e10vq
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 2010
     
o    
For the transition period from           to
Commission file number 001-32172
Express-1 Expedited Solutions, Inc.
(Exact name of small business issuer as specified in its charter)
     
Delaware   03-0450326
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
3399 South Lakeshore Drive, Suite 225
Saint Joseph, MI 49085

(Address of Principal Executive Offices)(Zip Code)
(269) 429-9761
(Issuer’s Telephone Number, Including Area Code)
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     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 Regulation 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 o No o
     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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting company þ
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     The Registrant has 32,382,522 shares of its common stock outstanding as of November 12, 2010.
 
 

 


 

Express-1 Expedited Solutions, Inc.
Form 10-Q
Index
         
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    30  
 
       
       
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2

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Part I — Financial Information
Item 1 — Financial Statements
Express-1 Expedited Solutions, Inc.
Consolidated Balance Sheets
                 
    (Unaudited)        
    September 30, 2010     December 31, 2009  
ASSETS                
Current assets:
               
Cash
  $ 951,000     $ 495,000  
Accounts receivable, net of allowances of $302,000 and $225,000, respectively
    26,282,000       17,569,000  
Prepaid expenses
    430,000       158,000  
Deferred tax asset, current
    169,000       353,000  
Other current assets
    554,000       459,000  
 
           
Total current assets
    28,386,000       19,034,000  
 
           
 
               
Property and equipment, net of $3,116,000 and $2,651,000 in accumulated depreciation, respectively
    2,806,000       2,797,000  
Goodwill
    16,959,000       16,959,000  
Identifiable intangible assets, net of $2,669,000 and $2,198,000 in accumulated amortization, respectively
    8,704,000       9,175,000  
Loans and advances
    162,000       30,000  
Other long-term assets
    735,000       1,044,000  
 
           
Total long-term assets
    29,366,000       30,005,000  
 
           
Total assets
  $ 57,752,000     $ 49,039,000  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:
               
Accounts payable
  $ 8,780,000     $ 6,769,000  
Accrued salaries and wages
    1,218,000       310,000  
Accrued expenses, other
    3,469,000       2,272,000  
Line of credit
          6,530,000  
Current maturities of notes payable and capital leases
    1,671,000       1,215,000  
Other current liabilities
    495,000       968,000  
 
           
Total current liabilities
    15,633,000       18,064,000  
 
           
 
               
Line of credit
    4,073,000        
Notes payable and capital leases, net of current maturities
    2,513,000       213,000  
Deferred tax liability, long-term
    1,630,000       1,156,000  
Other long-term liabilities
    841,000       1,202,000  
 
           
Total long-term liabilities
    9,057,000       2,571,000  
 
           
 
               
Stockholders’ equity:
               
Preferred stock, $.001 par value; 10,000,000 shares; no shares issued or outstanding
           
Common stock, $.001 par value; 100,000,000 shares authorized; 32,562,522 and 32,215,218 shares issued, respectively; and 32,382,522 and 32,035,218 shares outstanding, respectively
    33,000       32,000  
Additional paid-in capital
    27,077,000       26,488,000  
Treasury stock, at cost, 180,000 shares held
    (107,000 )     (107,000 )
Accumulated earnings
    6,059,000       1,991,000  
 
           
Total stockholders’ equity
    33,062,000       28,404,000  
 
           
Total liabilities and stockholders’ equity
  $ 57,752,000     $ 49,039,000  
 
           
 
               
The accompanying notes are an integral part of the consolidated financial statements.

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Express-1 Expedited Solutions, Inc.
Consolidated Statements of Operations
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30, 2010     September 30, 2009     September 30, 2010     September 30, 2009  
Revenues
                               
Operating revenue
  $ 44,448,000     $ 26,211,000     $ 116,430,000     $ 68,526,000  
Expenses
                               
Direct expense
    36,309,000       21,482,000       95,453,000       56,944,000  
 
                       
Gross margin
    8,139,000       4,729,000       20,977,000       11,582,000  
Sales general and administrative expense
    5,219,000       3,284,000       13,892,000       9,533,000  
 
                       
Operating income from continuing operations
    2,920,000       1,445,000       7,085,000       2,049,000  
 
                       
Other expense
    48,000       19,000       102,000       28,000  
Interest expense
    32,000       26,000       140,000       74,000  
 
                       
Income from continuing operations before income tax
    2,840,000       1,400,000       6,843,000       1,947,000  
Income tax provision
    1,110,000       599,000       2,775,000       858,000  
 
                       
Income from continuing operations
    1,730,000       801,000       4,068,000       1,089,000  
Income from discontinued operations, net of tax
          10,000             15,000  
 
                       
Net income
  $ 1,730,000     $ 811,000     $ 4,068,000     $ 1,104,000  
 
                       
 
                               
Basic income per share
                               
Income from continuing operations
  $ 0.05     $ 0.03     $ 0.13     $ 0.03  
Income from discontinued operations
                       
Net income
    0.05       0.03       0.13       0.03  
Diluted income per share
                               
Income from continuing operations
    0.05       0.03       0.12       0.03  
Income from discontinued operations
                       
Net income
  $ 0.05     $ 0.03     $ 0.12     $ 0.03  
Weighted average common shares outstanding
                               
Basic weighted average common shares outstanding
    32,381,502       32,035,218       32,154,890       32,035,218  
Diluted weighted average common shares outstanding
    33,008,742       32,138,885       32,741,822       32,142,150  
The accompanying notes are an integral part of the consolidated financial statements.

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Express-1 Expedited Solutions, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
                 
    Nine Months Ended September 30,  
    2010     2009  
Operating activities
               
Net income
  $ 4,068,000     $ 1,104,000  
Adjustments to reconcile net income to net cash from operating activities
               
Provisions for allowance for doubtful accounts
    77,000       147,000  
Depreciation & amortization expense
    1,026,000       835,000  
Stock compensation expense
    156,000       143,000  
Loss (gain) on disposal of equipment
    4,000       (29,000 )
Deferred tax expense
    658,000       260,000  
Changes in assets and liabilities, net of effects of acquisition:
               
Account receivable
    (8,790,000 )     (3,480,000 )
Other current assets
    (95,000 )     75,000  
Prepaid expenses
    (272,000 )     184,000  
Other Long-term assets and advances
    89,000       (36,000 )
Accounts payable
    2,011,000       (1,062,000 )
Accrued expenses
    2,105,000       1,148,000  
Other liabilities
    (834,000 )     (173,000 )
 
           
Cash provided (used) by operating activities
    203,000       (884,000 )
 
           
Investing activities
               
Acquisition of businesses, net of cash acquired
          (250,000 )
Payment of acquisition earn-out
          (1,100,000 )
Payment for purchases of property and equipment
    (482,000 )     (103,000 )
Proceeds from sale of property and equipment
    2,000       63,000  
 
           
Cash flows used by investing activities
    (480,000 )     (1,390,000 )
 
           
Financing activities
               
Credit line, net activity
    (2,457,000 )     2,796,000  
Proceeds from credit facility renewal
    5,000,000        
Payments of term debt
    (2,244,000 )     (946,000 )
Proceeds from exercise of options
    434,000        
 
           
Cash flows provided by financing activities
    733,000       1,850,000  
 
           
Net increase (decrease) in cash
    456,000       (424,000 )
Cash, beginning of period
    495,000       1,107,000  
 
           
Cash, end of period
  $ 951,000     $ 683,000  
 
           
Supplemental disclosure of noncash activities:
               
Cash paid during the period for interest
  $ 153,000     $ 51,400  
Cash paid during the period for income taxes
    2,534,000       282,000  
Acquisition of assets and liabilities (First Class 2009):
               
Property and equipment
          $ 82,000  
Goodwill and other intangible assets
            210,000  
Liabilities assumed
            (42,000 )
 
             
Total purchase price paid in cash
          $ 250,000  
 
             
The accompanying notes are an integral part of the consolidated financial statements.

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Express-1 Expedited Solutions, Inc.
Consolidated Statement of Changes in Stockholders’ Equity
Nine Months Ended September 30, 2010
(Unaudited)
                                                         
                                    Additional              
    Common Stock     Treasury Stock     Paid In     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Earnings     Total  
Balance, December 31, 2009
    32,215,218     $ 32,000       (180,000 )   $ (107,000 )   $ 26,488,000     $ 1,991,000     $ 28,404,000  
Stock option expense
                                    156,000               156,000  
Issuance of common stock
    347,304       1,000                       433,000               434,000  
Net income
                                            4,068,000       4,068,000  
         
Balance, September 30, 2010
    32,562,522     $ 33,000       (180,000 )   $ (107,000 )   $ 27,077,000     $ 6,059,000     $ 33,062,000  
         
The accompanying notes are an integral part of the consolidated financial statements.

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Express-1 Expedited Solutions, Inc.
Notes to Consolidated Financial Statements
Three and Nine Months Ended September 30, 2010 and 2009
(Unaudited)
1. Significant Accounting Principles
Basis of Presentation
     The accompanying unaudited condensed consolidated financial statements of Express-1 Expedited Solutions, Inc. (“we”, “us”, “our” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.
     The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position at September 30, 2010 and December 31, 2009 and results of operations for the three and nine month periods ended September 30, 2010 and 2009. The preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ materially from those estimates.
     These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2009 included in our Annual Report on Form 10-K as filed with the SEC and available on the SEC’s website (www.sec.gov). Results of operations in interim periods are not necessarily indicative of results to be expected for a full year.
Revenue Recognition
     Within the Company’s Express-1 and Bounce Logistics business units, revenue is recognized at the time of freight delivery; with related costs of delivery being accrued as incurred and expensed within the same period in which the associated revenue is recognized. For these business units, the Company uses the following supporting criteria to determine revenue has been earned and should be recognized:
    Persuasive evidence that an arrangement exists,
 
    Services have been rendered,
 
    The sales price is fixed and determinable, and
 
    Collectability is reasonably assured.
     Within its Concert Group Logistics business unit, the Company utilizes an alternative point in time to recognize revenue. Concert Group Logistics revenue and associated operating expenses are recognized on the date the freight is picked up from the shipper. This method of revenue recognition is not the preferred method of revenue recognition as prescribed within generally accepted accounting principles in the United States of America (US GAAP). This method recognizes revenue and associated expenses prior to the point in time that all services are completed; however, the use of this method does not result in a material difference. The Company has evaluated the impact of this alternative method on its consolidated financial statements and concluded that the impact is not material to the financial statements.

