SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

 X . QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: September 30, 2009

 

     . TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to _____________

 

Commission File Number: 000-53405

OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		74-2958195
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

707 Grant Street, Suite #2307, Pittsburgh, PA, 15219

(Address of Principal Executive Offices)

(412) 258-2260

(Issuer’s Telephone Number, including Area Code)

(Former Name, Former Address, and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  X . Yes      . No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      . Yes      . No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      . Yes      . No

There were 12,084,000 issued and outstanding shares of the registrant’s common stock, par value $.001 per share, as of September 30, 2009.

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

TABLE OF CONTENTS

 

PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements - Unaudited	3
	Consolidated Balance Sheets at September 30, 2009 (Unaudited) and September 30, 2008 (Unaudited)	3
	Consolidated Statements of Income for the three months and nine months ended September 30, 2009 and 2008 (Unaudited)	4
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2009 (Unaudited)	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	12
Item 4T.	Controls and Procedures	16
Item 6.	Exhibits	16
PART II.	FINANCIAL INFORMATION
Item 1.	Legal Proceedings – N/A
Item 1a.	Risk Factors – N/A
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds – N/A
Item 3.	Defaults upon Senior Securities – N/A
Item 4.	Submission of Matters to a Vote of Security Holders – N/A
Item 5.	Other Information – N/A
Item 6.	Exhibits	16

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Consolidated Balance Sheets

(Unaudited)

				September 30, 2009		September 30, 2008
Assets
	Current assets -
		Cash	$	2,219	$	68,947
		Accounts receivable		56,955		637,151
		Prepaid expenses		275,000		10,778
		Due from WLSV		-		102,708
		Total current assets		334,174		819,584
	Fixed assets -
		Furniture and equipment, net		10,586		-
		Software		220,060		-
		Total fixed assets		230,646		-
	Other Assets
		Deposits and other assets		-		10,445
		Total long term assets		-		10,445
		Total assets	$	564,820	$	830,029
LIABILITIES AND STOCKHOLDERS' EQUITY
		Current liabilities -
		Overdraft	$	4,054	$	-
		Accounts payable		19,730		19,596
		Accrued agent and carrier expenses		26,203		637,319
		Line of credit		244,905		-
		Note payables		28,500		40,000
		Total current liabilities		323,392		696,915
		Total liabilities		323,392		696,915
	Stockholders' equity:
		Preferred stock, 10,000,000 shares authorized:
		Convertible preferred stock, Series A $0.001 par value, 1,050,000 shares		1,050		-
		shares issued and outstanding
		Preferred stock, Series B $0.001 par value, 1,000,000 shares issued		1,000		-
		and outstanding
		Common stock, $0.001 par value, 100,000,000 shares authorized;		12,084		200
		issued and outstanding: 12,084,000 at September 30, 2009
		Additional paid-in capital		52,395		-
		Retained earnings		174,899		132,914
		Total stockholders’ equity		241,428		133,114
		Total liabilities and stockholders’ equity	$	564,820	$	830,029

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

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Consolidated Statements of Income

(unaudited)

			THREE MONTHS ENDED				NINE MONTHS ENDED
			SEPTEMBER 30,				SEPTEMBER 30,
			2009		2008		2009		2008
Revenue		$	1,393,350	$	1,630,006	$	6,671,342	$	1,902,767
Costs and expenses:
	Cost of transportation		1,040,151		1,395,293		5,273,181		1,538,212
	Selling, general and administrative expenses		205,661		114,449		1,226,035		301,620
	Total costs and expenses		1,245,812		1,509,742		6,499,216		1,839,832
	Income from operations		147,538		120,264		172,126		62,935
Other income (expense):
	Interest expense		(30,383)		(798)		(69,658)		(11,384)
	Total other income (expense)		(30,383)		(798)		(69,658)		(11,384)
	Income before income tax (expense) benefit		117,155		119,466		102,468		51,551
Income tax (expense) benefit			-		-		-		-
	Net income	$	117,155	$	119,466	$	102,468	$	51,551
Net income  per common share – basic		$	0.0191	$	0.0149	$	0.0167	$	0.0064
Net income  per common share – diluted		$	0.0087	$	0.0149	$	0.0076	$	0.0064
	Weighted average shares outstanding:
	Basic shares		6,121,689		8,000,000		6,121,689		8,000,000
	Diluted shares		13,432,800		8,000,000		13,432,800		8,000,000

