8-K/A 1 form8k-a.txt POWER2SHIP FORM 8K-A MARCH 21,2005 OMB APPROVAL OMB Number: 3235-0060 Expires: March 31, 2006 Estimated average burden hours per response: 28.0 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K/A AMENDMENT NO.1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) March 21, 2005 -------------- POWER2SHIP, INC. ---------------- (Exact name of registrant as specified in its charter) Nevada 000-25753 87-0449667 ---------------------------- -------------- ------------ (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 903 Clint Moore Road, Boca Raton, Florida 33487 ----------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 561-998-7557 ------------ ------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) GENERAL EXPLANATION The purpose of this report is to amend the Registrant's Current Report on Form 8-K dated March 21, 2005 that was filed on March 25, 2005 (the "Initial Report") which disclosed the acquisition by the wholly owned subsidiary of the Registrant of certain assets representing the business of Commodity Express Transportation, Inc. and various other agreements related to this acquisition. This report amends the Initial Report so as to provide the information required pursuant to Items 9.01 (a) and 9.01(b) of Form 8-K. Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. Report of Independent Registered Public Accounting Firm Consolidated Financial Statements of Commodity Express Transportation, Inc. and Subsidiary: Balance Sheets as of December 31, 2004 and February 28, 2005 (Unaudited) Statements of Operations for the Years Ended December 31, 2003 and 2004 and the Two-Month Period Ended February 28, 2005 (Unaudited) Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 2003 and 2004 and the Two-Month Period Ended February 28, 2005 (Unaudited) Statements of Cash Flows for the Years Ended December 31, 2003 and 2004 and the Two-Month Period Ended February 28, 2005 (Unaudited) Notes to Consolidated Financial Statements for the Years Ended December 31, 2003 and 2004 and the Two-Month Period Ended February 28, 2005 (Unaudited) (b) Pro Forma Financial Information. Unaudited Pro Forma Combined Consolidated Financial Statements of Power2Ship, Inc. and Commodity Express Transportation, Inc.: Balance Sheet as of February 28, 2005 Statements of Operations for the Year Ended December 31, 2004 and the Two-Month Period Ended February 28, 2005 2 (A) Financial Statements of Business Acquired. COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 4 Balance Sheets as of December 31, 2004 and February 28, 2005 (Unaudited) 5 Statements of Operations for the Years Ended December 31, 2003 and 2004 and the Two Month Period Ended February 28, 2005 (Unaudited) 6 Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 2003 and 2004 and the Two Month Period Ended February 28, 2005 (Unaudited) 7 Statements of Cash Flows for the Years Ended December 31, 2003 and 2004 and the Two Month Period Ended February 28, 2005 (Unaudited) 8 Notes to Consolidated Financial Statements for the Years Ended December 31, 2003 and 2004 and the Two Month Period Ended February 28, 2005 (Unaudited) 9 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Commodity Express Transportation, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of Commodity Express Transportation, Inc. and Subsidiary as of December 31, 2004 and 2003, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amount and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Commodity Express Transportation, Inc. and Subsidiary as of December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/Sherb & Co., LLP Certified Public Accountants Boca Raton, Florida June 22, 2005 4

COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, -------------------------- February 28, 2005 2004 2003 ------------ ------------ ------------ (Unaudited) ASSETS Current assets: Receivables, net of allowance of $78,363 for all periods $ 332,576 $ 339,901 $ 377,976 Restricted cash 62,713 102,713 102,713 Prepaid expenses 36,320 19,544 31,784 ------------ ------------ ------------ Total current assets 431,609 462,158 512,473 Property and equipment: Land 42,512 42,512 42,512 Building and improvements 150,755 150,755 145,276 Office furniture and equipment 156,506 157,923 149,423 Shop tools and equipment 70,449 71,157 64,907 Tractors and trailers 2,484,324 2,495,023 2,528,373 Accumulated depreciation (1,565,290) (1,525,290) (1,284,473) ------------ ------------ ------------ Net property and equipment 1,339,256 1,392,080 1,646,018 Deposits 32,000 32,000 49,517 ------------ ------------ ------------ Total assets $ 1,802,865 $ 1,886,238 $ 2,208,008 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Cash overdraft $ 83,374 $ 56,906 $ 2,954 Accounts payable 1,020,107 1,062,135 983,503 Short term loan 98,990 98,990 98,990 Current portion of long term debt 428,389 482,945 479,899 ------------ ------------ ------------ Total current liabilities 1,630,860 1,700,976 1,565,346 Long term debt, net of current portion 91,619 106,335 529,565 Stockholders' equity: Common stock 100,000 shares, no par value, authorized, issued and outstanding 276,946 276,946 276,946 Accumulated deficit (196,560) (198,019) (163,849) ------------ ------------ ------------ Total stockholders' equity 80,386 78,927 113,097 ------------ ------------ ------------ Total liabilities and stockholders' equity $ 1,802,865 $ 1,886,238 $ 2,208,008 ============ ============ ============

See accompanying notes 5

COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, Two Months Ended -------------------------- February 28, 2005 2004 2003 ------------ ------------ ------------ (Unaudited) Revenue: Freight sales $ 1,507,910 $ 8,361,520 $ 7,562,812 Warehouse 143,931 617,342 1,903,178 Brokerage 848,440 6,786,048 4,918,159 Other 121,050 540,265 162,784 ------------ ------------ ------------ 2,621,331 16,305,175 14,546,933 ------------ ------------ ------------ Costs and expenses: Personnel costs 376,128 2,263,724 1,954,395 Warehouse operations 92,923 488,694 1,736,179 Repairs and maintenance 15,318 186,278 156,324 Equipment and facility rent 219,700 1,199,754 922,428 Interest 49,256 239,783 279,315 Depreciation 40,000 240,817 256,630 Gas and oil 238,853 1,210,992 767,639 Office and other expense 41,536 376,844 468,928 Other brokerage expense 33,412 244,638 171,299 Tires 27,893 151,704 137,803 Unloading fees 5,034 43,094 51,584 Insurance 105,892 510,002 502,516 Utilities and telephone 12,955 75,240 80,204 Outside driver expenses 526,157 2,849,239 2,984,004 Brokerage carrier pay 834,815 6,243,972 4,542,235 Loss on sale of property and equipment - 14,570 - ------------ ------------ ------------ 2,619,872 16,339,345 15,011,483 ------------ ------------ ------------ Income (loss) before income taxes 1,459 (34,170) (464,550) Provision for income taxes - - - ------------ ------------ ------------ Net income (loss) $ 1,459 $ (34,170) $ (464,550) ============ ============ ============

See accompanying notes 6

COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) Common Stock Retained Earnings -----------------(Accumulated Shares Amount Deficit) Total ------- -------- ---------- ---------- Balance, January 1, 2003 100,000 $276,946 $ 300,701 $ 577,647 Net loss - - (464,550) (464,550) ------- -------- ---------- ---------- Balance, December 31, 2003 100,000 276,946 (163,849) 113,097 Net loss - - (34,170) (34,170) ------- -------- ---------- ---------- Balance, December 31, 2004 100,000 276,946 (198,019) 78,927 Net income (Unaudited) - - 1,459 1,459 ------- -------- ---------- ---------- Balance, February 28, 2005 (Unaudited) 100,000 $276,946 $(196,560) $ 80,386 ======= ======== ========== ==========

