As filed with the Securities and Exchange Commission on February 11, 2005
An Exhibit List can be found on page II-6.
Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AIRTRAX, INC.
(Name of small business issuer in its charter)
New Jersey 22-3506376
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
870B CENTRAL AVENUE
HAMMONTON, NEW JERSEY 08037
(609) 567-3555
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
PETER AMICO, PRESIDENT AND CEO
870B CENTRAL AVENUE
HAMMONTON, NEW JERSEY 08037
(609) 567-3555
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
WITH COPIES TO:
RICHARD A. FRIEDMAN, ESQ.
ERIC A. PINERO, ESQ.
SICHENZIA ROSS FRIEDMAN FERENCE LLP
1065 AVENUE OF AMERICAS
NEW YORK, NEW YORK 10018
(212) 930-9700
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
Pursuant to Rule 429 promulgated under the Securities Act of 1933, the enclosed
prospectus constitutes a combined prospectus also relating to an aggregate of up
to 6,760,188 shares of our common stock that were previously registered for sale
in a Registration Statement on Form S-2, Registration No. 333-116475, as amended
by Registration Statements Amendment No. 1, Amendment No. 2 on Form S-2 and
Post-Effective Amendment No. 1, Registration Nos. 333-116475. As such, this
prospectus also constitutes Post-Effective Amendment No. 2 to the Registration
Statement on Form S-2, Registration No. 333-116475, which shall hereafter become
effective concurrently with the effectiveness of this Registration Statement on
Form SB-2 in accordance with Section 8(c) of the Securities Act of 1933.
2
CALCULATION OF REGISTRATION FEE
====================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
Common Stock, no par value 3,600,125(2) $2.20 $7,920,275 $932.22*
--------------------------------------------------------------------------------------------------------------------
Common Stock, no par value 3,160,063(3) $2.20 $6,952,138.60 $818.27*
--------------------------------------------------------------------------------------------------------------------
Common Stock, no par value 1,640,000(4) $2.20 $3,608,000 $424.66
--------------------------------------------------------------------------------------------------------------------
Common Stock, no par value 1,184,001(5) $2.20 $2,604,802.20 $306.59
--------------------------------------------------------------------------------------------------------------------
TOTAL 9,584,189 $1,599.53*
====================================================================================================================
*The registrant previously paid a filing fee in the amount of $882.21 with
respect to the shares of its common stock registered on Form S-2, Registration
No. 333-116475, as amended by Registration Statements Amendment No. 1 and
Amendment No. 2 on Form S-2, Registration Nos. 333-116475. Accordingly, the
registrant is paying a filing fee of $868.28 to account for a fluctuation in the
market price of the registrant's common stock. Pursuant to Rule 429 under the
Securities Act, the prospectus filed as part of this registration statement also
relates to securities of the registrant registered pursuant to the registration
statement of the registrant on Form S-2, Registration No. 333-116475, as amended
by Registration Statements Amendment No. 1 and Amendment No. 2 on Form S-2,
Registration Nos. 333-116475.
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933,
using the average of the high and low price as reported on the Over-The-Counter
Bulletin Board on February 10, 2005.
(2) Represents shares of common stock issued to certain of the selling
stockholders pursuant to the Company's May 2004 Private Placement.
(3) Represents shares of common stock underlying warrants issued to certain of
the selling stockholders pursuant to the Company's May 2004 Private Placement.
(4) Represents shares of common stock issued to certain of the selling
stockholders pursuant to the Company's November 2004 Private Placement.
(5) Represents shares of common stock underlying warrants issued to certain of
the selling stockholders pursuant to the Company's November 2004 Private
Placement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
3
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2005
PROSPECTUS
Airtrax, Inc.
9,584,189 Shares of Common Stock
This prospectus relates to the resale by the selling stockholder of 9,584,189
shares of our common stock, including 4,569,064 shares issuable upon the
exercise of warrants. The selling stockholder may sell common stock from time to
time in the principal market on which the stock is traded at the prevailing
market price or in negotiated transactions.
We will pay the expenses of registering these shares. We will not receive any
proceeds from the sale of shares of common stock in this offering. All of the
net proceeds from the sale of our common stock will go to the selling
stockholders.
Our common stock is registered under Section 12(g) of the Securities Exchange
Act of 1934 and is listed on the Over-The-Counter Bulletin Board under the
symbol "AITX." The last reported sales price per share of our common stock as
reported by the Over-The-Counter Bulletin Board on February 10, 2005 was $2.20.
Investing in these securities involves significant risks. Investors should not
buy these securities unless they can afford to lose their entire investment.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is February __, 2005.
The information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by Airtrax,
Inc., with the Securities and Exchange Commission. The Selling Stockholder may
not sell these securities until the registration statement becomes effective.
This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
4
TABLE OF CONTENTS
Page
-------
Prospectus Summary 6
Recent Developments 7
Risk Factors 9
Use of Proceeds 12
Market for Common Equity and Related Stockholder Matters 12
Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Business 18
Description of Property 23
Legal Proceedings 23
Management 23
Executive Compensation 24
Certain Relationships and Related Transactions 26
Security Ownership of Certain Beneficial Owners and Management 27
Description of Securities Being Registered 28
Indemnification for Securities Act Liabilities 29
Selling Stockholders 30
Plan of Distribution 36
Legal Matters 36
Experts 36
Available Information 37
Index to Consolidated Financial Statements 38
Part II. Information Not Required in Prospectus 60
Indemnification of Directors and Officers 60
Other Expenses of Issuance and Distribution 60
Recent Sales of Unregistered Securities 60
Exhibits 61
Undertakings 62
Signatures 63
5
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this
prospectus. This summary does not contain all the information you should
consider before investing in the securities. Before making an investment
decision, you should read the entire prospectus carefully, including the "risk
factors" section, the financial statements and the notes to the financial
statements.
Airtrax, Inc.
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. Four pilot models of the commercial
omni-directional lift truck are currently operational.
We have commenced and are near completion of getting the parts together for our
initial production run consisting of 10 units of our Sidewinder ATX-3000
Omni-Directional Lift Truck. Substantially all of the parts including frames,
motors, controllers, and micro-processors have been ordered and received by us,
and are partially assembled. The initial production run will be completed upon
receipt of wheels and other components from suppliers which is expected in the
first quarter of 2005. Unit assembly is undertaken by Crane and Machinery, Inc.,
(Schaeff Forklift) Bridgeview, Illinois under our specifications. UL and final
ANSI testing is expected to be completed from 30 to 90 days from production
completion. Following required testing, we expect to sell these units to select
dealers in the United States. We have received orders for our initial run
production run of 10 units.
We have incurred losses and experienced negative operating cash flow since our
formation. For the nine months ended September 30, 2004 and 2003, we had a net
loss of $(1,277,747) and $(1,510,964), respectively. For our fiscal years ended
December 31, 2003 and 2002, we had a net loss of $(2,282,946) and $(640,616),
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 870B Central Avenue, Hammonton,
NJ 08037 and our telephone number is (609) 567-7800. We are incorporated in the
State of New Jersey.
The Offering
Common stock offered by selling stockholders............ Up to 9,584,189 shares, including up to
4,344,064 shares issuable upon the exercise
of common stock purchase warrants, assuming
full exercise of the warrants. This number
represents 38.8% of the total number of
shares to be outstanding following this
offering assuming the exercise of all
securities being registered.
Common stock to be outstanding after the offering........ Up to 24,713,531 shares
Use of proceeds.......................................... We will not receive any proceeds from the sale
of the common stock. However, we will receive
the exercise price of any common stock we issue to
the selling stockholders upon exercise of the
warrants. We expect to use the proceeds
received from the exercise of their
warrants, if any, for general working capital
purposes.
Over-The-Counter Bulletin Board Symbol................... AITX
The above information regarding common stock to be outstanding after the
offering is based on 15,129,342 shares of common stock outstanding as of
February 11, 2005 and assumes the subsequent issuance of common stock to the
selling stockholders and exercise of warrants by our selling stockholders.
6
RECENT DEVELOPMENTS
May 2004 Private Placement
In May 2004, Airtrax, Inc. ("AITX" or "we") and several accredited investors
(collectively, the "Investors") entered into a Subscription Agreement whereby
the Investors agreed to purchase an aggregate of 3,600,125 shares of common
stock at a price of $0.80 per share for an aggregate purchase price of
$2,855,100. In addition, the Investors received warrants, exercisable at $1.25
per share, to purchase 50% of the shares issued.
In connection with Subscription Agreement, AITX and the Investors also entered
into a Registration Rights Agreement. AITX is obligated to file a registration
statement covering the above-referenced common stock and shares underlying the
warrants within 30 days of closing. If the Registration Statement is not filed
within the 30 day period, or declared effective within 105 days of the closing,
AITX will pay a penalty of 1% of the offering proceeds for the first month and
2% of such amount per month thereafter in penalties until such default is cured,
on a pro-rated daily basis.
Pursuant to Rule 429 under the Securities Act, the prospectus filed as part of
this registration statement also relates to securities of the registrant
registered pursuant to the registration statement of the registrant on Form S-2,
Registration No. 333-116475, as amended by Registration Statements Amendment No.
1 and Amendment No. 2 on Form S-2, Registration Nos. 333-116475.
November 2004 Private Placements
On November 22, 2004, we entered into a Purchase Agreement (the "Purchase
Agreement") pursuant to which we sold and issued 1,125,000 shares of Common
Stock, no par value (the "Common Shares"), and common stock purchase warrants
(the "Warrants") to purchase 562,500 shares of our Common Stock (the "Warrant
Shares") to certain purchasers who are a party to the Purchase Agreement (the
"Purchasers") for an aggregate purchase price of $900,000. Thereafter, on
November 23, 2004, we entered into Joinders to the Purchase Agreement pursuant
to which we sold and issued an additional 515,000 shares of common stock and
Warrants to purchase an additional 257,500 Warrant Shares to certain purchasers
who are a party to the Joinders to the Purchase Agreement for an aggregate
purchase price of $412,000.
The Warrants are exercisable from November 22, 2004 until November 22, 2009 for
up to 562,500 shares of common stock and from November 23, 2004 until November
23, 2009 for up to 257,500 shares of common stock, each at an exercise price of
$1.25 per share, subject to adjustment upon the occurrence of specific events,
including stock dividends, stock splits, combinations or reclassifications of
our common stock or distributions of cash or other assets. In addition, the
Warrants contain provisions protecting against dilution resulting from the sale
of additional shares of our common stock for less than the exercise price of the
Warrants, or the market price of the common stock, on the date of such issuance
or sale (the "Anti-Dilution Shares"). The Warrants do not entitle the holders to
any voting or other rights as a stockholder until such Warrants are exercised
and common stock is issued.
In addition, we entered into a Registration Rights Agreement on November 22,
2004 and a Joinder to the Registration Rights Agreement on November 23, 2004
with the Purchasers and the Placement Agent (as defined below) pursuant to which
we are obligated to file a registration statement on Form SB-2 (or if Form SB-2
is not then available to us, on such form of registration statement that is
available to effect the registration of the Common Shares) within 45 days after
the closing date. We must register at least the number of shares of our Common
Stock equal to the Common Shares plus the number of shares necessary to permit
the exercise in full of the Warrants. If we do not file the registration
statements with the SEC within 45 days after the closing date, we are required
to make pro rata payments to the Purchasers, as liquidated damages and not as a
penalty, in an amount equal to 2.0% of the aggregate amount invested by each
Purchaser for each 30 day period or pro rata for any portion thereof following
the date by which such registration statement should have been filed.
We are also obligated to file a one or more registration statements on Form SB-2
or amend the registration statement previously filed, as described in the
preceding paragraph, if such registration statement has not previously been
declared effective covering the Anti-Dilution Shares within 10 days following
written demand by any Purchaser following the issuance of Anti-Dilution Shares.
If a registration statement covering the Anti-Dilution Shares is required to be
filed and is not filed with the SEC within 10 days of the request of any
Purchaser, we will make pro rata payments to each Purchaser in an amount equal
to 2.0% of the aggregate amount invested by such Purchaser for each 30-day
period or pro rata for any portion thereof following the date by which such
registration statement should have been filed for which no registration
statement is filed with respect to the Anti-Dilution Shares.
If a registration statement covering the Common Shares is not declared effective
by the SEC within 90 days after the closing date or if a registration statement
covering Anti-Dilution Shares is not declared effective by the SEC within 90
days following the time such registration statement was required to be filed,
then the Company will make pro rata payments to each Purchaser, as liquidated
damages and not as a penalty, in an amount equal to 2,0% of the aggregate amount
invested by such Purchaser for each 30-day period or pro rata for any portion
thereof following the date by which such registration statement should have been
effective.
7
First Montauk Securities Corp. (the "Selling Agent") acted as selling agent in
connection with the offering. We issued a total of 176,500 Warrants on November
22 & 23, 2004 to the Selling Agent and the Selling Agent received gross fees of
$174,560, as consideration for services performed in connection with the
issuance of the Common Shares and Warrants to the Purchasers pursuant to the
Purchase Agreement. The Selling Agent has no obligation to buy any Common Shares
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 shares and the warrants 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 Investors 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.
February 2005 Private Placement
On February 11, 2005, we entered into a Subscription Agreement (the
"Subscription Agreement") pursuant to which we sold an aggregate of $5,000,000
of principal amount promissory notes (the "Notes") convertible into shares of
our common stock, no par value, and Class A and Class B share purchase warrants
(the "Warrants") to purchase shares of our common stock to certain purchasers
who are a party to the Subscription Agreement (the "Purchasers")
The Notes mature on August 10, 2005 and pay simple interest accruing at the
annual rate of 6%, either in the form of freely-tradeable common stock, which
shall be valued at the conversion price in effect at the maturity date, or cash,
each at our option. The Notes are 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 of
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 Purchasers convert all or a portion of the
Notes and the Purchasers may in their discretion require that we redeem all or a
portion of the Notes pursuant to the Subscription Agreement.
In addition, we issued an aggregate of 1,923,077 Class A Warrants and 961,538
Class B Warrants, representing 50 Class A Warrants and 25 Class B Warrants for
each 100 shares of common stock which would be issued on the closing date
assuming the complete conversion of the Notes issued on the closing date at the
conversion price in effect on the closing date. The Class A Warrants are
exercisable at a price equal to $1.85 from the date of issuance until 5 years
after the closing date. The Class B Warrants are exercisable at a price equal to
$2.11, representing 101% of the 3 day average closing bid prices of our common
stock on the trading day immediately preceding the closing date, from the date
of issuance until 5 years after the closing date. The Class A and Class B
Warrants both have a cashless feature.
Under the Subscription Agreement, we are obligated to file a registration
statement on Form SB-2 (or if Form SB-2 is not then available to us, on such
form of registration statement that is available to effect the registration of
the common stock issuable upon conversion of the Notes and exercise of the
Warrants) within 10 days after the effectiveness of this registration statement
provided, however, that in the event that we do not obtain shareholder approval
to increase the number of our authorized shares of common stock to 100,000,000
before 10 days after the effectiveness of this registration statement, then we
are required to file a registration statement no later than 10 days after such
shareholder approval is obtained (but in any event no later than April 30,
2005). We are obligated to use our best efforts to amend this registration
statement to include the shares of our common stock issuable upon conversion of
the Notes and exercise of the Warrants. In addition, we shall cause the
registration statement to be declared effective no later than 105 days after the
filing date.
First Montauk Securities Corp. (the "Selling Agent") acted as selling agent in
connection with the offering. We issued a total of 384,616 Warrants on February
11, 2005 to the Selling Agent and the Selling Agent received gross fees of
$650,000, as consideration for services performed in connection with the
issuance of the Notes and Warrants to the Purchasers pursuant to the
Subscription Agreement. The Selling Agent has no obligation to buy any Notes 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 Notes and the Warrants 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.
8
RISK FACTORS
If you purchase shares of our common stock, you will take on a financial risk.
In deciding whether to invest, you should consider carefully the following
factors, the information contained in this prospectus and the other information
to which we have referred you. If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS
WE MAY NEVER BECOME PROFITABLE AND CONTINUE AS A GOING CONCERN BECAUSE WE HAVE
HAD LOSSES SINCE OUR INCEPTION.
We may never become profitable and continue as a going concern because we have
incurred losses and experienced negative operating cash flow since our
formation. For the nine months ended September 30, 2004 and 2003, we had a net
loss of $(1,277,747) and $(1,510,964), respectively. For our fiscal years ended
December 31, 2003 and 2002, we had a net loss of $(2,282,946) and $(640,616),
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. If
such financing is available you may experience significant additional dilution.
WE HAVE A LIMITED OPERATING HISTORY
We are development stage company, and, together with our predecessor, have been
in operation since 1995. However, since 1995, our operations have been limited
to the development of our omni-directional products, and limited revenue has
been generated during this period. Consequently, our business may be subject to
the many risks and pitfalls commonly experienced by development stage companies.
OUR BUSINESS OPERATIONS WILL BE HARMED IF WE ARE UNABLE TO OBTAIN ADDITIONAL
FUNDING.
Our business operations will be harmed if we are unable to obtain additional
funding. We believe that our available short-term assets and investment income
will be sufficient to meet our operating expenses and capital expenditures
through the end of fiscal year 2004. We do not know if additional financing will
be available when needed, or if it is available, if it will be available on
acceptable terms. Insufficient funds may prevent us from implementing our
business strategy or may require us to delay, scale back or eliminate certain
opportunities for the provision of our technology and products. In addition to
our own need of working capital, we also will need working capital to fund the
operations of Filco GmbH. Filco has informed us that its working capital needs
are approximately $5,000,000 until it can achieve profitable operations, which
includes approximately $1,300,000 required under the Filco agreement. As of
September 30, 2004, we have loaned $1,230,000 to Filco. If we are unable to
complete the terms of the Filco agreement and loan Filco the remaining amounts
due thereunder, Filco may be unable to continue its operations and the repayment
of amounts loaned to Filco by us may be jeopardized.
