UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2005.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________ to ________.
Commission file number: 001-16237
AIRTRAX, INC.
(Name of Small Business Issuer in its charter)
New Jersey 22-3506376
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
870B Central Avenue, Hammonton, New Jersey 08037
(Address of principal executive offices)
(609) 567-7800
(Issuer's telephone number)
Check whether issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court: Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 10, 2005, the issuer had
21,703,039 shares of common stock, no par value, issued and outstanding.
Transitional Small Business Issuer Format (Check One): Yes [ ] No [X]
AIRTRAX, INC.
MARCH 31, 2005 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets 4
Statements of Operations and Deficit Accumulated During
Development Stage 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Special Note Regarding Forward Looking Statements 10
Item 2. Management's Discussion and Analysis or Plan of Operations 11
Item 3. Controls and Procedures 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits 14
SIGNATURES 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRTRAX, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)
CONTENTS
--------
Page
----
Balance Sheets 4
Statements of Operations and Deficit Accumulated
During Development Stage 5
Statements of Cash Flows 6
Notes to Financial Statements 7
3
AIRTRAX, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, 2005 December 31, 2004
(Unaudited) (Audited)
----------- -----------
ASSETS
------
Current Assets
Cash ................................................. $ 3,187,890 $ 641,477
Accounts receivable .................................. 76,991 --
Accrued interest receivable .......................... 147,447 86,667
Inventory ............................................ 1,050,552 709,281
Prepaid expenses ..................................... --
5,113
Vendor advance ....................................... 129,017 52,017
Deferred tax asset ................................... 282,559 224,414
------------ ------------
Total current assets ........................ $ 4,874,456 $ 1,718,969
Fixed Assets
Office furniture and equipment ....................... 96,807 90,714
Automotive equipment ................................. 21,221 21,221
Shop equipment ....................................... 26,446 24,553
Casts and tooling .................................... 205,485 205,485
------------ ------------
349,959 341,973
Less, accumulated depreciation ....................... 257,489 248,386
------------ ------------
Net fixed assets ............................ 92,470 93,587
Other Assets
Advances to FiLCO GmbH ............................... 3,825,000 2,670,000
Patents - net ........................................ 129,970 117,402
Utility deposits ..................................... 65 65
------------ ------------
Total other assets .......................... 3,955,035 2,787,467
------------ ------------
TOTAL ASSETS .................................... $ 8,921,961 $ 4,600,023
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ..................................... $ 446,845 $ 394,959
Accrued liabilities .................................. 463,013 459,565
Shareholder deposits for stock ....................... --
1,403,174
Shareholder notes payable ............................ 34,459 33,455
------------ ------------
Total current liabilities ................... 944,317 $ 2,291,153
Stockholders' Equity
Common stock - authorized, 100,000,000 shares without
par value; 21,216,215 and 15,089,342 issued and
outstanding, respectively ..................... 16,999,584 10,710,999
Preferred stock - authorized, 5,000,000 shares without
par value; 275,000 issued and outstanding ......... 12,950 12,950
Deficit accumulated during the development stage ..... (8,827,938) (8,208,127)
Deficit prior to development stage ................... (206,952) (206,952)
------------ ------------
Total stockholders' equity .................. 7,977,644 2,308,870
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY .............................. $ 8,921,961 $ 4,600,023
============ ============
The accompanying notes are an integral part of these financial statements.
