U.S. SECURITIES AND EXCHANGE COMMISSION PRIVATE
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the period ended September 30, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
Act of 1934 for the transition period from ___ to ___.
Commission file number: 0-25791
AIRTRAX, INC.
(Name of Small Business Issuer in its charter)
New Jersey 22-3506376
(State of (I.R.S. Employer
Incorporation) I.D. Number)
870B Central Avenue, Hammonton, New Jersey 08037
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 609-567-7800.
1616 Pennsylvania Avenue, #122, Vineland, New Jersey 08361; 856-327-8112
(Former address and former telephone number, if changed from last report)
Securities registered under Section 12 (b) of the Act:
Title of each class Name of exchange on which
to be registered each class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
Check whether issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1). Yes: X No:
(2). Yes: X No:
The number of shares issued and outstanding of issuer's common stock, no
par value, as of June 30, 2000 was 4,824,288.
Transitional Small Business Issuer Format (Check One):
Yes: No: X
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements.
Page No.
Balance Sheets 3
Statements of Income 4
Statements of Changes in Stockholder's Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities. 12
Item 3. Defaults upon Senior Securities. 13
Item 4. Submission of Matters to Vote of Securityholders. 13
Item 5. Other Information. 13
Item 6. Exhibits and Reports on Form 8-K. 13
Signatures 13
AIRTRAX, INC.
BALANCE SHEETS
September 30, December 31,
2000 1999
_______________ _____________
ASSETS
Current Assets
Cash $ 24,924 $ 48,652
Accounts receivable 10,172 71,453
Inventory 808,653 511,525
Prepaid expenses 6,938 6,938
---------------- ----------------
Total current assets 850,687 638,568
Fixed Assets
Office furniture and equipment 35,303 34,003
Automotive equipment 16,915 16,915
Shop equipment 20,909 20,660
Casts and tooling 77,162 72,962
---------------- ----------------
150,289 144,540
Less, accumulated depreciation 77,989 55,777
---------------- ----------------
Net fixed assets 72,300 88,763
Other Assets
Patents - net 72,402 50,380
Utility deposits 65 65
---------------- ----------------
Total other assets 72,467 50,445
---------------- ----------------
TOTAL ASSETS $ 995,454 $ 777,776
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------
Current Liabilities
Accounts payable $ 771,825 $ 527,255
Accrued liabilities 22,098 15,161
Stockholder note payable 45,685 50,000
--------------- ----------------
Total current liabilities 839,608 592,416
Stockholders' Equity
Common stock - authorized, 5,000,000
shares without par value; issued and
outstanding - 4,824,288 and
4,549,013, respectively 48,243 45,490
Preferred stock - authorized, 500,000
shares without par value; 275,000 issued
and outstanding 12,950 12,950
Additional paid-in-capital 2,193,484 1,784,038
Retained deficit (2,098,831) (1,657,118)
---------------- ----------------
Total stockholders' equity 155,846 185,360
---------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 995,454 $ 777,776
================ ================
The accompanying notes are an integral part of these financial statements.
AIRTRAX, INC.
STATEMENTS OF INCOME
For the Three and Nine Month Periods Ended September 30, 2000 and 1999
YEAR 2000 YEAR 1999
--------- ---------
Nine Three Nine Three
Months Months Months Months
------- -------- ------- ---------
SALES $ 58,090 $ 25,701 $ 55,305 $ 46,413
COST OF GOODS SOLD 16,371 6,677 7,383 2,896
------------ ------------ ----------- ---------
Gross Profit 41,719 19,024 47,922 43,517
OPERATING AND ADMINISTRATIVE EXPENSES:
Cost of prototype development 165,539 44,085 177,936 97,232
Auto expense 44 - 74 -
Health insurance 7,574 2,596 7,382 2,472
Utilities 1,549 741 1,576 610
Telephone 8,471 3,482 7,647 3,017
Shipping, postage and office
supplies 20,341 7,026 22,076 20,580
Rent - - 7,353 373
Professional fees 41,385 2,089 46,042 13,495
Transfer agent fee 2,145 2,145 3,370 3,370
Corporate taxes 573 573 824 824
Sales commission 1,026 1,026 - -
Travel and entertainment 7,500 1,803 7,618 2,151
Advertising and promotion 19,688 3,513 68,730 23,753
Interest expense 14,613 10,610 3,982 -
Operating supplies 10,093 378 507 507
Depreciation and amortization 25,536 8,512 23,504 7,909
Insurance 3,417 2,596 4,047 1,175
Equipment rental 3,765 909 4,571 1,714
Payroll and related taxes 150,199 38,495 139,272 35,976
--------- --------- --------- -------
Total General and Administrative
Expenses 483,458 130,579 526,511 215,158
--------- ---------- --------- --------
NET LOSS BEFORE OTHER INCOME (441,739) (111,555) (478,589) (171,641)
Other income 26 24 9,675 8,342
---------- ---------- --------- ---------
NET LOSS $ (441,713) $(111,531) $(468,914) $(163,299)
=========== ========== ========= =========
NET LOSS PER SHARE $(.11) $(.03) $(.12) $(.04)
===== ===== ===== =====
The accompanying notes are an integral part of these financial statements.