FINAL TESTING OF OUR PRODUCT COULD RESULT IN COMPONENT REFINEMENT OR REDESIGN,
WHICH COULD DELAY THE COMMERCIAL INTRODUCTION OR CONTINUED SALE OF THE FORKLIFT.
We have developed pilot versions of our unique, omni-directional forklift. The
commercial introduction of the product is subject, however, to additional
testing and component refinement. Due to the unique performance attributes of
the forklift, the forklift will undergo a series of unprecedented tests relating
to these attributes. Although management has performed substantially all of
these tests or is otherwise confident of the performance capabilities of the
forklift, final testing has not been completed. In addition, our product must be
sufficiently durable to withstand the day-to-day rigors of its anticipated work
environment. As stated above, although we have conducted numerous tests, the
product has not been subjected to the normal day-to-day usage typically required
of forklifts. Therefore, it is conceivable that final testing, or durability
issues after prolonged use, could result in component refinement or redesign,
which could delay the commercial introduction or continued sale of the forklift.
THE PRICING POLICY FOR OUR FORKLIFTS MAY BE SUBJECT TO CHANGE, AND ACTUAL SALES
OR OPERATING MARGINS MAY BE LESS THAN PROJECTED.
9
We are assessing present and projected component pricing in order to establish a
pricing policy for the SIDEWINDER Lift Truck. We have not finalized our
assessment as current prices for certain forklift components reflect special
development charges which are expected to be reduced as order volume for such
components increase and as manufacturing efficiencies improve. We intend to
price our forklifts so as to maximize sales yet provide sufficient operating
margins. Given the uniqueness of our product, we have not yet established final
pricing sensitivity in the market. Consequently, the pricing policy for its
forklifts may be subject to change, and actual sales or operating margins may be
less than projected.
WE HAVE RECEIVED LIMITED INDICATIONS OF THE COMMERCIAL ACCEPTABILITY OF OUR
OMNI-DIRECTIONAL FORKLIFT. ACCORDINGLY, WE CANNOT PREDICT WHETHER OUR
OMNI-DIRECTIONAL PRODUCTS CAN BE MARKETED AND SOLD IN A COMMERCIAL MANNER.
Our success will be dependent upon our ability to sell omni-directional products
in quantities sufficient to yield profitable results. To date, we have received
limited indications of the commercial acceptability of our omni-directional
forklift. Accordingly, we cannot predict whether the omni-directional product
can be marketed and sold in a commercial manner.
We cannot assure that we will have in place patent protection and
confidentiality agreements for our proprietary technology. If we do not
adequately protect our intellectual property rights, there is a risk that they
will be infringed upon or that our technology infringes upon one of our
competitor's patents. As a result, we may experience a loss of revenue and our
operations may be materially harmed.
Our success will be dependent, in part, upon the protection of our proprietary
omni-directional technology from competitive use. The patent for the
omni-directional wheel expired in 1990. We, however, have received patent
protection of certain other aspects of its omni-directional wheel, and for
features specific to our forklift. In addition to the patent applications, we
rely on a combination of trade secrets, nondisclosure agreements and other
contractual provisions to protect our intellectual property rights.
Nevertheless, these measures may be inadequate to safeguard our underlying
technology. If these measures do not protect the intellectual property rights,
third parties could use our technology, and our ability to compete in the market
would be reduced significantly. In addition, if the sale of our product extends
to foreign countries, we may not be able to effectively protect its intellectual
property rights in such foreign countries.
In the future, we may be required to protect or enforce our patents and patent
rights through patent litigation against third parties, such as infringement
suits or interference proceedings. These lawsuits could be expensive, take
significant time, and could divert management's attention from other business
concerns. These actions could put our patents at risk of being invalidated or
interpreted narrowly, and any patent applications at risk of not issuing. In
defense of any such action, these third parties may assert claims against us. We
cannot provide any assurance that we will have sufficient funds to vigorously
prosecute any patent litigation, that we will prevail in any of these suits, or
that the damages or other remedies awarded, if any, will be commercially
valuable. During the course of these suits, there may be public announcements of
the results of hearings, motions and other interim proceedings or developments
in the litigation. If securities analysts or investors perceive any of these
results to be negative, it could cause the price of our common stock to decline.
WE CURRENTLY LACK ESTABLISHED DISTRIBUTION CHANNELS FOR OUR FORKLIFT PRODUCT
LINE
We do not have an established channel of distribution for our forklift product
line. We have initiated efforts to establish a network of designated dealers
throughout the United States. Although we have received indications of interest
from a number of equipment distributors, to date, such indications have been
limited. We cannot predict whether we will be successful in establishing our
intended dealer network.
If we are unable to retain the services of MR. PETER AMICO, or if we are unable
to successfully recruit qualified personnel, we may not be able to continue
operations.
Our ability to successfully conduct our business affairs will be dependent upon
the capabilities and business acumen of current management including Peter
Amico, our President. Accordingly, shareholders must be willing to entrust all
aspects of our business affairs to our current management. Further, the loss of
any one of our management team could have a material adverse impact on our
continued operation.
OUR INDUSTRY AND PRODUCTS ARE CONSIDERED TO BE HIGH-RISK WITH A HIGH INCIDENCE
OF SERIES PERSONAL INJURY OR PROPERTY LOSS WHICH COULD HAVE A MATERIAL ADVERSE
IMPACT ON OUR BUSINESS.
10
The manufacture, sale and use of omni-directional forklifts and other mobility
or material handling equipment is generally considered to be an industry of a
high risk with a high incidence of serious personal injury or property loss. In
addition, although we intend to provide on-site safety demonstrations, the
unique, sideways movement of the forklift may heighten potential safety risks.
Despite the fact that we intend to maintain sufficient liability insurance for
the manufacture and use of our products, one or more incidents of personal
injury or property loss resulting from the operation of our products could have
a material adverse impact on our business.
If we do not successfully distinguish and commercialize our developed
proprietary products and services, we will not attract a sufficient number of
customers. Accordingly, we may be unable to compete successfully with our
competitors or to generate revenue significant to sustain our operations.
Although management believes our product will have significant competitive
advantages to conventional forklifts, we are competing in an industry populated
by some of the foremost equipment and vehicle manufacturers in the world. All of
these companies have greater financial, engineering and other resources than us.
No assurances can be given that any advances or developments made by such
companies will not supersede the competitive advantages of our omni-directional
forklift. In addition, many of our competitors have long-standing arrangements
with equipment distributors and carry one or more of competitive products in
addition to forklifts. These distributors are prospective dealers for our
company. It therefore is conceivable that some distributors may be loath to
enter into any relationships with us for fear of jeopardizing existing
relationships with one or more competitors.
RISKS RELATING TO OUR COMMON STOCK
IF WE FAIL TO OBTAIN STOCKHOLDER APPROVAL TO INCREASE OUR AUTHORIZED SHARES OF
COMMON STOCK, WE MAY BE SUBJECT TO VARIOUS PENALTIES.
We presently do not have an adequate amount of authorized and unissued shares of
common stock to issue in connection with the November 2004 Private Placements to
account for additional shares which would be issuable upon dilution of our
common stock. As of February 11, 2005, there were 15,129,342 shares of common
stock outstanding. On January 11, 2005 filed a proxy statement with the SEC for
a special meeting of shareholders pursuant to which we will request that our
shareholders approve an amendment to our certificate of incorporation to
increase our authorized common stock to 50,000,000 shares. In the event that we
are unable to obtain an increase in our authorized common stock, we will be
required to pay penalties to the selling stockholders of the November 2004
Private Placements.
THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE BECAUSE THERE ARE WARRANTS THAT
MAY BE AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY DEPRESS THE
MARKET PRICE.
The market price of our common stock may decline because there are a large
number of warrants that may be available for future sale, and the sale of these
shares may depress the market price. As of February 11, 2005, we had
approximately 8,876,552 plus 1,640,000 (from this offering) shares of common
stock issued and outstanding and 3,304,438 outstanding options and warrants to
purchase up to 3,304,438 shares of common stock. All of the shares included in
this prospectus may be sold without restriction. The sale of these shares may
adversely affect the market price of our common stock.
OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules require:
o that a broker or dealer approve a person's account for transactions in penny
stocks; and
o the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased.
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
11
o obtain financial information and investment experience objectives of the
person; and
o make a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
o sets forth the basis on which the broker or dealer made the suitability
determination; and
o that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities
subject to the "penny stock" rules. This may make it more difficult for
investors to dispose of our common stock and cause a decline in the market value
of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the commissions payable
to both the broker-dealer and the registered representative, current quotations
for the securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the selling
stockholder. All of the net proceeds from the sale of our common stock will go
to the selling stockholder. In connection with our May 2004 Private Placement,
we will receive the proceeds from the exercise of warrants entitling the selling
stockholders to purchase 2,160,063 shares from us at an exercise price of $1.25
per share, 135,000 shares from us at an exercise price of $1.00 per share, and
865,000 shares from us at an exercise price of $2.50 per share. If all warrants
held by the selling stockholders are exercised, we will receive $4,982,578 in
proceeds. In connection with the November 2004 Private Placement, we will
receive the proceeds from the exercise of warrants entitling the selling
stockholders to purchase 1,184,001 shares from us at an exercise price of $1.25
per share. If all warrants held by the selling stockholders are exercised, we
will receive $1,480,001.25 in proceeds.
We anticipate that any proceeds from the exercise of warrants by the selling
stockholders will be used for general corporate purposes, which may include but
are not limited to working capital, capital expenditures, acquisitions and the
repayment or refinancing of our indebtedness. Pending the application of any
proceeds from the exercise of warrants, if any, by the selling stockholders, we
expect to invest the proceeds in short-term, interest-bearing instruments or
other investment-grade securities.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has been traded on the Over-The-Counter Bulletin Board under
the symbol "AITX". The table below sets forth, for the periods indicated, the
high and low closing prices per share of the common stock as reported on the
Over-The-Counter Bulletin Board. These quotations reflect prices between
dealers, do not include retail mark-ups, markdowns, and commissions and may not
necessarily represent actual transactions. The prices are adjusted to reflect
all stock splits.
High Low
---- ---
2004 First Quarter 1.60 0.65
Second Quarter 1.45 0.75
Third Quarter 1.15 0.61
Fourth Quarter 3.35 0.81
2003
First Quarter 1.50 0.80
Second Quarter 1.68 0.87
Third Quarter 1.20 0.80
Fourth Quarter 1.01 0.65
12
As of February 11, 2005, there were 15,129,342 shares of common stock
outstanding.
As of February 11, 2005, there were approximately 946 stockholders of record of
our common stock, respectively. This does not reflect those shares held
beneficially or those shares held in "street" name.
We have not paid cash dividends in the past, nor do we expect to pay cash
dividends for the foreseeable future. We anticipate that earnings, if any, will
be retained for the development of our business.
Equity Compensation Plan Information
------------------- --------------------------------- ---------------------------------- ------------------------------------------
Plan category Number of securities to be issued Weighted-average exercise price of Number of securities remaining available for
upon exercise of outstanding outstanding options, warrants and future issuance under equity compensation
options, warrants and rights rights plans (excluding securities reflected in
(a) (b) column (a))
(c)
------------------- --------------------------------- ---------------------------------- -------------------------------------------
Equity compensation -0- -0- -0-
plans approved by
security holders
------------------- --------------------------------- ---------------------------------- -------------------------------------------
Equity compensation -0- -0- -0-
plans not approved
by security holders
------------------- --------------------------------- ---------------------------------- -------------------------------------------
Total -0- -0- -0-
------------------- --------------------------------- ---------------------------------- -------------------------------------------
We currently do not have an equity compensation plan for our officers,
directors, employees or consultants. However, certain of our officers are
compensated with stock options to purchase shares of our common stock. A
description of these options can be found in this registration statement under
the heading "Management", "Executive Employment Agreements".
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Some of the information in this Form SB-2 contains forward-looking statements
that involve substantial risks and uncertainties. You can identify these
statements by forward-looking words such as "may", "will", "expect",
"anticipate", "believe", "estimate" and "continue", or similar words. You should
read statements that contain these words carefully because they:
o discuss our future expectations;
o contain projections of our future results of operations or of our financial
condition; and
o state other "forward-looking" information.
We believe it is important to communicate our expectations. However, there may
be events in the future that we are not able to accurately predict or over which
we have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including those set forth under "Risk Factors,"
"Business" and elsewhere in this prospectus. See "Risk Factors."
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. Four pilot models of the commercial
omni-directional lift truck are currently operational.
We have commenced and are near completion of getting the parts together for our
initial production run consisting of 10 units of our Sidewinder ATX-3000
Omni-Directional Lift Truck. Substantially all of the parts including frames,
motors, controllers, and micro-processors have been ordered and received by us,
and are partially assembled. The initial production run will be completed upon
receipt of wheels and other components from suppliers which is expected in the
third quarter of 2004. Unit assembly is undertaken by Crane and Machinery, Inc.,
(Schaeff Forklift) Bridgeview, Illinois under our specifications. UL and final
ANSI testing is expected to be completed from 30 to 90 days from production
completion. Following required testing, we expect to sell these units to select
dealers in the United States. We have received orders for our initial run
production run of 10 units.
We have incurred losses and experienced negative operating cash flow since our
formation. For the nine months ended September 30, 2004 and 2003, we had a net
loss of $(1,277,747) and $(1,510,964), respectively. For our fiscal years ended
December 31, 2003 and 2002, we had a net loss of $(2,282,946) and $(640,616),
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 870B Central Avenue, Hammonton,
NJ 08037 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.
CRITICAL ACCOUNTING POLICIES
The Securities and Exchange Commission ("SEC") defines "critical accounting
policies" as those that require application of management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain and may change in
subsequent periods.
Not all of the accounting policies require management to make difficult,
subjective or complex judgments or estimates. However, the following policies
could be deemed to be critical within the SEC definition.
Revenue Recognition
Revenue on product sales is recognized when persuasive evidence of an
arrangement exists, such as when a purchase order or contract is received from
the customer, the price is fixed, title to the goods has changed and there is a
reasonable assurance of collection of the sales proceeds. We obtain written
14
purchase authorizations from our customers for a specified amount of product at
a specified price and consider delivery to have occurred at the time of
shipment. Revenue is recognized at shipment and we record a reserve for
estimated sales returns, which is reflected as a reduction of revenue at the
time of revenue recognition.
Revenues from research and development activities relating to firm fixed-price
contracts are generally recognized as billing occurs. Revenues from research and
development activities relating to cost-plus-fee contracts include costs
incurred plus a portion of estimated fees or profits based on the relationship
of costs incurred to total estimated costs. Contract costs include all direct
material and labor costs and an allocation of allowable indirect costs as
defined by each contract, as periodically adjusted to reflect revised agreed
upon rates. These rates are subject to audit by the other party. Amounts can be
billed on a bi-monthly basis. Billing is based on subjective cost investment
factors.
Results of Operations
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2003
We are a development stage company and have not engaged in full-scale operations
for the periods covered by this registration statement. A small portion of
expenses for the 2003 period were derived from a contract with the United States
Navy that relates to the research and potential application of omni-directional
products for military use. The period-to-period results presented and discussed
below are not necessarily meaningful comparisons due to our development stage
status, and are not indicative of future results.
Revenues
For both the three and nine month periods ended September 30, 2004, we had sales
revenue of $0. This compares to revenues of $0 and $21,977 respectively for the
three and nine months ended September 30, 2003. There was no billing for the
Navy MP2 project in either of the 2004 periods. The MP2 munitions carrier was
delivered to the Navy on/or about April 1, 2004 for their evaluation and
testing. An Omni-Direction engine handler developed for the Navy will be
delivered to the Navy prior to the end of 2004. Production of the Sidewinder
ATX-3000 Omni-Directional Lift Truck is scheduled to begin pending wheel
deliveries from Timken Corporation.
Cost of Goods Sold
Our cost of goods sold for both the three and nine months ended September 30,
2004 amounted to $0. For the three months and nine months ended September 30,
2003, our cost of goods sold were approximately $26,601 and $83,368,
respectively. Our $0 cost of goods sold reflects that we had no sales during the
three and nine months ended September 30, 2004.
Operating and Administrative Expenses
Operating and administrative expenses includes administrative salaries and
overhead. For the three and nine months ended September 30, 2004, our operating
and administrative expenses totaled $549,338 and $1,397,479, respectively.
Operating and administrative expenses totaled $498,436 and $1,578,516 for the
three and nine months ended September 30, 2003, respectively. For the three and
nine months ended September 30, 2004 operating and administrative expenses
increased $50,902 and decreased $181,037, respectively, compared with the same
periods of 2003. These changes are a result of decreased work on behalf of the
United States Navy MP2 contract during this period.
Net Loss Before Income Taxes
Net loss before income taxes for the three and nine-month periods ended
September 30, 2004 totaled $545,323 and $1,396,973, respectively. For the three
and nine months ended September 30, 2003, net loss before income taxes totaled
$527,352 and $1,660,400, respectively. The increase in net loss before income
tax for the three months ended September 30, 2004 compared with the same period
of 2003 was caused by the allocation of labor and services for vehicle
preparation for ANSI testing which was scheduled for the forth quarter. The
decrease in net loss before income tax for the nine months ended September 30,
2004 compared with the same period of 2003 was caused by the allocation of stock
for services in 2003 that did not occur in 2004.
Preferred Stock Dividends
During the three and nine months ended September 30, 2004, we recorded dividends
on preferred stock in the amount of $5,931 and $91,868, respectively. During the
three and nine months ended September 30, 2003, we recorded dividends on
preferred stock in the amount of $0 and $80,746, respectively. The preferred
stock dividends are payable to a company that is owned by our President.
