Designations, Preferences and Rights to
Series C Convertible Preferred Stock *
3.6 Certificate of Voting Powers, Designations, Preferences and Right to
Series Y Preferred Stock, filed March 11, 2003 (5)
3.7 Certificate of Correction of Certificate of Voting Powers, Designations,
Preferences and Right to Series Y Preferred Stock, filed
April 9, 2003 (5)
3.8 Certificate of Amendment to Articles of Incorporation as filed on August
13, 2004 (10)
3.9 Certificate of Voting Powers, Designations, Preferences and Right to
Preferred Stock of Series X Convertible Preferred Stock (5)
3.10 Bylaws (2)
3.10 Amended Bylaws dated March 31, 2003 (5)
4.1 Form of Common Stock Purchase to Newbridge Securities Corporation for
Business Advisory Agreement*
4.2 $ 1,747,000 principal amount 14.25% secured convertible debenture *
4.3 $2,000,000 principal amount Series B 5% secured convertible
debenture (6)
4.4 Form of non-plan option agreement*
4.5 Form of common stock purchase warrant*
4.6 Form of Common Stock Purchase Warrant re: 14.25% secured convertible
debentures*
4.7 Form of Common Stock Purchase Warrant issued to Newbridge Securities
Corporation as Placement Agent for 14.25% secured convertible
debentures*
5 Opinion of Schneider Weinberger & Beilly, LLP**
10.1 Securities Purchase Agreement (6)
10.2 Investor Registration Rights Agreement (6)
10.3 Standby Equity Distribution Agreement (6)
10.4 Placement Agent Agreement with Newbridge Securities Corporation (6)
10.5 2001 Employee Stock Compensation Plan (3)
10.6 Form of Registration Rights Agreement, dated as of December 21, 2001,
by and between Jaguar Investments, Inc. and certain shareholders of
Jaguar Investments, Inc. (7)
10.11 Stock Purchase Agreement between Jaguar Investments, Inc. and The
D.A.R. Group, Inc., dated March 10, 2003. (1)
10.12 Employment Agreement with Richard Hersh (8)
10.13 Employment Agreement with Michael J. Darden (8)
10.14 Employment Agreement with John Urbanowicz (8)
10.15 Business Advisory Agreement with Newbridge Securities
Corporation *
10.16 Vendor Agreement with TruckersB2B, Inc. (9)
10.17 Form of Intellectual Property Assignment Agreement between Power2Ship,
Inc. and each of Richard Hersh, Michael J. Darden and John Urbanowicz*
10.18 Security Agreements for 14.25% secured convertible debentures*
10.19 Registration Rights Agreement for 14.25% secured convertible
debentures *
10.20 Distribution Agreement with Wireless Links, Inc. (11)**
10.21 Advertising/Marketing Agency Agreement with Palm Beach Media
Associates, Inc.**
10.22 Agency Agreement With ARL, Inc.**
10.23 Agreement with Comdata**
10.24 Consulting Agreement with Michael Garnick**
10.25 Form of Motor Carrier Transportation Agreement**
14.1 Code of Ethics**
22 Subsidiaries of Registrant **
23.1 Consent of Sherb & Co., LLP**
23.2 Consent of Schneider Weinberger & Beilly, LLP (included in Exhibit 5
hereto)**
|
II-5
* Previously filed ** Filed herewith
(1) Incorporated by reference to the registrant's Report on Form 8-K as filed
on March 36, 2003.
(2) Incorporated by reference to the registrant's registration statement on
Form 10-SB, SEC file number 000-25753, as amended.
(3) Incorporated by reference to the registrant's definitive Schedule 14C
Information Statement as filed on February 2, 2001
(4) Incorporated by reference to the registrant's definitive Schedule 14C
Information Statement as filed on April 22, 2003
(5) Incorporated by reference to the registrant's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2002.
(6) Incorporated by reference to the registrant's Report on Form 8-K as filed
on July 8, 2004.
(7) Incorporated by reference to the registrant's Report on Form 8-K as filed
on January 3, 2002.
(8) Incorporated by reference to the registrant's Quarterly Report on Form
10-QSB for the period ended March 31, 2003.
(9) Incorporated by reference to the registrant's Report on Form 8-K as filed
on May 11, 2004. Portions of this exhibit have been omitted and separately
filed with the SEC with a request for confidential treatment.
(10) Incorporated by reference to the registrant's definitive Schedule 14C
Information Statement as filed on July 27, 2004.
(11) Portions of this exhibit have been omitted and separately filed with the
SEC with a request for confidential treatment.
ITEM 28. UNDERTAKINGS
The undersigned small business issuer will:
1. File, during any period in which offers or sells securities, a post-effective amendment to this registration statement to:
i. Include any prospectus required by section 10(a)(3) of the Securities Act;
ii. Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and 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 prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
iii. Include any additional or changed material information on the plan of distribution.
II-6
2. For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
3. File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising 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.
In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or preceding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Boca Raton, Florida on October 19, 2004.
POWER2SHIP, INC.
By: /s/ Richard Hersh
-------------------
Richard Hersh, CEO and Chairman of the Board of
Directors, Principal Executive Officer, and
principal accounting and financial officer
|
Pursuant to the requirements of the Securities Act of 1933, this Form SB-2 registration statement has been signed by the following persons in the capacities and on the dates indicated.
II-8
Signature Title Date
--------- ----- ----
/s/ Richard Hersh Chairman of the Board, CEO October 19, 2004
-----------------
Richard Hersh
/s/ Michael J. Darden President and director October 19, 2004
---------------------
Michael J. Darden
/s/ Brett Kublin Director October 19, 2004
----------------
Brett Kublin
II-9
|
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheet, June 30, 2004 F-3 Consolidated Statements of Operations, Year Ended June 30, 2004 and May 31, 2003 F-4 Consolidated Statement of Changes in Stockholders' Deficit for the period May 31, 2002 through June 30, 2004 F-5 Consolidated Statements of Cash Flows, Year Ended June 30, 2004 and May 31, 2003 F-6 Transition Period Ended June 30, 2003: Consolidated Statement of Operations, One Month Period Ended June 30, 2003 F-7 Consolidated Statement of Cash Flows, One Month Period Ended June 30, 2003 F-8 |
Notes to Consolidated Financial Statements for the Year Ended June 30, 2004 F-9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Power2Ship, Inc.
We have audited the accompanying consolidated balance sheets of Power2Ship, Inc. and Subsidiary as of June 30, 2004 and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the years ended June 30, 2004 and May 31, 2003, and the one month ended June 30, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Power2Ship, Inc. and Subsidiary, as of June 30, 2004 and the consolidated results of their operations and their cash flows for the years ended June 30, 2004 and May 31, 2003, and for the one month ended June 30, 2003, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company had net losses and cash used in operations of $4,134,885 and $2,598,189, respectively, for the year ended June 30, 2004. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Sherb & Co., LLP
New York, New York Certified Public Accountants
August 12, 2004
|
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2004
ASSETS
Current assets:
Cash and cash equivalents $ 832,130
Receivables, net of allowance of $2,963 319,089
Prepaid insurance 59,039
-------------
Total current assets 1,210,258
Furniture and equipment 248,099
Less: accumulated depreciation (72,800)
-------------
Net furniture and equipment 175,299
Deferred financing costs 766,609
Restricted cash for interest on debentures 124,474
Other assets 160,682
-------------
Total assets $ 2,437,322
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable - short term $ 60,000
Accounts payable 305,705
Accrued expenses 196,460
Accrued salaries 44,713
-------------
Total current liabilities 606,878
Long term debt:
Long term notes payable 20,000
Convertible notes payable less discount of $94,920 2,827,080
Convertible note payable to related party 115,000
Stockholders' deficit:
Preferred stock, $.01 par value, 1,000,000 authorized:
Series B convertible preferred stock, $.01 par value, 200,000
shares authorized; 198,000 shares issued and outstanding 1,980
Series C convertible preferred stock, $.01 par value, 20,000
shares authorized; 10,832 shares issued and outstanding 108
Series Y convertible preferred stock, $.01 par value, 87,000
shares authorized; 87,000 shares issued and outstanding 870
Common stock, $.001 par value, 100,000,000 shares
authorized; 38,248,146 shares issued and outstanding 38,248
Deferred compensation (208,410)
Additional paid-in capital 11,794,765
Accumulated deficit (12,759,197)
-------------
Total stockholders' deficit (1,131,636)
-------------
Total liabilities and stockholders' deficit $ 2,437,322
=============
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended Year ended
June 30, 2004 May 31, 2003
--------------- --------------
Revenue:
Freight transportation $ 1,778,027 $ 482,824
Access services 290,013 88,064
Implementation services 23,925 448,995
--------------- --------------
Total revenue 2,091,965 1,019,883
Operating expenses:
Freight transportation 1,581,119 473,304
Selling, general and administrative:
Salaries, benefits and consulting fees 2,808,305 1,057,773
Other selling, general and administrative 1,112,537 540,936
Research and development 320,059 156,144
--------------- --------------
Total operating expenses 5,822,020 2,228,157
--------------- --------------
Loss from operations (3,730,055) (1,208,274)
--------------- --------------
Other income (expense):
Litigation settlement - (1,002,098)
Forgiveness of debt - 93,074
Interest income 854 821
Interest expense (405,684) (122,165)
Other income - 2,770
--------------- --------------
Total other expense (404,830) (1,027,598)
--------------- --------------
Net loss $ (4,134,885) $ (2,235,872)
Less: Preferred stock dividend (1,347,044) -
--------------- --------------
Loss available to common shareholders $ (5,481,929) $ (2,235,872)
=============== ==============
Loss per share-basic and diluted $ (0.17) $ (0.15)
=============== ==============
Weighted average shares outstanding
- basic and diluted 32,947,559 14,957,590
=============== ==============
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD MAY 31, 2002 THROUGH JUNE 30, 2004
Series B Stock Series C Stock Series X Stock Series Y Stock
---------------------- ----------------------- ----------------- ----------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- --------- ---------- ----------- -------- ------- ---------- ----------
Balance, May, 31, 2002 - $ - 87,000 $ 870 - $ - - $ -
Conversion of Series C preferred
to series Y (87,000) (870) 87,000 870
Issuance of Series X preferred 100,000 1,000
Retirement of Treasury stock
Sale of common stock
Conversion of notes and accrued
salaries to stock options
Common stock issued for services
Options and warrants issued for services
Common stock issued upon merger
Net loss - - - - - - - -
----------- --------- ---------- ----------- -------- ------- ---------- ----------
Balance, May 31, 2003 - $ - - $ - 100,000 $ 1,000 87,000 $ 870
=========== ========= ========== =========== ======== ======= ========== ==========
Sale of Series B preferred stock 9,000 90
Common stock issued for services and
compensation
Common stock issued for rent deposit
Warrants issued for interest
Net loss - - - - - - - -
----------- --------- ---------- ----------- -------- ------- ---------- ----------
Balance, June 30, 2003 9,000 $ 90 - $ - 100,000 $ 1,000 87,000 $ 870
=========== ========= ========== =========== ======== ======= ========== ==========
Conversion of Series X preferred stock
to common stock (100,000) (1,000)
Common stock issued for anti-dilution
Sale of Series B preferred stock 163,200 1,632
Sale of Series C preferred stock net of
costs of $30,000 10,832 108
Sale of common stock (Reg S) net of costs
of $428,847
Conversion of notes and accrued interest
to Series B stock 25,800 258
Common stock issued for Series B
preferred dividend
Common stock returned for rent deposit
Common stock issued for services
Common stock issued for interest
Common stock issued for financing
Common stock issued for services -
financial consultant
Warrants issued for services -
financial consultant
Options and warrants issued for discount
on notes
Options and warrants issued for services
Options and warrants issued for financing
Net loss - - - - - - - -
----------- --------- ---------- ----------- -------- ------- ---------- ----------
Balance, June 30, 2004 198,000 $ 1,980 10,832 $ 108 - $ - 87,000 $ 870
=========== ========= ========== =========== ======== ======= ========== ==========
(Continued)
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD MAY 31, 2002 THROUGH JUNE 30, 2004
(Continued)
Treasury Stock
Common Stock (at cost) Additional
----------------- ------------------ Deferred Paid-in Accumulated
Shares Amount Shares Amount Compensation Capital Deficit Total
-------- ------- -------- --------- ------------- -------- ------- ---------
Balance, May, 31, 2002 11,907,157 $11,907 (410,000) $(30,000) $ - $ 6,211,563 $(6,133,292) $ 61,048
Conversion of Series C preferred
to series Y - -
Issuance of Series X preferred (1,000) -
Retirement of Treasury stock (410,000) (410) 410,000 30,000 (29,590) -
Sale of common stock 657,000 657 327,843 328,500
Conversion of notes and accrued
salaries to stock options 4,430 4,430
Common stock issued for services 2,101,027 2,101 1,400,452 1,402,553
Options and warrants issued
for services 31,785 31,785
Common stock issued upon merger 12,860,000 12,860 (12,860) -
Net loss - - - - - - (2,235,872) (2,235,872)
---------- ------- -------- --------- ----------- ---------- --------- -----------
Balance, May 31, 2003 27,115,184 $27,115 - $ - $ - $ 7,932,623 $(8,369,164) $ (407,556)
========== ======= ======== ========= =========== ========== ========== ===========
Sale of Series B preferred stock 44,910 45,000
Common stock issued for services
and compensation 180,000 180 151,020 151,200
Common stock issued for rent deposit 50,000 50 39,450 39,500
Warrants issued for interest 16,650 16,650
Net loss - - - - - - (167,416) (167,416)
---------- ------- -------- --------- ----------- ---------- --------- -----------
Balance, June 30, 2003 27,345,184 $27,345 - $ - $ - $ 8,184,653 $ (8,536,580)$ (322,622)
========== ======= ======== ========= =========== ========== ========== ===========
Conversion of Series X preferred
stock to common stock 5,700,000 5,700 (4,700) -
Common stock issued for
anti-dilution 948,275 948 (948) -
Sale of Series B preferred stock 814,368 816,000
Sale of Series C preferred stock
net of costs of $30,000 294,852 294,960
Sale of common stock (Reg S)
net of costs of $428,847 1,128,400 1,128 284,770 285,898
Conversion of notes and accrued
interest to Series B stock 128,742 129,000
Common stock issued for Series B
preferred dividend 233,336 233 87,499 (87,732) -
Common stock returned for
rent deposit (50,000) (50) (39,450) (39,500)
Common stock issued for services 1,085,208 1,085 299,557 300,642
Common stock issued for interest 441,483 441 208,729 209,170
Common stock issued for financing 816,260 816 309,363 310,179
Common stock issued for services -
financial consultant 600,000 600 (150,000) 299,400 150,000
Warrants issued for services -
financial consultant (58,410) 116,820 58,410
Options and warrants issued for
discount on notes 108,160 108,160
Options and warrants issued for
services 569,489 569,489
Options and warrants issued for
financing 133,462 133,462
Net loss - - - - - - (4,134,885) (4,134,885)
---------- ------- -------- --------- ----------- ---------- --------- -----------
Balance, June 30, 2004 38,248,146 $38,248 - $ - $(208,410) $11,794,765 $(12,759,197) $(1,131,636)
=========== ======= ========= ========= =========== ========== ========= ===========
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended Year ended
June 30, 2004 May 31, 2003
--------------- --------------
Cash flows from operating activities:
Net loss $ (4,134,885) $ (2,235,872)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 37,656 7,659
Amortization of deferred financing costs 39,642 -
Amortization of discount on notes payable 13,240 -
Increase (decrease) in allowance for doubtful accounts (4,403) 7,367
Gain on forgiveness of accrued salary - (93,074)
Issuance of stock options and warrants
for services and conversion 627,899 31,785
Issuance of stock for services, interest and litigation settlement 659,812 1,402,553
Changes in operating assets and liabilities:
Decrease (increase) in receivables 59,447 (324,328)
Increase in prepaid insurance (29,220) (33,026)
Increase in other assets (117,313) (31,479)
Increase in accounts payable and accrued expenses 249,936 442,047
--------------- --------------
Net cash used in operating activities (2,598,189) (826,368)
--------------- --------------
Cash flows from investing activities:
Purchases of property and equipment (79,773) (130,663)
--------------- --------------
Net cash used in investing activities (79,773) (130,663)
--------------- --------------
Cash flows from financing activities:
Proceeds from convertible promissory notes net of costs of $487,084
and $0, respectively 2,109,916 217,000
Proceeds from promissory notes 340,000 -
Repayments of promissory notes (380,000) (26,816)
Repayments of promissory notes - related party (20,000) -
Proceeds from conversion of options to common stock - 225,000
Proceeds from sale of preferred stock net of costs of $30,000
and $0, respectively 1,110,960 195,720
Proceeds from sale of common stock net of costs of $428,847
and $0, respectively 285,898 328,500
--------------- --------------
Net cash provided by financing activities 3,446,774 939,404
--------------- --------------
Net increase (decrease) in cash and cash equivalents 768,812 (17,627)
Cash and cash equivalents, beginning of period 63,318 36,027
--------------- --------------
Cash and cash equivalents, end of period $ 832,130 $ 18,400
=============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ 14,790 $ -
=============== ==============
Cash paid for income taxes during the period $ - $ -
=============== ==============
Non-cash transactions affecting investing and financing activities:
Conversion of bridge loan to convertible promissory notes $ 150,000 $ -
=============== ==============
Warrants issued for deferred financing costs $ 133,462 $ -
=============== ==============
Common stock issued for deferred financing costs $ 310,179 $ -
=============== ==============
Warrants issued for discount on notes payable $ 108,160 $ -
=============== ==============
Common stock cancelled for rent deposit $ (39,500) $ -
=============== ==============
Conversion of notes and accrued interest to preferred stock $ 129,000 $ -
=============== ==============
Conversion of notes and accrued interest to common stock $ 87,732 $ -
=============== ==============
Common stock and warrants for services to be rendered in future $ 208,410 $ -
=============== ==============
Common stock issued for anti-dilution $ 948 $ -
=============== ==============
Conversion of accrued salaries to note payable $ - $ 135,000
=============== ==============
Retirement of treasury stock $ - $ (30,000)
=============== ==============
Conversion of notes and accrued interest to common stock $ - $ 1,600,618
=============== ==============
Conversion of accrued salaries and note payable to options $ - $ 4,430
=============== ==============
Conversion of Series B preferred stock to common stock $ - $ 1,957
=============== ==============
Conversion of Series C to Series Y preferred stock $ - $ 870
=============== ==============
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
ONE MONTH TRANSITION PERIOD ENDED JUNE 30, 2003
Revenue:
Freight transportation $ 77,895
Access services 35,000
------------
Total revenue 112,895
Operating expenses:
Freight transportation 39,254
Selling, general and administrative:
Salaries, benefits and consulting fees 97,706
Other selling, general and administrative 106,274
Research and development 20,113
------------
Total operating expenses 263,347
------------
Loss from operations (150,452)
------------
Other income (expense):
Interest income 401
Interest expense (17,365)
------------
Total other expense (16,964)
------------
Net loss $ (167,416)
Less: Preferred stock dividend (45,000)
------------
Loss available to common shareholders $ (212,416)
============
Loss per share-basic and diluted $ (0.01)
============
Weighted average shares outstanding
- basic and diluted 27,324,184
============
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
ONE MONTH TRANSITION PERIOD ENDED JUNE 30, 2003
Cash flows from operating activities:
Net loss $(167,416)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 1,638
Issuance of warrants for interest 16,650
Issuance of stock for services and compensation 62,367
Changes in operating assets and liabilities:
Increase in receivables (57,171)
Decrease in prepaid insurance 3,207
Increase in accounts payable and accrued expenses 43,309
----------
Net cash used in operating activities (97,416)
----------
Cash flows from investing activities:
Purchases of property and equipment (2,666)
----------
Net cash used in investing activities (2,666)
----------
Cash flows from financing activities:
Proceeds from convertible promissory notes 100,000
Proceeds from sale of preferred stock 45,000
----------
Net cash provided by financing activities 145,000
----------
Net increase in cash and cash equivalents 44,918
Cash and cash equivalents, beginning of period 18,400
----------
Cash and cash equivalents, end of period $ 63,318
==========
Supplemental disclosure of cash flow information:
Cash paid for interest during the period $ -
==========
Cash paid for income taxes during the period $ -
==========
Non-cash transactions affecting investing & financing activities:
Common stock issued for rent deposit $ 39,500
==========
Conversion of convertible note to short term promissory note $ 125,000
==========
Common stock issued as payment for accounts payable $ 88,833
==========
|
See accompanying notes
POWER2SHIP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS
The Company is licensed by the United States Department of Transportation as a broker, arranging for transportation of freight (except household goods) by motor vehicle. Since October 2002, the Company's primary source of revenue has been derived from providing freight transportation services to its shipper customers. The Company transports inbound and outbound freight using independent trucking companies and tracks the freight while in transit through the Company's web-based MobileMarket(TM). The Company believes that the accurate and timely information available in the MobileMarket(TM) enables its shipper customers to optimize their supply chain and reduce their transportation, warehousing and inventory carrying costs. Also, the Company provides freight carriers with free, unlimited use of a web-based asset management system to track the location, destination and availability of their transportation equipment and help them better manage the utilization of their assets and drivers. By using the asset management system, the Company's MobileMarket(TM) is capable of automatically displaying to shippers any available transportation equipment that meets their requirements and enables them to book a particular transportation asset through the MobileMarket(TM). The Company generates revenue each time a shipper selects a carrier to move its freight either through the MobileMarket(TM) or with the assistance of a Company employee.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
On February 27, 2004, as reported in Form 8-K, the Company's board of directors authorized a change in the Company's fiscal year from May 31 to June 30 in order to align the Company's quarterly reporting obligations with calendar quarters, resulting in a more traditional reporting pattern and thereby reducing potential confusion in the marketplace. As a result, this Form 10-KSB includes consolidated financial statements for the years-ended June 30, 2004, May 31, 2003 and the transition period associated with the changed fiscal year which is the one month period ended June 30, 2003.