4
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Three Month Periods Ended March 31, 2005 and 2004
(Unaudited)
May 19, 1997
(Date of Inception)
2005 2004 to March 31, 2005
----------- ----------- -------------
SALES ...................................... $ 76,991 $ -- $ 1,100,114
COST OF GOODS SOLD ......................... 52,361 -- 522,732
------------ ------------ ------------
Gross Profit (Loss) ...... 24,630 -- 577,382
OPERATING AND ADMINISTRATIVE EXPENSES ...... 723,594 298,809 9,559,960
------------ ------------ ------------
OPERATING LOSS ............................. (698,964) (298,809) (8,982,578)
OTHER INCOME AND EXPENSE
Interest expense .................. (40,272) (7,604) (215,336)
Interest income ................... 61,144 -- 147,811
Other income ...................... 136 -- 78,430
------------ ------------ ------------
LOSS BEFORE INCOME TAXES ................... (677,956) (306,413) (8,971,673)
------------ ------------ ------------
INCOME TAX BENEFIT (STATE):
Current ........................... 58,145 25,959 58,145
Prior years ....................... -- -- 717,142
------------ ------------ ------------
Total Benefit ............ 58,145 25,959 775,287
------------ ------------ ------------
LOSS ACCUMULATED DURING
DEVELOPMENT STAGE ................. (619,811) (280,454) (8,196,386)
DEEMED DIVIDEND ON PREFERRED STOCK ......... -- -- 188,412
------------ ------------ ------------
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS ........................... (619,811) (280,454) (8,384,798)
PREFERRED STOCK DIVIDENDS DURING
DEVELOPMENT STAGE ................. -- (45,833) (443,140)
------------ ------------ ------------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE $ (619,811) $ (326,287) $ (8,827,938)
============ ============ ============
EARNINGS PER SHARE:
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS ........................... $ (619,811) $ (280,454)
ADJUSTMENT FOR PREFERRED DIVIDENDS ......... (17,188) (17,188)
------------ ------------
LOSS ALLOCABLE TO COMMON
SHAREHOLDERS ........................... $ (636,999) $ (297,642)
============ ============
NET LOSS PER SHARE-
Basic and Diluted ...................... $ (.04) $ (.03)
WEIGHTED AVERAGE SHARES OUTSTANDING ........ 15,523,209 9,336,042
The accompanying notes are an integral part of these financial statements.
5
AIRTRAX, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Three Month Periods ended March 31, 2005 and 2004
(Unaudited)
May 19, 1997
(Date of
Inception)
2005 2004 to March 31, 2005
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss .............................................. $ (619,811) $ (280,454) $ (8,384,798)
Adjustments to reconcile net income to net cash
consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization ............. 10,833 9,053 312,030
Value of common stock issued for services . 5,113 145,539 2,832,481
Value of options granted for services ..... 83,650 -- 83,650
Increase in accrual of deferred tax benefit (58,145) (25,959) (282,559)
Deemed dividends on preferred stock ....... -- -- 188,412
Interest accrued on shareholder loan ...... 1,004 1,998 22,645
Changes in current assets and liabilities:
Increase in accrued interest receivable .. (60,780) -- (147,447)
Increase in accounts receivable .......... (76,991) -- (76,991)
Increase in vendor advances .............. (77,000) -- (129,017)
(Decrease) Increase in accounts payable
and accrued liabilities .............. (30,318) (269,923) 887,866
Increase in prepaid expense ............... -- -- (146,957)
Increase in inventory .................... (341,271) (43,076) (1,050,552)
------------ ------------ ------------
Net Cash Consumed By
Operating Activities ........... (1,163,716) (462,822) (5,891,237)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment ............................. (7,986) (2,427) (356,270)
Additions to patent cost .............................. (14,298) -- (172,229)
Advances to FiLCO GmbH ................................ (1,155,000) (500,000) (3,825,000)
------------ ------------ ------------
Net Cash Consumed By
Investing Activities .......... (1,177,284) (502,427) (4,353,499)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of issuance of convertible debt .......... 4,277,500 1,213,874 4,277,500
Net proceeds of common stock sales .................... 55,000 -- 8,627,611
Proceeds from option exercises ........................ -- -- 14,344
Proceeds from exercise of warrants .................... 554,913 -- 648,663
Proceeds of sales of preferred stock .................. -- -- 12,950
Borrowings (repayments) of stockholder loans .......... -- (52,005) 35,120
Preferred stock dividends paid in cash ................ -- (45,833) (185,274)
Principal payments on installment note ................ -- (349) (425)
------------ ------------ ------------
Net Cash Provided By
Financing Activities ............ 4,887,413 1,115,687 13,430,489
------------ ------------ ------------
Net Increase (Decrease) In Cash ..... 2,546,413 150,438 3,187,890
Balance at beginning of period ............... 641,477 37,388 --
------------ ------------ ------------
Balance at end of period ..................... $ 3,187,890 $ 187,286 $ 3,187,890
============ ============ ============
The accompanying notes are an integral part of these financial statements.