15
Liquidity and Capital Resources - Three and Nine Months Ended September 30,
2004.
As of September 30, 2004, our cash on hand was $178,991 and working capital was
$365,129. Since its inception, we have financed our operations through the
private placement of its common stock. During the nine months ended September
30, 2004, we sold an aggregate of 3,610,125 shares of common stock to accredited
and institutional investors and issued an aggregate of 433,840 shares of common
stock in consideration for services rendered. During the three months ended
September 30, 2004, we sold an aggregate of no shares of common stock to
accredited and institutional investors and issued an aggregate of 270,000 shares
of common stock in consideration for services rendered.
We anticipate that our cash requirements for the foreseeable future will be
significant. In particular, our management expects substantial expenditures for
inventory, production, and advertising in anticipation of the rollout of its
omni-directional forklift. We expect that we will be required to raise funds
through the private or public offering of its securities.
Our initial production run of ten SIDEWINDER Omni-Directional Lift Trucks is
expected to be completed in the first quarter of 2005, pending wheel deliveries.
We will need additional funds to support production requirements beyond the
initial production run of our forklift which are estimated to be $2,000,000. Of
the total amount, approximately 75% is projected for parts and component
inventory and manufacturing costs, with the balance projected as general
operating expenditures, which includes overhead and salaries. We also will
require additional funds to complete the acquisition of the 75.1% interest in
Filco GmbH ("Filco"), and for Filco's working capital needs. As of September 30,
2004, we have loaned to Filco a total of $1.23 million. We will complete the
acquisition of Filco once operating capital for Filco is secured to Filco to
finance their operations.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002
Results of Operations
We have been a development stage company for the 2003 and 2002 periods and have
not engaged in full-scale operations for the periods indicated. The limited
revenues for the periods have been derived from the sales of a
non-omni-directional product and from contracts with the United States Navy that
relate to the research and potential application of omni-directional technology
for military use. The available dollar limits of contracts with the United
States Navy were substantially completed during 2002, and we recognized limited
revenues from the United States Navy contract during 2003. During 2005, we
expect to transition from a development stage company to an operating company as
it completes the initial run of its forklifts. Consequently, management believes
that the year-to-year comparisons described below are not indicative of future
year-to-year comparative results.
Revenues
Revenues for fiscal 2003 were $21,879 representing a decrease of $529,243 from
revenues of $551,122 for the 2002 period. Revenues for the 2003 period were
attributable to the US Navy contract. The revenue mix for 2002 consisted of;
$5,686 in sales of a non omni-directional parts, $490,658 in contract revenues
from the United States Navy, and $54,778 in sub-contract revenue.
Cost of Goods Sold
Cost of sales for 2003 was $91,283 which reflects a $116,382 decrease from
$207,665 in fiscal 2002. Cost of sales for 2003 consisted of entirely of
salaries and material incurred in connection with the performance of the US Navy
contract, while amounts for the 2002 period consisted of principally of salaries
and material incurred in connection with the performance of the US Navy contract
and sub-contract work, and to a lesser extent cost of equipment for
non-omni-directional sales.
Operating and Administrative Expenses
Operating and administrative expenses which includes administrative salaries,
depreciation and overhead for the 2003 period totaled $2,199,659 which
represents an increase of $1,185,253 from $1,014,406 incurred in 2002. The
increase is due primarily to consulting fees paid to various third parties in
the form of common stock which totaled $1,424,278, and costs related to the
development of its omni-directional technology. Interest expense payable to
third party suppliers totaled $43,938 for the 2003 period, representing a slight
increase from $33,174 for the 2002 period. In 2003, we received $7,914 in other
income from interest payments from Filco GmbH, which contrasts with $4,215 for
the prior period. Net loss before taxes in 2003 was $2,3 05,087 which reflects
on increase of $1,605,179 from $699,908 in net loss before taxes for the 2002
period.
In 2003, we recorded $210,553 as the expected sale of its net operating losses
and tax credits under a New Jersey program described further in Liquidity and
Capital Resources below. This amount contrasts with $59,292 recorded during
2002.
16
Loss attributable to shareholders for 2003 was $2,282,946 which represents an
increase of $1,642,330 from $640,616 during the 2002 period. During 2003, we
paid dividends on its preferred stock to a controlling shareholder of our
company in the amount of $80,749. No such dividends were paid in 2002. Deficit
accumulated during development stage during 2003 was $2,363,695 (or a loss per
share of $0.30 for common stockholders) which represents an increase of
$1,723,079 from $640,616 (or a loss per share of $0.12 for common stockholders)
for the 2002 period.
Liquidity and Capital Resources
Since our inception, we have financed our operations through the private
placement of our common stock and from loans from our President. During 2003 and
2002 we raised net of offering costs $789,000 and $396,630 from the private
placement oFf our securities.
Dufring 2000, we were approved by the State of New Jersey for our technology tax
transfer program pursuant to which we could sell our net operating losses and
research and development credits as calculated under state law. During 2003 and
2002, we recorded credits of $210,553 and $59,292, respectively from the sale of
our losses and credits (see Note 6 to financial statements).
We anticipate that our cash requirements for the foreseeable future will be
significant. In particular, management expects substantial expenditures for
inventory, product production, and advertising in anticipation of the rollout of
its omni-directional forklift. On January 13, 2004, we entered into a placement
agency agreement with a NASD registered broker-dealer for the private placement
offering of our securities. Our securities consist of units comprised of one
share of common stock and a stock warrant to purchase 50% of an additional share
of common stock at a unit-offering price of $0.80. The warrant is exercisable at
$1.25 per share during a five-year term. The offering is being made on a best
efforts basis, for a total minimum amount of $1,000,000 and a total maximum
amount of $4,000,000, terminating April 26, 2004. During the first quarter of
2004, we received $1,213,874 net of offering costs and expenses from the
offering. The offering is made pursuant to exemptions under the Securities Act
of 1933, as amended. We expect to complete our initial production run of its
SIDEWINDER Lift Truck in the second quarter of 2004. We expect to receive
sufficient funds from the offering to complete the initial production run and to
complete ANSI and UL testing, as well as special tooling costs.
We will require additional funds to continue its operations beyond the initial
production run. These funds are in addition to the funds required by Filco GmbH
as discussed above. Our cash requirements for the next 12 months are projected
to be $2,500,000. Of the total amount, approximately 75-90% are projected for
parts and component inventory and manufacturing costs, with the balance
projected as general operating expenditures, which includes overhead and
salaries. We expect to recognize lower per unit manufacturing and part costs in
the future due to volume discounts, as well as lower per unit shipping costs as
we transition from the initial production run to full-scale production. We
intend to fund these additional cash requirements through the issuance of equity
and/or debt securities which may include the offering described above. We cannot
predict whether we will be successful in obtaining sufficient capital to fund
its continuing operations. If we are unable to obtain sufficient funds in the
near future, such event will delay the rollout of its product and likely will
have a material adverse impact on us and our business prospects.
As of December 31, 2003, our working capital deficit was $77,359. Fixed assets,
net of accumulated depreciation, and total assets, as of December 31, 2003, were
$138,198 and $1,072,253, respectively. Current liabilities and long-term
liabilities, as of December 31, 2003, were $968,296 and $3,974, respectively.
17
BUSINESS
OMNI-DIRECTIONAL TECHNOLOGY
Prior History
Omni directional vehicle technology has been the subject of research and
development by universities, the Department of Defense, and industry for over 25
years. A Swedish inventor patented an early stage omni-directional wheel.
Thereafter, the technology was purchased by the United States Navy and was
advanced at the Naval Surface Warfare Center. The US Navy held the patent until
its expiration in 1990. In 1996, the Navy transferred this technology to us for
commercialization through a Cooperative Research and Development Agreement
(CRADA).
Technology Description
Since the technology transfer under the CRADA agreement, we have examined and
redesigned many aspects of the system for use in various applications including
forklifts and other material handling equipment. In this regard, we refined
control software and hardware, and tested a variety of drive component features
on our pilot omni directional lift trucks and scissor-lifts. Extensive
demonstrations of prototype vehicles for commercial and military users in
combination with market research enabled us to direct our initial development
efforts towards the material handling products, offering the best probability
for successful market entry.
Our management designed other aspects of our machine to complement the unique
functionality of our omni-directional technology. In so doing, we achieved a
virtually maintenance free unit which allows the operator free and unrestricted
movement during operation. Each vehicle is powered with AC motors eliminating
brushes and commutators of conventional DC motors. The AC motors also are
lubricated for life thereby eliminating the need for additional greasing and
fittings. The transmission uses a synthetic lubricant, and is sealed for life.
The joystick controls all vehicle movement; therefore conventional drive trains,
steering racks, hydraulic valve levers, and foot petals for braking and
acceleration are all non-existent.
On a four-wheel omni-directional vehicle employing our technology, each wheel
has a separate electric motor, making the vehicle capable of traveling in any
direction. The motion of the vehicle is controlled by coordinating all four
wheels through a microprocessor that receives input from an operator-controlled
joystick. The joystick controls all vehicle movement (starting, steering, and
stopping). The framework of our omni-directional lift truck consists primarily
of a steel frame mobilized with four omni-directional wheels. The AC electric
motor for each wheel turns its own wheel hub. Each wheel hub is encircled with
multiple tapered rollers that are offset 45 degrees. The tapered rollers,
covered with polyurethane, are extremely durable. By independently controlling
the forward or rearward rotation of each wheel, the vehicle has the capability
of traveling in any direction. The technology allows the vehicle to move
forward, laterally, diagonally, or completely rotate within its own footprint,
thereby allowing it to move into confined spaces without difficulty. The
navigational options of an omni-directional vehicle are virtually limitless. The
omni-directional wheel can be manufactured in almost any size depending upon the
application. For instance, our management believes the wheel can be used on
miniature vehicles or massive load-carrying vehicles.
EXISTING AND PROPOSED PRODUCTS
Sidewinder Omni-Directional Lift Truck. We anticipate that our Sidewinder
Omni-Directional lift truck will be available with rated lift capacities ranging
from 3000 pounds and higher. Our SIDEWINDER ATX-3000 Omni-Directional lift
truck, which is our 3,000-pound model, features our revolutionary
omni-directional technology. Conventional steering racks and foot petals are
non-existent allowing impediment free ingress and egress. This lift truck will
deliver unequaled maneuverability providing significantly improved operating
efficiencies in the materials handling industry. The dealer price is expected to
retail at prices similar to or slightly higher than high-end, comparably sized
standard forklifts. The "street prices" of similar rated, standard
(non-omni-directional) forklifts range from $16,000 to $31,000 per unit. Other
specialty forklifts, that are multi-directional sell for $42,000 and greater,
and vehicles considered very narrow aisle (VNA), are priced from $75,000 and
higher per unit. We believe that, due to its unique features, the
omni-directional lift truck will support a price slightly higher than the
average selling price of a conventional forklift.
Airtrax Conventional Forklift . In the event of the successful acquisition of
Filco GmbH, we expect to use the Filco plant and operations to produce and sell
a line of conventional forklifts manufactured under the Airtrax name for
distribution in the United States and other geographical markets. It also is
contemplated that the SIDEWINDER Omni-Directional lift truck will be
manufactured at the Filco plant and distributed by Filco to European or Middle
East markets.
18
Omni-Directional Aerial Work Platform . In late February 2004, we, in
collaboration with MEC Aerial Platform Sales Corporation of Fresno, California
("MEC"), introduced a concept version of a scissor lift at the American Rental
Association trade show in Atlanta. The scissor lift called the "Phoenix"
incorporated our omni-directional technology along with an MEC platform and lift
mechanisms. The vehicle contains features presently unavailable on conventional
aerial work platforms. For example, similar to our lift truck, the aerial work
platform's movement is controlled by a joystick. Movement to a particular spot
or location at a job site can be accomplished easily due to the omni-directional
technology, thereby eliminating the back and forth positioning typically
associated with conventional platforms. Our designed control systems allow the
operator to move at very regulated and easily controlled acceleration and speed,
virtually eliminating operator error. The machine can climb over obstacles that
would impede other machines. We believe that, similar to our lift truck, the
improved functionality of the aerial work platform will result in increased
productivity at the job-site.
On March 13, 2004, we entered into a draft Product Development, Sales and
Representation Agreement with MEC. The draft agreement calls for the joint
development of a proto-type and production versions of an omni-directional
aerial work platform called the "Phoenix". During the development stage, each
party will provide the parts, which apply to that party's area of
responsibility. We will provide all of the parts required for the
omni-directional traction system and related control systems, and MEC will
provide all of the parts required for the scissor lift and lifting apparatus and
the control systems for the scissor lift apparatus. After development of the
prototype version, the parties will establish the cost of a commercial product,
and if the cost of a commercial product is considered commercially viable, the
parties will jointly develop a commercial version of the aerial work platform.
If commercial production results, we will be responsible for product
manufacturing, and MEC or its affiliate will be responsible to promote, market
and sell the product to their network of approximately 200 distributors. Aerial
work platform sales made by MEC will be subject to a royalty to us and, likewise
sales made by us will be subject to a royalty to MEC. The amount of the
respective royalties will be subject to agreement by the parties. Orders placed
by MEC will be financed by MEC subject to agreed production schedules. The
parties expect to enter into a more formal agreement to further define the
relationship of the parties. At this time, we cannot predict whether a formal
agreement will be entered into between the parties, or whether any sales will
result form the aerial work platform to be developed by the parties.
Omni-directional Wheelchair . Over 43 million disabled and aging Americans are
protected by the Americans with Disabilities Act of 1990 (ADA). This law became
effective in 1991, and now requires businesses with over 15 employees to comply
with specifications which enable persons with disabilities access buildings. As
a result of increased physical access, we believe that persons with disabilities
will experience an increased number of employment and other opportunities. We
have conducted a preliminary design of an omni-directional wheel for wheelchair
applications. Based upon the preliminary design, we believe that we can retail
an omni-directional wheelchair for under $6,000. Wheelchair pricing ranges from
$3,500 for a standard unit to $30,000 for units with improved functionality such
as stair climbing capability.
We will require additional funds to complete a structural and ergonomic design
of a proto-type wheelchair, and to construct the proto-type for further
evaluation and testing. We cannot predict whether we will be able to
successfully develop this product.
Military Products . During 1999, we were awarded a Phase I research contract
under the Department of Defense's Small Business Innovation Research program
(SBIR) to develop an omni-directional Multiple Purpose Mobility Platform (MP2).
Under the Phase I base contract, we studied the application of the
omni-directional technology for military use and were supervised by the Naval
Air Warfare Center Aircraft Division (NAWC-AD) in Lakehurst, New Jersey. The
contemplated use includes the installation of jet engines on military aircraft
and the transportation of munitions and other military goods. We completed the
Phase I base contract in 1999 and were subsequently awarded a Phase I option
from NAWC-AD to further define the uses of the MP2. In July 2000, we were
awarded a Phase II research contract under the SBIR program. Under the Phase II
contract, we are studying the feasibility of the MP2 for military purposes, and
will culminate with the construction of one or more proto-type devices. This
contract (with the option) was extended twice for 6 months each past the
42-month contract time period. Contract revenues were $750,000. Through December
31, 2003 we have received approximately $720,000 in revenues from the Phase II
contract, and completed the production design of the MP2. A completed proto-type
MP2 was delivered to the US Navy during the end of the first quarter of 2004 for
testing purposes. A second vehicle, an omni-directional jet engine installation
machine is being constructed for the US Navy, pending receipt of additional
funding from the SBIR program. We have been advised by the US Navy that a
non-SBIR sponsor for the MP2 program must be identified before a Phase II option
is exercised. A Phase III contract could be awarded without such a sponsor.
Although our management believes the underlying omni-directional technology for
the proposed MP2 has significant potential for both commercial and military
applications, we cannot predict whether any sales beyond the Phase II contract
will result from the SBIR program.
19
In connection with the MP2, on December 11, 2003, we entered into a Teaming
Agreement with United Defense, L.P., Arlington, Virginia. Under the agreement,
United Defense agreed to provide the exclusive manufacture, marketing and
support for the MP2 and any derivative products in respect to any contracts
awarded to us by U.S. Department of Defense and any international military
customers under the SBIR arrangement.
CURRENT OPERATIONS
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 its components,
including the unique shaped wheels, motors, and frames, have been specially
designed by us and specially manufactured. Four pilot models of the commercial
omni-directional lift truck are currently operational.
We have commenced and are near completion of our initial production run
consisting of 10 units of our Sidewinder ATX-3000 Omni-Directional Lift Truck.
Substantially all of the parts including frames, motors, controllers, and
micro-processors have been ordered and received by us, and are partially
assembled. The initial production run will be completed upon receipt of wheels
and other components from suppliers which is expected in the second quarter of
2004. Unit assembly is undertaken by Crane and Machinery, Inc., Bridgeview,
Illinois under our specifications. UL and final ANSI testing is expected to be
completed from 30 to 90 days from production completion. Following required
testing, we expect to sell these units to select dealers in the United States.
We have received purchase orders for our initial production run of 10 units.
Transaction with Filco GmbH
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.
The consideration for the proposed acquisition consists of the issuance of
three-year options to Mr. Filipov to purchase 900,000 shares of our common stock
at an exercise price of $0.01. No more than 12.5% of such options can be
exercised during any one year, and the exercise period for such annual amount is
three years. In addition, we agreed to loan Filco GmbH approximately $1,300,000,
which, if the acquisition is completed, may, at our exclusive election, be
converted into equity of Filco GmbH along with approximately 1,300,000 Euros
currently owed to Fil Filipov by Filco GmbH. Finally, the agreement in principal
provided for Mr. Filipov to be appointed a director of our company and to
receive an additional 100,000 options of our common stock for serving as a
director. In December 2004, Mr. Filipov was appointed as a director of our
company.