Freight transportation revenue consists of the total dollar value of services purchased from us by our customers. The Company recognizes freight transportation revenue when shipments of goods reach their destinations and the receiver of the goods acknowledges their receipt by signing a bill of lading. At that time, our obligations to the customer are completed and collection of receivables is reasonably assured. Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, establishes the criteria for recognizing revenues on a gross or net basis. In these transactions, we are the primary obligor, we are a principal to the transaction not an agent, we have the risk of loss for collection, we have discretion to select the supplier and we have latitude in pricing decisions.
Access services revenue is recognized in the month that access to the P2S MobileMarket(TM) is provided to customers.
Implementation services revenue, generated pursuant to software development contracts with customers, is recognized on the percentage of completion basis for each deliverable provided for in the contract. Revenue from implementation services is expected to be insignificant as a percentage of total revenue in the foreseeable future.
The Company maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation up to $100,000 per institution. At June 30, 2004, the Company's cash balances exceeded the insured limits by approximately $700,000. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash on deposit.
The Company performs on-going credit evaluations of its customer base including those that represent its accounts receivable at June 30, 2004. The Company maintains reserves for potential credit losses and such losses historically have been within management's expectations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for the first interim period beginning after June 15, 2003, with certain exceptions. The adoption of SFAS No. 150 did not have a significant impact on the consolidated financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying consolidated financial statements are prepared assuming the Company will continue as a going concern. During the twelve months ended June 30, 2004 and May 31, 2003, the Company incurred losses from operations of $3,730,055 and $1,208,274, respectively and had negative cash flows from operations of $2,598,189 and $826,368, respectively. While the Company is attempting to increase sales, the growth has not been significant enough to support the Company's daily operations. Management intends to continue raising additional funds with private placements of its debt and equity securities to accredited investors. While the Company believes in the viability of its strategy to improve sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 4 - CONCENTRATIONS
During the twelve months ended June 30, 2004, six customers accounted for 95% of the Company's revenue. Their individual percentages ranged from 2% to 64% with one customer representing approximately 64% and one other customer representing 15%. Four of the same customers accounted for 79% of the Company's accounts receivable at June 30, 2004.
NOTE 5 - RELATED PARTY TRANSACTIONS
In November, 2002, the Chief Executive Officer received $20,000 from the Company in the form of a short-term demand note bearing interest at the rate of 6% per annum. As of May 31, 2003 the balance of the note and accrued interest was $20,985. This transaction occurred prior to the reverse merger when Freight Rate was a private company. In September, 2003, the note was paid in full.
In November, 2004, an employee received $6,000 from the Company in the form of a short-term demand note bearing interest at the rate of 18% per annum. As of June 30, 2004 the balance of the note and accrued interest was $4,250.
NOTE 6 - FURNITURE AND EQUIPMENT
At June 30, 2004, furniture and equipment consisted of the following:
Estimated
Useful lives
Computer Hardware & Software $166,024 5 years
Equipment 54,396 5 years
Furniture & Fixtures 24,651 7 years
Leasehold Improvements 3,028 4 years
---------
248,099
Less: accumulated depreciation (72,800)
---------
$175,299
=========
|
Depreciation expense was $37,656 and $7,659 for the years ended June 30, 2004 and May 31, 2003, respectively.
NOTE 7 - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE
In June, 2004, the Company issued $1,000,000 of its Series B Convertible Debentures to one accredited investor and paid commissions and expenses of $135,500 that were accounted for as deferred financing costs to be amortized over the terms of the Debentures. In addition, the company issued 816,260 common shares valued at $348,179 to the lender and placement agent that were also accounted for as deferred financing costs to be amortized over the terms of the Debentures. The Debentures mature on June 28, 2006, and earn interest of 5.00% per annum. The Debentures may be converted by the holder at any time into common stock at a conversion price equal to the lesser of an amount equal to 120% of the closing bid price of the common stock as of the closing date or 100% of the average of the three lowest closing bid prices of the common stock for the thirty trading days immediately preceding the conversion date. The Company may redeem the Debentures, with three days notice at any time, by paying a premium of up to 20% of their original purchase price in a combination of cash and common stock. For the twelve months ended June 30, 2004, there was no accrued interest on the Debentures and no amortization of deferred financing costs. The Company has provided the Debenture holders with a security interest in its tangible and intangible assets, subject to automatic subordination to most traditional asset-based loans, to secure the prompt payment of principal
In March and April, 2004, the Company issued $1,747,000 of its Series A Convertible Debentures to 35 accredited investors and paid commissions and expenses of $227,110 that were accounted for as deferred financing costs to be amortized over the terms of the Debentures. In addition, the company issued 873,500 warrants valued at $108,160 (see Note 11) and 131,025 common shares valued at $55,031 to the lenders that were accounted for as additional interest costs. The Debentures mature on December 31, 2006, and earn interest of 14.25% per annum payable semi-annually in arrears on June 30 and December 31. The Debentures may be converted by the holders at any time into common stock at a conversion price equal to the lesser of $.80 per share or 90% of the average closing bid price of the common stock for the ten trading days immediately preceding the date that a registration statement registering the shares of common stock underlying the Debentures becomes effective. The Company may redeem the Debentures, with fifteen days notice at any time, by paying a premium of up to 20% of their original purchase price in a combination of cash and common stock. For the twelve months ended June 30, 2004, the accrued interest on the Debentures was $66,867 (paid July 1, 2004) and amortization of deferred financing costs was $39,642. The Company has provided the Debenture holders with a security interest in its tangible and intangible assets, subject to automatic subordination to most traditional asset-based loans, to secure the prompt payment of principal. In addition, the Company is required to set aside the equivalent of six months interest on the debentures in a separate account in the event of a default. At June 30, 2004, the Company had restricted cash of $124,474 for this purpose.
In December 2003 and January 2004, the Company issued a total of $340,000 of 18% short-term promissory notes to six individuals, paid commissions associated with the placement of such notes of $34,000 and issued the lenders a total of 185,458 shares of the Company's restricted common stock valued at $81,383. Interest expense for the twelve months ended June 30, 2004 on the notes was $14,790. The total of commissions, value of the common stock and interest of $130,173 was recorded as interest expense for the twelve months ended June 30, 2004. In March, 2004, the Company repaid $190,000 of these notes and converted $150,000 into Series A Convertible Debentures discussed above.
On July 15, 2003, the Company issued a promissory note in the amount of $170,000 for licenses to use certain logistics software. The note replaced a prior note for the licenses which was the subject of a lawsuit and other disputed claims by various parties. The lawsuit was initiated by the software vendor to enforce payment of the prior promissory note in the amount of $143,000 which had expired in May 2002. This prior note had been issued to the software vendor in September 2001 to reflect the balance we owed on software licenses purchased in March 2000. We did not made the required payments on the prior note and asserted counterclaims against the software vendor in the lawsuit for breach of contract, fraudulent inducement and declaratory relief. The new note was the result of a settlement agreement for all claims by all parties. The note bears no interest and required the Company to pay $30,000 upon issuing the note followed by 22 consecutive payments of $5,000 on the first of each month beginning on August 1, 2003 for a total of $140,000. The new note payable was recorded at the face value of $170,000 and the old note of $140,000 and accrued interest of $15,111 was written off. Prepaid interest in the amount of $11,889 was recorded. If all the aforementioned payments are made on or before their applicable due dates, or within their permitted grace periods, the $30,000 balance remaining of the note will be waived. The Company expects to receive the waiver in the fourth fiscal quarter of 2005 and will write off the note balance of $30,000 against the prepaid interest, leaving a gain of $18,101 that will be recorded at that time. At June 30, 2004, the outstanding balance on the note was $80,000 of which $20,000 was accounted for as long term notes payable and $60,000 as notes payable - short term.
In March 2003, the Company issued a $125,000 convertible promissory note to a private investor that also was a non-affiliated Company shareholder. In June 2003, the Company and the shareholder cancelled the old note and issued a new promissory note for $225,000 as the Company received an additional $100,000. The new note had an interest rate of 5% per annum, had a maturity date of December 5, 2003 and had a conversion price of $.40 per share. Subsequent to its issuance, the conversion provision in the new note was amended to change the conversion price to $.79 per share which equaled the closing market price of our common stock on the issue date of the note. We also granted the note holder, in connection with the loan, warrants to purchase 75,000 shares of common stock at a price of $0.79 per share which expired on June 5, 2004. These warrants were valued at $16,650 and recorded as interest expense. In July 2003, the Company made a $100,000 principal payment on the $225,000 note and, in September 2003, repaid the $125,000 outstanding balance of the note, plus accrued interest of $4,000, with 25,800 shares of its Series B preferred stock convertible at $0.25 per share. This conversion provision represents a beneficial conversion feature, the value of which is calculated by subtracting the conversion price of $0.25 from the market price of the common stock on the date the preferred shares were issued. In this case, since the beneficial conversion feature is valued at more than the conversion price, the total value of the shares or $129,000 has been recognized as preferred dividends during the fiscal quarter ended November 30, 2003.
On March 10, 2003, the Company issued an 8% convertible promissory note due June 30, 2006 in the amount of $135,000 to its Chief Executive Officer in exchange for his forgiveness of $147,520 of accrued salary. The outstanding principal balance of the note may be converted at any time into common stock at a conversion price equal to the lesser of $1.51 per share or 50% of the average closing bid prices of the Company's common stock for the five trading days immediately preceding the date of such conversion but no less than $0.75 per share. During the twelve months ended June 30, 2004, $20,000 was repaid leaving a balance of $115,000.
On March 6, 2003, the Company issued a convertible promissory note in the amount of $175,000 to an unaffiliated Company shareholder. The interest rate of the note is 8% per annum and it had a maturity date of June 30, 2006. The holder of the note has the right to convert the outstanding principal balance of the note into the Company's common stock at any time prior to its maturity date at a conversion price equal to the lesser of 1) $1.51 per share or 2) 50% of the average of the closing bid prices of the common stock for the five trading days immediately preceding the date of conversion but no less than $0.25 per share. As of June 30, 2004, the Company has accrued interest in the amount of $18,441 and the principal balance of the note is $175,000. Since the conversion price per share is contingent upon the occurrence of a future event, no beneficial conversion feature is recognized in earnings until the contingency is resolved.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
At June 30, 2004, minimum rental commitments are as follows:
2005 $ 119,475
2006 125,213
2007 52,813
-------------
$ 297,501
=============
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Also required was an additional security deposit of $9,312 by June 1, 2004. This amount was secured by 50,000 shares of the Company's common stock valued at $39,500 which were deposited with the landlord in June, 2003 and returned in May, 2004 when the payment of the additional deposit was made.
For the years ended June 30, 2004 and May 31, 2003, rent expense was $121,586 and $26,712, respectively. For the month of June, 2003, rent expense was $8,845.
In addition, the Company leases a phone system and a copier with total rental commitments of $24,412 through March 31, 2007.
At June 30, 2004, minimum rental commitments are as follows:
2005 $ 10,780
2006 10,780
2007 2,852
-------------
$ 24,412
=============
Total amounts expensed for the years ended June 30, 2004 and May 31, 2003, was
|
$9,576 and $1,797, respectively. For the month of June, 2003, the amount expensed was $150.
In April 2004, we obtained an order for provisional relief from the Supreme Court of the State of New York, County of Kings, against Flow Capital Advisors et al in the matter of Power2Ship, Inc. vs. Flow Capital Advisors, Inc., Douglas F. Gass and Madison Stock Transfer, Inc. restraining Flow Capital from transferring or in any manner encumbering any securities of Power2Ship held by it. Flow Capital received 779,155 shares of our common stock and an option to purchase 200,000 shares of our common stock, in addition to other compensation, pursuant to two consulting agreements between Flow Capital and Power2Ship. In our compliant we alleged that the first consulting agreement represented a wrongful usurping of corporate opportunity by the principal shareholder of Flow Capital and that both consulting agreements were fraudulently obtained through material omissions and misrepresentations made prior to, and after, entering into the consulting agreements. In May 2004, we initiated an arbitration proceeding under the rules of the American Arbitration Association in Florida to resolve this dispute and discontinued our legal action in the Supreme Court of the State of New York. In July 2004, Mr. Gass and Flow Capital Advisors entered a motion in the Broward County, Florida 17th Judicial Circuit Court to stay the arbitration. We submitted our answer to the complaint and counterclaims to the court on August 12, 2004. The court granted the motion to stay the arbitration and the matter remains pending.
NOTE 9 - EMPLOYMENT AGREEMENTS
Effective January 1, 2003, the Company commenced a five-year employment agreement with its Chief Executive Officer, Richard Hersh. The term of employment may be automatically renewed for successive one year terms beginning on the five-year anniversary of the agreement unless previously terminated according to the termination provisions in the agreement or if the Company or Hersh elects to terminate the agreement by written notice at least ninety days prior to the expiration of the then-current term of employment. Under the terms of this agreement, Hersh will receive a base salary and became eligible to receive a bonus based on the financial performance of the Company. This summary of the employment agreement is qualified by reference to the complete text of the employment agreement which was filed on May 15, 2003 as an exhibit to the Company's Form 10-QSB for the period ended March 31, 2003.
Effective January 1, 2003, the Company commenced a four-year employment agreement with its Vice President of Technology, John Urbanowicz. The term of employment may be automatically renewed for successive one year terms beginning on the four-year anniversary of the agreement unless previously terminated according to the termination provisions in the agreement or if the Company or Urbanowicz elects to terminate the agreement by written notice at least ninety days prior to the expiration of the then-current term of employment. Under the terms of this agreement, Urbanowicz will receive a base salary and became eligible to receive a discretionary bonus based on performance. This summary of the employment agreement is qualified by reference to the complete text of the employment agreement which was filed on May 15, 2003 as an exhibit to the Company's Form 10-QSB for the period ended March 31, 2003.
Effective April 15, 2003, the Company commenced a four-year employment agreement with its President, Michael J. Darden. The term of employment may be automatically renewed for successive one year terms beginning on the four-year anniversary of the agreement unless previously terminated according to the termination provisions in the agreement or if the Company or Darden elects to terminate the agreement by written notice at least ninety days prior to the expiration of the then-current term of employment. Under the terms of this agreement, Darden will receive a base salary, be granted a certain number of stock options subject to a specified vesting period and became eligible to receive a bonus based on the financial performance of the Company. This summary of the employment agreement is qualified by reference to the complete text of the employment agreement which was filed on May 15, 2003 as an exhibit to the Company's Form 10-QSB for the period ended March 31, 2003.
At June 30, 2004, the aggregate commitments pursuant to the employment agreements with our executive officers are as follows:
2005 $ 520,266
2006 600,987
2007 513,111
2008 155,520
---------
$1,789,884
=========
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NOTE 10 - INCOME TAXES
The Company had available at June 30, 2004, operating loss carryforwards for federal and state taxes of approximately $8,700,000, which could be applied against taxable income in subsequent years through 2024. Such amounts would be subject to the limitations contained under Section 382 of the Internal Revenue Code relating to changes in ownership. However, given that the realization of this tax effect is uncertain, a full valuation allowance was recorded.
