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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
ELITE LOGISTICS, INC.
(Exact name of registrant as specific in its charter)
Idaho 91-0843203
(State of Incorporation) (I.R.S. Employer
Identification No.)
1201 North Avenue H
Freeport, Texas 77541
(Address of executive offices, including zip code.)
Registrant's telephone number: (409) 230-0222
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Background
Summit Silver Inc, Inc. (the "Company") was incorporated under the
laws of Idaho on December 26, 1968 to engage in the business of mining.
On November 17, 1999 it changed its business purpose and acquired all
of the issued and outstanding shares of common stock and preferred
stock of Elite Logistics Services Inc., a Texas corporation. On
January 24, 2000 the Company amended its articles of incorporation and
changed its name to Elite Logistics, Inc.
The Business
The Company is engaged in the business of designing, developing,
and marketing a wireless monitoring and tracking system that enables a
user to monitor the exact location of the subject mobile assets at any
time. The Company outsources the manufacturing of the product to third
parties.
The System
The Company's PageTrack[TM] Intelligent Vehicle Management Systems
(the "System") allows the user to monitor, track, analyze, and direct
the movement of, objects, including ground vehicles, marine vessels,
railway equipment and valuable objects in transit. It also allows the
monitoring or control of functions on a vehicle including
locking/unlocking doors, window up/down, disabling the vehicle etc.
The vehicle can be tracked controlled via 2-way pager, PDA (e.g. Palm
Pilot), the Internet, or by calling Elite's 24 hour per day call
center.
The components of the System are:
A unit that integrates a two-way reflex telemetry unit and a
Global Positioning System ("GPS") installed in the monitored vehicle.
Web-enabled Geographic Information Systems ("GIS") technology that
allows customers to access the data collected through the Company's
system, including displaying the vehicle's location on a map, via the
Internet.
A Network Operations Center ("NOC") where the system servers are
maintained and the network elements are monitored 24 hours per day, 7
days per week.
A Customer Control Center ("CCC") where operators are available to
assist customers 24 hours per day, 7 days per week and to provide
communications services to customers that do not have Internet access.
A Web-enabled Logistics Satellite Operating System ("LSOS")
Internet based software.
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Operation of the System
A GPS located in a vehicle transmits a signal to Elite's Server
located within its Network Operations Center via Skytel's reflex
telemetry network. Elite's customers can either monitor the
information through their own computer systems via the Internet via a
2-way pager or PDA, or in the event the customer does not have Internet
access, it may obtain the desired information directly from the Company
through its 24 hour Customer Support Center.
The System integrates proprietary technologies with technologies
licensed from MapInfo, Oracle and Microsoft. The Company licenses
commercially available technology whenever possible rather than
acquiring internally developed systems. The System runs on a Microsoft
Windows NT 4.0 Server and Oracle Database. Geographical information
services and map data are maintained on MapInfo software also running
on Windows NT 4.0 Server.
The Company's web site is designed for fast downloads and
compatibility with most browsers. Pages are deliberately built with
minimal graphics and do not require client-side plug-ins or Java to
view.
LSOS[TM] Fleet Management Software
LSOS[TM] is a proprietary fleet management software application
that provides fleet customers accurate fleet vehicle location through
a detailed digitized map displayed on a personal computer connected to
the Company's network operations center via the internet. LSOS[TM]
operates in a Windows or browser environment on a personal computer
located in the customer's office. The open client server architecture
permits LSOS[TM] to operate on a variety of hardware platforms and to
be integrated with the customer's other management information systems
(such as billing, accounting and human resources), allowing the
customer to use location information to measure and improve
productivity in the field.
The Internet interface allows customers to monitor vehicle
locations on a detailed map in near real-time. LSOS[TM] updates and
can display the position of all PageTrack[TM] equipped vehicles at
periodic intervals determined by the customer. Customers can adjust
the level of map detail through a zoom-in/zoom-out feature, allowing a
customer to simultaneously view the location of all fleet vehicles or
to focus on a single vehicle.
The Company believes that software solutions that must be
customized to the needs of individual fleet customers are too expensive
and time-consuming to be sold effectively to any but the largest
fleets. LSOS[TM] is therefore designed to address a wide range of
customer requirements. By emphasizing its off-the-shelf, user-
friendly software, the Company believes it can attract a wide range of
customers, many of whom would otherwise use less sophisticated
communication and management systems, if any at all.
LSOS[TM] will automatically complete selection of the most
economical and available transport and select the most efficient and
economical route for review by the operator. LSOSTM also reports a
driver's completed route, speed, estimated fuel consumption, estimated
time of arrival at next stop, the time of each stop and provides
documentation for customers who require verification of deliveries.
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LSOS[TM] provides a two-way messaging platform allowing
alphanumeric communications from the fleet operator to its drivers and
numerous pre-programmed messages from the drivers to the fleet
operator. Customers can send messages directly to drivers from the
computer on which LSOS[TM] operates, via the Internet or from a 2-way
pager or PDA. Messages can be sent to a single vehicle, several
vehicles or broadcast to the entire fleet. The Company's communication
network service costs are generally lower than conventional near real-
time, two-way communication services, such as cellular, SMR and ESMR
services.
Hardware
The Company's PageTrack[TM] hardware integrates off the shelf GPS
units (available from a variety of sources) with Motorola's CreataLink
reflex telemetry unit to provide a means of determining and reporting
the location and status of a vehicle or other asset at any point in
time.
Manufacturing
Strategic relationships have been established with three out-
source manufacturers. The System consisting of software and hardware
components is designed, integrated and tested at the Company's
facilities.
The Manufacturers are selected based on the following criteria:
* Ability to deliver product to functional specification
* Reputation for quality
* Ability to meet cost objectives
* Financial capability
* Ability to respond to rapid volume increases
The Company has written agreements with all of its manufactures
and in the event one of the Company's current manufactures were to
cease doing business with the Company for any reason, the other
manufactures could support the increase in manufacturing to support the
loss for the other manufacturer. The Company could suffer adverse
effects even with this contingency.
Services
Commercial Fleet Management
The Company offers a range of fleet management solutions,
depending on the customer's budget and location and messaging needs.
All of these solutions involve the installation of the PageTrack[TM]
IVS in each vehicle. In addition to the IVS, commercial fleet
customers may purchase software or location services from the Company.
The Company believes that the majority of its target customers'
vehicles are currently equipped with wireless communications devices
that do not provide automatic location features, such as two-way radio,
specialized mobile radio ("SMR"), pagers and cellular devices. The
Company's products and services allow commercial fleet operators to
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* Increase driver productivity and fleet efficiency.
* Improve customer service.
* Limit unauthorized vehicle use.
* Reduce driver overtime.
* Increase security for fleet drivers, vehicles and cargo.
The Company's potential customers include metropolitan commercial
fleets (such as trade service providers, delivery services, bus and
taxi fleets, ambulance companies, telecommunications companies, utility
companies, municipal government vehicles and law enforcement agencies)
and long-haul trucking fleets.
Security Services
The Company's commercial fleet customers can establish a "zone of
compliance" that activates the Company's security system when vehicles
leave the zone. Customers may also attach an IVS directly to valuable
cargo or to expensive equipment such as construction equipment.
PageTrack[TM] can be integrated with a vehicle's alarm system. If
the vehicle alarm is triggered, or the vehicle is moved, PageTrack[TM]
automatically emits an alert, notifying the Customer and the Company's
Customer Control Center of a potential vehicle theft. If the customer
does not respond, the Elite Customer Control Center will telephone the
customer directly. If the customer believes that the vehicle has been
stolen or a driver is in danger, the Elite Customer Control Center will
assist the customer, and local law enforcement in the recovery or
assistance as needed. Our Customer Control Center is staffed twenty-
four hours a day, seven days a week with Company employees who can
track the location of the vehicle and, at the direction of the
customer, can contact local law enforcement authorities and provide
them with the location of the potentially stolen vehicle in near real-time.
The System when installed in conjunction with third party hardware
connected to the ignition system can also immobilize the vehicle and/or
lock the doors to facilitate recovery by law enforcement (or a lien
holder).
The Company's ability to offer automated, reliable and near real-
time vehicle tracking at the time of theft differentiates its stolen
vehicle recovery assistance service from other available services.
Other vehicle recovery services, such as LoJack require a subscriber
to first realize, and then report, a vehicle stolen in order to begin
the tracking process.
Information Services/Roadside Assistance
Customers can have a alert notification button installed with the
PageTrack[TM] unit that when activated will notify the Company's
Customer Control Center under the Company's Roadside Assistance
Program, through which the Company will have a tow truck sent to the
caller's location. Under its Automated Roadside Assistance Program,
offered to its customers at a higher monthly fee, the Company can
direct a tow truck or other selected services directly to a subscribing
customer's location when the customer presses a roadside assistance
button installed in his or her vehicle.
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Industry sources estimate that 25% of roadside assistance calls
are for keys locked in the vehicle. PageTrack[TM] can remotely
lock/unlock the doors of the vehicle by the customer calling the
Customer Control Center or the customer can unlock the doors by using
their two way pager, Palm VII or Internet capable cellular phone. In
other situations Customers can use PageTrack[TM] to initiate a vehicle
location or immobilize the vehicle in an emergency.
PageTrack[TM] also has the ability to provide both consumer and
commercial customers a "mobile yellow pages" that provides the customer
the location of nearby prominent businesses or landmarks. The customer
can call and obtain information such as the location of the nearest
fast food restaurant, automatic teller machine, gas station, hospital,
police station, or interstate on-ramp.
The Company's proprietary Internet monitoring service also allows
its subscribers to locate their vehicle(s) in near real-time and report
its location for compliance, security and convenience purposes.
Alternatively, the subscriber could call the Elite Customer Control
Center, provide the operator with a proper User ID and Password for the
vehicle to be located and within seconds receive an automated voice
response or live operator indicating the location of the vehicle at
that time.
Marketing
The Company currently markets the System to:
* Shipping and delivery companies
* Other Fleet Operators
* Rental car companies
* Railroad and transportation companies
* Private motor vehicle owners (via dealers and other indirect
channels)
The Company will execute marketing activities to establish and
build brand recognition. A variety of target marketing communications
techniques will be deployed to achieve this such as public relations
programs, advertising and industry and consumer promotions.
A strong multiple class distribution channel will be established
to serve both the commercial customer segment as well as the consumer
segment. OEM relationships will be explored and International
expansion opportunities will be pursued.
The Company will similarly establish an installation, service and
support channel by establishing authorization criteria, standards of
service, quality monitoring and training to ensure a leadership level
of customer satisfaction is delivered.
The Company also markets and distributes its products to
consumers, through a dealer network and strategic partnerships or
third-party reseller.
The dealer network is comprised of automobile dealers and
automobile aftermarket products installers.
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Patents and Trademarks
Both the Logistics Satellite Operating System software and the
PageTrack units are patent pending at this time.
The Company owns or has reserved the following URLs
www.elitelog.com, www.elitelogistics.com, www.pagetrak.com. The
Company intends to pursue ownership of the URL for www.pagetrack.com
Competition
There are three basic classes of products that offer commercial
location and messaging capabilities competitive with the Company's
products:
* GPS, private satellite and Loran-C systems
* LMS systems
* Traditional wireless communication
GPS systems and certain private satellite systems use satellite
ranging techniques to measure a GPS device's distance relative to a
group of satellites in space. Typically, a GPS device must be in
"sight" of several satellites to receive adequate transmission data for
the determination of relative location on earth. Because GPS and other
satellite services require "line of sight" to the orbiting satellite,
dense metropolitan areas, parking garages, tunnels or other covered
areas can impact the system's effectiveness and reliability.
The Loran-C system uses land-based transmitting stations to send
a low-frequency radio signal that is used by a vehicle to calculate its
position relative to the location of other Loran-C transmitters.
Loran-C systems also frequently have difficulty penetrating
"metropolitan canyons" and therefore may provide inaccurate position
readings in urban areas.
When paired with a wireless communications system, GPS, certain
private satellite networks and Loran-C may provide a location system
competitive with the Company's products. There are a number of
wireless systems that can be linked to a satellite system or a Loran-C
system to transmit location information to a dispatch center:
Cellular and PCS systems can provide local or nationwide networks
to transmit location information to a dispatcher. Most vehicle
location systems that link a satellite or Loran-C location system with
a cellular or PCS communication system, such as Highway Master, are
best suited for long-haul trucking fleets. CDPD, an overlay of a
packet switched data service on a traditional cellular system, is
available in most metropolitan markets throughout the U.S. CDPD can
improve the cost and delivery of location information over existing
cellular infrastructure.
SMR/ESMR-- SMR has traditionally been used to serve the needs of
local dispatch services, such as taxis and couriers, which typically
broadcast short messages to a large number of units. Several SMR
operators (e.g. Nextel) are constructing Enhanced Specialized Mobile
Radio ("ESMR") digital systems that offer mobile telephone services.
Geotek Communications, Inc. has developed an ESMR system with GPS
location features to provide an automatic vehicle location service
using its own dedicated ESMR network. Geotek is available in a limited
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number of metropolitan markets in the U.S. In certain markets, Geotek
has developed a fleet management program incorporating GPS location
information, which is being marketed with monthly service fees.
Satellite-based communication is accomplished through transmission
of a signal from a vehicle-based transmitter to a satellite, which
automatically retransmits the signal to a dispatcher. Such systems
provide seamless nationwide service for transmitting location
information, but do not currently transmit location data at a cost
competitive with the Company's system. Vehicle location products with
satellite-based communications are currently offered by Orbcomm Global,
L.P. and Qualcomm, Inc.
ARDIS and RAM are dedicated two-way wireless data networks that
can also be used to transmit location information through integration
with GPS. ARDIS is owned by Motorola and RAM is owned by a joint
venture between RAM Broadcasting Corp. and BellSouth. Both wireless
providers cover primarily metropolitan markets. ARDIS covers
approximately the top 400 markets in the United States, and RAM reports
coverage in approximately the top 100 markets.
Companies operating or developing LMS location and messaging
systems include Teletrac, Pinpoint Communications Inc., METS
Inc./MobileVision, L.P. and Comtrak Inc. LMS systems are land-based
wireless systems providing accurate service in metropolitan areas.
Many fleet managers use existing SMR, ESMR, two-way radio,
cellular or paging systems to communicate with vehicles and obtain
their location. Such systems are less reliable than the Company's
products, because they rely exclusively on drivers to accurately
identify their location.
Governmental Regulation
The Company is not aware of any governmental regulations that
effect the manufacture, development or sale of the System.
Company's Office
The Company's offices are located at 1201 North Avenue H,
Freeport, Texas 99202.
Employees
The Company has 15 full-time employees and one part-time employee.
The Company's Officers provide their services on a full-time basis.
See "Management."
Risk Factors
1. Limited Operating History and Revenues and Development Stage
Operation. Although the Company began operations in August 1997, The
Company is recently formed and is subject to all the risks inherent in
the creation of a new business. Since the Company is a new venture, it
has no record of operations and there is nothing at this time upon
which to base an assumption that the Company's plans will ultimately
prove successful. The Company's Independent Certified Public
Accountant's report on the Company's December 31, 1999 financial
statements contained an explanatory paragraph which expressed
substantial doubt about the Company's ability to continue as a going
concern due to the Company's loss from operations and lack of revenue.
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2. Lack of Market Research. The Company has neither conducted nor
has the Company engaged other entities to conduct market research such
that management has assurance market demand exists for the business
contemplated by the Company. See "Business."
3. Year 2000. The Company is aware of the issues associated
with the programming code in existing computer systems as the
millennium (year 2000) approaches. The "year 2000" problem is
pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do
not properly recognize such information could generate erroneous data
or cause a system to fail. Since the Company has not acquired
additional hardware or software technology in support of its services
at present, the year 2000 problem is not anticipated to have a
significant impact on the Company's operations. However, it may have
a significant impact on key suppliers and customers with whom the
Company may conduct business in the future.
4. Possible Inability to Service Customers. The Company may be
unable to deliver its products to the market and provide a high level
of technical, installation, Internet and call center support. Failure
to complement its product with a high level of installation and post-
sales service could have a material detrimental impact on the Company.
5. Possible Inability to Establish Distribution Channels. The
Company has a fledgling dealer distribution channel. There can be no
assurance that the Company will be successful in building such a dealer
network in the future. The failure to establish a dealer distribution
channel could adversely impact on the results of our operations.
6. Dependence on Manufacturers. The Company relies on the
efforts and skills of the manufacturers of its products in significant
volume. The absence of qualified manufacturers could adversely affect
the Company's operations.
7. Dependence on Key Suppliers. The Company relies on the
products and services of a small number of key suppliers. In
particular the Company relies upon Motorola for the supply of key
components and SkyTel for the provision of a reliable two-way reflex
telemetry network. The failure of these key suppliers to deliver
reliable and competitively priced products or services could adversely
affect the Company's operations.
8. Limited Coverage Area. The Company's System currently only
communicates via the SkyTel reflex telemetry network. Presently this
network covers most major metropolitan areas and several rural areas of
the United States. Coverage is not complete however. There can be no
assurance that SkyTel will expand their coverage areas. Furthermore
there can be no assurance that the Company will be able to successfully
adapt its product to work with other networks or that other network
providers will be willing to provide service to the Company.
9. GPS Antenna Obstruction. Position information depends on the
ability of the GPS antenna to receive signals from multiple GPS
satellites. Certain materials including concrete, metals and other
dense substances can obstruct these signals. The accuracy of the
System can diminish if the antenna is unable to pick up signals from 3
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or more satellites. Furthermore criminals may be able to defeat the
vehicle recovery system if they were to become aware that a stolen
vehicle was equipped with the System.
10. Reliance on Key Distributors. The Company currently has only
two distributors for its System. The loss of either distributor would
likely have a material adverse effect on our business, financial
condition and results of operations.
11. Rapid Technological Change. Significant technological
changes could render the Company's existing technology obsolete. If
the Company does not respond to new technological developments, its
financial condition and results of operations will be materially
adversely affected.
12. The System May Contain Technological or Manufacturing Flaws.
The Company's System may contain undetected errors or failures as new
versions are released. Despite testing, there may still be errors in
new products, even after commencement of commercial shipments. The
occurrence of these errors could result in delays in or failure to
achieve market acceptance of the System, which could have a material
adverse effect on the Company's business, financial condition and
results of operations. In addition, such flaw could give rise to
substantial product liability claims, which also could have a material
adverse effect the Company's business, financial condition and results
of operations.
13. Possible litigation To Protect Intellectual Property Rights.
Litigation may be necessary in order to enforce the Company's patents,
copyrights or other intellectual property rights, to protect the
Company's trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of
infringement. This type of litigation could result in the expenditure
of significant financial and managerial resources and could result in
injunctions preventing the Company from distributing certain products.
Such claims could materially adversely affect the Company's business,
financial condition and results of operations.
14. Failure To Protect Intellectual Property Rights May Impair
the Competitive Position. The Company will seek to protect its
intellectual property rights through patents, copyrights, trade secrets
and other measures, however the Company cannot be certain that:
* It will be able to protect our technology adequately;
* Any issued patents will not be successfully challenged by one
or more third parties, which could result in the loss of the
right to prevent others from exploiting the technology
claimed in the patent or inventions claimed in any other
issued patents;
* Competitors will not be able to develop similar technology
independently;
* Intellectual property laws will protect the Company's
intellectual property rights; and
* Third parties will not assert that the Company's products
infringe upon their patents, copyrights or trade secrets.
If the Company is unsuccessful in protecting its intellectual property,
there could be a material adverse effect on the Company's business,
financial condition and results of operations.
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15. Securities are Subject to Penny Stock Rules. The Company's
shares are "penny stocks" consequently they are subject to Securities
and Exchange Commission regulations which impose sales practice
requirements upon brokers and dealers to make risk disclosures to
customers before effecting any transactions therein.
16. Lack of Key Personnel Insurance. The Company has not obtained
key personnel life insurance on the lives of any of the officers or
directors of the Company. The death or unavailability of one or all of
the officers or directors of the Company could have a material adverse
impact on the operation of the Company. See "Management."
17. No Insurance Coverage. The Company, like other companies in
its industry, is finding it difficult to obtain adequate insurance
coverage against possible liabilities that may be incurred in
conducting its business activities. At present, the Company has
secured general liability insurance. The Company has potential
liability from its general business activities, and accordingly, it
could be rendered insolvent by a serious error or omission
18. Uninsured Risks. The Company may not be insured against all
losses or liabilities that may arise from operations, either because
such insurance is unavailable or because the Company has elected not to
purchase such insurance due to high premium costs or other reasons.
19. Need for Subsequent Funding. The Company believes it will
need to raise approximately $10m additional funds in order to achieve
profitable operations and provide the working capital to support its
growth. The Company's continued operations therefore will depend upon
the availability of cash flow, if any, from its operations or its
ability to raise additional funds through bank borrowings or equity or
debt financing. There is no assurance that the Company will be able to
obtain additional funding when needed, or that such funding, if
available, can be obtained on terms acceptable to the Company. If the
Company cannot obtain needed funds, it may be forced to curtail or
cease its activities. See "Business."
20. Need for Additional Key Personnel. The success of the
Company's proposed business will depend, in part, upon the ability to
attract and retain qualified employees. The Company believes that it
will be able to attract competent employees, but no assurance can be
given that the Company will be successful in this regard. If the
Company is unable to engage and retain the necessary personnel, its
business would be materially and adversely affected. See "Business."
21. Issuance of Additional Shares. As of January 31, 2000,
approximately 38,232,120 shares of Common Stock or 76.74% of the
50,000,000 authorized shares of Common Stock of the Company remain
unissued. The Board of Directors has the power to issue such shares,
subject to shareholder approval, in some instances. Although the
Company presently has no commitments, contracts or intentions to issue
any additional shares to other persons, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. See "Description of Securities -
Shares Eligible for Future Sale."
22. Non-Arms' Length Transaction. The number of shares of Common
Stock issued to a number of present shareholders of the Company for
property and services was arbitrarily determined and may not be
considered the product of arm's length transactions. See "Principal
Shareholders."
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23. Indemnification of Officers and Directors for Securities
Liabilities. The Articles of Incorporation of the Company provide that
the Company may indemnify any Director, Officer, agent and/or employee
as to those liabilities and on those terms and conditions as are
specified in the Idaho Business Corporation Act. Further, the Company
may purchase and maintain insurance on behalf of any such persons
whether or not the corporation would have the power to indemnify such
person against the liability insured against. The foregoing could
result in substantial expenditures by the Company and prevent any
recovery from such Officers, Directors, agents and employees for losses
incurred by the Company as a result of their actions. Further, the
Company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
24. Competition. Competition in the vehicle location market is
intense and it can be expected to intensify as new competitors enter
the market. There are possibly other competitors who are developing
products of which we the Company is unaware. There are competitors
that have substantially greater financial, technical and marketing
resources than the Company. There can be no assurance that the Company
will be able to compete effectively or successfully implement its
business plan.
25. Limited Public Market for Securities. At present, a limited
public market exists for the Company's securities and there is no
assurance that the trading market will continue in the future, or if it
does continue that it will be sustained. A shareholder of the
Company's securities may, therefore, be unable to resell the securities
should he/she desire to do so. Furthermore, it is unlikely that a
lending institution will accept the Company's securities as pledged
collateral for loans unless a regular trading market develops.
26. Cumulative Voting, Preemptive Rights and Control. There are
no preemptive rights in connection with the Company's Common Stock.
Cumulative voting in the election of Directors is not provided for.
Accordingly, the holders of a majority of the shares of Common Stock,
present in person or by proxy, will be able to elect all of the
Company's Board of Directors.
27. No Dividends Anticipated. At the present time the Company
does not anticipate paying dividends, cash or otherwise, on its Common
Stock in the foreseeable future. Future dividends will depend on
earnings, if any, of the Company, its financial requirements and other
factors. Investors who anticipate the need of an immediate income from
their investment in the Company's Common Stock should refrain from the
purchasing the Company's securities. See "Dividend Policy."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following Management's Discussion and Analysis contains
forward-looking statements within the meaning of Federal securities
laws. Forward looking statements discuss future expectations, contain
projections of results of operations or of financial conditions,
characterize future events or circumstances or state other forward-
looking information. We have based all forward-looking statements
included in Management's Discussion and Analysis on information
currently available to us, and we assume no obligation to update any
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such forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, actual results could differ materially from
those projected in the forward-looking statements. Potential risks
include those set out in the "Risk Factors" section of our Business
Plan.
Overview
Elite Logistics Services, Inc., (ELSI) a corporation organized
under the laws of the State of Texas was acquired on November 17th,
1999, by Elite Logistics, Inc. (ELI), a corporation organized under the
laws of the State of Idaho. For accounting purposes, ELSI, which
became a wholly owned subsidiary of ELI, is deemed to be the acquirer
under a reverse takeover transaction; accordingly, all figures
including comparatives are those of the legal subsidiary.
ELSI designs, develops, and produces a wireless monitoring and
tracking system that integrates two-way paging and Global Positioning
Systems (GPS) technology, with an Internet-enabled Geographic
Information System to allow online remote tracking and control of
vehicles. Our PageTrack[TM] Intelligent Vehicle Systems (IVS) can
monitor, track, analyze, and control the movement of virtually any
object, including ground vehicles, marine vessels, railway equipment
and valuable objects that are in transit.
From our inception in November, 1997 through late 1999, we devoted
substantially all of our efforts to product development, and raising
capital. In late 1999, we began to place greater emphasis on securing
funding for our official launch and developing the sales and marketing
plans for our technology. We also decided that the company needed the
credibility and access to capital of a public company structure and
decided to seek a public listing via a reverse merger. We entered into
a one-year consulting agreement with the Forte Group of Houston, TX to
provide strategic management consulting services that would assist us
in all these endeavors. Forte consultants have played an active role
in the management of the company and will continue to do so pending the
expansion of our own management team.
We first generated product revenues in the third quarter of 1999
through the sale of our PageTrack[TM] hardware products and the re-sale
of SkyTel network services. Feedback from early adopters of the
technology revealed some minor flaws in the technology that needed to
be addressed prior to a mass-market roll-out. Product design
enhancements were completed by the end of 1999. The customer
acceptance of the enhanced product has been overwhelmingly positive.
We are now ready to commence volume production and sales of the
PageTrack2[TM] unit (PT2). Orders on hand exceed our first six months
forecasts and we are confident of exceeding our first year target of
approximately 20,000 PT2 sales.
We are now investing significant resources to increase our
distribution reach by building a multi-faceted sales channel that
includes OEMs, Distributors, Dealers and Manufacturers Agents. We are
currently also in discussions with Motorola for the potential
distribution of the product within the Latin American and Caribbean
region.
<PAGE> 14
To date, we have derived our revenues principally from the sale of
hardware products and the re-sale of SkyTel network service fees within
the United States. We recognize hardware revenues upon delivery of the
product and we recognize network fees ratably over the length of the
service contract.
We expense all research and development as incurred. Development
costs incurred in the period from achievement of technological
feasibility, which we define as the establishment of a working model,
until the general availability of this software to customers, have been
short, and therefore software development costs qualifying for
capitalization have been insignificant. Accordingly, we have not
capitalized any software development costs to date.
We have a limited operating history upon which investors may
evaluate our business and prospects. Since inception we have incurred
significant losses, and as of November 30, 1999 we had an accumulated
deficit of $1,144,545. We intend to continue to expend significant
financial and management resources on the development of additional
products and services, sales and marketing, improved technology and
expanded operations. As a result, we expect to incur additional losses
and continued negative cash flow from operations through at least the
end of the current fiscal year.
Our revenues may not increase or even continue at their current
levels or we may not achieve or maintain profitability or generate cash
from operations in future periods. Our prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies
in new and rapidly evolving markets such as the intelligent vehicle
management systems market. We may not be successful in addressing these
risks, and our failure to do so would harm our business.
Results of Operations
Revenues
Revenues for the period ended November 30, 1999 totaled $236,596.
Total Cost of Net Revenues
Total Cost of Revenues for the period was $181,917.
Our gross profit of $54,679 equated to 23.1%. Cost of revenues
primarily consists of hardware purchases from Motorola and network
service fees paid to Skytel.
Operating Expenses
Marketing. Marketing expenses consist primarily of compensation
for our marketing and business development personnel, advertising,
trade show and other promotional costs, design and creation expenses
for marketing literature and our website. We do not make an allocation
of our occupancy costs and other overhead.
<PAGE> 15
Marketing expenses increased 139% to $75,865 for the six months
ended November 30, 1999 from $31,784 for the six months ended November
30, 1998. This increase was primarily due to increases in the number
of marketing personnel, advertising and promotional programs. We
expect that sales and marketing expenses will increase both in absolute
dollars and as a percentage of total net revenues in future periods due
to expanded efforts to market and promote our products and services
both domestically and internationally.
Research and Development. Research and development expenses
consist primarily of compensation for our research and development
personnel, network operations and, to a lesser extent, depreciation on
equipment used for research and development. We do not make an
allocation of our occupancy costs and other overhead. Research and
development expenses increased 187% to $115,842 for the six months
ended November 30, 1999 from $40,381 in the six months ended November
30, 1998. This increase was primarily due to increases in the number
of personnel needed to develop new products and services and build our
external network and computer data center infrastructure. We expect
that research and development expenses will increase in absolute
dollars in future periods due to expanded investments in the
development of enhanced and new products and online services.
Selling and Administrative. Selling and administrative expenses
consist primarily of compensation for personnel and payments to outside
contractors for general corporate functions, including finance,
information systems, human resources, facilities, legal and general
management, bad debt expense and an allocation of our occupancy costs
and other overhead. Selling and administrative expenses increased 584%
to $393,566 for the six months ended November 30, 1999 from $57,555 in
the six months ended November 30, 1998. This increase was primarily
due to increases in the number of personnel and outside contractors
needed to support the growth of our business. We expect that selling
and administrative expenses will increase in absolute dollars as we
hire additional personnel and incur additional expenses relating to the
anticipated growth of our business, such as costs associated with
increased infrastructure and our public company status.
