Investment Overview

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US Capital Investment Management

FOOD BY RAIL LOGISITICS HOLDINGS, INC.


US Capital Investment Management

INVESTMENT OPPORTUNITY


US Capital Global Securities, LLC (“USCGS”) is offering 100 Membership Units in USCIM Fund XXXI Food by Rail, LLC (“Fund XXXI”), a pooled investment vehicle, on a “best efforts” basis. The Fund XXXI will be managed by San Francisco-based asset management firm US Capital Investment Management, LLC (“USCIM” or the “Manager”), investing in Series A Convertible Preferred Stock of Food by Rail Logistics Holdings, Inc. (“Food by Rail” or the “Company”). The Company intends to use the proceeds raised in this new equity offering to finance the launch, growth and development of the Company, including marketing and business development initiatives, additional employees, operating infrastructure, working capital, and operating reserves.



INVESTMENT TERMS


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SERIES A PREFERRED STOCK TERMS


The Series A Preferred Stock issued by Food by Rail, which Fund XXXI will purchase, is expected to have the following terms:


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COMPANY’S OVERVIEW


Incorporated in May 2017, Food by Rail Logistics Holdings, Inc. is a Delaware corporation, to be headquartered in the Orlando suburb, Celebration, Florida. Food by Rail plans to enter a multi-billion-dollar transportation and logistics market for frozen and refrigerated protein, produce, packaged food and beverages. It intends to be operating as a third-party logistics provider (3PL) of refrigerated boxcars and related services, operating refrigerated boxcar on railroads nationwide. The Company is a holding company, and will have two subsidiaries – Food by Rail Logistics LLC (FBRL) as the operating subsidiary, and Food by Rail Facilities LLC (FBRF) as the facilities company. Both subsidiaries are registered in Florida. Contingent on proper capitalization, Food by Rail intends to begin operations in January 2018, and move under FBRL’s management.


Value Proposition


Food by Rail intends to provide state-of-the-art refrigerated boxcars with a unique stacking system to use more cube capacity. The Company intends to use railroad premium expedited service with faster schedules to be truck competitive. The vision is, using Food by Rail’s services, producers, growers and buyers will benefit from transporting large volumes (up to four truckloads per refrigerated boxcar) of perishable freight, faster, at costs that may be ten percent or more below competitive highway transportation, with a lower carbon footprint, over greater distances. On average, railroads are four times more fuel efficient than trucks, so moving freight by rail instead of truck lowers greenhouse gas emissions by 75% ¹. Additionally, railroads are less affected by weather conditions and road traffic, so customers will benefit from a consistent and timely delivery service.


1. The Environmental Benefits of Moving Freight by Rail, June 2017, available here


Business Launch and Growth Strategy


The Company initially plans to lease 24 72-ft. refrigerated boxcars (if available) from a Texas-based railcar leasing company, for service beginning in early 2018 for use throughout the United States. Additionally, it plans to lease up to 41 54-ft. refrigerated boxcars from a Chicago-based railcar leasing company in 2018, which will need upgrading. The Company also plans to use 72-ft refrigerated boxcars supplied by one or possibly two major western railroads.

The Company intends to hire team members, commission agents, and other professionals with shipper industry relationships to begin marketing the service to industry segments consisting of protein, produce, fruit, refrigerated and dry food products, and frozen imports. Food by Rail will begin developing a network of operations from several western locations to eastern and southeastern destinations, and will also include backhaul² business.

The Company has a list of potential customers known to the management, which Company intends to provide trial services. If satisfied, the Company expects to enter into long-term arrangements. The Company plans to place a long-term lease order for new refrigerated boxcars that are high-tech, allowing the Company to monitor and track refrigerated boxcars’ locations, as well as check the fuel level on the refrigeration units, and adjust the temperature setting while they are moving.


2. To carry freight on a return journey.



CAPITALIZATION CHART


Pre-Financing Capitalization Chart


Pre-Money Valuation: $7,000,000
(Fully Diluted)

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Post-Financing Capitalization Chart


(Fully Diluted)

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SOURCES AND USES OF FUNDS


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Source Notes:

1. Equity contribution for 61,965 shares in Food by Rail at a $7,000,000 valuation. The Company’s current valuation is based on Discounted Cash Flow model and Comparable Company analysis completed by the Company.

