UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 30, 2005.
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the transition period from __________ to ________.
Commission file number: 001-16237
AIRTRAX, INC.
(Name of Small Business Issuer in its charter)
New Jersey 22-3506376
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
200 Freeway Drive, Unit One, Blackwood, NJ 08012
(Address of principal executive offices)
(856) 232-3000
(Issuer's telephone number)
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court: Yes [X] No [ ]
Indicate by check whether the registrants is a shell company (as defined in rule
12b of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of October 31, 2005, the issuer
had 21,928,674 shares of common stock, no par value, issued and outstanding.
Transitional Small Business Issuer Format (Check One): Yes [ ] No [X]
AIRTRAX, INC.
SEPTEMBER 30, 2005 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets 4
Statements of Operations and Deficit Accumulated During
Development Stage 5
Statements of Cash Flows 8
Notes to Financial Statements 9
Special Note Regarding Forward Looking Statements 11
Item 2. Management's Discussion and Analysis or Plan of Operations 13
Item 3. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRTRAX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2005
(Unaudited)
CONTENTS
Page
----
Balance Sheets 4
Statements of Operations and Deficit Accumulated
During Development Stage 5
Statements of Cash Flows 8
Notes to Financial Statements 9
3
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
September 30, 2005 December 31, 2004
(Unaudited) (Audited)
--------------------- ---------------------
ASSETS
Current Assets
Cash $ 40,682 $ 641,477
Accounts receivable 2,421 -
Accrued interest receivable 361,912 86,667
Inventory 2,204,373 709,281
Prepaid expenses - 5,113
Vendor advance 173,017 52,017
Deferred tax asset 596,252 224,414
--------------------- ---------------------
Total current assets 3,378,657 1,718,969
Fixed Assets
Office furniture and equipment 162,051 90,714
Automotive equipment 21,221 21,221
Shop equipment 57,400 24,553
Casts and tooling 239,297 205,485
--------------------- ---------------------
479,969 341,973
Less, accumulated depreciation 275,695 248,386
--------------------- ---------------------
Net fixed assets 204,274 93,587
Other Assets
Advances to Filco Gmbh 6,255,462 2,670,000
Patents - net 147,601 117,402
Bond discount 416,667 -
Utility deposits 65 65
--------------------- ---------------------
Total other assets 6,819,795 2,787,467
--------------------- ---------------------
TOTAL ASSETS $ 10,402,726 $ 4,600,023
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,258,715 $ 394,959
Accrued liabilities 1,504,195 459,565
Shareholder deposits for stock 70,875 1,403,174
Bank loan 100,000 -
Shareholder notes payable 34,474 33,455
--------------------- ---------------------
Total current liabilities 2,968,259 2,291,153
Long Term Convertible Debt 500,000 -
--------------------- ---------------------
TOTAL LIABILITIES 3,468,259 2,291,153
--------------------- ---------------------
Stockholders' Equity
Common stock - authorized, 100,000,000 shares without par value; issued and
outstanding - 21,874,374 and 15,089,342,
respectively 20,773,723 10,822,854
Paid in capital - warrants 2,366,339
Preferred stock - authorized, 500,000,000
shares without par value; 375,000
issued and outstanding 545,491 12,950
Deficit accumulated during the development
stage (16,544,134) (8,319,982)
Deficit prior to development stage (206,952) (206,952)
--------------------- ---------------------
Total stockholders' equity 6,934,467 2,308,870
--------------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,402,726 $ 4,600,023
===================== =====================
The accompanying notes are an integral part of these financial statements.
4
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Nine Month Periods Ended September 30,
(Unaudited)
May 19, 1997
(Date of Inception)
to September
2005 2004 30, 2005
--------------- --------------- ---------------
SALES $ 167,545 $ -- $ 1,190,668
COST OF GOOD SOLD 160,126 -- 630,497
--------------- --------------- ---------------
Gross Profit 7,419 -- 560,171
OPERATING AND ADMINISTRATIVE EXPENSES 3,987,695 1,397,479 12,935,956
--------------- --------------- ---------------
OPERATING LOSS (3,980,276) (1,397,479) (12,375,785)
OTHER INCOME AND EXPENSE
Interest expense (4,374,592) (23,716) (4,549,616)
Interest income 291,208 24,091 377,875
Other income 211 131 78,505
--------------- --------------- ---------------
NET LOSS BEFORE INCOME TAXES (8,063,449) (1,396,973) (16,469,021)
INCOME TAX BENEFIT (STATE):
Current 371,838 119,226 371,838
Prior years -- -- 717,142
--------------- --------------- ---------------
Total Benefit 371,838 119,226 1,088,980
--------------- --------------- ---------------
NET LOSS BEFORE DIVIDENDS (7,691,611) (1,277,747) (15,380,041)
DEEMED DIVIDENDS ON PREFERRED STOCK (480,978) -- (669,390)
--------------- --------------- ---------------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS (8,172,589) (1,277,747) (16,049,431)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (51,563) (91,868) (494,703)
--------------- --------------- ---------------
DEFICIT ACCUMULATED $ (8,224,152) $ (1,369,615) $ (16,544,134)
=============== =============== ===============
NET LOSS PER SHARE - Basic and Diluted $ (.45) $ (.11)
WEIGHTED AVERAGE SHARES OUTSTANDING 18,038,164 11,452,797
The accompanying notes are an integral part of these financial statements.
