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: June 30, 2010

 

     .. 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. Yes  X . 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 30,115,500 issued and outstanding shares of the registrant’s common stock, par value $.001 per share, as of August 16, 2010.

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

TABLE OF CONTENTS

 

PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements - Unaudited
	Consolidated Balance Sheets at June 30, 2010 (Unaudited) and December 31, 2009 (Audited)	3
	Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009 (Unaudited)	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4T.	Controls and Procedures	20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1a.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults upon Senior Securities	21
Item 4.	Removed and Reserved	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES		22

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.
Consolidated Balance Sheets
			June 30,			December 31,
			2010			2009
			(unaudited)			(audited)
Assets
	Current assets -
		Cash	$	67,099		$	60,059
		Accounts receivable		11,442			75,463
		Prepaid expenses		489,705			10,686
		Due from related parties		81,165			-
		Total current assets		649,411			146,208
	Property and equipment, net of accumulated
		depreciation of $68,173 and $3,069, respectively		972,230			232,334
	Other Assets
		Goodwill		364,552			-
		Deposits and other assets		437,200			-
		Total assets	$	2,423,393		$	378,542
Liabilities and Stockholders' Equity
	Current liabilities -
		Accounts payable	$	17,016		$	28,960
		Accrued expenses		18,097			21,400
		Line of credit		171,238			251,584
		Note payables		1,194,751			15,772
		Derivative liability		129,213			-
		Due to shareholders and related parties		9,940			-
		Total liabilities		1,540,225			317,716
	Stockholders' Equity:
		Preferred stock, 10,000,000 shares authorized:
		Preferred stock, Convertible Series A $0.001 par value, 1,605,000
		and 1,050,000 shares issued and outstanding, respectively		1,605			1,050
		Preferred stock, Series B $0.001 par value, 1,500,000 shares
		issued and outstanding		2,500			1,500
		Common stock, $0.001 par value, 100,000,000 shares authorized;
		issued and outstanding: 30,115,500and 12,384,000, respectively		30,116			12,384
		Additional paid-in capital		1,516,955			(66,982)
		Retained earnings (deficit)		(668,038)			112,874
		Total stockholders’ equity		883,138			60,826
		Total liabilities and stockholders’ equity	$	2,423,393		$	378,542
The accompanying notes are an integral part of these consolidated financial statements.

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.
Consolidated Statements of Operations
(unaudited)
			Three Months Ended						Six Months Ended
			June 30,						June 30,
				2010			2009			2010			2009
Revenue			$	1,568,586		$	496,690		$	2,662,598		$	1,567,334
Costs and expenses:
	Cost of transportation			1,204,418			364,102			2,057,667			964,563
	Selling, general and administrative			1,251,459			254,324			1,705,390			499,340
	Total costs and expenses			2,455,877			618,426			3,763,057			1,463,903
	Income from operations			(887,291)			(121,736)			(1,100,459)			103,431
Other income (expense):
	Interest expense			(30,882)			-			(41,380)			-
	Change in derivative			(79,393)			-			(97,673)			-
	Total other income (expense)			(110,275)			-			(139,053)			-
	Income before income tax (expense) benefit			(997,566)			(121,736)			(1,239,512)			103,430
Income tax (expense) benefit				369,200			45,000			458,600			(38,300)
	Net income		$	(628,366)		$	(76,736)		$	(780,912)		$	65,130
Net income per common share – basic			$	(0.05)		$	(0.01)		$	(0.04)		$	0.01
Net income per common share – diluted			$	(0.05)		$	(0.01)		$	(0.02)		$	0.01
Weighted average shares outstanding:
	Basic shares			12,381,873			8,000,000			17,758,651			8,000,000
	Diluted shares			12,392,373			8,000,000			31,684,065			8,000,000
The accompanying notes are an integral part of these consolidated financial statements.