Selling and Administrative expenses include an expense of $229,955
for common stock warrants issued to consultants. The amount recorded
as an expense is based on the estimated fair value of the warrants
based on the Black-Scholes option pricing model.
Interest expense. Net interest expense consists of expenses
related to our financing obligations, which include borrowings under
equipment loans, and short-term bank loans and capital lease
obligations. Interest expense increased to $1,890 for the six months
ended November 30, 1999 from $0 in the six months ended November 30,
1998. This increase was primarily due to interest paid on the bank
lines of credit.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through
the sale of our of common stock by way of private placement, loans from
shareholders, equipment financing, lines of credit, short-term loans
and through deferred employee compensation. $244,500 of this deferred
salary obligation has been converted to redeemable preferred stock.
<PAGE> 16
In September and October of 1999 Elite Logistics Services, Inc
(ELSI) raised $400,000 through the private placement of 320,000 shares
at $1.25. On November 17th, 1999 ELSI agreed to be acquired in a
stock-for-stock transaction pursuant to an Acquisition Agreement with
Summit Silver, Inc. (since renamed Elite Logistics, Inc.). ELSI
entered into this transaction to facilitate the raising of additional
capital through ELI to fund the ELSI business plan.
Elite Logistics Inc (ELI) is currently seeking to raise $1,500,000
from the issuance of 750,000 shares of restricted common stock at a
price of $2.00 per share. As of February 28, 2000, the Company has
received commitments in excess of this amount and $1,500,000 from this
issuance had received actual subscriptions for approximately 445,000
shares. The Company intends to accept subscriptions for 750,000 shares
on a first come, first served, basis.
We believe that the net proceeds from our private placement
currently underway will need to be augmented during the balance of the
current fiscal year by a line of credit and/or further equity raising
of $2,500,000 to fund the current business plan. Thereafter, the
Company expects that it will be able to fund operations out of
operating cash flow. The sale of additional equity or convertible debt
securities could result in additional dilution to our stockholders.
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 believes that the Company could re-orient its
business plan to a slower growth scenario that would enable the Company
to survive and grow at a slower pace. However 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.
At November 30, 1999 the Company had borrowings of $50,000 under
a bank line of credit that has since terminated and been repaid. The
Company is currently seeking a bank revolving line of credit for up to
$0.5 million to fund working capital requirements that are higher than
expected due to customer orders exceeding our forecasts. The Company
is also seeking an underwriter for a secondary offering to raise up to
$10,000,000. Proceeds from this underwriting, should it proceed, would
be used to repay borrowings under the line of credit and to fund the
global expansion of the Company's activities.
We also have some lease financing agreements that amount to less
than $11,000. The Company has no material commitments for capital
expenditures, but anticipates an increase in the rate of capital
expenditures consistent with our anticipated growth in operations,
infrastructure and personnel. We anticipate that we will continue to
add computer hardware resources, and expand our primary office facility
during the next 12 months. We may also use cash to acquire or license
technology, products or businesses related to our current business. In
addition, we anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future and that
our operating expenses will be a material use of our cash resources.
<PAGE> 17
Cash Flow for Six Months Ending November 30, 1999
Net cash used in operating activities was $309,473 for the six
months to November 30, 1999. Net cash used for operating activities
was primarily the result of net losses before non-cash charges, which
include equity instrument compensation expense, deferred salaries and
amortization. The net cash used for operating activities also includes
increases in accounts receivable ($89,971) and inventory ($180,187)
offset by increases in accounts payable ($110,817) and accrued expenses
($41,899).
Net cash used in investing activities of $37,513 comprised patent
application costs and fixed asset purchases.
Net cash provided by financing activities was $450,550 and
consisted of proceeds from the sale of stock of $414,100 and a bank
line of credit $50,000 offset by the repayment of shareholder notes of
$30,000.
Market Risk Disclosure
As at 28th February ELI had yet to complete the private placement
of 750,000 shares at $2.00 per share to partially fund ELSI's business
plan. The Company has received oral commitments for the full amount
being sought, however a sudden negative disruption to the equity
markets could cause potential subscribers to change their minds and not
subscribe for stock.
As previously discussed, ELI intends to seek a further $10,000,000
from a secondary offering this year of which an estimated $2,500,000 is
required to fund ELSI's business plan. Until such time as ELSI has
successfully completed such funding arrangements, the Company remains
at risk of a sudden negative disruption to the equity markets
preventing such underwriting from proceeding.
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company leases 2,518 sq feet of space at $3,900.00 per month
with utilities paid and offices furnished on a lease that expires
December 31, 2001.
The Company's offices are currently adequate and suitable for its
operations. The Company may relocate its offices upon generating
revenues from operations, however, there is currently no plan to do so
and the Company has not entered into any negotiations with anyone to
relocate its offices.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the Common Stock ownership as of
January 20, 2000 of each person known by the Company to be the
beneficial owner of five percent or more of the Company's Common Stock,
each director individually and all officers and directors of the
Company as a group. Each person has sole voting and investment power
with respect to the shares of Common Stock shown, unless otherwise
noted, and all ownership is of record and beneficial.
<PAGE> 18
Name and
address Number of Percentage of
of owner Shares Position Shares Owned
Joseph Smith 1,104,400 President, Chief Executive 2.21%
Officer and a member of the
Board of Directors
Richard Hansen 502,000 Chief Operating Officer and a 1.00%
member of the Board of Directors
Thien Nguyen 1,104,400 Vice President and a member of 2.21%
the Board of Directors
Hahn Nguyen 3,112,400 Vice President and a member of 6.23%
the Board of Directors
John Ryan 214,167 Secretary and member of the 0.49%
Board of Directors
Russell A Naisbitt 0 Treasurer, Chief Financial 0.00%
Officer and a member of the
Board of Directors
Diana Smith 4,016,000 Member of the Board of Directors 8.03%
the Board of Directors
All officers and 10,086,367 20.17%
directors as a
group (7 persons)
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
The officers and directors of the Company are as follows:
Name Age Position with Company
Joseph Smith 55 President, Chief Executive Officer and a
member of the Board of Directors
Richard Hansen 56 Chief Operating Officer and a member of
the Board of Directors
Thien Nguyen 37 Vice President and a member of the Board
of Directors
Hahn Nguyen 36 Vice President and a member of the Board
of Directors
John Ryan 37 Secretary and a member of the Board of
Directors
Russell Naisbitt 38 Treasurer, Chief Financial Officer and a
member of the Board of Directors
Diana Smith 47 Member of the Board of Directors
<PAGE> 19
All directors hold office until the next annual meeting of
shareholders and until their successors have been elected and
qualified. The Company's officers are elected by the Board of
Directors after each annual meeting of the Company's shareholders and
hold office until their death, or until they resign or have been
removed from office.
Officers and Directors Biographical Descriptions:
Joseph Smith - President, Chief Executive Officer and a member of the
Board of Directors.
Since November 1999, Mr. Smith has been President, Chief
Executive Officer and a member of the Board of Directors. From August
1997 to November 1999, Mr. Smith was President of Elite Logistics
Services, Inc., the Company's wholly owned subsidiary corporation. From
1996 to August 1997, Mr. Smith was Director of Logistics for Baker
Energy located in Houston, Texas. Baker Energy is in the business of
oil and gas logistics. Mr. Smith was responsible for all logistics
planning, logistics software development, budgeting and company
development. From March 1988 to January 1999, Mr. Smith was a part
owner and Chief Technical Officer of Southern Instrument Company
located in Freeport, Texas. Southern Instrument Company was engaged in
the business of selling science and laboratory equipment. From October
1995 to May 1996 Mr. Smith was an independent logistics consultant.
Mr. Smith is the husband of Diana Smith, the Company's Comptroller and
member of the Board of Directors.
Richard Hansen - Chief Operating Officer and a member of the Board of
Directors.
Since November 1999, Mr. Hansen has been Chief Operating Officer
and a member of the Board of Directors of the Company. Mr. Hansen
duties include the daily operations of the Company ensuring customer
support, investors relations, marketing and all operations in the
absence of the President. From 1995 to 1998, Mr. Hansen was the
corporate logistics manager and new business manager for Call Henry,
Inc., Cocoa, Florida. Mr. Hansen was responsible for new business
contacts, including marketing, proposal development and integration,
and logistic policies.
Thien Nguyen - Vice President and a member of the Board of Directors.
Since November 1999, Mr. Nguyen has been Vice President and a
member of the Board of Directors. From August 1997 to November 1999
Mr. Nguyen was Senior Vice President and a member of the Board of
Directors of Elite Logistics Services, Inc., the Company's wholly owned
subsidiary corporation. From August 1996 to August 1997, Mr. Nguyen
was unemployed. From February 1993 to August 1996, Mr. Nguyen was Vice
President of Operations for Tree Fresh of Texas, Inc. Tree Fresh of
Texas, Inc. is located in Houston,, Texas and is engage in the business
of produced and distributed fruit juices to hotels. Mr. Nguyen is the
husband of Hanh Hoang Nguyen, the Company's Vice President of Research
and Development and a member of the Board of Directors.
<PAGE> 20
Hanh Hoang Nguyen - Vice President and a member of the Board of
Directors.
Since November 1999, Ms. Nguyen has been Vice President, with her
husband Thien Nguyen, and a member of the Board of Director. Since
November 1997, Ms. Nguyen has been a director of Elite Logistics
Services, Inc., the Company's wholly owned subsidiary corporation.
Since 1989, Ms. Nguyen has been Senior Lead Engineer for Dow Chemical
Company.
John Ryan - Secretary and a member of the Board of Directors.
From April 1998 to November 1999, Mr. Ryan was the President and
Chief Executive Officer of the Company. At that time the Company was
engaged in the business of mining. In November 1999, Mr. Ryan resigned
as President of the Company and was appointed Secretary of the Company.
Since May 1998, Mr. Ryan has been the Secretary and a member of the
Board of Directors of American Health Providers Corporation, and Idaho
corporation located in Coeur d'Alene, Idaho. American Health Providers
Corporation is engaged in the business of acquiring existing health
care companies. From May 1996 to November 1999, Mr. Ryan was Secretary
and a Director of Metalline Mining Company, an Idaho corporation
engaged in the mining business. From January 1998 to February 1999,
Mr. Ryan was President and a member of the Board of Directors of Grand
Central Silver Mines, Inc., a Utah mining corporation. Since October
1996 Mr. Ryan has been Vice President of Corporate Development for
Royal Silver Mines, Inc., a Utah corporation engaged in the business of
mining. Since April 1997, he has been a member of the Board of
Directors of Royals Silver Mines, Inc. as well. From May 1995 to May
1996, Mr. Ryan was a financial consultant for Pennaluna & Company, an
SEC, NASD registered broker/dealer located in Coeur d'Alene, Idaho.
From January 1995 to May 1995, Mr. Ryan was an engineer and manager for
Bunker Hill Mines.
Russell Naisbitt - Chief Financial Officer, Vice President of Business
Development and a member of the Board of Directors.
Since November 1999, Mr. Naisbitt has been Chief Financial
Officer, Vice President of Development and a member of the Board of
Directors of the Company. From June 1999 to the present, Mr. Naisbitt
has been a founding partner and member of the Board of Directors of
Forte Group L.L.C., an e-commerce company, located in Houston, Texas.
From April 1998 to June 1999, Mr. Naisbitt was an independent
consultant in the Internet and telecommunications fields. From January
1997 to the present, Mr. Naisbitt has been a member of the Board of
Directors for eWave, Inc., an online advertising company, located in
Houston, Texas. From January 1996 to March 1998, Mr. Naisbitt was the
President and a member of the Board of Directors of Pharos Systems USA,
Inc., a network print management software company, located Houston,
Texas. From June 1994 to December 1995, Mr. Naisbitt was the Vice
President, Business Development and member of the Board of Directors of
Landmark Golf Products, Inc., a software company, located in Houston,
Texas.
<PAGE> 21
Diana Smith - Member of the Board of Directors.
Since November 1999, Ms. Smith has been Comptroller and a member
of the Board of Directors of the Company. From August 1999 to November
1999, Ms. Smith was Chief Financial Officer and a Director of Elite
Logistics Services, Inc., the Company's wholly owned subsidiary
corporation. From March 1988 to January 1999, Ms. Smith a part owner
and Chief Financial Officer of Southern Instrument Company located in
Freeport, Texas. Southern Instrument Company was engaged in the
business of selling science and laboratory equipment. Since June 1993,
Ms. Smith has operated an accounting and bookkeeping service in
Freeport, Texas. Ms. Smith is the wife of Joseph Smith, the Company's
President and a member of the Board of Directors.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company during fiscal 1999 to its officers. This information includes
the dollar value of base salaries, bonus awards and number of stock
options granted, and certain other compensation, if any.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE [1]
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph D. 1999 85,000 - - - - - -
Smith 1998 63,417 - - - - - -
President 1997 20,000 - - - - - -
Richard 1999 68,500 - - - - - -
Hansen 1998 27,417 - - - - - -
COO 1997 5,000 - - - - - -
Thien
Nguyen 1999 70,000 - - - - - -
Vice 1998 50,617 - - - - - -
President 1997 - - - - - - -
Hahn
Nguyen 1999 - - - - - - -
Vice 1998 - - - - - - -
President 1997 - - - - - - -
John Ryan 1999 - - - - - - -
Secretary 1998 - - - - - - -
1997 - - - - - - -
Russell A. 1999 - - - - - - -
Naisbitt 1998 - - - - - - -
Treasurer 1997 - - - - - - -
and CFO
</TABLE>
All compensation received by the officers and directors has been
disclosed.
There are no stock option, retirement, pension, or profit sharing
plans for the benefit of the Company's officers and directors.
<PAGE> 22
Option/SAR Grants.
No individual grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs"), and freestanding SARs have
been made to any executive officer or any director since the inception
of the Company, accordingly, no stock options have been exercised by
any of the officers or directors in fiscal 1999.
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance to
occur over a period longer than one fiscal year, whether such
performance is measured by reference to financial performance of the
Company or an affiliate, the Company's stock price, or any other
measure.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
From time to time, the Company has entered into transactions with
parties related to the Company. The Company believes that all
transactions with related parties were entered into on terms no more or
less favorable to the Company than could have been obtained from
unrelated third parties.
On November 17, 1999, Elite Logistics Services, Inc. completed an
acquisition agreement with Summit Silver, Inc. subsequently to be known
as Elite Logistics, Inc. (the "Company"). In late November 1999,
Summit Silver, Inc. was renamed as Elite Logistics, Inc.
Under the terms of the agreement, Summit Silver, Inc. issued
10,400,000 shares of common stock in exchange for all of Elite
Logistics Services, Inc.'s common stock. Immediately prior to the
agreement and plan of reorganization, Elite Logistics Services, Inc.
had 10,400,000 shares of common stock issued and outstanding. Elite
Logistics Services, Inc. will continue as a subsidiary of the Company.
The shares were valued at $1.87 per share for a total value of
$19,500,000. This value increase was allocated to intangible assets of
patents. As of November 17, 1999, the market value of Summit Silver,
Inc.'s stock was $3.75 and the above value allowed for a 50% discount
for the issuance of restricted stock.
In connection with this same transaction, all 2,445 shares of
Elite Logistics Services, Inc.'s preferred stock were exchanged for an
equivalent amount of Summit Silver, Inc. preferred stock, which
conferred the same rights and provisions as the original shares of
Elite Logistics Services, Inc.'s preferred stock. The exchange of the
redeemable preferred stock resulted in no significant valuation
adjustment in the allocation of value in the merger. Also, the
1,215,555 outstanding warrants in Elite Logistics Services, Inc. were
exchanged with Summit Silver, Inc. for warrants of the same terms and
rights. The warrants were revalued for the purposes of the acquisition
based upon the Summit Silver, Inc. stock value of $1.87 using the
Black-Scholes valuation model. The warrants additional value of
$886,444, derived from this calculation, resulted in an addition to the
intangible asset of patents.
<PAGE> 23
Officers Loans and Deferred Compensation
On September 30, 1999 the Company owed $112,356 by way of deferred
compensation and other outstanding loans as follows:
Deferred
Name Compensation Loans Total
Joseph Smith $47,523 $ 4,001 $ 51,524
Richard Hansen
Thien Nguyen $17,667 $ 17,667
Hahn Nguyen $40,000 $ 40,000
Russell Naisbitt
Diane Smith $ 3,165 $ 3,165
Total $68,355 $44,001 $112,356
The Company has not entered into any other obligations regarding
deferred compensation with its officers and consultants.
Series A Preferred Stock
Elite Logistics Services, Inc. ("Elite") entered into an agreement
with certain officers that provided for those officers to convert
certain debt owing to them by Elite for deferred compensation into
equity in the form of Series A Preferred Redeemable Preference Shares.
The shares carry an annual dividend of $8.25 per share and are
redeemable on or before September 16, 2000, with Board of Directors
approval.
The Series A Preferred shares of Elite were exchanged for Series
A Preferred shares of The Company on the same terms upon consummation
of the Plan of Merger. See "Certain transactions - Plan of Merger."
Forte Group L.L.C. Consulting Services and other transactions
Mr. Stephen Harris, a partner in Forte Group L.L.C. a Houston
consulting company specializing in assisting emerging technology
companies, has agreed to be a director of Elite Logistics, Inc.
Elite has entered into a consulting agreement with Forte that
provides for cash compensation of $20,000 per month for services to be
provided by Forte over an initial period of six (6) months.
Compensation (if any) and consulting services to be provided (if any)
beyond the initial period are to be mutually agreed. In addition to
the consulting fees detailed above, Forte may earn certain success-
related contingency fees in the event that it introduces investors who
fund the company or executives who are employed by the company.
Forte was also issued a warrant to purchase 1,115,555 shares of
Elite at $1.25, which was exchanged for a similar warrant to purchase
shares in the Company upon consummation of the Plan of Merger. See
"Certain transactions - Plan of Merger" below.
Plan of Merger
The Company entered into a plan of merger dated November 17, 1999
with the shareholders of Elite whereby it was agreed that the Company
would acquire all of the outstanding stock in Elite in exchange for the
issue of 10,540,000 shares of the Companies common stock.
<PAGE> 24
ITEM 8. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company currently consists of
50,000,000 shares of Common Stock, $0.01 par value per share. As of
January 31, 2000, 11,627,880 share of common stock were issued and
outstanding. Of the 11,627,880 shares presently outstanding,10,909,750
are "restricted" as that term is defined in Rule 144 of the Securities
Act of 1933 (the "Act"), and may only be resold in compliance therewith
and 718,130 are freely tradeable.
In general, under Reg. 144, a person who has held his shares for
a period of one (1) year, may sell in ordinary market transactions
through a broker or with a market maker, within any three (3) month
period a number of shares which does not exceed the greater of one
percent (1%) of the number of outstanding shares of Common Stock or the
average of the weekly trading volume of the Common Stock during the
four calendar weeks prior to such sale. Sales under Reg. 144 require
the filing of Form 144 with the Securities and Exchange Commission. If
the shares of Common Stock have been held for more than two (2) years
by a person who is not an affiliate, there is no limitation on the
manner of sale or the volume of shares that may be sold and no Form 144
is required. Sales under Reg. 144 may have a depressive effect on the
market price of the Company's Common Stock.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred
stock, $0.01 par value per share. The preferred shares may be issued
in one or more series and may have such voting powers, designations,
privileges, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions as shall
be fixed from time to time by the Board of Directors. As of the date
hereof, no preferred shares outstanding other than as follows:
Series A Preferred Stock
Elite Logistics Services, Inc. ("Elite") entered into an agreement
with certain officers that provided for those officers to convert
certain debt owing to them by Elite for deferred compensation into
equity in the form of Series A Preferred Redeemable Preference Shares.
The shares carry an annual dividend of $8.25 per share and are
redeemable on or before September 16, 2000, with Board of Directors
approval.
The Series A Preferred shares of Elite were exchanged for Series
A Preferred shares of The Company on the same terms upon consummation
of the Plan of Merger. See "Certain transactions - Plan of Merger."
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has been
paid on the Common Stock since inception, and none is contemplated in
the foreseeable future.
Transfer Agent
The Company's transfer agent is OTC Stock Transfer, Inc., 231 East
2100 South, Salt Lake City, Utah 84115 and its telephone number is
(801) 485-5555.
<PAGE> 25
Rights of Shareholders
All shares have equal voting rights and are not assessable. Voting
rights are not cumulative and, therefore, the holders of more than 50%
of the Common Stock could, if they chose to do so, elect all of the
directors of the Company.
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common Stock
is not subject to redemption and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of
Common Stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. The shares of Common Stock, when
issued, will be fully paid and non-assessable.
There are no outstanding options, warrants or rights to purchase
shares of the Company's Common Stock, other than as follows:
Warrants
At the present time the Company has 1,215,555 Warrants issued and
outstanding. Each warrant is convertible into one share of common
stock upon payment of $1.25 per Warrant.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "ELOG." The Company's shares began
trading in 1996. Summary trading by quarter for the 1999 and 1998
fiscal years and the first quarter of 2000 are as follows:
Fiscal Quarter High Bid[1] Low Bid[1]
2000
First Quarter 5.50 3.50
1999
Fourth Quarter 3.875 0.25
Third Quarter 0.25 0.1825
Second Quarter 0.25 0.04
First Quarter 0.25 0.0625
1998
Fourth Quarter 0.45 0.125
Third Quarter 0.51 0.125
Second Quarter 0.125 0.10
First Quarter 0.0625 0.0625
[1] These quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commissions and may not represent actual
transactions.
As of January 20, 2000, the Company had 1,075 holders of record of
its Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
<PAGE> 26
SEC Rule 15g
The Company's shares are covered by Section 15g of the Securities
Act of 1933, as amended that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouses). For transactions covered by
the Rule, the broker/dealer must make a special suitability
determination for the purchase and have received the purchaser's
written agreement to the transaction prior to the sale. Consequently,
the Rule may affect the ability of broker/dealers to sell the Company's
securities and also may affect the ability of purchasers to sell their
shares in the secondary market.
Section 15g also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one
page summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary
marketing; terms important to in understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a dealers
"spread" and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers duties to its customers, including the
disclosures required by any other penny stock disclosure rules; the
customers rights and remedies in causes of fraud in penny stock
transactions; and, the NASD's toll free telephone number and the
central number of the North American Administrators Association, for
information on the disciplinary history of broker/dealers and their
associated persons.
ITEM 2. LEGAL PROCEEDINGS.
No material legal proceedings to which the Company is a party are
pending nor are any known to be contemplated and the Company knows of
no legal proceedings pending or threatened, or judgments entered
against, any Director or Officer of the Company in his capacity as
such.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Registration Statement.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has made the following sale of unregistered securities
during the last three years:
<PAGE> 27
DATE NAME SHARES AMOUNT PAID
1/11/00 Joyce L. Stump 5,000 $ 10,000.00
1/11/00 Frank Pitts 5,000 $ 10,000.00
1/18/00 Abraham Toubail 10,000 $ 20,000.00
1/18/00 Rutherford Limited
Partnership 15,000 $ 30,000.00
1/18/00 Bruce Bishop 10,000 $ 20,000.00
1/19/00 Michael Moneymaker 5,000 $ 10,000.00
1/19/00 Charles Colvard 1,000 $ 2,000.00
1/24/00 J. K. Hazen 25,000 $ 50,000.00
1/24/00 English Builders 8,000 $ 16,000.00
1/24/00 Michael Moneymaker 2,000 $ 4,000.00
1/25/00 Roger Sanders II 2,500 $ 5,000.00
1/25/00 Michael Aspinwall 7,500 $ 15,000.00
1/25/00 Simon Williams 5,000 $ 10,000.00
1/28/00 Floyd E. Hambleton 12,500 $ 25,000.00
1/28/00 Kelly Revocable Trust 5,000 $ 10,000.00
1/28/00 Fred C. or Margaret Hoeppner 5,000 $ 10,000.00
1/28/00 Wallis W. Wood 10,000 $ 20,000.00
1/28/00 Deborah and Joseph Jacobson 1,250 $ 2,500.00
1/28/00 Richard and Suzanne Salter 7,500 $ 15,000.00
1/31/00 James H. Harris, M.D. 35,000 $ 70,000.00
1/31/00 Robert J. Kaufman 5,000 $ 10,000.00
1/31/00 Thomas C. Dryden 2,500 $ 5,000.00
The foregoing 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.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Idaho Revised Statutes and certain provisions of the Company's
Bylaws under certain circumstances provide for indemnification of the
Company's Officers, Directors and controlling persons against
liabilities which they may incur in such capacities. A summary of the
circumstances in which such indemnification is provided for is
contained herein, but this description is qualified in its entirety by
reference to the Company's Bylaws and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
<PAGE> 28
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
Indemnification may also be granted pursuant to the terms of
agreements which may be entered in the future or pursuant to a vote of
shareholders or Directors. The statutory provision cited above also
grants the power to the Company to purchase and maintain insurance
which protects its Officers and Directors against any liabilities
incurred in connection with their service in such a position, and such
a policy may be obtained by the Company.
PART F/S
ITEM 13. FINANCIAL STATEMENTS.
TABLE OF CONTENTS
ACCOUNTANT'S REVIEW REPORT . . . . . F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . F-2
Consolidated Statements of Operations
and Accumulated Deficit . . . . . F-3
Consolidated Statements of Stockholders' Equity . F-4
Consolidated Statements of Cash Flows . . . F-5
NOTES TO FINANCIAL STATEMENTS . . . . . F-6
SUPPLEMENTAL INFORMATION . . . . . . F-17
<PAGE> 29
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants & Business Consultants
601 W. Riverside, Suite 1940, Spokane, WA 99201
(509) 838-5111 FAX (509) 838-5114 E-mail [email protected]
ACCOUNTANT'S REVIEW REPORT
To the Board of Directors
Elite Logistics, Inc.
Freeport, Texas
We have reviewed the accompanying consolidated balance sheets of Elite
Logistics, Inc., as of November 30, 1999 and 1998, and the related
consolidated statements of operations, stockholders equity, and cash
flows for the six months the ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of
Elite Logistics, Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying consolidated financial
statements in order for them to be in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 15 to the financial statements, the Company's
significant operating losses raise substantial doubt about its ability
to continue as a going concern. Management's plans regarding the
resolution of this issue are also discussed in Note 15. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
Our review was made for the purpose of expressing limited assurance
that there are no material modifications that should be made to the
financial statements in order for them to be in conformity with
generally accepted accounting principles. The information included in
the accompanying proforma financial information is for supplementary
analysis purposes and for requirements of the Securities and Exchange
Commission. Such information has been subjected to the inquiry and
analytical procedures applied in the review of the basic financial
statements, and we are not aware of any material modifications that
should be made thereto.
/s/ Williams & Webster P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
February 15, 2000
<PAGE> 30
ELITE LOGISTICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, November 30,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 137,828 $ 59,972
Investments 24,400 -
Accounts receivable 48,167 -
Inventory 180,267 80
------------ ---------
TOTAL CURRENT ASSETS 390,662 60,052
------------ ---------
PROPERTY AND EQUIPMENT
Computer equipment 90,240 61,285
Furniture and equipment 6,089 2,645
Software 87,426 86,063
Less: accumulated depreciation and
amortization (86,296) (53,164)
------------ ---------
TOTAL PROPERTY AND EQUIPMENT 97,459 96,829
------------ ---------
OTHER ASSETS
Patents, net of amortization 20,298,408 -
------------ ---------
TOTAL OTHER ASSETS 20,298,408 253,790
------------ ---------
TOTAL ASSETS $ 20,786,529 $ 156,881
============ =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 110,817 $ -
Line of credit 50,000 -
Accrued expenses 41,899 -
Leases payable 3,620 -
Deferred salaries 56,255 161,252
Notes payable to shareholders 49,001 42,101
------------ ---------
TOTAL CURRENT LIABILITIES 311,592 203,353
------------ ---------
LONG-TERM LIABILITIES
Leases payable, net of current portion 6,935 -
------------ ---------
TOTAL LIABILITIES 318,527 -
------------ ---------
See accountant's review report and notes to the financial statements.
F-2a
<PAGE> 31
ELITE LOGISTICS, INC.
CONSOLIDATED BALANCE SHEETS
November 30, November 30,
1999 1998
<S> <C> <C>
COMMITMENTS AND CONTINGENCIES - -
------------ ---------
REDEEMABLE PREFERRED STOCK 244,500 -
------------ ---------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
50,000,000 shares authorized,
11,411,168 shares issued and
outstanding 114,412 -
Common stock - no par value;
100 shares authorized and
100 shares issued and outstanding-
"S" Corporation - 381,360
Warrants outstanding 1,116,399 -
Additional paid-in capital 20,137,236 -
Accumulated deficit (1,144,545) (427,832)
TOTAL STOCKHOLDERS' EQUITY 20,223,502 (46,472)
------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 20,786,529 $ 156,881
============ =========
</TABLE>
See accountant's review report and notes to the financial statements.
F-2b
<PAGE> 32
ELITE LOGISTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended November 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
REVENUES $ 236,596 $ 6,300
COST OF REVENUES 181,917 412
----------- -----------
GROSS PROFIT 54,679 5,888
EXPENSES
Professional services 40,634 -
Marketing expenses 75,865 31,784
Selling and administrative expenses 393,566 57,555
Exploration costs 2,800 -
Research and development 115,842 40,381
----------- -----------
TOTAL EXPENSES 628,707 129,720
OPERATING INCOME (LOSS) (574,028) (123,832)
OTHER INCOME (EXPENSE)
Interest (1,890) -
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (1,890) -
LOSS BEFORE INCOME TAXES (575,918) (123,832)
INCOME TAX BENEFIT - -
----------- -----------
NET (INCOME) LOSS $ (575,918) $ (123,832)
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.06) $ (0.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 10,411,269 10,040,000
=========== ===========
</TABLE>
See accountant's review report and notes to the financial statements.