5
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Three Month Periods Ended September 30,
(Unaudited)
May 19, 1997
(Date of Inception)
to September
2005 2004 30, 2005
--------------- --------------- ---------------
SALES $ - $ - $ 1,190,668
COST OF GOOD SOLD - - 630,497
--------------- --------------- ---------------
Gross Profit - - 560,171
OPERATING AND ADMINISTRATIVE EXPENSES 1,981,664 549,338 12,935,956
--------------- --------------- ---------------
OPERATING LOSS (1,981,664) (549,338) (12,375,785)
OTHER INCOME AND EXPENSE
Interest expense (86,391) (9,986) (4,549,616)
Interest income 118,908 13,964 377,875
Other income - 37 78,505
--------------- --------------- ---------------
NET LOSS BEFORE INCOME TAXES (1,949,147) (545,323) (16,469,021)
INCOME TAX BENEFIT (STATE):
Current 147,392 51,456 371,838
Prior years - - 717,142
--------------- --------------- ---------------
Total Benefit 147,392 51,546 1,088,980
--------------- --------------- ---------------
NET LOSS BEFORE DIVIDENDS (1,801,755) (493,867) (15,380,041)
DEEMED DIVIDENDS ON PREFERRED STOCK - - 669,390
--------------- --------------- ---------------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS (1,801,755) (493,867) (16,049,431)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE - (5,931) (494,703)
--------------- --------------- ---------------
DEFICIT ACCUMULATED $ (1,801,755) $ (499,798) $ (16,544,134)
=============== =============== ===============
NET LOSS PER SHARE - Basic and Diluted $ (.08) $ (.04)
WEIGHTED AVERAGE SHARES OUTSTANDING 21,740,196 12,888,343
The accompanying notes are an integral part of these financial statements.
7
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
ACCUMULATED DURING DEVELOPMENT STAGE
For the Nine Month Periods Ended September 30,
(Unaudited)
May 19, 1997
(Date of Inception)
to September
2005 2004 30, 2005
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,172,589) $ (1,277,747) $ (16,049,431)
Adjustments to reconcile net loss to net cash
consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization 32,499 27,159 333,663
Amortization of bond discount 83,333 - 83,333
Equity securities issued for services 1,866,500 623,401 4,805,723
Provision for impairment loss 120,280 - 120,280
Value of warrants issued with convertible debt 944,500 - 944,500
Conversion benefits associated with debt issue 3,269,231 - 3,269,231
Increase in accrual of deferred tax benefit (371,838) (119,226) (596,252)
Deemed dividends on preferred stock 480,978 - 669,390
Interest accrued on shareholder loan 3,021 3,775 24,662
Changes in current assets and liabilities:
Increase in accrued interest receivable (275,245) (24,081) (361,912)
Increase in accounts receivable (2,421) - (2,421)
Increase in vendor advances (121,000) - (173,017)
Increase (decrease) in accounts payable and
accrued liabilities 884,830 (225,888) 1,805,184
Increase in prepaid expenses - - (146,957)
Increase in inventory (1,495,092) (131,842) (2,204,373)
--------------- --------------- ---------------
Net Cash Consumed By Operating Activities (2,753,013) (1,124,449) (7,478,397)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (137,996) (19,249) (486,280)
Additions to patent cost (35,389) (37,686) (193,320)
Advances to Filco GmbH (3,247,171) (1,230,000) (5,917,171)
--------------- --------------- ---------------
Net Cash Consumed By Investing Activities (3,420,556) (1,286,935) (6,596,771)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of issuance of convertible debt 4,277,500 - 4,277,500
Net proceeds of common stock sales 55,000 2,696,462 8,627,611
Proceeds of convertible loan 409,913 - 409,913
Proceeds from exercise of warrants 718,486 - 812,236
Proceeds of bank loan 100,000 - 100,000
Proceeds of sales of preferred stock - - 12,950
Proceeds from exercise of options 13,877 5,944 28,221
Borrowings (repayments) of stockholder loans (2,002) (52,005) 33,118
Preferred stock dividends paid in cash - (91,868) (185,274)
Principal payments on installation note - (5,546) (425)
--------------- --------------- ---------------
Net Cash Provided By Financing Activities 5,572,774 2,552,987 14,115,850
--------------- --------------- ---------------
Net (Decrease) Increase In Cash (600,795) 141,603 40,682
Balance at beginning of period 641,477 37,388 -
--------------- --------------- ---------------
Balance at end of period $ 40,682 $ 178,991 $ 40,682
=============== =============== ===============
The accompanying notes are an integral part of these financial statements.
8
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
BASIS OF PRESENTATION
The unaudited interim financial statements of AirTrax, Inc. ("the Company") as
of September 30, 2005 and for the three month and nine month periods ended
September 30, 2005 and 2004, respectively, have been prepared in accordance with
accounting principals generally accepted in the United States of America. In the
opinion of management, such information contains all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results for such periods. The results of operations for the three and nine month
periods ended September 30, 2005 are not necessarily indicative of the results
to be expected for the full fiscal year ending December 31, 2005.
Certain information and disclosures normally included in the notes to financial
statements have been condensed or omitted as permitted by the rules and
regulations of the Securities and Exchange Commission, although the Company
believes the disclosure is adequate to make the information presented not
misleading. The accompanying unaudited financial statements should be read in
conjunction with the financial statements of the Company for the year ended
December 31, 2004.
2. COMMON STOCK AND WARRANTS
The certificate of incorporation was amended on March 28, 2005 to increase the
number of authorized shares to 100,000,000 for common no par stock, and to
5,000,000 for preferred no par stock.
