10QSB 1 0001.txt U.S. SECURITIES AND EXCHANGE COMMISSION PRIVATE 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 period ended September 30, 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 (I.R.S. Employer Incorporation) I.D. Number) 870B Central Avenue, Hammonton, New Jersey 08037 (Address of principal executive offices) (Zip Code) Issuer's telephone number: 609-567-7800. 1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361; 856-327-8112 (Former address and former telephone number, if changed from last report) 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: The number of shares issued and outstanding of issuer's common stock, no par value, as of June 30, 2000 was 4,824,288. Transitional Small Business Issuer Format (Check One): Yes: No: X PART I - FINANCIAL STATEMENTS Item 1. Financial Statements. Page No. Balance Sheets 3 Statements of Income 4 Statements of Changes in Stockholder's Equity 5 Statements of Cash Flows 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 12 Item 2. Changes in Securities. 12 Item 3. Defaults upon Senior Securities. 13 Item 4. Submission of Matters to Vote of Securityholders. 13 Item 5. Other Information. 13 Item 6. Exhibits and Reports on Form 8-K. 13 Signatures 13 AIRTRAX, INC. BALANCE SHEETS September 30, December 31, 2000 1999 _______________ _____________ ASSETS Current Assets Cash $ 24,924 $ 48,652 Accounts receivable 10,172 71,453 Inventory 808,653 511,525 Prepaid expenses 6,938 6,938 ---------------- ---------------- Total current assets 850,687 638,568 Fixed Assets Office furniture and equipment 35,303 34,003 Automotive equipment 16,915 16,915 Shop equipment 20,909 20,660 Casts and tooling 77,162 72,962 ---------------- ---------------- 150,289 144,540 Less, accumulated depreciation 77,989 55,777 ---------------- ---------------- Net fixed assets 72,300 88,763 Other Assets Patents - net 72,402 50,380 Utility deposits 65 65 ---------------- ---------------- Total other assets 72,467 50,445 ---------------- ---------------- TOTAL ASSETS $ 995,454 $ 777,776 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY ---------------------------------------- Current Liabilities Accounts payable $ 771,825 $ 527,255 Accrued liabilities 22,098 15,161 Stockholder note payable 45,685 50,000 --------------- ---------------- Total current liabilities 839,608 592,416 Stockholders' Equity Common stock - authorized, 5,000,000 shares without par value; issued and outstanding - 4,824,288 and 4,549,013, respectively 48,243 45,490 Preferred stock - authorized, 500,000 shares without par value; 275,000 issued and outstanding 12,950 12,950 Additional paid-in-capital 2,193,484 1,784,038 Retained deficit (2,098,831) (1,657,118) ---------------- ---------------- Total stockholders' equity 155,846 185,360 ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 995,454 $ 777,776 ================ ================ The accompanying notes are an integral part of these financial statements. AIRTRAX, INC. STATEMENTS OF INCOME For the Three and Nine Month Periods Ended September 30, 2000 and 1999 YEAR 2000 YEAR 1999 --------- --------- Nine Three Nine Three Months Months Months Months ------- -------- ------- --------- SALES $ 58,090 $ 25,701 $ 55,305 $ 46,413 COST OF GOODS SOLD 16,371 6,677 7,383 2,896 ------------ ------------ ----------- --------- Gross Profit 41,719 19,024 47,922 43,517 OPERATING AND ADMINISTRATIVE EXPENSES: Cost of prototype development 165,539 44,085 177,936 97,232 Auto expense 44 - 74 - Health insurance 7,574 2,596 7,382 2,472 Utilities 1,549 741 1,576 610 Telephone 8,471 3,482 7,647 3,017 Shipping, postage and office supplies 20,341 7,026 22,076 20,580 Rent - - 7,353 373 Professional fees 41,385 2,089 46,042 13,495 Transfer agent fee 2,145 2,145 3,370 3,370 Corporate taxes 573 573 824 824 Sales commission 1,026 1,026 - - Travel and entertainment 7,500 1,803 7,618 2,151 Advertising and promotion 19,688 3,513 68,730 23,753 Interest expense 14,613 10,610 3,982 - Operating supplies 10,093 378 507 507 Depreciation and amortization 25,536 8,512 23,504 7,909 Insurance 3,417 2,596 4,047 1,175 Equipment rental 3,765 909 4,571 1,714 Payroll and related taxes 150,199 38,495 139,272 35,976 --------- --------- --------- ------- Total General and Administrative Expenses 483,458 130,579 526,511 215,158 --------- ---------- --------- -------- NET LOSS BEFORE OTHER INCOME (441,739) (111,555) (478,589) (171,641) Other income 26 24 9,675 8,342 ---------- ---------- --------- --------- NET LOSS $ (441,713) $(111,531) $(468,914) $(163,299) =========== ========== ========= ========= NET LOSS PER SHARE $(.11) $(.03) $(.12) $(.04) ===== ===== ===== ===== The accompanying notes are an integral part of these financial statements. -2- AIRTRAX, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Nine Month Period Ended September 30, 2000 COMMON PREFERRED STOCK STOCK ADDITIONAL ----------------- ----------------- PAID-IN RETAINED Shares Amount Shares Amount CAPITAL DEFICIT TOTAL Balance, December 31, 1999 4,549,013 $ 45,490 275,000 $12,950 $1,784,038 $(1,657,118) $ 185,360 Private placement sales of stock 