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

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Consolidated Statement of Stockholders’ Equity

for the nine months ended September 30, 2009

(Unaudited)

										Additional				Total
		Common Stock				Preferred Stock				Paid in		Retained		Stockholders
		SHARES		AMOUNT		SHARES		AMOUNT		Capital		Earnings		Equity
Balance at June 30, 2008		200	$	200		-	$	-	$	-	$	10,846	$	11,046
Net income for the six months ended December 31, 2008		-		-		-		-		-		61,585		61,585
Balance at December 31, 2008		200		200		-		-		-		72,431		72,631
Shares issued for acquisition of Federal Logistics, Inc. and Optimized Transportation Software, Inc.		5,500,000		5,500		1,200,000		1,200		-		-		6,700
Recapitalization		2,499,800		2,300		-		-		(8,998)		-		(6,698)
Shares issued for services		9,584,000		9,584		850,000		850		787,516		-		797,950
Repayment of debt		(5,500,000)		(5,500)		-		-		(726,123)		-		(731,623)
Net income for the nine months ended September 30, 2009		-		-		-		-		-		102,468		102,468
Balance at September 30, 2009		12,084,000	$	12,084		2,050,000	$	2,050	$	52,395	$	174,899	$	241,428

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

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Consolidated Statements of Cash Flows

(unaudited)

				For nine months ended September 30,
				2009		2008
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
	Net income		$	102,468	$	51,551
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
	PROVIDED BY (USED BY) OPERATING ACTIVITIES:
	CHANGE IN ASSETS AND LIABILITIES -
		accounts receivable		1,465,600		(595,743)
		other current assets		4,815		(10,778)
		accounts payable		(212,105)		13,289
		other accrued costs		(1,300,848)		636,164
		Net cash provided by operating activities		59,930		94,483
CASH FLOWS USED FOR INVESTING ACTIVITIES:
		purchase of surety bond		-		(10,445)
		net advances to related parties		-		(60,053)
		software development costs		(170,696)		-
		Net cash used for investing activities		(170,696)		(70,498)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
		bank overdraft		(6,018)		-
		proceeds from notes		28,500		40,000
		payments on notes payable		(47,062)		-
		net proceeds from line of credit		57,350		-
		proceeds from issuance of common stock		80,215		2,800
		Net cash provided by financing activities		112,985		42,800
		NET INCREASE IN CASH		2,219		66,785
	CASH, BEGINNING OF THE PERIOD			-		2,162
	CASH, END OF PERIOD		$	2,219	$	68,947
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
		Interest paid	$	69,658	$	11,384
		Income taxes paid	$	-	$	-

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

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

NOTE 1 – THE COMPANY AND BASIS OF PRESENTATION

The Company

Optimized Transportation Management, Inc. (the “Company”) is a Pittsburgh, Pennsylvania based supply chain logistics company formed subsequent to the acquisition of its two operating subsidiaries, Federal Logistics, Inc. (FL), and Optimized Transportation Software, Inc. (OTSI). FL, a non asset based transportation company, was incorporated in the state of Florida on February 29, 2008. OTSI, engaged in the implementation of supply chain software, was incorporated in the state of Florida on June 25, 2007.

As reported on a Form 8-K filed with the Securities and Exchange Commission (“SEC”) on June 19, 2009, on June 19, 2009 UNITED RESTAURANT MANAGEMENT, Inc. (the “Registrant”), a Delaware corporation, entered into an Agreement (the “Agreement”) with World Logistics Services. Inc. (“World Logistics”), a corporation incorporated under the laws of the state of Delaware. Pursuant to the terms of the Agreement, World Logistics agreed to transfer all of the issued and outstanding shares of common stock in Federal Logistics, Inc. and Optimized Transportation Software, Inc. to the Registrant in exchange for the issuance of an aggregate of 5,500,000 shares of the Registrant’s common stock and 700,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 500,000 shares of Series B Preferred Stock (“Series B Preferred Stock”) to Kevin P. Brennan, thereby causing Federal Logistics, Inc. (FL) and Optimized Transportation Software, Inc. (OTSI) to become wholly-owned subsidiaries of the Registrant (the “Share Exchange”).

Interim Disclosure

The consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company’s management believes that the disclosures are adequate to make the information presented not misleading. The Company’s management suggests that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 8-K filed on July 6, 2009.