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.
Consolidated Statements of Cash Flows
(unaudited)
				June 30,
					2010			2009
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
	Net income (loss)			$	(780,912)		$	65,130
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
	PROVIDED BY (USED BY) OPERATING ACTIVITIES:
			depreciation		65,104			3,074
			stock-based compensation		522,701
		CHANGE IN ASSETS AND LIABILITIES -
			accounts receivable		64,021			1,507,399
			other current assets and deposits		(524,219)			19,211
			accounts payable		(11,944)			(224,614)
			other accrued liabilities		(3,303)			(1,354,844)
	Net cash (used in) provided by operating activities				(668,552)			15,356
CASH FLOWS USED FOR INVESTING ACTIVITIES:
		capital expenditures and software development costs			-			(696,948)
	Net cash used in investing activities				-			(696,948)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
		bank overdraft			-			(10,101)
		proceeds from convertible notes payable			452,500			40,000
		proceeds on notes payable			299,663			(45,395)
		Repayments on line of credit			(80,346)			(187,555)
		stockholder and related party, net			(71,225)			1,146,795
		proceeds from issuance of common stock			75,000			-
	Net cash provided by (used in) financing activities				675,592			943,744
		NET INCREASE IN CASH			7,040			262,152
	CASH, BEGINNING OF THE PERIOD				60,059			27
	CASH, END OF PERIOD			$	67,099		$	262,179
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
		Interest paid		$	28,631		$	-
		Income taxes paid		$	-		$	-
NON-CASH TRANSACTIONS:
			Acquisition of property & equipment in business purchase	$	805,000
			Issuance of notes payable for acquisition of business	$	500,000
			Issuance of common stock, at fair market value, for
			acquisition of business	$	500,000
The accompanying notes are 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 BUSINESS OPERATIONS

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. (FLI), and Optimized Transportation Software, Inc. (OTSI). FLI, 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. (FLI) and Optimized Transportation Software, Inc. (OTSI) to become wholly-owned subsidiaries of the Registrant (the “Share Exchange”).

Business Operations

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 un-served 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 consists of the following components:

 

·

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

·

Warehousing Agents - Storage and sub-assembly of Customer inventory

·

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

·

Freight Forwarding Agents - Manages freight between ports of entry

·

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.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

 

The Company prepares its financial statements in conformity with generally accepted accounting principles in the United States of America. These principals require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that these estimates are reasonable and have been discussed with the Board of Directors; however, actual results could differ from those estimates.

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In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of (a) the result of operations for the three and six month periods ended June 30, 2010 and 2009; (b) the financial position at June 30, 2010 and December 31, 2009, and (c) cash flows for the three and six month periods ended June 30, 2010 and 2009, have been made.

These financial statements should be read in conjunction with our December 31, 2009 audited financial statements and notes thereto included in our annual report on Form 10-K filed with the SEC.

 

Principals of Consolidation

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.

Business Acquisitions

Acquisitions of business are accounted for utilizing the purchase method and, accordingly, the results of operations of acquired properties are included in our results of operations from the respective dates of acquisition. Estimates of future cash flows and other valuation techniques are used to allocate the purchase price of acquired property between land, buildings and improvements, equipment, debt liabilities assumed and identifiable intangible assets and liabilities.

Restatement of Statement of Operations

The financial statements presented include entities that were acquired during the current year. For comparative purposes, the information presented in the Statement of Operations for the three and six month periods ended June 30, 2010 and 2009 includes those accounts and transactions of the acquired entities in the consolidated accounts for all periods presented. The prior periods have been restated to include the acquired entities transactions. Additionally, certain previously reported amounts have been reclassified to conform to current period presentation.

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 10-K filed on March 31, 2010.

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.

Variable Interest Entities

 

The Company considers the consolidation of entities to which the usual condition (ownership of a majority voting interest) of consolidation does not apply, focusing on controlling financial interests that may be achieved through arrangements that do not involve voting interest. If an enterprise holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary is generally required to consolidate assets, liabilities and non-controlling interests at fair value (or at historical cost if the entity is a related party) and subsequently account for the variable interest as if it were consolidated based on a majority voting interest.

Fair Value Measurements and Financial Instruments

 

Effective January 1, 2008, the Company adopted FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

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ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company’s balance sheets include the following financial instruments: cash, accounts receivable, prepaid expenses, accounts payable, notes payable, derivative liabilities, and due to related parties. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization. The carrying values of the note payable to stockholder approximates fair value based on borrowing rates currently available to the Company for instruments with similar terms and remaining maturities.

