-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IYewAoaMjuRqB31NGo0oA7eKTLI5vpUgemi3RxLZ45PlI6AXl2S/fyh0sFgk9XpH 4bWcViIvAmvxuLwvQqOgwA== 0000950134-02-000369.txt : 20020413 0000950134-02-000369.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950134-02-000369 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011130 FILED AS OF DATE: 20020116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELITE LOGISTICS INC CENTRAL INDEX KEY: 0000095284 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 910843203 STATE OF INCORPORATION: ID FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29825 FILM NUMBER: 2510979 BUSINESS ADDRESS: STREET 1: 1201 NORTH AVENUE H CITY: FREEPORT STATE: TX ZIP: 77541 BUSINESS PHONE: 4092300222 FORMER COMPANY: FORMER CONFORMED NAME: SUMMIT SILVER INC DATE OF NAME CHANGE: 20000131 10QSB/A 1 d93490ae10qsba.txt AMENDMENT NO. 1 TO FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-QSB/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended NOVEMBER 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ________________ Commission File Number 000-29825 ELITE LOGISTICS, INC. (Exact Name of Registrant as Specified in its Charter) Idaho 91-0843203 (State of Incorporation) (I.R.S. Employer Identification No.) 1201 North Avenue H, Freeport, Texas 77541 (Address of Principal Executive Offices) (Zip Code) (979) 230-0222 (Registrant's Telephone Number) Check whether the (issuer) (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of January 10, 2002, the number of shares outstanding of the registrant's class of common stock was 15,650,429. Transitional Small Business Disclosure Format (Check one): Yes[ ] No: [X] This Form 10QSB/A has been amended to make corrections for typographical mistakes included within the original filing on page 3, page 4, and page 5. These corrections had no financial impact on the consolidated financial statements included herein. ELITE LOGISTICS, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
Page Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets as of November 30, 2001 and May 31, 2001 2 Consolidated Statements of Operations for the Three Months and Six Months ended November 30, 2001 and 2000 3 Consolidated Statement of Stockholders' Equity (Deficit) for the Six Months ended November 30, 2001 4 Consolidated Statements of Cash Flows for the Six Months ended November 30, 2001 and 2000 5 Notes to the Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Operations 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 18
PART I ITEM 1. FINANCIAL STATEMENTS. ELITE LOGISTICS, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
November 30, May 31, 2001 2001 ------------- ------------- ASSETS CURRENT ASSETS Cash $ 21,263 $ 34,591 Accounts receivable, net of an allowance for doubtful accounts of $15,429 and $70,294 at November 30, 2001 and May 31, 2001, respectively 51,588 133,542 Inventory 104,943 237,745 Other current assets 3,482 1,193 ------------- ------------- TOTAL CURRENT ASSETS 181,276 407,071 PROPERTY AND EQUIPMENT Computer equipment 140,538 141,539 Software 118,788 118,788 Furniture and equipment 63,978 63,978 Less: accumulated depreciation and amortization (194,972) (169,564) ------------- ------------- TOTAL PROPERTY AND EQUIPMENT, NET 128,332 154,741 PATENTS 82,875 62,592 ------------- ------------- TOTAL ASSETS $ 392,483 $ 624,404 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 334,803 $ 266,902 Accrued expenses 126,334 66,342 Leases payable 33,784 35,255 Accrued salaries 88,644 48,356 Accrued preferred stock dividends 53,622 43,729 Convertible promissory notes payable, net of discount 679,646 70,000 Shareholder loans payable 218,854 205,373 Notes payable 5,546 93,736 ------------- ------------- TOTAL CURRENT LIABILITIES 1,541,233 829,693 ------------- ------------- LONG-TERM LIABILITIES Leases payable, net of current portion 9,439 24,017 ------------- ------------- TOTAL LIABILITIES 1,550,672 853,710 ------------- ------------- REDEEMABLE PREFERRED STOCK 244,500 244,500 ------------- ------------- STOCKHOLDERS' EQUITY (DEFICIT) Common stock - $0.01 par value: 50,000,000 shares authorized, 13,171,048 and 13,085,258 issued and outstanding at November 30, 2001 and May 31, 2001, respectively 131,710 130,853 Warrants 892,993 592,063 Additional paid in capital 2,440,457 2,431,314 Accumulated deficit (4,830,724) (3,598,036) Treasury stock, 18,000 shares and 15,000 shares at November 30, 2001 and May 31, 2001, respectively, at cost (37,125) (30,000) ------------- ------------- TOTAL STOCKHOLDERS' DEFICIT (1,402,689) (473,806) ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 392,483 $ 624,404 ------------- -------------
See accompanying notes to consolidated financial statements. 2 ELITE LOGISTICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended November 30, November 30, -------------------------------- -------------------------------- 2001 2000 2001 2000 -------------- -------------- -------------- -------------- Revenues $ 145,105 $ 499,413 $ 442,074 $ 671,634 Cost of revenues 130,381 401,694 373,613 576,638 -------------- -------------- -------------- -------------- Gross profit 14,724 97,719 68,461 94,996 Expenses Marketing 84,644 126,601 186,482 247,033 Administrative expenses 439,080 344,247 756,024 540,152 Research and development 109,347 117,610 223,303 225,683 -------------- -------------- -------------- -------------- Total expenses 663,071 588,458 1,165,809 1,012,868 -------------- -------------- -------------- -------------- Operating loss (618,347) (490,739) (1,097,348) (917,872) -------------- -------------- -------------- -------------- Other income (expense) Loss on sale of equipment -- -- -- (608) Loss on exchange of investments -- -- -- (19,400) Interest income 28 180 74 914 Interest expense (108,266) (1,949) (133,207) (3,448) Other income 131 -- 7,686 -- -------------- -------------- -------------- -------------- Total other income (expense) (108,107) (1,769) (125,447) (22,542) -------------- -------------- -------------- -------------- Loss before income taxes (726,454) (492,508) (1,222,795) (940,414) Income taxes -- -- -- -- -------------- -------------- -------------- -------------- Net loss $ (726,454) $ (492,508) $ (1,222,795) $ (940,414) -------------- -------------- -------------- -------------- Basic and diluted loss per common share $ (0.06) $ (0.04) $ (0.09) $ (0.08) Basic and diluted weighted average number of common shares outstanding 13,154,538 12,637,533 13,127,684 12,428,043
See accompanying notes to consolidated financial statements. 3 ELITE LOGISTICS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
Common Stock --------------------------- Total Additional Stockholders' Number of Paid in Accumulated Treasury Equity Shares Amounts Warrants Capital Deficit Stock (Deficit) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at May 31, 2001 13,085,258 $ 130,853 $ 592,063 $ 2,431,314 $(3,598,036) $ (30,000) $ (473,806) Issuance of 85,790 shares of common stock and 550,000 warrants for services, net of expenses of $111 85,790 857 100,450 77,816 -- -- 179,123 Issuance of 660,000 warrants in conjunction with the issuance of convertible -- -- 131,807 -- -- -- 131,807 promissory notes Issuance of 330,000 warrants in conjunction with the repricing of warrants -- -- 68,673 (68,673) -- -- -- Purchase of treasury stock, 3,000 shares at cost -- -- -- -- -- (7,125) (7,125) Preferred cumulative -- -- -- -- (9,893) -- (9,893) dividends Net loss -- -- -- -- (1,222,795) -- (1,222,795) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at November 30, 2001 13,171,048 $ 131,710 $ 892,993 $ 2,440,457 $(4,830,724) $ (37,125) $(1,402,689) ----------- ----------- ----------- ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. 4 ELITE LOGISTICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended November 30, --------------------------- 2001 2000 ------------ ------------ Cash flows from operating activities: Net loss $ (1,222,795) $ (940,414) Adjustments to reconcile net loss to net cash used by operating activities Depreciation 25,407 19,820 Amortization of convertible note discount 81,453 Allowance for doubtful accounts (60,894) -- Common stock issued for services 78,673 197,732 Warrants issued for services 100,450 -- Notes payable issued for services -- 62,538 Loss on exchange of investments -- 19,400 Investments exchanged for services -- 5,000 Loss on sale of equipment 1,002 608 Changes in operating assets and liabilities Accounts receivable and other current assets 140,559 11,211 Inventory 132,802 215,497 Accounts payable 67,901 (504,313) Accrued liabilities 59,992 115,278 Accrued salaries 40,288 -- ------------ ------------ Net cash used in operating activities (555,162) (797,643) ------------ ------------ Cash flows from investing activities: Purchase of property, equipment, and software -- (9,955) Proceeds from sale of property and equipment -- 591 Proceeds from note receivable -- 10,000 Patent costs (20,283) (7,009) ------------ ------------ Net cash (used in) provided by investing activities (20,283) (6,373) ------------ ------------ Cash flows from financing activities: Issuance of common stock, net of expenses -- 834,436 Exercise of common stock options -- 1,000 Payments on leased equipment (16,049) (2,616) Payments on notes payable (102,474) (101,236) Proceeds from notes payable 14,284 140,872 Proceeds from convertible promissory notes payable 660,000 -- Payments on shareholder notes payable (994) (12,118) Proceeds from shareholder loans payable 14,475 51,000 Purchase of treasury stock (7,125) -- ------------ ------------ Net cash provided by financing activities 562,117 911,338 ------------ ------------ Net increase (decrease) in cash (13,328) 107,322 Cash, beginning of period 34,591 89,334 ------------ ------------ Cash, end of period $ 21,263 $ 196,656 ------------ ------------
See accompanying notes to consolidated financial statements. 5 NOTE 1 - BUSINESS ORGANIZATION The financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, the results of operations and cash flows for the interim periods on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results to be expected for a full year. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-KSB for the year ended May 31, 2001 filed with the Securities and Exchange Commission on August 29, 2001. Nature of Operations Elite Logistics, Inc. (hereinafter "ELI" or the "Company"), an Idaho corporation, through its wholly owned subsidiary, Elite Logistics Services, Inc. ("Elite"), is in the telematics business. Telematics is the broad term used to describe products and services enabled by the convergence of communications (including wireless and the Internet) and Information Technology in the automotive industry. Elite is a telematics services provider (TSP) providing hosted Internet-based telematics services including asset tracking, access to roadside assistance, automatic collision notification, stolen vehicle recovery and a variety of remote vehicle management solutions. Elite designs and sells the PageTrack(R) range of intelligent vehicle management hardware. PageTrack(R), which includes a Global Positioning Systems (GPS) receiver, links a vehicle, or other asset, to Elite's Internet servers via ReFLEX(TM) two-way wireless telemetry networks. The Company's products and services are marketed nationally and in certain international markets through a dealer/distributor channel. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany balances and transactions have been eliminated upon consolidation. 