178,015 1,780 332,212 333,992 Shares issued under option exercises 80,494 805 44,773 45,578 Shares issued for services 16,766 168 32,461 32,629 Net loss for the period 441,713) (441,713) --------- -------- ------- --------- --------- ---------- ---------- Balance, September 30, 2000 4,824,288 $ 48,243 275,000 $12,950 2,193,484 $(2,098,831)$ 155,846 ========== ========= ======= ======== ========== =========== ========= The accompanying notes are an integral part of these financial statements. -3- AIRTRAX, INC. STATEMENTS OF CASH FLOWS For the Three and Nine Month Periods Ended September 30, 2000 and 1999 Year 2000 Year 1999 Nine Three Nine Three Months Months Months Months CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $(441,713) $(111,531) $(468,914) $(163,299) Adjustments to reconcile net income to net cash consumed by operating activities: Depreciation and amortization 25,536 8,512 23,504 7,909 Value of common stock issued for services 41,956 - 9,970 - Changes in current assets and liabilities: Increase (decrease) in accounts payable and accrued liabilities 251,507 (9,772) (91,627) (16,127) Decrease in prepaid expense - - 2,500 4,438 Decrease (increase) in accounts Receivable 61,281 (8,612) (43,773) (44,001) Increase in inventory (297,128) (20,944) (30,975) (9,462) ---------- --------- ---------- ---------- Net Cash Consumed By Operating Activities (358,561) (142,347) (599,315) (220,542) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of equipment (5,749) (4,300) (56,887) (12,029) Additions to patent cost (25,346) (4,460) (4,981) (4,981) Disposition of shop equipment - - 3,067 3,067 Decrease in utility deposits - - 149 149 --------- -------- ---------- --------- Net Cash Consumed By Investing Activities (31,095) (8,760) (58,652) (13,794) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds of common stock sales 370,243 155,479 874,806 - (Repayment) Proceeds of borrowing (4,315) (3,124) - (21,043) Preferred stock dividends - - (40,498) (6,123) ---------- --------- ---------- --------- Net Cash Provided (Consumed) By Financing Activities 365,928 152,355 834,308 (27,166) ---------- --------- ---------- --------- Net Increase (Decrease) In Cash (23,728) 1,248 176,341 (261,502) Balance at beginning of period 48,652 23,676 5,081 442,924 ---------- --------- ---------- --------- Balance at end of period $ 24,924 $ 24,924 $181,422 $181,422 ========== ========= ========== ========= The accompanying notes are an integral part of these financial statements. -4- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS September 30, 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. Business The Company has designed a forklift vehicle using omni-directional technology obtained under a cooperative research and development agreement with the U.S. 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 first 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. 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 use of the Modified Accelerated Cost Recovery System (MACRS), as permitted by Internal Revenue Service Regulations, using lives of seven years for furniture and shop equipment and five years for computers and automobiles. 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. - 5 - AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2000 2. RELATED PARTY TRANSACTIONS During 1999, 305,737 shares of common stock of the Company were issued in lieu of dividends on the preferred stock, 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. The majority shareholder corporation advanced a total of $98,810 to the Company during 1999 and 2000. During August 2000, $50,001 of this advance was used to acquire 33,334 shares of common stock, and $3,124 was repaid. The remaining balance of this debt is due on demand and bears interest as 12%. 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 1999 and the first nine months of the year 2000. These offerings were exempt under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. A total of 614,552 shares of common stock was sold under the offerings during 1999 and 178,015 shares during the first nine months of 2000, resulting in net proceeds of $872,268 and $333,992, respectively. In addition, during the first nine months of 2000, 75,494 shares of common stock were issued under option arrangements with officers and directors, yielding proceeds of $43,078, and 21,766 shares of common stock were issued in lieu of cash for services valued at $35,129, of which 5,000 shares were issued for services under an option arrangement with a director. 