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 June 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)
(609) 567-7800
(Issuer's telephone number)
870B Central Avenue, Hammonton NJ 08037
(Former name, former address and former fiscal year,
if changed since last report)
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 [ ] No [ ]
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 August 04, 2005, the issuer had
21,695,735 shares of common stock, no par value, issued and outstanding.
Transitional Small Business Issuer Format (Check One): Yes [ ] No [X]
AIRTRAX, INC.
JUNE 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 7
Notes to Financial Statements 8
Special Note Regarding Forward Looking Statements 12
Item 2. Management's Discussion and Analysis or Plan of Operations 12
Item 3. Controls and Procedures 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits 15
SIGNATURES 18
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRTRAX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
JUNE 30, 2005
(Unaudited)
CONTENTS
Page
----
Balance Sheets 4
Statements of Operations and Deficit Accumulated
During Development Stage 5
Statements of Cash Flows 6
Notes to Financial Statements 8
3
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
June 30, 2005 December 31, 2004
------------------ -----------------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash $ 1,098,691 $ 641,477
Accounts receivable 2,445 -
Accrued interest receivable 244,666 86,667
Inventory 1,673,435 709,281
Prepaid expenses - 5,113
Vendor advance 173,017 52,017
Deferred tax asset 448,860 224,414
------------------ ------------------
Total current assets 3,641,114 1,718,969
Fixed Assets
Office furniture and equipment 111,786 90,714
Automotive equipment 21,221 21,221
Shop equipment 43,619 24,553
Casts and tooling 236,484 205,485
------------------ ------------------
413,110 341,973
Less, accumulated depreciation 266,592 248,386
------------------ ------------------
Net fixed assets 146,518 93,587
Other Assets
Advances to FiLCO GmbH 5,266,136 2,670,000
Patents - net 145,152 117,402
Bond discount 479,167 -
Utility deposits 65 65
------------------ ------------------
Total other assets 5,890,520 2,787,467
------------------ ------------------
TOTAL ASSETS $ 9,678,152 $ 4,600,023
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 559,506 $ 394,959
Accrued liabilities 424,555 459,565
Shareholder deposits for stock - 1,403,174
Shareholder notes payable 33,460 33,455
------------------ ------------------
Total current liabilities 1,017,521 2,291,153
Long Term Convertible Debt 500,000 -
------------------ ------------------
TOTAL LIABILITIES 1,517,521 2,291,153
------------------ ------------------
Stockholders' Equity
Common stock - authorized, 100,000,000 shares without par value; issued
and outstanding - 21,639,926 and
15,089,342, respectively 15,005,573 10,710,999
Paid in capital - warrants 3,233,312
Preferred stock - authorized, 5,000,000 shares without
par value; 375,000 issued and outstanding 545,491 12,950
Deficit accumulated during development stage (10,416,793) (8,208,127)
Deficit prior to development stage (206,952) (206,952)
------------------ ------------------
Total stockholders' equity 8,160,631 2,308,870
TOTAL LIABILITIES AND
------------------ ------------------
STOCKHOLDER'S EQUITY $ 9,678,152 $ 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 Six Month Periods Ended June 30, 2005 and 2004
