U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the period ended December 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from ___ to ____.
Commission file number: 0-25791
AIRTRAX, INC.
----------------------
(Name of Small Business Issuer in its charter)
New Jersey 22-3506376
----------------------- ---------------------
(State of Incorporation) (I.R.S. Employer I.D.
Number)
870B Central Avenue, Hammonton, New Jersey 08037
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number 609-567-7800.
Securities registered under Section 12 (b) of the Act:
Title of each class Name of exchange on which
to be registered each class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
Check whether issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
1). Yes: X No
2). Yes: X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
State issuer's revenues for the most recent fiscal year. $83,464
As of March 31, 2001, the aggregate market value of the voting and
non-voting common equity held by non-affiliates as approximately $7,756,945.
This calculation is based upon the average bid price of $2.50 and asked price of
$2.65 of the common stock on March 31, 2001.
The number of shares issued and outstanding of issuer's common stock, no
par value, as of December 31, 2000 was 5,040,621.
DOCUMENTS INCORPORATED BY REFERENCE
None.
AIRTRAX, INC.
FORM 10-KSB
For the fiscal year ended December 31, 2000
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business 3
Item 2. Description of Properties 9
Item 3. Legal Proceeding 9
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 10
Item 6. Management's Discussion and Analysis or Plan of Operations 10
Item 7. Financial Statements 15
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 15
PART III
Item 9. Directors, Executive Officers, Promoters, and Control Persons 15
Item 10. Executive Compensation 17
Item 11. Security Ownership of Certain Beneficial Owners and Management 19
Item 12. Certain Relationships and Related Transactions 20
Item 13. Exhibits and Reports on Form 8-K 21
Signatures 22
Index to Financial Statements F-1
2
PART I
Item 1. Description of Business.
INTRODUCTION.
AirTrax, Inc. ("AirTrax" or "Company") was incorporated in the State of New
Jersey on April 17, 1997. On May 19, 1997, the Company entered into a merger
agreement with a predecessor company that initiated and advanced the
omni-directional technology. The predecessor company was incorporated on May 10,
1995. The Company became the surviving company in the merger.
Effective November 5, 1999, the Company merged with MAS Acquisition IX Corp
("MAS"), and became 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 AirTrax. After giving effect to fractional and
other reductions, MAS shareholders received 57,280 shares of AirTrax as a result
of the merger.
As used in this Form 10-KSB, the terms "Company" or "AirTrax" refers to
AirTrax, Inc. and companies previously acquired.
AirTrax is a development stage company that has developed an omni-
directional wheel technology intended to be used for various commercial
applications.
The Company's executive offices are located at 870B Central Avenue,
Hammonton, New Jersey 08037, its telephone number is (609) 567-7800, and its
web-site is www.airtrax.com.
3
THE COMPANY.
OMNI-DIRECTIONAL TECHNOLOGY.
Prior History.
------------
An early stage omni-directional wheel was patented by a Swedish inventor.
The technology was purchased by the United States Navy and was advanced at the
Naval Surface Warfare Center. The Navy held the patent until its expiration in
1990. In January 1996, the Company entered into a Cooperative Research and
Development Agreement ("CRADA") with the Navy to transfer the technology to the
Company. Since CRADA, the Company has advanced the development of the technology
for various applications including use on forklifts and other material handling
equipment.
Technology Description.
----------------------
An omni-directional vehicle employing the Company's technology is capable
of traveling in any direction. On a four-wheel omni-directional vehicle, each
omni-directional wheel has its own independent electric or hydraulic motor. Each
motor is AC powered eliminating brushes and commutators of conventional, DC
powered motors. 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). Conventional drive trains, steering racks, and foot petals for
braking and acceleration are all non-existent. The steel framework of the
Company's omni-directional forklift is mobilized with four omni-directional
wheels. The electric or hydraulic 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 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, management believes the wheel can be used on
miniature vehicles or massive load-carrying vehicles. Presently, the Company has
incorporated omni-directional technology into three pilot forklifts.
EXISTING AND PROPOSED PRODUCTS.
ATX Series Omni-Directional Forklift.
------------------------------------
The Company anticipates that its omni-directional forklift will be
available in the following series with rated lift capacities ranging from 3000
through 6000 pound, in increments of 1000 pounds;
ATX Series. The ATX series is the standard version featuring the
revolutionary omni-directional technology. As described, conventional steering
racks and foot petals are non-existent allowing impediment free ingress and
egress. This forklift will deliver unequaled maneuverability providing
significantly improved operating efficiencies in the materials handling
industry. This model is expected to retail at prices higher than comparably
sized standard forklifts.
4
ATX-E Series. This series will include the omni-directional technology, and
will have a feature that permits the upper section of the forklift to extend and
retract very similar to a "reach truck". This extend/retract feature effectively
reduces the overall dimension of the machine while carrying a load to
approximately 84 inches enabling it to traverse an eight-foot aisle sideways. At
this time, the Company has initiated but not completed the engineering design
and analysis of the ATX-E Series.
In the future, the Company may attempt to add a rotational feature to its
forklift allowing loads to be transferred from one side to the other while the
forklift remains stationary. The Company will be required to complete an
engineering design and analysis as well as a market feasibility study of this
vehicle prior to its development, for which no assurances can be given.
The Company expects the retail price of the ATX series forklift (3000 pound
capacity rated) to range between $35,900 to $37,900 per unit. The retail price
of a similar rated, standard (non-omni-directional) forklift ranges from $18,000
to $23,500 per unit.
Omni-directional Wheelchair.
---------------------------
The Company has conducted a preliminary design of an omni-directional wheel
for wheelchair applications. It will require additional funds to complete a
structural and ergonomic design of a proto-type wheelchair, as well as to
construct the proto-type for further evaluation and testing. Although management
recognizes the potential utilitarian benefit and significant market size of an
omni-directional wheelchair, no assurances can be given that the product can be
successfully developed by the Company.
Military Products.
-----------------
During 1999, the Company was 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). The Phase
I contract studied the application of the omni-directional technology for
military use and was supervised by the Naval Air Warfare Center Aircraft
Division in Lakehurst, New Jersey. The contemplated use includes the
installation of jet engines on military aircrafts and the transportation of
munitions and other military goods. The Company completed the Phase I base
contract in 1999 and was subsequently granted a Phase I option from NAWC to
further define the uses of the MP2. In July 2000, the Company was awarded a
Phase II research contract under the SIBR program. The Phase II contract with an
option will not exceed 42 months and will further study the feasibility of the
MP2 for military purposes, and will culminate with the construction of one or
more proto-type devices. Contract revenues range from $750,000 to $1 million.