4. PREFERRED STOCK The Company is authorized to issue 500,000 shares of preferred stock, without par value. At September 30, 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 last price offered or traded during the applicable quarter. This issue of preferred stock also provides a voting right of 10 votes for each share. Dividends totaling $105,119 had accrued through December 31, 1998 on this issue of preferred stock; another $68,750 accrued during 1999 and $51,563 accrued during the first nine months of the year 2000. Cash dividends of $13,005 were paid during 1998 and $40,498 was paid during 1999. An additional $91,721 was paid during 1999 through the issuance of common stock, leaving a balance of $80,208 unpaid at September 30, 2000. The characteristics of the remaining 225,000 preferred shares authorized have not been specified. -6- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS September 30, 2000 5. EARNINGS PER SHARE Nine Months Ended September 30, 2000 --------------------------------------------- Income Average Shares Per Share (Loss) Outstanding Amount -------- -------------- --------- Net loss $ (441,713) Adjustment for preferred stock dividends (51,562) ---------- Income (loss) allocable to common shareholders $ (493,275) 4,686,651 $ (.11) =========== =========== ======== Three Months Ended September 30, 2000 ------------------------------------------- Net Loss $ (111,531) Adjustment for preferred stock dividends (17,187) ---------- Income (loss) allocable to common shareholders $ (128,718) 4,755,798 $ (.03) =========== =========== ======== Nine Months Ended September 30, 1999 ------------------------------------------- Net loss $ (468,914) Adjustment for preferred stock dividends (51,563) ----------- Income (loss) allocable to common shareholders $ (520,477) 4,209,170 $ (.12) =========== =========== ======== Three Months Ended September 30, 1999 ------------------------------------------ Net Loss $ (163,299) Adjustment for preferred stock dividends (17,188) ---------- Income (loss) allocable to common shareholders $ (180,487) 4,132,923 $ (.04) =========== =========== ======== 6. INCOME TAXES The Company has experienced losses each year since its inception. As a result, it has incurred no Federal income tax. A New Jersey corporation business tax liability of $200 accrued during each of the years 1999 and 1998, that being the minimum annual tax imposed on all New Jersey corporations. 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. New Jersey tax law allows the carry forward of NOL's for seven years. The Company had NOL carry forwards of $1,009,000 as of December 31, 1999. The potential tax benefit of these NOL's has not been recorded on the books of the Company. New Jersey tax law also permits corporations, in certain circumstances, to sell their NOL'S and their potential for research and development credits. The Company has sold such NOL'S and credits which accumulated through the year 1999, and expects to receive $122,560 as proceeds of this sale in the fourth quarter of 2000. This projected refund has not been recorded on the books of the Company. -7- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS September 30, 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 2000 (Remainder) $ 1,905 2001 6,857 2002 6,857 2003 2,857 --------- $ 18,476 ========= Rent expense amounted to $909 and $3,765, respectively in the three and nine month periods ended September 30, 2000 and $2,087 and $11,924 in 1999 periods. 8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for interest during the third quarter of 2000 totaled $10,610. There was no cash paid for income taxes. There were no noncash investing activities during either the 2000 periods or 1999 periods. The following noncash financing activities occurred: a. Shares of common stock totaling 16,766 shares were issued for services during the three months ended June 30, 2000. These were valued at $32,629. b. Shareholder debt of $50,001 was cancelled during the third quarter of 2000 in exchange for 33,334 shares of common stock. 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 has asserted claims against the majority shareholder. The claims involve the amount of the MAS Common Stock and the cash due to the majority shareholder and affiliate under the merger agreement. The Company has not issued the MAS Common Stock. The parties are currently discussing the matter; however, no assurances can be given that a resolution will be effected. The Company has an employment agreement with its president which provides, in part, for options permitting the president to acquire up to 50,000 shares of common stock per year. The first 10,000 shares each year are available at a price per share of $1; the next 25,000 shares are available at a price per share equal to 30% of the lowest price paid for the stock during the 30 days preceding the date of exercise; the last 15,000 shares are available at a price equal to one half the 30% price described above. These options accumulate if they are not exercised. None of these options had been exercised prior to December 31, 1999. Options for 60,000 shares were exercised during the first quarter of 2000, 50,000 at the 30% price and 10,000 at the $1 price. Options for 22,500 shares were outstanding at September 30, 2000 at the one half of 30% price. The employment agreement was scheduled to terminate June 30, 2000, but has been extended to December 31, 2000. -8- Item 2. Management's Discussion and Analysis. The following discusses the financial results and position of the consolidated accounts of the Company for the periods indicated. Results of Operations Nine-Months