Reconciliation of the differences between income taxes computed at the federal statutory tax rates and the provision for income taxes is as follows:
2004 Percent 2003 Percent
------------ -------- ---------- --------
Income tax benefit computed at
Federal statutory tax rate $ 1,488,000 34.0% $ 760,000 34.0%
State tax, net of
Federal benefits 145,000 3.5 78,000 3.5
Non-deductible non-cash
expenses (457,000) (10.5) (79,000) (10.4)
Reinstatement/change in deferred
tax asset valuation allowance (1,176,000) (27.0) (759,000) (27.1)
------------ -------- ---------- --------
Provision for income taxes $ - -% $ - -%
============ ======== ========== ========
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Temporary differences that give rise to significant deferred tax assets are as follows:
2004 2003
------------ ------------
Net operating loss carryforward $ 3,266,000 $ 2,090,000
============ ============
Total deferred tax assets 3,266,000 2,090,000
Valuation allowance (3,266,000) (2,090,000)
------------ ------------
Net deferred tax asset $ - $ -
============ ============
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Issued 12,860,000 shares of its common stock, recorded at par value of $12,860, upon its reverse merger with Freight Rate, Inc. in March 2003
Sold 657,000 shares of common stock at $.50 per share during March and April 2003 raising $328,500,
Recorded the issuance of 1,698,472 shares of common stock valued at $1,002,098 pursuant to a settlement agreement entered into with two former consulting firms related to disputed compensation arising from consulting agreements with them which expired in 2002, and
Issued 402,555 shares of common stock to consultants for services and recorded the shares at their fair market value of $400,455.
During the one month period ended June 30, 2003, the Company:
Issued 180,000 shares of common stock to vendors and employees and recorded
the shares at their fair market value of $151,200 at an average price of
$.84 per share. Of this amount, $88,833 was expensed in the year ended May
31, 2003 and $38,667 was expensed in June, 2003, both of which were
classified as other selling, general and administrative expense. The
balance of $23,700 was recorded as salaries, benefits and consulting fees
in June, 2003, and
Issued 50,000 shares of common stock valued at $39,500 to its landlord as security for $9,312 required to be paid as an additional security deposit by June 1, 2004 pursuant to its office lease agreement.
During fiscal year 2004, the Company:
Issued 600,000 shares of common stock valued at $300,000 pursuant to a
consulting agreement entered into in March 2004, of which one-half of these
shares, valued at $150,000, were earned and expensed upon issuance and the
other half was recorded as $150,000 of deferred compensation to be earned
on September 1, 2004 unless the agreement was terminated by either party
prior to that date. In August, 2004, the Company notified the consultant
that it was terminating the agreement, the shares were returned by the
consultant and deferred compensation was reduced by $150,000,
Issued 5,700,000 shares of common stock, recorded at par value of $5,700, in exchange for all 100,000 shares of its Series X convertible preferred stock,
Issued 1,085,208 shares of common stock to vendors, employees and consultants and recorded the shares at their fair market value of $300,642,
Sold 1,128,400 shares of common stock to individual investors residing outside of the United States for $714,745 less offering costs and discounts of $428,847 netting $285,898,
Issued 948,275 shares of common stock, recorded at par value of $948, pursuant to anti-dilution agreements with respect to the issuance of common stock to the holders of the Company's Series X convertible preferred stock which restates the 2,143,000 common shares reported as being issued related to anti-dilution provisions in the Company's 10-QSB for the period ended November 30, 2003,
Issued 441,483 shares of common stock to various lenders and recorded interest expense of $209,170,
Issued 233,336 shares of common stock, recorded at par value of $233, as a dividend to holders of its Series B convertible preferred stock,
Cancelled the 50,000 shares issued to its landlord as an additional security deposit upon paying the required additional security deposit of $9,312 in May 2004, and
On June 28, 2004, the Company entered into a Standby Equity Distribution Agreement with an institutional investor pursuant to which the investor granted the Company the right to put up to $10,000,000 of the Company's registered shares of common stock to it. This right commences on the date that the Company's registration statement, registering the resale of the shares that may be put to the investor, becomes effective and continues for up to the following two years. The Company may put up to $500,000 of its shares to the investor as frequently as every seven trading days at a price per share equal to 98% of the lowest price (using the daily volume weighted average price) of the common stock during the five trading days following the date on which the Company notifies the investor of its intent to put the shares. The Company issued 816,260 shares valued at $310,179 to the investor and the placement agent upon entering into this agreement and agreed to pay the investor 5% of the gross amount of any shares put to the investor. The value of these shares was treated as deferred financing costs to be amortized over the life of the agreement.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations. Accordingly, compensation cost for stock options and warrants is measured as the excess, if any, of the estimated fair value of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148, which require pro forma disclosures of net income and earnings per share as if the fair value method of accounting had been applied.
The following table presents pro forma net loss and per share amounts as if the fair value method had been applied to employee stock options and warrants granted:
Twelve Months One Month Twelve Months
Ended Ended Ended
June 30,2004 June 30, 2003 May 31,2003
------------ ------------- -----------
Loss available to common shareholders: As reported $(5,481,929) $(212,416) $(2,235,872)
============ ============= ===========
Pro forma $(5,725,481) $(212,416) $(2,385,881)
============ ============= ===========
Loss per share, basic and diluted: As reported $ (0.17) $ (0.01) $ (0.15)
============ ============= ===========
Pro forma $(0.17) $ (0.01) $ (0.16)
============ ============= ===========
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For purposes of the pro forma calculations, the fair value of each option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions used:
2004 2003
---- -----
Dividend yield None None
Expected volatility factor 57 - 88% 0 - 64%
Approximate risk free interest rates 3% 3%
Expected lives, in years 1-30 1-5
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The determination of fair values for all stock options and warrants is based on the assumptions described in the preceding paragraph, and because additional option grants are expected to be made each year, the above pro forma disclosures are not representative of pro forma effects on reported net income or loss for future years.
In March 2003, the Company issued its former Chairman 83,733 options in consideration for his forgiveness of $83,733 relating to accrued salary and services performed under a consulting agreement resulting in a gain of $79,304.
In November 2003, in connection with a twelve-month Business Advisory Agreement, the Company granted a securities advisor an option to purchase 500,000 shares of its common stock at a price of $.01 per share. These options were exercised in June, 2004. Using the Black-Scholes option-pricing model, $270,000 was expensed as consulting fees.
In December 2003 and April 2004, the Company granted options to purchase 71,500 and 250,000 shares of common stock to certain employees and directors of the Company. The options expire in three to five years from the grant date. The options are exercisable at prices ranging from $.31 to $.52 per share which were equal to or above the fair values of the common stock at the respective grant dates. Accordingly, under APB 25, no compensation was recognized.
In April 2004, the Company granted options to purchase 320,334 shares of common stock to consultants and charged $85,683 to consulting fees for the fair value of the instruments granted using the Black-Scholes option-pricing model. The Company also cancelled 100,000 options for one of the consultants.
A summary of the stock option activity is as follows:
Weighted
Average
Exercise Number Exercise Price
Price of Options Per Option
-------- ---------- ----------
Outstanding options at May 31, 2002 $0.38 7,224,649 $0.38
Granted $0.43 7,262,030 $0.01 - $.052
---------
Outstanding options at May 31, 2003 $0.40 14,486,679 $0.38 - $1.01
Granted - - -
---------
Outstanding options at June 30, 2003 $0.40 14,486,679 $0.38 - $1.01
Granted $0.19 1,141,834 $0.01 - $.052
Cancelled $0.56 (100,000) $0.56
Exercised $0.01 (500,000) $0.01
Expired $0.42 (274,764) $0.38 - $0.75
---------
Outstanding options at June 30, 2004 $0.40 14,753,749 $0.31 - $1.01
==========
Exercisable options at June 30, 2004 $0.39 14,578,749 $0.01 - $0.75
==========
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The following table summarizes information concerning stock options outstanding at June 30, 2004.
Weighted Weighted
average average
Number of Options remaining exercise
Range of Exercise Price Outstanding life in years price
------------------------ ----------- ------------- ------
0.31 - 0.40 13,345,973 2.36 $ 0.37
0.50 - 0.56 1,107,776 1.29 $ 0.55
1.01 300,000 3.29 $ 1.01
-----------
14,753,749
===========
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For the fiscal years ended June 30, 2004 and May 31, 2003, the following tables show the weighted average exercise prices and corresponding weighted average fair values of options granted classified separately for options whose exercise price is less than, equals or exceeds the price of the stock on the grant date.
Weighted Weighted
average average
exercise market
For the fiscal year ended June 30, 2004 price price
----------------------------------------------- --------- ---------
Exercise price is less than price on grant date $0.01 $0.54
Exercise price equals price on grant date $0.41 $0.41
Exercise price exceeds price on grant date $0.31 $0.30
Weighted Weighted
average average
exercise market
For the fiscal year ended May 31, 2003 price price
----------------------------------------------- --------- ---------
Exercise price is less than price on grant date $0.50 $0.56
Exercise price equals price on grant date $0.41 $0.41
Exercise price exceeds price on grant date $0.57 $0.38
|
During June, 2003, the Company granted 75,000 warrants to purchase shares of the Company's common stock at $0.79 per share which expired on June 5, 2004 to the lender in connection with receiving proceeds of a loan. The warrants were valued at $16,650 and expensed as interest.
During fiscal year 2004, the Company granted 541,600 warrants to purchase shares of the Company's common stock at $1.00 per share of which 500,000 expire on July 14, 2006 and 41,600 expire on December 8, 2006 to the investors in the Company's Series C convertible preferred stock and 100,000 warrants at $2.00 per share that expire on July 14, 2006 to the sales agent responsible for the private placement. No expense was recognized on the transaction as both the charge and the credit were to additional paid in capital.
During fiscal year 2004, the Company granted 395,200 warrants to purchase shares of the Company's common stock at prices ranging from $0.53 to $0.78 per share which expire three years from their grant dates to various employees. Accordingly, under APB 25, no compensation was recognized.
During fiscal year 2004, the Company granted 323,715 warrants to purchase shares of the Company's common stock at prices ranging from $0.38 to $1.29 per share which expire three years from the date granted to vendors and consultants. The warrants were valued at $213,805 and expensed as consulting and legal fees.
During fiscal year 2004, the Company granted 600,000 warrants to purchase shares of the Company's common stock at $0.75 per share which expire on March 31, 2007 to a consultant for providing the Company with financial services for a period of one year. Pursuant to the consulting agreement, 300,000 warrants, valued at $58,410, were earned and expensed as consulting fees upon issuance and the other 300,000 warrants were recorded as $58,410 of deferred compensation and will be earned on September 1, 2004 unless the agreement is terminated by either party prior to that date. In August, 2004, the Company notified the consultant that it was terminating the agreement, the 300,000 warrants were returned by the consultant and the previously recorded deferred compensation was eliminated.
During fiscal year 2004, the Company granted 1,091,875 warrants to purchase shares of the Company's common stock at prices ranging from $0.45 to $0.80 per share which expire between March 9, 2007 and April 30, 2007 to the placement agent for the Series A Convertible Debentures. The warrants were valued at $133,462 and treated as deferred financing costs.
A summary of the warrant activity is as follows:
Weighted
Average
Exercise Number of Exercise Price
Price Warrants Per Warrant
------- -------- -----------
Outstanding warrants at May 31, 2002 $0.83 1,538,569 $0.75 - $1.51
Granted $0.79 2,374,635 $0.38 - $2.00
--------
Outstanding warrants at May 31, 2003 $0.56 3,913,204 $0.75 - $2.00
Granted $1.36 140,700 $0.79 - $2.00
--------
Outstanding warrants at June 30, 2003 $0.56 4,053,904 $0.75 - $2.00
Granted $0.67 4,746,224 $0.38 - $2.00
Expired $0.85 (529,089) $0.75 - $1.51
--------
Outstanding warrants at June 30, 2004 $0.73 8,271,039 $0.38 - $2.00
========
Exercisable warrants at June 30, 2004 $0.74 7,771,038 $0.38 - $2.00
========
|
The following table summarizes information concerning warrants outstanding at June 30, 2004:
Weighted Weighted
average average
remaining exercise
Range of Exercise Price Number of Warrants life in years price
------------------------ ------------------ ------------- ------
0.38 - 0.80 6,952,754 1.99 $ 0.64
1.00 - 1.30 1,050,769 1.75 $ 1.07
1.50 - 2.00 267,516 1.86 $ 1.81
------------------
8,271,039
==================
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NOTE 12 - SUBSEQUENT EVENTS
On August 16, 2004, the Company amended its articles of incorporation to increase its number of authorized shares of common stock from 100 million to 250 million. This action was approved unanimously by the Company's Board of Directors and consented to in writing by shareholders of the Company holding a majority of its issued and outstanding voting stock in lieu of having a special meeting of shareholders.
The Company entered into Intellectual Property Assignment Agreements with three of its executives pursuant to which each of them assigned to the Company all of their right, title and interest in and to all the intellectual property which they had contributed to the Company in the past in consideration for 200,000 shares of the Company's common stock per executive that is to be issued in January 2005. The Company believes that there are no other parties with any claims to any right, title and interest in and to any of the Company's intellectual property.
SCHNEIDER WEINBERGER & BEILLY LLP
Attorneys-at-Law
2200 Corporate Boulevard, N.W., Suite 210
Boca Raton, Florida 33431-7307
Telephone
James M. Schneider, P.A. (561) 362-9595
Steven I. Weinberger, P.A. Facsimile
Roxanne K. Beilly, P.A. (561) 362-9612
October 19, 2004
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Power2Ship, Inc.
903 Clint Moore Road
Boca Raton, Florida 33487
RE: REGISTRATION STATEMENT ON FORM SB-2 (THE "REGISTRATION STATEMENT")
POWER2SHIP, INC. (THE "COMPANY")
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Dear Sir or Madam:
This opinion is submitted pursuant to the applicable rules of the Securities and Exchange Commission with respect to the registration pursuant to the Company's Registration Statement on Form SB-2 of (i) 9,090,508 shares of common stock presently issued or issuable; (ii) 4,939,217 shares of common stock issuable upon the conversion of 14.25% Secured Convertible Debentures; (iii) 10,600,000 shares of common stock issuable upon the conversion of the $2.0 million principal amount Series B 5% Secured Convertible Debentures; (iv) 4,126,758 shares of common stock issuable upon exercise of outstanding options and common stock purchase warrants; (v) 853,333 shares of common stock issuable upon conversion of certain convertible promissory notes; and (vi) up to 11,018,610 shares of common stock issuable pursuant to a Standby Equity Distribution Agreement to which the Company is a party (all of such shares of common stock issued or to be issued as referred to above are collectively referred to as the "Registerable Shares"), all as described in the Registration Statement.
In connection therewith, we have examined and relied upon original, certified, conformed, photostat or other copies of (a) the Articles of Incorporation, as amended, and Bylaws of the Company; (b) resolutions of the Board of Directors of the Company authorizing the issuance of the Registerable Shares; (c) the Registration Statement and the exhibits thereto; (d) the agreements, instruments and documents pursuant to which the Registerable Shares are to be issued; and (e) such other matters of law as we have deemed necessary for the expression of the opinion herein contained. In all such examinations, we have assumed the genuineness of all signatures on original documents, and the conformity to originals or certified documents of all copies submitted to us as conformed, photostat or other copies. In passing upon certain corporate records and documents of the Company, we have necessarily assumed the correctness and completeness of the statements made or included therein by the Company, and we express no opinion thereon. As to the various questions of fact material to this opinion, we have relied, to the extent we deemed reasonably appropriate, upon representations of officers or directors of the Company.
Power2Ship, Inc.
October 19, 2004
Based upon and subject to the foregoing, we are of the opinion that the Registerable Shares presently issued are validly issued, fully paid and non-assessable, and the balance of Registerable Shares or when issued in accordance with their terms and, upon receipt by the Company of the agreed upon consideration therefor, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the prospectus forming a part of the Registration Statement. In giving such consent, we do not thereby admit that we are included within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations promulgated thereunder.
Sincerely,
SCHNEIDER WEINBERGER & BEILLY LLP
/s/ Schneider Weinberger & Beilly LLP |
DISTRIBUTOR AGREEMENT
This Agreement is made and entered into this 7th day of April, 2003 (the "Effective Date"), by and between Wireless Links Inc, a Pennsylvania corporation having its principal place of business at 1050 Wall Street, Suite 202, Lyndhurst, New Jersey 07071 (hereinafter called "WLI"), and Jaguar Investments, Inc. and its affiliates, a Nevada corporation, having its principal place of business at 10400 Griffin Rd., Suite 101, Ft. Lauderdale, Florida 33328 (hereinafter called "Power2Ship") with reference to the following facts:
Whereas WLI is engaged in the design and development, manufacture, importation, distribution, resale, service and support of mobile data and GPS based information products and services;
Whereas Power2Ship is engaged in the business of collecting, processing and disseminating logistics information and providing other transportation-related products and services to shippers and carriers of freight and
Whereas Power2Ship desires to become a distributor of certain of WLI's products and services on the terms and conditions hereinafter set forth.
NOW, THEREFORE; in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto do hereby agree as follows:
1. APPOINTMENT
1.1. WLI hereby grants to Power2Ship the non-exclusive right and license to
distribute certain WLI's products and services (the "Products" or "Units") and
software programs ("Licensed Programs") to Power2Ship's customers (which are end
users) located in North America. "Products" or "Units" in this Agreement are
limited to WLI's G3001 GPSLink mobile terminal as defined in Section 1.2.
"Licensed Programs" in this Agreement are limited to WLI's MidLink Middleware
software and G3001 programming tools. Further, Power2Ship shall also be
authorized to resell other WLI products, services and support programs subject
to separate written amendments to be made by the parties to this Agreement. WLI
reserves the right to add additional products and to delete obsolete or
superseded products at any time during the term of this Agreement upon sixty
(60) days prior written notice to Power2Ship.
1.2. G3001 GPSLink is a fully functional device including GPS receiver with an integrated CDPD or GPRS modem including 4 dry contact alarm inputs and one contact output and a DB9 connector for serial connection to a PDA. When integrated with MidLink middleware the G3001 can integrate to any third party software application subject to specifications published from time to time by WLI and available for download from the WLI web site.
1.3. The Products and Licensed Programs shall be sold by Power2Ship to its customers pursuant to WLI's standard warranty and software license agreements.