F-3
<PAGE> 33
ELITE LOGISTICS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Number
of Shares Amount Warrants
<S> <C> <C> <C>
Balance at
December 31, 1997 100 $ 381,360 $ -
Loss for the five months
ending May 31, 1998 - - -
Loss for six months ending
November 30, 1998 - - -
----------- --------- -----------
Balance at
November 30, 1998 100 381,360 -
Loss for the month ending
December 31, 1998 - - -
----------- --------- -----------
Balance at
December 31, 1998 100 381,360 -
Common stock returned to
treasury at $4,167 per
share (5) (20,833) -
Issuance of treasury shares
for cash and deferred
salaries at $7,000
per share 5 35,000 -
Conversion of "S"
Corporation common stock
to "C" Corporation common
stock at 100,400 to 1 10,039,900 (295,127) -
Issuance of common stock
for cash at $1.25
per share 320,000 3,200 -
Issuance of common stock
at $1.25 in exchange for
accounts payable 40,000 400 -
Warrants issued as
consulting fees - - 229,955
Reverse acquisition and
recapitalization 1,014,500 10,412 886,444
Loss for five months
ending May 31, 1999 - - -
Loss for six months
ending November 30,1999 - - -
---------- --------- -----------
Balance at
November 30, 1999 11,414,500 $ 114,412 $ 1,116,399
========== ========= ===========
See accountant's review report and notes to the financial statements.
F-4a
<PAGE> 34
ELITE LOGISTICS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Balance at
December 31, 1997 $ - $ (257,440) $ 123,920
Loss for the five months
ending May 31, 1998 - (46,560) (46,560)
Loss for six months ending
November 30, 1998 - (123,832) (123,832)
------------ ------------ ------------
Balance at
November 30, 1998 - (427,832) (46,472)
Loss for the month ending
December 31, 1998 - (51,670) (51,670)
------------ ------------ ------------
Balance at
December 31, 1998 - (479,502) (98,142)
Common stock returned to
treasury at $4,167
per share - - (20,833)
Issuance of treasury shares
for cash and deferred salaries
at $7,000 per share - - 35,000
Conversion of "S"
Corporation common stock
to "C" Corporation common
stock at 100,400 to 1 295,127 - -
Issuance of common stock
for cash at $1.25
per share 396,800 - 400,000
Issuance of common stock
at $1.25 in exchange for
accounts payable 49,600 - 50,000
Warrants issued as
consulting fees - - 229,955
Reverse acquisition and
recapitalization 19,395,709 - 20,292,565
Loss for five months ending
May 31, 1999 - (89,125) (89,125)
Loss for six months ending
November 30, 1999 - (575,918) (575,918)
------------ ------------ ------------
Balance at
November 30, 1999 $ 20,137,236 $ (1,144,545) $ 20,223,502
============ ============ ============
</TABLE>
See accountant's review report and notes to the financial statements.
F-4b
<PAGE> 35
ELITE LOGISTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended November 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (575,918) $ (123,832)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization 33,132 29,055
Deferred salaries 56,255 128,794
Stock issued for accounts payable 50,000 -
Stock issued for compensation 244,500 -
Decrease (Increase) in :
Accounts receivable (89,971) -
Inventory (180,187) (80)
Increase (Decrease) in :
Accounts payable 110,817 -
Accrued expenses 41,899 -
---------- ----------
Net cash provided (used) in
operating activities (309,473) 33,937
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (14,282) -
Payments on leased equipment (1,481) -
Patent costs (21,750) -
---------- ----------
Net cash provided (used) in
investing activities (37,513) -
---------- ----------
Cash flows from financing activities:
Issuance of stock 414,100 -
Proceeds from line of credit 226,000 -
Payments on line of credit (165,550) -
Proceeds from shareholders'
notes payable 6,000 20,000
Payments to shareholders for notes (30,000) -
---------- ----------
Net cash provided (used) in
financing activities 450,550 20,000
---------- ----------
Net increase (decrease ) in cash 103,564 53,937
Cash, beginning of period 34,264 6,035
---------- ----------
Cash, end of period $ 137,828 $ 59,972
========== ==========
See accountant's review report and notes to the financial statements.
F-5a
<PAGE> 36
ELITE LOGISTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
For the Six Months Ended November 30, 1999 and 1998
1999 1998
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest expense $ 5,383 $ -
========== ==========
Income taxes $ - $ -
========== ==========
NON-CASH OPERATING ACTIVITIES
Stock issued for accounts payable $ 50,000 $ -
Stock issued for deferred salaries $ 244,500 $ -
Warrants issued for consulting $1,116,399 $ -
</TABLE>
See accountant's review report and notes to the financial statements.
F-5b
<PAGE> 37
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 1 - BUSINESS ORGANIZATION
Nature of Operations
Elite Logistics Services, Inc. (hereinafter "Elite") was incorporated
as an "S" Corporation on August 6, 1997 under the laws of the State of
Texas. Elite is engaged in the production of global positioning
systems and provides the required services for the operation of these
systems. The Company's services are marketed nationally. On September
1, 1999, the Company amended its articles of incorporation to become a
regular "C" Corporation. See Note 16.
On November 17, 1999, the Company agreed to an exchange of its stock in
an acquisition with Summit Silver, Inc. This acquisition is being
accounted for as a purchase and reverse acquisition of a non-operating
public enterprise by a private operating company. Elite Logistics
Services, Inc, the operating company, will be a subsidiary of Elite
Logistics, Inc. (formerly Summit Silver Inc.) See Note 9. Elite
Logistics, Inc. (hereinafter "ELI") is the holding company of Elite.
Elite is a wholly owned subsidiary and is consolidated for financial
reporting. As part of the acquisition, the Company acquired limited
assets from Summit Silver, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
ELI uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising
Advertising costs are charged to operations in the year incurred.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated
using the straight-line method over estimated useful lives of three to
seven years. Expenditures for repairs and maintenance which do not
extend the useful life of the related asset are expensed as incurred.
Impairment of Long-lived Assets
The Company evaluates the recoverability of long-lived assets when
events and circumstances indicate that such assets might be impaired.
The Company determines impairment by comparing the undiscounted future
cash flows estimated to be generated by these assets to their
respective carrying amounts.
F-6
<PAGE> 38
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Elite Logistics Services Inc. had elected to be taxed under the
provision of Subchapter S of the Internal Revenue Code for the years
ended December 31, 1998 and 1997 and for the period ending August 31,
1999. Under those provisions, Elite does not pay federal corporate
income taxes on its taxable income. Instead, the stockholders are
liable for individual federal income taxes on their respective shares
of corporate income. Accordingly, no provision has been made for
federal income tax for the period ended August 31, 1999 or for the
years ended December 31, 1998 and 1997 in the accompanying financial
statements. For the period subsequent to August 31, 1999, the Company
had a significant loss for tax purposes.
At November 17, 1999, the Summit Silver, Inc. entity had a net
operating loss of approximately $1,450,000, which may be offset against
future taxable income through 2013. No provision for taxes or tax
benefit from net operating loss carryforwards has been reported in the
financial statements as the Company will probably continue to
experience operating losses. It is currently unknown if the
carryforwards will expire unused. With the significant change in
ownership the utilizability of this net operating loss will be
substantially minimized for future periods.
Trade Accounts Receivable
The Company provides for losses which may be sustained in collection of
accounts receivable. All receivables are considered collectible and no
valuation allowance is considered necessary.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents.
Intangibles
Intangible assets consist of patents pending patents will be amortized
using a straight-line method over seventeen years. Once granted from
the United States Patent office.
Research and Development Costs
Costs of research and development are expensed as incurred.
Mineral Properties
Summit Silver, Inc. was a minerals exploration company. Costs of
acquiring, exploring and developing mineral properties were capitalized
by project area. Costs to maintain mineral rights and leases were
expensed as incurred. Mineral properties were periodically assessed
for impairment of value and any losses were charged to operations at
the time of impairment.
F-7
<PAGE> 39
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mineral Properties (Continued)
Should a property be abandoned, its capitalized costs were charged to
operations. Summit Silver charged to operations the allocable portion
of capitalized costs attributable to properties sold. Capitalized
costs were allocated to properties sold based on the proportion of
claims sold to the claims remaining within the project area.
Basic and Diluted Earnings Per Share
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basis earnings
per share is computed using the weighted average number of common
shares outstanding. Diluted net loss per share is the same as basic
net loss per share as the inclusion of common stock equivalents would
be antidilutive.
Revenue and Cash Recognition
Revenues and cost of revenues are recognized when services and products
are furnished or delivered.
Compensated Absences
Employees of the Company are entitled to paid vacation, paid sick days
and personal days off depending on job classification, length of
service, and other factors. It is impracticable to estimate the amount
of compensation for future absences, and accordingly, no liability has
been recorded in the accompanying financial statements. The Company's
policy is to recognize the cost of compensated absences when actually
paid to employees.
NOTE 3 - MINERAL PROPERTIES
The following information summarizes Summit Silver, Inc's. mineral
property holdings and transactions in prior periods.
Kimberly Gold Mine Property
The Company owned 33 unpatented claims located in Idaho County, Idaho.
In recent years, the Company's activities concentrated at the Kimberly
Gold Mine, located about 35 miles east of Riggins, Idaho and about 55
miles north of McCall, Idaho. The Company entered into a lease
agreement on the Kimberly Mine with Marshall Mountain Mining and
Exploration, Inc. in 1993. During 1994, this agreement was assigned to
Quasar Equities. During the year ended May 31, 1999, these claims were
exchanged for Ashington Mining Company common stock valued at $3,750
and Central Silver Corp. common stock valued at $15,000. Ashington
also agreed to indemnify Summit for future environmental and
reclamation costs. This transaction resulted in a loss of $328,120.
Other Mineral Properties
The Company owned five patented claims known as the Baltimore Mine,
near Boulder, Montana and 46 unpatented claims located about 50 miles
southeast of Battle Mountain, Nevada in the Crescent Valley known as
the East Cortez property. During the year ended May 31, 1998, these
F-8
<PAGE> 40
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 3 - MINERAL PROPERTIES (Continued)
claims were sold to Idora Silver Mines, Inc. in exchange for Idora
common stock. The Idora common stock was exchanged for equipment
during the same period.
Other mineral properties owned by the Company include five Association
Placer claims near Ruby Creek, Beaverhead County, Montana and 100 lode
claims located on Roberts Mountain in Eureka County, Nevada.
During the year ended May 31, 1999, the Company's Nevada claims were
exchanged for Sterling Mining Company common stock valued at $43,910.
During this same period the Company also exchanged four unpatented
mining claims in Wenatchee, Washington along with equipment for Silver
Trend Mining Company's common stock. This transaction resulted in a
loss of $46,664. After an evaluation of all other mineral properties,
it was deemed to be uneconomical to develop these properties;
therefore, their recorded costs and previously capitalized unrecovered
exploration costs were written off. This resulted in a loss of
$38,337, which was charged to operations.
NOTE 4 - INVESTMENTS
The Company's securities, which are bought and held principally for the
purpose of sale in the near term, are classified as trading securities.
The Company's securities, which were originally acquired by Summit
Silver, Inc., are recorded at fair value on the balance sheet as
current assets, with changes in fair value during the period included
in earnings.
The Company's trading securities consist of common stock stated at fair
value and are summarized as follows:
Investment November 30, 1999
Ashington Mining Company $ 600
Sterling Mining Company 21,200
Royal Silver Mines, Inc. 1,000
Utah-Idaho Consolidated Uranium, Inc. 1,600
--------
$ 24,400
========
NOTE 5 - PATENT COSTS
The costs of patent applications are capitalized. The Company
currently has two domestic and two foreign patent applications pending.
The Company's patent applications relate to internet-enabled, global
positioning system technology for the commanding, controlling,
identification and routing of moving items.
F-9
<PAGE> 41
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 5 - PATENT COSTS (continued)
The costs of patent applications are capitalized. The cost of patents
are amortized over their statutory lives of seventeen years. As part
of the reverse merger, the Company allocated $20,275,913 to additional
patent value for future amortization. (See Note 9) At November 30,
1999, the Company had not received any patent approvals. There was no
patent amortization expense recorded in 1999 or 1998.
NOTE 6 - INVENTORY
Inventories are stated at the lower of cost or market, with cost being
determined on a weighted average basis.
Inventories at November 30, 1999 and December 31, 1998 consist of the
following for the dates shown:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Finished goods $ 13,000 $ -
Work in Progress 26,000 -
Raw materials 141,267 80
--------- -----
Total $ 180,267 $ 80
========= =====
</TABLE>
Substantially all of the inventory is pledged as collateral for the
Company's line of credit.
NOTE 7 - NOTES PAYABLE
As of November 30, 1999, the Company had a loan from International Bank
of Commerce in the amount of $50,000. The loan is a revolving line of
credit with a current maximum limit of $100,000, bearing interest at
9.75%. The note is due November 5, 2000 and is collateralized by
accounts receivable and inventory.
Elite has a capital lease with Linc Monex Equipment, Inc. payable
monthly at $460, including interest at 18%. The remaining capital
lease payments are included in the schedule below.
Current maturities of long-term debt are as follows:
2000 $ 3,620
2001 $ 4,309
2002 $ 2,626
F-10
<PAGE> 42
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 8 - LOANS FROM SHAREHOLDERS
The Company has cash loans from its shareholders in the amounts of
$49,001 and $42,101 at November 30, 1999 and December 31, 1998,
respectively. The notes bear an interest rate of 5% annually, are
unsecured, and due upon demand.
Notes to shareholders also included deferred salaries due to the
shareholders of $56,255, $161,251 and for the period ending November
30, 1999 and the year ended December 31, 1998 , respectively. In
September 1999, the shareholders exchanged $244,500 in deferred
salaries for 2,445 shares of preferred stock at $100 per share.
NOTE 9 - MERGER AND ACQUISITION
On November 17, 1999, Elite Logistics Services, Inc. ("Elite")
completed an acquisition agreement with Summit Silver, Inc. (SSI)
subsequently to be known as Elite Logistics, Inc. (ELI). In late
November 1999, SSI was renamed as Elite Logistics, Inc.
Under the terms of the agreement, SSI issued 10,400,000 shares of
common stock in exchange for all of Elite's common stock. Immediately
prior to the agreement and plan of reorganization, Elite had 10,400,000
shares of common stock issued and outstanding. Elite will continue as
a subsidiary of ELI. The shares were valued at $1.87 per share for a
total value of $19,500,000. This value increase was allocated to
intangible assets of patents. As of November 17, 1999, the market
value of SSI's stock was $3.75 and the above value allowed for a 50%
discount for the issuance of restricted stock.
The acquisition was accounted for as a purchase by Elite of SSI because
the shareholders of Elite controlled SSI after the acquisition in what
is referred to as a reverse acquisition. Elite's financial information
will be that of the continuing operating company.
In connection with this same transaction, all 2,445 shares of Elite's
preferred stock were exchanged for an equivalent amount of SSI
preferred stock, which conferred the same rights and provisions as the
original shares of Elite's preferred stock. The exchange of the
redeemable preferred stock resulted in no significant valuation
adjustment in the allocation of value in the merger. Also, the
1,215,555 outstanding warrants in Elite were exchanged with SSI for
warrants of the same terms and rights. The warrants were revalued for
the purposes of the acquisition based upon the SSI stock value of $1.87
using the Black-Scholes valuation model. The warrants additional value
of $886,444, derived from this calculation, resulted in an addition to
the intangible asset of patents.
The income statement effect of the merger with SSI was the recognition
of $2,800 of SSI's expenses in consolidated financial statements. The
only substantial asset of SSI that was acquired was $24,400 of
investments.
F-11
<PAGE> 43
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 9 - MERGER AND ACQUISITION (continued)
The valuation of the merger included the $19,500,000 value attributed
to the exchanged distribution of common stock and the $886,444 value
attributed to warrants. After adjustments for the par value of the
stock and the acquisition of the net debts of SSI, there was a $110,531
net decrease allocatable to patents. The total allocation to patents
is $20,275,913. Management believes that all intangible value is
attributed to pending patent applications. The value allocated to
patents will be amortized over 17 years, once they are granted.
NOTE 10 - REDEEMABLE PREFERRED STOCK
In September 1999, the Company issued 2,445 shares of $100 par value
Series A preferred stock for deferred compensation of $244,500.
Holders of Series A preferred shares are entitled to cumulative
dividends at the per share rate of prime rate plus 2% of the original
issue price, payable quarterly if declared by the board of directors.
As of November 17, 1999, cumulative dividends have not been declared or
paid.
The Corporation is required to redeem all issued and outstanding shares
of series A preferred stock in September 15, 2000 at a redemption price
of $100 per share. Prior to such time, the Corporation may redeem in
whole or in part Series A preferred stock at the option of the board of
directors. See Note 8.
On September 15, 1999, the Company agreed to issue 2,445 shares of
preferred stock with $100 per value. These shares are preferred as to
dividends and liquidation. The cumulative dividends are currently
payable at prime of 8.25% plus 2 which is 10.25%. The shares are
required to be redeemed within one year. The preferred stock was
issued in payment to existing stockholders for deferred compensation.
As part of the acquisition of Summit Silver, Inc., these shares were
traded for 2,445 shares of Summit's preferred stock at $.01 per value.
(Note 9).
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Leases
Elite leases office space in Freeport, Texas on an annually renewable
lease. The monthly rent is $200 and the lease term ends in December
1999. Subsequent to December 31, 1999, the Company has expanded its
office space and renewed the lease for a twelve month term ending
December 2000. The monthly lease payment is $3,800, commencing January
1, 2000.
Exclusive Agreement
The Company has an exclusive agreement with a distributor to sell the
company's Page Track system on the two-way pager service requirements.
The agreement limits the market area. The distributor paid $100,000 at
the time the agreement was signed. Elite will pay the distributor 20%
of net sales of air time less a 10% administration charge.
F-12
<PAGE> 44
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 11 - COMMITMENTS AND CONTINGENCIES (continued)
Employment Agreements
The Company has several employment agreements in place. These
agreements are for unspecified term and contain 12-18 month non-
complete clauses for employees in the event that their job tenure with
the Company is severed.
NOTE 12 - COMMON STOCK
Elite originally had 100 shares of no par stock issued. In September
1999 the original 100 shares were converted to 10,040,000 shares of
common stock. Also, in September 1999, the Company issued 320,000
shares of common stock to various investor groups in exchange for cash
proceeds of $400,000. This issuance resulted in non-qualifying
shareholders to discontinue the Company's S election and resulted in
the conversation to a C Corporation. Also in November 1999, the
Company issued 40,000 shares of common stock in settlement of a vendor
payable of $50,000.
NOTE 13 - WARRANTS
On September 20, 1999, the Board of Directors approved the issuance of
a warrant to Vernor Investments to purchase up to 100,000 shares of the
Company's common stock at 5% below the current market value at the time
of purchase, exercisable from the date of issuance until September 30,
2000.
On November 10, 1999, the Board of Directors approved the issuance of
a warrant to Forte Group LLC to purchase up to 1,115,555 shares of the
Company's common stock at $1.25 per share from the date of issuance
until September 30, 2002.
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 to estimating fair value. The risk-free interest
rate is 5.5%, volatility is .5% and the expected life of the warrants
is one to three years.
As part of the acquisition of Summit Silver, Inc. by Elite Logistic
Services, Inc., the above warrants were transferred and valued based
upon the market value of Summit's common stock. This valuation used
the same assumptions for the Black-Scholes calculations except for a
discounted stock value of $1.87 per share. As part of the acquisition,
this results in an additional change of $886,444 to stock warrants.
(See Note 9).
F-13
<PAGE> 45
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 13 - WARRANTS (continued)
The following is a summary of warrants during the period ended November
30, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
Of Shares Price
<S> <C> <C>
Outstanding at December 31, 1998 - $ -
Granted during 1999 1,215,555 1.25
Exercised - -
Forfeited or expired - -
--------- ------
Outstanding at November 17, 1999 1,215,555 $ 1.25
========= ======
Weighted average fair value of
Warrants granted during 1999 $ 0.91
======
</TABLE>
NOTE 14 - YEAR 2000
Like other companies, Elite could be adversely affected if the computer
systems it, its suppliers or customers use do not properly process and
calculate date-related information and data from the period surrounding
and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer
systems and devices such as production equipment, elevators, etc. At
this time, because of the complexities involved in the issue,
management cannot provide assurances that the Year 2000 issue will not
have an impact on the Company's operations.
The Company has reviewed its business and processing systems and
believes that the majority of its systems are already year 2000
compliant or can be made so with software updates. Based on
preliminary assessments, the Company regards the costs associated with
Year 2000 readiness to be immaterial.
NOTE 15 - GOING CONCERN CONSIDERATION
As shown in the accompanying financial statements, the Company incurred
net losses of $665,043 and $222,062, for the period ended November 30,
1999 and the year ended December 31, 1998, respectively. The Company
is currently involved in a merger with another corporation to expand
its business direction. See Note 7. If successful, the merger's
consequences will serve to mitigate the factors which had 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 operation and future market development.
Management's plans, after completing all required activities of the
merger, are to raise substantial resources from private investors.
F-14
<PAGE> 46
ELITE LOGISTICS, INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
November 30, 1999
NOTE 15 - GOING CONCERN CONSIDERATION (continued)
After the date of these financial statements, the Company executed a
merger and share exchange with another corporation. This merger and
exchange resulted in the Company's current stockholders becoming
majority stockholders in the new company. See Note 9.
NOTE 16 - INCOME TAXES
The Company elected to be taxed as a subchapter S corporation for tax
purposes. An S Corporation makes no provision for tax purposes and
passes all items of income, loss or tax preference to the individual
shareholders. For the years ended December 31, 1998 and 1997, there
are no provisions for taxes based upon the Company's effective S
election.
On September 1, 1999, the Company sold shares of common stock to non-
qualifying holders for an S Corporation. As of September 1, 1999, the
Company's S election was terminated. The loss for the period from
January 1, 1999 to August 31, 1999 is $226,706. The loss for the
period from September 1, 1999 to November 30, 1999 is $438,337. The S
Corporation period loss will be passed to the shareholders of record on
August 31, 1999. The subsequent loss of $438,337 is the Company's net
operating loss as of November 30, 1999. The net operating loss
acquired from Summit Silver of approximately $1,450,000 is not expected
to be utilized by the Company because of the Internal Revenue Code
limitations concerning ownership changes.
The Company has no significant book to tax differences in its assets
and liabilities, which would give rise to deferred tax assets or
liabilities. The Company may elect to file consolidated tax returns in
the future as part of the merged entity to be known as Elite
Logisitics, Inc, formerly Summit Silver, Inc. See Note 9.
F-15
<PAGE> 47
ELITE LOGISTICS, INC.
PROFORMA FINANCIAL INFORMATION
The following Proforma Combined Balance Sheet as of May 31, 1999 and
Proforma Combined Statements of Operations for the six months ended
November 30, 1999 and the year ended May 31, 1999 are unaudited. These
proforma financial statements relate to the reverse acquisition of
Summit Silver, Inc. by Elite Logistic Services, Inc. Summit Silver,
Inc. (subsequently renamed Elite Logistics, Inc.) issued 10,400,000
shares of common stock for 100% of the outstanding common stock of
Elite Logistics Services, Inc.
The proforma financial information has been prepared utilizing the
historical financial statements of Summit Silver, Inc. and Elite
Logistics Services, Inc. and should be read in conjunction with the
separate historical financial statements and notes thereto of these
companies for the respective periods presented.
The proforma financial information is based on the purchase method of
accounting and the acquisition as a reverse acquisition with the
surviving company being the operating company, previously Elite
Logistics Services, Inc. The Proforma Combined Statements of
Operations assume the acquisition had occurred at the beginning of the
period presented in the statements. All intercompany accounts and
transactions have been eliminated.
The proforma combined financial statements do not purport to be
indicative of the financial positions and results of operations and
cash flows which actually would have been obtained if the acquisition
had occurred on the date indicated or the results which may be obtained
in the future.
F-16
<PAGE> 48
ELITE LOGISTICS, INC.
PROFORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
Summit Elite Logistics
Silver, Inc. Services, Inc.
June through June through
11/07/99 11/30/99 Adjustments Total
<S> <C> <C> <C> <C>
REVENUES $ - $ 344,845 $ - $ 344,845
COST OF REVENUES - 271,273 - 271,273
---------- ---------- ---- ----------
GROSS PROFIT - 73,572 - 73,572
EXPENSES
Professional services 23,896 40,634 - 64,530
Marketing expenses - 104,581 - 104,581
Selling and
administrative expenses 39,426 400,002 - 439,428
Exploration costs 5,435 2,800 - 8,235
Research and development - 163,307 - 163,307
---------- ---------- ---- ----------
TOTAL EXPENSES 68,757 711,324 - 780,081
OPERATING INCOME (LOSS) (68,757) (637,752) - (706,509)
OTHER INCOME (EXPENSE)
Other income - - -
Loss on sale of
investments (161,780) -
Interest - (6,104) - (6,104)
---------- ---------- ---- ----------
TOTAL OTHER INCOME
(EXPENSE) (161,780) (6,104) - (167,884)
INCOME (LOSS) BEFORE
INCOME TAXES (230,537) (643,856) - (874,393)
INCOME TAX BENEFIT - - - -
---------- ---------- ---- ----------
NET (INCOME) LOSS $ (230,537) $ (643,856) $ - $ (874,393)
========== ========== ==== ==========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.23) $ (0.06) $ - $ (0.08)
========== ========== ==== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON STOCK SHARES
OUTSTANDING 989,168 10,293,269 11,282,437
========== ========== ==========
</TABLE>
See accountant's review report.
F-17
<PAGE> 49
ELITE LOGISTICS, INC.
PROFORMA BALANCE SHEET
MAY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
Elite Logistics
Summit Silver, Services, Inc.
Inc. Inc. Adjustments Total
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,864 $ 34,264 $ - $ 38,128
Accounts receivable - 11,125 - 11,125
Other receivable 2,046 100 - 2,146
Inventory - 51,656 51,656 80
---------- --------- ---------- ---------
TOTAL CURRENT ASSETS 5,910 97,145 - 103,055
---------- --------- ---------- ---------
PROPERTY AND EQUIPMENT
Computer equipment - 84,369 - 84,369
Furniture and equipment - 4,828 - 4,828
Software - 87,426 - 87,426
Less: accumulated depreciation
and amortization - (66,921) - (66,921)
TOTAL PROPERTY AND EQUIPMENT - 109,702 - 109,702
---------- --------- ---------- ---------
OTHER ASSETS
Investments 31,766 - - 31,766
Patents, net of amortization - - - -
---------- --------- ---------- ---------
TOTAL OTHER ASSETS 31,766 - - 31,766
---------- --------- ---------- ---------
TOTAL ASSETS $ 37,676 $ 206,847 $ - $ 244,523
========== ========= ========== =========
See accountant's review report.
F-18a
<PAGE> 50
ELITE LOGISTICS, INC.
PROFORMA BALANCE SHEET
MAY 31, 1999
HISTORICAL PROFORMA
Elite Logistics
Summit Silver, Services, Inc.
Inc. Inc. Adjustments Total
<S> <C> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,781 $ 47,767 $ - $ 50,548
Line of credit - - - -
Accrued expenses - 4,469 - 4,469
Leases payable - 3,620 - 3,620
Deferred salaries - 250,751 - 250,751
Notes payable to shareholders - 52,101 - 52,101
---------- --------- ---------- ---------
TOTAL CURRENT LIABILITIES 2,781 358,708 - 361,489
---------- --------- ---------- ---------
LONG-TERM LIABILITIES
Leases payable, net
of current portion - 7,723 - 7,723
---------- --------- ---------- ---------
TOTAL LIABILITIES - 366,431 - 369,212
---------- --------- ---------- ---------
COMMITMENTS AND CONTINGENCIES - - - -
---------- --------- ---------- ---------
REDEEMABLE PREFERRED STOCK - - - -
---------- --------- ---------- ---------
STOCKHOLDERS' EQUITY
Common stock 9,638 100,400 - 110,038
Additional paid-in
capital 1,287,666 295,127 (1,262,409) 320,384
Accumulated deficit (1,262,409) (555,111) 1,262,409 (555,111)
---------- --------- ---------- ---------
TOTAL STOCKHOLDERS' EQUITY 34,895 (159,584) - (124,689)
---------- --------- ---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 37,676 $ 206,847 $ - $ 244,523
========== ========= ========== =========
</TABLE>
See accountant's review report.
F-18b
<PAGE> 51
ELITE LOGISTICS, INC.
PROFORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDING MAY 31, 1999
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
Elite Logistics
Summit Silver, Services, Inc.
Inc. Inc. Adjustments Total
<S> <C> <C> <C> <C>
REVENUES $ - $ 129,819 $ - $ 129,819
COST OF REVENUES - 21,336 - 21,336
---------- ---------- ---- ----------
GROSS PROFIT - 108,483 - 108,483
EXPENSES
Professional services 83,200 892 - 84,092
Marketing expense - 74,178 - 74,178
Selling and administrative
expenses 42,162 143,425 - 185,587
Exploration - - - -
Research and development - 141,534 - 141,534
---------- ---------- ---- ----------
TOTAL EXPENSES 125,362 360,029 - 485,391
OPERATING INCOME (LOSS) (125,362) (251,546) - (376,908)
OTHER INCOME (EXPENSE)
Capital gain (loss) (374,784) - - (374,784)
Loss on sale of
investments (120,759) - - (120,759)
Loss on market value
of investments (38,337) - - -
Other income 1,000 - - 1,000
Interest - (999) - (999)
---------- ---------- ---- ----------
TOTAL OTHER INCOME
(EXPENSE) (532,880) (999) - (533,879)
INCOME (LOSS) BEFORE
INCOME TAXES (658,242) (252,545) - (910,787)
---------- ---------- ---- ----------
INCOME TAX BENEFIT - - - -
---------- ---------- ---- ----------
NET INCOME (LOSS) $ (658,242) $ (252,545) $ - $ (910,787)
========== ========== ==== ==========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (1.06) $ (0.025) $ (0.085)
========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON STOCK SHARES
OUTSTANDING 621,979 10,040,000 10,661,979
========== ========== ==========
</TABLE>
See accountant's review report.