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     The Company reports revenue on a gross basis in accordance with US GAAP principles. The following facts justify our position of reporting revenue on a gross basis:
    The Company is the primary obligor and is responsible for providing the service desired by the customer.
 
    The customer holds the Company responsible for fulfillment including the acceptability of the service.
 
    The Company has discretion in setting sales prices and as a result, its earnings vary.
 
    The Company has discretion to select its drivers, contractors, or other transportation providers (collectively, “service providers”) from among thousands of alternatives, and
 
    The Company bears credit risk on its receivables.
Stock-Based Compensation
     The Company has in place a stock option plan approved by the shareholders for 5,600,000 shares of its common stock. Through the plan, the Company offers stock options to employees and directors which assist in recruiting and retaining these individuals. Under the plan, the Company may also grant restricted stock awards, subject to the satisfaction by the recipient of certain conditions specified in the restricted stock grant.
     Options generally become fully vested three to five years from the date of grant and expire five to ten years from the grant date. During the nine-month period ended September 30, 2010, the Company granted 635,000 options to purchase shares of its common stock while cancelling or retiring 301,000 options in the same period. As of September 30, 2010 the Company has 3,130,000 options outstanding and an additional 2,122,000 options available for future grants under the existing plan. During the life of the plan 347,000 stock options have been exercised.
     The weighted-average fair value of each stock option recorded in expense for the nine-month period ended September 30, 2010 was estimated on the date of grant using the Black-Scholes option pricing model and amortized over the requisite service period of the underlying options. The Company has used one grouping for the assumptions, as its option grants are primarily basic with similar characteristics. The expected term of options granted has been derived based upon the Company’s history of actual exercise behavior and represents the period of time that options granted are expected to be outstanding. Historical data was also used to estimate option exercises and employee terminations. Estimated volatility is based upon the Company’s historical market price at consistent points in a period equal to the expected life of the options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and the dividend yield is zero. The weighted average assumptions outlined in the table below were utilized in the calculations of compensation expense from option grants in the reporting period reflected.
         
    Nine Months Ended
    September 30,
    2010   2009
Risk-free interest rate
  2.5%   2.8%
Expected life (in years)
  5.8   5.3
Expected volatility
  35%   39%
Expected dividend yield
  none   none
Grant date fair value
  $0.53   $0.31

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     The following table summarizes the option activity for the nine-month period ended September 30, 2010:
                         
                    Weighted  
            Weighted Average     Average  
    Options     Exercise Price     Remaining Life  
Outstanding at December 31, 2009
    3,143,000     $ 1.14       5.0  
Granted
    635,000       1.41          
Expired
    (301,000 )     1.28          
Exercised
    (347,000 )     1.25          
     
Outstanding at September 30, 2010
    3,130,000       1.17       6.2  
     
 
                       
     
Outstanding exercisable at September 30, 2010
    2,348,000     $ 1.14       5.4  
     
     For the nine months ended September 30, 2010 and 2009, the Company recognized $156,000 and $143,000, respectively, in stock based compensation.
     As of September 30, 2010, the Company had approximately $337,000 of unrecognized compensation cost related to non-vested share-based compensation that is anticipated to be recognized over a weighted average period of approximately 1.2 years. Estimated remaining compensation expense related to existing share-based plans is $45,000, $147,000, $107,000 and $38,000 for the years ended December 31, 2010, 2011, 2012, and 2013, respectively.
     At September 30, 2010, the aggregate intrinsic value of options outstanding was $2.2 million and the aggregate intrinsic value of options exercisable was $1.7 million. The total fair value of options vested during the nine months ended September 30, 2010 and 2009 was $111,000 and $160,000 respectively.
     347,000 options were exercised during the nine-month period ended September 30, 2010 and zero options were exercised during the nine-month period ended September 30, 2009. Cash proceeds received from the exercise of options for the nine months ended September 30, 2010 and 2009 were $434,000 and $0, respectively.
Use of Estimates
     The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to: unbilled revenue, purchased transportation, recoverability of long-lived assets, accrual of acquisition earn-outs, recoverability of prepaid expenses, estimated legal accruals, valuation allowances for deferred taxes, valuation of investments and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made as information is available. Management believes that these estimates are reasonable and have been discussed with the audit committee; however, actual results could differ from these estimates.
Reclassifications
     Certain prior year amounts shown in the accompanying consolidated financial statements have been reclassified to conform to the 2010 presentation. These reclassifications did not have any effect on total assets, total liabilities, total stockholders’ equity or net income.
Income Taxes
     Taxes on income are provided in accordance with US GAAP. 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 basis of particular assets and liabilities, and the tax effects of net operating loss and capital loss carry forwards. 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. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized as income or expense in the period that included the enactment date. 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 has evaluated its tax position and concluded no valuation allowance on its deferred tax assets is required, as of September 30, 2010. The Company had previously generated a significant federal net operating loss (NOL) deduction which had been utilized over the past several years. During 2009 the carryforward deduction was fully utilized and no further NOL carryforward will be available for federal tax purposes during 2010. For state tax purposes an NOL still exists and as of September 30, 2010 the NOL carryforward equals approximately $2.3 million.

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Goodwill
     Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. The Company follows the provisions of US GAAP in its accounting of goodwill, which requires an annual impairment test for goodwill and intangible assets with indefinite lives. The first step of the impairment test requires that the Company 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 performs the annual impairment testing during the third quarter unless events or circumstances indicate impairment of the goodwill may have occurred before that time. The Company evaluated its goodwill during the third quarter and determined that no impairment was necessary.
     The Company added $687,000 of goodwill in the first quarter of 2009, as a result of the final earnout settlement related to the acquisition of certain assets and liabilities of Concert Group Logistics, LLC. For a more complete analysis of this item refer to Footnote 7 — Related Party Transactions.
Identified Intangible Assets
     The Company follows the provisions of US GAAP in its accounting of identified intangible assets, which establishes accounting standards for the impairment of long-lived assets such as property, plant and equipment and intangible assets subject to amortization. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. During the nine-month periods ended September 30, 2010, and 2009, there was no impairment of intangible assets.
Other Long-Term Assets
     Other long-term assets primarily consist of balances representing various deposits, and the long-term portion of the Company’s non-qualified deferred compensation plan. Also included within this account classification are incentive payments to independent station owners within the Concert Group Logistics network. These payments are made by Concert Group Logistics to certain station owners as an incentive to join the network. These amounts are amortized over the life of each independent station contract and the unamortized portion is recoverable in the event of default under the terms of the agreements.
Estimated Fair Value of Financial Instruments
     The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company’s debt is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of similar maturities.
Earnings per Share
     Earnings per common share are computed in accordance with US GAAP which requires companies to present basic earnings per share and diluted earnings per share.

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     Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
     Diluted earnings per share are computed by dividing net income by the combined weighted average number of shares of common stock outstanding and dilutive options outstanding during the period.
                                 
    Three Months Ended     Nine Months Ended  
    September 30, 2010     September 30, 2009     September 30, 2010     September 30, 2009  
Income from continuing operations
  $ 1,730,000     $ 801,000     $ 4,068,000     $ 1,089,000  
Income from discontinued operations
          10,000             15,000  
 
                       
Net income
  $ 1,730,000     $ 811,000     $ 4,068,000     $ 1,104,000  
 
                       
 
                               
Basic weighted shares outstanding
    32,381,502       32,035,218       32,154,890       32,035,218  
Diluted weighted shares outstanding
    33,008,742       32,138,885       32,741,822       32,142,150  
 
                               
Basic earnings per share
                               
Income from continuing operations
  $ 0.05     $ 0.03     $ 0.13     $ 0.03  
Income from discontinued operations
                       
Net income
    0.05       0.03       0.13       0.03  
 
                               
Diluted earnings per share
                               
Income from continuing operations
    0.05       0.03       0.12       0.03  
Income from discontinued operations
                       
Net income
  $ 0.05     $ 0.03     $ 0.12     $ 0.03  
2. Recent Accounting Pronouncements
     The Company’s management does not believe that recent codified pronouncements by the FASB will have a material impact on the Company’s current or future financial statements.
3. Acquisitions
  First Class (Express-1, Metro Detroit) (Metro Detroit)
     In January of 2009, the Company purchased certain assets and liabilities from First Class Expediting Services Inc. (FCES). FCES was a Rochester Hills; Michigan based company providing regional expedited transportation in the Midwest. The Company paid the former owners of FCES $250,000 in cash and received approximately $40,000 of net assets consisting primarily of fixed assets net of related debt. The Company funded the transaction through cash available from working capital.
     For financial reporting purposes, Metro Detroit is included within the operating results of Express-1. The Company has recognized identifiable intangible assets of $210,000 amortizable over a 2-5 year period.
  LRG (CGL International)
     On October 1, 2009, CGL purchased certain assets and liabilities of Tampa, Florida based LRG International, Inc., an international freight forwarder. The purchase complements and expands CGL’s ability to move international freight competitively. The transaction has an effective date of October 1, 2009. For financial reporting purposes, CGL International is included within the operating results of CGL.
     At closing, the Company paid the former owners of LRG International, Inc. $2.0 million in cash. The Company used its existing line of credit to finance the transaction. On the one year anniversary of the purchase, the Company will pay the former owners $500,000. The transaction also provides for two potential annual earn-out payments totaling $900,000 provided certain performance criteria are met over a two year period. The Company recorded a liability of $737,000 based on the estimated fair value for these earn-outs. The Company has the discretion of paying the additional consideration in the form of cash, stock or any combination thereof.