1.4. Power2Ship may, at any time during the term of this Agreement, assign its rights and obligations under this Agreement to one or more of its subsidiaries in which it owns at least 50.1% of the actual equity of the subsidiary on a fully diluted basis and as long as Power2Ship remains the guarantor for the payments and terms and conditions of this Agreement (individually, a "Subsidiary"). Each Subsidiary shall thereafter have the rights and obligations of Power2Ship hereunder with respect to all terms and conditions of this agreement as if such Subsidiary had entered into this Agreement directly with WLI.
1.5. If Power2Ship merges with another company and/or changes its name, this Agreement will survive the merger and/or name change and the new entity will assume all the rights and obligations of Power2Ship pursuant to this Agreement.
1.6. WLI may, at any time during the term of this Agreement, assign its rights and obligations under this Agreement to any subsidiary in which it owns at least 50.1% of the equity on a fully diluted basis.
1.7. Power2Ship acknowledges that it has already integrated the G3001 packaged with the MidLink middleware into its application tested it and found it to meet its requirements.
2. TERM
2.1. Unless otherwise terminated as provided herein, the initial term of this Agreement shall be three (3) years from the Effective Date and shall thereafter be automatically renewed for subsequent one (1) year periods unless either party notifies the other in writing of its election not to renew the Agreement at least one hundred twenty (120) days prior to the expiration of the then-current term. Should this Agreement be terminated by either party for any reason, the obligations of the parties to each other as set forth herein will survive any termination.
3. PRICES
3.1. Subject to Section 3.6 below the price of the Product, excluding the Licensed Programs, is $[*] per Unit. The total price for both of the Licensed Programs together is $[*] per month per Product ("License Fee"). The License Fee shall begin on the date the Product is shipped to a customer and shall be paid by Power2Ship to WLI by the 7th of each month for the prior month (prorated if the Unit was shipped during the prior month) and shall continue for as long as the Product is active on any wireless network. Notwithstanding the foregoing, Power2Ship is obligated to pay the License Fee to WLI for a minimum of 36 months.
3.2. Once the monthly License Fee for a particular Unit has started, it will continue for a minimum of 36 consecutive months with the only exception being that should Power2Ship uninstall a particular Unit from one customer and install it at another customer, Power2Ship is permitted to suspend the monthly License Fee for that particular Unit for a maximum of 2 months during the life of this Agreement. This suspension of the License Fee is permitted only once per a particular Unit during the life of the Agreement (i.e., the suspension can't occur in two non-consecutive months). Units that are suspended for less than thirty consecutive days are not considered suspended.
3.3. Once Power2Ship has paid WLI the License Fee for a minimum of 36 months for a particular Unit, Power2Ship may discontinue paying the month License Fee only if that particular Unit has been deactivated from the wireless network. If a Unit is deactivated after 36 months and subsequently is reactivated, Power2Ship must restart the payment of the License Fee for as long as that particular Unit remains active on the wireless network.
3.4. The $[*] hardware price per Unit is based on a single order of a minimum of 1000 Units and manufacturing of a minimum 500 Units. At the time of placing the order with WLI, Power2Ship must pay the full purchase price of $[*] per Unit. The delivery time is 8-10 weeks starting with the date the payment is received by WLI.
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3.5. To shorten the delivery time to 3-4 weeks, Power2Ship has the option to purchase all the key components for $[*] per Unit and have them stored at no charge by WLI on behalf of Power2Ship so they can be available for immediate manufacturing when Power2Ship places an order. If this option is exercised, when Power2ship places an order to authorize Units to be manufactured it will pay with the $[*] balance per Unit at the time of such order.
3.6. Power2ship has the option to order Units in lower quantities at higher Unit prices as follows: 100 to 299 Unit at $[*]; 300 to 499 Units at $[*] and; 500 to 999 Units at $[*]. The only exception to this will be the first order of 100 Units at a Unit price of $[*] if the order is placed no later than April 4, 2003.
3.7. The Unit prices and monthly License Fees of $[*] can't be increased by WLI under the terms of this Agreement.
3.8. Unless otherwise stated in writing by WLI, all prices quoted shall be exclusive of state and local use, sales and property taxes. Power2Ship agrees to be responsible for any such taxes incurred as a result of its purchase of Products from WLI, unless Power2Ship shall have presented WLI with an exemption certificate.
3.9. Power2Ship may purchase dual antennas with a " screw for the Units from WLI at the following unit prices: $[*] when purchased in quantities of 100 to 499; $[*] when purchased in quantities of 500 to 999 and; $[*] when purchased in quantities of 1000 or more. Terms of payment for the antennas are [*]% upon placing the order with WLI and the balance when the antennas are ready to be shipped to Power2Ship. A lead time of at least four weeks is required for delivery.
3.10. Power2Ship will pay WLI 10% of any activation commissions ("Unit Commissions"), if any, it receives as a result of any Unit activated on a specific wireless network. The payment will be paid on the 7th of every month for any Unit Commissions received by Power2Ship during the previous month. Power2Ship will provide with the payment a report of the total number of activations during the month and the amount received per activation.
3.11. All prices are FOB WLI offices in NJ.
4. RESERVATION OF TITLE; COPYRIGHT; CONFIDENTIALITY
4.1. Licensed Programs are provided solely in executable files. This Agreement does not provide Power2Ship with title or ownership of the Licensed Programs, but only a limited right to sub-license the Licensed Programs. The Licensed Programs are, and shall remain, the property of WLI and certain third-party licensors who have authorized WLI to incorporate their software into the Licensed Programs.
4.2. Power2Ship acknowledges that the programs, software information, and user materials included in the Licensed Programs contain confidential information and trade secrets, which WLI has entrusted to Power2Ship in confidence to use only as expressly permitted by this Agreement. Power2Ship acknowledges that WLI claims and reserves all rights and benefits afforded under federal law in the programs, software information, and user materials included in the Licensed Programs as copyrighted works.
4.3. The MidLink software is licensed to Power2Ship for the exclusive use with WLI's products. Power2ship commits not to connect to WLI's MidLink software using any other wireless devices and /or terminal (s) and /or GPS devices other than WLI branded products.
4.4. Power2Ship shall protect the programs, software information, and user materials included in the Licensed Programs as confidential information and trade secrets. Power2Ship shall not, at any time, disclose such confidential information and trade secrets to any other person, firm, organization, or employee that does not (consistent with Power2Ship's right of use hereunder) need to obtain access to the Licensed Programs. Power2Ship shall devote its best efforts to ensure that all Power2Ship's personnel and all other persons afforded access to the Licensed Programs by Power2Ship protect the Licensed Programs as trade secrets and confidential information and refrain from any use or disclosure in any manner not expressly permitted by this Agreement. These restrictions shall not apply to information (1) generally known to the public or obtainable from public sources; (2) readily apparent from the keyboard operation, visual display, or output reports of the Licensed Programs; (3) previously in the possession of Power2Ship or subsequently developed or acquired without reliance on the Licensed Programs; or (4) approved by WLI for release without restriction.
4.5. Restrictions on Use of Licensed Programs and Products. The programs, software information and user materials included in the Licensed Programs and Products may not be decomposed, reverse engineered, reprinted, transcribed, extracted or reproduced, in whole or in part, without the prior written consent of WLI. Power2Ship shall not in any way modify or alter the Licensed Programs without the prior written consent of WLI.
4.6. Survival of Obligations. Power2Ship's obligations under Section 4 of this Agreement shall survive the termination of this Agreement.
4.7. Specific Performance and Injunctive Relief. Power2Ship agrees and acknowledges that, in the event of any breach directly or indirectly by Power2Ship of any provision of this Section 4, monetary damages will not afford WLI an adequate remedy, and irreparable harm may be presumed. Accordingly, WLI shall be entitled to receive injunctive relief from a court of competent jurisdiction for any such breach by Power2Ship.
4.8. Confidentiality. Power2Ship acknowledges that the Licensed Programs and all copies thereof are proprietary, confidential and a trade secret of WLI and the exclusive title shall remain with WLI. All applicable rights to copyrights, patents, trademarks, trade names, logos and identifying slogans and other intellectual property rights in the products are the exclusive property of WLI and Power2Ship shall not contest such ownership. Power2Ship is committing directly or indirectly not to copy and/or not to reverse engineer any of WLI's software and/or hardware products. Power2Ship shall be responsible for any breach of this Section by its employees, agents, subcontractors or consultants. WLI acknowledges that the conceptual functionality of its Unit is in the public domain and this paragraph does not cover the Unit's actual functionality. But this Section 4.8 shall apply to the proprietary WLI implementation and technology.
5. ORDER PROCEDURE AND MANDATORY REPORTS BY POWER2SHIP
5.1. Power2Ship shall place individual written purchase orders for Products from time to time during the term of this Agreement. Each purchase order placed by Power2Ship shall contain the following minimum information: (i) identification of each Product ordered by model number, quantity and price; (ii) shipping instructions and destinations; and (iii) requested delivery date for each Product. Power2Ship will pay for shipping cost from WLI offices in NJ to any destination.
5.2. Any Units shipped by WLI directly to a customer of Power2ship as per Power2Ship's instruction is considered activated at the date of the shipment and the $[*] monthly License Fee will start as of that date .
5.3. Once an order is placed by Power2Ship, such order can't be cancelled and delivery dates for Units can't be rescheduled.
5.4. When Products are ordered for the GPRS network, Power2Ship must provide one SIM card for every Unit ordered within a maximum of two weeks from the date of order. The Sim Cards have to be placed and tested in the Unit as they are being manufactured at the factory. Failure to provide the SIM cards in time will require re-opening and re-test of the Units in the US at a cost of $[*] per Unit to be paid by Power2Ship.
5.5. Every Unit has a serial number. Power2Ship must provide WLI with a weekly report listing the serial number of every Unit shipped to a customer during the prior week.
5.6. Power2Ship must provide a separate weekly report to WLI that lists the serial number of any Units suspended during the prior week and that includes the SIM # and ID, date of return, name of returning customer and reason for return.
5.7. Power2Ship must provide a separate weekly report to WLI that lists the serial number of any Units reactivated (i.e., after having previously been suspended) during the prior week.
5.8. The weekly reports in Section 5.5, 5.6 and 5.7 must be sent to WLI every Monday. The weekly reports are to be sent in Excel file format via e-mail. The report must be sent even if there is no activity during the prior week.
5.9. Power2Ship must provide WLI with a complete copy of its monthly airtime bill for the Units as received by the respective wireless operators (T-Mobile, Verizon, AT&T, etc.). Power2Ship is required to keep all the WLI Unit activations on every wireless network on a separate account from any other vendor's brand used by Power2Ship. Every such monthly invoice (one per operator) must be submitted to WLI within 7 days from the date it is received by Power2Ship and the invoice must include all pages listed on the invoice (example 7of 7 pages). Power2Ship's Chief Executive Officer or Chief Financial Officer must confirm in writing to WLI every quarter that the account numbers under which the WLI Units are being activated on the various networks are the only accounts under which the WLI units are activated.
6. DELIVERY, TITLE AND RISK OF LOSS
6.1. Delivery shall be F.O.B. WLI's facility in Lyndhurst, New Jersey. WLI shall use its reasonable efforts to deliver Products to Power2Ship on the date of delivery specified by Power2Ship. WLI will use its reasonable efforts to notify Power2Ship of any delays in scheduled delivery dates.
6.2. Title to the Products and the risk of loss or damage shall pass to Power2Ship upon delivery of the Products to Power2Ship or its shipping company of choice. In the event of any loss of or damage to the Products following delivery to the carrier, WLI shall, upon request, cooperate with Power2Ship in connection with the proof of loss claim presented by Power2Ship to the carrier and/or insurer.
6.3. Power2Ship shall bear the entire risk of loss or damage to the Units and any other equipment purchased from WLI (collectively the "Equipment") after installation of the Equipment in the customers' vehicles. The occurrence of any such loss or damage shall not permit Power2Ship to delay or reduce the payment of any fees prescribed under this agreement unless Power2Ship presents WLI with proof of a claim to an insurance company and, in such case, Power2Ship should replace the lost or damaged Equipment within a maximum of 60 days and resume the payment of monthly License Fees to WLI. Power2Ship is advised to obtain and maintain property and casualty insurance for the Equipment against all risks of loss or damage. The amount of such insurance shall not be less than the replacement cost of the Equipment.
6.4. Power2Ship is responsible for maintaining and storing in a safe and secure location backup copies of all data files Power2Ship may place in the System. In no event shall WLI be liable for loss or destruction of Power2Ship's data files for any reason.
7. PAYMENT
7.1. Power2Ship must pay WLI for the Products in full on the day it submits a PO (i.e., the PO is not valid unless accompanied by payment in full).
7.2. The payment of the optional antenna is 50% with the purchase order and 50% when the antennas are ready to be shipped to Power2Ship.
7.3. Monthly License Fees must be paid no later then the 7th of the month for all Units active during the previous month. For example, on the 7th of July Power2Ship will pay for Units that were active in June.
7.4. The purchase price for the Unit does not include repair beyond the first year limited warranty. The renewal of the limited warranty after the first year is at the option of the customer, but in any case, Unit failure does not relieve Power2Ship of its obligation to pay the monthly License Fees to WLI for that Unit. The first year limited warranty starts on the day of the activation of the Unit on a wireless network. As a distributor, Power2Ship should keep a minimum number of Units in stock for immediate replacement for its customers.
7.5. This Agreement is separate and apart from the contract between Power2Ship and its customer. Failure of the customer to pay Power2Ship, for whatever reason, does not affect the obligation of Power2Ship to pay its contractual obligations to WLI.
7.6. If an invoice is past due by more than 30 days, WLI may discontinue providing technical support to Power2Ship until the invoice is paid. If Power2Ship does not make payment of any amount due and payable hereunder within 60 days of the date of invoice, WLI (without prejudice to any other remedy) shall be entitled to interest on all past due amounts at the lower of eighteen percent (18%) per annum or the highest rate permitted by law, plus reimbursement of all costs incurred in collecting such amounts, including court costs and reasonable attorney fees.
8. LICENSED SOFTWARE ACCESS AND AUDIT
8.2. WLI, at its own discretion, may visit Power2Ship's warehouse at normal business hours to verify the actual number of Units in inventory and/or the number of Units suspended.
8.3. Power2Ship commits to allow WLI free access to its MidLink software via the Internet for ongoing maintenance and updates.
9. PRODUCT INFORMATION OBLIGATIONS
9.1. Product Descriptions and Technical Support Requirements. WLI shall provide Power2Ship with integration documentation and programming information for its Unit.
9.2. Warranty Return Procedure. WLI's warranty return procedure is set forth in Exhibit A.
10. TECHNICAL INFORMATION AND SERVICES
10.1. WLI shall provide, at no cost to Power2Ship, reasonable training, including but not limited to, training of Power2Ship's sales and technical personnel, to enable Power2Ship to meets its obligations under this Agreement, including its obligation to provide service or support to end-users following termination of this Agreement.
10.2. Power2Ship is committed to provide technical support and service for WLI's Products sold by Power2Ship to its customers.
10.3. Power2Ship will receive the first customer call and will have to maintain a minimum inventory level of spare Units to service its customers within 48 hours. WLI will support an end-user only upon Power2Ship's request and only after Power2Ship has tried to provide the support and has failed to fix the problem. WLI will not be involved in any end-user training.
10.4. Power2Ship will maintain a minimum level of inventory of the Product for service purposes, which the parties estimate to be 1% of the aggregate number of Units active on any wireless network at any given time.
11. WARRANTY AND INDEMNIFICATION
11.1. WLI warrants the Products pursuant to the terms of its hardware limited warranty and limited software warranty set forth in Exhibit B hereto. Subject to the terms and conditions of Exhibit A, WLI agrees, in its sole discretion, to repair or replace at its sole cost and expense, any defective Products or parts thereof which are returned to it within the applicable warranty period, provided that the Products have not been altered or repaired other than with authorization from WLI and by its approved procedures; that the Products have not been subjected to misuse, improper maintenance, negligence or accident; that the Products have not been damaged by excessive physical or electrical stress; and that the Products have not had their serial number or any part thereof altered, defaced or removed.
11.2. The warranty and remedies set forth in Exhibit B are exclusive and in lieu of any other warranties or remedies, express or implied, including the implied warranties of merchantability and fitness for intended or particular purpose. The liability of WLI to Power2Ship for any claim whatsoever related to the Products or the Licensed Programs or this Agreement, including any cause of action in contract, tort, or strict liability, shall not exceed the total amount payable under this Agreement by Power2Ship to WLI within the most recent six-month period for the Licensed Programs (if such claim relates to the Licensed Programs), or for the WLI Products (if such claim relates to the WLI Products). Under no circumstances shall WLI be liable to Power2Ship or to any other person or entity for any incidental, special or consequential damages whether arising out of breach of warranty, breach of contract or otherwise even if WLI has been advised of the possibility of such claims or demands.
11.3. To the extent not otherwise provided herein, WLI agrees to defend, indemnify and hold harmless Power2Ship from and against (a) any claim by a third party that a Product supplied hereunder did not conform to WLI's warranty when received by Power2Ship or that WLI failed on request to provide warranty service in accordance with WLI's applicable warranty statement or (b) any claim arising under Section 14 of this Agreement. Power2Ship shall be reimbursed for any actual loss, liability or damage suffered or incurred by Power2Ship and for all reasonable costs and expenses (including reasonable attorneys' fees) incurred by Power2Ship in connection with any action, suit, proceeding, demand, assessment or judgment incident to any of the matters indemnified against in this provision provided that Power2Ship immediately notifies WLI as to the institution of such suit, gives or obtains for WLI such authority as may be necessary for WLI to defend same, and supplies WLI such further information and assistance for the defense thereof as WLI may reasonably require and request. WLI shall have no obligation under this section, and shall have no liability to Power2Ship, if such claim arises due to the alteration or modification of any Product without the prior written consent of WLI.
11.4. Power2Ship shall defend, indemnify and hold harmless WLI from all liability and claims whatsoever for any injury to persons or property or for any loss, expense, or damage incurred by any of Power2Ship's personnel or invitees or by any other person or party (except agents or employees of WLI) arising as a result of or in connection with Power2Ship's acquisition or use of the Products and Licensed Programs or WLI 's performance of its obligations or exercise of its rights hereunder except for those claims which are the result of the willful acts or gross negligence of WLI.