F-19
<PAGE> 52
SUMMIT SILVER, INC.
FINANCIAL STATEMENTS
MAY 31, 1999 AND 1998
CONTENTS
Independent Auditor's Report . . . . . . F-1
Balance Sheets . . . . . . . . . . F-2
Statements of Operations and Comprehensive Loss . . . F-4
Statement of Stockholders' Equity . . . . . F-5
Statements of Cash Flows . . . . . . . . F-7
Notes to the Financial Statements . . . . . F-9
<PAGE> 53
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants and Business Consultants
601 West Riverside, Suite 1940, Spokane, WA 99201-0611
(509) 838-5111 FAX (509) 838-5114
The Board of Directors
Summit Silver, Inc.
Coeur d'Alene, Idaho
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Summit Silver, Inc.
as of May 31, 1999 and 1998, and the related statements of operations
and comprehensive loss, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Summit
Silver, Inc. as of May 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 11
to the financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding the resolution of this issue are
also discussed in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
September 8, 1999
F-1
<PAGE> 54
SUMMIT SILVER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31,
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,864 $ 2,362
Other receivables 2,046 2,546
Investments 31,765 11,160
-------- ---------
Total Current Assets 37,675 16,068
-------- ---------
PROPERTY AND EQUIPMENT
Mining properties - 468,532
Equipment - 88,450
Less accumulated depreciation - (30,975)
-------- ---------
Total Property and Equipment - 526,007
-------- ---------
TOTAL ASSETS $ 37,675 $ 542,075
======== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2
<PAGE> 55
SUMMIT SILVER, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31,
1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,781 $ -
Payable to related party - 3,336
----------- ---------
Total Current Liabilities 2,781 3,336
----------- ---------
COMMITMENTS AND CONTINGENCIES - -
----------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 20,000,000
shares authorized, 5,783,006 and
14,208,835 shares issued and
outstanding, respectively 57,831 142,089
Additional paid-in capital 1,239,472 960,692
Stock subscriptions receivable - (140,000)
Accumulated deficit (1,082,284) (424,042)
Accumulated other comprehensive loss (180,125) -
----------- ---------
Total Stockholders' Equity 34,894 538,739
----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 37,675 $ 542,075
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 56
SUMMIT SILVER, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Years Ended May 31,
1999 1998
<S> <C> <C>
SALES $ - $ -
COST OF SALES - -
---------- ---------
GROSS PROFIT - -
---------- ---------
EXPENSES
Management and professional 86,200 25,531
Unrecovered exploration costs - 79,380
Recording, taxes and insurance 3,311 5,357
Depreciation 7,542 3,412
Storage 1,945 2,463
Office 10,832 2,017
Maintenance and repairs 3,198 1,597
Travel and entertainment 12,334 -
---------- ---------
Total Expenses 125,362 119,757
---------- ---------
NET LOSS FROM OPERATIONS (125,362) (119,757)
---------- ---------
OTHER INCOME AND (EXPENSES)
Lease income 1,000 16,250
Interest and dividends - 222
Gain (loss) from mineral
property disposition (533,880) 7,761
Other revenue - 4,356
Interest expense - (185)
---------- ---------
TOTAL OTHER INCOME
(EXPENSES) (532,880) 28,404
---------- ---------
NET LOSS (658,242) (91,353)
OTHER COMPREHENSIVE LOSS
Unrealized holding losses arising
during the period (180,125) -
---------- ---------
COMPREHENSIVE LOSS $ (838,367) $ (91,353)
========== =========
NET LOSS PER COMMON SHARE $ (0.22) $ (0.01)
========== =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,731,871 9,940,472
========== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE> 57
SUMMIT SILVER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Additional
Number Paid-in Subscriptions
of Shares Amount Capital Receivable
<S> <C> <C> <C> <C>
Balance
June 1, 1997 9,669,435 $ 96,695 $ 838,306 $ -
Common stock issued at
$0.0542 per share 520,000 5,200 21,610 -
Common stock issued at
$0.035 per share
for debt 4,000,000 40,000 100,000 (140,000)
Common stock issued at
$0.05 per share
for services 19,400 194 776 -
Net loss - - - -
----------- --------- ----------- ----------
Balance
May 31, 1998 14,208,835 142,089 960,692 (140,000)
Reverse stock split,
1 for 6 (11,790,696) (117,907) 117,907 -
Common stock issued for
cash at prices ranging
from $0.025 to $0.21
per share 416,400 4,164 9,763 -
----------- -------- ----------- ----------
Balance forward 2,834,539 $ 28,346 $ 1,088,362 $ (140,000)
----------- -------- ----------- ----------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 58
SUMMIT SILVER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
</TABLE>
<TABLE>
<CAPTION>
Accumulated Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
<S> <C> <C> <C>
Balance
June 1, 1997 $ (332,689) $ - $ 602,312
Common stock issued at
$0.0542 per share - - 26,810
Common stock issued at
$0.035 per share
for debt - - -
Common stock issued at
$0.05 per share
for services - - 970
Net loss (91,353) - (91,353)
---------- ----------- ---------
Balance
May 31, 1998 (424,042) - 538,739
Reverse stock split,
1 for 6 - - -
Common stock issued for
cash at prices ranging
from $0.025 to $0.21
per share - - 13,927
---------- ----------- ---------
Balance forward $ (424,042) $ - $ 552,666
---------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 59
SUMMIT SILVER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
Additional
Number Paid-in Subscriptions
of Shares Amount Capital Receivable
<S> <C> <C> <C> <C>
Balance forward 2,834,539 $ 28,346 $ 1,088,362 $ (140,000)
Common stock issued for
equipment at $0.25 per
share 436,000 4,360 213,640 -
Common stock issued for
services, consulting
and directors fees at
prices ranging from
$0.02 to $0.25 per
share 2,815,800 28,158 35,917 -
Common stock issued
in settlement of
property title at
$0.05 per share 30,000 300 1,200 -
Payment of stock
subscriptions - - - 40,000
Payment of fees for
stock transfer - - (2,980) -
Cancellation of stock
subscription receivable
and common stock (333,333) (3,333) (96,667) 100,000
Net loss - - - -
Unrealized holding
losses for the period - - - -
--------- -------- ----------- ----------
Balance, May 31, 1999 5,783,006 $ 57,831 $ 1,239,472 $ -
========= ======== =========== ==========
The accompanying notes are an integral part of these financial
statements.
F-6a
<PAGE> 60
SUMMIT SILVER, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Accumulated Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
<S> <C> <C> <C>
Balance forward $ (424,042) $ - $ 552,666
Common stock issued for
equipment at $0.25 per
share - - 218,000
Common stock issued for
services, consulting and
directors fees at prices
ranging from $0.02 to $0.25
per share - - 64,075
Common stock issued in
settlement of property
title at $0.05 per share - - 1,500
Payment of stock subscriptions - - 40,000
Payment of fees for stock
transfer - - (2,980)
Cancellation of stock
subscription receivable
and common stock 100,000 - -
Net loss (658,242) - (658,242)
Unrealized holding losses
for the period - (180,125) (180,125)
------------ ---------- ----------
Balance,
May 31, 1999 $ (1,082,284) $ (180,125) $ 34,894
============ ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-6b
<PAGE> 61
SUMMIT SILVER, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended May 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (658,242) $ (91,353)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation 7,542 3,412
Services paid by issuance of stock 64,075 970
Expense of unrecovered exploration costs - 79,380
Investment exchanged for services 2,998 -
Loss on write off of mineral properties 38,337 -
Loss on exchange of investments 110,690 -
Loss on exchange of investment
for services 10,472 -
Capital (gain) loss on mining property
exchanged for investment 374,784 (6,095)
Decrease (increase) in:
Receivable from related party 500 -
Increase (decrease) in:
Accounts payable 2,781 -
Payable to related party (3,336) (3,494)
---------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (49,399) (17,180)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment (1,500) -
Investments (1,526) (9,330)
---------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (3,026) (9,330)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Receipt of cash for stock subscriptions 40,000 -
Stock issuance for cash 13,927 26,810
---------- ---------
NET CASH FLOWS FROM FINANCING ACTIVITIES 53,927 26,810
---------- ---------
Net increase (decrease) in cash 1,502 300
Cash at the beginning of period 2,362 2,062
---------- ---------
Cash at the end of period $ 3,864 $ 2,362
========== =========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-7
<PAGE> 62
SUMMIT SILVER, INC.
STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Years Ended May 31,
1999 1998
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE:
Interest paid $ - $ 185
========= =====
Taxes paid $ - $ -
========= =====
Non-cash investing and financing activities:
Common stock issued for services $ 64,075 $ 970
Common stock issued for mining properties $ - $ -
Common stock issued for equipment $ 218,000 $ -
Common stock issued in lieu of debt $ 1,500 $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-8
<PAGE> 63
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Summit Silver, Inc. was incorporated on December 26, 1967 under the
laws of the State of Idaho for the purpose of acquisition, exploration
and development of mining properties. The Company conducts operations
primarily from its offices in Coeur d'Alene, Idaho.
During the year ended May 31, 1999, the Company disposed of or wrote
off virtually all its mineral properties and began seeking acquisitions
in the technology industry. This began a new development stage
subsequent to the date of these financial statements.
The Company is actively seeking additional capital and management
believes that its stock can be sold to enable the Company to continue
its operations. However, there are inherent uncertainties and
management cannot provide assurances that it will be successful in its
endeavors.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Summit Silver, Inc.
is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of
the Company's management which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the
preparation of the financial statements.
Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
Loss per Share
Loss per share is computed by dividing the net loss by the weighted
average number of shares during the year. The weighted average number
of shares is calculated by taking the number of shares outstanding and
weighting them by the amount of time that they were outstanding.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-9
<PAGE> 64
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Mineral Properties
Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and
leases are expensed as incurred. When a property reaches the
production stage, the related capitalized costs will be amortized,
using the units of production method on the basis of periodic estimates
of ore reserves. Mineral properties are periodically assessed for
impairment of value and any losses are charged to operations at the
time of impairment.
Should a property be abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable portion of
capitalized costs attributable to properties sold. Capitalized costs
are allocated to properties sold based on the proportion of claims sold
to the claims remaining within the project area.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
Impaired Asset Policy
The Company reviews its long-lived assets quarterly to determine if any
events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company
determines impairment by comparing the undiscounted future cash flows
estimated to be generated by its assets to their respective carrying
amounts. The Company does not believe any adjustments are needed to
the carrying value of its assets at May 31, 1999.
Provision for Taxes
At May 31, 1999, the Company has a net operating loss of approximately
$1,230,000, which may be offset against future taxable income through
2013. No provision for taxes or tax benefit from net operating loss
carryforwards has been reported in the financial statements as the
Company will probably continue to experience operating losses during
its development stage and it is currently unknown if the carryforwards
will expire unused.
NOTE 3 - MINERAL PROPERTIES
Kimberly Gold Mine Property
The Company owned 33 unpatented claims located in Idaho County, Idaho.
In recent years, the Company's activities concentrated at the Kimberly
Gold Mine, located about 35 miles east of Riggins, Idaho and about 55
miles north of McCall, Idaho. The Company entered into a lease
agreement on the Kimberly Mine with Marshall Mountain Mining and
Exploration, Inc. in 1993. During 1994, this agreement was assigned to
F-10
<PAGE> 65
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - MINERAL PROPERTIES (Continued)
Kimberly Gold Mine Property
Quasar Equities. During the year ended May 31, 1999, these claims were
exchanged for Ashington Mining Company common stock valued at $3,750
and Central Silver Corp. common stock valued at $15,000. Ashington
also agreed to indemnify Summit for future environmental and
reclamation costs. This transaction resulted in a loss of $328,120.
Other Mineral Properties
The Company owned 5 patented claims known as the Baltimore Mine, near
Boulder, Montana and 46 unpatented claims located about 50 miles
southeast of Battle Mountain, Nevada in the Crescent Valley known as
the East Cortez property. During the year ended May 31, 1998, these
claims were sold to Idora Silver Mines, Inc. in exchange for Idora
common stock. The Idora common stock was exchanged for equipment
during the same period.
Other mineral properties owned by the Company include 5 Association
Placer claims near Ruby Creek, Beaverhead County, Montana and 100 lode
claims located on Roberts Mountain in Eureka County, Nevada.
During the year ended May 31, 1999, the Company's Nevada claims were
exchanged for Sterling Mining Company common stock valued at $43,910.
During this same period the Company also exchanged 4 unpatented mining
claims in Wenatchee, Washington along with equipment for Silver Trend
Mining Company's common stock. (Note 8.) This transaction resulted in
a loss of $46,664. After an evaluation of all other mineral
properties, it was deemed to be uneconomical to develop these
properties; therefore, their recorded costs and previously capitalized
unrecovered exploration costs were written off. This resulted in a
loss of $38,337, which was charged to operations.
NOTE 4 - COMMON STOCK
During the year ended May 31, 1999, the Company issued 436,000 shares
of its common stock for the purchase of equipment, 2,815,800 shares of
its common stock for services to directors, consultants and independent
contractors and 30,000 shares of its common stock for settlement of a
property title. The stock was issued at prices ranging from $0.02 to
$0.50 per share, which approximated its market value in the opinion of
management at the dates of issuance.
On June 12, 1998, the Board of Directors authorized a 1 for 6 reverse
stock split of common stock to stockholders of record on that date.
Per-share amounts in the accompanying financial statements have not
been adjusted for the split.
During the year ended May 31, 1998, the Company issued 106,400 shares
of its common stock in payment of services to directors and
consultants. The stock was issued at $0.05 per share, which is the
fair market value of the shares on the date of issuance.
F-11
<PAGE> 66
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMON STOCK OPTIONS
In August 1997, in exchange for debt of $2,520, the Company granted an
option to acquire 150,000 shares of the Company's common stock at
prices ranging from $0.36 to $0.90 per share. The option is
nonassignable and expires in one to three years.
The value of this option was estimated on the grant date of the option
using the Black-Scholes Option Price Calculation. The following
assumptions were made in estimating fair value. Risk-free interest
rate is 5% and the expected life of the option is one to three years.
The options granted in August 1997 consisted of 150,000 common stock
options that may be exercised for terms of one to three years at prices
ranging from $0.36 to $0.90 per share. The strike price of these
options exceeds the options' minimum value calculated using the Black-
Scholes model and the assumptions described, and therefore no expenses
for these 150,000 shares have been recognized pursuant to Financial
Accounting Standard No. 123.
Following is a summary of the stock options during the years ending May
31, 1999 and 1998.
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
Of Shares Price
<S> <C> <C>
Outstanding at 6/1/97 150,000 $ .63
Granted - -
Exercised - -
Forfeited - -
------- ------
Outstanding at 5/31/98 150,000 $ .63
======= ======
Options exercisable at 5/31/98 41,670 $ .36
======= ======
Outstanding at 6/1/98 150,000 $ .63
Granted - -
Exercised - -
Forfeited - -
Expired (41,670) .36
------- ------
Outstanding at 5/31/99 108,330 $ .73
======= ======
Options exercisable at 5/31/99 66,660 $ .63
======= ======
</TABLE>
As of May 31, 1998 and 1999, no options had been exercised.
F-12<PAGE> 67
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company leases office facilities in Coeur d'Alene, Idaho from
Ironwood Investments, Inc. The lease is classified as a month to month
tenancy and provides for monthly payments of $325.
NOTE 7 - RELATED PARTY
See Note 10 regarding cancellation of stock subscription to former
shareholder.
NOTE 8 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method for financial reporting purposes and
amounted to $7,542 and $3,412 for the fiscal years ended May 31, 1999
and 1998, respectively. For federal income tax purposes, depreciation
is computed under the accelerated cost recovery system and the modified
accelerated cost recovery system.
During the year ended May 31, 1999, the Company issued 436,000 shares
of its common stock for equipment valued at $218,000. (Note 4.) The
Company then exchanged all of its equipment and 4 unpatented mining
claims (Note 3) for 6,000,000 shares of Silver Trend Mining Company's
common stock. Thereafter, Silver Trend underwent a 1 for 10 reverse
stock split and changed its name to Trend Mining Company resulting in
600,000 shares of the new stock held by the Company.
NOTE 9 - INVESTMENTS
The Company's securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading
securities. Trading securities are recorded at fair value on the
balance sheet in current assets, with the change in fair value during
the period included in earnings.
The Company's trading securities consist of common stock stated at fair
value and are summarized as follows:
<TABLE>
<CAPTION>
May 31,
Investment 1999 1998
<S> <C> <C>
Ashington Mining Company $ 3,750 $ 11,160
Trend Mining Company 5,700 -
Ashbrook Energy 2,850 -
Sterling Mining Company 16,465 -
Central Silver Corporation 3,000 -
-------- --------
$ 31,765 $ 11,160
======== ========
</TABLE>
F-13
<PAGE> 68
SUMMIT SILVER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - SUBSCRIPTIONS RECEIVABLE
During the year ended May 31, 1998, the Company issued 4,000,000 pre-
reverse split shares of common stock in exchange for a short-term, non-
interest bearing receivable of $140,000. During the year ended May 31,
1999, payment of $40,000 was made against this receivable and the
remaining balance of $100,000 in stock subscriptions was cancelled as
a result of a settlement negotiated with a former shareholder.
NOTE 11 - GOING CONCERN
The Company's financial statements have been presented on a going
concern basis that contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
liquidity of the Company has been adversely affected by accumulated net
losses since inception. These conditions raise substantial doubt about
the Company's ability to continue as a going concern.
Management's plans are summarized as follows: The Company is actively
seeking additional equity capital and is endeavoring to find another
business line outside of mining which encompasses the development and
commercialization of technology.
NOTE 12 - SUBSEQUENT EVENTS
Acquisition of Elite Logistics Services, Inc.
In September 1999, the Company signed a letter of intent to acquire
100% of the outstanding shares of Elite Logistics Services, Inc., based
in Freeport, Texas. Elite has developed proprietary technology and is
producing products using wireless telecommunications and Internet
technology to provide time and location specific asset monitoring and
management. The technology allows for remote control of many vehicle
functions including the ability to remotely disable a vehicle. The
Company anticipates closing this transaction by the end of November
1999.
NOTE 13 - YEAR 2000 ISSUES
The Company has modified its business technologies to be ready for the
year 2000. Critical data processing systems have been reviewed and the
Company does not expect a significant effect on internal operations.
However, like other companies, Summit Silver, Inc. could be adversely
affected if the computer systems its suppliers or customers use do not
properly process and calculate date-related information and data for
the period surrounding and including January 1, 2000. This is commonly
known as the "Year 2000" issue. Additionally, this issue could impact
non-computer systems and devices such as production equipment,
elevators, etc. At this time, because of the complexities involved in
the issue, management cannot provide absolute assurances that the Year
2000 issue will not have an impact on the Company's operations. The
costs related to Year 2000 compliance are expensed as incurred.
F-14
<PAGE> 69
ELITE LOGISTICS SERVICES, INC.
Financial Statements
For the period ended November 17, 1999 and
For the years ended December 31, 1998 and 1997
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT . . . . . . F-1
FINANCIAL STATEMENTS
Balance Sheets . . . . . . . . F-2
Statements of Operations and Accumulated Deficit . . F-3
Statements of Stockholders' Equity . . . . F-4
Statements of Cash Flows . . . . . . F-5
NOTES TO FINANCIAL STATEMENTS . . . . . . F-6
<PAGE> 70
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants and Business Counsultants
601 W. Riverside, Suite 1940, Spokane, WA 99201-0611
(509) 838-5111 FAX (509) 838-5114 E-mail [email protected]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Elite Logistics Services, Inc.
Freeport, Texas
We have audited the accompanying balance sheets of Elite Logistics
Services, Inc. as of November 17, 1999, December 31, 1998 and 1997 and
the related statements of operations and accumulated deficit, cash
flows, and stockholders' equity for the period and years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Elite
Logistics Services, Inc. as of November 17, 1999, December 31, 1998 and
1997, and the results of its operations and its cash flows for the
period and years then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue a going concern. As discussed in Note 13 to
the financial statements, the Company's significant losses raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding the resolution of this issue are also
discussed in Note 13. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington
February 15, 2000
F-1
<PAGE> 71
ELITE LOGISTICS SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
November 17, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 135,779 $ 7,941 $ 31,817
Accounts receivable 50,692 360 -
Inventory 178,017 80 -
------------ ---------- ----------
TOTAL CURRENT ASSETS 364,488 8,381 31,817
------------ ---------- ----------
PROPERTY AND EQUIPMENT
Computer equipment 88,929 61,285 59,653
Furniture and equipment 6,089 2,645 2,645
Software 87,426 86,063 85,622
Less: accumulated
depreciation and
amortization (86,184) (53,164) (23,360)
------------ ---------- ----------
TOTAL PROPERTY AND
EQUIPMENT 96,260 96,829 124,560
------------ ---------- ----------
OTHER ASSETS
Patent costs 22,421 - -
------------ ---------- ----------
TOTAL OTHER ASSETS 22,421 - -
------------ ---------- ----------
TOTAL ASSETS $ 483,169 $ 105,210 $ 156,377
============ ========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 102,272 $ - $ -
Line of credit 50,000 - -
Accrued expenses 26,849 - -
Leases payable 3,620 - -
Deferred salaries 56,255 161,251 18,357
Shareholder loans
payable 44,001 42,101 14,100
------------ ---------- ----------
TOTAL CURRENT
LIABILITIES 282,997 203,352 32,457
------------ ---------- ----------
LONG-TERM LIABILITIES
Leases payable, net of
current portion 6,935 - -
------------ ---------- ----------
TOTAL LIABILITIES 289,932 203,352 32,457
------------ ---------- ----------
The accompanying notes are an integral part of these financial
statements.
F-2a
<PAGE> 72
ELITE LOGISTICS SERVICES, INC.
BALANCE SHEETS
November 17, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
COMMITMENTS AND
CONTINGENCIES - - -
------------ ---------- ----------
REDEEMABLE PREFERRED
STOCK 244,500 - -
------------ ---------- ----------
STOCKHOLDERS' EQUITY
Common stock - $0.01 par
value; 20,000,000 shares
authorized; 10,400,000
and shares issued and
outstanding - "C"
Corporation 104,000 - -
Common stock - no par
value; 100 shares
authorized and 100 shares
issued and outstanding -
"S" Corporation - 381,360 381,360
Warrants outstanding 229,955 - -
Additional paid-in
capital 741,527 - -
Accumulated deficit (1,126,745) (479,502) (257,440)
------------ ---------- ----------
TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) (51,263) (98,142) 123,920
------------ ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 483,169 $ 105,210 $ 156,377
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-2b
<PAGE> 73
ELITE LOGISTICS SERVICES, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
Period Ending Year Ending Year Ending
November 17, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
REVENUES $ 344,421 $ 6,269 $ 1,000
COST OF REVENUES 263,864 1,945 244
------------ ---------- ----------
GROSS PROFIT 80,557 4,324 756
------------ ---------- ----------
EXPENSES
Marketing 104,581 54,213 22,478
Administrative expenses 454,569 77,699 188,348
Research and development 163,267 94,474 47,370
------------ ---------- ----------
TOTAL EXPENSES 722,417 226,386 258,196
------------ ---------- ----------
OPERATING INCOME (LOSS) (641,860) (222,062) (257,440)
------------ ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense (5,383) - -
------------ ---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (647,243) (222,062) (257,440)
INCOME TAXES - - -
------------ ---------- ----------
NET (INCOME) LOSS (647,243) (222,062) (257,440)
ACCUMULATED DEFICIT,
BEGINNING BALANCE (479,502) (257,440) -
------------ ---------- ----------
ACCUMULATED DEFICIT,
ENDING BALANCE $ (1,126,745) $ (479,502) $ (257,440)
============ ========== ==========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.06) $ (0.02) $ (0.02)
============ ========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON STOCK SHARES
OUTSTANDING 10,231,524 10,400,000 10,400,000
============ ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE> 74
ELITE LOGISTICS SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Number
of Shares Amount Warrants
<S> <C> <C> <C>
Beginning balance
November 19, 1997 - $ - $ -
Issuance of common stock
in November 1997 for cash
at $3,810 per share 38 143,888 -
Issuance of common stock
in November 1997 for
compensation at $3,810
per share 37 142,711 -
Issuance of common stock
in November 1997 for
cash at $3,810 for
contributed assets 25 94,761 -
Loss for year ending
December 31, 1997
---------- --------- ---------
Balance
December 31, 1997 100 381,360 -
Loss for year ending
December 31, 1998 - - -
---------- --------- ---------
Balance
December 31, 1998 100 381,360 -
Common stock returned to
treasury at $4,167 per
share (5) (20,833) -
Issuance of treasury shares
for cash and deferred
salaries at $7,000
per share 5 35,000 -
Exchange "S "Corporation
common stock for "C"
Corporation common stock
at 100,400 to 1 10,039,900 (295,127) -
Issuance of common stock
for cash at $1.25
per share 320,000 3,200 -
Issuance of common stock
at $1.25 in exchange for
accounts payable 40,000 400 -
Issuance of 1,215,555
warrants for common
stock - - 229,955
Loss for period ending
November 17, 1999 - - -
---------- --------- ---------
Balance at
November 17, 1999 10,400,000 $ 104,000 $ 229,955
========== ========= =========
The accompanying notes are an integral part of these financial
statements.
F-4a
<PAGE> 75
ELITE LOGISTICS SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Additional Total
Paid-in Accumulated Stockholders'
Capital Deficit Equity
<S> <C> <C> <C>
Beginning balance
November 19, 1997 $ - $ - $ -
Issuance of common stock in
November 1997 for cash at
$3,810 per share - - 143,888
Issuance of common stock
in November 1997 for
compensation at $3,810
per share - - 142,711
Issuance of common stock
in November 1997 for
cash at $3,810 for
contributed assets - - 94,761
Loss for year ending
December 31, 1997 (257,440) (257,440)
--------- ------------ ----------
Balance
December 31, 1997 - (257,440) 123,920
Loss for year ending
December 31, 1998 - (222,062) (222,062)
--------- ------------ ----------
Balance
December 31, 1998 - (479,502) (98,142)
Common stock returned to
treasury at $4,167
per share - - (20,833)
Issuance of treasury shares
for cash and deferred
salaries at $7,000 per share - - 35,000
Exchange "S "Corporation
common stock for "C"
Corporation common stock
at 100,400 to 1 295,127 - -
Issuance of common stock
for cash at $1.25
per share 396,800 - 400,000
Issuance of common stock
at $1.25 in exchange for
accounts payable 49,600 - 50,000
Issuance of 1,215,555
warrants for common
stock - - 229,955
Loss for period ending
November 17, 1999 - (647,243) (647,243)
--------- ------------ ----------
Balance at
November 17, 1999 $ 741,527 $ (1,126,745) $ (51,263)
========= ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-4b
<PAGE> 76
ELITE LOGISTICS SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period Ending Year Ending Year Ending
November 17, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (647,243) $ (222,062) $ (257,440)
Adjustments to reconcile
net loss to net cash
provided (used) by
operating activities:
Depreciation and
amortization 33,404 29,804 23,360
Deferred salaries 42,155 128,794 32,457
Warrants issued for
consulting 229,955 - -
Stock issued for accounts
payable 50,000 - -
Stock issued for
compensation 95,277 - 144,181
Decrease (Increase) in :
Accounts receivable (50,332) (360) -
Inventory (177,937) (80) -
Increase (Decrease) in :
Accounts payable 102,272 - -
Accrued expenses 26,717 - -
---------- ---------- ----------
Net cash provided (used)
in operating activities (295,732) (63,904) (57,442)
---------- ---------- ---------
Cash flows from investing activities:
Purchase of property
and equipment (13,679) (2,073) (54,629)
Payments on
leased equipment (1,290) - -
Patent costs (19,561) - -
---------- ---------- ----------
Net cash provided (used)
in investing activities (34,530) (2,073) (54,629)
---------- ---------- ----------
The accompanying notes are an integral part of these financial
statements.
F-5a
<PAGE> 77
ELITE LOGISTICS SERVICES, INC.
STATEMENTS OF CASH FLOWS
Period Ending Year Ending Year Ending
November 17, December 31, December 31,
1999 1998 1997
<S> <C> <C> <C>
Cash flows from financing activities:
Issuance of stock 414,100 - 143,888
Proceeds from line
of credit 226,000 - -
Payments on line of
credit (176,000) - -
Proceeds from notes
payable shareholders 30,000 42,101 -
Payments to shareholders
for notes (36,000) - -
---------- ---------- ----------
Net cash provided (used)
in financing activities 458,100 42,101 143,888
---------- ---------- ----------
Net increase (decrease) in cash
Cash,
beginning of period 7,941 31,817 -
Cash, end of period $ 135,779 $ 7,941 $ 31,817
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest
and income taxes:
Interest $ 5,383 $ - $ -
Income taxes $ - $ - $ -
NON-CASH OPERATING ACTIVITIES:
Common stock issued for
accounts payable $ 50,000 $ - $ -
Redeemable preferred
stock issued for
deferred salaries $ 244,500 $ - $ -
Warrants issued for
consulting $ 229,955 $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial
statements.
F-5b
<PAGE> 78
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 1 - BUSINESS ORGANIZATION
Nature of Operations
Elite Logistics Services, Inc. (hereinafter "Elite") was incorporated
on August 6, 1997 under the laws of the State of Texas. Elite is
engaged in the production of global positioning systems and provides
the required services for the operation of these systems. The Company's
services are marketed nationally. On September 1, 1999, the Company
acquired new non-qualifying shareholders and amended its articles of
incorporation to change from an S corporation to a regular C
corporation. See Note 14.