See accompanying notes 7

COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, Two Months Ended ---------------------- February 28, 2005 2004 2003 ------------ ---------- ---------- (Unaudited) Cash flows from operating activities: Net income (loss) $ 1,459 $ (34,170) $(464,550) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 40,000 240,817 256,630 Loss on sale of assets - (14,570) - Changes in operating assets and liabilities: Decrease in receivables 7,325 38,075 4,305 Decrease (increase) in prepaid insurance (16,776) 12,240 24,641 Decrease (increase) in other assets - 17,517 (13,000) (Decrease) increase in accounts payable and accrued expenses (42,028) 78,632 546,127 ------------ ---------- ---------- (10,020) 338,541 354,153 ------------ ---------- ---------- Cash flows from investing activities: (Purchases) disposals of property and equipment 12,824 27,691 (14,191) ------------ ---------- ---------- 12,824 27,691 (14,191) ------------ ---------- ---------- Cash flows from financing activities: Decrease in restricted cash 40,000 - - Increase (decrease) in cash overdraft 26,468 53,952 (15,605) Proceeds from borrowings - - 98,990 Repayments of debt (69,272) (420,184) (423,347) ------------ ---------- ---------- (2,804) (366,232) (339,962) ------------ ---------- ---------- - - - Cash and cash equivalents, beginning of period - - - ------------ ---------- ---------- Cash and cash equivalents, end of period $ - $ - $ - ============ ========== ========== Supplemental disclosure of cash flow information: Cash paid for interest during the period $ 49,256 $ 239,783 $ 279,315 ============ ========== ========== Cash paid for income taxes during the period $ - $ - $ - ============ ========== ==========