(Unaudited)
May 19, 1997
(Date of Inception)
2005 2004 to June 30, 2005
------------------ ------------------ ------------------
SALES $ 167,545 $ - $ 1,190,668
COST OF GOODS SOLD 160,126 - 630,497
------------------ ------------------ ------------------
Gross Profit 7,419 - 560,171
OPERATING AND ADMINISTRATIVE
EXPENSES 2,007,882 848,141 10,844,248
------------------ ------------------ ------------------
OPERATING LOSS (2,000,463) (848,141) (10,284,077)
OTHER INCOME AND EXPENSE
Interest expense (74,430) (13,730) (249,494)
Interest income 172,300 10,127 258,967
Other income 211 94 78,505
------------------ ------------------ ------------------
NET LOSS BEFORE INCOME TAXES (1,902,382) (851,650) (10,196,099)
------------------ ------------------ ------------------
INCOME TAX BENEFIT (STATE):
Current 224,446 67,770 224,446
Prior years - - 717,142
------------------ ------------------ ------------------
Total Benefit 224,446 67,770 941,588
------------------ ------------------ ------------------
NET LOSS BEFORE DIVIDENDS (1,677,936) (783,880) (9,254,511)
DEEMED DIVIDENDS ON PREFERRED STOCK 479,167 - 667,579
------------------ ------------------ ------------------
NET LOSS ATTRIBUTABLE TO COMMON (2,157,103) (783,880) (9,922,090)
SHAREHOLDERS
PREFERRED STOCK DIVIDENDS DURING (51,563) (85,937) (494,703)
DEVELOPMENT STAGE
------------------ ------------------ ------------------
DEFICIT ACCUMULATED $ (2,208,666) $ (869,817) $(10,416,793)
================== ================== ==================
NET LOSS PER SHARE - Basic and Diluted $ (.11) $ (.08)
WEIGHTED AVERAGE SHARES OUTSTANDING 19,435,015 10,267,532
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 June 30, 2005 and 2004
(Unaudited)
2005 May 19, 1997
(Date of Inception)
2005 2004 to June 30, 2005
------------------ ------------------ ------------------
SALES $ 90,554 $ - $ 1,190,668
COST OF GOODS SOLD 107,765 - 630,497
------------------ ------------------ ------------------
Gross Profit (Loss) (17,211) - 560,171
OPERATING AND ADMINISTRATIVE
EXPENSES 1,284,288 549,332 10,844,248
------------------ ------------------ ------------------
OPERATING LOSS (1,301,499) (549,332) (10,284,077)
OTHER INCOME AND EXPENSE
Interest expense (34,158) (6,126) (249,494)
Interest income 111,156 10,127 258,967
Other income 75 94 78,505
------------------ ------------------ ------------------
NET LOSS BEFORE INCOME TAXES (1,224,426) (545,237) (10,196,099)
------------------ ------------------ ------------------
INCOME TAX BENEFIT (STATE):
Current 166,301 41,811 224,446
Prior years - - 717,142
------------------ ------------------ ------------------
Total Benefit 166,301 41,811 941,588
------------------ ------------------ ------------------
NET LOSS BEFORE DIVIDENDS (1,058,125) (503,426) (9,254,511)
DEEMED DIVIDENDS ON PREFERRED STOCK 479,167 - 667,579
------------------ ------------------ ------------------
NET LOSS ATTRIBUTABLE TO COMMON (1,537,292) (503,426) (9,922,090)
SHAREHOLDERS
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (51,563) (40,104) (494,703)
------------------ ------------------ ------------------
DEFICIT ACCUMULATED $ (1,588,855) $ (543,530) $ (10,416,793)
------------------ ================== ==================
NET LOSS PER SHARE - Basic and Diluted $ (.07) $ (.05)
WEIGHTED AVERAGE SHARES OUTSTANDING 21,477,816 11,430,485
The accompanying notes are an integral part of these
financial statements.