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     The following table sets forth the components of identifiable intangible assets associated with the acquisition of LRG International, Inc.:
                 
    Fair Value     Useful Lives  
Trademark/name
  $ 220,000     5 years
Association memberships
    160,000     5 years
Customer list
    1,410,000     12 years
Non-compete agreements
    60,000     5 years
 
             
Total identifiable intangible assets
  $ 1,850,000          
 
             
4. Commitments and Contingencies
Litigation
     In the ordinary course of business, the Company may be a party to a variety of legal actions. The Company does not currently anticipate any of these matters or any matters in the aggregate to have a materially adverse effect on the Company’s business or its financial position or results of operations.
5. Debt
Notes Payable and Capital Leases
     The Company enters into notes payable and capital leases with various third parties from time to time to finance certain operational equipment and other assets used in its business operations. Generally, these loans and capital leases bear interest at market rates, and are collateralized with equipment and certain assets of the Company.
     The following table outlines the Company’s debt obligations as of September 30, 2010 and December 31, 2009.
                                 
    Interest rates     Term (months)     As of September 30, 2010     As of December 31, 2009  
Term notes payable
    2.5 %     36     $ 4,167,000     $ 1,400,000  
Capital leases payable
    5% - 18 %     12 - 36       17,000       28,000  
 
                           
Total notes payable and capital leases
                    4,184,000       1,428,000  
Less: current maturities of notes payable and capital leases
                    1,671,000       1,215,000  
 
                           
Non-current maturities of notes payable and capital leases
                  $ 2,513,000     $ 213,000  
 
                           
The Company entered into a new $5.0 million term note March 31, 2010. Commencing April 30, 2010, the term note is payable in 36 consecutive monthly installments consisting of $139,000 in monthly principal payments plus the unpaid interest accrued on the note. Interest is payable at the one-month LIBOR plus 225 basis points (2.51% at September 30, 2010).
6. Revolving Credit Facilities
Line of Credit
     On March 31, 2010, the Company entered a credit facility which provides for a receivables based line of credit of up to $10.0 million. The Company may draw upon the receivables based line of credit the lesser of $10.0 million or 80% of eligible accounts receivable, less amounts outstanding under letters of credit and 50% of the above term loan balance. The proceeds of the line of credit will be used exclusively for working capital purposes.

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     Substantially all the assets of the Company and wholly owned subsidiaries (Express-1, Inc., Concert Group Logistics, Inc., and Bounce Logistics, Inc.) are pledged as collateral securing the Company’s performance under the credit facility and in Note 5 above. The line of credit bears interest based upon one-month LIBOR with an initial increment of 200 basis points.
     The line of credit and the term note referenced in Note 5 above carry certain covenants related to the Company’s financial performance. Included among the covenants are a fixed charge coverage ratio and a total funded debt to earnings before interest, taxes, depreciation and amortization ratio. As of September 30, 2010, the Company was in compliance with all terms under the line of credit and the above term note and no events of default existed under the terms of the agreements.
     The Company had outstanding standby letters of credit at September 30, 2010 of $410,000 related to insurance policies either continuing in force or recently canceled. Amounts outstanding for letters of credit reduce the amount available under the line of credit, dollar-for-dollar.
     Available capacity in excess of outstanding borrowings under the line was approximately $5.5 million as limited by 80% of the Company’s eligible receivables as of September 30, 2010. The line of credit carries a maturity date of March 31, 2012. As of September 30, 2010 the line of credit balance was $4.1 million.
7. Related Party Transactions
     In January 2008, in conjunction with the Company’s purchase of substantially all assets of Concert Group Logistics, LLC (“Concert Transaction”), Daniel Para, was appointed to the Board of Directors of the Company. Prior to the completion of the Concert Transaction, Mr. Para served as the Chief Executive Officer of Concert Group Logistics, LLC, and was its largest stockholder. The Company purchased substantially all the assets of Concert Group Logistics, LLC for $9.0 million in cash, 4,800,000 shares of the Company’s common stock and the assumption of certain liabilities. The transaction contained performance targets, whereby the former owners of Concert Group Logistics, LLC could earn up to $2.0 Million of additional consideration. During March of 2009, the final earnout settlement with CGL was completed for consideration totaling $1.2 million that included a $1.1 million cash payment in addition to the forgiveness of an $87,000 debt. The settlement included a general release between the Company and the former owners of Concert Group Logistics, LLC. Subsequent to the release, the Company has no future obligations related to the earnout provisions of the Concert Transaction. As the largest shareholder of Concert Group Logistics, LLC, Mr. Para received, either directly or through his family trusts and partnerships, approximately 85% of the proceeds transferred in the transaction. Immediately after the transaction, Mr. Para became the largest shareholder of the Company, through holdings attributable to himself and Dan Para Investments, LLC.
     In April 2009, the Company contracted the services of Daniel Para to serve as the Director of Business Development. Mr. Para will manage all Company activity related to mergers and acquisitions. His remuneration for these services was $10,000 per month in 2009. For the six months ended June 30, 2010, his remuneration was $53,000. Effective June 1, 2010 Dan Para, was appointed the CEO of CGL and is no longer serving as the Director of Business Development.
     In January 2008, in conjunction with the Concert Group Logistics acquisition, the Company entered into a lease for approximately 6,000 square feet of office space located within an office complex at 1430 Branding Avenue, Downers Grove, Illinois 60515. The lease calls for, among other general provisions, rent payments in the amount of $101,000, $104,000 and $107,000 to be paid for 2010 and the two subsequent years thereafter. The building is owned by an Illinois Limited Liability Company, which has within its ownership group, Daniel Para, the former CEO of Concert Group Logistics, LLC.
     The above transactions are not necessarily indicative of amounts, terms and conditions that the Company may have received in transactions with unrelated third parties.

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8. Operating Segments
     The Company has four reportable segments based on the type of service provided, to its customers:
     Express-1, Inc. (Express-1) — provides time critical expedited transportation to its customers. This typically involves dedicating one truck and driver to a load which has a specified time delivery requirement. Most of the services provided are completed through a fleet of exclusive use vehicles that are owned and operated by independent contract drivers. The use of non-owned resources to provide transportation services minimizes the amount of capital investment required and is often described with the terms “non-asset” or “asset-light.” In January of 2009, certain assets and liabilities of First Class Expediting (Metro Detroit) were purchased to complement the operations of Express-1. The financial reporting of this operation has been included with Express-1.
     Concert Group Logistics, Inc. (CGL) — provides freight forwarding services through a chain of independently owned stations located throughout the United States. These stations are responsible for selling and operating freight forwarding transportation services within their geographic area under the authority of CGL. In October of 2009, certain assets and liabilities of LRG International (CGL International) were purchased to complement the operations of CGL. The financial reporting of this operation has been included with CGL.
     Bounce Logistics, Inc. (Bounce) — provides premium truckload brokerage transportation services to its customers throughout the Unites States.
     Corporate — The costs of the Company’s Board of Directors, executive team and certain corporate costs associated with operating as a public company are referred to as “corporate” charges. In addition to the aforementioned items, the Company also commonly records items such as its income tax provision and other charges that are reported on a consolidated basis within the corporate classification item.
     The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Substantially all intercompany sales prices are market based. The Company evaluates performance based on operating income of the respective business segments.
     The following schedule identifies select financial data for each of the business segments.
Express-1 Expedited Solutions, Inc
Segment Data
Three and Nine Months Ended September 30, 2010 and 2009
                                                         
       
                                            Total     Discontinued  
            Concert Group                             Continuing     Operations  
    Express-1     Logistics     Bounce     Corporate     Eliminations     Operations     E-1 Dedicated  
Three Months Ended September 30, 2010
                                                       
Revenues
  $ 21,407,000     $ 18,586,000     $ 5,696,000     $     $ (1,241,000 )   $ 44,448,000     $  
Operating income (loss) from continuing operations
    2,532,000       552,000       280,000       (444,000 )             2,920,000        
Depreciation and amortization
    172,000       140,000       8,000       5,000               325,000        
Interest expense
            23,000       9,000                     32,000        
Tax provision
    980,000       193,000       109,000       (172,000 )             1,110,000        
Goodwill
    7,737,000       9,222,000                           16,959,000        
Total assets
    26,505,000       26,247,000       3,694,000       24,179,000       (22,873,000 )     57,752,000        
Three Months Ended September 30, 2009
                                                     
Revenues
    14,704,000       8,945,000       3,077,000             (515,000 )     26,211,000        
Operating income (loss) from continuing operations
    1,407,000       287,000       181,000       (430,000 )             1,445,000       19,000  
Depreciation and amortization
    176,000       96,000       7,000                     279,000        
Interest expense
          19,000       6,000       1,000               26,000        
Tax provision
                      599,000               599,000       9,000  
Goodwill
    7,737,000       7,865,000                           15,602,000        
Total assets
    24,932,000       17,985,000       1,891,000       13,750,000       (14,238,000 )     44,320,000        
Nine Months Ended September 30, 2010
                                                       