Ended September 30, 2000 compared with Nine-Months Ended September 30, 1999. For the nine-month period ended September 30, 2000 and comparable period in 1999, the Company was a development stage company. Revenues for the three- and nine-months ended September 30, 2000 were $25,701 and $58,090, respectively, compared with $46,413 and $55,305 for the same respective periods in 1999. Of the total revenues for the nine-month period in 2000, approximately 50% were omni-directional technology related sales, with the remainder consisting of sales of non-omni directional products. Cost of sales for the nine-month period in 2000 period was $16,371 representing principally parts and manufacturing costs for the non-omni directional product. General and administrative expenses which includes administrative salaries and overhead for the three and nine-month periods in 2000 totaled $130,579 and $483,458, respectively, compared with $215,158 and $526,511 for the same respective periods in 1999. The decrease of $43,053 for the nine- month period in 2000 is due to a reduction of advertising and promotion and professional costs, partially offset by increased operating supplies, interest expense and increased salaries to officers. Net loss for the three- and nine-month periods in 2000 was $111,531 and $441,719, respectively, compared with a net loss of $163,299 and $468,914 for the respective prior periods. PAGE 9 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 the first nine-months of 2000, the Company raised approximately $333,992 net of offering costs from the private placement of its common stock. As of September 30, 2000, the Company's working capital was $11,079. Recently, the Company was approved by the State of New Jersey for its technology tax transfer program (see Note 6 to financial statements). Pursuant to the program, the Company expects to receive $122,560 from the state during the 4th quarter of 2000. 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. 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 have a material adverse impact on the Company and its business prospects. The Company expects to commercially sell its forklift during the first quarter of 2001, subject however, to available funds to complete required product testing and final preparation in anticipation of commercial sale. PAGE 10 Fixed assets, net of accumulated depreciation, totaled $72,300 on September 30, 2000. Fixed assets, net of accumulated depreciation, totaled $88,763 on December 31, 1999. Forward Looking Statements. Certain of the statements contained in this Quarterly Report on Form 10-QSB includes "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). See the Company's Annual Report on Form 10-KSB for the period ending December 31, 1999 for additional statements concerning operations and future capital requirements. Certain risks exist with respect to the Company and its business, which risks include the need for additional capital, additional product testing to be completed, and lack of commercial product. Readers are urged to refer to the section entitled "Cautionary Statements in the Company's Form 10-KSB for the period ended December 31, 1999 for a broader discussion of such risks and uncertainties. PAGE 11 Part II OTHER INFORMATION Item 1. Legal Proceedings. Pursuant to 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 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 has asserted claims against the affiliate and majority shareholder. These claims relate to representations made by such parties attendant to the transaction and involve the amount of the MAS Common Stock and the cash due to the parties under the transaction. The Company has not issued the MAS Common Stock nor has it paid the $25,000. The parties are currently discussing the matter for resolution,however, no assurances can be given that a resolution of this dispute will be effected. Item 2. Changes in Securities. None PAGE 12 Item 3. Defaults upon Senior Securities. None Item 4. Submission of Matters to a Vote of Securityholders. None Item 5. Other Information. None Item 6. Exhibits. (a). Furnish the Exhibits required by Item 601 of Regulation S-B. Exhibit 27.1 - Financial Data Schedule (b) Reports on Form 8-K. None. Pursuant to the requirements 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. Date: November 17, 2000 /s/ Peter Amico ----------------- Peter Amico President and Principal Financial Officer EXHIBIT 27.1 FINANCIAL DATA SCHEDULE ART.5 FDS FOR 3rd QUARTER 10-Q Multiplier 1,000 PERIOD TYPE 9 MONTHS FISCAL YEAR END DEC-31 PERIOD END SEPT-30-2000 CASH 25 SECURITIES 0 RECEIVABLES 1 ALLOWANCES 0 INVENTORY 809 CURRENT-ASSETS 851 PP&E 150 DEPRECIATION 78 TOTAL ASSETS 995 CURRENT-LIABILITIES 840 BONDS 0 COMMON 48 PREFERRED-MANDATORY 13 PREFERRED 13 OTHER-SE 2,193 TOTAL-LIABILITIES-AND-EQUITY 995 SALES 58 TOTAL-REVENUES 58 CGS 16 TOTAL-COST 485 OTHER-EXPENSES 0 LOSS-PROVISION 0 INTEREST-EXPENSE 15 INCOME-PRETAX (442) INCOME-TAX 0 INCOME-CONTINUING (442) DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME (442) EPS-PRIMARY (.11) EPS-DILUTED (.11)