On February 11, 2005, the Company issued $5,000,000 of 6% convertible promissory
notes, which were convertible into Company common stock and two classes of
warrants to purchase Company common stock. The notes were to mature on August
10, 2005. The Company retained the right to require conversion of the notes at a
price of $1.30 per share. Conversion occurred on March 29, 2005 and 3,846,154
shares of common stock were issued. In addition, warrants to purchase common
stock were issued in connection with this transaction, as follows: 1,923,077
Class A warrants and 961,538 Class B warrants. The Class A warrants are
exercisable for a five year period at a price per share of $1.85 The Class B
warrants are exercisable for a five year period at a price of $2.11. As partial
compensation, the broker-dealer which arranged this transaction was awarded
384,616 warrants to purchase common stock at $1.85 per share, and 100,000
warrants to purchase common stock at $1.00 per share.
9
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
2. COMMON STOCK AND WARRANTS (CONTINTUED)
The issuance of convertible promissory notes and warrants was accounted for as
required by Emerging Issues Task Force (EITF) 98-5 "Accounting For Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios" and EITF 00-27 "Application of Issue no. 98-5 To Certain Convertible
Investments." Accordingly, expense was increased by $944,500 representing the
value of the warrants and by $3,269,231 representing the value of the conversion
privilege.
On May 14, 2005, the Company issued a $500,000 8% convertible note. The note is
scheduled for maturity in two years. During that period, it can be converted to
stock at a rate of $1.30 per share, which would translate to 384,615 shares.
Accompanying the convertible note were 384,615 warrants to purchase common stock
at $2.11 per share; these warrants are exercisable over a five year period.
A total of 8,536,298 warrants was outstanding at September 30, 2005, as follows:
Other Total
Class A Class B Warrants Warrants
--------------- --------------- --------------- ---------------
Outstanding at December 31, 2004 5,537,763 5,537,763
Issued in connection with sale
of $5,000,000 in convertible notes 1,923,077 961,538 484,616 3,369,231
Issued in conjunction with
$500,000 of convertible debt 384,615 384,615
Other warrants issued 37,689 37,689
Reductions:
Warrants exercised (593,000) (593,000)
Warrants voided (200,000) (200,000)
--------------- --------------- --------------- ---------------
Outstanding, September 30, 2005 1,923,077 1,346,153 5,267,068 8,536,298
=============== =============== =============== ===============
10
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
2. COMMON STOCK AND WARRANTS (continued)
Shares of common stock were issued during the third quarter and first nine
months of 2005 as follows:
Third Quarter Nine Months
--------------- ---------------
Conversion of $5,000,000 notes - 3,846,154
Private placement sales - 68,750
Shares issued based on warrants exercised - 593,000
Shares issued to purchase Filco third pary debt 187,939 187,939
Issuance of shares sold in prior year - 1,749,827
Shares issued for services 46,509 310,909
Shares issued in settlement of interest due
on convertible notes - 28,453
--------------- ---------------
Total shares issued 234,448 6,785,032
=============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was $5, 803 and $10,135, respectively, for the nine month
periods ended September 30, 2005 and June 30, 2004. There was no cash paid for
income taxes during either the 2005 or 2004 nine month periods.
There were no noncash investing activities during either the 2005 or 2004
periods. The following noncash financing activities occurred during these
periods.
a. During the second quarter of 2005, the Company issued 24,853 shares in
settlement of the interest obligation on its $5,000,000 convertible
issue prior to the conversion of the notes to stock.
b. Shares of common stock were issued for services in 2005 and 2004;
these totaled 310,909 shares and 192,277 shares, respectively.
c. Shares were issued in 2005 and 2004 in settlement of shares paid for
in prior years. These amounted to 1,749,827 shares and 30,000 shares,
respectively.
d. The Company purchased third part debt of Filco for 187,939 shares in
2005.
11
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
(Unaudited)
OPERATING AND ADMINISTRATIVE EXPENSES
The following details expenses incurred during the nine month periods ended
September 30, 2005 and 2004:
2005 2004
--------------- ---------------
Options Expense $ 1,163,838 $ -
Payroll 422,680 242,027
Marketing 243,761 67,922
Production Costs 234,639 51,529
Professional Fees 419,710 75,200
Consulting Expenses 524,981 614,079
Insurance 173,633 61,158
Penalties 199,149 -
Freight 107,275 3,195
Impairment 120,280 -
Other Expenses 377,749 282,369
--------------- ---------------
Total Expenses $ 3,987,695 $ 1,397,479
=============== ===============
CONTINGENCY
The Company has a tentative agreement to purchase 75.1% of the stock of FiLCO
GmBH (FiLCO), a German manufacturer of fork trucks with a manufacturing facility
in Mulheim, Germany. During the pendency of the tentative agreement, the Company
has agreed to make advances to FiLCO. Through September 30, 2005, advances
totaling $6,255,462 had been made. A portion of these advances may be converted
to capital on the books of FiLCO. The seller, who will continue to own the
remaining 24.9% of the FiLCO stock, has agreed that if the Company converts
$1,220,000 of its advances to capital he will also convert to FiLCO capital a
loan of 1,225,000 Euros that FiLCO owes to him. As additional consideration for
this FiLCO stock purchase, the Company has agreed to pay the seller 12,750 Euros
and to issue to the seller 900,000 warrants to purchase Company stock; these
warrants would be exercisable at $.01 per share. The Company has appointed the
seller of the FiLCO stock a director of the Company and upon a closing of the
acquisition would grant him as compensation for service as a director options to
purchase 100,000 shares of Company stock for $.01. Additionally, the Company
agreed to advance funds, if needed, to FiLCO to provide for its working capital
needs. Any advances made under the latter provision would be collateralized by
the remaining 24.9% of FiLCO stock and would be repaid only from dividends paid
on that stock.