Cash and Cash Equivalents

The majority of cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed on demand and, therefore, bear minimal risk. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

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 June 30, 2010 or December 31, 2009.

Property and Equipment

Property and equipment are stated at historical cost, less accumulated depreciation over the estimated useful lives of the respective assets. Tangible assets acquired in the purchase of a business (Light) have been valued at the fair market value of the items at the time of the purchase. Depreciation is computed using five to ten year lives for furniture and equipment on a straight line method. Computer software is depreciated over the expected life of the software’s expected life, currently estimated five years, 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 five years, based on the estimated economic life of the product.

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.

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Goodwill

The Company performs an annual impairment test for goodwill and intangible assets with indefinite lives. The first step of the impairment test requires the Company to determine the fair value of each reporting unit, and compare the fair value to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform a second more detailed impairment assessment. The second impairment assessment involves allocating the reporting unit’s fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of the reporting unit’s goodwill as of the assessment date. The implied fair value of the reporting unit’s goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date. The Company typically performs its annual impairment test effective at midyear of each year, unless events or circumstances indicate, an impairment may have occurred before that time. As of December 31, 2009 no goodwill impairment has been recognized.

Long-Lived Assets

 

The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate 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. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Management has performed a review of all long-lived assets and has determined no impairment of the respective carrying value has occurred as of December 31, 2009.

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 accounts for uncertain income tax positions and, accordingly, 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.

 

Revenue Recognition and Purchased Transportation Costs

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.

The Company recognizes revenue on a gross basis, 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, which are not assigned under the trade credit outsourcing agreement (described below).

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.

Our software as a service is offered as a subscription service on a month to month billing. Accordingly, there are no multi-deliverable arrangements. We recognize revenue for our software division as we bill the monthly maintenance fees. Acquisition costs are expensed in the period incurred.

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Share Based Compensation

The Company accounts for share-based compensation under the fair value recognition provisions such that compensation cost is measured at the grant date based on the value of the award and is expensed ratably over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the percentage of awards which will be forfeited, stock volatility, the expected life of the award, and other inputs. If actual forfeitures differ significantly from the estimates, share-based compensation expense and the Company's results of operations could be materially impacted.

The Company may also issue restricted stock to consultants for various services Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete. The Company recognizes these service expenses and a corresponding increase to additional paid-in-capital related to stock issued for services. When stock is issued as payment for past services provided, accordingly, all shares issued are fully vested, and there is no unrecognized compensation associated with these transactions. If stock is issued in advance of service performance expense is recognized ratably over the requisite service period.

Advertising Costs

The costs of advertising are expensed as incurred. Advertising expenses are included in the Company’s operating expenses. Advertising expense was $16,218, $0, $16,218 and $2,624 for the three and six month periods ended June 30, 2010 and 2009, respectively.

 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.

Common stock equivalents for the period ended June 30, 2010 includes approximately 13,925,414 shares that could dilute earnings per share in future periods. There were no common stock equivalents for the year ended June 30, 2009 and therefore the earnings per share calculation, for both basic and dilutive were 8,000,000 shares.

Basic income per share is computed by dividing net income (loss) 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 convertible stock, had been issued and if the additional common shares were dilutive. For the period ended June 30, 2010, preferred shares were convertible into 13,925,414 shares of common stock and the weighted average number of common stock equivalent shares were included in the computation of diluted weighted average shares outstanding.