See accompanying notes 8 COMMODITY EXPRESS TRANSPORTATION, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004 AND FOR THE TWO MONTH PERIOD ENDED FEBRUARY 28, 2005 (UNAUDITED) NOTE 1 - DESCRIPTION OF BUSINESS Commodity Express Transportation, Inc. (the "Company") was incorporated in South Carolina in June, 1992. The Company engages in the business of motor carriage specializing in full truckload transportation services primarily using dry vans. The Company provides its transportation services by contracting with independent truck owner-operators and drivers that use trucks provided by the Company. Also, the Company operates a 137,000 square foot rented warehouse in South Carolina as a service for its largest customer and provides freight transportation brokerage services through its wholly owned subsidiary, Commodity Express Brokerage, Inc., a wholly owned subsidiary of the Company incorporated in South Carolina in April 2003. The accompanying unaudited financial statements for the two month period ending February 28, 2005 have been prepared in accordance with generally accepted accounting principles for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). These financial statements reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the period presented. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All material intercompany transactions have been eliminated. RECLASSIFICATIONS Certain prior period balances have been reclassified to conform to the current year's presentation. These reclassifications had no impact on previously reported results of operations or stockholders' deficit. CASH AND CASH EQUIVALENTS The Company considers all unrestricted deposits and highly liquid investments, readily convertible to known amounts, with an original maturity of three months or less, to be cash equivalents. ACCOUNTS RECEIVABLE The Company provides an allowance for doubtful accounts equal to the estimated future losses on year-end receivables. The allowance is based on a review of the current status of the receivables. FACTORING ESCROW The Company is required by the company factoring its accounts receivable to maintain an escrow account having a certain amount of restricted cash which varies depending on the level of accounts receivable factored at any given time. 9 PROPERTY AND EQUIPMENT Property and equipment are recorded on the basis of original cost less allowances for depreciation. Land and buildings have been recorded at their acquisition costs. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows: 40 years for buildings, 8 years for office furniture/equipment and shop tools/equipment, 5 to 8 years for tractors and trailers and 10 years for leasehold improvements. The costs of maintenance and repairs are charged to operations as incurred. Expenditures for major renewals and betterments that extend the useful lives of the assets are capitalized. The costs of property retired or otherwise disposed of and the related allowances for depreciation are eliminated from the respective accounts. Gains or losses resulting from such dispositions are reflected in current income. Property and equipment includes capitalized lease obligations of $76,127 and $40,354 as of December 31, 2003 and 2004, respectively, and $36,100 as of February 28, 2005 (unaudited). Depreciation expense was $256,630 and $240,817 for the years ended December 31, 2003 and 2004, respectively, and $40,000 for the two months ended February 28, 2005 (unaudited). LEASES On non-cancelable lease agreements that are essentially equivalent to installment purchases of property, the Company records assets and the present value of the related obligations (discounted to cover applicable interest). On operating leases, neither assets nor obligations are recorded. In such cases, lease rental expenses are charged to operations as incurred. INCOME TAXES Under the asset and liability method of FASB Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance, when in the Company's opinion it is likely that some portion or the entire deferred tax asset will not be realized. REVENUE RECOGNITION The Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin 104 for revenue recognition. In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the reported revenue streams of the Company: The Company recognizes freight sales revenue, brokerage revenue and other revenue (primarily consisting of assessorial charges such as fuel surcharges), when shipments of goods that we are transporting for our customers, or, in the case of brokerage revenue that we have subcontracted to a third party, reach their destinations and the receivers of the goods acknowledges their receipt by signing a bill of lading. Upon such delivery and acknowledgement, our obligations to the customer are completed and collection of receivables is reasonably assured. Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, establishes the criteria for recognizing revenues on a gross or net basis. In these transactions, we are the primary obligor, we are a principal to the transaction not an agent, we have the risk of loss for collection, we have discretion to select the supplier and we have latitude in pricing decisions. The Company recognizes warehouse revenue at the end each time period for which a customer is obligated to pay rent. 10 FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash, receivables, accounts payable, notes payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates the recoverability and carrying value of its long-lived assets at each balance sheet date, based on guidance issued in SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Among other factors considered in such evaluation is the historical and projected operating performance of business operations, the operating environment and business strategy, competitive information and market trends. At December 31, 2004 and 2003 and February 28, 2005, the Company had no assets which were considered to be impaired. NOTE 3 - CONCENTRATIONS During the years ended December 31, 2003 and 2004, one customer accounted for approximately 59% and 69%, respectively, of the Company's revenue. During the two months ended February 28, 2005, an affiliated company representing this customer accounted for approximately 62% (unaudited) of the Company's revenue (see Note 4 - "Related Party Transactions"). NOTE 4 - RELATED PARTY TRANSACTIONS During 2004, the Company's largest customer during the years ended December 31, 2003 and 2004 entered into an exclusive transportation services agreement with TPS Logistics, Inc., a South Carolina corporation, for which the president of the Company and his wife are vice president and principal owner, respectively. Upon TPS entering into this agreement, the Company began providing transportation services for all of TPS' customers. NOTE 5 - SHORT TERM LOAN In March 2004, the Company issued an unsecured promissory note for $100,000 to Regions Bank. The note had a term of 1 year, a variable interest rate equal to one percent over the base rate of interest established from time to time by the lender and requires all accrued unpaid interest to be paid on each monthly anniversary of the note. The outstanding principal balance on the note was $98,990 as of December 31, 2003 and 2004, respectively, and $98,990 as of February 28, 2005 (unaudited). NOTE 6 - NOTES PAYABLE AND CAPITAL LEASES In May and July 2001, the Company issued two secured promissory notes for $173,750 each to Financial Federal Credit Inc. The notes have a term of 58 months and are collateralized by transportation equipment. The monthly installments for each of these notes are one payment of $7,194 payable on the date of the note followed by 58 payments of $3,597 including interest of 9.56%. The notes mature in March and May 2006. The outstanding principal balance on these notes was $174,130 and $101,309 as of December 31, 2003 and 2004, respectively, and $88,484 as of February 28, 2005 (unaudited). 