SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended June 30, 2002 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to . ------------ ----------------

                         Commission file number: 0-29754

                             TARGET LOGISTICS, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                           11-3309110
---------------------------------                       ------------------------
  (State or other jurisdiction                             (I.R.S. Employer
of incorporation or organization)                         Identification No.)

112 East 25th Street, Baltimore, Maryland                        21218
-----------------------------------------               ------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code           (410) 338-0127

                   Securities registered pursuant to Section
                               12(b) of the Act:

   Title of Class                      Name of Each Exchange on Which Registered
        None                                             None
   --------------                      -----------------------------------------

                   Securities registered pursuant to Section
                               12(g) of the Act:

                                 Title of Class
                          Common Stock, $.01 par value
                   Redeemable Common Stock Purchase Warrants

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  X   No
                                              ---     ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive  proxy or information  statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of September 25, 2002 was $551,626.

The number of shares of common stock  outstanding  as of September  25, 2002 was
12,179,002

                      DOCUMENTS INCORPORATED BY REFERENCE

To the extent specified,  Part III of this Form 10-K incorporates information by
reference to the  Registrant's  definitive  proxy  statement for its 2002 Annual
Meeting of Shareholders (to be filed).


                                       1
<PAGE>




                             TARGET LOGISTICS, INC.
                         2002 ANNUAL REPORT ON FORM 10-K

                                Table of Contents


                                                                          Page
                                                                          ----

                                     PART I


Item 1.    Business                                                         3
Item 2.    Properties                                                       5
Item 3.    Legal Proceedings                                                5
Item 4.    Submission of Matters to a Vote of Security Holders              5

           Executive Officers of the Registrant                             6


                                    PART II

Item 5.    Market for  Registrant's  Common  Equity and
           Related  Stockholder Matters                                     7
Item 6.    Selected Financial Data                                          8
Item 7.    Management's Discussion and Analysis of Financial
           Conditions and Results of Operations                             8
Item 7A.   Quantitative And Qualitative Disclosures About Market Risk      11
Item 8.    Financial Statements and Supplementary Data                     12
Item 9.    Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosures                            12


                                    PART III

Item 10.   Directors and Executive Officers of the Registrant              14
Item 11.   Executive Compensation                                          14
Item 12.   Security Ownership of Certain Beneficial Owners
           and Management                                                  14
Item 13.   Certain Relationships and Related Transactions                  14


                                    PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports
           on Form 8-K                                                     15

           Signatures                                                      17
           Certifications                                                  18


                                       2
<PAGE>

                                     PART I


ITEM  1. BUSINESS
         --------

Background
----------

          Target  Logistics,   Inc.   ("Company")  provides  freight  forwarding
services and logistics  services,  through its wholly owned  subsidiary,  Target
Logistic Services,  Inc. ("Target").  The Company has a network of offices in 34
cities throughout the United States. The Company was incorporated in Delaware in
January 1996 as the successor to operations commenced in 1970.

Description of Business
-----------------------

          The Company's  freight  forwarding  services involve arranging for the
total  transport  of  customers'  freight  from the  shipper's  location  to the
designated  recipients,  including the preparation of shipping documents and the
providing  of  handling,  packing  and  containerization  services.  The Company
concentrates  on cargo  shipments  weighing  more than 50 pounds  and  generally
requiring  second-day  delivery.  The  Company  also  assembles  bulk  cargo and
arranges  for  insurance.  The  Company  has a network  of  offices in 34 cities
throughout the United States,  including  exclusive  agency  relationships in 21
cities. The Company has international  freight forwarding  operations consisting
of strategic relationships in over 20 countries including share ownership in its
exclusive  agents in China and  Philippines.  The Company has developed  several
niches  including  fashion  services,  consumer  direct  logistics  of oversized
freight,  the distribution of materials for the entertainment  industry,  and an
expertise in material supply logistics to manufacturing concerns.

Operations
----------

          Movement  of  Freight.  The  Company  does  not own any  airplanes  or
significant  trucking  equipment and relies on independent  contractors  for the
movement of its cargo. The Company utilizes its expertise to provide  forwarding
services  that are  tailored to meet  customer  requirements.  It  arranges  for
transportation  of  customers'  shipments  via  commercial  airlines,  air cargo
carriers,  steamship lines, and, if delivery schedules permit, the Company makes
use of lower cost inter-city truck transportation  services. The Company selects
the carrier for  particular  shipments on the basis of cost,  delivery  time and
available cargo capacity. Through the Company's advanced data processing system,
it can provide, at no additional cost to the customer, value-added services such
as electronic data interchange, computer based shipping and tracking systems and
customized computer generated reports.  Additionally, the Company provides cargo
assembly and warehousing services.

          The  rates  charged  by the  Company  to its  customers  are  based on
destination,  shipment  weight and required  delivery  time.  The Company offers
graduated  discounts for shipments with later scheduled delivery times and rates
generally  decrease in inverse proportion to the increasing weight of shipments.
Due to the high  volume of  freight  controlled  by the  Company,  it is able to
obtain favorable  contract rates from carriers and is often able to book freight
space at times when  available  space is  limited.  When  possible,  the Company
consolidates   different   customers'   shipments   to   reduce   its   cost  of
transportation.

          Information  Systems. An important component of the Company's business
strategy is to provide  accurate and timely  information  to its  management and
customers.  Accordingly,  the Company has invested, and will continue to invest,
substantial  management and financial  resources in developing these information
systems.

          The  Company  leases  two  HP  9000  mainframe  computers  and  has  a
proprietary  freight  forwarding  software  system  which the  Company has named
"TRACS". TRACS is an integrated freight forwarding and financial management data
processing system. It provides the Company with the information needed to manage
its sourcing and  distribution  activities  through either printed or electronic
medium. Specifically,  the TRACS system permits the Company to track the flow of
a  particular  shipment  from the point of  origin  through  the  transportation
process to the point of delivery.  The Company intends to  continuously  upgrade
TRACS to enhance its ability to maintain a competitive advantage.

          International  Operations.   The  Company's  international  operations
consist of air and ocean  freight  movements  imported to and exported  from the


                                       3
<PAGE>

Company's Target  subsidiary's  network of offices in the United States.  During
the  fiscal  year ended  June 30,  2002,  the  Company's  international  freight
forwarding accounted for 25.5% of the Company's operating revenue.

Customers and Marketing
-----------------------

          The Company's  principal  customers  include large  manufacturers  and
distributors of computers and other  electronic and  high-technology  equipment,
computer  software and wearing  apparel.  As of June 30,  2002,  the Company had
approximately 5,000 accounts.

          The  Company   markets  its  services   through  an   organization  of
approximately  20  full-time   salespersons  and  30  independent  sales  agents
supported by the sales efforts of senior management, and the operations staff in
the Company's offices.  The Company strongly promotes team selling,  wherein the
salesperson is able to utilize  expertise from other  departments in the Company
to provide value-added  services to gain a specific account.  The Company staffs
each office with  operational  employees to provide  support for the sales team,
develop frequent contact with the customer's  traffic  department,  and maintain
customer service. The Company believes that it is important to maintain frequent
contact with its customers to assure  satisfaction  and to immediately  react to
resolve any problem as quickly as possible.

          The Company has and continues to develop  expertise in several niches:
fashion,  consumer direct logistics,  and entertainment and media. The Company's
fashion  services  division  targets chain retail and department store customers
and provides  specific  expertise  in handling  fashion-related  shipments.  The
fashion  services  division  specializes in the movement of wearing apparel from
manufacturing vendors to their department store customers located throughout the
United  States.   The  Company's   Consumer  Direct  Logistics  (CDL)  operation
specializes   in  oversize   and/or  heavy  weight   shipments   primarily  from
manufacturers  and catalogue  sales  distribution  centers  moving direct to the
residential  consumer.  The Company has  recently  expanded  its service  geared
toward the  entertainment  industry.  The  Entertainment  Media  Logistics (EML)
service  has  now  expanded  beyond  film  and   entertainment   logistics  with
specialized services aimed at broadcast companies.

          Many of the Company's  customers utilize more than one  transportation
provider. In soliciting new accounts, the Company uses a strategy of becoming an
approved carrier in order to demonstrate the quality and  cost-effectiveness  of
its services.  Using this approach,  the Company has advanced its  relationships
with several of its major customers,  from serving as a back-up freight services
provider to primary freight forwarder.

Competition
-----------

          Although there are no weight restrictions on the Company's  shipments,
the Company focuses  primarily on cargo  shipments  weighing more than 50 pounds
and requiring  second-day  delivery.  As a result, the Company does not directly
compete for most of its business with overnight couriers and integrated shippers
of principally  small parcels,  such as United Parcel Service of America,  Inc.,
Federal Express  Corporation,  DHL Worldwide  Express,  Inc.,  Airborne  Freight
Corporation  and the United  States Postal  Service.  However,  some  integrated
carriers,  such as Emery Air Freight  Corporation and Pittston BAX Group,  Inc.,
primarily  solicit the shipment of heavy cargo in competition  with  forwarders.
Additionally, there is a developing trend among integrated shippers of primarily
small parcels to solicit the shipment of heavy cargo.

          There is intense  competition within the freight forwarding  industry.
While the industry is highly fragmented,  the Company most often competes with a
relatively  small  number of  forwarders  who have  nationwide  networks and the
capability  to provide a full range of services  similar to those offered by the
Company.  These include EGL, Inc.,  Pilot Air Freight,  Inc., and USF Worldwide,
Inc.  There is also  competition  from  passenger  and  cargo air  carriers  and
trucking  companies.  On the  international  side of the  business,  the Company
competes with forwarders that have a predominantly  international focus, such as
Exel plc, Danzas Group and Kuehne Nagal  International.  All of these companies,
as  well as many  other  competitors,  have  substantially  greater  facilities,
resources and financial capabilities than those of the Company. The Company also
faces  competition from regional and local air freight  forwarders,  cargo sales
agents and brokers,  surface freight forwarders and carriers and associations of
shippers organized for the purpose of consolidating  their members' shipments to
obtain lower freight rates from carriers.



                                       4
<PAGE>

Employees
---------

          The Company  and its  subsidiaries  had  approximately  192  full-time
employees as of June 30, 2002.  None of the  Company's  employees  are currently
covered by a collective  bargaining  agreement.  The Company has  experienced no
work stoppages and considers its relations with its employees to be good.

Regulation
----------

          The  Company's  freight  forwarding  business as an indirect air cargo
carrier  is  subject  to  regulation   by  the  United   States   Department  of
Transportation  under the Federal Aviation Act. However,  air freight forwarders
(including the Company) are exempted from most of such Act's requirements by the
Economic Aviation Regulations promulgated thereunder, but must adhere to certain
rules,  such  as  security  requirements.  The  Company's  foreign  air  freight
forwarding operations are subject to regulation by the regulatory authorities of
the respective foreign  jurisdictions.  The air freight  forwarding  industry is
subject to regulatory and legislative  changes which can affect the economics of
the industry by  requiring  changes in operating  practices or  influencing  the
demand for, and the costs of providing, services to customers.


ITEM 2.  PROPERTIES
         ----------

          As of June 30, 2002, the Company leased terminal facilities consisting
of office and warehouse  space in 13 cities  located in the United  States,  and
also utilized 21 offices operated by exclusive agents. The Company's  facilities
range in size from  approximately  1,000  square feet to  approximately  100,000
square feet and consist of offices and warehouses with loading bays. All of such
properties are leased from third parties. The Company's headquarters are located
in Baltimore,  Maryland,  and Target's  headquarters are located in Los Angeles,
California,  and consists of  approximately  100,000  square feet of floor space
leased  pursuant to the terms of a lease which expires in July 2005.  Management
believes that its current  facilities  are more than  sufficient for its planned
growth.

The Company has an additional 12 terminal facilities in the following locations:

         Atlanta, Georgia                     Houston, Texas
         Charlotte, North Carolina            Memphis, Tennessee
         Chicago, Illinois                    Miami, Florida
         Dallas, Texas                        Newark, New Jersey
         El Paso, Texas                       New York, New York
         Greensboro, North Carolina           Seattle, Washington


ITEM 3.  LEGAL PROCEEDINGS
         -----------------

          On October  12,  2000,  Pilot Air  Freight  Corp.  ("Pilot"),  a major
competitor of Target,  sued Target in the United States  District  Court for the
Eastern  District of  Pennsylvania,  Case No.  00-CV-5190,  with  respect to the
termination by a former Pilot freight  forwarder of its relationship  with Pilot
and  entering  into an  exclusive  forwarder  relationship  with  Target.  Pilot
alleged, among other things,  intentional  interference with contract,  tortious
interference with business  relations,  violation of section 43(a) of the Lanham
Act,  violation of  Pennsylvania  state statutes  concerning  stored  electronic
communications,  and  misappropriation of trade secrets.  Pilot sought an amount
"in excess of $100,000" in damages,  punitive damages, and an injunction against
Target requiring it to cease competing in the Hartford,  Connecticut  market for
six months.  During  subsequent  discovery  proceedings,  Pilot claimed that its
damages exceed $3 million.  Target has denied all of Pilot's claims and believes
they are without  merit.  Target  will  continue to  vigorously  defend  Pilot's
claims.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         None.




                                       5
<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------

          The following is a listing of the executive officers of the Company as
of June 30, 2002.  There are no family  relationships  between any Directors and
Officers of the Company.

NAME                              AGE     POSITION
----                              ---     --------

Stuart Hettleman...............    52     President and Chief Executive
                                          Officer

Philip J. Dubato...............    46     Vice President, Chief Financial
                                          Officer and Secretary

Christopher Coppersmith........    52     President and Chief Executive Officer,
                                            Target Logistic Services, Inc.

STUART HETTLEMAN has been President,  Chief Executive  Officer and a director of
the Company since  February 7, 1996, and a director and Chairman of Target since
May 8, 1997.

PHILIP J. DUBATO has been Vice President,  Chief Financial Officer and Secretary
of the  Company  since  February  3, 1997 and a director  of the  Company  since
September  18, 1998.  From 1984  through  1996,  Mr.  Dubato was employed by LEP
Profit  International,  Inc., a domestic and  international  freight  forwarder,
where he held successive  positions as Controller,  Chief Financial  Officer and
Executive Vice President.

CHRISTOPHER COPPERSMITH has been President and Chief Executive Officer of Target
Logistic  Services,  Inc.  (acquired by the Company in May 1997) since  November
1996,  and a director of the Company since May 1997.  From 1974 through  October
1996, Mr.  Coppersmith was Executive Vice President and Chief Operating  Officer
of Target Airfreight, Inc.



                                       6
<PAGE>



                                    PART II
                                    -------

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
          ---------------------------------------------------------------------

          The  Company's  common  stock,  $.01 par value  (the  "Common  Stock")
trades,  and the  Company's  Redeemable  Common  Stock  Purchase  Warrants  (the
"Warrants") traded, on the Over-The-Counter  (OTC) market under the symbols TARG
and TARGW, respectively. The warrants expired on June 28, 2001.

          The following  table shows the high and low sales prices of the Common
Stock and Warrants for each of the quarters  during the fiscal years  indicated,
as available  through the OTC market.  The quotations  represent  prices between
dealers and do not reflect the retailer markups,  markdowns or commissions,  and
may not represent actual transactions. There have been no dividends declared.

<TABLE>
<CAPTION>
                                           COMMON STOCK              WARRANTS
   Fiscal Year Ended June 30, 2002
<S>                                                 <C>
   First Quarter                         High       $0.39       High           -
                                         Low        $0.14       Low            -

   Second Quarter                        High       $0.32       High           -
                                         Low        $0.11       Low            -

   Third Quarter                         High       $0.34       High           -
                                         Low        $0.12       Low            -

   Fourth Quarter                        High       $0.45       High           -
                                         Low        $0.14       Low            -

   Fiscal Year Ended June 30, 2001
   First Quarter                         High       $0.53       High       $0.00
                                         Low        $0.36       Low        $0.00

   Second Quarter                        High       $0.45       High       $0.00
                                         Low        $0.23       Low        $0.00

   Third Quarter                         High       $0.47       High       $0.00
                                         Low        $0.25       Low        $0.00

   Fourth Quarter                        High       $0.36       High       $0.00
                                         Low        $0.25       Low        $0.00

</TABLE>

          On  September  25, 2002 there were 703  shareholders  of record of the
Company's  Common Stock.  The closing price of the Common Stock on that date was
$0.13 per share.




                                       7
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA
          -----------------------

<TABLE>
                             TARGET LOGISTICS, INC.
                     (in thousands, except per share data)


<CAPTION>
                                                                        Year Ended June 30,
                                               --------------------------------------------------------------------
                                                    1998            1999          2000         2001          2002
Statement  of Operations Data:
<S>                                            <C>              <C>           <C>           <C>          <C>
    Operating revenue                          $   97,784       $   51,720    $   84,088    $  90,143    $   93,484
    Cost of transportation                         73,599           34,790        56,949       60,912        63,174
                                               ----------       ----------    ----------    ---------    ----------
    Gross profit                                   24,185           16,930        27,139       29,231        30,310
    Selling, general & administrative
      expenses                                     21,880           20,471        27,194       30,655        29,969
    Depreciation and Amortization                   1,132              833           989          897         1,017
                                               ----------       ----------    ----------    ---------    ----------
    Operating income (loss)                    $    1,173       $   (4,374)   $   (1,044)   $  (2,321)   $     (676)
    Gain on sale of subsidiary                          -           24,832             -            -             -
    Net income (loss)                          $    7,404       $   14,016    $   (1,197)   $  (1,772)   $     (935)
    Net income (loss) per common share         $     0.90       $     1.63    $     (0.14)  $    (0.18)  $    (0.10)

Balance Sheet Data:
    Total assets                               $   38,547       $   34,932    $   36,669    $  36,484    $   37,388
    Working capital (deficit)                     ( 2,340)           5,567         4,535          336            57
    Current liabilities                            26,085           15,251        18,474       20,440        22,293
    Long-term indebtedness                          4,138               24            92           34            34
    Shareholders' equity                       $    8,324       $   19,657    $   18,102     $ 16,010      $ 15,061

</TABLE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          -----------------------------------------------------------
          AND RESULTS OF OPERATIONS
          -------------------------

          This  Annual  Report on Form  10-K  contains  certain  forward-looking
statements  reflecting the Company's  current  expectations  with respect to its
operations,  performance,  financial  condition,  and other  developments.  Such
statements  are  necessarily  estimates  reflecting  the Company's best judgment
based upon current  information and involve a number of risks and uncertainties.
While it is impossible  to identify all such factors,  factors which could cause
actual results to differ  materially  from  expectations  are: (i) the Company's
historic  losses  and  ability  to  achieve  operating  profitability,  (ii) the
Company's ability to increase  operating  revenue,  improve gross profit margins
and  reduce  selling,   general  and  administrative  costs,  (iii)  competitive
practices in the  industries in which the Company  competes,  (iv) the Company's
dependence on current management,  (v) the impact of current and future laws and
governmental  regulations  affecting the transportation  industry in general and
the Company's operations in particular,  (vi) general economic  conditions,  and
(vii) other factors  which may be identified  from time to time in the Company's
Securities and Exchange Commission filings and other public announcements. There
can be no assurance that these and other factors will not affect the accuracy of
such forward-looking  statements.  Forward-looking statements are preceded by an
asterisk (*).

Overview
--------

          The  Company  generated  operating  revenues of $93.5  million,  $90.1
million,  and $84.1 million,  and had a net loss of $0.9 million,  $1.8 million,
and $1.2  million for the fiscal  years  ended June 30,  2002,  2001,  and 2000,
respectively.

          The  Company  had  earnings  or  (losses)  before   interest,   taxes,
depreciation and amortization (EBITDA) of approximately $340,000,  ($1,424,000),
and  ($54,000),  for the  fiscal  years  ended  June 30,  2002,  2001,  and 2000
respectively.  EBITDA,  like operating  income,  does not include the effects of
interest and taxes,  and excludes the  "non-cash"  effects of  depreciation  and
amortization  on current  assets.  Companies  have some  discretion  as to which
elements  of  depreciation   and   amortization   are  excluded  in  the  EBITDA


                                       8
<PAGE>

calculation.  The Company excludes all depreciation charges related to property,
plant and equipment,  and all amortization  charges,  including  amortization of
goodwill,  leasehold  improvements and other intangible assets. While management
considers EBITDA useful in analyzing the Company's  results,  it is not intended
to replace any  presentation  included in the Company's  consolidated  financial
statements.

          * For the  fiscal  year  ended  June  30,  2002,  the  revenue  of the
Company's Target  subsidiary  increased by 3.7% when compared to the fiscal year
ended June 30, 2001. Target's gross profit margin (i.e., gross operating revenue
less  cost of  transportation  expressed  as a  percentage  of  gross  operating
revenue)  was  32.4%  for the 2002 and 2001  periods.  Management  continues  to
believe that the Company  must focus on  increasing  revenues and must  increase
gross profit margin to restore the Company to profitability.  Management intends
to continue to work on growing revenue by increasing sales generated by Target's
employed  sales  personnel,  sales  generated  by exclusive  forwarders,  and by
strategic acquisitions. Management also intends to continue to work on improving
Target's gross profit margins by reducing transportation costs.

Results of Operations
---------------------

Years ended June 30, 2002 and 2001

          Operating  Revenue.  Operating  revenue increased to $93.5 million for
the year ended  June 30,  2002 from  $90.1  million  for the year ended June 30,
2001,  a 3.7%  increase,  due to increased  domestic  freight  volume.  Domestic
revenue  increased by 6.7% to $69,652,711  for the year ended June 30, 2002 from
$65,255,740  for the year  ended  June 30,  2001,  while  international  revenue
decreased  by  4.2% to  $23,831,028  for the  year  ended  June  30,  2002  from
$24,887,462 for the year ended June 30, 2001, primarily as a result of decreases
in air export freight volume.

          Cost of Transportation.  Cost of transportation was 67.6% of operating
revenue for each of the years ended June 30, 2002 and 2001.

          Gross  Profit.  As a result of the factors  described  in the previous
paragraph,  gross profit was 32.4% of operating revenue for the years ended June
30, 2002 and 2001.

          Selling,  General and Administrative Expenses.  Selling,  general, and
administrative  expenses  decreased to 33.1% of  operating  revenue for the year
ended June 30, 2002, from 35.0% of operating revenue for the year ended June 30,
2001.   Within  the   Company's   Target   subsidiary,   selling,   general  and
administration  expenses (excluding exclusive forwarder commission expense) were
16.7% of  operating  revenue for each of the years ended June 30, 2002 and 2001.
Exclusive forwarder  commission expense was 14.6% and 16.4% of operating revenue
for the year June 30, 2002 and 2001, respectively,  an 11.0% decrease, resulting
from decreases in forwarder agent freight volume.

          Net Loss.  The Company  realized a net loss of ($934,527) for the year
ended June 30, 2002,  compared to a net loss of ($1,771,583)  for the year ended
June 30, 2001. The 2001 results include a $777,895 benefit for income taxes.

Years ended June 30, 2001 and 2000

          Operating  Revenue.  Operating  revenue increased to $90.1 million for
the year ended  June 30,  2001 from  $84.1  million  for the year ended June 30,
2000,  a 7.2%  increase,  due to increased  domestic  freight  volume.  Domestic
revenue  increased by 16.3% to $65,255,740 for the year ended June 30, 2001 from
$56,093,399  for the year  ended  June 30,  2000,  while  international  revenue
decreased  by 11.1%  to  $24,887,462  for the year  ended  June  30,  2001  from
$27,994,796 for the year ended June 30, 2000,  primarily the result of decreases
in air export and import freight volume.

          Cost of Transportation.  Cost of transportation  decreased slightly to
67.6% of  operating  revenue  for the year  ended  June 30,  2001 from  67.7% of
operating revenue for the year ended June 30, 2000.

