-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fi0T2VAXnye6bag7LEbrBIkuIVKd8PwrEmhnqi2BOzdIvJqgpduQzG9ZqiCDUyw/ jayM9YtAbG/HKd3/MCqNMA== 0001093239-01-000001.txt : 20010123 0001093239-01-000001.hdr.sgml : 20010123 ACCESSION NUMBER: 0001093239-01-000001 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20010110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRTRAX INC CENTRAL INDEX KEY: 0001081372 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 223506376 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: SEC FILE NUMBER: 001-16237 FILM NUMBER: 1505280 BUSINESS ADDRESS: STREET 1: 1616 PENNSYLVANIA AVE 122 CITY: VINELAND STATE: NJ ZIP: 08361 BUSINESS PHONE: 8563278112 MAIL ADDRESS: STREET 1: 1616 PENNSYLVANIA AVE 122 CITY: VINELAND STATE: NJ ZIP: 08361 FORMER COMPANY: FORMER CONFORMED NAME: MAS ACQUISITION IX CORP DATE OF NAME CHANGE: 19990308 10KSB/A 1 0001.txt U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB/A (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the period ended December 31, 1999 [ ] 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) 1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361 _______________________________________________________________ (Address of principal executive offices) (Zip Code) Issuer's telephone number 856-327-8112. -------------- 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. 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. $79,302 As of March 31, 2000, the aggregate market value of the voting and non-voting common equity held by non-affiliates as approximately $10,576,193. This calculation is based upon the average bid price of $2.25 and asked price of $5.50 of the common stock on March 31, 2000. The number of shares issued and outstanding of issuer's common stock, no par value, as of December 31, 1999 was 4,663,880. DOCUMENTS INCORPORATED BY REFERENCE None. 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. Pursuant to an Agreement and Plan of Merger dated November 5, 1999 by and between AirTrax and MAS Acquisition IX Corp. ("MAS"), an Indiana corporation, all of the issued and outstanding shares of capital stock of MAS were exchanged for 114,867 shares of AirTrax. AirTrax became the surviving company in 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 1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361 and its telephone number is (856) 327-8112. 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 and the motion of the vehicle is controlled by coordinating all four wheels through a microprocessor that receives input from an operator-controlled joystick. Unlike most vehicles, there is no conventional drive train, axle, or steering rack. The basis of the Company's omni-directional technology consists primarily of a mobile platform with four omni-directional wheels. Each wheel has its own electric or hydraulic motor that turns a wheel hub. However, the wheel hub is not covered by a conventional rubber tire. Rather, each wheel hub is encircled with multiple tapered rollers that are offset 45 degrees. The tapered rollers, fabricated from steel and 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 joystick controls the direction of the vehicle. 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, the wheel can be used on miniature vehicles or massive load-carrying vehicles. Presently, the Company has incorporated omni-directional technology into a prototype forklift. CURRENT OPERATIONS. During the past three years, 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. A pilot model of a commercial omni-directional forklift is currently operational, however, additional testing and 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 would be completed in the second or third quarter of 2000. The results of the additional testing may cause the further delay in the commercial sale of the product. However, management does not expect any material functionality defects during the final test period. EXISTING AND PROPOSED PRODUCTS Omni-Directional Products. The omni-directional forklift will be available in the ATX, ATX-E and ATX-ER series with 3000 through 6000 pound capacities. Each series is briefly described below. ATX Series. This series will the standard version featuring the revolutionary omni-directional technology. This forklift will deliver unequaled maneuverability providing significantly improved operating efficiencies in the materials handling industry. This model is expected to retail at a prices higher than standard forklifts. ATX-E Series. In addition to the omni-directional technology, this series permits the upper section of the forklift to extend and retract. This feature effectively reduces the overall dimension of the machine while carrying a load to approximately 84 inches enabling it to traverse a eight-foot aisle sideways. ATX-ER Series. In addition to the omni-directional technology and the extend/retract feature, the upper section of this series can rotate allowing loads to be transferred from one side to the other while the forklift remains stationary. At this time, the Company's product pricing has not been established. However, the Company believes that its ATX series will range from $36,500 to $39,900 per unit. 