12. INTELLECTUAL PROPERTY RIGHTS INDEMNIFICATION
12.1. WLI represents and warrants that: (i) it owns all right, title and interest in and to the Products necessary to enter into and perform its obligations to Power2Ship hereunder, and (ii) no Product or Licensed Programs sold to Power2Ship during the term of this Agreement, nor the use of any such Product or Licensed Program, nor anything in or contemplated by this Agreement, infringes upon the Intellectual Rights (as defined herein) of any other person or entity, and no suit or proceeding is pending or threatened alleging that any Product or Licensed program, or the use thereof, infringes upon any Intellectual Rights. As used herein, the term "Intellectual Right" means any rights relating to any trademark, trade name, service mark, copyright, patent, trade secret or other proprietary right.
13. USE OF TRADEMARKS
13.1. Power2Ship shall not acquire any right to or interest in any trademark or trade name owned or used by WLI. Power2Ship may use for purposes of this Agreement such trademarks and trade names as appear on the Products and on promotional materials therefore when received by Power2Ship from WLI.
13.2. Power2Ship acknowledges that WLI and its affiliates are the owners and/or licensees of the trademarks, service marks, commercial symbols and trade names used by WLI. Power2Ship shall not contest the right of WLI and its affiliates to the use of any trademarks, service marks, commercial symbols or trade names used or claimed by WLI.
13.3. All WLI's use of Power2Ship's company name, logos, trademarks or other registered identifiers must meet Power2Ship's corporate communications standards and must have Power2Ship's written approval prior to such use by WLI. All Power2Ship's use of WLI's company name, logos, trademarks or other registered identifiers must meet WLI's corporate communications standards and must have WLI's written approval prior to such use by WLI.
13.4. Power2Ship shall have the right to place its trademarks on the Products but shall not obscure any WLI trademarks.
14. TERMINATION
14.1. Termination for Cause by WLI WLI may, upon written notice, terminate this Agreement at any time in the event that (a) Power2Ship defaults or otherwise fails to perform any obligation, warranty, duty, responsibility or other term or condition of this Agreement, including failure to make a payment when due and such default or failure continues unremedied for a period fifteen (15) days after such notice; (b) Power2Ship ceases permanently to carry on its present business, except as a result of a bona fide reorganization in the course of which the Agreement is transferred to a successor company of equal or greater financial resources carrying on substantially the same business; (c) Power2Ship makes an assignment for the benefit of creditors; or admits in writing its inability to pay debts as they mature; or a trustee or receiver of Power2Ship, or of any substantial part of Power2Ship's assets, is appointed by any court; or a proceeding is instituted by or against Power2Ship under any provision of the United States Bankruptcy Code or any other law affecting the rights of creditors and such proceeding is acquiesced in or is not dismissed within sixty (60) days; or (d) WLI's continued performance under this Agreement would cause it to be in violation of (i) any order of any court or regulatory agency having jurisdiction over WLI, or (ii) any law, statute, ordinance or regulation to which WLI is subject.
14.2. Termination for Cause by Power2Ship. Power2Ship may, upon written notice,
terminate this Agreement at any time in the event that (a) WLI defaults or
otherwise fails to perform any obligation, warranty, duty, responsibility or
other term or condition of this Agreement, including failure to pay a refund
when due and such default or failure continues unremedied for a period fifteen
(15) days after such notice; (b) WLI ceases permanently to carry on its present
business, except as a result of a bona fide reorganization in the course of
which the Agreement is transferred to a successor company of equal or greater
financial resources carrying on substantially the same business; (c) WLI makes
an assignment for the benefit of creditors; or admits in writing its inability
to pay debts as they mature; or a trustee or receiver of WLI, or of any
substantial part of WLI's assets, is appointed by any court; or a proceeding is
instituted by or against WLI under any provision of the United States Bankruptcy
Code or any other law affecting the rights of creditors and such proceeding is
acquiesced in or is not dismissed within sixty (60) days; or (d) Power2Ship's
continued performance under this Agreement would cause it to be in violation of
(i) any order of any court or regulatory agency having jurisdiction over
Power2Ship, or (ii) any law, statute, ordinance or regulation to which
Power2Ship is subject.
14.3. Termination of this Agreement shall not release either party from the obligation to pay any sums to the other party whether then or thereafter due or operate to discharge any liability which has been incurred prior to the effective date of such termination.
14.4. Upon expiration of this Agreement or termination by either party, Power2Ship may sell off any remaining inventory of the Products or Licensed Software acquired prior to termination.
14.5. Neither party shall be liable to the other party for any special, incidental, or consequential damages arising in connection with, or out of termination of, this agreement.
15. NOTICES
Any notice or communication given pursuant to this Agreement shall be in writing, delivered in person or may be telegraphed, telexed, sent by facsimile transmission or United States certified, registered or express mail, Federal Express or other private courier, postage prepaid, return receipt requested in the event of delivery by mail. In the event notice shall be given by facsimile transmission an original of such notice shall simultaneously be deposited in United States mail, postage prepaid, or sent by Federal Express or other private courier, addressed as hereinafter required. Notices shall be given to the parties addressed as set forth in the first paragraph of the Agreement or at such other address as the parties may from time to time designate by notice hereunder. Notices shall be given when delivered personally, or when telegraphed, telexed or sent by facsimile transmission if sent during regular business hours of the recipient and if not, on the next following business day or if mailed, at midnight on the third business day after the date of mailing or if sent by Federal Express or by other private courier on the next following business day.
If to WLI: Wireless Links, Inc. Attention: Joe Shayovitch 1050 Wall Street Suite 320 Lyndhurst, New Jersey 07071 Facsimile No. 201-531-9795
If to Power2Ship: Freight Rate, Inc.
Attention: Richard Hersh
10400 Griffin Rd., Suite 101
Ft. Lauderdale, FL 33328
16. GENERAL
16.1. This Agreement, its interpretation and construction, and the remedies for its enforcement or breach are to be applied in accordance with the laws of the State of New Jersey.
16.2. Failure on any occasion by WLI or Power2Ship to enforce any term or condition of this Agreement shall not prevent or bar enforcement on any other occasion.
16.3. Neither party shall be deemed to be in default of any provision hereof or be liable for any delay, failure in performance or interruption of service resulting directly or indirectly from act of war, act of God, act of civil or military authority, civil disturbance or any other cause beyond its reasonable control.
16.4. The relationship between WLI and Power2Ship is that of independent contractors. Neither party, nor its agents or its employees shall be deemed to be the agent of the other party. Neither party shall have the right to bind the other party, transact any business in the other party's name or in its behalf or incur any liability for or on behalf of the other party.
16.5. Neither WLI nor Power2Ship shall intentionally disclose, and each party shall use reasonable efforts to prohibit, the unintentional disclosure to any third party of any confidential or proprietary information of the other party during the term of this Agreement and for a period of one (1) year thereafter.
16.6. The headings to the paragraphs of this Agreement are included merely for convenience of reference and shall not affect the meaning of the language included therein.
16.7. No provisions of this Agreement may be altered or amended unless such alteration or amendment is in writing and executed by duly authorized officers of both parties, except where otherwise specifically provided for in this Agreement.
16.8. The covenants contained in this Agreement which, by their terms, require or contemplate performance by the parties after the expiration or termination of this Agreement shall be enforceable notwithstanding said expiration or termination.
16.9. This Agreement (including all Exhibits hereto), constitutes the entire Agreement and understanding between the parties relating to the subject matter hereof, supersedes all other agreements, oral or written, heretofore made between the parties with respect to such subject matter, supersedes the standard terms and conditions in Power2Ship's purchase order form and WLI's quotation, invoice or acknowledgment form, and supersedes any other terms or conditions of purchase proposed by Power2Ship or WLI. This Agreement may not be assigned by either party without the prior written consent of the other party. If any provision in this Agreement should be held illegal or unenforceable, no other provision of this Agreement shall be affected.
RH JS Page 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.
Wireless Links, Inc. Jaguar Investments, Inc.
By: By:
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Its: Its: Chief Executive Officer
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EXHIBIT A
PRODUCT WARRANTY INFORMATION
WARRANTY
A) HARDWARE LIMITED WARRANTY - WLI will provide a one year limited warranty
for its hardware products as per the terms and conditions described in
"Attachment B". The first year warranty starts with the date of shipment
and terminates on the anniversary of the first year.
B) Extended limited warranty beyond the first year is available at the same terms and conditions described in "Attachment B ". The second year Limited warranty price will be determined between the parties based on the total number of units to be under warranty in a particular year.
- The Warranty is a limited warranty that does not cover damage caused by improper use, abuse or use for other than intended purposes. The Warranty does not cover LCD screen or batteries. See Attachment B, Limited Warranty for the Acknowledger(TM) and related accessories.
- The parties understand and agree that WLI does not warrant any part of the Peripheral equipment that is not sold directly by WLI
- Within 14 days from discovery of a defect, the Integrator shall notify WLI in writing of said defect. Said notice of defect shall contain a reasonably detailed description of the defect as determinable by the Integrator. Said notice shall also indicate the serial numbers of all Acknowledgers and the release levels of software in which the defect was discovered.
C) DEFECTIVE EQUIPMENT RETURN. Defective equipment will be returned promptly to WLI's repair centre at the Power2Ship cost. The integrator will return for repair products under warranty and will pay the shipping cost to WLI and will carry the risk of loss until the package has been delivered to WLI. WLI will pay the shipping cost back via standard "UPS ground" and will carry the risk of loss until the package is delivered to the integrator.
For each unit, prior to return Power2Ship must send WLI a description of the problem including the serial number and date of shipping and date of purchase. Every return must have a Return Merchandise Authorisation number (RMA) as issued by WLI. Replacement or repaired units will be returned to the Integrator within 14 working days of receipt of a defective unit at WLI's cost.
D) LIMITED WARRANTY OF LICENSED PROGRAMS. WLI warrants, for the benefit of the Integrator only, that at the time Integrator's license of Licensed Programs commences, WLI has the right and authority to license the Licensed Programs to Integrator, and the Licensed Programs conform in all material respects to any specifications supplied to Integrator in writing by WLI. WLI does not warrant that the Licensed Programs can be used without interruption or that they are error-free.
Any implied warranties of the Licensed Software are LIMITED to one year starting from the date it was shipped to the integrator or starting with the date specified as the starting date in the leasing and / or purchase agreement with the Integrator. If the date is different then the shipping date to the integrator the integrator has to provide a copy of the agreement with the Integrator to verify the start of warranty.
E) CORRECTIONS AND UPDATES OF LICENSED PROGRAMS.
WLI shall maintain the accuracy of the Licensed Programs by making a reasonable attempt to correct any programming or database errors that Integrator brings to WLI attention. In addition, WLI from time to time may furnish Integrator with further releases of the Licensed Programs to provide corrections of significant programming or database errors and updates of database information. WLI obtains the information contained in the database of the Licensed Programs from established outside sources, and WLI makes every effort to keep the information up-to-date, but it cannot guarantee absolute accuracy and timeliness. After the expiration of the initial term of this Agreement, WLI shall provide any correction and update assistance only on mutually acceptable terms at WLI's customary rates then in effect. WLI reserves the right to make modifications and enhancements of the Licensed Programs (other than simple corrections and updates
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EXHIBIT B
End User Warranty
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REPAIR OR REPLACEMENT BY WLI AS PROVIDED IN THIS LIMITED WARRANTY IS YOUR EXCLUSIVE REMEDY UNDER THIS LIMITED WARRANTY. WLI SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES. WLI DISCLAIMS ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY INCLUDING BUT NOT LIMITED TO, ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY ARISING OUT OF ANY PROPOSAL, SPECIFICATION OR SAMPLE. ANY SOFTWARE PROVIDED WITH THE EQUIPMENT IS PROVIDED UNDER A SEPARATE SOFTWARE LICENSE AGREEMENT.
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EXHIBIT C-2
END-USER PROGRAM LICENSE AGREEMENT
WIRELESS LINKS (WLI) SOFTWARE LICENSE AGREEMENT
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Licensed Programs are provided solely in executable files and consist of the following programs: MidLink (WLI's middleware), MapLink, and all G3001 related programming tools,
1. RESERVATION OF TITLE. This Agreement does not provide the Power2Ship (you) with title or ownership of the Licensed Programs, but only a right of limited use of one copy per software package per license. The Licensed Programs are, and shall remain, the property of Wireless Links and certain third-party licensers who have authorized Wireless Links to incorporate their software into the System. Subject to a distribution agreement the Power2Ship (you) can redistribute the licensed products but you can't reproduce the Licensed Programs.
2. COPYRIGHT PROTECTION. Power2Ship acknowledges that the programs, software information, and user materials included in the Licensed Programs contain confidential information and trade secrets, which WLI(TM) has entrusted to Power2Ship in confidence to use only as expressly permitted by this Agreement. Power2Ship acknowledges that Wireless Links claims and reserves all rights and benefits afforded under federal law in the programs, database information, and user materials included in the Licensed Programs as copyrighted works.
3. PRESERVATION OF SECRECY AND CONFIDENTIALITY. Power2Ship shall protect the
programs, database information, and user materials include din the Licensed
Programs as confidential information and trade secrets. Power2Ship shall not, at
any time, disclose such confidential information and trade secrets to any other
person, firm, organization, or employee that does not (consistent with
Power2Ship's right of use hereunder) need to obtain access to the Licensed
Programs. Power2Ship shall devote its best efforts to ensure that all
Power2Ship's personnel and all other persons afforded access to the Licensed
Programs by Power2Ship protect the Licensed Programs as trade secrets and
confidential information and refrain from any use of disclosure in any manner
not expressly permitted by this Agreement. These restrictions shall not apply to
information (1) generally know to the public of obtainable from public sources;
(2) readily apparent from the keyboard operation, visual display, or output
reports of the Licensed Program; (3) previously in the possession of Power2Ship
or subsequently developed or acquired without reliance on the Licensed programs;
or (4) approved by WLI for release without restriction.
4. RESTRICTIONS ON USE OF LICENSED PROGRAMS. The programs, software information, and user materials included in the Licensed Programs may not be decompiled, reverse engineered, reprinted, transcribed, extracted, or reproduced, in whole or in part, without the prior written consent of WLI. Power2Ship shall not in any way modify or alter the Licensed Programs without the prior written consent of WLI.
5. SURVIVALS OF OBLIGATIONS; RETURN OF PROGRAMS. Power2Ship's obligations under this Agreement shall remain in effect for as long as Power2Ship continues to use the Licensed Programs. Power2Ship shall promptly return all materials and documentation relating to the Licensed Programs provided by WLI upon (1) termination of either this Agreement of Power2Ship's license of the Licensed Programs, for any reason, or (2) discontinuance or abandonment of Power2Ship's use or control of the Licensed Programs.
6. POWER2SHIP'S DATA FILES. Power2Ship is responsible for maintaining and storing in a safe and secure location backup copies of all data files Power2Ship may place in the System. In no event shall WLI(TM) be liable for loss or destruction of Power2Ship's data files for any reason.
7. LIMITED WARRANTY ON LICENSED PROGRAMS. WLI(TM) warrants, for the benefit of Power2Ship only, that at the time Power2Ship's license of Licensed Programs commences, WLI(TM) has the right and authority to license the Licensed Programs to Power2Ship, and the Licensed Programs conform in all material respects to any specification supplied to Power2Ship in writing by WLI(TM). WLI(TM) does not warrant that the Licensed Programs can be used without interruption or that they are error-free. Any implied warranties of the Licensed Software are LIMITED to one year starting from the date of purchase or for the period described in the contractual agreement with the Power2Ship. For best and fast service WLI recommends to Power2Ship to install on the server NT computer a modem fax with PC-Anywhere software and a dedicated phone line to allow WLI to dial in for routine maintenance.
8. CORRECTIONS AND UPDATES OF LICENSED PROGRAMS. WLI shall maintain the accuracy of the Licensed Programs by using its best endeavors to correct any programming or database errors that Power2Ship brings to WLI(TM)'s attention. In addition, during the warranty period and/or duration of this agreement WLI from time to time may furnish Power2Ship with further releases of the Licensed Programs to provide corrections of significant programming or software errors. After the expiration of this agreement, WLI shall provide any correction and update assistance only on mutually acceptable terms at WLI's customary rates then in effect. WLI(TM) reserves the right to make optional modifications and enhancements of the Licensed Programs (other than simple corrections and updates) available only at additional charges.
ADVERTISING / MARKETING AGENCY AGREEMENT
THIS AGREEMENT is made this 4th day of June, 2004 by and between Palm Beach Media Associates, Inc. ("Agency") and Power2Ship, Inc. ("Customer").
RECITALS
A. Agency is in the business of providing marketing and advertising services for a fee.
B. Customer desires to have Agency render certain marketing & advertising services (the "Services") as set form in Exhibit B.
C. Agency desires to render certain marketing & advertising services as set forth in Exhibit B.
AGREEMENTS
In consideration of the mutual covenants set forth in this Agreement, Customer and Agency hereby agree as follows:
1. ENGAGEMENT OF SERVICES.
Agency agrees to render to Customer services in connection with the planning, preparing and creation of marketing services for Customer as follows:
a) Provide consulting services to Customer in the form of an analysis of Customer's current products, goods or services as it relates to Customer's present and/or target markets.
b) Develop advertising ideas and creative content for Customer for approval for use in future marketing programs.
c) Prepare estimates of costs and expenses associated with idea and content development and present them to Customer for approval.
d) Design, contract or otherwise arrange for the preparation of creative content, advertising, campaign management and other related services.
e) Execute advertising and marketing services as agreed upon in Exhibit B.
f) Provide proofing services on behalf of Customer in order to check for accuracy, completeness, adherence to specifications and Customer branding in all forms of contracted advertising that Agency handles on behalf of Customer.
g) Audit all invoices and expenses provided by third-party to ensure accuracy.
h) Provide other such services as Customer may request from time to time such as content creation, assistance to Customer's staff and employees, market research, analysis or additional project consulting.
2. SPECIFICATIONS.
Agency agrees to develop the advertising and consulting services pursuant to the specifications set forth in Exhibit B attached hereto (the "Specifications").
3. SERVICES COMPLETION.
Agency will use reasonable diligence in the development of the Advertising and Marketing Services and endeavor to deliver to Customer all agreed upon specifications (or "Milestones") outlined in Exhibit B no later than approved deadline. Customer acknowledges, however, that this delivery deadline, and the other payment milestones listed in Exhibit A, are estimates, and are not required delivery dates. Agency will be retaining all creative source code, original works, files, digital media and other intellectual property for the entire project and providing Customer with the output formats only. Customer shall retain all of its intellectual property rights in any logos, graphics, text, images or other components it owns and transmits to Agency for use in fulfillment or creation of services.