6 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reclassifications Certain prior period amounts have been reclassified to conform to current period presentation. Such reclassifications had no affect on net loss or equity (deficit). Basic and Diluted Loss Per Share In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share" basic earnings (loss) per share is computed using the weighted average number of common shares outstanding. Due to the Company having a net loss during the three and six month periods ended November 30, 2001 and November 30, 2000, diluted net loss per share is the same as basic net loss per share as the inclusion of common stock equivalents would be antidilutive. New Accounting Standards In July 2001, the Financial Accounting Standards Board issued SFAS 141, "Business Combinations", and SFAS 142, "Goodwill and Other Intangible Assets". SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". The provisions of SFAS 141 are effective immediately. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001. Earlier adoption is permitted for entities with fiscal years beginning after March 15, 2001 but not required. SFAS 141 will require that upon adoption of SFAS 142, the Company evaluate its existing intangible assets and make any necessary reclassifications in order to conform with the new criteria in SFAS 141. Upon adoption of SFAS 142, the Company plans to reassess the useful lives and residual values of all recorded intangible assets, and make any necessary amortization period adjustments by December 31, 2001. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 by December 31, 2002. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle. Upon adoption of SFAS 141 and SFAS 142, the Company does not anticipate a material impact to its financial statements. NOTE 3 - DEBT Capital leases Elite has capital leases with various leasing companies payable monthly at $3,473, including interest at rates ranging from 14% to 24%. Capital leases outstanding as of November 30, 2001 were $43,223. Shareholder loans payable The Company has cash loans from its shareholders in the amount of $218,854 at November 30, 2001. The notes bear interest at an annual rate of 5%, are unsecured and mature during the fourth quarter of 2002. Notes payable Elite has unsecured notes payable with American Express in the amount of $5,546 at November 30, 2001 payable monthly at $3,221, including interest at a rate of 15.9%. Each note payable has a maturity of six months from the date of each note's origination. Factoring agreement On June 21, 2000, the Company entered into a factoring agreement with a national banking organization. Under the agreement, the bank advances the Company 80% of each receivable purchased up to a 7 maximum of $750,000, subject to full recourse to the Company and renewal on an annual basis. Finance charges equal 1.25% per month of the average daily account balance outstanding and an administrative fee of 0.25% of each purchased receivable. At November 30, 2001, there is no outstanding balance owed under the factoring agreement. Convertible promissory notes In July, 2001, the Company entered into an agreement with an investment capital group to raise interim capital for the company through an offering of 10% convertible promissory notes (the "Convertible Notes"). Each $10,000 investment also provides for the issuance of 10,000 warrants to purchase common stock of the Company exercisable at any time within five years from the date of issuance at a price of $0.625 per share. At maturity, all unpaid principal and interest may be convertible into units of an equity private placement of the Company's common stock. Unless converted, principal and interest are due on December 31, 2001. At the Company's option, the maturity date of the Convertible Notes may be extended under similar terms to March 31, 2002, upon giving proper written notice. If the Company elects to extend the maturity date to March 31, 2002, the Company is required to issue to note holders of record at December 31, 2001 an additional 10,000 warrants for each $10,000 investment exercisable at any time within five years from the date of issuance at a price of $0.625 per share. The Company opted not to extend the Convertible Notes. See Note 7, "Subsequent Events." 8 NOTE 3 - DEBT (CONTINUED) Convertible promissory notes (Continued) During the six months ended November 30, 2001 the Company raised $660,000 through the issue of the Convertible Notes. In conjunction with the issuance of these Convertible Promissory Notes the Company issued 660,000 warrants which would provide total cash proceeds to the Company of $412,500 ($0.625 per share) if all of the warrants are exercised. A debt discount of $131,807 was recorded in conjunction with the issuance of these warrants, of which $81,453 has been amortized to interest expense during the six months ended November 30, 2001 (see Note 4). NOTE 4 - EQUITY Common Stock From time to time, in order to fund operating activities of the Company, common stock is issued for cash or in exchange for goods or services. Generally, offerings of the Company's common stock often include warrants to acquire common stock of the Company at fixed exercise prices. Occasionally, depending on the nature of the offering and restrictions imposed on the shares being acquired, the exercise price of the warrant may be below the fair market value of the underlying common stock on the date of issuance. During the six months ended November 30, 2001, the Company issued 85,790 shares of common stock in exchange for services valued at $78,673. Warrants During October 2000, provisions for a private placement of the Company's common stock to an investor provided for the issuance of 555,556 warrants with an exercise price of $2.70 per share and contingent penalty warrants which are to be issued in the future in the event that the Company's common stock is not registered prior to January 13, 2001. Since October 2000, under the provisions of this offering, 200,000 penalty warrants were issued at an exercise price of $1.35 per share. At the request of the investor, the issuance of the remaining 400,000 penalty warrants have been waived in lieu of a reduced exercise price of the original 555,556 warrants previously issued. On August 2, 2001 the Company agreed to amend the exercise price per share of the $2.70 original warrants and the $1.35 penalty warrants to $0.625 per share. Additionally, the Company issued 330,000 warrants with an exercise price of $0.625 per share to this investor to waive their right to veto subsequent issues of the Company's common stock. The Company recorded an adjustment of $68,673 to the original proceeds of the October 2000 private placement offering in conjunction with the issuance of these additional warrants. During the six months ended November 30, 2001, the Company issued 1,210,000 warrants in conjunction with an offering of 10% Convertible Promissory Notes. This included 660,000 warrants issued to holders of the Convertible Promissory Notes and a further 550,000 warrants issued to the placement agent and a consultant who assisted in structuring the Convertible Note offering. A non-cash charge of $100,450 arising from the issuance of these warrants was recorded against general and administrative expenses. During the six months ended November 30, 2001 no warrants were exercised. The fair value of each warrant granted is estimated on the grant date using the Black-Scholes Option Price Calculation. The following assumptions were made in estimating fair value. The risk-free interest rate range was 2.09% - 3.82%, volatility was 30% and the expected life of the warrants is five to seven years. The fair value of warrants issued during the six months ended November 30, 2001 was estimated to be $300,930. 9 NOTE 4 - EQUITY (CONTINUED) Treasury Stock Due to possible violations of Blue Sky laws in certain states in which the Company's common stock had been offered for possible sale by a broker, the Company determined to contact shareholders in those states and offer to reacquire those shares at the original offering price. Accordingly, during the year ended May 31, 2001, the Company reacquired 15,000 shares of common stock at a cost of $30,000, or $2.00 per share. During the six months ended November 30, 2001, an additional 3,000 shares were reacquired at a cost of $7,125 or $2.375 per share. NOTE 5 - SUPPLEMENTAL CASH FLOW DISCLOSURES For cash flow purposes, various, non-cash transactions have been entered into by the Company during the six month periods ended November 30, 2001 and 2000. These items are as follows:
Six Months Ended November 30, --------------------------- 2001 2000 ------------ ------------ Supplemental cash flow disclosures: Cash paid for interest $ 2,725 $ -- Non cash transactions: Common stock issued for services 78,673 197,732 Common stock issued for equipment -- 10,681 Warrants issued for services 100,450 -- Notes payable issued for services -- 62,538 Investments exchanged for services -- 5,000
NOTE 6 - GOING CONCERN The Company has a history of net losses and continues to experience negative cash flows from operations. Management will continue to attempt to raise capital resources and may do so through a registered offering of securities or through additional private offerings of debt or common stock of the Company. The Company is dependent on raising capital resources from outside sources and will continue to do so until such time as the Company generates revenues and cash flows sufficient to maintain itself as a viable entity. Management believes that these actions will assist the Company in reaching the point of profitability from operations and enable the Company to raise further capital from private placements or public offerings. If successful, these actions will serve to mitigate the factors which have raised substantial doubt about the Company's ability to continue as a going concern and increase the availability of resources for funding of the Company's current operations and future market development. NOTE 7 - SUBSEQUENT EVENTS Since November 30, 2001, the Company has received an additional $496,500 of proceeds from the issue of 10% Convertible Promissory Notes. The Company elected not to extend the terms of the notes at December 31, 2001, and $1,156,500 of Convertible Promissory notes were converted into 2,431,381 shares of the common stock of the Company. In addition the Company issued 1,215,691 warrants in conjunction with the conversion of these notes as stipulated by the note agreement. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein should be read in conjunction with the unaudited consolidated financial statements and notes to the consolidated financial statements of Elite Logistics, Inc. and subsidiary included in Item 1 above and the Company's Audited Consolidated Financial Statements included in the Company's Annual Report on Form 10K-SB for the year ended May 31, 2001. All significant inter-company balances and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" refers to the continuing operations of the Company. Since inception, the Company has incurred significant losses and as of November 30, 2001 has an accumulated deficit of $(4,830,724). The Company's auditors issued a going concern opinion in connection with their audit of the Company's consolidated financial statements as of May 31, 2001, due to substantial doubt that the Company can continue as an on-going business for the next twelve (12) months, unless the Company obtains additional capital to cover its operating expenses. In order to meet its capital needs, the Company will have to continue to raise capital from sources other than the sale of its products and services. The Company has historically raised its cash through private placements. There is no assurance that the Company will be able to raise the additional funds it needs to continue in business. The Company will cease operations if it is unable to raise additional funds until it becomes a viable entity. RESULTS OF OPERATIONS A significant amount of management's time during the quarter was devoted to efforts to secure additional funding for the Company, which diverted management resources from sales and operations. The Company has been constrained by a lack of funding and current economic conditions to effectively undertake the marketing activities necessary to generate sales growth. The Company anticipates that management will continue to be required to devote significant resources to raising capital for the immediate future. The events of September 11 had a negative impact for the economy in general and this impacted Elite's existing and prospective customers. In particular, some promising strategic alliance negotiations were deferred, our ability to raise capital was adversely impacted and some customers were adversely impacted. Management believes that increased focus on vehicular security, security of sensitive cargoes (including hazardous materials and munitions transportation) and homeland defense may create opportunities for the Company's systems. Net revenues for the three and six month periods ending November 30, 2001 were $145,105 and $442,074, respectively, compared to $499,413 and $671,634 for the three months and six months ending November 30, 2000, respectively. Revenues include sales of the Company's PageTrack(R) hardware to distributors, monitoring and control service contracts and miscellaneous third party hardware sales. The Company continues to have a lack of working capital to fund sales and marketing activities and inventory purchases. This and the condition of the economy has constrained the company's ability to generate revenues. Revenues declined 70.9% during the three months ended November 30, 2001 compared to the same quarter last year and 34.2% for the six month period ended November 30, 2001 compared to the same period last year. Cost of revenues for the quarter ending November 30, 2001 were $130,381 compared to $401,694 for the quarter ending November 30, 2000 a decrease of 67.5% . The cost of revenues for the six month period ending November 30, 2001 were $373,613 compared to $576,638 for the period ending November 30, 2000,a decrease of 35.2%. Cost of revenues includes the manufactured cost of our PageTrack(R) products, wireless telemetry network services, internet connectivity and the costs of operating Elite's 24-hour Control Center. The decrease in cost of revenues for the three months and six months periods reflects the decline in sales for the year. Gross profit for the three months ending November 30, 2001 was $14,724 compared to $97,719 during the three months ending November 30, 2000 while gross profit for the six month period ending November 30, 2001 and 2000 was $68,461 and $94,996, respectively. Gross profit includes margins on our PageTrack(R) products and the telematics services fees offset by the costs of Internet connectivity and operating Elite's 24-hour Control Center. The significant decline in gross profit margin for the quarter ending November 30, 2001 (10.1%) compared to the same quarter in 2000 (19.6%) was due to one-time firmware changes to the communications module provided by the module manufacturer and installed by Elite. As a percent of revenues, gross profit for the six month period ended November 30, 2001 was 15.5% compared to 14.1% during the six month period ended November 30, 2000. The slight increase in 11 the gross profit margin reflects the higher proportion of telematics services revenues compared to hardware revenue in the overall sales mix, offset by the increased cost due to firmware changes in the current quarter. The control center operations costs are semi-fixed and will therefore tend to decrease as a percent of revenue if and when the number of subscribers to our service increases. If the Company is able to increase volumes, this will also lead to significant reductions in the manufactured cost per hardware unit. Assuming the Company is able to maintain its current sales prices, gross profit margins could increase. Sales and marketing expenses for the three and six month periods ending November 30, 2001 were $84,644 and $186,482, respectively compared to $126,601 and $247,033, respectively during the three and six month periods ended November 30, 2000. Sales expenses consist primarily of compensation for our sales and marketing personnel, advertising, marketing literature, trade show and other promotional costs. Costs decreased 33.1% for the quarter and 24.5% for the six months compared to the same periods last year due primarily to a decrease in salary expense resulting from staff reductions and voluntary reductions in management compensation. The Company expects that sales and marketing expenses will increase in absolute dollars in future periods due to expanded efforts to market and promote its products and services both domestically and internationally. General and administrative ("G&A") expenses for the three and six month periods ended November 30, 2001 were $439,080 and $756,024, respectively compared to $344,247 and $540,152, respectively for the three and six month periods ended November 30, 2000. G&A expenses consist primarily of compensation for personnel and payments to outside contractors for general corporate functions, including finance, legal fees, information systems, human resources, facilities, general management, bad debt expense and the Company's occupancy costs and other overhead. The increase of 27.5%for the quarter and 40% for the six months ending November 30, 2001 was primarily due to an increase of $84,336 and $228,584 in offering fees and consulting and professional expenses primarily related to capital sourcing activities. The Company expects that G&A expenses will continue to increase as it hires additional personnel and incurs additional expenses relating to the growth of its business, such as costs associated with increased infrastructure and maintaining its status as a publicly traded company. However, the Company seeks to hold such increases to less than the rate of revenue growth and expects that G&A will decrease as a percentage of revenue. Research and development expenses for the three and six month periods ending November 30, 2001 were $109,347 and $223,303, respectively compared to $117,610 and $225,683 for the three and six month periods ending November 30, 2000, respectively. Research and development expenses consist primarily of compensation for the Company's research and development personnel, network operations and, to a lesser extent, depreciation on equipment used for research and development. The Company does not make an allocation of its occupancy costs. Costs decreased 7% for the quarter and 1% for the six months ending November 30, 2001 compared to the same periods last year due primarily to lower purchases of components for testing and development. The Company expects that, subject to funding, research and development expenses will increase in absolute dollars in future periods as the Company develops new and enhanced telematics products and services to meet a variety of market opportunities. Other income (expense) for the three and six month periods ending November 30, 2001 were $(108,107) and $(125,447), respectively compared to $(1,769) and ($22,542) for the three and six month periods ended November 30, 2000, respectively. The increase is primarily due to increased interest expense related to the Company's financing obligations, which include borrowings under equipment loans, short-term loans from American Express, a factoring agreement, capital lease obligations, shareholder loans, and convertible promissory notes, inclusive of the amortization of debt discount. CASH FLOW FOR SIX MONTHS ENDING NOVEMBER 30, 2001 Net cash used in operating activities was $555,162 for the six months ending November 30, 2001. Net cash used for operating activities was primarily the result of the net loss before changes in operating assets and liabilities of $(996,704), offset by an increase in accounts payable of $67,901, an increase in accrued liabilities and salaries of $100,280 and reductions in accounts receivable and inventory of $273,361. The reduction in accounts receivable and inventory reflects the lower levels of operations as 12 well as tighter credit control and inventory management to conserve cash flow. The increase in accrued liabilities is primarily a result of professional services fees related to the Convertible Note offering. Net cash used in investing activities of $20,283 consists of patent application and acquisition costs. The Company recently acquired a patent (#5,712,899), issued in 1998, covering the transmission over a cellular network of location information from a vehicle to a base station operator and the communication of information to the mobile user via voice circuit. This patent covers a "call center centric" business model for the provision of telematics services. This patent also covers cell phone handsets that incorporate a GPS unit for the provision of E-911 services, emergency response, roadside assistance or concierge services. The FCC has mandated the general availability of E-911 services commencing late 2001. These may or may not be based on the Elite's technology, and it is therefore not possible to say if license revenue will accrue to the Company. Elite remains alert for the potential to acquire additional patents in the telemetry and telematics arenas. Elite also has two patents pending that cover its Internet-centric machine-to-machine telematics business model ("the PageTrack Patent") and an end-to-end logistics management system ("the logistics patent"). The International Patent examiner has advised Elite that key claims made in our PageTrack patent will be allowed. As a result, management is optimistic regarding the potential for allowance of these claims in the USA. Elite is currently negotiating with the patent office regarding the logistics patent and Elite cannot be sure at this stage which claims will be allowed or whether this patent will be issued at all. Elite intends to file additional patent applications in the telemetry and telematics arenas in order to protect proprietary technology development. Net cash provided by financing activities during the six month period ending November 30, 2001 was $562,117, which comprised net proceeds from the issuance of Convertible Promissory Notes of $660,000 offset by repayments on prior borrowings of $119,517 and the acquisition of treasury stock in the amount of $7,125. The Company currently depends on cash from financing activities to sustain its business operations and this is subject to significant constraints as described below. LIQUIDITY AND CAPITAL RESOURCES Since inception, the Company has financed its operations primarily through the private placement of its common stock, loans from shareholders, equipment financing, lines of credit, short-term loans and deferral of employee compensation (of which $244,500 was converted to Preferred Stock during fiscal year 2000). The Company does not anticipate positive cash flow from operations until it achieves an installed base of around 25,000 units (the current installed base is approximately 4,147 unit) or monthly sales of 2,250 units (current monthly volume is approximately 200 units). Subject to availability of the necessary capital funding, the Company expects to achieve volumes in excess of 2,000 units