The interim period information included in this Quarterly Report on Form 10-Q reflects all adjustments, consisting of normal recurring adjustments, that are, in the opinion of the Company’s management, necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

Basis of Presentation

The consolidated financial statements include the accounts of Optimized Transportation Management, Inc. and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Use of Estimates

The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Such estimates include revenue recognition, accruals for the cost of purchased transportation, accounting for the issuance of shares and share based compensation, the assessment of the recoverability of long-lived assets (specifically Software), the establishment of an allowance for doubtful accounts and the valuation allowance for deferred tax assets. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary. Actual results could differ from those estimates.

b) Cash

For purposes of the statements of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less which are not securing any corporate obligations.

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c) Concentration

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

d) Accounts Receivable

The Company’s receivables are recorded when billed and represent claims against third parties that will be settled in cash. The carrying value of the Company’s receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. The Company evaluates the collectability of accounts receivable on a customer-by-customer basis. The Company records a reserve for bad debts against amounts due to reduce the net recognized receivable to an amount the Company believes will be reasonably collected. The reserve is a discretionary amount determined from the analysis of the aging of the accounts receivables, historical experience and knowledge of specific customers. Based on management’s evaluation no reserve is required as of September 30, 2009 or September 30, 2008.

e) Fixed Assets

Furniture and equipment are stated at cost, less accumulated depreciation over the estimated useful lives of the respective assets. Depreciation is computed using five to seven year lives for furniture and equipment and the double declining balance method. Computer software is depreciated over a three year life using the straight line method of depreciation. Upon retirement or other disposition of these assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in other income or expense. Expenditures for maintenance, repairs and renewals of minor items are charged to expense as incurred. Major renewals and improvements are capitalized.

 

Certain software development costs incurred subsequent to the establishment of technological feasibility may be capitalized and amortized over the estimated lives of the related products. The Company determines technological feasibility to be established upon the internal release of a working model. Upon the general release of the product to customers, development costs for that product are amortized over periods not exceeding three years, based on the estimated economic life of the product. Capitalized software costs amounts to $220,060 and $0 at September 30, 2009 and 2008, respectively. There has been no related accumulated amortization during 2009 and 2008 as the software has not been released for sale as of September 30, 2009.

Costs for general and administrative, overhead, maintenance and training, as well as the cost of software that does not add functionality to existing systems, are expensed as incurred.

 f) Commitments

The Company has operating lease commitments, some of which are for office space and are under non-cancelable operating leases expiring at various dates through November 2013.

g) Income Taxes

 

Taxes on income are provided in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred income tax assets and liabilities are recognized for the expected future tax consequences of events that have been reflected in the consolidated financial statements. Deferred tax assets and liabilities are determined based on the differences between the book values and the tax bases of particular assets and liabilities. Deferred tax assets and liabilities are measured using tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided to offset the net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s net operating losses are severely limited due to the change in control. The Company has evaluated its tax position and concluded that a 100% valuation allowance is necessary.

 

The Company accounts for uncertain income tax positions in accordance with FAS Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109” (“FIN 48”), which was adopted by the Company on July 1, 2008. Accordingly, the Company reports a liability for unrecognized tax benefits resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties are recorded as a component of interest expense or other expense, respectively.

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h) Revenue Recognition and Purchased Transportation Costs

The Company recognizes revenue on a gross basis, in accordance with Emerging Issues Task Force ("EITF") 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent," as a result of the following: The Company is the primary obligor responsible for providing the service desired by the customer and is responsible for fulfillment, including the acceptability of the service(s) ordered or purchased by the customer. At the Company’s sole discretion, it sets the prices charged to its customers, and is not required to obtain approval or consent from any other party in establishing its prices. The Company has multiple suppliers for the services it sells to its customers, and has the absolute and complete discretion and right to select the supplier that will provide the product(s) or service(s) ordered by a customer, including changing the supplier on a shipment-by-shipment basis. In most cases, the Company determines the nature, type, characteristics, and specifications of the service(s) ordered by the customer. The Company also assumes credit risk for the amount billed to the customer.

As a non-asset based carrier, the Company does not own transportation assets. The Company generates the major portion of its freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to its customers. We recognize revenue on a transportation shipment when delivered and record estimated costs related to that shipment based on the paperwork received by us at delivery.

We recognize revenue for our software division as we bill monthly maintenance fees.

i) Basic and Diluted Income Per Share

The Company uses SFAS No. 128, "Earnings Per Share" for calculating the basic and diluted income per share. Basic income per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares, such as stock issued upon conversion of our series A preferred stock, had been issued and if the additional common shares were dilutive.