The SBIR program enables the Government to place production orders for awarded
products under a Phase III contract. Although management believes the underlying
omni-directional technology for the proposed MP2 has significant potential for
both commercial and military applications, no assurances can be given that
Company will be awarded the Phase III Contract nor that any product sales from
the United States military under a Phase III contract will result.
5
In addition to the military applications relating to SBIR contracts
discussed above, the Company has proposed to adapt its ATX omni-directional
forklift product line for use on-board Military Sealift Command and Navy
re-supply ships. This application will involve upgrading materials, sealing,
coatings, and electromagnetic hardening to enable its machine to function in the
corrosive shipboard environment. In January 2001, the Company responded to a
request for proposal from the United States Navy to supply two 4,000 pound
capacity omni-directional forklifts suitable for shipboard testing and use. The
Company's proposal included options to buy additional units. This proposal is
currently under evaluation by the Navy. The Company believes that
omni-directional technology will enhance long load handling in the confined
spaces on-board Navy and MSC re-supply ships currently in inventory. It also
believes that the United States Navy, as well as foreign naval applications,
represents a significant market opportunity for omni-directional forklift sales.
The Company estimates potential use on 21 US Navy and MSC re-supply ships, 12
aircraft carriers, and 11 amphibious warfare ships, with each ship requiring
between 10 and 15 omni-directional fork lifts. At this time, the Company cannot
predict the likely result of its proposal to the Navy, nor whether future sales
to the United States Navy or any foreign government will result.
Other Products.
---------------
Since 1995, the Company and its predecessor have manufactured and sold a
helicopter ground handling device. Sales to date have been limited, and
management believes that future sales will be insignificant. Although it has
received a patent on an omni-directional ground handling devise, at this time,
the Company does not expect to develop this product.
During 2000, the Company completed a feasibility study for a hybrid power
supply module for forklifts and other battery powered mobility machines. It is
designed to replace a standard battery enabling operation on either fossil fuel
or battery power. The module will consist of a generator coupled to a specially
designed battery with micro-processor controls. Its unique hybrid feature will
enable a forklift to be powered indoors by battery without noise or exhaust
pollution, and by fossil fuel in non pollution sensitive areas. The battery is
designed to re-charge during fossil fuel use thereby eliminating re-charging
downtime customarily experienced by battery powered forklifts. The Company has
filed a patent application for the unique features of the hybrid power module.
The further development of this product will be subject to available funds to
complete an engineering design of module, however, no assurances can be given
that the product can be successfully developed by the Company.
6
CURRENT OPERATIONS.
Since 1995, substantially all of the Company's 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 the Company and specially manufactured. Three pilot models
of the commercial omni-directional forklift are currently operational.
Additional testing and minor component refinement will be required prior to
commercial production and sale. Testing by Underwriters Laboratory, and by the
Company to meet the stability standards of the American National Standards
Institute (ANSI B56) also will be required. The Company anticipates that
required testing and component refinement should be completed in the second
quarter of 2001, and expects to initiate the commercial sale of its ATX series
forklift during the third quarter of 2001. Although management does not
anticipate any material functionality defects during the final test period, the
results of additional testing and component refinement may delay the initiation
of product sales. Initial sales of the ATX series will be limited to 3,000 pound
capacity rated models. Delivery of initial orders is anticipated to occur within
eight to 12 weeks from placement.
MANUFACTURING AND SUPPLIERS.
The Company has entered into an arrangement with an equipment manufacturer
located in Willow Grove, Pennsylvania to commercially assemble the forklift. The
Company expects to enter into arrangements with one or more other facilities to
satisfy its future production requirements. The Company believes that these
arrangements will be suitable for its production needs during fiscal 2001. In
addition, it is conceivable the Company may establish its own manufacturing
facility in the future if economically advantageous.
Components for the Company's forklifts consist of over the counter products
and products that have been specially designed and manufactured by various
suppliers in collaboration with the Company. The Company believes that continual
refinements of certain components will occur during the first six months of
initial production in response to user feedback. The Company 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.
The Company considers 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 the Company maintains single sources for
the over the counter components, it believes that other sources are available if
necessary.
MARKETING.
The Company intends to establish an exclusive dealer network nationally and
internationally for its forklift product line. Each dealer likely will be an
existing equipment distributor, and will be granted a designated territory. In
addition, each dealer will be required to purchase a number of forklifts
commensurate with the size of its territory. In March 2001, the Company hired a
director of dealer sales to establish a national dealer network. The Company
will initiate dealer solicitation during the second quarter of 2001. In
addition, the Company plans to increase user awareness through direct mailings
to dealers and large users, television advertising, and trade shows.
7
MARKETS
Forklifts.
---------
The Company's initial market focus will be directed to the forklift market.
The Company believes 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 (Company 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 $23,000 for a standard
3000 pound rated vehicle to $80,000 or more for specialty narrow aisle or side
loaders. Of the total market, management expects to compete with mid-range
electrical and fossil fuel riders, and some specialty narrow aisle or side
loaders.
Man Lifts.
---------
Man lifts are used in the construction and warehousing industries, and are
ideally suited for omni directional technology. According to data provided by
the United Department of Commerce, this market consists of approximately $1.2
billion in annual sales. Man lifts range in size from single user lifts to large
off road machines. Of the total market, the Company expects to compete with a
range of indoor man lifts.
COMPETITION
Although the Company believes that initially it will not confront direct
competition for its omni-directional technology, it does anticipate facing
competition from competing technologies in the future. In the near term, the
Company expects to confront competition with conventional products (ie. standard
forklifts) on the basis of price and reliability. In addition, 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 the Company. In addition, the patent on
omni-directional technology expired in 1990. Although the Company has sought
patent protection for certain aspects of its technology, no assurances can be
given that such patent protection will effectively thwart competition.
PATENTS AND PROPRIETARY RIGHTS
The Company has filed patent applications encompassing certain aspects of
the omni-directional wheel, as well as features specific to the forklift. The
Company also anticipates that it will make future patent applications relating
to various aspects of its omni-directional technology. Recently, the Company
filed a patent application for its power module. The Company also has made a
preliminary filing for foreign patent protection which comports with the patent
applications filed in the United States. At this time, no patents, foreign or
domestic, have been issued for any of the Company's technology other than
helicopter ground handling device described below. The Company also seeks to
protect its proprietary technology through exclusive supply contracts with
manufacturers for specially designed and manufactured components. In December
1997, the Company was awarded a patent for an omni-directional helicopter
ground-handling device.
8
BACKLOG
The Company had no backlog for the year ended December 31, 2000. There is
no seasonal impact on the Company's sales.
FACILITIES
The Company maintains its administrative offices at 870B Central Avenue,
Hammonton, New Jersey 08361 on premises owned by the president of the Company.