6
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS For the Six Month Periods
ended June 30, 2005 and 2004
(Unaudited)
May 19, 1997
(Date of Inception)
2005 2004 to June 30, 2005
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,157,103) $ (783,880) $(9,922,090)
Adjustments to reconcile net loss to net cash
consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization 21,666 18,106 322,830
Amortization of bond discount 20,833 - 20,833
Common stock issued for services 633,943 278,244 3,461,311
Options granted for services 83,650 - 83,650
Stock issued in settlement of interest obligation 36,986 - 36,986
Increase in accrual of deferred tax benefit (224,446) (67,770) (448,860)
Deemed dividends on preferred stock 479,167 - 667,579
Interest accrued on shareholder loan 2,007 2,925 23,648
Changes in current assets and liabilities:
Increase in accrued interest receivable (157,999) - (244,666)
Increase in accounts receivable (2,445) (37,485) (2,445)
Increase in vendor advances (121,000) - (173,017)
Increase (decrease) in accounts payable and
accrued liabilities 45,945 (345,261) 966,299
Increase in prepaid expenses - - (146,957)
Increase in inventory (964,154) (33,833) (1,673,435)
------------------ ------------------ ------------------
Net Cash Consumed By
Operating Activities (2,302,950) (968,954) (7,028,334)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (71,137) (25,412) (419,421)
Additions to patent cost (31,460) - (189,391)
Advances to Filco GmbH (2,596,136) (1,000,000) (5,266,136)
------------------ ------------------ ------------------
Net Cash Consumed By
Investing Activities (2,698,733) (1,025,412) (5,874,948)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds of issuance of convertible debt 4,277,500 - 4,277,500
Net proceeds of common stock sales 55,000 2,457,212 8,627,611
Proceeds of convertible loan 409,913 - 409,913
Proceeds from exercise of warrants 718,486 - 812,236
Proceeds of sales of preferred stock - - 12,950
Proceeds from exercise of options - - 14,344
Borrowings (repayments) of stockholder loans (2,002) (52,005) 33,118
Preferred stock dividends paid in cash - (85,937) (185,274)
Principal payments on installation note (471) (425)
------------------ ------------------ ------------------
Net Cash Provided By
Financing Activities 5,458,897 2,318,799 14,001,973
------------------ ------------------ ------------------
Net Increase In Cash 457,214 324,433 1,098,691
Balance at beginning of period 641,477 37,388 -
------------------ ------------------ ------------------
Balance at end of period $ 1,098,691 $ 361,821 $ 1,098,691
================== ================== ==================
The accompanying notes are an integral part of these
financial statements.
7
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim financial statements of AirTrax, Inc. ("the Company") as
of June 30, 2005 and for the three month and six month periods ended June 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 quarter and six month period ended
June 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, 2005.
2. COMMON STOCK
The certificate of incorporation was amended on March 28, 2005 to increase the
number of authorized shares to 100,000,000 for the common no par stock, and to
5,000,000 for the preferred no par stock.
3. COMMON STOCK AND WARRANTS
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 per share of $2.11.
As partial compensation, the broker-dealer which arranged this transaction was
awarded 484,616 warrants to purchase common stock, 384,616 at $1.85 per share,
and 100,000 at $1.00 per share.
8
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
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 were outstanding at June 30, 2005 as follows:
Other
Class A Class B Warrants Total
-------------- -------------- -------------- --------------
Outstanding at December 31, 2004 5,537,763 5,537,763
Issued in connection with conversion
of $5,000,000 in convertible notes 1,923,077 961,538 484,616 3,369,231
Warrants issued in conjunction with
$500,000 of convertible debt 384,615 384,615
Reductions:
Warrants exercised (593,000) (593,000)
Warrants voided (200,000) (200,000)
Other warrants issued 37,689 37,689
-------------- -------------- -------------- --------------
1,923,077 1,346,153 5,2467,068 8,536,298
Shares of common stock were issued during the second quarter and first six
months of 2005 as follows:
Second Quarter Six Months
-------------- --------------
Conversion of $5,000,000 notes 3,846,154
Private placement sales 68,750
Shares issued based on warrants exercised 130,858 593,000
Issuance of shares sold in prior year 1,749,827
Shares issued for services 264,400 264,400
Shares issued in settlement of interest
due to registrants 28,453 28,453
-------------- --------------
Total shares issued 423,711 6,550,584
-------------- --------------
9
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
4. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was $ 5,803 and $10,135, respectively, for the six month
periods ended June 30, 2005 and June 30, 2004. There was no cash paid for income
taxes during either the 2005 or 2004 six month periods.
There were no noncash investing activities during either the or 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 224,000 shares and 163,745, 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.
10
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 2005
(Unaudited)
5. OPERATING AND ADMINISTRATIVE EXPENSES
The following expenses are unaudited:
6 Months Ended 6 Months Ended
June 30,2005 June 30, 2004
-------------- --------------
Stock-Based Compensation $ 83,650 $ -
Payroll 254,894 150,573
Marketing 202,978 32,617
Production Costs 152,705 56,175
Professional Fees 306,068 66,674
Consulting Expenses 407,943 285,275
Insurance 129,879 54,480
Penalties 120,429 -
Other Expenses 349,336 202,347
-------------- --------------
Totals $ 2,007,882 $ 848,141
-------------- --------------
6. 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 June 30, 2005, loans totaling $
5,266,236 had been made. These loans 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 its loan 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 as a director
of the Company and would grant him 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 the stock..