As of September 30, 2005, the Company had not concluded the contract and had not
issued any of the warrants or options contemplated by the tentative agreement.
12
Item 2. Management's Discussion and Analysis and Results of Operations Forward
Looking Statements
This report contains forward-looking statements within the meaning of 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 our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms, or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those in the
forward-looking statements as a result of various important factors. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, such should not be regarded as a representation by AIRTRAX, Inc., or
any other person, that such forward-looking statements will be achieved. The
business and operations of AIRTRAX, Inc. are subject to substantial risks, which
increase the uncertainty inherent in the forward-looking statements contained in
this report.
Overview
Since 1995, substantially all of our resources and operations have directed
towards the development of the omni-directional wheel and related components for
forklift and other material handling applications. Many of the components,
including the unique shaped wheels, motors, and frames, have been specially
designed by us and specially manufactured. Ten commercial omni-directional lift
trucks carrying the UL Label have been delivered to customers in the United
States and Canada as of October 25, 2005 and several others are ready to ship
pending receipt of funds or consummation of letters of credit or other credit
facilities. We believe that up to a total of 84 units could be manufactured and
sold through the fourth quarter of 2005 pending receipt of parts from certain
vendors.
We have commenced production and have most of the parts required for production
of another 74 units of our Sidewinder ATX-3000 Omni-Directional Lift Truck
during the 4th quarter of 2005. As of October 27, 2005 we do not have all of the
parts required from every vendor for completion of the 74 trucks heretofore
noted. The assembly and sale is dependent upon delivery of all of the required
parts.
Omni-Directional means that vehicles designed and built by us can travel in any
direction. Our Omni-directional vehicles are controlled with a joystick. The
vehicle will travel in the direction the joystick is pushed. If the operator
pushes the joystick sideways, the vehicle will travel sideways. If the operator
were to twist the joystick the vehicle will travel in circles. Our
omni-directional vehicles have one motor and one motor controller for each
wheel. The omni-directional movement is caused by coordinating the speed and
direction of each motor with joystick inputs which are routed to a
micro-processor, then from the micro-processor to the motor controllers and
finally to the motor itself.
Complete assembly is conducted by us at our newly leased facilities at 200
Freeway Drive Unit One, Blackwood, NJ 08012. Approximately 50% of the frames are
manufactured in the United States. These frames are shipped to the Blackwood
plant for complete assembly. In addition to the assembly of vehicles at
Blackwood, partially assembled vehicles are shipped to the Blackwood facility
from the Filco plant in Germany. To date, partial assembly of approximately 19
lift trucks have been completed at the Filco plant, 14 of which and have been
shipped to the USA for final assembly. To date, a total of approximately 80 lift
truck frames will be shipped from Bulgaria to the Filco plant for partial
assembly and shipped to the Blackwood plant for final assembly during the fourth
quarter of 2005.
We have incurred losses and experienced negative operating cash flow since our
formation. For the three months ended September 30, 2005 and 2004, we had a net
loss of $(1,801,755) and $(493,867), respectively. For our fiscal years ended
December 31, 2004 and 2003, we had a net loss of $(2,272,200) and $(2,282,946),
respectively. We expect to continue to incur significant expenses. Our operating
expenses have been and are expected to continue to outpace revenues and result
in significant losses in the near term. We may never be able to reduce these
losses, which will require us to seek additional debt or equity financing.
Our principal executive offices are located at 200 Freeway Drive, Unit One,
Blackwood, NJ 08012 and our telephone number is (856) 232-3000. We are
incorporated in the State of New Jersey.
13
Company History
We were incorporated in the State of New Jersey on April 17, 1997. On May 19,
1997, we entered into a merger agreement with a predecessor company that was
incorporated on May 10, 1995. We were the surviving company in the merger.
Effective November 5, 1999, we merged with MAS Acquisition IX Corp ("MAS"), and
were the surviving company in the merger. Pursuant to the Agreement and Plan of
Merger, as amended, each share of common stock of MAS was converted to 0.00674
shares of our company. After giving effect to fractional and other reductions,
MAS shareholders received 57,280 of our shares as a result of the merger.
In March 2004, we reached an agreement in principal, subject to certain closing
conditions, with Fil Filipov to acquire 51% of the capital stock of Filco GmbH,
a German corporation. In April 2003, Filco GmbH acquired substantially all of
the assets of Clark Material Handling of Europe GmbH which were located at
Clark's facility in Rheinstrasse Mulheim a.d. Ruhr, Germany. These assets
consisted of all of the tooling, machinery, equipment, inventory, intellectual
property, office furniture and fixtures, and personnel necessary to build the
entire Clark line of lift trucks, but excluded the building and land, as well as
the rights to the Clark name. Further, Filco GmbH has entered into an 18-month
lease agreement with the current property owner with an option to purchase the
200,000 square foot building and land for 4.7 million euros, and Filco GmbH has
been operating this plant since July 1, 2003.