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 ("NAWC") 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 subsequently has been granted a Phase I option from NAWC to further define the uses of the MP2. The Company also was advised that NAWC has recommended it for a Phase II research contract ("Phase II Contract"), however, as of this date, the contract has not been awarded. The total amount of the Phase II Contract, if awarded, is anticipated be between $600,000 and $1 million and, payable during a 24 month performance period. The contract will further study the feasibility of the MP2 for military purposes, and likely will include the construction of one or more proto-type devices. 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 II Contract nor that any product sales from the United States military under a Phase III contract will result. 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 the construction of the proto-type for evaluation and testing. Although management recognizes the potential utilitarian benefit and corresponding market size of an omni-directional wheelchair, no assurances can be given that the product can be successfully developed by the Company. 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. The Company has recently 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 by battery indoors without noise or exhaust pollution, and by fossil fuel outdoors or in other 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 provisional patent for the unique features of the hybrid power module. MANUFACTURING AND SUPPLIERS. The Company has entered into an arrangement with H&R Industries, Inc. located in Warminster, Pennsylvania to commercially produce the forklift. The Company believes that this arrangement will be suitable for its production needs during fiscal 2000. The Company intends to establish arrangements with one or more other facilities to satisfy its future production requirements. As of this date, the Company is exploring production facilities domestically and internationally, however, it has not entered into any formal arrangements at this time. 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 Company considers the specially designed and manufactured products proprietary and has entered into exclusive contractual agreements with such suppliers. 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 an exclusive territory. In addition, each dealer will be required to purchase a number of forklifts commensurate with the size of its territory. To date, the Company has conducted limited dealer solicitation. The Company will initiate its dealer solicitation following the successful testing of its forklift. In addition, the Company plans to increase user awareness through print media, advertising, and trade shows, as well as direct industry contact. 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 sales 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 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 I deally 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 immediate future, however, the Company will confront competition from conventional products in the materials handling and warehousing industry (ie. other forklift companies). Many of these companies are subsidiaries of major national and international equipment companies, and have significantly greater financial, engineering, marketing 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 In December 1997, the Company was awarded a patent for an omni- directional helicopter ground-handling device. In March 1998, the Company filed a patent application encompassing certain aspects of the omni-directional forklift. In addition, the Company anticipates that it will make other patent applications relating to certain aspects of its omni-directional technology. Recently, the Company filed patent applications for its power module and for an additional feature of its omni directional wheel. The Company also seeks to protect its proprietary technology through exclusive supply contracts with manufacturers for specially designed and manufactured components. BACKLOG The Company had no backlog for the year ended December 31 1999. There is no seasonal impact on the Company's sales. FACILITIES The Company maintains its administrative offices at 1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361 on premises owned by the president of the Company. As of December 31, 1999, 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, 1999, 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, 1999, 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 1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361 on premises owned by the president of the Company. As of December 31, 1999, 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, 1999, the arrangement between the parties has been rent-free. Item 3. Legal Proceedings. None Item 4. Submission of Matters to Vote of Security Holders. None 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 $3.50 As of December 31, 1999, there are 840 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. Results of Operations Fiscal year end 1999 compared with Fiscal year end 1998. The Company has been a development stage company for the 1999 and 1998 period. Revenues for fiscal 1999 were $79,302 representing an increase of $59,717 from revenues of $19,585 for the 1998 period. Revenues for the 1999 