6
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim financial statements of AirTrax, Inc. ("the Company") as
of March 31, 2005 and for the three month periods ended March 31, 2005 and 2004,
respectively, have been prepared in accordance with accounting principles
generally accepted in the United State of America. In the opinion of management,
such information contains all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for such periods.
The results of operations for the quarter ended March 31, 2005 are not
necessarily indicative of the results to be expected for the full fiscal year
ending December 31, 2005.
Certain information and disclosures normally included in the notes to financial
statements have been condensed or omitted as permitted by the rules and
regulations of the Securities and Exchange Commission, although the Company
believes the disclosure is adequate to make the information presented not
misleading. The accompanying unaudited financial statements should be read in
conjunction with the financial statements of the Company included in the Annual
Report on Form 10-KSB for the year ended December 31, 2004.
2. CAPITAL STOCK
The certificate of incorporation was amended on March 28, 2005 to increase the
number of authorized shares to 100,000,000 for the common no par stock, and
5,000,000 for the preferred no par stock.
7
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
3. COMMON STOCK AND WARRANTS
On February 11, 2005, the Company issued $5,000,000 of 6% convertible promissory
notes, which were convertible into Company common stock and two classes of
warrants to purchase Company common stock. The notes were to mature on August
10, 2005. The Company retained the right to require conversion of the notes at a
price of $1.30 per share. Conversion occurred on March 29, 2005 and 3,846,154
shares of common stock were issued. In addition, warrants to purchase common
stock were issued in connection with this transaction as follows: 1,923,077
Class A warrants and 961,538 Class B warrants. The Class A warrants are
exercisable for a five year period at a price per share of $1.85; the Class B
warrants are exercisable for a five year period at a price per share of $2.11.
As partial compensation, the broker-dealer which arranged this transaction was
awarded 384,616 warrants to purchase common stock at $1.85 per share.
A total of 8,144,852 warrants was outstanding at March 31, 2005, as follows:
Other
Class A Class B Warrants
--------- ------- ----------
Outstanding at December 31, 2004 5,537,763
Issued in connection with conversion
of convertible notes 1,923,077 961,538 384,616
--------- ------- ----------
1,923,077 961,538 5,922,379
Reductions during quarter:
Warrants exercised (462,142)
Warrants voided (200,000)
--------- ------- ----------
1,923,077 961,538 5,260,237
----------
8,144,852
==========
A total of 6,126,873 shares of common stock was issued during the first quarter
of 2005, as follows:
Conversion of $5,000,000 notes 3,846,154
Private placement sales 68,750
Shares issued based on warrants exercised 462,142
Issuance of shares sold in prior year 1,749,827
---------
Total shares issued 6,126,873
=========
8
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
4. SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for interest was $4 and $2,735 respectively, for the quarters ended
March 31, 2005, and March 31, 2004. There was no cash paid for income taxes
during either the 2005 or 2004 quarters.
Shares of common stock sold during 2004 were issued during 2005. Proceeds of
these stock sales were $1,403,174.