-2-
AIRTRAX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Month Period Ended September 30, 2000
COMMON PREFERRED
STOCK STOCK ADDITIONAL
----------------- ----------------- PAID-IN RETAINED
Shares Amount Shares Amount CAPITAL DEFICIT TOTAL
Balance,
December 31,
1999 4,549,013 $ 45,490 275,000 $12,950 $1,784,038 $(1,657,118) $ 185,360
Private
placement sales
of stock 178,015 1,780 332,212 333,992
Shares issued
under option
exercises 80,494 805 44,773 45,578
Shares issued for
services 16,766 168 32,461 32,629
Net loss for
the period 441,713) (441,713)
--------- -------- ------- --------- --------- ---------- ----------
Balance,
September 30,
2000 4,824,288 $ 48,243 275,000 $12,950 2,193,484 $(2,098,831)$ 155,846
========== ========= ======= ======== ========== =========== =========
The accompanying notes are an integral part of these financial statements.
-3-
AIRTRAX, INC.
STATEMENTS OF CASH FLOWS
For the Three and Nine Month Periods Ended September 30, 2000 and 1999
Year 2000 Year 1999
Nine Three Nine Three
Months Months Months Months
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(441,713) $(111,531) $(468,914) $(163,299)
Adjustments to reconcile net income to
net cash consumed by operating activities:
Depreciation and amortization 25,536 8,512 23,504 7,909
Value of common stock issued
for services 41,956 - 9,970 -
Changes in current assets and liabilities:
Increase (decrease) in accounts
payable and accrued liabilities 251,507 (9,772) (91,627) (16,127)
Decrease in prepaid expense - - 2,500 4,438
Decrease (increase) in accounts
Receivable 61,281 (8,612) (43,773) (44,001)
Increase in inventory (297,128) (20,944) (30,975) (9,462)
---------- --------- ---------- ----------
Net Cash Consumed By
Operating Activities (358,561) (142,347) (599,315) (220,542)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of equipment (5,749) (4,300) (56,887) (12,029)
Additions to patent cost (25,346) (4,460) (4,981) (4,981)
Disposition of shop equipment - - 3,067 3,067
Decrease in utility deposits - - 149 149
--------- -------- ---------- ---------
Net Cash Consumed By
Investing Activities (31,095) (8,760) (58,652) (13,794)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds of common stock sales 370,243 155,479 874,806 -
(Repayment) Proceeds of borrowing (4,315) (3,124) - (21,043)
Preferred stock dividends - - (40,498) (6,123)
---------- --------- ---------- ---------
Net Cash Provided (Consumed)
By Financing Activities 365,928 152,355 834,308 (27,166)
---------- --------- ---------- ---------
Net Increase (Decrease) In Cash (23,728) 1,248 176,341 (261,502)
Balance at beginning of period 48,652 23,676 5,081 442,924
---------- --------- ---------- ---------
Balance at end of period $ 24,924 $ 24,924 $181,422 $181,422
========== ========= ========== =========
The accompanying notes are an integral part of these financial statements.
-4-
AIRTRAX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization Of Company
The Company was formed April 17, 1997. On May 19, 1997, it merged with a
predecessor which had initiated and advanced the development of omni-
directional technology. On November 5, 1999, the Company merged with MAS
Acquisition IX Corp. ("MAS"), a reporting company under Federal securities
law. Pursuant to this merger agreement, the Company assumed the reporting
status of MAS. In both merger transactions, the Company was the surviving
entity.
Business
The Company has designed a forklift vehicle using omni-directional
technology obtained under a cooperative research and development agreement
with the U.S. Navy. Significant resources have been devoted during the
past two years to the construction of a prototype of this omni-directional
forklift vehicle. It is expected to be in full commercial production
during the first quarter of 2001. At that time, it will be offered to
industrial users.