Revenues
    58,176,000       47,598,000       13,494,000             (2,838,000 )     116,430,000        
Operating income (loss) from continuing operations
    6,663,000       1,363,000       518,000       (1,459,000 )             7,085,000        
Depreciation and amortization
    505,000       484,000       23,000       14,000               1,026,000        
Interest expense
            116,000       23,000       1,000               140,000        
Tax provision
    2,741,000       510,000       204,000       (680,000 )             2,775,000        
Goodwill
    7,737,000       9,222,000                           16,959,000        
Total assets
    26,505,000       26,247,000       3,694,000       24,179,000       (22,873,000 )     57,752,000        
Nine Months Ended September 30, 2009
                                                       
Revenues
    33,682,000       28,739,000       7,089,000             (984,000 )     68,526,000       666,000  
Operating income (loss) from continuing operations
    2,264,000       838,000       308,000       (1,361,000 )             2,049,000       28,000  
Depreciation and amortization
    537,000       278,000       20,000                     835,000       1,000  
Interest expense
          52,000       18,000       4,000               74,000        
Tax provision
                      858,000               858,000       13,000  
Goodwill
    7,737,000       7,865,000                           15,602,000        
Total assets
  $ 24,932,000     $ 17,985,000     $ 1,891,000     $ 13,750,000     $ (14,238,000 )   $ 44,320,000     $  

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9. Discontinued Operations
     During the fourth quarter of 2008, the Company discontinued it Express-1 Dedicated business unit. The Company had operated this unit under the terms of a dedicated contract to supply transportation services to a domestic automotive manufacturer.
     Substantially all of the assets of Express-1 Dedicated have been redeployed in other operating units of the Company, and therefore, no impairment charges were recorded on the Company’s financial statements during 2009. Management does not anticipate recording any additional material activity on its discontinued operations in future periods.
     The following table reflects the revenue, operating expenses, gross margins, and net income of the Company’s discontinued Express-1 Dedicated business unit for the three and nine-month period ending September 30, 2009.
                 
    Three Months Ended     Nine Months Ended  
    September 30, 2009     September 30, 2009  
Operating revenue
  $     $ 666,000  
Operating expense
    (19,000 )     532,000  
 
           
Gross margin
    19,000       134,000  
Sales, general, and administrative expenses
          106,000  
 
           
Income from continuing operations before tax provision
    19,000       28,000  
Tax provision
    9,000       13,000  
 
           
Net income
  $ 10,000     $ 15,000  
 
           
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.
     Forward-Looking Statements. This Form 10-Q 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. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth of the Company’s business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances.
     Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Factors that could adversely affect actual results and performance include, among others, potential fluctuations in quarterly operating results and expenses, government regulation, technology change and competition. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
Critical Accounting Policies
     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. In certain circumstances, those estimates and assumptions can affect amounts reported in the accompanying consolidated financial statements. We have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts will be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2009, includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. For the period ended September 30, 2010, there were no significant changes to our critical accounting policies.

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New Pronouncements
     The Company’s management does not believe that recent codified pronouncements by the FASB will have a material impact on the Company’s current or future financial statements.
Executive Summary
     Express-1 Expedited Solutions, Inc. (the “Company,” “we,” “our” and “us”), a Delaware corporation, is a transportation services organization focused upon premium logistics solutions provided through its non-asset based or asset-light operating units. The Company’s operations are provided through three distinct but complementary operating divisions, each with its own President. Our wholly owned subsidiaries include; Express-1, Inc. (“Express-1”), Concert Group Logistics, Inc. (“Concert Group Logistics” or “CGL”) and Bounce Logistics, Inc. (“Bounce Logistics”, or “Bounce”). These operating divisions are more fully outlined in the following table.
             
Business Divisions   Primary Office Location   Premium Industry Niche   Initial Date
Express-1
  Buchanan, Michigan   Expedited Transportation   August 2004
Concert Group Logistics
  Downers Grove, Illinois   Freight Forwarding   January 2008
Bounce Logistics
  South Bend, Indiana   Premium Truckload Brokerage   March 2008
     Express-1 and CGL were both existing companies acquired as part of two separate acquisitions. Express-1, Inc. was formed in 1989, while CGL was formed in 2001. Bounce Logistics was a start-up operation formed in March 2008.
     Express-1, Inc. (Express-1) — provides time critical expedited transportation to its customers. This typically involves dedicating one truck and driver to a load which has a specified time delivery requirement. Most of the services provided are completed through a fleet of exclusive use vehicles that are owned and operated by independent contract drivers. The use of non-owned resources to provide transportation services minimizes the amount of capital investment required and is often described with the terms “non-asset” or “asset-light.” In January of 2009, certain assets and liabilities of First Class Expediting (Metro Detroit) were purchased to complement the operations of Express-1. The financial reporting of this operation has been included with Express-1.
     Concert Group Logistics, Inc. (CGL) — provides freight forwarding services through a chain of independently owned stations located throughout the United States. These stations are responsible for selling and operating freight forwarding transportation services within their geographic area under the authority of CGL. In October of 2009, certain assets and liabilities of LRG International (CGL International) were purchased to complement the operations of CGL. The financial reporting of this operation has been included with CGL.
     Bounce Logistics, Inc. (Bounce) — provides premium truckload brokerage transportation services to its customers throughout the Unites States.
Other Reporting Disclosures
     During the fourth quarter of 2008, the Company discontinued its Express-1 Dedicated business unit. The Company had operated this unit under the terms of a dedicated contract to supply transportation services to a domestic automotive manufacturer. The automotive manufacturer did not renew the contract and Express-1 Dedicated ceased operations in February of 2009. The financial results of this discontinued business unit for all reported periods are included as discontinued operations for reporting purposes.
     Throughout our reports, we refer to the impact of fuel on our business. For purposes of these references, we have considered the impact of fuel surcharge revenues, and the related fuel surcharge expenses only as they relate to our Express-1 business unit. The expediting transportation industry commonly negotiates both fuel surcharges charged to its customers as well as fuel surcharges paid to its carriers. Therefore, we feel that this approach, most readily conveys the impact of fuel revenues, costs, and the resulting gross margin within this business unit.
     Alternatively, within our other two units, Concert Group Logistics and Bounce Logistics, fuel charges to our customers are not commonly negotiated and identified separately from total revenue and the associated cost of transportation. We therefore, have not included an analysis of fuel surcharges for these two operating units. We believe this is a common practice within the freight forwarding and freight brokerage business sectors.
     We often refer to the costs of our Board of Directors, our executive team and certain operating costs associated with operating as a public company as “corporate” charges. In addition to the aforementioned items, we also record items such as our income tax provision and other charges that are reported on a consolidated basis within the corporate line items of the following tables.

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For the three months ended September 30, 2010 compared to the three months ended September 30, 2009
The following tables are provided to allow users to visualize quarterly results within our major reporting classifications. The tables do not replace the financial statements, notes thereto, or management discussion contained within this report on Form 10-Q. We encourage users to review these items for a more complete understanding of our financial position and results of operations.
Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Three Months Ended September 30,
(Unaudited)
                                                 
                Percent of  
    Quarter to Date     Quarter to Quarter Change     Business Unit Revenue  
    2010     2009     In Dollars     In Percentage     2010     2009  
Revenues
                                               
Express-1
  $ 21,407,000     $ 14,704,000     $ 6,703,000       45.6 %     48.2 %     56.1 %
Concert Group Logistics
    18,586,000       8,945,000       9,641,000       107.8 %     41.8 %     34.1 %
Bounce Logistics
    5,696,000       3,077,000       2,619,000       85.1 %     12.8 %     11.7 %
Intercompany eliminations
    (1,241,000 )     (515,000 )     (726,000 )     -141.0 %     -2.8 %     -1.9 %
 
                                   
Total revenues
    44,448,000       26,211,000       18,237,000       69.6 %     100.0 %     100.0 %
 
                                   
 
                                               
Direct expenses
                                               
Express-1
    16,096,000       11,430,000       4,666,000       40.8 %     75.2 %     77.7 %
Concert Group Logistics
    16,699,000       8,026,000       8,673,000       108.1 %     89.8 %     89.7 %
Bounce Logistics
    4,755,000       2,541,000       2,214,000       87.1 %     83.5 %     82.6 %
Intercompany eliminations
    (1,241,000 )     (515,000 )     (726,000 )     -141.0 %     100.0 %     100.0 %
 
                                   
Total direct expenses
    36,309,000       21,482,000       14,827,000       69.0 %     81.7 %     82.0 %
 
                                   
 
                                               
Gross margin
                                               
Express-1
    5,311,000       3,274,000       2,037,000       62.2 %     24.8 %     22.3 %
Concert Group Logistics
    1,887,000       919,000       968,000       105.3 %     10.2 %     10.3 %
Bounce Logistics
    941,000       536,000       405,000       75.6 %     16.5 %     17.4 %
 
                                   
Total gross margin
    8,139,000       4,729,000       3,410,000       72.1 %     18.3 %     18.0 %
 
                                   
 
                                               
Selling, general & administrative
                                               
Express-1
    2,779,000       1,867,000       912,000       48.8 %     13.0 %     12.7 %
Concert Group Logistics
    1,335,000       632,000       703,000       111.2 %     7.2 %     7.1 %
Bounce Logistics
    661,000       355,000       306,000       86.2 %     11.6 %     11.5 %
Corporate
    444,000       430,000       14,000       3.3 %     1.0 %     1.6 %
 
                                   
Total selling, general & administrative
    5,219,000       3,284,000       1,935,000       58.9 %     11.7 %     12.5 %
 
                                   
 