period consisted of $9,354 in sales of a non omni-directional product and $69,709 in contract revenues from the United States Navy. Revenues for 1998 were 19,585 and consisted of sales of a non omni- directional product. Cost of sales for 1999 was $10,083 which consisted on parts and manufacturing costs. Cost of sales for 1998 was $7,637 and consisted of principally of parts and manufacturing costs. General and administrative expenses which includes administrative salaries, depreciation and overhead for the 1999 period totaled $765,382 which represents an increase of $261,733 from $503,649 incurred in 1998. The increase is due primarily to higher payroll costs of $141,382 to reflect an increase in salary to the president of the Company and the initiation of a salary to the vice president of the Company, higher professional fees of $77,456, and general and administrative costs increases as the Company moves closer to commercial production. The stated increases were partially offset, however, by a reduction of prototype development costs. 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. As of December 31, 1999, the Company had limited working capital. The Company anticipates that its use of cash will be substantial for the foreseeable future. In particular, management of the Company 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. 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 forklift. 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 Company's 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 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. 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. 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 exclusive 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 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. 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. OFFICERS AND DIRECTORS Name Age Title Peter Amico 56 President and Chairman D. Barney Harris 39 Executive Vice President and Director John Watt Jr. 62 Secretary and Director Frank A. Basile, Esq. 63 Director James Hudson 55 Director Daniel H. Luciano, Esq. 48 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. In 1996 and in connection with operations of Titan, Mr. Amico filed for bankruptcy protection. 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. From 1990 to the present, he has been the President of Watt-Bollard Associates, Inc., a manufacturers' representative sales agency located in Fort Washington, Pennsylvania. From 1970 to 1990, he served as President of John C. Watt Associates, Inc. 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. Item 10. Executive Compensation. The compensation for all directors and officers individually for services rendered to the Company for the fiscal year ended December 31, 1999 is set forth in the following table: SUMMARY COMPENSATION Annual Compensation Long Term Compensation Awards ___________________ _____________________________ Name and Principal Salary Bonus Other Stock Options # Position Year ($) ($) ($) - -------- ---- ---- ---- ----- ---------------- Peter Amico(1) 1999 $84,065(2) -- $6,500(3) 25,000 Chairman and 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 only for such year. (2). Includes accrued but unpaid salary from fiscal 1998. (3). During 1999, Mr. Amico was paid a finder's fee in connection with the private placement of the Company's stock. The Company and Peter Amico, as President, have entered into a written employment agreement for a period from April 1997 to June 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 certain stock options, of which 10,000 shares are exercisable at $1.00 for year three of the contract, and 25,000 are exercisable at 30% of the lowest price paid in the proceeding 30 day period for each year 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 will be entitled to receive annual stock options not exceeding 25,000 shares of common stock, of which 2,500 shares are exercisable at $1.00, 10,000 are exercisable at 35% of the lowest price paid in the proceeding 30 day period for each year of the contract, and 12,500 is exercisable at 50% of the option prices described above (in proportion to the above option amounts) for each year of the contract. Option Grants in Fiscal Year 1999 % of Total Options to Exercise or Market price Options Employee in Base on date of Name Granted Fiscal Year Price ($/sh) Grant Expiration Date Peter Amico 25,000 50% (1) (1) None President And Chairman 1. The options are exercisable at 30% of the lowest rate paid for the Company's common stock in the 30 days preceding the exercise. 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 -0- -0- 25,000/35,000 $52,500/$82,499 President and Chairman (1). Assumes a price of $3.00 per of the Company's common stock for purposes of this calculation. 