The following table reconciles the numerator and denominator of the basic and diluted per share computations for earnings per share as follows:			June 30,
			2010			2009
Net Income			(780,912)			65,130
Weighted average shares, basic			17,758,651			8,000,000
Convertible preferred shares			13,925,414			-
Weighted average shares, dilutive			31,684,065			8,000,000
Earnings per share, basic			(0.04)			0.01
Earnings per share, dilutive			(0.02)			0.01

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NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the FASB issued new accounting guidance that established the FASB Accounting Standards Codification (“Codification”), as the single source of authoritative GAAP to be applied by nongovernmental entities, except for the rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. This new guidance became effective for interim and annual periods ending after September 15, 2009. Other than the manner in which new accounting guidance is referenced, the Codification did not have an effect on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements and disclosures and improvement in the disclosure about fair value measurements. This ASU requires additional disclosures regarding significant transfers in and out of Levels 1 and 2 of fair value measurements, including a description of the reasons for the transfers. Further, this ASU requires additional disclosures for the activity in Level 3 fair value measurements, requiring presentation of information about purchases, sales, issuances, and settlements in the reconciliation for fair value measurements. This ASU is effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

In February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and amendments to certain recognition and disclosure requirements. Under this ASU, a public company that is a SEC filer, as defined, is not required to disclose the date through which subsequent events have been evaluated. This ASU is effective upon the issuance of this ASU. The adoption of this ASU did not have a material impact on our financial statements.

In April 2010, the FASB issued ASU No. 2010-18 regarding improving comparability by eliminating diversity in practice about the treatment of modifications of loans accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”). Furthermore, the amendments clarify guidance about maintaining the integrity of a pool as the unit of accounting for acquired loans with credit deterioration. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early adoption is permitted. We are currently evaluating the impact of this ASU; however, we do not expect the adoption of this ASU to have a material impact on our financial statements.

Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following, as of:

		June 30,		December 31,
		2010		2009
Equipment	$	820,343	$	15,343
Software development costs		220,060		220,060
		1,040,403		235,403
Accumulated depreciation		68,173		3,069
	$	972,230	$	232,334

Depreciation and amortization expense related to property and equipment was $32,551, $767, $65,104 and $1,534 for the three and six months ended June 30, 2010 and 2009, respectively.

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NOTE 6 – RELATED PARTY

The Company has received or has issued advances or other temporary financial assistance, from time to time, with affiliated companies or related parties (shareholder or director). These advances are typically short-term in nature, for the purposes ranging from funding acquisitions or for cash flow requirements. There are no formal agreement or repayment terms on these temporary advances. The Company has accrued interest and recognized interest expense at a minimally reasonable rate of 3% per annum. Management believes the applied interest is reasonable for loans of this nature and will review formalizing the debt arrangements at a later time. The Company had $81,165 due from an entity and a director and $9,940 payable to related parties at June 30, 2010 and no amounts were due from or to the Company at December 31, 2009.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

NOTE 7 – DEBT

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. A processing commission rate of 1% is applied on the initial $20 million and .75% thereafter. of the face value of each account assigned. 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 officers and shareholder has personally guaranteed the line of credit.

As of June 30, 2010 and December 31, 2009, the Company had $171,238 and $251,584, respectfully, in advances under the trade credit outsourcing agreement.

At June 30, 2010, based on available collateral, there was $0 available for borrowing under the trade credit outsourcing agreement based on advances outstanding.

Notes Payable

Note Payable for Acquired Business

In connection with the purchase of businesses, a note was issued in the amount of $400,000 with repayment terms of $25,000 for first three months, $50,000 for months four through six and balance, including unpaid interest at a rate of 8%, in month seven (November 2010), from the date of agreement.

Note Payable for Working Capital

On February 4, 2010, to obtain funding for working capital, the Company entered into securities purchase agreement with financing companies pursuant to which the Company agreed to issue Convertible Promissory Notes, with interest varying from 8%-21%, with a weighted average rate of 10.7%, maturing in nine months, November 2010 through March 2011. This master note allows for additional issuances at the same terms. As of June 30, 2010, $452,500 has been secured through these arrangements. The Promissory Notes and accrued interest will be convertible at the option of the holder at any time into shares of common stock, at an initial conversion price equal to the lesser of (i) fair market value, as quoted on a public exchange; or (ii) the fixed conversion price ($1.00), limited to 4.99% of the outstanding shares. Approximately, 7,000,000 shares have been reserved for potential conversion.

