U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

**FORM 10-KSB/A**

**(Amendment No. 1)**

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

**For the fiscal year ended December 31, 2007**

 

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

**Commission File No. 0-28223**

 

**CARGO CONNECTION LOGISTICS HOLDING, INC.**

**(Exact name of registrant as specified in its charter)**

 
| **Florida**                     | **65-0510294**      |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (I.R.S. Employer    |
| incorporation or organization)  | Identification No.) |

 

**600 Bayview Avenue,** 

**Inwood, New York, 11096**

(Address of principal executive offices)

 

**(516) 239-7000**

(Issuer’s Telephone Number)

 

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

**None**

 

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

 

**Common Stock, $.001 par value per share**

(Title of Class)

 

Check whether the Issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.o

 

Check whether the Issuer (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. YesxNoo

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSBx

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesoNox

 

Issuer’s revenues for the fiscal year ended December 31, 2007: $17,212,765.

 

Aggregate market value of the voting Common Stock held by non-affiliates of the registrant as of February 29, 2008, was: $1,120,582

 

The Registrant’s common stock outstanding as of February 29, 2008 is: 1,258,310,353..

 

Transitional Small Business Disclosure Format (Check One): YesoNox

 

 
|   |   |   |
|--------|--------|--------|

 

 

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**EXPLANATORY NOTE**

 

This Amendment No. 1 on Form 10-KSB/A amends the Annual Report on Form 10-KSB for the year ended December 31, 2007 (the “Original Report”) of Cargo Connection Logistics Holding, Inc. (the “Company”), which was filed with the Securities and Exchange Commission on March 31, 2008, and is being filed with respect certain information contained in the Company’s Consolidated            Financial Statements and the Notes thereto in Item 7, as well as Items 5 and 11. The Company is also including an amended and restated Item 13 to include Exhibit 21.1, a list of the Company’s subsidiaries.

 

We have prepared this Amendment No. 1 to provide the disclosures referred to above. Unless expressly noted otherwise, the disclosures in this Form 10-KSB/A continue to speak as of the date of the Original Report, and do not reflect events occurring after the filing of the Original Report.  For additional information on subsequent events, the reader should refer to the Forms 10-Q and 8-K we have            filed in 2008.  The filing of this Form 10-KSB/A shall not be deemed an admission that the Original Report, when made, included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

 

**Item 5.**- MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND OTHER STOCKHOLDER MATTERS

 

The Company’s Common Stock trades on The National Association of Securities Dealers, Inc. Over-the-Counter Bulletin Board (the “OTC Bulletin Board”) under the symbol “CRGO”. The following table represents the closing high and low bid information for our Common Stock during the last two fiscal years as reported by the OTC Bulletin Board. The quotations reflect inter-dealer            prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The market for our common stock is sporadic.

 
| 2007           |   | High   |   | Low    |
|----------------|--------|--------|--------|--------|
| First Quarter  |   | $.007  |   | $.004  |
| Second Quarter |   | $.005  |   | $.003  |
| Third Quarter  |   | $.003  |   | $.002  |
| Fourth Quarter |   | $.003  |   | $.001  |
|           |   |   |   |   |
| 2006           |   | High   |   | Low    |
| First Quarter  |   | $.015  |   | $.003  |
| Second Quarter |   | $.019  |   | $.010  |
| Third Quarter  |   | $.025  |   | $.011  |
| Fourth Quarter |   | $.013  |   | $.006  |

 

**Dividend Policy**

 

The Company has not declared, or paid, any cash dividends since inception and does not anticipate declaring or paying a cash dividend for the foreseeable future.

 

**DESCRIPTION OF CAPITAL STOCK**

 

The Company has authorized 5,000,000,000 shares of Common Stock, $.001 par value per share and 2,000,000 shares of preferred stock, $1.00 par value per share, with such designations, and powers of preferences and rights, and the qualification, limitations or restrictions as the Board of Directors may determine. As of February 29, 2008, we had 462 shareholders of record of our Common Stock.

 

**Preferred Stock**

 

The Company has 2,000,000 authorized shares of blank check preferred stock, of which the Company has designated (i) 500,000 shares as Series III Preferred Stock, $1.00 par value per share; (“Series III Preferred Stock”); (ii) 600,000 shares as Series IV convertible preferred stock (“Series IV Preferred Stock”), par value $1.00 per share; (iii) 500,000 shares of Series V            preferred stock (“Series V Preferred Stock”), $1.00 par value per share. The remaining 400,000 shares remain undesignated blank check preferred stock. The Board of Directors of the Company is authorized to fix, subject to the provisions herein set forth, before the issuance of any shares of a particular series, the number, designation, and relative rights, preferences and limitations of the shares of such series, including

 

 
|   | 2 |   |
|--------|---|--------|

 

 

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|   | (1) | voting rights, if any, which may include the right to vote together as a single class with the Common Stock and any other series of the preferred stock with the number of votes per share accorded to shares of such series being the same as or different from that accorded to such other shares; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | (2) | the dividend rate per annum, if any, and the terms and conditions pertaining to dividends and whether such dividends shall be cumulative; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | (3) | the amount payable upon voluntary or involuntary liquidation; |
|--------|-----|---------------------------------------------------------------|

 
|   | (4) | the terms and conditions of the redemption; |
|--------|-----|---------------------------------------------|

 
|   | (5) | sinking fund provisions; |
|--------|-----|--------------------------|

 
|   | (6) | the terms and conditions on which such shares are convertible, in the event the shares are to have conversion rights; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------|

 
|   | (7) | all other rights, preferences and limitations pertaining to such series which may be fixed by the Corporation’s Board of Directors pursuant to the Florida Business Corporation Act. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Series III Preferred Stock: There were 100,000 shares of Series III Preferred Stock issued and outstanding as of December 31, 2007. These shares were issued upon the conversion of an outstanding loan entered into between the Company and Jesse Dobrinsky and John L. Udell, two of our executive officers. Each share of Series III Preferred Stock is treated as being convertible            into shares of the Company’s common stock at a conversion price equal to the lesser of (i) the average of the lowest of three-day trading prices during the five trading days immediately prior to the conversion date multiplied by .70, or (ii) the average of the lowest of three-day trading prices during the five trading days immediately prior to the funding date(s). The Series III Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval            and has voting power equal to twenty votes for each share of common stock into which such holder’s shares of Series III Preferred Stock are then convertible. The holders of the Series III Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. The Series III Preferred Stock has a liquidation preference of $1.00 per share in the event of any liquidation, dissolution or winding up of the Company,            whether voluntary or involuntary. The Company believes that its articles of incorporation may not properly reflect certain of the above terms, and intends to take corrective action in this regard.

 

Series IV Preferred Stock: There were 517,500 shares of Series IV Preferred Stock issued and outstanding as of December 31, 2007 These Shares were issued upon conversion of a convertible promissory note entered into between the Company and Triple Crown. The Series IV is convertible into shares of the Company’s common stock at a conversion price equal to the lesser of            (i) the average of the lowest of three-day trading prices during the five trading days immediately prior to the Conversion Date multiplied by .70, or (ii) the average of the lowest of three-day trading prices during the five trading days immediately prior to the funding date(s). The Series IV Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval and has voting power equal to twenty votes for each share of common stock into which such            holder’s shares of Series IV Preferred Stock are then convertible. In addition, the holders of the Series IV Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. The Series IV Preferred Stock has a liquidation price of $1.00 per share in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The Company believes that its articles of            incorporation may not properly reflect certain of the above terms, and intends to take corrective action in this regard.

 

Series V Preferred Stock: There were 479,867 shares of Series V Preferred Stock issued and outstanding as of December 31, 2007. These shares were issued based on the Stock Purchase Agreement and Share Exchange entered into on May 12, 2005 between the Company and the shareholders of Cargo Connection and Cargo International, which called for the Company to issue shares of            its preferred stock which are convertible into Common Stock of the Company additional consideration to be given to the shareholders twelve (12) months from the closing date of the transaction whereby they would own eighty percent (80%) of the outstanding shares of the Company at that time. The Series V Preferred Stock is convertible into 7,575 shares of Common Stock. The Series V Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval and            has voting power equal to thirty votes per outstanding share of Series V Preferred Stock. In addition, the holders of the Series V Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series V Preferred Stock shall be entitled to

 
|   | 3 |   |
|--------|---|--------|

 

 

----

 

receive distributions out of the assets of the Corporation, whether from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders of Common Stock.

 

The Company has determined that it is treating all three of the above series of preferred stock issuances on the balance sheet as mezzanine financing in accordance with the guidelines set forth under EITF D-98. This is required since there are liquidation preferences to be paid from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders            of common stock in the event of any liquidation, whether voluntary or involuntary.

 

**Warrants**

 

In connection with the convertible debt issued on December 28, 2005, the Company has issued to Montgomery a warrant to purchase 2,000,000 shares which is exercisable at an exercise price of $0.001 and will expire on December 28, 2008. This warrant is subject to anti-dilution provisions which include an adjustment of the exercise price to equal the issuance price of any shares issued at a lower price            than the exercise price.

 

**Equity Compensation Plan Information**

 

The following table sets forth the information about securities authorized for issuance under our equity compensation plans.

 
| **Plan category**                                           | **(a) Number of securities to be issued on exercise of outstanding options, warrants and rights** | **(b) Weighted average exercise price of outstanding options, warrants, and rights** | **(c) Number of securities remaining available for future issuance under equity compensation plans.** |
|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|
| Equity Compensation Plans

approved by security holders     | 220,000                                                                                           | $1.07                                                                                | 50,780,000                                                                                            |
| Equity compensation plans not

approved by security holders | 0                                                                                                 | 0                                                                                    | 0                                                                                                     |
| Totals                                                      | 220,000                                                                                           | $1.07                                                                                | 50,780,000                                                                                            |

 

**Stock-based compensation**

 

The Company has not granted any stock options and no stock options have been exercised or expired in 2006 or 2007.

 

 

 
|   | 4 |   |
|--------|---|--------|

 

 

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**Item 7.**- FINANCIAL STATEMENTS

 

Set forth below is a list of our financial statements for December 31, 2007 included in this Annual Report on Form 10-KSB/A.

 

==================================================================================

PAGE

 
| Report of Independent Registered Public Accounting Firm                                         | F-1 |
|-------------------------------------------------------------------------------------------------|-----|
| Consolidated Balance Sheet as of December 31, 2007                                              | F-2 |
| Consolidated Statements of Operations for the Years Ended December 31, 2007 and 2006            | F-3 |
| Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 2007 and 2006 | F-4 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2007 and 2006            | F-5 |
| Notes to Consolidated Financial Statements                                                      | F-7 |

 

 

 
|   | 5 |   |
|--------|---|--------|

 

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders of

Cargo Connection Logistics Holding, Inc.

Inwood, New York

 

We have audited the accompanying consolidated balance sheet of Cargo Connection Logistics Holding, Inc. as of December 31, 2007 and the related consolidated statements of operations, and stockholders' deficiency and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on            these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial            reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 audit provides 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 Cargo Connection Logistics Holding, Inc. as of December 31, 2007 and the consolidated results of its operations and its cash flows for the years ended December 31, 2007 and 2006 in conformity with accounting principles generally accepted in the United            States of America.

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has reported losses from operations, negative cash flows from operating activities, negative working capital and has a stockholders' deficit. These conditions raise substantial doubt about its ability            to continue as a going concern. Management's plans in regard to these matters are described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Friedman LLP

Friedman LLP

East Hanover, New Jersey

March 31, 2008

 

 

 

F-1

 

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| **CARGO CONNECTION LOGISTICS HOLDING, INC. AND SUBSIDIARIES**                       |
|-------------------------------------------------------------------------------------|
| **CONSOLIDATED BALANCE SHEET**                                                      |
| **DECEMBER 31, 2007**                                                               |
|                                                                                |   |   |   |
| ASSETS                                                                              |
| **Current Assets**                                                                  |   |   |   |
| Cash                                                                                | $ | 470,779 |   |
| Accounts receivable, net of doubtful accounts of $177,075                           |   | 807,356 |   |
| Notes receivable                                                                    |   | 300,000 |   |
| Due from officers                                                                   |   | 74,949 |   |
| Prepaid expenses                                                                    |   | 70,588 |   |
| **Total current assets**                                                            |   | 1,723,672 |   |
|                                                                                |   |   |   |
| Property and equipment, net of accumulated depreciation in the amount of $1,565,225 |   | 438,560 |   |
| License agreements - RadRopeTM                                                 |   | 1,316,854 |   |
| Security deposits                                                                   |   | 91,904 |   |
| **TOTAL ASSETS**                                                                    | $ | 3,570,990 |   |
|                                                                                |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                            |
| **Current Liabilities**                                                             |   |   |   |
| Accounts payable and accrued expenses                                               | $ | 4,701,804 |   |
| Secured convertible debenture, net of discount of $38,327                           |   | 2,293,173 |   |
| Financial instruments                                                               |   | 997,743 |   |
| Current portion of notes payable                                                    |   | 299,695 |   |
| Current portion of capital leases payable                                           |   | 105,975 |   |
| Due to related parties                                                              |   | 2,027,936 |   |
| Due to others                                                                       |   | 1,388,158 |   |
| Security deposits and escrowed funds                                                |   | 42,170 |   |
| **Total current liabilities**                                                       |   | 11,856,654 |   |
|                                                                                |   |   |   |
| Long term portion of capital leases payable                                         |   | 110,342 |   |
| Long term portion of notes payable                                                  |   | 896,815 |   |
| Deferred rent                                                                       |   | 566,577 |   |
| **Total other liabilities**                                                         |   | 1,573,734 |   |
| **TOTAL LIABILITIES**                                                               |   | 13,430,388 |   |
|                                                                                |   |   |   |
| Commitments and contingencies                                                       |   |   |   |
|                                                                                |   |   |   |
| Non-controlling interest - ITG subsidiary                                           |   | 329 |   |
|                                                                                |   |   |   |
| Series III Preferred Stock, par value $1.00 - authorized                            |   |   |   |
| 500,000 shares, 100,000 shares issued and outstanding (liquidation value $100,000)  |   | 100,000 |   |
| Series IV Preferred Stock, par value $1.00 - authorized                             |   |   |   |
| 600,000 shares, 517,500 shares issued and outstanding (liquidation value $517,500)  |   | 517,500 |   |
| Series V Preferred Stock, par value $1.00 - authorized                              |   |   |   |
| 500,000 shares, 479,867 shares issued and outstanding (liquidation value $479,867)  |   | 479,867 |   |
|                                                                                |   |   |   |
| **Stockholders' Deficiency**                                                        |   |   |   |
| Common stock, par value $.001 - authorized 5,000,000,000 shares,                    |   |   |   |
| 1,147,807,354 shares issued and outstanding                                         |   | 1,147,808 |   |
| Additional paid in capital                                                          |   | 3,500,297 |   |
| Accumulated deficit                                                                 |   | (15,605,199) |   |
| **TOTAL STOCKHOLDERS' DEFICIENCY**                                                  |   | (10,957,094) |   |
| **TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY**                                  | $ | 3,570,990 |   |

 

See accompanying notes to consolidated financial statements.