Use Notes:

a. This includes all labor costs ($1M), marketing and business development costs ($500K), and other costs ($500K).
b. This includes transaction fees and other costs ($1M) such as office buildout, furniture and fixtures, technology, communications, and intangible assets. Transaction Fees consist of USCGS placement agent fees of $400K of the closing amount raised, and an annual management and administrative services fee of $20K, with initial year’s fee payable from first close proceeds.
c. This includes working capital ($1M), and SCAT (Self Contained Auxiliary Transloaders), cross deck design and facility investment ($200K).


FINANCIAL SNAPSHOT


The Company expects to begin operations on January 1, 2018. Accordingly, no revenues are projected before then. Pro forma data are contingent on a successful and full completion of the proposed $5,000,000 Offering and execution by management team.

Pro Forma (000's)


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Assumptions for the pro forma revenue, and direct and indirect costs have not been reviewed, nor provided by management.
Key risks are listed on page 5 which may impede the achievement of the forecasts and valuation appearing herein.

Notes and Assumptions:

a. Revenue projections are based on a combination of headhaul and backhaul revenues. Headhaul revenues are estimated based on cross-country headhaul rates per car. Backhaul revenues are projected to be on average 75% of the headhaul rate, and the volume of backhaul reloading of refrigerated boxcars is estimated to be approx. 10% of headhaul volume. Beginning in 2020, the Company expects to extend its customer base, and transport goods to and from Mexico and Canada.
b. Direct transport costs represent estimated per headhaul cost. It also includes drayage, transloading, and rail transportation costs.
c. Annual labor costs consist of employee base compensation, plus an average annual raise of 5% and an average annual bonus of 10% of base compensation.
d. This includes occupancy (including utilities), technology, marketing and business development, research and development, insurance, and professional fees. The Company will locate its corporate headquarters in the Orlando suburb, Celebration, Florida. The space will be leased under a 5-year rental agreement with a deposit of $75,000, and monthly rent of $16,000.
e. Other expenses include setup, launch and startup costs, temporary help, unallocated lease costs, and other operating and contingencies.

COMPANY’S MANGEMENT TEAM


Marcus S. Kostolich, Founder, Chairman, President and CEO


Marcus S. Kostolich, has spent 47 years in the transportation and logistics industries, developing and introducing new railroad car technologies to the market place for GATX as well as creating new businesses like the intermodal tank container business (BulkTainer Service) and the flatrack intermodal business (FlatTainer Service) for the Union Pacific Railroad.


Kevin R. McKinney, Executive Vice President - Chief Operating Officer


Kevin R. McKinney, has over 45 years in the transportation and logistics business, with the last 20 years in refrigerated boxcar services for ExpressTrak LLC (an Amtrak affiliate), Green Zephyr as founder and CEO, and most recently as Director of Refrigerated and Regional Marketing for a railroad holding company. Mr. McKinney has a BA in Marketing and Transportation Administration from Michigan State University.


Ralph P. Perrino, CPA, Executive Vice President - Chief Financial Officer


Ralph P. Perrino has served as an Audit Partner with KPMG in their New York operating unit; and Audit Partner-In-Charge with Miami based Rachlin & Cohen CPA.  He was the VP of Finance of Olsten Corporation in Melville, NY for 5 years before becoming CFO of The Catholic Foundation in Central Florida Inc. in Orlando for 4 years.  Mr. Perrino has been President of his own practice in Orlando since 2000.  While attending the State University of New York in Albany, where he received his BA and MS, he attended doctoral courses in economics.


Alexander H. Jordan, Executive Vice President – Transportation and Facility Operations


Alexander H. Jordan, has had experience in marine container and railroad transportation and operations for over forty years. He began his career with Kimberly-Clark Corporation; then received a political appointment to work at the Interstate Commerce Commission; and then held management positions with the Denver & Rio Grande Western Railroad, Southern Pacific Lines, and was Manager of Corporate Affairs and Strategic Planning at Norfolk Southern Railroad. He has worked extensively in strategic planning and intermodal operations, and has been a logistics consultant for international and national railroad and marine container issues. He also served as President and Chief Operating Officer of NYPort Marine Container Terminal company, a subsidiary of a major international marine container terminal company. Most recently he has been heavily involved with railroad and truck transportation of perishable food products, where he worked for several national transportation companies. Mr. Jordan has language ability in French, German, and Dutch.