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 received a stock option for 5,000 shares of common stock exercisable at $0.50 per share. Other than as indicated 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. Item 11. Security Ownership of Certain Beneficial Owners and Management. The following table identifies as of March 31, 2000 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) - ----------------------------------------------------------------------- [S] [C] [C] [C] [C] Peter Amico President and Chairman 1,685,737(4) 2,750,000(5) 36.40% 100% D. Barney Harris 92,500(6) -0- 1.97% -0- Vice President and Director Frank Basile 110,128(7) -0- 2.36% -0- Director James Hudson 55,800(8) -0- 1.20% -0- Director John Watt Jr. 109,000(9) -0- 2.33% -0- Secretary and Director Daniel H. Luciano 16,375(10) -0- 0.35% -0- Director All directors 2,069,540 2,750,000 43.38% 100% and executive officers as a group (6 persons) - ----------------- (1). The address of each beneficial owner is the address of the Company. (2). Based on 4,630,604 shares of common stock outstanding as of March 31, 2000, 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 per share of the preferred stock. (4). Represents 1,585,737 shares of common stock held by Arcon Corp., a corporation wholly owned by Mr. Amico, and includes options to purchase 100,000 shares of common stock pursuant to Mr. Amico's employment agreement. (5). Represents 275,000 shares of preferred stock held by Arcon Corp., a corporation wholly owned by Mr. Amico, and gives effect to the 10 for 1 voting rights per share of the preferred stock. (6). Includes options to purchase 25,000 shares of common stock pursuant to Mr. Harris' employment agreement. (7). Includes 5,128 shares of common stock held by an affiliate, 10,000 shares of common stock held by his spouse, and 5,000 shares of common stock issuable upon exercise of director's options. (8). Includes 44,500 shares of common stock held by an affiliate. (9). Includes 100,000 shares of common stock held jointly with his spouse, 4,000 shares of common stock held by an affiliate, and 5,000 shares of common stock issuable upon exercise of director's options. (10). Includes 5,000 shares of common stock issuable upon exercise of director's options. 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 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 offering or trading price of the common stock during an applicable calendar quarter. 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. Dividends totaling $105,119 had accrued through fiscal 1998 and $68,750 had accrued through fiscal 1999 on the preferred stock. Cash dividends in the amount of, $13,005 was paid during fiscal 1998 and $40,498 was paid during fiscal 1999. An additional $120,366 was paid during fiscal 1999 through the issuance of common stock. As of December 31, 1999, a loan in the amount of $50,000 from Arcon Corp. is outstanding. The loan is due April 1, 2000 and bears interest at 12%. Mr. Peter Amico received $14,000 and $6,500 in finder's fees during fiscal 1998 and 1999, respectively, in connection with the private placement of the Company's stock Mrs. Patricia Amico, the wife of the Company's President, performed services to the Company during 1999. The amount of such services totaled $8,099. Mr. Timothy Smith, the son in law of the Company's President, performed services to the Company during 1999. The amount of such services totaled $17,236. Mr. John Watt, a director of the Company, received commissions during fiscal 1998 and 1999 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 1998 and 1999. 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 1998. The billing amount of such services for the year was less than $10,000. During 1999, each director of the Company 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(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). 3.(a)(2). Financial Statements FINANCIAL STATEMENTS INDEX Independent Auditors' Report of March 29, 2000. 1 - - Balance Sheet as of December 31, 1999. 2 - - Statement of Income for Fiscal Years Ended December 31, 1999 and December 31, 1998. 3 - - Statements of Changes in Stockholder's Equity For Years Ended December 31, 1999 and December 31, 1998. 4 - - Statements of Cash Flows for Fiscal Years Ended December 31, 1999 and December 31, 1998. 5 - - Notes to Financial Statements. 6 AIRTRAX, INC. FINANCIAL STATEMENTS December 31, 1999 CONTENTS Page Accountant's Audit Report 1 Balance Sheet 2 Statements of Income 3 Statements of Changes in Stockholder's Equity 4 Statements of Cash Flows 5 Notes to Financial Statements 6 ROBERT G. JEFFREY Certified Public Accountant 61 Berdan Avenue Wayne, New Jersey 07470 Board of Directors AirTrax, Inc. I have audited the accompanying balance sheet of AirTrax, Inc. as of December 31, 1999, and the related statements of income, changes in stockholders' equity, and cash flows for the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Company's 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, 1999, and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles. /s/ Robert G. Jeffrey Robert G. Jeffrey March 29, 2000 AIRTRAX, INC. BALANCE SHEET December 31, 1999 ASSETS -------- Current Assets Cash $ 48,652 Accounts receivable 71,453 Inventory 511,525 Prepaid expenses 6,938 ---------- Total current assets $ 638,568 Fixed Assets Office furniture and equipment 34,003 Automotive equipment 16,915 Shop equipment 20,660 Casts and tooling 72,962 --------- 144,540 Less, accumulated depreciation 55,777 ---------- Net fixed assets 88,763 Other Assets Patents - net 50,380 Utility deposits 65 ---------- Total other assets 50,445 ---------- TOTAL ASSETS $777,776 ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities Accounts payable $527,255 Accrued liabilities 