                                               
Operating income from continuing operations
                                               
Express-1
    2,532,000       1,407,000       1,125,000       80.0 %     11.8 %     9.6 %
Concert Group Logistics
    552,000       287,000       265,000       92.3 %     3.0 %     3.2 %
Bounce Logistics
    280,000       181,000       99,000       54.7 %     4.9 %     5.9 %
Corporate
    (444,000 )     (430,000 )     (14,000 )     -3.3 %     -1.0 %     -1.6 %
 
                                   
Operating income from continuing operations
    2,920,000       1,445,000       1,475,000       102.1 %     6.6 %     5.5 %
 
                                   
 
                                               
Interest expense
    32,000       26,000       6,000       23.1 %     0.1 %     0.1 %
Other expense
    48,000       19,000       29,000       152.6 %     0.1 %     0.1 %
 
                                   
Income from continuing operations before tax
    2,840,000       1,400,000       1,440,000       102.9 %     6.4 %     5.3 %
 
                                               
Tax provision
    1,110,000       599,000       511,000       85.3 %     2.5 %     2.3 %
 
                                   
Income from continuing operations
    1,730,000       801,000       929,000       116.0 %     3.9 %     3.1 %
 
                                               
Loss from discontinued operations, net of tax
          10,000       (10,000 )     -100.0 %     0.0 %     0.0 %
 
                                   
Net income
  $ 1,730,000     $ 811,000     $ 919,000       113.3 %     3.9 %     3.1 %
 
                                   
 
                                               

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Express-1 Expedited Solutions, Inc.
Summary of Selling, General & Administrative Expenses
For the Three Months Ended September 30,
(Unaudited)
                                 
    Quarter to Date     Quarter to Quarter Change  
    2010     2009     In Dollars     In Percentage  
Express-1, Inc.
                               
Salaries & benefits
  $ 1,919,000     $ 1,309,000     $ 610,000       46.6 %
Purchased services
    339,000       165,000       174,000       105.5 %
Depreciation & amortization
    123,000       129,000       (6,000 )     -4.7 %
Other
    398,000       264,000       134,000       50.8 %
 
                       
Total selling, general & administrative
    2,779,000       1,867,000       912,000       48.8 %
 
                       
 
                               
Concert Group Logistics
                               
Salaries & benefits
    789,000       377,000       412,000       109.3 %
Purchased services
    64,000       20,000       44,000       220.0 %
Depreciation & amortization
    140,000       129,000       11,000       8.5 %
Other
    342,000       106,000       236,000       222.6 %
 
                       
Total selling, general & administrative
    1,335,000       632,000       703,000       111.2 %
 
                       
 
                               
Bounce
                               
Salaries & benefits
    472,000       247,000       225,000       91.1 %
Purchased services
    34,000       18,000       16,000       88.9 %
Depreciation & amortization
    8,000       7,000       1,000       14.3 %
Other
    147,000       83,000       64,000       77.1 %
 
                       
Total selling, general & administrative
    661,000       355,000       306,000       86.2 %
 
                       
 
                               
Corporate
                               
Salaries & benefits
    118,000       86,000       32,000       37.2 %
Purchased services
    191,000       232,000       (41,000 )     -17.7 %
Depreciation & amortization
    5,000             5,000       100.0 %
Other
    130,000       112,000       18,000       16.1 %
 
                       
Total selling, general & administrative
    444,000       430,000       14,000       3.3 %
 
                       
 
                               
Total SG&A expenses
                               
Total salaries & benefits
    3,298,000       2,019,000       1,279,000       63.3 %
Total purchased services
    628,000       435,000       193,000       44.4 %
Total depreciation & amortization
    276,000       265,000       11,000       4.2 %
Total other
    1,017,000       565,000       452,000       80.0 %
 
                       
Total selling, general & administrative
  $ 5,219,000     $ 3,284,000     $ 1,935,000       58.9 %
 
                       

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     Consolidated Results
     Solid growth in all three operating divisions continued in the third quarter of 2010 when compared to the same quarter in 2009. We continue to believe that our 2009 investment in sales diversification and maintaining our Express-1 fleet have paid big dividends in 2010. The sales team has produced an increasingly diverse customer base, and our successful 2009 acquisitions of First Class and LRG International have been integrated and continue to grow and prosper. Express-1 has experienced solid overall revenue growth with its international department becoming a major factor in Express-1’s service offerings. Additionally, CGL and Bounce are seeing strong organic growth as the freight environment continues to improve. Based on the above, gross revenues increased to $44.4 million in the third quarter as compared to $26.2 million in the same period in 2009, representing a 69.6% increase.
     Direct expenses represent expenses attributable to freight transportation. During the third quarter of 2010, these expenses continued to maintain a direct relationship to our operating revenues. Our “asset light” operating model provides transportation capacity through variable cost transportation alternatives, and therefore enables us to control our operating costs as our volumes fluctuate. Our primary means of providing capacity are through our fleet of independent contractors and brokerage relationships. We continue to view this operating model as a strategic advantage. Our overall gross margin improved to 18.3% for the third quarter of 2010 as compared to 18.0% for the third quarter of 2009 due in large part to improved margins at Express-1. We believe that this is also a positive sign for the economy as overall industry capacity shortages coupled with economic improvements continue to put upward pressure on margins.
     We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the third quarter of 2010 to 11.7% as compared to 12.5% in the comparable period in 2009. Overall, selling, general and administrative (SG&A) expenses increased by $1.9 million for the three months ended September 30, 2010 compared to the same period in 2009. Salaries and benefits represented $1.3 million of the increased SG&A costs and were incurred due to the increased business volumes in addition to reestablishing some of the benefits that were eliminated in 2009. The current percentage of 11.7% is consistent with historical trends and we believe this percentage is sustainable throughout the remainder of the year as additional volumes have contributed to our efficiencies.
     Net income for the quarter ended September 30, 2010 totaled $1.7 million compared to $811,000 for the same quarter in 2009 representing an increase of 113.3%. This positive trend reflects the overall improvement in the economy in addition to efficiencies garnered during the economic downturn. This positive trend also reflects positive impacts due to acquisition activity over the past two years.
     Express-1
     For the fourth consecutive quarter, Express-1 generated record quarterly revenues of $21.4 million in the third quarter as revenue grew by 45.6% compared to the same period in 2009. Express-1’s continued investment in sales diversification has paid off handsomely as it has expanded its presence into other markets. Also, the Company’s investment in its Mexican freight operation has exceeded management’s expectations by providing approximately 17.0% of Express-1’s revenue for the quarter. During the quarter, home appliance, and retail business sectors have also contributed to the Company surpassing previous year’s levels and have contributed to our overall improvement in diversifying our customer base which historically has been more dependent on the automotive sector. Additionally, our Detroit Metro office (formerly First Class Expedite Service) continued to provide a boost to our business by serving as the key contact for certain large customer relationships. In the quarter, the Detroit office tendered 518 shipments with our main office, and handled approximately 6,000 shipments with their Detroit based fleet. Express-1 has historically rebounded quickly from recessions as the expediting industry in general is typically one of the first benefactors of a recovering economy.
     Fuel prices have increased resulting in a corresponding increase in fuel surcharge as a percentage of revenue in the third quarter of 2010. For the three month period ended September 30, 2010, fuel surcharge revenues represented 12.1% of our revenue as compared to 10.2% in the same period in 2009. Rising fuel prices tend to have a negative impact on our gross margin percentage since these revenues are substantially passed through to our owner operators. We believe that any negative margin impact from fuel will be offset by pricing adjustments allowed by the market due to tightening truck capacity.
     Express-1’s gross margin percentage increased to 24.8% for the third quarter of 2010 compared to 22.3% in the same quarter in 2009. We believe that margins will remain somewhat consistent moving forward in 2010 as tightening capacity has allowed the Company to gain margin with targeted revenue increases. We are somewhat cautious with our anticipated margin moving forward due to the fact that direct transportation cost pressures due to fuel increases and an overall lack of capacity will offset any upside gains that the market might allow on the revenue side.

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     Selling, general and administrative expenses increased slightly in the third quarter of 2010 to 13.0% as compared to 12.7% in the third quarter of 2009. Overall, selling, general and administrative (SG&A) expenses increased by $912,000 in the third quarter of 2010 compared to the same period in 2009. The current percentage of 13.0% is consistent with historical trends and we believe this percentage is sustainable throughout the remainder of the year. Increases in salaries and benefits added $610,000 to the SG&A, compared to the same quarter in 2009. The increase in this area resulted from increased business volumes in addition to the reestablishment of benefits that were eliminated in 2009.
     For the quarter ended September 30, 2010, Express-1 generated income from operations before tax of $2.5 million compared to $1.4 million in the same quarter in 2009 representing an increase of 80.0%. Management remains optimistic about the remainder of the year as the overall economy improves and trucking capacity tightens.
     Concert Group Logistics (CGL)
     CGL continued to rebound from its 2009 results. CGL’s third quarter revenue was $18.6 million which compared favorably to revenues of $8.9 million in 2009 representing an increase of 107.8%. The purchase of certain assets and liabilities of LRG International (CGL International) in October of 2009, contributed to the revenue increases during the third quarter as compared to the same period in 2009. CGL International (formerly LRG International) revenues represented $4.0 million or 21.5% of CGL’s third quarter’s revenue.
     Direct expenses of $16.7 million consist primarily of payments for purchased transportation in addition to payments to CGL’s independent offices that control the overall operation of customer shipments. CGL International’s direct expense represented $3.4 million or 20.4% of the total direct expense of CGL. As a percentage of CGL revenue, direct expenses represented 89.8% for the third quarter of 2010 as compared to 89.7% for the same quarter in 2009. We anticipate slight improvements in CGL’s gross margin moving forward due to CGL International being a company-owned office with less of its costs being reflected as direct expenses. These costs relate to the operational activities of the 2 CGL International branches in Tampa and Miami and have been included in the SG&A expense line item for financial presentation purposes.
     Selling, general and administrative expenses increased in the third quarter of 2010 by $703,000 as compared to the same period in 2009. These cost increases relate primarily to additional costs of $355,000 associated with running CGL International as Company owned branches. These additional costs represent a shift from direct costs to SG&A costs due to CGL International’s company owned status. Total SG&A costs of $1.3 million for the third quarter represented an increase of $703,000 from the same quarter in 2009. The majority of this increase, $412,000 was due to increased payroll related to increased volumes and revenues generated during 2010. Additionally, benefits that were discontinued during the recession of 2009 were reestablished during 2010 and have also contributed to the increased costs in the third quarter when compared to the prior year. As a percentage to revenue SG&A costs increased slightly to 7.2% in the third quarter of 2010 as compared to 7.1% in the third quarter of 2009. We anticipate the current SG&A percentage of revenue being sustained for the remainder of the year based on the additional operating costs associated with CGL International being classified on this line item for financial statement presentation. Additionally, other expenses increased by $291,000 in the third quarter of 2010 primarily relating to bad debts incurred during the quarter in addition to other expenses incurred at CGL International.
     For the quarter ended September 30, 2010, Concert Group Logistics generated income from operations before tax of $552,000 representing an increase of 92.3% from the comparable period in 2009. Approximately $220,000 or 39.9% of CGL’s operating income was generated at CGL International. Again, this is due primarily to an improving freight environment and we continue to anticipate favorable results for the remainder of the year as compared to 2009.
     Management continues to focus on the expansion of its independent office network, and is actively pursuing strategic opportunities. As of September 30, 2010 the Company maintained a network of 23 independent offices and 2 Company owned branches as compared to 26 independent offices as of September 30, 2009.