          Gross  Profit.  As a result of the factors  described  in the previous
paragraph,  gross profit for the year ended June 30, 2001 increased  slightly to
32.4% of operating  revenue  from 32.3% of operating  revenue for the year ended
June 30, 2000.



                                       9
<PAGE>

          Selling,  General and Administrative Expenses.  Selling,  general, and
administrative  expenses  increased to 35.0% of  operating  revenue for the year
ended June 30, 2001, from 33.5% of operating revenue for the year ended June 30,
2000.   Within  the   Company's   Target   subsidiary,   selling,   general  and
administration  expenses (excluding exclusive forwarder commission expense) were
16.7% of  operating  revenue  for the year ended June 30, 2001 and 16.3% for the
year ended June 20, 2000, a 2.5%  increase.  This  increase was primarily due to
increased  operating  labor  costs to handle the  increased  freight  volume and
increased  selling labor cost  resulting  from  increases in the number of sales
personnel employed by Target.  Exclusive forwarder  commission expense was 16.4%
and  15.2%  of  operating   revenue  for  the  year  June  30,  2001  and  2000,
respectively,  a 7.9%  increase,  resulting  from  increases in forwarder  agent
freight volume.

          Net Loss. The Company realized a net loss of ($1,771,583) for the year
ended June 30, 2001,  compared to a net loss of ($1,196,605)  for the year ended
June 30, 2000. The 2001 results include a $777,895 benefit for income taxes.

Liquidity and Capital Resources
-------------------------------

          General.  During  the year  ended  June  30,  2002,  net cash  used in
operating  activities  was  $315,838.  Cash  used in  investing  activities  was
$839,950,  which  consisted  of $311,287 of capital  expenditures  and  $528,663
relating to the purchase by the Company's Target subsidiary of the assets of SDS
Logistics  and Air America  Freight  Service,  Inc.  Cash  provided by financing
activities was $1,910.

          Currently,  approximately  $1.4 million of the  Company's  outstanding
accounts  payable  represent  unsecured  trade  payables of closed  subsidiaries
which, at this time, the Company continues to carry on its books.

          Capital  expenditures.  Capital expenditures for the fiscal year ended
June 30, 2002 were $311,287.

          GMAC Facility. The Company's Target subsidiary maintains a $10 million
revolving  credit  facility ("GMAC  Facility")  with GMAC Commercial  Credit LLC
("GMAC"),  guaranteed by the Company.  The interest rate of the GMAC Facility is
prime plus 1%,  however,  at any time prior to September 20, 2002,  the interest
rate could not be less than 6.0% and after  September  20,  2002  cannot be less
than 5.0%. Under the terms of the GMAC Facility, Target can borrow the lesser of
$10 million or 85% of eligible  accounts  receivable.  The borrowings  under the
GMAC  Facility  are  secured  by a first  lien on all of the  Company's  and its
subsidiaries' assets. As of June 30, 2002, there were outstanding  borrowings of
$5,993,475  under  the  GMAC  Facility  (which  represented  83% of  the  amount
available  thereunder)  out of a total amount  available for borrowing under the
GMAC Facility of approximately $7,211,000.  The GMAC Facility expires on January
14, 2005.  The Company  entered into the GMAC Facility on January 16, 1997,  and
subsequently  extended the facility for an additional  three-year  term and most
recently for an additional two-year term.

          *  Working  Capital  Requirements.  Cash  needs  of  the  Company  are
currently met by the Company's accounts  receivable  financing facility and cash
on hand. As of June 30, 2002, the Company had $1,217,761 available under its $10
million accounts receivable  financing facility and approximately  $4,333,015 in
cash from  operations  and cash on hand.  The Company  believes that its current
financial resources will be sufficient to finance its operations and obligations
(current and long-term  liabilities) for the long and short terms.  However, the
Company's  actual working capital needs for the long and short terms will depend
upon numerous factors,  including the Company's  operating results,  the cost of
increasing the Company's sales and marketing activities, and, competition,  none
of which can be predicted with certainty.

Inflation
---------

          The Company does not believe  that the  relatively  moderate  rates of
inflation in the United States in recent years have had a significant  effect on
its operations.

Critical Accounting Policies
----------------------------

          The Company's  accounting  policies are more fully described in Note 3
of the Notes to the Consolidated Financial Statements,  starting on page F-8. As
discussed  there,  the  preparation of financial  statements in conformity  with
accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions  about future events that affect the amounts  reported
in the financial  statements  and  accompanying  notes.  Since future events and
their effects cannot be determined with absolute certainty, the determination of
estimates  requires the exercise of judgment.  Actual  results could differ from


                                       10
<PAGE>

those  estimates,   and  such  difference  may  be  material  to  the  financial
statements.   The  most  significant   accounting   estimates  inherent  in  the
preparation of the Company's  financial  statements  include estimates as to the
appropriate  carrying  value of  certain  assets and  liabilities  which are not
readily apparent from other sources,  primarily allowance for doubtful accounts,
accruals  for  transportation  and  other  direct  costs,   accruals  for  cargo
insurance,  and  the  classification  of  net  operating  loss  and  tax  credit
carryforwards  between  current  and  long-term  assets.  Management  bases  its
estimates on historical experience and on various assumptions which are believed
to  be  reasonable  under  the  circumstances.  The  Company  reevaluates  these
significant  factors as facts and  circumstances  change.  Historically,  actual
results have not differed significantly from the Company's estimates.

New Accounting Pronouncements
-----------------------------

          In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No.  141  "Business  Combinations."  SFAS  No.  141  supersedes  Accounting
Principles  Board  ("APB") No. 16 and requires  that any  business  combinations
initiated  after June 30,  2001,  be  accounted  for as a  purchase,  therefore,
eliminating the pooling-of-interest  method defined in APB No. 16. The statement
was effective for any business  combination  initiated  after June 30, 2001, and
must  have  been  applied  to all  business  combinations  accounted  for by the
purchase  method for which the date of  acquisition  was July 1, 2001, or later.
The adoption of this  statement did not have a material  impact to the Company's
financial  position  or  results  of  operations,  since  the  Company  has  not
participated in such activities covered under this pronouncement.

          In July  2001,  the FASB  issued  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets",  which requires the use of a  non-amortization  approach to
account for  purchased  goodwill  and certain  intangibles.  This  statement  is
effective  for fiscal years  beginning  after  December  15,  2001.  The Company
adopted this  statement on July 1, 2002.  Under the  non-amortization  approach,
goodwill  and  certain  intangibles  will  not  be  amortized  into  results  of
operations,  but  instead  will be reviewed  for  impairment,  written  down and
charged to results of operations  only in periods in which the recorded value of
goodwill  and certain  intangibles  is more than its fair value.  The Company is
having an independent  valuation  analysis completed and does not anticipate any
material transitional impairment;  however, future impairment reviews may result
in periodic write-downs ranging from zero to $11,239,917.  The Company amortized
approximately  $596,000 of goodwill  for each of the fiscal years ended June 30,
2002, 2001 and 2000, respectively.

          In October 2001, the FASB issued SFAS No. 143,  "Accounting  for Asset
Retirement Obligations",  which requires companies to record the fair value of a
liability  for asset  retirement  obligations  in the  period in which  they are
incurred. The statement applies to a company's legal obligations associated with
the retirement of a tangible long-lived asset that results from the acquisition,
construction,  and  development or through the normal  operation of a long-lived
asset. When a liability is initially recorded,  the company would capitalize the
cost,  thereby  increasing  the  carrying  amount  of  the  related  asset.  The
capitalized asset retirement cost is depreciated over the life of the respective
asset while the liability is accreted to its present value.  Upon  settlement of
the liability,  the obligation is settled at its recorded  amount or the company
incurs a gain or loss.  The  statement is effective  for fiscal years  beginning
after June 30, 2002. The Company does not expect the adoption to have a material
impact to the Company's financial position or results of operations.

          In August  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of".
SFAS No. 144 addresses financial  accounting and reporting for the impairment or
disposal of long-lived  assets.  SFAS No. 144 requires that long-lived assets be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that its carrying  amount may not be recoverable and is measured by a comparison
of the  carrying  amount  of an  asset to  undiscounted  future  net cash  flows
expected  to be  generated  by the  asset.  If the  carrying  amount of an asset
exceeds its estimated future  undiscounted  cash flows, an impairment  charge is
recognized for the amount by which the carrying  amount of the asset exceeds the
fair value of the asset.  SFAS No. 144 requires  companies to separately  report
discontinued  operations  and extends that reporting to a component of an entity
that either has been disposed of (by sales,  abandonment or in a distribution to
owners) or is classified  as held for sale.  Assets to be disclosed are reported
at the  lower of the  carrying  amount or fair  value  less  costs to sell.  The
Company  adopted  SFAS No. 144 on July 1, 2002.  The  Company  anticipates  that
adoption  of SFAS  No.  144 will not have a  material  impact  to the  Company's
financial position or results of operations.

          In April 2002, the FASB issued Statement No. 145,  "Rescission of FASB
Statements No. 4, 44, and 64,  Amendment of FASB Statement No. 13, and Technical


                                       11
<PAGE>

Corrections". This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from  Extinguishment  of Debt", and an amendment of that Statement,  FASB
Statement  No.  64,  "Extinguishments  of  Debt  Made  to  Satisfy  Sinking-Fund
Requirements",  and FASB Statement No. 44,  "Accounting for Intangible Assets of
Motor Carriers".  This Statement  amends FASB Statement No. 13,  "Accounting for
Leases",  to eliminate an  inconsistency  between the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.

         In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This Statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)". The provisions
of this Statement are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------

          The Company's principal  financial  instrument is long-term debt under
the GMAC Facility  which  provides for interest at the prime rate plus 1% with a
minimum  interest  rate of 6.0%  prior to  September  20,  2002,  and a  minimum
interest  rate of 5.0% after  September  20,  2002.  The  Company is affected by
market risk exposure  primarily  through the effect of changes in interest rates
on amounts payable by the Company under the GMAC Facility. A significant rise in
the prime  rate  could  materially  adversely  affect  the  Company's  business,
financial  condition and results of  operations.  At June 30, 2002, an aggregate
principal  amount of $5,993,475 was outstanding  under the GMAC Facility bearing
interest at an annual rate of 6.0%. If principal  amounts  outstanding under the
Company's credit facility remained at this year-end level for an entire year and
the prime rate increased or decreased,  respectively, by 0.5%, the Company would
pay or save,  respectively,  an additional $29,967 in interest in that year. The
Company  does not utilize  derivative  financial  instruments  to hedge  against
changes in interest rates or for any other purpose.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------

          The financial  statements and supplementary data required by this Item
8 are included in the Company's  Consolidated Financial Statements and set forth
in the pages indicated in Item 14(a) of this Annual Report.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ------------------------------------------------
          ACCOUNTING AND FINANCIAL DISCLOSURES
          ------------------------------------

          On April 22,  2002,  the Company  filed a Current  Report on Form 8-K.
Item 4 of Form 8-K, "Changes in Registrant's Certifying Accountant" was reported
as follows:

          On April 18, 2002, Target Logistics,  Inc. (the "Company") determined,
for  itself  and on behalf  of its  subsidiaries,  to  dismiss  its  independent
auditors, Arthur Andersen LLP ("Arthur Andersen"), and to engage the services of
Stonefield  Josephson,  Inc.  ("Stonefield  Josephson")  as its new  independent
auditors.   The  change  in  auditors   became   effective   immediately.   This
determination followed the Company's decision to seek proposals from independent
accountants to audit the financial  statements of the Company,  and was approved
by the  Company's  Board of  Directors  upon  the  recommendation  of its  Audit
Committee.  Stonefield  Josephson was engaged to review the financial statements
of the Company beginning with the fiscal quarter ended March 31, 2002.

          During the two most recent  fiscal years of the Company ended June 30,
2001,  and the subsequent  interim period through April 18, 2002,  there were no
disagreements  between  the  Company  and  Arthur  Andersen  on  any  matter  of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedure,  which  disagreements,  if not resolved to Arthur Andersen's
satisfaction, would have caused Arthur Andersen to make reference to the subject
matter of the disagreement in connection with its reports.



                                       12
<PAGE>

          None of the reportable  events  described  under Item  304(a)(1)(v) of
Regulation  S-K occurred  within the two most recent fiscal years of the Company
ended June 30, 2001 or within the interim period through April 18, 2002.

          The audit  reports of Arthur  Andersen on the  consolidated  financial
statements of the Company as of and for the fiscal years ended June 30, 2000 and
2001 did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles. A
letter from Arthur Andersen was attached as Exhibit 16.1 to the Form 8-K filing.

          During the two most recent  fiscal years of the Company ended June 30,
2001,  and the subsequent  interim  period  through April 18, 2002,  neither the
Company  nor  any  of  its  subsidiaries  consulted  with  Stonefield  Josephson
regarding any of the matters or events set forth in Item  304(a)(2)(i)  and (ii)
of Regulation S-K.



                                       13
<PAGE>

                                   PART III
                                   --------


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

          The information  with respect to the identity and business  experience
of  the  directors  of the  Company  and  their  remuneration  in the  Company's
definitive  Proxy Statement to be filed pursuant to Regulation 14A and issued in
conjunction with the 2002 Annual Meeting of Shareholders, is incorporated herein
by  reference.  The  information  with  respect  to the  identity  and  business
experience  of executive  officers of the Company is set forth in Part I of this
Form 10-K.


ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

          The  information  required by this item is  incorporated  by reference
from the Company's  definitive  Proxy Statement to be issued in conjunction with
the 2002 Annual Meeting of Shareholders.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          ---------------------------------------------------
          MANAGEMENT AND RELATED STOCKHOLDER MATTERS
          ------------------------------------------

          The  information  required by this item is  incorporated  by reference
from the Company's  definitive  Proxy Statement to be issued in conjunction with
the 2002 Annual Meeting of Shareholders.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

          The  information  required by this item is  incorporated  by reference
from the Company's  definitive  Proxy Statement to be issued in conjunction with
the 2002 Annual Meeting of Shareholders.




                                       14
<PAGE>

                                    PART IV
                                    -------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8 - K
         -----------------------------------------------------------------

(a)  1.  Financial Statements
         --------------------
                                                                           Page
                                                                           ----
Report of Independent Public Accountants                                    F-1
Report of Independent Public Accountants                                    F-2
Consolidated Balance Sheets as of June 30, 2002 and 2001                    F-3
Consolidated Statements of Operations for the Years Ended
  June 30, 2002, 2001, and 2000                                             F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
  June 30, 2002, 2001, and 2000                                             F-5
Consolidated Statements of Cash Flows for the Years Ended
  June 30, 2002, 2001, and 2000                                             F-6
Notes to Consolidated Financial Statements                                  F-8

(a)  2.  Financial Statement Schedules
         -----------------------------

Schedule II - Schedule of Valuation and Qualifying Accounts                 S-1

All  other  schedules  are  omitted  because  they are not  applicable,  are not
required,  or because the required  information is included in the  consolidated
financial statements or notes thereto.

(a)  3.  Exhibits required to be filed by Item 601 of Regulation S-K
         -----------------------------------------------------------

Exhibit No.
-----------

3.1       Certificate of Incorporation of Registrant,  as amended  (incorporated
          by reference to Exhibit 3.1 to the Registrant's Current Report on Form
          8-K dated November 30, 1998, File No. 0-29754)
3.2       By-Laws  of  Registrant,  as amended  (incorporated  by  reference  to
          Exhibit 3.2 to the Registrant's  Quarterly Report on Form 10-Q for the
          Quarter Ended December 31, 1998, File No. 0-29754)
4.1       Warrant Agent Agreement  (incorporated  by reference to Exhibit 4.3 to
          the Registrant's  Registration Statement on Form S-1, Registration No.
          333-03613)
4.2       Form of Amendment No. 1 to Warrant Agent Agreement dated June 13, 1997
          (incorporated   by  reference  to  Exhibit  4.7  to  the  Registrant's
          Registration Statement on Form S-1, Registration No. 333-30351)
4.3       Certificate of Designations  with respect to the Registrant's  Class A
          Preferred Stock (contained in Exhibit 3.1)
4.4       Certificate of Designations  with respect to the Registrant's  Class B
          Preferred Stock (contained in Exhibit 3.1)
4.5       Certificate of Designations  with respect to the Registrant's  Class C
          Preferred Stock (contained in Exhibit 3.1)
4.6       Certificate of Designations  with respect to the Registrant's  Class D
          Preferred Stock (contained in Exhibit 3.1)
4.7       Certificate of Designations  with respect to the Registrant's  Class E
          Preferred Stock (contained in Exhibit 3.1)
10.1      1996 Stock Option Plan  (incorporated  by reference to Exhibit 10.1 to
          the  Registrant's  Quarterly Report on Form 10-Q for the Quarter Ended
          December 31, 1997, File No. 0-29754)
10.2      Restated  and Amended  Accounts  Receivable  Management  and  Security
          Agreement,  dated as of July 13, 1998 by and between  GMAC  Commercial
          Credit  LLC,  as  Lender,  and  Target  Logistic  Services,  Inc.,  as
          Borrower, and guaranteed by the Registrant ("GMAC Facility Agreement")
          (incorporated by reference to Exhibit 10.2 to the Registrant's  Annual
          Report on Form 10-K for the Fiscal Year Ended June 30, 1999,  File No.
          0-29754)
10.3      Letter  amendment to GMAC Facility  Agreement,  dated January 25, 2001
          (incorporated  by  reference  to  Exhibit  10.3  to  the  Registrant's
          Quarterly Report on Form 10-Q for the Quarter Ended December 31, 2000,
          File No. 0-29754)
10.4      Amendment to GMAC Facility Agreement, dated September 20, 2002


                                       15
<PAGE>

10.5      Employment  Agreement dated June 24, 1996 between Amertranz  Worldwide
          Holding  Corp.  and Stuart  Hettleman  (incorporated  by  reference to
          Exhibit 10.13 to the  Registrant's  Annual Report on Form 10-K for the
          Fiscal Year Ended June 30, 1996, File No. 0-29754)
10.6      Addendum to  Employment  Agreement  effective  June 24,  1999  between
          Target Logistics, Inc. and Stuart Hettleman (incorporated by reference
          to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the
          Fiscal Year Ended June 30, 2000, File No. 0-29754)
10.7      Addendum to Employment  Agreement  dated June 30, 2002 between  Target
          Logistics, Inc. and Stuart Hettleman
10.8      (P)  Lease  Agreement  for  Los  Angeles  Facility   (incorporated  by
          reference to Exhibit 10.17 to the  Registrant's  Annual Report on Form
          10-K for the Year Ended June 30, 1997, File No. 0-29754)
10.9      Amendment to Lease Agreement for Los Angeles Facility
21        Subsidiaries of Registrant (incorporated by reference to Exhibit 21 to
          the  Registrant's  Annual  Report on Form 10-K for the Year Ended June
          30, 1997, File No. 0-29754)
23        Consent of Stonefield Josephson, Inc.
99        Certification  Required Pursuant to Section 906 of the  Sarbanes-Oxley
          Act of 2002

(b)       Reports on Form 8-K
          -------------------

On April 22, 2002, the  Registrant  filed a Current Report on Form 8-K reporting
its change of auditors from Arthur Andersen LLP to Stonefield Josephson, Inc.






                                       16
<PAGE>

                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereto duly authorized.


                                            TARGET LOGISTICS, INC.



Date:  September 27, 2002                   By:     /s/ Stuart Hettleman
                                               ---------------------------------
                                               Stuart Hettleman
                                               President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

Signature                                 Title                     Date
---------                                 -----                     ----


 /s/ Stuart Hettleman           President, Chief Executive    September 27, 2002
----------------------------    Officer and Director
Stuart Hettleman


 /s/ Michael Barsa              Director                      September 27, 2002
----------------------------
Michael Barsa


 /s/ Brian K. Coventry         Director                       September 27, 2002
----------------------------
Brian K. Coventry


 /s/ Christopher Coppersmith    Director                      September 27, 2002
----------------------------
Christopher Coppersmith


 /s/ Philip J. Dubato           Vice President, Chief         September 27, 2002
----------------------------    Financial Officer,
Philip J. Dubato                Principal Accounting Officer
                                and Director




                                       17
<PAGE>

                                 CERTIFICATIONS


          I, Stuart Hettleman, certify that:

          1. I  have  reviewed  this  Annual  Report  on  Form  10-K  of  Target
Logistics, Inc.;

          2. Based on my  knowledge,  this  Annual  Report  does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
Annual Report; and 3. Based on my knowledge, the financial statements, and other
financial  information  included in this Annual  Report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the Registrant as of, and for, the periods presented in this Annual Report.


Date: September 27, 2002                         /s/ Stuart Hettleman
                                            ------------------------------------
                                            Stuart Hettleman
                                            Chief Executive Officer




         I, Philip J. Dubato, certify that:

          1. I  have  reviewed  this  Annual  Report  on  Form  10-K  of  Target
Logistics, Inc.;

          2. Based on my  knowledge,  this  Annual  Report  does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
Annual Report; and

          3.  Based  on  my  knowledge,  the  financial  statements,  and  other
financial  information  included in this Annual  Report,  fairly  present in all
material respects the financial condition,  results of operations and cash flows
of the Registrant as of, and for, the periods presented in this Annual Report.

Date: September 27, 2002                         /s/ Philip J. Dubato
                                            ------------------------------------
                                            Philip J. Dubato
                                            Chief Financial Officer





                                       18
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



The Board of Directors
Target Logistics, Inc.
Baltimore, Maryland

We have audited the  consolidated  balance  sheet of Target  Logistics,  Inc. (a
Delaware  corporation)  and  subsidiaries,  as of June 30, 2002, and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated financial position of Target
Logistics, Inc. and subsidiaries,  as of June 30, 2002, and the results of their
consolidated  operations  and their  consolidated  cash  flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.

Our  audit  was  made  for the  purpose  of  forming  an  opinion  on the  basic
consolidated  financial  statements taken as a whole. The schedule listed in the
index of financial  statements is presented  for purposes of complying  with the
Securities  and  Exchange  Commission's  rules  and  are not  part of the  basic
consolidated  financial  statements.  This  schedule  has been  subjected to the
auditing  procedures  applied in the audit of the basic  consolidated  financial
statements  and, in our  opinion,  fairly  states in all  material  respects the
financial  data  required  to be set  forth  therein  in  relation  to the basic
consolidated financial statements taken as a whole.


STONEFIELD JOSEPHSON, INC.

Santa Monica, California
August 9, 2002



                                      F-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Target Logistics, Inc.:

We  have  audited  the  accompanying   consolidated  balance  sheets  of  Target
Logistics,  Inc. (a Delaware corporation),  and subsidiaries as of June 30, 2001
and 2000, and the related consolidated  statements of operations,  shareholders'
equity and cash flows for the three years then ended. These financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Target Logistics,
Inc.  and  subsidiaries  as of June 30, 2001 and 2000,  and the results of their
operations  and their cash flows for the years  ended  June 30,  2001,  2000 and
1999, in conformity with accounting  principles generally accepted in the United
States.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
consolidated  financial  statements taken as a whole. The schedule listed in the
index of financial  statements is presented  for purposes of complying  with the
Securities  and  Exchange  Commission's  rules  and  are not  part of the  basic
consolidated  financial  statements.  This  schedule  has been  subjected to the
auditing  procedures  applied in the audit of the basic  consolidated  financial
statements  and, in our  opinion,  fairly  states in all  material  respects the
financial  data  required  to be set  forth  therein  in  relation  to the basic
consolidated financial statements taken as a whole.