For the three months ended September 30, 2009, the weighted average outstanding number of dilutive common shares totaled 13,432,800. For the three months ended September 30, 2008, the weighted average outstanding number of dilutive common shares totaled 8,000,000. 

 

For the nine months ended September 30, 2009, the weighted average outstanding number of dilutive common shares totaled 13,432,800. For the nine months ended September 30, 2008, the weighted average outstanding number of dilutive common shares totaled 8,000,000.

 

Common stock equivalents for the nine months ended September 30, 2009 and 2008 were anti-dilutive. Therefore, the diluted weighted average common shares outstanding for the dilutive weighted average share calculation in the periods ended September 30, 2009 and 2008 excludes approximately 7,000,000 shares that could dilute earnings per share in future periods.

NOTE 3 – FURNITURE AND EQUIPMENT

Furniture and equipment consists of the following:

		September 30,			September 30,
		2009			2008
Office equipment		$	10,586		$	0
			10,586			0
Less: Accumulated depreciation and amortization			(0)			(0)
Furniture and equipment – net		$	10,586		$	0

Depreciation and leasehold amortization expense for the three and nine months ended September 30, 2009 and 2008 was $0.

The Company follows the provisions of SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, which establishes accounting standards for the impairment of long-lived assets such as furniture and equipment and intangible assets subject to amortization. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. During the three and nine-month periods ended September 30, 2009 and 2008, there was no impairment of intangible assets.

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NOTE 4 – LINE OF CREDIT

The Company outsources certain of its accounts receivables under a trade credit outsourcing agreement with a third party. The third party assumes credit risk for the accounts they purchase under the agreements and charges the company certain administration fees for handling the collections of these accounts. In addition the Company is allowed to take advances up to one million dollars limited by 85% of eligible receivables. Advances under the line of credit are available to fund acquisitions, capital expenditures, or for other corporate purposes. The line of credit is collateralized by accounts receivable and other assets of the Company and its subsidiaries. Borrowings under the line of credit bear interest at the Bank’s prime rate plus 2.00% and are due on demand.

 

One of our officer’s and shareholder has personally guaranteed the line of credit.

As of September 30, 2009, the Company had $244,905 in advances under the Facility.

At September 30, 2009, based on available collateral, there was $0 available for borrowing under the Facility based on advances outstanding.

NOTE 5 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value at $.001 per share. On September 30, 2009, the Company issued 700,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) and 500,000 shares of Series B Preferred Stock (“Series B Preferred Stock”) as part of the acquisition of Federal Logistics, Inc. (FL) and Optimized Transportation Software, Inc. (OTSI), becoming wholly-owned subsidiaries of the Company. At various times throughout the current quarter ended September 30, 2009, the Company issued 350,000 shares of Series A Convertible Preferred Stock and 500,000 shares of Series B Preferred Stock to various consultants for services they provided the Company. Series A is convertible to common on a ten for one basis. Each share of preferred stock is entitled to ten votes. Neither series has redemption, dividend, or liquidation rights.

Common Stock

The Company is authorized to issue 100,000,000 shares of common stock, par value at $.001 per share. On September 30, 2009 the Company issued 5,500,000 shares of common stock to purchase 100% of the outstanding shares of Federal Logistics, Inc. (FL) and Optimized Transportation Software, Inc. (OTSI). Prior to the transaction, the Registrant had a total of 6,165,073 shares issued and outstanding, of which 3,665,073 were cancelled at the closing, resulting in a total number of outstanding common shares post closing of 8,000,000.

In connection with the transaction, the Company also entered into a registration rights agreement with certain pre-closing holders of common stock of the Company, with no monetary penalties.

In July 2009, the 5,500,000 shares issued for the purchase of Federal Logistics, Inc. (FL) and Optimized Transportation Software, Inc. (OTSI) were returned to the Company as payment of debt owed the Company. The shares were subsequently canceled.

On July 31, 2009 the Company established the Optimized Transportation Management, Inc. Equity Incentive Plan to attract, retain and motivate employees of the Company, to encourage employees, directors and independent contractors to acquire an equity interest in the Company, to make monetary payments to certain employees based upon the value of the Company’s Stock and provide employees, directors and independent contractors with an incentive to maximize the success of the Company and to further the interests of the shareholders. Five million (5,000,000) shares of Stock (the "Maximum Plan Shares") are reserved and subject to issuance under the Plan. To date we have issued two million four hundred and fifty thousand (2,450,000) shares.