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Bounce Logistics
     Bounce continues to see significant growth as its third quarter of 2010 revenues of $5.7 million represented an 85.1% increase over 2009 revenues in the comparable period. We believe this is reflective of an improving economy and Bounce’s aggressive growth strategy. We continue to be very optimistic about growth potential as economic conditions improve in 2010.
     In the third quarter of 2010 Bounces’ direct transportation expenses increased to 83.5% as a percentage of revenue as compared to 82.6% in the third quarter of 2009. This resulted in Bounces’ gross margin being reduced to 16.5% as compared to 17.4% in the comparable period in 2009. We believe the margin for the remainder of 2010 will approximate our current percentage as trucking capacity tightens creating upward pressure on purchased transportation. We believe that volume and price increases will more than offset the margin reduction as the economy continues to improve. We continue to have confidence in Bounce’s ability to grow and access truck capacity in 2010.
     Selling, general and administrative expenses increased by $306,000 in the third quarter of 2010 compared to the same period in 2009. Increases in payroll and related benefits accounted for $225,000 of the increase during the quarter as compared to the same quarter in 2009. As mentioned previously, increased staffing due to volume increases in addition to reestablished benefits that were discontinued in 2009 accounted for this difference. Overall, our SG&A percentage to revenue increased slightly to 11.6% in the third quarter of 2010 as compared to 11.5% in the same period in 2009 and we anticipate that this percentage will be sustainable throughout the remainder of 2010.
     The above items have resulted in Bounce generating operating income of $280,000 in the third quarter of 2010 compared to $181,000 in the same period in 2009. Management continues to be optimistic regarding the future growth and profitability potential of Bounce for the remainder of 2010.
Corporate
     Corporate costs for the third quarter of 2010 increased by $14,000 as compared to the same quarter in 2009. As a percentage of revenue, corporate costs decreased to 1.0% in the third quarter of 2010 from 1.6% in the same period in 2009. We anticipate holding these costs below 2009 levels as increased revenues have produced favorable efficiencies in scale.
For the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009
The following tables are provided to allow users to visualize quarterly results within our major reporting classifications. The tables do not replace the financial statements, notes thereto, or management discussion contained within this report on Form 10-Q. We encourage users to review these items for a more complete understanding of our financial position and results of operations.

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Express-1 Expedited Solutions, Inc.
Summary Financial Table
For the Nine Months Ended September 30,
(Unaudited)
                                                 
                Percent of  
    Year to Date     Year to Year Change     Business Unit Revenue  
    2010     2009     In Dollars     In Percentage     2010     2009  
Revenues
                                               
Express-1
  $ 58,176,000     $ 33,682,000     $ 24,494,000       72.7 %     50.0 %     49.2 %
Concert Group Logistics
    47,598,000       28,739,000       18,859,000       65.6 %     40.9 %     41.9 %
Bounce Logistics
    13,494,000       7,089,000       6,405,000       90.4 %     11.6 %     10.3 %
Intercompany eliminations
    (2,838,000 )     (984,000 )     (1,854,000 )     -188.4 %     -2.5 %     -1.4 %
 
                                   
Total revenues
    116,430,000       68,526,000       47,904,000       69.9 %     100.0 %     100.0 %
 
                                   
 
                                               
Direct expenses
                                               
Express-1
    44,358,000       26,099,000       18,259,000       70.0 %     76.2 %     77.5 %
Concert Group Logistics
    42,653,000       25,952,000       16,701,000       64.4 %     89.6 %     90.3 %
Bounce Logistics
    11,280,000       5,877,000       5,403,000       91.9 %     83.6 %     82.9 %
Intercompany eliminations
    (2,838,000 )     (984,000 )     (1,854,000 )     -188.4 %     100.0 %     100.0 %
 
                                   
Total direct expenses
    95,453,000       56,944,000       38,509,000       67.6 %     82.0 %     83.1 %
 
                                   
 
                                               
Gross margin
                                               
Express-1
    13,818,000       7,583,000       6,235,000       82.2 %     23.8 %     22.5 %
Concert Group Logistics
    4,945,000       2,787,000       2,158,000       77.4 %     10.4 %     9.7 %
Bounce Logistics
    2,214,000       1,212,000       1,002,000       82.7 %     16.4 %     17.1 %
 
                                   
Total gross margin
    20,977,000       11,582,000       9,395,000       81.1 %     18.0 %     16.9 %
 
                                   
 
                                               
Selling, general & administrative
                                               
Express-1
    7,155,000       5,319,000       1,836,000       34.5 %     12.3 %     15.8 %
Concert Group Logistics
    3,582,000       1,949,000       1,633,000       83.8 %     7.5 %     6.8 %
Bounce Logistics
    1,696,000       904,000       792,000       87.6 %     12.6 %     12.8 %
Corporate
    1,459,000       1,361,000       98,000       7.2 %     1.3 %     2.0 %
 
                                   
Total selling, general & administrative
    13,892,000       9,533,000       4,359,000       45.7 %     11.9 %     13.9 %
 
                                   
 
                                               
Operating income from continuing operations
                                               
Express-1
    6,663,000       2,264,000       4,399,000       194.3 %     11.5 %     6.7 %
Concert Group Logistics
    1,363,000       838,000       525,000       62.6 %     2.9 %     2.9 %
Bounce Logistics
    518,000       308,000       210,000       68.2 %     3.8 %     4.3 %
Corporate
    (1,459,000 )     (1,361,000 )     (98,000 )     -7.2 %     -1.3 %     -2.0 %
 
                                   
Operating income from continuing operations
    7,085,000       2,049,000       5,036,000       245.8 %     6.1 %     3.0 %
 
                                   
 
                                               
Interest expense
    140,000       74,000       66,000       89.2 %     0.1 %     0.1 %
Other expense
    102,000       28,000       74,000       264.3 %     0.1 %     0.0 %
 
                                   
Income from continuing operations before tax
    6,843,000       1,947,000       4,896,000       251.5 %     5.9 %     2.8 %
 
                                               
Tax provision
    2,775,000       858,000       1,917,000       223.4 %     2.4 %     1.3 %
 
                                   
Income from continuing operations
    4,068,000       1,089,000       2,979,000       273.6 %     3.5 %     1.6 %
 
                                               
Income from discontinued operations, net of tax
          15,000       (15,000 )     -100.0 %     0.0 %     0.0 %
 
                                   
Net income
  $ 4,068,000     $ 1,104,000     $ 2,964,000       268.5 %     3.5 %     1.6 %
 
                                   

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Express-1 Expedited Solutions, Inc.
Summary of Selling, General & Administrative Expenses
For the Nine Months Ended September 30,
(Unaudited)
                                 
    Year to Date     Year to Year Change  
    2010     2009     In Dollars     In Percentage  
Express-1, Inc.
                               