                                            ARTHUR ANDERSEN LLP



New York, New York
August 10, 2001


                      EXPLANATORY NOTE REGARDING REPORT OF
                         INDEPENDENT PUBLIC ACCOUNTANTS

     On April 18, 2002, the Company  decided to no longer engage Arthur Andersen
LLP ("Andersen") as its independent  public  accountants and engaged  Stonefield
Josephson,  Inc. to serve as its  independent  public  accountants  for the year
ending  June 30,  2002.  More  information  regarding  the  Company's  change in
independent  public  accountants  is contained  in a Current  Report on Form 8-K
filed with the Securities and Exchange Commission on April 22, 2002.

     We could not obtain  permission of Andersen to the inclusion in this Annual
Report on Form 10-K of their Report of Independent  Public  Accountants,  above.
Accordingly,  the  above  Report of  Independent  Public  Accountants  is merely
reproduced from the Company's Annual Report on Form 10-K for the year ended June
30, 2001 (although the  consolidated  balance sheet as of June 30, 2000, and the
consolidated  statements of operations,  shareholders' equity and cash flows for
the year ended June 30, 1999 referred to in that report are not included herein)
and does not include the manual signature of Andersen.

Because Andersen has not consented to the inclusion of its report in this Annual
Report,  it may be more  difficult  to seek  remedies  against  Andersen and the
ability to seek relief against Andersen may be impaired.

                                      F-2
<PAGE>

<TABLE>
                             TARGET LOGISTICS, INC.
                          CONSOLIDATED BALANCE SHEETS


<CAPTION>
                       ASSETS                                        June 30, 2002      June 30, 2001
                                                                     -------------      -------------
CURRENT ASSETS:
<S>                                                                    <C>                <C>
Cash and cash equivalents                                              $4,333,015         $5,486,893
Accounts receivable, net of allowance for doubtful accounts of
   $995,245 and $1,391,157, respectively                               17,012,677         14,855,373
Deferred income taxes                                                     694,333            245,960
Prepaid expenses and other current assets                                 310,543            188,135
                                                                          -------            -------
                                 Total current assets                  22,350,568         20,776,361
PROPERTY AND EQUIPMENT, NET                                               615,606            725,138
OTHER ASSETS                                                              942,110            458,717
DEFERRED INCOME TAXES                                                   2,239,667          2,688,040
GOODWILL, net of accumulated amortization of $3,715,106
   and $3,119,239, respectively                                        11,239,917         11,835,784
                                                                       ----------         ----------
                                 Total assets                         $37,387,868        $36,484,040
                                                                      ===========        ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                       $5,834,820         $5,594,124
Accrued expenses                                                        1,783,136          2,197,726
Accrued transportation expenses                                         8,430,078          6,713,348
Note payable to bank                                                    5,993,475          5,679,912
Dividends payable                                                         110,270            115,862
Taxes payable                                                              64,576             65,375
Lease obligation - current portion                                         76,982             73,909
                                                                       ----------         ----------
                    Total current liabilities                          22,293,337         20,440,256
LEASE OBLIGATION -- LONG TERM                                              34,002             33,624
                                                                      -----------        -----------
                    Total liabilities                                 $22,327,339        $20,473,880
                                                                      -----------        -----------

COMMITMENT AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Preferred Stock, $10 par value; 2,500,000 shares authorized,
   320,696 shares issued and outstanding                                3,206,960          3,206,960
Common Stock, $.01 par value; 30,000,000 shares authorized,
   12,913,953 and 12,613,953 shares issued and outstanding,
   respectively                                                           129,139            126,139
Paid-in capital                                                        24,202,248         23,905,248
Accumulated deficit                                                   (11,833,013)       (10,583,382)
Less:  Treasury stock, 734,951 shares held at cost                       (644,805)          (644,805)
                                                                      -----------        -----------
                    Total shareholders' equity                         15,060,529         16,010,160
                                                                      -----------        -----------

                    Total liabilities and shareholders' equity        $37,387,868        $36,484,040
                                                                      ===========        ===========

              The accompanying notes are an integral part of these
                          consolidated balance sheets.

</TABLE>
                                      F-3
<PAGE>


<TABLE>
                             TARGET LOGISTICS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                                           Year Ended            Year Ended           Year Ended
                                                          June 30, 2002         June 30, 2001        June 30, 2000
                                                          -------------         -------------        -------------

<S>                                                         <C>                   <C>                  <C>
OPERATING REVENUES:                                         $93,483,739           $90,143,202          $84,088,195

COST OF TRANSPORTATION:                                      63,173,982            60,912,272           56,948,811
                                                            -----------           -----------          -----------

GROSS PROFIT:                                                30,309,757            29,230,930           27,139,384
                                                            -----------           -----------          -----------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
("SG&A"):
SG&A - Target subsidiary                                     15,600,538            15,025,467           13,692,166
SG&A - Target subsidiary
(Exclusive forwarder commissions)                            13,620,593            14,802,994           12,803,075
SG&A - Corporate                                                748,411               826,886              698,635
Depreciation and amortization                                 1,016,687               896,610              989,205
                                                            -----------            ----------           ----------
  Selling, general and administrative expenses               30,986,229            31,551,957           28,183,081
                                                            -----------            ----------           ----------

Operating loss                                                 (676,472)           (2,321,027)          (1,043,697)

OTHER EXPENSE:
Interest expense                                               (258,055)             (228,451)             (44,013)
                                                            -----------            ----------           -----------

Loss before income taxes                                       (934,527)           (2,549,478)          (1,087,710)
(Benefit) provision for income taxes                                  -              (777,895)             108,895
                                                            -----------           -----------          -----------
Net loss                                                    $  (934,527)          $(1,771,583)         $(1,196,605)
                                                            ===========           ===========          ===========

Basic and diluted loss per share attributable to                 $(0.10)               $(0.18)              $(0.14)
                                                                 ======                ======               ======
common shareholders

Weighted average shares outstanding                          11,953,797            11,879,002           11,015,126
                                                             ==========            ==========           ==========

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

</TABLE>

                                      F-4
<PAGE>


<TABLE>
                                                             TARGET LOGISTICS, INC.
                                                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000



<CAPTION>
                                   Preferred Stock       Common Stock     Additional    Treasury Stock
                                   ---------------       ------------      Paid-In      --------------      Accumulated
                                   Shares   Amount     Shares    Amount    Capital     Shares    Amount       Deficit      Total
                                   ------   ------     ------    ------    -------     ------    ------       -------      -----

<S>           <C> <C>            <C>     <C>         <C>        <C>      <C>         <C>       <C>         <C>          <C>
Balance, June 30, 1999           427,207 $4,272,070  10,031,868 $100,318 $22,877,209 (839,855) $(654,935)  $(6,937,598) $19,657,064

Cash dividends associated
with the Class A, C and D
Preferred Stock                        -          -           -        -           -        -          -      (357,172)    (357,172)

Common Stock issued in
connection with the conversion
of Class D Preferred Stock      (106,511)(1,065,110)  2,582,085   25,821   1,039,289        -          -             -            -

Purchase of Treasury Stock
at cost                                -          -           -        -           -   (1,400)    (1,120)            -       (1,120)

Treasury Stock retired,
at cost                                -          -           -        -     (11,250) 106,304     11,250             -            -

Net loss                               -          -           -        -           -        -          -    (1,196,605)  (1,196,605)
                                -------- ----------  ---------- -------- ----------- --------  ---------   -----------  -----------

Balance, June 30, 2000           320,696 $3,206,960  12,613,953 $126,139 $23,905,248 (734,951) $(644,805)  $(8,491,375) $18,102,167

Cash dividends associated
with the Class A and C
Preferred Stock                        -          -           -        -           -        -          -      (320,424)    (320,424)

Net loss                               -          -           -        -           -        -          -    (1,771,583)  (1,771,583)
                                -------- ----------  ---------- -------- ----------- --------  ---------  ------------  -----------

Balance, June 30, 2001           320,696 $3,206,960  12,613,953 $126,139 $23,905,248 (734,951) $(644,805)$ (10,583,382) $16,010,160

Cash dividends associated
with the Class A and C
Preferred Stock                        -          -           -        -           -        -          -      (315,104)    (315,104)

Common Stock issued pursuant
to Subscription Agreements
                                       -          -     300,000    3,000     297,000        -          -             -      300,000
Net loss                               -          -           -        -           -        -          -      (934,527)    (934,527)
                                -------- ----------  ----------  ------- ----------- --------  ---------  ------------  -----------

Balance, June 30, 2002           320,696 $3,206,960  12,913,953 $129,139 $24,202,248 (734,951) $(644,805) $(11,833,013) $15,060,529
                                ======== ==========  ========== ======== =========== ========  =========  ============= ===========


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

</TABLE>

                                      F-5
<PAGE>

<TABLE>
                             TARGET LOGISTICS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                                    Year Ended        Year Ended        Year Ended
                                                                                   June 30, 2002    June 30, 2001     June 30, 2000
                                                                                   -------------    -------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                    <C>            <C>               <C>
  Net loss                                                                             $(934,527)     $(1,771,583)      $(1,196,605)
  Bad debt expense                                                                       341,090         (239,611)          312,659
  Depreciation and amortization                                                        1,016,687          896,610           989,205
  Deferred income tax                                                                          -         (777,895)          108,895
  Adjustments to reconcile net loss to net cash used in operating activities-
     (Increase) decrease in accounts receivable                                       (2,498,395)         334,062        (4,609,167)
     (Increase) decrease in prepaid expenses and other current assets                   (122,408)        (155,774)          120,579
     Decrease in other assets                                                             45,270            9,898             9,767
     Increase (decrease) in accounts payable and accrued expenses                      1,836,445          937,752           (44,945)
                                                                                      ----------      -----------       -----------
                  Net cash used for operating activities                                (315,838)        (766,541)       (4,309,612)
                                                                                      -----------     ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                                   (311,287)        (450,694)         (435,787)
  Asset Purchase Acquisitions (Note 5)                                                  (528,663)               -                 -
                                                                                      -----------     -----------       -----------
                  Net cash used for investing activities                                (839,950)        (450,694)         (435,787)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                                                        (315,104)        (320,626)         (409,788)
  Purchase of treasury stock                                                                   -                -            (1,120)
  Borrowing from note payable to bank                                                 87,585,081       83,376,995        76,853,359
  Repayment of note payable to bank                                                  (87,271,518)     (82,333,904)      (73,566,516)
  Repayment of long-term debt                                                                  -                -           (10,500)
  Proceeds (payment) of lease obligations                                                  3,451          (73,441)           53,473
                                                                                     -----------      ------------      -----------
                  Net cash provided by financing activities                                1,910          649,024         2,918,908
                                                                                     -----------      -----------       -----------

                  Net decrease in cash and cash equivalents                           (1,153,878)        (568,211)       (1,826,491)

CASH AND CASH EQUIVALENTS, beginning of year                                           5,486,893        6,055,104         7,881,595
                                                                                     -----------      -----------       -----------
CASH AND CASH EQUIVALENTS, end of year                                                $4,333,015       $5,486,893        $6,055,104
                                                                                     ===========      ===========       ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
  Interest                                                                              $382,320         $506,793          $361,349
  Income taxes                                                                        $      800       $    2,499        $   19,934

              The accompanying notes are an integral part of these
                       consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>


<TABLE>
                             TARGET LOGISTICS, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (Continued)

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

<CAPTION>
                                                                                    Year Ended        Year Ended        Year Ended
                                                                                   June 30, 2002    June 30, 2001     June 30, 2000
                                                                                   -------------    -------------     -------------

<S>                                                                                    <C>            <C>               <C>
Issuance of 300,000 shares of Common Stock pursuant to Subscription Agreements          $300,000                -                 -
TIA, Inc. conversion of 106,511 Class D Preferred Shares                                       -                -       $(1,065,110)
Issuance of Common Stock for TIA, Inc. conversion of 106,511
   Class D Preferred Shares                                                                    -                -       $     25,821
Retirement of Treasury Stock                                                                   -                -       $     11,250


























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

</TABLE>


                                      F-7
<PAGE>


                             TARGET LOGISTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEAR ENDED JUNE 30, 2002


1.        BUSINESS

          Target  Logistics,   Inc.   ("Company")  provides  freight  forwarding
services and logistics  services,  through its wholly owned  subsidiary,  Target
Logistic Services,  Inc. ("Target").  The Company has a network of offices in 34
cities throughout the United States. The Company was incorporated in Delaware in
January 1996 as the successor to operations commenced in 1970.

          The Company's  freight  forwarding  services involve arranging for the
total  transport  of  customers'  freight  from the  shipper's  location  to the
designated  recipients,  including the preparation of shipping documents and the
providing  of  handling,  packing  and  containerization  services.  The Company
concentrates  on cargo  shipments  weighing  more than 50 pounds  and  generally
requiring  second-day  delivery.  The  Company  also  assembles  bulk  cargo and
arranges  for  insurance.  The  Company  has a network  of  offices in 34 cities
throughout the United States,  including  exclusive  agency  relationships in 21
cities. The Company has international  freight forwarding  operations consisting
of strategic relationships in over 20 countries including share ownership in its
exclusive  agents in China and  Philippines.  The Company has developed  several
niches  including  fashion  services,  consumer  direct  logistics  of oversized
freight,  the distribution of materials for the entertainment  industry,  and an
expertise in material supply logistics to manufacturing concerns.

2.        CHANGE IN AUDITORS

          On April 18, 2002, the Company determined, for itself and on behalf of
its subsidiaries,  to dismiss its independent auditors, Arthur Andersen LLP, and
to engage the services of Stonefield Josephson, Inc. ("Stonefield Josephson") as
its  new  independent   auditors.   The  change  in  auditors  became  effective
immediately.   This  determination  followed  the  Company's  decision  to  seek
proposals from independent  accountants to audit the financial statements of the
Company,  and  was  approved  by the  Company's  Board  of  Directors  upon  the
recommendation of its Audit Committee.

3.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant  accounting  policies of the Company,  as summarized  below,  are in
conformity with generally  accepted  accounting  principles.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

Principles of Consolidation

For the  fiscal  years  ended  June  30,  2002,  2001  and  2000,  the
consolidated  financial statements include the accounts of the Company,  Target,
and other inactive subsidiaries. All significant intercompany balances and
transactions have been eliminated upon consolidation.

Use of Estimates

In the process of preparing its consolidated  financial statements,  the Company
estimates the appropriate carrying value of certain assets and liabilities which
are not readily  apparent from other sources.  Management bases its estimates on
historical  experience  and on  various  assumptions  which are  believed  to be
reasonable  under  the  circumstances.  The  primary  estimates  underlying  the
Company's  consolidated  financial  statements  include  allowance  for doubtful
accounts, accruals for transportation and other direct costs, accruals for cargo
insurance,  and the classification of NOL and tax credit  carryforwards  between
current and long-term assets.


                                      F-8
<PAGE>


                             TARGET LOGISTICS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                            YEAR ENDED JUNE 30, 2002


Property and Equipment

Property and equipment are stated at cost.  Depreciation  is computed  under the
straight-line  method over  estimated  useful  lives  ranging from 3 to 8 years.
Assets under capital  leases are  depreciated  over the shorter of the estimated
useful  life of the asset or the lease term.  The  Company  utilizes a half-year
convention  for  assets  in the  year of  acquisition  and  disposal.  Leasehold
improvements  are amortized using the  straight-line  method over the shorter of
the asset life of the asset or the remaining lease term.

Accounting for Long-Lived Assets

The Company accounts for long-lived  assets in accordance with the provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
Of." This statement establishes financial accounting and reporting standards for
the  impairment of long-lived  assets,  certain  identifiable  intangibles,  and
goodwill related to those assets to be held and used, and for long-lived  assets
and certain identifiable intangibles to be disposed of. Management has performed
a review of all long-lived  assets and has determined  that no impairment of the
respective carrying value has occurred as of June 30, 2002.

Goodwill

Goodwill represents the excess of cost over net assets acquired and is amortized
on a straight-line basis over 25 years.

In July 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets",  which requires the use of a  non-amortization  approach to account for
purchased  goodwill and certain  intangibles.  This  statement is effective  for
fiscal  years  beginning  after  December  15,  2001.  The Company  adopted this
statement on July 1, 2002.  Under the  non-amortization  approach,  goodwill and
certain  intangibles  will not be  amortized  into  results of  operations,  but
instead will be reviewed for impairment,  written down and charged to results of
operations  only in periods in which the recorded  value of goodwill and certain
intangibles  is more than its fair value.  The Company is having an  independent
valuation analysis  completed and does not anticipate any material  transitional
impairment;   however,   future  impairment   reviews  may  result  in  periodic
write-downs   ranging   from  zero  to   $11,239,917.   The  Company   amortized
approximately  $596,000 of goodwill  for each of the fiscal years ended June 30,
2002, 2001 and 2000, respectively.

Income Taxes

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes".  Under SFAS No. 109,  deferred tax assets and liabilities are recognized
for  the  future  tax  consequences  attributable  to  differences  between  the
financial  statement  carrying  amounts of existing  assets and  liabilities and
their tax bases.  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 or liabilities of a change in tax rates is recognized in the
period that the tax change occurs.

Stock Options

The Company  accounts for its employee stock option plan in accordance  with the
provisions of Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock  Issued  to  Employees",  and  related  interpretations.  Compensation
expense  relating to employee  stock options is recorded only if, on the date of
grant,  the fair value of the underlying  stock exceeds the exercise price.  The
Company adopted the  disclosure-only  requirements of SFAS No. 123,  "Accounting
for  Stock-Based  Compensation",  which allows entities to continue to apply the
provisions of APB Opinion No. 25 for transactions with employees and provide pro
forma net income and pro forma earnings per share disclosures for employee stock
options as if the fair value based method of accounting in SFAS No. 123 had been
applied to these transactions.



                                      F-9
<PAGE>

The  Company  accounts  for  non-employee  stock-based  awards in which goods or
services are the consideration  received for the equity instruments issued based
on the fair value of the consideration  received or the fair value of the equity
instrument issued, whichever is more readily determinable.

Revenue Recognition

In  accordance  with EITF 91-9  "Revenue  and  Expense  Recognition  for Freight
Services in  Process",  revenue  from  freight  forwarding  is  recognized  upon
completed  delivery of goods,  and direct  expenses  associated with the cost of
transportation are accrued concurrently.  Ongoing provision is made for doubtful
receivables, discounts, returns and allowances.

Cash and Cash Equivalents

The  Company  considers  all  highly  liquid  investments  that  are not held as
collateral, and which are purchased with an original maturity of three months or
less, to be cash equivalents.

Per Share Data

Basic loss per share is calculated by dividing net loss  attributable  to common
shareholders  plus preferred stock dividends,  by the weighted average number of
shares of common stock outstanding  during the period.  Diluted income per share
is calculated by dividing net loss  attributable  to common  shareholders by the
weighted average number of common shares  outstanding,  adjusted for potentially
dilutive  securities.  Diluted loss per share has not been  presented  since the
inclusion of outstanding  convertible preferred stock and stock options would be
antidilutive.

The following table  summarizes the equivalent  number of common shares assuming
the related  securities that were outstanding as of June 30, 2002, 2001 and 2000
had been  converted,  but not  included in the  calculation  of diluted loss per
share as such shares are antidilutive:

                                                        June 30,
                                                        --------
                                              2002        2001         2000
                                              ----        ----         ----

Convertible preferred stock...........     9,983,626   6,951,166    5,127,730
Stock Options.........................       576,957     576,957      456,957
Stock Warrants........................                   109,448    5,183,731
                                          ----------   ---------   ----------

Antidilutive securities                   10,560,583   7,637,571   10,768,418
                                          ==========   =========   ==========

Options to purchase 576,957, 576,957, and 456,957 shares of common stock for the
years ended June 30, 2002, 2001 and 2000, respectively, were not included in the
computation  of diluted EPS because the  exercise  prices of those  options were
greater  than the  average  market  price of the  common  shares,  thus they are
anti-dilutive. The options were still outstanding at the end of the period.

Warrants to purchase  109,448 and 5,183,731 shares of common stock for the years
ended June 30, 2001 and 2000, respectively, were not included in the computation
of diluted EPS because they were also anti-dilutive.

Fair Value of Financial Instruments

Cash equivalents are reflected at cost which approximate their fair values.  The
fair value of notes and loans payable  outstanding  is estimated by  discounting
the future  cash flows using the  current  rates  offered by lenders for similar
borrowings  with similar credit  ratings.  The carrying  amounts of the accounts
receivable and debt approximate their fair value.



                                      F-10
<PAGE>

Foreign Currency Transactions

In the normal  course of  business  the  Company  has  accounts  receivable  and
accounts payable that are transacted in foreign currencies. The Company accounts
for transaction differences in accordance with Statement of Financial Accounting
Standard Number 52, "Foreign Currency  Translation",  and accounts for the gains
or  losses  in  operations.  For  all  periods  presented,  these  amounts  were
immaterial to the Company's operations.

Reclassifications

Certain amounts in the prior years' consolidated  financial statements have been
reclassified to conform with the 2002 presentation.

Recent Accounting Pronouncements

In July 2001,  FASB issued SFAS No. 141  "Business  Combinations".  SFAS No. 141
supersedes  APB No. 16 and  requires  that any business  combinations  initiated
after June 30, 2001, be accounted for as a purchase, therefore,  eliminating the
pooling-of-interest  method  defined in APB No. 16. The  statement was effective
for any business  combination  initiated after June 30, 2001, and must have been
applied to all business  combinations  accounted for by the purchase  method for
which the date of acquisition  was July 1, 2001, or later.  The adoption of this
statement did not have a material impact to the Company's  financial position or
results of operations, since the Company has not participated in such activities
covered under this pronouncement.

In July 2001,  the FASB  issued  SFAS No. 142,  "Goodwill  and Other  Intangible
Assets",  which requires the use of a  non-amortization  approach to account for
purchased  goodwill and certain  intangibles.  This  statement is effective  for
fiscal  years  beginning  after  December  15,  2001.  The Company  adopted this
statement on July 1, 2002.  Under the  non-amortization  approach,  goodwill and
certain  intangibles  will not be  amortized  into  results of  operations,  but
instead will be reviewed for impairment,  written down and charged to results of
operations  only in periods in which the recorded  value of goodwill and certain
intangibles  is more than its fair value.  The Company is having an  independent
valuation analysis  completed and does not anticipate any material  transitional
impairment;   however,   future  impairment   reviews  may  result  in  periodic
write-downs   ranging   from  zero  to   $11,239,917.   The  Company   amortized
approximately  $596,000 of goodwill  for each of the fiscal years ended June 30,
2002, 2001 and 2000, respectively.

In October 2001, the FASB issued SFAS No. 143,  "Accounting for Asset Retirement
Obligations",  which requires  companies to record the fair value of a liability
for asset retirement  obligations in the period in which they are incurred.  The
statement  applies  to  a  company's  legal  obligations   associated  with  the
retirement  of a tangible  long-lived  asset that results from the  acquisition,
construction,  and  development or through the normal  operation of a long-lived
asset. When a liability is initially recorded,  the company would capitalize the
cost,  thereby  increasing  the  carrying  amount  of  the  related  asset.  The
capitalized asset retirement cost is depreciated over the life of the respective
asset while the liability is accreted to its present value.  Upon  settlement of
the liability,  the obligation is settled at its recorded  amount or the company
incurs a gain or loss.  The  statement is effective  for fiscal years  beginning
after June 30, 2002. The Company does not expect the adoption to have a material
impact to the Company's financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment of
Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed  Of". SFAS No. 144
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived assets.  SFAS No. 144 requires that long-lived assets be reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that its
carrying  amount may not be  recoverable  and is measured by a comparison of the
carrying amount of an asset to undiscounted future net cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated
future  undiscounted  cash flows,  an impairment  charge is  recognized  for the
amount by which the carrying  amount of the asset  exceeds the fair value of the
asset.  SFAS No.  144  requires  companies  to  separately  report  discontinued
operations  and extends  that  reporting to a component of an entity that either
has been disposed of (by sales,  abandonment or in a distribution  to owners) or
is classified as held for sale. Assets to be disclosed are reported at the lower
of the  carrying  amount or fair value less costs to sell.  The Company  adopted


                                      F-11
<PAGE>

SFAS No. 144 on July 1, 2002. The Company  anticipates that adoption of SFAS No.
144 will not have a  material  impact to the  Company's  financial  position  or
results of operations.

