10QSB 1 a10q63001.txt AIRTRAX 6-30-01 U.S. 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 period ended June 30, 2001. [ ] 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 March 31, 2001 was 5,327,849. Transitional Small Business Issuer Format (Check One): Yes: No: X PART I - FINANCIAL STATEMENTS Item 1. Financial Statements. INDEX Page ---- Balance Sheets 3 Statements of Income 4 Statements of Cash Flows 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings. 18 Item 2. Changes in Securities. 18 Item 3. Defaults upon Senior Securities. 18 Item 4. Submission of Matters to Vote of Securityholders. 18 Item 5. Other Information. 18 Item 6. Exhibits and Reports on Form 8-K. 18 Signatures 19 2 AIRTRAX, INC. (A Development Stage Company) BALANCE SHEETS
June 30, 2001 December 31, 2000 -------------- ------------------ ASSETS Current Assets Cash $ 17,837 $ 23,663 Accounts receivable 12,955 34,382 Inventory 718,664 764,875 Prepaid expenses 6,938 6,938 Deferred tax asset 94,311 61,285 -------------- ------------------ Total current assets 850,705 891,143 Fixed Assets Office furniture and equipment 45,598 35,303 Automotive equipment 16,915 16,915 Shop equipment 20,660 20,660 Casts and tooling 85,298 76,687 -------------- ------------------ 168,471 149,565 Less, accumulated depreciation 97,602 82,346 -------------- ------------------ Net fixed assets 70,869 67,219 Other Assets Patents - net 43,997 45,331 Utility deposits 65 65 -------------- ------------------ Total other assets 44,062 45,396 -------------- ------------------ TOTAL ASSETS $ 965,636 $ 1,003,758 ============== ================== LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2001 December 31, 2000 -------------- ------------------ Current Liabilities Accounts payable $ 677,161 $ 763,210 Accrued liabilities 26,517 35,630 Stockholder note payable 24,714 23,314 Contract deposit 50,000 - -------------- ------------------ Total current liabilities 778,392 822,154 Stockholders' Equity Common stock - authorized, 10,000,000 shares without par value; 5,327,849issued and outstanding 2,748,117 2,408,549 Preferred stock - authorized, 500,000 shares without par value; 275,000 issued and outstanding 12,950 12,950 Deficit accumulated during the development stage (2,366,871) (2,032,943) Deficit prior to development stage (206,952) (206,952) -------------- ------------------ Total stockholders' equity 187,244 181,604 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 965,636 $ 1,003,758 ============== ==================
See accompanying notes and accountant's report. 3 AIRTRAX, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS and DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE For the Three Month Periods Ended June 30, 2001 and 2000
May 19, 1997 (Date of Inception) 2001 2000 to June 30, 2001 -------------- ---------- -------------------- SALES $ 52,463 $ 4,800 $ 318,265 COST OF GOODS SOLD 1,222 3,795 64,733 -------------- ---------- -------------------- Gross Profit 51,241 1,005 253,532 OPERATING AND ADMINISTRATIVE EXPENSES 215,810 154,951 2,564,564 -------------- ---------- -------------------- OPERATING LOSS (164,569) (153,946) (2,311,032) -------------- ---------- -------------------- OTHER INCOME (EXPENSE) Interest expense (9,051) (3,938) (55,004) Other income 800 1 13,186 -------------- ---------- -------------------- NET LOSS BEFORE INCOME TAXES (172,820) (157,883) (2,352,850) -------------- ---------- -------------------- INCOME TAX BENEFIT (STATE): Current 15,617 - 94,311 Prior years - - 122,288 -------------- ---------- -------------------- Total Benefit 15,617 - 216,599 -------------- ---------- -------------------- LOSS ACCUMULATED DURING DEVELOPMENT STAGE $ (157,203) $(157,883) (2,136,251) ============== ========== PREFERRED STOCK DIVIDENDS DURING DEVELOPMENT STAGE (230,620) -------------------- DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE $ (2,366,871) ==================== NET LOSS PER SHARE - Basic and Diluted $(.03) $(.04) ====== ======
See accompanying notes and accountant's report. 4 AIRTRAX, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS and DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE For the Six Month Periods Ended June 30, 2001 and 2000