The agreement in principal provides that we will register with the Securities
and Exchange Commission all of the shares issuable to Mr. Filipov, including
those underlying the described stock options.
We have not yet finalized nor executed the acquisition agreement but have loaned
Filco GmbH an aggregate principal amount of $2,700,000 pursuant to a series of
unsecured promissory notes. We have used proceeds from the private placement
offerings that we completed during 2004 to fund such loans. Filco GmbH has
informed us its estimated working capital needs during the next year will be
approximately $5,000,000, with $1,500,000 needed during January 2005, in order
for it to achieve profitable operations. Should we complete the acquisition of
Filco GmbH, we will need to raise additional capital in order to fund the
working capital needs of Filco GmbH.
No assurance can be given that the acquisition agreement will be finalized, or
that if it agreement is finalized, that the conditions to closing will be
satisfied, or that we will raise sufficient funds to pay all amounts due under
the acquisition agreement. Further, in the event that we consummate the
20
acquisition agreement, no assurance can be given that we will be able to raise
sufficient funds to meet the working capital needs of Filco, as well as its own
working capital needs. Our inability to raise sufficient capital as discussed
herein may impair Filco's operations as well as its own operations.
MANUFACTURING AND SUPPLIERS
The initial production run of our lift truck is being assembled at Crane and
Machinery, Inc. (Schaeff Forklift), Bridgeview, Illinois. Schaeff Forklift also
has constructed the frames and overhead guards for this production run in
accordance with our specifications. The parties operate under the terms of
written purchase orders. Parts and assemblies for the first commercial models
have being ordered and/or procured from other vendors. The initial production
run will be completed upon receipt of wheels manufactured for us by The Timken
Corporation and components from other suppliers. The initial run will refine the
assembly line, help develop procedures, and incorporate inventory control and
quality assurance. Management anticipates that the initial run of forklifts
should be completed in the first quarter of 2005. We plan to create the
framework for rapidly scalable production capacity at the Crane and Machinery
facility, initially sized for nominal monthly production but capable of ramping
up for anticipated demand before year's end. We also plan to manufacture the
omni-directional lift truck at the Filco GmbH facility for European and Middle
Eastern sales.
Components for our forklifts consist of over the counter products and
proprietary products that have been specially designed and manufactured by
various suppliers in collaboration with us. We believe that continual
refinements of certain components will occur during the first six months of
initial production in response to user feedback and additional product testing.
We will strive to improve product functionality which may require additional
refinements in the future. The need for additional refinements on a continuing
basis may slow projected product sales.
We consider the specially designed and manufactured products proprietary, and
has entered into exclusive contractual agreements with certain suppliers to
protect the proprietary nature of these products. These arrangements prohibit
the supplier from producing the same or similar products for other companies. In
addition, while we maintain single sources for the over the counter components,
we believes that other sources are available if necessary.
DISTRIBUTION AND PRODUCT MARKETING
We intend to establish a national and international dealer network to sell our
forklift product line to existing equipment dealers. However, we may sell
directly to select national and international accounts, such as Home Depot and
Lowe's.
During the past two years, in anticipation of commercial production, we
solicited interest from targeted dealers nationwide, and in certain instances,
received contracts from a number of these dealers. Due to the delay in
establishing commercial production, the contracts were not fulfilled. In 2004,
we began soliciting dealers for distribution and during the first quarter of
2004 have reached an agreement with approximately 40 dealers nationwide.
Targeted dealers will consist of selected premier forklift dealers, currently
selling other forklift products. The dealer network will consist of dealers who
have substantial market share in the US, with a history of being able to sell
and repair forklifts and/or related material handling solutions. Several of the
targeted dealers are significant sized entities, having annual sales in excess
of $100 million. We expect to provide a sales incentive to dealers through an
aggressive pricing structure. Typically, a dealer will earn a commission ranging
from $500 to $1,000 on the sale of a competitive forklift. Our pricing structure
will enable the dealer to receive commissions from $3,500 to $4,000 per sale of
the SIDEWINDER ATX-3000.
In May 2003, we entered into contracts with two Alaskan Native Corporation (ANC)
whose primary purpose is to manage assets and conduct business for the benefit
of its nearly 3,000 Alaskan Native shareholders. The two corporations have been
granted Section 8(a), small disadvantaged business status, under the Small
Business Administration. Under their Section 8(a) status, the two corporations
can provide sole source bid to provide services and products, such as those
developed by us, for resale to the United States Government. During fiscal 2003,
we did not effect any sales through this re-seller channel, and can not predict
whether we will be able to do so in the future.
In addition to establishing our own dealer network, we will attempt to
capitalize on the existing distribution network of MEC if we are able to reach a
formal agreement with MEC and successfully develop the omni-directional work
platform discussed above. We would seek to include our omni-directional forklift
into the distribution network of MEC, which consist of approximately 200 dealers
nationwide. We cannot predict whether a formal agreement will be entered into
between the parties, or whether any sales will result form the aerial work
platform to be developed by the parties.
21
We also intend to use trade shows and print and television media to advertise
and promote our omni-directional products. Print media will include
advertisements in national and international publications such as major material
handling equipment magazines, and direct mailings to targeted distributors and
end-users. Heavy equipment is rarely, if at all, advertised on television.
However, we believe that television will provide an effective media for our
product, due to its unique attributes. We believe that due to the current
economic conditions, we will be able to capitalize on favorable advertising
pricing. We also expect to be an exhibitor at industry trade shows from time to
time, including the bi-annual ProMat show located in Chicago, Illinois.
FACILITIES
We maintain our administrative offices at 870B Central Avenue, Hammonton, New
Jersey 08361 on premises owned by our President. As of December 31, 2003, the
arrangement between the parties has been rent-free. In addition, we maintain
limited offices at H&R Industries, Inc. ("H&R Industries"), located at 100 Park
Avenue, Warminster, Pennsylvania 18974. H&R Industries provides contract
manufacturing and assembly services to us. Through December 31, 2002, the
arrangement between the parties has been rent-free. Effective January 1, 2003,
we have agreed to pay H&R Industries a rental fee of $3,000 per month and have
the option to pay in cash or in the form of common stock. The arrangement is on
a month-to-month basis.
MARKETS
Forklifts
Our initial market focus will be directed to the forklift market. We believe the
commercial version of the omni-directional forklift will revolutionize the
materials handling and warehousing industries creating potential markets
globally. Industry data indicates that during 1998 approximately 174,000 and
550,000 units were sold in the United States and worldwide, respectively (Modern
Materials Handling). Based upon an average per unit sale price of $28,500
(Modern Materials Handling estimate), the total market in the United States
would approximate $5 billion in 1998. This amount represents sales of a broad
range of vehicles with price ranges from $18,000 to $31,000 for a standard
3000-pound rated vehicle to $75,000 or greater for specialty narrow aisle or
side loaders. Of the total market, management expects to compete with mid-range
electrical and gas powered riders, and some specialty narrow aisle or side
loaders.
Aerial Work Platforms
Aerial Work Platforms are used in the construction and warehousing industries,
and are ideally suited for omni directional technology. According to data
provided by the United States Department of Commerce, this market consists of
approximately $1.2 billion in annual sales. Aerial Work Platforms and man lifts
range in size from single user lifts to large off road machines. Of the total
market, we expect to compete with a range of indoor man lifts.
COMPETITION
We expect to confront competition from existing products, such as standard and
"very narrow aisle" forklifts, and from competing technologies. Competition with
standard forklifts, which retails from $16,000 to $31,000, will be on the basis
of utility, price, and reliability. We believe that we will compete favorably
with a standard forklift for reliability, and that a purchase decision will be
based upon weighing the operational advantages of our products against its
higher purchase price. VNA and sideloader forklifts retail at $75,000 or
greater. While our SIDEWINDER omni-directional lift truck cannot be considered
"very narrow aisle", it can perform "narrow aisle" functions at a significantly
less cost. We also are aware of multi-directional forklifts now being offered by
other manufacturers that retail from $42,000 and higher for the standard
version. These newer products have improved operational features, however, they
are unable to travel in all directions, and hence are not omni-directional.
These machines have to stop, turn all four wheels, and then proceed to drive in
the sideward direction. Despite these improved operational features, management
believes these manufacturers have adhered to older conventional methods and have
added a substantial amount of parts to their forklifts to achieve improved
functionality, which contrasts with the design and features of our product as
discussed previously herein. Therefore, to that extent, we believe that we
maintain a competitive advantage to these newer products.
We recognize that many of these manufacturers are subsidiaries of major national
and international equipment companies, and have significantly greater financial,
engineering, marketing, distribution, and other resources than us. In addition,
the patent on omni-directional technology expired in 1990. Although we have
received patent protection for certain aspects of our technology, no assurances
can be given that such patent protection will effectively thwart competition.
22
PATENTS AND PROPRIETARY RIGHTS
On January 22, 2002, we received US patent #6,340,065 relating to our low
vibrations wheels. On May 28, 2002, we received US patent #6,394,203
encompassing certain aspects of the omni-directional wheel with some features
specific to the forklift, and in April 15, 2003 we received US patent #6,394,203
relating to methods for designing low-vibration wheels. We also have several
patent applications pending relating to other aspects of our technology. We
expect to make future patent applications relating to various other aspects of
our omni-directional technology. We also have filed a patent application for our
power module. At this time, no foreign patents have been issued for any of our
technology. In December 1997, we were awarded a patent for an omni-directional
helicopter ground-handling device.
We also seek to protect our proprietary technology through exclusive supply
contracts with manufacturers for specially designed and manufactured components.
PRODUCT LIABILITY
Due to nature of our business, we may face claims for product liability
resulting from the use or operation of our forklifts or other products.
Presently, we do not maintain any product liability insurance. It intends to
obtain such insurance commensurate with the initial shipment of our
omni-directional forklifts
EMPLOYEES
As of February 11, 2005, we have six full time employees which includes our
President, two part time employees, and engage consultants from time to time. We
have no collective bargaining agreements with our employees and believe our
relations with our employees are good.
DESCRIPTION OF PROPERTY
We maintain our administrative offices at 870B Central Avenue, Hammonton, New
Jersey 08361 on premises owned by our President. As of December 31, 2003, the
arrangement between the parties has been rent-free. In addition, we maintain
limited offices at H&R Industries, Inc. ("H&R Industries"), located at 100 Park
Avenue, Warminster, Pennsylvania 18974. H&R Industries provides contract
manufacturing and assembly services to us. As of December 31, 2002, the
arrangement between the parties has been rent-free. Effective February 1, 2003
we have agreed to pay H&R Industries a rental fee of $3,000 per month and has
the option to pay in cash or in the form of common stock. The arrangement is on
a month-to-month basis.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors are elected at each meeting of stockholders and hold office until the
next annual meeting of stockholders and the election and qualifications of their
successors. Executive officers are elected by and serve at the discretion of the
board of directors.
Our executive officers and directors are as follows:
Name Age Position
---- --- --------
Peter Amico 61 President and Chairman of the Board of Directors
D. Barney Harris 43 Executive Vice President and Director
Frank A. Basile, Esq 68 Director
James Hudson 61 Director
William Hungerville 68 Director
Fil Filipov 58 Director
23
Peter Amico - Mr. Amico is the founder of the Company and has been President and
Chairman of the Company and its predecessor since their inception in April 1995.
Prior to 1995, Mr. Amico was president and majority shareholder of Titan
Aviation and Helicopter Services, Inc. ("Titan"). He has an extensive background
in sales and in structural steel design. His career in sales has spanned over
thirty years and he has held sales positions at Firestone Tire & Rubber and
Union Steel Products, Inc. As a consequence of separate helicopter and airplane
accidents involving Titan, Mr. Amico filed for bankruptcy protection in 1996.
D. Barney Harris - Mr. Harris has been a Director of the Company since December
1998 and a Vice President since July 1999. From 1997 to July 1999, Mr. Harris
was employed by UTD, Inc. Manassas, Virginia. Prior to 1997, Mr. Harris was
employed by EG&G WASC, Inc., Gaithersburg, Maryland, as a Senior Engineer and
Manager of the Ocean Systems Department where he was responsible for the
activities of 45 scientists, engineers and technicians. During this period while
performing contract services for the US Navy, he was principally responsible for
the design of the omni-directional wheel presently used by the Company. Mr.
Harris received his B.S.M.E. from the United States Merchants Marine Academy in
1982.
Frank A. Basile, Esq. - Mr. Basile has been a Director of the Company since
April 1999. Mr. Basile has been a practicing attorney since 1963 and is
president of the law firm Basile & Testa, Vineland, New Jersey.
James Hudson - Mr. Hudson has been a Director of the Company since May 1998.
From 1980 to present, he has been President of Grammer, Dempsey & Hudson, Inc.,
a steel distributor located in Newark, New Jersey.
William Hungerville - Mr. Hungerville has been a director since February 2002.
Since 1998, Mr. Hungerville has been retired from full time employment. From
1974 to 1998, he was the sole owner of a pension administrative service firm.
Mr. Hungerville is a graduate of Boston College, and attended an MBA program at
Harvard University for 2 years.
Fil Filipov - Mr. Filipov is the Chairman of Supervisory Board of Tatra, a Czech
Company, which is producing off highway trucks. He is the former President & CEO
of Terex Cranes, a Division of Terex Corp. From 1994 through 1996, Mr. Filipov
served as Executive Vice President of the Terex Corp., where he was responsible
for strategic acquisitions and was the Managing Director of Clark Material
Handling Company in Germany (Filco GmbH). If the acquisition of Filco GmbH is
completed Mr. Filipov will retain 24.9% of Filco GmbH.
Executive Officers of the Company
Officers are appointed to serve at the discretion of the Board of Directors.
None of our executive officers or directors has a family relationship with any
other executive officer or director of the Company.
Committees of the Board of Directors
We currently do not have any committees of our board of directors. We intend to
form an audit committee during the first quarter of 2005.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on the Company's review of copies of all disclosure reports filed by
directors and executive officers of the Company pursuant to Section 16(a) of the
Securities Exchange Act of 1934, as amended, all of our company's officers and
directors timely filed reports on Forms 3, 4 and 5.
EXECUTIVE COMPENSATION
The compensation for all directors and officers individually for services
rendered to the Company for the fiscal years ended December 31, 2003, 2002 and
2001 are set forth in the following table:
Long-Term
Compensation
Other Annual Awards (Securities
Name and Position Year Salary Bonus Compensation Underlying Options)
================================= ========== ============== ========== ================= ====================
Peter Amico
President and Chairman 2004 116,826 0 0
2003 88,462 (1) 0 0 64,000 (2)
2002 84,135 (1) 0 0 52,399 (2)
24
(1). During 2003, Mr. Amico was entitled to receive a salary of $100,000,
however $88,461.68 was paid and the balance was deferred for future payment. In
2002, $84,135 was paid as salary to Mr. Amico and $3,365 balance deferred for
future payment. In 2002 and 2003, Mr. Amico received an automobile usage valued
at $1,000.
(2) Pursuant to his employment agreements, Mr. Amico had outstanding options to
acquire a total of 180,000 shares of common stock of the Company. Of these
options, 20,000 shares are exercisable at a total price of $2.00, 50,000 shares
are exercisable at $0.315 per share, 60,000 shares are exercisable at a price of
$0.1575 per share, and 50,000 shares were exercised at a total price of $0.01.
On February 12, 2003, Mr. Amico exercised all of his options in exchange for the
payment of $25,202. The fair market value of the underlying common stock is
$1.26, the closing price of $1.26 on the exercise date of February 12, 2003. The
amount for 2003 represents the number of options (50,000) multiplied by the fair
market ($1.26) less his exercise costs of $0.01. The amount for 2002 represents
the number of options (50,000) multiplied by the fair market ($1.26) less his
exercise costs of $12,601. The amount for 2001 represents the number of options
(50,000) multiplied by the fair market ($1.26) less his exercise costs of
$12,601. In addition, for 2002 and 2003, the amounts include $1,000 for the
value of an automobile usage. Mr. Amico was issued 50,000 options for the period
July 1, 2003 through June 30, 2004.
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning options granted to executive
officers named in the Summary Compensation Table during the fiscal year ended
December 31, 2003:
Individual Grants
Number of % of Total Options
Securities Granted to
Name Underlying Employees in Fiscal
Options Granted Year Exercise Expiration Date
(#) Price ($/sh)
--------- ----------------------------------------------------------------------------
Peter Amico 50,000 40%(1) $2.20(1) None(1)
President and Chairman
(1) Pursuant to his employment agreements, Mr. Amico had outstanding options to
acquire a total of 180,000 shares of common stock of the Company. Of these
options, 20,000 shares are exercisable at a total price of $2.00, 50,000 shares
are exercisable at $0.315 per share, 60,000 shares are exercisable at a price of
$0.1575 per share, and 50,000 shares were exercised at a total price of $0.01.
On February 12, 2003, Mr. Amico exercised all of his options in exchange for the
payment of $25,202. The fair market value of the underlying common stock is
$1.26, the closing price of $1.26 on the exercise date of February 12, 2003.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table contains information concerning the number and value, at
December 31, 2003, of unexercised options held by executive officers named in
the Summary Compensation Table:
Number of Securities Underlying Unexercised Options at Value of Unexercised In-the-Money
Name FY-End (#) (Exercisable/Unexercisable) Options at FY-End ($)
(Exercisable/Unexercisable)
------- ------------------------------------------------------------------------------------------------------
Peter Amico
President and Chairman 180,000 0 0 $201,598
Compensation of Directors
Our directors are compensated at the rate of $250 per meeting and are reimbursed
for expenses incurred by them in connection with our business. During 2002 and
2001, each director, other than Mr. Amico, received an annual stock option to
purchase 5,000 shares of common stock exercisable at $0.50 per share. During
2003, each director, other than Mr. Amico, received a stock grant of 10,000
shares of our common stock. During 2004, each director received a stock grant of
10,000 shares of our common stock. Our board of directors approved stock grants
of 20,000 shares for each director for 2005, conditional upon us having
revenues.