As of December 31, 2000, the arrangement between the parties has been rent-free.
In addition, the Company maintains 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 the Company.
As of December 31, 2000, the arrangement between the parties has been rent-free.
PRODUCT LIABILITY
Due to nature of the Company's business, the Company may face claims for
product liability resulting from the use or operation of the Company's forklifts
or other products.
Presently, the Company does not maintain any product liability insurance.
It intends to obtain such insurance commensurate with the initial shipment of
its omni-directional forklifts.
EMPLOYEES
As of December 31, 2000, the Company has five employees which includes its
President and Executive Vice President. The Company has no collective bargaining
agreements with its employees and believes its relations with its employees are
good.
Item 2. Description of Property.
The Company maintains its administrative offices at 870B Central Avenue,
Hammonton, New Jersey 08037 on premises owned by the president of the Company.
As of December 31, 2000, the arrangement between the parties has been rent-free.
In addition, the Company maintains 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 the Company.
As of December 31, 2000, the arrangement between the parties has been rent-free.
Item 3. Legal Proceedings.
In accordance with the agreements relating to the merger transaction with
MAS Acquisition IX Corp. ("MAS"), the Company was required to issue 114,867
shares of common stock to MAS shareholders and make a cash payment to an
affiliate of the majority shareholder of MAS in the amount of $50,000. Following
the merger, the Company asserted claims against the affiliate and majority
shareholder relating to certain representations attendant to the transaction
made by such parties. The claims involved the amount of the common stock and the
cash payable by the Company. During the first quarter of 2001, the parties
settled the disagreement, pursuant to which the Company agreed to total payment
of $28,806.47 and 57,280 shares of common stock to be issued the MAS
shareholders.
9
Item 4. Submission of Matters to Vote of Security Holders.
On December 13, 2000, the Company's Board of Directors approved and
recommended that the Certificate of Incorporation be amended to increase the
Company's authorized common stock from 5,000,000 shares to 10,000,000 shares. A
consent of shareholders holding in excess of a majority of the voting capital
stock approving the amendment was executed on December 15, 2000. The Company
filed with the Securities and Exchange Commission a Preliminary Information
Statement on December 22, 2000 and a Definitive Information Statement on January
23, 2001 in respect of the action by the majority of shareholders.
PART II
Item 5. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Company's common stock has traded on the NASDAQ OTC Bulletin Board
since March 6, 2000 under the symbol "AITX". Prior to such time, the Company's
common stock traded on the National Quotation Bureau's "pink sheets".
The table below sets forth the high and low bid prices of the Common stock
of the Company as reported by NASDAQ. The quotations reflect inter-dealer
prices, without retail mark-up, mark-down, or commissions and may not
necessarily represent actual transactions. There is an absence of an established
trading market for the Company's common stock, as the market is limited,
sporadic and highly volatile. The absence of an active market may have an effect
upon the high and low priced as reported.
2000 Low Bid High Bid
1st Quarter $2.25 $2.25
2nd Quarter 1.50 2.50
3rd Quarter 1.50 1.875
4th Quarter 1.4375 1.75
As of December 31, 2000, there are 848 shareholders of record of the
Company's common stock. Although there are no restrictions on the Company's
ability to declare or pay dividends, the Company has not declared or paid any
dividends since its inception' and does not anticipate paying dividends in the
future.
Item 6. Management's Discussion and Analysis.
The following discusses the financial results of the Company for the
periods indicated.
10
Results of Operations
Fiscal year end 2000 compared with fiscal year end 1999.
The Company has been a development stage company for the 2000 and 1999
periods and has 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. Consequently, management believes that the year to year
comparisons described below are not indicative of future year to year
comparative results.
Revenues for fiscal 2000 were $83,464 representing an increase of $4,162
from revenues of $79,302 for the 1999 period. Revenues for the 2000 period
consisted of $31,082 in sales of a non omni-directional product and $52,383 in
contract revenues from the United States Navy. Revenues for 1999 consisted of
$9,354 in sales of a non omni- directional product and $69,709 in contract
revenues from the United States Navy.
Cost of sales for 1999 was $7,453 which reflects a decrease of $2,630 from
$10,083 in 1999. Cost of sales consists of parts and manufacturing costs of the
non-omni-directional product.
General and administrative expenses which includes administrative salaries,
depreciation and overhead for the 2000 period totaled $756,991 which represents
a decrease of $8,391 from $765,382 incurred in 1999. The slight decrease is due
primarily to lower advertising costs and professional fees offset by higher
interest and prototype development costs and increases payroll and related
taxes.
Liquidity and Capital Resources
Since its inception, the Company has financed its operations through the
private placement of its common stock. During 1999, the Company raised
approximately $872,268 net of offering costs from the private placement of its
common stock. During 2000, the Company raised approximately $430,858 net of
offering costs from the private placement of its common stock.
As of December 31, 2000, the Company's working capital was $68,989.
During 2000, the Company was approved by the State of New Jersey for its
technology tax transfer program pursuant to which the Company could sell its net
operating losses and research and development credits as calculated under state
law. During the fourth quarter of 2000, the Company received $122,561 for losses
and credits that accrued through December 31, 1999. (see Note 6 to financial
statements)
The Company anticipates that its cash requirements for the foreseeable
future will be significant. In particular, management expects substantial
expenditures for inventory and product production in anticipation of the rollout
of its omni-directional forklift, which is projected to occur in the third
quarter of 2001. The Company intends to fund its operations through the issuance
of equity and/or debt securities. Presently, the Company is seeking capital from
one or more funding sources; however, at this time no arrangement has been
finalized. No assurances can be given that the Company will be successful in
obtaining sufficient capital to fund the initiation of its production
activities. If the Company is 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 the Company and its business prospects. In order to
facilitate additional funding, on December 15, 2000, a majority of shareholders
approved the increase of its authorized capital stock of the Company to
10,000,000 common shares.
11
Fixed assets, net of accumulated depreciation, totaled $67,219 on December
31, 2000.
Disclosure Regarding Forward Looking Statement and Cautionary Statement.
Forward Looking Statements. Certain of the statements contained in this
Annual Report on Form 10-KSB includes "forward looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended
("Exchange Act"). All statements other than statements of historical facts
included in this Form 10-KSB regarding the Company's financial position,
business strategy, and plans and objectives of management for future operations
and capital expenditures, and other matters, are forward looking statements.
These forward looking statements are based upon management's expectations of
future events. Although the Company believes the expectations reflected in such
forward looking statements are reasonable, there can be no assurances that such
expectations will prove to be correct. Additional statements concerning
important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed below in the
Cautionary Statements section and elsewhere in this Form 10-KSB. All written and
oral forward looking statements attributable to the Company or persons acting on
behalf of the Company subsequent to the date of this Form 10-KSB are expressly
qualified in their entirety by the Cautionary Statements.