Salaries & benefits
  $ 5,075,000     $ 3,722,000     $ 1,353,000       36.4 %
Purchased services
    866,000       547,000       319,000       58.3 %
Depreciation & amortization
    362,000       394,000       (32,000 )     -8.1 %
Other
    852,000       656,000       196,000       29.9 %
 
                       
Total selling, general & administrative
    7,155,000       5,319,000       1,836,000       34.5 %
 
                       
 
                               
Concert Group Logistics
                               
Salaries & benefits
    2,002,000       1,076,000       926,000       86.1 %
Purchased services
    154,000       149,000       5,000       3.4 %
Depreciation & amortization
    484,000       394,000       90,000       22.8 %
Other
    942,000       330,000       612,000       185.5 %
 
                       
Total selling, general & administrative
    3,582,000       1,949,000       1,633,000       83.8 %
 
                       
 
                               
Bounce
                               
Salaries & benefits
    1,216,000       580,000       636,000       109.7 %
Purchased services
    60,000       51,000       9,000       17.6 %
Depreciation & amortization
    23,000       20,000       3,000       15.0 %
Other
    397,000       253,000       144,000       56.9 %
 
                       
Total selling, general & administrative
    1,696,000       904,000       792,000       87.6 %
 
                       
 
                               
Corporate
                               
Salaries & benefits
    421,000       328,000       93,000       28.4 %
Purchased services
    695,000       671,000       24,000       3.6 %
Depreciation & amortization
    14,000             14,000       100.0 %
Other
    329,000       362,000       (33,000 )     -9.1 %
 
                       
Total selling, general & administrative
    1,459,000       1,361,000       98,000       7.2 %
 
                       
 
                               
Total SG&A expenses
                               
Total salaries & benefits
    8,714,000       5,706,000       3,008,000       52.7 %
Total purchased services
    1,775,000       1,418,000       357,000       25.2 %
Total depreciation & amortization
    883,000       808,000       75,000       9.3 %
Total other
    2,520,000       1,601,000       919,000       57.4 %
 
                       
Total selling, general & administrative
  $ 13,892,000     $ 9,533,000     $ 4,359,000       45.7 %
 
                       

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     Consolidated Results
     The nine months ended September 30, 2010 represented a significant rebound from the same period in 2009 due to our focus on sales diversification and maintaining our fleet at Express-1 over the past year. Revenues for each of the business units saw significant increases as compared to 2009. In total, revenues of $116.4 million for the first nine months of 2010 represented a 69.9% increase as compared to the same period in 2009. We believe that our focus on business diversity and investing resources in sales during 2009 has positioned the Company well in the improved transportation environment. We continue to see improved revenues as compared to 2009 for the remainder of 2010.
     Direct expenses represent expenses attributable to freight transportation. During the initial nine months of 2010, these expenses continued to maintain a direct relationship to our operating revenues. Our “asset light” operating model provides transportation capacity through variable cost transportation alternatives, and therefore enables us to control our operating costs as our volumes fluctuate. Our primary means of providing capacity are through our fleet of independent contractors and brokerage relationships. We continue to view this operating model as a strategic advantage. Our overall gross margin increased to 18.0% for the initial nine months of 2010 as compared to 16.9% for the same period in 2009 due in large part to improved margins at Express-1 and Concert Group Logistics. We believe that this is also a positive sign for the economy as overall industry capacity shortages coupled with an improving freight environment continue to put upward pressure on margins.
     We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the first nine months of 2010 to 11.9% as compared to 13.9% in the comparable period in 2009. Overall, selling, general and administrative (SG&A) expenses increased by $4.4 million for the initial nine months of 2010 compared to the same period in 2009. The current percentage of 11.9% is consistent with historical trends and we believe this percentage is sustainable throughout the remainder of the year as additional volumes have contributed to our efficiencies. Increased salaries and benefits are responsible for $3.0 million of the increase in SG&A expense and are a direct result of increased staffing costs related to increased volumes in addition to benefits that were reestablished in 2010 after being eliminated in 2009. Additionally, other costs increased by $919,000 and represented additional costs of running CGL International as a Company branch in addition to higher than normal bad debts incurred during year at CGL.
     Operating income from all three operating divisions reflected significant increases as compared to the same nine month period in 2009. Net income for the nine month period ended September 30, 2010 totaled $4.1 million compared to $1.1 million for the same period in 2009 representing an increase of 268.5%. This positive trend reflects the overall improvement in the freight environment in addition to efficiencies garnered during the economic downturn. This positive trend also reflects positive impacts due to acquisition activity over the past two years.
     Express-1
     Express-1 generated record revenues of $58.2 million in the nine month period ended September 30, 2010, as revenue grew by 72.7% compared to the same period in 2009. Express-1’s continued investment in sales diversification and maintaining its fleet of vehicles has paid off handsomely as it has expanded its presence into other markets. Also, the Company’s investment in its Mexico operations two years ago continues to exceed management’s expectations. During the same period, home appliance and retail business sectors contributed to the Company surpassing previous year’s levels. Additionally this contributed to our overall improvement in diversifying our customer base which historically has been more dependent on the automotive sector. Express-1 has historically rebounded quickly from recessions as the expediting industry in general is typically one of the first benefactors of a recovering economy. We continue to be optimistic for the remainder of the year as capacity tightens and the economy improves.
     Fuel prices have increased during the year resulting in a corresponding increase in fuel surcharge as a percentage of revenue during the first nine months of 2010. For the nine month period ended September 30, 2010, fuel surcharge revenues represented 12.1% of our revenue as compared to 8.9% in the same period in 2009. Rising fuel prices tend to have a negative impact on our gross margin since these revenues are substantially passed through to our owner operators; however, we believe that any negative margin impact from fuel will be offset by pricing adjustments allowed by the market due to tightening truck capacity and an improved freight environment.
     Express-1’s direct expenses represent both fleet costs associated with their fleet of vehicles along with brokerage costs related to runs that are brokered to other carriers. Express-1’s gross margin percentage increased to 23.8% for the first nine months of 2010 compared to 22.5% for the same period in 2009. We believe that the current margins will remain somewhat consistent as the improved freight environment and a corresponding tight capacity market has allowed Express-1 to increase pricing in targeted areas.

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     We are encouraged that as a percentage to total revenue our SG&A costs have dropped during the first nine months to 12.3% as compared to 15.8% in the third quarter of 2009. Overall, selling, general and administrative (SG&A) expenses increased by $1.8 million in the period compared to the same period in 2009. Increased salaries and benefits accounted for $1.4 million of the increase in SG&A and resulted from increased staffing due to improved volumes and the reestablishment of benefits that were eliminated in 2009. The current percentage of 12.3% is consistent with historical trends and we believe this percentage is sustainable throughout the remainder of the year.
     For the nine month period ended September 30, 2010, Express-1 generated income from operations before tax of $6.7 million compared to $2.3 million in the same period in 2009 representing an increase of 194.3%. Management remains optimistic about the remainder of the year as the overall freight environment continues to improve.
     Concert Group Logistics (CGL)
     CGL’s initial nine months of revenue in 2010 reflected a healthy rebound from 2009. Revenues of $47.6 million compared favorably to revenues of $28.7 million in 2009 representing a 65.6% increase. The purchase of certain assets and liabilities of LRG International (CGL International) in October of 2009, contributed to the revenue increases during the nine month period. CGL International (formerly LRG International) revenues represented $8.9 million or 18.7% of CGL’s third quarter’s revenue.
     Direct expenses consist primarily of payments for purchased transportation in addition to payments to CGL’s independent offices that control the overall operation of our customer’s shipments. As a percentage of CGL revenue, direct expenses represented 89.6% for the first three quarters of 2010 compared to 90.3% for the same period in 2009. CGL International’s direct expense represented $7.6 million or 17.8% of the total direct expense of CGL. This overall gain in efficiency resulted in CGL’s gross margin percentage improving to 10.4% in the first three quarters of 2010 from 9.7% in the same period in 2009. We believe that the improved margin will be sustainable for the remainder of the year and is partly due to running CGL International as a Company owned station which by nature produces a higher gross margin since some costs of operation are included in SG&A costs rather than in direct costs.
     Selling, general and administrative (SG&A) expenses increased in the nine month period ended September 30, 2010, by $1.6 million as compared to the same period in 2009 and relate in large part to running CGL International as a company owned branch. These increased costs with CGL International are directly offset by decreases in direct expenses resulting in a higher gross margin percentage. Increased salaries and benefits were responsible for $926,000 of the increase and resulted from increased volumes and the reestablishment of benefits that were eliminated in 2009 due to the recession. Other costs have also increased by $612,000 during the initial nine months of 2010 and relate primarily to additional costs due to running CGL International as a company owned branch in addition to higher than expected bad debts during the year. As a percentage of revenue, SG&A costs increased to 7.5% in the first three quarters of 2010 from 6.8% during the first three quarters of 2009. We anticipate the current SG&A percentage of revenue being sustained for the remainder of the year based on this change in our operating model.
     For the nine month period ended September 30, 2010, Concert Group Logistics generated income from operations before tax of $1.4 million representing an increase of 62.6% from the comparable period in 2009. Approximately $298,000 or 21.3% of CGL’s operating income was generated at CGL International. Again, this is due primarily to the improved freight environment and the addition of CGL International. We continue to anticipate favorable results for the remainder of the year with an improved freight environment resulting in increased revenues.
     Management continues to focus on the expansion of its independent office network, and is actively pursuing strategic opportunities. As of September 30, 2010 the Company maintained a network of 23 independent offices and 2 Company owned branches as compared to 26 independent offices as of September 30, 2009.