5. OPERATING AND ADMINISTRATIVE EXPENSES
The following expenses are unaudited
3 Months Ended 3 Months Ended
3/31/05 3/31/04
-------------- --------------
Officer's Compensation $ 83,650 $ -
Salaries 121,594 67,270
Marketing Expense 133,012 7,459
Production Costs 100,903 16,350
Professional Fees 118,364 32,607
Consulting-Administrative 5,113 51,250
Consulting-Marketing - 75,000
Other Expenses 160,958 48,873
----------- ----------
Totals $723,594 $298,809
=========== ==========
9
AIRTRAX, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
(Unaudited)
6. CONTINGENCIES
The Company has a tentative agreement to purchase 75.1% of the stock of FiLCO
GmbH (FiLCO)., a German manufacturer of fork trucks with a manufacturing
facility in Mulheim, Germany. During the pendency of this tentative agreement,
the Company agreed to make advances to FiLCO. Through March 31, 2005, loans
totaling $3,825,000 had been made. Under the provisions of the tentative
agreement, advances of $1,300,000 would be converted to FiLCO capital and the
seller, who will continue to own the remaining 24.9% of the FiLCO stock, would
convert to FiLCO capital a loan of 1,225,000 Euros that FiLCO owes to him. As
additional consideration for this FiLCO stock purchase, the Company agreed to
pay the seller 12,750 Euros and to issue to the seller 900,000 warrants to
purchase Company stock; these warrants would be exercisable at $.01 per share.
The Company has appointed the seller of the FiLCO stock a director of the
Company and will grant him options to purchase 100,000 shares of Company stock
for $.01. Additionally, the Company agreed to advance funds, if needed, to FiLCO
to provide for its working capital needs. Any advances made under the latter
provision would be collateralized by the remaining 24.9% of FiLCO stock and
would be repaid only from dividends paid on the stock.
As of March 31, 2005, the Company had not concluded the contract and had not
issued any of the warrants or options contemplated by the tentative agreement.
10
Item 2. Management's Discussion and Analysis and Results of Operations Forward
Looking Statements
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms, or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those in the
forward-looking statements as a result of various important factors. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, such should not be regarded as a representation by AIRTRAX, Inc., or
any other person, that such forward-looking statements will be achieved. The
business and operations of AIRTRAX, Inc. are subject to substantial risks, which
increase the uncertainty inherent in the forward-looking statements contained in
this report.
Overview
Since 1995, substantially all of our resources and operations have directed
towards the development of the omni-directional wheel and related components for
forklift and other material handling applications. Many of the components,
including the unique shaped wheels, motors, and frames, have been specially
designed by us and specially manufactured for us. Four pilot models of the
commercial omni-directional lift truck are operational and have been used for
extensive testing over the past few years.
We have completed our initial production run consisting of 10 units of our
Sidewinder ATX-3000 Omni-Directional Lift Truck. Two of these vehicles have been
sold to consumers while several of the other eight trucks will be used for
additional testing including UL (Underwriters Laboratories) compliance. Unit
assembly for the first 10 units was completed by us at the H&R Industries
facility in Warminster, PA. ANSI testing is completed using specified mast and
will be continued throughout the second and third quarters on optional mast to
be used with this vehicle. Final UL compliance must be completed at the plant of
initial and final assembly. Following required compliance testing, we expect to
sell the remainder these units to select dealers in the United States. We have
received orders for these units.
We have incurred losses and experienced negative operating cash flow since our
formation. For the three months ended March 31, 2005 and 2004, we had a net loss
of $(619,811) and $(280,454), 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.
Results of Operations - Three Months Ended March 31, 2005 compared with Three
Months Ended March 31, 2004
We have been a development stage company for the periods ended March 31, 2005
and 2004 and have not engaged in full-scale operations for the periods
indicated. The limited revenues for the periods have been derived from the first
sales of the Sidewinder Omni-Directional Lift Truck. During 2005, we expect to
transition from a development stage company to an operating company as we begin
production and sales of the Sidewinder Omni-Directional Lift Truck.