RISK FACTORS


You should be aware that an investment in Units of the Issuer, and the Issuer's investment in Company Securities, involves considerable risks, including the possible loss of all or a material portion of your investment. Securities sold through private placements are not publicly traded and are intended for investors who do not have a need for a liquid investment. The abbreviated risks set forth below, as well as the detailed risk factors set forth in the Confidential Offering Memorandum and Supplement, are not the only risks facing investors.

The Company is subject to a number of significant risks that could result in a reduction in its value and the value of the Company Securities, potentially including, but not limited to:


  • The Company is pre-revenue, with an unproven business model, a new and unproven enterprise model.
  • The Company’s business may be negatively affected if:
    • The Company is not able to secure additional refrigerated boxcar capacity to grow the business through the railcar leasing and manufacturing industries.
    • The railway companies are not able to provide refrigerated boxcars to the Company.
    • The Perishable Foods industry is affected by natural disasters.
  • The Company will be exposed to general market and economic fluctuations which may impact the demand for its services.
  • The Company will be dependent on the transportation, logistics, and perishable food industry trends.
  • The Company is dependent on market demand and acceptance of a faster and more efficient rail service to move refrigerated boxcars quickly and safely.
  • The Company’s assumptions for the pro forma revenue, and direct and indirect costs have not been reviewed, nor provided by management.

Investors must understand that by purchasing Units they are voluntarily assuming all of the risks of the investment, including any and all risks relating to the Company and Company’s Securities, whether disclosed in this Fund Summary, Offering Memorandum and Supplement or not.


CONFLICT OF INTEREST DISCLOSURES


The Manager and USCGS are affiliated entities. Charles Towle is Co-Managing Partner of the Manager, the Division Head and licensed principal of USCGS, and an indirect stockholder of the Manager and USCGS. Jeffrey Sweeney is Co-Managing Partner of the Manager and is also Chairman, CEO, and the indirect controlling stockholder of the Manager and USCGS. Conflicts of interest may arise in connection with Mr. Towle’s and Mr. Sweeney’s control of both the Manager and USCGS. Investors should be aware that these conflicts of interest, and a number of other conflicts of interest relating to the Manager and its affiliates, are permitted under the terms of the Fund’s offering documents. You should not invest in the Fund unless you are willing to accept these conflicts of interest and the associated risk.

This presentation does not constitute an offer to sell or a solicitation of an offer to buy any security and may not be relied upon in connection with the purchase or sale of any security. Any offer would only be made by means of a formal offering memorandum. No offer or solicitation will be made prior to delivery of a confidential information memorandum, private placement memorandum, or similar offering documents (“Offering Documents”). Offer and sales will be made only in accordance with applicable security laws and pursuant to the Offering Documents, operating agreement, subscription agreement, and other definitive documentation.

This presentation does not purport to be all-inclusive or to contain all of the information that the Recipient may require and is qualified in its entirety by reference to the Offering Documents. This presentation is not a part of or supplemental to the Offering Documents or such definitive documentation. The Offering Documents and any supplements will supersede this Presentation in its entirety. Projections and other forward-looking information as to events that may occur in the future (including projections of revenue, expense, net income and stock performance) are based on information provided by the Issuer and other publicly available information as of the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. The Recipient should not rely on any information contained herein. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation. Actual results will vary from the projections and such variations may be material, including the possibility that an investor may lose some or all or its invested capital.

This presentation is confidential. By acceptance hereof, you agree that (i) the information must not be used, reproduced, distributed to others without the prior written consent; (ii) you will maintain the confidentiality of this information, not already in the public domain; and (iii) you will only use the information contained herein for informational purposes.



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Securities offered through US Capital Global Securities, LLC, member FINRA, SIPC.

IMPORTANT: All investing is risky, and no investor should decide to commit funds without first consulting with a competent professional adviser. Some or all invested funds can be lost. The past performance of any investment, investment strategy or investment style is not indicative of future performance. Future results may vary, and are not guaranteed. The value of investments and their income may increase or decrease, and a loss of principal – including all principal – may occur.

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