25
Other than as described above, we does not have any other form of compensation
payable to our officers or directors, including any stock option plans, stock
appreciation rights, or long term incentive plan awards for the periods
indicated in the table.
Executive Employment Agreements
We and Peter Amico have entered into written employment agreements for Mr.
Amico's role as our President. The parties entered into an agreement covering
the period from April 1997 to June 30, 2002 ("Original Employment Agreement").
Effective July 1, 2002, the parties entered into a second employment agreement
for a one year term ("Second Employment Agreement").
Under the Original Employment Agreement, Mr. Amico received an annual salary of
$75,000 per year, and received stock options to acquire up to 50,000 shares per
annum. Of the options, 10,000 shares were exercisable for a total consideration
of a $1.00 beginning year three of the contract, 25,000 shares were exercisable
at 30% of the lowest price paid for the stock in the 30 day period preceding
exercise for each year of the contract, and 15,000 shares were exercisable at
15% of the lowest price paid for the stock in the 30 day period preceding
exercise beginning year three of the contract.
Under the Second Employment Agreement, Mr. Amico was entitled to receive an
annual salary of $100,000, and receives an option to acquire 50,000 shares of
our common stock for a total exercise price of $0.01. We may terminate the
agreement without cause upon 14 days' written notice to the Employee. The Second
Employment Agreement terminated on June 30, 2003, and the parties have not
entered into a subsequent agreement, however, Mr. Amico continues to receive an
annual salary of $100,000. We and Mr. Amico expect to enter into a new
employment agreement which may include stock options similar to those of the
Second Employment Agreement retroactive to July 1, 2003 and for periods
subsequent to fiscal 2003; however, the terms of the new employment agreement
has not been finalized by the parties, and will be subject to approval by the
Board of Directors.
Under the Employment Agreement, ratified by the Board of Directors on November
30, 2004 for the period of July 1 2003 through June 30, 2004, Mr. Amico was
entitled to receive an annual salary of $135,000, and receives an option to
acquire 50,000 shares of our common stock for a total exercise price of $0.01.
We may terminate the agreement without cause upon 14 days' written notice to the
Mr. Amico.
Under a two year Employment Agreement, ratified by the Board of Directors on
November 30, 2004 for the period of July 1, 2004 through June 30, 2005, Mr.
Amico is entitled to receive an annual salary of $200,000, and receives options
to purchase up to 500,000 shares of our common stock per year at the rate equal
to the "bid" price of one share of stock on the beginning date of the employment
agreement. All options have a cashless exercise. We may terminate the agreement
without cause upon 14 days' written notice to Mr. Amico. Under the second year
of the above Employment Agreement, for the period of July 1, 2005 through June
30,2006, Mr. Amico is entitled to receive an annual salary of $250,000, and
options to purchase up to 750,000 shares of our common stock per year at the
rate equal to the "bid" price of one share of stock on the beginning date of the
employment agreement. All options have a cashless exercise. We may terminate the
agreement without cause upon 14 days' written notice to Mr. Amico.
Two of our employees maintain annual stock options for 25,000 during the term of
their respective employment agreements. The employment agreements may be
terminated by either party with 14 days prior notice, and do not contain a fixed
term. Accordingly, the amount of stock options issuable to such employees is not
determinable.
The stock options for shares of our common stock identified above are
exercisable as follows; 2,500 shares are exercisable for a total consideration
of $1.00, 10,000 shares are exercisable at 35% of the lowest price paid for the
stock in the 30 day period preceding exercise, and 12,500 shares are exercisable
at 17.5% of the lowest price paid for the stock in the 30 day period preceding
exercise. The options had not been exercised as of December 31, 2003 and
weighted average exercise price is not determinable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Arcon Corp., a corporation wholly owned by our chairman and president, owns
275,000 shares of preferred stock of the Company. Each share of preferred stock
is entitled to 10 voting rights on all matters on which shareholders are
entitled to vote. The preferred stock has a stated value per share of $5.00 and
an annual dividend per share equal to 5% of the stated value. The annual cash
dividend through November 30, 2004 is $68,750. Dividends are cumulative and the
holder has a right during any quarter to waive any cash dividend and receive the
dividend in the form of common stock at a price per share equal to 30% of the
lowest private offering or trading price of the common stock. The preferred
stock is not convertible into common stock, however, has a preference over
26
common stockholders upon liquidation equal to the stated value per share. For
fiscal year 2001, Arcon received 246,731 shares of our common stock in lieu of
the cash dividend. For fiscal year 2002, Arcon received a cash dividend of
$17,187.50. For fiscal year 2003, Arcon received a cash dividend of $28,646 and
expects to receive an additional $34,375 in cash dividends and 19,097 shares of
common stock in lieu of the cash payment of the dividend.
Arcon Corp. and our President have made loans from time to time to us in varying
amounts. As of December 31, 2003, a loan in favor of our President in the amount
of $32,665 is outstanding. The loan is due on demand and bears interest at 12%.
In July 2000, Arcon Corp. purchased 33,334 shares of common stock at a price per
share of $1.50 for a total consideration of $50,001.
Mrs. Patricia Amico, the wife of our President, performed services for us during
2003, 2002, and 2001 for which she received $11,579, $9,930, and $9,126,
respectively. Mr. Timothy Smith, the son in law our President, performed
services for us during 2000. The amount of such services totaled $4,644.
Mr. Frank Basile, a director, is a partner of a law firm that performed legal
services for us during fiscal 2003, 2002 and 2000. The billing amount for such
services for each year was less than $10,000.
During 2002 and 2001, each of our directors, other than Mr. Amico, received a
stock option to acquire 5,000 shares of common stock at a price per share of
$0.50, and in 2003, each director, other than Mr. Amico, received a grant from
us of 10,000 shares of common stock. In 2004, each director received a grant
from us of 10,000 shares of our common stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table identifies as of February 11, 2005 information regarding the
current directors and executive officers of the Company and those persons or
entities who beneficially own more than 5% of its common stock and Preferred
Stock of the Company, the number of and percent of the Company's common stock
beneficially owned by:
o all directors and nominees, naming them,
o our executive officers,
o our directors and executive officers as a group, without naming them, and o
persons or groups known by us to own beneficially 5% or more of our common
stock:
The Company believes that all persons named in the table have sole voting and
investment power with respect to all shares of common stock beneficially owned
by them.
A person is deemed to be the beneficial owner of securities that can be acquired
by him within 60 days from February 11, 2005 upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage ownership
is determined by assuming that options, warrants or convertible securities that
are held by him, but not those held by any other person, and which are
exercisable within 60 days of February 11, 2005 have been exercised and
converted.
Peter Amico(1) Common Stock 1,870,623 (6) 12.36% (2)
870B Central Avenue Preferred Stock 2,750,000 (3)(5) 100%
Hammonton, NJ 08037
D. Barney Harris(1) Common Stock 236,025 (7) 1.56% (2)
870B Central Avenue Preferred Stock 0 0%
Hammonton, NJ 08037
Frank Basile(1) Common Stock 142,873 (8) *
870B Central Avenue Preferred Stock 0 0%
Hammonton, NJ 08037
James Hudson(1) Common Stock 75,800 (9) *
870B Central Avenue Preferred Stock 0 0%
Hammonton, NJ 08037
William Hungerville(1) Common Stock 165,950 (10) *
870B Central Avenue Preferred Stock 0 0%
Hammonton, NJ 08037
All Officers and Directors Common Stock 2,491,271 (11) 16.47% (2)
As a Group (5 persons) Preferred Stock 2,750,000 100%
----------------------------
Arcon Corp. Common Stock 1,580,623 (4) 10.45%
870B Central Avenue Preferred Stock 2,750,000 (3)(5) 100%
Hammonton, NJ 08037
*Less than 1%
27
(1) The address of each beneficial owner is the address of the Company.
(2) Based on 15,129,342 shares of common stock outstanding as of February 11,
2005, except that shares of common stock underlying options or warrants
exercisable within 60 days of the date hereof are deemed to be outstanding for
purposes of calculating the beneficial ownership of securities of the holder of
such options or warrants.
(3) Based upon 275,000 outstanding shares of preferred stock after giving effect
to the 10 for 1 voting rights.
(4) Represents 1,580,623 shares held by Arcon Corp., a corporation wholly owned
by Mr. Amico ("Arcon"), and however, excludes common stock that may be issued to
Arcon as a dividend on the preferred stock.
(5) Represents shares held by Arcon.
(6) Represents 1,580,623 shares of common stock held by Arcon as stated in
footnote (4) above, and 305,000 shares of common stock held individually by Mr.
Amico.
(7) Represents 200,625 shares of common stock held individually, 25,000 shares
of common stock issuable under his employment agreement, and 5,000 shares of
common stock issuable upon exercise of director's options for 2002.
(8) Represents 100,000 shares held individually, 15,000 shares of common stock
issuable upon exercise under director's options for 2002 and 2001, 12,046 shares
held by an affiliate, and 10,000 shares held by his spouse. The amount excludes
shares of common stock to the Company's that may be granted to directors during
2004.
(9) Represents 41,300 shares of common stock held by an affiliate. The amount
excludes shares of common stock to the Company's that may be granted to
directors during 2004.
(10) Represents 34,300 shares of common stock held individually, 700 shares held
by his spouse and 10,000 shares held by a family trust. The amount excludes
shares of common stock to the Company's that may be granted to directors during
2004.
(11) Includes (4), (6), (7), (8), (9), and (10).
DESCRIPTION OF SECURITIES BEING REGISTERED
COMMON STOCK
We are authorized to issue up to 20,000,000 shares of Common Stock without par
value. On January 11, 2005, we filed a proxy statement with the SEC for a
special meeting of shareholders pursuant to which we will request that our
shareholders approve an amendment to our certificate of incorporation to
increase our authorized common stock to 50,000,000 shares. As of February 11,
2005, there were 15,129,342 shares of common stock outstanding. The holders of
the issued and outstanding shares of our common stock are entitled to receive
dividends if declared by our board of directors out of any funds lawfully
available therefore. The board of directors intends to retain future earnings to
finance the development and expansion of our business and does not expect to
declare any dividends in the foreseeable future. The holders of the common stock
have the right, in the event of liquidation, to receive pro rata all assets
remaining after payment of debts and expenses. The common stock does not have
any preemptive rights and does not have cumulative voting rights. The issued and
outstanding shares of common stock are fully paid and nonassessable.
Holders of shares of common stock are entitled to vote at all meetings of such
shareholders for the election of directors and for other purposes. Such holders
have one vote per share for each share of common stock held by them.
We have engaged Signature Stock Transfer as independent transfer agent and
registrar.
PREFERRED STOCK
We are authorized to issue up to 500,000 shares of preferred stock. On January
11, 2005, we filed a proxy statement with the SEC for a special meeting of
shareholders pursuant to which we will request that our shareholders approve an
amendment to our certificate of incorporation to increase our authorized
preferred stock to 5,000,000 shares. In addition, under such proxy statement we
will propose to amend our certificate of incorporation to provide that the
shares of preferred stock may be issued in series, and shall have such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issuance of such
28
stock adopted from time to time by the board of directors. If our shareholders
approve such proposal, the board of directors will be expressly vested with the
authority to determine and fix in the resolution or resolutions providing for
the issuances of preferred stock the voting powers, designations, preferences
and rights, and the qualifications, limitations or restrictions thereof, of each
such series to the full extent now or hereafter permitted by the laws of the
State of New Jersey.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
On January 11, 2005, we filed proxy statement with the SEC for a special meeting
of shareholders pursuant to which we will request that our shareholders approve
an amendment to our certificate of incorporation to provide, to the fullest
extent permitted under the laws of the State of New Jersey, that our directors
or officers shall not be personally liable to us or our shareholders for damages
for breach of such director's or officer's fiduciary duty. The effect of this
provision of our articles of incorporation is to eliminate our rights and our
shareholders (through shareholders' derivative suits on behalf of our company)
to recover damages against a director or officer for breach of the fiduciary
duty of care as a director or officer (including breaches resulting from
negligent or grossly negligent behavior), except under certain situations
defined by statute. We believe that the indemnification provisions in our
articles of incorporation, if approved by our shareholders, are necessary to
attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
29
SELLING STOCKHOLDERS
The table below sets forth information concerning the resale of the shares of
common stock by the selling stockholders. We will not receive any proceeds from
the resale of the common stock by the selling stockholders. We will receive
proceeds from the exercise of the warrants. Assuming all the shares registered
below are sold by the selling stockholders, none of the selling stockholders
will continue to own any shares of our common stock.
The following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.
30
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering After the Offering
------------------------------- ----------------------------------
Total
Shares
Name Number (1) Percent Registered (1) Number Percent
--------------------------------- ------------------- -------------- ------------------ ------------ ------------
Lerner Enterprises 468,750 * 468,750 0 0
Wilfred Shearer 375,000 * 375,000 0 0
Richard Spencer 187,500 * 187,500 0 0
Bais Yakov Moishe 187,500 * 187,500 0 0
Michael Vanechanos 187,500 * 187,500 0 0
Harry & Linda Whale 187,500 * 187,500 0 0
Herbert Strauss 181,500 * 181,500 0 0
Sara Heiman 178,125 * 178,125 0 0
Eliezer Rosenthal 159,375 * 159,375 0 0
Professional Traders Fund 150,000 * 150,000 0 0
Frank Vero and Sharon Vero 112,500 * 112,500 0 0
Mark A. Phelps Catherine L. Phelps 93,750 * 93,750 0 0
Mitchell Quintner 93,750 * 93,750 0 0
Danny Goode 93,750 * 93,750 0 0
Kellog Capital Group LLC 93,750 * 93,750 0 0
Leon Goldenberg 93,750 * 93,750 0 0
Douglas P. Cone, Jr 93,750 * 93,750 0 0
Judith Glaser 93,750 * 93,750 0 0
Ami Silberman & Karen 93,750 * 93,750 0 0
Century Development Corp 93,750 * 93,750 0 0
Noel Ischy 93,750 * 93,750 0 0
Shalom Torah Center 75,000 * 75,000 0 0
Wayne Miller 75,000 * 75,000 0 0
Van Wyck Window Fashion 75,000 * 75,000 0 0
Judy Rosenthal 75,000 * 75,000 0 0
Anthony Costanzo 69,375 * 69,375 0 0
Ateres Mechoel, Inc. 65,625 * 65,625 0 0
Daniel Barbara 60,000 * 60,000 0 0
Anne Oldham 56,250 * 56,250 0 0
James & Maureen Mcmullen 56,250 * 56,250 0 0
Dr. Dushan Kosovich 56,250 * 56,250 0 0
James Schultz 46,875 * 46,875 0 0
Stuart Margolis 46,875 * 46,875 0 0
Raymond Labella 46,875 * 46,875 0 0
David Rubenstein and Deborah S. Rubenstein 46,875 * 46,875 0 0
Murry Weitman and Toby Weitman 46,875 * 46,875 0 0
Edward Jaffe 46,875 * 46,875 0 0
Salvatore Amato 46,875 * 46,875 0 0
Rachel Mendelowitz 46,875 * 46,875 0 0
Sal Marsella 46,875 * 46,875 0 0
Richard Weir Wendy A. Weir 46,875 * 46,875 0 0
Jerome Miller 46,875 * 46,875 0 0
Fedele Volpe 46,875 * 46,875 0 0
James Blumenthal 46,875 * 46,875 0 0
James Woodworth 46,875 * 46,875 0 0
John Pearson 46,875 * 46,875 0 0
Bella Jacobs 46,875 * 46,875 0 0
Shmyer Breuer 46,875 * 46,875 0 0
Jacob Gold 46,875 * 46,875 0 0
Lloyd Cox 46,875 * 46,875 0 0
Tighe Taylor 46,875 * 46,875 0 0
Abraham Muller 46,875 * 46,875 0 0
James Moore Def benefit pl 46,875 * 46,875 0 0
William Kurinsky (2) 48,437 * 48,437 0 0
Benjamin Bekhore 46,875 * 46,875 0 0
Maria Marsella 46,875 * 46,875 0 0
Salvatore & Carlo Amato 46,875 * 46,875 0 0
More Int'l Investments, Inc. 46,875 * 46,875 0 0
Evangelos Xistris and Carol Monroe 40,875 * 40,875 0 0
Jay & Marsha Bloom 23,438 * 23,438 0 0
Edward Pikus 23,438 * 23,438 0 0
Nuala O'Halloran and Daniel O'Halloran 23,438 * 23,438 0 0
Israel David Zajac 46,875 * 46,875 0 0
George Scritchfield (3) 35,000 * 35,000 0 0
Wahl, William, Sr.(4) 100,000 * 100,000 0 0
Raymond James & Assoc. Inc Custodian,
Thompson, William (4) 100,000 * 100,000 0 0
31
Shares Beneficially Owned Shares Beneficially Owned
Prior to the Offering After the Offering
------------------------------- ----------------------------------
Total
Shares
Name Number (1) Percent Registered (1) Number Percent
--------------------------------- ------------------- -------------- ------------------ ------------ ------------
Entrust Admin Services, Inc. FBO
Angela Metelitsa (13) 5,500 * 5,500 0 0
Thompson, John IRA 1106030101(4) 80,000 * 80,000 0 0
Thompson, John(4) 70,000 * 70,000 0 0
Hiliard Lyons Custodian Guzzetti Andrew
IRA(4) 50,000 * 50,000 0 0
Paine, Nicholas c/o Cayman Management
Ltd.(4) 35,000 * 35,000 0 0
Shaver,William M(4) 35,000 * 35,000 0 0
Canuso, Gerald L(4) 35,000 * 35,000 0 0
Moorehouse, Thomas R.(4) 35,000 * 35,000 0 0
Bloom, Jay and Marsha(4) 35,000 * 35,000 0 0
Paine, Nicholas(4) 35,000 * 35,000 0 0
Van Note, Stephen(4) 35,000 * 35,000 0 0
Prudential Securities C/F, Millet-IRA,
Julien(4) 35,000 * 35,000 0 0
Dunning, John D., CrossFire Ventures(4) 20,000 * 20,000 0 0
Seidel, Jerome Jr.(4) 20,000 * 20,000 0 0
Pober, Lionel(4) 17,500 * 17,500 0 0
Wagner Jr., Alvin(4) 17,500 * 17,500 0 0
Pober, Lionel(4) 17,500 * 17,500 0 0
Wagner Jr., Alvin(4) 17,500 * 17,500 0 0
Mandel, Mathew(4) 10,000 * 10,000 0 0
Siegel, Dean M.(4) 10,000 * 10,000 0 0
Indictor, Gregg(4) 10,000 * 10,000 0 0
Lustig, S. Jeffrey(4) 10,000 * 10,000 0 0
Schiller, Robert B(4) 10,000 * 10,000 0 0
Entrust Admin Services, Inc. FBO, Steven
Bolden IRA #1114030102(4) 10,000 * 10,000 0 0
Seidel, Jerome Jr.(4) 5,000 * 5,000 0 0
John Jr. and Mary Ferrino(4) 10,000 * 10,000 0 0
Excalibur Limited Partnership(5) 937,500 * 937,500 0 0
Stonestreet Limited Partnership(6) 819,375 * 819,375 0 0
Whalehaven Capital Fund(7) 328,125 * 328,125 0 0
Linda Hechter(8) 375,000 * 150,000 0 0
First Montauk Securities Corp.(9) 389,998 * 389,998 0 0
Ernest Pellegrino(10) 225,751 * 225,751 0 0
Max Povolotsky(11) 65,250 * 65,250 0 0
Shirang Jeurkar(12) 36,000 * 36,000 0 0
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares which the selling stockholders has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the exercise
of the warrants is subject to adjustment depending on, among other factors, the
future market price of the common stock, and could be materially less or more
than the number estimated in the table.