Cautionary Statements. Certain risks and uncertainties are inherent in the
Company's business. In addition to other information contained in this Form
10-KSB, the following Cautionary Statements should be considered when evaluating
the forward looking statements contained in this Form 10-KSB:
NEED FOR ADDITIONAL CAPITAL. The Company will require additional capital
immediately and long term to meet its ongoing operating requirements. The
immediate need includes funds to complete the final testing of its pilot model
forklifts. In the future, in order to initiate full scale production, the
Company will require significant funds for inventory, manufacturing costs and
for other working capital needs. The Company intends on raising the capital
through a private or public financing of debt or equity. Presently, the Company
has no commitment for any such funding. No assurances can be given that the
Company will be successful in obtaining such financing on terms acceptable to
the Company or on any terms. The inability to obtain such financing could have a
material adverse affect on the Company.
LACK OF COMMERCIAL PRODUCT. The Company has developed the pilot version of
its 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 is confident in the performance capabilities of the forklift,
management has not performed these tests separately. If the forklift cannot
perform these tests successfully, the commercial sale of the product will be
delayed. It also is conceivable that as of result of testing, the forklift may
be redesigned to lessen certain of the competitive advantages of the forklift.
The occurrence of either event may have a negative impact upon the operations of
the Company.
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LACK OF A DETERMINED PRODUCT PRICES AND IMPACT ON PROFIT MARGINS. The
Company is assessing present and projected component pricing in order to
establish a pricing policy for the ATX Series forklifts. The Company has not
completed its 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.
The Company intends to price its forklifts so as to maximize sales yet provide
sufficient operating margins. Given the uniqueness of its product, the Company
is uncertain of pricing sensitivity of product 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.
LIMITED OPERATING HISTORY. The Company is a development stage company, and,
together with its predecessor, has been in operation since 1995. However, since
1995, the Company's operations have been limited to the development of its
omni-directional products, and limited revenue has been generated during this
period. Consequently, its business may be subject to the many risks and pitfalls
commonly experienced by development stage companies. There can be no assurances
that future operations will be profitable.
LACK OF INDICATIONS OF PRODUCT ACCEPTABILITY. The success of the Company
will be dependent upon its ability to sell omni-directional products in
quantities sufficient to yield profitable results. To date, the Company has
received limited indications of the commercial acceptability of certain of its
omni-directional products. Accordingly, no assurances can be given that the
Company's omni-directional products can be marketed and sold in a commercial
manner.
PROTECTION OF INTELLECTUAL PROPERTY. The success of the Company will be
dependent, in part, upon the protection of its proprietary omni-directional
technology from competitive use. The patent for the omni-directional wheel
expired in 1990. The Company, however, has filed for patent protection of
certain other aspects of its omni-directional wheel, and for features specific
to its forklift, although a patent has not been issued. In addition to the
patent applications, the Company relies on a combination of trade secrets,
nondisclosure agreements and other contractual provisions to protect its
intellectual property rights. Nevertheless, these measures may be inadequate to
safeguard the Company's underlying technology. If these measures do not protect
the intellectual property rights, third parties could use the Company's
technology, and its ability to compete in the market would be reduced
significantly. In addition, if the sale of the Company's product extends to
foreign countries, the Company may not be able to effectively protect its
intellectual property rights in such foreign countries.
13
In the future, the Company may be required to protect or enforce its
patent, if any, 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 the Company's
patents, if any, 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 the Company. The Company cannot provide
any assurance that it will have sufficient funds to vigorously prosecute any
patent litigation, that it 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 Company's stock to decline.
LACK OF ESTABLISHED DISTRIBUTION CHANNELS. The Company does not have an
established channel of distribution for its forklift product line. It intends on
establishing a network of designated dealers throughout the United States.
Although the Company has received indications of interest from a number of
equipment distributors, to date, such indications have been limited. No
assurances can be given that the Company will be successful in establishing its
intended dealer network.
FEATURES OF PREFERRED STOCK. The Company has 275,000 shares of preferred
stock outstanding that are held by an affiliate of the President. The stock
carries a 10 for 1 voting right and a stated value of $5.00 per share. The
preferred stock carries a liquidation preference equal to the stated value and
an annual, cumulative dividend preference of five percent, all to the detriment
of common shareholders. In addition, the holder may elect to receive the
dividend in the form of common stock at a deep discount to the market price (see
Item 12 Certain Relationships and Related Transactions).
MANAGEMENT. The ability of the Company to successfully conduct its business
affairs will be dependent upon the capabilities and business acumen of current
management including Peter Amico, the Company's President. Accordingly,
shareholders must be willing to entrust all aspects of the business affairs of
the Company to its current management. Further, the loss of any one of the
Company's management team could have a material adverse impact on its continued
operation.
CONTROL EXERCISED BY MANAGEMENT. The existing officers and directors will
control approximately 70% of the shareholder votes. This control by management
is in the form of common stock and preferred stock that has 10 for 1 voting
rights. Consequently, management will control the vote on all matters brought
before shareholders, and holders of common stock may have no power in corporate
decisions usually brought before shareholders.
NATURE OF BUSINESS/INSURANCE. 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 the Company
intends to provide on-site safety demonstrations, the unique, sideways movement
of the forklift may heighten potential safety risks. Despite the fact that the
Company intends to maintain sufficient liability insurance for the manufacture
and use of its products, one or more incidents of personal injury or property
loss resulting from the operation of its products could have a material adverse
impact on the business of the Company.
14
COMPETITION. Although management believes its product will have significant
competitive advantages to conventional forklifts, the Company will be competing
in an industry populated by some of the foremost equipment and vehicle
manufacturers in the world. Substantially all of these companies have greater
financial, engineering and other resources than the Company. No assurances can
be given that any advances or developments made by such companies will not
supersede the competitive advantages of the Company's omni- directional
forklift. In addition, many of the Company's 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 the Company. It therefore is conceivable that some distributors may be loath
to enter into any relationships with the Company for fear of jeopardizing
existing relationships with one or more competitors.
PENNY STOCK REGULATION. The Company's common stock may be deemed a "penny
stock" under federal securities laws. The Securities and Exchange Commission has
adopted regulations that define a "penny stock" generally to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These regulations impose additional sales practice
requirements on any broker/dealer who sell such securities to other than
established investors and accredited investors. For transactions covered by this
rule, the broker/dealer must make certain suitability determinations and must
receive the purchaser's written consent prior to purchase. Additionally, any
transaction may require the delivery prior to sale of a disclosure schedule
prescribed by the Commission. Disclosure also is required to be made of
commissions payable to the broker/dealer and the registered representative, as
well as current quotations for the securities. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock held
in the account of the customers and information on the limited market in penny
stocks. These requirements generally are considered restrictive to the purchase
of such stocks, and may limit the market liquidity for such securities.