per month and a positive cash flow within the 2002 fiscal year, but there can be no assurance that the Company will achieve this target. The Company's business plan is based on marketing its telematics products and services through a national and international distribution channel of PageTrack(R) dealers and distributors. The plan requires hiring additional personnel for sales, marketing, customer support and technical support. The Company estimates a minimum of $3,000,000 in additional capital is required to fund its current business plan to the point of positive cash flow from operations. There can be no assurance that the Company will be successful in obtaining any such funds on terms acceptable to it, if at all. In the event that the Company is unable to secure such additional funding, management would attempt to downsize the business so as to enable the Company to survive and grow at a slower pace. Failure to capitalize on current market opportunities could allow competitors to overtake the Company and significantly impair the long-term growth and value of the Company. The Company is currently significantly constrained by its lack of capital. It has historically raised capital through the private placement of its common stock. It is also possible that the Company may register its common stock or preferred stock for sale to the public; however, turmoil in the equity markets has greatly impaired the Company's access to such funding opportunities. If the Company were to register its common stock or preferred stock for sale, there can be no assurance that market conditions would facilitate a successful sale. The Company has commenced negotiations with several strategic partners 13 to determine if funding will be possible. The Company has also retained a financial advisor to assist in evaluating funding options available. The Company will continue to utilize its factoring agreement for eligible receivables, to accelerate cash flow from sales. The Company, through its principal shareholders, has borrowed funds to operate the Company. The Company has also explored opportunities to obtain a working capital debt facility, including eligibility for access to US Government programs that provide working capital assistance to exporters and debt facilities offered by Small Business Investment Companies. Management is also exploring avenues to increase sales in order to fund a greater amount of operations from cash flow. In July 2001, the Company entered into an agreement with an investment capital group to raise interim capital for the company through an offering of 10% convertible promissory notes (the "Convertible Notes"). Each $10,000 investment also provides for the issuance of 10,000 warrants to purchase common stock of the Company at a price of $0.625 per share exercisable at any time within five years from the date of issuance. Unless converted, principal and interest are due on December 31, 2001. At maturity, all unpaid principal and interest may be convertible into units of an equity private placement of the Company's common stock. At the Company's option the maturity date of the Convertible Notes may be extended under similar terms to March 31, 2002, upon giving proper written notice. If the Company elects to extend the maturity date to March 31, 2002 the Company is required to issue to note holders of record at December 31, 2001 an additional 10,000 warrants for each $10,000 investment exercisable at any time within five years from the date of issuance at a price of $0.625 per share. The Company opted not to extend the Convertible Notes. See Note 7, "Subsequent Events." During the six months ended November 30, 2001 the Company raised $660,000 through the issue of the Convertible Promissory Notes. In conjunction with the issuance of these Convertible Promissory Notes the Company issued 660,000 warrants which would provide total cash proceeds to the Company of $412,500 ($0.625 per share) if all of the warrants are exercised. A debt discount of $131,807 was recorded in conjunction with the issuance of these warrants, of which $81,453 has been amortized to interest expense during the six months ended November 30, 2001. Since November 30, 2001, the Company has received an additional $496,500 of proceeds from the issue of 10% Convertible Promissory Notes. The Company elected not to extend the terms of the notes at December 31, 2001, and $1,156,500 of Convertible Promissory notes were converted into 2,431,381 shares of the common stock of the Company. In addition, the Company issued 1,215,691 warrants in conjunction with the conversion of these notes as stipulated by the note agreement. Until such time as the Company has successfully completed additional funding arrangements, and is cash flow positive from operations, it remains at significant risk from its lack of capitalization. It is highly likely that our shareholders will incur additional dilution as a result of future fundings involving issuance of common stock or common stock derivatives. During June 2000, the Company entered into a factoring agreement with a national banking organization. The bank will advance the Company 80% of each receivable purchased up to a maximum of $750,000, subject to full recourse to the Company and renewal on an annual basis. Finance charges equal 1.25% per month of the average daily account balance outstanding and an administrative fee of 0.25% of each purchased receivable. At November 30, 2001, the Company has no contingent amounts owed under this factoring agreement. The Company has no material commitments for capital expenditures. Subject to the funding constraints described above, the Company anticipates that if it can acquire capital, there will be an increase in the rate of capital expenditures consistent with its anticipated growth in operations, infrastructure and personnel. The Company expects to add web-based servers and telecommunications equipment to service increases in the customer base. If, as, and when the number of personnel increases, the Company foresees that it would add computer hardware resources and expand its primary office facility. If sales increase, the Company will need to fund higher inventory levels to support this growth. The Company may also use cash to acquire or license technology, products or businesses related to its current business. In addition, 14 the Company anticipates that it will continue to experience growth in its operating expenses commensurate with growth in sales and that its operating expenses will be a material use of its cash resources for the foreseeable future. FORWARD-LOOKING STATEMENTS Except for historical information contained herein, certain other matters discussed herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, that address future activities, events or developments, including such things as future revenues, projected break-even points, ability to raise capital through private or public offerings, product development, market acceptance, responses from competitors, capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of Elite Logistics, Inc., and its subsidiaries' business and operations, plans, references to future success and other such matters, are forward-looking statements. The words "anticipates," "believes," "estimates," "expects," "plans," "intends," "should," "seek," "will," and similar expressions are intended to identify these forward-looking statements, but are not the exclusive means of identifying them. These statements are based on certain historical trends, current conditions and expected future developments as well as other factors we believe are appropriate in the circumstances. However, whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties that may cause actual results to differ materially, our success or failure to implement our business strategy, our ability to successfully market our on-line location, tracking and logistics management concept, changes in consumer demand, changes in general economic conditions, the opportunities (or lack thereof) that may be presented to and pursued by us, changes in laws or regulations, changes in technology, the rate of acceptance of the Internet as a commercial vehicle, competition in the online logistics management business and other factors, many of which are beyond our control. Consequently, all of the forward-looking statements made in this Report are qualified by these cautionary statements and there can be no assurance that the actual results we anticipate will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. 15 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS VIP Finance vs. Elite Logistics, Inc. - On September 19, 2001, the Company was served legal notice that a customer had filed claims in court regarding facts and circumstances surrounding a purchase entered into by and between the plaintiff and the Company during August 2000. The plaintiff is seeking actual and punitive damages, post judgment interest and reimbursement of court costs. The Company believes that the claims are without merit and intends to defend this case vigorously. This lawsuit is currently in the discovery phase. ITEM 2. CHANGES IN SECURITIES The following shares were sold pursuant to Section 4(6) of the Securities Act of 1933 (the "Act"). All purchasers were accredited investors as that term is defined in Rule 501 of the Securities Act of 1933.
Shares of Date Common Stock $ Price Consideration Services Warrants $ Price Expiration - ---------- ------------ ---------- ---------------- ---------- ------------ --------- ----------- 9/30/01 15,000 0.73 $ -- $ 10,950 -- -- -- 10/31/01 15,000 0.60 -- 9,000 -- -- -- 10/31/01 2,790 5.38 -- 14,996 -- -- -- 9/07/01 -- -- -- -- 15,000 0.625 9/07/06 9/24/01 -- -- -- -- 30,000 0.625 9/24/06 9/25/01 -- -- -- -- 50,000 0.625 9/25/06 9/26/01 -- -- -- -- 10,000 0.625 9/26/06 9/28/01 -- -- -- -- 5,000 0.625 9/28/06 10/01/01 -- -- -- -- 100,000 0.625 10/01/08 10/01/01 -- -- -- -- 100,000 1.00 10/01/05 10/01/01 -- -- -- -- 100,000 1.25 10/01/05 10/04/01 -- -- -- -- 20,000 0.625 10/04/06 10/08/01 -- -- -- -- 35,000 0.625 10/08/06 10/09/01 -- -- -- -- 10,000 0.625 10/09/06 10/10/01 -- -- -- -- 25,000 0.625 10/10/06 10/15/01 -- -- -- -- 30,000 0.625 10/15/06 10/17/01 -- -- -- -- 45,000 0.625 10/17/06 10/25/01 -- -- -- -- 10,000 0.625 10/25/06 10/26/01 -- -- -- -- 30,000 0.625 10/26/06 11/05/01 -- -- -- -- 10,000 0.625 11/05/06 11/26/01 -- -- -- -- 40,000 0.625 11/26/06 11/30/01 -- -- -- -- 60,000 0.625 11/30/06
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held December 13, 2001 in Freeport, Texas. The purposes of the Annual Meeting were the election of the Board of Directors and the ratification of the Board of Director's selection of independent auditors. Joseph D. Smith, Hanh Nguyen, Richard Hansen, Thien Nguyen and Russell A. Naisbitt were elected to the Board of Directors. There were present at the Meeting, in person or by proxy, stockholders of the Company who were holders of record on November 15, 2001 of 11,550,512 shares of Common Stock or 87.8133% of the total shares of the outstanding Common Stock of the Company, which constituted a quorum. 16 The tabulation of votes for each nominee was as follows:
FOR AGAINST WITHHELD ABSTAIN BROKER NON_VOTE Joseph D. Smith 10,719,460 0 153 0 830,899 0 Hanh Nguyen 10,719,460 0 153 0 830,899 0 Richard Hansen 10,719,460 0 153 0 830,899 0 Thien Nguyen 10,719,460 0 153 0 830,899 0 Russell A Naisbitt 10,719,460 0 153 0 830,899 0
Additionally, the shareholders voted to ratify the Board of Director's selection of Pannell Kerr Forster of Texas P.C. as the Company's independent auditors for the fiscal year ended May 31, 2002.