On November 17, 1999, the Company agreed to an exchange of its stock in
an acquisition with Summit Silver, Inc. This acquisition is being
accounted for as a purchase and reverse acquisition of a non-operating
public enterprise by a private operating company. Elite Logistics
Services, Inc, the operating company, will be a subsidiary of Elite
Logistics, Inc. (formerly Summit Silver Inc.) See Note 7.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
Elite uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising
Advertising costs are charged to operations in the year incurred.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and depreciated
using the straight-line method over estimated useful lives of three to
seven years. Expenditures for repairs and maintenance which do not
extend the useful life of the related asset are expensed as incurred.
Impairment of Long-lived Assets
The Company evaluates the recoverability of long-lived assets when
events and circumstances indicate that such assets might be impaired.
The Company determines impairment by comparing the undiscounted future
cash flows estimated to be generated by these assets to their
respective carrying amounts.
F-6
<PAGE> 79
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Elite Logistics Services, Inc. has elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code for the years
ended December 31, 1998 and 1997 and for the period ending August 31,
1999. Under those provisions, Elite does not pay federal corporate
income taxes on its taxable income. Instead, the stockholders are
liable for individual federal income taxes on their respective shares
of corporate income and tax preferences. Accordingly, no provision has
been made for federal income tax for the period ended August 31, 1999
or for the years ended December 31, 1998 and 1997 in the accompanying
financial statements for income tax provision arising after September
1, 1999. See Note 14.
Trade Accounts Receivable
The Company provides for losses which may be sustained in collection of
accounts receivable. All receivables are considered collectible and no
valuation allowance is considered necessary.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of acquisition to be cash equivalents.
Intangibles
Intangible assets consist of patents pending. Patent costs will be
amortized using a straight-line method over seventeen years. Patents
are currently expected to be granted in 2000 at which time amortization
would begin.
Research and Development Costs
Costs of research and development are expensed as incurred.
Basic and Diluted Earnings Per Share
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basis earnings
per share is computed using the weighted average number of common
shares outstanding. Diluted net loss per share is the same as basic
net loss per share, as the inclusion of common stock equivalents would
be antidilutive.
Revenue and Cash Recognition
Revenues and cost of revenues are recognized when services and products
are furnished or delivered.
Compensated Absences
Employees of the Company are entitled to paid vacation, paid sick days
and personal days off depending on job classification, length of
service, and other factors. It is impracticable to estimate the amount
of compensation for future absences, and accordingly, no liability has
been recorded in the accompanying financial statements. The Company's
policy is to recognize the cost of compensated absences when actually
paid to employees.
F-7
<PAGE> 80
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 3 - PATENT COSTS
The costs of patent applications are capitalized. The Company
currently has two domestic and two foreign patent applications pending.
The Company's patent applications relate to internet-enabled, global
positioning system technology for the commanding, controlling,
identification and routing of moving items. The cost of patents are
amortized over their statutory lives of seventeen years. At November
17, 1999, the Company had not received any patent approvals. There was
no patent amortization expensed recorded in 1999, 1998 or 1997.
NOTE 4 - INVENTORY
Inventories are stated at the lower of cost or market, with cost being
determined on a weighted average basis.
Inventories at November 17, 1999, December 31, 1998 and 1997 consist of
the following for the dates shown:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Finished goods $ 13,000 $ - $ -
Work in progress 26,000 - -
Raw materials 139,017 80 -
--------- ----- -----
Total $ 178,017 $ 80 $ -
========= ===== =====
</TABLE>
Substantially all of the inventory is pledged as collateral for the
Company's line of credit.
NOTE 5 - NOTES PAYABLE
As of November 17, 1999, the Company had a loan from International Bank
of Commerce in the amount of $50,000. The loan is a revolving line of
credit with a current maximum limit of $100,000, bearing interest at
9.75%. The note is due November 5, 2000 and is collateralized by
accounts receivable and inventory.
Elite has a capital lease with Linc Monex Equipment, Inc. payable
monthly at $460, including interest at 18%. The remaining capital
lease payments are included in the schedule below.
Current maturities of long-term debt are as follows:
2000 $ 3,620
2001 $ 4,309
2002 $ 2,626
F-8
<PAGE> 81
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 6 - LOANS FROM SHAREHOLDERS
The Company has unsecured cash loans with its shareholders in the
amounts of $44,001, $42,101, $14,100 at November 17, 1999, December 31,
1998 and 1997, respectively. The notes bear an interest rate of 5%
annually, are unsecured, and due upon demand.
Notes to shareholders also included deferred salaries due to the
shareholders of $56,255, $161,251 and $18,357 for the period ending
November 17, 1999 and the years ended December 31, 1998 and 1997,
respectively. In September 1999, the shareholders exchanged $244,500
in deferred salaries for 2,445 shares of preferred stock at $100 per
share.
NOTE 7 - MERGER AND ACQUISITION
On November 17, 1999, Elite Logistics Services, Inc. ("Elite")
completed an acquisition agreement with Summit Silver, Inc. (SSI)
subsequently to be known as Elite Logistics, Inc. (ELI). In late
November 1999, SSI was renamed as Elite Logistic, Inc.
Under the terms of the agreement, SSI issued 10,400,000 shares of
common stock in exchange for all of Elite's common stock. Immediately
prior to the agreement and plan of reorganization, Elite had 10,400,000
shares of common stock issued and outstanding. Elite will continue as
a subsidiary of ELI.
The acquisition was accounted for as a purchase by Elite of SSI because
the shareholders of Elite controlled SSI after the acquisition in what
is referred to as a reverse acquisition. Elite's financial information
will be that of the continuing operating company.
In connection with this same transaction, all 2,445 shares of Elite's
preferred stock were exchanged for an equivalent amount of SSI
preferred stock, which conferred the same rights and provisions as the
original shares of Elite's preferred stock. Also, the 1,215,555
outstanding warrants in Elite were exchanged with SSI for warrants of
the same terms and rights.
NOTE 8 - REDEEMABLE PREFERRED STOCK
In September 1999, the Company issued 2,445 shares of $100 par value
Series A preferred stock for deferred compensation of $244,500.
Holders of Series A preferred shares with $100 par value are entitled
to cumulative dividends at the per share rate of prime rate plus 2%
(10.25% as of November 17, 1999) of the original issue price payable
quarterly, if declared by the board of directors.
As of November 17, 1999 cumulative dividends have not been declared or
paid.
The Corporation is required to redeem all issued and outstanding shares
of series A preferred stock in September 15, 2000 at a redemption price
of $100 per share. Prior to such time, the Corporation may redeem in
whole or in part Series A preferred stock at the option of the board of
directors.
<PAGE> 82
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 8 - PREFERRED STOCK (Continued)
As part of the acquisition of Summit Silver, Inc. these preferred
shares were traded for 2,445 shares of Summit's preferred stock at $.01
per value. (See Note 6 & 7)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Elite leases office space in Freeport, Texas on an annually renewable
lease. The monthly rent is $2,000 and the lease term ends in December
1999. Subsequent to December 31, 1999, the Company has expanded its
office space and renewed the lease for a twelve month term ending
December 2000. The monthly lease payment is $3,800, commencing January
1, 2000.
Exclusive Agreement
The Company has an exclusive agreement with a distributor to sell the
Company's Page Track system which involves two-way pager service
requirements. The agreement limits the market area. The distributor
paid $100,000 at the time the agreement was signed. Elite will pay the
distributor 20% of net sales of air time less a 10% administration
charge.
Employment Agreements
The Company has several employment agreements in place. These
agreements are for unspecified terms and contain 12-18 month non-
complete clauses for employees in the event that their job tenure with
the Company is severed.
NOTE 10 - COMMON STOCK
Upon incorporation the Company had 100 shares of no par stock issued.
In September 1999, the original 100 shares were converted to 10,040,000
shares of common stock. Also in September 1999, the Company issued
320,000 shares of common stock to various investor groups in exchange
for cash proceeds of $400,000. This issuance resulted in non-
qualifying shareholders to discontinue the Company's S elections, and
resulted in the conversion to a C Corporation. Also in Novmeber 1999,
the Company issued 40,000 shares of common stock in settlement of a
vendor payable of $50,000.
NOTE 11 - WARRANTS
On September 20, 1999, the Board of Directors approved the issuance of
a warrant to Vernor Investments to purchase up to 100,000 shares of the
Company's common stock at 5% below the current market value at the time
of purchase, exercisable from the date of issuance until September 30,
2000. For valuation purchases at issuance the strike price was
determined to be $1.19 per share of common stock.
On November 10, 1999, the Board of Directors approved the issuance of
a warrant to Forte Group LLC to purchase up to 1,115,555 shares of the
Company's common stock at $1.25 per share from the date of issuance
until September 30, 2002.
<PAGE> 83
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 11 - WARRANTS (continued)
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 to estimating fair value. The risk-free interest
rate is 5.5%, volatility is .5% and the expected life of the warrants
is one to three years.
The fair market value of these warrants of $229,955 for consulting fees
are included in the financial statements at November 17, 1999 pursuant
to Financial Accounting Standard No. 123.
The following is a summary of warrants during the period ended November
17, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
Of Shares Price
<S> <C> <C>
Outstanding at December 31, 1998 - -
Granted during 1999 1,215,555 $ 1.25
Exercised - -
Forfeited or expired - -
--------- ------
Outstanding at November 17, 1999 1,215,555 $ 1.25
========= ======
Weighted average fair value of
Warrants granted during 1999 $ 0.19
=========
</TABLE>
On November 17, 1999 the outstanding warrants were converted under the
acquisition agreement into warrants of Elite Logistics, Inc. under the
same terms and conditions described above.
NOTE 12 - YEAR 2000
Like other companies, Elite could be adversely affected if the computer
systems it, its suppliers or customers use do not properly process and
calculate date-related information and data from the period surrounding
and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer
systems and devices such as production equipment, elevators, etc. At
this time, because of the complexities involved in the issue,
management cannot provide assurances that the Year 2000 issue will not
have an impact on the company's operations.
The Company has reviewed its business and processing systems and
believes that the majority of its systems are already year 2000
compliant or can be made so with software updates. Based on
preliminary assessments, the Company regards the costs associated with
Year 2000 readiness to be immaterial.
F-11
<PAGE> 84
ELITE LOGISTICS SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Period Ended November 17, 1999
For the Years Ended December 31, 1998 and 1997
NOTE 13 - GOING CONCERN CONSIDERATION
As shown in the accompanying financial statements, the Company incurred
net losses of $647,243, $222,062, and $257,440, for the period ended
November 17, 1999 and the years ended December 31, 1998 and 1997,
respectively. Management's plans are to successfully merge the Company
with another corporation to expand its business direction. See Note 7.
If successful, the merger's consequences will serve to mitigate the
factors which had 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 operation and future
market development.
After the date of these financial statements, the Company executed a
merger and share exchange with another corporation. This merger and
exchange resulted in the Company's current stockholders becoming
majority stockholders in the new company. See Note 7.
NOTE 14 - INCOME TAXES
The Company upon formation elected to be taxed as a subchapter S
corporation for tax purposes. An S Corporation makes no provision for
tax purposes and passes all items of income, loss or tax preference to
the individual shareholders. For the years ended December 31, 1998 and
1997, there are no provisions for taxes based upon the Company's
effective S election.
On September 1, 1999, the Company sold shares of common stock to non-
qualifying holders for an S Corporation. As of September 1, 1999 the
Company's S election was terminated. The loss for the period from
January 1, 1999 to August 31, 1999 is $226,706. The loss for the
period from September 1, 1999 to November 17, 1999 is $420,537. The S
Corporation period loss will be passed to the shareholders of record on
August 31, 1999. The subsequent loss of $420,537 is the Company's net
operating loss as of November 17, 1999.
The Company has no significant book to tax differences in its assets
and liabilities, which would give rise to deferred tax assets or
liabilities. The Company may elect to file consolidated tax returns in
the future as part of the merged entity to be known as Elite Logistics,
Inc., formerly Summit Silver, Inc. See Note 7.
F-12
<PAGE> 85
PART III
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
3.1 Articles of Incorporation.
3.2 Amended Articles of Incorporation.
3.3 Amended Articles of Incorporation.
3.4 Amended Articles of Incorporation.
3.5 Amended Articles of Incorporation.
3.6 Bylaws.
4.1 Specimen Stock Certificate.
10.1 Acquisition Agreement.
27.1 Financial Data Schedule.
99.1 Office Lease.
<PAGE> 86
SIGNATURES
In accordance with Section 12 of the Securities Ace of 1934, the
registrant caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized:
ELITE LOGISTICS SERVICES, INC.
BY: /s/ Joseph D. Smith
Joseph D. Smith, President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Joseph D. Smith, as true and lawful attorney-in-
fact and agent, with full power of substitution, for his and in his name, place
and stead, in any all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the
same, therewith, with the Securities and Exchange Commission, and to make any
and all state securities law or blue sky filings, granting unto said attorney-
in-fact and agent, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intends and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or any
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10SB Registration Statement has been signed by the following persons
in the capacities and on the dates indicated:
Signatures Title Date
/s/ Joseph D. Smith
Joseph D. Smith President and a member of the February 18, 2000
the Board of Directors
/s/ Diana Smith Member of the Board of Directors February 18, 2000
Diana Smith
/s/ Richard Hansen
Richard Hansen Chief Operating Officer and a February 17, 2000
member of the Board of Directors
/s/ Thien Nguyen Vice President and a member of February 17, 2000
Thien Nguyen the Board of Directors
/s/ Hahn Nguyen
Hahn Nguyen Vice President and a member of February 18, 2000
the Board of Directors
/s/ John Ryan Secretary and a member of the February 18, 2000
John Ryan Board of Directors
/s/ Russell Naisbitt Treasurer, Chief Financial February 18, 2000
Russell Naisbitt Officer and a member of the
Board of Directors
<PAGE> 87
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SUMMIT SILVER, INC.
KNOW ALL MEN BY THESE PRESENTS That we, the undersigned, citizens of the
United States. of America, each over the age of twenty-one years do hereby
voluntarily associate ourselves together for the purpose of forming a domestic
corporation under and by virtue of the laws of the State of Idaho, and we do
hereby make, sign, acknowledge and files these Articles of Incorporation as
follows:
ARTICLE I
The name of this corporation is, and shall be SUMMIT SILVER, INC.
ARTICLE II
The objects and purposes for which this Corporation is formed are as
principals, agents, or otherwise, to do in any part of the world any and
every of the things therein set forth or permitted by law to the same extent
as natural persons might and could do. In furtherance and not in limitation
of the general powers conferred by the laws of the State of Idaho, we do
expressly provide that the Corporation shall have power;
(a) To purchase, sell, option, own, locate, lease or otherwise acquire,
mortgage and dispose of lands, mines, mining claims and mineral rights;
to own, handle and control letters patent and inventions; to use and to own,
enter, apply for patents for mines, mill sites, mills, water-rights, tunnels
and rights of way; to work, prospect, explore, exploit and develop mines and
mineral lands of every kind and nature and wherever the same may be situated,
and to carry on every operation of the business of mining, lead, gold, silver
and any and all other metals and minerals of every kind and character and to
sell and dispose of the same and the by-products thereof, and to do everything
that may be necessary or proper in the conduct of the business of working such
mines and mineral lands and the production of ore s and to buy, sell, contract
for, own, erect, and operate all mills, smelting and other ore reduction works,
sawmills, machinery, roads, tramways, ditches, flumes, water rights, power
plants of any and all kind use electricity for power and lighting purposes,
and to file upon water rights for any and all purposes.
(b) To take, hold, lease, mortgage, own, purchase, or acquire by operation
of the law or otherwise, real property or any interest therein or appurtenant
thereto, including storerooms, sawmills, store buildings and any part thereof,
or any interest therein, or to sell, lease, exchange, mortgage or hypothecate
real estate or any interest therein and to engage in any and all undertakings
and business necessary and proper to the improvement and betterment of any of
the land or real property or interest therein
<PAGE> 88
or to be owned or otherwise acquired by said corporation, or in any other lands
in which the said corporation may have any interest, and to handle and deal in
any land, interest in land, or other property or interest therein, of said
corporation in any manner it may desire.
(c) To enter into, make, perform and carry out any and all contracts or
agreements or every kind, amount and character with any person, firm,
association, corporation, Federal or State government or any political
subdivision, or corporation or agency thereof.
(d) To purchase, own, sell, convey, mortgage, pledge, exchange, acquire
by operation of law or otherwise, personal property of every kind and
character, debts, dues and demands or causes of action, and each and every
kind of personal property, evidence of debts, bonds, stocks of this and other
Corporations, both public and private, which the Corporation may deem necessary
and convenient for its business or otherwise.
(e) To borrow and lend money from and to any person, firm, corporation an
association or federal or state government or any political subdivision, or
corporation or agency thereof, and to make, take and execute notes, mortgages,
bonds, deeds of trust, or other evidence of indebtedness to secure payment
thereof, or by any other lawful manner or means, and to take and receive
notes, bonds, mortgages, deeds of trust, or any evidence of indebtedness for
the use and benefit of said corporation, or otherwise.
(f) To own, hold, lease, or sublet, or to conduct on its own account, or for
any person, firm association, corporation, or federal or state government or
any political subdivision, or corporation or agency thereof, all and every
kind of merchandise, business or property necessary or proper to carry on an
account of the business of said corporation.
(g) To build any and all necessary shops, buildings, storerooms boarding
houses, sleeping quarters, sawmills and structures at any place proper and
convenient to carry on any or all of the business of said Corporation.
(h) To do and perform every act and thing necessary to carry out the above
enumerated purposes, or calculated directly or indirectly to the advancement
of the interest of the corporation, or to the enhancement of the value of its
stock, holdings and property of any kind or character.
ARTICLE III
The corporate existence of this corporation shall be perpetual.
ARTICLE IV
The location and post office address of the corporation's registered office
in the State of Idaho shall be Wallace, Idaho. P. 0. Box 709.
<PAGE> 89
ARTICLE V
This company shall be capitalized for $5OO,000.00. The total authorized
stock of this corporation shall be divided into 5,000,000 share, all of
which shall be common stock with a par value of $.10 per share. Said shares
shall be non-assessable and shall all be of the same class and every share of
said stock shall be equal in all respects to every other of said shares
The said shares may be issued and sold from time to time by the corporation
for such consideration and upon such terms as may, from time to time, be fixed
by the Board of Directors without action by the stockholders.
Notwithstanding the provisions of Section 30-120, Idaho Code, the Board of
Directors of this corporation shall have power and authority from time to
time to authorize the sale of, and to sell for cash or otherwise, all or any
portion of the unissued and/or of the treasury stock of this corporation
without said stock, or any thereof, being first offered to the shareholders
of this corporation.
ARTICLE VI
The corporate powers of the corporation shall be vested in a Board of
Directors of not less than three, and no more than seven members, who shall
be elected annually by the shareholders, and who shall serve until the
election and qualification of their successors. No person shall serve as a
director of this corporation who is not a shareholder therein, Directors who
are to serve for the first corporate year shall be selected by the
incorporators. Unless otherwise determined by the shote of a majority of the
outstanding shares of stock of the corporation and then entitled to vote or by
writing or writings signed by a majority of such holders of stock which shall
have the same force and effect as though such authorization, ratification or
approval were made. by the stockholders; and no director or officer shall be
liable to account to the corporation for any profits realized by him through
any such transaction or contract of the corporation authorized, ratified or
approved, as aforesaid, by reason of the fact that at he may be, or any firm
of which he is a which he is a shareholders, officer or director, was
interested in such transaction. Nothing in this paragraph contained shall
create any liability in the events above mentioned, or prevent the
authorization, ratification or approval of such contracts or transactions
in any other mariner than permitted by law, or invalidate or made
voidable may be executed only by a majority of the whole Board of Directors.
ARTICLE IX
A director may be, or any firm of which he is a which he is a shareholders,
officer or director, was interested in such transaction. Nothing in this
paragraph contained shall create any liability in the events above mentioned,
or prevent the authorization, ratification or approval of such contracts or
transactions in any other mariner than permitted by law, or invalidate or
made voidablemay be executed only by a majority of the whole Board of
Directors.
ARTICLE IX
A director or officer of the corporation shall not, in the absence of actual
fraud, be disqualified by his office from dealing or contracting with the
corporation, either as vendor, purchaser, or otherwise; and in the absence
of actual fraud no transaction or contract of the corporation shall be void
or voidable by reason of the fact that any director or officer, or firm of
which any director or officer is a member, or any other corporation of which
any director or officer is a shareholder, officer or director in such
transaction or contract; provided, that such transaction or contract is, or
shall be, authorized, ratified or approved (1) by a vote of a majority of a
quorum of the Board of Directors, or of the Executive Committee if any,
counting for the purpose of determining the existence of such majority or
quorum, any Director, when present, who is so interested, or who is a member
of a firm so interested; or (2) at a stockholders' meeting by a vote of a
majority of the outstanding shares of stock of the corporation, and that
said corporation is non-productive and has no expectation of immediate
production.
Furthermore affiant sayeth not.
/s/ Dennis E. Wheeler
Subscribed and sworn to before me this 24th day of December, 1968.
/s/ Scott Hull
Notary Public in and for the State of Idaho, Residing at Wallace, Idaho.
<PAGE> 92
EXHIBIT 3.2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SUMMIT SILVER, INC.
Pursuant to the provisions of Section 30-1-61 of the Idaho
Business Corporation Act, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The following amendments to the Articles of
Incorporation was adopted by the shareholders of the corporation on
April 7, 1983 in the manner prescribed by the Idaho Business
Corporation Act:
That Article Fourth of the Articles of Incorporation of Summit
Silver, Inc. was amended to read as follows:
"ARTICLE IV
The location and post office address of the corporation's
registered office in the State of Idaho shall be 202 Johnston
Building, P. 0. Box 488, Coeur d'Alene, Idaho 83814."
That the first paragraph of Article V of the Articles of
Incorporation of Summit Silver, Inc. was amended to read as follows:
"ARTICLE V.
That the aggregate number of shares which the corporation
shall have the authority to issue is Ten Million (10,
000,000) shares of the par value of Ten Cents ($.10) per
share. The said shares shall be designated "common shares "
and shall be non-assessable.
Second paragraph unchanged.
Third paragraph unchanged.
SECOND: The number of one-class shares of the corporation
outstanding at the time of such adoption was 4,227,974; and the number
of shares entitled to vote thereon was 4,227,974.
THIRD: The number of shares voted for the amendment changing
Article Fourth was 2,708,747; and the number of shares voted against
such amendment was 17,127. The number of shares voted for the amendment
changing Article Fifth was 2,669,547; and the number of shares voted
against such amendment-was 56,327.
FOURTH: The manner in which such amendment to Article Fifth
effects a change in the amount of stated capital, and the amount of
stated capital as changed by such amendments, are as follows:
<PAGE> 93
That the stated capital was increased by $500, 000.00 from
the prior amount of $500,000.00 to the amount of $1,000,000.00.
DATED: April 9, 1983.
SUMMIT SILVER, INC.
By: /s/ Peter Laczay
President
and: /s/ H.S. Sanderson
Secretary
STATE OF IDAHO )
) ss.
County of Kootenai )
I, JEAN A. SMITH, a notary public, do hereby certify that on this
9th day of April, 1983, personally appeared before me, PETER W. LACZAY
and H. S. SANDERSON, who being by me first duly sworn, declared that
they are the persons who signed the foregoing document was President
and Secretary, respectively, and that the statements contained are
true.
/s/ Jean A. Smith
Notary Public in and for the State of
Idaho Residing at: Coeur d'Alene, Idaho
My commission expires: life
<PAGE> 94
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SUMMIT SILVER, INC.
Pursuant to the provisions of Section 30-1-61 of the Idaho
Business Corporation Act, the undersigned corporation adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: Thee Following amendments to the Articles of Incorporation
was adopted by the shareholders of the corporation on January 13, 1995
in the manner prescribed by the Idaho Business Corporation Act:
That the first paragraph of Article V of the Articles of
Incorporation of Summit Silver, Inc. was amended to read as follows:
ARTICLE V
That the aggregate number of shares which the
corporation shall have the authority to issue is Twenty
Million (20,000,000) shares of the par value of One Cent
($.01) per share. The said shares shall be designated "common
shares" and shall be non-assessable."
Second paragraph unchanged.
Third paragraph unchanged.
SECOND: The number of one-class shares of the corporation
outstanding at the time of such adoption was 9,234,902 (8,555,503
issued and 679,399 reserved for Kimberly shareholders); and the number
of shares entitled to vote thereon was 8,555,503.
THIRD: The number of shares voted for the amendment changing
Article Fifth was 4,664,980; and the number of shares voted against
such amendment was 32,600.
FOURTH: The manner in which such amendment to Article Fifth
effects a change in the amount of stated capital and the amount of
stated capital as changed by such amendment, are as follows:
The Ten Million (10,000,000) authorized shared at Ten Cents
($.10) par value before amendment were increased to Twenty Million
(20,000,000) authorized shares with One Cent ($.01) par value. As
a result, the stated capital of Nine Hundred Twenty-Three Thousand
Four Hundred Ninety and 20/100 Dollars ($923,490.20 before the
amendment is decreased to Ninety-Two Thousand Three Hundred Forty-
Nine and 02/100 Dollar. ($92,349.02).
<PAGE> 95
DATED: February 20, 1995
SUMMIT SILVER, INC.
By: /s/ Peter Laczay
President
and: /s/ H. S. Sanderson
Secretary
STATE OF IDAHO )
) ss.
County of Kootenai )
I, CAROL HARSIN, a notary Public, do hereby certify that on this
20th day of February, 1995, personally appeared before me, PETER W.
LACZAY and H.S. SANDERSON, who being by me first duly sworn, declared
that they are the persons who signed the foregoing document, was
President and Secretary, respectively, and that the statements
contained are true.
/s/ Caral Hansin
Notary Public in and for the State of
Idaho Residing at: Hayden Lake, Idaho
My commission expires: 3-15-95
<PAGE> 96
EXHIBIT 3.4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
SUMMIT SILVER, INC.
Pursuant to the provisions of Section 30-1-61 of the Idaho Business
Corporation Act, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
FIRST: The following Amendments to the Articles of Incorporation
were adopted by the shareholders of the corporation on September
20, 1999 in the manner prescribed by the Idaho Business Corporation
Act:
That the Article titled Article I of the Articles of Incorporation
of Summit Silver, Inc., page 1, was amended to read as follows:
"The name of this corporation is, and shall be ELITE
LOGISTICS, INC."
That the Article titled Article II and further titled paragraph
(a) of the Articles of Incorporation of Summit Silver, Inc., page
I and 2, was amended to read as follows:
"(a) To carry out any and all general business activities
which the Board of Directors considers and approves, and to
engage in any type of business without regard to industry
which the Board of Directors believes is in the best interests
of the corporation."
Items (b) through (h) of Article Fourth of the Articles of
Incorporation of Summit Silver, Inc., pages 2 and 3 remain
unchanged.
That the first paragraph of the Article titled Article V was
amended to read as follows:
"That the aggregate number of shares which the
corporation shall have the authority to issue is Fifty Million
(50,000,000) common shares of the par value of One Cent
($0.01) per share, and Ten Million (10,000,000) preferred
shares of the par value of One Cent ($0.01) per share. All
shares of either class shall be non-assessable.
Second paragraph unchanged.
Third paragraph unchanged.
<PAGE> 97
SECOND: The number of one-class shares of the corporation
outstanding at the time of such adoption was 6,258,784 and the
number of shares entitled to vote thereon was 6,258,784.
THIRD: The number of shares voted approving the amendment to
Article I was 4,159,859 (66%), the number abstaining from voting
was 0, the number of shares voted against such amendment was 0. The
number of shares voted approving the amendment to Article II was
4,159,859 (66%), the number abstaining from voting was 0, the
number of shares voted against such amendment was 0. The number of
shares voted approving the amendment to Article V was 4,159,859
(66%), the number abstaining from voting was 0, the number of
shares voted against such amendment was 0.
DATED: November 4, 1999
SUMMIT SILVER, INC.
/s/ John P. Ryan
John P. Ryan
President
STATE OF IDAHO )
) ss.
County of Kootenai )
I, Kathy V. Neubeurt, a Notary Public, do hereby certify that on
this 4th day of November 1999, personally appeared before me John
P. Ryan, who being by me first duly sworn, declared that he is the
person who signed the foregoing document, is the President of
Summit Silver, Inc., and that the statements contained therein are
true.
/s/ Kathy V. Neubeurt
Residing at: Kellogg, Idaho
My Commission Expires:
6/23/2003
<PAGE> 98
EXHIBIT 3.5
ARTICLES OF CORRECTION
TO THE
ARTICLES OF INCORPORATION
OF
ELITE LOGISTICS, INC.
(formerly Summit Silver, Inc.)
Pursuant to the provisions of the Idaho Business Corporation Act,
the undersigned corporation adopts the following Articles of
Correction to its Articles of Incorporation:
On November 5, 1999, Summit Silver filed an Amendment to its
Articles of Incorporation which among other things, changed the
name of Summit Silver, Inc. to Elite Logistics, Inc.
The following corrections (which are in bold italics) are hereby
adopted to that November 5, 1999 filing:
Page 1, paragraph 2 should read:
"FIRST: The following Amendments to the Articles of
Incorporation were adopted by the shareholders of the
corporation on September 20, 1999 in the manner prescribed
by the Idaho Business Corporation Act:"
Page 2, paragraph 3 should read:
"THIRD: The number of shares voted approving the amendment
to Article I was, 4,012,739 (64%), the number abstaining
from voting was 1,602 (0.02%), the number of shares voted
against such amendment was 6,365 ( 05%). The number of
shares voted approving the amendment to Article 11 was
4,178,490 (67%), the number abstaining from voting was 1,268
(0.02%), the number of shares voted against such amendment
was 1,353 ( 02%). The number of shares voted approving the
amendment to Article V was 4,170,969 (67%), the number
abstaining from voting was 8,03 7 (0.6%), the number of
shares voted against such amendment was 2,105 (.03%)."