Item 7. Financial Statements.
The Financial Statements that constitute Item 7 of this Annual Report on
Form 10-KSB are included in Item 13 below.
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company, their ages, and the
positions they hold are set forth below. The directors of the Company hold
office until the next annual meeting of stockholders of the Company and until
their successors in office are elected and qualified. All officers serve at the
discretion of the Board of Directors.
15
OFFICERS AND DIRECTORS
Name Age Title
Peter Amico 57 President and Chairman
D. Barney Harris 40 Executive Vice President and Director
John Watt Jr. 63 Secretary and Director
Frank A. Basile, Esq. 64 Director
James Hudson 56 Director
Daniel H. Luciano, Esq. 49 Director
Peter Amico - Mr. Amico is the founder of the Company and has been
President and Chairman of the Company and its predecessor since its 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 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 helicopter accident 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. Prior to 1997, Mr. Harris was employed by EG&G
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.
John Watt Jr. - Mr. Watt has been Secretary and a Director of the Company
since August 1998. Since March 2001, Mr. Watt has retired from full time
employment and currently is performing limited consulting services to the
Company. From 1990 to the March 2001, he has been the President of Watt-Bollard
Associates, Inc., a manufacturers' representative sales agency located in Fort
Washington, Pennsylvania.
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.
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 located in Vineland, New Jersey. The
firm was one of seven law firms selected by the State of New Jersey to represent
the State in a class action lawsuit against the tobacco industry.
Daniel H. Luciano, Esq. - Mr. Luciano has been a Director of the Company
since March 2000. Mr. Luciano has been a practicing attorney since 1977 with an
emphasis on corporate and securities law.
16
Item 10. Executive Compensation.
The compensation for all directors and officers individually for services
rendered to the Company for the fiscal years ended December 31, 1999 and 2000 is
set forth in the following table:
SUMMARY COMPENSATION
Long Term
Annual Compensation Compensation Awards (4)
___________________________ _______________________
Name and
Principal Salary Bonus Other Stock Options #
Position Year ($) ($) ($)
-------- ---- ------ ----- ----- ----------------
Peter Amico(1) 2000 $75,000(2) $-0- $-0- 100,000
Chairman and 1999 $84,065(2) -0- $6,500(3) 25,000
President
------------------------------------------------------------------
(1). The Company and Mr. Amico are parties to an employment agreement governing
Mr. Amico's employment with the Company (see below). The Company became a
reporting company during fiscal 1999, and disclosure is made for years
1999 and 2000.
(2). Mr. Amico's annual salary under his employment agreement for 1999 and 2000
is $75,000. In 2000, $65,538 was paid with the balance deferred to 2001.
In 1999, the amount includes an amount accrued from 1998.
(3). During 1999, Mr. Amico was paid a finder's fee in connection with certain
private placements.
(4) The Company has no Long Term Compensation Awards other that the stock
options indicated.
The Company and Peter Amico, as President, have entered into a written
employment agreement for a period from April 1997 to June 2000. The agreement
was extended to December 31, 2000. Pursuant to the agreement, Mr. Amico receives
a salary of $75,000 per year for fiscal 1999 through June 2000. In addition, the
agreement provides Mr. Amico with stock options to acquire up to a maximum of
50,000 shares per annum. Of the options, 10,000 shares are exercisable for a
total consideration of a $1.00 beginning year three of the contract, 25,000
shares are 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
are exercisable at 15% of the lowest price paid for the stock in the 30 day
period preceding exercise beginning year three of the contract.
The Company and D. Barney Harris, as Vice President, have entered into a
written employment agreement for period of five years. Pursuant to the
agreement, Mr. Harris receives an annual salary of $75,000, subject to annual
review by the Company. In addition, Mr. Harris is entitled to receive annual
stock options not exceeding 25,000 shares of common stock, of which 2,500 shares
are exercisable for a total consideration of $1.00, 10,000 are exercisable at
35% of the lowest price paid for the stock in the 30 day period preceding
exercise for each year of the contract, and 12,500 is exercisable at 17.5% of
the lowest price paid for the stock in the 30 day period preceding exercise for
each year of the contract.
17
Option Grants in Fiscal Year 2000
% of Total
Options to Exercise or Market price
Options Employee in Base on date of
Name Granted Fiscal Year Price ($/sh) Grant Expiration Date
Peter Amico 50,000 100% (1) (1) None
President
And Chairman
(1). During 2000, pursuant to his employment agreement, Mr. Amico received
options for, 10,000 shares exercisable for a total consideration of a
$1.00 or $0.0001 per share, 25,000 shares exercisable at 30% of the lowest
price paid for the stock in the 30 day period preceding exercise, and
15,000 shares exercised 15% of lowest price paid for the stock in the 30
day period preceding exercise. Market price on date of grant in not
provided due to lack of a specific grant date.
Aggregate Option Exercises
In Last Fiscal Year and FY-End Option Values
Value of
# of Securities Unexercised
Unexercised In-the-Money
Options at Options at
Shares FY-End(#) FY-End($)at
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable(1)
Peter Amico 100,000 $201,624(1) 0/0 $0/$0
President and
Chairman
(1). Options for, 10,000 shares were exercised for a total consideration of a
$1.00 or $0.0001 per share (market price on exercise date was $2.25),
50,000 shares were exercised at $0.84375 per share, or 30% of the lowest
price paid for the stock in the 30 day period preceding exercise, (market
price on exercise date was $2.25), 25,000 shares were exercised at $0.45
per share, or 30% of lowest price paid for the stock in the 30 day period
preceding exercise, (market price on exercise date was $2.875), and 15,000
shares were exercised at $0.225 per share, or 15% of lowest price paid for
the stock in the 30 day period preceding exercise, (market price on
exercise date was $2.875).
Compensation of Directors
-------------------------
The Company's directors are compensated at the rate of $250 per meeting and
are reimbursed for expenses incurred by them in connection with the Company's
business. In addition, each director receives per year a stock option to
purchaser 5,000 shares of common stock exercisable at $0.50 per share.
Other than as described above, the Company does not have any other form of
compensation payable to its officers or directors, including any stock option
plans, stock appreciation rights, or long term incentive plan awards for the
periods indicated in the table.