 

F-2

 

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| **CARGO CONNECTION LOGISTICS HOLDING, INC. AND SUBSIDIARIES**       |
|---------------------------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF OPERATIONS**                           |
| **FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006**                  |
|                                                                |   |   |   |   |   |
|                                                                |   | 2007 |   |   | 2006 |
| Operating revenue:                                                  |   |   |   |   |   |
| Revenue                                                             | $ | 17,212,765 |   | $ | 17,927,544 |
| Total revenue                                                       |   | 17,212,765 |   |   | 17,927,544 |
|                                                                |   |   |   |   |   |
| Operating expenses:                                                 |   |   |   |   |   |
| Direct operating expenses                                           |   | 11,615,518 |   |   | 12,296,989 |
| Selling, general and administrative                                 |   | 6,677,192 |   |   | 8,441,906 |
| Total operating expenses                                            |   | 18,292,710 |   |   | 20,738,895 |
|                                                                |   |   |   |   |   |
| Loss from operations                                                |   | (1,079,945) |   |   | (2,811,351) |
|                                                                |   |   |   |   |   |
| Other (expense) income                                              |   |   |   |   |   |
| Interest expense, net                                               |   | (3,109,378) |   |   | (1,857,929) |
| Rental income                                                       |   | 121,850 |   |   | 123,950 |
| Change in value of financial instruments                            |   | 2,946,392 |   |   | (817,591) |
| Non-controlling interest - ITG                                      |   | 659 |   |   | (987) |
| Loss from debt extinguishment                                       |   | (35,766) |   |   | (502,110) |
| Other income                                                        |   | 46,341 |   |   | 693 |
| Total other expense                                                 |   | (29,902) |   |   | (3,053,974) |
|                                                                |   |   |   |   |   |
| Net loss before cumulative effect of change in accounting principle |   | (1,109,847) |   |   | (5,865,325) |
|                                                                |   |   |   |   |   |
| Cumulative effect on prior years of retroactive application of a    |   |   |   |   |   |
| change in accounting principle                                      |   | (396,000) |   |   | - |
|                                                                |   |   |   |   |   |
| Net loss attributable to common stockholders                        | $ | (1,505,847) |   | $ | (5,865,325) |
|                                                                |   |   |   |   |   |
| Net loss per common share, basic and diluted                        | $ | (0.001) |   | $ | (0.008) |
|                                                                |   |   |   |   |   |
| Weighted average number of common shares used                       |   |   |   |   |   |
| in the net loss per share calculation                               |   | 1,102,435,761 |   |   | 738,792,011 |

 

See accompanying notes to consolidated financial statements.

 

F-3

 

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| **CARGO CONNECTION LOGISTICS HOLDING, INC. AND SUBSIDIARIES** |
|---------------------------------------------------------------|
| **CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY**        |
| **AS OF DECEMBER 31, 2007**                                   |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |   |   |   |   | **Additional** |   | **Deferred** |   |   |   | **Total** |
|                                                          |   | **Common Stock** |   | **Paid-in** |   | **Offering** |   | **Accumulated** |   | **Stockholders'** |
|                                                          |   | **Shares** |   | **Amount** |   | **Capital** |   | **Costs** |   | **Deficit** |   | **Deficiency** |
| Balance December 31, 2006                                     |   | 1,082,912,617 | $ | 1,082,913 | $ | 3,242,192 | $ | (10,000) | $ | (14,099,352) | $ | (9,784,247) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative effect of change in                                |   |   |   |   |   |   |   |   |   |   |   |   |
| accounting principle                                          |   | - |   | - |   | - |   | - |   | (396,000) |   | (396,000) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Cancellation of shares in connection                          |   |   |   |   |   |   |   |   |   |   |   |   |
| with deferred offering costs                                  |   | (105,263) |   | (105) |   | (9,895) |   | 10,000 |   | - |   | - |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of shares for payables                               |   | 25,000,000 |   | 25,000 |   | 75,000 |   | - |   | - |   | 100,000 |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion of principal on secured                            |   |   |   |   |   |   |   |   |   |   |   |   |
| convertible notes into commonstock                            |   | 40,000,000 |   | 40,000 |   | 28,000 |   | - |   | - |   | 68,000 |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                      |   | - |   | - |   | - |   | - |   | (1,109,847) |   | (1,109,847) |
|                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance December 31, 2007                                     |   | 1,147,807,354 | $ | 1,147,808 | $ | 3,335,297 | $ | - | $ | (15,605,199) | $ | (11,122,094) |

 

See accompanying notes to consolidated financial statements.

 

 

F-4

 

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| **CARGO CONNECTION LOGISTICS HOLDING, INC. AND SUBSIDIARIES**       |
|---------------------------------------------------------------------|
| **CONSOLIDATED STATEMENTS OF CASH FLOWS**                           |
| **FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006**                  |
|                                                                |   |   |   |   |   |
|                                                                | **December 31,** |   | **December 31,** |
|                                                                | **2007** |   | **2006** |
| **Cash flows from operating activities:**                           |   |   |   |   |   |
| Net loss attributable to common stockholders                        | $ | (1,505,847) |   | $ | (5,865,325) |
| Cumulative effect of prior years of retroactive application         |   |   |   |   |   |
| of a change in accounting principle                                 |   | 396,000 |   |   | - |
| Net loss before cumulative effect of change in accounting principle |   | (1,109,847) |   |   | (5,865,325) |
| Adjustments to reconcile net loss to net                            |   |   |   |   |   |
| cash used in operating activities:                                  |   |   |   |   |   |
| Interest expense in connection with derivative instruments          |   | - |   |   | 490,902 |
| Amortization of note discounts                                      |   | 1,645,921 |   |   | 645,158 |
| Change in derivative liability due to accrued liquidated damages    |   | 165,236 |   |   | - |
| Mark to market on derivative instrument                             |   | (2,946,392) |   |   | 817,591 |
| Depreciation and amortization                                       |   | 184,853 |   |   | 161,927 |
| Deferred rent                                                       |   | (496,949) |   |   | 187,959 |
| Issuance of shares for services                                     |   | - |   |   | 562,978 |
| Bad debt expense                                                    |   | 25,000 |   |   | 52,996 |
| Loss on extinguishment of debt                                      |   | 35,766 |   |   | 534,789 |
| Non-controlling interest                                            |   | (658) |   |   | 987 |
| Guaranteed rental expense                                           |   | (495,000) |   |   | 495,000 |
| Changes in:                                                         |   |   |   |   |   |
| Escrow held by factor                                               |   | 361,846 |   |   | (208,982) |
| Escrow held by attorney                                             |   | - |   |   | 49,351 |
| Accounts receivable                                                 |   | (174,129) |   |   | (2,165) |
| Due from factor                                                     |   | 351,924 |   |   | 259,760 |
| Prepaid expenses                                                    |   | 231,441 |   |   | (85,884) |
| Accounts payable and accrued expenses                               |   | 2,080,598 |   |   | (84,471) |
| Security deposits and escrowed funds                                |   | 1,657 |   |   | 4,871 |
|                                                                |   |   |   |   |   |
| **Net cash used in operating activities**                           |   | (138,733) |   |   | (1,982,558) |
|                                                                |   |   |   |   |   |
| **Cash flows from investing activities**                            |   |   |   |   |   |
| Proceeds from sale of common stock for investment in NMDT           |   | - |   |   | 200,000 |
| Issuance of notes receivable                                        |   | (300,000) |   |   | - |
| Redemption of security deposits                                     |   | - |   |   | 3,171 |
| Payments received for security deposits                             |   | (1,096) |   |   | (18,445) |
| Sale of property and equipment                                      |   | 7,300 |   |   | - |
| Purchase of property and equipment                                  |   | (38,378) |   |   | (56,734) |
|                                                                |   |   |   |   |   |
| **Net cash (used in) provided by investing activities**             |   | (332,174) |   |   | 127,992 |
|                                                                |   |   |   |   |   |
| **Cash flows from financing activities**                            |   |   |   |   |   |
| Repayments from related parties                                     |   | - |   |   | 66,378 |
| Repayments from officers                                            |   | - |   |   | 430 |
| Repayments due to others                                            |   | (177,051) |   |   | - |
| Proceeds received from others                                       |   | - |   |   | 1,502,709 |
| Repayments to / advances from officers                              |   | (101,460) |   |   | (1,382) |
| Proceeds received from related parties                              |   | 900,777 |   |   | 323,635 |
| Proceeds from notes payable                                         |   | 150,000 |   |   | - |
| Proceeds from secured debenture                                     |   | 40,000 |   |   | 600,000 |
| Principal payments on convertible notes payable                     |   | - |   |   | (251,002) |
| Principal payments on notes payable                                 |   | (139,766) |   |   | (229,388) |
| Principal payments on capital leases payable                        |   | (69,486) |   |   | (65,160) |
|                                                                     |  |  |  |  |  |  |

 

 

F-5

 

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|                                                              |   |      |   |   |      |
|-------------------------------------------------------------------|--------|-----------|--------|--------|-----------|
| **Net cash provided by financing activities**                     |   | 603,014   |   |   | 1,946,220 |
|                                                              |   |      |   |   |      |
| Net decrease in cash                                              |   | 132,107   |   |   | 91,654    |
|                                                              |   |      |   |   |      |
| Cash, beginning of period                                         |   | 338,672   |   |   | 247,018   |
|                                                              |   |      |   |   |      |
| Cash, end of period                                               | $      | 470,779   |   | $      | 338,672   |
|                                                              |   |      |   |   |      |
| **Supplemental disclosure of cash flow information**              |   |      |   |   |      |
| Interest expense                                                  | $      | -         |   | $      | 1,458,073 |
| Income taxes                                                      | $      | -         |   | $      | -         |
|                                                              |   |      |   |   |      |
| **Supplemental schedule of non-cash activities:**                 |   |      |   |   |      |
| Conversion of convertible notes payable to common stock           | $      | -         |   | $      | 350,290   |
| Conversion of secured debenture to common stock                   | $      | 40,000    |   | $      | -         |
| Conversion of preferred stock to common stock                     | $      | -         |   | $      | 180,000   |
| Issuance of common stock for deferred consulting services         | $      | -         |   | $      | 100,000   |
| Discount on secured debenture                                     | $      | 34,791    |   | $      | 600,000   |
| Value of shares issued in connection with investment in NMDT      | $      | -         |   | $      | 1,316,854 |
| Write off of derivatives for convertible note payable and         |   |      |   |   |      |
| secured debenture due to conversion and payoffs                   | $      | 25,553    |   | $      | 291,584   |
| Write off of discount for convertible note payable and            |   |      |   |   |      |
| secured debenture due to conversion and payoffs                   | $      | 33,319    |   | $      | 154,204   |
| Issuance of common stock for settlement of trade payables         | $      | 100,000   |   | $      | 21,784    |
| Purchase of equipment through capital lease                       | $      | 265,696   |   | $      | 19,800    |
| Cumulative effect of accrued liquidated damages                   | $      | 396,000   |   | $      | -         |
| Cancellation of shares in connection with deferred offering costs | $      | 10,000    |   | $      | -         |
| Conversion of trade payables into notes payable                   | $      | 1,012,256 |   | $      | -         |

 

See accompanying notes to consolidated financial statements.

 

 

F-6

 

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**NOTE 1 - ORGANIZATION, HISTORY AND NATURE OF BUSINESS**

 

On May 12, 2005, through a reverse merger, pursuant to a Stock Purchase Agreement and Share Exchange among Cargo Connection Logistics Holding, Inc. (f/k/a Championlyte Holdings, Inc.) and primarily through its newly acquired subsidiaries, Cargo Connection Logistics Corp. (“Cargo Connection”) and Cargo Connection Logistics – International, Inc., f/k/a Mid-Coast Management, Inc.,            (“Cargo International”), the Company began operating in the transportation and logistics industry as a third party logistics provider of transportation and management services.  Effective May 23, 2005, the name Championlyte Holdings, Inc. was changed to Cargo Connection Logistics Holding, Inc. to better reflect the new nature and focus of the entity and its operations. Cargo Connection Logistics Holding, Inc. and all of its subsidiaries are collectively referred to            as the “Company.”

 

The Company is a provider of logistics solutions for global partners through its network of branch terminal locations and independent agents in North America. The Company’s target customer base ranges from mid-sized to Fortune 100(TM) companies.

 

On May 12, 2005, the Company purchased all of the outstanding shares of Cargo Connection Logistics Corp., a Delaware corporation (“Cargo Connection”) and Mid-Coast Management, Inc., an Illinois corporation, for seventy percent (70%) of the issued and outstanding shares of common stock of Championlyte Holdings, Inc. pursuant to a Stock Purchase Agreement and Share Exchange among            Championlyte Holdings, Inc., Cargo Connection, Mid-Coast Management, Inc. and the stockholders thereof. As additional consideration, the Company issued shares of preferred stock to the stockholders of Cargo Connection and Mid-Coast Management, Inc., which were convertible into a number of shares of common stock of the Company on the first anniversary of the closing date so that the stockholders of Cargo Connection and Mid-Coast Management, Inc. would own eighty percent (80%) of the            outstanding shares of the Company. On May 23, 2005, the Company changed its name to Cargo Connection Logistics Holding, Inc.

 

On March 14, 2006, Mid Coast Management, Inc. changed its name to Cargo Connection Logistics – International, Inc. (“Cargo International”).

 

The Company operates predominately as a non-asset based transportation provider which provides truckload and less-than-truckload transportation services utilizing some Company equipment and dedicated owner operators, as well as in coordination with other transportation companies with whom the Company has established relationships. The Company also provides a wide range of value-added logistics            services, including those provided through its leased U.S. Customs Bonded warehouse facilities, U.S. Customs approved container freight station operations, and a U.S Customs approved General Order warehouse operation which began during the latter part of the second quarter of 2006. All of these leased facilities enhance and support the supply chain logistics needs of the Company’s customers. Some of the services provided are pick-and-pack services, special projects that may            include changing labels or tickets on items and assistance in the inspection of customers’ shipments into the United States, as well as storage of goods and recovery of goods damaged in transit.

 

In December 2006, the Company acquired NMDT, which has been accounted for as a wholly-owned subsidiary. At the time of its acquisition by the Company, NMDT’s assets consisted of a license to certain patent rights and cash. The Company intends to develop, with the licensor, a market-ready nuclear radiation detection device, called RadRopeTM, to service the logistics, transportation and            general cargo industries. The Company anticipates that the development of a revised prototype will be completed by the end of the second quarter 2008. The Company expects the prototype to be marketed by the middle of 2008, subject to the requirements of any potential purchaser. There can be no assurances that the prototype will be marketable without additional revisions, improvements and resulting expenses for the Company.

 

The Company owns a 51% interest in ITG and EmplifyHR (a related party – see note 12) owns a 49% interest. The financial statements of ITG are included in the Company’s consolidated financial statements. The minority interest in operating results is reflected as an element of non-operating expense in the Company’s consolidated statements of operations and the minority interest in the            equity of ITG is reflected as a separate component in the Company’s consolidated balance sheet.

 

 

F-7

 

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In 2006, Cargo Connection became one of an exclusive number of companies that works closely with the Department of Homeland Security CBP. The Company has become the operator of the sole General Order warehouse for JFK. General Order warehouses operate under specific provisions of the CFR. Applicable provisions of the CFP require merchandise to be considered General Order merchandise when it is taken            into the custody by CBP.

 

**NOTE 2 - GOING CONCERN**

 

The accompanying consolidated financial statements have been prepared on a basis which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company incurred a net loss attributable to common stockholders of approximately $1,109,847 for the year ended December 31, 2007, prior to the cumulative effect of the adjustment for prior            year’s adjustment for compliance with EITF 00-19-2 and a net loss of $1,505,847 after the cumulative effect of such adjustment, as compared with a net loss of $5,865,325 for the year ended December 31, 2006. The Company has a working capital deficiency of $10,132,982 and a stockholders’ deficit of $11,122,094 at December 31, 2007 and expects that it will incur additional losses in the immediate future. The effect of the change in the value of the financial instruments is            not included in operational losses. To date the Company has financed operations primarily through sales of its equity securities and issuances of debt instruments to related and unrelated parties.

 

As of December 31, 2007, the Company was obligated under the Registration Rights Agreement between the Company and Montgomery to have filed and declared effective a Securities Act registration statement registering for resale the shares issuable upon conversion of outstanding debentures held of record by Montgomery and in the outstanding aggregate principal amount of $2,210,000 at such date (see note            14). The Registration Rights Agreement contains liquidated damages provisions relating to the failure of such registration statement to become effective by a specified date. Such registration statement was not declared effective by the specified date. The Company has previously accrued an aggregate $1,030,540 with respect to such liquidated damages provisions, of which $396,000 has been recorded as a cumulative effect adjustment in conformity with EITF 00-19-2. The total maximum            liquidated damage liability cannot be determined until such time as the registration statement is declared effective. The registration statement which the Company previously filed was withdrawn with the consent of Montgomery. Subsequently, the Company failed to file another registration statement by the required date. Currently the debentures have matured and the Company owes the principal plus accrued interest. Additionally, the Company is in default of its obligation under a            Registration Rights Agreement and additional liquidating damages are due. In addition, the Montgomery Debentures have matured and have not been repaid.