In April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements
No.  4,  44,  and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
Corrections". This Statement rescinds FASB Statement No. 4, "Reporting Gains and
Losses from  Extinguishment  of Debt", and an amendment of that Statement,  FASB
Statement  No.  64,  "Extinguishments  of  Debt  Made  to  Satisfy  Sinking-Fund
Requirements"  and FASB Statement No. 44,  "Accounting for Intangible  Assets of
Motor Carriers".  This Statement  amends FASB Statement No. 13,  "Accounting for
Leases",  to eliminate an  inconsistency  between the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions. The Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.

In June  2002,  the  FASB  issued  Statement  No.  146,  "Accounting  for  Costs
Associated with Exit or Disposal Activities". This Statement addresses financial
accounting and reporting for costs  associated with exit or disposal  activities
and  nullifies  Emerging  Issues Task Force (EITF)  Issue No.  94-3,  "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)".  The provisions
of this  Statement  are  effective  for  exit or  disposal  activities  that are
initiated  after  December  31, 2002,  with early  application  encouraged.  The
Company does not expect the adoption to have a material  impact to the Company's
financial position or results of operations.

4.       PROPERTY AND EQUIPMENT, NET
<TABLE>
<CAPTION>
                                                                         June 30, 2002        June 30, 2001
                                                                         -------------        -------------
         Property and Equipment consists of the following:
<S>                                                                        <C>                  <C>
           Furniture and fixtures                                          $ 864,517            $ 821,553
           Furniture and fixtures - Capital Lease                             63,494                    -
           Computer Equipment                                                317,827              212,821
           Computer Equipment - Capital Lease                                499,398              499,398
           Computer Software                                                 421,117              394,551
           Leasehold Improvements                                            380,114              363,935
           Vehicles                                                           81,036              116,036
                                                                           ---------            ---------
                                                                           2,627,503            2,408,294
           Less:  Accumulated depreciation and amortization (a)           (2,011,897)          (1,683,156)
                                                                          -----------          ----------
                                                                          $  615,606           $  725,138
                                                                          ===========          ==========

</TABLE>
(a)       Includes  accumulated  depreciation  and amortization of capital lease
          assets of $463,997  and  $386,377 for the year ended June 30, 2002 and
          2001, respectively.

5.       ASSET PURCHASE ACQUISITIONS

On November 30, 2001, the Company's Target Logistic  Services,  Inc.  subsidiary
("Target")  acquired  the assets and certain  liabilities  of SDS  Logistics,  a
Newark,  New Jersey based forwarder for a combination of an initial cash payment
and an earn out structure over five years.

On February 11, 2002, the company's  Target  subsidiary  acquired the assets and
certain  liabilities of Air America Freight Service,  Inc., an Atlanta,  Georgia
based  forwarder  for a  combination  of an initial cash payment and an earn out
structure over five years.



                                      F-12
<PAGE>

6.       DEBT

As of June 30, 2002 and 2001,  long-term and  short-term  debt  consisted of the
following:

<TABLE>
<CAPTION>
                                                                         June 30, 2002        June 30, 2001
                                                                         -------------        -------------

<S>                                                                       <C>                  <C>
         Asset-based financing                                            $5,993,475           $5,679,912
                                                                          ==========           ==========
</TABLE>


During the years ended June 30, 2002 and 2001, the Company's  Target  subsidiary
("Borrower") maintained an Accounts Receivable Management and Security Agreement
with GMAC  Commercial  Credit LLC  ("GMAC")  whereby  the  Borrower  can receive
advances  of up to  85% of the  net  amounts  of  eligible  accounts  receivable
outstanding to a maximum of  $10,000,000.  The credit line ("GMAC  Facility") is
subject to interest at a rate of 1.0% per annum over the  prevailing  prime rate
as defined by GMAC (4.75% and 6.75%) as of June 30, 2002 and 2001, respectively,
but at no time can the rate be less than  6.0% per  annum  (and not less than 5%
after September 20, 2002). At June 30, 2002 and 2001, the outstanding balance on
the GMAC Facility was $5,993,475 and $5,679,912 which represented 83% and 82% of
the approximate $7,211,000 and $6,967,000 available thereunder, respectively. At
June 30,  2002,  the  remaining  amount  available  under the GMAC  Facility was
approximately $1,218,000. GMAC has a security interest in all present and future
accounts  receivable,  machinery  and equipment and other assets of the Borrower
and the GMAC Facility is guaranteed by the Company. The GMAC Facility expires on
January 14, 2005.

7.       SHAREHOLDERS' EQUITY

Preferred Stock

As of June 30, 2002, the authorized  preferred stock of the Company is 2,500,000
shares.  As of June 30, 2002,  320,696 shares of preferred stock are outstanding
as follows:

<TABLE>
<CAPTION>
                                                       Number of Shares Outstanding
                                       ------------------------------------------------------------
                                       Class A (a)      Class C (b)       Class D(c)          Total
                                       -----------      -----------       ----------          -----

<S>                   <C> <C>              <C>              <C>              <C>             <C>
      Balance at June 30, 1999             122,946          197,750          106,511         427,207
           Issuances                             -                -                -               -
           Conversions                           -                -         (106,511)       (106,511)
                                           -------          -------         --------        --------

      Balance at June 30, 2000             122,946          197,750                -         320,696
           Issuances                             -                -                -               -
           Conversions                           -                -                -               -
                                           -------          -------         --------         -------

      Balance at June 30, 2001             122,946          197,750                -         320,696
           Issuances                             -                -                -               -
           Conversions                           -                -                -               -
                                           -------          -------         --------         -------

      Balance at June 30, 2002             122,946          197,750                -         320,696
                                           =======          =======         ========         =======
</TABLE>

(a) Class A Preferred  Stock. On July 3, 1996, the Company issued 200,000 shares
of Class A, non-voting, cumulative, convertible preferred stock with a par value
of $10.00 in exchange for a paydown of $2,000,000 on the $10,000,000  promissory
note.

The Class A Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share in cash or, at the option of the Company,  in shares of Class
A Preferred  Stock,  at the rate of $10.00 per share.  The Company is prohibited


                                      F-13
<PAGE>

from paying any cash  dividends  on common  stock  unless all  required  Class A
Preferred  Stock dividends have been paid. Each share of Class A Preferred Stock
may be converted at any time, at the option of the holder,  into common stock at
a conversion  price (subject to adjustment) of the lower of (i) $6.00 per share,
or (ii) 80% of the  average  of the  closing  bid and  asked  price per share of
Common Stock on the day prior to the conversion  date.  Class A Preferred  Stock
holders are entitled to a  liquidation  preference  of $10.00 per share plus all
accrued and unpaid dividends.

On December 31, 1996,  June 30, 1997,  December 31, 1997 and June 30, 1998,  the
Company issued 10,000, 10,500, 6,887 and 5,809 respectively,  shares of Class A,
non-voting,  cumulative,  convertible preferred stock with a par value of $10.00
representing the semi-annual dividend due the Class A preferred shareholders.

On September 23, 1997,  110,250 shares of Class A Preferred Stock were converted
into 1,102,500 shares of the Company's Common Stock.

There were no shares of Class A Preferred  Stock  converted  into the  Company's
Common Stock during fiscal years ending June 30, 2002 and 2001.

(b) Class C Preferred Stock. On June 13, 1997, the Company issued 257,500 shares
of Class C, non-voting, cumulative, convertible preferred stock with a par value
of $10.00 upon completion of a $2,575,000 private placement of equity securities
to individual investors (the "Private Placement").

The Class C Preferred Stock will pay cumulative cash dividends at an annual rate
of $1.00 per share payable the last day of each calendar  quarter in cash or, at
the option of the  Company,  in shares of common stock  provided a  registration
statement  with respect to the  underlying  shares of common stock is in effect.
The Company is  prohibited  from paying any dividends on common stock or Class A
Preferred  Stock unless all required Class C Preferred Stock dividends have been
paid. Each share of Class C Preferred Stock may be converted at any time, at the
option of the holder,  into 10 shares of common  stock.  There were no shares of
Class C Preferred Stock converted into the Company's  Common Stock during fiscal
year ending June 30, 2002 and 2001.

(c) Class D Preferred  Stock.  On November 28, 1997,  the Company  acquired from
TIA, Inc.  $1,000,000 of secured debt of a closed subsidiary in exchange for the
issuance of 100,000 shares of the Company's non-voting,  cumulative, convertible
Class D Preferred  Stock,  par value $10.00 per share.  On December 31, 1997 and
June 30, 1998, the Company issued 1,479 and 5,032 respectively,  shares of Class
D,  non-voting,  cumulative,  convertible  preferred  stock  with a par value of
$10.00  representing  the  semi-annual   dividend  due  the  Class  D  Preferred
shareholders.  On October 29 and November 1, 1999,  55,000 and 51,511  shares of
Class D Preferred Stock,  respectively,  were converted into 2,582,085 shares of
the Company's  Common  Stock.  Therefore,  as of November 1, 1999,  there are no
shares of Class D Preferred Stock outstanding.

Warrants

As of June 30, 2002, the Company had no warrants outstanding.

Stock Option Plan

In June 1996,  the Board of  Directors  of the  Company  adopted  the  Amertranz
Worldwide  Holding  Corp.  1996  Stock  Option  Plan  ("1996  Plan"),  which was
subsequently approved by shareholders.  The 1996 Plan authorizes the granting of
awards, the exercise of which would allow up to an aggregate of 1,000,000 shares
of the Company's common stock to be acquired by the holders of said awards.  The
awards can take the form of incentive  stock  options  ("ISOs") or  nonqualified
stock options ("NSOs") and may be granted to key employees,  officers, directors
and  consultants.  Any plan participant who is granted an Incentive Stock Option
and possesses  more than 10% of the voting  rights of the Company's  outstanding
common  stock must be granted an option  price at least 110% of the fair  market
value on the date of grant and the option  must be  exercised  within five years
from the date of grant.  Under the 1996 Plan, stock options have been granted to
employees and directors for terms of up to 10 years at exercise  prices  ranging
from $.10 to $6.00 and are  exercisable in whole or in part at stated times from
the date of grant up to ten  years  from the date of  grant.  At June 30,  2002,
356,957 stock options granted to employees and directors were  exercisable.  The


                                      F-14
<PAGE>

Company  accounts for  equity-based  awards  granted to employees  and directors
under APB Opinion No. 25 under which no  compensation  cost has been  recognized
for stock options  granted at market value (Note 3). Had  compensation  cost for
these stock options been determined  consistent with SFAS No. 123, the Company's
net income (loss) and net income  (loss) per share would have been  increased to
the following pro forma amounts:

<TABLE>
<CAPTION>
                                         Year Ended            Year Ended           Year Ended
                                        June 30, 2002        June 30, 2001         June 30, 2000
                                        -------------        -------------         -------------
    Net income (loss):
<S>                                       <C>                 <C>                   <C>
                As Reported               $(934,527)          $(1,771,583)          $(1,196,605)
                Pro Forma                 $(953,204)          $(1,914,581)          $(1,270,152)

    Basic and Diluted EPS:
                As Reported                  $(0.10)               $(0.18)               $(0.14)
                Pro Forma                    $(0.10)               $(0.19)               $(0.15)


The  effects  of  applying  SFAS No.  123 in the pro  forma  disclosure  are not
indicative  of  future  amounts  as  additional   awards  in  future  years  are
anticipated.

Prior to the adoption of the 1996 Plan,  there were 224,399  options  granted to
purchase  common stock at exercise  prices ranging from $0.048 to $0.408.  These
options were granted pursuant to the terms of the Asset Exchange  Agreement.  At
each of June 30, 2002,  2001 and 2000,  6,957 of these options were  outstanding
and exercisable.

The following table reflects  activity under the plan for the three-year  period
ended June 30, 2002:

</TABLE>

<TABLE>
<CAPTION>
                                      Year Ended June 30, 2002  Year Ended June 30, 2001   Year Ended June 30, 2000
                                      ------------------------  ------------------------   ------------------------
                                                   Weighted                   Weighted                   Weighted
                                                    Average                    Average                    Average
                                                   Exercise                   Exercise                   Exercise
                                       Shares        Price       Shares         Price        Shares        Price
                                       ------        -----       ------         -----        ------        -----

<S>                                   <C>             <C>       <C>              <C>        <C>             <C>
Outstanding at beginning of year      576,957         1.24      456,957          1.99       446,957         2.00
Granted                                     -            -      455,000          0.50        10,000         1.25
Exercised                                   -            -            -             -             -            -
Forfeited                                   -            -      (25,000)         1.25             -            -
Cancelled                                   -            -     (310,000)         1.25             -            -

Outstanding at end of year            576,957        $1.24      576,957         $1.24       456,957        $1.99
Exercisable at end of year            356,957        $1.70      259,290         $2.15       193,624        $2.99

</TABLE>

The per share weighted  average fair value of stock options  granted during 2001
and 2000 was $0.22 and $0.72, respectively. No stock options were granted during
2002.

The fair value of each stock  option  grant is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:

                                          2002         2001           2000
                                          ----         ----           ----
       Risk-Free Interest Rates          4.25%        4.35%           6.34%
       Expected Lives                       5            5               5
       Expected Volatility              67.50%      368.23%          72.28%
       Expected Dividend Yields          0.00%        0.00%           0.00%



                                      F-15
<PAGE>

The following table summarizes  information  about stock options  outstanding at
June 30, 2002:

<TABLE>
<CAPTION>
                                       Options Outstanding                      Options Exercisable
                          ----------------------------------------------   ------------------------------
                            Number      Weighted Average    Weighted          Number           Weighted
                          Outstanding       Remaining        Average       Exercisable         Average
Exercise Prices           at 6/30/02    Contractual Life  Exercise Price    at 6/30/02     Exercise Price
---------------           ----------    ----------------  --------------   -----------     --------------

<C>     <C>                 <C>               <C>             <C>            <C>                <C>
$0.04 - $1.13               501,957           7.63            $0.53          281,957            $0.56
$4.00 - $6.00                75,000           4.00            $6.00           75,000            $6.00
                            -------          -----            -----          -------            -----
$0.04 - $6.00               576,957           7.22            $1.24          356,957            $1.70
                            =======          =====            =====          =======            =====
</TABLE>

8.       COMMITMENTS AND CONTINGENCIES

Leases

As of June 30,  2002,  future  minimum  lease  payments  for capital  leases and
operating leases relating to equipment and rental premises are as follows:

         YEAR ENDING                         CAPITAL LEASES    OPERATING LEASES
         -----------                         --------------    ----------------

            2003                                 $51,870          $1,035,743
            2004                                  17,359           1,057,656
            2005                                  17,359             942,976
            2006                                   4,339             269,477
            2007                                       -              12,856
                                                 -------          ----------
    Total minimum lease payments                 $90,927          $3,318,708
                                                                  ==========
    Less - Amount representing interest           (9,636)
                                                 -------
                                                 $81,291

Employment Agreements

The Company has employment agreements with certain employees expiring at various
times through June 30, 2007. Such  agreements  provide for minimum salary levels
and for incentive  bonuses which are payable if specified  management  goals are
attained.  The  aggregate  commitment  for  future  salaries  at June 30,  2002,
excluding bonuses, was approximately $680,000.

Litigation

On October 12, 2000,  Pilot Air Freight Corp.  ("Pilot"),  a major competitor of
Target, sued Target in the United States District Court for the Eastern District
of  Pennsylvania,  Case No.  00-CV-5190,  with respect to the  termination  by a
former Pilot freight  forwarder of its relationship with Pilot and entering into
an exclusive  forwarder  relationship  with Target.  Pilot alleged,  among other
things,  intentional  interference  with contract,  tortious  interference  with
business  relations,  violation of section 43(a) of the Lanham Act, violation of
Pennsylvania  state statutes  concerning stored electronic  communications,  and
misappropriation  of trade  secrets.  Pilot  sought  an  amount  "in  excess  of
$100,000"  in  damages,  punitive  damages,  and an  injunction  against  Target
requiring it to cease  competing  in the  Hartford,  Connecticut  market for six
months. During subsequent discovery proceedings,  Pilot claimed that its damages
exceed $3 million. Target has denied all of Pilot's claims and believes they are
without merit. Target will continue to vigorously defend Pilot's claims.

9.       SEGMENT INFORMATION

The  Company's  revenue  includes  both  domestic  and   international   freight
movements.  Domestic freight movements originate and terminate within the United
States, and never leave the United States.  International  freight movements are


                                      F-16
<PAGE>

either  exports  from the United  States or imports to the United  States.  With
regard to international  freight  movements,  the account  receivable can be due
from either a domestic debtor or from one of the Company's  Target  subsidiary's
international agents (an international debtor).

A reconciliation of the Company's  domestic and international  segment revenues,
gross profit,  and accounts  receivable for the years ended June 30, 2002,  2001
and 2000 is as follows:

<TABLE>
<CAPTION>
                                                 June 30, 2002      June 30, 2001       June 30, 2000
                                                 -------------      -------------       -------------

<S>                                               <C>                <C>                 <C>
  Domestic revenue                                $69,652,711        $65,255,740         $56,093,399
  International revenue                            23,831,028         24,887,462          27,994,796
                                                  -----------        -----------         -----------
            Total revenue                         $93,483,739        $90,143,202         $84,088,195
                                                  -----------        -----------         -----------

  Domestic gross profit                           $23,876,294        $22,900,071         $20,152,072
  International gross profit                        6,433,463          6,330,859           6,987,312
                                                  -----------        -----------         -----------
            Total gross profit                    $30,309,757        $29,230,930         $27,139,384
                                                  -----------        -----------         -----------

  Domestic accounts receivable                     16,394,974        $13,579,181         $12,731,926
  International accounts receivable                 1,812,948          2,867,349           4,048,666
  Less: allowance for doubtful accounts             (995,245)        (1,391,157)         (1,630,768)
                                                  -----------        -----------         -----------
           Accounts receivable, net of
           allowance for doubtful accounts        $17,212,677        $15,055,373         $15,149,824
                                                  -----------        -----------         -----------
</TABLE>

10.      QUARTERLY FINANCIAL DATA SCHEDULE (unaudited)

<TABLE>
                                                                         Year Ended
                                                                        June 30, 2002

<CAPTION>
                                              9/30/01        12/31/01       03/31/02        06/30/02     Fiscal Year
                                           -----------     -----------    -----------     -----------    -----------
<S>                                        <C>             <C>            <C>             <C>            <C>
Operating revenue                          $21,552,498     $24,020,827    $21,414,092     $26,526,322    $93,483,739
Cost of transportation                      14,395,369      16,314,144     14,323,881      18,140,588     63,173,982
                                           -----------     -----------    -----------     -----------    -----------
Gross profit                                 7,127,129       7,706,683      7,090,211       8,385,734     30,309,757
Selling, general & administrative
   expense                                   7,528,749       7,725,386      7,326,125       8,405,969     30,986,229
Interest (expense)                             (68,482)        (58,760)       (57,308)        (73,505)      (258,055)
Provision (benefit) for income taxes                 -               -              -               -              -
Net (loss)                                   ($470,102)       ($77,463)     ($293,222)       ($93,740)     ($934,527)
Net (loss) per share:
Basic and diluted loss per share
attributable to common
shareholders                                    ($0.04)         ($0.02)        ($0.03)         ($0.02)        ($0.10)
Weighted average shares outstanding         11,879,002      11,879,002     11,879,002      12,179,002     11,953,797




                                      F-17
<PAGE>

                                                                         Year Ended
                                                                        June 30, 2001

                                              9/30/00        12/31/00       03/31/01        06/30/01     Fiscal Year
                                           -----------     -----------    -----------     -----------    -----------
Operating revenue                          $21,380,041     $24,700,710    $22,864,467     $21,197,984    $90,143,202
Cost of transportation                      14,164,019      16,679,273     15,468,266      14,600,714     60,912,272
                                           -----------     -----------    -----------     -----------    -----------
Gross profit                                 7,216,022       8,021,437      7,396,201       6,597,270     29,230,930
Selling, general & administrative
   expense                                   7,476,197       8,127,358      8,199,735       7,748,667     31,551,957
Interest (expense)                             (57,091)        (45,328)       (60,940)        (65,092)      (228,451)
(Benefit) provision for income taxes                 -               -       (255,209)       (522,686)      (777,895)
Net (loss)                                   ($317,266)      ($151,249)     ($609,265)      ($693,803)   ($1,771,583)
Net (loss) per share:
Basic and diluted loss per share
attributable to common
shareholders                                    ($0.03)         ($0.02)        ($0.06)         ($0.07)        ($0.18)
Weighted average shares outstanding         11,879,002      11,879,002     11,879,002      11,879,002     11,879,002


</TABLE>
11.      INCOME TAXES

The Company has tax net operating  loss  carryforwards  of  approximately  $13.1
million, which are available to offset future regular taxable income. The losses
expire from 2011 through 2022.  Some of the losses are limited to annual maximum
amounts,  due to a prior  ownership  change,  as  defined in  regulations  under
Section 382 of the Internal Revenue Code.