The tabulation of votes for the proposal to ratify the selection of Pannell Kerr Forster of Texas P.C. was as follows: FOR AGAINST WITHHELD ABSTAIN BROKER NON-VOTE 10,719,460 0 146 0 830,864 0
ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS See the Index to Exhibits (B) REPORTS ON FORM 8-K During the three months ended November 30, 2001 there were no reports filed on Form 8-K. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons, in the capacities and on the dates indicated below, have signed this report. ELITE LOGISTICS SERVICES, INC. Name Title Date - ------------------------------------ --------- -------------------- /s/ Joseph D. Smith CEO January 14, 2002 - ------------------------------------ Joseph D. Smith /s/ Russell A. Naisbitt CFO January 14, 2002 - ------------------------------------ Russell A. Naisbitt 18 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION 3.1 * Articles of Incorporation (incorporated by reference to Exhibit 3.1 of Registrant's Form 10SB as filed on March 7, 2000). 3.2 * Amended (No. 1) Articles of Incorporation (incorporated by reference to Exhibit 3.2 of Registrant's Form 10SB as filed on March 7, 2000). 3.3 * Amended (No. 2) Articles of Incorporation (incorporated by reference to Exhibit 3.3 of Registrant's Form 10SB as filed on March 7, 2000). 3.4 * Amended (No. 3) Articles of Incorporation (incorporated by reference to Exhibit 3.4 of Registrant's Form 10SB as filed on March 7, 2000). 3.5 * Amended (No. 4) Articles of Incorporation (incorporated by reference to Exhibit 3.5 of Registrant's Form 10SB as filed on March 7, 2000). 3.6 * Bylaws (incorporated by reference to Exhibit 3.6 of Registrant's Form 10SB as filed on March 7, 2000). 4.1 * Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 of Registrant's Form 10SB as filed on March 7, 2000). 4.2 * Management Services Agreement dated September 1, 2000 by and between Elite Logistics, Inc. and Joseph D. Smith (incorporated by reference to Exhibit 4.2 of Registrant's Form 10QSB as filed on October 16, 2000). 4.3 * Management Services Agreement dated September 1, 2000 by and between Elite Logistics, Inc. and Diana M. Smith. (incorporated by reference to Exhibit 4.3 of Registrant's Form 10QSB as filed on October 16, 2000). 4.4 * Management Services Agreement dated September 1, 2000 by and between Elite Logistics, Inc. and Richard L. Hansen (incorporated by reference to Exhibit 4.4 of Registrant's Form 10QSB as filed on October 16, 2000). 4.5 * Management Services Agreement dated September 1, 2000 by and between Elite Logistics, Inc. and Thien K. Nguyen (incorporated by reference to Exhibit 4.5 of Registrant's Form 10QSB as filed on October 16, 2000). 4.6 * Elite Logistics 2001 Equity Incentive Plan dated March 2, 2000 (incorporated by reference to Exhibit 4.6 of Registrant's Form 10QSB as filed on October 16, 2000). 4.7 * Elite Logistics Services, Inc. 401K Plan dated May 24, 2000 (incorporated by reference to Exhibit 4.7 of Registrant's Form 10QSB as filed on October 16, 2000).
19 4.8 * Common Stock Purchase Agreement - Koyah. (incorporated by reference to Exhibit 4.8 of Registrant's Form 10QSB as filed on January 5, 2001). 4.9 * Investor Rights Agreement - Koyah. (incorporated by reference to Exhibit 4.9 of Registrant's Form 10QSB as filed on January 5, 2001). 4.10* Warrant Agreement - Koyah. (incorporated by reference to Exhibit 4.10 of Registrant's Form 10QSB as filed on January 5, 2001). 4.11* Investment Banking Agreement - Schneider Securities. (incorporated by reference to Exhibit 4.11 of Registrant's Form 10QSB as filed on April 11, 2001. 4.12* Termination of Investment Banking Agreement - Schneider Securities. (incorporated by reference to Exhibit 4.12 of Registrant's Form 10KSB as filed on August 29, 2001. 4.13 Promissory Note 4.14 Class A Warrant Agreement 10.1* Acquisition Agreement (incorporated by reference to Exhibit 10.1 of Registrant's Form 10SB as filed on March 7, 2000). 10.2* Agreement between the Company and Motorola, Inc. (incorporated by reference to Exhibit 10.2 of Registrant's Form 10SB12G/A as filed on June 15, 2000). 10.3* Agreement between the Company and Motorola, Inc. (incorporated by reference to Exhibit 10.3 of Registrant's Form 10SB12G/A as filed on June 15, 2000). 10.4* Distribution Agreement (incorporated by reference to Exhibit 10.4 of Registrant's Form 10SB12G/A as filed on July 11, 2000). 11.1 Computation of Per Share Earnings 99.1* Office Lease (incorporated by reference to Exhibit 99.1 of Registrant's Form 10SB as filed on March 7, 2000). 99.2* Agreement between the Company and Vollmer Public Relations (incorporated by reference to Registrant's Form 10SB12G/A as filed on June 15, 2000).
*Incorporated by reference as indicated. 20 EX-4.13 3 d93490aex4-13.txt PROMISSORY NOTE FORM OF NOTE THE SECURITIES, IN THE FORM OF THE PROMISSORY NOTE OF ELITE LOGISTICS, INC., HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED, EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. PROMISSORY NOTE Freeport, Texas [DateofNote], 2001 FOR VALUE RECEIVED, ELITE LOGISTICS, INC., a Idaho corporation, 1201 N Ave H, Freeport, TX 77541, and its successors and assigns, (the "Company") promises to pay to the order of [Name] ("Holder"), at [Address1], or at such other place as Holder may from time to time designate in writing, the principal sum of [Amtfull] Dollars ($[Amt]) in lawful money of the United States of America, together with interest on so much thereof as is from time to time outstanding at the rate hereinafter provided, and payable as hereinafter provided. This Note is one of a series of Notes containing the same terms as this Note. 1. Interest Rate. The unpaid principal balance of this Note shall bear interest at the rate of ten percent (10%) per annum, simple interest. Interest shall be paid in cash at the Maturity of the Note. 2. Payment/Maturity Date. The total outstanding principal balance hereof, together with accrued and unpaid interest, shall be due and payable on December 31, 2001; or the Company may extend the Payment Date to March 31, 2002, by providing notice to the Holder at least five days prior to the Payment Date; and by issuing the Holder warrants to purchase shares of its Common Stock in accordance with paragraph 6 hereunder. 3. Conversion. The Notes will automatically convert as described in the Summary of Terms attached to the Subscription Agreement. 4. Default Interest and Attorney Fees. Upon declaration of a default hereunder, the balance of the principal remaining unpaid, interest accrued thereon, and all other costs, and fees shall bear interest at the rate of eighteen percent (18%) per annum from the date of default, or the date of advance, as applicable. In the event of default, the Company and all other parties liable hereon agree to pay all costs of collection, including reasonable attorneys' fees. 5. Interest Calculation. Daily interest shall be calculated on a 365-day year and the actual number of days in each month. 6. Issuance of Additional Warrants. The Company has issued the Holder warrants to purchase shares of its Common Stock on the basis of 10,000 shares for each $10,000 principal amount Note. If the Company extends the Payment Date of the Note in accordance with paragraph 2, it shall issue Holder an additional 10,000 shares per each $10,000 principal amount of the Note outstanding, pro rata for any amount less than $10,000. 7. Prepayment. This Note may be prepaid in whole or in part. 8. Costs of Collection. Company agrees that if, and as often as, this Note is placed in the hands of an attorney for collection or to defend or enforce any of Holder's rights hereunder or under any instrument securing payment of this Note, Company shall pay to Holder its reasonable attorneys' fees and all court costs and other expenses incurred in connection therewith, regardless of whether a lawsuit is ever commenced or whether, if commenced, the same proceeds to judgment or not. Such costs and expenses shall include, without limitation, all costs, reasonable attorneys' fees, and expenses incurred by Holder in connection with any insolvency, bankruptcy, reorganization, foreclosure, deed in lieu of foreclosure or similar proceedings involving Company or any endorser, surety, guarantor, or other person liable for this Note which in any way affect the exercise by Holder of its rights and remedies under this Note, or any other document or instrument securing, evidencing, or relating to the indebtedness evidenced by this Note. 9. Default. At the option of Holder, the unpaid principal balance of this Note and all accrued interest thereon shall become immediately due, payable, and collectible, with written notice of default and demand, and with five days notice to cure any default, upon the occurrence at any time of any of the following events, each of which shall be deemed to be an event of default hereunder: a. Company's failure to make any payment of principal, interest, or other charges on or before the date on which such payment becomes due and payable under this Note. b. Company's breach or violation of any agreement or covenant contained in this Note, or in any other document or instrument securing, evidencing, or relating to the indebtedness evidenced by this Note. c. Dissolution, liquidation or termination of Company. 10. Application of Payments. Any payment made against the indebtedness evidenced by this Note shall be applied against the following items in the following order: (1) costs of collection, including reasonable attorney's fees incurred or paid and all costs, expenses, default interest, late charges and other expenses incurred by Holder and reimbursable to Holder pursuant to this Note (as described herein); (2) default interest accrued to the date of said payment; (3) ordinary interest accrued to the date of said payment; and (4) finally, outstanding principal. 11. Assignment and Transferability of Note. Company may assign this Note to any entity that acquires Company or substantially all of Company's assets. Holder may not transfer the Note in any manner without the written agreement of the Company. 12. Non-Waiver. No delay or omission on the part of Holder in exercising any rights or remedy hereunder shall operate as a waiver of such right or remedy or of any other right or remedy under this Note. A waiver on any one or more occasion shall not be construed as a bar to or waiver of any such right and/or remedy on any future occasion. 13. Maximum Interest. In no event whatsoever shall the amount paid, or agreed to be paid, to Holder for the use, forbearance, or retention of the money to be loaned hereunder ("Interest") exceed the maximum amount permissible under applicable law. If the performance or fulfillment of any provision hereof, or any agreement between Company and Holder shall result in Interest exceeding the limit for Interest prescribed by law, then the amount of such Interest shall be reduced to such limit. If, from any circumstance whatsoever, Holder should receive as Interest an amount that would exceed the highest lawful rate, the amount that would be excessive Interest shall be applied to the reduction of the principal balance owing hereunder (or, at the option of Holder, be paid over to Company) and not to the payment of Interest. 14. Purpose of Loan. Company certifies that the loan evidenced by this Note is obtained for business or commercial purposes and that the proceeds thereof will not be used primarily for personal, family, household, or agricultural purposes. 