 

The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future, raise additional capital through the issuance of debt and sale of its common or preferred stock and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Although the            Company continues to pursue these plans, there is no assurance that the Company will be successful in obtaining financing on terms acceptable to the Company, if at all. The outcome of these matters cannot be predicted with any certainty at this time.

 

These factors raise substantial doubt that the Company may be able to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts or classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

 

The audit report prepared by our independent registered public accounting firm relating to our consolidated financial statements for the year ended December 31, 2007 includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.

 

F-8

 

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**NOTE 3 - BASIS OF PRESENTATION**

 

The consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year’s presentation.

 

**NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Cash and concentration of credit risk**

 

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Company has not experienced any losses on these accounts, and believes that such risk is minimal.

 

The Company extends credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

 

**Accounts receivable and allowance for doubtful accounts**

 

Accounts receivable are recorded at the outstanding amounts, net of the allowance for doubtful accounts. The Company uses estimates to determine its allowance for doubtful accounts based on the ability of its customers to make required payments, historical collections experience, current economic trends and a percentage of accounts receivable by aging category. The Company reviews available customer            account and financial information, including public filings and credit reports, current trends, credit policy, and accounts receivable aging and may also consult legal counsel when appropriate. The Company continuously monitors collections and payments from its customers. When the Company deems it probable that an account of a specific customer will become uncollectible, that customer’s account balance will be included in the reserve calculation. While credit losses have            historically been within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has experienced in the past.

 

**Property and equipment and depreciation and amortization**

 

Property and equipment is recorded at cost. Depreciation and amortization of property and equipment is provided for by the straight-line method over the estimated useful lives of the respective assets. The estimated useful lives of the office equipment, trucks, machinery and equipment, and furniture and fixtures are five and seven years. Computer equipment and software is depreciated over three years            and leasehold improvements are amortized over the shorter of the life of the improvement or the length of the lease.

 

The Company amortizes deferred financing costs over the respective terms of their agreements using the straight-line method.

 

**Valuation of long-lived assets**

 

The Company accounts for its long-lived assets in accordance with Statement of Financial Accounting Standards (“SFAS”) SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS 144”) which requires that long-lived assets be evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If            the total of the undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized for the difference between the estimated fair value and the carrying value of the asset or asset group. During the year ended December 31, 2007, there were no impairment charges relating to long-lived assets.

 

F-9

 

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**Revenue recognition**

 

The Company recognizes all transportation revenues based upon the tendering of freight to the Company for the delivery of the goods at their final destination. The Company recognizes warehouse services operations revenue upon the completion of those services. Costs related to such revenue are included in direct operating expenses. The Company presents taxes that are directly imposed on            revenue-producing transactions by a governmental authority on a gross basis (i.e., included in revenues and cost of sales).

 

**Income taxes**

 

The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred taxes are provided utilizing the liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the financial            statement and tax bases of assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Current income taxes are based on the respective periods’ taxable income for federal, state and city income tax            reporting purposes. No benefit for income taxes has been provided as the deferred tax asset generated from net operating losses and temporary differences has been offset by a full valuation allowance.

 

Effective January 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) - an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded            in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.            FIN 48 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2007, the Company does not have a liability for unrecognized tax benefits.

 

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2002. During the periods open to examination, the Company has net operating losses (“NOLs”) and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed            periods. Since these NOLs and tax credit carry forwards may be utilized in future periods, they remain subject to examination. The Company is in the process of preparing the Company’s consolidated tax returns for the years ended December 31, 2003, 2004, 2005, 2006 and 2007 and does not anticipate any adverse effect from any of the filings thereof.

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2007, the Company has no additional accrued interest or penalties related to uncertain tax positions.

 

**Estimated liability for insurance claims**

 

The Company, under a self insurance program, maintains automobile, general, cargo, and workers’ compensation claim liability insurance coverage under both deductible and retrospective rating policies. In the fiscal period in which claims are reported, the Company estimates and establishes any potential liabilities, if they exist, for its share of ultimate settlements using all available            information, as well as the Company’s history of such claims. Claim estimates are adjusted when additional information becomes available. The recorded expense depends upon actual loss experience and changes in estimates of settlement amounts for open claims that have not been fully resolved. However, final settlement of these claims could differ from the amounts the Company has accrued.

 

F-10

 

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**Use of estimates**

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses            during the reporting periods. Actual results could differ from these estimates. The more significant accounting estimates inherent in the preparation of the Company’s consolidated financial statements include estimates as to the depreciable lives of property and equipment, valuation of equity related instruments and derivatives issued and valuation allowance for deferred income tax assets.

 

**Fair value disclosure**

 

For certain of the Company’s financial instruments, including cash, receivables, accounts payable, accrued expenses and financial instruments, the carrying amounts approximate their fair values due to their short-term maturities. The carrying amounts of the Company’s long-term debt also approximate fair values based on current rates for similar debt offered to the Company.

 

**Net loss per share**

 

The Company reports loss per share in accordance with SFAS No. 128, “Earnings per Share.”Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the dilution from the potential conversion or exercise into common stock of securities such as            warrants, stock options, restrictive stock awards and other convertible securities. All potentially dilutive shares as of December 31, 2007 and 2006, of 6,208,253,135 and 3,777,138,477 shares, respectively, have been excluded from diluted loss per share as the effect would be antidilutive for the periods then ended. In all financial statements presented, diluted net loss per common share is the same as basic net loss per common share. As of December 31, 2007 and 2006, there were            1,147,807,354 and 1,082,912,617 shares of common stock outstanding, respectively, with a weighted average number of shares used for the net loss per share computation of 1,102,435,761 and 738,792,011 shares, respectively

 

**Stock-based compensation**

 

On January 1, 2002, the Company adopted fair value accounting for grants of common stock, options and warrants to employees and non-employees in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), as amended by FAS 148 and Emerging Issues Task Force Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than            Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”). Accordingly, compensation expense is recognized over the vesting period.

 

On January 1, 2006, the Company adopted SFAS No. 123R, “Share-based Payment”(“SFAS 123R”), using the modified prospective method. SFAS 123R supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and its interpretations and revises SFAS No. 123 and requires all share-based payments, including grants            of employee stock options, to be recognized in the financial statements based on their fair values. Under SFAS 123R, the Company measures the cost of services received in exchange for stock options and similar awards based on the grant-date fair value of the award and recognizes this cost in the income statement over the period during which an award recipient is required to provide service in exchange for the award. The Company uses the Black-Scholes model to assess the fair value            of share-based payments and amortizes this cost over the service period.

 

The Company has not granted any stock options nor have any stock options been exercised or expired in 2006 or 2007.

 

 

F-11

 

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**Financial instruments**

 

The Company has allocated the proceeds received from convertible debt instruments between the underlying debt instruments and the warrants, and has recorded the conversion feature as a liability in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), and related interpretations. The conversion feature and certain other            features that are considered embedded derivative instruments, such as a variable interest rate feature, a conversion reset provision and redemption option, have been recorded at their fair value within the terms of SFAS 133, as their fair value can be separated from the convertible note and the conversion feature liability is independent of the underlying note value. The conversion liability is marked-to-market each reporting period with the resulting gains or losses shown on the            Company’s consolidated statements of operations. For debt instruments having conversion features whereby the holder can convert at any time, the deferred charge is recorded as interest expense in the period proceeds are received.

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under SFAS 133 and related interpretations, including EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”            (“EITF 00-19”). The result of this accounting treatment is that the fair value of the embedded derivative is recorded as a liability and marked-to-market at each balance sheet date. In the event that the embedded derivative is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion            date and reclassified to equity.

 

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

 

The classification of derivative instruments, including the determinations as to whether instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Instruments that are initially classified as equity that become subject to reclassification under SFAS 133 are reclassified to liability at the fair value of the instrument on the reclassification date.            Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date.

 

**Deferred Rent**

 

The term of certain of the Company’s lease obligations provide for scheduled escalations in the monthly rent. In accordance with SFAS 13, “Accounting for Leases” the non-contingent rent increases are being amortized over the term of the leases in a straight line basis. Deferred rent includes Illinois & Atlanta rent and represents the unamortized rent adjustment amount, and is            reflected as deferred rent obligations in the Company’s consolidated balance sheet.

 

**Intangible Assets**

 

Excess of cost over fair value of net tangible assets acquired arising from the acquisition of NMDT are first attributed to patents and licenses based upon their estimated fair value at the date of acquisition. These intangible assets are being amortized over their estimated useful lives, which is 19 years. Excess of cost over fair value of net assets acquired will be reviewed for impairment pursuant            to the SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”).

 

The Company accounts for its intangible assets under the provisions of SFAS No. 142. In accordance with SFAS No. 142, intangible assets with a definite life are accounted for impairment under SFAS No. 144 and intangible assets with indefinite lives are accounted for impairment under SFAS No. 142.

 

 

F-12

 

----

 

 

The Company’s intangible assets, such as patents or trademarks, that are determined to have definite lives are amortized over their useful lives and are measured for impairment when events or circumstances indicate that the carrying value may be impaired. In these cases, the Company estimates the future undiscounted cash flows to be derived from the intangible asset to determine whether or not a            potential impairment exists. If the carrying value exceeds the estimate of future undiscounted cash flows, the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value. Any impairment charges would be classified as other expense within the consolidated statement of operations for the subject accounting period. Alternatively, and until a patent with respect to the Patent Rights is granted by the PTO (or the Company is advised that            the PTO has rejected the patent application with respect to the Patent Rights), in accordance with SFAS No. 142 the Company intends to conduct periodic impairment tests on the License based on a comparison of the estimated fair value of the License to the carrying value of the License. Such testing will be based on the status of the development of the marketable RadRopeTM product and, once developed, the extent of market acceptance of the RadRopeTM product following the            commencement of the marketing of the product. If the carrying value exceeds the estimate of fair value, impairment will be calculated as the excess of the carrying value over the estimate of fair value.

 

**Stock Based Transactions**

 

The Company has concluded various transactions in which it paid the consideration in shares of common stock. These transactions include:
|   | **•** | Acquiring NMDT; |
|--------|------------|-----------------|
|   | **•** | Acquiring the services of various professionals who provided the Company with a range of corporate consultancy services, strategic planning, development of business plans, investor presentations and advice and assistance with funding; and |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **•** | Settlement of the Company’s indebtedness. |
|--------|------------|-------------------------------------------------|

 

When common stock is used in transactions, the transactions are generally valued using the market price of the common stock at the time the shares are issued for the services provided. If the value of the asset or services being acquired is available and believed to fairly represent its market value, the transaction is valued using the value of the asset or service being provided, and any excess of            the value of the common stock issued over this value is recorded as goodwill or a charge to the statement of operations.

 

**NOTE 5 - PROPERTY AND EQUIPMENT**

 

The components of property and equipment at December 31, 2007 are as follows:

 
| Communication systems                           |   | $      | 182,884     |
|-------------------------------------------------|--------|--------|-------------|
| Computer equipment                              |   |   | 633,271     |
| Furniture and fixtures                          |   |   | 45,249      |
| Leasehold improvements                          |   |   | 144,154     |
| Machinery and equipment                         |   |   | 858,416     |
| Office equipment                                |   |   | 139,811     |
| Property and equipment, at cost                 |   |   | 2,003,785   |
| Less: accumulated depreciation and amortization |   |   | (1,565,225) |
| Property and equipment, net                     |   | $      | 438,560     |

 

Depreciation and amortization expense for the years ended December 31, 2007 and 2006 was $184,853 and $161,927, respectively. In addition, $102,477 and $75,206 of depreciation and amortization on assets under capital leases have been included in depreciation expense for the years ended December 31, 2007 and 2006, respectively.

 

F-13

 

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**NOTE 6 - ACQUISITIONS**

 

On August 29, 2007, the Company entered into a letter agreement with Fleet and its sole stockholder to acquire all of the issued and outstanding shares of capital stock of Fleet. The consummation of this transaction has been delayed due to, among other things, financing limitations, and no assurance can be given that it will be consummated, nor that financing for the transaction will be            obtained.

 

Effective December 6, 2006, the Company acquired certain exclusive license rights, including limited sublicensing rights (the “License”), to manufacture, use and sell products utilizing intellectual property rights (the “Patent Rights”) which are the subject of a pending patent application with the United States Patent and Trademark Office (the “PTO”). The Patent            Rights relate to portable nuclear radiation detection technology for use within the logistics, transportation and general cargo industries.

 

The Company acquired the License as a result of its acquisition of NMDT, a then wholly-owned subsidiary of UTEK Corporation, in a stock-for-stock exchange transaction. Pursuant to such transaction, the Company issued 168,539,326 shares of Company common stock to UTEK Corporation in exchange for all of the issued and outstanding NMDT equity securities. The Company has valued such 168,539,326 shares at            $1,516,854, based on the fair market value of the Company’s common stock on the date of issuance. Such purchase price has been allocated among the assets of NMDT as follows:

 
| Cash    | $    200,000 |
|---------|----------------------------------|
| License | 1,316,854                        |
|    | $ 1,516,854                 |

 

NMDT was formed in November 2006 and acquired the License less than two weeks prior to its acquisition by the Company in December 2006. From the date of its formation through the date of its acquisition by the Company, NMDT had no employees, business operations or material liabilities. At the time of its acquisition by the Company, NMDT’s only assets consisted of $200,000 of cash and the            License. The License agreement provides for payments to the licensor of up to 7% of the net revenues from sales of products utilizing the Patent Rights, subject to minimum annual fees payable to the licensor, beginning in the second year of the licensing agreement, which range from $5,000 in year 2 to $30,000 in year 5 after the product is available for production. The License is scheduled to terminate upon the extinguishment of the Patent Rights. The latest possible date of such            extinguishment cannot be determined at this time and will only be determinable when and if a patent with respect to the Patent Rights is granted by the PTO. The patent owner is still currently pursuing the final patents for all the uses of the RadRopeTM product. Currently, the PTO has approved 8 of the 16 claims for which the patent owner has applied. The patent expires in 2025. The Company cannot accurately predict the value or eventual useful life of the patent in light of            the continuing progress in the development of this technology. The Company intends to continue to account for the License based on the License’s allocated portion of the Company’s purchase price for NMDT until such time as a patent with respect to the Patent Rights is granted by the PTO and/or the Company determines the extent of market acceptance of the RadRopeTM product following the commencement of the marketing of the product. The current useful life of this            technology is based on the remaining life of the patent and will be subject to periodic review for impairment under SFAS 144.

 

**NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS**

 

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure            requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact of adoption of SFAS 141R on its consolidated financial statements. However, the Company does not expect the adoption of SFAS 141R to have a material effect on its consolidated financial statements.

 

F-14

 

----

 

 

In December 2007, the FASB issued SFAS No. 160. "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51" (“SFAS 160”). SFAS 160 establishes accounting and reporting standards pertaining to ownership interests in subsidiaries held by parties other than the parent, the amount of net income attributable to the parent and to the noncontrolling interest,            changes in a parent's ownership interest, and the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. This statement also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating the potential impact of adoption of SFAS 160 on            its consolidated financial statements. However, the Company does not expect the adoption of SFAS 160 to have a material effect on its consolidated financial statements.

 

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 110 Share-Based Payment (“SAB 110”). SAB 110 establishes the continued use of the simplified method for estimating the expected term of equity based compensation. The simplified method was intended to be eliminated for any equity based compensation arrangements granted after            December 31, 2007. SAB 110 was published to help companies that may not have adequate exercise history to estimate expected terms for future grants. The Company does not expect the adoption of SAB 110 to have a material effect on its consolidated financial statements.