DATED: November 11, 1999
ELITE LOGISTICS, INC.
/s/ John P. Ryan
John P. Ryan
President
<PAGE> 99
EXHIBIT 3.6
BY-LAWS
OF
ELITE LOGISTICS, INC.
ARTICLE I. NAME, SEAL AND OFFICES, ETC.
Section 1 Name: The name of the corporation is Elite
Logistics, Inc.
Section 2. Seal: The seal of the corporation shall be in such
form as the Board of Directors shall from time to time prescribe.
Section 3. Offices: The registered offices of the corporation
shall be in the City of Coeur d'Alene, State of Idaho. The
corporation may also have offices at such other places within or
without the State of Idaho as the Board of Directors may from time
to time establish.
Section 4. Book of By-Laws: These By-Laws shall be recorded in
a book kept in the registered office of the corporation, to be
known as the Book of By-Laws, and no By-Laws, or repeal or
amendment thereof, shall take effect until so recorded. Said book
may be inspected at said office by the public during office hours
of each day except holidays.
ARTICLE II. SHAREHOLDERS
Section 1 - Annual Meetings of Shareholders: The annual
meeting of the Shareholders for the election of Directors and for
such other business as may be laid before such meeting shall be
held in the registered office of the corporation, or at such other
place within or without the State of Idaho as the Board of
Directors may from time to time appoint, on the third Tuesday of
October unless that day shall be a legal holiday, in which event it
shall be held on the next following day which shall not be a legal
holiday whether or not mentioned in the notice. Any corporate
business may be transacted at such meeting.
Section 2. Special Meetings of Shareholders: Special meetings
of the Shareholders may be called at any time by the Board of
Directors, and the Shareholders may meet at any convenient place,
within or without the State of Idaho, designated in the call for
such meeting. If more than eighteen months are allowed to elapse
without the annual Shareholders meeting being held, any Shareholder
may call such meeting to be held at the registered office of the
corporation. At any time, upon written request of any Director or
any Shareholder or Shareholders holding in the aggregate one-fifth
of the voting power of all Shareholders, it shall be the duty of
the Secretary to call a special meeting of Shareholders to be held
at the registered office at such time as the Secretary may fix, not
less than fifteen nor more than thirty-five days after the receipt
<PAGE> 100
of said request, and if the Secretary shall neglect or refuse to
issue such call, the Director or Shareholder or Shareholders making
the request may do so. If a special meeting is called within three
weeks of the scheduled annual meeting, such meeting may serve as
the annual meeting and "I be designated as such in the notice to
shareholders. All business to be conducted at the annual meeting
shall be conducted at this meeting.
Section 3. Adjourned Meetings: An adjournment or adjournments
of any annual or special meeting may be taken without a new notice
being given.
Section 4. Notice of Meetings: A written notice of the time,
place and purpose of meetings, including annual meetings, shall be
given by the Secretary or other person authorized so to do, to all
stockholders entitled to vote at such meeting, at least ten days
prior to the day named for the meeting. If such written notice is
placed in the United States mail, postage prepaid, addressed to a
Shareholder at his last known post office address, notice shall be
deemed to have been given him.
Section 5. Waiver of Notice: Notice of time, place and purpose
of any meeting of Shareholders may be waived by the written assent
of a Shareholder entitled to notice, filed with or entered upon the
records of the meeting before or after the holding thereof.
Section 6. Action Without Formal Meeting: Any action which,
under any provision of the Laws of Idaho, or the Articles or By-
Laws, may be taken at a meeting of Shareholders, may be taken
without a meeting if authorized by a writing signed by a majority
of the holders of shares who would be entitled to notice of a
meeting for such purpose. Whenever a certificate in respect to any
such action is required by the laws of Idaho to be filed in the
office of the County Recorder or in the office of the Secretary of
State, the officers signing the same shall therein state that the
action was authorized in the manner aforesaid.
Section 7. Waiver of Invalid Call or Notice: When all the
Shareholders of this corporation are present at any meeting,
however called or notified, and sign a written consent thereto on
the record of such meeting, the doings of such meeting are as valid
as if had at a meeting legally called and notified.
Section 8. Voting: Every Shareholder shall have the right at
every Shareholders meeting to one vote for every share of stock
standing in his or her name on the books of the Corporation on the
record date fixed as hereinafter provided, or, if no such date has
been fixed, ten days prior to the time of the meeting, and in
voting for Directors, but not otherwise, he may cumulate his votes
in the manner and to the extent permitted by the laws of the State
of Idaho.
<PAGE> 101
The Board of Directors may fix a time not more than forty days
prior to the date of any meeting of the stockholders as the record
date as of which stockholders entitled to notice of and to vote at
such meeting shall be determined.
At each meeting of the shareholders a full, true and complete
list, in alphabetical order, of all the stockholders entitled to
vote at such meeting and indicating the number of shares held by
each, certified by the Secretary or transfer agent, shall be
furnished, which list shall be open to the inspection of the
stockholders.
Shareholders may vote at all meetings, either in person or by
proxy appointed by instrument in writing, subscribed by the
Shareholders or his duly authorized attorney in fact, executed and
filed with the Secretary not less than one day before the meeting
which shall be named therein. Shareholders may also be represented
at all meetings by persons holding general power of attorney.
Prior to any meeting, powers of attorney or proxies shall be
submitted to the Secretary for examination. The certificate of the
Secretary as to the regularity of such powers of attorney or
proxies and as to the number of shares held by the persons who
severally and respectively executed such powers of attorney or
proxies shall be received as prima facie evidence of the number of
shares held by the holder of such powers of attorney or proxies for
the purpose of establishing the presence of a quorum at such
meeting or for organizing the same, and for all other purposes.
Section 9. Quorum: Except as otherwise provided in the
Articles of Incorporation at any meeting of the Shareholders, the
presence, in person or by proxy, of the holders of a majority of
the voting power of all Shareholders shall constitute a quorum. The
Shareholders present at a duly organized meeting can continue to do
business until adjournment, notwithstanding the withdrawal of
enough Shareholders to leave less than a quorum. If a Shareholders
meeting cannot be organized because a quorum has not attended,
those Shareholders present may adjourn the meeting to such time and
place as they may determine, but in case of any meeting called for
the election for Directors those who attend the second of such
adjourned meetings, though less than a majority of the voting
powers of all shareholders shall nevertheless, constitute a quorum
for the purpose of electing Directors.
Whenever all Shareholders entitled to vote at any meeting
consent, either by writing on the records of the meeting or filed
with the Secretary of the Corporation, or by presence at such
meeting, an oral consent entered on the minutes, or by taking part
in the deliberations at such meeting without objection, the doings
of such meeting shall be as valid as if had at a meeting regularly
called and noticed and at such meeting any business may be
transacted which is not excepted from the written consent or to the
<PAGE> 102
consideration of which no objection from want of notice is made at
the time, and if any meeting be irregular for want of notice or of
such consent provided a quorum was present at such meeting, the
proceedings of said meeting may be ratified and approved and
rendered likewise valid and the irregularity or defect therein
waived by a writing signed by all the Shareholders having the right
to vote at such meeting and such consent or approval of
Shareholders may be by proxy or power of attorney in writing.
ARTICLE III. DIRECTORS
Section 1. Number and Election: The business of the
corporation shall be managed by a Board of at least three
Directors or of such other number (which shall not be less than
three nor more than seven) as may be determined from time to time
by the Board of Directors. A Director shall hold office for the
term for which he was named or elected and until his successor is
elected and qualified, except as hereinafter otherwise provided.
Directors shall be chosen by ballot.
Section 2. Annual Meetings: The Board of Directors may hold
its first annual meeting and all subsequent annual meetings after
its election by the Shareholders, without notice and at such place
within or without the State of Idaho as the Board of Directors may
from time to time appoint, for the purpose of organization, the
election of officers, and the transaction of other business. At
such meetings the Board shall elect a President, a Secretary and a
Treasurer, and may elect one or more Vice-Presidents, an Assistant
Secretary and an Assistant Treasurer.
Section 3. Special Meetings: Special meetings of the Board of
Directors may be called by the President, or any Vice-President or
by any two members of the Board of Directors.
Section 4. Notice of Meeting Notice of all Director's
meetings, except as herein otherwise provided, shall be given
either by mail, telephone, telegraph, or personal service of
notice, oral or written, at such time or times as the person or
persons calling the meeting may deem reasonable, but in no event
upon less than three days notice. Special meetings of the Board may
be held at such place within or without the State of Idaho as the
Board of Directors may from time to time appoint. Notice of any
meeting may be waived by any Director entitled to notice before or
after the holding thereof by his written or oral assent and the
presence of any Director at any meeting, even though without any
notice, shall constitute a waiver of notice. Unless otherwise
indicated in the notice thereof any and all business may be
transacted at any Director's meeting.
<PAGE> 103
Section 5. Quorum: At all meetings of the Board a majority of
the Directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and the acts of a majority
of the Directors present at any meeting at which a quorum is
present shall be the acts of the Board of Directors, except as may
be otherwise specifically provided for herein or by law. If at any
meeting there is less than a quorum present, a majority of those
present may adjourn the meeting from time to time without further
notice to any absent Director.
Section 6. Removal: A Director may be removed either with or
without cause, by two/thirds of the vote of the Shareholders at a
special meeting called for that purpose.
Section 7, Vacancies: Any vacancy in the Board of Directors
occurring during the year may be filled for the unexpired portion
of the term and until a successor is elected and qualified, either:
(a) at the next annual meeting of Shareholders or at any
special meeting of the Shareholders duly called for that
purpose and held prior thereto, or
(b) by a majority of the remaining members of the Board. In
the instance in which vacancies result in there being
less than three remaining Directors, the remaining
Director or Directors may appoint new members but may
begin no new business until the appointed Board members
have accepted such nominations. Business relating to
ongoing matters may be conducted by a Board of less than
three.
Section 8. Powers: All the corporate powers, except such as
are otherwise provided for in the Articles of Incorporation, in
these By-Laws and by the laws of the State of Idaho, shall be, and
are, hereby vested in and shall be exercised by the Board of
Directors.
Section 9. Executive Committee: The Board of Directors may, by
resolution passed by a majority of the whole Board, designate two
or more of their number to constitute an Executive Committee to
serve during the pleasure of the Board, which Committee shall have
and exercise the authority of the Board in the management of the
business of the corporation to the extent authorized by said
resolution. All action taken by the Executive Committee shall be
reported to the Board of Directors at its meeting next succeeding
such action, and shall be subject to revision or alteration by the
Board; providing, however, that no rights or acts of third parties
shall be affected by any such revision or alteration.
<PAGE> 104
A majority of the Executive Committee present at a meeting
thereof shall constitute a quorum. Vacancies in the Executive
committee shall be filled by the Board of Directors. The Executive
Committee shall fix its own rules of procedure including the time
and place of and method or manner of calling meetings thereof.
Section 10. Directors' Fees: The Board of Directors may fix
their own fees and may approve and authorize reimbursement of
expenses incurred by the Directors in the conduct of the Company's
business. Such fees and expenses will be submitted to the Corporate
Treasurer for payment.
ARTICLE IV. OFFICERS
Section 1. Officers: The Officers of the Corporation shall be
a President, Secretary and Treasurer, and, in the discretion of the
Board of Directors, one or more Vice-Presidents, and an Assistant
Secretary, and an Assistant Treasurer, each of whom shall be
elected at a meeting of and by the Board of Directors.
Any officers may resign by mailing a notice of resignation to
the registered office of the Corporation or such other office as
may be designated by the Board of Directors. To the extent.
permitted by law, the resignation shall become effective at the
time designated in the notice of resignation, but in no event
earlier than its receipt by the Secretary or Assistant Secretary of
the Corporation.
In case of a vacancy of any of said offices for any reason,
the Board of Directors shall at any regular or special meeting
elect a successor who shall hold office for the unexpired term of
his predecessor. Any two of the offices of President, Vice-
President, Secretary, Treasurer, Assistant Secretary and Assistant
Treasurer may be combined in one person, except the President may
not also serve as the Secretary or Assistant Secretary.
The Board of Directors may appoint such other officers and
agents as may be necessary for the business of the he corporation.
Any officer or agent may be removed by the Board of Directors
whenever in their judgment the interest of the corporation may be
served thereby; such removal, however, shall be without prejudice
to the contract rights of the person so removed.
Section 2. President: The President shall preside at all
meetings of the Shareholders and Directors. He shall see that all
orders and resolutions of the Board are carried into effect shall
execute all deeds, mortgages, bonds or documents authorized by the
Board of Directors, and shall sign as President all certificates of
stock, all contracts, and other instruments, in writing, excepting
only those which are specifically provided to be signed by others.
<PAGE> 105
He shall from time to time as requested report to the Board all the
matters within his knowledge of interest to the corporation, and
shall also perform such duties as may be required by the State of
Idaho, these By-Laws and by order of the Board of Directors.
Section 3. Vice-President(s): The Vice-President(s) shall be
vested with all the powers and duties and shall perform such as
designated by the Board of Directors and/or the President The
President shall name an Executive Vice-President who is the senior
vice-president and who shall be vested with all the powers and
shall perform all the duties of the President in the absence or
disability of the latter.
Section 4. Treasurer: The Treasurer shall be custodian of the
corporation's money and securities, and shall deposit and withdraw
the same in the corporations name as directed by the Board of
Directors; he shall keep a record of his accounts and report to the
Board of Directors as requested.
Section 5. Secretary The Secretary shall keep a record of the
meetings of the Shareholders and Board of Directors. He shall keep
the books of certificates of stock, fill out and sign all
certificates of stock issued, and make corresponding entries on the
margin or stub of such book. He shall keep a debit and credit form,
showing the number of shares issued to and transferred by the
Shareholders, and the dates thereof He shall keep the corporate
seal and shall affix the same to certificates of stock and other
corporate instruments, and shall make such acknowledgments as may
be prescribed by the Board of Directors. The Secretary shall give
or cause to be given, notice of all meetings of Shareholders and
Board of Directors, and all other notices required by the laws of
the State of Idaho, or by these By-Laws.
Section 6. Assistant Treasurer and Assistant Secretary: The
Assistant Treasurer and Assistant Secretary shall be vested with
all the powers and shall perform all the duties of the Treasurer
and Secretary, respectively, in the absence of disability of the
Treasurer or Secretary as the case may be.
Section 7. Salary: The salaries of all officers shall be fixed
by the Board of Directors and the fact that any officer is a
Director shall not preclude him from receiving a salary or from
voting on the resolution providing for the same. The Board may also
approve compensation for services performed for the corporation
prior to a fixed salary being set Salaries or fees paid in the form
of common stock shall be approved and appraised at the discretion
of the Board, and the amount of stock issued is purely a
discretionary matter of the Board of Directors.
<PAGE> 106
ARTICLE V. STOCK
Section 1. Certificates of Stock: Each Shareholder shall be
entitled to a certificate of stock signed by the President and the,
Secretary, or by such other officers as are authorized by these By-
Laws or by the Board of Directors. When any certificate of stock is
signed by a transfer agent or registrar, the signature of any such
corporate officer and the corporate seal upon such certification
may be facsimiles, engraved or printed.
Certificates of stock shall be numbered in the order of
issuance thereof, and, except as prescribed by law, shall be in
such form as the Board of Directors may determine.
Section 2. Transfer of Shares: Transfer of shares of stock
shall be made on the books of the corporation only by the holder in
person or by written power of attorney duly executed and witnessed
and upon surrender of the certificate or certificates of such
shares.
Section 3. Transfer Agent and Registrar: The Board of
Directors may appoint either a transfer agent or registrar, or both
of them.
Section 4. Stock Transfer Books: Stock transfer books may be
closed for not exceeding forty days next preceding the meeting of
shareholders and for the payment of dividends during such periods
as may be fixed from time to time by the Board of Directors. During
such periods no stock shall be transferable.
Section 5. Lost or Destroyed Certificates: In case of loss or
destruction of a certificate of stock of this Corporation, another
certificate may be issued in its place upon proof of such loss or
destruction and the giving of a bond of indemnity or other security
satisfactory to the Board of Directors.
ARTICLE VI. REPEAL OR AMENDMENT OF BY-LAWS
Section 1. By the Shareholders: The power to make, amend or
repeal By-Laws shall be in the Shareholders, and the By-Laws may be
repealed or amended or new By-Laws may be adopted at any annual
Shareholders' meeting, or at any special meeting of the
Shareholders called for that purpose, by a vote representing a
majority of the allotted shares, or by the written consent duly
acknowledged in the same manner as conveyances of real estate
required by law to be acknowledged of the holders of a majority of
the allotted shares, which written consent may be in one or more
instruments.
<PAGE> 107
Section 2. By the Directors: Subject to the power of the
Shareholders to make, amend or repeal any By-Laws made by the Board
of Directors, a majority of the whole Board of Directors at any
meeting thereof shall have the power to repeal and amend these By-
Laws and to adopt new By-Laws.
The foregoing By-Laws were adopted at a Board of Directors
meeting of the corporation held on the ____ day of ____________
2000, at by a unanimous vote of the Directors present.
__________________________________
Joseph Smith
Chairman of the Board and President
__________________________________
John Ryan
Director and Secretary
<PAGE> 108
EXHIBIT 4.1
ELITE LOGISTICS, INC.
INCORPORATION UNDER THE LAWS OF THE STATE OF IDAHO
AUTHORIZED SHARES $0.01 PAR VALUE
NUMBER SHARES
CUSIP
See Reverse
For Certain Definitions
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $0.00001 PAR VALUE COMMON
STOCK OF
ELITE LOGISTICS, INC.
Transferable only on the books of the Company in person or by duly
authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this
Certificate to be executed by the facsimile signatures of its duly
authorized officers and to be sealed with the facsimile seal of the
Company.
Dated:
_______________________ _________________________
Secretary SEAL President
<PAGE> 109
ELITE LOGISTICS, Inc.
TRANSFER FEE: $_____ PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable law or
regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________ Custodian ___________ (Minor)
under Uniform Gifts to Minors Act ____________ (State)
Additional abbreviations may also be used though not in the above
list.
For Value Received, _________________ hereby sell, assign and
transfer unto _______________ (Please insert Social Security or
other identifying number of Assignee).
_________________________________________________________________
Please print or typewrite name and address, including zip code of
Assignee)
_________________________________________________________________
_________________________________________________________________
__________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint _______________________
attorney-in-fact to transfer the said stock on the books of the
within-named Corporation, with full power of substitution in the
premises.
Dated: _________________
_____________________________________________
Notice: The signatures to this Assignment
must correspond with the name(s) as written
upon the face of the certificate in every
particular, without alteration or enlargement
or any change whatsoever.
Signature(s) Guaranteed:
___________________________
The signature(s) must be guaranteed by an eligible guarantor
institution (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions with membership in an approved signature
guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
<PAGE> 110
EXHIBIT 10.1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made as this 17th
day of November, 1999, (the "Closing Date") by and among Elite
Logistics, Inc. (formerly "Summit Silver, Inc."), an Idaho
corporation(hereinafter referred to as "SSI"); Elite Logistics
Services, Inc., a Texas corporation (hereinafter referred to as
"ELSI"); and individuals, corporations, or other entities listed herein
In paragraph (1) below (hereinafter collectively referred to as the
"Stockholders"), who are the sole shareholders of ELSI;
BACKGROUND:
A. The Stockholder own or will own as of the Closing Date (as defined
below), all of the issued and outstanding stock of ELSI (the "ELSI
Stock"), which they desires to exchange pursuant to the terms,
conditions mid covenants of this Agreement, for shares of voting
Common Stock of SSI, $0.01 par value, and for shares of Preferred
Stock of SSI, $100,00 par value (collectively, the "SSI Stock") as
hereinafter provided; and,
B. SSI desires to acquire all of the ELSI Stock from the
Stockholders, solely in exchange for shares of SSI Stock, as
hereinafter provided; and,
C. The shareholders of SSI have recently approved a I for 6 reverse
split of the issued and outstanding common shares of SSI. The
reverse split is designated to be effective on or about November
24, 1999: (the"Reverse Split Effective Date").
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements, representations, warranties, provisions and covenants
herein contained, the parties hereto hereby agree as follows:
1. THE EXCHANGE OF SHARES.
1.1 Common Shares: On or about the Reverse Split Effective Date,
the Stockholders agree to deliver or cause to be delivered to SSI all
of the issued and outstanding shares of ELSI Stock (the "ELSI Exchange
Shares"). In exchange for the ELSI Exchange Shares, SSI shall have
issued and caused to be delivered to the Stockholders 10,400,000 shares
of common stock of 351 Stock (the "SSI Exchange Shares") as follows,
Joseph D. Smith 1,104,400
Diana M. Smith 4,016,000
Hanh Nguyen 3,112,400
Thien Nguyen 1,104,400
Michael McKinley 200,800
Richard L. Hansen 502,000
Kokopelli Developments, L.L.C. 80,000
Vernor Investments, L.P. 80,000
Thomas Dunn 40,000
Ralf Caly 40,000
Stephen A, Koinis 40,000
Steven G. Eifert 40,000
Arrow Manufacturing, Inc. 40,000
TOTAL 10,400,000
<PAGE> 111
1.2 Preferred Shares: ELSI also has a class of redeemable
Preferred Shares of which there are 2,445 shares issued and
outstanding. These shares are to be exchanged for the same
class of Preferred Shares of SSI at a same time as common
stock are issued, at the same exchange rate and some terms as
the existing ELSI preferred stock.
1.3 Warrants: ELSI has issued warrants ("ELSI Warrants") to
purchase 1,215,555 shares of ELSI common stock. Upon the
Reverse Split Effective Date, such warrants shall be
exchanged for warrants to purchase 1,215,555 shares of SSI
common stock at the same exercise price, and exercisable
within the same time period, and bearing the same rights and
covenants as the ELSI Warrants.
DELIVERY OF COMMON SHARES.
2.1 Delivery of Temporary Certificates, On the Closing Date of
November 17, 1999, SSI shall deliver Temporary SSI Exchange
shares to the Stockholders, by delivering on such date to
Federal Express (or other overnight courier) for delivery to
the ELSI office in Freeport, Texas. Such temporary
certificates shall be distributed to the Stockholders and
shall be non-voting and non-transferable, and represent only
a right to receive a security at a future date, and way be
exchanged only by the Stockholder designated on the face
thereon, for Permanent SSI Exchange Shares sometime on or
after the Reverse Split Effective Date.
2.2 Delivery of ELSI Exchange Shares. On or about the Closing
Date. the Stockholders shall deliver to the President of ELSI
at the offices in Freeport, Texas certificates representing
their shares of ELSI. Such shares shall be held by the
President until Permanent Certificates of SSI have been
delivered on or about the Reverse Split Effective Date.
2.3 Final Delivery and Exchange. On or about the Reverse Split
Effective Date and after Permanent Certificates of SSI
Exchange Shares have been delivered to the President of ELSI,
the President shall cause such Permanent Certificates to be
exchanged and delivered to the Stockholders. The President
shall collect all Temporary Certificates and forward these
along with the ELSI Exchange Shares to the designated
Transfer Agent of SSI for safekeeping.
2.4 Restricted Nature of Shares. As provided in section 14 of
this Agreement, the parties agree that the SSI Exchange
Shares will be issued in reliance on Section 4(2) of the
Securities Act of 1933 (the "Act") and will be "restricted
securities," as that term is defined in Reg. 144 of the Act.
3. ENDORSEMENT OF ELSI SHARES.
The Stockholders shall deliver the certificates representing the
ELSI Exchange Sham, duly endorsed in blank by the Stockholders or
accompanied by blank stock powers, with signatures Medallion Guaranteed
by a national bank, and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholder's expense, affixed and
<PAGE> 112
canceled. The Stockholders agrees to cure any deficiencies with respect
to the endorsement of the certificates or other documents of conveyance
with respect to such ELSI Exchange Shares or with respect to the stock
powers accompanying any ELSI Exchange Shares.
4. CLOSING.
The exchange and delivery of Temporary Certificates referred to in
Section 2 hereof (hereinbefore and hereinafter referred to as the
"Closing") shall take place on the 17th day of November, 1999, which
date has boon and shall be referred to as the "Closing Date." Time is
of the essence. The effective date for accounting/tax purposes shall be
November 17, 1999.
5. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND ELSI
The Stockholders and ELSI represent and warrant that all of the
following representations and warranties shall, except as otherwise
disclosed herein, be true at the time of Closing and that such
representations and warranties as made at the time of Closing shall
survive the Closing for a period of two (2) years from the Closing Date
(which date is hereinafter called the "Expiration Date").
5.1 Due Organization. ELSI is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Texas, and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public
authorities to carry on its businesses in the places and in the manner
as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect oil the
business of ELSI taken as a whole. Copies of the Articles of
Incorporation, Bylaws, each as amended, stock records and minute books
of ELSI as heretofore made available to SSI, are correct and complete.
5.2 Authorization. The Stockholders and ELSI have full legal
right, power and authority to enter into this Agreement, and the
exchange of ELSI Exchange Shares for SSI Exchange Shares, pursuant to
the provisions of this Agreement will transfer valid title in the ELSI
Exchange Shares to SSI, free and clear of all liens, encumbrances and
claims of every kind.
5.3 Capital Stock of ELSI. The authorized capital stock of ELSI
consists of 20,000,000 shares of voting common stock, $0.01 par value,
of which 10,400,000 shares are issued and outstanding, and 2,000,000
shares of preferred stock of par value $100.00, of which 2,445 shares
are issued and outstanding. All of the issued and outstanding shares of
the capital stock of ELSI are owned by the Stockholders, and are free
Find clear of all liens, encumbrances and claims of every kind. All of
the issued and outstanding shares of ELS) Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are
owned of record and beneficially by the Stockholders and further such
shares were offered, issued, sold and delivered by ELSI in compliance
with all applicable state and federal laws concerning the issuance of
securities.
5.4 Transactions in Capital Stock. No option, warrant, call,
conversion right or commitment of any kind exists which obligates ELSI
to issue any of its authorized but unissued capital stock, except the
Forte Group, LLC Warrant and Vernor Investment Warrant as disclosed in
Schedule 5.4 hereto, In addition, ELSI has no obligation (contingent or
<PAGE> 113
otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof, except as disclo5cd in Schedule 5.4
hereto,
5.5 Financial Statements. The Stockholders have delivered to SSI
copies of unaudited financial and must prepare within sixty (90) days
from the Closing Date audited financial statements. The ELSI financial
statements will be prepared in accordance with generally accepted
accounting principles and applied on a consistent basis throughout the
period indicated. The ELSI financial statements will present fairly the
financial condition of ELSI as of the date indicated thereon, and such
Statements of Earnings, and Cash Flows and Retained Earnings will
present fairly the results of its respective operations for the periods
indicated thereon. All such financial statements are accurate and
present fairly the financial position of Summit at their respective
dates and the results of operations for tho months periods then ended,
all in accordance with generally accepted United States accounting
principles, subject in the ease of the quarterly financial statements,
to normal recurring year end adjustments (the effect of which will not,
individually or in the aggregate, be materially adverse) and the
absence of notes (which, if presented, would not differ materially from
those included in the May 31, 1999 financial statements. The financial
statements referred to in this section reflect the consistent
application of accounting principles throughout the periods involved.
5.6 Property The Stockholders have delivered to SSI an accurate
list and summary description (Schedule 5.6) of each item of real and
personal property owned by ELSI (hereinafter "ELSI Property") and
warrants it owns such free and clear of all encumbrances, or if
encumbered, warrants that the such encumbrances are limited to those
designated thereon. As used herein, "Permitted Encumbrance means any of
the following;
1. Liens related to transactions in the ordinary course of the
business of Elite and with respect to which Elite received
the full benefits of the considerations given in exchange for
such lien.
2. Liens for taxes, assessments, and other governmental charges
or levies if payment thereof shall not at the time be
required to be made, or if same are being contested in good
faith and by appropriate proceedings.
3. Liens of vendors, carriers, warehousemen, mechanics,
laborers, and material-men incurred in the ordinary course of
business for sums not then due or being contested in good
faith.
4. Liens incurred or deposits made in the ordinary course of
business in connection with wo0unen's compensation,
unemployment insurance and other social security, or to
secure the performance of tenders, statutory obligations,
surety and appeal bonds, performance and return of money
bonds and other similar obligations ("elusive of obligations
for the payment of money borrowed or the obtaining of
advances of credit.)
<PAGE> 114
5.7 Material Contracts and Commitments. ELSI is not a party to,
nor bound by, any material contracts, or commitments (including, but
not limited to, joint venture or partnership agreements, contracts with
any labor organizations, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, options to purchase land, liens, pledges
or other security agreements) other than as disclosed on Schedule 5.7
hereto.
5.8 Conformity with Law. ELSI is not in material default under any
law or regulation or under any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over them which would
have a material adverse effect on their businesses, taken as a whole;
and there are no claims, actions, suits or proceedings, pending or
threatened, against or affecting ELSI, at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over either of them and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received.
ELSI has conducted and is conducting its business in substantial
compliance with the requirements, standards, criteria and conditions
set forth inapplicable federal, state and local statutes ordinances,
permits, licenses, orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing which might materially
and adversely affect the business. operations. affairs, prospects,
properties, assets, profits or condition (financial or otherwise) of
them, taken as a whole. ELSI has received no notice from any
shareholder or former shareholder asserting that ELSI or any Affiliate
("Affiliate" as used herein is used with the same meaning as under Rule
405 promulgated under the 1933 Act) has violated or in any manner
failed to comply with any law or regulation, including without
limitation, federal or state securities laws and regulations.
