KHK Kitty Hawk

Kitty Hawk, Inc. (AMEX:KHK) announced today the sale of 14,800 shares of Series B Convertible Preferred Stock coupled with warrants in a private placement to accredited investors. The placement resulted in net proceeds to Kitty Hawk of approximately $14 million, which will be used to fund the Company's recently initiated time-definite scheduled less-than-truckload (LTL) ground freight transportation network and for general corporate purposes. In addition, the Company also announced today the expansion of Kitty Hawk's revolving line of credit with Wells Fargo Business Credit, Inc. to $15 million from $10 million. "These two transactions provide our company with ample financial resources to continue to implement our business plan, implement various programs to increase our overall operating efficiency and productivity and execute our scheduled LTL ground freight transportation network. Combined, these initiatives should enhance our long term profitability potential," said Robert W. Zoller, president and chief executive officer. "We began operations of the new scheduled LTL ground freight transportation network on October 31 and the initial results are quite encouraging," added Mr. Zoller. "Our existing air cargo customer base is excited and supportive of the expansion of our service offerings. To date, the new ground network is matching the excellent service reputation and delivery results of our air cargo operations and we recently announced planned expansion to 46 cities from the current 28 cities during the first quarter of 2006," he concluded. Each share of preferred stock has a liquidation preference equal to $1,000 per share, and is convertible into Kitty Hawk common stock at a conversion price of $0.9604 per share of common stock. The shares of preferred stock vote on an as converted basis with the Kitty Hawk common stock. The shares of preferred stock are coupled with immediately exercisable warrants to purchase up to 3,609,756 shares of common stock at $0.82 per share. Dividends will be paid in cash at a rate of 8.00% per annum, payable quarterly in arrears. Cash dividends for the first two quarters immediately following the consummation of the offering will be deferred and paid out pro-rata over the subsequent four quarters. In connection with this sale, Kitty Hawk signed a registration rights agreement with the holders of the preferred shares. Among other things, this registration rights agreement requires Kitty Hawk to file a registration statement permitting the resale of the common stock issuable upon conversion of the preferred stock and exercise of the warrants. The sale of these shares was not registered under the Securities Act of 1933, and the shares may not be sold without registration or an exemption from the registration requirements of the Securities Act of 1933. The shares were offered and sold pursuant to the exemption from registration afforded by Rule 506 under the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933. Los Angeles-based investment bank, B. Riley & Co., Inc., acted as Kitty Hawk's financial advisor and sole placement agent for this financing. The expanded revolving line of credit with Wells Fargo Business Credit is part of an amendment to Kitty Hawk's existing Credit and Security Agreement. In addition to the increase in the revolving line of credit to $15 million from $10 million, the amendment extends the term of the line of credit from March 22, 2007 to March 31, 2008 and modifies other terms and conditions. As of November 14, 2005, Kitty Hawk had $1.9 million borrowed and $2.2 million of outstanding Letters of Credit under the Credit Agreement and $10.9 million of availability. About Kitty Hawk, Inc. As a recognized leader in customer service, Kitty Hawk is the premier provider of guaranteed, mission-critical, scheduled overnight air and beginning October 31, 2005 of scheduled time-definite coast-to-coast less-than-truckload (LTL) ground freight transportation to major business centers and surrounding communities throughout North America, including, Alaska, Hawaii, Toronto, Canada; and San Juan, Puerto Rico. With more than 30 years experience in the aviation and air freight industries, Kitty Hawk plays a key connecting role in the global supply chain. Kitty Hawk serves the logistics needs of more than 550 freight forwarders, integrated carriers, logistics companies and major airlines with its extensive integrated air and ground network, fleet of Boeing 737-300SF and 727 cargo aircraft, as well as a 239,000 square-foot cargo warehouse, U.S. Customs clearance and sort facility at its Fort Wayne, Ind. hub. In 2005, Kitty Hawk became the North American launch customer for the fuel-efficient and environmentally-friendly Boeing 737-300SF aircraft. Kitty Hawk's air and ground cargo networks and award-winning, guaranteed overnight time-definite service are ideal for heavy-weight shipments (over 150 lbs), special goods with unique dimensions, perishables, animals and other valuable shipments. Statement under the Private Securities Litigation Reform Act: This report may contain forward-looking statements that are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or future financial performance and involve known and unknown risks and uncertainties that may cause actual results or performance to be materially different from those indicated by any forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "forecast," "may," "will," "could," "should," "expect," "plan," "believe," "potential" or other similar words indicating future events or contingencies. Some of the things that could cause actual results to differ from expectations are: economic conditions; the impact of high fuel prices; our inability to successfully implement and operate our expanded ground network; failure of key suppliers and vendors to perform; our inability to attract sufficient customers at economical prices for our expanded ground network; unforeseen increases in liquidity and working capital requirements related to our expanded ground network; potential competitive responses from other operators of coast-to-coast less than truckload networks; the continued impact of terrorist attacks, global instability and potential U.S. military involvement; the Company's significant lease obligations and indebtedness; the competitive environment and other trends in the Company's industry; changes in laws and regulations; changes in the Company's operating costs including fuel; changes in the Company's business plans; interest rates and the availability of financing; liability and other claims asserted against the Company; labor disputes; the Company's ability to attract and retain qualified personnel; inflation; and costs. For a discussion of these and other risk factors, see Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2004. All of the forward-looking statements are qualified in their entirety by reference to the risk factors discussed therein. These risk factors may not be exhaustive. The Company operates in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict such new risk factors, nor can it assess the impact, if any, of such new risk factors on the Company's business or events described in any forward-looking statements. The Company disclaims any obligation to publicly update or revise any forward-looking statements after the date of this report to conform them to actual results.