In October 2004, Mr. Filipov and we agreed to modify our agreement in principal
so as to increase the number of shares of the capital stock of Filco GmbH which
we will acquire, if we finalize the acquisition, from 51% to 75.1%. The purpose
of this change is to give us control of Filco GmbH in accordance with USGAAP and
German law considerations regarding consolidation and capitalization. Further,
this change was offered and accepted in consideration of our agreeing to advance
Filco additional funds, in the form of a loan, to fund the start up of the Filco
operation prior to the consummation of the transaction. All other conditions and
terms of the agreement between the parties shall remain the same.
We have not yet finalized nor executed the acquisition agreement but have loaned
Filco GmbH an aggregate principal amount of $6,255,462 as of September 30, 2005
pursuant to a series of secured and unsecured promissory notes. We have used
proceeds from the private placement offerings that we completed during 2004 and
2005 to fund such loans. Our analysis shows that additional estimated working
capital needs during the next year will be approximately $5,000,000, with
$1,750,000 needed during November 2005, in order for it to achieve profitable
operations. Should we complete the acquisition of Filco GmbH, we will need to
raise additional capital or proper lines of credit in order to fund the working
capital needs of Filco GmbH.
In general, the Filco transaction could provide us access to strategic
partnerships in personnel and successful business ventures, sales and market
exposure in Europe.
The proposed acquisition of Filco may include a leased manufacturing facility,
with an experienced workforce, inventory, intellectual property, and machinery
sufficient to fill 200,000 square feet of assembly and manufacturing. Filco
could provide us with cliental throughout Europe and the Middle East. This could
provide us with the ability to sell a complete line of lift trucks beyond the
limited sized Sidewinder Omni-Directional Lift Truck. It would provide
manufacturing or assembly for our products, including, but not limited to, the
aerial work platforms or any other products we develop or can contract to
assemble with other companies.
14
In addition, if the acquisition is completed we anticipate that we will
establish manufacturing capability in Europe, to complement our manufacturing in
the United States. We currently purchase a high percentage of our parts in
Europe, including, but not limited to, the frames from Bulgaria, motors and
controllers manufactured in the Czech Republic and Sweden, and transmissions,
brakes and seats manufactured in Germany. The mast could be manufactured, the
frames could be powder coated (painted), and European parts could be assembled
at the Filco plant. Partially assembled vehicles would be shipped to the United
States for final assembly. Wheels and other parts for the vehicles may be sold
in Europe or Middle Eastern countries could be shipped from the United States
for the completion of manufacturing at Filco. We believe we could cut
manufacturing costs because our material handling equipment could be
manufactured in the continent in which it is sold, i.e., Europe. With our
manufacturing capabilities in the United States, this potential acquisition
would allow a portion of the Sidewinder becoming assembled and manufactured in
each of the two continents that purchase and use about 70% of all material
handling equipment worldwide.
The primary objective that must be achieved to reach the aforementioned goal(s)
is to secure the necessary financing required to fund the acquisition and
manufacturing objectives of Filco and us. There can be no assurance that we will
be able to raise sufficient capital necessary to complete the acquisition and
fund the manufacturing objectives of Filco and us.
Loans to Filco GmbH
From May 5, 2003 through September 2, 2003, we loaned Filco $365,435 to acquire
our initial interest in Filco. Such funds were provided in the form of a loan
because we were not able to come up with sufficient funding to acquire our
initial interest. Filco repaid principal and interest under this loan to us.
In March of 2004, a tentative agreement was negotiated with the principals of
Filco in connection with the proposed acquisition. Our management determined to
provide Filco limited funding in the form of loans, until financing could be
obtained which would help guarantee that the operating capital needed for Filco
operations could, in fact, be obtained. The tentative agreement reached with
Filco provided that we would take a 51% controlling ownership interest in Filco.
The tentative agreement required that we provide $1.3 million to be allocated in
the form of equity in Filco and Filipov would also capitalize 1.3 million Euros
that he had loaned Filco. The tentative agreement required that we secure a
guaranteed credit line for Filco of not less than $5 million to be used as
operating capital. However, once we complete the acquisition, we are responsible
to provide adequate operating capital to insure a successful business. A later
addendum to the tentative agreement stated that we would acquire 75.1%
controlling ownership interest in Filco.
The amounts loaned to Filco to date, in the aggregate amount of $6,255,462, even
if unrecoverable, would not prevent us from commencing the manufacture of the
Sidewinder Omni-Directional Lift Truck. The manufacture and sale of
omni-directional material handling equipment is our primary goal. During the
first, second and third quarters of 2005, we realized limited revenues from
sales of the Sidewinder Omni-Directional Lift Truck.
We believe that our secured and unsecured loans to Filco are recoverable if the
proposed acquisition is not completed. Should Filco default with loan repayment,
if such payment were due and requested, it would be much easier to put Filco
into bankruptcy in Germany than it would be in the United States. Should Filco
be put into bankruptcy, we, as the largest creditor, would be in position to do
a legal takeover through bankruptcy administrators.
We loaned Filco approximately $2.7 million through the end of 2004 and loaned a
total of $6,255,462 as of September 30, 2005. We intend to provide another $5
million to Filco, either in the form of guaranteed credit lines or through
additional sales of our securities.
Filco GmbH's Financial Condition
The improvement of Filco's financial condition and results of operations, as set
forth below, furthers our belief that we would be able to recover principal and
interest due under our unsecured loans to Filco in the event that the proposed
acquisition is not completed.