11 In September 2001, the Company issued a secured promissory note for $120,250 to Financial Federal Credit Inc. The note had a term of 40 months and was collateralized by transportation equipment. The monthly installments on the note were one payment of $6,670 paid on the date the note was issued followed by 40 monthly payments of $3,335 including interest of 9.71%. The note matured in December 2004. The outstanding principal balance on the note was $37,993 and $0 as of December 31, 2003 and 2004, respectively. In May 2002, the Company entered into two capital leases to borrow a total of $141,113 from BB&T Leasing Corporation. The first lease for $43,163 had a term of 24 months, was collateralized by transportation equipment, required monthly payments of $1,936 including interest of 7.2% and matured in June 2004. The other lease for $97,950 has a term of 48 months, is collateralized by transportation equipment, requires monthly payments of $2,383 including interest of 7.8% and matures in June 2006. The outstanding principal balance on these leases was $76,127 and $40,354 as of December 31, 2003 and 2004, respectively, and $36,100 as of February 28, 2005 (unaudited). In June, July and August 2002, the Company issued three secured promissory notes for a total of $1,044,841 to Financial Federal Credit Inc. The June note has a term of 42 months, is collateralized by transportation equipment, requires monthly installments of $5,540 including interest of 8.59% and matures in January 2006. The outstanding principal balance on the note was $126,400 and $68,536 as of December 31, 2003 and 2004, respectively, and $58,401 as of February 28, 2005 (unaudited). The July note had a term of 18 months, was collateralized by transportation equipment, required monthly installments of $2,016 including interest of 10.85% and matured in February 2004. The outstanding principal balance on the note was $3,978 and $0 as of December 31, 2003 and 2004, respectively. The August note has a term of 42 months, is collateralized by transportation equipment, has monthly installments of $22,275 for 36 months followed by 6 monthly payments of $19,046 including interest of 8.56% and matures in February 2006. The outstanding principal balance on the note was $450,816 and $252,997 as of December 31, 2003 and 2004, respectively, and $218,367 as of February 28, 2005 (unaudited). In September 2002, the Company issued a secured promissory note for $57,057 to Wells Fargo Equipment Finance, Inc. The note has a term of 48 months, is collateralized by transportation equipment, requires monthly installments of $1,366 including interest of 7.0% and matures in October 2006. The outstanding principal balance on the note was $42,027 and $28,132 as of December 31, 2003 and 2004, respectively, and $25,722 as of February 28, 2005 (unaudited). In April 2003, the Company entered into a loan agreement to borrow $50,000 from American Express Business Finance Corporation. This unsecured loan has a term of 24 months and monthly installments of $2,261 including interest of 8.0%. The outstanding principal balance on the note was $42,027 and $28,132 as of December 31, 2003 and 2004, respectively, and $25,722 as of February 28, 2005 (unaudited). In addition, the Company has a $45,000 line of credit with American Express Business Finance Corporation with an interest rate of approximately 11.0% that had an outstanding balance of $0 and $45,000 as of December 31, 2003 and 2004, respectively, and $45,000 as of February 28, 2005 (unaudited). The Company recorded interest expense related to these notes and leases of $112,341 and $68,892 for the years ended December 31, 2003 and 2004, respectively and $16,203 for the two months ended February 28, 2005. As of December 31, 2004, the principal repayments for these notes and leases during their remaining terms are as follows: 12 2005 $ 482,945 2006 91,621 ----------- $ 574,566 =========== NOTE 7 - COMMITMENTS AND CONTINGENCIES The Company leases tractors pursuant to three operating leases entered into in 1999, 2003 and 2004 and leases trailers pursuant to one operating lease entered into in 2002. The terms of the tractor leases range from 24 to 72 months and the trailer lease is for 60 months. As of December 31, 2004, the minimum lease liability is as follows: 2007 $ 776,098 2008 642,480 2009 608,820 2010 507,840 2011 456,540 Thereafter 371,470 ----------- $ 3,363,248 =========== On September 11, 2001, the Company entered into a warehouse lease for a 123,750 square foot facility located in Blythewood, South Carolina that terminates on October 31, 2008. As of December 31, 2004, the minimum rental commitment associated with this lease was as follows: 2005 $ 360,232 2006 371,038 2007 382,170 2008 326,400 2009 0 ----------- $ 1,439,840 =========== The Company has provided the landlord with a $32,000 security deposit. Also, the landlord has the right to terminate the lease with respect to 61,875 square feet by providing at least 90 days prior written notice to the Company. In the event of such a partial termination, the monthly base rent for the remaining space during the balance of the lease term would be as follows: Period Monthly Base Rent ------ ----------------- November 1, 2004 through October 31, 2005 $20,780 November 1, 2005 through October 31, 2006 $21,398 November 1, 2006 through October 31, 2007 $22,040 November 1, 2007 through October 31, 2008 $22,702 The Company incurred equipment and facility rent expense of $922,428 and $1,199,754 for the years ended December 31, 2003 and 2004, respectively, and $219,700 for the two months ended February 28, 2005 (unaudited). NOTE 8 - STOCKHOLDERS' EQUITY The Company had 100,000 shares of common stock, no par value, authorized, issued and outstanding as of December 31, 2003 and 2004 and as of February 28, 2005 (unaudited). 13 NOTE 9 - INCOME TAXES The Company had available at December 31, 2004, operating loss carryforwards for federal and state taxes of approximately $927,000 which could be applied against taxable income in subsequent years through 2024. Such amounts would be subject to the limitations contained under Section 382 of the Internal Revenue Code relating to changes in ownership. However, given that the realization of this tax effect is uncertain, a full valuation allowance was recorded. Reconciliation of the differences between income taxes computed at the federal statutory tax rates and the provision for income taxes is as follows:

2004 Percent 2003 Percent --------- -------- ---------- -------- Income tax benefit computed at Federal statutory tax rate $ 12,000 35.1% $ 158,000 34.0% State tax, net of Federal benefits 1,000 2.9 16,000 3.4 Non-deductible non-cash expenses (25,000) (208.3) (38,000) (24.1) Reinstatement/change in deferred tax asset valuation allowance 12,000 (170.3) (136,000) (13.4) --------- -------- ---------- -------- Provision for income taxes $ - - $ - - ========= ======== ========== ========

Temporary differences that give rise to significant deferred tax assets are as follows:

2004 2003 ---------- ---------------- Net operating loss carryforward $ 348,000 $ 360,000 ========== ================ Total deferred tax assets 348,000 360,000 Valuation allowance (348,000) (360,000) ---------- ---------------- Net deferred tax asset $ - $ - ========== ================

NOTE 10 - SUBSEQUENT EVENTS (UNAUDITED) On March 21, 2005, the Company sold certain assets, including customer lists, back-shop equipment, office equipment, telecommunications equipment, certain contracts and one vehicle to a subsidiary of Power2Ship, Inc., a Nevada corporation, for a price of $302,504 consisting of $100,000, 370,370 shares of Power2Ship, Inc. common stock that had a market value of $96,296 which was used to satisfy the Company's $100,000 liability to the business broker associated with the transaction, the buyer's assumption of $69,208 of certain other Company liabilities and the buyer's replacement of $37,000 of deposits. In addition, upon closing this transaction, the buyer replaced approximately $168,000 of letters of credit previously made or issued on the Company's behalf with third parties related to the operation of the Company's business and agreed to replace an additional letter of credit for $20,000 on or before June 10, 2005. The buyer also assumed certain leases related to the operation of the Company's business, including tractor leases, owner/operator leases and a warehouse lease. 14 UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The following Unaudited Pro Forma Combined Financial Statements of Power2Ship, Inc. and the Company give effect to the acquisition of assets of the Company under the purchase method of accounting prescribed by Financial Accounting Standards Board Statement No. 141, Business Combinations. These pro forma statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. The Unaudited Pro Forma Combined Financial Statements do not purport to represent what the results of operations or financial position of Power2Ship, Inc. would actually have been if the acquisition had in fact occurred on January 1, 2004, nor do they purport to project the results of operations or financial position of Power2Ship, Inc. for any future period or as of any date, respectively. These Unaudited Pro Forma Combined Financial Statements do not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from the acquisition of the Company by Power2Ship, Inc. You should read the financial information in this section along with the historical financial statements and accompanying notes of Power2Ship, Inc. in prior Securities and Exchange Commission filings and in this amended Current Report on Form 8-K. 15