 

In June 2007, the EITF reached a consensus on EITF Issue No. 06-11, “Accounting for Income Tax Benefits on Dividends on Share-Based Payment Awards” (“EITF 06-11”). EITF 06-11 addresses share-based payment arrangements with dividend protection features that entitle employees to receive (a) dividends on equity-classified nonvested shares, (b) dividend equivalents on            equity-classified nonvested share units, or (c) payments equal to the dividends paid on the underlying shares while an equity-classified share option is outstanding, when those dividends or dividend equivalents are charged to retained earnings under SFAS 123(R) and result in an income tax deduction for the employer. A realized income tax benefit from dividends or dividend equivalents that are paid to employees for equity-classified nonvested shares, nonvested equity share units, and            outstanding equity share options are charged to retained earnings are and should be recognized as an increase in additional paid in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payments. The Company does not expect the adoption of this pronouncement to have a material impact on            its financial position or results of operation.

 

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007.            Earlier adoption is permitted, provided the Company also applies the provisions of SFAS No. 157. The Company currently is evaluating the effect of SFAS No. 159 on its consolidated financial statements.

 

**NOTE 8 - FACTORING FACILITIES**

 

Cargo Connection had entered into an accounts receivable factoring facility with Accord Financial Services, Inc. Pursuant to that factoring agreement, the factor purchased certain accounts receivable and extended credit with a maximum borrowing amount of $2,000,000. The Company ended that factoring facility on November 20, 2007. The facility provided for the purchase of up to 90% of eligible accounts            receivable of Cargo Connection minus a discount of approximately 1.6% as of that last day of the agreement and a discretionary reserve (holdback) which was reduced via payments from the individual accounts receivable debtors. If a receivable was outstanding over 90 days, under recourse provisions, Cargo Connection would have to buy back the receivable from the factor. Cargo Connection had to submit a minimum of $1,500,000 of eligible invoices in each calendar quarter. At December            31, 2007, $-0- is due to and or from the factor. The factor and the Company also had an informal agreement, whereby the Company escrowed funds that were to be used to pay for the services of outside transportation vendors. This was mainly due to the concerns of the factor for any of its transportation clients as to the potential default of payments by their clients to outside transportation vendors to ensure that these funds are not diverted for other uses.

 

 

F-15

 

----

 

 

Effective November 20, 2007, Cargo Connection entered into: (i) an Account Transfer Agreement (the "Account Transfer Agreement") with Wells Fargo Bank, National Association ("WFBA"); and (ii) that certain letter agreement dated November 20, 2007 between WFBA and Cargo Connection, amending the Account Transfer Agreement (the "Letter Agreement"); and, collectively with the Account Transfer Agreement,            (the "Amended Transfer Agreement"). The Amended Transfer Agreement provides that WFBA shall serve as a factor to Cargo Connection by purchasing certain of the Cargo Connection's accounts receivable, and provide a maximum factoring capacity of $3,000,000. The obligations of Cargo Connection to WFBA are guaranteed by the Company and the executive officers of the Company.

 

Concurrently with the Amended Transfer Agreement, WFBA, Cargo Connection and Accord Financial, Inc., ("Accord") Cargo Connection's previous factor, executed a Buyout Agreement (the "Buyout Agreement") pursuant to which WFBA purchased all of Cargo Connection's accounts receivable owned by Accord and Accord assigned all of the security interests, financing statements and liens it possessed in Cargo            Connection's accounts receivable and assets to WFBA. In addition, all previous amounts escrowed by Accord were returned to the Company.

 

Cargo Connection’s accounts receivable factoring facility with WFBA, provides that the factor purchase certain accounts receivable and extend credit with a maximum borrowing amount of $3,000,000 The facility automatically renews annually unless either party provides 30 days’ prior notice of cancellation. The facility provides for the purchase of up to 95% of eligible accounts receivable of            Cargo Connection minus a fixed discount of approximately .35% as of December 31, 2007, along with a variable discount calculated by WFBC’s prime rate plus 1% per annum for the time period from the initial payment to date of receipt of collections along with a discretionary reserve (holdback) which is reduced with payments from the individual accounts receivable debtors. If a receivable is outstanding over 90 days, under recourse provisions, Cargo Connection is required to buy            back the receivable from the factor. Cargo Connection must submit a minimum of $1,000,000 of eligible invoices in each calendar month. At December 31, 2007, $200,680 is due from the factor, which represents the reserve against collected receivables. At December 31, 2007, the total amount advanced by the factor was $1,793,438, which represents the proceeds from financing of accounts receivables purchased of $1,992,714 less an escrow against these funds in the amount of            $199,276

 

**NOTE 9 - NOTES RECEIVABLE**

 

On November 21, 2007, the Company loaned $300,000 to Fleet Global Services, Inc., which is represented by a promissory note. The note bears interest at 11% per annum and matures on November 21, 2008. As of December 31, 2007, the principal amount outstanding on the note is $300,000. Interest earned on the note for the year ended December 31, 2007 amounted to $3,707.

 

**NOTE 10 - OBLIGATIONS UNDER CAPITAL LEASES**

 

The Company leases machinery, equipment and software under various non-cancelable capital leases with a capitalized cost of $1,014,427, less accumulated amortization of $698,318 as of December 31, 2007. The remaining obligations require monthly payments, including interest, totaling $10,796. Interest rates on these leases range from 2% to 23%. These leases mature at various times through September            2011. Certain obligations are guaranteed by certain executive officers of the Company.

 

On September 20, 2007, Cargo International acquired seven forklifts to be used in the operations of the Company. In connection with this purchase, the Company financed $129,168 of the purchase price under a capital lease obligation. The lease bears interest at 22.275% per annum and matures on September 20, 2011, and requires monthly payments of $4,089. The Company traded in old forklifts valued at            $14,500, which was applied against the purchase price of the new forklifts.

 

 

F-16

 

----

 

 

As of December 31, 2007, the aggregate future minimum annual lease payments under these leases are as follows:

 
| Year Ending December 31,                       |   |   |      |
|------------------------------------------------|--------|--------|-----------|
|                                           |   |   |      |
| 2008                                           |   | $      | 132,129   |
| 2009                                           |   |   | 59,370    |
| 2010                                           |   |   | 49,067    |
| 2011                                           |   |   | 36,800    |
| Total payments                                 |   |   | 277,366   |
| Less: amount representing interest             |   |   | (61,049)  |
| Net present value of capital lease obligations |   |   | 216,317   |
| Less: current portion                          |   |   | (105,975) |
| Long-term portion                              |   | $      | 110,342   |

 

 

**NOTE 11 – DUE TO OTHERS**

 

During the year ended December 31, 2007, the Company received cash advances of $100,000 from Triple Crown, which were repaid in full by November 9, 2007.

 

The Company classifies advances as current liabilities, as the Company is expected to repay these advances within a twelve month period unless a more formal agreement is put into place for the repayment of these funds. The Company is currently negotiating formal note agreements with the lenders listed below with respect to their advances to the Company.

 

The following table details Due to Others as of December 31, 2007:

 
| Loan from Ferro                  | $      | 130,000   |
|----------------------------------|--------|-----------|
| Loan from RAKJ Holdings          |   | 145,000   |
| Loan from Triple Crown           |   | 975,000   |
|                             |   | 1,250,000 |
|                             |   |      |
| Due to Avalon Insurance Co.      |   | 128,140   |
| Due to Premium Financing Special |   | 10,018    |
|                             |   | 138,158   |
|                             |   |      |
| Total account balance            | $      | 1,388,158 |

 

In addition, the Company has entered into insurance premium financing arrangements with two providers with balances due to the providers of $138,158 as of December 31, 2007.

 

**NOTE 12 - NOTES PAYABLE**

 

On December 31, 2007, the Company issued a promissory note in the principal amount of $800,000 to EmplifyHR, evidencing payroll advances previously extended by EmplifyHR to the Company. The Note bears interest at a rate of 12% per annum, requires equal monthly amortization payments and matures on January 1, 2012. The Company may prepay the unpaid principal balance, or any portion thereof, of the note            at any time without premium or penalty. Concurrently with the issuance of the note: (i) the Company entered into a security agreement with EmplifyHR, pursuant to which it granted to EmplifyHR a security interest in all of their respective assets; and (ii) Cargo Connection and Cargo International entered into a Guaranty of Payment Agreement pursuant to which Cargo Connection and Cargo International agreed to guarantee the Company's payment obligations under the note. EmplifyHR            provides payroll and human resource services to the Company. EmplifyHR owns a 49% interest in ITG, of which the Company owns 51%. Ivan Dobrin, a principal shareholder of EmplifyHR, is the brother of Jesse Dobrinsky, the Company's CEO.

 

On June 30, 2007, Cargo International issued a promissory note to Target Temporaries, Inc. in the principal amount of $200,000, representing an accounts payable obligation due to Target Temporaries, Inc. The note bears interest at a rate

 

F-17

 

----

 

of 12% per annum and has a maturity date of June 30, 2009. Interest totaling $6,564 is unpaid and included in accrued expenses as of December 31, 2007.

 

On April 17, 2007, Cargo International borrowed $100,000 from a related party to assist in meeting the short term cash flow needs of the Company. Cargo International issued the lender a promissory note in such principal amount. This note provides for interest at the annual rate of 12% and a maturity date of July 10, 2007. As of December 31, 2007, the accrued interest, was $8,515 and is included in            accrued expenses.

 

On April 10, 2007, Cargo International borrowed $50,000 from a related party to assist in short term cash flow needs of the Company. This note provided for interest at the annual rate of 12% and a maturity date of July 3, 2007. The principal balance of this note was repaid in full, including accrued interest of $1,381 prior to December 31, 2007.

 

In January 2006, the Company issued a promissory note to National Semi-Trailer in the principal amount of $87,910 bearing interest at 10% per annum, representing an accounts payable obligation due to National Semi-Trailer Corp. This note was to mature November 16, 2006, but was informally extended by the holder. In June 2007, the Company settled with National Semi-Trailer Corp. on a balance of            $34,452, payable in three equal consecutive monthly installments commencing on June 15, 2007. As of December 31, 2007, the note was fully repaid.

 

In March 2004, Cargo International entered into a revolving term loan with HSBC Bank whereby Cargo International was granted a $100,000 line of credit that bears interest at a rate of prime plus 2.5% (9.5% at December 31, 2007). Cargo International made monthly interest only payments until December 15, 2006, when under the terms of the loan agreement, the line of credit terminated and the remaining            balance became a note payable with a four year term. This obligation is collateralized by all of the assets of Cargo International and is guaranteed by certain of the executive officers of the Company.

 

In May 2003, the Company entered into a loan agreement with U.S. Small Business Administration (“SBA”) whereby the SBA loaned $90,200 to the Company for working capital purposes. The loan bears interest at a rate of 4% per annum and matures in 2008, when the balance due approximates $14,000. Monthly installments totaling $2,664 commenced in June 2005. The note is collateralized by            substantially all the assets of Cargo Connection and is supported by the personal guarantees of certain of the executive officers of Cargo Connection. As of December 31, 2007 the outstanding balance of the note is $21,467.

 

At December 31, 2007, future minimum annual principal payments on the above notes are as follows:

 
| Year Ending December 31, |   |      |
|--------------------------|--------|-----------|
|                     |   |      |
| 2008                     | $      | 299,695   |
| 2009                     |   | 409,892   |
| 2010                     |   | 231,301   |
| 2011                     |   | 234,764   |
| 2012                     |   | 20,858    |
|                     | $      | 1,196,510 |

 

The following table details the Notes Payable as of December 31, 2007:

 
| EmplifyHR             |   | $      | 800,000   |
|-----------------------|--------|--------|-----------|
| US-SBA                |   |   | 21,467    |
| HSBC Bank             |   |   | 75,043    |
| Target Temporaries    |   |   | 200,000   |
| Parkside Properties   |   |   | 100,000   |
| Total                 |   |   | 1,196,510 |
| Less: Current portion |   |   | 299,695   |
| Long-term portion     |   | $      | 896,815   |

 

 

F-18

 

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**NOTE 13 - SECURED CONVERTIBLE DEBENTURES**

 

In October 2005, the Company issued a secured convertible debenture to members of management (the management Debenture” in the amount of $75,000, bearing an interest rate of 15% per annum maturing on September 30, 2006. The Management Debenture is convertible into common stock of the Company at a conversion price equal to the lesser of (a) $0.005 per share or (b) seventy five percent (75%) of            the lowest Closing Bid Price of the common stock of the five (5) trading days immediately preceding the conversion date. The holders of Management Debenture informally agreed to extend the due date of the Management Debenture to December 31, 2007. The Management Debenture has not been repaid as of this date. The Company has not received any notification that it is in default under the provisions of the note.

 

This Note is a hybrid instrument which contains an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under SFAS 133. The embedded derivative feature has been bifurcated from the debt host contract, referred to as the “Compound Embedded Derivative Liability.” The embedded derivative feature includes the conversion feature within the            note and an early redemption option. The value of the embedded derivative liability, in the amount of $14,286 as of December 31, 2007 (see note 14), was bifurcated from the debt host contract and recorded as a derivative liability, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the notes and was fully amortized as of December 31, 2007.

 

Pursuant to a Securities Purchase Agreement, dated December 28, 2005 (the “Montgomery Purchase Agreement”), with Montgomery, the Company issued a $1,750,000 secured convertible debenture (the “First Montgomery Debenture”) to Montgomery with an interest rate of 10% per annum and a maturity date of December 28, 2007. The First Montgomery Debenture is convertible into shares of            common stock at a conversion price equal to the lesser of (a) $0.0025 per share or (b) seventy five percent (75%) of the lowest Closing Bid Price of the common stock for the ten (10) trading days immediately preceding the conversion date. The First Montgomery Debenture is secured by substantially all of the assets of the Company. Simultaneously with the issuance of the First Montgomery Debenture, the Company issued to Montgomery a three year warrant (the “Montgomery            Warrant”) to purchase 2,000,000 shares of common stock at an exercise price of $0.001 per share, which is exercisable immediately. The Montgomery Warrant was valued at $2,394,000 using a Black-Scholes option pricing model. Also in connection with the issuance of the First Montgomery Debenture, the Company paid Montgomery a fee of $135,000. The value of the Montgomery Warrant and the fees paid to Montgomery were recorded as a discount to the First Montgomery Debenture and are            being amortized over the term of the First Montgomery Debenture using the effective interest method.

 

The First Montgomery Debenture is a hybrid instrument which contains both freestanding derivative financial instruments and multiple embedded derivative features each of which would require separate accounting as a derivative instrument under SFAS 133. The freestanding derivative financial instruments include the Montgomery Warrant, which was valued individually at $1,861,535 at the date of inception.            The various embedded derivative features have been bundled together as a single, compound embedded derivative instrument that has been bifurcated from the debt host contract, referred to as a “Compound Embedded Derivative Liability.” The compound embedded derivative features include the conversion feature within the First Montgomery Debenture, the conversion reset feature, the early redemption option and the interest rate adjustments. The value of the compound embedded            derivative liability was bifurcated from the debt host contract and recorded as a derivative liability of $1,857,752, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the First Montgomery Debenture. The unamortized discount is being amortized to interest expense using the effective interest method over the life of the First Montgomery Debenture, or 24 months. The unamortized discount and the effect of this transaction are included with the            accounting treatment relating to the issuance to Montgomery of a second debenture on February 13, 2006.