May 19, 1997 (Date of Inception) 2001 2000 to June 30, 2001 -------------- ---------- -------------------- SALES $ 88,430 $ 32,389 $ 318,265 COST OF GOODS SOLD 1,222 9,694 64,733 -------------- ---------- -------------------- Gross Profit 87,208 22,695 253,532 OPERATING AND ADMINISTRATIVE EXPENSES 438,933 348,876 2,564,564 -------------- ---------- -------------------- OPERATING LOSS (351,725) (326,181) (2,311,032) OTHER INCOME AND (EXPENSE) Interest expense (16,154) (4,003) (55,004) Other income 925 2 13,186 -------------- ---------- -------------------- NET LOSS BEFORE INCOME TAXES (366,954) (330,182) (2,352,850) -------------- ---------- -------------------- INCOME TAX BENEFIT (STATE): Current 33,026 - 94,311 Prior years - - 122,288 -------------- ---------- -------------------- Total Benefit 33,026 - 216,599 -------------- ---------- -------------------- LOSS ACCUMULATED DURING DEVELOPMENT STAGE $ (333,928) $(330,162) (2,136,251) ============== ========== PREFERRED STOCK DIVIDENDS DURING DEVELOPMENT STAGE (230,620) -------------------- DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE $ (2,366,871) ==================== NET LOSS PER SHARE - Basic and Diluted $(.07) $(.08) ====== ======
See accompanying notes and accountant's report. 5 AIRTRAX, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS For the Six Month Periods ended June 30, 2001 and 2000
May 19, 1997 (Date of Inception) 2001 2000 to June 30, 2001 -------------- ---------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (333,928) $(330,182) $ (2,136,251) Adjustments to reconcile net income to net cash consumed by operating activities: Depreciation and amortization 16,590 17,024 121,212 Value of common stock issued for services 18,767 41,956 99,569 Accrual of deferred tax benefit (33,026) (94,311) Changes in current assets and liabilities: (Decrease) increase in accounts payable and accrued liabilities (95,162) 261,279 703,678 Decrease (Increase) in prepaid expense - - (7,003) Decrease (increase) in accounts receivable 21,428 69,893 (12,955) Decrease (increase) in inventory 46,211 (276,184) (718,664) -------------- ---------- -------------------- Net Cash Consumed By Operating Activities (359,120) (216,214) (2,044,725) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of equipment (18,907) (1,449) (168,471) Additions to patent cost - (20,886) (67,607) -------------- ---------- -------------------- Net Cash Consumed By Investing Activities (18,907) (22,335) (236,078) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds of common stock sales 320,801 164,763 2,264,479 Proceeds of borrowing - 48,810 12,950 Proceeds of stockholder loans 1,400 - 24,714 Receipt of contract deposit 50,000 - 50,000 Preferred stock dividends paid in cash - - (53,503) -------------- ---------- -------------------- Net Cash Provided By Financing Activities 372,201 213,573 2,298,640 -------------- ---------- -------------------- Net Increase (Decrease) In Cash (5,826) (24,976) 17,837 Balance at beginning of period 23,663 48,652 - -------------- ---------- -------------------- Balance at end of period $ 17,837 $ 23,676 $ 17,837 ============== ========== ====================
See accompanying notes and accountant's report. 6 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Of Company The Company was formed April 17, 1997. On May 19, 1997, it merged with a predecessor which had initiated and advanced the development of omni-directional technology. On November 5, 1999, the Company merged with MAS Acquisition IX Corp. ("MAS"), a reporting company under Federal securities law. Pursuant to this merger agreement, the Company assumed the reporting status of MAS. In both merger transactions, the Company was the surviving entity. For financial accounting purposes, the reverse merger with MAS was accounted for as a pooling of interests. Business The Company has designed a forklift vehicle using omni-directional technology obtained under a contract with the United States Navy Surface Warfare Center in Panama City, Florida. The right to exploit this technology grew out of a Cooperative Research and Development Agreement with the Navy. Significant resources have been devoted during the past two years to the construction of a prototype of this omni-directional forklift vehicle. It is expected to be in full commercial production during the fourth quarter of 2001. At that time, it will be offered to industrial users. The Company has also developed a traditional helicopter ground handling machine which has been marketed by the Company on a limited basis. Development Stage Accounting The Company is a development stage company, as defined in Financial Accounting Standards (FAS) Statement No. 7. Generally accepted accounting principles that apply to established operating enterprises govern the recognition of revenue by a development stage enterprise and the accounting for costs and expenses. From inception to June 30, 2001, the Company has been in the development stage and all its efforts have been devoted to the development of a forklift vehicle with omni-directional technology that is suitable for market. Only small amounts of revenue have been realized through June 30, 2001. Basis of Presentation The Company has incurred losses from inception to June 30, 2001 of $2,136,252. Activities have been financed primarily through private placements of equity securities. The Company may need to raise additional capital through the issuance of debt or equity securities to fund its operations. 