POWER2SHIP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET FEBRUARY 28, 2005 Pro Forma Adjustments Commodity ------------------------ Power2Ship Express Debit Credit Pro Forma ------------- ------------ ------------ ---------- ---------- Current assets: Cash and cash equivalents $ 399,438 $ - (b) 137,000 $ 262,438 Receivables, net of allowances 529,124 332,576 (a) 332,576 529,124 Restricted cash - 62,713 (a) 62,713 - Short-term note receivable 100,000 - 100,000 Prepaid expenses 15,657 36,320 (b) 105,043 (a) 36,320 120,700 ------------- ------------ ----------- Total current assets 1,044,219 431,609 1,012,262 Furniture and equipment 367,911 2,904,546 (b) 156,000 (a) 2,904,546 523,911 Less: accumulated depreciation (105,573) (1,565,290)(a) 1,565,290 (105,573) ------------- ------------ ----------- Net furniture and equipment 262,338 1,339,256 418,338 Other assets: Software development costs, net of accumulated amortization 569,702 - 569,702 Deferred financing costs 640,524 - 640,524 Intangible asset, net of accumulated amortization 160,081 - (b) 4,461 164,542 Restricted cash for interest on debentures 125,045 - 125,045 Other 168,116 32,000 (b) 37,000 (a) 32,000 205,116 ------------- ------------ ----------- Total other assets 1,663,468 32,000 1,704,929 Total assets $ 2,970,025 $ 1,802,865 $3,135,529 ============= ============ =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Cash overdraft $ - $ 83,374 (a) 83,374 $ - Notes payable - short term 682,500 527,379 (a) 527,379 682,500 Line of credit 281,033 - 281,033 Accounts payable 180,772 1,020,107 (a) 1,020,107 (b) 69,208 249,980 Accrued expenses 277,947 - 277,947 ------------- ------------ ----------- Total current liabilities 1,422,252 1,630,860 1,491,460 Long term debt: Long term notes payable - 91,619 (a) 91,619 - Convertible notes payable less discount of $132,669 3,781,752 - 3,781,752 Convertible note payable to related party 115,000 - 115,000 Stockholders' equity (deficit): Preferred stock, $.01 par value, 1,000,000 authorized: Series B convertible preferred stock, $.01 par value, 200,000 shares authorized; 168,200 shares issued and outstanding 1,682 - 1,682 Series C convertible preferred stock, $.01 par value, 20,000 shares authorized; 832 shares issued and outstanding 8 - 8 Series Y convertible preferred stock, $.01 par value, 87,000 shares authorized; 87,000 shares issued and outstanding 870 - 870 Common stock, $.001 par value, 250,000,000 shares authorized; 48,556,210 issued and outstanding 48,186 276,946 (a) 276,946 (b) 370 48,556 Deferred compensation (175,762) - (175,762) Additional paid-in capital 13,728,826 (b) 95,926 13,824,752 Accumulated deficit (15,952,789) (196,560) (a) 196,560 (15,952,789) ------------- ------------ ----------- Total stockholders' equity (deficit) (2,348,979) 80,386 (2,252,683) ------------- ------------ ----------- Total liabilities and stockholders' deficit $ 2,970,025 $ 1,802,865 $ 3,135,529 ============= ============ ============