At various times throughout the current quarter ended September 30, 2009, the Company issued 7,134,000 shares of Common Stock to various consultants for services they provided the Company.

NOTE 6 – RECENT ACCOUNTING PRONOUNCEMENTS

In May 2009, the FASB issued SFAS No. 165 Subsequent Events. SFAS No. 165 establishes authoritative accounting and disclosure guidance for recognized and non-recognized subsequent events that occur after the balance sheet date but before the financial statements are issued. SFAS No. 165 also requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. SFAS No. 165 was effective for the Company beginning with our Quarterly Report on Form 10-Q for the three and six months ended September 30, 2009 and had no impact on our consolidated financial statements.

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In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Standards - a Replacement of FASB Statement No. 162. The FASB Accounting Standards Codification (the “Codification”) will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Once the Codification is in effect, all of its content will carry the same level of authority and the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and nonauthoritative. SFAS No. 168 will be effective for the Company on July 1, 2009 and will not have a material effect on our consolidated financial statements.

Other recent pronouncements will not have a mutual effect on our consolidated financial statements.

NOTE 7 – SUBSEQUENT EVENTS

The Company evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on November 12, 2009.

On October 20, 2009 the Company ceased operations of its’ subsidiary Federal Logistics, and consolidated operations into its’ new subsidiary ShoMoves, Inc.

The Company is not aware of any other subsequent events that occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on our consolidated financial statements.

NOTE 8

 - SEGMENT INFORMATION

Segment information is presented in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." This standard is based on a management approach that designates the internal organization that is used by management for making operating decisions and assessing performance as the sources of the Company's reportable segments. Operating segments are defined as components of an enterprise about which financial information is available that is evaluated on a regular basis by the chief operating decision-maker, or decision-making groups, in deciding how to allocate resources to an individual segment and in assessing performance of the segment.

The Company's operations during the quarter ended September 30, 2009 are classified into two reportable business segments: Logistics Services and Supply Chain Software. Each of these segments is organized based upon the nature of products and services offered. Summarized financial information about each segment is provided below:

				Supply
		Logistic		Chain		Consolidated
		Services		Software		Total
Nine Months Ended September 30, 2009
Revenues from external customers	$	6,511,747	$	159,595	$	6,671,342
Segment profit (loss) from operations	$	459,971	$	(287,845)	$	172,126
Assets	$	319,000	$	245,820	$	564,820
Nine Months Ended September 30, 2008
Revenues from external customers	$	1,590,364	$	312,403	$	1,902,767
Segment profit (loss) from operations	$	77,340	$	(14,405)	$	62,935
Assets	$	250,406	$	579,623	$	830,029
Three Months Ended September 30, 2009
Revenues from external customers	$	1,347,767	$	45,583	$	1,393,350
Segment profit (loss) from operations	$	259,200	$	(111,662)	$	147,538
Assets	$	319,000	$	245,820	$	564,820
Three Months Ended September 30, 2008
Revenues from external customers	$	1,539,173	$	90,833	$	1,630,006
Segment profit (loss) from operations	$	133,434	$	(13,170)	$	120,264
Assets	$	250,406	$	579,623	$	830,029

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

The following discussion and analysis of our financial condition and result of operations should be read in conjunction with the financial statements and the related notes and other information included elsewhere in this report as well as the MD&A included in the form 8K.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding future operating performance, events, trends and plans. All statements other than statements of historical fact contained herein, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues and costs, and plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation thereon or similar terminology or expressions. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. While it is impossible to identify all of the factors that may cause our actual operating performance, events, trends or plans to differ materially from those set forth in such forward-looking statements, such factors include the inherent risks associated with our ability to: (i) to acquire a transportation company to use as a “platform” upon which we can build a profitable global supply chain logistics company; (ii) continue the development of our transportation management software product; (iii) maintain the future operations of our agency business, (iv) continue to grow our businesses; (v) locate acquisition candidates that meet our stringent requirements; (vi) secure the financing necessary to acquire suitable companies that fit our strategy; (vii) remain competitive in our industry, (viii) hire excellent management and staff to continue our growth; (ix) be able to comply with current and future governmental regulations affecting the transportation industry in general and our operations in particular; and (xii) assess and respond to such other factors which may be identified from time to time in our Securities and Exchange Commission (SEC) filings and other public announcements including all subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Readers are cautioned not to place undue reliance on our forward-looking statements, as they speak only as of the date made. Except as required by law, we assume no duty to update or revise our forward-looking statements.