18
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table identifies as of March 31, 2001 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:
Percentage of Percentage of
Common Stock Preferred Common Stock Preferred Stock
Beneficially Voting Stock Beneficially Beneficially
Name(1) Owned(2) Rights(3) Owned(2) Owned(3)
--------------------------------------------------------------------------------
Peter Amico
President and
Chairman 1,839,558(4) 2,750,000(5) 35.2% 100%
D. Barney Harris 92,400(6) -0- 1.8% -0-
Vice President and
Director
Frank Basile 117,225(7) -0- 2.2% -0-
Director
James Hudson 60,800(8) -0- 1.2% -0-
Director
John Watt Jr. 104,000(9) -0- 2.1% -0-
Secretary and
Director
Daniel H. Luciano 26,914(10) -0- 0.5% -0-
Director
All directors 2,240,897(11) 2,750,000 42.7% 100%
and executive
officers as a
group (5 persons)
-----------------
(1). The address of each beneficial owner is the address of the Company.
(2). Based on 5,208,288 shares of common stock outstanding as of March 31,
2001, 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) Includes 1,714,558 shares held by Arcon Corp., a corporation wholly owned
by Mr. Amico ("Arcon") , 100,000 shares held by Mr. Amico individually,
stock options for 25,000 shares exercisable pursuant to Mr. Amico's
employment agreement, 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 shares held by Mr. Harris individually.
(7). Includes 90,000 shares held individually, 7,225 shares held by an
affiliate, 10,000 shares held by Mr. Basile's spouse, and 10,000 shares
issuable upon exercise of director's options for years 2000 and 2001.
19
(8). Includes 11,300 shares held individually, 44,500 shares held by an
affiliate and 5,000 shares issuable upon exercise of director's options
for 2001.
(9). Includes 100,000 shares held jointly with his wife, and 4,000 held by an
affiliate.
(10).Includes 21,914 shares held individually, and 5,000 shares of common
stock issuable upon exercise of director's options for 2001.
(11). Includes (4),(6),(7),(8),(9), and (10).
Item 12. Certain Relationships and Related Transactions.
Arcon Cop., a corporation wholly owned by the Company's 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.
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 common stockholders upon liquidation equal to the
stated value per share. At December 31, 1998, unpaid dividends on the preferred
stock totaled $92,114. An additional $68,750 in dividends accrued during each of
the years 1999 and 2000. During 1999, the holder received cash dividends of
$40,498, and dividends in the form of 305,737 shares of common stock, which were
valued at $120,366. During 2000, the holder received dividends in the form of
95,558 shares of common stock, which were valued at $56,751. At December 31,
2000, $11,999 in dividends remains unpaid.
As of December 31, 1999, a loan in the amount of $20,589.59 from Arcon
Corp. 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 $1.500 for a total consideration of $50,001.
Mrs. Patricia Amico, the wife of the Company's President, performed
services to the Company during 1999 and 2000. The amount of such services
totaled $8,099 and $9,930. Mr. Timothy Smith, the son in law of the Company's
President, performed services to the Company during 1999 and 2000. The amount of
such services totaled $17,236 and $4,644.
Mr. John Watt, a director of the Company, received commissions during
fiscal 1999 and 2000 from certain suppliers and fabricators that conduct
business with the Company. The amount of such commission for each year was less
that $10,000.
Mr. Frank Basile, a director of the Company, is a partner of a law firm
that performed legal services to the Company during fiscal 1999 and 2000. The
billing amount for such services for each year was less than $10,000.
Mr. Daniel Luciano, a director of the Company, performed legal services for
the Company during fiscal 2000. The billing amount of such services for the year
approximated $20,000.
20
During 2000, each director of the Company, other than Mr. Amico, received a
stock option to acquire 5,000 shares of common stock at a price per share of
$0.50.
PART IV
Item 13. Exhibits and reports on Form 8-K.
(a)(1). Exhibits
EXHIBIT INDEX
3(i)(a). Certificate of Incorporation of AirTrax, Inc. dated April 11, 1997.
(Incorporated by reference to the Company's Form 8-K filed with the
Securities and Exchange Commission on November 19, 1999). 3(i)(b).
Certificate of Amendment to Certificate of Incorporation of AirTrax,
Inc. dated November 11, 1999. (Incorporated by reference to the
Company's Form 8-K filed with the Securities and Exchange Commission
on November 19, 1999).
3(i)(c). Certificate of Correction of the Company dated April 30, 2000 (filed
herewith).
3(i)(d). Certificate of Amendment of Certificate of Incorporation dated March
19, 2001 (filed herewith).
3(ii)(a).Amended and Restated By-Laws of the Company. (Incorporated by
reference to the Company's Form 8-K filed with the Securities and
Exchange Commission on November 19, 1999).
10(i) Agreement and Plan of Merger by and between MAS Acquisition IX Corp.
and AirTrax, Inc. dated November 5, 1999. (Incorporated by reference
to the Company's Form 8-K filed with the Securities and Exchange
Commission on January 13, 2000).
10(ii). Employment agreement dated April 1, 1997 by and between the Company
and Peter Amico. (Incorporated by reference to the Company's Form
8-K/A filed with the Securities and Exchange Commission on January 13,
2000).
10(iii). Employment agreement dated July 12, 1999, by and between the Company
and D. Barney Harris. (Incorporated by reference to the Company's Form
8-K/A filed with the Securities and Exchange Commission on November
19, 1999).
99(i) Consulting Agreement by and between MAS Financial Corp. and AirTrax,
Inc. dated October 26, 1999. (Incorporated by reference to the
Company's Form 8-K filed with the Securities and Exchange Commission
on November 19, 1999).
(b). Reports on Form 8-K.
Not Applicable
21
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AirTrax, Inc.
April 16, 2001
/s/ Peter Amico
---------------
Peter Amico
Chairman and
Principal Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/Peter Amico April 16, 2001
--------------
Peter Amico
Director
/s/D. Barney Harris April 16, 2001
-------------------
D. Barney Harris
Director
/s/John Watt April 16, 2001
------------
John Watt
Director
/s/Daniel H. Luciano April 16, 2001
--------------------
Daniel H. Luciano
Director
22
AIRTRAX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 2000
CONTENTS
Page
Accountant's Audit Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholder's Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
F-1
Board of Directors
AirTrax, Inc.
I have audited the accompanying balance sheet of AirTrax, Inc. (a
development stage company) as of December 31, 2000, and the related statements
of operations, changes in stockholders' equity, and cash flows for the years
ended December 31, 2000 and 1999. These financial statements are the
responsibility of the Company management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted the audit in accordance with generally accepted auditing
standards. 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 audit provides 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, 2000, and the results of its operations and its cash flows for the years
ended December 31, 2000 and 1999 in conformity with generally accepted
accounting principles.