(1) With the exception of First Montauk Securities Corp., the number of shares
owned and being registered is comprised of 53.59% of shares of common stock and
46.41% of shares of common stock underlying warrants. First Montauk Securities
Corp. owns (i) 339,938 shares of common stock underlying warrants exercisable at
$1.25 per share; and (ii) 25,000 warrants shares of common stock underlying
exercisable at $1.00 per share.
(2) Includes (i) 31,250 shares of common stock; and (ii) 17,187 shares of common
stock underlying warrants.
(3) Includes 35,000 shares of common stock underlying warrants exercisable at
$1.00 per share.
(4) Includes shares of common stock underlying warrants exercisable at $2.50 per
share.
32
(5) Includes (i) 625,000 shares of common stock; and (ii) 312,500 shares of
common stock underlying warrants exercisable at $1.25 per share.
(6) Includes (i) 546,250 shares of common stock; and (ii) 312,500 shares of
common stock underlying warrants exercisable at $1.25 per share.
(7) Includes (i) 218,750 shares of common stock; and (ii) 109,375 shares of
common stock underlying warrants exercisable at $1.25 per share.
(8) Includes (i) 250,000 shares of common stock; and (ii) 125,000 shares of
common stock underlying warrants exercisable at $1.25 per share.
(9) Includes (i) 339,938 shares of common stock underlying warrants exercisable
at $1.25 per share; and (ii) 25,000 warrants shares of common stock underlying
exercisable at $1.00 per share.
(10) Includes (i) 172,251 shares of common stock underlying warrants exercisable
at $1.25 per share; and (ii) 53,500 shares underlying warrants exercisable at
$1.00 per share. Mr. Pellegrino is affiliated with First Montauk Securities, a
broker-dealer and has acquired these securities in the ordinary course of
business as compensation.
(11) Includes shares of common stock underlying warrants exercisable at $1.25
per share. Mr. Povolotsky is affiliated with First Montauk Securities, a
broker-dealer and has acquired these securities in the ordinary course of
business as compensation.
(12) Includes (i) 16,000 shares of common stock underlying warrants exercisable
at $1.00 per share; and (ii) 20,000 shares of common stock underlying warrants
exercisable at $1.25 per share. Mr. Jeurkar is affiliated with First Montauk
Securities, a broker-dealer and has acquired these securities in the ordinary
course of business as compensation.
(13) Includes shares of common stock underlying warrants exercisable at $1.00
per share.
PLAN OF DISTRIBUTION
Each Selling Stockholder (the "Selling Stockholders") of the common stock
("Common Stock") of Airtrax, Inc., a New Jersey corporation (the "Company") and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on the American Stock
Exchange or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
33
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. One
of the Selling Stockholders, First Montauk Securities Corp., is a registered
broker dealer and NASD member firm. First Montauk served as placement agent in
our recently completed May 2004 private placement, and received, in addition to
commissions, warrants to purchase an aggregate of 360,000 shares of our Common
Stock with an exercise price of $1.25 per share. First Montauk also served as
placement agent in our recently completed November 2004 private placements and
received, in addition to commissions, warrants to purchase an aggregate of
164,000 shares of our Common Stock with an exercise price of $1.25 per share. In
addition, we are obligated to issue First Montauk warrants to purchase 100,000
shares of our common stock as compensation pursuant to an advisory agreement we
have entered into with First Montauk. The registration statement of which this
Prospectus forms a part includes the shares underlying the warrants held by
First Montauk. In addition, First Montauk has been retained as a financial
consultant to Airtrax, for which it received cash compensation of $30,000.
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock, however, they may
elect to sell their shares through First Montauk Securities Corp. as described
below. As a broker dealer who is also a selling shareholder, First Montauk may
be deemed an underwriter with respect to the shares it may sell pursuant to this
Prospectus.
In order to comply with the securities laws of some states, the selling
shareholders must sell the shares in those states only through registered or
licensed brokers or dealers. In addition, in some states the Selling
Stockholders must sell the shares only if we have registered or qualified those
shares for sale in the applicable state or an exemption from the registration or
qualification requirement is available and the selling shareholder complies with
the exemption.
The Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
First Montauk Securities Corp. served as placement agent in connection with the
private placement offering recently completed by us in which we raised
$2,880,100 in gross proceeds. First Montauk is a National Association of
Securities Dealers, Inc. member brokerage firm. First Montauk received 360,000
warrants as compensation for its services as placement agent. The warrants have
an exercise price of $1.25 per share. The warrants expire on May 13, 2009.
Pursuant to NASD Rule 2710(g)(1), the 360,000 shares of common stock issued or
issuable upon conversion of placement agent warrants received by First Montauk
are restricted from sale, transfer, assignment or hypothecation for a period of
six months from the effective date of this Registration Statement except to
34
officers or partners (not directors) of First Montauk and members of the selling
group and/or their officers or partners. Additionally, William Kurinsky, who is
listed as a selling shareholder, is an officer of First Montauk Securities Corp.
All securities (48,437 total shares and warrants) held by Mr. Kurinsky (or any
other person who might be associated with First Montauk Securities and receives
securities as a transferee in compliance with NASD Rule 2710) will be subject to
the same resale, transfer and assignment restrictions as set forth in NASD Rule
2710(g)(1) for six months from the effective date of the Registration Statement.
First Montauk Securities Corp. also served as placement agent in connection with
the November 2004 private placement offerings recently completed by us in which
we raised $1,312,840 in gross proceeds. First Montauk is a National Association
of Securities Dealers, Inc. member brokerage firm. First Montauk and certain of
its affiliated members received 164,000 warrants as compensation for its
services as placement agent. The warrants have an exercise price of $1.25 per
share. The warrants expire on November 22 and 23, 2009. In addition, we are
obligated to issue First Montauk warrants to purchase 100,000 shares of our
common stock as compensation pursuant to an advisory agreement we have entered
into with First Montauk.
First Montauk has indicated to us its willingness to act as selling agent on
behalf of the selling shareholders named in the Prospectus under "Selling
Stockholders" that purchased our privately placed securities. All shares sold,
if any, on behalf of selling shareholders by First Montauk would be in
transactions executed by First Montauk on an agency basis and commissions
charged to its customers in connection with each transaction shall not exceed a
maximum of 4.5% of the gross proceeds. First Montauk does not have an
underwriting agreement with us and/or the selling shareholders and no selling
shareholders are required to execute transactions through First Montauk. In the
event that there are other broker dealer firms involved in the distribution of
securities on behalf of selling shareholders, the maximum commission or discount
to be received will not be greater than 8% of the sale of any securities which
were registered pursuant to this prospectus under SEC Rule 415.
NASD Notice to Members 88-101 states that in the event a selling shareholder
intends to sell any of the shares registered for resale in this Prospectus
through a member of the NASD participating in a distribution of our securities,
such member is responsible for insuring that a timely filing is first made with
the Corporate Finance Department of the NASD and disclosing to the NASD the
following:
o it intends to take possession of the registered securities or to facilitate
the transfer of such certificates;
o the complete details of how the selling shareholders shares are and will be
held, including location of the particular accounts;
o whether the member firm or any direct or indirect affiliates thereof have
entered into, will facilitate or otherwise participate in any type of payment
transaction with the selling shareholders, including details regarding any such
transactions; and
o in the event any of the securities offered by the selling shareholders are
sold, transferred, assigned or hypothecated by any selling shareholder in a
transaction that directly or indirectly involves a member firm of the NASD or
any affiliates thereof, that prior to or at the time of said transaction the
member firm will timely file all relevant documents with respect to such
transaction(s) with the Corporate Finance Department of the NASD for review.
No persons associated with us or the selling shareholders may participate in the
distribution of the shares to be offered by selling shareholders unless they
meet the safe harbor provisions of the SEC Rule 3a4-1 promulgated under the
Securities Exchange Act of 1934 with respect to exemption from registration as a
broker/dealer.
We agreed to keep this prospectus effective until the earlier of (i) the date on
which the shares may be resold by the Selling Stockholders without registration
and without regard to any volume limitations by reason of Rule 144(e) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
35
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.
Any selling shareholder may from time to time pledge or grant a security
interest in some or all of the shares of common stock or warrants owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling shareholders to include the pledgee, transferee or
other successors in interest as selling shareholders under this prospectus.
The selling shareholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
At the time a selling shareholder makes a particular offer of shares we will, if
required under applicable rules and regulations, distribute a Prospectus
supplement that will set forth:
o the number of shares that the Selling Holder is offering;
o the terms of the offering, including the name of any underwriter, dealer or
agent;
o the purchase price paid by any underwriter;
o any discount, commission and other underwriter compensation;
o any discount, commission or concession allowed or reallowed or paid to any
dealer; and
o the proposed selling price to the public.
We will not receive any proceeds from sales of any shares by the selling
shareholders.
LEGAL MATTERS
Sichenzia Ross Friedman Ference LLP, New York, New York will issue an opinion
with respect to the validity of the shares of common stock being offered hereby.
EXPERTS
The financial statements as of December 31, 2003 and for the years ended
December 31, 2003 and 2002 incorporated in this prospectus, to the extent and
for the periods indicated in their reports, have been audited by Robert G.
Jeffrey, Certified Public Accountant, and are included herein in reliance upon
the authority of this firms as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the documents incorporated by
reference in this prospectus contain forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events.
In some cases, you can identify forward-looking statements by words such as
"may," "should," "expect," "plan," "could," "anticipate," "intend," "believe,"
"estimate," "predict," "potential," "goal," or "continue" or similar
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks outlined under "Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements.
Unless we are required to do so under U.S. federal securities laws or other
applicable laws, we do not intend to update or revise any forward-looking
statements.
36
AVAILABLE INFORMATION
We file annual, quarterly and special reports and other information with the
Securities and Exchange Commission. You may read and copy any of these documents
at the SEC's public reference rooms in Washington, D.C.. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public at the SEC' s website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be an important part of this prospectus. Any information that we incorporate by
reference is automatically updated and superseded if information contained in
this prospectus modifies or replaces that information. You must look at all of
our SEC filings that we have incorporated by reference to determine if any of
the statements in a document incorporated by reference have been modified or
superseded.
We incorporate by reference the document listed below:
o Our quarterly report on Form 10-QSB for the period ending September 30, 2004;
o Our annual report on Form 10-KSB for the year ended December 31, 2003; and
o Our current reports on Form 8-K for the past fiscal year.
A copy of our above-mentioned reports are being delivered with this prospectus.
You may request additional copies of these filings at no cost, by writing or
telephoning us at the following address or phone number:
Airtrax, Inc.
870B Central Avenue
Hammonton, NJ 08037
Attention: President
(609) 567-7800
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this prospectus.
37
FINANCIAL STATEMENT INDEX
AIRTRAX, INC.
(A Development Stage Company)
Financial Statements
September 30, 2004
(Unaudited)
Page
Balance Sheets 1
Statements of Operations and Deficit Accumulated
During Development Stage 2
Statements of Cash Flows 3
Notes to Financial Statements 4
38
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
For the Nine Month Period Ended September 30, 2004
and for the Year Ended December 31, 2003
September 30, 2004 December 31, 2003
------------------ -----------------
(Unaudited) (Audited)
ASSETS
Current Assets
Cash $ 178,991 $ 37,388
Accounts receivable - -
Accrued interest receivable 24,081 -
Inventory 516,596 384,754
Prepaid expenses 35,086 267,790
Deferred tax asset 320,231 201,005
------------- ------------
Total current assets 1,074,985 890,937
Fixed Assets
Office furniture and equipment 80,852 75,652
Automotive equipment 21,221 21,221
Shop equipment 24,459 22,155
Casts and tooling 185,384 173,639
------------- ------------
311,916 292,667
Less, accumulated depreciation 178,211 154,469
------------- ------------
Net fixed assets 133,705 138,198
Other Assets
Patents - net 77,322 43,053
Loans to Filco GmbH 1,230,000 -
Utility deposit 65 65
------------- ------------
Total other assets 1,307,387 43,118
------------- ------------
TOTAL ASSETS $ 2,516,077 $ 1,072,253
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 185,464 $ 475,951
Payroll taxes and other accrued liabilities 161,877 279,878
Shareholder deposits for stock 329,850 130,000
Current portion of note payable - 1,572
Stockholder note payable 32,665 80,895
------------- ------------
Total current liabilities 709,856 968,296
Long Term Liabilities
Long term portion of note payable - 3,974
------------- ------------
TOTAL LIABILITIES 709,856 972,270
------------- ------------
Stockholders' Equity
Common stock - authorized, 20,000,000 shares without
par value; issued and outstanding - 12,940,517 and
8,696,552, respectively 8,985,582 5,909,729
Preferred stock - authorized, 500,000 shares without
par value; 275,000 issued and outstanding 12,950 12,950
Deficit accumulated during development stage (6,985,359) (5,615,744)
Deficit prior to development stage (206,952) (206,952)
Total stockholders' equity 1,806,221 99,983
TOTAL LIABILITIES AND ------------- -------------
STOCKHOLDER'S EQUITY $ 2,516,077 $ 1,072,253
============= =============
The accompanying notes are an integral part of these financial statements.
39
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Nine Month Periods Ended September 30, 2004 and 2003
(Unaudited)
May 19, 1997
(Date of Inception)
2004 2003 to September 30, 2004
------------ ------------ ---------------------
SALES $ - $ 21,977 $ 1,023,123
COST OF GOODS SOLD - 83,368 470,371
------------ ------------ ------------
Gross Profit (Loss) - (61,391) 552,752
OPERATING AND ADMINISTRATIVE EXPENSES 1,397,479 1,578,516 7,704,070
------------ ------------ ------------
OPERATING LOSS (1,397,479) (1,639,907) (7,151,318)
OTHER INCOME AND EXPENSE
Interest expense (23,716) (28,407) (167,886)
Interest income 24,091 - 24,091
Other income 131 7,914 75,446
NET LOSS BEFORE INCOME TAXES (1,396,973) (1,660,400) (7,219,667)
------------ ------------ ------------
INCOME TAX BENEFIT (STATE):
Current 119,226 149,436 119,226
Prior years - - 518,319
------------ ------------ ------------
Total Benefit 119,226 149,436 637,545
------------ ------------ ------------
LOSS ACCUMULATED DURING
DEVELOPMENT STAGE (1,277,747) (1,510,964) (6,582,122)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (91,868) (80,749) (403,237)
DEFICIT ACCUMULATED DURING DEVELOPMENT ------------ ------------ ------------
STAGE $ (1,369,615) $ (1,591,713) $ (6,985,359)
============ ============ ============
NET LOSS PER SHARE - Basic and Diluted $ (0.12) $ (0.21)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 11,452,797 7,631,386
============ ============
The accompanying notes are an integral part of these financial statements.
40
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Three Month Periods Ended September 30, 2004 and 2003
(Unaudited)
May 19, 1997
(Date of Inception)
2004 2003 to September 30, 2004
------------ ------------ ---------------------
SALES $ - $ - $ 1,023,123
COST OF GOODS SOLD - 26,601 470,371
------------ ------------ ------------
Gross Profit (Loss) - (26,601) 552,752
OPERATING AND ADMINISTRATIVE EXPENSES 549,338 498,436 7,704,070
------------ ------------ ------------
OPERATING LOSS (549,338) (525,037) (7,151,318)
OTHER INCOME AND EXPENSE
Interest expense (9,986) (6,860) (167,886)
Interest income 13,964 - 24,091
Other income 37 4,545 75,446
------------ ------------ ------------
NET LOSS BEFORE INCOME TAXES (545,323) (527,352) (7,219,667)
------------ ------------ ------------
INCOME TAX BENEFIT (STATE):
Current 51,456 47,336 119,226
Prior years - - 518,319
------------ ------------ ------------
Total Benefit 51,456 47,336 637,545
------------ ------------ ------------
LOSS ACCUMULATED DURING
DEVELOPMENT STAGE (493,867) (480,016) (6,582,122)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (5,931) - (403,237)
------------ ------------ ------------
DEFICIT ACCUMULATED DURING DEVELOPMENT
STAGE $ (499,798) $ (480,016) $ (6,985,359)
============ ============ ============
NET LOSS PER SHARE - Basic and Diluted $ (0.04) $ (0.06) -
============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 12,888,343 8,433,464
============ ============
The accompanying notes are an integral part of these financial statements.