15
Filco manufactured approximately 550 lift trucks in 2003 and very limited
numbers in 2004. In 2004, Filco did not have adequate operating capital to
conduct business operations and had numerous issues with its worker's union to
resolve. It was and is considered by Filco's management, a better long term
negotiating tactic with unions to threaten to close the facility completely than
to attempt to run the facility during negotiations. For this reason as well as
the lack of funding, Filco's plant was closed for much of 2004 and the beginning
of 2005.
Filco reached accord with the union on March 30, 2005. Employees will be
required to work a 40-hour week instead of 35 prior to additional hires. Wages
have been decreased 20%. The resolution of the problems Filco was experiencing
with its union is critical to the future success of the company. In addition,
the loans that we granted to Filco as of the date hereof have created
considerable improvements in Filco's financial condition and results of
operations.
As a result of the above, Filco recommenced very limited production of standard
forklifts during the second quarter of 2005. In April 2005, Filco shipped at
least 14 re-conditioned vehicles. In addition, Filco began the assembly of a
Russian tractor for distribution in Europe. This agreement calls for the
production of 700 units to be assembled each year at a price of 2,800 Euros
each. After the prototypes, large quantities of tractors will be assembled. It
is expected that volume assembly will commence early 2006. The Russian company
will supply all parts. It is anticipated that Filco will be in full forklift
production early in the 4th quarter of 2005. The final production schedule is
contingent upon supply of parts from various venders.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED WITH
THREE MONTHS ENDED SEPTEMBER 30, 2004.
We have been a development stage company for the periods ended September 30,
2005 and 2004 and have not engaged in full-scale operations for the periods
indicated. During 2005, we expect to transition from a development stage company
to an operating company as we begin production and sales of the Sidewinder
Omni-Directional Lift Truck. Consequently, management believes that the
year-to-year comparisons described below are not indicative of future
year-to-year comparative results.
Revenues
For the three month period ended September 30, 2005, the Company had sales
revenue of $-0-. This compares to revenues of $-0- for the three months ended
September 30, 2004. The lack of sales revenue occurred as a result of moving the
location of operations to 200 freeway Drive, Unit One, Blackwood, NJ and that
time required to get the plant situated and operational.
Cost of Goods Sold
The Company's cost of goods sold for the three months ended September 30, 2005
amounted to $0-. For the three months ended September 30, 2004, the Company's
cost of goods sold was $-0-.
The Company is entitled to a benefit for the effect on income taxes on the net
operating loss. Accordingly, a benefit in the amount of $147,392 has been
recorded for the third quarter of 2005 and $51,456 was recorded during the third
quarter of 2004.
Operating and Administrative Expenses
Operating and administrative expenses includes administrative salaries and
overhead. For the three months ended September 30, 2005, the Company's operating
and administrative expenses totaled $1,981,664. Operating and administrative
expenses totaled $549,338 for the three months ended September 30, 2004. For the
three months ended September 30, 2005 operating and administrative expenses
increased $1,432,326 compared with the same period of 2004. These changes are a
result of the time and material costs preparing for production of the SIDEWINDER
and other production related issues including labor and materials used to outfit
the new Airtrax assembly plant in Blackwood NJ.
Research and Development
We had no research and development costs for the three months ended September
30, 2005.
Loss Before Income Taxes
Loss before income taxes for the three month period ended September 30, 2005
totaled $1,949,147. For the three months ended September 30, 2004, loss before
income taxes totaled $545,283. The increase in loss before income tax for the
three months ended September 30, 2005 compared with the same period of 2004 was
caused by the time and material allocations preparing for production of the
SIDEWINDER and other production related issues including labor and materials
used to outfit the new Airtrax assembly plant in Blackwood NJ.
16
Preferred Stock Dividends
During the three months ended September 30, 2005, the Company paid $-0- in
dividends on preferred stock. During the three months ended September 30, 2004,
the Company paid dividends on preferred stock in the amount of $5,931. The
preferred stock dividends are payable to a company that is owned by our
President.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED WITH NINE
MONTHS ENDED SEPTEMBER 30, 2004
We have been a development stage company for the nine months ended September 30,
2005 and 2004 and have not engaged in full-scale operations for the periods
indicated. The limited revenues for the periods have been derived from the first
sales of the Sidewinder Omni-Directional Lift Truck. During 2005, we expect to
transition from a development stage company to an operating company as we begin
production and sales of the Sidewinder Omni-Directional Lift Truck.
Consequently, management believes that the year-to-year comparisons described
below are not indicative of future year-to-year comparative results.
Revenues
For the nine-month period ended September 30, 2005, the Company had sales
revenue of $167,545. This compares to revenues of $-0- for the nine months
ended September 30, 2004. The lack of sales revenue occurred as a result of
moving the location of operations to 200 freeway Drive, Unit One, Blackwood, NJ
and that time required to get the plant situated and operational.
Cost of Goods Sold
The Company's cost of goods sold for the nine months ended September 30, 2005
amounted to $160,126. For the nine months ended September 30, 2004, the
Company's cost of goods sold was $-0-. The Company's cost of goods sold reflects
the cost of the lift trucks sold during the nine months ended September 30,
2005.
The Company is entitled to a benefit for the effect on income taxes on the net
operating loss. Accordingly, a benefit in the amount of $371,838 has been
recorded for the nine months ended September 30, 2005 and $119,226 was recorded
during the nine months ended September 30, 2004.