ROBERT G. JEFFREY, CPA
March 30, 2001
Wayne, New Jersey
-1-
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31, 2000
ASSETS
Current Assets
Cash $ 23,663
Accounts receivable 34,382
Inventory 764,875
Prepaid expenses 6,938
Deferred tax asset 61,285
--------------
Total current assets $ 891,143
Fixed Assets
Office furniture and equipment 35,303
Automotive equipment 16,915
Shop equipment 20,660
Casts and tooling 76,687
--------------
149,565
Less, accumulated depreciation 82,346
--------------
Net fixed assets 67,219
Other Assets
Patents - net 45,331
Utility deposits 65
--------------
Total other assets 45,396
--------------
TOTAL ASSETS $ 1,003,758
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 763,210
Accrued liabilities 35,630
Stockholder note payable 23,314
--------------
Total current liabilities $ 822,154
Stockholders' Equity
Common stock - authorized, 5,000,000 shares without
par value; issued and outstanding - 5,040,621 and 2,408,549
Preferred stock - authorized, 500,000 shares without
par value; 275,000 issued and outstanding 12,950
Deficit accumulated during the development stage (2,032,943)
Deficit prior to development stage (206,952)
--------------
Total stockholders' equity 181,604
--------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,003,758
==============
The accompanying notes are an integral part of these financial statements.
-2-
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS and DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Years Ended December 31, 2000 and 1999
May 19, 1997
(Date of Inception)
YEAR 2000 YEAR 1999 to December 31, 2000
------------- ------------- ---------------------
SALES $ 83,464 $ 79,302 $ 229,835
COST OF GOODS SOLD 7,453 10,083 63,511
------------- ------------- ---------------------
Gross Profit 76,011 69,219 166,324
OPERATING AND ADMINISTRATIVE EXPENSES 734,230 757,630 2,125,631
OPERATING LOSS (658,219) (688,411) (1,959,307)
------------- ------------- ---------------------
OTHER INCOME AND (EXPENSE)
Interest expense (22,761) (7,752) (38,850)
Other income 26 10,548 12,261
------------- ------------- ---------------------
NET LOSS BEFORE INCOME TAXES (680,954) (685,615) (1,985,896)
------------- ------------- ---------------------
INCOME TAX BENEFIT (STATE):
Current 61,285 - 61,285
Prior years 122,288 - 122,288
------------- ------------- ---------------------
Total Benefit 183,573 - 183,573
------------- ------------- ---------------------
LOSS ACCUMULATED DURING
DEVELOPMENT STAGE $(497,381) $ (685,615) $ (1,802,323)
============= =============
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE (230,620)
---------------------
DEFICIT ACCUMULATED DURING DEVELOPMENT
STAGE (2,032,943)
=====================
NET LOSS PER SHARE - Basic and Diluted $(.12) $(.18)
============= =============
The accompanying notes are an integral part of these financial statements.
-3-
AIRTRAX, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Year Ended December 30, 2000
COMMON PREFERRED DEFICIT ACCUMULATED DEFICIT PRIOR
STOCK STOCK DURING TO
Shares Amount Shares Amount DEVELOPMENT STAGE DEVELOPMENT STAGE TOTAL
---------------------------------------------------------------------------------------------------
Balance, December 31, 1998 3,610,095 $ 848,301 275,000 $ 12,950 $ (632,332) $ (206,952) $ 21,967
Sales of stock under Rule
504, Regulation D, offering 614,552 872,268 872,268
Shares issued as dividend on
Preferred stock 305,737 120,366 (120,366) -
Shares issued for services 18,629 17,238 17,238
Net loss for the period (685,615) (685,615)
Cash dividends on preferred stock (40,498) (40,498)
---------------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,549,013 1,858,173 275,000 12,950 (1,478,811) (206,952) 185,360
Sales of stock under Rule
504, Regulation D, offering 330,719 430,858 430,858
Shares issued as dividend on
Preferred stock 95,558 56,751 (56,751) -
Shares issued for services 65,331 62,767 62,767
Net loss for the period (497,381) (497,381)
---------------------------------------------------------------------------------------------------
Balance, December 31, 2000 5,040,621 $2,408,549 275,000 $ 12,950 $ (2,032,943) $ (206,952) $ 181,604
===================================================================================================
The accompanying notes are an integral part of these financial statements.
-4-
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000 and 1999
May 19, 1997
(Date of Inception)
Year 2000 Year 1999 to December 31, 2000
----------- ---------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(497,381) $(685,615) $ (1,802,323)
Adjustments to reconcile net income to net cash
consumed by operating activities:
Depreciation and amortization 33,191 30,740 104,622
Value of common stock issued for services 62,767 17,238 80,802
Accrual of deferred tax benefit (61,285) (61,285)
Changes in current assets and liabilities:
Increase in accounts payable and
accrued liabilities 256,424 421,967 798,840
Decrease (Increase) in prepaid expense - 2,649 (7,003)
Decrease (increase) in accounts receivable 37,071 (68,271) (34,383)
Increase in inventory (253,350) (488,553) (764,875)
----------- ---------- ---------------------
Net Cash Consumed By
Operating Activities (422,563) (769,845) (1,685,605)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (5,460) (63,373) (149,564)
Additions to patent cost (1,138) (4,981) (67,607)
----------- ---------- ---------------------
Net Cash Consumed By
Investing Activities (6,598) (68,354) (217,171)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales 430,858 872,268 1,943,678
Proceeds of sales of preferred stock - - 12,950
(Repayment) proceeds of stockholder loans (26,686) 50,000 23,314
Preferred stock dividends paid in cash - (40,498) (53,503)
----------- ---------- ---------------------
Net Cash Provided By
Financing Activities 404,172 881,770 1,926,439
----------- ---------- ---------------------
Net Increase (Decrease) In Cash (24,989) 43,571 23,663
Balance at beginning of period 48,652 5,081 -
----------- ---------- ---------------------
Balance at end of period $ 23,663 $ 48,652 $ 23,663
=========== ========== =====================
The accompanying notes are an integral part of these financial statements.
-5-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization Of Company
The Company was formed April 17, 1997. On May 19, 1997, it merged with a
predecessor which had initiated and advanced the development of omni-directional
technology. On November 5, 1999, the Company merged with MAS Acquisition IX
Corp. ("MAS"), a reporting company under Federal securities law. Pursuant to
this merger agreement, the Company assumed the reporting status of MAS. In both
merger transactions, the Company was the surviving entity. For financial
accounting purposes, the reverse merger with MAS was accounted for as a pooling
of interests.
Business
The Company 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 two years to the construction of a
prototype of this omni-directional forklift vehicle. It is expected to be in
full commercial production during the third quarter of 2001. At that time, it
will be offered to industrial users.
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 Financial
Accounting Standards (FAS) Statement 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, 2000, 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,
2000.