7 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 1. continued Cash For purposes of the statements of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. Inventory Inventory consists principally of component parts and supplies which are being used to assemble forklift vehicles. Inventories are stated at the lower of cost (determined on a first in-first out basis) or market. Fixed Assets Fixed assets are recorded at cost. Depreciation is computed by using accelerated methods, with useful lives of seven years for furniture and shop equipment and five years for computers and automobiles. Income Taxes Deferred income taxes are recorded to reflect the tax consequences or benefits to future years of temporary differences between the tax bases of assets and liabilities, and of net operating loss carryforwards. Intangible Assets Patents The Company incurred costs to acquire and protect certain patent rights. These costs were capitalized and are being amortized over a period of fifteen (15) years on a straight-line basis. Prototype Equipment The cost of developing and constructing the prototype omni-directional helicopter handling vehicle and the omni-directional forklift vehicle is expensed as incurred. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated. 8 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 1. continued Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values at June 30, 2001. Advertising Costs The Company expenses advertising costs when the advertisement occurs. Advertising costs amounted to $8,274 in the second quarter of 2001. These costs were $18,201 in the first six months of 2001 and $16,175 in the comparable 2000 period. Segment Reporting Management treats the operations of the Company as one segment. Revenue Recognition Revenue is realized from product sales. Recognition occurs upon delivery. Common Stock Common stock is often issued in return for product, services, and as dividends on the preferred stock. These issuances are assigned values equal to the value of the product or service received or the market value of the common stock, with appropriate discounts, whichever is most clearly evident. 9 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 2. RELATED PARTY TRANSACTIONS During the year 2000, 95,558 shares of common stock of the Company were issued in lieu of cash dividends on the preferred stock in the amount of $56,751, as permitted by the terms of the preferred stock issue. The preferred stock is wholly owned by the majority shareholder (see Note 4 for description of the preferred stock). This majority shareholder is a corporation wholly owned by the president of the Company. During the year 2000, a total of 129,999 shares were issued to the President and Vice President of the Company pursuant to their respective employment agreements, yielding a total of $60,851. Three non-employee directors each received 5,000 shares of common stock during 2000 upon exercise of their director options yielding a total of $7,500. During the six months ended June 30, 2001, one director received 5,000 shares of common stock upon exercise of director options, yielding $2,500. In addition, the majority stockholder purchased 33,334 shares for $50,001 during the 2000 period. The majority shareholder corporation made loans to the Company during 1999 and 2000. The related notes accrued interest at 12%, which totaled $5,519 for the year 2000 and $1,400 for the six months ended June 30, 2001. The unpaid balance of principal and interest was $24,714 at June 30, 2001, and was due on demand. During 2000, a board member received 5,539 shares of common stock in exchange for professional services rendered to the Company valued at $9,000, and an affiliate of a board member received 2,097 shares of common stock in exchange for professional services rendered to the Company valued at $6,208. During the six months ended June 30, 2001, an affiliate of a board member received 2,657 shares of common stock, valued at $3,985, in exchange for professional services. Since June 1999, the Company has made its headquarters in premises owned by the Company president, which to date has been rent free. 3. PRIVATE PLACEMENT OFFERINGS The Company conducted private placement offerings during 2000 and the first half of 2001. These offerings were exempt under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. A total of 330,719 shares of common stock was sold under the offerings during 2000 and 212,199 shares during the first half of 2001, resulting in net proceeds of $430,858 and $318,301, respectively. 