15,161 Stockholder note payable 50,000 --------- Total current liabilities $592,416 Stockholders' Equity Common stock - authorized, 5,000,000 shares without par value; 4,549,013 issued and outstanding 45,490 Preferred stock - authorized, 500,000 shares without par value; 275,000 issued and outstanding 12,950 Additional paid-in-capital 1,812,683 Retained deficit (1,685,763) ------------ Total stockholders' equity 185,360 TOTAL LIABILITIES AND STOCKHOLDER' EQUITY $777,776 ============ The accompanying notes and accountant's audit report are an Integral part of these financial statements. -2- AIRTRAX, INC. STATEMENTS OF INCOME For the Years Ended December 31, 1999 and 1998 1999 1998 ---- ---- SALES $ 79,302 $ 19,585 COST OF GOODS SOLD 10,083 7,637 --------- --------- Gross Profit 69,219 11,948 OPERATING AND ADMINISTRATIVE EXPENSES: Cost of prototype development 250,831 341,125 Auto expense 74 858 Health insurance 9,765 6,538 Utilities 1,972 1,828 Telephone 8,894 5,012 Shipping, postage and office supplies 25,531 15,840 Rent 7,353 14,898 Professional fees 88,246 10,790 Engineering services 23,223 1,709 Travel and entertainment 9,077 9,648 Business taxes 1,084 5,179 Advertising and promotion 81,021 2,797 Interest expense 7,752 2,854 Operating supplies 1,261 5,302 Depreciation and amortization 30,740 18,269 Insurance 15,207 1,754 Equipment repairs - 1,317 Equipment rental - 150 Commissions 5,743 1,555 Payroll 197,608 56,226 --------- --------- Total General and Administrative Expenses 765,382 503,649 --------- --------- NET LOSS BEFORE OTHER INCOME (696,163) (491,701) Other income 10,548 1,687 --------- --------- NET LOSS $(685,615) $(490,014) ========= ========= NET LOSS PER SHARE $ (.18) $ (.17) ========= ========= The accompanying notes and accountant's audit report are an integral part of these financial statements. -3- AIRTRAX, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended December 31, 1999 and 1998 COMMON PREFERRED STOCK STOCK ADDITIONAL ----------------- --------------- PAID-IN RETAINED Shares Amount Shares Amount CAPITAL DEFICIT TOTAL --------- -------- ------- ------- ---------- ---------- ------- Balance, December 31, 1997 2,006,600 $ 20,066 275,000 $12,950 $ 315,116 $ (336,265) $ 11,867 Sales of stock under Rule 504, Regulation D, offerings 471,962 4,720 488,399 493,119 Stock issued pursuant to stock split 1,021,825 10,218 (10,218) - Stock issued to redeem note payable 30,000 300 19,700 20,000 Stock issued for services 79,708 797 (797) - Net loss for the year (490,014) (490,014) Cash dividends on preferred stock (13,005) (13,005) --------- ------- ------- ------ ---------- --------- ------- Balance, December 31, 1998 3,610,095 36,101 275,000 12,950 812,200 (839,284) 21,067 Sales of stock under Rule 504 Regulation D offering 614,552 6,146 866,122 872,268 Shares issued as dividend on preferred stock 305,737 3,057 117,309 (120,366) - Shares issued for services 18,629 186 17,052 17,238 Net losses for the year (685,615) (685,615) Cash Dividends on preferred stock (40,409) (40,498) ---------- ------- ------- ------- -------- ---------- -------- Balance, December 31 1999 4,549,013 $ 45,490 275,000 $12,950 $1,812,683$(1,685,763) $185,360 ========== ======== ======= ======= ========== ============ ======== The accompanying notes and accountant's audit report are an integral part of these financial statements -4- AIRTRAX, INC. STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999 and 1998 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $(685,615) $(490,014) Adjustments to reconcile net income to net cash consumed by operating activities: Depreciation and amortization 30,740 18,269 Value of common stock issued for services 17,238 - Changes in current assets and liabilities: Increase in accounts payable and accrued liabilities 421,967 58,543 Decrease (increase) in prepaid expense 2,500 (9,438) Increase in accounts receivable (68,271) (3,182) Increase in inventory (488,553) (10,902) ---------- ------- Net Cash Consumed By Operating Activities (769,994) (436,724) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of equipment (63,373) (44,490) Acquisition of patents (4,981) - Increase in utility deposits 149 800 ----------- --------- Net Cash Consumed By Investing Activities (68,205) (43,690) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds of common stock sales 872,268 493,119 Proceeds of borrowing 50,000 - Preferred stock dividends (40,498) (13,055) ----------- ---------- Net Cash Provided By Financing Activities 881,770 480,114 ----------- ---------- Net Increase (Decrease) In Cash 43,571 (300) Balance at beginning of year 5,081 5,381 ----------- ---------- Balance at end of year $ 48,652 $ 5,081 =========== ========== The accompanying notes and accountant's audit report are an integral part of these financial statements. -5- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 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 omnidirection 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. The right to exploit this technology grew out of a Cooperative Research and Development Agreement with the United States 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 second quarter of 2000. 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 shortterm 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. -6- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 1. continued 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. 