The Company has also developed a traditional helicopter ground handling
machine which has been marketed by the Company on a limited basis.
Cash
For purposes of the statements of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
Inventory
Inventory consists principally of component parts and supplies which are
being used to assemble forklift vehicles. Inventories are stated at the
lower of cost (determined on a first in-first-out basis) or market.
Fixed Assets
Fixed assets are recorded at cost. Depreciation is computed by use of the
Modified Accelerated Cost Recovery System (MACRS), as permitted by Internal
Revenue Service Regulations, using lives of seven years for furniture and
shop equipment and five years for computers and automobiles.
Intangible Assets
Patents
The Company incurred costs to acquire and protect certain patent
rights. These costs were capitalized and are being amortized over a
period of fifteen (15) years on a straight-line basis.
Prototype Equipment
The cost of developing and constructing the prototype omni-directional
helicopter handling vehicle and the omni-directional forklift vehicle
is expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimated.
- 5 -
AIRTRAX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
2. RELATED PARTY TRANSACTIONS
During 1999, 305,737 shares of common stock of the Company were issued in
lieu of dividends on the preferred stock, as permitted by the terms of the
preferred stock issue. The preferred stock is wholly owned by the majority
shareholder (see Note 4 for description of the preferred stock). This
majority shareholder is a corporation wholly owned by the president of the
Company.
The majority shareholder corporation advanced a total of $98,810 to the
Company during 1999 and 2000. During August 2000, $50,001 of this advance
was used to acquire 33,334 shares of common stock, and $3,124 was repaid.
The remaining balance of this debt is due on demand and bears interest as
12%.
Since June 1999, the Company has made its headquarters in premises owned by
the Company president, which to date has been rent free.
3. PRIVATE PLACEMENT OFFERINGS
The Company conducted private placement offerings during 1999 and the first
nine months of the year 2000. These offerings were exempt under the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
A total of 614,552 shares of common stock was sold under the offerings
during 1999 and 178,015 shares during the first nine months of 2000,
resulting in net proceeds of $872,268 and $333,992, respectively. In
addition, during the first nine months of 2000, 75,494 shares of common
stock were issued under option arrangements with officers and directors,
yielding proceeds of $43,078, and 21,766 shares of common stock were issued
in lieu of cash for services valued at $35,129, of which 5,000 shares were
issued for services under an option arrangement with a director.
4. PREFERRED STOCK
The Company is authorized to issue 500,000 shares of preferred stock,
without par value. At September 30, 2000, 275,000 of these shares had been
issued. Each of these shares entitles the holder to a 5% cumulative
dividend based on a $5 per share stated value. If sufficient cash is not
available, or at the option of the shareholder, these dividends may be paid
in common stock. If payment is in stock, it is to be valued at a price
calculated at thirty percent of the last price offered or traded during the
applicable quarter. This issue of preferred stock also provides a voting
right of 10 votes for each share.
Dividends totaling $105,119 had accrued through December 31, 1998 on this
issue of preferred stock; another $68,750 accrued during 1999 and $51,563
accrued during the first nine months of the year 2000. Cash dividends of
$13,005 were paid during 1998 and $40,498 was paid during 1999. An
additional $91,721 was paid during 1999 through the issuance of common
stock, leaving a balance of $80,208 unpaid at September 30, 2000.
The characteristics of the remaining 225,000 preferred shares authorized
have not been specified.
-6-
AIRTRAX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
5. EARNINGS PER SHARE
Nine Months Ended September 30, 2000
---------------------------------------------
Income Average Shares Per Share
(Loss) Outstanding Amount
-------- -------------- ---------
Net loss $ (441,713)
Adjustment for preferred
stock dividends (51,562)
----------
Income (loss) allocable to
common shareholders $ (493,275) 4,686,651 $ (.11)
=========== =========== ========
Three Months Ended September 30, 2000
-------------------------------------------
Net Loss $ (111,531)
Adjustment for preferred
stock dividends (17,187)
----------
Income (loss) allocable to
common shareholders $ (128,718) 4,755,798 $ (.03)
=========== =========== ========
Nine Months Ended September 30, 1999
-------------------------------------------
Net loss $ (468,914)
Adjustment for preferred
stock dividends (51,563)
-----------
Income (loss) allocable to
common shareholders $ (520,477) 4,209,170 $ (.12)
=========== =========== ========
Three Months Ended September 30, 1999
------------------------------------------
Net Loss $ (163,299)
Adjustment for preferred
stock dividends (17,188)
----------
Income (loss) allocable
to common shareholders $ (180,487) 4,132,923 $ (.04)
=========== =========== ========
6. INCOME TAXES
The Company has experienced losses each year since its inception. As a
result, it has incurred no Federal income tax. A New Jersey corporation
business tax liability of $200 accrued during each of the years 1999 and
1998, that being the minimum annual tax imposed on all New Jersey
corporations. The Internal Revenue Code allows net operating losses
(NOL's) to be carried forward and applied against future profits for a
period of twenty years. New Jersey tax law allows the carry forward of
NOL's for seven years. The Company had NOL carry forwards of $1,009,000 as
of December 31, 1999. The potential tax benefit of these NOL's has not
been recorded on the books of the Company.