Consequently, management believes that the year-to-year comparisons described
below are not indicative of future year-to-year comparative results.
Revenues. For the three-month period ended March 31, 2005, the Company had sales
revenue of $76,991. This compares to revenues of $0 for the three months ended
March 31, 2004. The increase in sales revenue represents the first sales of the
SIDEWINDER Omni-Directional Lift Truck.
Cost of Goods Sold. The Company's cost of goods sold for the three months ended
March 31, 2005 amounted to $52,361. For the three months ended March 31, 2004,
the Company's cost of goods sold was $0. The Company's $52,361 cost of goods
sold reflects the cost of the lift trucks sold during the three months ended
March 31, 2005.
11
The Company is entitled to a benefit for the effect on income taxes on the net
operating loss. Accordingly, a benefit in the amount of $58,145 has been
recorded for the first quarter of 2005 and $25,959 was recorded during the first
quarter of 2004.
Operating and Administrative Expenses. Operating and administrative expenses
includes administrative salaries and overhead. For the three months ended March
31, 2005, the Company's operating and administrative expenses totaled $723,594.
Operating and administrative expenses totaled $298,809 for the three months
ended March 31, 2004. For the three months ended March 31, 2005 operating and
administrative expenses increased $424,785 compared with the same period of
2004. These changes are a result of the time and material costs preparing for
production of the SIDEWINDER and other production related issues.
Loss Before Income Taxes. Loss before income taxes for the three month period
ended March 31, 2005 totaled $677,956. For the three months ended March 31,
2004, loss before income taxes totaled $306,413. The increase in loss before
income tax for the three months ended March 31, 2005 compared with the same
period of 2004 was caused by the time and material allocations preparing for
production of the SIDEWINDER and other production related issues.
Preferred Stock Dividends. During the three months ended March 31, 2005, the
Company paid no dividends on preferred stock. During the three months ended
March 31, 2004, the Company paid dividends on preferred stock in the amount of
$45,833. The preferred stock dividends are payable to a company that is owned by
the Company's President.
Liquidity and Capital Resources - Three Months Ended March 31, 2005 compared
with Three Months Ended March 31, 2004
As of March 31, 2005, the Company's cash on hand was $3,187,890 and working
capital was $3,930,139. Since its inception, the Company has financed its
operations through the private placement of its common stock. During the three
months ended March 31, 2005, the Company sold an aggregate of 3,914,904 shares
of common stock to accredited and institutional investors. During the three
months ended March 31, 2004, the Company sold an aggregate of 1,831,250 shares
of common stock to accredited and institutional investors and issued an
aggregate of 93,745 shares of common stock in consideration for services
rendered.
The Company anticipates that its cash requirements for the foreseeable future
will be significant. In particular, management expects substantial expenditures
for inventory, production, and advertising in anticipation of the rollout of its
omni-directional forklift. The Company expects that it will be required to raise
funds through the private or public offering of its securities.
The Company's initial production run of ten SIDEWINDER Omni-Directional Lift
Trucks was completed in the first quarter of 2005. The Company will need
additional funds to support production requirements beyond the initial
production run of its forklift which are estimated to be $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. The Company also will
require additional funds to complete the proposed acquisition of the 75.1%
interest in Filco GmbH ("Filco"), primarily for Filco's working capital needs.
As of March 31, 2005, the Company has loaned to Filco a total of $3,825,000. The
Company intends to complete the acquisition of Filco once operating capital for
Filco is secured to finance their operations. The Company will lease facilities
starting in the second quarter of 2005 as corporate headquarters. This building
will also facilitate the assembly of the SIDEWINDER and other omni-directional
products, partial assembly of Filco lift trucks, if the proposed acquisition is
completed, warranty work, and product distribution. The Company currently rents
or leases space at Warminster PA and Flemington NJ. These leases and/or rentals
will be terminated as the workload permits.