One of the above notes had attached warrants to purchase 200,000 shares of common stock, exercisable within 7 years of issue date, at an exercise price of $1.50. The warrants were valued using the Black-Sholes model. The resulting warrant value, $33,800, was apportioned to the loan, effectively discounted the note payable. The accretion of the note will occur as the value of the warrants is ratably recognized as interest expense over the term of the note. The following assumptions were used in the calculation of the warrant value:

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Dividend rate	0.000%
Risk-free interest rate	3.080%
Expected lives	4.0
Expected price volatility	301.6%
Forfeiture Rate	0.000%

There is one warrant to purchase one share of common stock for each dollar issued under the Promissory Note. 200,000 warrants, with an exercise price of $1.50, with warrant expiring 7 years from the date of issuance, were issued for the receipt of the $200,000. The fair value was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions: expected dividend yield of 0%; expected volatility of 304.9%; risk-free interest rate of 3.08% and an expected holding period of four years.

The resulting value was allocated to the proceeds received and applied as a discount to the face value of the Promissory Note, to be amortized over the term of the Promissory Note.

Derivative Liabilities

In connection with the issuance of the Convertible Promissory Note on February 4, 2010, the Company has applied the guidance of FASB ASC Topic No. 815-40. Accordingly, the convertible instrument is accounted for as a derivative liability at the date of issuance and adjusted to fair value through earnings at each reporting date. The fair value was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions: expected dividend yield of 0%; expected volatility of 301.6%; risk-free interest rate of 3.08% and an expected holding period of 4 years. The resulting value, at the date of issuance, was allocated to the proceeds received and applied as a discount to the face value of the Convertible Promissory Note; The Company has recognized a derivative liability of $31,540 at the date of issuance.

NOTE 8 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value at $.001 per share. On June 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. (FLI) 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 1,000,000 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 June 30, 2009 the Company issued 5,500,000 shares of common stock to purchase 100% of the outstanding shares of Federal Logistics, Inc. (FLI) 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. (FLI) and Optimized Transportation Software, Inc. (OTSI) was 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.

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NOTE 9 – PROVISION FOR INCOME TAXES

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before taxes. The items causing this difference are as follows:

		June 30,
		2010		2009
Income tax provision (benefit) at statutory rate	$	(477,200)	$	39,900
State income tax expense (benefit), net of federal benefit		18,600		(1,600)
		(458,600)		38,300
Valuation Allowance		-		-
	$	(458,600)	$	38,300

 

Deferred tax assets (liabilities) were as follows

		June 30,		December 31,
		2010		2009
Deferred tax asset, beginning	$	-	$	-
Change in deferred tax asset		458,600		-
Deferred tax asset, ending	$	458,600	$	-
Deferred tax liability, beginning	$	21,400	$	-
Change in deferred tax		-		21,400
Deferred tax liability, ending	$	21,400	$	21,400
Net Deferred Tax Asset (Payable)	$	437,200	$	(21,400)

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Leases

Our principal executive offices are located at 707 Grant Street, Suite 2307, Pittsburgh, Pennsylvania and consist of approximately 1,800 feet of office space which we lease for approximately $2,600 per month pursuant to the lease expiring November 30, 2013. We also maintain approximately 6,000 feet of warehouse space in Hanging Rock Ohio, which we lease on a month to month basis.

Future minimum lease payments, for the years ended December 31:

2010	$	15,648
2011		31,296
2012		31,296
2013		28,688
thereafter		-
	$	106,928

Contingencies

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

NOTE 11 - SEGMENT INFORMATION

Segment information is presented 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.

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The Company's operations during the six months ended June 30, 2010 and 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			Totals
For the six months ended June 30, 2010
Revenues from external customers		$	2,621,143		$	41,455		$	2,662,598
Costs of revenues			2,049,527			8,140			2,057,667
			571,616			33,315			604,931
Selling and general and administrative			1,689,328			16,062			1,705,390
Segment profit (loss) from operations		$	(1,117,712)		$	17,253		$	(1,100,459)
Assets		$	2,414,328		$	9,065		$	2,423,393
For the six months ended June 30, 2009
Revenues from external customers		$	1,453,322		$	114,012		$	1,567,334
Costs of revenues			892,540			72,023			964,563
			560,782			41,989			602,771
Selling and general and administrative			281,436			217,904			499,340
Segment profit (loss) from operations		$	279,345		$	(175,914)		$	103,431
Assets		$	1,686,114		$	737,279		$	2,423,393