Operating and Administrative Expenses
Operating and administrative expenses includes administrative salaries and
overhead. For the nine months ended September 30, 2005, the Company's operating
and administrative expenses totaled $3,987,695. Operating and administrative
expenses totaled $1,397,479 for the nine months ended September 30, 2004. For
the nine months ended September 30, 2005 operating and administrative expenses
increased $2,590,216 compared with the same period of 2004. These changes are a
result of the time and material costs preparing for production of the SIDEWINDER
and other production related issues including labor and materials used to outfit
the new Airtrax assembly plant in Blackwood NJ.
Research and Development
We had no research and development costs for the nine months ended September 30,
2005.
Loss Before Income Taxes
Loss before income taxes for the nine month period ended September 30, 2005
totaled $8,063,449. For the nine months ended September 30, 2004, loss before
income taxes totaled $1,396,973. The principal reason for the increase in loss
before income taxes for the nine months ended September 30, 2005 compared with
the same period of 2004 was two amounts charged to interest expense which
totaled $4,213,731. These charges stemmed from the convertible bond issue and
are described in Note 3 to the financial statements. Other factors contributing
to the increase in the 2005 loss were time and materials devoted to preparing
for production of the SIDEWINDER and preparing the new assembly plant in
Blackwood, New Jersey.
17
Preferred Stock Dividends
During the nine months ended September 30, 2005, the Company paid $ 51,563 on
preferred stock. During the nine months ended September 30, 2004, the Company
paid dividends on preferred stock in the amount of $91,868 The preferred stock
dividends are payable to a company that is owned by our President.
Liquidity and Capital Resources
As of September 30, 2005, the Company's cash on hand was $40,682 and working
capital was $410,398. Since its inception, the Company has financed its
operations through the private placement of its common stock. During the nine
months ended September 30, 2005, the Company sold an aggregate of 68,750 shares
of common stock to accredited and institutional investors. During the three
months ended September 30, 2004, the Company sold an aggregate of 0 shares of
common stock to accredited and institutional investors and issued an aggregate
of 46,509 shares of common stock in consideration for services rendered.
The Company anticipates that its cash requirements for the foreseeable future
will be significant. In particular, management expects substantial expenditures
for inventory, production, and advertising in anticipation of the rollout of its
omni-directional forklift. The Company expects that it will be required to raise
funds through the private or public offering of its securities.
The Company's initial production run of ten SIDEWINDER Omni-Directional Lift
Trucks was completed in the first quarter of 2005. The Company will need
additional funds to support production requirements beyond the initial
production run of its forklift which are estimated to be $10,000,000. Of the
total amount, approximately 25% is projected for parts and component inventory
and manufacturing costs, with the balance projected as general operating
expenditures, which includes overhead and salaries and the additional funds to
complete the proposed acquisition of the 75.1% interest in Filco GmbH ("Filco"),
primarily for Filco's working capital needs. As of September 30, 2005, the
Company had loaned to Filco a total of $6,255,462. The Company intends to
complete the acquisition of Filco once operating capital for Filco is secured to
finance their operations. The Company leased facilities starting in the second
quarter of 2005 as corporate headquarters. This building will also facilitate
the assembly of the SIDEWINDER and other omni-directional products, partial
assembly of Filco lift trucks, if the proposed acquisition is completed,
warranty work, and product distribution.
As of September 30, 2005, our working capital was $410,398. Fixed assets, net of
accumulated depreciation, and total assets, as of September 30, 2005 and 2004,
were $204,274 and $10,402,726, respectively. Current liabilities as of September
30, 2005 were $2,968,259.
Item 3. Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. There was
no change in our internal controls or in other factors that could affect these
controls during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
18
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 1, 2005 we issued options to purchase an aggregate of 750,000 shares of
our common stock at an exercise price of $.85 per share to certain of our
employees and consultants as compensation for services performed on our behalf.
On August 25, 2005 we issued an aggregate of 187,939 shares of our common stock
in satisfaction of an aggregate of $338,291 of debt owed by Filco GmbH.
The issuance of the aforementioned securities was exempt from registration
requirements of the Securities Act of 1933 pursuant to Section 4(2) of such
Securities Act and Regulation D promulgated thereunder based upon the
representations of each of the purchasers that it was an "accredited investor"
(as defined under Rule 501 of Regulation D) and that it was purchasing such
securities without a present view toward a distribution of the securities. In
addition, there was no general advertisement conducted in connection with the
sale of the securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
(a) Exhibits.
3.1 Certificate of Incorporation of Airtrax, Inc. dated April 11, 1997. (Filed
as an exhibit to the Company's Form 8-K filed with the Securities and Exchange
Commission on November 19, 1999).
3.2 Certificate of Correction of the Company dated April 30, 2000 (Filed as an
exhibit to Company's Form 8-K filed with the Securities and Exchange Commission
on November 17, 1999).
3.3 Certificate of Amendment of Certificate of Incorporation dated March 19,
2001 (Filed as an exhibit to Company's Form 8-K filed with the Securities and
Exchange Commission on November 17, 1999).
3.4 Certificate of Amendment of Certificate of Incorporation dated April 1, 2005
(Filed as an exhibit to Company's Form 10-QSB filed with the Securities and
Exchange Commission on May 16, 2005).
3.5 Amended and Restated By-Laws of the Company. (Filed as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on November
19, 1999).
4.1 Form of Common Stock Purchase Warrant issued to investors pursuant to the
May 2004 private placement. (Filed previously)
4.2 Form of Common Stock Purchase Warrant dated as of November 22, 2004 and
November 23, 2004. (Filed as an exhibit to the Company's Form 8-K filed with the
Securities and Exchange Commission on November 30, 2004).