10 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 4. PREFERRED STOCK The Company is authorized to issue 500,000 shares of preferred stock, without par value. At June 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 lower of the last price traded in either a public or private transaction during the applicable quarter. This issue of preferred stock also provides a voting right of 10 votes for each share. The holder of this preferred stock is the majority shareholder of the Company, which is a corporation wholly owned by the Company's President and Chairman. Dividends of $68,750 accrued on this issue of preferred stock during the year 2000; an additional $34,375 accrued during the first half of 2001. During 2000, the holder received dividends in the form of 95,558 shares of common stock, which were valued at $56,751. At June 30, 2001, $46,374 of dividends remains unpaid. The characteristics of the remaining 225,000 preferred shares authorized have not been specified. 11 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2001 5. LOSS PER SHARE Basic and diluted loss per share is based on the net loss divided by the weighted average number of common shares outstanding during the period. Six Months Ended June 30, 2001 ------------------------------------- Weighted Income Average Shares Per Share (Loss) Outstanding Amount ------------------------------------- Net loss $(333,928) Adjustment for preferred stock dividends (34,375) ---------- Loss allocable to common shareholders - Basic and Diluted $(368,303) 5,243,331 $ (.07) ========== ========= ========= Three Months Ended June 30, 2001 ------------------------------------- Net loss $(157,203) Adjustment for preferred stock dividends (17,188) ---------- Loss allocable to common shareholders - Basic and Diluted $(174,391) 5,315,137 $ (.03) ========== ========= ========= Six Months Ended June 30, 2000 ------------------------------------- Net loss $(330,182) Adjustment for preferred stock dividends (34,375) ---------- Loss allocable to common shareholders - Basic and Diluted $(364,557) 4,618,160 $ (.08) ========== ========= ========= Three Months Ended June 30, 2000 ------------------------------------- Net loss $(157,883) Adjustment for preferred stock dividends (17,188) ---------- Loss allocable to common shareholders - Basic and Diluted $(175,071) 4,673,771 $ (.04) ========== ========= ========= 12 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 6. INCOME TAXES The Company has experienced losses each year since its inception. As a result, it has incurred no Federal income tax. The Internal Revenue Code allows net operating losses (NOL's) to be carried forward and applied against future profits for a period of twenty years. At December 31, 2000, the Company had NOL carryforwards of $1,885,253 available for Federal taxes and $586,773 for New Jersey taxes. The potential tax benefit of the state NOL's has been recognized on the books of the Company; the potential benefit of the Federal NOL's has been offset by a valuation allowance. If not used, these Federal carryforwards will expire as follows: 2017 $129,092 2018 486,799 2019 682,589 2020 586,773 During the year 2000, the Company realized $122,561 from the sale, as permitted by New Jersey law, of its rights to use the New Jersey NOL'S and research and development credits that had accrued through December 31, 1999. These potential New Jersey offsets are, thus, no longer available to the Company. Under Statement of Financial Accounting Standards No. 109, recognition of deferred tax assets is permitted unless it is more likely than not that the assets will not be realized. At June 30, 2001, the Company has recorded deferred tax assets as follows: Current Non-current Total ------------------------------------ Deferred Tax Assets $207,847 $623,616 $831,463 Valuation Allowance 113,536 623,616 737,152 ------------------------------------ Balance Recognized $ 94,311 $ - $ 94,311 ==================================== The entire balance of the valuation allowance relates to Federal taxes. Since state tax benefits for years prior to 2000 were realized during the year 2000, no reserve is deemed necessary for the benefit of state tax losses of 2000 or 2001. 