15. Governing Law. As an additional consideration for the extension of credit, Company and each endorser, surety, guarantor, and any other person who may become liable for all or any part of this obligation understand and agree that the loan evidenced by this Note is made in the State of Colorado and the provisions hereof will be construed in accordance with the laws of the State of Colorado, and such parties further agree that in the event of default this Note may be enforced in any court of competent jurisdiction in the State of Colorado, and they do hereby submit to the jurisdiction of such court regardless of their residence or where this Note was executed or any endorsement hereof may be executed. 16. Arbitration. If at any time during the term of this Note any dispute, difference, or disagreement shall arise upon or in respect of the Note, and the meaning and construction hereof, every such dispute, difference, and disagreement 2 shall be referred to a single arbiter agreed upon by the parties, or if no single arbiter can be agreed upon, an arbiter or arbiters shall be selected in accordance with the rules of the American Arbitration Association and such dispute, difference, or disagreement shall be settled by arbitration in accordance with the then prevailing commercial rules of the American Arbitration Association, and judgment upon the award rendered by the arbiter may be entered in any court having jurisdiction thereof. 17. Binding Effect. The term "Company" as used herein shall include the original Company of this Note and any party who may subsequently become liable for the payment hereof as an assumer with the consent of the Holder, provided that Holder may, at its option, consider the original Company of this Note alone as Company unless Holder has consented in writing to the substitution of another party as Company. The term "Holder" as used herein shall mean Holder or, if this Note is transferred, the then Holder of this Note. 18. Relationship of Parties. Nothing herein contained shall create or be deemed or construed to create a joint venture or partnership between Company and Holder. Holder is acting hereunder as a lender only. 19. Severability. Invalidation of any of the provisions of this Note or of any paragraph, sentence, clause, phrase, or word herein, or the application thereof in any given circumstance, shall not affect the validity of the remainder of this Note. 20. Amendment. This Note may not be amended, modified, or changed, except only by an instrument in writing signed by both of the parties. 21. Time of the Essence. Time is of the essence for the performance of each and every obligation of Company hereunder. IN WITNESS WHEREOF, the undersigned has executed this Note as of [Date of Note], 2001. ELITE LOGISTICS, INC. an Idaho corporation By: ------------------------------- Joseph Smith, CEO 3 EX-4.14 4 d93490aex4-14.txt CLASS A WARRANT AGREEMENT TERMS OF CLASS A WARRANTS 1. Warrants/Warrant Certificates. Each Warrant shall entitle the holder (the "Registered Holder" or, in the aggregate, the "Registered Holders") in whose name the Warrant Certificate shall be registered on the books maintained by the Company to purchase one share of Common Stock of the Company on exercise thereof, subject to modification and adjustment as provided in Section 7. A copy of the form of Warrant Certificate is attached hereto as Exhibit A. Subject to the provisions of Sections 3, 5 and 6, the Company shall deliver Warrant Certificates in required whole number denominations to Registered Holders in connection with any transfer or exchange permitted under this Agreement. Except as provided in Section 6 hereof, no Warrant Certificates shall be issued except (i) Warrant Certificates initially issued hereunder, (ii) Warrant Certificates issued on or after the initial issuance date, upon the exercise or conversion of any Warrants, to evidence the unexercised or unconverted Warrants held by the exercising Registered holder, and (iii) Warrant Certificates issued after the initial issuance date, upon any transfer or exchange of Warrant Certificates or replacements of lost or mutilated Warrant Certificates. 2. Form and Execution of Warrant Certificates. The Warrant Certificates shall be substantially in the form attached as Exhibit A. The Warrant Certificates shall be dated as of the date of their issuance, whether on initial issuance, transfer, or exchange or in lieu of mutilated, lost, stolen or destroyed Warrant Certificates. Each such Warrant Certificate shall be numbered serially in accordance with the Common Stock initially attached thereto with the letters "WA" appearing on each Warrant Certificate. 3. Exercise and Conversion. (a) Subject to the provisions of Sections 4 and 7, the Warrants may be exercised at a price (the "Exercise Price") of $.625 in whole or in part at any time during the period (the "Exercise Period") commencing August 31, 2001, and terminating August 31, 2006 (the "Expiration Date"), unless extended by a majority vote of the Company's Board of Directors at its discretion. The Company shall promptly notify the Company of any extension of the Exercise Period of the Warrants. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the date (the "Exercise Date") of the surrender for exercise of the Warrant Certificate. The exercise form shall be executed by the Registered Holder thereof or his attorney duly authorized in writing and will be delivered together with payment to the Company in cash, bank wired funds, or by bank or certified check, of an amount equal to the aggregate applicable Exercise Price, in lawful money of the United States of America. (b) In addition to and without limiting the rights of the Warrant Holder under the terms of the Warrant, the Holder shall have the right (the "Conversion Right") to convert the Warrant evidenced by this certificate or any portion thereof into Shares as provided in this section at any time or from time to time prior to its expiration. Upon exercise of the Conversion Right with respect to a particular number of Shares (the "Conversion Shares"), the Company shall deliver to the Holder, without payment by the Holder of any Exercise Price or any cash or other consideration, that number of Shares equal to the value (as determined below) of the Warrants computed using the following formula: X = Y(A-B) --------- A Where: X = the number of Shares to be issued to the Holder; Y = the number of Warrants to be exercised under the Warrant; A = the Current Market Price of one share of Common Stock; and B = the Share Exercise Price. No fractional securities shall be issuable upon exercise of the Conversion Right, and if the number of securities to be issued in accordance with the foregoing formula is other than a whole number, the Company shall pay to the Holder an amount in cash equal to the Current Market Price of the resulting fractional Share. The Current Market Price shall be determined as follows: (a) if the security at issue is listed on a national securities exchange or admitted to unlisted trading privileges on such an exchange or quoted on either the Nasdaq National Market or the Nasdaq Small Cap Market, the Current Market Price shall be the last reported high bid price of that security on such exchange or system at 4:00 PM EST on the day immediately before the event; or (b) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges, the Current Market Price shall be the last reported high bid price of that security on the OTC Bulletin Board at 4:00 PM EST on the day immediately before the event; or (c) if the security at issue is not so listed or quoted or admitted to unlisted trading privileges and bid and asked prices are not reported, the Current Market Price shall be determined in such reasonable manner as may be prescribed from time to time by the Board of Directors of the Company. The Conversion Right may be exercised by the Holder by the surrender of the Warrant at the principal office of the Company or at the office of the Company's stock transfer agent, if any, together with a written statement specifying that the Holder thereby intends to exercise the Conversion Right and indicating the number of Shares subject to the Warrant which are being surrendered on the reverse side of the Warrant, in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of the Warrant, or on such later date as is specified therein (the "Conversion Date"), but not later than the Expiration Date. Certificates for the Converted Shares issuable upon exercise of the Conversion Right, together with a check in payment of any fractional Warrant Share and, in the case of a partial exercise a new Warrant evidencing the Warrant Shares remaining subject to the Warrant, shall be issued as of the Conversion Date and shall be delivered to the Holder within seven (7) days following the Conversion Date. (c) Unless Warrant Shares may not be issued as provided herein, the person entitled to receive the number of Warrant Shares deliverable on exercise or conversion shall be treated for all purposes as the holder of such Warrant Shares as of the close of business on the Exercise or Conversion Date. In addition, the Company shall also, at such time, verify that all of the conditions precedent to the issuance of Warrant Shares set forth in Section 4 have been satisfied as of the Exercise or Conversion Date. If any one of the conditions precedent set forth in Section 4 are not satisfied as of the Exercise or Conversion Date, the Company shall request written instructions from the Registered Holder as to whether to return the Warrant and Exercise Price (if applicable) to the exercising or converting Registered Holder or to hold the same until all such conditions have been satisfied. The Company shall not be obligated to issue any fractional share interests in Warrant Shares issuable or deliverable on the exercise or conversion of any Warrant but cash will be paid in lieu of any fractional share. If more than one Warrant shall be exercised or converted at one time by the same Registered Holder, the number of full 2 Shares which shall be issuable on exercise or conversion thereof shall be computed on the basis of the aggregate number of full shares issuable on such exercise or conversion. Within ten days after the Exercise or Conversion Date, and in any event prior to the applicable Expiration Date, pursuant to a Stock Transfer Agreement between the Company and its stock transfer agent, the Company shall cause to be issued and delivered to the person or persons entitled to receive the same, a certificate or certificates for the number of Warrant Shares deliverable on such exercise or conversion. No adjustment shall be made in respect of cash dividends on Warrant Shares delivered on exercise or conversion of any Warrant. The Company may deem and treat the Registered Holder of the Warrants at any time as the absolute owner thereof for all purposes., The Warrants shall not entitle the holder thereof to any of the rights of shareholders or to any dividend declared on the Common Stock unless the holder shall have exercised or converted the Warrants and purchased the shares of Common Stock prior to the record date fixed by the Board of Directors of the Company for the determination of holders of Common Stock entitled to such dividend or other right. 4. Reservation of Shares and Payment of Taxes. The Company covenants that it will at all times reserve and have available from its authorized Common Stock such number of shares as shall then be issuable on the exercise of all outstanding Warrants. The Company covenants that all Warrant Shares which shall be so issuable shall be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. If any shares of Common Stock to be reserved for the purpose of exercise of warrants hereunder require any other registration with or approval of any government authority under any federal or state law before such shares may be validly issued or delivered, then the Company covenants that it will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be. No Warrant Shares shall be issued unless and until any such registration requirements for which no valid exemption exist have been satisfied. 