 

 

F-19

 

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The Company has classified the Montgomery Warrant as a liability and recorded an associated interest expense effective December 28, 2005 to reflect that the Registration Rights Agreement entered into, in connection with the issuance of the Montgomery Warrant and the First Montgomery Debenture. The agreement requires the Company to pay liquidated damages under specified conditions, which in some cases            could exceed a reasonable discount for delivering unregistered shares and thus would require the Montgomery Warrant to be classified as a liability until the earlier of the date the Montgomery Warrant is exercised or expires. In accordance with EITF 00-19, the Company has allocated a portion of the proceeds of the First Montgomery Debenture to the Montgomery Warrant based on their fair value. EITF 00-19 also requires that the Company revalue the Montgomery Warrant as a derivative            instrument periodically to compute the value in connection with changes in the underlying stock price and other assumptions, with the change in value recorded as other expense or other income.

 

On February 13, 2006, the Company completed a financing for an additional $600,000 with Montgomery as part of the funding package contemplated by the Montgomery Purchase Agreement. In connection with the February 2006 financing, the Company issued to Montgomery a second secured convertible debenture (the “Second Montgomery Debenture” and, collectively with the First Montgomery Debenture,            the “Montgomery Debentures”) in the principal amount of $600,000 with a 10% interest rate and a maturity date of February 13, 2008. The Second Montgomery Debenture is convertible into shares of common stock at a conversion price equal to the lesser of (a) $0.0025 per share or (b) 75% of the lowest closing bid price of the common stock for the ten trading days immediately preceding the conversion date. Shares of common stock issuable upon conversion of the Second            Montgomery Debenture are also subject to the Registration Rights Agreement.

 

The Second Montgomery Debenture is a hybrid instrument which contains an embedded derivative feature which would individually require separate accounting as a derivative instrument under SFAS 133. The freestanding derivative financial instruments totaled $1,090,902 at the date of inception. The embedded derivative feature has been bifurcated from the debt host contract, referred to as the            “Compound Embedded Derivative Liability.” The embedded derivative feature includes the conversion feature within the debenture and an early redemption option. The value of the embedded derivative liability was bifurcated from the debt host contract and recorded as a derivative liability of $1,090,902, which resulted in a reduction of the initial carrying amount (as unamortized discount) of the notes. The unamortized discount is being amortized to interest expense using            the effective interest method over the life of the notes, or 24 months. The discount on these debentures was fully amortized at December 31, 2007.

 

Pursuant to the Registration Rights Agreement, the Company committed to file with the Securities and Exchange Commission, no later than 45 days from date of funding, a Registration Statement on Form SB-2 (the “SB-2 Registration Statement”) with respect to the shares of common stock issuable upon conversion of the Montgomery Debentures and upon exercise of the Montgomery Warrant. The            Company could have been held in default under the Registration Rights Agreement because the SB-2 Registration Statement was not declared effective by the Securities and Exchange Commission within 150 days of the filing of the registration statement. There is no limitation on the maximum amount of liquidated damages that the Company could incur as a result of the failure to have the SB-2 Registration Statement declared effective. There are liquidated damages provisions under the            Registration Rights Agreement, effective upon the SB-2 Registration Statement not being declared effective by the Securities and Exchange Commission within 120 days of filing the SB-2 Registration Statement. The SB-2 Registration Statement was filed in February 2006 (SEC File No: 333-131825). An amendment to the SB-2 Registration Statement was filed in July 2006. The registration statement which the Company previously filed has been withdrawn, and the Company failed to file a            registration statement by a second deadline.

 

The liquidated damages liability accrues monthly at a rate equal to 2% of the outstanding principal amount due under the Montgomery Debentures. As of December 31, 2007, the rate of the liquidated damages liability is being calculated at approximately $45,000 per month. As of December 31, 2007, the Company had recognized an aggregate $1,030,540 liability for these liquidated damages, of which $396,000            has been recorded as a cumulative effect adjustment against retained earnings as of December 31, 2007, in conformity with EITF 00-19-2. The total maximum liquidated damages liability cannot be determined until such time as the registration statement is declared effective.

 

F-20

 

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On May 7, 2007, the Company entered into an agreement with Montgomery (the “Waiver Agreement”). Under the Waiver Agreement, Montgomery agreed to:

 
|   | (a) | Waive 50% of the Company’s obligation under the Registration Rights Agreement to pay Montgomery the liquidated damages relating to the Company’s inability to obtain effectiveness of the SB-2 Registration Statement. Such waiver was effective only if (i) the Company complied with all of its obligations under the Waiver Agreement and (ii) the                        Company redeemed the Montgomery Debentures on or prior to June 5, 2007. Montgomery reserved the right to consent, which consent may not be unreasonably, withheld, conditioned or denied, to an extension of such redemption deadline to June 30, 2007 if the Company delivered to Montgomery, no later than June 5, 2007, significant evidence of a potential financing transaction, the proceeds of which would, at a minimum, be sufficient to repay the all of the outstanding                        principal and accrued interest due under the Montgomery Debentures and other debt due Montgomery. The Company actively pursued potential financing transactions during this time period, but such efforts have been unsuccessful to date. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | (b) | Permit the Company to withdraw the SB-2 Registration Statement. On May 9, 2007, the Company filed a Request for Withdrawal of Registration Statement on Form RW. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Also under the Waiver Agreement, the Company agreed to file a new registration no later than June 5, 2007 (or June 30, 2007, if Montgomery consented to an extension of the redemption date for the Secured Convertible Debentures to June 30, 2007), registering for resale under the Securities Act the shares of common stock issuable upon conversion of the Montgomery Debentures. The Company is obligated to            use its best efforts to have such registration statement (the “New Registration Statement”) declared effective within 60 days after its filing with the Commission. The maximum number of shares of common stock that the Company is required to include in the New Registration Statement is equal to the lesser of (i) one-third of the number of shares of common stock issued and held by persons other than Company affiliates, or (ii) the number of shares of common stock issuable            upon conversion of the Montgomery Debentures. If the New Registration Statement includes less than all of the shares of common stock issuable upon complete conversion of the Montgomery Debentures, the Company is required to file further registration statements, within specified time frames, as may be necessary to register for resale all of the remaining shares of common stock issuable upon exercise of the Montgomery Debentures. To date, the Company has not filed the New Registration            Statement with the Securities and Exchange Commission .

 

On November 14, 2007, the Company issued a senior secured convertible subordinated debenture in the principal amount of $46,500 to a related entity of Montgomery, YA Global, which bears interest at a rate equal to prime plus 2.25% per annum, matures on November 14, 2008, and initially is convertible into shares of the Company’s common stock at a price per share equal to, at the option of the            holder, either (a) $.0025 or (b) 75% of the volume weighted average price per share of the Company’s common stock for the 10 day period prior to such conversion. This note is secured by substantially all the assets of the Company. Interest is scheduled to be paid on the first day of each calendar quarter effective January 1, 2008. The Company is late in making the payment owed on January 1 and is in default of this debenture. The Company has not received any notice of default            from YA Global.

 

On November 30, 2007, Montgomery converted $40,000 of principal into 40,000,000 shares of the Company’s common stock at a conversion rate of $.001 per share. The change in value of the embedded derivatives within the convertible notes due to these conversions was $25,553.

 

As of December 31, 2007, $140,000 represents the cumulative principal amount of the Montgomery Debentures that has been satisfied pursuant to common stock conversions.

 

The Montgomery Debentures have matured and have not been repaid.

 

F-21

 

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**NOTE 14**-**FINANCIAL INSTRUMENTS (“Compound Embedded Derivative Liability”)**

 

The effect of the mark to market adjustments associated with the financial instruments for the year ending December 31, 2007 generated a gain of $2,946,392, as compared to a loss of $817,591 for the year ended December 31, 2006. In addition, interest expense associated with the derivative financial instruments totaled $1,645,921 for the year ended December 31, 2007, as compared to $1,458,935 for the            year ended December 31, 2006.

 

The following table details the liability for financial instruments as of December 31, 2007:

 
|                 |   |   |           |   |   |          |   |   |            |   |   |            |   |   |           |
|----------------------|--------|--------|----------------|--------|--------|---------------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|----------------|
| **Financial**        |   |   | **Balances**   |   |   |          |   |   |            |   |   | **Mark to**     |   |   | **Balances**   |
| **Instrument**       |   |   | **as of**      |   |   |          |   |   | **Other**       |   |   | **Market**      |   |   | **as of**      |
| **Liability**        |   |   | **12/31/2006** |   |   | **Additions** |   |   | **Adjustments** |   |   | **Adjustments** |   |   | **12/31/2007** |
|                 |   |   |           |   |   |          |   |   |            |   |   |            |   |   |           |
| Management Debenture |   | $      | 142,890        |   | $      | -             |   | $      | -               |   | $      | (128,604)       |   | $      | 14,286         |
| Montgomery Notes     |   |   | 3,615,412      |   |   | -             |   |   | 139,683         |   |   | (2,807,952)     |   |   | 947,143        |
| Montgomery Warrants  |   |   | 11,359         |   |   | -             |   |   | -               |   |   | (9,433)         |   |   | 1,926          |
| YA Global Note       |   |   | -              |   |   | 34,791        |   |   | -               |   |   | (403)           |   |   | 34,388         |
|                 |   |   |           |   |   |          |   |   |            |   |   |            |   |   |           |
| Totals               |   | $      | 3,769,661      |   | $      | 34,791        |   | $      | 139,683         |   | $      | (2,946,392)     |   | $      | 997,743        |

 

**NOTE 15 - EMPLOYEE BENEFIT PLAN**

 

The Company maintains a 401(k) savings plan that covers substantially all of its employees. Participants in the savings plan may elect to contribute, on a pretax basis, a certain percentage of their salary to the plan. Presently, the Company does not match any portion of the participant’s contributions as per the provisions of the plan.

 

**NOTE 16 - COMMITMENTS AND CONTINGENCIES**

 

**Lease Commitments**

 

The Company has entered into non-cancelable operating leases for offices and warehouse space in several states including Illinois, New York, Ohio, Florida and Georgia. Additionally, the Company leases equipment and trucks under non-cancelable operating leases. The office and warehouse leases are subject to escalation for the Company’s proportionate share of increases in real estate taxes and            certain other operating expenses. The approximate future minimum rentals under non-cancelable operating leases in effect on December 31, 2007, are as follows:

 

 
| Year Ended   |   |   | Office and      |   |   | Equipment  |
|--------------|--------|--------|-----------------|--------|--------|------------|
| December 31, |   |   | Warehouse Space |   |   | And Trucks |
|         |   |   |            |   |   |       |
| 2008         |   | $      | 1,680,166       |   | $      | 115,688    |
| 2009         |   |   | 1,570,062       |   |   | 117,424    |
| 2010         |   |   | 1,393,179       |   |   | 89,055     |
| 2011         |   |   | 1,349,316       |   |   | -          |
| 2012         |   |   | 1,426,326       |   |   | -          |
| Thereafter   |   |   | 4,516,096       |   |   | -          |
|         |   | $      | 11,935,145      |   | $      | 322,167    |

 

 

F-22

 

----

 

 

The Company and AMB HTD Beacon Centre, LLC ("AMB"), the lessor under the lease agreement between Cargo Connection (as tenant) and AMB (as landlord), dated as of September 30, 2004, for Cargo Connection's commercial use of the premises located at 8501 N.W. 17th Street, Suite 102, Miami, Florida, entered into an agreement, dated as of November 21, 2007 pursuant to which Cargo is required to make a            series of six equal monthly installment payments in the amount of $40,031, plus one final payment in the amount of $34,605, to AMB, or an aggregate amount of $274,792, to fully cure previous payment arrearages.

 

As of January 11, 2008, Cargo International entered into a Commercial Lease Agreement with MP Cargo ORD Property LLC, a Delaware limited liability company, for Cargo International's commercial use of the premises located at 491 Supreme Drive, Bensenville, Illinois (the "Premises"). The lease is for a term of ten years and calls for annual rent in the amount of $600,000 for the first two years, with            bi-annual increases thereafter throughout the term of the lease, which is paid on a monthly basis. As an inducement for the landlord to enter into the lease and concurrently therewith: (i) the Company issued a Guaranty of Lease dated as of January 11, 2008 (the "Corporate Guaranty”); and (ii) Jesse Dobrinsky, the Chief Executive Officer of the Company, issued a Personal Guaranty of the lease dated as of January 11, 2008 (the "Dobrinsky Personal Guaranty"; and together with the            Corporate Guaranty, collectively the "Guarantees"), in each case in favor of the landlord, guaranteeing all of Cargo International's obligations under the lease.

 

In connection with the execution of this lease, on January 11, 2008, Cargo International entered into a Sublease Termination Agreement (the "Termination Agreement"), with Underwing International, LLC ("Underwing"), a related party, terminating a sublease agreement between itself and Underwing, dated as of May 1, 2007, pursuant to which Underwing (as the prior tenant of the premises) sub-leased the            Premises to Cargo International. The Termination Agreement, which terminated Underwing's status as Cargo International's sub-lessor of the Premises, allowed Cargo International to enter into the lease directly with the landlord. The landlord and Underwing contemporaneously terminated the Commercial Lease Agreement dated January 31, 2005 between Underwing and the landlord.

 

Rent charged to operations for office and warehouse space for the years ended December 31, 2007 and 2006 amounted to $909,893 and $1,311,112, respectively (see note 19 for rent expense paid to related entities). Rent expense charged to operations for trucks and equipment for the years ended December 31, 2007 and 2006 amounted to $602,136 and $550,964, respectively.

 

**Litigation**

 

On or about November 17, 2006, Daniel Murray (“Murray”), a former employee, filed a complaint against the Company, seeking damages for alleged age discrimination, fraudulent inducement, breach of contract and other forms of discrimination, under the captionDaniel Murray v. Cargo Connection Logistics Holding, Inc., case no. 19405-06            (Supreme Court of the State of New York, Nassau County, New York). Murray sought damages equal to the annual salary contained in his employment agreement of $150,000 per year for five years, or $750,000. On February 27, 2007, the Company’s motion to dismiss all causes of action other than the breach of contract and age discrimination claims was granted. On or about July 10, 2007, the Company and Murray reached a settlement agreement. Under such settlement agreement, Murray            delivered to the Company a general release in consideration for $20,000, payable by the Company in three equal consecutive monthly installments commencing on July 17, 2007. The Agreement has been satisfied in full as of December 31, 2007.

 

On or about November 10, 2006, One Rason Road Joint Venture, Inc. (“Rason”) filed a complaint against Cargo Connection seeking damages in the amount of $282,672 for alleged lease payments for a non-owned, non-related or non-affiliated company, Airfreight Management Group, Inc. (“AMG”), under the captionOne Rason Road Joint Venture v. Airfreight            Management Group, Inc. n/k/a Cargo Connection Logistics Corporation, case no. 06-017600 (Supreme Court of the State of New York, County of Nassau, NY). Rason filed the action for alleged breach of a lease, dated July 10, 2003 between itself and AMG for premises located at 45 Rason Road, Inwood, NY, which lease expires on July 31, 2008. Rason alleges that AMG vacated the premise on or about May, 2006 and owes back rent. Rason also alleges that AMG is now            known as Cargo Connection and asserts that the Company is liable for AMG’s debts under the lease. The Company’s motion to dismiss the complaint was granted on May 8, 2007.

 

F-23

 

----

 

 

On or about November 6, 2006, in an application to the Bankruptcy Court for an Examination of Airfreight Warehouse Corporation (“AFW”), which filed for bankruptcy protection under Chapter XI in the US Bankruptcy Court for the Southern District of New York, the trustee in the matter alleged that, pursuant to an agreement entered into between AFW and Cargo Connection, Cargo Connection has            not paid all funds due to AFW under the agreement in the amount of $300,000. The Company has not conducted any discovery related to this matter. The Company believes that it has acted in good faith and remitted all funds due to AFW under the agreement.

 

On or about May 2006, Cargo Connection filed suit against a former business agent, under the captionCargo Connection Logistics Corp. v. Fleet Global Services, Inc., case no. 48-2006-CA-3208-0 (9th Judicial Circuit, Orange County, Florida), for breach of contract, seeking $128,179 in damages. Cargo Connection claims that, upon the ending of its            relationship with the business agent, there were funds still owed to Cargo Connection. As part of the terms and conditions under the letter agreement entered into by both parties on August 29, 2007, Fleet Global Services agreed to pay $56,000 to Cargo Connection in settlement of this pending litigation.