Overview

The Company is driving to be a total solution provider of supply chain execution software and services to our target market of manufacturers and distributors. The mission is to provide the most efficient, reliable, easy-to-use supply chain management system for the midsized market, at an affordable price, backed by superior customer support.

We plan on achieving these goals through organic growth and acquisition.

 

The current Supply Chain Management (SCM ) and Supply Chain Execution (SCE) markets are highly fragmented with many vendor companies only focusing on a small segment of the overall supply chain. Some of the larger competitors supply either the software or the transportation management processes in the chain and cater primarily to the Fortune 1000 market with much higher costs. However, in today’s economy, most companies are attempting to do more with less. We believe there is a current unserved market for SCM and SCE for midsized manufacturing and distribution companies. The Company feels it can capitalize on this unmet need, by marketing ever increasing parts of the supply chain to our large base of customers for quick and enhanced market entry.

Our supply chain operation will consist of the following components:

 

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Freight Agents - Ground Transportation of freight via Truck (48 States)

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Warehousing Agents - Storage and sub-assembly of Customer inventory

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Intermodal Agents - Containers transporting freight between rail, ship or air

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 Freight Forwarding Agents - Manages freight between ports of entry

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OTSI - Software service that helps customers manage and track their freight and assets throughout the supply chain

Our business plan is to build a full service supply chain logistics company by developing a management system for midsized manufacturers and distributors, and providing the necessary transportation services to complement the system thereby meeting 100% of our customer’s logistical needs. We plan on achieving these goals through organic growth, and acquisition of historically profitable businesses, that fill the various niches of the supply chain. Toward that we have identified and are pursuing the acquisition of historically profitable companies we feel will allow us to complete our plan.

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We are a supply chain logistics company headquartered in Pittsburgh, Pennsylvania. Our operations are conducted through our two wholly owned subsidiaries, Federal Logistics, Inc. (FL) and Optimized Transportation Software, Inc. (OTSI). FL is engaged in the business of global supply chain management. The Company currently operates a domestic logistics business. The Company is a non-asset based logistics company providing domestic logistics management services through a network of agent offices across North America. FL has a diversified account base, including manufacturers, distributors and retailers using a network of independent carriers throughout North America

OTSI has been a provider of Transportation Management System software for the last 3 years. The Company has developed software, Optivity Suite, in use by hundreds of companies across North America. The technology is sound, proven, feature rich and solid.

The Optivity Suite is now an application accessed over the internet, eliminating the need to buy expensive hardware and software to run the Transportation Management Software applications in house, also reducing the need for extra IT personnel. All access to the application is via the internet, accessing our servers hosted in world class data centers located around the globe providing 24x7x365 availability. All data is backed up nightly in a hardened archive for easy access in case of emergency.

OTSI is driving to become the complete Supply Chain Management provider as well as the leader in Supply Chain Execution in the industry for the small to medium sized manufacturers, retailers, and distributors. The Company intends to become our customer’s trusted partner for all their supply chain management needs from sourcing, intermodal, warehousing and sub-assembly, local and long distance delivery, freight tracking, and all back office operations. OTSI will be the one stop shop in managing all of our customer supply chain needs. Our support staff is here to ensure that our customer’s inventory and / or products make it to its destination on time and under budget.

Performance Metrics

 

Our principal source of income is derived from our agents providing freight dispatch services to our customers. Our agents negotiate with our customers a cost for the movement of their freight. Our agents then arrange the assignment of our customer’s freight to a trucking company and we assume the payment of that negotiated cost. Our revenue represents the total dollar value of services we charge to our customers. Our transportation cost is the direct cost of transportation charged by the motor carrier.

As it is our intent to continue to grow by way of strategic acquisitions, the operating results of the Company will be affected as acquisitions occur. Since all acquisitions are generally made using the purchase method of accounting for business combinations, our financial statements will only include the results of operations and cash flows of acquired companies for periods subsequent to the date of acquisition.

Results of Operations

For the three months ended September 30, 2009 (unaudited) and September 30, 2008 (unaudited)

 

We generated revenue of $1,393,350 and $1,630,006 and gross profit of $353,199 and 234,713 for the three months ended September 30, 2009 and 2008, respectively. Net income was $117,155 for the three months ended September 30, 2009 and $119,466 for the three months ended September 30, 2008.