New Jersey tax law also permits corporations, in certain circumstances, to
sell their NOL'S and their potential for research and development credits.
The Company has sold such NOL'S and credits which accumulated through the
year 1999, and expects to receive $122,560 as proceeds of this sale in the
fourth quarter of 2000. This projected refund has not been recorded on the
books of the Company.
-7-
AIRTRAX, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
7. RENTALS UNDER OPERATING LEASES
Office equipment is leased under an operating lease that expires in June
2003. The following is a schedule of future minimum rental payments
required under the operating lease:
Year Ending
December 31, Amount
2000 (Remainder) $ 1,905
2001 6,857
2002 6,857
2003 2,857
---------
$ 18,476
=========
Rent expense amounted to $909 and $3,765, respectively in the three and
nine month periods ended September 30, 2000 and $2,087 and $11,924 in 1999
periods.
8. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for interest during the third quarter of 2000 totaled $10,610.
There was no cash paid for income taxes.
There were no noncash investing activities during either the 2000 periods
or 1999 periods. The following noncash financing activities occurred:
a. Shares of common stock totaling 16,766 shares were issued for services
during the three months ended June 30, 2000. These were valued at
$32,629.
b. Shareholder debt of $50,001 was cancelled during the third quarter of
2000 in exchange for 33,334 shares of common stock.
9. CONTINGENCIES
Pursuant to agreements relating to the merger transaction with MAS, the
Company was required to issue 114,867 shares of common stock to former
shareholders of MAS (MAS Common Stock) and make a cash payment to an
affiliate of the majority shareholder of MAS in the amount of $25,000. The
Company has asserted claims against the majority shareholder. The claims
involve the amount of the MAS Common Stock and the cash due to the majority
shareholder and affiliate under the merger agreement. The Company has not
issued the MAS Common Stock. The parties are currently discussing the
matter; however, no assurances can be given that a resolution will be
effected.
The Company has an employment agreement with its president which provides,
in part, for options permitting the president to acquire up to 50,000
shares of common stock per year. The first 10,000 shares each year are
available at a price per share of $1; the next 25,000 shares are available
at a price per share equal to 30% of the lowest price paid for the stock
during the 30 days preceding the date of exercise; the last 15,000 shares
are available at a price equal to one half the 30% price described above.
These options accumulate if they are not exercised. None of these options
had been exercised prior to December 31, 1999. Options for 60,000 shares
were exercised during the first quarter of 2000, 50,000 at the 30% price
and 10,000 at the $1 price. Options for 22,500 shares were outstanding at
September 30, 2000 at the one half of 30% price. The employment agreement
was scheduled to terminate June 30, 2000, but has been extended to December
31, 2000.
-8-
Item 2. Management's Discussion and Analysis.
The following discusses the financial results and position of the
consolidated accounts of the Company for the periods indicated.
Results of Operations
Nine-Months Ended September 30, 2000 compared with Nine-Months Ended
September 30, 1999.
For the nine-month period ended September 30, 2000 and comparable period
in 1999, the Company was a development stage company. Revenues for the
three- and nine-months ended September 30, 2000 were $25,701 and $58,090,
respectively, compared with $46,413 and $55,305 for the same respective
periods in 1999. Of the total revenues for the nine-month period in 2000,
approximately 50% were omni-directional technology related sales, with
the remainder consisting of sales of non-omni directional products.
Cost of sales for the nine-month period in 2000 period was $16,371
representing principally parts and manufacturing costs for the non-omni
directional product.
General and administrative expenses which includes administrative salaries
and overhead for the three and nine-month periods in 2000 totaled $130,579
and $483,458, respectively, compared with $215,158 and $526,511 for the
same respective periods in 1999. The decrease of $43,053 for the nine-
month period in 2000 is due to a reduction of advertising and promotion
and professional costs, partially offset by increased operating supplies,
interest expense and increased salaries to officers. Net loss for the
three- and nine-month periods in 2000 was $111,531 and $441,719,
respectively, compared with a net loss of $163,299 and $468,914 for the
respective prior periods.