The components of current and deferred income tax expense (benefit) are as
follows:

<TABLE>
<CAPTION>
                                                 Year Ended           Year Ended          Year Ended
                                                June 30, 2002       June 30, 2001        June 30, 2000
                                                -------------       -------------        -------------
   (In thousands)
   Current:
<S>                                                 <C>                 <C>                   <C>
   State                                            $ -                 $   -                 $  3
   Federal                                            -                     -

   Deferred:
   State                                              -                     -                    -
   Federal                                            -                  (778)                 106
                                                    ---                  ----                 ----

   Net income tax expense (benefit)                 $ -                 $ 778                 $109
                                                    ===                 =====                 ====

</TABLE>



                                      F-18
<PAGE>

A  reconciliation  of income taxes between the statutory and effective tax rates
on income before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                   Year Ended         Year Ended        Year Ended
                                                                 June 30, 2002      June 30, 2001      June 30, 2000
                                                                 -------------      -------------      -------------

(In thousands)
<S>                                                                 <C>                 <C>                <C>
Income tax (benefit) expense at U.S. statutory rate                 $ (318)             $(867)             $(370)

Tax deductible goodwill                                                  -                  -                  -
Non-deductible goodwill                                                203                203                203

State and local income taxes                                             -                  -                  3
(net of federal benefit)

AMT Credit                                                               -                  -                (17)

Valuation Allowance                                                    117                  -                  -

Non-deductible expenses                                                 (2)              (114)               290
                                                                     -----             ------              -----

                                                                     $   -              $(778)             $ 109
                                                                     =====             ======              =====
</TABLE>

The components of deferred income taxes are as follows:


<TABLE>
<CAPTION>
                                                                       Year Ended                  Year Ended
                                                                      June 30, 2002               June 30, 2001
                                                                      -------------               -------------
(In thousands)

<S>                                                                       <C>                         <C>
NOLs                                                                      $4,468                      $4,170
Tax credits                                                                  286                         286
Accrued amounts and other                                                    694                         877
                                                                          ------                      ------
                                                                           5,448                       5,333

Depreciation and amortization                                                 87                          85
                                                                          ------                      ------
                                                                           5,535                       5,418

Valuation allowance                                                       (2,601)                     (2,484)
                                                                          ------                      ------
                                                                          $2,934                      $2,934
                                                                          ======                      ======
</TABLE>

                                      F-19
<PAGE>



<TABLE>
                                                                     SCHEDULE II

                  SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<CAPTION>
                                                 Balance at    Charged to     Charged to
                                                 Beginning     Costs and        Other                      Balance at
                                                  of Year       Expenses       Accounts     Deductions    End of Year
                                                  -------       --------       --------     ----------    -----------

For the fiscal year ended June 30, 2000

<S>                                               <C>            <C>           <C>           <C>            <C>
  Allowance for doubtful accounts                 $ 1,318        $  536        $     -       $  (223)       $ 1,631
                                                  =======        ======        =======       =======        =======

  Reserve for restructuring                       $              $    -        $     -       $   (22)       $     -
                                                  =======        ======        =======       =======        =======


For the fiscal year ended June 30, 2001

  Allowance for doubtful accounts                 $ 1,631        $  180        $     -       $  (420)      $  1,391
                                                  =======        ======        =======       =======        =======


For the fiscal year ended June 30, 2002

  Allowance for doubtful accounts                 $ 1,391        $  341        $     -       $  (737)      $    995
                                                  =======        ======        =======       =======        =======
</TABLE>







                                      S-1
<PAGE>

                                                                    EXHIBIT 10.4

                                                        as of September 20, 2002


GMAC COMMERCIAL CREDIT LLC
1290 Avenue of the Americas
New York, New York 10104

         Re: Amendment to ARMS Agreement
             ---------------------------

Gentlemen:

          Reference  is made to  that  certain  Restated  and  Amended  Accounts
Receivable  Management and Security Agreement,  dated July 13, 1998 (as the same
now  exists  or  may  hereafter  be  amended,   restated,   renewed,   replaced,
substituted,   supplemented,   extended,   or  otherwise  modified,   the  "ARMS
Agreement"),  by and between GMAC COMMERCIAL  CREDIT LLC,  formerly known as BNY
Factoring  LLC, as successor by merger to BNY Financial  Corporation  ("Lender")
and TARGET LOGISTIC  SERVICES,  INC.  ("Borrower")  formerly known as Target Air
Freight,  Inc. All capitalized terms used and not otherwise defined herein shall
have the respective meanings ascribed to them in the ARMS Agreement.

          Borrower has requested  that Lender amend and modify  certain terms of
the ARMS  Agreement,  which  Lender has agreed to do subject to and on the terms
and  conditions  contained in this Letter Re:  Amendment to ARMS  Agreement (the
"Amendment").

          In consideration  of the foregoing,  the parties hereto mutually agree
as follows:

          1.    Definitions.
                -----------

          (a)  Amendment to  Definitions.  Effective as of the date hereof,  the
following  definitions  appearing in paragraph  1(A) of the ARMS  Agreement  are
hereby amended and restated in their entirety as follows:

                    (i)  ""Advance  Rates"  means the  Accounts  Advance  Rate."
                           -------------

                    (ii) ""Collateral" means and includes:
                           ----------

                         (a)     all Accounts;

                         (b)     all Equipment;

                         (c)     all General Intangibles;

                         (d)     all Inventory;

                         (e)     all  of  Borrower's  present and future  right,
                    title and  interest  in and to (i) goods and other  property
                    including,  but not limited to, all merchandise  returned or
                    rejected by  Customers,  relating to or securing  any of the
                    Receivables;  (ii) all  additional  amounts  due to Borrower
                    from any Customer  relating to the Receivables;  (iii) other
                    property,  including warranty claims,  relating to any goods
                    securing this  Agreement;  (iv) all of  Borrower's  contract
                    rights,  rights of payment  which have been  earned  under a
                    contract  right,   instruments   (including  all  promissory
                    notes), documents, chattel paper (including all tangible and
                    electronic  chattel  paper),  warehouse  receipts,   deposit
                    accounts,   money,   securities  and   investment   property
                    (including     securities,     whether    certificated    or
                    uncertificated,  securities accounts, security entitlements,
                    commodity contracts or commodity accounts),  monies,  credit
                    balances,  deposits  and other  property of Borrower  now or
                    hereafter held or received by or in transit to Lender or any
                    of Lender's  Affiliates or at any other  depository or other
                    institution  from or for the account of Borrower whether for


                                     - 1 -
<PAGE>

                    safekeeping,  pledge, custody,  transmission,  collection or
                    otherwise;  (v) any other goods,  personal  property or real
                    property now owned or hereafter  acquired in which  Borrower
                    has  expressly  granted a  security  interest  or may in the
                    future grant a security interest to Lender hereunder,  or in
                    any amendment or supplement hereto or thereto,  or under any
                    other  agreement  between  Lender  and  Borrower;  (vi)  all
                    letters  of  credit,   banker's   acceptances   and  similar
                    instruments and including all  letter-of-credit  rights; and
                    (vii)  all  commercial  tort  claims,   including,   without
                    limitation, all commercial tort claims set forth on Schedule
                    6(j);

                         (f)    all  present and  future supporting  obligations
                    and  all  present  and  future  liens,  security  interests,
                    rights,  remedies,  title and interest in, to and in respect
                    of Receivables  and other  Collateral,  including (i) rights
                    and remedies under or relating to  guaranties,  contracts of
                    suretyship, letters of credit and credit and other insurance
                    related  to the  Collateral,  (ii)  rights  of  stoppage  in
                    transit,    setoff,   detinue,    replevin,    repossession,
                    reclamation,  repurchase and other rights and remedies of an
                    unpaid  vendor,  consignor,  consignee,  mechanic,  artisan,
                    lienor or secured party,  (iii) goods described in invoices,
                    documents,  contracts  or  instruments  with  respect to, or
                    otherwise  representing or evidencing,  Receivables or other
                    Collateral,  including  returned,  repossessed and reclaimed
                    goods,  and (iv) if and when obtained by Borrower,  all real
                    and personal property of third parties in which Borrower has
                    been granted a lien or security interest as security for the
                    payment or enforcement of Receivables and including deposits
                    by and property of account debtors or other persons securing
                    the obligations of account debtors;

                         (g)    to the extent not otherwise described above, all
                    Receivables;

                         (h)    all  of Borrower's ledger sheets, ledger  cards,
                    files,  correspondence,  Records, books of account, business
                    papers,  computers,  computer  software  (whether  owned  by
                    Borrower or in which  Borrower  has an  interest),  computer
                    programs,   tapes,  disks  and  documents  relating  to  the
                    property and rights  described in  subparagraphs  (a),  (b),
                    (c), (d), (e), (f) or (g) above; and

                          (i)   all  proceeds and  products of the property and
                    rights described in  subparagraphs  (a), (b), (c), (d), (e),
                    (f), (g) and (h) above in whatever form, including,  but not
                    limited to: cash, deposit accounts (whether or not comprised
                    solely of  proceeds),  certificates  of  deposit,  insurance
                    proceeds  (including  hazard,  flood,  credit  and  business
                    interruption  insurance),  negotiable  instruments and other
                    instruments  for  the  payment  of  money,   chattel  paper,
                    security  agreements,  documents,  eminent domain  proceeds,
                    condemnation proceeds and tort claim proceeds."


               (iii)  ""Contract Rate" means an interest rate per annum equal to
(i) the Alternate Base Rate plus (ii) one percent (1%), provided,  however, that
the Contract Rate shall not at any time be less than five percent (5%)."

               (iv) ""Credit Risk" means the risk of loss  resulting  solely and
exclusively  from a  Customer's  financial  inability  to pay at  maturity  with
respect to any Account purchased hereunder."

               (v)  ""Dispute"  means  any  cause  asserted  for  nonpayment  of
Accounts,  including,  without  limitation,  any alleged defense,  counterclaim,
offset, dispute or other claim (real or merely asserted) whether arising from or
relating  to the sale of goods or  rendition  of  services  or  arising  from or
relating to any other transaction or occurrence."

               (vi) ""Equipment" means all of Borrower's now owned and hereafter
acquired goods (other than  Inventory),  wherever  located,  including,  without
limitation,  equipment,  machinery,  vehicles, tools, furniture,  fixtures, data
processing and computer  equipment and computer  hardware and software,  whether
owned or licensed, and including, embedded software, all attachments, accessions
and property now or hereafter  affixed thereto or used in connection  therewith,
and substitutions and replacements thereof, wherever located."



                                     - 2 -
<PAGE>

               (vii) ""General Intangibles" means and includes all of Borrower's
general intangibles,  whether now owned or hereafter acquired including, without
limitation,  all choses in action, causes of action, corporate or other business
records, patents, patent rights, patent applications,  manufacturing procedures,
quality   control   procedures,   trademarks,   service   marks,   service  mark
applications,  goodwill (including any goodwill associated with any trademark or
the license of any trademark), copyrights, works which are the subject matter of
copyrights, rights in works of authorship, copyright registrations,  inventions,
trade secrets, formulas,  processes,  compounds,  drawings, designs, blueprints,
surveys, reports, manuals and operating standards, design rights, registrations,
licenses,  franchises,  customer lists, tax refunds, tax refund claims, computer
programs,  internet domain names,  internet domain name registrations,  software
and contract rights relating to software, all claims under guaranties,  security
interests or other  security held by or granted to Borrower to secure payment of
any of the  Receivables  by a Customer,  all rights of  indemnification  and all
other intangible property of every kind and nature (other than Receivables)."

               (viii)  ""Guarantor"  means  Holding and any other Person who may
now or hereafter  guarantee  payment and performance of the whole or part of the
Obligations; and "Guarantors" means collectively all such Persons."

               (ix) ""Holding" means Target Logistics,  Inc.,  formerly known as
Amertranz Worldwide Holding Corp., together with its successors and assigns."

               (x) ""Inventory"  means all of Borrower's now owned and hereafter
existing or acquired goods,  wherever located,  which (a) are leased by Borrower
as lessor; (b) are held by Borrower for sale or lease or to be furnished under a
contract of service;  (c) are furnished by Borrower under a contract of service;
or (d) consist of raw  materials,  work in process,  finished goods or materials
used or consumed in its business,  together with all documents of title or other
documents representing or relating to any of the foregoing."

               (xi) ""Net Face Amount" of Accounts  means the gross face invoice
amount  thereof,  less returns,  discounts  (the  calculation  of which shall be
determined by Lender where optional terms are given),  anticipation or any other
unilateral  deductions  taken  by  Customers,  and  credits  and  allowances  to
Customers of any nature."

               (xii)  ""Receivables"  means,  all of the  following now owned or
hereafter  arising or acquired property of Borrower:  (a) all Accounts;  (b) all
interest, fees, late charges,  penalties,  collection fees and other amounts due
or to become due or otherwise  payable in connection  with any Account;  (c) all
payment  intangibles  of Borrower  and other  contract  rights,  chattel  paper,
instruments,  notes, and other forms of obligations  owing to Borrower,  whether
from the sale and lease of goods or other  property,  licensing  of any property
(including General Intangibles), rendition of services or from loans or advances
by  Borrower or to or for the benefit of any third  person  (including  loans or
advances to any Affiliates or Subsidiaries of Borrower) or otherwise  associated
with any  Accounts,  Inventory or General  Intangibles  of Borrower  (including,
without limitation,  choses in action, causes of action, tax refunds, tax refund
claims,  any funds which may become  payable to Borrower in connection  with the
termination  of any  employee  benefit  plan and any other  amounts  payable  to
Borrower from any employee benefit plan,  rights and claims against carriers and
shippers,  rights  to  indemnification,   business  interruption  insurance  and
proceeds  thereof,  casualty or any similar  types of insurance and any proceeds
thereof and  proceeds of  insurance  covering  the lives of  employees  on which
Borrower is beneficiary)."

               (xiii)  ""Revolving  Credit  Advances" shall have the meaning set
forth in paragraph 2(b)."

               (xiv)  ""Settlement  Date" means two (2) Business  Days after the
day on which the applicable Account is actually collected by Lender."

               (xv) ""Term"  means the Closing  Date  through  January 14, 2005,
subject to acceleration  upon the occurrence of an Event of Default hereunder or
other termination hereunder."



                                     - 3 -
<PAGE>

          (b) Additional Definitions. Effective as of the date hereof, paragraph
1(A)  of  the  ARMS   Agreement  is  hereby  amended  by  adding  the  following
definitions:

               (i)  ""Accounts"  means all present and future rights of Borrower
to payment of a monetary obligation, whether or not earned by performance, which
is not  evidenced by chattel paper or an  instrument,  (a) for property that has
been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b)
for services rendered or to be rendered, (c) for a secondary obligation incurred
or to be  incurred,  or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card."

               (ii) ""Accounts Advance Rate" shall have the meaning set forth in
the definition of Accounts Availability."

               (iii) ""Accounts  Availability"  means  the  amount of  Revolving
Credit Advances  against  Eligible  Accounts Lender may from time to time during
the term of this Agreement make available to Borrower up to eighty-five  percent
(85%)  (the  "Accounts  Advance  Rate")  of the net face  amount  of  Borrower's
Eligible Accounts."

               (iv) ""Blocked  Account"  shall  have the  meaning  set forth  in
paragraph 22(a)."

               (v)  ""Borrowing  Base  Certificate"  shall have the  meaning set
forth in paragraph 9."

               (vi)  ""Collateral   Access  Agreement"  means  an  agreement  in
writing,  in form and  substance  satisfactory  to  Lender,  from any  lessor of
premises to  Borrower,  or any other  person to whom any  Collateral  (including
Inventory,  Equipment, bills of lading or other documents of title) is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the  owner or  operator  of any  premises  on which  any of such  Collateral  is
located,  pursuant to which such lessor,  consignee or other person, inter alia,
acknowledges the first priority  security interest of Lender in such Collateral,
agrees to waive any and all claims such  lessor,  consignee or other person may,
at any time, have against such  Collateral,  whether for processing,  storage or
otherwise,  and agrees to permit  Lender  access to, and the right to remain on,
the  premises  of such  lessor,  consignee  or other  person  so as to  exercise
Lender's rights and remedies and otherwise deal with such Collateral and, in the
case of any  consignee or other  person who at any time has custody,  control or
possession  of  any  Collateral,  acknowledges  that  it  holds  and  will  hold
possession of the  Collateral for the benefit of Lender and agrees to follow all
instructions of Lender with respect thereto."

               (vii) ""Deposit Account Control  Agreement" means an agreement in
writing,  in form and  substance  satisfactory  to Lender,  by and among Lender,
Borrower  and any bank at which any  deposit  account of Borrower is at any time
maintained  which  provides  that  such bank will  comply  with the  irrevocable
instructions  originated  by Lender  directing  disposition  of the funds in the
deposit  account  without  further  consent by Borrower and such other terms and
conditions  as Lender  may  require,  including  as to any such  agreement  with
respect to any Blocked  Account,  providing that all items received or deposited
in the Blocked  Accounts are the  property of Lender,  that the bank has no lien
upon, or right to setoff  against the Blocked  Account,  the items  received for
deposit therein,  or the funds from time to time on deposit therein and that the
bank will wire, or otherwise  transfer,  in immediately  available  funds,  on a
daily basis to an account  designated by Lender in writing all funds received or
deposited into the Blocked Account."

               (viii) ""Eligible Accounts" means and includes each Account which
conforms to the following criteria:  (a) such Accounts arise from the actual and
bona fide sale and  delivery of goods by Borrower  or  rendition  of services by
Borrower in the ordinary course of its business which transactions are completed
in accordance with the terms and provisions  contained in any documents  related
thereto and shipment of the  merchandise  or the  rendition of services has been
completed;  (b) no return,  rejection or  repossession  of the  merchandise  has
occurred;  (c)  merchandise or services shall not have been rejected or disputed
by the  Customer  and there shall not have been  asserted  any offset,  defense,
counterclaim,  or  Dispute;  (d)  continues  to be in full  conformity  with the
representations  and warranties made by Borrower to Lender with respect thereto;
(e) Lender is, and continues to be,  satisfied  with the credit  standing of the


                                     - 4 -
<PAGE>

Customer in relation to the amount of credit  extended;  (f) is documented by an
invoice  in a form  approved  by Lender  and  shall not be unpaid  more than (i)
ninety  (90) days from  invoice  date or (ii) sixty (60) days from the due date;
(g) less than fifty percent (50%) of the unpaid amount of invoices due from such
Customer  remain unpaid more than (i) ninety (90) days from invoice date or (ii)
sixty (60) days from the due date;  (h) is not  evidenced by chattel paper or an
instrument of any kind with respect to or in payment of the Account  unless such
instrument is duly endorsed to and in possession of Lender or represents a check
in payment of an Account;  (i) if the Customer is located  outside of the United
States,  the goods which gave rise to such Account were shipped after receipt by
Borrower from or on behalf of the Customer of an  irrevocable  letter of credit,
assigned  and  delivered  to Lender and  confirmed  by a  financial  institution
acceptable to Lender and is in form and substance acceptable to Lender,  payable
in the full amount of the Account in United States dollars at a place of payment
located  within the United  States and, if required by Lender,  the  original of
such  letter of credit  has been  delivered  to  Lender  or  Lender's  agent and
Borrower  has complied  with the terms of paragraph  6(i) hereof with respect to
the  assignment  of the  proceeds  of such  letter of credit to Lender or naming
Lender as transferee beneficiary  thereunder,  as Lender may specify; (j) is not
subject  to any lien,  other  than  Permitted  Liens;  (k) does not arise out of
transactions  with  any  employee,  officer,  agent,  director,  stockholder  or
Affiliate of Borrower;  (l) is payable to Borrower;  (m) does not arise out of a
bill and hold sale prior to shipment and, if the Account arises out of a sale to
any Person to which Borrower is indebted,  the amount of such indebtedness,  and
any anticipated indebtedness, is deducted in determining the face amount of such
Account; (n) is net of any returns,  discounts,  claims, credits and allowances;
(o) if the  Account  arises out of  contracts  between  Borrower  and the United
States, any state, or any department,  agency or instrumentality of any of them,
Borrower  has so  notified  Lender,  in writing,  prior to the  creation of such
Account,  and,  if  Lender  so  requests,  there  has been  compliance  with any
governmental  notice or approval  requirements,  including,  without limitation,
compliance  with the Federal  Assignment  of Claims Act; (p) is a good and valid
account  representing  an  undisputed  bona fide  indebtedness  incurred  by the
Customer  therein  named,  for a fixed sum as set forth in the invoice  relating
thereto with respect to an unconditional sale and delivery upon the stated terms
of goods sold by Borrower,  or work, labor and/or services rendered by Borrower;
and (q) is  otherwise  satisfactory  to Lender as  determined  in good  faith by
Lender in the reasonable exercise of its discretion."

               (ix) "" Interest  Coverage  Ratio" shall mean and  include,  with
respect to any fiscal period of Holding,  the ratio of (a) the sum of (i) EBITDA
minus (ii) cash capital expenditures and cash dividends, to (b) Interest Expense
during  such  fiscal  period,  all  determined  on a  consolidated  basis and in
accordance with GAAP consistently applied."

               (x)  ""Interest  Expense"  shall mean,  for any period,  interest
expenses  for such Person  (including  the  amortization  of debt  discount  and
premium,  the interest  component under capital leases and the implied  interest
component under synthetic  leases,  net of interest income) for such period,  as
determined in accordance with GAAP consistently applied."

               (xi) ""Investment  Property Control Agreement" means an agreement
in writing,  in form and substance  satisfactory to Lender, by and among Lender,
Borrower and any securities intermediary, commodity intermediary or other person
who has custody,  control or possession of any  investment  property of Borrower
acknowledging that such securities intermediary, commodity intermediary or other
person has custody,  control or possession of such investment property on behalf
of Lender, that it will comply with entitlement orders originated by Lender with
respect to such investment property, or other instructions of Lender, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Lender,  in each case,  without the further  consent of Borrower and
including such other terms and conditions as Lender may require."

               (xii)  ""Records"  means,  all of  Borrower's  present and future
books of  account  of  every  kind or  nature,  purchase  and  sale  agreements,
invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence,   memoranda,  credit  files  and  other  data  relating  to  the
Collateral or any account debtor,  together with the tapes, disks, diskettes and
other data and software  storage media and devices,  file cabinets or containers
in or on which the foregoing are stored  (including  any rights of Borrower with
respect to the foregoing maintained with or by any other person)."



                                     - 5 -
<PAGE>

               (xiii) ""Reserves" shall mean, with respect to Borrower,  (a) all
Obligations  then  chargeable  to any account of Borrower,  and (b)  Obligations
which may, in Lender's sole  discretion,  be  chargeable  to Borrower's  account
thereafter,  by  reason  of or in  connection  with  any of the  following:  (i)
Accounts  which  are  not  Eligible   Accounts,   disputed  items,   deductions,
allowances, credits, bill and hold sales, consignment sales, offsets asserted by
or granted to account debtors, and sales calling for payment in currencies other
than United States  Dollars,  all of the foregoing  without  duplication  to the
extent  included in the  calculation of Accounts  Availability;  (ii) letters of
credit;  (iii) steamship  guarantees;  (iv) airway  releases;  (v) to adjust for
audit/examination of Borrower's accounts(s) or for any documentation correction;
and (vi) such additional  reserves as Lender in its sole discretion,  reasonably
exercised,  deems appropriate,  including, but not limited to, to adjust for any
condition or prospect of the Borrower or the Borrower's industry."

               (xiv) ""Sanction/Embargo  Programs" shall mean economic and other
sanctions and embargo program restrictions  promulgated by the government of the
United  States of  America or any office or agency  thereof  including,  but not
limited  to,  the  President  and the Office of  Foreign  Assets  Control of the
Treasury Department, or either of them."

               (xv)  ""Tangible Net Worth" shall mean, at a particular  date and
determined on a consolidated  basis,  (i) the aggregate  amount of all assets of
Holding  as  may  be  properly  classified  as  such  in  accordance  with  GAAP
consistently  applied excluding such other assets as are properly  classified as
intangible  assets under GAAP, less (ii) the aggregate amount of all liabilities
of the Holding."

               (xvi)  ""UCC" means the Uniform  Commercial  Code as in effect in
the State of New York and any successor statute,  as in effect from time to time
(except,  that,  terms used herein  which are defined in the Uniform  Commercial
Code as in effect in the State of New York on the date hereof shall  continue to
have the same  meaning  notwithstanding  any  replacement  or  amendment of such
statute except as Lender may otherwise determine)."

          (c) Deletion of Certain Definitions.  Effective as of the date hereof,
paragraph 1(A) of the ARMS Agreement is hereby amended by deleting the following
definitions  in their  entirety:  "BNYFC  Interest  Coverage  Ratio";  "Eligible
Receivables";"Receivables Advance Rate"; and"Receivables Availability".

          2.    Amendment to ARMS Agreement.
                ---------------------------

          (a)   Effective  as of the  date  hereof,  paragraph  1(C) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(C) UCC Terms.  All UCC terms used  herein and defined
                    in the UCC,  shall have the meaning  given therein
                    unless otherwise defined herein."