As of June 30, 2005, the Company had not concluded the contract and had not
issued any of the warrants or options contemplated by the tentative agreement.
11
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 for us. Four pilot models of the
commercial omni-directional lift truck are operational and have been used for
extensive testing over the past few years.
We have completed our initial production run consisting of 10 units of our
Sidewinder ATX-3000 Omni-Directional Lift Truck. Two of these vehicles have been
sold to consumers while several of the other eight trucks will be used for
additional testing including UL (Underwriters Laboratories) compliance. Unit
assembly for the first 10 units was completed by us at the H&R Industries
facility in Warminster, PA. ANSI testing is completed using specified mast and
will be continued throughout the second and third quarters on optional mast to
be used with this vehicle. Final UL compliance must be completed at the plant of
initial and final assembly. Following required compliance testing, we expect to
sell the remainder of these units to select dealers in the United States. We
have received orders for these units.
We have incurred losses and experienced negative operating cash flow since our
formation. For the three months ended June 30, 2005 and 2004, we had a net loss
of $(1,537,292) and $(503,426), 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 (609) 567-7800. We are
incorporated in the State of New Jersey.
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.
Results of Operations - Three Months Ended June 30, 2005 compared with Three
Months Ended June 30, 2004
We have been a development stage company for the periods ended June 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 three-month period ended June 30, 2005, the Company had sales revenue of
$90,544. This compares to revenues of $-0- for the three months ended June 30,
2004. The increase in sales revenue represents the first sales of the SIDEWINDER
Omni-Directional Lift Truck to Airtrax Canada, a non-affiliate.
12
Cost of Goods Sold
The Company's cost of goods sold for the three months ended June 30, 2005
amounted to $107,765. For the three months ended June 30, 2004, the Company's
cost of goods sold was $-0-. The Company's $107,765 cost of goods sold reflects
the cost of the lift trucks sold during the three months ended June 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 $166,301 has been
recorded for the second quarter of 2005 and $41,811 was recorded during the
second quarter of 2004.
Operating and Administrative Expenses
Operating and administrative expenses includes administrative salaries and
overhead. For the three months ended June 30, 2005, the Company's operating and
administrative expenses totaled $1,284,288. Operating and administrative
expenses totaled $549,332 for the three months ended June 30, 2004. For the
three months ended June 30, 2005 operating and administrative expenses increased
$734,956 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.
Loss Before Income Taxes
Loss before income taxes for the three month period ended June 30, 2005 totaled
$1,224,426. For the three months ended June 30, 2004, loss before income taxes
totaled $545,237. The increase in loss before income tax for the three months
ended June 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.
Preferred Stock Dividends
During the three months ended June 30, 2005, the Company paid $51,563 dividends
on preferred stock. During the three months ended June 30, 2004, the Company
paid dividends on preferred stock in the amount of $-0-. The preferred stock
dividends are payable to a company that is owned by our President.
Results of Operations - Six Months Ended June 30, 2005 compared with Six Months
Ended June 30, 2004
We have been a development stage company for the six months ended June 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 six-month period ended June 30, 2005, the Company had sales revenue of
$167,545. This compares to revenues of $-0- for the six months ended June 30,
2004. The increase in sales revenue represents the first sales of a total of 4
SIDEWINDER Omni-Directional Lift Trucks plus batteries and chargers.
Cost of Goods Sold
The Company's cost of goods sold for the six months ended June 30, 2005 amounted
to $160,126. For the six months ended June 30, 2004, the Company's cost of goods
sold was $-0-. The Company's $160,126 cost of goods sold reflects the cost of
the lift trucks sold during the six months ended June 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 $224,446 has been
recorded for the six months ended June 30, 2005 and $67,770 was recorded during
the six months ended June 30, 2004.
Operating and Administrative Expenses
Operating and administrative expenses includes administrative salaries and
overhead. For the six months ended June 30, 2005, the Company's operating and
administrative expenses totaled $2,007,882. Operating and administrative
expenses totaled $848,141 for the six months ended June 30, 2004. For the six
months ended June 30, 2005 operating and administrative expenses increased
$1,159,741 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.