13 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 7. RENTALS UNDER OPERATING LEASES Office equipment is leased under an operating lease that expires in June 2003. The following is a schedule of future minimum rental payments required under the operating lease: Year Ending December 31, Amount ----------------------------- 2001(Remainder) $ 3,429 2002 6,857 2003 2,857 -------- $13,143 ======== During the second quarter of 2001, the Company entered a month-to-month lease of warehouse space in New Jersey. A total of $10,500 was incurred for rent expense during the six months ended June 30, 2001. Rent expense amounted to $2,856 in the 2000 period. 8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for interest and income taxes is presented below: Six Months Ended June 30, Three Months Ended June 30, 2001 2000 2001 2000 Interest $ - $1,142 - $1,077 Income taxes - 200 - - There were no noncash investing activities during the 2001 period or the 2000 period. The following noncash financing activity occurred: a. Shares of common stock were issued for services during both years. These totaled 19,669 shares during the six months ended June 30, 2000 and 12,757 shares during the six months ended June 30, 2001. b. Common stock totaling 57,272 shares was issued to satisfy the Company obligation under a merger agreement (see Note 9). 14 AIRTRAX, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 9. CONTINGENCIES Pursuant to agreements relating to the merger transaction with MAS, the Company was required to issue 114,867 shares of common stock to former shareholders of MAS (MAS Common Stock) and make a cash payment to an affiliate of the majority shareholder of MAS in the amount of $25,000. The Company asserted claims against the majority shareholder. The claims involved the amount of the MAS Common Stock and the cash due to the majority shareholder and affiliate under the merger agreement. This matter was settled during the first quarter of 2001 by the issuance of 57,272 share of common stock. The Company had an employment agreement with its president, which expired December 31, 2000. The agreement provided, in part, for options permitting the president to acquire up to 50,000 shares of common stock per year, with portions of these options accumulating if not exercised. Options were exercised for 100,000 shares during the year 2000; these yielded proceeds of $48,376. There were no options outstanding at December 31, 2000. A renewal of the president's contract is currently being discussed and a new contract is expected to be executed shortly. In May 2001, the Company entered into a Memorandum of Understanding ("MOU") with Management Assistance & Concepts Corporation ("MACC"). Under the provisions of the MOU, MACC would establish a facility in West Virginia to assemble up to 70% of Company forklift requirements for the United States. MACC would also be required to purchase existing Company inventory of approximately $700,000, and to purchase $1,300,000 of common stock. The number of shares to be issued would be between 371,428 and 433,332, depending on the market value of Company stock during a six month period following issuance. The parties are presently negotiating a definitive agreement. In addition, MACC paid the Company $50,000 as a deposit under the MOU. The deposit is non refundable. If an agreement can not be reached for reasons outside of the control of AirTrax, the deposit will be converted to common stock at a price of $3.50 per share. 15 Item 2. Management's Discussion and Analysis. The following discusses the financial results and position of the accounts of the Company for the periods indicated. 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, 2000 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, lack of commercial product, lack of determined product prices and impact on profit margins, and limited operating history, among other factors. Readers are urged to refer to the section entitled "Cautionary Statements in the Company's Form 10-KSB for the period ended December 31, 2000 for a broader discussion of such risks and uncertainties. Results of Operations --------------------- Six Months Ended June 30, 2001 compared with Six Months Ended June 30, 2000. For the period ended June 30, 2001 and comparable period in 2000, the Company was a development stage company and the Company has not engaged in full scale operations for these periods. The limited revenues for the periods have been derived from sales of a non omni-directional product, and from contracts with the United States