          (b)   Effective  as  of  the  date  hereof,  paragraph  1 of  the ARMS
Agreement is hereby amended by adding the following at the end thereof:



                                     - 6 -
<PAGE>

               "(D) Certain   Matters  of   Construction.   The  terms
                    "herein", "hereof" and "hereunder" and other words
                    of similar  import  refer to this  Agreement  as a
                    whole and not to any particular section, paragraph
                    or  subdivision.  All  references  to  a  specific
                    "Section" or  "paragraph"  of this  Agreement (and
                    not any  references to any Section or paragraph in
                    any other Ancillary  Agreements or any statutes or
                    related  regulations) shall mean the corresponding
                    "paragraph" of this  Agreement  (for example,  the
                    reference   to   "Section   14"  as  used  in  the
                    definition of "Reports" shall mean paragraph 14 of
                    this Agreement).  Any pronoun used shall be deemed
                    to cover all genders.  Wherever appropriate in the
                    context,  terms used herein in the  singular  also
                    include the plural and vice versa.  All references
                    to statutes and related  regulations shall include
                    any amendments of same and any successor  statutes
                    and regulations. All references to any instruments
                    or  agreements,   including,  without  limitation,
                    references  to  any of  the  Ancillary  Agreements
                    shall  include  any  and  all   modifications   or
                    amendments  thereto and any and all  extensions or
                    renewals thereof. All references to the term "good
                    faith" used herein when applicable to Lender shall
                    mean,  notwithstanding  anything  to the  contrary
                    contained herein or in the UCC, honesty in fact in
                    the  conduct or  transaction  concerned.  Borrower
                    shall have the burden of proving  any lack of good
                    faith on the part of Lender alleged by Borrower at
                    any time."

          (c)   Effective  as of the  date  hereof, paragraph  2(a) of the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(a) Lender  shall not assume  the  Credit  Risk on any
                    Accounts.   Accordingly,  all  Accounts  shall  be
                    purchased by Lender with full recourse to Borrower
                    in the event of non-payment thereof for any reason
                    whatsoever   and  Lender   may   charge   back  to
                    Borrower's  account the amount of any Account that
                    is not paid on its due date. "

          (d)   Effective  as of the  date  hereof, paragraph  2(b) of the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(b) Subject  to the  terms  and  conditions  set forth
                    herein  and  in  the  Ancillary  Agreements,   and
                    provided  there does not exist an Event of Default
                    or an  Incipient  Event of Default,  Lender  shall
                    make  revolving  credit  advances (the  "Revolving
                    Credit  Advances")  to Borrower  from time to time
                    during the Term  which,  in the  aggregate  at any
                    time  outstanding,  shall not exceed the lesser of
                    (x) the Maximum  Revolving Amount or (y) an amount
                    equal to the sum of:

                    (A)   Accounts Availability, minus

                    (B)   Reserves.

          The sum of paragraph  2(b)(y)(A)  minus paragraph  2(b)(y)(B) shall be
referred to as the "Formula  Amount".  In this  regard,  without  limitation  of
Lender's  rights  under  paragraph 9 hereof,  upon each  request for a Revolving
Credit Advance or more frequently as Lender may request, Borrower agrees that it
shall  submit a Borrowing  Base  Certificate  to Lender,  in form and  substance
satisfactory to Lender which shall include such  calculations,  in each instance
that Lender may deem necessary or desirable in order to verify whether  Borrower
is in compliance with the preceding  limitations  pertaining to Revolving Credit
Advances."


          (e)   Effective  as of  the  date  hereof,  paragraph  4  of  the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "4.  Procedure  for  Revolving  Credit  Advances.   The
                    Borrower  may  request a  borrowing  of  Revolving
                    Credit  Advances  prior to 1:00 P.M. New York time
                    on the  Business  Day of its request to incur,  on
                    that day, a  Revolving  Credit  Advance,  provided
                    that,  Borrower  shall make any such  request  via
                    telephone at [(678) 937-4101], which request shall
                    be  recorded,   and  Borrower  shall  concurrently
                    confirm  such  request in  writing to Lender.  All
                    Revolving  Credit Advances shall be disbursed from
                    whichever   office  or  other  place   Lender  may
                    designate from time to time and, together with any
                    and all other  Obligations  of Borrower to Lender,
                    shall be  charged  to the  Borrower's  account  on
                    Lender's  books.  The  proceeds of each  Revolving
                    Credit  Advance  made by the Lender  shall be made
                    available  to the Borrower on the day so requested
                    by way of credit to any general  operating account
                    designated  by Borrower  in  writing.  Any and all


                                     - 7 -
<PAGE>

                    Obligations due and owing hereunder may be charged
                    to   Borrower's   account  and  shall   constitute
                    Revolving Credit Advances."

          (f)   Effective  as of  the  date  hereof,  paragraph  6  of  the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "6.  Security Interest.
                    -----------------

                    (a)  To secure the prompt payment to Lender of the
                         Obligations, Borrower hereby assigns, pledges
                         and  grants to Lender a  continuing  security
                         interest  in and to the  Collateral,  whether
                         now owned or existing or  hereafter  acquired
                         or arising and wheresoever  located  (whether
                         or not the same is  subject  to  Article 9 of
                         the UCC).  All of Borrower's  ledger  sheets,
                         files,  records,  books of account,  business
                         papers   and   documents   relating   to  the
                         Collateral  shall,   until  delivered  to  or
                         removed by  Lender,  be kept by  Borrower  in
                         trust for Lender until all  Obligations  have
                         been   paid  in   full.   Each   confirmatory
                         assignment   schedule   or   other   form  of
                         assignment  hereafter  executed  by  Borrower
                         shall be  deemed  to  include  the  foregoing
                         grant,   whether  or  not  the  same  appears
                         therein.

                    (b)  Borrower   irrevocably  and   unconditionally
                         authorizes  Lender  (or its agent) to file at
                         any time and from time to time such financing
                         statements  with  respect  to the  Collateral
                         naming  Lender or its designee as the secured
                         party and  Borrower as debtor,  as Lender may
                         require,  and including any other information
                         with   respect  to  Borrower   or   otherwise
                         required  by  Article  9 of the  UCC of  such
                         jurisdiction   as   Lender   may   determine,
                         together with any amendment and continuations
                         with  respect  thereto,  which  authorization
                         shall apply to all financing statements filed
                         on,  prior  to  or  after  the  date  hereof.
                         Borrower  hereby  ratifies  and  approves all
                         financing  statements  naming  Lender  or its
                         designee  as secured  party and  Borrower  as
                         debtor with  respect to the  Collateral  (and
                         any amendments and continuations with respect
                         to such financing  statements) filed by or on
                         behalf of Lender prior to the date hereof and
                         ratifies and confirms  the  authorization  of
                         Lender to file such financing statements (and
                         amendments   and   continuations,   if  any).
                         Borrower hereby authorizes Lender to adopt on
                         behalf of Borrower  any symbol  required  for
                         authenticating  any electronic  filing. In no
                         event  shall  Borrower  at any time file,  or
                         permit or cause to be filed,  any  correction
                         statement  or   termination   statement  with
                         respect  to  any   financing   statement  (or
                         amendment   or   continuation   with  respect
                         thereto)  naming  Lender or its  designee  as
                         secured party and Borrower as debtor.  In the
                         event the  indication  of  collateral  in any
                         financing  statement  naming  Lender  or  its
                         designees  as secured  party and  Borrower as
                         debtor   includes  assets  or  properties  of
                         Borrower  that do not at any time  constitute
                         Collateral,   whether  hereunder,  under  any
                         Ancillary Agreement or otherwise,  the filing
                         of such financing statement shall nonetheless
                         be  deemed  authorized  by  Borrower  to  the
                         extent  of the  Collateral  included  in such
                         indication   and  it  shall  not  render  the
                         financing statement  ineffective as is any of
                         the   Collateral  or  otherwise   affect  the
                         financing  statement  as it applies to any of
                         the Collateral.

                    (c)  Borrower  does  not have  any  chattel  paper
                         (whether    tangible   or    electronic)   or
                         instruments as of the date hereof,  except as
                         set forth on Schedule 6(c). In the event that
                         Borrower   shall  be  entitled  to  or  shall
                         receive any chattel paper or instrument after
                         the  date  hereof,  Borrower  shall  promptly
                         notify  Lender  thereof in writing.  Promptly
                         upon the  receipt  thereof by or on behalf of
                         Borrower   (including   by   any   agent   or
                         representative),  Borrower shall deliver,  or
                         cause to be delivered to Lender, all tangible
                         chattel paper and  instruments  that Borrower
                         or may at any time  acquire,  accompanied  by
                         such  instruments  of transfer or  assignment
                         duly  executed  in blank as  Lender  may from
                         time to time specify,  in each case except as
                         Lender  may  otherwise   agree.  At  Lender's
                         option,  Borrower shall, or Lender may at any
                         time  on  behalf  of   Borrower,   cause  the
                         original  of any such  instrument  or chattel
                         paper to be  conspicuously  marked  in a form
                         and manner acceptable to Lender with a legend
                         indicating   that   the   chattel   paper  or
                         instrument,  as applicable, is subject to the
                         security  interest  and  rights of Lender and
                         any sale, transfer, assignment or encumbrance
                         of  the  chattel  paper  or  instrument,   as
                         applicable, violates the rights of Lender.

                    (d)  In the event that Borrower  shall at any time
                         hold or acquire an interest in any electronic
                         chattel  paper or any  "transferable  record"
                         (as such term is defined  in  Section  201 of
                         the Federal  Electronic  Signatures in Global
                         and National Commerce Act or in Section 16 of
                         the Uniform Electronic Transactions Act as in
                         effect   in   any   relevant   jurisdiction),
                         Borrower shall promptly notify Lender thereof
                         in writing.  Promptly upon Lender's  request,
                         Borrower  shall  take,  or cause to be taken,
                         such actions as Lender may reasonably request
                         to give  Lender  control  of such  electronic
                         chattel  paper under Section 9-105 of the UCC


                                     - 8 -
<PAGE>

                         and control of such transferable record under
                         Section   201  of  the   Federal   Electronic
                         Signatures  in Global and  National  Commerce
                         Act or, as the case may be, Section 16 of the
                         Uniform  Electronic  Transactions  Act, as in
                         effect in such jurisdiction.

                    (e)  Borrower  has no deposit  accounts  as of the
                         date hereof,  except as set forth on Schedule
                         6(e).   Borrower   shall  not,   directly  or
                         indirectly,   after  the  date  hereof  open,
                         establish  or maintain  any  deposit  account
                         unless each of the  following  conditions  is
                         satisfied: (i) Lender shall have received not
                         less  than  five  (5)  Business   Days  prior
                         written  notice of the  intention of Borrower
                         to  open  or  establish  such  account  which
                         notice shall specify in reasonable detail and
                         specificity  acceptable to Lender the name of
                         the account,  the owner of the  account,  the
                         name and  address  of the bank at which  such
                         account is to be opened or  established,  the
                         individual at such bank with whom Borrower is
                         dealing and the purpose of the account,  (ii)
                         the bank  where  such  account  is  opened or
                         maintained shall be acceptable to Lender, and
                         (iii)  on  or  before  the  opening  of  such
                         deposit account, Borrower shall as Lender may
                         specify   either  (A)  deliver  to  Lender  a
                         Deposit   Account   Control   Agreement  with
                         respect   to  such   deposit   account   duly
                         authorized,   executed   and   delivered   by
                         Borrower  and the bank at which such  deposit
                         account  is  opened  and  maintained,  or (B)
                         arrange for Lender to become the  customer of
                         the bank with respect to the deposit  account
                         on terms and conditions acceptable to Lender.
                         The  terms of this  subsection  (e) shall not
                         apply to deposit  accounts  specifically  and
                         exclusively  used for payroll,  payroll taxes
                         and other employee wage and benefit  payments
                         to or for the benefit of Borrower's  salaried
                         employees.

                    (f)  Borrower  does not own or hold,  directly  or
                         indirectly,  beneficially  or as record owner
                         or both, any investment  property,  as of the
                         date hereof, or have any investment  account,
                         securities  account,   commodity  account  or
                         other similar  account with any bank or other
                         financial  institution  or  other  securities
                         intermediary or commodity  intermediary as of
                         the date  hereof,  in each case except as set
                         forth on Schedule 6(f).

                    (g)  In the event that Borrower  shall be entitled
                         to or shall at any time after the date hereof
                         hold or acquire any certificated  securities,
                         Borrower shall promptly  endorse,  assign and
                         deliver  the same to Lender,  accompanied  by
                         such  instruments  of transfer or  assignment
                         duly  executed  in blank as  Lender  may from
                         time to time specify. If any securities,  now
                         or   hereafter   acquired  by  Borrower   are
                         uncertificated  and are issued to Borrower or
                         its nominee  directly by the issuer  thereof,
                         Borrower  shall  immediately   notify  Lender
                         thereof  and  shall as  Lender  may  specify,
                         either  (i)  cause  the  issuer  to  agree to
                         comply  with  instructions  from Lender as to
                         such  securities,  without further consent of
                         Borrower or such nominee, or (ii) arrange for
                         Lender to become the registered  owner of the
                         securities.

                    (h)  Borrower  shall not,  directly or indirectly,
                         after  the date  hereof  open,  establish  or
                         maintain any investment  account,  securities
                         account,   commodity  account  or  any  other
                         similar   account   (other   than  a  deposit
                         account) with any securities  intermediary or
                         commodity  intermediary  unless  each  of the
                         following conditions is satisfied: (i) Lender
                         shall  have  received  not less than five (5)
                         Business  Days  prior  written  notice of the
                         intention  of Borrower  to open or  establish
                         such account  which  notice shall  specify in
                         reasonable detail and specificity  acceptable
                         to Lender the name of the account,  the owner
                         of the  account,  the name and address of the
                         securities    intermediary    or    commodity
                         intermediary  at which such  account is to be
                         opened or established, the individual at such
                         intermediary  with whom  Borrower  is dealing
                         and the  purpose  of the  account,  (ii)  the
                         securities    intermediary    or    commodity
                         intermediary  (as the case may be) where such
                         account  is  opened  or  maintained  shall be
                         acceptable to Lender,  and (iii) on or before
                         the  opening  of  such  investment   account,
                         securities  account or other similar  account
                         with a securities  intermediary  or commodity
                         intermediary,  Borrower  shall as Lender  may
                         specify  either (A) execute and deliver,  and
                         cause to be executed and delivered to Lender,
                         an Investment Property Control Agreement with
                         respect thereto duly authorized, executed and
                         delivered  by  Borrower  and such  securities
                         intermediary  or commodity  intermediary,  or
                         (B)   arrange   for   Lender  to  become  the
                         entitlement   holder  with  respect  to  such
                         investment  property on terms and  conditions
                         acceptable to Lender.

                    (i)  Borrower is not the  beneficiary or otherwise
                         entitled  to any right to  payment  under any
                         letter  of  credit,  banker's  acceptance  or
                         similar  instrument  as of the  date  hereof,
                         except as set forth on Schedule  6(i). In the
                         event that  Borrower  shall be entitled to or


                                     - 9 -
<PAGE>

                         shall  receive any right to payment under any
                         letter of credit,  banker's acceptance or any
                         similar  instrument,  whether as  beneficiary
                         thereof or  otherwise  after the date hereof,
                         Borrower shall promptly notify Lender thereof
                         in writing.  Borrower shall  immediately,  as
                         Lender may specify,  either (i)  deliver,  or
                         cause to be delivered to Lender, with respect
                         to  any  such  letter  of  credit,   banker's
                         acceptance or similar instrument, the written
                         agreement   of  the   issuer  and  any  other
                         nominated   person   obligated  to  make  any
                         payment in  respect  thereof  (including  any
                         confirming or negotiating  bank), in form and
                         substance satisfactory to Lender,  consenting
                         to  the  assignment  of the  proceeds  of the
                         letter of credit  to Lender by  Borrower  and
                         agreeing   to  make  all   payments   thereon
                         directly to Lender or as Lender may otherwise
                         direct or (ii)  cause  Lender to  become,  at
                         Borrower's     expense,     the    transferee
                         beneficiary of the letter of credit, banker's
                         acceptance or similar instrument (as the case
                         may be).

                    (j)  Borrower has no commercial  tort claims as of
                         the  date  hereof,  except  as set  forth  on
                         Schedule  6(j).  In the event  that  Borrower
                         shall at any time after the date  hereof have
                         any  commercial  tort claims,  Borrower shall
                         promptly  notify  Lender  thereof in writing,
                         which   notice   shall   (i)  set   forth  in
                         reasonable detail the basis for and nature of
                         such  commercial  tort claim and (ii) include
                         the express  grant by Borrower to Lender of a
                         security  interest  in such  commercial  tort
                         claim  (and  the  proceeds  thereof).  In the
                         event that such notice does not include  such
                         grant of a  security  interest,  the  sending
                         thereof by Borrower to Lender shall be deemed
                         to constitute such grant to Lender.  Upon the
                         sending of such notice,  any commercial  tort
                         claim described therein shall constitute part
                         of  the   Collateral   and  shall  be  deemed
                         included   therein.   Without   limiting  the
                         authorization of Lender provided in paragraph
                         6(b)  hereof  or  otherwise  arising  by  the
                         execution  by Borrower of this  Agreement  or
                         any of the  Ancillary  Agreements,  Lender is
                         hereby  irrevocably  authorized  from time to
                         time and at any time to file  such  financing
                         statements  naming  Lender or its designee as
                         secured party and Borrower as debtor,  or any
                         amendments  to  any   financing   statements,
                         covering  any such  commercial  tort claim as
                         Collateral.   In  addition,   Borrower  shall
                         promptly upon Lender's  request,  execute and
                         deliver,   or  cause  to  be   executed   and
                         delivered,  to Lender such other  agreements,
                         documents  and   instruments  as  Lender  may
                         require in  connection  with such  commercial
                         tort claim.

                    (k)  Borrower  does not have any goods,  documents
                         of title or other  Collateral in the custody,
                         control or  possession of a third party as of
                         the  date  hereof,  except  as set  forth  on
                         Schedule 6(k) and except for goods located in
                         the United States in transit to a location of
                         Borrower  permitted  herein  in the  ordinary
                         course  of   business   of  Borrower  in  the
                         possession of the carrier  transporting  such
                         goods. In the event that any goods, documents
                         of title or other  Collateral are at any time
                         after  the  Closing   Date  in  the  custody,
                         control or possession of any other person not
                         referred   to  in   Schedule   6(k)  or  such
                         carriers,   Borrower  shall  promptly  notify
                         Lender  thereof  in  writing.  Promptly  upon
                         Lender's  request,  Borrower shall deliver to
                         Lender a  Collateral  Access  Agreement  duly
                         authorized,  executed  and  delivered by such
                         person and Borrower.

                    (l)  Borrower   shall   take  any  other   actions
                         reasonably  requested  by Lender from time to
                         time to cause the attachment,  perfection and
                         first  priority of, and the ability of Lender
                         to enforce,  the security  interest of Lender
                         in any and all of the Collateral,  including,
                         without limitation, (i) executing, delivering
                         and,  where  appropriate,   filing  financing
                         statements  and amendments  relating  thereto
                         under the UCC or other applicable law, to the
                         extent,  if any,  that  Borrower's  signature
                         thereon is required  therefor,  (ii)  causing
                         Lender's name to be noted as secured party on
                         any certificate of title for a titled good if
                         such  notation is a condition to  attachment,
                         perfection  or  priority  of, or  ability  of
                         Lender to enforce,  the security  interest of
                         Lender in such  Collateral,  (iii)  complying
                         with any provision of any statute, regulation
                         or  treaty  of the  United  States  as to any
                         Collateral if compliance  with such provision
                         is a condition to  attachment,  perfection or
                         priority of, or ability of Lender to enforce,
                         the  security  interest  of  Lender  in  such
                         Collateral,  and (iv)  obtaining the consents
                         and approvals of any  governmental  authority
                         or   third    party,    including,    without
                         limitation,  any  consent  of  any  licensor,
                         lessor   or   other   person   obligated   on
                         Collateral,  and taking all actions  required
                         by any  earlier  versions  of  the  UCC or by
                         other  law,  as  applicable  in any  relevant
                         jurisdiction."

          (g)  Effective  as of the  date  hereof,  paragraph  7(b) of the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(b)      all Accounts (i) represent complete bona fide
                         transactions  which  require no  further  act
                         under any circumstances on Borrower's part to
                         make such Accounts payable by Customers, (ii)
                         unless  they  do not  exceed  $500 in any one
                         instance or $5,000 in the  aggregate,  to the
                         best of Borrower's knowledge, are not subject
                         to  any   present,   future   or   contingent
                         Disputes;  (iii)  unless  they do not  exceed
                         $500 in any one  instance  or  $5,000  in the
                         aggregate,  do not  represent  bill  and hold


                                     - 10 -
<PAGE>

                         sales,  consignment sales,  guaranteed sales,
                         sale   or    return    or    other    similar
                         understandings    or   obligations   of   any
                         Affiliate or  Subsidiary  of  Borrower;  (iv)
                         included in any Borrowing Base Certificate as
                         an  Eligible   Account   meets  all  criteria
                         specified  in  the   definition  of  Eligible
                         Accounts,   except   as  may   otherwise   be
                         specifically disclosed in such Borrowing Base
                         Certificate   or  as  otherwise   theretofore
                         disclosed  in  writing  to  Lender;  and  (v)
                         Borrower  has no  knowledge  of any  fact  or
                         circumstance  not  disclosed to Lender in the
                         pertinent   Borrowing  Base   Certificate  or
                         otherwise in writing,  which would impair the
                         validity or collectibility of any Account and
                         that all  documents in  connection  with each
                         Account are genuine."

          (h)  Effective  as of the  date  hereof,  paragraph  7(c) of the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(c)      in the event any  amounts  due and owing from
                         any   account   debtor  to  Borrower  on  any
                         Eligible  Account shall become subject to any
                         Dispute, or to any other adjustment otherwise
                         permitted to be made in  accordance  with the
                         terms and  provisions  hereof in the ordinary
                         course   of   business   and   prior  to  the
                         occurrence of an Event of Default  hereunder,
                         Borrower agrees that it shall, at the time of
                         the  submission  of the next  Borrowing  Base
                         Certificate   required  to  be  delivered  to
                         Lender  immediately  following  the  date  on
                         which Borrower learns thereof, provide Lender
                         with notice thereof.  Borrower further agrees
                         that it shall also notify Lender  promptly of
                         all  returns and credits in excess of $500 in
                         any one  instance or $5,000 in the  aggregate
                         at any time  outstanding  in  respect  of any
                         Accounts  included  within a  Borrowing  Base
                         Certificate,  which notice shall  specify the
                         Accounts affected."

          (i)  Effective  as of the  date  hereof,  paragraph  8(f) of the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(f)      not extend the  payment  terms of any Account
                         or other  Receivable  without  prompt  notice
                         thereof to Lender;"

          (j) Effective as of the date hereof, paragraph 8 of the ARMS Agreement
is hereby amended by adding the following at the end thereof:

              "(i)       Borrower  shall not  change  its name  unless
                         each   of   the   following   conditions   is
                         satisfied: (i) Lender shall have received not
                         less  than  thirty  (30) days  prior  written
                         notice from Borrower of such proposed  change
                         in its  corporate  name,  which  notice shall
                         accurately  set forth the  proposed new name;
                         and (ii) Lender  shall  receive a copy of the
                         amendment to the Certificate of Incorporation
                         of  Borrower  providing  for the name  change
                         certified  by the  Secretary  of State of the
                         jurisdiction of incorporation or organization
                         of Borrower as soon as it is available;

              (j)        Borrower shall not change its chief executive
                         office   or   its    mailing    address    or
                         organizational  identification  number (or if
                         it does  not have  one,  Borrower  shall  not
                         acquire  an   organizational   identification
                         number) unless Lender shall have received not
                         less  than  thirty  (30) days  prior  written
                         notice from Borrower of such proposed change,
                         which notice shall set forth such information
                         with  respect  thereto as Lender may  require
                         and   Lender   shall   have   received   such
                         agreements as Lender may  reasonably  require
                         in connection therewith;

              (k)        Borrower   shall  not   change  its  type  of
                         organization, jurisdiction of organization or
                         other legal structure; and

              (l)        Borrower may open any new location within the
                         continental  United States provided  Borrower
                         (i) gives  Lender  sixty  (60)  days  written
                         notice  of  the   opening  of  any  such  new
                         location,  and (ii) if  requested  by Lender,
                         executes  and  delivers,   or  causes  to  be
                         executed  and   delivered,   to  Lender  such
                         agreements,  documents,  and  instruments  as
                         Lender may deem  necessary  or  desirable  to
                         protect its  interests in the  Collateral  at
                         such location."