13
Loss Before Income Taxes
Loss before income taxes for the six month period ended June 30, 2005 totaled
$1,902,382. For the six months ended June 30, 2004, loss before income taxes
totaled $851,650. The increase in loss before income tax for the six months
ended June 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.
Preferred Stock Dividends
During the six months ended June 30, 2005, the Company paid $51,563 on preferred
stock. During the six months ended June 30, 2004, the Company paid dividends on
preferred stock in the amount of $-0-. The preferred stock dividends are payable
to a company that is owned by our President.
Liquidity and Capital Resources
As of June 30, 2005, the Company's cash on hand was $1,098,691 and working
capital was $2,623,593. Since its inception, the Company has financed its
operations through the private placement of its common stock. During the three
months ended June 30, 2005, the Company sold an aggregate of 68,750 shares of
common stock to accredited and institutional investors. During the three months
ended June 30, 2004, the Company sold an aggregate of 1,778,875 shares of common
stock to accredited and institutional investors and issued an aggregate of
163,745 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 June 30, 2005, the Company
has loaned to Filco a total of $5,266,136. 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. The Company currently rents or leases space at
Warminster PA and Flemington NJ. These leases and/or rentals will be terminated
as the workload permits.
As of June 30, 2005, our working capital was $2,623,593. Fixed assets, net of
accumulated depreciation, and total assets, as of June 30, 2005 and 2004, were
$146,518 and $9,678,152, respectively. Current liabilities as of June 30, 2005
were $1,017,521.
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.
14
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 31, 2005, we entered into a 8% Series B Unsecured Convertible Debenture
and Warrants Purchase Agreement (the "Purchase Agreement") with one accredited
investor pursuant to which we sold a $500,000 principal amount unsecured
convertible debenture (the "Debenture") convertible into shares of our common
stock, no par value, and stock purchase warrants (the "Warrants") to purchase
shares of our common stock to a certain investor who is a party to the Purchase
Agreement (the "Investor") for an aggregate purchase price of $500,000.
The Debenture matures on May 31, 2007 and pays simple interest quarterly
accruing at the annual rate of 8%, either in the form of our common stock, which
shall be valued at the conversion price in effect on the trading day prior to
the date interest is due, or cash, each at our option. The Debenture is
convertible into shares of our common stock at a conversion price equal to
$1.30, subject to adjustment in certain events, including, without limitation,
upon our consolidation, merger or sale of all or substantially all of our
assets, a reclassification of our common stock, or any stock splits,
combinations or dividends with respect to our common stock. We may in our
discretion require that the Investor convert all or a portion of the Debenture
and the Investor may in its discretion require that we redeem all or a portion
of the Debenture.
In addition, we issued 384,615 Warrants to the Investor, representing an amount
of Warrants equal to 100% of the quotient of (i) the principal amount of the
Debenture issued at the closing date divided by (ii) the conversion price on the
closing date. The Warrants are exercisable at a price equal to $2.11, subject to
adjustment in certain events, including, without limitation, upon our
consolidation, merger or sale of all or substantially all of our assets, a
reclassification of our common stock, or any stock splits, combinations or
dividends with respect to our common stock, from the date of issuance until 5
years after the closing date.
First Montauk Securities Corp. (the "Selling Agent") acted as selling agent in
connection with the offering. We issued a total of 38,462 Warrants on May 31,
2005 to the Selling Agent and the Selling Agent received gross fees of $65,000,
as consideration for services performed in connection with the issuance of the
Debenture and Warrants to the Investor pursuant to the Purchase Agreement. The
Selling Agent has no obligation to buy any Debenture or Warrants from us. In
addition, we have agreed to indemnify the Selling Agent and other persons
against specific liabilities under the Securities Act of 1933, as amended.
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.
15
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).
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).
16
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).
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).
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).
17
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 15th day of
August 2005.
AIRTRAX, INC.
By:/s/ Peter Amico
---------------
Peter Amico, Chief Executive Officer,
Principal Financial Officer and Chairman
18