4. OWNERSHIP RIGHTS.
a) Agency shall endeavor to insure that Customer shall be able to retain, under the fullest extent under the law, any and all intellectual property rights in any text, images or other components created for Customer pursuant to this agreement.
b) Customer agrees that any material, content, plan or idea prepared by Agency or submitted to Customer for approval at any stage, which is not utilized at the termination of this agreement, shall remain the property of Agency. Customer agrees to return to Agency any materials it may have of Agency such as artwork, mock-ups, comps, text, digital media, film, photos or any other physical embodiment of Agency's creative work performed while under this agreement.
c) Upon termination or expiration of Agreement, Customer agrees to be solely responsible for any additional use of materials and advertisements, created by Agency, pursuant to this agreement. Additional expenses may include, but are not limited to: Fees, Licenses, Translations, Royalties, Talent and other associated fees. Agency's obligation in 4.a shall not apply with any respect to foreign use.
5. COMPENSATION.
For all of Agency's services under this Agreement, Customer shall compensate
Agency, in cash, pursuant to the terms of Exhibit A attached hereto. In the
event Customer fails to make any of the payments referenced in Exhibit A by the
deadline set forth in Exhibit A, Agency have the right, but are not obligated,
to pursue any or all of the following remedies: (1) terminate the Agreement,
(2) withhold all materials, services and creative content administered by Agency
on behalf of Customer, (3) bring legal action.
6. CONFIDENTIALITY.
Customer and Agency acknowledge and agree that the Specifications and all other documents and information related to the engagement of marketing or advertisement development (the "Confidential Information") will constitute valuable trade secrets of Agency. Customer shall keep the Confidential Information in confidence and shall not, at any time during or after the term of this Agreement, without Agency's prior written consent, disclose or otherwise make available to anyone, either directly or indirectly, all or any part of the Confidential Information. Excluded from the "Confidential Information" definition is anything that can be seen by the public in any advertising medium or channel prior to the engagement of Agency to provide services, or information which was provided to Agency by Customer for publication as a requirement of fulfillment of the Specifications.
7. LIMITED WARRANTY AND LIMITATION ON DAMAGES.
Customer agrees to indemnify and hold Agency harmless with respect to any claims, loss, lawsuit, liability or judgment suffered by Customer which results from the use of any material prepared or execution of service by Agency or at the direction of Agency which has been materially changed from the Specifications by any advertisers, publishers, hosts, radio & television broadcasts, quotes, testimonials, print journalism or other third-party entity.
In the event of any litigation, proceeding or suit against Customer by any regulatory agency or in the event of a court action challenging any advertising or marketing service prepared by Agency, Agency shall assist in the preparation of defense of such action and cooperate with Advertiser. Customer acknowledges that Agency are not responsible for the results obtained by Customer from any creative, advertising, programs, ideas or execution thereof. Customer waives any claim for damages, direct or indirect, and agrees that its sole and exclusive remedy for damages (either in contract or tort) is the return of the consideration paid to Agency as set forth in Exhibit A attached hereto.
8. INDEPENDENT CONTRACTOR.
Agency will be retained as independent contractors. Agency will be fully responsible for payment of their own income taxes on all compensation earned under this Agreement. Customer will not withhold or pay any income tax, social security tax, or any other payroll taxes on Agency's behalf. Agency understands that they will not be entitled to any fringe benefits that Customer provides for its employees generally or to any statutory employment benefits, including without limitation worker's compensation or unemployment insurance.
9. RESOURCES & EQUIPMENT.
Customer agrees to make available to Agency, for Agency's use in performing the services required by this Agreement, all logos, graphics, photos, branding, collateral, items of hardware and software as Customer and Agency may agree are reasonably necessary for such purpose.
10. GENERAL PROVISIONS.
10.1 ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes any and all prior agreements or understandings, written or oral, between the parties related to the subject matter hereof. No modification of this Agreement shall be valid unless made in writing and signed by both of the parties hereto.
10.2 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. Exclusive jurisdiction and venue shall by in the Palm Beach County, Florida Superior Court.
10.3 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of Customer and Agency and their respective successors and assigns, provided that Agency may not assign any of his obligations under this Agreement without Customer's prior written consent.
10.4 WAIVER.
The waiver by either party of any breach or failure to enforce any of the terms and conditions of this Agreement at any time shall not in any way affect, limit, or waive such party's right thereafter to enforce and compel strict compliance with every term and condition of this Agreement.
10.5 GOOD FAITH.
Each party represents and warrants to the other that such party has acted in good faith, and agrees to continue to so act, in the negotiation, execution, delivery, performance, and any termination of this Agreement.
10.6 RIGHT TO WITHHOLD CONTENT, CREATIVE AND SERVICES.
In the event Customer fails to make any of the payments set forth on Exhibit A within the time prescribed in Exhibit A, Agency has the right to withhold further content, creative and services perform for or on behalf of Customer until payment in full is paid, plus accrued late charges of 1 % per month.
10.7 INDEMNIFICATION.
Customer warrants that everything it gives Agency to use in fulfillment of services is legally owned or licensed to Customer. Customer agrees to indemnify and hold Agency harmless from any and all claims brought by any third party relating to any aspect of the services, creative or other content, including, but without limitation, any and all demands, liabilities, losses, costs and claims including attorney's fees arising out of injury caused by Customer's products/services, material supplied by Customer, copyright infringement, and defective products sold via the advertising or services. Further, customer agrees to indemnify Agency from responsibility for problems/disruptions caused by 3rd party services and contractors that Customer may use such as media buyers, transportation, merchant accounts, shopping carts, shipping, hosting services, real time credit card processing and other services that relate to the execution of the services outline in this agreement by Agency.
10.8 USE OF SERVICES & CREATIVE CONTENT FOR PROMOTIONAL PURPOSES.
Customer grants Agency the right to use the creative content, description of services performed, results of services and campaign data as it sees fit for promotional purposes.
10.9 NO RESPONSIBILITY FOR THEFT.
Agency has no responsibility for any third party taking all or any part of the content, ideas, or services provided to Customer by Agency.
10.10 ATTORNEY'S FEES.
In the event any party to this Agreement employs an attorney to enforce any of the terms of the Agreement, the prevailing party shall be entitled to recover its actual attorney's fees and costs, including expert witness fees.
10.11 TERM OF AGREEMENT.
This agreement shall begin on June 4, 2004 and shall continue in full force for the term of one year. Contract can then be renegotiated.
Each party represents and warrants that, on the date first written above, that they are authorized to enter into this Agreement in entirety and duly bind their respective principals by their signature below:
EXECUTED as of the date first written above.
Power2Ship, Inc.
Palm Beach Media Associates, Inc.
EXHIBIT A
PAYMENT TERMS
1. Customer agrees to pay Agency a year management fee of $30,000.00 and a $40,000.00 a year retainer for all services according to the following terms:
A. Client is billed monthly for $6,000.00.
B. Agency Management Fee of $2,500.00.
C. $3,500.00 will be applied to "all" work invoiced monthly.
D. Client will be billed accordingly for all work over monthly retainer.
2. Customer agrees to the pay for all out-of-pocket expenses incurred by Agency in developing the project including, but without limitation, any:
A. Outsource services billed for Customer
B. Media Buying
C. Printing
D: Travel
3. Customer agrees to pay for the Agencies' fee and all expenses, as set forth above, within 15 days of invoice. All unpaid balances shall accrue interest at 1 % per month.
4. Customer agrees that any changes customer makes to the specification may adversely affect the original estimate. Extra time incurred above and beyond the original specification will be billed at an hourly rate of $70.00 and is not subject to the costs, estimates and caps in 1. above.
EXHIBIT B
SPECIFICATIONS
The project can contain the following components and/or services:
A. Create One Year Marketing/Advertising Campaign
B. Management of Marketing/Advertising Campaign
C. Print Advertising Campaign
D. Internet Advertising Campaign
E. Public Relations Campaign
F. Direct Mail Campaign
G. Telemarketing Campaign
H. Point of Sale Campaign
I. Product Branding
J. Graphic Design - All print collateral work
K. Interactive Design
L. Media Buying
M. Copy Writing
N. Printing
O. Consulting
This Agreement made this 21st day of July, 2003 by and between ARL, Inc. of Moon Township, Pennsylvania, or any of its Divisions (American Carrier Group, Inc., General Express, or Patriot Transport) hereinafter referred to as CARRIER and Power2Ship, Inc., a Nevada corporation located at 903 Clint Moore Rd., Boca Raton, Florida 33487, hereinafter referred to as AGENT.
It is mutually understood, agreed and promised by and between CARRIER and AGENT, each in consideration of the covenants, agreements and promises of the other recited herein, as follows:
I. AGENT COVENANTS AND AGREES:
1. To represent CARRIER for the purposes and within the scope of the limitations set forth in Paragraph I and II of this Agreement.
2. To establish and maintain at his/her own expense adequate office and terminal facilities within the area set forth in APPENDIX A of this AGREEMENT, which facilities shall meet reasonable standards as determined by CARRIER as to location, structure, interior arrangement and housekeeping. AGENT further agrees that CARRIER's representative shall be allowed unhindered access to AGENT's premises during normal business hours.
3. To employ a sufficient number of people to properly perform the obligations and duties set forth in this AGREEMENT.
4. It is understood that AGENT will have a business phone for the purpose of conducting the CARRIER's business. All costs and expenses incurred to establish, maintain and operate such telephone or telephones will be paid by AGENT, and AGENT agrees he or she will not be entitled to any reimbursement for such expenses from CARRIER.
5. To comply with the regulations of all Federal, State and local governmental agencies having jurisdiction.
6. To comply with all rules, policies and procedures from time to time established by CARRIER including, but not limited to, the control of drivers' logs, the verification of hours of services, and the inspection of vehicles.
7. For container agents, any per diems billed and not able to be collected on will be the AGENT's responsibility. It will be the AGENT's responsibility to reimburse the CARRIER in full.
8. To get approval from CARRIER before accepting C.O.D.'s, Shipments originating at or destined to points CARRIER is not authorized to serve direct, shipments involving rigging and shipments, where size and/or weight, are such that they cannot be legally transported over the highways of the states through which they must pass without obtaining special permits.
9. To assist CARRIER in securing full compliance with all provisions of Lease Agreements in effect between CARRIER and owners of equipment.
10. To assist CARRIER in the investigation of claims when so requested by CARRIER, and to give all possible assistance in the settling of claims.
11. To comply in all respects with the provisions of tariffs governing the movements of traffic by CARRIER.
12. To procure and pay for Workmen's Compensation Insurance for him/herself, his/her associates, assistants and employees in a sufficient amount and upon such terms and conditions as will indemnify and save harmless CARRIER from any liability by reason of any accident or injury that may arise out of and during the course of their employment.
13. To hold, store and safeguard any property of CARRIER received by him\her for the account of CARRIER and upon request to return such property to CARRIER in as good condition as when received, ordinary wear and tear excepted. All records or papers of any kind relating to CARRIER's business and any forms and other materials bearing the name or trademark of CARRIER or any division thereof shall remain the property of CARRIER and shall be surrendered to CARRIER upon demand.
14. Any AGENT found representing ARL, Inc., or any other divisions of ARL, Inc., or making such arrangements by the use of names which are the same or deceptively similar to any of the ARL Network names, and utilizing any of these practices to directly invoice and/or receive payments from customers, will be subject to all applicable civil and criminal prosecutions, and will surrender back to the CARRIER all revenues obtained in this manner, and to the imposition upon the AGENT of such other damages, including punitive damages, as a court of competent jurisdiction may deem appropriate.
II. CARRIER COVENANTS AND AGREES:
1. To vest AGENT with authority to represent ARL, Inc. within the area depicted and/or described in APPENDIX A to this Agreement for the purpose of soliciting, picking up, dispatching and properly documenting all freight that the CARRIER may legally and properly transport or freight of the following types only: FLATBEDS, VANS, HOT SHOTS, DROP FRAMES, DOUBLE DROP FRAMES & REEFERS.
2. To furnish AGENT with appropriate copies of documents used in the operation of CARRIER's transportation business.
3. While operating under CARRIER's authority, AGENT will be provided with auto liability, cargo and general liability insurance.
4. Cargo liability exposure will not exceed $100,000 per movement of freight unless prior authorization is received by ARL's corporate office.
III. AGENT & CARRIER COVENANTS AND AGREES:
1. AGENT is not entitled to any commission on traffic requiring CARRIER's approval if the traffic is actually transported before approval is received from CARRIER.
2. AGENT is not authorized or empowered to lease equipment from leasing companies in the name ARL, Inc.
3. The amount or amounts set forth in APPENDIX A are to be payment in full of all compensation due to AGENT for his/her services rendered under the provisions of this AGREEMENT.
4. If AGENT does not agree with CARRIER's statement of charges accurately set for the rates, weights, charges and shipments for the applicable statement period, AGENT must notify CARRIER of its position as to the correct amount of the charges within 60 days of receipt. Otherwise, AGENT or its legal representatives, successors and assigns shall waive the right to claim that additional commissions are due from CARRIER.
5. CARRIER receives the right to offset any payables against open CARRIER receivables generated by signatory or any subsidiary company.
6. This AGREEMENT may not be assigned or otherwise transferred by AGENT.
7. AGENT shall not have nor shall he/she hold him/herself out as having authority to make representations or promises on the part of CARRIER except as specifically provided in this AGREEMENT. AGENT shall not have nor shall he/she hold him/herself out as having the power to pledge CARRIER's credit, nor to extend credit in the name of CARRIER except in those instances specifically authorized by CARRIER. Decisions regarding credit shall be made only by CARRIER.
8. This AGREEMENT shall become effective as of the date hereof and shall remain in full force and effect until terminated by written correspondence by either party.
9. This AGREEMENT shall supersede all agreements, oral or written, between AGENT and CARRIER prior to the date of this AGREEMENT.
10. In case the AGENCY is a PARTNERSHIP, all of the partners must sign this AGREEMENT and each partner shall have full authorization to sign documents, disburse funds and to represent and otherwise bind the partnership.
Governed by the rules regulated and tried by a competent jury under the Commonwealth of Pennsylvania.
Compensation: The compensation referred to in Section I, Paragraph 2; Section II, Paragraph 1; and Section III, Paragraph 3 shall be as follows:
Loads moved within assigned territory: 84% of 100%
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Loads moved through the Central Office: 3% of 100%
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Special Service Loads (Brokerage): 90% of 100%
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Truck Pay: 75% of 100%
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ARL's share of accessorials: 11% of 100%
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Territorial Assignment: 48 contiguous states plus Alaska, and Canadian Providence's.
ARL, INC.
Witness: By:
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CARRIER'S REPRESENTATIVE DATE
Witness: By:
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AGENT DATE
Witness: By:
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2ND AGENT (if applicable) DATE
Agent Initial: Page 3 Carrier Initial:
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COMDATA TRANSPORTATION SERVICES
STANDARD CUSTOMER AGREEMENT
ACCOUNT #:
This Agreement is made and entered into by and between COMDATA NETWORK, INC., d/b/a Comdata Corporation" ("COMDATA") and the above named Company ("CUSTOMER"), and sets forth the terms and conditions pursuant to which Comdata will provide an account to Customer as provided for herein.
2. CREDIT LIMIT. If approved, Comdata will establish a credit limit for the Account, which is subject to periodic review and adjustment by Comdata. Customer shall provide Comdata with such financial information as Comdata may reasonably require to review Customer's credit limit and authorizes Comdata to make any credit investigation Comdata deems necessary and appropriate. Customer shall not allow its unpaid Account balance, including fees and other charges on the Account, to exceed its credit limit. If Customer exceeds its credit limit, then Comdata may request immediate payment, request additional security, suspend the Account, and charge additional service fees.
5. TERM. This Agreement will remain in effect for a term of two years commencing on the date this Agreement is approved by Comdata.
7. DEFAULT AND REMEDIES. In the event of Customer's default under this Agreement, including, without limitation, failure to comply with the credit limit and payment terms provisions hereof, Comdata shall have the right to immediately suspend the Account until such breach is cured. In the event any such breach or default is not cured within a reasonable period of time, then Comdata may thereafter terminate this Agreement. Customer's obligation to pay for all outstanding amounts on the Account incurred before the effective date of termination shall survive termination.
8. RESPONSIBILITY FOR CARDS, CODES AND SECURITY INFORMATION. Customer agrees to accept full responsibility for all purchases and transactions made as a result of the use of Cards, Codes, Comcheks , passwords or other security codes and procedures. Customer shall notify Comdata immediately by telephone of any loss, theft, unauthorized use or fraudulent use of Cards, codes, passwords or other security codes or procedures and shall be fully responsible for the unauthorized or fraudulent use thereof until such time as Comdata has received such notification from Customer provided that each fraud or misuse is not attributed to Comdata.
10. LIMITATION OF LIABILITY. Comdata shall not be liable to Customer for any loss or damages sustained by Customer as a result of delay in servicing a transaction request, delay resulting from equipment failure or transmission failure, act of God or any other cause not within the reasonable control of Comdata. IN NO EVENT SHALL COMDATA BE RESPONSIBLE FOR CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES, REGARDLESS OF WHETHER COMDATA WAS MADE AWARE OF THE POSSIBILITY OF SUCH DAMAGES. COMDATA MAKES NO REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
11. CONFIDENTIALITY. Comdata and Customer agree and covenant to each other that they shall not, during the performance of this Agreement or at any time after the termination or expiration hereof, use or disclose to any third party other than during the proper performance of their duties hereunder, the terms, rates and conditions of this Agreement, the confidential and proprietary information of the other party hereto, including, but not limited to technical information, such as file record layouts, or any of the procedures, practices or confidential dealings of the other party hereto. The provisions of this Section shall not apply to disclosures required by law. Customer acknowledges and agrees that all transaction information, including, without limitation, Comdata card numbers, Customer's rates and fees and data gathered at the point-of-sale by Comdata, whether electronically or by voice, is property of Comdata. Customer shall be entitled to use this information only for its internal business purposes and shall not divulge the same to any other person, firm or corporation without the written consent of Comdata.
12. LIABILITY OF ACTS OF CUSTOMERS, EMPLOYEES AND AGENTS. Customer agrees to hold Comdata harmless from any and all liability resulting from the acts of any employees or agents of Customer, which acts shall include but are not limited to negligent acts and willful misconduct of such persons. For purposes hereof, any person who is given authorization by Customer to use Cards, Express Checks, codes, passwords or other security codes or procedures shall be deemed an agent of Customer.
13. RIGHT OF SETOFF. Comdata shall have the right to setoff and apply any amounts owing by Comdata to Customer against any amounts owing from Customer to Comdata pursuant to this Agreement.