As of March 31, 2005, our working capital was $3,930,139. Fixed assets, net of
accumulated depreciation, and total assets, as of March 31, 2005, were $92,470
and $8,921,961, respectively. Current liabilities as of March 31, 2005 were
$944,317.
Item 3. Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. There was
no change in our internal controls or in other factors that could affect these
controls during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
12
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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 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. On
March 29, 2005, after the Company obtained stockholder approval to increased the
Company's authorized common stock to 100 million shares, the Company converted
all of the Notes into stock pursuant to the Subscription Agreement. Interest
earned as of March 29, 2005 amounted to $36,986. As a result thereof, the
Company will issue the Purchasers a total of 28,451 shares of common stock in
lieu of $36,986 in cash for interest due thereunder.
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, only if the Registration Statement
required to be filed pursuant to the financing is not available during the time
that such Registration Statement is required to be effective.
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.
On September 14, 2004, options to purchase 25,000 shares of common stock were
exercised by Nicholas Fenelli under the terms of his Employment Agreement with
the Company. This stock was issued on March 29, 2005.
On March 29, 2005, the Company issued 6,174 shares of common stock to certain of
its vendors as payment for services performed on behalf of the Company. These
shares were earned on June 25, 2004 and September 15, 2004.
The issuance of the common stock, Notes, Warrants and options was exempt from
registration requirements of the Securities Act of 1933 pursuant to Section 4(2)
of such Securities Act and Regulation D promulgated thereunder based upon the
representations of each of the Purchasers that it was an "accredited investor"
(as defined under Rule 501 of Regulation D) and that it was purchasing such
securities without a present view toward a distribution of the securities. In
addition, there was no general advertisement conducted in connection with the
sale of the securities.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
1. A Special Meeting of the Company's Stockholders was held on March 28, 2005 at
9:30 a.m. eastern time, at the Ramada Inn, 2216 West Landis Avenue, Vineland,
New Jersey 08360.
2. There were present in person or by proxy 18,137,092 voting shares comprised
of common stock, of a total of 15,387,092 shares of common stock entitled to
vote as of the February 16, 2005 record date, and 275,000 shares of preferred
stock entitled to vote.
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The Company's common stock and preferred stock were the only classes of voting
securities of the Company. The Company's common stock was entitled to one vote
per share and the holder of shares of preferred stock were entitled to 10 votes
per share.
3. 15,203,441 shares were voted in favor of the amendment to our certificate of
incorporation to increase the number of authorized shares of common stock of the
Company from 20,000,000 shares to 100,000,000 shares;
4. 8,050,353 shares were voted in favor of the amendment to our certificate of
incorporation to increase the authorized shares of the Company's "blank check"
preferred stock from 500,000 to 5,000,000 shares; and
5. 15,131,899 shares were voted in favor of the amendment to our certificate of
incorporation to provide, to the fullest extent permitted by New Jersey law,
that the Company's directors or officers shall not be personally liable to the
Company or its shareholders for damages for breach of such director's or
officer's fiduciary duty.
Item 5. Other Information
None.
Item 6. Exhibits
(a) Exhibits.
3.1 Certificate of Incorporation of Airtrax, Inc. dated April 11, 1997. (Filed
as an exhibit to the Company's Form 8-K filed with the Securities and Exchange
Commission on November 19, 1999).
3.2 Certificate of Correction of the Company dated April 30, 2000 (Filed as an
exhibit to Company's Form 8-K filed with the Securities and Exchange Commission
on November 17, 1999).
3.3 Certificate of Amendment of Certificate of Incorporation dated March 19,
2001 (Filed as an exhibit to Company's Form 8-K filed with the Securities and
Exchange Commission on November 17, 1999).
3.4 Certificate of Amendment of Certificate of Incorporation dated April 1, 2005
(Filed herewith).
3.5 Amended and Restated By-Laws of the Company. (Filed as an exhibit to the
Company's Form 8-K filed with the Securities and Exchange Commission on November
19, 1999).