 

On or about September 7, 2007, Rikki Hawkins-Fuller (“Hawkins”), a former employee, filed a verified complaint against the Company with the New York State Division of Human Rights, seeking an unspecified amount of damages for alleged unlawful discriminatory practices, under captionRikki Hawkins-Fuller v. Cargo Connection Logistics, case            no. 10114466 (State Division of Human Rights, State of New York, Hempstead, New York). The Company has responded to allegations in the verified complaint. Management believes that the Company has meritorious defenses to this claim and intends to vigorously defend this matter.

 

On March 7, 2008, the Company and Cargo–International were served with a summons and complaint in connection with the action entitledTravelers Indemnity Company v. Mid Coast Management and Cargo Connection Logistics Holding, Inc.The action seeks payment of $16,196.00, relating to an insurance premium for the period commencing January 26, 2005            through January 25, 2006 and was brought in New York State Supreme Court, Nassau County.

 

The Company is party to various legal proceedings generally incidental to its business as is the case with other companies in the same industry. Although the ultimate disposition of legal proceedings cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a            materially adverse effect on the consolidated financial statements of the Company.

 

**Significant Customers**

 

For the year ended December 31, 2007, the Company had no customers which comprised more than 10% of its operating revenue. For the year ended December 31, 2006, the Company had one customer who comprised approximately 21% of operating revenue and one additional customer that accounted for 9.4% of operating revenues.

 

**NOTE 17**

 

**Common Stock**

 

On April 19, 2007, 105,263 shares of outstanding Common Stock were deemed returned to the Company and cancelled. The accounting for these shares is included in the number of shares outstanding as of December 31, 2007.

 

On May 11, 2007, the Company issued 25,000,000 shares of Common Stock in payment for $100,000 of outstanding payables, which represented the fair market value of the transaction at this date.

 

In July 2007, the Company cancelled 50,000,000 shares of its Common Stock which were held in escrow as part of the issuance of secured debentures to Highgate House, Ltd. in May 2005. These shares were placed into escrow to secure the Company’s obligation to issue shares of common stock upon conversion of such debentures. The debentures were not converted prior to their repayment by the Company.            Because these shares were not formally issued and the debentures were not converted prior to their repayment, they were not included in the net loss per share calculations.

 

On November 30, 2007, Montgomery converted $40,000 of principal into 40,000,000 shares of the Company’s Common Stock at a conversion rate of $.001 per share. The change in value of the embedded derivatives within the convertible notes due to these conversions was $25,553.

 

F-24

 

----

 

 

The Company has 2,000,000 authorized shares of blank check preferred stock, of which the Company has designated (i) 500,000 shares as Series III Preferred Stock, $1.00 par value per share; (“Series III Preferred Stock”); (ii) 600,000 shares as Series IV convertible preferred stock (“Series IV Preferred Stock”), par value $1.00 per share; (iii) 500,000 shares of Series V            preferred stock (“Series V Preferred Stock”), $1.00 par value per share. The remaining 400,000 shares remain undesignated blank check preferred stock. The Board of Directors of the Company is authorized to fix, subject to the provisions herein set forth, before the issuance of any shares of a particular series, the number, designation, and relative rights, preferences and limitations of the shares of such series, including

 
|   | (1) | voting rights, if any, which may include the right to vote together as a single class with the Common Stock and any other series of the preferred stock with the number of votes per share accorded to shares of such series being the same as or different from that accorded to such other shares; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | (2) | the dividend rate per annum, if any, and the terms and conditions pertaining to dividends and whether such dividends shall be cumulative; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | (3) | the amount payable upon voluntary or involuntary liquidation; |
|--------|-----|---------------------------------------------------------------|

 
|   | (4) | the terms and conditions of the redemption; |
|--------|-----|---------------------------------------------|

 
|   | (5) | sinking fund provisions; |
|--------|-----|--------------------------|

 
|   | (6) | the terms and conditions on which such shares are convertible, in the event the shares are to have conversion rights; and |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------|

 
|   | (7) | all other rights, preferences and limitations pertaining to such series which may be fixed by the Corporation’s Board of Directors pursuant to the Florida Business Corporation Act. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Series III Preferred Stock: There were 100,000 shares of Series III Preferred Stock issued and outstanding as of December 31, 2007. These shares were issued upon the conversion of an outstanding loan entered into between the Company and Jesse Dobrinsky and John L. Udell, two of our executive officers. Each share of Series III Preferred Stock is treated as being convertible            into shares of the Company’s common stock at a conversion price equal to the lesser of (i) the average of the lowest of three-day trading prices during the five trading days immediately prior to the conversion date multiplied by .70, or (ii) the average of the lowest of three-day trading prices during the five trading days immediately prior to the funding date(s). The Series III Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval            and has voting power equal to twenty votes for each share of common stock into which such holder’s shares of Series III Preferred Stock are then convertible. The holders of the Series III Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. The Series III Preferred Stock has a liquidation preference of $1.00 per share in the event of any liquidation, dissolution or winding up of the Company,            whether voluntary or involuntary. The Company believes that its articles of incorporation may not properly reflect certain of the above terms, and intends to take corrective action in this regard.

 

Series IV Preferred Stock: There were 517,500 shares of Series IV Preferred Stock issued and outstanding of as of December 31, 2007 These Shares were issued upon conversion of a convertible promissory note entered into between the Company and Triple Crown. The Series IV is convertible into shares of the Company’s common stock at a conversion price equal to the lesser            of (i) the average of the lowest of three-day trading prices during the five trading days immediately prior to the Conversion Date multiplied by .70, or (ii) the average of the lowest of three-day trading prices during the five trading days immediately prior to the funding date(s). The Series IV Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval and has voting power equal to twenty votes for each share of common stock into which such            holder’s shares of Series IV Preferred Stock are then convertible. In addition, the holders of the Series IV Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. The Series IV Preferred Stock has a liquidation price of $1.00 per share in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. The Company believes that its articles of            incorporation may not properly reflect certain of the above terms, and intends to take corrective action in this regard.

 

 

F-25

 

----

 

 

Series V Preferred Stock: There were 479,867 shares of Series V Preferred Stock issued and outstanding as of December 31, 2007. These shares were issued based on the Stock Purchase Agreement and Share Exchange entered into on May 12, 2005 between the Company and the shareholders of Cargo Connection and Cargo International, which called for the Company to issue shares of            its preferred stock which are convertible into Common Stock of the Company additional consideration to be given to the shareholders twelve (12) months from the closing date of the transaction whereby they would own eighty percent (80%) of the outstanding shares of the Company at that time. The Series V Preferred Stock is convertible into 7,575 shares of Common Stock. The Series V Preferred Stock votes together with the Common Stock on all matters subject to stockholder approval and            has voting power equal to thirty votes per outstanding share of Series V Preferred Stock. In addition, the holders of the Series V Preferred Stock are entitled to receive non-cumulative cash dividends at an annual dividend rate as determined by the Board of Directors. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series V Preferred Stock shall be entitled to receive distributions out of the assets of the Corporation, whether from            capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders of Common Stock.

 

The Company has determined that it is treating all three of the above series of preferred stock issuances on the balance sheet as mezzanine financing in accordance with the guidelines set forth under EITF D-98. This is required since there are liquidation preferences to be paid from capital or from earnings available for distribution to its stockholders, before any amount shall be paid to the holders            of common stock in the event of any liquidation, whether voluntary or involuntary.

 

**NOTE 18 - STOCK OPTION PLANS**

 

In August 1999, the Company’s stockholders approved the adoption of an Incentive Stock Option Plan (“1999 Option Plan”), which allows the Board of Directors to grant options to purchase up to 100,000 shares of common stock to employees and directors. On August 17, 2000, with the approval of the shareholders of the Company, the number of shares available under the 1999 Option Plan was            increased to 1,000,000. As of December 31, 2007, 220,000 options were outstanding under the 1999 Option Plan. During the year ended December 31, 2007, the Company did not issue any shares of its common stock under non-plan options in lieu of granting options. As of December 31, 2007, there are no non-plan options outstanding.

 

In July 2005, the Company's stockholders approved the adoption of an Incentive Stock Option Plan ("2005 Stock Incentive Plan"), which allows the Board of Directors to grant options to employees and members of the Board of Directors. The 2005 Option Plan provided the Board of Directors the right to grant options to purchase up to a total of 50,000,000 shares of the Company's Common Stock. As of            December 31, 2007, the Company has not issued any options under the 2005 Stock Incentive Plan.

 

The following information summarizes the Company’s stock option activity at December 31, 2007:

 

**Stock Options Plans:**

 
|                             |   | Weighted |   |   |   |
|----------------------------------|--------|----------|--------|--------|--------|
|                             |   | Average  |   |   |   |
|                             |   | Exercise |   |   |   |
|                             |   | Options  |   |   | Price  |
| Outstanding at December 31, 2005 |   | 220,000  |   | $      | 1.07   |
|                             |   |     |   |   |   |
| Granted                          |   | -        |   |   | -      |
| Exercised                        |   | -        |   |   | -      |
| Expired or cancelled             |   | -        |   |   | -      |
| Outstanding at December 31, 2006 |   | 220,000  |   | $      | 1.07   |
|                             |   |     |   |   |   |
| Granted                          |   | -        |   |   | -      |
| Exercised                        |   | -        |   |   | -      |
| Expired or cancelled             |   | -        |   |   | -      |
| Outstanding at December 31, 2007 |   | 220,000  |   | $      | 1.07   |

 

 

F-26

 

----

 

 

**Non-plan stock options**:            

 
|                             |   | Weighted |   |   |   |
|----------------------------------|--------|----------|--------|--------|--------|
|                             |   | Average  |   |   |   |
|                             |   | Exercise |   |   |   |
|                             |   | Options  |   |   | Price  |
| Outstanding at December 31, 2005 |   | 500,000  |   | $      | 0.07   |
|                             |   |     |   |   |   |
| Granted                          |   | -        |   |   | -      |
| Exercised                        |   | -        |   |   | -      |
| Expired or cancelled             |   | 400,000  |   |   | 0.16   |
| Outstanding at December 31, 2006 |   | 100,000  |   | $      | 0.03   |
|                             |   |     |   |   |   |
| Granted                          |   | -        |   |   | -      |
| Exercised                        |   | -        |   |   | -      |
| Expired or cancelled             |   | 100,000  |   |   | -      |
| Outstanding at December 31, 2007 |   | -        |   | $      | -      |

 

 

The following table summarizes information about stock options outstanding and exercisable at December 31, 2007

 
|                     |   |        |   |     |   | Weighted  |   |        |
|--------------------------|--------|-------------|--------|----------|--------|-----------|--------|-------------|
|                     |   |        |   |     |   | Average   |   | Weighted    |
|                     |   |        |   | Average  |   | Remaining |   | Average     |
|                     |   | Number      |   | Life     |   | Exercise  |   | Number      |
| Range of exercise price: |   | Outstanding |   | In Years |   | Price     |   | Exercisable |
| $0.001 to $0.50          |   | -           |   | -        |   | -         |   | -           |
| $0.51 to $1.00           |   | -           |   | -        |   | -         |   | -           |
| $1.01 to $1.50           |   | 220,000     |   | 1.71     |   | 1.07      |   | 220,000     |
|                     |   | 220,000     |   |     |   |      |   | 220,000     |

 

 

**NOTE 19 - RELATED PARTY TRANSACTIONS**

 

The Company is owed $29,450 from employees of the Company. These amounts are non-interest bearing and do not have formal repayment terms. The Company anticipates full collection of these amounts within a one-year period.

 

As of December 31, 2007, the Company owes an aggregate of $2,027,936 to related parties pursuant to non-interest bearing loans which have no formal repayment terms. The majority of this amount is for office and warehouse space due to one entity for the space the Company occupies in New York. The lease in New York is not collateralized by the Company and the related party is the master leaseholder for            those premises and there are other tenants in the facility.

 

Effective as of January 31, 2005, Underwing, a Delaware limited liability company controlled by Jesse Dobrinsky, Scott Goodman and John L. Udell, three of the executive officers of the Company, entered into a ten-year lease for a 92,000 square foot facility located in Bensenville, Illinois (the “Bensenville Lease”), with the intention of initially subleasing a portion of the facility to            the Company and the remaining portions to third parties on short-term basis until the Company needed to sublease such remainder of the facility. Underwing intended to sublet the facility to the Company and other sub-tenants at market-comparable rental rates and as of May 1, 2007 Cargo International and Underwing entered into a sublease agreement (the “Sublease Agreement”). The owner of the facility, MP Cargo ORD Property, LLC as a condition to leasing the facility to            Underwing, thereby making the facility available to the Company for subletting, demanded that the Company agree to guaranty all of Underwing’s obligations under the Bensenville Lease pursuant to a Guaranty of Lease, dated as of January 31, 2005 (the “Guaranty”). No rent was accrued or payable under the Bensenville Lease prior to February 2006, other than utility and similar charges, which the Company paid proportionally based upon the area within the facility which            the Company utilized. Commencing in February 2006, the monthly rental cost for the entire facility was approximately $45,000. Underwing did not make any rental payments under the Bensenville Lease although rent began to be accrued in February 2006; it being the understanding between Underwing and the landlord that payment of rent would commence no sooner than August 2007. On January 11, 2008 this lease and Sublease Agreement was terminated and simultaneous therewith Cargo            International entered into a ten

 

F-27

 

----

 

year commercial lease agreement with ORD. (see note 16). As a result of this transaction, the guaranteed rental payments that the Company had recorded on its books relating to the guarantee of the lease payments of Underwing have been reversed in the amount of $900,000 at December 31, 2007.

 

The Company rents warehouse space and equipment from related entities. For the year ended December 31, 2007 and 2006, rent expense charged to operations relating to these rentals totaled $871,958 and $909,912, respectively. The leases contain various extension options and currently call for termination in February 2014.

 

On April 10, 2007, Cargo International borrowed $50,000 from a related party to assist in short term cash flow needs of the Company. This note provides for interest at the annual rate of 12% and a maturity date of July 3, 2007. The principal balance of this note was repaid in full, along with accrued interest of $1,381, on July 3, 2007.

 

On April 17, 2007, Cargo International borrowed $100,000 from a related party to assist in short term cash flow needs of the Company. Cargo International issued the lender a promissory note in such principal amount. This note provides for interest at the annual rate of 12% and a maturity date of July 10, 2007. As of December 31, 2007, the balance of the note, inclusive of accrued interest, was            $108,515.

 

In June 2007, the Company borrowed $100,000 from an entity controlled by a nephew of an executive officer of the Company in order to assist in short term cash flow needs of the Company. This informal loan provided for a weekly payment of $5,000 to be applied against the balance until the loan was paid off. The principal balance of this loan was repaid as of November 9, 2007. Other amounts previously            borrowed from the entity continue to be outstanding without interest or formal negotiated payment terms.

 

On December 31, 2007, the Company issued a promissory note in the principal amount of $800,000 to EmplifyHR evidencing loans previously extended by EmplifyHR to the Company. The Note bears interest at a rate of 12% per annum, requires equal monthly amortization payments and matures on January 1, 2012. The Company may prepay the unpaid principal balance, or any portion thereof, of the note at any time            without premium or penalty. Concurrently with the issuance of the note: (i) the Company entered into a security agreement with EmplifyHR, pursuant to which it granted to EmplifyHR a security interest in all of their respective assets; and (ii) Cargo Connection and Cargo International entered into a Guaranty of Payment Agreement pursuant to which Cargo Connection and Cargo International agreed to guarantee the Company's payment obligations under the note. EmplifyHR provides payroll            and human resource services to the Company. EmplifyHR owns a 49% interest in ITG, of which the Company owns 51%. Ivan Dobrin, a principal shareholder of EmplifyHR, is the brother of Jesse Dobrinsky, the Company's CEO.