14. QUALITY ASSURANCE. For quality assurance purposes, Comdata may record calls with Comdata's customer service representatives.
15. NOTICES. All written notices required to be given by this Agreement shall be deemed to be duly given if delivered personally or sent by U.S. mail, facsimile or overnight courier to Comdata, 5301 Maryland Way, Brentwood, TN 37027, or to Customer at the address listed on the front of this Agreement.
16. MISCELLANEOUS. This Agreement shall be governed by the laws of the State of Tennessee without regard to the choice of law rules of such state. Any action to enforce or interpret this Agreement shall be brought in the appropriate judicial forum located in Nashville, Davidson County, Tennessee, and Customer does hereby consent to such jurisdiction and waives any objections thereto. No waiver by either party of any breach of any provision of this Agreement to be performed by the other party shall be construed as a waiver of any succeeding breach of the same or any other provision of this Agreement. This Agreement, together with Schedule A constitutes the entire agreement of the parties relating to this subject matter and except as expressly set forth herein may only be modified by a writing signed by both parties. This Agreement may not be assigned, in whole or in part, by Customer without the prior written consent of Comdata. Customer shall return the originally executed copy of this Agreement to Comdata as soon as possible. Notwithstanding the foregoing, Customer acknowledges and agrees that electronic records and signatures and facsimile copies of signatures shall have the full legal effect of a writing.
17. TERM COMMITMENT INCENTIVE. Comdata agrees to credit to Customer all Customer transaction fees charged for all Comdata Card Funded Fuel, Comdata Funded Fuel with Cash, Comdata Non Funded Fuel (Data Capture), and Comdata Card Terminal Fuel Data Capture Transactions, for a period of twelve months, commencing as of the first month in which Customer begins use of these Services. Should Customer cease using these Services during the term of this Agreement, the provisions of this Section shall no longer apply, and the Customer will be bound by the other provisions of this Agreement.
ACCEPTED AND AGREED:
CUSTOMER
By: s/s Michael J. Darden
------------------------
Signature
Michael J. Darden
--------------------
Please Type Or Print Name
Title: President
---------
Date: 10-03-03
--------
APPROVED BY COMDATA:
By: s/s Scott J. Bryers
----------------------
Scott J. Bryers
-----------------
Please Type Or Print Name
Title: Vice President Nat'l Accts
-------------------------------
Date: 10-3-03
-------
|
COMDATA TRANSPORTATION SERVICES
STANDARD CUSTOMER AGREEMENT
SCHEDULE A
ACCOUNT AND SERVICE FEES PAYMENT TERMS:
-----------------------------------------------------------------------------------------------------------------
Customer shall pay to Comdata a
fee per transaction to be charged All payments shall be for all transactions through
daily, to be calculated as follows: the previous day.
-----------------------------------------------------------------------------------------------------------------
TRANSACTION TYPE FEE PER TRANSACTION METHOD OF PAYMENT
-----------------------------------------------------------------------------------------------------------------
Comdata Card Funded Level A (Directory) $0.25 With Cash $0.25 Wire Customer Initiated ACH
---- ----
-----------------------------------------------------------------------------------------------------------------
Comdata Card Funded Level B (Directory) $0.50 With Cash $0.50 Comdata Initiated ACH EFT
---- ----
-----------------------------------------------------------------------------------------------------------------
Comdata Card Funded Level D (Directory) $1.25 With Cash $1.25 X Prepaid Wire Transfer (Comcash)
----
-----------------------------------------------------------------------------------------------------------------
Comdata Card Funded Cash Only $1.25 Other
---- ----
-----------------------------------------------------------------------------------------------------------------
Comdata Card Non Funded Fuel (Data Capture) $0.45
-----------------------------------------------------------------------------------------------------------------
Comdata Card Terminal Fuel Data Capture $0.45 Frequency of Payment
-----------------------------------------------------------------------------------------------------------------
Comdata Credit Card $N/A Cash Card / Express Comchek
-----------------------------------------------------------------------------------------------------------------
Comdata Card ATM Access (Limit Based) US $1.25 International $1.25 Daily
----
-----------------------------------------------------------------------------------------------------------------
Balance Inquiry $1.00 Decline $1.00 Times Weekly (M T W TH F S)
----
-----------------------------------------------------------------------------------------------------------------
Comdata Express Cash: X
----
-----------------------------------------------------------------------------------------------------------------
Load Fee (one Fee draft &/or direct deposit) $1.50
Manual Direct Deposit Fee $1.00 (after 1st transaction) Credit Card
-----------------------------------------------------------------------------------------------------------------
Automatic Direct Deposit Fee $0.50 Daily
----
-----------------------------------------------------------------------------------------------------------------
ATM Access Fee (US) / (International) $1.25 / $2.25 Semi-Monthly (15th, End of Month)
----
-----------------------------------------------------------------------------------------------------------------
ATM Balance Inquiry / Decline Fee $1.00 / $1.00 Monthly (End of Month)
----
-----------------------------------------------------------------------------------------------------------------
POS Debit / Decline $0.50 / $0.50
-----------------------------------------------------------------------------------------------------------------
Express Comcheck (Per $1,000 increments) $1.25 SECURITY
-----------------------------------------------------------------------------------------------------------------
MINIMUM MONTHLY TRANSACTIONS Customer shall provide Comdata with
the Security checked below to secure
the performance of its obligations.
-----------------------------------------------------------------------------------------------------------------
Comdata Card Fuel and Cash Transactions N/A per month TYPE AMOUNT
-----------------------------------------------------------------------------------------------------------------
Comdata Express Cash Loads N/A per month Letter of Credit $
---- ------
-----------------------------------------------------------------------------------------------------------------
Express Comchek Transactions N/A per month Bond $
---- ------
-----------------------------------------------------------------------------------------------------------------
Comdata Answer Plus (provided by Comdata
Telecommunications Services, Inc. Deposit $
---- ------
-----------------------------------------------------------------------------------------------------------------
Long Distance Service (per minute) 0.13 Surcharge/Call $0.26 Other $Comcash
---- ------
-----------------------------------------------------------------------------------------------------------------
Information Services (i.e. News, Weather) N/A
-----------------------------------------------------------------------------------------------------------------
A per call fee of $.26 applies to all calls
originating from payphones
-----------------------------------------------------------------------------------------------------------------
Customer Service Fee (per call) 1.50 (after 90 days) CREDIT LIMIT
-----------------------------------------------------------------------------------------------------------------
Comcheck Services Payphone Fee: Each time
a call is made from a payphone to Comchek
Services number (1-800-741-6060) a $.26
fee will be deducted from the Card Comdata provided credit limit based
balance. on the following:
-----------------------------------------------------------------------------------------------------------------
Monthly Fee for Faxed or Mailed Invoices $10.00 Credit Application $
---- ------
-----------------------------------------------------------------------------------------------------------------
Equipment Fees: D & B Rating $
---- ------
-----------------------------------------------------------------------------------------------------------------
Stripe Reader (per unit) $N/A # of units N/A Financials $
---- ------
-----------------------------------------------------------------------------------------------------------------
Stripe Reader with Printer (per unit) $N/A # of units N/A Corporate Guarantee $
---- ------
-----------------------------------------------------------------------------------------------------------------
[ ] Fuel Management Monthly Fee (choose one): Personal Guarantee $
---- ------
-----------------------------------------------------------------------------------------------------------------
[ ] 50% of Savings [ ] Flat Monthly fee of $ TOTAL CUSTOMER CREDIT LIMIT IS:
-----------------------------------------------------------------------------------------------------------------
One time set-up fee of $50.00, which is
payable as follows(choose one): N/A Amount: $0
---
-----------------------------------------------------------------------------------------------------------------
[ ] Enclosed [ ] Bill to Account
[ ] Deduct from Opening Balance ($0 if Comcash Account)
-----------------------------------------------------------------------------------------------------------------
|
Signature of Authorized Customer Representative:
s/s Michael J. Darden Date: 10-3-03 -------------------------- |
Printed Name and Title:
Accepted by Comdata: s/s Scott J. Bryers Date: 10-3-03 ----------------------- |
Printed Name and Title:
Power2Ship
www.POWER2SHIP.COM
October 19, 2004, 2004
Mr. Michael Garnick
1590 Stockton Road
Meadowbrook, PA 19046
Dear Michael,
This letter sets forth an agreement (the "Agreement") between Power2Ship, Inc., its affiliates and assigns (the "Company") and you related to your providing various consulting services to Company. You shall be an independent contractor and shall have no right or authority to assume or create any obligations or responsibility, express or implied, on behalf of or in the name of the Company, unless specifically authorized in writing by the Company. The term of this Agreement shall be twelve (12) months commencing upon the date of execution of this Agreement. This Agreement shall be binding upon the Company and you and its and your respective successors and assigns.
Pursuant to the Agreement, you shall provide business advisory services to the senior executives of the Company with respect to certain legal and other matters as requested by the Chief Executive Officer of the Company from time to time (the "Consulting Services"). You may provide the Consulting Services from any location and in any form (i.e., oral, written, electronic, etc.) that you deem appropriate.
In consideration for providing the Consulting Services, the Company shall grant you, as a signing bonus upon execution of this Agreement, 150,000 shares of the Company's common stock, all of which are "free trading" shares that have been registered in a registration statement on Form S-8 which the Company filed with the SEC on June 6, 2003. These 150,000 shares shall be deemed earned upon their receipt by you and under no circumstances shall the Company ever contest your ownership thereof.
Further, the Company shall reimburse you for any out-of-pocket expenses you incur while providing the Consulting Services upon submission of an expense report with receipts attached thereto. Expenses in excess of $100 during any monthly period must be pre-approved in writing by the Company.
All notices and other communications hereunder shall be delivered or mailed to you at your address set forth at the beginning of this letter or to the Company at the address set forth in the footer of this letter, or to such other address furnished by either party to the other in writing.
If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever; (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including, with limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held, invalid illegal or unenforceable.
This Agreement shall be construed in accordance with and governed in all respects exclusively by the laws of the State of Florida without reference to the conflict or choice of law provisions thereof.
Should any dispute arise in the administration of this Agreement, the dispute shall be resolved through arbitration under the rules of the American Arbitration Association with its location in the state of Florida.
This Agreement contains the entire agreement between the parties with respect to the services to be provided to the Company by you and supersedes any and all prior understandings, agreement or correspondence between the parties.
This Agreement is not assignable by you without prior written consent of the Company. Any attempted assignment without such consent shall be void.
No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties hereto. No waiver of any other provisions hereof (whether or not similar) shall be binding unless executed in writing by both parties hereto nor shall such waiver constitute a continuing waiver.
This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument.
The signatures of both parties below shall be evidence of acceptance of the terms and conditions in this letter agreement and shall be binding upon the parties.
POWER2SHIP, INC.
s/s Richard Hersh s/s Michael Garnick --------------------- --------------------------- Richard Hersh Michael Garnick Chairman & CEO |
Congress Corporate Plaza 901 Tel: 561-998-7557 903 Clint Moore Road Toll-free: 866-727-4995 Boca Raton, Florida 33487 Fax: 561-998-7821 |
PLEASE PRINT THIS AGREEMENT AND COMPLETE THE NECESSARY INFORMATION.
SIGN THE COMPLETED AGREEMENT AND FAX IT TO POWER2SHIP AT 561-998-7618.
If you have any comments or questions, please contact Customer Service toll-free at 1-866-727-4995.
POWER2SHIP, INC.
MOTOR CARRIER TRANSPORTATION AGREEMENT
Whereas, ASP, to satisfy some of its customers transportation needs, desires to engage CARRIER to perform transportation within the limit of the CARRIER's operating authority according to this Agreement terms and conditions and CARRIER desires to perform such transportation.
Now, therefore in order to be legally bound the parties agree as follows:
2. PROPERTY BROKER LICENSE. BROKER is a licensed property broker which holds authority from the Department of Transportation - Federal Motor Carrier Safety Administration at Docket No. MC-467847.
3.1 SERVICE OF CARRIER. The Transportation Service shall be for the prompt
transportation of products tendered by ASP's customers to and from points and
places designated by ASP and ASP's customers, subject to the provisions of this
Agreement and the limitations of CARRIER'S operating authority. The
Transportation Service to be provided to ASP by CARRIER shall include the
following: (1) the procurement of necessary approvals, authorities or licenses
from all Governmental Agencies; (2) the provision of motor vehicles and allied
equipment (hereinafter called the "Vehicles"); (3) the maintenance of the
vehicles in accordance with the rules and regulations of the Federal Motor
Carrier Safety Administration; (4) the employment of drivers qualified pursuant
to the rules and regulations of the Federal Motor Carrier Safety Administration;
(5) compliance with all of ASP's customers safety program requirements; (6)
proper compliance with State and Federal safety regulations; (7) the safe,
proper, and legal load securement of all products tendered by ASP's customers to
CARRIER; (8) the dispatch of drivers and Vehicles; (9) timely delivery; and (10)
the procurement of all supplies.
3.2 MINIMUM TENDER. There is no Minimum volume of freight contemplated by this Agreement. ASP is not restricted against tendering its freight to other carriers; CARRIER is not restricted against performing transportation for other shippers.
3.3 STATUS NOTIFICATION. CARRIER shall transport all ASP's customers shipments without delay. Unless CARRIER is using the P2S GPS PDA data collection device which updates information directly to the ASP while in transit, CARRIER shall notify ASP as a minimum, verbally or electronically TWICE a day Monday through Saturday.
4. TERM OF AGREEMENT. The term of the Agreement shall be for one (1) year,
commencing as of the date first written above, and shall be deemed to be
automatically renewed from year to year thereafter, but can be terminated by
either party, without cause, by giving thirty (30) days' notice. ASP may also
terminate this agreement, by giving one (1) day's notice: (A) if CARRIER fails
to: (1) comply with the rules and regulations of the Federal Motor Carrier
Safety Administration; (2) maintain insurance consistent with Paragraph 21, and
(3) comply with substantial provisions of this agreement. Notice shall be sent
by Certified Mail, Return Receipt Requested, and addressed to the other party at
the address of said party as set forth in this agreement.
5. RATES AND CHARGES. The parties agree the rates and charges for the
contemplated transportation shall be:
5.1 On manually processed loads only those rates on the individual Rate
Confirmation Sheets, signed by each party prior to each shipment.
5.2 When CARRIER has been granted access to the P2S electronic asset
management tool and CARRIER is classified as a MEMBER CARRIER, then their unused
CARRIER assets have CARRIER entered rates for the unused capacity, then that
CARRIER rate will be displayed to SHIPPER for their selection and when carrier
accepts the shipment tendered to them from an action item, then CARRIER is
confirming acceptance of the rate to perform the transportation transaction.
ASP will pay CARRIER the agreed amount within thirty days of ASP's receipt of CARRIER's freight bill, bill of lading, clear delivery receipt, and any other documents necessary to enable ASP to ascertain transportation has been properly provided. Should CARRIER desire to accelerate the settlement of freight charges, the use of the P2S GPS/PDA will enable them to do so for a service fee. CARRIER agrees ASP, at its option, may offset against any payments owed to CARRIER amounts CARRIER owes ASP.
6. ASP AUDIT. ASP reserves the right to continually audit CARRIER's information for accuracy. If ASP discovers that CARRIER is imputing incorrect information then ASP can terminate this contract immediately.
7. CORRECTION OF A FREIGHT CHARGE. If CARRIER does not agree with a freight charge paid, CARRIER must notify ASP as to the correct amount of the freight charge within ninety (90) days of receipt of payment, OTHERWISE, CARRIER, its legal representatives, successors and assignees, shall have waived the right to claim that any additional freight charge due from ASP or any other party. Both parties agree that if the amount to be corrected is Five Dollars ($5.00) or less, that the correction will not be necessary and no further action needs to be taken to correct the amount.
8. ASP BILLING OF FREIGHT CHARGES TO ITS CUSTOMERS. ASP shall have the exclusive right to bill all freight charges to its customers for shipments handled pursuant to this Agreement. CARRIER shall not seek to collect from Customer or any other party involved with the shipment.
9. BILL OF LADING. CARRIER shall sign a bill of lading or receipt for each shipment tendered to it in the form required by ASP, an example attached, or ASP's customer. If ASP and/or ASP's customer elects to use a bill of lading or other form of freight receipt or contract for each shipment, any terms, conditions, or provisions of such bill of lading or other form shall be subject and subordinate to the terms of this Agreement. Any bill of lading or other form inconsistent with the terms of this Agreement shall be null and void, and the terms of this Agreement shall govern. Upon delivery of each shipment, CARRIER shall obtain a signed delivery receipt from the consignee in a form acceptable to ASP, setting forth the goods delivered, correct count, condition of such goods and date and time of delivery. All such documents shall show the actual consignor (Shipper) and Consignee (Receiver) and Freight Rate shall appear in the "Bill To:" section and in the "Special Instructions" section as being "SHIPPED UNDER CONTRACTOR AUTHORITY WITH ASP CUSTOMER."
10. CONTRACT CARRIAGE. Regardless of whether CARRIER is authorized to operate or does operate as a Common Carrier, each and every shipment tendered to CARRIER by ASP shall be deemed to be tendered to CARRIER as a motor Contract Carrier and shall be subject only to the terms of this Agreement and the provisions of law applicable to motor contract carriage. The CARRIER rules; waivable statutory provisions under 49 USC 14101; and other documents which are inconsistent with the terms of this contract are hereby expressly waived and shall be null and void, and the terms of this contract shall govern.
11. INDEPENDENT CONTRACTOR. The relationship of CARRIER to ASP shall at all times be that of an independent contractor and such status shall govern all relations between CARRIER, ASP, and any third party.
12. CARRIER'S LIABILITY FOR TRANSPORTATION SERVICE. CARRIER does not have the right to assign, allocate, or tender Power2Ship Customer's freight to a third party that would in any way negate, eliminate, circumvent, or alleviate CARRIER'S liability to ASP. CARRIER shall be responsible for all liabilities incident to the Transportation Service rendered by CARRIER under this Agreement including, but not limited to, all costs, expenses and liabilities incident to or arising out of accidents, repairs of equipment, labor, fuel and insurance.
13. REGULATIONS OF THE FEDERAL GOVERNMENT. CARRIER must comply with all the rules and regulations of the Federal Motor Carrier Safety Administration.
14. CARRIER'S LIABILITY FOR FREIGHT LOSS OR DAMAGE. CARRIER shall be liable for all loss and damage to the property which ASP arranges for CARRIER to transport, and CARRIER hereby agrees to be liable for loss or damage to the freight from the time CARRIER receives the freight until the time the freight is delivered. CARRIER shall be liable to ASP and/or ASP's Customer for the full actual loss, damage or injury.