4.1 Form of Common Stock Purchase Warrant issued to investors pursuant to the
May 2004 private placement. (Filed previously)
4.2 Form of Common Stock Purchase Warrant dated as of November 22, 2004 and
November 23, 2004. (Filed as an exhibit to the Company's Form 8-K filed with the
Securities and Exchange Commission on November 30, 2004).
10.1 Agreement and Plan of Merger by and between MAS Acquisition IX Corp. and
Airtrax , Inc. dated November 5, 1999. (Filed as an exhibit to the Company's
Form 8-K filed with the Securities and Exchange Commission on January 13, 2000).
10.2 Employment agreement dated April 1, 1997 by and between the Company and
Peter Amico. (Filed as an exhibit to the Company's Form 8-K/A filed with the
Securities and Exchange Commission on January 13, 2000).
10.3 Employment agreement dated July 12, 1999, by and between the Company and D.
Barney Harris. (Filed as an exhibit to the Company's Form 8-K/A filed with the
Securities and Exchange Commission on November 19, 1999).
10.4 Consulting Agreement by and between MAS Financial Corp. and Airtrax, Inc.
dated October 26, 1999. (Filed as exhibit to the Company's Form 8-K filed with
the Securities and Exchange Commission on November 19, 1999).
10.5 Employment Agreement effective July 1, 2002 by and between the Company and
Peter Amico (filed as an exhibit to the Company's Form 10-KSB for the period
ended December 31, 2002)
10.6 Agreement dated July 15, 2002 by and between the Company and Swingbridge
Capital LLC and Brian Klanica. (Filed as an exhibit to the Company's Form 8-K
filed on August 7, 2002).
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10.7 Purchase Agreement, dated November 22, 2004, by and among Airtrax, Inc. and
Excalibur Limited Partnership, Stonestreet Limited Partnership, Whalehaven
Capital Fund. (Filed as an exhibit to the Company's Form 8-K filed on November
30, 2004).
10.8 Joinder to the Purchase Agreement, dated November 23, 2004, by and among
Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited Partnership
and Linda Hechter. (Filed as an exhibit to the Company's Form 8-K filed on
November 30, 2004).
10.9 Registration Rights Agreement, dated November 22, 2004, by and among
Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited
Partnership, Whalehaven Capital Fund and First Montauk Securities Corp. (Filed
as an exhibit to the Company's Form 8-K filed on November 30, 2004).
10.10 Joinder to the Registration Rights Agreement, dated November 23, 2004, by
and among Airtrax, Inc. and Excalibur Limited Partnership, Stonestreet Limited
Partnership, Linda Hechter and First Montauk Securities Corp. (Filed as an
exhibit to the Company's Form 8-K filed on November 30, 2004).
10.11 Subscription Agreement, dated February 11, 2005, by and among Airtrax,
Inc. and the investors named on the signature page thereto (Filed as an exhibit
to the Company's Form 8-K filed on February 11, 2005).
10.12 Form of Series A Convertible Note of Airtrax, Inc. dated as of February
11, 2005 (Filed as an exhibit to the Company's Form 8-K filed on February 11,
2005).
10.13 Form of Class A Common Stock Purchase Warrant of Airtrax, Inc. dated as of
February 11, 2005 (Filed as an exhibit to the Company's Form 8-K filed on
February 11, 2005).
10.14 Form of Class B Common Stock Purchase Warrant of Airtrax, Inc. dated as of
February 11, 2005 (Filed as an exhibit to the Company's Form 8-K filed on
February 11, 2005).
31.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to Sarbanes-Oxley Section 302 (filed herewith).
32.1 Certification by Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350 (filed herewith).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on this 16th day of
May 2005.
AIRTRAX, INC.
By:/s/ Peter Amico
---------------
Peter Amico, Chief Executive Officer,
Principal Financial Officer and Chairman
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