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POWER2SHIP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 Pro Forma Adjustments Commodity -------------------- Power2Ship Express Debit Credit Pro Forma ------------ ------------ ------------ ------ --------- Revenue $ 2,689,979 $16,305,175 $18,995,154 Operating expenses: Freight transportation 2,338,126 10,561,333 12,899,459 Selling, general and administrative: Salaries, benefits and consulting fees 3,084,064 2,179,979 5,264,043 Other selling, general and administrative 1,388,238 3,343,500 (c) 20,392 4,752,130 ------------ ------------ ------------ Total operating expenses 6,810,428 16,084,812 22,915,632 ------------ ------------ ------------ Income (loss) from operations (4,120,449) 220,363 (3,920,478) ------------ ------------ ------------ Other income (expense): Loss on sale of property and equipment - (14,750) (14,750) Other income 571 - 571 Interest income 1,486 - 1,486 Interest expense (663,498) (239,783) (903,281) ------------ ------------ ------------ Total other expense (661,441) (254,533) (915,974) ------------ ------------ ------------ Loss available to common shareholders $(4,781,890) $ (34,170) $(4,836,452) ============ ============ ============ Basic and diluted loss per common share $ (0.12) ============ Weighted average common shares outstanding 39,129,646 ============

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POWER2SHIP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR THE TWO MONTHS ENDED FEBRUARY 28, 2005 Pro Forma Adjustments Commodity ------------------- Power2Ship Express Debit Credit Pro Forma ------------ ----------- ------------ ------ --------- Revenue $ 501,836 $2,621,329 $ 3,123,165 Operating expenses: Freight transportation 442,392 1,618,220 2,060,612 Selling, general and administrative: Salaries, benefits and consulting fees 1,120,974 364,872 1,485,846 Other selling, general and administrative 92,683 587,522 (c) 3,399 683,604 ------------ ----------- ------------ Total operating expenses 1,656,049 2,570,614 4,230,062 ------------ ----------- ------------ Loss from operations (1,154,213) 50,715 (1,106,897) ------------ ----------- ------------ Other income (expense): Other income 22 - 22 Interest income 2,006 - 2,006 Interest expense (165,379) (49,256) (214,635) ------------ ----------- ------------ Total other expense (163,351) (49,256) (212,607) ------------ ----------- ------------ Loss available to common shareholders $(1,317,564) $ 1,459 $(1,319,504) ============ =========== ============ Basic and diluted loss per common share $ (0.03) ============ Weighted average common shares outstanding 42,005,005 ============

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POWER2SHIP, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA ADJUSTMENTS TO COMBINED FINANCIAL STATEMENTS FEBRUARY 28, 2005 Pro Forma Adjustments: (a) To eliminate all assets and liabilities of Commodity Express as of February 28, 2005: Debit Credit ---------- --------- Accounts receivable 332,576 Factoring escrow - restricted cash 62,713 Prepaid expenses 36,320 Furniture and equipment 2,904,546 Accumulated depreciation 1,565,290 Other assets 32,000 Cash overdraft 83,374 Notes payable - short term 527,379 Accounts payable 1,020,107 Long term notes payable 91,619 Common stock 276,946 Accumulated deficit 196,560 ---------- --------- 3,564,715 3,564,715 (b) To record all assets purchased and liabilities assumed of Commodity Express as of February 28, 2005, including brokerage fees of $100,000: Debit Credit ---------- --------- Cash and cash equivalents 137,000 Prepaid expenses 105,043 Furniture and equipment 156,000 Intangible asset - customer list 4,461 Other assets 37,000 Accounts payable 69,208 Common stock 370 Additional paid-in capital 95,926 ---------- --------- 302,504 302,504 (c) To record amortization of intangible assets acquired using the straight-line method over five years. To record depreciation of furniture and equipment acquired using the straight-line method over eight years.

19 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 hereunto duly authorized. POWER2SHIP, INC. Date: July 12, 2005 By: /s/ Richard Hersh ----------------- Richard Hersh, Chief Executive Officer 20