5.9 Taxes. ELSI has filed with the appropriate governmental
authorities all tax and related returns required to be filed by it, and
such returns accurately reflect the taxes payable. All federal, state
local, county, franchise, sales, use, excise, property, and other taxes
which are due and payable have been duly paid; and no reserves for
unpaid taxes have been set up or am required on the basis of the facts
and in accordance with generally accepted accounting principles, except
as may be specified and set forth in the ELSI disclosure Schedule.
There are no unpaid assessments or proposed assessments of federal
income taxes pending against ELSI and there are no federal, state, or
local tax audits pending or threatened. ELSI has never filed a consent
under Section 341(f) of the Internal Revenue Code ELSI has timely filed
all requisite federal and other tax returns for all fiscal periods
ended; and there are no open years, examinations in progrc33 or claims
against them for federal and other taxes (including penalties and
Wtere3t) for any period.
5.10 Absence of Changes. Since the date of the ELSI financial
statements, there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business
of ELSI;
(b) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties
or business of ELSI;
<PAGE> 115
(c) any change in the authorized capital of ELSI or in their
respective securities outstanding or any change in their
respective ownership interests or any grant of any options,
warrants, calls, conversion rights or commitments;
(d) any declaration of payment of any dividend of
distribution in respect of the capital stock or
any director indirect redemption, purchase or other acquisition of
any of the capital stock of ELSI,- (e) any transaction by ELSI
outside the ordinary course of their respective businesses.
5.11 Deposit Accounts: Power of Attorney. The Stockholders have
delivered to SSI an accurate schedule as of the date of the Agreement,
of:
(a) the names of all banks and other financial institution in
which are depositories of the funds of ELSI, the accounts
established at such depositories, the names of all persons
authorized to draw or sign checks or drafts upon the accounts
established in such depositories, the name of any depositories or
other organization in which ELSI has a safe deposit box and the
names of the persons having access thereto.
(b) All insurance coverage's, with policy description, and
coverage period the names in which the accounts are covered
(c) A list of each officer and employee of ELSI presently
receiving remuneration (including salary, commission, bonuses, and
any other form of compensations if any) and the rate of
remuneration and position for each person named. ELSI has no
obligation to pay to any person listed any remuneration in excess
of that shown.
ELSI has also set forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from ELSI
and a description of the terms of such power.
5.12 Environmental Matters. ELSI has no knowledge of any assertion
by any governmental agency or other regulatory authority of any
environmental lien or action.
5.13 Validity of Obligations. The execution and delivery of this
Agreement by ELSI and the performance of the transactions contemplated
herein have been duty and validly authorized by the Board of Directors
of ELSI, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation
of the Stockholders and ELSI.
5.14 Relations with Government. ELSI has not made, offered or
agreed to offer anything of value to any governmental official,
political party or candidate for government office nor has it otherwise
taken any action which would cause) ELSI to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended or any law of similar
effect.
5.15 Disclosure. This Agreement and all other documents and
information furnished to SSI and its representatives pursuant hereto
and listed on Schedule 5.15, to the knowledge of ELSI or the
Stockholders, do not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
<PAGE> 116
statements therein not misleading. If ELSI or the Stockholders become
aware of any fact or circumstances which would change a representation
or warranty of ELSI or the Stockholders in this Agreement or any
representation made on behalf of ELSI, ELSI and the Stockholders shall
immediately give notice of such fact or circumstance to SSI. However,
such notification shall not relieve either ELSI or the Stockholders of
their respective obligations under this Agreement, and at the sole
option of SSI, the truth gad accuracy of any and all warranties and
representations of ELSI, or on behalf of ELSI and of the Stockholders
tit the date of this Agreement and at the closing, shall be a
precondition to the consummation of this transaction.
5.16 Employee Benefit Plans. ELSI does not maintain or otherwise
have any liability (whether direct or indirect, actual or contingent)
in respect of any employee pension benefit plan (as such term is
defined in Section 3(2) of the Employee Retirement income Security Act
of 1974, as amended "ERISA") or under any "employee welfare benefit
plan" (as such term is defined in Section 3(l) of ERISA)
5.17 No Subsidiaries. ELSI has no subsidiaries, and has made no
advances to or investments in, directly or indirectly, any other
business, entity, enterprise, or organization, nor has it ever had any
subsidiaries or made such investments, except as specifically disclosed
on Schedule 5.15, there are no related entities controlled by ELSI.
6. REPRESENTATIONS AND WARRANTIES OF SSI AND SSI STOCKHOLDERS.
SSI represents and warrants that all of the following
representations and warranties be true at the time of Closing and that
such representations and warranties as made at the time of Closing
shall survive the Closing for a period of four (4) years from the
Closing Date (which date is hereinafter called the "Expiration Date"),
unless otherwise modified by documents furnished to ELSI in accordance
with paragraph 14.10 of this document.
6.1 Due Organization. SSI is duly organized, validly existing and
in good standing under the laws of the State of Idaho, and is duly
authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry on
its business in the places and in the manner as now conducted except
where the failure to be so authorized, qualified or licensed would not
have a material adverse effect on the business of SSI taken as a whole.
Copies of the Articles of Incorporation, bylaws, stock records and
minute books of SSI as heretofore made available to ELSI, are complete
and correct.
6.2 Authorization. SSI has full legal right, power and authority
to enter into this Agreement and the exchange of the SSI Exchange
Shares for the ELSI Exchange Shares, pursuant to the provisions of Us
Agreement will transfer valid title in the SSI Exchange Shares to the
Stockholders, free and clear of all liens, encumbrances and claim of
every kind.
6.3 Capital Stock of SSI. The authorized capital stock of SSI
consists of 20,000,000 shares of voting common stock, $0.01 par value,
of which 6X8,784 shares are issued and outstanding as of the Closing
Date. Upon the Reverse Split Effective Date approximately 1,044,000
common shares will be issued and outstanding. SSI also has authorized
class of Preferred Stock consisting of 10,000,000 shares of $0.01 par
value of which none is issued and outstanding. The SSI Exchange Shares
<PAGE> 117
to be delivered to the Stockholders on or after the Reverse Split
Effective Date will constitute valid and legally issued shares of SSI
fully paid and non-assessable, and with the exception of restrictions
upon resale. will be legally equivalent in all respects to the SSI
Stock issued and outstanding as of the date hereof.
6.4 Transactions in Capital Stock. No option, warrant, call,
conversion right or commitment of any kind exists which obligates SSI
to issue any of their authorized but unissued capital stock.
6.5 Financial Statements. SSI has or will have delivered prior to
the Reverse Split Effective Date to ELSI and Stockholder copies of the
following financial statements (the SSI Financial Statements"):
SSI's unaudited financial statement as of August 31, 1999
(hereinafter referred to as the "SSI Financial Statements") and
Statements of Earnings, Cash Flows and Retained Earnings for the
period ended May 31, 1999.
The SSI Financial Statements have been prepared in accordance with
generally accepted accounting principles and applied on a consistent
basis throughout the periods indicated (except as noted). The SSI
Financial Statements present fairly the financial condition of SSI as
of the date indicated thereon, unless disclosed in Schedule 6.5
attached hereto, and such Statements of Earnings, and Cash Flows and
Retained Earnings present fairly the results of its respective
operations for the periods indicated thereon.
6.6 Property. SSI owns no property.
As used herein, "Permitted Encumbrances" means any of the
following:
1. Liens related to transactions in the ordinary course of the
business of Elite and with respect to which Elite received
the full benefits of the considerations given in exchange for
such lien.
2. Liens for taxes, assessments, and other governmental charges
or levies if payment thereof shall not at the time be.
required to be made, or if same are being contested in good
faith and by appropriate proceedings.
3. Liens of vendors, carriers, warehousemen, mechanics,
laborers, and material-men incurred in the ordinary course of
business for sums not then due or being contested in good
faith.
4. Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation,
unemployment insurance and other social security, or to
secure the performance Of tenders, statutory obligations,
surety and appeal bonds, performance and return of money
bonds and other similar obligations (exclusive of obligations
for the payment of money borrowed or the obtaining of
advances of credit.)
6.7 Liabilities. SSI has no liabilities or obligations (direct
or indirect, absolute or contingent, matured or unmatured, asserted or
unasserted) of whatever nature, whether arising out of contract, tort,
statute, or otherwise other than those reflected on or reserved against
on the August 31, 1999 Balance Sheet and those incurred since August
31, 1999, incurred only in the ordinary course of business (excluding
from the meaning of "Ordinary course of business" for purposes of this
<PAGE> 118
agreement any tort liability or any liability arising out of a
violation of law or breach of a contractual or other obligation) and
recorded on the books of Summit other then those listed its financial
statements referenced in Section 6.5 above. Books & Records, The books
and records of Summit Silver, Inc. set forth in all respects the
transactions of Summit Silver, Inc. to which Summit Silver, Inc. is a
party or by which it or if properties are bound and such books and
records have been properly kept and maintained in accordance with
generally accepted accounting principles applied on a consistent basis,
where applicable, and otherwise in accordance with prudent business
practices.
6.8 Conformity with Law. SSI is not in material default under any
law or regulation or under any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction over them which would
have a material adverse effect on their businesses, taken as a whole;
and except to the extent set forth in Schedule 6.8, there are no
claims, actions, suits or proceedings, pending or threatened, against
or affecting SSI or the SSI Subsidiaries at law or in equity, or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having
jurisdiction over either of them and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received,
nor is SSI aware of any grounds for such claims, actions, suits or
proceedings, to materialize. SSI is not aware of any disgruntled
shareholders or any circumstances that would give rise to a shareholder
or shareholder class action lawsuit. SSI and the SSI Subsidiaries have
conducted and are conducting their businesses in substantial compliance
with the requirements, standards, criteria and conditions set forth in
applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing which might materially and
adversely affect the business, operations, affairs, prospects,
properties, assets, profits or condition (financial or otherwise) of
them, taken as a whole. ELSI has received no notice from any
shareholder or former shareholder asserting that ELSI or any Affiliate
("Affiliate" as used herein is used with the same meaning as under Rule
405 promulgated under the 1933 Act) has violated or in any manner
failed to comply with any law or regulation, including without
limitation, federal or state securities laws and regulations
6.9 Taxes. SSI has filed with the appropriate governmental
authorities all tax and related returns required to be filed by it, and
such returns accurately reflect the taxes payable. All federal, state
local, county, franchise, sales, use, excise, property, and other taxes
which are due and payable have been duly paid; and no reserves for
unpaid taxes have been set up or are required on the basis of the facts
and in acceptance with generally accepted accounting principles, except
as may be specified and set forth in the SSI disclosure Schedule. There
are no unpaid assessments or proposed assessments of federal income
taxes pending against SSI and there are no federal, state, or local tax
audits pending or threatened. SSI has never filed consent under Section
341 (f) of the Internal Revenue Code. SSI has timely filed all
requisite federal and other tax returns for all fiscal periods, there
are no open years, examinations in progress or claims against them for
federal and other taxes (including penalties and interest) for any
period or periods and no notice of any claim, whether pending or
threatened, for taxes has been received.
<PAGE> 119
6.10 Absence of Charges Since the date of the SSI financial
statements, there has not been:
(a) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business
of SSI;
(b) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the properties or
business of SSI;
(c) any declaration or payment of any dividend or
distribution in respect of the capital stock or any direct or
indirect redemption, purchase or other acquisition of any of the
capital stock of SSI;
6.11 Deposit Accounts: Powers of Attorney. SSI has delivered to
the Stockholders an accurate schedule as of the date of the Agreement,
of:
(a) The names of all banks and other financial institution
in which are depositories of the funds of ELSI, the accounts
established at such depositories, the names of all persons
authorized to draw or sign checks or drafts upon the accounts
established in such depositories, the name of any depositories or
other organization in which ELSI has a safe deposit box and the
names of the persons having access thereto.
(b) All insurance coverage's, with policy description, and
coverage period the names in which the accounts are covered
(c) A list of each officer and employee of ELSI presently
receiving remuneration (including salary, commission, bonuses, and
any other form of compensations if any) and the rate of
remuneration and position for each person named. ELSI has no
obligation to pay to any person listed any remuneration In excess
of that shown.
SSI has delivered the name of each person, corporation, firm or other
entity holding a general or special power of attorney from SSI and a
description of the terms of such power.
6.12 Environmental Matters & Laws. All real property
presently or formerly owned or leased by Summit Silver. Inc. ("Company
Property") and the operations conducted thereon do not violate any
order or requirement of any court of the United States, the state,
county, city, and political subdivision in which Summit Property is
located or which exercises jurisdiction over any such Company Property
or any agency. department. commission, board, bureau or instrumentality
which exercises jurisdiction over any such Company Property
Governmental Authority") or any Environmental Laws (as hereinafter
defined) and there are no conditions existing on or resulting from
operations conducted on Summit Property that may give rise to any on-
site or off-site remedial obligations under any Environmental Laws.
Summit Property and the operations conducted by any prior owner or
operator of Summit Property, are not subject to any existing, pending,
or threatened action, suit, investigation, inquiry, or proceeding by
or before any court or Governmental Authority. All hazardous substances
or solid waste generated at Summit Property and shipped for disposal
has been transported, treated, stored, and
<PAGE> 120
disposed of only by persons and entities authorized to do so under
applicable Environmental Laws and only at treatment storage, and
disposal facilities maintaining authorizations under applicable
Environmental Laws, which persons, entities, and facilities have been
and are operating in compliance with such authorizations and are not
the subject of any existing, pending, or, to the knowledge of Sellers,
threatened action, investigations, or inquiry by any Governmental
Authority in connection with any Environmental Laws with respect to the
transportation, treatment storage and disposal of hazardous substances
or solid waste. No hazardous substances or solid wa5tv has been
dispo3ed of or otherwise released on Summit property except in
compliance with Environmental Laws, and there are no leaking above
ground or below ground storage tanks or containers on Summit Property
For purposes hereof, "Environmental Laws" means any and all laws,
statutes, ordinances, rules, regulations, orders, or determinations of
any Governmental Authority pertaining to healthy or the environment in
effect in any and all jurisdictions in which Summit Property is
located, including without limitation, the Clean Air Act, as amended,
the Comprehensive Environmental, Response, compensation, and Liability
Act of 1980 ("CERCLA") as amended, the, Federal Water Pollution Control
Act, as amended, the occupational Safety and Health Act of 1970, as
amended, The Resource Conservation and Recovery Act of 1976 ("RCRA")
as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, and other environmental, conservation
or protection laws, The terms "hazardous substance" and "releaser (or
threatened release") have the meanings specified in CERCLA, and the
terms solid waste and disposal" (or "disposed") have the meanings
specified in RCRA; provided, however that (1) to the extent that laws
of the state in which Summit property is located established a meaning
for "hazardous substance", "release", "solid waste', or "disposal"
shall include all oil and gas exploration and production wastes that
may present an endangerment to public health or welfare or the
environment, even if such wastes are specifically exempt from
classification as hazardous substances or solid Wastes Pursuant to a
CERCLA or RCRA or the state analogues to those statutes. SSI has no
knowledge of any assertion by any governmental agency or other
regulatory authority of any environmental lien or action. SSI now owns
or controls no mining properties. SSI has provided ELSI an
environmental assessment produced by GeoEngineers, Inc, evaluating the
Kimberly Mine property which was formerly controlled by SSL Such report
is made a part herein as Schedule 6.12. Other than the evaluation
contained therein, SSI is unaware of any other environmental conditions
on any other mining properties it owned or controlled which would
require further environmental assessments being conducted.
6.13 Validity of Obligations. The execution and delivery of this
Agreement by the SSI and the performance of the transactions
contemplated herein have been duly and validly authorized by the )Board
of Directors of SSI, and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and
binding obligation of the SSI.
6.14 Relations with Government. SSI has not made, offered or
agreed to offer anything of value to any governmental official,
political party or candidate for government office nor has it otherwise
taken any action which would cause SSI to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended or any law of similar
effect,
<PAGE> 121
6.15 Disclosure. This Agreement and all other documents and
information furnished to the Stockholders and its representatives
pursuant hereto do not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein not misleading. If SSI becomes aware of any fact or
circumstance which would change a representation or warranty of SSI in
this Agreement or any representation made on behalf of SSI, SSI shall
immediately give notice of such fact or circumstance to die
Stockholders. However, such notification shall not relieve SSI of its
obligations under this Agreement, and at the sole option of the
Stockholders, the truth and accuracy of any and all warranties and
representations of SSI at the date of this Agreement and at the
Closing, shall be a precondition to the consummation of this
transaction.
6.16 Employee Benefit Plans. SSI does not maintain or otherwise
have any liability (whether direct or indirect, actual or contingent)
in respect of any "employee pension benefit plan" (as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") or under any "employee welfare benefit
plan" [as such term is defined in Section 3(l) of ERISA).
6.17 Affiliations and Subsidiaries. SSI does not presently own,
of record or beneficially, or control, directly or indirectly, the
capital stock securities convertible into capital stock of any other
equity interest in any corporation, association or business entity. SSI
is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity. Further, SSI does not own
any subsidiary corporations.
6.18 Predecessor Status, Etc. SSI has not owned any predecessor
companies SS) has never been a subsidiary or division of another
corporation nor been a part of an acquisition which was later
rescinded, other than as disclosed in Schedule 6.18 hereto.
6.19 Guaranties. There are no contracts or commitments by Summit
guaranteeing the payment or performance by others or whereby Summit is,
or will be, in any way liable with respect to the obligations of any
other person, firm, corporations, limited liability company,
partnership or other entity. Summit is not obligated as surety or
indemnitor under any surety or similar bond or other contract or
agreement.
6.20 Related Party Transactions: Summit is not a party to any
transactions with an officer, director, employee or shareholder or
their respective Affiliates.
6.21 No Claims. No shareholder, officer, director, or employee of
Summit or any of their respective Affiliates has any claims of any
nature against Summit, including without limitation any claim for
compensation for services or use of property. Summit is not aware of
any state of facts that would operate to prevent Summit from carrying
on its business in the manner in which it is being carried on or which
would render Summit subject to any liabilities or adversely affect any
of its assets.
<PAGE> 122
6.22 Improper Payments. Neither Summit or any Affiliate, officer,
or employee thereof has paid or caused to be paid, directly or
indirectly. in connection with the business of Summit any bribe,
kickback, or other similar payment to any domestic or foreign
government or agency thereof or any contribution to any political party
or candidate (other than from personal funds of officers or employees
not reimbursed by Summit.
6.23 Confidentiality. Each party agrees with respect to all
technical, commercial, and other information that is furnished or
disclosed by the other party, including, but not limited to,
information regarding each party's organization, personnel, business
activities, customers, subscribers, policies, assets, finances, costs,
sales, revenues, technology, riots, obligations, liabilities and
strategies ("the Corporate Information"), that, unless and until the
transactions contemplated hereby shall have been consummated:
a) such Corporate Information is confidential and or proprietary
to the. furnishing/disclosing party and entitled to and shall
receive treatment as such by the receiving party;
b) the receiving party will hold in confidence and not disclose
or use (except in respect of the transactions contemplated
hereby) any such Corporate Information, treating such
Corporate Information with the same degree of care and
confidentiality as it accords its own confidential and
proprietary information; provided, however, that the
receiving parry shall not have any restrictive obligations
with respect to any Corporate information within the
following categories:
(1) is contained in a printed publication available to the
general public without breach hereof by the receiving
party.
(2) Is or becomes publicly known through no wrongful act or
omission of the receiving party;
(3) Is known by the receiving party without any proprietary
restrictions by the furnishing disclosing party at the
time of receipt of such Corporate Information; or
(4) Disclosure is compelled by or court or other
governmental body
(5) All such Corporate information furnished to a party by
another, unless otherwise this Agreement is terminated,
shall be returned to it, together with any and all
copies made thereof, upon written request for such
return by it (except for documents submitted to a
governmental agency with the consent of the
furnishing/disclosing party or upon subpoena and that
cannot be retrieved with reasonable effort), and each
party shall confirm in writing to the other compliance
with any such request.
COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation: ELSI. ELSI will afford to the officers
and authorized representatives of SSI access to all of ELSI's
properties, books and records and will furnish SSI with such additional
financial and operating data and other information as to the business
and properties of ELSI as SSI may from time to time reasonably request.
ELSI will cooperate with SSI, its representatives, engineers, auditors
and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required
<PAGE> 123
by any governmental agency. SSI will cause all information obtained in
connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section
12 hereof.
7.2 Access and Cooperation: SSI. SSI will afford to the officers
and authorized representatives of ELSI access to all of SSIs
properties, books and records and will furnish ELSI with such
additional financial and operating data and other information as to the
business and properties of SSI as ELSI may from time to time reasonably
request. SSI and stockholders will cooperate with ELSI, its
representatives, engineers, auditors and counsel in the preparation of
any documents or other material which may be required in connection
with any documents or materials required by any governmental agency,
ELSI will cause all information obtained in connection with the
negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 12 hereof.
7.3 Conduct of Business 5. UPON CLOSING OF ACQUISITION
Stockholders shall cause ELSI to:
(a) carry on its business in substantially the same manner
as they have heretofore and not introduce any material new method
of management, operation or accounting;
(b) maintain their respective properties and facilities,
including those held under leases, in as good working order and
condition as at present, ordinary wear and tear excepted;
(c) perform all of their respective material obligations
under agreements relating to or affecting their respective assets,
properties or rights;
(d) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(e) use their beat efforts to maintain and preserve their
business organization intact retain their present employees and
maintain their respective relationships with suppliers, customers
and others having business relations with ELSI or SSI, as the case
may be;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, etc.;
(g) maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments, without the
knowledge and consent of all parties hereto; and
(h) maintain present salaries and commission levels for all
officers, directors, employees and agents
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS.
The obligations of the Stockholders hereunder are subject to the
following conditions.
<PAGE> 124
8.1 Representations and Warranties; Performance of Obligations.
The representations and warranties of SSI contained in Section 7 shall
be accurate as of the Closing Date as though such representations and
warranties had been made as of that time; and all of the terms,
covenants and conditions of this Agreement to be complied with and
performed by SSI an or before the Closing Date shall have been duty
complied with and performed.
8.2 No Litigation No claim, suit, action, or other proceeding will
be pending or, to the knowledge of any party hereto, threatened before
any court or governmental agency seeking to restrain, prohibit, or
obtain damages or other relief in connection with this agreement or the
consummation of the transactions contemplated hereby and, to the
knowledge of any party hereto, no investigation or inquiry will have
been made or commenced by any governmental agency in connection with
this agreement or transaction.
8.1 No Material Adverse Change No material adverse change in the
results of operations, financial condition or business of SSI and shall
have occurred, and SSI shall not have suffered any material loss or
damages to any of its properties or asset whether or not covered by
insurance, since the SSI Financial statements, which change, loss or
damage materially affects or impairs the ability of SSI to conduct its
business.
8.4 Counsel Approval All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall have been approved by, Christian,
Samson & Jones, P.C., counsel to the Stockholders. The consents of any
third parties whose consent may be required for the consummation of the
transactions contemplated hereby shall have been obtained.
8.5 Opinion of Counsel. The Stockholders shall have received an
opinion from Conrad C. Lysiak, counsel to SSI, dated the Closing Date.
in form and substance satisfactory to the Stockholders, to the effect
that:
(a) SSI has been duly organized and is validly existing in
good standing under the laws of the State of Idaho;
(b) this Agreement has been duly authorized, executed and
delivered red by SSI and constitutes a valid and binding agreement
of SSI enforceable in accordance with its terms except as such
enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors except as the
same may be subject to the effect of general principles of equity
and that no opinion need be expressed as to the enforceability of
indemnification provisions Included herein; and
(c) the shams of SSI Stock to be received by the Stockholders
on or after the Reverse Split Effective Date shall be duly
authorized, fully paid and non-assessable.
8.6 Elite shall have completed Elite's due diligence review of
Company, its assets and its liabilities, and the result thereof shall
be satisfactory to Elite in its sole discretion.
<PAGE> 125
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SSI.
The obligations of SSI hereunder are, at its option, subject to
the satisfaction, on or prior to the Closing Date, of the following
conditions,
9.1 Representations and Warranties; Performance of Obligations.
Ile representations and warranties of the Stockholders and ELSI
contained in this Agreement shall be true on and as of the Closing Date
with the same effect as though such representations and warranties had
been made on and as of such date and 411 of the agreements of the
Stockholders and ELSI shall have been performed.
9.2 No Litigation No action or proceeding before a court or any
other governmental agency or body shall have been instituted or
threatened to restrain or prohibit the acquisition by SSI of the ELSI
Stock, and no governmental agency or body shall have taken any other
action or made any request of SSI as a result of which the management
of SSI deems it inadvisable to proceed with the transactions hereunder.
9.3 No Material Adverse Change No material adverse change in the
results of operations, financial condition or business of ELSI shall
have occurred, and ELSI shall not have suffered any material loss or
damages to my of its properties or assets, whether or not covered by
insurance, since the ELSI Balance Sheet Date, which change, lose or
damage materially affects or impairs the ability of ELSI to conduct its
business; and SSI shall have received a certificate signed by the
Stockholders dated the Closing Date to such effect.
9.4 Counsel Approval. All actions, proceedings, instruments and
documents required to carry out this Agreement or incidental hereto and
all other related legal matters shall have been approved by Conrad C.
Lysiak, counsel to SSI
9.5 Opinion of Counsel. SSI shall have received an opinion from
Dayle C. Pugh, Attorney At Law, counsel to ELSI and the Stockholders,
dated the Closing Date, in form and substance satisfactory to SSI, to
the effect that:
(a) ELSI has been duly organized and is validly existing in
good standing under the laws of the state of Texas;
(b) this Agreement has been duly authorized, executed and
delivered by the Stockholders and constitutes a valid and binding
agreement of the Stockholders enforceable in accordance with its
terms except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors
except as the same may be subject to the effect of general
principles of equity and that no opinion need be expressed as to
tile enforceability of indemnification provisions included herein:
and
(c) the shares of ELSI Stock to be received by SSI on or
about the Closing Date shall be duly authorized, fully paid and
non-assessable.
<PAGE> 126
10. INDEMNIFICATION.
10.1 Indemnification by the Stockholders. The Stockholders
covenants and agrees that it will indemnify, defend, protect and hold
harmless SSI and ELSI at all times from and after the date of this
Agreement until the Expiration Date from and against all claims,
damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation)
incurred by SSI in excess of Ten Thousand Dollars ($10,000) In the
aggregate as a result of or incident to any material breach of the
representations and warranties set forth in Section 5 of this Agreement
or Certificates attached pursuant thereto and any misrepresentations
or nonfulfillment of any agreement on the part of the Stockholders
under this Agreement.
10.2 Indemnification by SSI. SSI covenants and agrees that it
will indemnify and hold harmless the Stockholders at all times from and
after the date of this Agreement until the Expiration Date from and
against all claim, damages actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by ELSI in excess of Too Thousand Dollars
($10,000) in the aggregate as a result of or incident to any material
breach of the representations and warranties set forth in Section 6 of
this Agreement or on the schedules or certificates attached pursuant
thereto and any misrepresentations or non-fulfillment of any agreement
on the part of SSI under this Agreement. in addition, other
indemnification agreements relating to the Kimberly Mine property are
contained in Schedule 10.2, and made a part of this section.
10.3 Third Person Claims. Promptly after any party hereto
(hereinafter the "Indemnified Party") has received notice of or has
knowledge of any claim by a person not a party to this Agreement
("Third Person") or the Commencement of any action or proceeding by a
Third Person, the Indemnified Party shall, as a condition precedent to
a claim with respect thereto being made against any party obligated to
provide indemnification pursuant to Sections 10.1 1 or 10.2, hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or
proceeding, Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof, The Indemnifying
Party shall have right to defend and settle, at its own expense and by
its own counsel, any such matter so long as the Indemnifying Party
pursues the same in good faith and diligently. if the Indemnifying
Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party
shall cooperate with the Indemnifying Party and its counsel in the
defense thereof and in any settlement thereof. Such cooperation shall
include, but shall not be limited to, furnishing the Indemnifying Party
with any books, records or Information reasonably requested by the
Indemnifying Party that are in the Indemnified Party's possession or
control, Notwithstanding the foregoing, the Indemnified Party shall
have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest
that prevents counsel for the indemnifying Party from representing
Indemnified Party, in which case the Indemnifying Party will reimburse
the Indemnified Party for the expenses of its counsel); provided that
the Indemnifying Party's counsel shall always be lead counsel and shall
determine all litigation and settlement steps, strategy and the like.
<PAGE> 127
After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability,
and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any
defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which
event the Indemnified Party shall be reimbursed by the Indemnifying
Party for reasonable additional legal expenses, out-of-pocket expenses
and allocable share of employee compensation incurred in connection
with such participation for any employee whose participation is so
requested. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified
Party refuses to consent to such settlement, then the Indemnifying
Party's liability under this Section with respect to such Third Person
claim shall be limited to the amount so offered in settlement by said
Third Person and the Indemnified Party shall reimburse the Indemnifying
Party for any additional costs of defense which it subsequently incurs
with respect to such claim. If the Indemnifying Party does not
undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue
such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying
Party, and the Indemnified Party may settle such matter, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount
paid in such settlement and any other liabilities or expenses incurred
by the Indemnified Party in connection therewith, provided, however,
that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld,
10.4 Method of Payment All claims paid to the Indemnified Party
pursuant to this indemnity shall be paid in cash.
11. TERMINATION OF AGREEMENT.
No party shall be permitted to terminate hereunder if such parry
is in violation of this Agreement. To all other circumstances, whether
or not shareholder approval has been received, this Agreement may he
terminated at any time prior to the Closing date as follows:
a) By mutual consent of the Board of Directors of SSI or
ELSI; or
b) By either party, if any of the following circumstances
occur:
1) Any representation or warranty of or by the other party
contained herein shall have been incorrect of breached
in any material respect, its to which notice shall have
been given to such party, and shall not have been cured
or otherwise resolved to the reasonable satisfaction of
the other party on or before the Closing Date.