We had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $147,538 for the three months ended September 30, 2009 and 120,264 for the three months ended September 30, 2008. EBITDA, is a non-GAAP measure of income and does not include the effects of interest and taxes, and excludes the “non-cash” effects of depreciation and amortization on current assets. Companies have some discretion as to which elements of depreciation and amortization are excluded in the EBITDA calculation. We incur no depreciation charges related to furniture, and no amortization charges. The financial markets believe EBITDA is useful in evaluating and measuring our financial performance, liquidity. While management considers EBITDA and adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our consolidated financial statements

The following table summarizes September 30, 2009 (unaudited) and September 30, 2008 (unaudited) revenue, cost of transportation and gross profit:

 

		Three months ended September 30,						Change
		2009			2008			Amount			Percent
Revenue		$	1,393,350		$	1,630,006		$	(236,656)			(15)%
Cost of transportation			1,040,151			1,395,293			(355,142)			(25)%
Gross profit		$	353,199		$	234,713		$	118,486			34%
Net margins			25%			14%

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Revenue was $1,393,350 for the three months ended September 30, 2009, a decrease of 15% over revenue of $1,630,006 for the three months ended September 30, 2008. The decrease was due primarily to the elimination of an underperforming agent.

Cost of transportation decreased to $1,040,151 for the three months ended September 30, 2009 compared to $1,395,293 for the three months ended September 30, 2008 as a result of the reduction in revenues.

Net margins increased to 25% of revenue for the three months ended September 30, 2009 as compared to 14% of revenue for the three months ended September 30, 2008. The increase in net margins in the current quarter was due to the higher margin of freight sales which was a result of eliminating the underperforming agent.

The most significant cost in selling, general and administrative costs is agent commissions. Commission costs were $169,062 for the three months ended September 30, 2009, a decrease of $81,929 from the three months ended September 30, 2008.

Other selling, general and administrative costs net of agent commissions were $36,599 for the three months ended September 30, 2009. There was no depreciation and amortization costs.

Income from operations was $147,538 for the three months ended September 30, 2009 compared to $120,264 for the three months ended September 30, 2008.

Interest expense was $30,383 for the three months ended September 30, 2009. There was $798 in interest expense for the three months ended September 30, 2008.

Net income was $117,155 for the three months ended September 30, 2009, compared $119,466 for the three months ended September 30, 2008.

For the nine months ended September 30, 2009 (unaudited) and September 30, 2008 (unaudited)

 

We generated revenue of $6,671,342 and $1,902,767 and gross profit of $1,398,161 and $364,555 for the nine months ended September 30, 2009 and 2008, respectively. Net income was $102,468 for the nine months ended September 30, 2009 compared to net income of $51,551 for the nine months ended September 30, 2008.

We had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $172,126 for the nine months ended September 30, 2009 EBITDA was $62,935 for the nine months ended September 30, 2008. EBITDA, is a non-GAAP measure of income and does not include the effects of interest and taxes, and excludes the “non-cash” effects of depreciation and amortization on current assets. Companies have some discretion as to which elements of depreciation and amortization are excluded in the EBITDA calculation. We incur no depreciation charges related to furniture, and no amortization charges. The financial markets believe EBITDA is useful in evaluating and measuring our financial performance, liquidity. While management considers EBITDA and adjusted EBITDA useful in analyzing our results, it is not intended to replace any presentation included in our consolidated financial statements

The following table summarizes September 30, 2009 (unaudited) and September 30, 2008 (unaudited) revenue, cost of transportation and gross profit:

 

		Nine months ended September 30,						Change
		2009			2008			Amount			Percent
Revenue		$	6,671,342		$	1,902,767		$	4,768,575			251%
Cost of transportation			5,273,181			1,538,212			3,734,969			243%
Gross profit		$	1,398,161		$	364,555		$	1,336,606			367%
Net margins			21%			19%

Revenue was $6,671,342 for the nine months ended September 30, 2009, an increase of 251% over revenue of $1,902,767 for the nine months ended September 30, 2008. The increase was due primarily to additional agency revenues.

Cost of transportation increased to $5,273,181 for the nine months ended September 30, 2009 compared to $1,538,212 for the nine months ended September 30, 2008 as a result of the additional revenues.

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Net margins increased to 21% of revenue for the nine months ended September 30, 2009 as compared to 19% of revenue for the nine months ended September 30, 2008. The increase in net margins in the current nine months was due to the higher volume of freight revenue.