15. NOTICE OF CARGO CLAIM. In the event that CARRIER loses or damages all or any part of a shipment consigned by ASP, CARRIER agrees to notify ASP at the earliest date and time, and such notice shall be no later than twenty-four (24) hours after CARRIER'S receipt of notice of loss or damage. CARRIER and ASP also agree that CARRIER should promptly notify ASP as described above of any conditional delivery receipt or of a refused delivery of all or any portion of a shipment.
16. FILING OF A CARGO CLAIM. A claim resulting from loss or damage of goods will be filed in writing with CARRIER within nine (9) months of the delivery date, and such a claim will contain sufficient facts to identify the involved shipment and the amount of loss or damage. ASP agrees to provide CARRIER with documentation in its possession or under its control which is reasonably necessary.
ASP shall be deemed to have filed such a claim in a timely manner in the event of any of the following:
a. by the mailing of a claim within the time limit; or
b. by CARRIER'S knowing acceptance or sale of the goods in their damaged condition.
A claim shall not be invalidated when ASP is unable to quantify the exact amount of loss within nine (9) months.
17. PAYMENT, COMPROMISE, OR DISALLOWANCE OF A CARGO CLAIM. ASP's cargo claim against CARRIER shall either be paid, compromised, or disallowed within One Hundred and Twenty (120) days of receipt by CARRIER, unless ASP has failed to provide complete documentation. If ASP has provided complete documentation, and CARRIER fails to pay, compromise or disallow a claim in One Hundred and Twenty (120) days of receipt by CARRIER, then CARRIER shall be liable for interest at the rate of one and one half percent (1-1/2%) per month on the amount of the claim commencing at the end of said One Hundred and Twenty (120) day period, and such interest shall continue until the claim is resolved.
18. FILING SUIT TO COLLECT A CARGO CLAIM. The time limit for filing suit against CARRIER for a loss or damage claim shall be two (2) years from the date ASP receives a written disallowance from CARRIER which states a lawful reason for declining to accept liability of a loss or damage.
If ASP is successful in recovering for loss, damage, or delay in a Court of law or through Arbitration, it shall be entitled to recover reasonable attorney fees in addition to other costs and interest accrued from the date of delivery or scheduled delivery.
19. INDEMNIFICATION. CARRIER shall defend, indemnify and hold harmless ASP and ASP's Customer from and against any and all liability arising out of CARRIER's act, omission, or negligence, as to the following:
a. All losses, damages, expenses, actions and claims for injury to or death of persons and damage to property arising out of or in connection with the load, handling, transportation, unloading or delivery of any shipments pursuant to this Agreement;
b. All losses, damages or expenses incurred by ASP and/or ASP's Customer from any breach by CARRIER of this Agreement;
c. All acts authorized by this Agreement, which are performed by CARRIER, its agents, employees or helpers, including but not limited to, criminal acts, gross negligence, and intentional or negligent conduct in violation of federal, state or local governmental laws, rules or regulations.
20. CARRIER'S UNLAWFUL RETENTION OF CARGO. CARRIER agrees that it will not seize or assume control of products tendered by ASP and/or ASP's Customer. CARRIER waives and releases all liens which it might otherwise have to any of ASP's Customer's freight in its possession.
21. INSURANCE. CARRIER shall maintain at its own cost, at all times during the life of this Agreement, a policy for liability insurance in an amount not less than Seven Hundred and Fifty Thousand dollars ($750,000) or such higher insurance coverage as may be required by law, which policy shall provide coverage for public liability, property damage, environmental restoration, and injury or death to persons resulting from the performance of the Transportation Service. CARRIER shall also maintain at its own cost, at all times during the life of this Agreement, a policy for cargo liability insurance in an amount not less than One Hundred Thousand dollars ($100,000) or such higher insurance coverage as may be required by law or by ASP from time to time. These insurance policies providing the above coverage shall be written by a reputable insurance company. These policies shall also provide that the Insurance Company issuing such policies shall notify both the CARRIER and ASP of its intention to cancel any policy at least ten (10) days prior to the effective date of cancellation. CARRIER shall furnish ASP with a Certificate or Certificates of Insurance designating ASP as an Additional Insured.
22. HAZARDOUS MATERIAL TRANSPORTATION. For any shipment arranged by ASP to be transported by CARRIER involving transportation of hazardous materials or waste requiring vehicle placarding under 49 CFR Part 172, the parties agree to the following provisions shall apply, in addition to provisions in the this Agreement:
a. CARRIER also represent and warrants it holds all Federal and/or State permits and registrations necessary to transport the hazardous materials or waste, and CARRIER shall provide ASP copies of all appropriate documents upon ASP's request.
b. CARRIER shall immediately notify ASP of (1) any revocation or suspension of the permits and registrations in (a) above and (2) any change in CARRIER's "satisfactory" USDOT safety rating. CARRIER acknowledges a "satisfactory" USDOT safety rating is a prerequisite to transporting hazardous materials or waste under this Agreement.
c. CARRIER also represents and warrants all CARRIER's drivers transporting hazardous materials or waste (1) are properly trained under Federal and State Laws, including, as example, 49 CFR 172.700 and 177.800, and (2) have the proper endorsements on their Commercial Driver's License to transport such shipment.
d. CARRIER shall comply with all Federal, State and Local Laws regarding the transportation of hazardous materials or waste, including, as example 49 CFR 172 and 397.
e. If CARRIER is requested to transport hazardous materials or waste for which CARRIER must maintain Five Million Dollars ($5,000,000) liability coverage under 49 CFR 387.9, CARRIER shall procure and maintain, at its sole expense, public liability and property damage insurance from a reputable and financially responsible insurance company insuring CARRIER for at least Five Million per occurrence. Such insurance shall name ASP as insured's for any and all liabilities for personal injuries (including death) and property damage, including environmental damage due to the release of a hazardous substance, arising out of or in any way related to CARRIER's transportation.
23. CONFIDENTIALITY. CARRIER acknowledges that his position as CARRIER for ASP gives him access to special knowledge of ASP's organization and business methods which could be harmful to ASP if used for any purpose other than the promotion of ASP's business as provided in this Agreement. CARRIER agrees that during the term of this Agreement that CARRIER will not communicate with any of ASP's customers. CARRIER agrees that in the event of any breach of the covenants contained in this paragraph ASP will be entitled, in addition to any other rights and remedies, to an injunction or restraining order restraining CARRIER from committing or continuing to commit any breach of these provisions, and CARRIER hereby consents to the issuance of such injunction or restraining order or other equitable relief without bond or other security and without the necessity of actual damage to ASP.
24. COVENANT NOT TO COMPETE. CARRIER agrees not to directly solicit freight from ASP's Customers that it hauled freight for as a result of the efforts of ASP under this Agreement for a period of three (3) years after termination of this Agreement. Should CARRIER breach the provision in this paragraph, it is understood between the parties that damages to ASP would be hard to calculate. Therefore, the parties have stipulated and agreed that should CARRIER breach the above provision, that the ASP will be entitled to the following:
a. ASP will be entitled, in addition to any other rights and remedies, to an injunction or restraining order restraining CARRIER from committing or continuing to commit any breach of these provisions, and CARRIER hereby consents to the issuance of such injunction or restraining order or other equitable relief without bond or other security and without the necessity of actual damage to ASP.
b. CARRIER shall pay ASP a commission of fifteen percent (15%) of the transportation or revenue received on the movement of traffic.
25. ENTIRE AGREEMENT. This Agreement constitutes the entire contract between the parties. This Agreement shall not be modified or changed by any express or implied promises, warranties, guarantees, representations or other information unless expressly and specifically set forth in the Agreement or an Addendum properly executed by the parties.
It is agreed that there are no oral representations, agreements, or understandings affecting this instrument and that any future representation, agreements, understandings or waivers to be binding upon the parties hereto, must be reduced to writing. Either party's failure strictly to enforce any provisions of this Agreement shall not be construed as a waiver or modification thereof excusing the other party from performance.
If any provision of this Agreement is found to be unlawful or unenforceable for any reason, such provision shall be severable from this Agreement, and all other provisions shall be binding upon the parties and shall remain in effect.
26. JURISDICTION. This Agreement shall be deemed to have been drawn under Florida Law and this Agreement shall be construed in accordance with the laws of the State of Florida. If there is a dispute, any legal action must be brought in Florida and Florida's laws shall apply, without regard to its conflict of laws rules.
27. NOTICES. Notices shall be sent by registered mail, return receipt requested, to each party at the address shown above, or to such other addresses as shall have been designated in writing.
In Witness Whereof, the parties hereto have caused this Agreement to be executed in their respective names by their duly authorized representatives as of the date first above written.
ASP: Power2Ship, INC.: By: Title: ------------------------------ ------------------------------------- |
CARRIER:
POWER2SHIP, INC.
CODE OF BUSINESS CONDUCT AND ETHICS
ADOPTED BY THE BOARD OF DIRECTORS
ON OCTOBER 15, 2004
The upholding of a strong sense of ethics and integrity is of the highest importance to Power2Ship, Inc. (the "Company") and critical to its success in the business environment. The Company's Code of Business Conduct and Ethics embodies the Company's commitment to such ethical principles and sets forth the responsibilities of the Company to its shareholders, employees, customers, lenders and other stakeholders. The Company's Code of Business Conduct and Ethics addresses general business ethical principles, conflicts of interests, special ethical obligations for employees with financial reporting responsibilities, insider trading laws, reporting of any unlawful or unethical conduct, political contributions and other relevant issues.
GENERAL PRINCIPLES
It is the Company's firm belief that effective business relationships can only be built on mutual trust and fair dealing. The Company and all its directors, officers and employees, to whom the Company's Code of Business Conduct and Ethics is applicable, will conduct themselves in accordance with the standards established herein.
The Company's Code of Business Conduct and Ethics outlines the fundamental principles of legal and ethical business conduct as adopted by the Board of Directors of the Company. It is not intended to be a comprehensive list addressing all legal or ethical issues which may confront the Company's personnel. Hence, it is essential that all personnel subject to the Company's Code of Business Conduct and Ethics employ good judgment in the application of the principles contained herein.
CONFLICTS OF INTEREST
Directors, officers and employees of the Company are expected to make decisions and take actions based on the best interests of the Company, as a whole, and not based on personal relationships or benefits. Generally, a "conflict of interest" is an activity that is inconsistent with or opposed to the best interest of the Company or one which gives the appearance of impropriety. As conflicts of interest can compromise the ethical behavior of Company personnel, they should be avoided.
Employees should avoid any relationship which would create a conflict of interest. Employees are expected to disclose such relationships and conflicts to their immediate supervisors. Conflicts of interest involving those with whom the Company does business should also be disclosed in writing to such third parties. Any waivers of conflicts of interest must be approved by the Board of Directors or an appropriate committee.
Members of the Board of Directors are to disclose any conflicts of interest and potential conflicts of interest to the entire Board of Directors as well as the committees on which they serve. Directors are to excuse themselves from participation in any decision of the Board of Directors or a committee thereof in any matter in which there is a conflict of interest or potential conflict of interest.
Set forth below is specific guidance in respect to certain conflicts of interest situations. As it is not possible to list all conflicts of interest situations, it is the responsibility of the individual, ultimately, to avoid and properly address any situation involving a conflict of interest or potential conflict of interest. Company personnel who wish to obtain clarification of the Company's conflicts of interest principles or further guidance with respect to the proper handling of any specific situation should consult his or her immediate supervisor, the Company's Chairman of the Board of Directors or the Company's outside legal counsel.
Outside Directorships: All Company's directors, officers and employees may serve on the boards of directors of other profit-making organizations to the extent that such service will not interfere or conflict with their respective duties to the Company. No Company's officers and employees may serve on the boards of directors of any business organization which is a competitor of the Company, without the informed consent of the Company's Board of Directors.
Individuals who serve as directors of other companies in the circumstances permitted hereunder may retain any compensation earned from that outside directorship unless otherwise specifically prohibited by the Company. Unless otherwise specifically authorized by the Company's Board of Directors, individuals may not receive any form of compensation (whether in the form of cash, stock or options) for service on a board of director of another business organization if such service is at the request of the Company or in connection with the investment of the Company in such business organization. All individuals must excuse themselves from any matters pertaining to the Company and the business organization of which they are directors.
The Company reserves the right to request any individual to resign his or her position as a director of other business organizations if determined to be in the best interests of the Company. The Company may terminate its relationship with any individual who does not comply with the Company's request in this regard.
Proper Payments: All individuals should pay for and receive only that which is proper. Company personnel should not make improper payments for the purposes of influencing another's acts or decisions and should not receive any improper payments or gifts from others for the purposes influencing the decisions or actions of Company's personnel. No individual should give gifts beyond those extended in the context of normal business circumstances. Company personnel must observe all government restrictions on gifts and entertainment.
Supervisory Relationships: Supervisory relationships with family members present special workplace issues. Accordingly, Company personnel must avoid a direct reporting relationship with a family member or any individual with whom a significant relationship exists. If such a relationship exists or occurs, the individuals involved must report the relationship in writing to the Board of Directors.
FINANCIAL REPORTING RESPONSIBILITIES
As a public company, it is of critical importance that the Company's filings with the Securities and Exchange Commission and other relevant regulatory authorities be accurate and timely. Hence, all Company personnel are obligated to provide information to ensure that the Company's publicly filed documents be complete and accurate. All Company personnel must take this responsibility seriously and provide prompt and accurate answers and responses to inquiries related to the Company's public disclosure requirements.
The Chief Executive Officer of the Company has the ultimate responsibilities of ensuring the integrity of the filings and disclosure made by the Company as required by the rules and regulations of the Securities and Exchange Commission and other relevant regulatory authorities. In the performance of his or her duties relating to the Company's public disclosure obligations, the Chief Executive Officer and all Company personnel must:
* Act with honesty and integrity;
* Provide information that is accurate, complete, objective, fair and timely;
* Comply with rules and regulations of federal, state, provincial and local governments and other relevant public and private regulatory authorities;
* Act in good faith with due care, competence and due diligence;
* Respect the confidentiality of information acquired in the course of the performance of one's duties;
* Promote ethical and proper behavior in the work environment; and
* Report to the Board of Directors any conduct that the individual believes to be a violation of law of the Company's Code of Business Conduct and Ethics.
INSIDER TRADING
Insider Trading Policy
The Company's Board of Directors has adopted a comprehensive Insider Trading Compliance Policy that applies to all "Insiders" (as defined therein). Any breach of the Insider Trading Compliance Policy by an Insider to whom the Company's Code of Business Conduct and Ethics is applicable shall be treated as a breach of the fundamental principles of legal and ethical business conduct as outlined herein.
Regulation FD
Regulation FD (Fair Disclosure) implemented by the Securities and Exchange Commission provides that when the Company, or person acting on its behalf, discloses material nonpublic information to certain enumerated persons (in general, securities market professionals and holders of the Company's securities who may well trade on the basis of the information), it must make public disclosure of that information. The timing of the required public disclosure depends on whether the selective disclosure was intentional or unintentional; for an intentional selective disclosure, the Company must make public disclosures simultaneously; for a non-intentional disclosure, the Company must make public disclosure promptly. Under the regulation, the required public disclosure may be made by filing or furnishing a Form 8-K, or by another method or combination of methods that is reasonably designed to effect broad, non-exclusionary distribution of the information to the public.
It is the policy of the Company that all communications with the press be handled through the Company's Chief Executive Officer or, in his or her absence, the President.
Confidentiality of Nonpublic Information: Nonpublic information relating to the Company is the property of the Company and the unauthorized disclosure of such information is strictly forbidden.
Applicability of Insider Trading Regulations to Securities of Other Companies: The Company's Insider Trading Policy shall also apply to material nonpublic information relating to other companies, including the Company's customers, vendors or suppliers ("business partners"), when that information is obtained in the course of employment with, or other services performed on behalf of the Company. All employees should treat material nonpublic information about the Company's business partners with the same care as is required with respect to information relating directly to the Company.
DUTY TO REPORT INAPPROPRIATE AND IRREGULAR CONDUCT
POLITICAL CONTRIBUTIONS
No assets of the Company, including the time of Company personnel, the use of Company premises or equipment and direct or indirect monetary payments, may be contributed to any political candidate, political action committees, political party or ballot measure without the approval of the Company's Board of Directors.
COMPLIANCE PROGRAM
In order to implement the principles of the Company's Code of Business Conduct and Ethics, at such time as the Company's growth and operations enable it to attract suitable additional independent members to its Board of Directors, the Company's goal is to establish a compliance program. It is envisioned that at the time the compliance program is established, the Company will adopted the following or similar policies:
Selection of Board Nominees: The Company's Board of Directors will be responsible for the selection of candidates for the nomination of all members of the Board of Directors.
Board Membership Criteria: The Board of Directors' policy will be to encourage selection of directors who will contribute to the Company's overall corporate goals of responsibility to its shareholders and other stakeholders.
Access to Information: The Board of Directors will encourage the presentation at meetings by managers who can provide additional insight into matters being discussed. The Company's executive management will afford each member of the Board of Directors full access to the Company's records, information, employees, outside auditors and outside counsel.
Insider Trading Compliance: The Board of Directors will adopt an Insider Trading Compliance Policy for the purposes of educating and ensuring the all subject persons are fully aware of the rules and regulations of the Securities and Exchange Commission with respect to insider trading. All Company personnel shall have full access to the Company's senior executive personnel and the Company's outside counsel with respect to any insider trading questions or issues.
Financial Reporting; Legal Compliance and Ethics: The Board of Directors' governance and oversight functions do not relieve the Company's executive management of its primary responsibility of preparing financial statements which accurately and fairly present the Company's financial results and condition, the responsibility of each executive officer to fully comply with applicable legal and regulatory requirements or the responsibility of each executive officer to uphold the ethical principles adopted by the Company.
Corporate Communications: Management has the primary responsibility to communicate with investors, the press, employees and other stakeholders on a timely basis and to establish policies for such communication.
Exhibit 22
Subsidiaries of the Registrant
Freight Rate, Inc., a Delaware corporation Power2Ship, Inc., a Delaware corporation Power4PL, Inc., a Delaware corporation
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption 'Experts' and to the use of our report dated August 12, 2004 in the Registration Statement on Form SB-2 and related Prospectus of Power2Ship, Inc.
/s/ Sherb & Co., LLP
New York, New York
October 20, 2004
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