2) Except as provided in (5) below any condition to the
consummation of the transactions contemplated hereby
that must be fulfilled to its satisfaction has, in the
good faith judgement of its Board of Directors, become
impractical to be fulfilled.
3) Any permanent injunction or other order of a court or
other competent authority preventing the consummations
of the transactions contemplated hereby shall have
become final and not subject to appeal as against the
other party.
<PAGE> 128
4) All of the transactions contemplated hereby have net
become effective by January 1, 1999.
5) If any of the conditions in Section 6 are not fulfilled
as determined in the sole discretion of Elite Board of
Directors, Elite may terminate this Agreement.
SSI or the Stockholders may, by notice in the manner hereinafter
provided on or before the Closing Date, terminate this Agreement if a
material default shall be made by the other party in the observance or
in the due and timely performance of any of the covenants, agreements
or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date and shall not
reasonably be expected to occur,
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
12.1 Confidentiality Each party agrees with respect to all
technical, commercial, and other information that is furnished or
disclosed by the other party, including, but not limited to,
information regarding such party's organization, personnel, business
activities, customers, subscribers, policies, assets, finances, costs,
sales, revenues, technology, riots, obligations, liabilities and
strategies ("the Corporate Information"), that, unless and until the
transactions contemplated hereby shall have been consummated:
a) such Corporate Information is confidential and or
proprietary to the furnishing/disclosing party and entitled to and
shall receive treatment as such by the receiving party;
b) the receiving party will hold in confidence and not
disclose or use (except in respect of the transactions
contemplated hereby) any such Corporate information, treating such
Corporate Information with the same degree of care and
confidentiality as it accords its own confidential and proprietary
information; provided, however, that the receiving party shall not
have any restrictive obligations with respect to any Corporate
information within the following categories:
1) is contained in a printed publication available to
the general public without breach hereof by the receiving
party;
2) is or becomes publicly known through no wrongful act
or omission of the receiving party;
3) is known by the receiving party without any
proprietary restrictions by the furnishing/disclosing party
at the time of receipt of such Corporate Information; or
4) disclosure is compelled by or court or other
governmental body;
5) all such Corporate information furnished to a party
by another, unless otherwise this Agreement is terminated,
shall be returned to it, together with any and all copies
made thereof, upon written request for such return by it
(except for documents submitted to a governmental agency with
the consent of the furnishing/disclosing party or upon
subpoena and that cannot be retrieved with reasonable
effort), and each party shall confirm in writing to the other
compliance with any such request.
<PAGE> 129
SSI recognizes and acknowledges that it has in the past, currently has,
and prior to the Closing Date, will have access to certain confidential
information of ELSI. such as lists of operations of ELSI and ELSI's
respective businesses. SSI agrees that it will not disclose such
confidential information to any person, firm, corporation, association,
or other entity for any purpose or reason whatsoever, prior to the
Closing Date without the Stockholder's prior written consent. In the
event of a breach or threatened breach by SSI of the provisions of this
Section, the Stockholders shall be entitled to an injunction
restraining SSI from disclosing, in whole or in part, such confidential
information, Nothing contained herein shall be construed as prohibiting
the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
13. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON SSI STOCK.
13.1 Status of Stockholders. Stockholders hereby represents and
warrants to, and covenants with SSI regarding as follows:
(a) The undersigned Subscriber understands that the Company's
Shares of Common Stock have not been approved or disapproved by
the United States Securities and Exchange Commission, any state
securities agency; or any foreign securities agency;
(b) The undersigned Subscriber is not an underwriter and
would be acquiring the Company's shares of Common Stock solely for
investment for his or her own account and not with a view to, or
for, resale in connection with any distribution within the meaning
of any federal securities act, state securities act or any other
applicable federal or state laws;
(c) The undersigned Subscriber understands the speculative
nature and risks of investments associated with the Company, and
confirms that the shares of Common Stock would be suitable and
consistent with his or her investment program; that his or her
financial position enable him or her to bear the risks of this
investment; and, that there is no public market for the shares of
Common Stock subscribed for herein;
(d) The shares of Common Stock subscribed for herein may not
be transferred, encumbered, sold, hypothecated, or otherwise
disposed of, if such disposition will violate any federal and/or
state securities acts. Disposition shall include, but is not
limited to acts of selling, assigning, transferring, pledging,
encumbering hypothecating, giving, and any form of conveying,
whether voluntary or not, and may not be resold for a period of
one (1) year from the date of issuance;
(e) To the extent that any federal, and/or state securities
laws shall require, the Subscriber hereby agrees that any shares
of Common Stock acquired pursuant to this Agreement shall be
without preference as to assets;
(f) The Company is under no obligation to register or seek
an exemption under any federal securities act, state securities
act, or any foreign securities act for any shares of Common Stock
of the Company or to cause or permit such shares of Common Stock
to be transferred in the absence of any such registration or
exemption;
<PAGE> 130
(g) The Subscriber has had the opportunity to ask questions
of the Company and has received additional information from the
Company to the extent that the Company possessed such Information,
necessary to evaluate the merits and risks of any investment in
the Company. Further, the Subscriber has been given:
(1) All material books, records and financial statements
of the Company; (2) all material contracts and documents
relating to the proposed transaction; and, (1) an opportunity
to question the appropriate executive officers of the
Company.
(h) The Subscriber has satisfied the suitability standards
imposed by his or her applicable state laws and has a preexisting
personal and business relationship with the Company;
(i) The Subscriber has adequate means of providing for his
current needs and personal contingencies and has no need to sell
the shares of Common Stock in the foreseeable future (that is at
the time of the investment, Subscriber can afford to hold the
investment for an indefinite period of time);
(j) The Subscriber has sufficient knowledge and experience
in financial matters to evaluate the merits and risks of this
investment and further, the Subscriber is capable of reading and
interpreting financial statements; and/or
(k) The Subscriber acknowledges that if he/she/it is a
resident of the State of Florida, he/she/it has the privilege of
declaring this transaction null and void provide the Subscriber
communicates such intention to the Company in writing within three
(3) days of the of the tender of his/her/its consideration,
13.2 Status of SSI SSI has never been required to make any filings
of any type with the Securities and Exchange Commission or any state
securities agency except for Form D and similar state forms claiming
exemptions from registrations, all of which were timely filed. SSI has
provided Elite with true, correct, and complete copies of each such
filings.
14. GENERAL.
14.1 Cooperation. The Stockholders and SSI shall each deliver or
cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the
purpose of carrying out this Agreement. The Stockholders will cooperate
and use its best efforts to have the present officers, directors and
employees of ELSI cooperate with SSI on and after the Closing Date in
furnishing information, evidence, testimony and other assistance in
connection with any actions, proceedings, arrangements or disputes of
any nature with respect to matters pertaining to all periods prior to
the Closing Date.
14.2 Board of Directors After Closing. Immediately after the
Closing, the existing Board of Directors of SSI shall nominate to the
Board of Directors of SSI the following individuals and Mr. Howard
Crosby shall resign from the SSI board:
<PAGE> 131
Joseph D. Smith
Russell Naisbitt
Diana Smith
Hanh Nguyen
Thien Nguyen
Richard L, Hansen
14.3 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and
shall be binding upon and shall inure to the benefit of the parties
hereto, the successor of SSI and the Stockholders.
14.4 Agreement This Agreement (including the schedules and
Exhibits attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding between the
Stockholders, ELSI, and SSI and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This
Agreement, upon execution, constitutes a valid and binding agreement
on the parties thereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by the
Stockholders, ELSI, and SSI acting through their respective officers,
duly authorized by their respective Boards of Directors.
14.5 Counterparts This Agreement may be executed simultaneously
in two (2) or more counterparts, each of which shall be deemed an
original and all of which together shall constitute but one and the
same instrument.
14.6 Brokers and Agents Each party represents and warrants that
it employed no broker, finder or agent in connection with this
transaction and agrees to indemnify the other against all loss, cost
damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying
party
14.7 Expenses Each parry will be responsible for their own
expenses in connection with this Agreement
14.8 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage
prepaid and registered or certified with return receipt requested,
overnight courier addressed to the party to be notified, postage
prepaid, or by delivering the same in person to an officer or agent of
such party.
(a) If to SSI, addressed to it at:
John Ryan
Elite Logistics, iNC.
1010 Ironwood Drive
Suite 105
Coeur d'Alene, Idaho 83814
(b) If to the Stockholders, addressed to it at:
Joseph Smith
Elite Logistics Services, Inc.
1201 North Avenue H
Freeport Texas 77541-1938
<PAGE> 132
(c) If to ELSI, addressed to it at:
Joseph Smith
Elite Logistics Services, Inc.
1201 North Avenue H
Freeport, Texas 77541-1938
14.9 Governing Law. This Agreement shall be construed in
accordance with the laws of the state of Idaho and any action brought
hereunder shall be exclusively in the state or federal courts of the
state of Idaho.
14. 10 Survival of Representations and Warranties, The
representations, warranties, indemnities, covenants and agreements of
the parties made hereto contain in this Agreement and any related
documents, shall survive for a period of four (4) years after the
closing date. At the end of the survival period of the representations
and warranties herein, each party shall, without further actions, be
deemed to have fully released the other party from any and all
responsibility with respect to a breach of such representations and
warranties (including any obligation under the indemnification
provisions contained in Section 4.02 unless during such survival period
a party shall have given the other party notice of the nature and
reasonable particulars under the then existing circumstances of any
claimed breach. The obligations, covenants, and Agreements of each
party hereto contained In this Agreement and any related documents
shall survive the Closing. The representation, warranties, obligations,
covenants, indemnities and agreements shall not be affected by, and
shall remain in full force and effect notwithstanding, any
Investigations at any time made by or on behalf of either party or any
information which either party may have with respect thereto.
14.11.1 Exercise of Rights and Remedies. Each party hereto
acknowledges that the remedy at law for any breach by a party of
its obligations under this Section is inadequate and that the
other parties shall be entitled to equitable remedies, including
injunctive relief, in the event of breach by any other party.
14.11.2 Each party hereto shall jointly and severally
indemnify and hold the other party harmless from and against and
promptly reimburse such other party for, any and all loss,
expense, damage, deficiency, liability or obligation. including
investigative and settlement cost, and attorney's fees, arising
out of or in connection with any breach of representation or
warranty contained herein or in any certificate delivered pursuant
hereto, regardless of whether any such other party relied upon the
truth of such representation or warranty or had any knowledge of
any breach thereof.
14.11.3 Upon receipt by a party ("Claimant") of notice of any
situation, event or occurrence that might give rise to a claim for
indemnification of or against the other party pursuant to this
Section 14.10.2, Claimant shall give prompt written notice thereof
to the other party, indicating the nature of such indemnification.
Failure to give any notice provided under this Section shall in
no way be deemed a forfeiture of any rights of Claimant to be
indemnified hereunder. A claim for indemnity may, at the option
of the Claimant, be asserted as soon as any situation, event or
occurrence has been noticed by Claimant, regardless of whether
actual harm has been suffered or out of pocket expenses incurred
<PAGE> 133
14.12 Except as otherwise provided herein, no delay of or omission
in the exercise of any right, power or remedy accruing to any party as
a result of any breach or default by any other parry under this
Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or
default, or of any similar breach or default occurring later; nor shall
any waiver of any single breach or default be deemed a waiver of any
other breach or default occurring before or after that waiver.
14.13 Time. Time is of the essence of this Agreement.
14.14 Reformation and Severability, In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the
extent possible, be modified in such manner as to be valid. legal and
enforceable but so as to most nearly retain the intent of the parties,
and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 17th day of November, 1999.
SSI:
ATTEST: ELITE LOGISTICS, INC.
/s/ John P. Ryan
/s/ illegible BY: John P. Ryan
Title: President
ELSI:
ATTEST: ELITE LOGISTICS SERVICES, INC.
/s/ Joseph D. Smith
/s/ Kevin D. Stulp BY: Joseph D. Smith
Title: President
<PAGE> 134
Addendum to that certain agreement titled "Acquisition
Agreement" between Elite Logistics Services, Inc., and Elite
Logistics, Inc. signed on November 17, 1999.
The following changes to the subject agreement are hereby adopted
by the parties and incorporated into and made part of the subject
agreement:
First, the introductory paragraph is hereby amended to read as
follows:
"THIS ACQUISTION AGREEMENT (the "Agreement') is made as of this
17", day of November, 1999, (the "Closing Date") by and among
Elite Logistics, Inc. (formerly "Summit Silver, Inc. "), an Idaho
corporation (hereinafter referred to as "SSI") and Elite Logistics
Services, Inc., a Texas corporation (hereinafter referred to as
"ELSI"):
Second, in any sections of the agreement referring to liabilities
of or representations of ELSI stockholders, or in sections requiring
indemnification of one or more parties by the ELSI stockholders, the
parties hereby agree that the minor shareholders listed below are
hereby exempt from and are not to be bound by such representations,
warranties, indemnification provisions, or other obligations (other
than their obligation under Section 3 and Section 10.1 of the
agreement to make good deliver of unencumbered shares of ELSI if they
choose to exchange such shares) and such minor shareholders are not
subject to any future liability or already accrued liability which may
result or have already resulted by the execution of said agreement;
Minor Shareholder # Shares Held
Kokopelli Developments, L.L.C. 80,000
Vernor Investments, L.P. 80,000
Thomas Dunn 40,000
Ralf Caly 40,000
Stephen A. Koinis 40,000
Steven G. Eifert 40,000
Arrow Manufacturing, Inc. 40,000
Third, the Section 8.4 is changed to read as follows:
Counsel Approval All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other
related legal matters shall have been approved by Dayle C. Pugh,
counsel to ELSI. The consents of any third parties whose consent may
be required for the consummation of the transactions contemplated
hereby shall have been obtained
Fourth, add to Section 13 the following definitions which are
hereby adopted and to be applied throughout Section 13, Company or
Company's: refers to and is the party Elite Logistics, Inc. an Idaho
Corporation,
Subscriber: refers to and is each and every stockholder listed
herein in Section L I ofthis agreement who exchanges subject ELSI
shares for the shares of Elite Logistics, Inc. ( "SSI")
Fifth, and there are no other changes, additions, or deletions at
this time.
<PAGE> 135
IN WITNESS WHEREOF, the parties hereto have adopted and executed
this Addendum to the Acquisition Agreement as of the 2nd day of
December, 1999,
SSI:
ATTEST: ELITE LOGISTICS, INC.
BY: /s/ John P. Ryan
/s/ Howard Crosby John P. Ryan,
Title: President
ELSI:
ATTEST: ELITE LOGISTICS SERVICES INC.
BY: /s/ Joseph D. Smith
/s/ illegible Joseph D. Smith
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information of Elite Logistics, Inc.,
and its predessor, Elite Logistics Services, Inc., extracted from the Balance
sheet at November 30, 1999 (Unaudited) and the Statement of Operations for the
six months ended November 30, 1999 (Unaudited) and is qualified in its entirety
by reference to suchs financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 MAY-31-2000
<PERIOD-END> DEC-31-1998 NOV-30-1999
<CASH> 7,941 137,838
<SECURITIES> 0 24,400
<RECEIVABLES> 360 48,167
<ALLOWANCES> 0 0
<INVENTORY> 80 180,267
<CURRENT-ASSETS> 8,381 390,662
<PP&E> 149,993 183,755
<DEPRECIATION> 53,164 86,296
<TOTAL-ASSETS> 105,210 20,786,529
<CURRENT-LIABILITIES> 203,352 311,592
<BONDS> 0 0
0 244,500
0 0
<COMMON> 381,360 114,412
<OTHER-SE> (479,502) 20,109,090
<TOTAL-LIABILITY-AND-EQUITY> 105,210 20,786,529
<SALES> 6,269 236,596
<TOTAL-REVENUES> 6,269 236,596
<CGS> 1,945 181,917
<TOTAL-COSTS> 1,945 181,917
<OTHER-EXPENSES> 226,386 628,707
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 1,890
<INCOME-PRETAX> (222,062) (575,918)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (222,062) (575,918)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (222,062) (575,918)
<EPS-BASIC> (0.02) (0.06)
<EPS-DILUTED> (0.02) (0.06)
</TABLE>
<PAGE> 137
EXHIBIT 99.1
REAL ESTATE LEASE
This Lease Agreement (this "Lease") is dated January 01, 2000,
by and between Petro-Chem Engineering ("Landlocd") and Elite
Logistics Services, Inc. ("Tenant"). The parties agree as follows:
PREMISES. Landlord, in consideration of the lease payments provided
in this Lease, leases to Tenant Rooms and Suites Numbers 216, 217,
218, 219A, 219B, 219C, 226, 227, 228, 229 & 230. (the "Premises")
located at 1201 North Avenue H, Freeport, Texas 77541-3967.
LEGAL DESCRIPTION. A sketch of the Premises subject to this Lease
is attached as an exhibit.
TERM. The lease term will begin on January 01, 2000 and will
terminate on December 31, 2000.
LEASE PAYMENTS. Tenant shall pay to Landlord monthly installments
of $3,800.00, payable in advance on the first day of each month,
for a total lease payment of $44,400.00. The first month's lease
payment shall be $2,600.00 and $3,800.00 each month thereafter.
Lease payments shall be made to the Landlord at 1201 North Avenue
14, Freeport, TX 77541-3967, which address may be changed from time
to time by the Landlord.
POSSESSION. Tenant shall be entitled to possession on the day of
the signing this Lease, and shall yield possession to Landlord on
the last day of the term of this Lease, unless otherwise agreed by
both parties in writing. At the expiration of the term, Tenant
shall remove its goods and effects and peaceably yield up the
Premises to Landlord ill as good a condition as when delivered to
Tenant, ordinary wear and tear excepted.
USE OF PREMISES. Tenant may use the Premises only for Business and
Research & Development Offices up to nineteen occupants. The
Premises may be used for any other purpose only with the prior
written consent of Landlord, which shall not be unreasonably
withheld. Tenant shall notify Landlord of any anticipated extended
absence from the Premises not later than the first day of the
extended absence.
FURNISHINGS. The existing furnishings will be provided: Furnishing
in this Lease are as is, no new purchases included within this
lease. Tenant shall return all such items at the end of the lease
term in a condition as good as the condition at the beginning of
the lease term, except for such deterioration that might result
from normal use of the furnishings.
PARKING. Tenant shall be entitled to use 19 parking spaces for the
parking and any other for the Tenant's customers'/guests' motor
vehicles.
<PAGE> 138
PROPERTY INSURANCE. Landlord and Tenant shall each maintain
appropriate insurance for their respective interests in the
Premises and property located on the Premises. Landlord shall be
named as an additional insured in such policies. Tenant shall
deliver appropriate evidence to Landlord as proof that adequate
insurance is in force issued by companies reasonably satisfactory
to Landlord. Landlord shall receive advance written notice from the
insurer prior to any termination of such insurance policies. Tenant
shall also maintain any other insurance which Landlord may
reasonably require for the protection of Landlord's interest in the
Premises. Tenant is responsible for maintaining casualty insurance
on its own property.
MAINTENANCE. Landlord shall have the responsibility to maintain the
Premises in good repair at all times.
UTILITIES AND SERVICES.
Landlord shall be responsible the following utilities and services
in connection with the Premises:
- electricity
- water and sewer
- heating
- garbage and trash disposal
- janitorial services
- yard service
- elevator service
Tenant shall be responsible for the following utilities and
services in connection with the Premises:
- telephone service
Tenant acknowledges that Landlord has fully explained to Tenant the
utility rates, charges and services for which Tenant will be
required to pay to Landlord (if any), other than those to be paid
directly to the third-party provider.
TAXES. Taxes attributable to the Premises or the use of the
Premises shall be allocated as follows:
REAL ESTATE TAXES. Landlord shall pay all real estate taxes
and assessments for the Premises.
PERSONAL TAXES. Tenant shall pay all personal taxes and any
other charges which may be levied against the Premises and
which are attributable to Tenant's use of the Premises, along
with all sales and/or use taxes (if any) that may be due in
connection with lease payments.
<PAGE> 139
TERMINATION UPON SALE OF PREMISES, Notwithstanding any other
provision of this Lease, Landlord may terminate this lease upon
Ninety days' written notice to Tenant that the Premises have been
sold.
DESTRUCTION OR CONDEMNATION OF PREMISES. If the Premises are
partially destroyed by fire or other casualty to an extent that
prevents the conducting of Tenant's use of the Premises in a normal
manner, and if the damage is reasonably repairable within sixty
days after the occurrence of the destruction, and if the cost of
repair is less than $50,000.00, Landlord shall repair the Premises
and a just proportion of the lease payments shall abate during the
period of the repair according to the extent to which the Premises
have been rendered untenantable. However, if the damage is not
repairable within sixty days, or if the cost of repair is
$50,000.00 or more, or if Landlord is prevented from repairing the
damage by forces beyond Landlord's control, or if the property is
condemned, this Lease shall terminate upon twenty days' written
notice of such event or condition by either party and any unearned
rent paid in advance by Tenant shall be apportioned and refunded to
it. Tenant shall give Landlord immediate notice of any damage to
the Premises.
DEFAULTS. Tenant shall be in default of this Lease if Tenant fails
to fulfill any lease obligation or term by which Tenant is bound.
Subject to any governing provisions of law to the contrary, if
Tenant fails to cure any financial obligation within 10 days (or
any other obligation within 15 days) after written notice of such
default is provided by Landlord to Tenant, Landlord may take
possession of the Premises without further notice (to the extent
permitted by law), and without prejudicing Landlord's rights to
damages. In the alternative, Landlord may elect to cure any default
and the cost of such action shall be added to Tenant's financial
obligations under this Lease. Tenant shall pay all costs, damages,
and expenses (including reasonable attorney fees and expenses)
suffered by Landlord by reason of Tenant's defaults. All sums of
money or charges required- to -be paid by Tenant under this Lease
shall be additional rent, whether or not such sums charges are
designated "additional rent". rights provided by this paragraph are
cumulative in nature and are in addition to any other rights
afforded by law.
LATE PAYMENTS. For any payment that is not paid within 10 days
after its due date, Tenant shall pay a late fee of $50.00,
HOLDOVER. If Tenant maintains possession of the Premises for any
period after the termination of this Lease ("Holdover Period"),
Tenant shall pay to Landlord lease payment(s) during the Holdover
Period at a rate equal to 120 % of the most recent rate preceding
the Holdover Period. Such holdover shall constitute a month-to-
month extension of this Lease.
<PAGE> 140
CUMULATIVE RIGHTS. The rights of the parties under this Lease are
cumulative, and shall not be construed as exclusive unless
otherwise required by law.
NON-SUFFICIENT FUNDS. Tenant shall be charged $30.00 for each check
that is returned to Landlord for lack of sufficient funds.
REMODELING OR STRUCTURAL IMPROVEMENTS. Tenant shall have the
obligation to conduct any construction or remodeling (at Tenant's
expense) that may be required to use the Premises as specified
above. Tenant may also construct such fixtures on the Premises (at
Tenant's expense) that appropriately facilitate its use for such
purposes, Such construction shall be undertaken and such fixtures
may be erected only with the prior written consent of the Landlord
which shall not be unreasonably withheld. Tenant shall not install
awnings or advertisements on any part of the Premises without
Landlord's prior written consent. At the end of the lease term,
Tenant shall be entitled to remove (or at the request of Landlord
shall remove) such fixtures, and shall restore the Premises to
substantially the same condition of the Premises at the
commencement of this Lease.
ACCESS BY LANDLORD TO PREMISES. Subject to Tenant's consent (which
shall not be unreasonably withheld), Landlord shall have the right
to enter the Premises to make inspections, provide necessary
services, or show the unit to prospective buyers, moTtgagees,
tenants or workers. However, Landlord does not assume any liability
for the care or supervision of the Premises. As provided by law, in
the case of an emergency, Landlord may enter the Premises without
Tenant's consent. During the last three months of this Lease, or
any extension of this Lease, Landlord shall be allowed to display
the usual "To Let" signs and show the Premises to prospective
tenants.
INDEMNITY REGARDING USE OF PREMISES. To the extent permitted by
law, Tenant agrees to indemnify, hold harmless, and defend Landlord
from and against any and all losses, claims, liabilities, and
expenses, including reasonable attorney fees, if any, which
Landlord may suffer or incur in connection with Tenant's
possession, use or misuse of the Premises, except Landlord's act or
negligence.
DANGEROUS MATERIALS. Tenant shall not keep or have on the Premises
any article or thing of a dangerous, flammable, or explosive
character that might substantially increase the danger of fire on
the Premises, or that might be considered hazardous by a
responsible insurance company, unless the prior written consent of
Landlord is obtained and proof of adequate insurance protection is
provided by Tenant to Landlord.
<PAGE> 141
COMPLIANCE WITH REGULATIONS. Tenant shall promptly comply with all,
laws, ordinances, requirements and regulations of the federal,
state, county, municipal and other authorities, and the fire:
insurance underwriters. However, Tenant shall not by this provision
on be required to make alterations to the exterior of the building
or alterations of a structural nature.
MECHANICS LIENS. Neither the Tenant nor anyone claiming through the
Tenant shall have the right to file mechanics liens or any other
kind of lien on the Premises and the filing of this Lease
constitutes notice that such liens are invalid. Further, Tenant
agrees to (1) give actual advance notice to any contractors,
subcontractors or suppliers of goods, labor, or services that such
liens will not be valid, and (2) take whatever additional steps
that are necessary in order to keep the premises free of all liens
resulting from construction done by or for the Tenant.
ARBITRATION. Any controversy or claim relating to this contract,
including the construction or application of this contract, will be
settled by binding arbitration under the rules of the American
Arbitration Association, and any judgment granted by the
arbitrator(s) may be enforced in any court of proper jurisdiction.
SUBORDINATION OF LEASE. This Lease is subordinate to any mortgage
that now exists, or may be given later by Landlord, with respect to
the Premises.
ASSIGNABILITY/SUBLETTING Tenant may not assign or sublease any
interest in the Premises, nor effect a change in the majority
ownership of the Tenant (from the ownership existing at the
inception of this lease), nor assign, mortgage or pledge this
Lease, without the prior written consent of Landlord, which shall
not be unreasonably withheld.
ADDITIONAL SPACE. Landlord shall lease to Tenant any additional
vacant space on second or third floor of said building at rate of
$1.60 per square foot, with the same conditions of this lease.
NOTICE. Notices under this Lease shall not be deemed valid unless
given or served in writing and hand delivered to addressed as
follows:
LANDLORD:
Petro-Chem Engineering
1201 North Avenue H
Freeport, TX 77541-3967
TENANT:
Elite Logistics Services, Inc.
1201 North Avenue H
Freeport, Texas 77541-3967
<PAGE> 142
Such addresses may be changed from time to time by either party by
providing notice as set forth above. Notices mailed in accordance
with the above provisions shall be deemed received on the third day
after posting.
GOVERNING LAW. This Lease shall be construed in accordance with the
laws of the State of Texas.
ENTIRE AGREEMENT/AMENDMENT. This Lease Agreement contains the
entire agreement of the parties and there are no other promises,
conditions, understandings or other agreements, whether oral or
written, relating to the subject matter of this Lease. This Lease
may be modified or amended in writing, if the writing is asigned by
the party obligated under the amendment.
SEVERABILITY. If any portion of this Lease shall be held to be
invalid or unenforceable for any reason, the remaining provisions
shall continue to be valid and enforceable. If a court finds that
any provision of this Lease is invalid or unenforceable, but that
by limiting such provision, it would become valid and enforceable,
then such provision shall be deemed to be written, construed, and
enforced as so limited.
WAIVER. The failure of either party to enforce any provisions of
this Lease shall not be construed as a waiver or limitation of that
party's right to subsequently enforce and compel strict compliance
with every provision of this Lease.
BINDING EFFECT. The provisions of this Lease shall be binding upon
and inure to the benefit of both parties and their respective legal
representatives, successors and assigns.
LANDLORD:
Petro-Chem Engineering
By: /s/ Joe D. Urbanovsky, Dated: 12/15/99
Joe D. Urbanovsky, President
TENANT:
Elite Logistics Services, Inc.
By: /s/ Joseph D. Smith Dated 12/15/99
Joseph D. Smith, President
<PAGE> 143
Petro-Chem Engineering
1201 North Avenue Freeport, Texas 77541-3967
Office, 409-233-7807 Houston: 281-393-1014 Fax: 409-233-9424
E-mail: [email protected] Web: www.pcdc-ine.com
January 21, 2000
Mr. Joseph Smith, President
Elite Logistics Services, Inc.
1201 N. Avenue H
Freeport, Texas 77541
This letter amends the existing lease dated January 1, 2000, adding
to the lease Reception Area Room #200 on the 2nd floor, at the
additional rate of $100 per month, Occupied immediately, lease
payments shall start February 1, 2000.
Please attach this amendment to your current lease, All terms and
conditions of the original lease shall apply to this addition.
Respectfully yours,
/s/ Joe D. Urbanovsky
Joe D Urbanovsky
<PAGE> 144
Petro-Chem Engineering
1201 North Avenue Freeport, Texas 77541-3967
Office, 409-233-7807 Houston: 281-393-1014 Fax: 409-233-9424
E-mail: [email protected] Web: www.pcdc-ine.com
February 23, 2000
Mr. Joseph Smith
Elite Logistics Services, Inc.
1201 North Avenue H
Freeport, Texas 77641-3967
RE: Additional Rooms
This letter amends the existing lease dated January 1, 2000 adding
to the lease the following rooms:
Room No. Sq. Ft. Rate Amount
214 134 $1.60 $ 214.40
222 201 $1.60 $ 321.60
223 120 $1.60 $ 192.00
224 120 $1.60 $ 192.00
225 126 $1.60 $ 201.60
701 $1,121.60
Lease payment shall begin March 1, 2000. Total current lease is
$5,121.60 per month including reception area. Please attach this
amendment to your current lease. All terms and conditions of the
original lease shall apply to these additional rooms.
Respectfully Yours,
/s/ Joe D. Urbanovsky
Joe D. Urbanovsky