Navy that relate to the research and potential application of omni-directional products for military use. The period-to-period results presented and discussed below are not necessarily meaningful comparisons due to the Company's development stage status, and are not indicative of future results. Revenues for the six months ended June 30, 2001 were $52,463 compared with $4,800 in revenues for the same period in 2000. Revenues for the 2001 period consisted principally of contract revenues from the United States Navy. Cost of sales for the 2001 and 2000 periods were $1,222 and $3,795, respectively, representing parts and manufacturing costs for the non omni-directional product. General and administrative expenses which includes administrative salaries and overhead for the six month period in 2001 totaled $438,933 compared with $348,876 for the same period in 2000. The increase of $90,057 for the 2001 period is principally due to marketing and promotional expenses that occurred in the second quarter of 2001 and increases in prototype development costs of the omni-directional wheel that occurred during the six month period. Net loss for the six month period in 2001 applicable to common shareholders was $333,928 or $0.07 per common share, compared with a net loss applicable to common shareholders of $330,162 or $0.08 per common share for the prior period. 16 Liquidity and Capital Resources ------------------------------- Since its inception, the Company has financed its operations through the private placement of its common stock. During 2000, the Company raised $430,858 net of offering costs from the private placement of 330,719 shares of its common stock. During the first quarter of 2001, the Company raised $318,301 net of offering costs from the private placement of 212,199 shares of its common stock. As of June 30, 2001, the Company's working capital was $72,310. The Company anticipates that its cash requirements for the foreseeable future will be significant. In particular, management expects substantial expenditures for inventory and product production in anticipation of the rollout of its omni-directional forklift, which is projected to occur during 2001. The Company intends to fund its operations through the issuance of equity and/or debt securities. Presently, the Company is seeking capital from one or more funding sources; however, at this time formal arrangements have been finalized. In this regard, in May 2001, the Company entered into a Memorandum of Understanding ("MOU") with Management Assistance & Concepts Corporation ("MACC"). The MOU provides that MACC will establish a facility in West Virginia to assemble up to 70% of the Company's forklifts for the territory of the United States. MACC also is required to purchase existing inventory of the Company with an approximate value of $700,000, and to purchase 371,428 shares of common stock for a total of $1,300,000 at prices ranging from $1.50 to $4.67 per share. In addition, MACC paid the Company $50,000 as deposit under the MOU. The deposit is a non refundable deposit if a mutually acceptable agreement can not be reached within an agreed period of time, provided that, if an agreement can not be reached for reasons within AirTrax's control, the amount is converted to common stock of the Company at $3.50 per share. The MOU is subject to the execution of a definitive agreement. Presently, the parties are negotiating a definitive agreement, however, as of the date of this report, such an agreement has not been executed. No assurances can be given that the Company will negotiate a definitive agreement with MACC or will be otherwise successful in obtaining sufficient capital to fund the initiation of its production activities. If the Company is unable to obtain sufficient funds in the near future, such event will delay the projected rollout of its product and likely will have a material adverse impact on the Company and its business prospects (See disclosure relating to cautionary statements in the Company's Annual Report on Form 10-KSB for the period ending December 31, 2000). 17 Total assets, net of accumulated depreciation, totaled $965,636 on June 30, 2001. Total assets, net of accumulated depreciation, totaled $1,003,758 on December 31, 2000. PART II OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities. None 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. None. (b). Reports on Form 8-K. None. 18 SIGNATURES 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: August 9, 2001 /s/Peter Amico ------------------------------ Peter Amico President and Principal Financial Officer 19