19
10.1 Agreement and Plan of Merger by and between MAS Acquisition IX Corp. and
Airtrax , Inc. dated November 5, 1999. (Filed as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on
January 13, 2000).
10.2 Employment agreement dated April 1, 1997 by and between the Company and
Peter Amico. (Filed as an exhibit to the Company's Form 8-K/A filed with
the Securities and Exchange Commission on January 13, 2000).
10.3 Employment agreement dated July 12, 1999, by and between the Company and
D. Barney Harris. (Filed as an exhibit to the Company's Form 8-K/A filed
with the Securities and Exchange Commission on November 19, 1999).
10.4 Consulting Agreement by and between MAS Financial Corp. and Airtrax,
Inc. dated October 26, 1999. (Filed as exhibit to the Company's Form 8-K
filed with the Securities and Exchange Commission on November 19, 1999).
10.5 Employment Agreement effective July 1, 2002 by and between the Company
and Peter Amico (filed as an exhibit to the Company's Form 10-KSB for
the period ended December 31, 2002)
10.6 Agreement dated July 15, 2002 by and between the Company and Swingbridge
Capital LLC and Brian Klanica. (Filed as an exhibit to the Company's
Form 8-K filed on August 7, 2002).
10.7 Purchase Agreement, dated November 22, 2004, by and among Airtrax, Inc.
and Excalibur Limited Partnership, Stonestreet Limited Partnership,
Whalehaven Capital Fund. (Filed as an exhibit to the Company's Form 8-K
filed on November 30, 2004).
10.8 Joinder to the Purchase Agreement, dated November 23, 2004, by and among
Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited
Partnership and Linda Hechter. (Filed as an exhibit to the Company's
Form 8-K filed on November 30, 2004).
10.9 Registration Rights Agreement, dated November 22, 2004, by and among
Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited
Partnership, Whalehaven Capital Fund and First Montauk Securities Corp.
(Filed as an exhibit to the Company's Form 8-K filed on November 30,
2004).
10.10 Joinder to the Registration Rights Agreement, dated November 23, 2004,
by and among Airtrax, Inc. and Excalibur Limited Partnership,
Stonestreet Limited Partnership, Linda Hechter and First Montauk
Securities Corp. (Filed as an exhibit to the Company's Form 8-K filed on
November 30, 2004).
10.11 Subscription Agreement, dated February 11, 2005, by and among Airtrax,
Inc. and the investors named on the signature page thereto (Filed as an
exhibit to the Company's Form 8-K filed on February 11, 2005).
10.12 Form of Series A Convertible Note of Airtrax, Inc. dated as of February
11, 2005 (Filed as an exhibit to the Company's Form 8-K filed on
February 11, 2005).
10.13 Form of Class A Common Stock Purchase Warrant of Airtrax, Inc. dated as
of February 11, 2005 (Filed as an exhibit to the Company's Form 8-K
filed on February 11, 2005).
10.14 Form of Class B Common Stock Purchase Warrant of Airtrax, Inc. dated as
of February 11, 2005 (Filed as an exhibit to the Company's Form 8-K
filed on February 11, 2005).
10.15 Series B Unsecured Convertible Debenture and Warrants Purchase
Agreement, dated May 31, 2005, by and between Airtrax, Inc. and the
investor named on the signature page thereto (Filed as an exhibit to the
Company's Form 8-K filed on June 6, 2005).
10.16 Registration Rights Agreement dated May 31, 2005, by and between
Airtrax, Inc. and the investor named on the signature page thereto
(Filed as an exhibit to the Company's Form 8-K filed on June 6, 2005).
20
10.17 Series B Unsecured Convertible Debenture of Airtrax, Inc. (Filed as an
exhibit to the Company's Form 8-K filed on June 6, 2005).
10.18 Form of Stock Purchase Warrant of Airtrax, Inc. (Filed as an exhibit to
the Company's Form 8-K filed on June 6, 2005).
10.19 Letter Agreement dated May 31, 2005 by and among Airtrax, Inc. and the
investors named on the signature page thereto (Filed as an exhibit to
the Company's Form 8-K filed on June 6, 2005).
10.20 Series C Unsecured Convertible Debenture and Warrants Purchase
Agreement, dated October 18, 2005 by and between Airtrax, Inc. and the
investor named on the signature page thereto (Filed as an exhibit to the
Company's Form 8-K filed on October 24, 2005).
10.21 Registration Rights Agreement dated October 18, 2005, by and between
Airtrax, Inc. and the investor named on the signature page thereto
(Filed as an exhibit to the Company's Form 8-K filed on October 24,
2005).
10.22 Series C Unsecured Convertible Debenture of Airtrax, Inc. (Filed as an
exhibit to the Company's Form 8-K filed on October 24, 2005).
10.23 Form of Stock Purchase Warrant of Airtrax, Inc. (Filed as an exhibit to
the Company's Form 8-K filed on October 24, 2005).
10.24 Amended and Restated Stock Acquisition Agreement effective as of
February 19, 2004 by and between Airtrax, Inc. and Fil Filipov
(incorporated by reference to our registration statement on Form SB-2
filed on November 3, 2005).
31.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to Sarbanes-Oxley Section 302 (filed herewith).
32.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 (filed herewith).
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 14th day of
November 2005.
AIRTRAX, INC.
By:/s/ Peter Amico
--------------------------------------------------------
Peter Amico, Chief Executive Officer,
Acting Chief Financial Officer (Principal Executive and
Financial Officer) and Chairman of the Board of Directors