The most significant cost in selling, general and administrative costs is agent commissions. Commission costs were $724,178 for the nine months ended September 30, 2009, an increase over $470,002 for the nine months ended September 30, 2008.

Other selling, general and administrative costs net of agent commissions were $501,857 for the nine months ended September 30, 2009. There was no depreciation and amortization costs.

Income from operations was $172,126 for the nine months ended September 30, 2009 compared to income from operations of $62,935 for the nine months ended September 30, 2008.

Interest expense was $69,658 for the nine months ended September 30, 2009. Interest expense for the nine months ended September 30, 2008 was $11,384.

Net income was $102,468 for the nine months ended September 30, 2009, compared to net income of $51,551 for the nine months ended September 30, 2008.

Liquidity and Capital Resources

Net cash provided by operating activities for the nine months ended September 30, 2009 was $59,930 compared to net cash provided by operating activities for the nine months ended September 30, 2008 of $94,483. The change was principally driven by the reduction in agency business.

Net cash used for investing activities was $170,696 for the nine months ended September 30, 2009 compared to net cash used of $70,498 for the nine months ended September 30, 2008. Use of cash for the nine months ended September 30, 2009 consisted primarily of additional software development costs.

 

Net cash provided by financing activities for the nine months ended September 30, 2009 was $112,985 compared to net cash provided by financing activities of $42,800 for the nine months ended September 30, 2008. Net cash used by financing activities for the nine months ended September 30, 2009, consisted primarily of receiving borrowings for operations. Net cash provided by financing activities for the six months ended September 30, 2008, consisted primarily of borrowings.

Credit Facility

The Company outsources certain of its accounts receivables under a trade credit outsourcing agreement with a third party. The third party assumes credit risk for the accounts they purchase under the agreements and charges the company certain administration fees for handling the collections of these accounts. In addition the Company is allowed to take advances up to one million dollars limited by 85% of eligible receivables. Advances under the line of credit are available to fund acquisitions, capital expenditures, or for other corporate purposes. The line of credit is collateralized by accounts receivable and other assets of the Company and its subsidiaries. Borrowings under the line of credit bear interest at the Bank’s prime rate plus 2.00% and are due on demand.

Off Balance Sheet Arrangements

 

As of September 30, 2009, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Accounting policies, methods and estimates are an integral part of the consolidated financial statements prepared by management and are based upon management's current judgments. Those judgments are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain accounting policies, methods and estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management's current judgments. While there are a number of accounting policies, methods and estimates that affect our financial statements, the areas that are particularly significant include the assessment of the recoverability of long-lived assets, specifically goodwill, acquired intangibles, and revenue recognition.

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We recognize revenue on a gross basis, in accordance with EITF 99-19, "Reporting Revenue Gross versus Net", as a result of the following: We are the primary obligor responsible for providing the service desired by the customer and are responsible for fulfillment, including the acceptability of the service(s) ordered or purchased by the customer. We, at our sole discretion, set the prices charged to our customers, and are not required to obtain approval or consent from any other party in establishing our prices. We have multiple suppliers for the services we sell to our customers, and have the absolute and complete discretion and right to select the supplier that will provide the product(s) or service(s) ordered by a customer, including changing the supplier on a shipment-by-shipment basis. In most cases, we determine the nature, type, characteristics, and specifications of the service(s) ordered by the customer. We also assume credit risk for the amount billed to the customer.

We recognize revenue for our software division as we bill monthly maintenance fees.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Our judgment concerning future cash flows is an important part of this determination. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount of fair value less the cost to sell.

Item 4T. Controls and Procedures.

An evaluation of the effectiveness of our "disclosure controls and procedures" (as such term is defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of September 30, 2009 was carried out by our management under the supervision and with the participation of our Chief Executive Officer ("CEO") who also serves as our Chief Financial Officer ("CFO"). Based upon that evaluation, our CEO/CFO concluded that, as of September 30, 2009, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our CEO/CFO, as appropriate to allow timely decisions regarding disclosure.

 

There were no changes to our internal control over financial reporting during the fiscal quarter ended September 30, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits

 

Exhibit No.		Exhibit		Method of Filing
31.1		Certification by Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
32.1		Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		Optimized Transportation Management, Inc.
DATE: November 12, 2009		/s/ Kevin P. Brennan
		Kevin P. Brennan Chief Executive Officer and Chief Financial Officer (Principle Accounting Officer)

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EXHIBIT INDEX

 

Exhibit No.		Exhibit		Method of Filing
31.1		Certification by Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
32.1		Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Filed herewith

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