          (k) Effective as of the date hereof, paragraph 9 of the ARMS Agreement
is hereby amended and restated in its entirety as follows:



                                     - 11 -
<PAGE>

              "9.        Collection and  Maintenance of Collateral and
                         Records.   Lender  may  at  any  time  verify
                         Borrower's  Accounts  purchased  hereunder by
                         utilizing  an audit  control  company  or any
                         other  agent of  Lender.  Lender or  Lender's
                         designee may notify Customers, at any time at
                         Lender's   sole   discretion,   of   Lender's
                         security  interest in such Accounts,  collect
                         them directly and charge the collection costs
                         and  expenses  to  Borrower's  account,  but,
                         unless  and  until  Lender  does so or  gives
                         Borrower other  instructions,  Borrower shall
                         instruct   all  of  its   Customers  to  make
                         payments  on account of such  Accounts  to an
                         account under  Lender's  dominion and control
                         at such  bank as  Lender  may  designate,  as
                         provided by the terms of paragraph 22. To the
                         extent  Borrower  receives  any  payments  on
                         account of Accounts and other Receivables, it
                         shall hold such payments for Lender's benefit
                         in trust as Lender's  trustee and immediately
                         deliver them to Lender in their original form
                         with  all  necessary   endorsements   or,  as
                         directed by Lender,  deposit such payments as
                         directed by Lender  pursuant to  paragraph 22
                         hereof.  Lender will credit (conditional upon
                         final   collection)   all  such  payments  to
                         Borrower's  account on the  Settlement  Date.
                         Promptly  after the  creation  of any Account
                         purchased  hereunder,  Borrower shall provide
                         Lender  with  schedules  describing  all such
                         Accounts  created or acquired by Borrower and
                         shall   execute  and   deliver   confirmatory
                         written   assignments  of  such  Accounts  to
                         Lender, but Borrower's failure to execute and
                         deliver    such    schedules    or    written
                         confirmatory  assignments  of  such  Accounts
                         shall not affect or limit  Lender's  security
                         interest  or  other  rights  in and  to  such
                         Accounts. Borrower shall furnish, at Lender's
                         request, copies of contracts, invoices or the
                         equivalent,  and any  original  shipping  and
                         delivery receipts for all merchandise sold or
                         services  rendered  and such other  documents
                         and information as Lender may require. All of
                         Borrower's  invoices  shall  bear  the  terms
                         stated on the applicable  customer order, and
                         no  change  from the  original  terms of such
                         customer  order  shall  be made  without  the
                         prior  written  consent of  Lender.  Borrower
                         shall provide Lender on a monthly (within ten
                         (10) days  after the end of each  month),  or
                         more frequent  basis, as requested by Lender,
                         a  summary   report  of  Borrower's   current
                         Inventory,  certified as true and accurate by
                         Borrower's   President  or  Chief   Financial
                         Officer,  as well as an aged trial balance of
                         Borrower's    existing    accounts   payable.
                         Borrower shall provide  Lender,  as requested
                         by Lender,  such other  schedules,  documents
                         and/or  information  regarding the Collateral
                         as Lender may require.  Without  limiting the
                         foregoing, Borrower shall provide to Lender a
                         borrowing  base  certificate  at  least  once
                         daily ("Borrowing Base  Certificate"),  which
                         must be in form and  substance  acceptable to
                         Lender and which  Borrowing Base  Certificate
                         shall  certify to Lender,  and shall  contain
                         sufficient  information  and  calculations as
                         Lender may deem  necessary or  desirable,  in
                         order to verify  any  Accounts  Availability,
                         the applicable  Formula Amount and whether or
                         not  Accounts  included  therein are Eligible
                         Accounts.  Without limiting the foregoing,  a
                         Borrowing Base  Certificate  must be executed
                         and  delivered  by  Borrower to Lender at the
                         time  of  or  prior  to  each   request   for
                         Revolving   Credit   Advances   pursuant   to
                         paragraph   4.  Each  such   Borrowing   Base
                         Certificate  shall be  delivered to Lender at
                         its office  described  in paragraph 25 below,
                         on each relevant Business Day."

          (l)  Effective  as of the  date  hereof,  paragraph  12(a) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

                    "(a) (i) Borrower is a corporation  duly organized
                         and  validly  existing  under the laws of the
                         State of Delaware and duly  qualified  and in
                         good   standing   in  every  other  state  or
                         jurisdiction   in   which   the   nature   of
                         Borrower's     business     requires     such
                         qualification.

                    (ii) The exact  legal name of  Borrower  is Target
                         Logistic  Services,  Inc.  Borrower  has not,
                         during the past five years,  been known by or
                         used any other  composite or fictitious  name
                         or   been   a   party   to  any   merger   or
                         consolidation,    or    acquired    all    or
                         substantially   all  of  the  assets  of  any
                         Person,  or acquired any of its properties or
                         assets   out  of  the   ordinary   course  of
                         business,  except  as set  forth on  Schedule
                         12(a)(ii).

                    (iii)Borrower is an  organization  of the type and
                         organized  in the  jurisdiction  set forth on
                         Schedule   12(a)(iii).   Schedule  12(a)(iii)
                         accurately  sets  forth  the   organizational
                         identification    number   of   Borrower   or
                         accurately  states that Borrower has none and
                         accurately  sets forth the  federal  employer
                         identification number of Borrower.



                                     - 12 -
<PAGE>

                    (iv) The  chief   executive   office  and  mailing
                         address of Borrower  and  Borrower's  Records
                         concerning  Accounts or other Receivables are
                         located  only at the  address  identified  as
                         such on Schedule 12(a)(iv) and its only other
                         places  of   business   and  the  only  other
                         locations  of  Collateral,  if  any,  are the
                         addresses set forth on Schedule 6(k), subject
                         to the right of  Borrower  to  establish  new
                         locations in accordance  with  paragraph 8(l)
                         above.  Schedule 12(l)  correctly  identifies
                         any of such locations  which are not owned by
                         Borrower  and sets  forth the  owners  and/or
                         operators thereof."

          (m)  Effective as of the date hereof,  paragraph  12(e)(i) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(e) (i) the  operation of  Borrower's  business is and
                    will  continue to be in compliance in all material
                    respects with all  applicable  federal,  state and
                    local  laws,  including,  but not  limited to, all
                    applicable  environmental laws and regulations and
                    Sanction/Embargo Programs."

          (n)  Effective as of the date hereof, paragraph  12(e)(ii) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(e) (ii) Borrower has established and maintained,  and
                    will continue to maintain,  a system to assure and
                    monitor  continued  compliance with all applicable
                    environmental laws, and Sanction/Embargo Programs,
                    which system  shall  include  periodic  reviews of
                    such compliance."

          (o)  Effective as of the date hereof,  paragraph  12(e)(v) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(e) (v) Borrower shall defend and indemnify Lender and
                    hold  Lender  harmless  from and against all loss,
                    liability,  damage  and  expense,  claims,  costs,
                    fines and penalties,  including  attorney's  fees,
                    suffered or incurred by Lender under or on account
                    of (A) any environmental laws, including,  without
                    limitation,  the assertion of any lien thereunder,
                    with  respect  to  any  Hazardous  Discharge,  the
                    presence  of any  hazardous  substances  affecting
                    Borrower's  property,  whether  or  not  the  same
                    originates or emerges from Borrower's  property or
                    any contiguous real estate,  including any loss of
                    value  of  the  Collateral  as  a  result  of  the
                    foregoing   except  to  the   extent   such  loss,
                    liability,  damage and expense is  attributable to
                    any Hazardous  Discharge resulting from actions on
                    the part of Lender,  and (B) any  Sanction/Embargo
                    Program.  Borrower's  obligations  under paragraph
                    12(e)(v)(A)  shall arise upon the discovery of the
                    presence of any Hazardous Substances on Borrower's
                    property,  whether or not any federal,  state,  or
                    local environmental agency has taken or threatened
                    any action in connection  with the presence of any
                    hazardous   substances,    and   under   paragraph
                    12(e)(v)(B)   on  failure   to  comply   with  any
                    Sanction/Embargo  Program.  Borrower's  obligation
                    and the  indemnifications  hereunder shall survive
                    the termination of this Agreement; and"

          (p)  Effective  as of the  date  hereof,  paragraph  12(n) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(n) it shall  not  permit  consolidated  Tangible  Net
                    Worth of Holding,  determined in  accordance  with
                    GAAP on a consolidated basis, as of the end of any
                    fiscal  quarter  to be less  than the  amount  set
                    forth below for each respective measurement date:

                    Quarter Ended                2002             2003
                    ----------------------------------------------------

                    September 30              3,100,000
                    December 31               3,328,000
                    March 31                                   3,392,000
                    June 30                                    3,614,000
                    September 30 and
                     for each fiscal quarter thereafter: 100% of the Net Income
                                                         for such fiscal quarter
                                                         (excluding losses) less
                                                         dividends paid or
                                                         accrued during such
                                                         quarter



                                     - 13 -
<PAGE>

                         To the extent that Holding pays any dividends
                    to the holders of any  preferred  stock  issued in
                    its  settlement  with trade  creditors  and to the
                    extent  Holding pays any  dividends to the holders
                    of any holders or other classes of preferred stock
                    (which  dividends  shall not  exceed an  aggregate
                    amount of  $350,000  during any fiscal year to the
                    holders of Class A and Class C Preferred Stock and
                    $240,000  during any fiscal year to the holders of
                    Class E Preferred  Stock),  then in such event the
                    dollar  amounts set forth above shall be decreased
                    by an amount equal to the aggregate  amount of the
                    dividends paid."

          (q)  Effective  as of the  date  hereof,  paragraph  12(p) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(p) At the  end of any  month,  the  aggregate  sum of
                    Borrower's  and  Holding's (i)  unrestricted  cash
                    plus (ii) the Formula Amount less Revolving Credit
                    Advances,  shall  not be  less  than:  (A) for the
                    months of  September,  2002 through and  including
                    February, 2003, $1,800,000;  and (B) for the month
                    of  March  2003  and for  each  month  thereafter,
                    2,400,000."

          (r)  Effective  as of the  date  hereof,  paragraph  12(q) of the ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "(q) (i) Borrower  will not contract  for,  purchase or
                    make any  expenditure or commitments  for fixed or
                    capital assets (including  capitalized  leases) in
                    any  fiscal   year  in  an  amount  in  excess  of
                    $500,000;   and  (ii)  in  addition  to  paragraph
                    12(q)(i)  above,  Borrower will not, in any fiscal
                    year,  acquire  or  purchase  any  assets  of  any
                    Person, except that so long as no Event of Default
                    exists or would exist after  giving  effect to the
                    proposed  acquisition  or  purchase,  Borrower may
                    acquire  or  purchase  any  assets  of any  Person
                    provided  that  the   aggregate   amount  of  such
                    purchases and acquisitions in any fiscal year does
                    not exceed $500,000."

          (s)  Effective  as of  the  date  hereof,  paragraph  12 of  the  ARMS
Agreement is hereby amended by adding the following at the end thereof:

               "(u) Holding,  on a consolidated  basis,  will maintain
                    for the twelve  (12) month  period  ending on last
                    day of each fiscal  quarter,  commencing  with the
                    fiscal  quarter  ending June 30, 2003, an Interest
                    Coverage Ratio equal to or greater than 1.0:1.0."

          (t)  Effective  as of  the  date  hereof,  paragraph  17 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "17. Term of Agreement.  This Agreement  shall continue
                    in full force and effect until the  expiration  of
                    the Term. The Term shall be automatically extended
                    for successive periods of one (1) year each unless
                    either party shall have  provided the other with a
                    written  notice of  termination,  at least  ninety
                    (90) days prior to the  expiration  of the initial
                    Term  or  any  renewal  Term.   The  Borrower  may
                    terminate  this  Agreement  at any time upon sixty
                    (60)  days'  prior  written  notice  ("Termination
                    Date")  upon  payment in full of the  Obligations;
                    provided, that, Borrower pays an early termination
                    fee in an amount equal to the Required  Percentage
                    of the Maximum Revolving Amount.  For the purposes
                    hereof, Required Percentage shall mean one percent
                    (1%)."



                                     - 14 -
<PAGE>

          (u)  Effective  as of  the  date  hereof,  paragraph  18 of  the  ARMS
Agreement is hereby amended by adding the
following at the end thereof:

               "(s) any bank at which any deposit  account of Borrower
                    is maintained shall fail to comply with any of the
                    terms of any Deposit Account Control  Agreement to
                    which  such  bank  is a  party  or any  securities
                    intermediary,   commodity  intermediary  or  other
                    financial  institution  at any  time  in  custody,
                    control or possession of any  investment  property
                    of  Borrower  shall fail to comply with any of the
                    terms of any Investment Property Control Agreement
                    to which such person is a party."

          (v)  Effective  as of  the  date  hereof,  paragraph  22 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

                "22.     Blocked Accounts.
                         ----------------

                (a) Borrower  shall  establish  and  maintain,  at its
                    expense, blocked accounts or lockboxes and related
                    blocked  accounts  (in  either  case,  a  "Blocked
                    Account"),  as Lender may specify, with such banks
                    as are  acceptable  to Lender into which  Borrower
                    shall  promptly  deposit  and direct  its  account
                    debtors  to   directly   remit  all   payments  on
                    Receivables and all payments constituting proceeds
                    of Inventory or other  Collateral in the identical
                    form in which such  payments are made,  whether by
                    cash,  check  or  other  manner.   Borrower  shall
                    deliver,  or cause to be  delivered  to Lender,  a
                    Deposit Account Control Agreement duly authorized,
                    executed  and  delivered  by  each  bank  where  a
                    Blocked  Account  is  maintained  as  provided  in
                    paragraph 6(e) hereof or at any time and from time
                    to time  Lender may become  bank's  customer  with
                    respect to a Blocked  Account  and  promptly  upon
                    Lender's  request,   Borrower  shall  execute  and
                    deliver such agreements or documents as Lender may
                    require in connection  therewith.  Borrower agrees
                    that all payments made to any such Blocked Account
                    or other funds  received and  collected by Lender,
                    whether in respect of the Receivables, as proceeds
                    of  Inventory  or other  Collateral  or  otherwise
                    shall be treated as  payments to Lender in respect
                    of   the   Obligations   and,   therefore,   shall
                    constitute the property of Lender to the extent of
                    the then outstanding Obligations.

                (b) Borrower   and   its   shareholders,    directors,
                    employees,    agents,    Subsidiaries   or   other
                    Affiliates  shall,  acting as trustee  for Lender,
                    receive,  as the  property of Lender,  any monies,
                    checks,   notes,   drafts  or  any  other  payment
                    relating  to and/or  proceeds of Accounts or other
                    Collateral  which  come into their  possession  or
                    under their control and  immediately  upon receipt
                    thereof,  shall  deposit  or cause  the same to be
                    deposited  in the  Blocked  Account,  or remit the
                    same or cause the same to be remitted, in kind, to
                    Lender.  In no event shall the same be  commingled
                    with  Borrower's  own  funds.  Borrower  agrees to
                    reimburse Lender on demand for any amounts owed or
                    paid to any bank at  which a  Blocked  Account  is
                    established  or any other bank or person  involved
                    in the  transfer  of funds to or from any  Blocked
                    Account  arising  out of  Lender's  payments to or
                    indemnification   of  such  bank  or  person.  The
                    obligation  of  Borrower to  reimburse  Lender for
                    such amounts  pursuant to this  paragraph 22 shall
                    survive the  termination  or  non-renewal  of this
                    Agreement."

          (w)  Effective  as of  the  date  hereof,  paragraph  23 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "23. Lender's  Discretion.  Lender shall have the right
                    in its sole  discretion to determine which rights,
                    Liens,  security  interests or remedies Lender may
                    at any time pursue,  relinquish,  subordinate,  or
                    modify or to take any other  action  with  respect
                    thereto and such determination will not in any way
                    modify or affect any of Lender's rights hereunder.
                    To the extent that  applicable  law imposes duties
                    on Lender to exercise  remedies in a  commercially
                    reasonable  manner  (which duties cannot be waived
                    under such law), Borrower  acknowledges and agrees
                    that  it  is  not  commercially  unreasonable  for
                    Lender  (a) to fail to incur  expenses  reasonably
                    deemed significant by Lender to prepare Collateral
                    for  disposition  or  otherwise  to  complete  raw
                    material or work in process into finished goods or
                    other finished  products for  disposition;  (b) to
                    fail to obtain third party  consents for access to
                    Collateral  to be disposed of, or to obtain or, if


                                     - 15 -
<PAGE>

                    not  required  by  other  law,  to fail to  obtain
                    consents of any  governmental  authority  or other
                    third party for the  collection or  disposition of
                    Collateral  to be collected or disposed of; (c) to
                    fail  to  exercise   collection  remedies  against
                    account  debtors,   secondary  obligors  or  other
                    persons obligated on Collateral or to remove liens
                    or  encumbrances  on or any adverse claims against
                    Collateral;  (d) to exercise  collection  remedies
                    against   account   debtors   and  other   persons
                    obligated  on  Collateral  directly or through the
                    use of  collection  agencies and other  collection
                    specialists;  (e)  to  advertise  dispositions  of
                    Collateral   through   publications  or  media  of
                    general circulation, whether or not the Collateral
                    is of a specialized  nature;  (f) to contact other
                    persons,  whether or not in the same  business  as
                    Borrowers for expressions of interest in acquiring
                    all or any portion of the Collateral;  (g) to hire
                    one or more professional  auctioneers to assist in
                    the disposition of Collateral,  whether or not the
                    collateral  is of a  specialized  nature;  (h)  to
                    dispose of Collateral by utilizing  Internet sites
                    that  provide  for the  auction  of  assets of the
                    types  included in the Collateral or that have the
                    reasonable  capability  of doing so, or that match
                    buyers and  sellers  of assets;  (i) to dispose of
                    assets in  wholesale  rather than retail  markets;
                    (j) to  disclaim  disposition  warranties;  (k) to
                    purchase  insurance  or  credit   enhancements  to
                    insure Lender against risks of loss, collection or
                    disposition  of Collateral or to provide to Lender
                    a  guaranteed   return  from  the   collection  or
                    disposition  of  Collateral;  or (l) to the extent
                    deemed   appropriate  by  Lender,  to  obtain  the
                    services  of other  brokers,  investment  bankers,
                    consultants  and  other  professionals  to  assist
                    Lender in the  collection or disposition of any of
                    the  Collateral.  Borrower  acknowledges  that the
                    purpose  of  this   paragraph  23  is  to  provide
                    non-exhaustive  indications of certain  actions or
                    omissions by Lender that would not be commercially
                    unreasonable  in  Lender's  exercise  of  remedies
                    against the  Collateral  and that other actions or
                    omissions   by   Lender   shall   not  be   deemed
                    commercially unreasonable solely on account of not
                    being  indicated  in this  paragraph  23.  Without
                    limitation of the foregoing,  nothing contained in
                    this  paragraph 23 shall be construed to grant any
                    rights  to  Borrower  or to impose  any  duties on
                    Lender that would not have been granted or imposed
                    by  this  Agreement  or by  applicable  law in the
                    absence of this paragraph 23."

          (x)  Effective  as of  the  date  hereof,  paragraph  25 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "25. Notices.  Any notice or request  hereunder  may be
                    given to  Borrower  or  Lender  at the  respective
                    addresses  set forth below or as may  hereafter be
                    specified  in a notice  designated  as a change of
                    address  under  this  paragraph.   Any  notice  or
                    request  hereunder shall be given by registered or
                    certified mail,  return receipt  requested,  or by
                    overnight mail or by telecopy (confirmed by mail).
                    Notices  and  requests  shall  be,  in the case of
                    those by mail or  overnight  mail,  deemed to have
                    been given when  deposited in the mail or with the
                    overnight  mail  carrier,  and,  in the  case of a
                    telecopy, when confirmed.

                    Notices shall be provided as follows:

                    If to the Lender:    GMAC Commercial Credit LLC
                                         1290 Avenue of the Americas
                                         New York, New York 10104
                                         Attention:   Frank Imperato, SVP
                                         Telephone: (212) 408-7026
                                         Telecopy:   (212) 408-7162

                    If to the Borrower:  Target Logistic Services, Inc.
                                         c/o Target Logistics, Inc.
                                         112 East 25th Street
                                         Baltimore, MD 21218
                                         Attention: Stuart Hettleman
                                         Telephone: (410) 338-0127
                                         Telecopy:   (410) 330-1105



                                     - 16 -
<PAGE>

                    with copy to:        Hillel Tendler, Esq.
                                         Neuberger, Quinn, Gielen, Rubin
                                            and Gibber, P.A.
                                         One South Street, 27th Floor
                                         Baltimore, MD 21202-3201
                                         Telephone: (410) 332-8552
                                         Telecopy:   (410) 951-6038"

          (y)  Effective  as of  the  date  hereof,  paragraph  27 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "27. Limitation of Liability. Borrower acknowledges and
                    understands  that in order to assure  repayment of
                    the Obligations  hereunder  Lender may be required
                    to  exercise  any and all of  Lender's  rights and
                    remedies  hereunder and agrees that neither Lender
                    nor any of  Lender's  agents  shall be liable  for
                    acts  taken  or  omissions   made  in   connection
                    herewith or therewith except for actual bad faith.
                    Except as prohibited by law,  Borrower  waives any
                    right which it may have to claim or recover in any
                    litigation  with  Lender any  special,  exemplary,
                    punitive or  consequential  damages or any damages
                    other than,  or in  addition  to,  actual  damages
                    unless  such  damages  are   directly   caused  by
                    Lender's   willful   misconduct.   Borrower:   (a)
                    certifies    that    neither    Lender   nor   any
                    representative, agent or attorney acting for or on
                    behalf of Lender  has  represented,  expressly  or
                    otherwise,  that Lender would not, in the event of
                    litigation,  seek to  enforce  any of the  waivers
                    provided  for  in  this  Agreement  or  any of the
                    Ancillary Agreements, and (b) acknowledges that in
                    entering   into  this   Agreement  and  the  other
                    Ancillary  Agreements,  Lender  is  relying  upon,
                    among other things, the waivers and certifications
                    set  forth  in  this  paragraph  27 and  elsewhere
                    herein and therein."

          (z)  Effective  as of  the  date  hereof,  paragraph  28 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "28. Entire  Understanding.   This  Agreement  and  the
                    Ancillary    Agreements    contain    the   entire
                    understanding  between  Borrower  and  Lender  and
                    constitute  the  complete  agreement  between  the
                    parties with respect to the subject  matter hereof
                    and thereof,  and any  promises,  representations,
                    warranties,   understandings,  or  guarantees  not
                    contained  in  this  Agreement  or  the  Ancillary
                    Agreements shall have no force and effect."

          (aa)  Effective  as of the  date  hereof,  paragraph  29 of  the  ARMS
Agreement is hereby amended and restated in its entirety as follows:

               "29. Modification.    Neither   this   Agreement,   the
                    Ancillary   Agreements,   nor   any   portion   or
                    provisions  thereof  may  be  changed,   modified,
                    amended,   waived,    supplemented,    discharged,
                    cancelled or terminated orally or by any course of
                    dealing,  or  in  any  manner  other  than  by  an
                    agreement in writing, signed by the parties hereto
                    and thereto."