5. Registration of Transfer. The Warrant Certificates may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Company at its Corporate Office. The Company shall keep transfer books at its Corporate Office that shall register Warrant Certificates and the transfer thereof. On due presentment for registration of transfer of any Warrant Certificate at such office, the Company shall execute, issue, and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants. All Warrant Certificates presented for registration of transfer or exercise shall be duly endorsed or be accompanied by a written instrument or instruments or transfer in form satisfactory to the Company. At the time of exercise the Company shall be responsible for any transfer fees and or taxes payable upon issuance of the common stock unless Registered Holder requests such common stock to be registered in a name other than Registered Holder. All Warrant Certificates so surrendered, or surrendered for exercise or conversion, or for exchange in case of mutilated Warrant Certificates, shall be promptly cancelled by the Company and thereafter retained by the Company. Prior to due presentment for registration of transfer thereof, the Company may treat the Registered Holder of any Warrant Certificate as the absolute owner thereof unless the Company has received written notification of the pledge or hypothecation of the warrant (notwithstanding any notations of ownership or writing thereon made by anyone other than the Company or the Company). 3 6. Loss or Mutilation. On receipt by the Company of evidence satisfactory as to the ownership of and the loss, theft, destruction or mutilation of any Warrant Certificate, the Company shall execute and deliver in lieu thereof, a new Warrant Certificate representing an equal aggregate number of Warrants. In the case of loss, theft, or destruction of any Warrant Certificate, the individual requesting issuance of a new Warrant Certificate shall be required to indemnify the Company in an amount satisfactory to it. In the event a Warrant Certificate is mutilated, such Certificate shall be surrendered and cancelled by the Company prior to delivery of a new Warrant Certificate. Applicants for a new Warrant Certificate shall also comply with such other regulations and pay such other reasonable charges as the Company may prescribe. 7. Adjustment of Exercise Price and Shares. After each adjustment of the Exercise Price(s) pursuant to this Section 7, the number of shares of Common Stock purchasable upon the exercise of each Warrant shall be the number receivable upon exercise thereof prior to such adjustment multiplied by a fraction, the numerator of which shall be the original Exercise Price as defined in Section 3 above and the denominator of which shall be such adjusted Exercise Price. The Exercise Price of the Warrants shall be subject to adjustment as set forth below: (a)(i) In case the Company shall hereafter (A) pay a dividend or make a distribution on its Common Stock in shares of its capital stock (whether shares of Common Stock or of capital stock of any other class), (B) subdivide its outstanding shares of Common Stock, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the Exercise Price in effect immediately prior to such action shall be adjusted so that the Registered Holder of any Warrant thereafter exercised shall be entitled to receive the number of shares of capital stock of the Company which he would have owned immediately following such action had such Warrant been exercised immediately prior thereto. An adjustment made pursuant to this subsection shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection, the Registered Holder of any Warrant thereafter exercised shall become entitled to receive shares of two or more classes of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a statement filed with the Company) shall determine the allocation of the adjusted Exercise Price between or among shares of such classes of capital stock. (ii) In any case in which this Section 7(a) shall require that an adjustment to the Exercise Price be made immediately following a record date, the Company may elect to defer (but only until five business days following the receipt by the Company of the certificate of independent public accountants described in subsection (i) of Section 7(d)) issuing to the holder of any Warrants exercised after such record date the shares of Common Stock and other capital stock of the Company issuable upon such exercise over and above the shares of Common Stock and other capital stock of the Company issuable upon such exercise on the basis of the Exercise Price prior to adjustment. (iii) No adjustment in the Exercise Price shall be required to be made unless such adjustment would require an increase or decrease of at least $.05; provided, however, that any adjustments which by reason of this subsection are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 7 shall be made to the nearest cent or to the nearest one tenth of a share, as the case may be, but in no event shall the Company be obligated to issue fractional shares upon the exercise of any Warrant. (b) In case of any reclassification or change of outstanding shares of Common Stock issuable upon exercise of the Warrants (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a Subsidiary in which merger the Company is the continuing corporation and which does not result in any 4 reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrants other than a change in par value or from par value to no par value or from no par value to par value) or in the case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, then, as a condition of such reclassification, change, consolidation, merger, sale or conveyance, the Company, or such successor or purchasing corporation, as the case may be, shall make lawful and adequate provision whereby the Registered Holder of each Warrant then outstanding shall have the right thereafter to receive on exercise of such Warrant the kind and amount of shares of stock and other securities and property receivable upon such reclassification change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon exercise of such Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance and the Company or its successors shall forthwith file at the Corporate Office of the Company a statement setting forth such provisions signed by (1) its Chairman of the Board or Vice Chairman of the Board or President or a Vice President and (2) by its Treasurer or an Assistant Treasurer or its Secretary or an Assistant Secretary evidencing such provisions. Such provisions shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 7(a). The above provisions of this Section 7(b) shall similarly apply to successive reclassifications and changes of shares of Common Stock and to successive consolidations, mergers, sales, or conveyances. (c) Before taking any action which could cause an adjustment reducing either Exercise Price below the then par value of the shares of Common Stock issuable upon exercise of any Warrants, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Common Stock at such adjusted Exercise Price. (d)(i) Upon any adjustment of the Exercise Price required to be made pursuant to this Section 7, the Company within 30 days thereafter shall (A) cause to be obtained a certificate of a firm of independent accountants setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based and (B) cause to be mailed to each of the Registered Holders of the Warrants written notice of such adjustment. Where appropriate, such notice may not be given in advance and included as a part of the notice required to be mailed under the provisions of subsection 7(d)(ii). (ii) In case at any time: (A) The Company shall declare any dividend upon its Common Stock payable otherwise than in cash or in Common Stock of the Company; or (B) The Company shall offer for subscription to the holders of its Common Stock any additional shares of stock of any class or any other securities convertible into shares of stock or any rights to subscribe thereto; or (C) There shall be any capital reorganization or reclassification of the capital stock of the Company, or a sale of all or substantially all of the shares of the assets of the Company, or a consolidation or merger of the Company with another corporation (other than a merger with a Subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification or change of the then outstanding shares of Common Stock or other capital stock issuable upon exercise of the Warrants other than a change in par value or from par value to no par value or from no par value to par value); or (D) There shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall cause to be mailed to each of the 5 Registered Holders of the Warrants, at the earliest practicable time (and, in any event, not less than 20 days before any record date or other date set for definitive action), written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or such reorganization, reclassification, sale, consolidation, merger, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also set forth such facts as shall indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Exercise Price and the kind and amount of the shares of stock and other securities and property deliverable upon exercise of the Warrants. Such notice shall also specify the date as of which the holders of the Common Stock of record shall participate in said dividend, distribution or subscription rights or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, sale, consolidation, merger, dissolution, liquidation or winding up, as the case may be (on which date, in the event of voluntary or involuntary dissolution, liquidation or winding up of the Company, the right to exercise the Warrants shall terminate). 8. Reduction in Exercise Price at Company's Option. In addition to any adjustments made to the Exercise Price pursuant to Section 7, the Company's Board of Directors may, at its sole discretion, reduce the Exercise Price of the Warrants in effect at any time either for the life of such Warrants or any shorter period of time determined by the Company's Board of Directors. The Company shall promptly notify the Company and the Registered Holders of any such reductions in the Exercise Price. 