41
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30, 2004 and 2003
(Unaudited)
May 19, 1997
(Date of Inception)
2004 2003 to September 30, 2004
------------ ------------ ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,277,747) $ (1,510,964) $ (6,582,122)
Adjustments to reconcile net loss to net cash
consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization 27,159 23,304 227,849
Value of common stock issued for services 623,401 1,017,315 2,638,126
Increase in accrual of deferred tax benefit (119,226) (149,436) (320,231)
Interest accrued on shareholder loan 3,775 - 20,850
Changes in current assets and liabilities:
(Decrease) increase in accounts payable
and accrued liabilities (225,888) 86,487 468,016
Increase in prepaid expense - - (146,957)
(Increase) decrease in accounts receivable (24,081) 41,678 (24,081)
Increase in inventory (131,842) (220,768) (516,596)
------------ ------------ ------------
Net Cash Consumed By
Operating Activities (1,124,449) (712,384) (4,235,146)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (19,249) (18,274) (318,227)
Additions to patent cost (37,686) - (114,678)
Advances to Filco GmBH (1,230,000) - (1,230,000)
------------ ------------ ------------
Net Cash Consumed By
Investing Activities (1,286,935) (18,274) (1,662,905)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales 2,696,462 760,899 6,165,970
Proceeds from option exercises 5,944 - 14,344
Proceeds of sales of preferred stock - -
12,950
Repayments of stockholder loans (52,005) (45,933) 35,120
Preferred stock dividends paid in cash (91,868) - (145,371)
Principal payments on installment note (5,546) - (5,971)
------------ ------------ ------------
Net Cash Provided By
Financing Activities 2,552,987 714,966 6,077,042
------------ ------------ ------------
Net Increase (Decrease) In Cash 141,603 (15,692) 178,991
Balance at beginning of period 37,388 51,431 -
------------ ------------ ------------
Balance at end of period $ 178,991 $ 35,739 $ 178,991
============ ============ ============
The accompanying notes are an integral part of these financial statements.
42
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim financial statements of Airtrax, Inc. ("the Company") as
of September 30, 2004 and for the three month and nine month periods ended
September 30, 2004 and 2003, respectively, have been prepared in accordance with
U.S. generally accepted accounting principles. 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 nine month periods ended September
30, 2004 are not necessarily indicative of the results to be expected for the
full fiscal year ending December 31, 2004.
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, 2003.
2. COMMON STOCK
Shares of common stock totaling 270,000 and 4,243,965 shares, respectively, were
issued during the third quarter and first nine months of 2004, as follows:
Third Nine
Quarter Months
------- ------
Private placement sales - 3,610,125
Stock issued for services 270,000 433,840
Stock option exercises - 70,000
Issuance of shares sold in
prior year private placement - 130,000
------- ---------
Total shares issued 270,000 4,243,965
3. SUPPLEMENTAL CASH FLOWS INFORMATION:
There was no cash payment for income taxes during either of the nine month
periods ended September 30, 2004 and 2003. Interest paid during the nine month
period ended September 30, 2004 was $10,815; there was none paid during the nine
month period ended September 30, 2003.
4. CONTINGENCIES
During January 2004, the Company entered into an agreement with an NASD
registered broker dealer to raise additional capital through a private placement
offering. The offering consisted of units, with each unit comprised of one share
of common stock and a warrant to purchase 50% of an additional share at an
exercise price of $.80. During the nine months ended September 30, 2004, there
were five closings on this offering, yielding net proceeds of $2,696,462. As of
September 30, 2004 a total of 3,600,125 units were issued as a result of these
closings. An additional 343,750 units included in the proceeds had not been
issued as of September 30, 2004; they were issued during October 2004. The
Company agreed as part of the fee of the placement agent to sell additional
warrants to the agent equal to no more than 10% of the units sold, at a price of
$.001 per warrant. These warrants would allow the agent to purchase common stock
during a five-year term at $1.25 per share. These issuances raised the total
number of warrants outstanding at September 30, 2004 to 3,160,063; these
warrants are exercisable at prices ranging from $.80 to $2.50 per share.
In March 2004, the Company 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 at
Clark's facility located in Rheinstrasse Mulheim a.d. Ruhr., Germany, excluding,
however, building and land and rights to the Clark name. Filco 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. Filco
GmbH has been operating this plant since July 1, 2003.
On or about 7 October 2004 an addendum was added to the above noted agreement in
principal in which the Company purchased, and Filipov sold, 75.1% of FiLCO GmbH.
A notarized document will be issued from a German notary for the sale to be
completed.
43
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
4. CONTINGENCIES (Continued)
The purpose of this change is to give the Company control of Filco GmbH
including USGAAP and German law regarding consolidation and capitalization. This
change is offered and accepted by Fil Filipov as incentive to the Company to
fund the Filco operation to start up. All other conditions and terms of the
agreement between the parties shall remain the same.
The consideration for the proposed acquisition of a control equity interest in
Filco is the issuance of stock options to Mr. Filipov to acquire 900,000 shares
of common stock of the Company. The Company will loan Filco GmbH approximately
$1,300,000 which, if the acquisition is completed, may be kept on the records as
a loan or put into equity of Filco along with approximately 1,300,000 Euros
currently owed to Fil Filipov by Filco.
Thus far the Company has not finalized nor executed the acquisition agreement
but has loaned Filco an aggregate principal amount of $1.230 million pursuant to
various unsecured promissory notes. The Company has used proceeds from its
private placement offering conducted during the first quarter of 2004 to fund
such loans. Future amounts in the aggregate principal amount of $1,350,000 to be
loaned to Filco will be taken from the proceeds of this offering. Filco has
informed the Company that adequate working capital should be available in the
total amount of $5,000,000 in order for it to achieve profitable operations.
This amount includes funds expected to be provided to Filco by the Company if
the Company finalizes the Filco acquisition agreement. The Company expects to
raise additional funds from this private placement in order to loan fund to
Filco, should it finalize and execute the acquisition agreement.
In accord with the agreement, if finalized and executed, the stock option to be
issued to Mr. Filipov to acquire 900,000 shares of the Company's common stock
will be exercisable at a price per share of $0.01. No more than 12.5% of the
options can be exercised during any one year, and the exercise period for such
annual amount is three years. Mr. Filipov also will be appointed a director of
the Company and will receive an additional 100,000 options of common stock of
the Company for his role as director. The Company will be required to register
with the Securities and Exchange Commission all of the shares issuable to Mr.
Filipov, including those underlying the described stock options.
No assurance can be given that the acquisition agreement will be finalized, or
that if it agreement is finalized, that the conditions to closing will be
satisfied, or that the Company will raise sufficient funds to pay all amounts
due under the acquisition agreement. Further, in the event that the Company does
consummate the acquisition agreement, no assurance can be given that it will be
able to raise sufficient funds to meet the working capital needs of Filco, as
well as its own working capital needs. The Company's inability to raise
sufficient capital as discussed herein may impair Filco's operations as well as
its own operations.
The Company intends to appoint Mr. Filipov to the board of directors effective
upon completion of the acquisition.
44
AIRTRAX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 2003
CONTENTS
Page
Accountant's Audit Report 1
Balance Sheet 2
Statements of Operations and Deficit Accumulated During Development Stage 3
Statements of Changes in Stockholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
45
ROBERT G. JEFFREY
CERTIFIED PUBLIC ACCOUNTANT
61 BERDAN AVENUE
WAYNE, NEW JERSEY 07470
LICENSED TO PRACTICE TEL: 973-628-0022
IN NEW YORK AND NEW JERSEY FAX: 973-696-9002
MEMBER OF AICPA E-MAIL: rgjcpa@optonline.net
PRIVATE COMPANIES PRACTICE SECTION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
AirTrax, Inc.
I have audited the accompanying balance sheet of AirTrax, Inc. (a development
stage company) as of December 31, 2003, and the related statements of operations
and deficit accumulated during development stage, changes in stockholders'
equity, and cash flows for the years ended December 31, 2003 and 2002, and for
the period from May 19, 1997 (inception) to December 31, 2003. These financial
statements are the responsibility of the Company management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted the audits in accordance with the standards of Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of AirTrax, Inc. as of December 31,
2003, and the results of its operations and its cash flows for the years ended
December 31, 2003 and 2002, and for the period from May 19, 1997 (inception) to
December 31, 2003, in conformity with U.S. generally accepted accounting
principles.
Robert G. Jeffrey
Certified Public Accountant
Wayne, New Jersey
March 29, 2004, except for Notes 10, 11, and 12, which is May 14, 2004
46
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 2003
ASSETS
Current Assets
Cash $ 37,388
Inventory 384,754
Prepaid expenses 267,790
Deferred tax asset 201,005
Total current assets 890,937
--------------
Fixed Assets
Office furniture and equipment 75,652
Automotive equipment 21,221
Shop equipment 22,155
Casts and tooling 173,639
--------------
292,667
Less, accumulated depreciation 154,469
--------------
Net fixed assets 138,198
Other Assets
Patents - net 43,053
Utility deposits 65
--------------
Total other assets 43,118
--------------
TOTAL ASSETS $ 1,072,253
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 475,951
Payroll taxes and other accrued liabilities 279,878
Shareholder deposits for stock 130,000
Current portion of note payable 1,572
Stockholder notes payable 80,895
--------------
Total current liabilities $ 968,296
Long Term Liabilities
Long term portion of note payable 3,974
--------------
TOTAL LIABILITIES 972,270
Stockholders' Equity
Common stock - authorized, 20,000,000 shares without
par value; 8,696,552 issued and outstanding 6,098,141
Preferred stock - authorized, 500,000 shares without
par value; 275,000 issued and outstanding 12,950
Deficit accumulated during the development stage (5,804,156)
Deficit prior to development stage (206,952)
--------------
Total stockholders' equity 99,983
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,072,253
==============
The accompanying notes are an integral part of these financial statements.
47
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS and DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Years Ended December 31, 2003 and 2002
May 19, 1997
(Date of Inception)
YEAR 2003 YEAR 2002 to December 31, 2003
-------------- ------------ ----------------------
SALES $ 21,879 $ 551,122 $ 1,023,123
COST OF GOODS SOLD 91,283 207,665 470,371
-------------- ------------ -------------
Gross Profit (Loss) (69,404) 343,457 552,752
OPERATING AND ADMINISTRATIVE EXPENSES 2,199,659 1,014,406 6,306,591
-------------- ------------ -------------
OPERATING LOSS (2,269,063) (670,949) (5,753,839)
OTHER INCOME AND (EXPENSE)
Interest expense (43,938) (33,174) (144,170)
Other income 7,914 4,215 75,315
-------------- ------------ -------------
NET LOSS BEFORE INCOME TAXES (2,305,087) (699,908) (5,822,694)
-------------- ------------ -------------
INCOME TAX BENEFIT (STATE):
Current 210,553 59,292 210,553
Prior years - - 307,766
Total Benefit 210,553 59,292 518,319
NET LOSS BEFORE DIVIDENDS (2,094,534) (640,616) (5,304,375)
-------------- ------------ -------------
DEEMED DIVIDENDS ON PREFERRED STOCK 188,412 - 188,412
-------------- ------------ -------------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS (2,282,946) (640,616) (5,492,787)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (80,749) - (311,369)
-------------- ------------ -------------
DEFICIT ACCUMULATED $ (2,363,695) $ (640,616) $ (5,804,156)
============== ============ =============
EARNINGS PER SHARE:
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS $ 2,282,946 $ 640,616
ADJUSTMENT FOR PREFERRED STOCK
DIVIDENDS ACCUMULATED BUT UNPAID 68,750 68,750
-------------- ------------
LOSS ALLOWABLE TO COMMON SHAREHOLDRS $ 2,351,696 $ 709,366
============== ============
NET LOSS PER SHARE - Basic and Diluted $ (.30) $ (.12)
============== ============
WEIGHTED AVERAGE SHARES OUTSTANDING 7,818,400 5,767,347
============== ============
The accompanying notes are an integral part of these financial statements.
48
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 30, 2003
COMMON PREFERRED DEFICIT ACCUMULATED DEFICIT PRIOR
STOCK STOCK DURING TO
------------------------ -------------------------
Shares Amount Shares Amount DEVELOPMENT STAGE EVELOPMENT STAGE TOTAL
---------- ----------- ----------- ----------- ----------------- ---------------- ------------
Balance, December 31, 2001 5,431,237 $2,852,895 275,000 $12,950 $(2,799,845) $(206,952) $ (140,952)
Sales of stock under
Regulation D offering 392.834 396,630 396,630
Shares issued for services 423,659 413,899 413,899
Net loss for period (640,616) (640,616)
Balance, December 31, 2002 6,247,730 3,663,424 275,000 12,950 (3,440,461) (206,952) 28,961
---------- ---------- ---------- ---------- ----------- ---------- ----------
Adjustment (21,912)
Sales of stock under
Regulation D offering 715,000 659,000 659,000
Shares issued for services 1,509,003 1,506,556 1,506,556
Shares in lieu of preferred
Dividends 246,731 269,161 (80,749) 188,412
Net loss for the period (2,282,946) (2,282,946)
---------- ---------- ---------- ---------- ------------ ---------- ------------
Balance, December 31, 2003 8,696,552 $6,098,141 275,000 $12,950 $(5,804,156) $(206,952) $ 99,983
========== ========== ========== ========== ============ ========== ============
The accompanying notes are an integral part of these financial statements.
49
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2003 and 2002
May 19, 1997
(Date of Inception)
Year 2003 Year 2002 to December 31, 2003
--------------- --------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (2,282,946) $ (640,616) $ (5,492,787)
Adjustments to reconcile net income to net cash
consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization 36,214 31,071 200,690
Value of common stock issued for services 1,424,278 413,899 2,014,725
Deemed dividends on preferred stock 188,412 188,412
Interest accrued on shareholder loan 11,478 2,800 17,075
(Increase) decrease in accrual of deferred
tax benefit (150,262) 19,043 (201,005)
Changes in current assets and liabilities:
Decrease (increase) in inventory (197,914) 46,410 (384,754)
(Increase) decrease in accounts receivable 50,936 (30,101) -
Increase (decrease) in accounts payable
and accrued liabilities 214,014 (107,294) 693,904
Increase in prepaid expense - (139,954) (146,957)
--------------- --------------- ---------------
Net Cash Consumed By
Operating Activities (705,790) (404,742) (3,110,697)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (90,045) (36,883) (298,978)
Additions to patent cost (9,385) - (76,992)
--------------- --------------- ---------------
Net Cash Consumed By
Investing Activities (99,430) (36,883) (375,970)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales 789,000 396,630 3,469,508
Proceeds of option exercises 5,900 2,500 8,400
Proceeds of sales of preferred stock - - 12,950
Proceeds (repayment) of stockholder loans (3,298) 61,506 87,125
Preferred stock dividends paid in cash - - (53,503)
Partial repayment of equipment note (425) (425)
--------------- --------------- ---------------
Net Cash Provided By
Financing Activities 791,177 460,636 3,524,055
--------------- --------------- ---------------
Net Increase (Decrease) In Cash (14,043) 19,011 37,388
Balance at beginning of period 51,431 32,420 -
--------------- --------------- ---------------
Balance at end of period $ 37,388 $ 51,431 $ 37,388
=============== =============== ===============
The accompanying notes are an integral part of these financial statements.
50
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company was formed April 17, 1997. It has designed a forklift vehicle using
omni-directional technology obtained under a contract with the United States
Navy Surface Warfare Center in Panama City, Florida. The right to exploit this
technology grew out of a Cooperative Research and Development Agreement with the
Navy. Significant resources have been devoted during the past four years to the
construction of a prototype of this omni-directional forklift vehicle.
The Company has also developed a traditional helicopter ground handling machine
which has been marketed by the Company on a limited basis.
Development Stage Accounting
The Company is a development stage company, as defined in Statement of Financial
Accounting Standards No. 7. Generally accepted accounting principles that apply
to established operating enterprises govern the recognition of revenue by a
development stage enterprise and the accounting for costs and expenses. From
inception to December 31, 2003, the Company has been in the development stage
and all its efforts have been devoted to the development of a forklift vehicle
with omni-directional technology that is suitable for market. Only small amounts
of revenue have been realized through December 31, 2003.
Basis of Presentation
The Company has incurred losses from inception to December 31, 2003 of
$5,304,375. Activities have been financed primarily through private placements
of equity securities. The Company may need to raise additional capital through
the issuance of debt or equity securities to fund its operations.
Cash
For purposes of the statements of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Inventory
Inventory consists principally of component parts and supplies which will be
used to assemble forklift vehicles. Inventories are stated at the lower of cost
(determined on a first in-first out basis) or market.
51
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
1. (continued)
Fixed Assets
Fixed assets are recorded at cost. Depreciation is computed by using accelerated
methods, with useful lives of seven years for furniture and shop equipment and
five years for computers and automobiles.
Income Taxes
Deferred income taxes are recorded to reflect the tax consequences or benefits
to future years of temporary differences between the tax bases of assets and
liabilities, and of net operating loss carryforwards.
Intangible Assets
Patents
The Company incurred costs to acquire certain patent rights. These
costs were capitalized and are being amortized over a period of
fifteen years on a straight-line basis.