          3 Conditions Precedent/Conditions Subsequent. (a) This Amendment shall
be  effective,  and the  effectiveness  of the  terms and  conditions  contained
hereof, shall be subject to:

                    (i) the receipt by Lender of an  original of this  Amendment
          duly authorized,  executed and delivered by Borrower and consented and
          agreed to by the Guarantor; and

                    (ii) no Event of Default shall exist or have occurred.

          (b)   Borrower agrees to deliver to  Lender  within ten (10) days from
the date hereof all Schedules required to be delivered  in connection  herewith.
The failure to deliver such Schedules shall constitute an Event of Default.

          4 Renewal Fee. In consideration of the terms and provisions hereof and
the agreements of Lender contained herein, in addition to all other fees payable


                                     - 17 -
<PAGE>

by  Borrower  under  the  ARMS  Agreement,   Borrower  shall  pay  to  Lender  a
non-refundable  fee in an  amount  equal to  $15,000,  which  fee shall be fully
earned and payable as of the date  hereof and may,  at the option of Lender,  be
charged to any account of Borrower maintained with Lender.

          5 Ratification. Except as otherwise set forth herein, no other changes
or modifications to the ARMS Agreement are intended or implied and, in all other
respects, the ARMS Agreement remains in full force and effect in accordance with
its  existing  terms and  provisions  and is hereby  specifically  ratified  and
confirmed  as of the date  hereof.  Except as  specifically  set  forth  herein,
nothing  contained  herein shall evidence a waiver or amendment by the Lender of
any other provision of the ARMS Agreement.

          6 Successors  and Assigns.  The terms and provisions of this Amendment
shall be for the benefit of the parties hereto and their  respective  successors
and assigns; no other person,  firm, entity or corporation shall have any right,
benefit or interest under this Amendment.

          7 Counterparts.  This Amendment may be signed in counterparts, each of
which  shall be an  original  and all of which  taken  together  constitute  one
amendment.  In making  proof of this  Amendment,  it shall not be  necessary  to
produce  or  account  for more  than one  counterpart  signed by the party to be
charged.

          8 Entire Agreement. This Amendment sets forth the entire agreement and
understanding of the parties with respect to the matters set forth herein.  This
Amendment cannot be changed, modified, amended or terminated except in a writing
executed by the party to be charged.

                                  Very truly yours,

                                  TARGET LOGISTIC SERVICES, INC.


                                  By:      /s/ Philip J. Dubato
                                     -------------------------------------------
                                  Title: Vice President, Secretary and Treasurer


ACKNOWLEDGED AND AGREED:

GMAC COMMERCIAL CREDIT LLC


By:       /s/ Edward Hill
   ------------------------------
Title: Senior Vice President







                                     - 18 -
<PAGE>

                     ACKNOWLEDGMENT AND CONSENT OF GUARANTOR


          1. Target  Logistics,  Inc.  (as  successor  in interest to  Amertranz
Worldwide Holding Corp., the "Guarantor") has executed and delivered a Guaranty,
dated January 14, 1997 (the "Guaranty") in favor of GMAC Commercial  Credit LLC,
formerly  known as BNY  Factoring  LLC, as successor by merger to BNY  Financial
Corporation (the "Lender").  Guarantor  hereby  acknowledges and consents to the
annexed  Letter re:  Amendment  to  Restated  and  Amended  Accounts  Receivable
Management and Security Agreement, by and between Target Logistic Services, Inc.
and Lender and the transactions referred to thereunder (the "Amendment").

          2.  Guarantor  hereby  acknowledges,  confirms  and  agrees  that  the
Guaranty, the General Security Agreement, dated January 14, 1997, by and between
Guarantor  and  Lender  and all  other  documents  and  agreements  executed  by
Guarantor in  connection  therewith,  are and remain in full force and effect in
accordance  with  their  respective  terms as of the date  hereof,  and that all
Obligations  (as defined in the Guaranty) are due and payable to Lender  without
offset, defense or counterclaim of any kind, nature or description whatsoever.

                                  TARGET LOGISTIC SERVICES, INC.


                                  By:      /s/ Philip J. Dubato
                                     -------------------------------------------
                                  Title: Vice President, Chief Financial Officer









<PAGE>

                                                                    EXHIBIT 10.7

                        ADDENDUM TO EMPLOYMENT AGREEMENT


          THIS ADDENDUM TO EMPLOYMENT  AGREEMENT (the  "Addendum") is made as of
the 30th day of June,  2002, by and between TARGET  LOGISTICS,  INC., a Delaware
corporation (the "Company") and STUART HETTLEMAN (the "Executive").

                             INTRODUCTORY STATEMENT

          The Company and Executive  entered into an Employment  Agreement dated
as of June 24, 1996, as amended by an Addendum to Employment Agreement effective
June 24, 1999 (the "Original Agreement").  The parties desire to extend the term
of the Original  Agreement for an additional  one-year  term,  and amend certain
other  provisions of the Original  Agreement to be effective  from and after the
date hereof.

          NOW, THEREFORE,  for good and valuable consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

          A. All capitalized  terms not otherwise defined in this Addendum shall
have the meanings set forth in the Original Agreement.

          B. The first  sentence of Section  2(a) of the  Original  Agreement is
hereby amended in it entirety to read as follows:

               The  Executive  shall  serve  as  President  and  Chief
          Executive  Officer  of the  Company  and as  Executive  Vice
          President of each of Amertranz and CAS for a term commencing
          on the Commencement Date and expiring on June 30, 2003.

          C.  Section 3(a) of the  Original  Agreement is hereby  amended in its
entirety to read as follows:

               Base  Salary.   In   consideration  of  his  employment
          hereunder,  the Company shall pay to the Executive,  in such
          installments  as shall accord with the normal pay  practices
          of the Company,  but no less  frequently  than  monthly,  an
          annual  salary at the  initial  rate of  $180,000  per annum
          ("Base Salary").

          D. The  introductory  text and clauses (i),  (ii) and (iii) of Section
3(b) of the Original  Agreement are hereby  amended in their entirety to read as
follows:

               Incentive Compensation.  Executive shall be entitled to
          receive incentive compensation ("Incentive Compensation") in
          addition to the Base Salary, in an amount equal to the total
          of the following calculations based on the Company's Defined
          Earnings (as defined below) with respect to each fiscal year
          of the Company during the term hereof:

               (i)  3% of  Defined  Earnings  up to and  including  $1
                    million;

               (ii) 4% of Defined  Earnings in excess of $1 million up
                    to and including $2 million; and

               (iii) 5% of Defined Earnings in excess of $2 million.

          E.  Section 3(c) of the  Original  Agreement is hereby  amended in its
entirety to read as follows:


<PAGE>

               Definition of "Defined Earnings".  For purposes of this
          Agreement,  the term "Defined  Earnings" shall be the income
          of the  Company,  but before  any (i) income  taxes or other
          taxes based on income,  (ii) income  resulting from the sale
          by the  Company  or any of its  subsidiaries  of any  assets
          (other than sales in the ordinary  course of business),  and
          (iii) the  effects of charges  resulting  from any change in
          accounting  principles.  The calculation of Defined Earnings
          shall be derived from the audited  financial  statements  of
          the Company,  computed in accordance with generally accepted
          accounting principles, consistently applied.

          F. In all other respects,  the Original Agreement,  as amended hereby,
shall remain in full force and effect.

          IN WITNESS WHEREOF,  the parties have executed this Addendum as of the
day and year first above written.

                                  TARGET LOGISTICS, INC.


                                  By:         /s/ Philip J. Dubato
                                     -------------------------------------------
                                     Philip J. Dubato, Vice President



                                             /s/ Stuart Hettleman
                                     -------------------------------------------
                                     Stuart Hettleman



















                                     - 2 -
<PAGE>

                                                                    EXHIBIT 10.9


                           SECOND AMENDMENT TO LEASE


          This Second Amendment to Lease  ("Amendment") is made and entered into
as of March 20,  2002,  by and between AMB  Property  L.P.,  a Delaware  limited
partnership,  successor in interest to West Carob Street Partners,  a California
general  partnership  ("Lessor") and Target Logistic Services,  Inc., a Delaware
corporation, successor in interest to AmerTranz Worldwide Holding Corporation, a
Delaware corporation ("Lessee").

          I. RECITALS

          Lessor   and   Lessee   are   parties   to   that   certain   Standard
Industrial/Commercial  Single-Lessee  Lease - Net dated May 19, 1997  ("Lease").
The  Lease  was  amended  by that  certain  First  Amendment  to  Lease  ("First
Amendment")  dated  June 12,  1997.  The  Lease  and  First  Amendment  are also
collectively referred to as the "Lease." Pursuant to the terms and conditions of
the Lease,  Lessee leased the premises  commonly known as 201 West Carob Street,
Compton, CA 90220  ("Premises").  The original term of the Lease expires on July
31, 2002.  By this  Amendment  Lessor and Lessee  desire and intend to amend the
Lease as set forth in this Amendment.

          II. AGREEMENTS

          NOW,  THEREFORE,  in  consideration  of the  foregoing  and the mutual
covenants,  conditions and agreements  contained herein,  and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, Lessor and Lessee hereby agree as follows:

          1. Lessor and Lessee.  Notwithstanding anything to the contrary in the
Lease,  "Lessor" shall mean AMB Property,  L.P., a Delaware limited partnership,
and "Lessee" shall mean Target Logistic Services, Inc., a Delaware corporation.

          2.  Sublease.   Lessee  entered  into  a  written  Standard   Sublease
("Sublease") with Yoon Shin Kim dba Turbo Air, Inc. ("Subtenant"), dated May 13,
1998.  The term of the Sublease was to expire on May 30, 1999.  Lessee  warrants
and  represents  to Lessor  that  Subtenant  is no longer in  possession  of any
portion of the Premises and that there are no subleases or  assignment of all or
any portion of the Premises.

          3.  Extension  of Term.  The  term of the  Lease  is  hereby  extended
("Extended Term") until and including July 31, 2005 ("Lease  Termination Date").
The Extended Term  commencement  date  ("Extended  Term  Commencement  Date") is
August 1, 2002.

          4. Rent During Extended Term. From the Extended Term Commencement Date
through  the end of the  Extended  Term,  the monthly  Base Rent,  as defined in
Section 1.5 of the Lease, shall be as follows

                Months 1-12  - $40,112.50
                Months 13-24 - $43,120.00
                Months 25-36 - $45,126.00

          5. Security  Deposit.  Upon execution of this Amendment,  Lessee shall
deliver to Landlord $7,019.60 which shall become an additional  security deposit
under the Lease  pursuant to Sections 1.7 and 5 of the Lease and shall bring the
total security deposit to $40,112.00.

          6. New Option to  Extend.  Lessor  hereby  grants to Lessee the option
("Option")  to extend the term of this Lease for one  2-year  period  commencing
August  1,  2005  and  terminating  July 31,  2007  ("Option  Period")  upon the
following terms:



                                     - 1 -
<PAGE>

               a).  Exercise Date: In order to exercise the Option,  Lessee must
          give written  notice  ("Notice") of such election to Lessor and Lessor
          must  receive  the same not  earlier  than 9 months  nor later  than 6
          months prior to the Lease Termination Date ("Option Exercise Period").
          If the Notice is not received,  the Option shall automatically expire.
          Lessee  acknowledges  that  because  of the  importance  to  Lessor of
          knowing no later than the end of the Option Exercise Period whether or
          not Lessee will  exercise the Option,  the failure of Lessee to notify
          Lessor by the end of the Option Exercise  Period will  conclusively be
          presumed an election by Lessee not to exercise the Option.


               b). Base Monthly  Rent:  The Base Monthly Rent and any  increases
          for  each  month  of  the  Option  Period  shall  be the  market  rent
          determined as follows:

                    i).  Four  months  prior to the  commencement  of the Option
               Period,  the Parties  shall  negotiate in good faith to determine
               the Base Rent and increases for the Option  Period.  If a written
               agreement  cannot be reached within thirty days and if Lessor and
               Lessee  mutually  agree in writing  ("Arbitration  Agreement") no
               more than three  months prior to the  commencement  of the Option
               Period to submit such determination to binding arbitration as set
               forth hereafter, then Lessor and Lessee shall each, no later than
               90 days prior to the  commencement  of the Option Period,  make a
               reasonable  determination of the fair market rental and increases
               for  the  Premises   for  the  Option   Period  and  submit  such
               determination,  in writing, to arbitration in accordance with the
               following provisions:

                         aa). No later than 90 days prior to the commencement of
                    the Option  Period,  Lessor and Lessee  shall each select an
                    industrial  leasing broker to act as an arbitrator.  The two
                    arbitrators so appointed  shall, no later than 75 days prior
                    to the  commencement  of the Option  Period,  select a third
                    mutually  acceptable  industrial  leasing broker to act as a
                    third arbitrator.

                         bb). The three arbitrators, acting by a majority, shall
                    no  later  than 75 days  prior  to the  commencement  of the
                    Option  Period,  determine the actual fair market rental and
                    increases  for the  Premises  for  the  Option  Period.  The
                    decision of a majority of the  arbitrators  shall be binding
                    on the  Parties.  The fair market  rental  determination  of
                    Lessor or Lessee which is closest to the fair market  rental
                    as determined by the arbitrators  shall be the Base Rent for
                    the Option  Period.  In no event shall the base rent for the
                    Option  Period be less  than the rent  paid in the  previous
                    period.

                         cc).  If  either of the  Parties  fails to  appoint  an
                    arbitrator within the period required by this Addendum,  the
                    arbitrator  timely  appointed  shall determine the Base Rent
                    and increases for the Option Period.

                         dd). The entire cost of such arbitration  shall be paid
                    by the party  whose fair  market  rental  submission  is not
                    selected.


          Notwithstanding the foregoing, if Lessor and Lessee do not execute the
Arbitration Agreement, the Option shall be null and void.

          c).  Conditions  to  Exercise of Option:  Lessee's  right to extend is
conditioned upon and subject to each of the following:

                    i). Lessee shall have no right to exercise the Option (i) if
          Lessee is in  default  or (ii) in the event  that  Lessor has given to
          Lessee  three (3) or more notices of separate  defaults  during the 12
          month period immediately preceding the exercise of the Option, whether
          or not the  defaults  are cured.  The period of time within  which the
          Option may be exercised shall not be extended or enlarged by reason of
          Lessee's inability to exercise the Option because of the provisions of
          this paragraph.


                    ii).  All of the terms and  conditions  of this Lease except
          where specifically modified by this Amendment
shall apply.

                    iii).  The  Option  is  personal  to the  Lessee,  cannot be
          assigned or  exercised  by anyone other than the Lessee and only while
          the Lessee is in full  possession  of the  Premises  and  without  the
          intention of thereafter  assigning or subletting.  Lessee acknowledges
          and  agrees  that it has no  option  to  extend  the term of the Lease
          beyond the Option Period.

          7. Improvements and Repairs.  Lessor shall repair the concrete portion
of the  driveway at entrance of the yard area as depicted on Exhibit "A" to this
Amendment.  During the Extended Term Lessor shall, at its sole cost and expense,
replace (as deemed  necessary  by Lessor) up to four  heating,  ventilating  and


                                     - 2 -
<PAGE>

air-conditioning units serving the Premises. Further, Lessee shall be reimbursed
by   Lessor   for  an   amount  up  to   $28,980.00   as  set  forth   hereafter
("Reimbursement")  to be used by Lessee solely for the purchase and installation
of carpeting  and carpet  padding  (collectively  "Carpeting")  in the Premises.
Lessee  shall not be  entitled  to the  Reimbursement  until  and  unless it has
delivered to Lessor written evidence  reasonably  satisfactory to Lessor showing
that the  Carpeting has been  installed and fully paid for by Lessee.  Except as
set forth in this Section 6 and notwithstanding  anything to the contrary in the
Lease, Lessor shall have no obligation to perform any work in the Premises other
than that to which  Lessor is  obligated  by the  Lease.  As of the date of this
Amendment, Lessee has no knowledge of any repair, replacement or maintenance in,
on or under the Premises which would be Lessor's obligation to repair.

          8. No Brokers.  Lessee  warrants and  represents  that it has not been
represented in any capacity by any real estate broker,  salesperson, or agent or
any other  person  who might  claim a fee from  Lessor  in  connection  with the
representation  or alleged  representation of Lessee regarding the Lease or this
Amendment  (collectively  "Broker Claims").  Lessee shall indemnify,  defend (by
counsel  satisfactory  to  Lessor)  and  hold  harmless  Lessor,  its  partners,
officers,   shareholders,   directors,  employees,  agents,  members,  insurers,
contractors,  and attorneys from any claim,  damage,  loss or liability  arising
from any and all Broker Claims.

          9. Execution of Guaranty.  This Amendment  shall not effective  unless
and until a Guaranty of Lease in form and  substance  identical to that attached
hereto  as  Exhibit  B, is  executed  by  Target  Logistics,  Inc.,  a  Delaware
corporation.

          10. Reaffirmation. Except as otherwise provided in this Amendment, all
other  terms and  conditions  of the Lease  shall  remain the same and the Lease
shall remain in full force and effect.

         IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the date first written above.

A.  Lessor:                                  Lessee:

AMB Property, L.P.                           Target Logistic Services, Inc.,
a Delaware limited partnership               a Delaware corporation
By: AMB Property Corporation
Maryland corporation
Its General Partner
                                             By: /s/ Christopher A. Coppersmith
                                                --------------------------------
                                                Its: President
By:   /s/ Martin J. Coyne
   -------------------------------
   Martin J. Coyne, Vice President








                                     - 3 -
<PAGE>

                                GUARANTY OF LEASE

          WHEREAS,   AMB  Property,   L.P.,  a  Delaware   limited   partnership
("Landlord")  has  agreed,  pursuant  to a  written  Second  Amendment  to Lease
("Amendment")  executed  contemporaneously with this Guaranty to extend the Term
and change the name of the "Tenant" under the written lease,  dated May 19, 1997
("Lease")  between it, as Landlord,  and the  predecessor  in interest to Target
Logistic Services, Inc. ("Tenant"),  for the premises commonly known as 201 West
Carob Street,  Compton, CA 90220;  WHEREAS,  Target Logistics,  Inc., a Delaware
corporation  ("Guarantor")  has a  financial  interest in Tenant;  and  WHEREAS,
Landlord  would not extend the Term of the Lease,  change the name of the Tenant
or execute the  Amendment if  Guarantor  did not execute and deliver to Landlord
this Guaranty of Lease.

         NOW THEREFORE, in consideration of the extension of the Term of the
Lease, the change of the name of the Tenant thereunder and the execution of the
Amendment by Landlord and as a material inducement to Landlord for the
foregoing:

          1. Guarantor  hereby  unconditionally  and irrevocably  guarantees the
prompt payment by Tenant of all rents and all other sums payable by Tenant under
the Lease and the  faithful and prompt  performance  by Tenant of each and every
one of the  terms,  conditions,  and  covenants  of the  Lease  to be  kept  and
performed by Tenant.
          2. The terms of the Lease  may,  without  the  consent of or notice to
Guarantor,  be modified by  Landlord  and Tenant or by a course of conduct,  and
this Guaranty shall guarantee the performance of said Lease as so modified.  The
Lease may be assigned by Landlord or any assignee of Landlord without consent or
notice to Guarantor.
          3. This Guaranty shall not be released,  modified,  or affected by the
failure  or  delay on the part of  Landlord  to  enforce  any of the  rights  or
remedies of the Landlord under the Lease,  whether pursuant to the terms thereof
or at law or in equity.
          4. No notice of default  need be given to  Guarantor.  The guaranty of
the  undersigned  is a  continuing  guaranty  under which  Landlord  may proceed
immediately  against  Tenant and/or  against  Guarantor  following any breach or
default by Tenant or for the  enforcement  of any rights which Landlord may have
against Tenant under the terms of the Lease or at law or in equity.
          5.  Landlord  shall  have  the  right  to  proceed  against  Guarantor
hereunder  following any breach or default by Tenant  without  first  proceeding
against  Tenant and without  previous  notice to or demand upon either Tenant or
Guarantor.
          6. Guarantor  hereby waives (a) notice of acceptance of this Guaranty,
(b) demand of payment,  presentation,  and  protest,  (c) all right to assert or
plead any statute of limitations relating to this Guaranty or the Lease, (d) any
right to  require  the  Landlord  to  proceed  against  the  Tenant or any other
Guarantor  or any other person or entity  liable to  Landlord,  (e) any right to
require  Landlord to apply to any default any security deposit or other security
it may hold under the Lease,  (f) any right to require Landlord to proceed under
any other remedy Landlord may have before proceeding against Guarantor,  and (g)
any right of subrogation.
          7. Guarantor does hereby subrogate all existing or future indebtedness
of Tenant to Guarantor to the  obligations  owed to Landlord under the Lease and
this Guaranty.
          8. If a Guarantor is married,  such  Guarantor  expressly  agrees that
recourse  may  be  had  against  his or her  separate  property  for  all of the
obligations hereunder.
          9. The  obligations  of Tenant  under the Lease to execute and deliver
estoppel  certificates and financial  statements shall be deemed to also require
the Guarantor hereunder to do and provide the same.
          10. The term "Landlord"  refers to and means the Landlord named in the
Lease,  as amended,  and also  Landlord's  successors  and  assigns.  So long as
Landlord's interest in the Lease, the leased premises, or the rents, issues, and
profits  therefrom,  are subject to any mortgage or deed of trust or  assignment
for security,  no  acquisition  by Guarantor of the  Landlord's  interest  shall
affect the  continuing  obligation of Guarantor  under this Guaranty which shall
nevertheless continue in full force and effect for the benefit of the mortgagee,
beneficiary,  trustee,  or  assignee  under  such  mortgage,  deed of trust,  or
assignment, and their successors and assigns.
          11.  The term  "Tenant"  refers to and means the  Tenant  named in the
Lease, as amended, and also Tenant's successors and assigns.
          12. In the  event  any  action is  brought  by said  Landlord  against
Guarantor  hereunder  to enforce the  obligation  of  Guarantor  hereunder,  the
unsuccessful  party in such action shall pay to the  prevailing  party therein a
reasonable attorney's fee which shall be fixed by the court.

Executed at                                 Target Logistics, Inc.,
            --------------------------      a Delaware corporation


                                     - 1 -
<PAGE>


on March 20, 2002                           By:     /s/ Stuart Hettleman
                                               ---------------------------------
                                               Its:  President

Address
       -----------------------------           "Guarantor"

       -----------------------------










                                     - 2 -
<PAGE>

                                                                      EXHIBIT 23



                        CONSENT OF INDEPENDENT AUDITORS


          As  independent   public   accountants,   we  hereby  consent  to  the
incorporation  of our  report  included  in this Form 10-K,  into the  Company's
previously  filed  Registration  Statements on Form S-3, File No.  333-30351 and
File No. 333-03613, and Registration Statement on Form S-8, File No. 333-71197.


                                            STONEFIELD JOSEPHSON, INC.



Santa Monica, California
September 26, 2002






<PAGE>

                                                                      EXHIBIT 99



                           CERTIFICATION PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection  with the Annual Report of Target  Logistics,  Inc. (the
"Company")  on Form 10-K for the fiscal  year ended June 30,  2002 as filed with
the Securities and Exchange  Commission  and to which this  Certification  is an
exhibit (the "Report"), the undersigned hereby certify,  pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

          (1)  The Report fully complies with the  requirements of section 13(a)
               or 15(d) of the Securities Exchange Act of 1934; and

          (2)  The information  contained in the Report fairly presents,  in all
               material  respects,   the  financial   condition  and  result  of
               operations of the Company for the periods reflected therein.


Date: September 27, 2002                        /s/ Stuart Hettleman
                                            ------------------------------------
                                            Stuart Hettleman
                                            Chief Executive Officer


                                                /s/ Philip J. Dubato
                                            ------------------------------------
                                            Philip J. Dubato
                                            Chief Financial Officer