9. Piggy-Back Registration Rights. If at any time prior to the Expiration Date the Company files a registration statement with the Commission pursuant to the Securities Act of 1933, or pursuant to any other act passed after the date of this Agreement, which filing provides for the sale of securities by the Company or any other persons to the public, the Company shall offer to the Registered Holders of the Warrants and the holders of any Warrant Shares the opportunity to register the Warrant Shares at the Company's sole expense. Notwithstanding anything to the contrary, this Section 9 shall not be applicable to a registration statement registering securities issued pursuant to an employee benefit plan or as to a transaction subject to Rule 145 promulgated under the Act or for which a Form S-4 registration statement could be used. The Company shall deliver written notice to the Registered Holders of the Warrants and to any holders of the Warrant Shares of its intention to file a registration statement under the Act at least 60 days prior to the filing of such registration statement, and the Registered Holders and holders of Warrant Shares shall have 30 days thereafter to request in writing that the Company register or qualify the Warrant Shares or the Warrant Shares underlying the unexercised portion of the Warrants in accordance with this Section 9. Upon delivery of such a written request within the specified time, the Company shall be obligated to include in its contemplated registration statement all information necessary or advisable to register or qualify the Warrant Shares or Warrant Shares underlying the unexercised portion of the Warrants for a public offering, if the Company does file the contemplated registration statement; provided, however, that neither the delivery of the notice by the Company nor the delivery of a request by a Registered Holder or by a holder of Warrant Shares shall in any way obligate the Company to file a registration statement. Furthermore, notwithstanding the filing of a registration statement, the Company may, at any time prior to the effective date thereof, determine not to offer the securities to which the registration statement relates. The Company shall comply with the requirements of this Section 9 at its own expense. That expense shall include, but not be limited to, legal, accounting, consulting, printing, federal and state filing fees, NASD fees, out-of-pocket expenses incurred by counsel, accountants and consultants retained by the Company, and miscellaneous expenses directly related to the registration statement and the offering. However, this expense shall not include the portion of any underwriting commissions, transfer taxes, and the underwriter's accountable and non-accountable expense allowances attributable to the offer and sale of 6 the Warrant Shares and the Warrant Shares underlying the unexercised portion of the Warrants, all of which expenses shall be borne by the Registered Holders of the Warrants and the holders of the Warrant Shares registered. 10. Modification of Agreement. The Company may make any changes or corrections in this document (i) that it shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or mistake or error herein contained provided, however, this document shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders of Warrant Certificates representing not less than 100% of the Warrants outstanding. Additionally, except as provided in Section 7, no change in the number or nature of the Warrant Shares purchasable on exercise of a Common Stock Purchase Warrant, increase in the purchase price therefor, or the acceleration of the Expiration Date of a Warrant shall be made without the consent in writing of the Registered Holder of the Warrant Certificate representing such Warrant, other than such changes as are specifically prescribed or allowed by this Agreement. 11. Notices. All notices, demands, elections, opinions or requests (however characterized or described) required or authorized hereunder shall be deemed given sufficiently if in writing and sent by registered or certified mail, return receipt requested and postage prepaid, or by tested telex, fax, telegram or cable to, in the case of the Company: Elite Logistics, Inc. 1201 N. Ave. H Freeport, Texas 77541 with a copy to: [Name] [Address] [City][State][ZIP] and if to the Registered Holder of a Purchase Warrant Certificate, at the address of such holder as set forth on the books maintained by the Company. 12. Severability. If any provision of this document shall be held, declared or pronounced void, voidable, invalid, unenforceable, or inoperative for any reason by any court of competent jurisdiction, government authority or otherwise, such holding, declaration or pronouncement shall not affect adversely any other provision of this Agreement, which shall otherwise remain in full force and effect and be enforced in accordance with its terms, and the effect of such holding, declaration or pronouncement shall be limited to the territory or jurisdiction in which made. 13. General Provisions. This document shall be construed and enforced in accordance with, and governed by, the laws of the State of Colorado. Except as otherwise expressly stated herein, time is of the essence in performing hereunder. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, and this Agreement may not be modified or amended or any term or provisions hereof waived or discharged except in writing signed by the party against whom such amendment, modification, waiver or discharge is sought to be enforced. The headings of this document are for convenience in reference only and shall not limit or otherwise affect the meaning hereof. 7 Exhibit A - Class A Warrant CERTIFICATE NO. WA-ELOG- THE SECURITIES REPRESENTED BY THIS CERTIEFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHER- WISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE LAW, THE AVAILABILITY OF WHICH MUST BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. WARRANT TO PURCHASE SHARES OF COMMON STOCK OF ELITE LOGISTICS, INC. An Idaho Corporation THIS CERTIFIES that, for value received, [Name][Address][City][State][Zip] or assigns (the "Holder"), is entitled to purchase from Elite Logistics, Inc., a Idaho corporation (the "Company"), up to 10,000 fully paid and nonassessable shares of common stock of the Company (the "Common Stock"), at any time commencing on the date hereof, and terminating on August 31, 2006, at the purchase price of $.625 per share (the "Exercise Price"), as provided in Section 1 of the Terms of Warrants. This Warrant is issued pursuant to the Terms of Warrants (the "Warrant Terms"), and is subject to all the terms thereof, including the registration rights and limitations on transferability set forth therein. The Holder accepts the terms and provisions of this Warrant Certificate, and acknowledges receipt thereof. The number of shares purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as set forth in the Warrant Terms. This Warrant may be exercised or converted in whole or in part by presentation of this Warrant with the Purchase Form on the last page hereof duly executed, concurrently with payment of the Aggregate Exercise Price (as defined in Section 3 of the Warrant Terms) at the offices of the Company, 1201 N. Ave. H, Freeport, Texas 77541. Payment of the Aggregate Exercise Price shall be made at the option of the Holder in cash, bank wired funds, or by bank or certified check. Upon any partial exercise or conversion of this Warrant, there shall be issued to the Holder a new Warrant in respect of the shares of Common Stock as to which this Warrant shall not have been exercised. This Warrant may be exchanged at the office of the Company by surrender of this Warrant Certificate, properly endorsed either separately or in combination with one or more other Warrants, for one or more new Warrants entitling the Holder thereof to purchase the same aggregate number of shares as were purchased on exercise of the Warrant or Warrants exchanged. No fractional shares will be issued upon the exercise of this Warrant, but the Company may pay the cash value of any fraction upon the exercise of one or more Warrants. This Warrant is transferable at the office of the Company, in the manner and subject to the limitations set forth in the Warrant Agreement. The Holder hereof may be treated by the Company and all other persons dealing with this Warrant, as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented hereby, or to the transfer hereof on the books of the Company, and until such transfer on such books, the Company may treat the Holder hereof as the owner for all purposes unless the Company has received written notification of the pledge or hypothecation of the warrant. 8 This Warrant does not entitle any Holder hereof to any of the rights of a stockholder of the Company. This Warrant shall not be valid or obligatory for any purpose until it shall have been signed by the Company. DATED: ATTEST ELITE LOGISTICS, INC., a Idaho Corporation By: - ------------------------------ ------------------------------ Secretary Its: President 9 PURCHASE FORM Dated ____________ The undersigned hereby irrevocably elects to exercise the Warrant represented by this Warrant Certificate No. WA-ELOG to the extent of purchasing shares of Common Stock of Elite Logistics, Inc., and hereby makes payment of $ payment of the Aggregate Exercise Price thereof. INSTRUCTIONS FOR REGISTRATION OF STOCK Name --------------------------------------------------------------------------- (Please type or print name in block letters) Address ------------------------------------------------------------------------ Signature ----------------------------------------------------------------------- ASSIGNMENT FORM FOR VALUE RECEIVED, hereby sells, assigns, and transfers unto ------------------ Name --------------------------------------------------------------------------- Address ----------------------------------------------------------------------- the right to purchase Common Stock of Elite Logistics, Inc. represented by this Warrant Certificate No. ___ to the extent of __________ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint _____________________ Attorney, to transfer the same on the books of the Company with full power of substitution. Date ------------------------------- Signature ---------------------------------------------------------------------- WARRANT CONVERSION FORM Pursuant to Section 3(b) of the Warrant Terms, the Holder hereby irrevocably elects to convert Warrants with respect to Shares of the Company into Shares of the Company. A conversion calculation is attached hereto as Exhibit B-1. The undersigned requests that certificates for such Shares be issued as follows: Name: ------------------------------------------------------------------ Address: ------------------------------------------------------------------ Deliver to: ------------------------------------------------------------------ and that a new Warrant Certificate for the balance remaining of the Warrants, if any, subject to the Warrant be registered in the name of, and delivered to, the undersigned at the address stated above. Date --------------------------------------- Signature ---------------------------------------------------------------------- 10 Exhibit B-1 CALCULATION OF WARRANT CONVERSION Number of Shares to be issued to the Holder ("Converted Shares") = Y(A-B) ------ A Where: Y = the number of Warrants to be exercised under the Warrant; A = the Current Market Price of one share of Common Stock; and B = the Exercise Price. Converted Shares = -------------------------- Fractional Converted Shares = (1) -------------------------- (1) Elite Logistics, Inc. to pay for fractional Shares in cash @ $ per Share. --------------------- 11 EX-11.1 5 d93490aex11-1.txt STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11.1 COMPUTATION OF EARNINGS PER SHARE For the following periods the registrant had no securities that were dilutive for the calculation of earnings per share.
Weighted average number of basic Summary from unaudited financial Basic and diluted loss per and diluted common stock shares statements common share outstanding ---------------------------------------- -------------------------------- ------------------------------------ Six months ended 11/30/2001 (0.09) 13,127,684 Three months ended 11/30/2001 (0.06) 13,154,538 Six months ended 11/30/2000 (0.08) 12,428,043 Three months ended 11/30/2000 (0.04) 12,637,533
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