Prototype Equipment
The cost of developing and constructing the prototype omni-directional
helicopter handling vehicle and the omni-directional forklift vehicle
is expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimated.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which include cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate their fair values at December 31, 2003.
Advertising Costs
The Company expenses advertising costs when the advertisement occurs.
Advertising costs amounted to $33,640 in 2002; there were no advertising
expenses in 2003.
Stock Options
Stock options are occasionally awarded to employees, directors and outside
parties as compensation for services. Such awards are immediately exercisable.
They are accounted for by changing income in the year of grant with the excess
of the fair market value of the underlying stock at the date of grant over the
exercise price.
52
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
1. (continued)
Segment Reporting
Management treats the operations of the Company as one segment.
Revenue Recognition
Revenue is realized from product sales and consulting services. Recognition
occurs upon delivery of goods or services.
Common Stock
Common stock is often issued in return for product, services, and as dividends
on the preferred stock. These issuances are assigned values equal to the value
of the product or service received or the market value of the common stock, with
appropriate discounts, whichever is most clearly evident.
2. RELATED PARTY TRANSACTIONS
The majority shareholder corporation and the Company president make loans to the
Company from time to time. The related notes accrue interest at 12% and are due
on demand. The combined unpaid balance of principal and interest on these notes
was $80,885 at December 31, 2003, including interest accrued on these notes of
$11,478.
During 2002, a non-employee director exercised options, receiving 5,000 shares
of common stock in return for $2,500. A director who is also an employee
exercised options, receiving 25,000 shares for $3,129. Two directors received a
total of 58,802 shares in return for services valued at $51,951, and an
affiliate of a director received 2,164 shares in return for services valued at
$1,623.
During 2003, two Company employees exercised options, receiving a total of 7,500
shares of common stock in return for $877. The same two employees each received
bonuses of 15,000 shares. Each member of the Board of Directors was awarded
10,000 shares for services as directors; these shares were valued at a total of
$50,000. One director purchased 10,000 shares in return for $5,000; an
additional $5,000 was treated as compensation of the director. An affiliate of a
director received $3,940 for legal services. The Company president exercised
options for 180,000 shares (see Note 9) in return for $25,202.
Since June 1999, the Company has made its headquarters in premises owned by the
Company president, which to date has been rent-free.
53
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
3. PRIVATE PLACEMENT OFFERINGS
The Company conducted private placement offerings during 2003 and 2002. These
offerings were exempt under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. A total of 845,000 shares of
common stock was sold under the offerings during 2003, and 392,834 shares were
issued during 2002. These sales resulted in net proceeds of $789,000 and
$396,630, respectively. The 2003 offerings were for units, with each unit
comprised of one share of common stock and one warrant to purchase one share of
common stock at a price of $2.50 per share; the warrants expire three years from
date of issuance. Of the shares sold during 2003, 130,000 had not been issued as
of December 31, 2003; these were issued during 2004. There were 845,000 warrants
outstanding at December 31, 2003.
4. PREFERRED STOCK
The Company is authorized to issue 500,000 shares of preferred stock, without
par value. At December 31, 2003, 275,000 of these shares had been issued. Each
of these shares entitles the holder to a 5% cumulative dividend based on a $5
per share stated value. If sufficient cash is not available, or at the option of
the shareholder, these dividends may be paid in common stock. If payment is in
stock, it is to be valued at a price calculated at thirty percent of the lower
of the last price traded in either a public or private transaction during the
applicable quarter. This issue of preferred stock also provides a voting right
of 10 votes for each share. The holder of this preferred stock is the majority
shareholder of the Company, which is a corporation wholly owned by the Company
president and chairman.
During the year 2003 unpaid preferred dividends that had accumulated during the
years 2000 and 2001, totaling $80,749, were paid through the issuance of 246,731
shares of common stock. Additional dividends of $68,750 accrued during each of
the years 2002 and 2003, and remained unpaid at December 31, 2003. The majority
shareholder had the right at December 31, 2003 to acquire 557,861 shares of
common stock as accrued and unpaid dividends under the features of the preferred
stock issue. A partial payment was made on these unpaid dividends in March 2004
by a cash payment of $45,833.
A deemed dividend in the amount of $188,412 was charged to operations during
2003. This deemed dividend is the excess of the fair market value of the 246,731
shares issued in satisfaction of dividends on the preferred stock over the
discounted amount at which they are issued. This deemed dividend was added to
paid in capital.
The characteristics of the remaining 225,000 preferred shares authorized have
not been specified.
54
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
5. LOSS PER SHARE
Stock options were granted to two Company employees during 2003. These are
described in Note 9. In addition, dividends accrued on the preferred stock
during 2002 and 2003 (see Note 4) which at the option of the preferred
shareholder could be paid in common stock. There also were 845,000 warrants
outstanding to purchase common stock (see Note 3). These shares and warrants
were not included in the calculation of earnings per share because such
inclusion would have an antidilutive effect.
6. INCOME TAXES
The Company has experienced losses each year since its inception. As a result,
it has incurred no Federal income tax. The Internal Revenue Code allows net
operating losses (NOL's) to be carried forward and applied against future
profits for a period of twenty years. At December 31, 2003, the Company had NOL
carryforwards of $5,606,154 available for Federal taxes and $2,233,386 for New
Jersey taxes. The potential tax benefit of the state NOL's has been recognized
on the books of the Company; the potential benefit of the Federal NOL's has been
offset by a valuation allowance. If not used, these Federal carryforwards will
expire as follows:
2011 $ 206,952
2012 129,092
2018 486,799
2019 682,589
2020 501,169
2021 775,403
2022 590,764
2023 2,233,386
During the year 2003, the Company realized $60,291 from the sale, as permitted
by New Jersey law, of its rights to use the New Jersey NOL'S and research and
development credits that had accrued during 2002. These potential New Jersey
offsets for periods prior to 2003 are, thus, no longer available to the Company.
Under Statement of Financial Accounting Standards No. 109, recognition of
deferred tax assets is permitted unless it is more likely than not that the
assets will not be realized. The Company has recorded deferred tax assets as
follows:
Current Non-current Total
-------------------- -----
Deferred Tax Assets $892,015 $1,146,741 $2,038,756
Valuation Allowance 691,010 1,146,741 1,837,751
-------- ---------- ----------
Balance Recognized $201,005 $ - $ 201,005
======== ========== ===========
The entire balance of the valuation allowance relates to Federal taxes. Since
state tax benefits for years prior to 2003 have been realized, no reserve is
deemed necessary for the benefit of state tax losses of 2003.
55
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
7. RENTALS UNDER OPERATING LEASES
Office equipment was leased under an operating lease that was fully paid during
2002. At present, the Company is not obligated under any operating lease.
Rent expense amounted to $36,000 in 2003 and $6,000 in 2002.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest and income taxes is presented below:
2003 2002
-------- -------
Interest $35,828 $27,927
Income taxes 500 200
There were no noncash investing activities during either 2003 or 2002. The
following noncash financing activities occurred:
a. Shares of common stock were issued for services during 2003 and 2002; these
totaled 1,509,003 and 423,659 shares, respectively.
b. Shareholder notes payable was reduced by $25,202 as compensation for the
exercise by the Company president of options to purchase 180,000 shares of
common stock.
c. Equipment of $5,971 was purchased by the issuance of a note.
d. Preferred dividends totaling $80,749 were satisfied by the issuance of
246,731 shares of common stock.
9. WARRANTS AND OPTIONS
Note 10 describes several circumstances in which rights to purchase common stock
have been issued. At March 29, 2004 outstanding options and warrants to purchase
Company common stock totaled 215,000 and 1,998,750, respectively.
56
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
10. CONTINGENCIES
The Company had employment agreements during 2003 with its president and three
employees. The president's contract, which expired June 30, 2003, provided in
part for options permitting the president to acquire up to 50,000 shares of
common stock per year, with portions of these options accumulating if not
exercised. Options for 180,000 shares which had accumulated through 2003 from
grants of previous years were exercised during 2003, generating proceeds to the
Company of $25,202.
Contracts with the three employees provide in part for options permitting the
acquisition of up to 25,000 shares per year. One employee, who was also a
director, exercised these options during 2002; another employee exercised
options for 2,500 shares during 2002. Two employees exercised options for 7,500
shares during 2003. At December 31, 2003, there were options for 115,000 shares
outstanding.
During January 2004, the Company entered into an agreement with an NASD
registered broker dealer to raise additional capital through a private placement
offering. The offering consists of units, with each unit comprised of one share
of common stock and a warrant to purchase 50% of an additional share at an
exercise price of $.80. These warrants have a five-year term. Through March 29,
2004, there had been two closings on this offering, with 1,831,250 units issued
yielding net proceeds of $1,213,874. At least one additional closing is
expected. The Company agreed, as part of the fee of the placement agent, to sell
additional warrants to the placement agent equal to 10% of the units sold, at a
price of $.01 per warrant. These warrants would allow the agent to purchase
common stock during a five-year term at $1.25 per share.
On March 9, 2004, the Company 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 manufacturer of fork trucks with a manufacturing
facility in Mulheim, Germany (FiLCO). As partial consideration for this
acquisition, the Company agreed to lend approximately $1,220,000 to FiLCO, to be
advanced in monthly installments through June 2, 2004. If the Company lends the
entire amount to FiLCO, the Company and FiLCO's sole shareholder have agreed to
convert all existing loans to FiLCO capital. Through March 29, 2004, loans
totaling $500,000 had been made to FiLCO by the Company and loans totaling
1,225,000 Euros had been made to FiLCO by it's sole shareholder. As additional
consideration for this FiLCO stock purchase, the Company 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 also agreed to appoint the seller of the FiLCO stock as a director of
the Company and grant him options to purchase 100,000 shares of Company stock at
a price of $.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 49% of FiLCO stock and
would be repaid only from dividends paid on that 49% stock. As of March 29,
2004, the Company had not paid the 12,750 Euros to the sole shareholder and had
not issued the warrants to purchase 900,000 shares of Company common stock.
57
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
10. CONTINGENCIES (CONTINUED)
The Company also agreed to make available to the management of FiLCO 100,000
shares of Company common stock and options to purchase another 100,000 shares.
During May 2002, the Company signed an agreement with a broker-dealer to provide
investment banking and financial advisory services, which included the raising
of funds. Under the agreement, the broker-dealer was entitled to receive stock
warrants which if exercised would produce 450,000 shares of common stock of the
Company during a four year term at an exercise price of approximately $1.75 per
share. A dispute arose between the parties regarding the agreement and its
performance. The Company has asserted that the broker-dealer induced the Company
to enter into the agreement through material misstatements and has not otherwise
performed its services under the agreement. The Company believes the
broker-dealer is not entitled to the stated compensation, and has not issued the
stock warrants.
11. SUBSEQUENT EVENTS
On May 14, 2004, a final closing occurred of the private placement referred to
in Note 10. The Company raised an additional $2,880,100 and issued 3.6 million
shares of common stock and 1.8 million warrants with and exercise price of
$1.25.
12. RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not anticipate the adoption of recently issued accounting
pronouncements to have a significant effect on the Company's results of
operations, financial position, or cash flows.
58
UP TO 9,584,189 SHARES
OF OUR
OF COMMON STOCK
TABLE OF CONTENTS
Page
Prospectus Summary 6
Recent Developments 7
Risk Factors 9
Use of Proceeds 12 Airtrax, Inc.
Market For Common Equity And Related Stockholder
Matters 12
Management's Discussion And Analysis or Plan Of
Operation 14
Business 23
Description of Property 23
Legal Proceedings 23
Management 23
Executive Compensation 24
Certain Relationships And Related Transactions 26 ----------------
Security Ownership Of Certain Beneficial Owners
And Management 27 PROSPECTUS
----------------
Description of Securities 28
Indemnification for Securities Act Liabilities 29
Selling Stockholders 30
Plan of Distribution 36
Legal Matters 36
Experts 36
Available Information 37
Index To Financial Statements 38 February 11, 2005
59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
On January 11, 2005, we filed a proxy statement with the SEC for a special
meeting of shareholders pursuant to which we will request that our shareholders
approve an amendment to our certificate of incorporation to provide, to the
fullest extent permitted under the laws of the State of New Jersey, that our
directors or officers shall not be personally liable to us or our shareholders
for damages for breach of such director's or officer's fiduciary duty. The
effect of this provision of our articles of incorporation is to eliminate our
rights and our shareholders (through shareholders' derivative suits on behalf of
our company) to recover damages against a director or officer for breach of the
fiduciary duty of care as a director or officer (including breaches resulting
from negligent or grossly negligent behavior), except under certain situations
defined by statute. We believe that the indemnification provisions in our
articles of incorporation, if approved by our shareholders, are necessary to
attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
NATURE OF EXPENSE AMOUNT
SEC Registration fee $ 1,599.53
Accounting fees and expenses 15,000.00*
Legal fees and expenses 45,000.00*
-----------
TOTAL $ 61,396.47*
===========
* Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On February 11, 2005, we entered into a Subscription Agreement pursuant to which
we sold an aggregate of $5,000,000 of principal amount promissory notes
convertible into shares of our common stock, no par value, and an aggregate of
2,884,615 Class A and Class B share purchase warrants to purchase shares of our
common stock to certain purchasers who are a party to the Subscription
Agreement.
On November 22, 2004, we entered into a Purchase Agreement (the "Purchase
Agreement") pursuant to which we sold and issued 1,125,000 shares of common
stock, no par value, and common stock purchase warrants to purchase 562,500
shares of our common stock to several accredited investors who are a party to
the Purchase Agreement for an aggregate purchase price of $900,000. Thereafter,
on November 23, 2004, we entered into Joinders to the Purchase Agreement
pursuant to which we sold and issued an additional 515,000 shares of common
stock and warrants to purchase an additional 257,500 shares of our common stock
to several accredited investors who are a party to the Joinders to the Purchase
Agreement for an aggregate purchase price of $412,000.
Between September 8, 2004 and December 20, 2004, we received subscriptions for
an aggregate of 1,812,403 shares of our common stock and an aggregate of 906,200
shares of common stock issuable upon exercise of common stock purchase warrants
to 33 accredited investors pursuant to a private placement offering.
In May 2004, we and several accredited investors entered into a Subscription
Agreement whereby the investors agreed to purchase an aggregate of 3,600,125
shares of common stock at a price of $0.80 per share for an aggregate purchase
price of $2,855,100. In addition, the investors received warrants, exercisable
at $1.25 per share, to purchase 50% of the shares issued.
* All of the above offerings and sales were deemed to be exempt under rule 506
of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of Airtrax or executive officers of
Airtrax, and transfer was restricted by Airtrax in accordance with the
60
requirements of the Securities Act of 1933. In addition to representations by
the above-referenced persons, we have made independent determinations that all
of the above-referenced persons were accredited or sophisticated investors, and
that they were capable of analyzing the merits and risks of their investment,
and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access to
our Securities and Exchange Commission filings.
ITEM 27. EXHIBITS.
The following exhibits are included as part of this Form SB-2. References to
"the Company" in this Exhibit List mean Airtrax, Inc., a New Jersey corporation.
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 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.
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).
4.3 Form of Series A Convertible Note dated as of February 11, 2005 (Filed
as an exhibit to the Company's Form 8-K filed on February 11, 2005).
4.4 Form of Class A Common Stock Purchase Warrant dated as of February 11,
2005 (Filed as an exhibit to the Company's Form 8-K filed on February
11, 2005).
4.5 Form of Class B Common Stock Purchase Warrant dated as of February 11,
2005 (Filed as an exhibit to the Company's Form 8-K filed on February
11, 2005).
4.6 Fonn of Broker's Common Stock Purchase Warrant dated as of February
11, 2005 (Filed as an exhibit to the Company's Form 8-K filed on
February 11, 2005).
5.1 Sichenzia Ross Friedman Ference LLP Opinion and Consent
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 Product Development, Sales and Manufacturing Representation Agreement
dated March 13, 2004 by and between Airtrax, Inc., and MEC Aerial
Platform Sales Corporation. (Filed as an exhibit to the Company's Form
8-K filed on March 15, 2004).
60
10.8 General Sales Contract and Amendment dated March 10, 2004 by and
between Airtrax , Inc with Incomex Saigon. (Filed as an exhibit to the
Company's Form 8-K filed on March 22, 2004).
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 Subscription Agreement dated February 11, 2005 by and among Airtrax,
Inc. and the investors named in the signature pages thereto (Filed as
an exhibit to the Company's Form 8-K filed on February 11, 2005).
23.1 Consent of Independent Certified Public Accountant - Robert G. Jeffrey
23.2 Consent of Sichenzia Ross Friedman Ference LLP (see Exhibit 5.1).
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of the securities offered would
not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective registration
statement, and
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(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant, Airtrax, Inc., certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and has duly
caused this Registration Statement on Form SB-2 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Hammonton, State of
New Jersey on the 11th day of February 2005.
AIRTRAX, INC.
Name: /s/ Peter Amico
----------------
Peter Amico
Title: President, Chief Executive Officer and
Acting Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Peter Amico
his or her true and lawful attorney in fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post effective amendments) to the Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all post effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-2 has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
---------------------------- ----------------------------- -------------------
By: /s/ Peter Amico President, Chief
----------------------- Executive Officer, Acting February 11, 2005
Peter Amico Chief Financial Officer
and Director
By: /s/ D. Barney Harris
-----------------------
D. Barney Harris Director February 11, 2005
By: /s/James Hudson
-----------------------
James Hudson Director February 11, 2005
By: /s/Frank Basile
-----------------------
Frank Basile Director February 11, 2005
By: /s/William Hungerville
-----------------------
William Hungerville Director February 11, 2005
By: /s/Fil Filipov
------------------------
Fil Filipov Director February 11, 2005
63