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Bounce Logistics
     Bounce continues to see significant growth as its revenue for the first nine months of 2010 increased by 90.4% to $13.5 million compared to 2009 revenues of $7.1 million in the comparable period. We believe this is reflective of an improving freight environment and an aggressive growth strategy. We continue to be very optimistic about growth potential as Bounce progresses through 2010.
     In the first nine month period of 2010, Bounces’ direct transportation expenses increased to 83.6% as a percentage of revenue as compared to 82.9% in the comparable period in 2009. We believe this cost increase reflects a tightening of truck capacity in the marketplace. This decrease in margin has been more than offset by additional business that has generated an additional $1.0 million in gross margin through the first nine months of 2010 as compared to the same period in 2009. We continue to have confidence in Bounce’s ability to grow and access truck capacity in 2010.
     Selling, general and administrative expenses increased by $792,000 in the nine month period ended September 30, 2010 compared to the same period in 2009. Increased salaries and benefits were responsible for $636,000 of the increase and resulted from increased volumes and the reestablishment of benefits that were eliminated in 2009 due to the recession. Overall, efficiencies of scale have improved based on revenue growth as the percentage of S&A costs to revenue has decreased from 12.8% in 2009 to 12.6% in 2010. We are anticipating that additional growth will continue to reduce Bounce’s SG&A percentage throughout the remainder of the year.
     The above items have resulted in Bounce generating operating income of $518,000 in the nine month period ended September 30, 2010 compared to $308,000 in the same period in 2009. Management continues to be optimistic regarding the future growth and profitability potential of Bounce moving forward in 2010.
Corporate
Corporate costs for the first nine months of 2010 increased by $98,000 as compared to the same three quarters in 2009. Increased salaries and benefits were responsible for $93,000 of the increase and resulted from increased volumes and the reestablishment of benefits that were eliminated in 2009 due to the recession. As a percentage of revenue, corporate costs decreased from 2.0% in the three quarter of 2009 to 1.3% in the same period in 2010. We anticipate holding these costs below 2009 levels as increased revenues have produced favorable efficiencies in scale.
     Liquidity and Capital Resources
General
     As of September 30, 2010, we had $12.8 million of working capital with associated cash of $951,000 compared with working capital of $970,000 and cash of $495,000 as of December 31, 2009. This represents an increase of $11.8 million or 1200% in working capital during the nine-month period. The Company renewed its credit facility with PNC Bank formerly National City Bank on March 31, 2010. The renewal of the Company’s credit facility had a positive impact of approximately $4.9 million on its working capital by converting the classification of both its term debt and line of credit to long term obligations based on the terms of the new agreement. The Company also had an increase of its account receivable of $8.8 million during the nine-month period ended September 30, 2010.
Cash Flow
     During the nine months ended September 30, 2010, $203,000 in cash was generated from operations. The primary source of cash for the nine month period was net income of $4.1 million resulting primarily from increased business revenues during the initial nine months of the year. The increased business and associated revenue also caused both accounts receivable and accounts payable, primarily associated with purchased transportation, to increase. The increase in accounts receivable resulted in an $8.8 million use of cash during the nine-month period, but did not materially impact our average days outstanding in accounts receivable during the period. As mentioned previously, purchased transportation has also increased during the nine-month period creating a source of $2.0 million in accounts payable and $2.1 million in accrued expenses. Typically, cash flows during periods of revenue growth are hindered as the Company’s accounts receivable grows at a quicker pace than the related short term transportation liabilities. Additional uses of cash included $272,000 in prepaid expenses and a decrease in other liabilities of $834,000. During the same period in 2009, $884,000 in cash was used in operations. The lower cash flow in 2009 was primarily due to lower than expected revenues and net income during the period. Uses of cash included a $3.5 million increase in accounts receivable associated with a slowdown of customer payments during the recession and a $1.1 million reduction of accounts payable associated with the declining volumes of purchased transportation. Increased volumes and profitability have improved operating cash flows since the third quarter of 2009 and the Company anticipates continued growth and improvement in this area. Also, it is important to note that cash flow can vary by as much as $1.0 million on a quarter to quarter basis based on the weekly payment and receipt cycles at the end of the quarter.

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     Investing activities required cash usage of approximately $480,000 during the nine months ended September 30, 2010. During this period, cash was used to purchase $482,000 in fixed assets. Additionally, on October 1, 2010, the company paid LRG International $500,000 relating to the purchase agreement dated October 2009 which will result in a use of cash in the fourth quarter. During the same period in 2009 the company used $1.4 million to fund investment activities relating to: 1) satisfying final earn-out payments of $1.1 million to the former owners of Concert Group Logistics, LLC (CGL) and, 2) purchasing $250,000 in net assets related to the purchase of First Class Expediting Service, LLC in January of 2009.
     Financing activities generated approximately $733,000 for the nine months ended September 30, 2010. Sources for cash for financing activities included $5.0 million of proceeds from term debt related to a new debt facility signed in March 2010 in addition to $434,000 in proceeds associated with the exercise of stock options during the period. Uses of cash for financing activities included payments on term debt of $2.2 million and net payments on the line of credit of $2.5 million. During the same period in 2009, financing activities generated approximately $1.9 million, which were derived primarily from net draws on the Company’s line of credit. Additionally, $946,000 in payments on the Company’s term debt was made during the period. Moving forward through the remainder of 2010, the Company expects to generate sufficient cash from operations to be used to pay down additional amounts on its line of credit.
     During 2009, the Company fully utilized its federal net operating loss which has resulted in an additional use of funds in 2010 as compared to 2009. Through the first nine months of 2010, cash payments related to tax liabilities equaled $2.5 million as compared to tax related payments of $282,000 in the same period of 2009.
Line of Credit and Term Note
     To ensure adequate near-term liquidity, we renewed our credit facility with PNC Bank, on March 31, 2010. This $15.0 million facility provides for a receivables based line of credit of up to $10.0 million and a term loan of $5.0 million. The Company may draw upon the receivables based line of credit the lesser of $10.0 million or 80% of eligible accounts receivable, less amounts outstanding under letters of credit and 50% of the term loan balance. The proceeds of the line of credit will be used exclusively for working capital purposes. The proceeds of the term loan were used to:
    Pay off the $1.1million balance of the previous term loan which was entered into on January 31, 2008,
 
    Refinance $2.0 million utilized to acquire the assets of LRG International, in October of 2009; and
 
    Reduce the balance on the previous line of credit initially established on January 31, 2008 by $1.9 million.
     Substantially all the assets of our Company and wholly owned subsidiaries (Express-1, Inc., Concert Group Logistics, Inc., Bounce Logistics, Inc., and CGL International, Inc.) are pledged as collateral securing our performance under the credit facilities. The credit facility bears interest based upon LIBOR with an initial increment of 200 basis points for the line of credit and 225 basis points for the term loan. The term loan is payable over a thirty-six month period and requires monthly principal payments of $139,000 plus accrued interest.
     The credit facilities carry certain covenants related to the Company’s financial performance. Included among the covenants are a fixed charge coverage ratio and a total funded debt to earnings before interest, taxes, depreciation and amortization ratio. As of September 30, 2010, the Company was in compliance with all terms under the credit facility and no events of default existed under the terms of this agreement.
     We had outstanding standby letters of credit at September 30, 2010 of $410,000 related to insurance policies either continuing in force or recently canceled. Amounts outstanding for letters of credit reduce the amount available under our line of credit, dollar-for-dollar.

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Available capacity in excess of outstanding borrowings under the line was approximately $5.5 million as limited by 80% of eligible accounts receivable less amounts outstanding under letters of credit and 50% of the term loan balance as of September 30, 2010. The credit facility carries a maturity date of March 31, 2012.
Options
     The following schedule represents those options that the Company has outstanding as of September 30, 2010. The schedule also segregates the options by expiration date and exercise price to better identify their potential for exercise. Additionally, the total approximate potential proceeds by year have been identified.
                                                         
                                            Total     Approximate  
    Options grouped by exercise price     Outstanding     Potential  
    .50-.75     .76-1.00     1.01-1.25     1.26-1.50     1.51 >     Options     Proceeds  
Option Expiration Dates
                                                       
2010
                                                $  
2011
                    125,000                       125,000       130,000  
2014
            50,000               500,000               550,000       769,000  
2015
    500,000               200,000                       700,000       603,000  
2016
            50,000       125,000       100,000               275,000       313,000  
2017
                    50,000       320,000               370,000       514,000  
2018
            287,000       100,000                       387,000       382,000  
2019
    25,000       75,000       25,000                       125,000       112,000  
2020
                    75,000       235,000       288,000       598,000       839,000  
     
Totals
    525,000       462,000       700,000       1,155,000       288,000       3,130,000     $ 3,662,000  
     
Contractual Obligations
     The following table reflects all contractual obligations of our Company as of September 30, 2010.
                                         
    Payments Due by Period  
            Less than 1     1 to 3     3 to 5     More than 5  
Contractual Obligations   Total     Year     Years     Years     Years  
Term notes payable
  $ 4,167,000     $ 1,667,000     $ 2,500,000     $     $  
Capital leases payable
    17,000       4,000       13,000              
 
                             
Total note payable and capital leases
    4,184,000       1,671,000       2,513,000              
Line of credit
    4,073,000             4,073,000              
Operating/real estate leases
    766,000       439,000       320,000       7,000        
Earnout obligation — LRG*
    1,400,000       950,000       450,000              
Employment contracts
    2,044,167       1,101,667       942,500              
     
Total contractual cash obligations
  $ 12,467,167     $ 4,161,667     $ 8,298,500     $ 7,000     $  
     
 
*   For additional information see Footnote 3-Acquisitions

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
     Not Required.
Item 4. Controls and Procedures.
     Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to Express-1 Expedited Solutions, Inc., including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared.
     Changes in internal controls. There were no changes in our internal controls over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
     PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
     From time-to-time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that is material to ongoing operations as defined in Item 103 of Regulation S-K as of the period ended September 30, 2010.
Item 1A. Risk Factors.
     Not required
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
     No unregistered equity securities were sold in the current reporting period.
Item 3. Defaults upon Senior Securities.
     The Company’s line of credit and a term note contain various covenants pertaining to the maintenance of certain financial ratios. As of September 30, 2010, the Company was in compliance with the ratios required under these agreements. No events of default exist on these agreements as of the filing date.
Item 4. Removed and Reserved.
Item 5. Other Information.
     None

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Item 6. Exhibits
     
Exhibit No.   Description
31.1
  Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
 
   
32.2
  Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
     SIGNATURES
     In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  Express-1 Expedited Solutions, Inc.
 
 
     /s/ Michael R. Welch    
    Michael R. Welch   
    Chief Executive Officer   
 
     
     /s/ John D. Welch    
    John D. Welch   
    Interim Chief Financial Officer   
 
Date: November 12, 2010

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Exhibit Index
     
Exhibit No.   Description
31.1
  Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
 
   
32.2
  Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

31