NOTE 11 – RESTATEMENT

In January 2010, the company acquired Light Logistics, Inc and Light Express, Inc. In exchange for the assets of the Companies, the Company issued 909,091 shares of common stock and issued a note in the amount of $500,000. In the transaction goodwill is to be recognized utilizing the purchase method, resulting from the excess of the valued consideration given greater than the fair market value of the identifiable assets, less the liabilities assumed. Estimates of future cash flows and other valuation techniques were used to allocate the purchase price of acquired property between equipment, debt liabilities assumed and identifiable intangible assets and liabilities. Purchase price was first allocated to the extent of the fair market value of the identifiable assets, which value exceeded the purchase price and therefore no goodwill has been recognized.

Presented is the condensed proforma balance sheet information of the consolidated entity, as of December 31, 2009, as it would have been presented had the transaction occurred prior to the year end.

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OPTIMIZED TRANSPORTATION MANAGEMENT, INC.

Condensed Proforma Balance Sheet

As of December 31, 2009

		Originally
		Reported			Acquisition		Restated
		(audited)			(unaudited)		(unaudited)
Assets
Total current assets	$	146,208		$	-	$	146,208
Property and equipment, net		232,334	(b)		805,000		1,037,334
Other Assets		-	(b)		195,000		195,000
Total Assets	$	378,542		$	1,000,000	$	1,378,542
Liabilities and Stockholders' Equity
Total liabilities	$	317,716	(a)	$	500,000	$	817,716
Capital Stock		(52,048)	(a)		500,000		447,952
Retained Earnings		112,874			-		112,874
Total liabilities and stockholders’ equity	$	378,542		$	1,000,000	$	1,378,542

(a)

Purchase price of $500,000 in common stock, $500,000 issued note payable to sellers.

(b)

Purchase price allocated to tangible assets, at fair market value. Excess costs over fair market value of tangible assets is assigned to goodwill.

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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 10K.

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 un-served 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:

 

·

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

·

Warehousing Agents - Storage and sub-assembly of Customer inventory

·

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

·

Freight Forwarding Agents - Manages freight between ports of entry

·

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. (FLI) and Optimized Transportation Software, Inc. (OTSI). FLI 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. FLI 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

Summary of financial data (unaudited) (‘000 omitted):

	June 30,						Change
	2010			2009			Amount			Percent
Revenue	$	2,663		$	1,567		$	1,096		69.9%
Cost of transportation		2,058			965			1,093		113.3%
		605			602			3		0.5%
		22.7%			38.4%					-15.7%
Selling and administrative		1,705			499			1,206		241.7%
Operating income		(1,100)			103			(1,203)		-1168.0%
		-41.3%			6.6%

For the three and six months ended June 30, 2010 (unaudited) and June 30, 2009 (unaudited)

 

We generated revenue of $1,569,000, $497,000, $2,663,000 and $1,567,000 and gross profit of $364,000 $133,000, $605,000 and $603,000 for the three and six months ended June 30, 2010 and 2009, respectively. Net loss was $549,000 and $781,000 for the three and nine months ended June 30, 2010 compared to a net loss of $77,000 and net income of $65,000 for the three and six months ended June 30, 2009.

Revenue increased $1,096,000 for the six months ended June 30, 2010 over the six months ending June 30, 2009, an increase of 70%. The revenue increase was due to increased volume and increases in billing rates which were aided by pass through of fuel price adjustments.

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We had operating loss in the amount of $887,000, $1,100,000 for the three and six months ended June 30, 2010 and a loss of $122,000 and a profit of $103,000 for the three and six months ended June 30, 2009. Included in income (loss) from operations were non-cash charges of approximately $32,000, $64,000, $1,000 and $2,000 for depreciation charges related to equipment, no amortization charges and approximately $550,000, $0, $573,000 and $0 for stock-based compensation, for the three and six month periods ended June 30, 2010 and 2009, respectively.