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 $50,000 to the Company during December 1999. The related note is due April 1, 2000 and bears interest at 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. 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 resulting in net proceeds of $872,268. -7- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 4. PREFERRED STOCK The Company is authorized to issue 500,000 shares of preferred stock, without par value. At December 31, 1999, 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 and another $68,750 accrued during 1999. Cash dividends of $13,005 were paid during 1998 and $40,498 was paid during 1999. An additional $120,366 was paid during 1999 through the issuance of common stock. The characteristics of the remaining 225,000 preferred shares authorized have not been specified. 5. Earnings Per Share YEAR 1999 Income Average Shares Per Share (Loss) Outstanding Amount Net loss $(685,615) Adjustment for preferred stock dividends (68,750) Income (loss) available to common shareholders $(754,365) 4,239,465 $(.18) YEAR 1998 Net loss $(490,014) Adjustment for preferred stock dividends (68,750) Income (loss) available to common shareholders $(558,764) 3,320,662 $(.17) Warrants to purchase common stock were outstanding at the end of 1998 but were not included in the computation of earnings per share because such inclusion would have an antidilutive effect. These warrants are no longer outstanding. -8- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENT December 31, 1999 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. 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. New Jersey tax law allows the carry forward of NOL's for seven 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. 7. RENTALS UNDER OPERATING LEASES Office equipment is leased under an operating lease that expires June 2003. The following is a schedule of future minimum rental payments required under the operating lease: Year Ending December 31, Amount 2000 $ 6,857 2001 6,857 2002 6,857 2003 2,857 --------- $23,428 Rent expense amounted to $5,743 in 1999 and $17,755 in 1998. 8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for interest and income taxes is presented below: 1999 1998 Interest $7,752 $2,904 Income taxes 200 200 There were no noncash investing activities during either 1999 or 1998. The following noncash financing activities occurred: a. A $20,000 note payable was redeemed in 1998 for 30,000 shares of common stock. b. Shares of common stock were issued for services during 1997 and 1998, totalling 18,629 and 30,000, respectively. c. Preferred stock dividends were partially satisfied by the issuance of 305,737 shares of common stock. -9- AIRTRAX, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1999 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. The Company has asserted claims against the affiliate and 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 matter is now under discussion and a settlement is expected shortly. The Company has an employment agreement with its president which expires June 30, 2000. The agreement provides, in part, for options permitting the president to acquire shares of common stock. These options permit acquisitions under three separate arrangements. First, 25,000 shares are available each year at prices per share equal to 30% of the lowest price paid for the stock during the 30 days preceding the date of exercise; under the second arrangement, 15,000 shares are available in the year 2000 at prices equal to one half the 30% price described above; finally, 10,000 shares are available in the year 2000 for a total cost of $1. These options accumulate if they are not exercised. None of the options has previously been exercised. Options for 50,000 shares were thus outstanding at December 31, 1999 at the 30% price. -10- (b). Reports on Form 8-K. On November 19, 1999, the Company filed a Form 8-K with the Securities and Exchange Commission. On January 13, 2000, the Company filed a Form 8-K/A with the Securities and Exchange Commission. 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. January 2, 2001 /s/ Peter Amico Date 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 January 2, 2001 Peter Amico Date Director /s/ D. Barney Harris January 2, 2001 D. Barney Harris Date Director /s/ James Hudson January 2, 2001 James Hudson Date Director /s/ Daniel H. Luciano January __, 2001 Daniel H. Luciano Date Director EXHIBIT 21 (i) SUBSIDIARIES None EXHIBIT 27.1 FINANCIAL DATA SCHEDULE ART.5 FDS Multiplier 1,000 PERIOD TYPE 12 MONTHS FISCAL YEAR END DEC-31-1999 PERIOD START JAN-1-1999 PERIOD END DEC-31-1999 CASH 49 SECURITIES 0 RECEIVABLES 71 ALLOWANCES 0 INVENTORY 512 CURRENT-ASSETS 639 PP&E 145 DEPRECIATION 56 TOTAL ASSETS 778 CURRENT-LIABILITIES 593 BONDS 0 COMMON 45 PREFERRED-MANDATORY 13 PREFERRED 0 OTHER-SE 1,784 TOTAL-LIABILITIES-AND-EQUITY 778 SALES 79 TOTAL-REVENUES 79 CGS 10 TOTAL-COST 765 OTHER-EXPENSES (11) LOSS-PROVISION 0 INTEREST-EXPENSE 0 INCOME-PRETAX (686) INCOME-TAX 0 INCOME-CONTINUING (686) DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME (686) EPS-PRIMARY (.18) EPS-DILUTED (.18) -----END PRIVACY-ENHANCED MESSAGE-----