 

**Employment Agreements**

 

The Company does not currently have employment agreements with any of its officers or the officers of Cargo Connection. In addition, the current members of the Board of Directors serve without compensation, except that on April 28, 2006, Cargo Connection entered into an employment agreement with William F. O’Connell (the “O’Connell Agreement”), the terms of which            include:

 
|   | **•** | a base annual salary of $250,000, |
|--------|------------|-----------------------------------|
|   | **•** | a term of five years commencing on May 29, 2006 which shall renew in subsequent one year renewal periods, unless terminated by either party with prior notice or as otherwise provided therein, |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **•** | a non-competition provision restricting William F. O’Connell from being involved with a business in direct competition with Cargo Connection during the term of the agreement and for two years thereafter, |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **•** | a non-solicitation provision, and |
|--------|------------|-----------------------------------|
|   | **•** | a confidentiality provision. |
|--------|------------|------------------------------|

 

The Company has not fully performed its payment obligations pursuant to the terms of the O’Connell Agreement.

 

F-28

 

----

 

 

**NOTE 20 - INCOME TAXES**

 
| For the years ended December 31, 2007 and 2006, there was no income tax expense        |   |     |   |
|----------------------------------------------------------------------------------------|--------|----------|--------|
|                                                                                   |   |     |   |
|                                                                                   |   | **2007** |   | **2006** |
| Federal                                                                                |   |     |   |   |   |   |
| Current                                                                                |   | $        | -      |   | $ | - |
| Deferred                                                                               |   |     | -      |   |   | - |
| Total                                                                                  |   |     | -      |   |   | - |
|                                                                                   |   |     |   |   |   |   |
| State and local                                                                        |   |     |   |   |   |   |
| Current                                                                                |   |     | -      |   |   | - |
| Deferred                                                                               |   |     | -      |   |   | - |
| Total                                                                                  |   |     | -      |   |   | - |
| Total                                                                                  |   |     | -      |   |   | - |
|                                                                                   |   |     |   |   |   |   |
|                                                                                   |   |     |   |   |   |   |
| Deferred income taxes reflect the net tax effects of temporary differences between     |   |     |   |
| the carrying amount of the assets and liabilities for financial reporting purposes     |   |     |   |
| and the amounts reported for income tax purposes. Significant components of the        |   |     |   |
| Company’s net deferred income tax assets and liabilities as of December 31, 2007 |   |     |   |
| and 2006 are as follows:                                                               |   |     |   |

 
|                                                                              |   | **2007** |        | **2006** |
|-----------------------------------------------------------------------------------|--------|----------|-------------|----------|
| Deferred tax asset                                                                |   |     |        |     |   |   |
| Net operating loss carryforward                                                   |   | $        | 2,605,600   |     | $ | 2,594,000 |
| Deferred rent                                                                     |   |     | 221,000     |     |   | 415,000 |
| Accrued compensation                                                              |   |     | 362,000     |     |   | 123,000 |
| Asset reserves and other items                                                    |   |     | 69,000      |     |   | 74,000 |
| Total deferred tax asset                                                          |   |     | 3,257,600   |     |   | 3,206,000 |
| Less valuation allowance                                                          |   |     | (3,257,600) |     |   | (3,206,000) |
| Total net deferred tax asset                                                      |   |     | -           |     |   | - |
|                                                                              |   |     |        |     |   |   |
| The Company has net operating losses carryforwards                                |   |     |        |
| of approximately $6,700,000 at December 31, 2007 that will be available to offset |   |     |        |
| future taxable income. The Company has concluded that a full valuation allowance  |   |     |        |
| was appropriate for the deferred tax items as they are not more likely than not   |   |     |        |
| going to be utilized in the foreseeable future.                                   |   |     |        |

 
| The Company has approximately $6,700,000 of tax loss carryforward (“NOL”s) as of December 31, 2007. |   |   |   |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| The scheduled expiration of such NOL’s is as follows:                                                     |   |   |   |
|                                                                                                            |   |   |   |
| For the Year Ending December 31,                                                                                |   |   |   |   |   |   |
| 2025                                                                                                            |   |   |   |   | $ | 4,000,000 |
| 2026                                                                                                            |   |   |   |   |   | 3,000,000 |
| 2027 |   |   |   |   |   | (318,000) |
|------|--------|--------|--------|--------|--------|-----------|
|   |   |   |   |   |   |      |
|--------|--------|--------|--------|--------|--------|-----------|
| Total  |   |   |   |   | $      | 6,682,000 |

 

 
| Income taxes computed at the statutory rate for the years ended December 31, 2007 |   |   |     |
|-----------------------------------------------------------------------------------|--------|--------|----------|
| and 2006 differ from amounts provided as follows:                                 |   |   |     |
|                                                                              |   |   | **2007** |   |   | **2006** |
| Tax provision (benefit) at statutory rate                                         |   |   | 34%      |   |   | (34%) |
| State and local taxes, net of federal benefit                                     |   |   | (1%)     |   |   | (3%) |
| Derivative expenses                                                               |   |   | (39%)    |   |   | 16% |
| Change in valuation allowance                                                     |   |   | 6%       |   |   | 21% |
|                                                                              |   |   |     |   |   |   |
| Effective income tax rate                                                         |   |   | 2%       |   |   | 0% |

 

 
|   | F-29        |   |
|--------|------------------------------------------------|--------|

 

 

----

 

 

**NOTE 21 - SUBSEQUENT EVENTS**

 

On January 11, 2008, Cargo Connection Logistics – International, Inc. entered into a 10 year lease with MP Cargo ORD Property LLC for premises in Bensenville, Illinois (the "Premises"). The lease is for a term of ten years and calls for annual rent in the amount of $600,000 for the first two years, with bi-annual increases thereafter throughout the term of the lease, which is paid on a monthly            basis. As an inducement for the landlord to enter into the lease and concurrently therewith: (i) the Company issued a Guaranty of Lease dated as of January 11, 2008 (the "Corporate Guaranty”); and (ii) Jesse Dobrinsky, the Chief Executive Officer of the Company, issued a Personal Guaranty of the lease dated as of January 11, 2008 (the "Dobrinsky Personal Guaranty"; and together with the Corporate Guaranty, collectively the "Guarantees"), in each case in favor of the landlord,            guaranteeing all of Cargo International's obligations under the lease.

 

On January 11, 2008, Cargo International entered into a Sublease Termination Agreement (the "Termination Agreement") with Underwing International, LLC ("Underwing"), a related party, terminating a sublease agreement between itself and Underwing, dated as of May 1, 2007, pursuant to which Underwing (as the prior tenant of the premises) sub-leased the Premises to Cargo International. The Termination            Agreement, which terminated Underwing's status as Cargo International's sub-lessor of the Premises, allowed Cargo International to enter into the lease directly with the landlord. The landlord and Underwing contemporaneously terminated the Commercial Lease Agreement dated January 31, 2005 between Underwing and the landlord.

 

On February 29, 2008, Cargo Connection Logistics Corp. entered into a renegotiated 65-month lease with LIT/Hodges Industrial Trust for a premises in College Park, Georgia (the "Premises") which: (i) extends the term for an additional period of one hundred twenty (120) months, ending June 30, 2018 (the "Extended Term"); (ii) provides for a new rent schedule commencing on March 1, 2008 through the            expiration of the Extended Term; (iii) grants Cargo Connection a right of first opportunity to lease, under certain terms and conditions, certain additional space which is contiguous to the Premises consisting of approximately 12,760 square feet; and (iv) grants Cargo Connection a new right to terminate the Lease, as amended by the First Amendment, in the event that Cargo Connection and the Landlord agree to relocate Cargo Connection to another building in the Landlord’s            portfolio and such parties enter into a new lease agreement for a minimum term of five (5) years with a minimum square footage of 40,000 square feet, at “then market” rent. All other terms and conditions of the Lease not amended by the First Amendment shall remain in full force and effect.

 

On February 21, 2008, the Company issued 55,000,000 shares of common stock to Montgomery, in connection with its conversion of $55,000 of a convertible secured debenture, at a conversion rate of $.001 per share.

 

On February 28, 2008, the Company issued 55,500,000 shares of common stock to Montgomery, in connection with its conversion of $55,500 of a convertible secured debenture, at a conversion rate of $.001 per share.

 

On March 17, 2008, the Company issued 61,600,000 shares of common stock to Montgomery, in connection with its conversion of $61,600 of a convertible secured debenture, at a conversion rate of $.001 per share.

 

On March 18, 2008, the Company received notification of a non-recourse assignment by Montgomery to YA Global of its interest in all documents relating to the financing arrangements between the Company and Montgomery.

 

 
|   | F-30          |   |
|--------|------------------------------------------------------------|--------|

 

 

----

 

 

**ITEM 11. -**SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

**Security Ownership of Certain Beneficial Owners**

 

The following table sets forth information about the beneficial ownership of our capital stock as of February 29, 2008, by each person who is the beneficial owner of more than 5% of the outstanding shares of any class of capital stock, based on filings with the Securities and Exchange Commission and other information.

 
| **Name and Address of Beneficial Owner** | **Title of Class**

**Amount, Nature and Percentage of Beneficial Ownership(1)** | **Percent of Combined Voting Power of All Classes** |
|------------------------------------------|----------------------------------------------------------------------------------|-----------------------------------------------------|
| **Common Stock(2)**

               | **Series III**

**Preferred Stock(3)**                                           | **Series IV**

**Preferred Stock(3)**               | **Series V**

**Preferred Stock (3)** |
| **No. of**

**Shares**                   | **Percent**

**of**

**Class**                                                   | **No. of Shares**                                   | **Percent**

**of**

**Class** | **No. of**

**Shares** | **Percent**

**of**

**Class** | **No. of**

**Shares** | **Percent**

**Of**

**Class** |
| Jesse

Dobrinsky (4)

              | 20,634,963,113(5)                                                                | 94.3%                                               | 50,000

  | 50%

  | 517,500(6)

  | 100% | 143,960 | 30% | 94.5% |
| Scott Goodman (4)

                 | 1,166,695,538(7)                                                                 | 48.1%                                               | 0 | 0 | 0 | 0 | 143,960 | 30% | 48.1% |
| John L. Udell (4)

                 | 2,881,961,398(8)                                                                 | 69.6%                                               | 50,000 | 50% | 0 | 0 | 143,960 | 30% | 69.6% |
| Utek

Corporation (9)

             | 164,951,070                                                                      | 13.1%                                               | 0 | 0 | 0 | 0 | 0 | 0 | 13.1% |
| Triple Crown (10)

                 | 18,640,651,801(11)                                                               | 93.7%                                               | 0 | 0 | 517,500(12) | 100% | 0 | 0 | 93.7% |
| Jay Finkelstein (4)

               | 388,901,048(13)                                                                  | 23.6%                                               | 0 | 0 | 0 | 0 | 47,987 | 10% | 23.6% |

 
|   | (1) | Unless otherwise indicated, the persons or entities identified herein have sole voting and investment power with respect to the shares shown as beneficially held by them, subject to community property laws where applicable. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | Applicable percentage of ownership is based on 1,258,310,353 shares of Common Stock outstanding as of February 29, 2008. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Act of 1934 and generally includes voting or investment power with respect to such securities. Shares of Common Stock subject to securities                        exercisable for or convertible into shares of Common Stock that are currently exercisable or exercisable within sixty (60) days are deemed to be beneficially owned by the person holding such options, warrants, rights, conversion privileges or similar obligations, for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (3) | Applicable percentage ownership is based on (i) 100,000 shares of Series III Preferred Stock; (ii) 517,500 shares of Series IV Preferred Stock; and (iii) 479,867 shares of Series V Preferred Stock, outstanding as of February 29, 2008. In determining the amount of Common Stock beneficially owned by a holder of Series III and Series IV Preferred Stock, we                        have assumed a conversion date of February 29, 2008 and have assumed that, each share of Series III and Series IV Preferred Stock, as the case may be, may be converted into Common Stock using a conversion price per share equal to the average of the lowest of three trading day prices during the five trading days immediately prior to the conversion date, multiplied by .70. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (4) | The address for this individual is 600 Bayview Avenue, Inwood Avenue, New York 11096. |
|--------|-----|---------------------------------------------------------------------------------------|
|   | (5) | Includes: (i) 71,879,738 shares of Common Stock owned by Mr. Dobrinsky directly; (ii) 85,763,293 shares of Common Stock issuable upon conversion of 50,000 shares of Series III Preferred Stock owned by Mr. Dobrinsky which are convertible within sixty (60) days and which have voting power equal to 1,715,265,860 shares of Common Stock; (iii) 887,650,086                        shares of |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
|   | 6 |   |
|--------|---|--------|

 

 

----

 

Common Stock issuable upon conversion of 517,500 shares of Series IV Preferred Stock owned by Triple Crown, which are convertible within sixty (60) days and which have voting power equal to 17,753,001,715 shares of Common Stock with respect to which Mr. Dobrinsky has shared voting power, pursuant to a voting proxy expiring on March 26, 2013 (the “Triple Crown Voting            Proxy”); and (iv) 1,090,497,000 shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Dobrinsky which are convertible within sixty (60) days, and which currently have voting power equal to 4,318,800 shares of Common Stock.
|   | (6) | Pursuant to the Triple Crown Voting Proxy, Mr. Dobrinsky, our CEO, has the right to vote the 517,500 shares of Series IV Preferred Stock. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------|
|   | (7) | Includes: (i) 71,879,738 shares of Common Stock owned by Mr. Goodman directly; (ii) 1,090,497,000 shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Goodman which are convertible within sixty (60) days and which have voting power equal to 4,318,800 shares of Common Stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (8) | Includes: (i) 71,879,738 shares of Common Stock owned directly by Mr. Udell; (ii) 85,763,293 shares of Common Stock issuable upon conversion of 50,000 shares of Series III Preferred Stock owned by Mr. Udell which are convertible within sixty (60) days and which have voting power equal to 1,715,265,860 shares of Common Stock; and (iii) 1,090,497,000                        shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Udell which are convertible within sixty (60) days and which currently have voting power equal to 4,318,800 shares of Common Stock. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (9) | The address for this party is 2109 East Palm Avenue, Tampa, Florida 33605. |
|--------|-----|----------------------------------------------------------------------------|
|   | (10) | The address for this party is 1850 South Ocean Drive, Apt. 2709, Hollandale Beach, FL 33009. The Company believes that Ben Kaplan, a nephew of Mr. Dobrinsky, controls Triple Crown and thus is the beneficial owner of the Series IV Preferred Stock owned by Triple Crown. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (11) | Includes: 887,650,086 shares of Common Stock issuable upon conversion of 517,500 shares of Series IV Preferred Stock owned by Triple Crown which are convertible within sixty (60) days and which have voting power equal to 17,753,001,715 shares of Common Stock. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (12) | Triple Crown owns and has shared voting power with respect to these shares. Triple Crown has granted a voting proxy with respect to these shares to Mr. Dobrinsky, our CEO, pursuant to the Triple Crown Voting Proxy. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (13) | Includes: (i) 23,959,913 shares of Common Stock owned by Mr. Finkelstein directly; and (ii) 363,501,525 shares of Common Stock issuable upon conversion of 47,987 Series V Preferred Stock owned by Mr. Finkelstein which are convertible within sixty (60) days and which have voting power equal to 1,439,610 shares of Common Stock. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 
|   | 7 |   |
|--------|---|--------|

 

 

----

 

 

The following table sets forth information about the beneficial ownership of our Common Stock as of February 29, 2008, by (i) each of our directors or those nominated to be directors, and executive officers, and (ii) all of our directors and executive officers as a group.

 
| **Name and Address of Beneficial Owner**

**(1)** | **Title of Class**

**Amount, Nature and Percentage of Beneficial Ownership(2)** | **Percent of Combined Voting Power of All Classes(3)** |
|---------------------------------------------------|----------------------------------------------------------------------------------|--------------------------------------------------------|
| **Common Stock**

                           | **Series III**

**Preferred Stock**                                              | **Series IV**

**Preferred Stock**                     | **Series V**

**Preferred Stock** |
| **No. of**

**Shares**                            | **Percent**

**of**

**Class**                                                   | **No. of Shares**                                      | **Percent**

**of**

**Class** | **No. of**

**Shares** | **Percent**

**of**

**Class** | **No. of**

**Shares** | **Percent**

**Of**

**Class** |
| Jesse

Dobrinsky

                           | 20,634,963,113(4)                                                                | 94.25%                                                 | 50,000

  | 50%

  | 517,500(5)

  | 100% | 143,960 | 30% | 94.25% |
| Scott

Goodman

                             | 1,166,695,538(6)                                                                 | 48.11%                                                 | 0 | 0 | 0 | 0 | 143,960 | 30% | 48.11% |
| John L. Udell

                              | 2,881,961,398(7)                                                                 | 69.61%                                                 | 50,000 | 50% | 0 | 0 | 143,960 | 30% | 69.61% |
| William F.