Cost of transportation increased at a greater rate, reducing gross margins on sales from 38% to 23% for the comparable six month periods. This was primarily due to labor and fuel costs.

The most significant cost in selling is agent commissions. Commission costs were $60,000, $24,000, $86,000 and $66,000 for the three and six months ended June 30, 2010 and 2009, respectively. The increase was volume related, as agent commission increase is related to revenue increase.

The most significant general and administrative costs is consulting and professional expenses which were approximately $133,000, $47,000, $306,000 and $124,000 for the three and six months ended June 30, 2010 and 2009, respectively. The increase was primarily due to due diligence and costs in association with the acquisitions and additional costs for public entity filings. Depreciation and amortization costs were approximately $32,000, $64,000, $1,000 and $2,000 for depreciation charges related to equipment, no amortization charges and approximately $550,000, $0, $573,000 and $0 for stock-based compensation, for the three and six month periods ended June 30, 2010 and 2009, respectively.

Interest expense was $31,000, $0, $41,000 and $0 for the three and six months ended June 30, 2010 and 2009, respectively. The increase was due to the additional debt borrowed during the current period, in funding of the acquisition. Interest expense included non-cash costs of accreted interest in the amount of $10,000 and $16,000 for the three and six months ended June 30, 2010. Additionally, there was a change in the calculated derivative liability and beneficial conversion features related to financing activities, resulting in a charge to expenses of approximately $80,000 and 98,000 for the three and six month periods ended June 30, 2010.

Liquidity and Capital Resources

Net cash used in operating activities for the six months ended June 30, 2010 was $668,000 compared to net cash provided by operating activities for the six months ended June 30, 2009 of $15,000. The change was principally driven by the recognition of deferred tax assets.

Net cash used for investing activities was $0 for the six months ended June 30, 2010 compared to net cash used of $697,000 for the six months ended June 30, 2009. Use of cash for the six months ended June 30, 2009 consisted of acquisition costs and additional software development costs, which were ratably expensed in subsequent periods.

 

Net cash provided by financing activities for the six months ended June 30, 2010 was approximately $676,000 compared to net cash provided by financing activities of $1,146,000 for the six months ended June 30, 2009. Net cash provided by financing activities for the six months ended June 30, 2010, consisted primarily of receiving borrowings for operations.

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 June 30, 2010, 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.

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Recent Accounting Pronouncements

We have reviewed accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration. Those standards have been addressed in the notes to the unaudited financial statement and in our Annual Report, filed on Form 10-K for the period ended December 31, 2009.

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.

We recognize revenue on a gross basis, in accordance with ASC 605, "Revenue Recognition", 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 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4T. Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2010. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as of the end of such periods are not effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure

 

The company has limited resources and as a result, a material weakness in financial reporting currently exists. Those weaknesses include: Lack of Effective Policies Regarding the General Accounting System. We do not have any documented processes for the input, accumulation, or testing of financial data that would provide assurance that all transactions are accurately and timely recorded or that the financial reports will be prepared on a periodic basis.

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Management has determined that the Company does not have the financial resources or personnel to address any of the material weaknesses identified or to conduct a more robust evaluation of its controls. As resources become available, management will develop and implement remedial actions to address the material weaknesses it has identified.

A material weakness is a deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB Auditing Standard 5) or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that a material weakness exists due to a lack of segregation of duties, resulting from the Company's limited resources.

The Company’s management, including the President (Principal Executive Officer), Director, and Chief Financial Officer (Principal Accounting and Financial Officer), confirm that there was no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

 

We are not currently involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in the Company’s 2009 Annual Report filed on Form 10-K. We are a smaller reporting company and are not required to provide information required by this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

We have issued 3,150,000 common shares to employees and consultants. A total of 4,862,591 shares were issued in connection with the Light acquisition, issued to existing shareholders and seller, per agreement.

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Removed and Reserved.

 

Not Applicable.

Item 5. Other Information.

 

None

Item 6. Exhibits

 

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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: August 16, 2010		/s/ Kevin P. Brennan
		Kevin P. Brennan Chief Executive Officer and Chief Financial Officer (Principle Accounting Officer)

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EXHIBIT INDEX

 

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