Basis of Presentation
The Company has incurred losses from inception to December 31, 2000 of
$1,802,323. 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.
-6-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. continued
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 are
being used to assemble forklift vehicles. Inventories are stated at the lower of
cost (determined on a first in-first out basis) or market.
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 and protect certain patent rights.
These costs were capitalized and are being amortized over a period of
fifteen (15) 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.
-7-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
1. continued
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, 2000.
Advertising Costs
The Company expenses advertising costs when the advertisement occurs.
Advertising costs amounted to $28,440 in 2000 and $81,021 in 1999.
Segment Reporting
Management treats the operations of the Company as one segment.
Revenue Recognition
Revenue is realized from product sales. Recognition occurs upon delivery.
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.
-8-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
2. RELATED PARTY TRANSACTIONS
During the year 2000, 95,558 shares of common stock of the Company were
issued in lieu of cash dividends on the preferred stock in the amount of
$56,751, as permitted by the terms of the preferred stock issue. The preferred
stock is wholly owned by the majority shareholder (see Note 4 for description of
the preferred stock). This majority shareholder is a corporation wholly owned by
the president of the Company.
A total of 129,999 shares were issued to the President and Vice President
of the Company pursuant to their respective employment agreements yielding a
total of $60,851. Three non-employee directors each received 5,000 shares of
common stock upon exercise of their director options yielding a total of $7,500.
In addition, the majority stockholder purchased 33,334 shares for $50,001 during
the 2000 period. The majority shareholder corporation made loans to the Company
during 1999 and 2000. The related notes accrued interest at 12%, which totaled
$5,519 for the year 2000. The unpaid balance of principal and interest was
$23,314 at December 31, 2000, and was due on demand.
During 2000, a board member received 5,539 shares of common stock in
exchange for professional services rendered to the Company valued at $9,000, and
an affiliate of a board member received 2,097 shares of common stock in exchange
for professional services rendered to the Company valued at $6,208.
Since June 1999, the Company has made its headquarters in premises owned by
the Company president, which to date has been rent free.
3. PRIVATE PLACEMENT OFFERINGS
The Company conducted private placement offerings during 2000. These
offerings were exempt under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. A total of 330,719 shares of
common stock was sold under the offerings resulting in net proceeds of $430,858.
-9-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2000
4. PREFERRED STOCK
The Company is authorized to issue 500,000 shares of preferred stock,
without par value. At December 31, 2000, 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's President and Chairman.
At December 31, 1998, unpaid dividends on this issue of preferred stock
totaled $92,114. An additional $68,750 in dividends accrued during each of the
years 1999 and 2000. During 1999, the holder received cash dividends of $40,498,
and dividends in the form of 305,737 shares of common stock, which were valued
at $120,366. During 2000, the holder received dividends in the form of 95,558
shares of common stock, which were valued at $56,751. At December 31, 2000,
$11,999 in dividends remains unpaid.
The characteristics of the remaining 225,000 preferred shares authorized
have not been specified.
-10-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
5. LOSS PER SHARE
Basic and diluted loss per share is based on the net loss divided by the
weighted average number of common shares outstanding during the period.
Year Ended 2000
----------------
Weighted
Income Average Shares Per Share
(Loss) Outstanding Amount
---------- -------------- ----------
Net Loss $(497,381)
Adjustment for preferred stock dividends (68,750)
Loss allocable to common shareholders -
Basis and Diluted $(566,131) 4,746,637 $ (.12)
========== ============== ==========
Year Ended 1999
----------------
Net loss $(685,615)
Adjustment for preferred stock dividends (68,750)
Loss allocable to common shareholders -
Basis and Diluted $(754,365) 4,239,465 $ (.18)
========== ============== ==========
-11-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
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, 2000, the Company had NOL
carryforwards of $1,885,253 available for Federal taxes and $586,773 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:
2017 $129,092
2018 486,799
2019 682,589
2020 586,773
During the year 2000, the Company realized $122,561 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 through December 31, 1999.
These potential New Jersey offsets 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 $243,418 $441,483 $684,901
Valuation Allowance 182,133 441,483 623,616
----------------------------------------
Balance Recognized $ 61,285 $ - $ 61,285
========================================
The entire balance of the valuation allowance relates to Federal taxes.
Since state tax benefits for years prior to 2000 were realized during the year
2000, no reserve is deemed necessary for the benefit of state tax losses of
2000. The state tax benefit recognized in 2000 is composed of the proceeds of
sale of benefits of prior years, plus benefits expected from current losses, as
follows:
Proceeds of sale of prior amounts $122,288
Current benefits 61,285
---------
$183,573
=========
-12-
AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
7. RENTALS UNDER OPERATING LEASES
Office equipment is leased under an operating lease that expires in June
2003. The following is a schedule of future minimum rental payments required
under the operating lease:
Year Ending
December 31, Amount
------------ --------
2001 $ 6,857
2002 6,857
2003 2,857
--------
$ 16,571
========
Rent expense amounted to $7,036 in 2000 and $5,743 in 1999.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest and income taxes is presented below:
2000 1999
------- ------
Interest $22,761 $7,752
Income taxes 200 200
There were no noncash investing activities during either 2000 or 1999. The
following noncash financing activities occurred:
a. Shares of common stock were issued for services during 2000 and 1999,
totaling 65,331 and 17,238, respectively.
b. Preferred stock dividends were partially satisfied by the issuance
during 2000 of 95,558 shares of common stock and by the issuance of
305,737 shares during 1999.
-13-
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000
9. CONTINGENCIES
Pursuant to agreements relating to the merger transaction with MAS, the
Company was required to issue 114,867 shares of common stock to former
shareholders of MAS (MAS Common Stock) and make a cash payment to an affiliate
of the majority shareholder of MAS in the amount of $25,000. The Company
asserted claims against the majority shareholder. The claims involved the amount
of the MAS Common Stock and the cash due to the majority shareholder and
affiliate under the merger agreement. At December 31, 2000, the Company had not
issued the MAS Common Stock. The matter was settled early in 2001 by the
issuance of 57,280 shares of common stock to the MAS shareholders.
The Company had an employment agreement with its president, which expired
December 31, 2000. The agreement 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 were exercised for
100,000 shares during the year 2000; these yielded proceeds of $48,376. There
were no options outstanding at December 31, 2000. A renewal of the president's
contract is currently being discussed and a new contract is expected to be
executed shortly.
-14-
EXHIBIT INDEX
Exhibit No Description Page
3(i)(c). Certificate of Correction of the Company dated
April 30, 2000 (filed herewith)...............................2
3(i)(d). Certificate of Amendment of Certificate of Incorporation
dated March 19, 2001 (filed herewith).........................4
21 Subsidiaries of the Company.................................. 5
1