O’Connell                       | 0                                                                                |                                                   | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| All executive officers and directors, as a group  | 30,683,620,049                                                                   | 96.06%                                                 | 100,000 | 100% | 517,500 | 100% | 431,880 | 90% | 96.06% |

 

 
|   | (1) | The address for these individuals is 600 Bayview Avenue, Innwood, New York 11096. |
|--------|-----|-----------------------------------------------------------------------------------|
|   | (2) | Unless otherwise indicated, the persons or entities identified herein have sole voting and investment power with respect to the shares shown as beneficially held by them, subject to community property laws where applicable. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (3) | Applicable percentage of ownership is based on 1,258,310,353 shares of Common Stock outstanding as of February 29, 2008. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Act of 1934 and generally includes voting or investment power with respect to such securities. Shares of Common Stock subject to securities                        exercisable for or convertible into shares of Common Stock that are currently exercisable or exercisable within sixty (60) days are deemed to be beneficially owned by the person holding such options, warrants, rights, conversion privileges or similar obligations, for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (4) | Includes: (i) 71,879,738 shares of Common Stock owned by Mr. Dobrinsky directly; (ii) 85,763,293 shares of Common Stock issuable upon conversion of 50,000 shares of Series III Preferred Stock owned by Mr. Dobrinsky which are convertible within sixty (60) days and which have voting power equal to 1,715,265,860 shares of Common Stock; (iii) 887,650,086                        shares of Common Stock issuable upon conversion of 517,500 shares of Series IV Preferred Stock owned by Triple Crown Consulting, Inc. (“Triple Crown”), which are convertible within sixty (60) days and which have voting power equal to 17,753,001,715 shares of Common Stock, with respect to which Mr. Dobrinsky has shared voting power, pursuant to a voting proxy expiring on March 26, 2013 (the “Triple Crown Voting Proxy”); and (iv) 1,090,497,000                        shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Dobrinsky which are convertible within sixty (60) days, and which currently have voting power equal to 4,318,800 shares of Common Stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 
|   | 8 |   |
|--------|---|--------|

 

 

----

 

 
|   | (5) | Pursuant to the Triple Crown Voting Proxy, Mr. Dobrinsky, our CEO has sole voting power over these 517,500 shares of Series IV Preferred Stock. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (6) | Includes: (i) 71,879,738 shares of Common Stock owned by Mr. Goodman directly; (ii) 1,090,497,000 shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Goodman which are convertible within sixty (60) days and which have voting power equal to 4,318,800 shares of Common Stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (7) | Includes: (i) 71,879,738 shares of Common Stock owned directly by Mr. Udell; (ii) 85,763,293 shares of Common Stock issuable upon conversion of 50,000 shares of Series III Preferred Stock owned by Mr. Udell which are convertible within sixty (60) days and which have voting power equal to 1,715,265,860 shares of Common Stock; and (iii) 1,090,497,000                        shares of Common Stock issuable upon conversion of 143,960 shares of Series V Preferred Stock owned by Mr. Udell which are convertible within sixty (60) days and which currently have voting power equal to 4,318,800 shares of Common Stock. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Equity Compensation Plan Information**

 

The following table sets forth the information about securities authorized for issuance under our equity compensation plans.

 
| **Plan category**                                           | **(a) Number of securities to be issued on exercise of outstanding options, warrants and rights** | **(b) Weighted average exercise price of outstanding options, warrants, and rights** | **(c) Number of securities remaining available for future issuance under equity compensation plans.** |
|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|
| Equity Compensation Plans

approved by security holders     | 220,000                                                                                           | $1.07                                                                                | 50,780,000                                                                                            |
| Equity compensation plans not

approved by security holders | 0                                                                                                 | 0                                                                                    | 0                                                                                                     |
| Totals                                                      | 220,000                                                                                           | $1.07                                                                                | 50,780,000                                                                                            |

 

**Stock-based compensation**

 

The Company has not granted any stock options and no stock options have been exercised or expired in 2006 or 2007.

 

   
|   | 9 |   |
|--------|---|--------|

----

 
| **ITEM 13.** | **EXHIBITS** |
|--------------|--------------|

 
| 3.1   | Amended and Restated Articles of Organization                                                                                                                                                                                                                                                                                                                                                      |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2   | By-Laws (Incorporated by reference to the Company’s registration statement on Form 10-SB originally filed with the Securities and Exchange Commission on November 19, 1999; SEC File No. 000-28233)                                                                                                                                                                                     |
| 4.1   | Specimen Common Stock Certificate                                                                                                                                                                                                                                                                                                                                                                  |
| 4.2   | Specimen Series III Preferred Stock Certificate                                                                                                                                                                                                                                                                                                                                                    |
| 4.3   | Specimen Series V Preferred Stock Certificate                                                                                                                                                                                                                                                                                                                                                      |
| 4.4   | 1999 Stock Incentive Plan (Incorporated by reference to the Company’s Registration Statement on Form 10-SB originally filed with the Securities and Exchange Commission on November 19, 1999; SEC File No. 000-28233)                                                                                                                                                                        |
| 4.5   | 2005 Stock Incentive Plan (Incorporated by reference to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 2005; SEC File No. 333-126354)                                                                                                                                                                                         |
| 4.6   | Warrant issued by the Company in favor of Montgomery, for 2,000,000 shares dated December 28, 2005 (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                             |
| 10.1  | Strategic Alliance Agreement dated August 4, 2004, by and between the Company and Utek Corporation (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                     |
| 10.2  | Consulting Agreement dated July 7, 2006, by and between the Company and TJM Investments, Inc. (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                          |
| 10.3  | Consulting Agreement dated December 13, 2006, by and between the Company and Charles Oswald (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                            |
| 10.4  | Employment Agreement dated April 28, 2006, by and between the Cargo Connection and William F. O’Connell (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                          |
| 10.5  | Secured Convertible Debenture dated February 13, 2006, issued by the Company to Montgomery.  (Incorporated by reference to the Company's annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                  |
| 10.6  | Voting Proxy dated March 26, 2008, in favor of Jesse Dobrinsky for the 517,500 shares of Series IV Preferred Stock held by Triple Crown. (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                               |
| 10.7  | Convertible Promissory Note, dated March 7, 2006 issued by the Company in favor of Advantage Capital Fund I in the principal amount of $100,000. (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                       |
| 10.8  | HSBC Agreement for Revolving Credit Term Loan dated March 11, 2004, by and between Cargo International and HSBC Bank. (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                  |
| 10.9  | General Security Agreement dated March 11, 2008, between Cargo International and HSBC Bank (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                             |
| 10.10 | Secured Convertible Debenture dated October 1, 2005, issued by the Company to Jesse Dobrinsky, Scott Goodman, and John L. Udell (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                        |
| 10.11 | Lease Agreement dated October 22, 2002, by and between M.D. Hodges Enterprises, Inc. and Cargo Connection for premises located at 2410 Paces Ferry Road, Suite 200, Atlanta, Georgia (Incorporated by reference to the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission on February 14, 2006; SEC File No.                        333-126354) |
| 10.12 | Lease Agreement dated December 15, 2005, by and between CDI and Cargo Connection for the premises located at 600 Bayview Avenue, Inwood New York. (Incorporated by reference to the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission on February 14, 2006; SEC File No. 333-126354)                                                           |
| 10.13 | Lease Agreement dated September 30, 2004, by and between AMB and Cargo Connection for the premises located at 8501 N.W. 17th Street, Suite 102, Miami Florida (Incorporated by reference to the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission on February 14, 2006; SEC File No.                        333-126354)                        |

 

 
|   | 10 |   |
|--------|----|--------|

----

 
| 10.14 | Lease Agreement dated October 12, 2004, by and between Ralston Industries, Inc. and Cargo International for the premises located at 580 N. Cassady Avenue, Columbus, Ohio (Incorporated by reference to the Company’s registration statement on Form SB-2 filed with the Securities and Exchange Commission on February 14, 2006; SEC File No.                        333-126354) |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15 | Securities Purchase Agreement dated December 28, 2005, by and between the Company and Montgomery (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                         |
| 10.16 | Secured Convertible Debenture dated December 28, 2005 issued to Montgomery (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                                               |
| 10.17 | Investor Registration Rights Agreement dated December 28, 2005, by and between the Company and Montgomery (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                |
| 10.18 | Escrow Agreement dated December 28, 2005, by and amongst the Company, Montgomery and David Gonzalez, Esq. (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                |
| 10.19 | Security Agreement dated December 28, 2005 by and between the Company and Montgomery (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 9, 2006; SEC File No. 000-28223)                                                                                                                                     |
| 10.20 | Agreement and Plan of Acquisition dated December 6, 2006, by and between the Company and NMDT (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on December 12, 2006; SEC File No. 000-28223)                                                                                                                          |
| 10.21 | Master Container Storage Agreement dated April 6, 2007, by and between the Cargo Connection and Rexam Beverage Can Company (Incorporated by reference to the Company’s quarterly report Form 10-QSB originally filed with the Securities and Exchange Commission on August 15, 2007.; SEC File No. 000-28223)                                                                          |
| 10.22 | Promissory Note dated April 10, 2007, in the principal amount of $50,000, payable to Parkside, issued by Cargo International (Incorporated by reference to the Company’s quarterly report on Form 10-QSB originally filed with the Securities and Exchange Commission on May 21, 2007; SEC File No. 000-28223)                                                                         |
| 10.23 | Promissory Note dated April 17, 2007, in the principal amount of $100,000, payable to Parkside, issued by Cargo International (Incorporated by reference to the Company’s quarterly report on Form 10-QSB originally filed with the Securities and Exchange Commission on May 21, 2007; SEC File No. 000-28223)                                                                        |
| 10.24 | Agreement for Logistic Services dated April 13, 2007, by and between Cargo International and AIT Worldwide Logistics (Incorporated by reference to the Company’s quarterly report on Form 10-QSB originally filed with the Securities and Exchange Commission on August 15, 2007; SEC File No. 000-28223)                                                                              |
| 10.25 | Waiver Agreement dated May 7, 2007, by and between the Company and Montgomery (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on May 10, 2007; SEC File No. 000-28223)                                                                                                                                               |
| 10.26 | Promissory Note dated June 30, 2007, in the principal amount of $200,000, payable to Target Temporaries, Inc., issued by Cargo International (Incorporated by reference to the Company’s quarterly report on Form 10-QSB originally filed with the Securities and Exchange Commission on November 14, 2007; SEC File No. 000-28223)                                                    |
| 10.27 | Letter Agreement dated as of August 20, 2007, by and between the Company and Fleet (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on September 5, 2007; SEC File No. 000-28223)                                                                                                                                     |
| 10.28 | Term Sheet dated October 29, 2007, by and between WFBA and Cargo Connection (Incorporated by reference to the Company’s quarterly report on Form10-QSB originally filed with the Securities and Exchange Commission on November 14, 2007; SEC File No. 000-28223)                                                                                                                      |
| 10.29 | Senior Secured Convertible Debenture dated November 14, 2007, issued to YA Global (Incorporated by reference to the Company’s quarterly report on Form 10-QSB originally filed with the Securities and Exchange Commission on November 14, 2007; SEC File No. 000-28223)                                                                                                               |
| 10.30 | Account Transfer Agreement dated as of November 20, 2007 between Cargo Connection and WFBA (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on November 27, 2007; SEC File No. 000-28223)                                                                                                                             |

 

 
|   | 11 |   |
|--------|----|--------|

----

 
| 10.31 | Letter Agreement Amendment of the Account Transfer Agreement between the Cargo Connection and WFBA, dated as of November 20, 2007 (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on November 27, 2007; SEC File No. 000-28223)                                   |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32 | Guaranty dated November 20, 2007 by Cargo Connection in favor of WFBA (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on November 27, 2007; SEC File No. 000-28223)                                                                                               |
| 10.33 | Buyout Agreement dated November 20, 2007, by and amongst Cargo Connection, WFBA and Accord (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on November 27, 2007; SEC File No. 000-28223)                                                                          |
| 10.34 | Agreement dated November 21, 2007, by and between Cargo Connection and AMB (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on November 27, 2007; SEC File No. 000-28223)                                                                                          |
| 10.35 | Promissory Note dated December 31, 2007, issued by the Company in the amount of $800,000, payable to EmplifyHR (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 7, 2008; SEC File No. 000-28223)                                                        |
| 1036  | Security Agreement dated December 31, 2007, Company. Cargo International and EmplifyHR (Incorporated by reference by Company's Form 8-K filed with Securities and Exchange Commission on January 7, 2008; SEC File No.: 000-28223)                                                                                                        |
| 10.37 | Guaranty dated December 31, 2007 by and amongst Company, Cargo International in favor of EmplifyHR (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 7, 2008. SEC File No. 000-28223)                                                                    |
| 10.38 | Lease Agreement dated as of January 11, 2008 between Cargo Connection and MD Cargo ORD Property LLC for premises located at 491 Supreme Drive, Bensenville, Illinois (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 15, 2008; SEC File No. 000-28223) |
| 10.39 | Guaranty Agreement issued by the Company as of January 11, 2008 in favor of MD Cargo ORD Property LLC (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 15, 2008; SEC File No. 000-28223)                                                                |
| 10.40 | Termination of Sublease Agreement dated as of January 11, 2008 between Cargo International and Underwing (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on January 15, 2008; SEC File No. 000-28223)                                                             |
| 10.41 | First Amendment to Lease dated as of January 10, 2008 between Cargo Connection and LIT/Hodges Industrial Trust. (Incorporated by reference to the Company’s Form 8-K originally filed with the Securities and Exchange Commission on March 5, 2008; SEC File No. 000-28223)                                                         |
| 10.42 | Lease Agreement dated December 15, 2005, between Cargo International and CDI (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                  |
| 14.1  | Code of Ethics (Incorporated by reference to the Company’s annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008; SEC File No. 000-28223)                                                                                                                                                |
| 21.1  | List of Subsidiaries                                                                                                                                                                                                                                                                                                                      |
| 31.1  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                    |
| 31.2  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                    |
| 32.1  | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer                                                                                                                                                                                                                                                 |

 

 
|   | 12 |   |
|--------|----|--------|

----

 

SIGNATURES

 

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

 

Date. May 22, 2008

 
|   | CARGO CONNECTION LOGISTICS HOLDINGS, INC. |
|--------|-------------------------------------------|

 

 

                    
| By:    |  /s/ Jesse Dobrinsky                           |
|--------|-----------------------------------------------------|
|   | Jesse Dobrinsky, President, Chief Executive Officer |
|   | and Director (Principal Executive Officer)          |
|   |                                                |
|   |                                                |

 

 

 

 

 
| By:    | /s/ Scott Goodman                            |
|--------|----------------------------------------------|
|   | Scott Goodman, Chief Financial Officer       |
|   | Chief Operating Officer and Director         |
|   | (Principal Accounting and Financial Officer) |
|   |                                         |
|   |                                         |

 

 

 

 

 

 

 
|   |  |   |
|--------|--|--------|