PAGE 9
Liquidity and Capital Resources
Since its inception, the Company has financed its operations through the
private placement of its common stock. During 1999, the Company raised
approximately $872,268 net of offering costs from the private placement of
its common stock. During the first nine-months of 2000, the Company raised
approximately $333,992 net of offering costs from the private placement of
its common stock.
As of September 30, 2000, the Company's working capital was $11,079.
Recently, the Company was approved by the State of New Jersey for its
technology tax transfer program (see Note 6 to financial statements).
Pursuant to the program, the Company expects to receive $122,560 from the
state during the 4th quarter of 2000.
The Company anticipates that its cash requirements for the foreseeable
future will be significant. In particular, management expects substantial
expenditures for inventory and product production in anticipation of the
rollout of its omni-directional forklift. The Company intends to fund its
operations through the issuance of equity and/or debt securities.
Presently, the Company is seeking capital from one or more funding sources,
however, at this time no arrangement has been finalized. No assurances can
be given that the Company will be successful in obtaining sufficient
capital to fund the initiation of its production activities. If the Company
is unable to obtain sufficient funds in the near future, such event will
have a material adverse impact on the Company and its business prospects.
The Company expects to commercially sell its forklift during the first
quarter of 2001, subject however, to available funds to complete required
product testing and final preparation in anticipation of commercial sale.
PAGE 10
Fixed assets, net of accumulated depreciation, totaled $72,300 on September
30, 2000. Fixed assets, net of accumulated depreciation, totaled $88,763
on December 31, 1999.
Forward Looking Statements. Certain of the statements contained in this
Quarterly Report on Form 10-QSB includes "forward looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended ("Exchange Act"). See the Company's Annual Report on Form 10-KSB
for the period ending December 31, 1999 for additional statements concerning
operations and future capital requirements.
Certain risks exist with respect to the Company and its business, which
risks include the need for additional capital, additional product testing to
be completed, and lack of commercial product. Readers are urged to refer to
the section entitled "Cautionary Statements in the Company's Form 10-KSB for
the period ended December 31, 1999 for a broader discussion of such risks
and uncertainties.
PAGE 11
Part II OTHER INFORMATION
Item 1. Legal Proceedings.
Pursuant to agreements relating to the merger transaction with MAS
Acquisition IX Corp. ("MAS"), the Company was required to issue 114,867
shares of common stock to former shareholders of MAS ("MAS Common Stock")
and make a cash payment to an affiliate of the majority shareholder of MAS
in the amount of $25,000. The Company has asserted claims against the
affiliate and majority shareholder. These claims relate to representations
made by such parties attendant to the transaction and involve the
amount of the MAS Common Stock and the cash due to the parties under the
transaction. The Company has not issued the MAS Common Stock nor has it
paid the $25,000. The parties are currently discussing the matter for
resolution,however, no assurances can be given that a resolution of this
dispute will be effected.
Item 2. Changes in Securities.
None
PAGE 12
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Securityholders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
(a). Furnish the Exhibits required by Item 601 of Regulation S-B.
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRTRAX, INC.
Date: November 17, 2000 /s/ Peter Amico
-----------------
Peter Amico
President and
Principal Financial Officer
EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
ART.5 FDS FOR 3rd QUARTER 10-Q
Multiplier 1,000
PERIOD TYPE 9 MONTHS
FISCAL YEAR END DEC-31
PERIOD END SEPT-30-2000
CASH 25
SECURITIES 0
RECEIVABLES 1
ALLOWANCES 0
INVENTORY 809
CURRENT-ASSETS 851
PP&E 150
DEPRECIATION 78
TOTAL ASSETS 995
CURRENT-LIABILITIES 840
BONDS 0
COMMON 48
PREFERRED-MANDATORY 13
PREFERRED 13
OTHER-SE 2,193
TOTAL-LIABILITIES-AND-EQUITY 995
SALES 58
TOTAL-REVENUES 58
CGS 16
TOTAL-COST 485
OTHER-EXPENSES 0
LOSS-PROVISION 0
INTEREST-EXPENSE 15
INCOME-PRETAX (442)
INCOME-TAX 0
INCOME-CONTINUING (442)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (442)
EPS-PRIMARY (.11)
EPS-DILUTED (.11)
